Exam Study PDF

Contents {#contents.TOCHeading} ======== [**Driving forces of globalisation -- technological innovation** 3](#driving-forces-of-globalisation-technological-innovation) [**Social and cultural globalization** 3](#social-and-cultural-globalization) [**Political globalization** 3](#political-globaliz...

Contents {#contents.TOCHeading} ======== [**Driving forces of globalisation -- technological innovation** 3](#driving-forces-of-globalisation-technological-innovation) [**Social and cultural globalization** 3](#social-and-cultural-globalization) [**Political globalization** 3](#political-globalization) [**Economic globalisation** 3](#economic-globalisation) [**Key players of economic globalization** 3](#key-players-of-economic-globalization) [**Levels of strategy** 3](#levels-of-strategy) [**Threshold and distinctive resources and capabilities** 4](#threshold-and-distinctive-resources-and-capabilities) [**Tools for VRIO analysis** 5](#tools-for-vrio-analysis) [**Dynamic capabilities** 6](#dynamic-capabilities) [**The Uppsala Model (Internationalisation process theory)** 9](#the-uppsala-model-internationalisation-process-theory) [**Haier - strategic stages of internationalization** 10](#haier---strategic-stages-of-internationalization) [**Gaining and sustaining competitive advantage through internationalization** 10](#gaining-and-sustaining-competitive-advantage-through-internationalization) [**Dunning's eclectic (OLI) paradigm (John H. Dunning, 1979)** 11](#dunnings-eclectic-oli-paradigm-john-h.-dunning-1979) [**Types of FDI** 11](#types-of-fdi) [**Turnkey contracting** 13](#turnkey-contracting) [**Build-operate-transfer (BOT)** 13](#build-operate-transfer-bot) [**The strategy clock (Bowman)** 13](#the-strategy-clock-bowman) [**Transaction cost theory (Oliver Williamson)** 13](#transaction-cost-theory-oliver-williamson) [**PESTEL** 14](#pestel) [**Forecasting** 17](#forecasting) [**Directions of change** 18](#directions-of-change) [**Scenario analysis** 18](#scenario-analysis) [**Porter\'s Five Forces framework** 19](#porters-five-forces-framework) [**Industry types** 21](#industry-types) [**Industry Life cycle** 22](#industry-life-cycle) [**Comparative industry structure analysis** 22](#comparative-industry-structure-analysis) [**Strategic group** 22](#strategic-group) [**Market segments** 23](#market-segments) [**Strategy canvas** 24](#strategy-canvas) [**Resource-based view** 25](#resource-based-view) [**Distinctive resources and capabilities** 25](#distinctive-resources-and-capabilities) [**VIRO model** 25](#viro-model) [**Value Chain** 27](#a-screenshot-of-a-computer-description-automatically-generatedvalue-chain) [**Activity system** 28](#activity-system) [**Benchmarking** 29](#benchmarking) [**SWOT** 29](#swot) [**Dynamic capabilities** 29](#dynamic-capabilities-1) [***Approaches to manage resources and capabilities*** 30](#approaches-to-manage-resources-and-capabilities) [**Stakeholder groups** 30](#stakeholder-groups) [**Stakeholder mapping** 31](#stakeholder-mapping) [**Ownership models** 33](#ownership-models) [**Corporative governance** 33](#corporative-governance) [**Governance models** 34](#governance-models) [**CSR** 35](#csr) [**History** 36](#history) [**Strategy and history** 36](#strategy-and-history) [**Historical analysis** 37](#historical-analysis) [**Culture and strategy** 37](#culture-and-strategy) [**Organizational field** 37](#organizational-field) [**Subdivided cultures in practice** 38](#subdivided-cultures-in-practice) [**Cultural influence on strategy** 39](#cultural-influence-on-strategy) [**Strategic drift** 40](#strategic-drift) [**Business strategy and models** 41](#business-strategy-and-models) [**Generic competitive strategies** 42](#generic-competitive-strategies) [**Cost leadership strategy** 42](#cost-leadership-strategy) [**Differentiation strategy --** 44](#differentiation-strategy) [**Focus strategy** 44](#focus-strategy) [**Hybrid strategy** 44](#hybrid-strategy) [**Strategic clock** 44](#strategic-clock) [**Interactive strategies** 45](#interactive-strategies) [**Game Theory** 46](#game-theory) [**Attributes of business model** 47](#attributes-of-business-model) [**Business model patterns** 47](#business-model-patterns) [**Multi-sided platforms** 47](#multi-sided-platforms) [**Corporate strategy** 48](#corporate-strategy) [**Diversification drivers** 50](#diversification-drivers) [**Value-destroying diversification drivers** 50](#value-destroying-diversification-drivers) [**Vertical Integration** 50](#vertical-integration) [**Divestment** 51](#divestment) [**Value-adding activities** 52](#value-adding-activities) [**BCG matrix** 54](#bcg-matrix) [**McKinsey matrix** 54](#mckinsey-matrix) [**Parenting Matrix** 55](#parenting-matrix) [**International strategy** 55](#international-strategy) [**Locational advantage : porter\'s diamond** 56](#locational-advantage-porters-diamond-1) [**Global integration** 57](#global-integration) [**CAGE framework for analysis before entry** 58](#cage-framework-for-analysis-before-entry) [**Market assessment criteria** 58](#market-assessment-criteria) [**Entry mode strategies** 59](#entry-mode-strategies) [**Internationalization and performance** 60](#internationalization-and-performance) [**Entrepreneurship and innovation** 60](#entrepreneurship-and-innovation) [**Steps in the entrepreneurial process** 61](#steps-in-the-entrepreneurial-process) [**Stages of Entrepreneurial Growth** 62](#stages-of-entrepreneurial-growth) [**Market pull** 62](#market-pull) [**Frugal innovation** 62](#frugal-innovation) [**Product and process innovation** 63](#product-and-process-innovation) [**Balance between open and closed innovation depends on...** 63](#balance-between-open-and-closed-innovation-depends-on) [**Innovation diffusion** 63](#innovation-diffusion) [**Diffusion S-curve** 64](#diffusion-s-curve) [**First-mover advantage** 64](#first-mover-advantage) [**Factors for choosing innovators or imitators** 65](#factors-for-choosing-innovators-or-imitators) [**Disruptive innovation** 65](#disruptive-innovation) [**Approaches to be disruptive innovators** 66](#approaches-to-be-disruptive-innovators) [**Organic development** 67](#organic-development) [**Corporate entrepreneurship** 67](#corporate-entrepreneurship) [**M&A context** 67](#ma-context) [**Strategic motives for M&A** 67](#strategic-motives-for-ma) [**Financial Motives for M&A** 67](#financial-motives-for-ma) [**Managerial motives for M&A** 67](#managerial-motives-for-ma) [**Target Choice in M&A** 67](#target-choice-in-ma) [**Integration in M&A** 68](#integration-in-ma) [**Post-acquisition integration matrix** 68](#post-acquisition-integration-matrix) [**Organizational Justice** 69](#organizational-justice) [**Strategic alliance** 69](#strategic-alliance) [**Types of Strategic Alliances** 