Strategy Analysis PDF

Chapter 1: Introducing Strategy 1. Definition: Strategy is the long-term direction of an organization a) Three elements of strategy Long-term: three horizons Strategic direction: Visions, Missions, Values, Objectives Organizations: Internal, External shareholders b) The pu...

Chapter 1: Introducing Strategy 1. Definition: Strategy is the long-term direction of an organization a) Three elements of strategy Long-term: three horizons Strategic direction: Visions, Missions, Values, Objectives Organizations: Internal, External shareholders b) The purpose of strategy: mission, vision, values, objectives Mission statement: provide employees and stakeholders with clarity about what the organization is fundamentally there to do Vision statement: the future the organization seeks to create Statements of corporate values: underlying and enduring core ‘principles’ that guide an org's strategy and define the way that the org should operate Objectives: statements of specific outcomes that are to be achieved ○ ‘triple bottom line': environmental, social c) Strategy statements: The fundamental goals (mission, vision, or objectives) that the org seeks The scope/ domain of the org's activities The particular advantages/ capabilities it has to deliver d) Levels of strategy Corporate-level strategy: provide employees and stakeholders with clarity about what the organization is fundamentally there to do Business-level strategy: how the individual businesses should compete in their particular markets (competitive strategy) Functional strategies: how the components of an org deliver effectively the corporate- and business-level strategies in terms of resources, processes, and people 2. Exploring Strategy Framework (3 pillars of strategic issues) Understanding the strategic position of an org Assessing strategic choices for the future Managing strategy in action Chapter 2: Macro-environment 1. Layers of the business environment  2. Analyzing: a) PESTEL Analysis: Political The role of the state e.g. as an owner, customer or supplier of businesses. Other political factors include government policies, exposure to civil society organizations, political risk in foreign markets, changes in trade blocks (e.g.expansion of EU). Economic The role of macro-economic factors. This includes business cycles, interest rates, personal disposable income, exchange rates, unemployment rates, differential growth rates around the world. Social Changing cultures and demographics ○ aging population in Western societies, income distribution, lifestyle changes, consumerism, changes in culture and fashion Technological New discoveries and technology developments ○ developments on the AI front, nano-technology or the rise of new composite materials Ecological This refers to ‘green’ environmental issues, such as pollution waste and climate change. ○ Environmental protection regulations, energy problems, global warming, waste disposal and recycling Legal Legislative and regulatory constraints or changes. ○ IPR, competition law, health and safety law, employment law, liberalisation of trade law. b) Key drivers of change environmental factors key drivers vary by market or industry c) Using the PESTEL framework Forecasting: Directions of change ○ Megatrends: large-scale changes, slow to form, influence many other activities ○ Inflexion points: trends shift sharply upwards or downwards ○ Weak signals: advanced signs of future trends that may help to identify inflexion points–often unstructured and fragmented bits of information. Scenario analysis: ○ Scenarios: plausible views of how the environment of an organisation might develop in the future based on key drivers of change about which there is a high level of uncertainty. Build on PESTEL, drivers of change  More than a single view Industries with long planning horizons (oil/ airlines) ⇒ plausible alternative views of how the macro-environment might develop in the future, typically in the long term. ○ Conduct scenario planning: Identify key drivers of change Develop scenarios Build detailed narratives Analyze scenario Develop a Strategic Plan Monitor and Adapt Chapter 3: Industry Analysis 1. Competitive forces: The Five-Forces Framework Helps identify the attractiveness of an industry in terms of five competitive forces ○ The threat of entry Barriers that need to be overcome by new entrants ⇒ low threat when the entry barriers are high & vice versa Main barriers: Economies of scale/ high fixed costs Legislation or gov restrictions Expected retaliation (doing sth harmful) from incumbents (ng/ cty đã có vị trí) ○ The threat of substitutes Products/ Services - a similar benefit to an industry, but different nature (from outside the industry) ⇒ Customers switch to alternatives Threat increases: performance/ price ratio of the substitute is superior ○ The bargaining power of buyers ○ The bargaining power of suppliers Powerful suppliers ⇒ reduce an org’s profits  High supplier power Concentrated Provide a specialist/ rare input High switching cost (when changing suppliers) Suppliers