Strategy and Organisation – Summary of All Lectures per Topic (1 – 13)
All lectures were recorded and accompanied with lecture slides…
Course Introduction:
Strategic management and organisation theory – economics, sociology, psychology.
How to build more effective organisations that can better achieve their goals and profitability.
Decision-making tools with models.
Levels of analysis
Individuals within firms – managerial decision making, motivation (rewards), social relationships,
limits and rationality.
Organisations – sources of financial success, strategies, internal structures and consequences.
Industries – relationships and competition between similar firms, influence of external developments,
differences in profitability.
Topic 1 (1) – Introduction to Strategic Management:
Kodak vs Fuji Film case – two traditional photo film producers; Kodak employee created the first digital
camera with megapixel sensors, Kodak was a monopoly in the photography market for years but failed
to make a strategic choice between two options and therefore the firm went bankrupt; in other words
the firm did not exploit a great opportunity and this turned out to become a fatal threat.
Internal managerial decision processes are influenced by external or exogenous developments and
firms have little to no control over these developments, which happen in other firms or in an industry
as a whole.
Technological developments are external to a firm and these developments can be both opportunities
as well as threats; internal strengths and weaknesses empower or prevent firms to exploit
competences or opportunities.
SWOT analysis model – internal and external parts combined (hybrid model); Strengths, Weaknesses,
Opportunities, Threats; use strengths to exploit opportunities and overcome threats by conducting
external analysis.
Topic 1 (2) – Different Streams of Thinking in Strategic Management
Perspective of Chandler – strategy as a plan; determination of long-run goals and objectives;
allocation of resources to carry out goals; strategic planning functions over time.
Three Horizons Framework:
Horizon 1 – short term; defend and build core business, current cash flows.
Horizon 2 – medium term; build emerging business, investing to gain new cash flows.
Horizon 3 – long term; create new viable opportunities for a business.
Perspective of Porter (position) – being different and original; choosing activities to deliver a unique
mix of values; competitive advantages; industry (external) analysis.
Trade-offs – choices which simultaneously provide a benefit and a downside, affecting marketing,
R&D, mergers and acquisitions, HR management; these trade-offs have to create value for firms by
addressing the needs of large enough target groups (to ensure growth).
Strategy Statement – explanation of goals of the firm, the methods to achieve the goals and the target
group to whom the firm wants to provide value (maximum of 35 words).
Firms should seek to become difficult to copy or imitate; firms should attempt to gain competitive
advantage with a position which cannot be taken away easily.
Perspective of Barney (resources) – distinct resources and competences to differentiate; firms can
make similar trade-offs but still fail to achieve the same level of competitive advantage because some
resources are perfectly immobile (meaning these cannot be obtained by numerous firms
simultaneously).
,Perspective of Mintzberg – strategy as a ‘pattern’, realised strategy is a combination of intended or
planned strategy and emergent strategy (due to unexpected external events, new business
strategies); dynamic capabilities to change and entrepreneurial orientation to spot new opportunities.
Perspective of Burgelman – strategy as process or practice, how decisions are being made; influence
of time, practitioners (managers), practice (tools), and praxis (flow of interactions).
Strategic planning processes are complex and therefore, in real life these processes are not as
structured and rational as expected.
Topic 2 (1) – External Analysis
Old management theories – reducing or preventing uncertainty in organisation environments and core
operations, striving for stability or homeostasis (self-stabilisation).
Recent management theories – using change for arising new business opportunities, changes can
either be opportunities or threats.
PESTEL analysis – macro-environment, six different exogenous factors which can impact
organisations; interrelated factors which can cause immediate and unexpected opportunities or threats
for organisations; Political Economic Social Technological Environmental Legal.
Systematic approach into predicting the future – building scenarios using PESTEL in order to identify
drivers of change in the firm’s industry, gathering data and looking for trends.
Estimating the impact on an organisation – independence, uncertainty, impact.
Topic 2 (2) – Industry Analysis
Industry – a group of firms in a certain category or geographical area which offer similar products or
services; competition between firms in the same industry is defined by rules and dynamics
(governments want at least some competition, so cartels are not legal).
Similarities between firms, differences in profitability between industries (likelihood), disruption of
markets.
Competitive Advantages – if one firm outperforms the other firms in a similar industry.
Five Forces Analysis by Porter – five (sometimes six) forces which determine how industries function
and how profitable these are: Bargaining Power of Suppliers, Threat of New Entrants, Bargaining
Power of Buyers, Threat of Substitutes, Rivalry Among Existing Competitors and sometimes the sixth
force Collaboration is mentioned.