69](#types-of-strategic-alliances) [**Motives for alliances** 69](#motives-for-alliances) [**Strategic alliance evolution** 70](#strategic-alliance-evolution) [**Buy, Ally or DIY** 71](#buy-ally-or-diy) **Driving forces of globalisation -- technological innovation** =============================================================== - **First phase** -- innovations in transport and communications technology - Steam engine to land and sea transport, and the invention of the electric telegraph - **Second phase** -- during the Second World War when German engineers working on the V2-project invented rocket propulsion - Reliable communication system with satellites - **Third phase** -- the invention of the microchip - Development of information and communication technologies -- reducing distances in space and time - Emergence and global use of the Internet and other computer communication systems -- global data networks that function as the hardware of the global financial capital market **Social and cultural globalization** ===================================== - Transmission of ideas, meanings, and values around the world in such a way as to extend and intensify social relations - Key terminologies: - Cross-cultural communication -- how people from differing cultural backgrounds communicate (related: intercultural communication) - Cultural diffusion -- the spread of cultural items such as ideas, styles, religions, technologies, languages etc. **Political globalization** =========================== - The expansion of a global political system, and its institutions, in which inter-regional transactions (including, but certainly not limited to trade) are managed - Key terminologies: - Intergovernmentalism -- states (and national governments in particular) as the primary actors in the integration process, European integration - Non-governmental organisations -- influence public policy across national boundaries, including humanitarian aid and developmental efforts, e.g., Doctors Without Borders - Isolationist policies -- North Korea, countering political globalisation **Economic globalisation** ========================== - Economic \"globalisation\" is a historical process, the result of human innovation and technological progress - It refers to the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders - The term sometimes also refers to the movement of people (labour) and knowledge (technology) across international borders **A macro-trend of intense economic interconnectedness among the nations of the world leading to growing interdependency of countries worldwide** Graphical user interface Description automatically generated with medium confidence **tariff-rate quotas** (TRQs), which allow a certain quantity of sugar to enter the country under a low tariff. TRQs apply to imports of raw cane sugar, refined sugar, sugar syrups, specialty sugars and sugar-containing products **Key players of economic globalization** ========================================= - **MNC** -- multinational corporation - Owns or controls the production of goods or services in one or more countries other than their home country - Can be privately owned companies; public, stock-held firms; and state-owned enterprises (SOEs) - **TNC** -- transnational corporation - Corporations which operate in other countries, other than the home country, and do not have a centralised management system - In a transnational company there is only one economic unit, the world. Selling, servicing, public relations, and legal affairs are local. But parts, machines, planning, research, finance, marketing, pricing, and management are conducted in contemplation of the world market - The following terminologies are used interchangeably though there are subtle differences among them - A multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation, or a stateless corporation **Levels of strategy** ====================== - Corporate-level strategy - The overall scope of an organisation and how value is added to the constituent businesses of the organisational whole - Business-level strategy (sometimes called competitive strategy) - How the individual businesses should compete in their particular markets - Functional strategy - Concerned with how the components of an organisation deliver effectively the corporate- and business-level strategies in terms of resources, processes and people - Integration in strategy = seamless linking among corporate, business and functional levels A screenshot of a computer Description automatically generated **Threshold and distinctive resources and capabilities** ======================================================== - Threshold resources and capabilities - Those needed for an organisation to meet the necessary requirements to compete in a given market and achieve parity with competitors in that market - **Distinctive resources and capabilities** - Required to achieve competitive advantage - comprise of a bundle of constituent skills and technologies rather than a single, discrete skill or technology - = **core competences** and the emphasis is thus on the linked set of resources, capabilities, skills and activities (the theory of core competences by Prahalad and Hamel) 1. **Tools for VRIO analysis** =========================== - Core competence - Is there any distinctive resources and capabilities? - McKinsey 7S framework - Suitable for organisations looking to determine the state of alignment between departments and processes - Strategy, structure, systems, shared values, skills, style, staff - Can assess an organisation\'s current state compared to a desired future state and evaluate the gaps and inconsistencies between them - Value chain analysis - Describes the categories of activities within an organisation which, together, create a product or service to create value for the organisation - Organisational culture  **Dynamic capabilities** ======================== - An organisation's ability to renew and recreate its resources and capabilities to meet the needs of changing business environments - Organisation\'s **overall portfolio of capabilities**: - Base level -- operational and other ordinary capabilities, the routine activities, administration, and basic governance that allow any organisation perform more or less efficiently - **Upper layer -- dynamic capabilities:** - Microfoundations -- adjustment and recombination of a firm\'s existing ordinary capabilities as well as the development of new ones. They are second-order dynamic capabilities that include new product development, expansion into new sales regions, the assignment of product mandates across divisions in large companies, and other actions that constitute astute managerial decision making under uncertainty - Higher-order capabilities -- management, supported by organisational