integrate forwards (move downstream, làm cả việc của trung gian - low cost airlines → cut out use of travel agents) ○ The extent of rivalry between competitors Orgs with similar products and services, aimed at same customer group, direct competitors in the same industry/ market Rivalry increases Competitors: roughly equal size Competitors: aggressive in seeking leadership Market: mature/ declining Exit barriers: high 2. Product and process innovation Product innovation: final product/ service to be sold (features) Process innovation: the way a product is produced and distributed (esp improvements in cost/ reliability) Product and process innovation vs life cycle 3. Issues: Defining the ‘rigth' industry: apply at the most appropriate level - not necessarily the whole industry Converging industries (Hội tụ giá): particularly in the high tech arenas, where industries overlap Complementary orgs 4. Strategic Groups Groups of companies that use similar strategies to compete in a given industry Alternative way to map industry structure Illustrates: not all firms are competitors Have at least 2 or more competitive characteristics in common  5. Dimensions to consider 6. Strategic Implications: Mobility barriers Cost associated with move to another strategic group Cost of change ○ Little costs of competing within the same strategic group ○ Costs of competing with firms in another strategic group (can be low or high) Asymmetrical (ko đối xứng) Mobility Barriers Chapter 4: Resources and Capabilities 1. Resources and competencies Strategic capabilities: capabilities of an org that contribute to its long-term survival/ competitive advantage ○ Resources: assets (what we have) ○ Competences: the way assets are used effectively (what we do well) 2. The VRIO concept: Evaluation → achieving sustainable competitive advantage 3. Dynamic capabilities ability to renew and recreate its strategic capabilities → meet the changing environment distinct from ordinary → may be necessary now, may not be sufficient to sustain superior performance in the future Generic dynamic capabilities ○ Sensing: identify and assess opportunities → constantly scanning ○ Seizing: ability to capitalize on identified opportunities (creating new products, processes, or entering new markets) ○ Re-configuring: reshaping their resources, routines, and investments to ensure they can continue adapting to changes in the market → new products and processes may require renewal and re-configuration of capabilities and investment in new technologies. 4. Redundant capabilities → effective in the past, but become less relevant  5. The Value Chain categories of activities → create a product/ service ○ 5 primary activities ○ 4 support activities ⇒ Competitive advantage The value chain concept Usefulness of the VC ○ A generic description of activities ○ Identifying activities → S and W ○ Analysing the competitive position (VRIO) → sustainable competitive advantage ○ Enhance value/ decrease cost The Value System: comprises the set of inter-organizational links that are necessary to create a product/ service ⇒ Competitive advantage: can be derived from linkages within the VS Chapter 5: SWOT Analysis Value creation in VRIO framework A resource is valuable if “it exploits opportunities and/or neutralizes threats in a firm' environment" Resources are valuable “when they enable a firm to conceive of or implement strategies that improve its efficiency and effectiveness" Resources have value in relation to their ability to meet customers’ needs. 1. How to access value?  Use Value = Willingness to pay (WTP): The intrinsic worth of a product or service as perceived by the customer based on its ability to fulfill their needs or solve their problems ○ Smartphone's use value: internet connectivity, camera quality, user interface Exchange Value: The market price of a product or service, determined by customer perception of its benefits and comparison with alternative ○ Smartphone: retail price, influenced by brand reputation, competitive pricing, market demand Consumer surplus (value for money) = WTP - Exchange value (or price paid) ⇒ Measure the benefit to consumers and producers from participating in the market. ⇒ Indicating extra benefit they receive ⇒ Objective: increase consumer surplus Value creation ○ Increase WTP (differentiation) ○ Decrease price 2. SWOT Analysis find and analyze ways to increase the willingness-to-pay or reduce the price (including costs of production and delivery) Definition: strategic planning tool used to identify an organization's internal Strengths and Weaknesses, as well as external Opportunities and Threats. Purpose: helps businesses understand their current position and formulate strategies for growth, risk management, or market positioning. Key Components: S Internal factors that give the business an advantage over competitors (e.g., strong brand, unique technology, skilled workforce). Ask: What does the company do well? What resources are superior? W Internal factors that may hinder business growth or competitive advantage (e.g., outdated technology, limited distribution channels). Ask: What needs improvement? Where is the company lacking? O External conditions that the business could exploit to its advantage (e.g., emerging markets, changes in regulation, new trends). Ask: What trends or events can the company benefit from? T External challenges that could harm the business (e.g., economic downturns, new competitors, shifting consumer preferences). Ask: What external risks could affect the company’s success? 