Summary
Summary Managing Business Strategically
- Module
- Institution
Full summary of all articles, videos, and lectures for Managing Business Strategically, the first course for the MSc Strategic Management at the RSM.
[Show more]
Seller
Follow
bergceline1
Reviews received
Content preview
Summary Managing Business StrategicallyContent module 1
VALUE CREATION AND VALUE CAPTURE: A MULTILEVEL PERSPECTIVE
(1) What is value, with a focus on the difference between use and exchange value?
Use value=the specific quality of a new job, task, product, or service as perceived by users in relation to
their needs, such as the speed or quality of performance on a new task or the aesthetics or performance
features of a new product or service. Subjective and individual specific.
Exchange value=either the monetary amount realized at a certain point in time, when the exchange of the
new task, good, service, or product takes place, or the amount paid by the user to the seller for the use
value of the focal task, job, product, or service.
Consumer surplus = use value – exchange value. Customers will select product with greatest consumer
surplus. Differentiate to increase WTP, or cut costs to decrease price.
2 economic conditions that may be necessary for value creation activities to endure: 1) the monetary
amount exchanged must exceed the producer's costs (money, time, effort, joy, and the like) of creating the
value in question; 2) the monetary amount that a user will exchange is a function of the perceived
performance difference between the new value that is created and the target user's closest alternative.
The greater the perceived novelty and appropriateness of the task, product, or service under consideration,
the greater the potential use value and exchange value to the user.
(2) How can (a) individuals, (b) organizations, and (c) society create value?
Individuals: creative acts displayed by individuals and a select set of individual attributes, such as ability,
motivation, and intelligence, and their interactions with the environment. The value created may be from
any new task, service, or job that provides greater utility or lower unit costs for the user over the closest
alternative.
Organizations: innovation, knowledge creation, invention, and management. New value is created when
firms develop/invent new ways of doing things using new methods, new technologies, and/or new forms of
raw material.
Society: level of entrepreneurship and macro-economic conditions in the external environment, including
laws and regulations restricting or encouraging innovation and entrepreneurship. Sources may act
intentionally or unintentionally to create value for society at the same time they are creating value for
themselves.
Only difference is the target user.
4 sources of value creation: novelty, lock-in, complementarities and efficiency.
(3) What determines the ability of (a) individuals, (b) organizations, and (c) society to capture value?
Value slippage=value created by one source or at one level of analysis may be captured at another. Occurs
when use value is high while exchange value is low.
2 key concepts determine which party captures the new value that is created: competition and isolating
mechanisms. Competition seek to replicate the new value that was created and participate in the profits ->
increased supply leads to lower price (exchange value), share value with competitors. Bargaining power can
lead to lower salaries for employees. An isolating mechanism is any knowledge, physical, or legal barrier
that may prevent replication of the value-creating new task, product, or service by a competitor. Raises the
potential bargaining power of the creator of value to retain this value.
Creative destruction=higher levels of competition drive firms to become more innovative by introducing
new products that create value, only to lose the value to competitors who replicate or imitate the product.
Stimulates growth and development at the societal level.
Individuals: isolating mechanisms include a unique position in a social network, the nature of their
relationship with selected others in the organization, and their specialized expertise or knowledge,
particularly tacit knowledge.
Organizations: firms may configure their primary and support activities to maximize and sustain
, competitive advantage through value chain analysis. Resources may serve as isolating mechanisms and
limit competition in cases where they are rare, inimitable, non-substitutable, and valuable. Resource
management.
Society: unique factor or resource advantages, strong demand conditions, related and supporting industry
infrastructure, and competitive markets.
BUSINESS MODELS VIDEO
Business model reflects firm’s realized strategy. Captures economic logic of strategy. Building block of
strategy. Consists of
1) value creation: customer value proposition, how will you create and deliver value to the customer. Who
are your customers, what do they value/are their unfulfilled needs, and what product/service would fulfill
these needs.
2) value capture: how do you capture value from each transaction with customers through certain revenue
streams (create profits). Potential market size, costs, desired profit level.
3) key resources: needed to deliver customer value proposition profitably.
4) key processes: make the profitable delivery of the customer value proposition repeatable and scalable.
LECTURE 1
A strategy has 5 elements:
1) Arena: where will we be active?
2) Vehicles: how will we get there?
3) Differentiators: how will we win in the marketplace?
4) Staging: what will be our speed and sequence of moves?
5) Economic logic: how will we obtain our returns?
Content module 2
DYNAMIC CAPABILITIES: WHAT ARE THEY?
1) What are dynamic capabilities?
Dynamic capabilities=a set of specific and identifiable processes such as product development, strategic
decision making, knowledge creation, and alliancing that create value for firms within dynamic markets by
manipulating resources - specifically the processes to integrate, reconfigure, gain and release resources -
into new value-creating strategies. It are unique and idiosyncratic processes that emerge from path-
dependent histories of individual firms. Learning mechanisms underlie the evolution of dynamic
capabilities. The crucial aspect of evolution in moderate velocity markets is variation in learning
experiences, in high velocity markets it’s selection.
Since the functionality of dynamic capabilities can be duplicated across firms, their value for competitive
advantage lies in the resource configurations that they create, not in the capabilities themselves. Dynamic
capabilities are necessary, but not sufficient, for competitive advantage (because they are only valuable and
rare).
When markets are moderately dynamic such that change occurs in the context of stable industry structure,
dynamic capabilities resemble the traditional conception of routines; they are complicated, detailed,
analytic processes that rely extensively on existing knowledge and linear execution to produce predictable
outcomes. In high-velocity markets where industry structure is blurring, dynamic capabilities are simple,
experiential, unstable processes that rely on quickly created new knowledge and iterative execution to
produce adaptive, but unpredictable outcomes. Simple routines keep managers focused on broadly
important issues without locking them into specific behaviors. Use real-time information, create and
implement multiple alternatives in parallel. May have detailed routines to deal with aspects of the process
where prior knowledge and/or codification are particularly useful (implementation/execution). Firm
managers must cope not only with the external challenge of competition, but also with the internal
challenge of potentially collapsing dynamic capabilities.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller bergceline1. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £5.57. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
81113 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now