processes, senses likely avenues for the future, devises business models to seize new or changed opportunities, and determines the best configuration for the organisation based on its existing form and the new plans for the future A diagram of a diagram Description automatically generated  #### **Locational advantage: Porter's Diamond** 5 Government Influences in Porter\'s Diamond Model \| Download \... Four international strategies (Bartlett--Ghoshal matrix)  **The Uppsala Model (Internationalisation process theory)** =========================================================== - Internationalisation takes place in incremental stages over a long period - Stages of internationalisation: - Psychic distance - Factors preventing or disturbing the flow of information between firm and market - Cultural, institutional and rarely geographical in nature - Preferred target of internationalisation is to internationalise to a low psychic distance country **Haier - strategic stages of internationalization** ==================================================== A screenshot of a computer Description automatically generated **Gaining and sustaining competitive advantage through internationalization** ============================================================================= - FDI--based explanation - Dunning's eclectic paradigm (OLI paradigm) - Non--FDI--based explanation - Networks and relational assets Represent the economically beneficial long-term relationships the firm undertakes with other business entities. Such entities include manufacturers, distributors, suppliers, retailers, consultants, banks, transportation suppliers, governments, and any other organization that can provide needed capabilities - Non--FDI based alliances (W5L) **Dunning's eclectic (OLI) paradigm (John H. Dunning, 1979)** ============================================================= - Professor John Dunning proposed the eclectic paradigm as a framework for determining the **extent and pattern** of the value-chain operations that companies should own abroad - Dunning draws from various theoretical perspectives, including the comparative advantage and the factor proportions, monopolistic advantage, and internalization advantage theories - Key characteristics - **O**wnership-specific advantages - The firm owns knowledge, skills, capabilities, processes, or physical assets - **L**ocation-specific advantages - Factors in individual countries provide specific benefits, such as natural resources, skilled labour, low-cost labour, and inexpensive capital - **I**nternalisation advantages - The firm benefits from internalising foreign manufacturing, distribution, or other value chain activities  **Types of FDI** ================ - Greenfield Investment versus M&As - Greenfield investment: direct investment to build a new manufacturing, marketing, or administrative facility as opposed to acquiring existing facilities (organic growth vs M&A, W5L) - The nature of ownership in FDI -- equity versus non--equity - Vertical versus horizontal integration (W5L) - Vertical integration: the firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product or service. - Horizontal integration: the firm owns, or seeks to own, the activities performed in a single stage of its value chain A diagram of a franchise Description automatically generated **Turnkey contracting** ======================= - Arrangement in which the focal firm (or a consortium of firms) plans, finances, organises, manages, and implements all phases of a project abroad and then hands it over to a foreign customer after training local workers **Build-operate-transfer (BOT)** ================================ - Arrangement in which the firm or a consortium of firms contracts to build a major facility abroad, operate it for a specified period, and then transfer control to the project sponsor, typically the host country government or public utility - Phu My 3 Vietnam: a model BOT **The strategy clock (Bowman)** =============================== Advantages over Porter's generic strategies: - Focused on prices to customers (more visible) (more visible rather than costs to the organisation - The circular design of the clock allows for more continuous choices than Porter's sharp contrast between cost leadership and differentiation  Is outsourcing always beneficial? **Transaction cost theory (Oliver Williamson)** =============================================== - Helps analyse the relative costs and benefits of managing ('transacting') activities internally or externally - Points to consider: - Complexity and rarity of the task (e.g., innovation) -- leaking out of idiosyncratic knowledge - Control over key resources (e.g., lithium) -- hostage to geopolitics, price fluctuations, whims of the subcontractors - Control over key processes (e.g., microchip) -- hostage to geopolitics, supply fluctuations, whims of the subcontractors - Loss of in--house capability -- hollowing out -- reliance on the subcontractor - Managing dispersed activities, at times across geographic domains Notes Macro Environment Analysis - PESTEL \-\-- Examine Macro environmental factors ( market and non-market factors)   - Forecasting \-\-- predict with varying degrees of precision (Mega trends, Inflexion points, Weak signals)   - Scenario analysis \-\-- develops plausible alternative views of how the environment might develop in the future **PESTEL** ========== Market environment \-- suppliers, customers, competitors Non-market environment \-- non-governmental organizations, politicians, government departments, regulators, political activist, campaign groups and the media   - Political The role of the state Exposure to civil society organizations ( political lobbyists, campaign groups, media) A diagram of a company\'s company Description automatically generated with medium confidence Macro -micro dimensions \-\-- macro (whole countries), micro risk (specific to particular organizations or sectors within a country) Internal External dimensions \-- internal ( factors originating within the countries), external ( knock-non effects of events occurring outside particular countries )   - Economics  Discretionary spend industries \-- volatile in relation to economic cycles High-fixed cost industries \-\-- airlines/hotels. Suffer from economic downturns.   - Social Demographics Distribution \-- wealth distribution Geography Culture   Organizational field \-- a community of organizations that interact more frequently with one another than with those outside the field   Sociograms \-- maps of potentially important social connections   Network density and effectiveness \-\-- density ( number of interactions between members), effectiveness is increased by density Broker positions \-\-- connect otherwise separate groups of organizations Central hub positions \-\-- provide power within networks Small world \-- large majority of a network\'s members is closely connected A diagram of network connections Description automatically generated     - Technology Primary indicators of innovative activity 1. R&DD budgets 2. Patenting activity 3. Citation analysis \--extent of citations by other organizations 4. New product announcements 5. Media coverage   - Ecological Challenges 1. Direct pollution obligations 2. Product stewardship \-\-- managing ecological issues throughout the value chain and life cycle of products 3. Sustainable development   Sources of pressure and motives    - Legal Types of market 1. Liberal Market economies \--favor competition/ radical innovations/ receptive to foreign firms (US,UK) 2. Coordinated market economies \-- encourage more coordination, family ownership, sready innovation over long-run, (Ger, JPN) 3. Developmental market economies \-\-- strong roles of states, influence industry important to the national economy, high regulations (BZL, CHI)     Key drivers for change \-\-- factors likely to have a high impact on industries and sectors and the success or failure of strategies within them   **Forecasting** =============== 1. Single-point forecasting \-\-- one forecast number 2. Range forecasting \-\-- range of possible outcomes 3. Alternative futures forecasting \-- set of distinctive futures , discontinuous ( happen or not) even driven A diagram of uncertainty Description automatically generated **Directions of change** ======================== Megatrends \-\--large-scale movements, slow to form, influence many areas of activity, long-term Inflection points \-\-- trends shift in direction, turning points for the country Weak signals \-\-- advanced signs for future trends, mortgage failure in Cali \-- 2008 crisis   **Scenario analysis** ===================== -    A diagram of a diagram Description automatically generated       **Industry and Sector analysis** **Porter\'s Five Forces framework** =================================== A diagram of a competitive conflict Description automatically generated   1. Competitive Rivalry Drivers of competitions   Competitor concentration and balance Industry growth rate High fixed costs High exit cost Low differentiation   1. Threat of entry Entry barriers   Scale and experience Access to supply or distribution channels Capital requirements Legislation or government action Expected retaliation of existing firms   1. Threat of substitutes   Extra-industry effects \-- buyers switching cost to substitute The price/performance ratio   1. Power of buyers   Concentrated buyers Low switching costs Buyer competition threat \-- backward vertical integration (acquisition of suppliers) Low buyer profits and impact on quality   Distinguish strategic customers (end consumers ) and powerful buyers (retailers)toward whom the strategy should be primarily oriented   1. Power of suppliers   Concentrated suppliers High switching costs Supplier competition threat \-- forward vertical integration Differentiated products     - Complementor \-\-- organizations that enhance your business attractiveness to customers or suppliers - Network effects \-- one customer of a product or service has a positive effect on the value of that product for other customers   Implementations of five forces which industries to enter or leave? how can the five forces be managed? how are competitors affected differently?   **Industry types** ==================  Hypercompetitive industries \-\-- the frequency, boldness and aggression of competitor interactions accelerate to create a condition of constant disequilibrium and change/rivals tend to invest heavily in destabilising innovation, expensive marketing initiatives and aggressive price cuts, with negative impacts on profits. Hypercompetition often breaks out in otherwise oligopolistic industries   **Industry Life cycle** ======================= A diagram of growth and development Description automatically generated **Comparative industry structure analysis** =========================================== -  **Strategic group** =================== A screenshot of a computer screen Description automatically generated Understanding strategic group is useful... 1. Understanding competition 2. Analysis of strategic opportunities 3. Analysis of mobility barriers  **Market segments** =================== Variations in customer needs Specialization within the market segments      **Strategy canvas** =================== - Critical success factor \-\-- particularly valued by customers/ significant advantage in terms of cost - Value curve - Value innovation \-- the creation of new market space by establishing critical success factors where competitors perform badly or haven\'t entered - Blue oceans \-- new market spaces where competition is minimized \-- red ocean  A diagram of a company Description automatically generated   **Resources and Capabilities analysis** **Resource-based view** =======================  **Distinctive resources and capabilities** ========================================== **VIRO model** ============== A screenshot of a questionnaire Description automatically generated - V- value of resource sand capabilities Value to customers Taking advantage of opportunities and neutralising threats Cost - R - rarity Rare resources and capabilities \-- possessed uniquely by one organization or by a few others- powerful branding - I -Inimitability \-- competitors find it difficult and costly to imitate or obtain or substitute Advantage Is more likely to be determined by capabilities ( way they deploy resources) 1. Complexity Internal linkages \-- linked activities deliver values to the customers External interconnectedness \-- activities that customers get dependent on them 1. Causal ambiguity Characteristic ambiguity \-\-- significance of the characteristic is difficult to comprehend, based on tacit knowledge/ organizational culture Linkage ambiguity \-- competitors cant discern which are dependent on which to form linkages 1. Culture and history \-- Tacit organizational knowledge ( personal, contexxt-specific, hard to formalize and communicate) \ explicit knowledge ( can be articulated and transmitted in formal systematic ways )  - O -organizational support \-\-- supporting capabilities / structure organizations in the way that it can fully take advantage of valuable rate and inimitable resources and capabilities A screenshot of a computer Description automatically generated**Value Chain** =============================================================================    Value chain is used... 1. As a generic description of activities 2. Analyzing the competitive position 3. Analyze the value and cost of activities identifying sets of value activities relative importance of activity costs internally   Value chain and Value system identify... 