3. The TOWS matrix 4. Various types of ownership  Top (Exclusive): Organizations that focus primarily or exclusively on profit-making. Their core objective is maximizing financial returns. Bottom (Mixed): Organizations that balance profit-making with other objectives, such as social, public, or community goals. Hybrid orgs: Orgs that try to combine potentially conflicting values: social, economic ○ Social values ⇒ create economic benefits: committed employees, attractive products ○ ESG: environmental, social, governance ○ Purpose: Chapter 6: Stakeholder Analysis & Culture 1. Definition: Freeman (1984:25): “Any group/ individual who can affect/ is affected by the achievement of the firm's objectives" 2 types of stakeholders: ○ Primary (a.k.a. ‘related parties’) Parties that the firm does business with (e.g., customers, strategic partners, investors) And that are strategically important to the firm’s survival ○ Secondary (a.k.a. ‘third parties’) Parties involuntarily related to the firm Are often unable to affect the firm directly in return (e.g., victims of misconduct, communities). ○ Overview of stakeholders  Analysis of stakeholders: The power/ attention matrix 2. Organizational governance Structures and systems of control that keeps (top) managers accountable to those who have a legitimate stake in the business The Board: ○ responsible for dictating policies within the org, determining plans and objectives ○ designing the management team's compensation structure, overseeing their performance  Two types of governance: ○ Principal-agent model: Principals (shareholders/board) employ agents (managers) to act on their behalf ○ The governance chain: roles and relationships of different groups involved in the governance of an organization 3. Board Diversity: Inclusion of members with varied backgrounds, perspectives, and experiences, including differences in gender, race, age, professional background, and other attributes. Benefits:  ○ Enhanced Decision-Making: Diverse perspectives lead to more thorough analysis and better decision-making. ○ Improved Company Performance: Studies show a positive correlation between board diversity and financial performance. ○ Better Representation of Stakeholders: A diverse board can better understand and address the needs of a diverse customer base. ○ Innovation and Creativity: A variety of viewpoints can foster innovative thinking and problem-solving. 4. Activist Investors: Shaping Corporate Strategies Activist investors are shareholders who seek to bring about significant changes in a company’s operations, financial structure, or leadership. They often acquire a substantial number of shares to gain influence over company decisions. Objectives of Activist Investors: ○ Improving Company Performance: Activists often push for changes they believe will enhance shareholder value, such as restructuring, cost-cutting, or strategic shifts. ○ Corporate Governance Reforms: They advocate for better governance practices, such as separating CEO and Chairman roles, increasing board diversity, and improving transparency. ○ Shareholder Rights: Activists work to ensure that shareholder interests are adequately represented, often leading campaigns for higher dividends, stock buybacks, or mergers and acquisitions. Methods Used: ○ Proxy Fights: Gaining control over board seats through shareholder votes. ○ Public Campaigns: Using media and public statements to pressure management. ○ Private Negotiations: Engaging with management and the board to propose changes. Impact on Companies: ○ Can lead to positive changes, increased accountability, and improved performance. ○ However, it may also create short-term pressures that conflict with long-term strategy 5. Culture and Strategy:  Organizational culture: taken-for-granted assumptions and behaviors of organizational members 4 layers: ○ Values: explicitly mentioned versus underlying and taken-for-granted (example: BlackRock investment in the coal industry) ○ Beliefs: How people in the organization talk about issues the organization face ○ Behaviors: day-to-day ways in which an organization operates (routines that could hinder change The cultural web:  Strategic Drift: Tendency for strategies to develop incrementally on the basis of cultural influences, failing to keep pace with a changing environment Chapter 8: Entrepreneurship and innovation Entrepreneurship: a process by which individuals, startups or orgs identify and exploit opportunities for new products or services that satisfy a need in a market Innovation: conversion of new knowledge into a new product, process or service and the putting of this … into actual commercial use 1. Entrepreneurship: Opportunity recognition: Entrepreneurs must identify unmet market needs or underexploited opportunities by observing trends, customer pain points, or technological shifts.  