Summary Strategy & Organisation: everything you need! Received grade: 8.2 ()
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Course
Strategy and Organisation (6012S0017Y)
Institution
Universiteit Van Amsterdam (UvA)
This is a very elaborate summary of strategy & organisation. This course was a lot so I hope I can help you with this summary that covers the material given in the lectures/seminars and the articles itself. Good luck with your preparations!
- The content of strategy = what is a good strategy
- The process of strategy = how do strategies come into being in organizations?
- The context of strategy = does the content or process of strategy depend on the type of
organization, the industry, the international environment, etc.?
Strategy is like an elephant in a dark room: everybody feels a different part of the elephant and thus
sees strategy in a different way. But what is strategy exactly? Strategy: is not a goal. It is the plan to
reach a goal:
- It is a plan of actions
- Usually with limited time horizon.
- A plan about how firms reach their goals (be unique and create value).
What is strategy about?
- How to develop new products?
- How to outperform competitors?
- Which markets to enter?
- How to realize organizational change?
- How to create synergies?
- Who to cooperate with?
- How to deal with environmental changes?
The goal here is value creation:
- Individual level = talent (rather than strategy)
- Firm level = accumulation of assets (rather than strategy).
The relationship between acquisitions and firm performance is negative. E.g. when a company buys
another one, a lot of new talent comes to the pool which might have a negative effect.
The relationship between diversification and firm performance is mixed. This concludes that
performance does not emerge naturally. It requires some sort of coordination.
Mostest argument: the firm with the most talent and assets will create more value than its
competitors. this does not necessarily hold in reality, accumulation of assets and expertise does not
always lead to performance.
Do we need strategy?
- (Reduce) Uncertainty
- Time limitation
- Cognitive limitation (bounded rationality)
- Irrational behavior
- Asymmetric information
- Structure & organization (planning)
1
, - How to reach the goal…
Performance requires coordination = strategy, it reduces uncertainty. Conclusion: unexplained
variance and negative relationships at different levels implies that strategy really matters for firm
performance. Strategic management is the integration and alignment to improve performance.
Theory: explanation of a phenomenon. Why does something happen?
Big questions theories of strategy tries to ask:
1. Why, how, and when do some firms outperform/ outcompete others?
2. Why, how and when does a firm that outperforms others do so consistently?
Theories of strategy describe when, how, and why a plan of action leads to value creation. It is mostly
related to firms that create the most important value outcompete/outperforms other firms. Besides
the fact that outperforming is the most important aspect, consistency is also important.
Competitive strategy: strategy at company level (business unit level). Key question:
why some firms outcompete other firms (and what are the sources of their
competitive advantage?
Two dominant theoretical approaches:
1. Positioning school (Porter, 1979)
2. Recourse-based view (Barney, 1991)
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,WEEK 1 SEMINAR
Content what should you do to perform well?
Process how what is actually happening?
Context why circumstances of the environment.
Video Porter: strategy is not a goal “my strategy is to internationalize”. That’s a step you want to
take. Strategy: how can we have CA and also overtime. The steps you take are not the strategy.
People forget the ‘why’.
Paradoxes from class text Porter and text Barney:
1. Firms vs industry
2. Resources vs positioning
3. Inside out vs Outside in
4. Choice vs little choice
5. Voluntaristic vs Deterministic
Say you need both is a little bit easy to say; depends on circumstances etc..
Paradox 1 from slide: inside-out vs outside-in
Some authors argue that the environment determines the optimal strategy for a firm (deterministic
view), while others argue that firms can actively influence the environment through their strategy
(voluntaristic view).
Paradox 2 from slide: deterministic vs. voluntaristic
Some authors maintain that strategy analysis should focus on the chars of industry, while others
maintain that strategy analysis should focus on the characteristics of the firm itself.
Baden-Fuller discuss the collection of data about the profitability of different firms and industries.
Examining the data allows us to identify strategic principles that facilitate strategic decision-making.
Porter’s Five Forces
1. Define the relevant industry (not too broad or narrow)
2. Identify the participants (buyers, suppliers, competitors, substitutes, potential entrance)
3. Assess the underlying drivers to determine the strength of the forces (do not merely list,
rigorously analyze)
4. Determine the overall industry structure and test your analysis for consistency;
a. Why is the profitability level what it is, are the more profitable players better
positioned in relation to the five forces?
5. Analyze trends (positive and negative) in each force
6. Use your analysis as a basis for strategic action
The industry analysis provides a baseline for strategic action:
1. Positioning your company where the forces are weakest
2. Exploit changes and trends in the forces
3. Reshape or influence the forces in your favor
a. Neutralize supplier power by standardizing specifications
b. Decrease buyer power by differentiation etc.
3
, WEEK 1 ARTICLES
Article 1.1: Thinking about strategy – Stoelhorst (2008)
SUMMARY
3 aspects of strategic management:
1. The process, interested in where strategies come from.
2. The content, interested in what good strategies are.
3. The context, interested in how organizational or environmental contexts affect the process or
content of strategy.
Standard model of strategy:
1. Formulating organizational objectives.
2. Conduct external and internal analysis SWOT identification strategic issues (conclusion
of analysis phase).
3. Generate strategic options/possible strategies to deal with strategic issues. When choosing,
the firm should consider:
- Suitability: does the strategy deal with the strategic issues?
- Acceptability: is the strategy acceptable to the firms stakeholders?
- Feasibility: will the firm be able to execute the strategy? This concludes the strategic choice
stage.
4. Implementation
- Strategy is broken down into detailed plans
- Responsibilities and budgets are assigned
- Performance measures to control the implementation of the strategy are agreed upon
The standard model has little to say about the content of strategy. Its focus is mainly on the process
of developing strategies with a rational, deliberate, and stepwise approach. But it does not give any
guidelines to what the strategies resulting from this process could, or should, be.
No surprise from design school bc they say strategies should be unique, so why bother to categorize?
From the point of view of the planning school, with its emphasis on formal analysis, we could
perhaps expect some insight in which strategies are more or less successful Ansoff model:
- Market penetration (growth strategy): existing product/existing market
- Product development: new product/existing market)
- Market development: existing product/new market
- Diversification: new product/new market
Prescriptive schools:
1. Design school: strategy as a conceptual process. Specific characteristics of the firm should be
confronted with the external situation it faces.
- Strategy formulation should be deliberate process of conscious thought. It must be learned
formally, it is not just a skill you have.
- Responsibility lies with the CEO.
- The model of strategy formulation must be kept simple and informal.
- Strategies should be one of a kind: resemble the competence of a specific firm.
- Strategies appear fully formulated as perspective.
- Strategies should be explicit and simple. Everyone in the firm can understand it.
- Strategies can be implemented.
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