1. Make or buy \-- outsourcing decisions for a particular activity 2. Activities and cost/price structure of the value system 3. Profit pools \-\-- different levels of profit available at different parts of the value system 4. Partnering \-- who can be the best partner in the value chain A diagram of a company\'s value chain Description automatically generated **Activity system** =================== 1. Relationship to the value chain 2. Importance of linkages and fit 3. Relationship to VRIO 4. Superfluous activities    **Benchmarking** ================ Industry/sector benchmarking & Best-in-class benchmarking   Potential limitations Surface comparisons \-- not explaining reasons Simply achieving competitive parity \-- best outcome is to reach the same level as the competitive parity **SWOT** ======== Main dangers Listing \-- prioritization of issues matters A summary, not a substitute to other analysis A close-up of a chart Description automatically generated   **Dynamic capabilities** ========================   Types of Dynamic capabilities 1. Sensing \-\-- constantly scan and search and explore opportunities ( R&D, Investigating customer needs) 2. Seizing \-\-- address new opportunities with new products 3. Reconfiguring \-- renewal of capabilities like tech, manufacturing, markets...     ***Approaches to manage resources and capabilities*** ===================================================== internal capability development \-- building and recombining capabilities, leveraging capabilities, stretching capabilities external capability development ceasing activities \-\-- if non-main activities can be outsourced or reduced in costs ** Stakeholders and Governance** - stakeholders are those individuals or groups that depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends. ** ** **Stakeholder groups** ====================== 1. Economic stakeholders \-- suppliers, customers, distributors, banks and shareholders 2. Social/political stakeholders \-- policy-makers, local coucils, regulators, and government agencies 3. Technological stakeholders \-- key adopters, standards agencies and ecosyste members supplying complementary products 4. Community and society stakeholders \-\-- affected by what the business does / activist groups 5. Internal stakeholders      A close-up of a text Description automatically generated **Stakeholder mapping** =======================  - Power \-\-- ability of individuals or groups to persuade induce or coerce others into following particular strategies - Attention \-- extent to which stakeholders pay attention to the particular strategy of the company Criticality Channels \-\-- good channel of information and communication Cognitive capacity \-\-- e.g. institutions need to reduce the complexity bc they own various companies and thus flood of information A diagram of power sources Description automatically generated with medium confidence Mapping helps the coalition-building process 1. Analyzing the key blockers and facilitators 1. Repositioning certain stakeholders 2. Maintaining the appropriate level of attention of power   **Ownership models** ====================  1. Publicly-quoted companies \-\-- publicly traded corp, short-term profit , owners often don't own the corp 2. State-owned enterprises \-- majority owned by national / regional gov, other country-specific objectives than just profits 3. Entrepreneurial businesses \-\-- owned and controlled by founders, closely attend on profit 4. Family businesses \-\-- family members might lack in skills to attend to strategy, hire chairman for management, long-term, diversification to small businesses   **Corporative governance** ========================== Governance chain \-- roles and relationships of different groups involved in the governance of an organization A diagram of a company structure Description automatically generated   - Governance issues from principal-agent theory 1. Knowledge imbalances \-\-- agents\>principals 2. Monitoring limits \-\-- difficult for principals to monitor closely 3. Misaligned incentives \-- agents are liable to pursue other objective that reward them better   **Governance models**  ====================== Shareholder model \-- public corp adv higher rates of return reduced risk increased innovation and entrepreneurship better decision making Dis Diluted attention Vulnerable minority shareholders Shor-termism - Stakeholder model \-- wealth is created by a variety of stakeholders/ deserve a portion of corp Adv long-term horizons Less reckless risk-taking better management Dis Weaker decision-making Uneconomic investments Reduced innovation and entrepreneurship - How boards of directors influence strategy Delegation Engagement   **CSR** ======= \-\-- commitment by organizations to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large.    ** History** ============ A diagram of cultural influence Description automatically generated     **Strategy and history** ========================  1. History Continuity - historical resources, path dependencies ( how early events and decisions establish policy paths that have lasting effects on subsequent events and decisions) 2. Historical Selection \-- historical learning, historical legitimation ( use of past to legitimate new strategies to gain acceptance) 3. Historical rediscovery 4. Historical Rupture \-\-- technological disruption, organizational crisis **Historical analysis** ======================= Chronological analysis \-\-- set down a chronology of key events Cyclical influences \-- economic cycles... Key events and decisions Historical story-telling **Culture and strategy** ======================== Geographically based cultures \-- Hofstede A diagram of a diagram Description automatically generated   **Organizational field** ======================== 1. Categorization \-- categorize members of the organizational field by activities 2. Recipes \-\-- a set of assumptions, norms, and routines held in common within an organizational field about the appropriate purposes and strategies of field members 3. Legitimacy \-- concerned with meeting the expectations within an organizational field in terms of assumptions, behaviors and strategies   - Organizational culture taken-for-granted assumptions and behaviors of an organization\'s members 1. Values 2. Belief 3. Behaviors 4. Taken-for-granted assumptions \-- paradigm ( set of assumptions held in common and taken for granted in an organization )  **Subdivided cultures in practice** =================================== 1. Organizational subcultures \-- e.g different cultures depending on the geographic differences 2. Organizational identity \-- what members believe and understand regarding who they specifically are as an organization   **Cultural influence on strategy** ================================== A diagram of a process Description automatically generated - **Cultural web**  1. Paradigm 2. Rituals and routines \-- repetitive nature of org cultures 3. The stories 4. Symbols \-- objectives , events, acts r people that convey, maintain or create meaning over and above their functional purpose 5. Power 6. Organizational structures 7. Control systems \-- formal and informal says of monitoring and supporting people   - Undertaking cultural analysis Statements of cultural values Pulling it together \-- characterizes the culture that the information conveys.   