Entrepreneurial process: ○ Begins with an idea followed by feasibility analysis. ○ Includes developing a viable business plan, acquiring necessary resources, and evaluating the competitive environment. ○ Requires constant iteration and adapting to changing market conditions. Stages of entrepreneurial growth: ○ Start-up: Initial launch, securing funding, and gaining early customer adoption. → venture capitalists ○ Growth: Expanding operations, scaling production, and increasing market share while managing growing complexity. ○ Maturity: Stabilizing operations, optimizing efficiencies, and defending market position. ○ Exit: Consideration of exit strategies like selling, merging, or IPO. 2. Innovation Dilemmas: Technology push vs. market pull: ○ Technology push refers to innovations driven by new technologies, regardless of immediate market demand (e.g., advanced products). ○ Market pull occurs when innovation is driven by specific customer needs or demands, focusing on solving existing problems. → lead users important Product vs. process innovation: ○ Product innovation involves developing new products or services. ○ Process innovation focuses on improving the efficiency of producing or delivering existing products, which can lead to cost reductions or quality improvements. New developing industries - product innovation Maturing industries - process innovation  Small new entrants - when dominant designs are either not established/ collapse Large incumbent firms: dominant design stability Open vs. closed innovation: ○ Open innovation encourages collaboration with external parties (partners, customers, academic institutions) to enhance innovative capabilities. ○ → Crowdsourcing: ○ → the deliberate import and export of knowledge by an org in order to accelerate and enhance its innovation → need ecosystem ○ Closed innovation relies solely on internal resources for generating and developing new ideas, keeping innovation efforts proprietary. ⇒ Balance: competitive rivalry, one-shot innovation, tight-linked innovation (Apple) 3. Innovation Diffusion and Market Timing: Innovation diffusion: Describes how quickly new innovations are adopted in the market, influenced by factors like product visibility, compatibility with existing practices, and trialability. Diffusion: the process by which innovation spread among users. The pace of diffusion: Supply Demand Degree of improvement Market awareness Compatibility Network effects Complexity Customer propensity to adapt Experimentation Diffusion S-curve: Illustrates the stages of innovation adoption, starting with early adopters and progressing to widespread acceptance over time.  First-mover advantage: Exists where an org is better off than its competitors as a result of being first to market with a new product, process or service ○ Network effects ○ Experience curve benefits ○ Scale benefits ○ Pre-emption of scarce resources ○ Reputation ○ Buyer switching costs Fast-second strategy: Letting the first mover establish the market, then improving on their innovation and entering with a more refined product at a lower risk. ○ Free-riding: imitate at less expense ○ Learning The Incumbent’s Response: Entrepreneurship is often defined by the ability to pursue opportunities and develop innovations without being immediately limited by existing resources. In contrast, incumbent organizations typically face constraints from their established resources, capabilities, and vested interests, making innovation challenging. For instance, Kodak's dominance in the photographic film market diminished significantly with the advent of digital photography. Challenges Faced by Incumbents: 1. Attachment to Existing Assets: Managers may become overly reliant on their current skills and resources, which can hinder their ability to embrace new opportunities. Their careers are often tied to these assets, leading to resistance against change. 2. Close Customer Relationships: Incumbents often have strong ties with their existing customers, who typically prefer gradual improvements rather than radical innovations. This creates a reluctance to introduce disruptive technologies that could cannibalize existing products. Types of Innovation: Sustaining Innovations: These improvements enhance existing technologies along a steady upward trajectory (Technology 1), meeting current customer expectations and allowing incumbents to remain competitive. Disruptive Innovations: creates substantial growth by offering a new performance trajectory that, even if initially inferior to the performance of existing technologies, has the potential to become markedly superior Incumbents struggle to respond to disruptive innovations because their initial poor performance can alienate existing customers. This dynamic poses a significant challenge for established firms attempting to adapt to rapid technological changes. Chapter 6: Business Strategies & Models 1. Corporate Structure: A strategic business unit (SBU): supplies goods or services for a distinct domain of activity ○ Small business = 1 SBU ○ Large diversified corporation is made up of multiple businesses (SBUs) ○ SBUs = divisions/ profit centers ○ SBUs: Market-based criteria (similar customers, channels and competitors); Capabilities-based criteria (similar strategic capabilities). 