Business strategy
Goal directed ''How should we complete?
Corporate Strategy
Decisions that leaders maker - goal directed like boundaries of the firm
*Cost leadership
cheapest product - like a honda civic
*Differentiation
Unique product like a bugatti
*Focus-Cost
One product at a cheap price
*Value innovation
lower costs while creating value (instead of focusing on just one)
*Blue ocean
differentiation and cost leadership activities at a fine line
Represent
untapped market space, creation of additional demand, and opportunities for highly profitable growth
Firm Effects on Competitive Advantage
value position and cost position lead to business strategies that lead to competitive advantage
Strategic Tradeoffs
choices between a cost or a value position
*Geographic Scope
where should the company compete
*Vertical integration
ownership of inputs or distribution channels
*Backwards integration
owning inputs of value chain
*Forward integration
owning activities closer to the customer
*Diversification
product:
increase in variety of products/services- in several product markets
*Diversification
Geographic:
increase in variety of markets/geographic regions- regional, national, or international markets
*Diversification
Product-market:
product and geographic diversification
*Corporate diversification
Single business:
low level of diversification
*Corporate diversification
Dominant business
additional business activity pursued
*Constrained related diversification
all businesses share competencies
*Linked related diversification
some businesses share competencies
*unrelated diversification
no businesses share competencies
Influences of economies of scale on firm growth
cheaper production costs in mass producing
internal transaction costs
recruiting and retaining employees
external transaction costs
searching for contractors, negotiating, monitoring, and enforcing contracts
Advantages of organizing economic actinides within a firm
more control, improve quality, facilitate scheduling and planning, secures supplies and distribution channels
Principal agent problem
principal: owner of the firm (shareholders)
Agent- should act on behalf of the principal
problem: agents pursue their own interests
solution: stock options to make agents owners
*What does the build-borrow-buy framework help strategic leaders determine?
Build- internal development
Borrow- enter a contract/strategic alliance
Buy- acquire new resources, capabilities, and competencies
*What are the main issues to consider/questions to answer when using the build-borrow-buy?
Relevency
Tradabilitiy: transfer ownership or allow use of the resource
Closeness- mergers and acquisitions are complex and costly. Achieved through alliances- joint ventures, equity alliances, resource borrowing
Integration: conditions for integrating th
Multinational enterprise
...
Globalization (definition, benefits, disadvantages)
a process of close integration and exchange between countries and peoples worldwide
*What is the cage distance framework for? What does it help them determine?
cultural: power distance, individualism, masculinity-femininity, indulgence
administrative/political: captures in factors such as shared money or political associations, weak or strong legal and financial situations
geographic: physical size, more than ph
real options perspective
breaks down investment into smaller decisions, staged sequentially over time
Explicit knowledge
codified knowledge found in documents, databases, etc
Tactical knowledge
intuitive knowledge and know how which is rooted in context, experience, practice, and values
hard to communicate- resides in the mind of the practitioner.. the best source of long term competitive advantage and innovation
Strategic Alliances
voluntary arrangement between firms
- involves the sharing of knowledge, resources, and capabilities to develop processes, products, and services
*Information asymmetry and byproducts
one party has more information than the other party, not equal
Moral hazard- when one party is incentivized to take undue risks or shirk responsibilities because of the costs incur to another party
Adverse selection- an increase in likelihood of selecting
Characteristics of a public stock company/publicly
limited liabilities for investors, transferability of investor ownership, legal personality, separation of legal ownership and management control
Shared value creation framework-
provides guidance to managers and helps reconcile gaining and sustaining competitive advantage and corporate social responsibility
Principal agent problem
managers incentive to acquire , managerial hubris (viewed themselves as exceptions to the rules)
Inside directors
CEO,COO, CFO
Outside directors
senior execs from other firms