A diagram of a diagram Description automatically generated **Strategic drift** =================== Phases of strategic drift 1. Incremental strategic changes \-- small changes, slow, no need for more radical change / pace of environment is slow 2. Strategic Drift \-\-- rate of environmental change starts to outpace the rate of the org\'s strategic change 3. Flux \-- downturn in performance caused by the growing gap , strategies without any clear directions/ loop back to itself 4. Transformation or death \-\-- bankruptcy or radical change to keep up with the environmental changes  - Why its hard to avoid strategic drift 1. Uncertainty 2. Path dependency and lock-in 3. Cultural entrenchment 4. Powerful People ** Business strategy and models** ================================= - SBU \-- strategic business unit \-- supplies goods or services for a distinct domain of activity 1. Generic competitive strategies 2. Interactive strategies 3. Business models   A diagram of a business strategy Description automatically generated   **Generic competitive strategies** ================================== Competitive strategy \-- how a company, business unit, or organization achieves competitive advantage in its domain of activity Competitive advantage \-- how a company, business unit or org creates values for its users both greater than the costs of supplying them and superior to that of rivals    **Cost leadership strategy** ============================ Key cost drivers input costs economies of scale experience product. Process design A diagram of a curve and a graph of a period Description automatically generated with medium confidence   Options of cost-leaders 1. Parity \-- same prices as the average competitor, translating its cost advantage wholly into extra profit 2. Proximity \-- closeness to competitors in terms of features, small cuts in prices /    **Differentiation strategy --** =============================== \- uniqueness along some dimension that is sufficiently valued by customers to allow a price premium Primary differentiation provider 1. Product and service attributes 2. Customer relationships 3. Complements \-\-- build linkage to other products **Focus strategy** ================== 1. Cost focusers \-\-- segments where broader cost based strategies fail bc of the added costs for wide range of needs 2. Differentiation focusers \-\-- on particular need/ build specialist knowledge and technology/ increases commitment to service and can improve brand recognition and customer loyalty Key factors to successful focus strategy 1. Distinct segment needs 2. Distinct segment value chain 3. Viable segment economics **Hybrid strategy** =================== Situations where strategies can be combined 1. Organizational separation 2. Technological or managerial innovation **Strategic clock** =================== A diagram of a strategy Description automatically generated **Interactive strategies** ========================== \-\-- strategies are interactive with those of competitors    A diagram of a business strategy Description automatically generated with medium confidence  Key decisions 1. Threat assessment 2. Differentiation response 3. Cost response **Game Theory** =============== 1. Get in the mind of the competitors 2. Think forwards and reason backward     - Business model \-\-- value proposition for customers and other participants, an arrangement of activities that produces this value, and associated revenue and cost structures    **Attributes of business model** ================================ 1. Value creation 2. Value configuration \-- how various interdependent resources and activities in the value chain underline the value proposition 3. Value capture \-- revenue stream **Business model patterns** =========================== 1. Razor and blade \-- selling two technically interlinked products ( sell one at extreme premium) 2. Freemium 3. Peer-to-peer \-- co-cooperation among individuals/ without middle one ( uber, Airbnb) **Multi-sided platforms** ========================= A table with text on it Description automatically generated Platform comp platform distinctiveness and size Choosing platform sides Multi-homing costs **Corporate strategy** ======================    - Diversification \-- increasing the range of products or markets served by an organization - Related diversification \-- expanding into products or services with a relationship to the existing business \ unrelated diversification A diagram of a company\'s strategy Description automatically generated - Market penetration \-- increasing share of current markets with the current product or service range Constraints 1. Retaliation from competitors 2. Legal constraints 3. Economic constraints - Product and service development \-\-- organizations deliver modified or new products ( or services) to existing markets Can be an expensive and high-risk activity bc... 1. New resources and capabilities \-- mastering new skills that employees are not familiar with 2. Project management risk \-- delays and increased costs - Market development \-\-- offering existing products/services to new markets Forms of market dev 1. New users 2. New geographies - Unrelated diversification **Diversification drivers** =========================== 1. Exploiting economies of scope \-- efficiency gains through applying the org existing resources of capabilities to new markets or services 2. Stretching corporate management capabilities - dominant logic ( set of corporate-level managerial capabilities applied across the portfolio of business) Exploiting superior internal processes internal processes within a diversified corporation- more efficient than external processes in the open market Emerging markets \-- conglomerate 1. Increasing market power Synergies \-- benefits gained where activities or assets complement each other so that their combined effect is greater than the sum of the parts **Value-destroying diversification drivers** ============================================ 1. Responding to market decline 2. Spreading risk across range of market 3. Managerial ambition Diversification and performance    **Vertical Integration** ======================== 1. Backward \-- input business ( supplier) 2. Forward \-- output ( retailers) A diagram of a car manufacturer Description automatically generated Decision between outsourcing and integration depends on the balance between 1. Relative resources and capabilities \-- does subcontractor perform better? 