2. Business level strategies: Definition ○ “Business strategies are about how to compete in a marketplace so that a restaurant for instance has to decide a range of issues such as food concept, menus, décor and prices in the light of local competition from other restaurants. " (Whittington et al. 2020 12th Edition,pg.203) ○ “Strategy is the creation of a unique and valuable position, involving a different set of activities” (Porter, 1996, pg.1) ○ "Business strategy is a set of integrated and coordinated commitments and actions designed to exploit core competencies and gain a competitive advantage in chosen markets or industries" (Hitt, Ireland, & Hoskisson, 2021, pg. 6). a) Porter's Generic Strategies (Three generic strategies) Competitive strategy is concerned with how a company, business unit or organisation achieves competitive advantage in its domain of activity. Competitive advantage: how a company/BU/org creates value for its users both greater than the costs of supplying them and superior to that of rivals ⇒ Costs, prices, profits Cost Leadership: involves becoming the systematically lowest-cost organization in a domain of activity. Four key cost drivers that can help deliver cost leadership: 1  ○ Lower input costs. (locating labor-intensive operations in countries with lower labor costs: India, Southeast Asia, China) ○ Economies of scale. ⇒ Increasing production scale reduces average costs over time, crucial when there are high fixed costs (R&D in pharmaceuticals) Purchasing ⇒ reduce input costs (aircrafts discounts from manufacturers) Minimum efficient scale: Cost-leaders aim to reach this level to minimize costs. Diseconomies of scale: Beyond a certain output level, costs can increase due to overtime, equipment neglect, etc., forming a U-shaped cost curve. ○ Experience: Cumulative experience with production leads to reduced costs over time Labor productivity Design and equipments efficiencies ⇒ Early entrants: entry timing, Higher market share, Continuous improvement: Cost reductions continue over time, though at a slower rate. ○ Product/process design: Efficiency can be ‘designed in’ at the outset. Build products with cheap standard components, not specialized ⇒ COST LEADERS have 2 options: Parity: Matching competitors in product/service features while having lower costs for higher profits (e.g., CSN in steel production). Proximity: Offering slightly lower quality but compensating with lower prices, still retaining better profits than competitors (e.g., Chinese car manufacturers in Western markets). Differentiation: involves uniqueness along some dimension that is sufficiently valued by customers to allow a price premium. The key drivers of differentiation are: ○ Product and service attributes – providing better or unique features (e.g. Apple or Dyson). 2  ○ Customer relationships – customer service and responsiveness (e.g. Zalando); customisation (e.g. SAP) or marketing and reputation (e.g. Coca Cola). ○ Complements – building on linkages with other products/services (Apple and iTunes) Focus Strategies: narrow segment - tailor products to the needs of that specific segment to the exclusion of others ⇒ Focus strategies can seek out weak spots of broad cost leaders and differentiators ○ Cost focusers identify areas where broader cost based strategies fail because of the added cost of trying to satisfy a wide range of need. For instance, in the United Kingdom food retail market, Iceland Foods has a cost-focused strategy concentrated on frozen and chilled foods, reducing costs against discount food retailers with a wider product range Differentiation focusers look for specific needs that broad differentiators do not satisfy so well. ⇒ Success depends on at least 1 of 3: Distinct segment needs, Distinct segment value chains, Viable segment economics ○ Stuck in the middle: Hybrid strategies ⇒ integrate cost and differentiation advantages Technological or managerial innovations where both cost efficiency and quality are improved/ Organizational separation Competitive failures – if rivals are similarly ‘stuck in the middle’ or if there is no significant competition then middle strategies may work. a) Bowman's Strategy Clock: allows for a dynamic approach for examining alternative generic strategies and gives more scope for hybrid strategies. It is focused on the prices to customers rather than the costs to organizations. The circular design allows for incremental adjustments in strategy rather than stark choices. 