Threat of New Entrants – ease of setting up a new firm and entering a market, time and cost barriers,
economies of scale (minimal optimal scale) and specialisation (learning efficiency); the larger the entry
barriers the more profit for existing firms, patents and legislation.
Bargaining Power of Suppliers – number and size of suppliers, uniqueness of services (mix of
values), cost of substitution.
Threat of Substitution (perspective of customer) – cost of substitution, will customers move away to
other firms, replacing or substituting; this has to do with brand image and customer loyalty.
Power of Buyers – number and size of customer(s) orders, differences between competitors, price
elasticity, cost of substitution, transparency of the market.
Rivalry Among Existing Competitors – number of competing firms, quality differentiation, switching
costs, price competition, customer loyalty, costs of leaving a (certain) market.
Industry dynamics: life cycle of a firm – 1) development (low rivalry and, high differentiation), 2)
growth (low entry barrier and weak buyers), 3) shake-out (slow growth, firms exit and more rivalry), 4)
maturity (slow growth, large entry barrier, and market share), 5) decline (exits, price competition).
Returns vary in industries from year to year.
If there is variation in customer needs there will be a lot of specialisation among competing firms in
market segments.
Blue Oceans – simultaneously aiming for differentiation and low costs, creating new market space
and new demand with minimised competition; if there is an industry which is in Decline (phase 5, with
many exiting firms) sometimes firms can enter or existing firms gain more profit by making slight
changes e.g. finding a new target group or reducing the prices of the products (or services).
, Topic 3 (1) – The Resource-Based View (Internal)
Studying external environment – firms identify what they might choose (choices) to do.
Studying internal environment – firms determine what they can (competences) do.
RBV () – the firm is a collection of resources, which can be physical (equipment or plants),
financial (available cash), human (knowledge) or intangible (brand value).
The internal RBV model challenges external model assumptions – firms within an industry are
identical in terms of resources which are controlled and the strategies that are pursued, and when
there is a resource heterogeneity (differences) this will be short-lived.
RBV replaces these by assuming that firms may be heterogeneous in terms of controlled resources
but that these resources may not be perfectly mobile, meaning that heterogeneity can be long-lived.
In other words, the RBV states that competitive advantage cannot only be obtained from trade-offs
(which cause competing firms to copy each other less easily), but that superiority in terms of resources
can also provide advantage.
VRIO analysis – internal resources result in direct or indirect competitive advantage when certain
criteria apply: 1) Valuable V, resources should generate value to customers or lead to lower
production costs; 2) Rarity R, resources should be uniquely owned by only one or a few organisations,
meaning a low threat of substitutes; 3) Inimitability I, complexity of duplicating products or services
and having patents or social interactions like brand loyalty or a certain culture; 4) Organisational
support O, when all the criteria apply an organisation should be able to exploit them in order to gain
advantage, in other words the resources must be translated into viable options.
Causality or Causation – the agency that connects a cause with another process, the effect, meaning
that the cause is understood to be responsible for the effect making the effect dependent on the
cause.
Correlation is not causation, so if two things seem to depend on each other this does not mean that
there is definitely a causal relationship, but this can be established by using longitudinal data or lab
and field experiments.
Critique on RBV – it is tautological; Value and Rare are both resource characteristics and part of the
definition of competitive advantage; anything can be a resource; RBV has a static approach; markets
and opportunities of competitive advantage are dynamic in nature.
Topic 3 (2) – Beyond Resources
Firms often gain competitive advantage through a combination of resources and capabilities.
Resources – inputs that firms use to create goods and services, undifferentiated and still firm-specific,
tangible or intangible.
Capabilities – a firm’s skills in using its resources to create goods and services, combination of
procedures and expertise.
Value chain (Porter) for diagnosing strategic capabilities – primary, core operations and supportive
activities e.g. management and R&D; what are the value-adding activities and what are cost-cutting
possibilities; benchmark a firm against the industry average and the best-in-class competitors (in terms
of profits and production costs).
Creating value – firms additionally analyse the complete value system, meaning that firms also look at
the value chains of distributors, suppliers, etc. (stakeholders).
Dynamic capabilities – being able to change strengths over time, because these core sources of
competitive advantage can turn into rigidities or competence traps in highly competitive environments.
Micro foundation of dynamic capabilities – excellence in R&D, new product development or corporate
venturing (meaning taking over a smaller firm and making it grow to either sell it or incorporate it into
the existing business), managerial flexibility, collaboration through alliances, human capital and
resource management.
Topic 4 (1) – Organisational Purpose 1
Why formal organisations with employer-employee relations exist – not everything is organised
within the free market; a formal organisation will arise when technological conditions demand physical
