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Corporate strategy required readings summary
- Instelling
- Erasmus Universiteit Rotterdam (EUR)
This is a summary of the required readings for corporate strategy
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Corporate strategy – summary short readingsTable of Content
L1 – Corporate value added.......................................................2
Reading 1 – From competitive advantage to corporate strategy
(Porter, M.E)....................................................................................2
Reading 2 – Exploring internal stickiness: impediments to the transfer
of best practice within the firm (Szulanski, G.)..................................5
L2 – Corporate strategy execution..............................................7
Reading 1 – Competing on resources (Collis, D. J. & Montgomery, C. A.)
......................................................................................................7
Reading 2 – Absorpative capacity: a new perspective on learning and
innovation (Cohen, W. M. & Levinthal, D. A.).....................................9
L3 – Tools to change firm boundaries – alone & together............12
Reading 1 – When to ally & when to acquire (Dyer, J. H. & Kale, P. &
Singh, H.)......................................................................................12
Reading 2 – Deliberate learning in corporate acquisitions: post-
acquisition strategies and integration capability in US bank mergers
(Zollo, M. & Singh, H.)....................................................................14
L4 – Post-acquisition management & integration.......................17
Reading 1 – Not all M&As are alike: and that matters (Bower, J. L.). . .17
Reading 2 – Managing the post-acquisition integration process: how
the human and task integration processes interact to foster value
creation (Birkinshaw, J. & Bresman, H. & Håkanson, L.)....................19
L5 – Corporate strategy, senior leadership and paradoxes.........22
Reading 1 – Toward a theory of paradox: a dynamic equlibrium model
of organizing (Smith, W. & Lewis, M.)..............................................22
Reading 2 – Senior team attributes and organizational ambidexterity:
the moderating role of transformational leadership (Jansen, J.J.P. &
George, G. & Van den Bosch, Volberda, H.W.)..................................26
L6 – Organizational change, TMT heuristics and scaling.............30
Reading 1 – How fast should your company really grow? (Pisano, G.P.)
....................................................................................................30
Reading 2 – From platform growth to platform scaling: the role of
decision rules and network effects over time (Varga, S., Cholakova, M.
Jansen, J.J.P., Mom, T.J.M., & Kok, G.)...............................................31
I. Introduction: The Complexity of Growth Decisions.................................................31
II. Theoretical Background........................................................................................32
III. Methodology........................................................................................................ 32
, IV. Findings................................................................................................................ 33
V. Discussion and Theoretical Implications...............................................................34
L7 – Purpose and emotions in corporate decision-making..........35
Reading 1 – Walking the purpose-talk inside a large company:
sustainable product development as an instance of divergent change
(Kimsey, M., Geradts, T., Battilana, J.).............................................35
Reading 2 – Frame flexibility: the role of cognitive and emotional
framing in innovation adoption by incumbent firms (Raffaelli, R.,
Glynn, M.A., & Tushman, M.)..........................................................37
L8 – Strategic renewal, role conflicts and the TMT-MM interface.40
Reading 1 – Strategizing throughout the organization: managing role
conflict in strategic renewal (Floyd, S. W., & Lane, P. J.)...................40
Reading 2 – Get the boss to buy in (Ashford, S.J. & Detert, J.)...........51
L9 – Globalization....................................................................53
Reading 1 – Geopolotics and the ‘new’ state capitalism (Alami et al.,
2021)............................................................................................53
L10 – Firm strategy and internationalization.............................55
Reading 1 – Development of the Uppsala model of internationalization
process: from internationalization to evolution (Vahlne, J.)..............55
L11 – Non-market forces..........................................................58
Reading 1: Integrated strategy: market and nonmarket components
(Baron, D.P.)..................................................................................58
....................................................................................................70
L1 – Corporate value added
Reading 1 – From competitive advantage to corporate strategy (Porter, M.E)
I. Distinction Between Competitive and Corporate Strategy
Competitive Strategy:
o Focuses on achieving competitive advantage within individual business units.
o Tools include differentiation, cost leadership, or focus strategies to position businesses in the
market.
Corporate Strategy:
o Centers on the overall portfolio of businesses a corporation operates and the governance of
these units.
o Key goal: ensure the "corporate whole" adds more value than the sum of its business units
through synergy, resource sharing, and strategic fit.
o Involves structure, composition, and coordination of the portfolio to enhance collective
value.