3 a) Game theory: consider competitors' likely moves and the implications of these moves for its own strategies ⇒ get in the mind of competitors, think forwards and reason backwards about competitive & cooperative strategies 1. Business Models Definition: ○ “A business model describes a value proposition for customers and other participants, an arrangement of activities that produces this value, and associated revenue and cost structures..” Whittington et al., 12th Edition ○ “the purpose of a business model is to describe and present the rationale of how organizations create, deliver and capture value..” Osterwalder, 2004 How to create and capture values: ○ Problem-Solution fit/Value Creation: Can you solve a problem for a certain group of people? ⇒ What is offered, how value is thus created for various parties involved ○ Product- Market fit/ Value Configuration: Do you have something people want (+ are willing for pay for)? ⇒ How various interdependent resources in the value chain underlie the value propostion ○ Business Model fit / Value Capture: Can you build a financially sustainable business around this? 1. Business models patterns: 4 Freemium Model: Provides basic services for free while charging for premium features or additional functionality. Example: Spotify offers free music streaming with ads but charges for ad-free and premium features. Pay-per-Use Model: Charges customers based on how much they use a product or service. Example: Utility companies or cloud services like AWS, where users are billed for the actual amount of resources consumed. Subscription Model: Customers pay a recurring fee, typically monthly or annually, for continuous access to a product or service. Example: Netflix or SaaS (Software-as-a-Service) platforms like Microsoft 365. Razor-Blade Model: Sells a base product at a low price or loss, but makes a profit by selling high-margin complementary goods. Example: Gillette sells razors at low prices but generates significant profits from replacement blades. Peer-to-Peer (P2P) Model: Facilitates transactions directly between individuals without intermediaries. Example: Airbnb or Uber, where the platform connects users with service providers. Long Tail Model: Focuses on selling a large number of niche products, each with relatively small sales volumes, instead of focusing on a few popular products. Example: Amazon’s business model, which leverages online inventory to sell many different niche items. Multi-Sided Platforms: Connects two or more interdependent groups, typically offering services to one group for free or at a reduced cost while monetizing the other group. Example: Google provides free search to users but makes money from advertisers​ 5  1. What is corporate strategy? “Corporate strategy is about the overall scope of the organization and how value is added to the constituent businesses of the organization as a whole.” Whittington et al., 12th Edition “Corporate strategy is the way a company creates value through the configuration and coordination of its multimarket activities.” Collis and Montgomery, 1997, p. 5 ⇒ How broad an organization should be ⇒ SCOPE IS CENTRAL TO CORPORATE STRATEGY The value-adding effect of head office to individual SBUs that make up the org's portfolio is termed parenting advantage 2. What are corporate level strategies a) Strategy directions Ansoff growth strategy matrix Diversification (Market penetration): increasing the range of products/ markets served by an org  ○ Capturing the Cross-Business Strategic–fit ○ Builds more shareholder value than owning a stock portfolio ○ Yields value in the application of specialized resources and capabilities ○ New Products OR New Markets ⇒ Greater market share: increased power vis-à-vis buyers and suppliers (Porter's five forces), greater economies of scale, experience curve benefits ○ Constraints: Retaliation, Legal, Economic Related diversification: expanding into products or services with relationships to existing business ○ Product/ Service development: (Apple: Iphone → Ipad → AW) expensive & high-risk: New resources and capabilities, Project management risk ○ Market development: 2 basic forms New users New geographies Unrelated diversification ⇒ extreme form: conglomerate diversification ○ Astute corporate parenting by management ○ Cross-business allocation of financial resources ○ Acquiring and restructuring undervalued companies 3. Drivers of diversification strategy Exploiting economies of scale & scope (when the resources and capabilities are over/under-utilized: uni’s hall) Stretching corporate management capabilities (dominant logic) → can be applied to businesses not sharing resources at the operating-unit level (LVMH) Exploiting superior internal processes (China → mobilize internal investment) Increasing market power by creating synergies (benefits gained where activities/assets complement → combined effect is greater than sum of the parts 2+2=5)  4. How to execute diversification strategy? a) Vertical integration: entering activities where the org is its own supplier or customer Backward: movement into input activities Forward: movement into output activities Horizontal: the strategy of acquiring other companies that reside along a similar area of the supply chain b) Outsourcing: is the process by which value chain activities previously carried out internally are subcontracted to external suppliers. 