Strategy PDF

Strategy “A set of concrete plans to help the organization accomplish its goals” (Oster, 1994) “The analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages” (Dess, Lumpkin, and Eisner, 2008...

Strategy “A set of concrete plans to help the organization accomplish its goals” (Oster, 1994) “The analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages” (Dess, Lumpkin, and Eisner, 2008) “The major intended and emergent initiatives undertaken by general managers on behalf of owners, involving utilization of resources to enhance the performance of firms in their external environment” (Nag, Hambrick, and Chen, 2007)  Types of strategies: Business-Level and Corporate-Level (A Glimpse) Cost leadership, Differentiation, Focus Single product + Single market; Single product + Multiple market Multiple product + Single market Multiple product + Multiple market Source: Adapted from Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (Cambridge, MA: Blackwell Publishers, 1991), p.20.  Sony’s Corporate-Level Strategy Core businesses= businesses in an attractive industry that: have the potential to achieve SCA; Related diversification have imp. relationships with other {Computers, Smart Phones, Play Station, Digital business units; cameras, Batteries, and Head-mounted 3-D provide skills or activities that are base displays} from which to diversify Core Industry Backward Vertical Integration Forward Vertical Integration {Consumer Electronics- TVs: {Production of electronic {Company owned retail outlets: 2004- a cumulative loss of $8.5 components- Semiconductors} 15*: US/ Canada} billion} Unrelated diversification Complements {Insurance, Sony’s most successful {Movies and Music: contributed $7 billion business**} to the bottom line over the last decade *http://www.twice.com/news/retail/sony-phasing-out-its-retail-stores/56291 ** Source: http://www.nytimes.com/2013/05/28/business/global/sonys-bread-and-butter-its-not-electronics.html?_r=0  Single v/s Multiple Business(es) Entering new market may involve any one or Related – combination of New Geog- following: PEST or CAGE horizontal/ Identify new vertical 1) New geography; targets Unrelated a 2) New type (B2B/B2C); b a and b are examples of 3) New segment within which element of type strategy ??? Loyalty schemes Diff SKUs Sale promotions Related Buy competitor Product Source: H Igor Ansoff “Strategies for Diversification” HBR (1951)  Reasons for Going Solo Advantages of Collaborating A solo development or collaboration is influenced by: Collaborating can offer the following advantages: Availability of capabilities Obtaining needed skills or resources more Does firm have needed capabilities in house? quickly Does it a potential partner? Reducing asset commitment and increase Protecting proprietary technologies flexibility How important is it to keep exclusive control of the technology? Learning from partner Controlling technology development and use How important is it for firm to direct development process and applications? Sharing costs and risks Building and renewing capabilities Can build cooperation around a common is the project key to renewing or developing standard the firm’s capabilities? Intel conducts most of its research outside the organization by funding university researchers; IBM does most of its research in-house.  Collaborate (for new technologies): Make/ Source/ Ally/ Acquire What about the appropriability regime? What about the availability of complementary assets? What about the technology life cycle? What about the nature of assets (proprietary/ commodity; general v/s specialized; critical/ substitutable)? What about competitive dynamics?  Collaboration: Choosing and Monitoring Partners Partner (potential) Selection Partner Monitoring and Governance Resource fit: May utilize legally binding contractual arrangements. Does the partner have the resource needed? Helps ensure partners are aware of rights and obligations. Are resources complementary or supplementary? Provides legal remedies for violations. Contracts often include: 1. What each partner is obligated to contribute. Strategic fit: 2. How much control each partner has in arrangement. Does the partner have compatible objectives and styles? 3. When and how proceeds of collaboration will be distributed. 4. Review and reporting requirements. 5. Provisions for terminating relationship. Impact on Opportunities and Threats: How would collaboration impact the bargaining power of customers and suppliers, degree of rivalry, threat of May also use shared equity ownership (i.e., each partner contributes entry, or substitutes? capital and owns a share of equity in the alliance) Helps to align incentives and provide sense of ownership Impact on Internal Strengths and Weaknesses: Would collaboration enhance a firm’s strengths? May rely on relational governance (self-enforcing governance based Overcome its weaknesses? Create a competitive on the goodwill, trust, and reputation of partners) advantage? Built over time Can facilitate more extensive cooperation, sharing, and Impact on Strategic Direction: learning by partners Would the collaboration help the firm achieve its strategic intent?  Collaborative Arrangements: Types and comparison CA Non equity Equity modes modes (FDI) Alliances and Wholly owned Contractual joint ventures subsidiaries agreements (JVs) Licensing Minority JVs Greenfield investments Outsourced R&D 50/50 JVs Acquisition Collective Collective research research organization organization Strategic alliances (within dotted areas) Source: Adapted from Pan, Y. and D. Tse, “The Hierarchical Model of Market Entry Modes,” Journal of International Business Studies, 31 (2000), 535-545  Ally or acquire: General Discussion Factor Strategy Factor Strategy 1. Types of Synergies 4. Degree of Market Uncertainty Modular Nonequity alliances Low Nonequity alliances Sequential Equity alliances Low/Medium Acquisitions Reciprocal Acquisitions 2. Nature of Resources High Equity alliances Relative value of soft to hard resources 5. Level of Competition Low Nonequity alliances Degree of competition for resources Low/Medium Acquisitions Low Nonequity alliances High Equity alliances Medium Equity alliances 3. Extent of Redundant Resources High Acquisitions Low Nonequity alliances Medium Equity alliances High Acquisitions  Trade offs in Collaboration Firms should match the trade-offs of a collaboration mode to their needs.