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Notes Strategic & Organisational Design (EBM636A05)
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Aantekeningen / Notes-
Strategic & Organisational Design
(EBM636A05)
Lecturers: Semester 2A year 2021/2022
- dr. C. (Charlie) Carroll
Index
Lecture 1 Introduction 2021/2022 .......................................................................................................... 3
Mintzberg talks about the 5 Ps of Stragey .......................................................................................... 4
Lecture 1 Introduction/ Issues in Strategic Management 2022/2023 .................................................... 6
What is Strategic Management? ......................................................................................................... 6
Lecture 2 External Analysis: The Environment ...................................................................................... 10
Implications for strategy ................................................................................................................... 13
Analyzing Costs .................................................................................................................................. 14
Lecture 3 Internal Analysis: Resource and Capabilities ......................................................................... 16
Resources .......................................................................................................................................... 17
Capabilities = competences ............................................................................................................... 17
Gaining & maintaining a Sustainable Competitive Advantage (SCA) ................................................ 18
Lecture 4 Strategic Decision-making Under risk & Uncertainty ............................................................ 21
Alternative views ............................................................................................................................... 21
Risk, Uncertainty & ambiguity ....................................................................................................... 21
Expected utility models ................................................................................................................. 21
Prospect theory ............................................................................................................................. 22
Decision-making processes ............................................................................................................... 22
Game theory (actions & reactions with rival firms) .......................................................................... 23
Scenario analysis (manage risk & uncertainty in environment)........................................................ 24
Lecture 5 – International Strategy......................................................................................................... 26
Lecture 6 Corporate Strategy ................................................................................................................ 33
Organizational Form .......................................................................................................................... 33
Types of diversification...................................................................................................................... 35
Methods for diversifying ................................................................................................................... 37
Mapping SBUs ................................................................................................................................... 39
Lecture 7 Strategic Management of Innovation ................................................................................... 43
Types of Innovation ........................................................................................................................... 43
Managing a portfolio of innovations ................................................................................................. 47
1
,Organizing for Innovation.................................................................................................................. 49
Concluding Remarks .......................................................................................................................... 51
2
,Lecture 1 Introduction 2021/2022
Question: What is strategy, why is it relevant?
What is the firm?
In other words:
- Why incur the costs of setting up a business?
- Why not simply outsource everything?
Economic theory of the firm:
Firms exist because of transaction costs.
Because of (1) search and information costs (2)
bargaining and contracting costs, and (3)
policing and enforcement costs, it is cheaper to create a firm
The firm, therefore, is a bundle of contract.
So, why should you hire a employee?
Because it is cheaper to hire an employee than to rent one.
Transaction cost approach is intuitive.
But if business success was really only about cost minimisation, then eventually, all firms would look
and perform the same…
What is the firm? that’s clearly not the case
So why do firms perform differently?
Broadly, there are two literatures that explain difference in performance:
1. The strategic Position Literature
Porter (1980) explained firm performance in terms of industry attractiveness; think, the 5
forces model.
Effectively, the strategic position literature suggests that the way in which the firm engages
with its market explains its performance.
2. The Strategic Capabilities Literature
If there are only 5 forces, there are a limited number of ways in which the firm can position
itself, and there should be an ‘optimum’
Resource based View (RBV):
Differences in performance, they suggest, is explained by the unique sets of
resources and capabilities that the firm bundles together.
The RBV sees the firm as a bundle of resource.
Why does a firm hire someone?
Because resources an capabilities are the source of success.
3
, So why do firms perform differently?
So who is right? Porter or barney?
Who cares! Lets follow both of their suggestions: lets position ourselves optimally against the
industry, and lets invest in key resources.
Both literatures agree on one thing: Successful firms are firms that develop sustainable competitive
advantages
What is a competitive advantage?
The reason that a someone prefers you over your competitor
You have ‘something’ that allows you to:
- Costs
+ Revenues
When it a competitive advantage sustainable?
A competitive advantage is sustainable when it persists despite the efforts of the competition to copy
it or to neutralize it
Got it. So what is Strategy?
Well, lets start with what it isn’t. It isn’t about investing in profitable projects
We often think that more is better:
Not only is this twice the revenue, but it allows for risk speeding too. Isn’t it safer to spread
your risk, and to diversify your investments.
This reasoning led to some weird decisions (bic in underwear)
Investing in all NPV>0 projects lead to large, diversified firms, without a clear focus, without the
necessary resources to maximize value
Diversification creates severe inefficiencies within a firm, which increase exponentially with the level
of diversification.
Anticipating difficulties…
The market adds a ‘diversification discount’ to the announcement of any diversification.
Mintzberg talks about the 5 Ps of Stragey
Plan:
Strategy is about embraicing (the trends, the demands),
extending upon these (adding propiertary elements to the
standard), to extinguish threats (the open standard).
Sun Tzu (500BC(: “Victorious warriors win first,
then go to war, while defeated warriors go to war
first, then seek to win”.
Ploy
Strategy is about discouraging, diverting, or influence
competitors.
Sun Tzu (500BC): “appear weak when you are
strong and strong when you are weak”.
4
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