5. Evaluation: BCG matrix (Growth share) - Boston Consulting Group  Uses market share and market growth criteria for determining the attractiveness and balance of a business portfolio 6. Divestment strategy: Divestment occurs when the organization decides to pull out of one or more of its businesses. A spin-off distributes shares of the new subsidiary to existing shareholders. IPO (initial public offering), in which shares of a private company are made available to the public for the first time In 2008, Campina was merged with Royal Friesland Foods and the name of the new company is FrieslandCampina. Which one of the below strategies would describe this event better? a. Corporate level strategy b. Business Strategy c. International Strategy d. Innovation Strategy After the bankruptcy of VD, La Place was taken over by Jumbo, a big retailer company in the Netherlands. How would you name this strategy? a. Horizontal integration b. Backward integration c. Forward integration d. Unrelated integration If a business unit has a low market share in a market with stable growth. How would you map this firm in the BCG matrix? a. Star b. Question mark c. Dog d. Cash Cow Barbie recently made an evolutionary change and started to produce new Barbie dolls in different colours, sizes, shapes and heights to represent the diversity among children. How would you name this new strategy of Barbie? a. Market penetration b. Market development c. Product diversification d. Conglomerate diversification Which one of the below statements cannot be considered as a reason of unrelated diversification strategy? a. Exploiting economies of scale b. Stretching corporate management competences c. Exploiting superior internal processes d. Increasing market penetration Session 11: International Strategies International strategy refers to a range of options for operating outside an organization’s country of origin. Global strategy involves high coordination of extensive activities dispersed geographically in many countries around the world. 1. International drivers and potentials of different markets a) Pepsi - Pepsi adapts its products to different markets but generally follows a similar marketing strategy across countries to reach a global customer base. Nike - Nike outsources much of its production to countries where labor and manufacturing costs are lower, allowing the company to scale production efficiently. Tesla - Tesla benefits from favorable government policies in regions like Europe, which promote electric vehicle adoption, driving international expansion. Kellogg’s - Kellogg’s faces competition from other global food brands, pushing the company to continuously enter new markets and regions to remain competitive. b) International value system Global sourcing refers to purchasing services and components from the most appropriate suppliers around the world, regardless of their location. The advantages include: ○ Cost advantages: e.g., labour costs, transportation and communications costs, taxation and investment incentives. ○ Unique local capabilities: e.g., centres of excellence in R&D clusters globally. ○ National market characteristics and national reputation for a particular product. Locational advantages can be due to: ○ Cost advantages including labour costs, transportation and communications costs and taxation and investment incentives e.g., employing software engineers in India. ○ Unique local capabilities. European pharma firms locating in Boston and California to tap into local research expertise. ○ National market characteristics. Differentiated product offerings aimed at different market segments e.g., Gibson high-end guitars  c) Global-local dilemma: The global–local dilemma relates to the extent to which products and services may be standardized across national boundaries or need to be adapted to meet the requirements of specific national markets. ○ TV: can be centralized ○ Processed food: national-specific, decentralize to as near as possible to local market 2. International strategies: Export Strategy: Leverages home country capabilities and strong brand reputation to enter foreign markets with minimal changes (e.g., Google). Multi-Domestic Strategy: Focuses on local responsiveness by tailoring products/services to specific markets, minimizing international coordination (e.g., McDonald’s adapting menus to local preferences). Global Strategy: Emphasizes global integration and standardization to achieve economies of scale and efficiency across markets (e.g., IKEA). Transnational Strategy: Balances local responsiveness and global integration while maximizing learning and innovation across international units, though it is complex to implement (e.g., Unilever). 