II. Premises of Corporate Strategy
,Corporate strategy succeeds only when it creates true value by adhering to these premises:
1. Competition Occurs at the Business Unit Level:
o Business units, not the diversified corporation, directly compete in the market.
2. Diversification Adds Costs and Constraints:
o Diversified corporations face added complexity and reduced unit autonomy.
3. Shareholders Can Diversify Themselves:
o Corporations must add value in ways that individual investors cannot replicate through stock
portfolios.
Key Implication: Corporate strategy must justify its costs by delivering tangible benefits like synergy, resource
optimization, or knowledge sharing.
III. Passing the Essential Tests
1. Attractiveness Test:
o Targeted industries must be structurally attractive or capable of being made attractive.
2. Cost-of-Entry Test:
o The cost of entering an industry should not absorb all future profits.
3. Better-Off Test:
o The new unit must gain a competitive advantage from its link to the corporation or vice versa.
IV. Concepts of Corporate Strategy
Not always mutually exclusive
First two require no connection among business units
The second two depend on them
The article identifies four corporate strategy approaches, each with unique methods and challenges:
1. Portfolio Management
Core Idea: Diversification through acquisitions, focusing on sound companies with strong
management. Units operate autonomously with corporate oversight.
Key Features:
o Autonomy: Units manage themselves but are subject to resource allocation and performance
reviews.
o Capital Allocation: Resources flow from cash-rich units to high-potential units needing
investment.
o Management Contribution: Analytical insights and professional management techniques
improve performance.
Assumptions and Challenges:
o Relies on finding undervalued companies benefiting from corporate expertise.
o Challenges include diminishing advantages due to developed capital markets and reduced
need for corporate intervention.
Criticisms:
o Eroding Benefits: Declining competitive edge in capital markets and expertise.
o Autonomy Issues: Lack of coordination can reduce corporate identity and performance.
o Complexity: Managing diverse portfolios becomes unsustainable, risking errors.
o Market Realities: Investors often undervalue diversified conglomerates ("conglomerate
discount").
2. Restructuring
Core Idea: Actively revitalizing underperforming units through management changes, strategy shifts,
or technology infusion.
Key Features:
, o Active Role: Direct interventions aim to unlock potential.
o Exit Strategy: Restructured units are often sold after value is maximized.
Benefits:
o Diversification Tests: Passes cost-of-entry and better-off tests by targeting undervalued
opportunities.
o Industry Impact: Successful restructuring can transform entire sectors.
Challenges:
o Complexity and Risk: Requires industry familiarity, skilled management, and adaptability.
o Market Competition: Intense demand raises costs and reduces viable opportunities.
o Human Factors: Resistance to selling units can lead to inefficiencies and misaligned priorities.
Pitfalls:
o Becoming a passive portfolio manager by retaining restructured units.
o Risk of becoming a sprawling conglomerate with reduced returns.
3. Transferring Skills
Core Idea: Creating value through synergies by sharing expertise, knowledge, or capabilities across
units with related value chains.
Key Features:
o Synergies: Skill-sharing improves unit performance (e.g., shared marketing techniques).
o Conditions for Success:
Meaningful similarities between units.
Strategic relevance of transferred skills.
Proprietary expertise that provides a competitive edge.
Challenges:
o Requires deliberate effort, reassignment of personnel, and strong management involvement.
o Opportunities are often one-time; once exhausted, units may no longer add value.
o Poor alignment or unclear synergies lead to inefficiencies.
Benefits:
o Reduces costs (e.g., acquisition premiums) and strengthens competitiveness.
o Fosters innovation and lowers barriers to new markets.
4. Sharing Activities
Core Idea: Leveraging common resources or processes among units to reduce costs, improve
efficiency, and enhance differentiation.
Key Benefits:
o Cost Reduction: Economies of scale, increased efficiency, and faster learning curve progress.
o Enhanced Differentiation: Unique offerings bolster competitive advantage.
o Synergies: Cross-unit expertise in areas like marketing or logistics.
Challenges:
o Coordination Costs: Aligning diverse units can lead to compromises.
o Superficial Sharing: Poorly implemented strategies reduce potential benefits.
o Resistance to Collaboration: Autonomous units may resist integration efforts.
o Overhead: Misaligned sharing initiatives can result in excessive costs.
Best Practices:
o Ensure activities align strategically and pass the "better-off" and "cost-of-entry" tests.
o Focus on activities providing significant, ongoing benefits.
V. Choosing a Corporate Strategy
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