2. Risk of opportunism \-- is the subcontractor likely to take advantage of the relationship over time? **Divestment** ============== \-- org decides to pull out of out one or more of its businesses Main types of divestment 1. Sell-off \-\-- sold to another company (SBU or comp) \-- LBO, MBO ( management team raises finance to buy out) 2. Spin-off - share of the SBU are distributed to parent organizations shareholders and the business is listed on the stock exchange 3. Equity carve out \-\-- sales a portion of SBU shares to the public in IPO/ still has controlling shares      **Value creation and the corporate parent** **Value-adding activities** =========================== 1. Envisioning 2. Facilitating synergies 3. Coaching 4. Providing central services and resources 5. Intervening - Value-destroying activities 1. Adding management costs 2. Adding bureaucratic complexity 3. Obscuring financial performance - Portfolio manager \-- active investor in a way that shareholders in the stock market are either too dispersed or too inexpert to be able to do so A diagram of a diagram of a company Description automatically generated   - Synergy manager \-- corporate parent seeking to enhance value for business units by managing synergies across business units Challenges 1. Excessive costs 2. Overcoming self-interest 3. Illusory synergy - Parental developer \-- seeks to employ its own central capabilities to add value to its business challenges 1. Parental focus 2. The crown jewel problem \-\-- performing well but parent adds little value / corp can be excessively attached **BCG matrix** ============== -  Problems 1. Definitional vagueness 2. Capital market assumptions \-- assumes that capital cannot be raised in external markets 3. Unkind to animals \-\-- cash cows and dogs receive ungenerous treatment 4. Ignores commercial linkages \-\-- assumes there is no ties to other business unit **McKinsey matrix** =================== - A diagram of a diagram Description automatically generated     **Parenting Matrix** ==================== 1. Feel \-- fit between each business unit\'s success factors and the capabilities of the corporate parent / how well the parent corp understand the business 2. Benefit \-- fit between the parenting opportunity and capabilities of the parent / right capabilities for the parenting opportunities / how much the parent corp can add value to the business 3.  **International strategy** ========================== A diagram of a strategy Description automatically generated   #### **Yip\'s globalization framework**  **Locational advantage : porter\'s diamond** ============================================ A diagram of a company Description automatically generated 1. Factor conditions \-\-- factors of production that go into making a product or service (land, labor, raw materials) 2. Home demand conditions \-\-- nature of the domestic customers/ trained by sophisticated customer base in home country \-- comp adv 3. Firm strategy, industry structure and rivalry \-- competitive local industry \-- adv in overseas - Global sourcing \-\-- purchasing services and components form most appropriate suppliers around the world, Adv 1. Cost adv include labor costs, transportation costs, communication costs and taxation and investment incentives 2. Unique local capabilities 3. National market characteristics **Global integration** ====================== - Local responsiveness \-- greater need to disperse operations and adapt to local demand - Global-local dilemma \-- products and services may be standardized across national boundaries or need to be adapted to meet the requirements of specific national markets  1. Export strategy \-- exporting / leverage home country adv 2. Multi-domestic \-- offer different product in each market, tailor for the local needs 3. Global strategy \-\-- standard products for all the countries , capture the scale of economies 4. Transnational stategy \-- mix of both multi-domestic and global \-- diff products/ knowledge sharing... , value chain integration **CAGE framework for analysis before entry** ============================================ 1. Cultural distance 2. Administrative and political distance 3. Geographical distance 4. Economic A diagram of a spider web Description automatically generated   **Market assessment criteria** ============================== 1. Market attractiveness ( pestel, cage...) 2. Defender\'s reactiveness 3. Defender\'s clout \-- power that defender is ablet to muster in order to fight back/ shares in the market ( connections with local players, gov)  **Entry mode strategies** ========================= - Staged international expansion model \-- proposes a sequential process whereby companies gradually increase their commitment to newly entered markets, as they build knowledge and capabilities A chart with text on it Description automatically generated with medium confidence The gradualism of staged international expansion outlined above has, however, recently been challenged by two phenomena 1. Born-global firms \-\-- new small firms that internationalize rapidly at early stages in their development ( new tech) \-- condition of existence 2. Emerging-country multinationals \-- Chinese/Indian \-- unique capabilities in the home market , spread quickly to world markets #### **Subsidiaries**  **Internationalization and performance** ======================================== 1. Inverted U-curve \-- moderate internationalization leading to the best results 2. Service-sector disadvantages \-- tightly regulated for foreign corp, sensitive to cultural differences 3. Internationalization and product diversity\-- product-diversified firms are likely to succeed in the entry \-- have sufficient resources and capabilities for managing the internal diversity ** Entrepreneurship and innovation** ==================================== - Strategic entrepreneurship \-- combines strategy and entrepreneurship and includes both advantage-seeking strategy activities and opportunity-seeking entrepreneurial activities to create value A diagram of innovation and entrepreneurship Description automatically generated        **Steps in the entrepreneurial process** ======================================== A diagram of a business process Description automatically generated     **Stages of Entrepreneurial Growth** ====================================  - Social entrepreneurs \-\-- individuals and groups who create independent org to mobilize ideas and resources to address social problems, typically earning revenues but on a not-for-profit basis Key choices 1. Social