3. Growth Methods: Organic: Building on and developing an organization’s own capabilities. Merger & Acquisition ○ Purchasing majority control of another company to access resources and capabilities ○ Mergers combine two separate businesses into a single new legal entity Strategic Alliance: Share resources and activities with other companies to pursue a common strategy  Challenges of Internationalization ○ Language Barriers → leading to unoptimized management processes ○ Cultural Differences → triggering misalignment problems ○ Managing global teams → creating communication inefficiencies ○ Currency exchange, taxation and inflation differences → leading to financial losses ○ Nuances of Foreign Politics, Policy, and Relations → exaggerating adaption issues In economics, a greenfield investment (GI) refers to a type of foreign direct investment (FDI) where a company establishes operations in a foreign country Toyota Corp. has 67 manufacturing companies in 23 different countries delivering 3000 components together with 150000 suppliers to produce 10 million cars a year in 170 countries. What is the internationalization strategy of Toyota according to Bartlett and Ghoshal typology? a. Export b. Global c. Transnational d. Multidomestic With the invention of smart phones, Blackberry started to lose its market share in developed countries. To sustain growth, Blackberry decides to move its sales force to developing countries. What is the main driver behind that decision? a. Cost b. Market c. Governmental d. Competition Which of the following can NOT be considered a part of growth methods? a. Organic b. M&A c. Strategic Alliances d. Sustainable What would be the less risky market entry mode for a start-up company reaching international markets? a. Exporting b. Licensing c. Joint Venture d. Green Field Investment Babylone, an EU-wide cosmetics company producing skincare products from natural sources, is considering moving its operations to Turkey due to cheap costs of labour and raw material. However, the company has concerns about product and market adaptation. Which of the following term describe the trade-off best? a. Internationalization dilemma b. Global-local dilemma c. Multinationality Trade-off d. Domestic-Public Trade-off  1. Introduction Strategy implementation is crucial for success and involves organizing and managing change. Organizational structures and systems are essential for strategy execution. Structures define roles, responsibilities, and reporting lines, while systems provide support and coherence. Leadership influences and guides employees to achieve strategic objectives. Strategic change can involve transformation or realignment, and leadership must manage this change effectively. 2. Structural types: a) Functional b) Divisional c) Matrix structure → combines advantages of different dimensions at the same time d) Multinational structures: e) Project-based: teams are created, undertake a specific project → dissolved 3. Systems Planning systems allocate resources and monitor their use, focusing on controlling inputs such as finances, human resources, and long-term investments. While these systems can improve efficiency, they may reduce flexibility in rapidly changing environments. Organizational Culture: Organizations have distinct cultures that reflect the fundamental beliefs and assumptions of their members, shaping how things are done. 3 mechanisms Recruitment Socialisation Reward Performance Targeting Systems: Focus: Measure outputs (e.g., product quality, revenues, profits) through Key Performance Indicators (KPIs) to assess strategy implementation. Appropriate Situations: ○ Large organizations can set performance targets to manage business units without delving into operational details. ○ Regulated industries may use KPIs established by regulators to ensure compliance with service or quality standards. Common Challenges: ○ Inappropriate Measures: Managers may select easily measurable indicators instead of those that truly reflect long-term success, risking crucial investments (e.g., R&D). ○ Inappropriate Target Levels: Managers may set undemanding targets to easily achieve them or, conversely, may set excessively ambitious goals that demotivate employees or encourage risky behavior. Market Systems: Definition: Internal market disciplines allow organizations to control activities through a competitive contracting system for resources and outputs.  Focus: Control is output-oriented, where units must compete for internal contracts, promoting adaptability and flexibility in how outputs are achieved. Benefits: ○ Effective in complex or rapidly changing environments where detailed direct controls are impractical. Potential Issues: ○ Increased bargaining and competition between units may consume management time and resources. ○ Excessive use of market mechanisms can lead to dysfunction, harming collaboration and internal relationships. 4. Strategic leadership Transformational (charismatic) → building a vision Transactional → hard levels of change: designing systems and control Situational: adjust to the context 5. Strategic change Kotter's change model