mission 2. Organizational form \-- cooperative forms 3. Business model \-- revenues dependent on the marketplace not only gov subsidy or charity donations **Market pull** =============== Lead users **Frugal innovation** ===================== \-\-- the pull exerted by ordinary consumers, particularly poor in emerging markets/ poor people\'s real needs   A diagram of a product and process diagram Description automatically generated **Product and process innovation** ================================== New developing industries \-- favor product innovation, defining the basic features of the product Maturing industries \-\-- favor process innovation\-- efficient production of a dominant design Small new entrants \-- greatest opportunity when dominant designs are not established or beginning to collapse Large incumbent firms \-- adv during the periods of dominant design stability, economy of scale - Open innovation \-- deliberate import and export of knowledge by an organization in order to accelerate and enhance its innovation **Balance between open and closed innovation depends on...** ============================================================ 1. Competitive rivalry 2. One-shot innovation \-- involves a major shift in tech 3. Tight-liked innovation \-- complex and tightly interlinked tech **Innovation diffusion** ======================== - Pace of diffusion is determined by features like... Supply Side 1. Degree of improvement 2. Compatibility with other factors 3. Complexity 4. Experimentation \-- ability to test products before commitment 5. Relationship management \-\-- how easy to get infor / receive support/ order... Demand Side 1. Market Awareness 2. Network effects 3. Customer propensity **Diffusion S-curve** ===================== \-- process of initial slow adoption of innovation, followed by a rapid acceleration in diffusion, leading to a plateau representing the limit to demand  - S curve decision points 1. Timing of the tipping point 2. Timing of the plateau 3. Extent of diffusion 4. Timing of the Tripping point **First-mover advantage** ========================= 1. Network effects 2. Experience curve benefits 3. Scale benefits 4. Pre-emption of scarce resources 5. Reputation 6. Buyer switching cost Late-mover adv 1. Free-riding 2. Learning - First-second being the most appropriate response - Fist to imitate the original innovator and thus building an early mover adv **Factors for choosing innovators or imitators** ================================================ 1. Capacity for profit capture 2. Complementary assets \-- possession of assets or resources for innovation/ scaling up 3. Fast-moving arenas \-- markets and tech are moving fast/dynamic **Disruptive innovation** ========================= A diagram of technology and innovation Description automatically generated **Approaches to be disruptive innovators** ========================================== - Develop a portfolio of real options - Corporate venturing - Intrapreneurship    **Mergers, Acquisitions and Alliances** A diagram of a strategy Description automatically generated **Organic development** ======================= Adv - Knowledge and learning - Spreading investment over time - No availability constraints - Strategic independence - Culture management **Corporate entrepreneurship** ============================== **M&A context** =============== - Historical context \-\-- M&A cycles influenced by global economy, new regulations, availability of finance, stock market performance, tech disturbances, supply of available target firms - Geographic context \-\-- Difference in national governance systems.. **Strategic motives for M&A** ============================= - Extension \-\-- geography, products, markets - Consolidation \-- consolidate the competitors - Resource and Capabilities \-\-- increase them **Financial Motives for M&A** ============================= - Financial efficiency \-\-- strong balance sheet acquiring highly indebted target company \-- save interest payment, bargaining in price for assets - Tax efficiency \-\-- transferrable tax losses - Asset stripping or unbuilding \-\-- assets worth more than the price \-- buy and immediately sell-off **Managerial motives for M&A** ============================== - Personal ambition - Bandwagon effects \-- pressure on senior managers (market trend of M&A) **Target Choice in M&A** ======================== - Strategic fit - Organizational fit  **Integration in M&A** ====================== - Depends on key criteria - The extent of strategic interdependence - The need for organizational autonomy  **Post-acquisition integration matrix** ======================================== A diagram of a diagram Description automatically generated 1. Preservation \-\-- Allowing old strategies, cultures, and systems to continue. Minimum changes , retain top management 2. Symbiosis \-\-- both learn from each other, time consuming, retain the top management, far-reaching changes ( most complex model) 3. Intensive care \-\-- not integrate the firm/ impose short-term targets and strategies to solve problems, top management replaced, businesses will be for sale later 4. Absorption \-\-- rapid adjustment of firm to the needs of new owner, new top management, different management style 5. Reorientation acquisitions \-\-- \-- distinctive resources of the firm is left and few changes to internal operations/ new top managers **Organizational Justice** ========================== - Distributive justice \-- distribution of rewards and positions - Procedural justice \-\-- procedures by which decisions are made - Informational justice \-\-- how information is used and communicated   **Strategic alliance** ====================== - Collective strategy \-\-- how the whole network of alliances of which an org is a member , competes against rival networks of alliances - Collaborative advantage is about managing alliances better than competitors **Types of Strategic Alliances** ================================ - Equity alliances \-\-- creation of a new entity owned separately by the partners involved - Non-equity alliances \-\-- based on contracts, ( franchising) **Motives for alliances** =========================    - Strategic alliance processes Co-evolution Trust ** Strategic alliance evolution** ================================= A diagram of a diagram Description automatically generated 1. Courtship \-\-- managerial time commitment 2. Negotiation \-\-\-- mutual roles at the outset, proportion of ownership 3. Start-up \-\-- investment of material and human resources, trust 4. Maintenance \-\-- ongoing operations of the strategic alliance 5. Termination \-\-- completion of agreed span / purpose from the start **Buy, Ally or DIY** ==================== Three key factor 1. Urgency 2. Uncertainty 3. Type of resources and capabilities