Information and Strategic Decision (Uas)

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INFORMATION AND STRATEGIC

DECISION

CHAPTER 3: STR ATEGIC CAPABIL ITY

The resource-based view of strategy: the competitive advantage and superior

performance of an organization is explained by the distinctiveness of its capabilities.

Strategic capability is the resources and competences of an organization needed for

it to survive and prosper.

Tangible resources are the physical assets of an organization such as plant, labor,

and finance.

Intangible resources are non-physical assets such as information, reputation, and

knowledge.

Competences are the skills and abilities by which resources are deployed effectively

through an organization‟s activities and processes.

Threshold capabilities are those capabilities needed for an organization to meet the

necessary requirements to compete in a given market. (2 significant challenges – page 97)

Threshold resources are the resources needed to meet customer‟s minimum

requirements and therefore to continue exist.

Threshold competences are activities and processes needed to meet customer‟s

minimum requirements and therefore to continue exist.

Unique resources are resources that underpin competitive advantage and are difficult

for competitors to imitate or obtain.

Core competences are activities that underpin competitive advantage and are

difficult for competitors to imitate or obtain.

Source of cost efficiency:

o economies of scale

o supply cost

o product/process design

o experience.

Cost efficiency as threshold strategy for 2 reasons:

o Customer don‟t value product features at any price



o Competitive rivalry

The experience curve:

o Growth is an optional

o Unit cost should decline year on year

o First mover advantage (pelopor)

Achieving and sustaining competitive advantage:

o Value of strategic capabilities

o Rarity of strategic capabilities , 3 important points:

Ease of transferability

Sustainability

Core rigidities

o Inimitable strategic capabilities , 3 main reasons:

Complexity, 2 main reasons:

Internal linkages External interconnectedness

Culture and history:

Taken-for-granted activities Path dependency: the origins and history by which competences

have developed over time.

Casual ambiguity, 2 different forms:

Characteristic ambiguity: where the significance of the

characteristic itself is difficult to discern or comprehend.

Linkages ambiguity: wh ere competitors can‟t discern which

activities are dependent on which others to form linkages that

create core competences.

o Non-substitutability of strategic capabilities , 2 different forms of

substitution:

Product or service substitution

Competence substitution

o Dynamic capabilities are an organization‟s abilities to renew and recreate its

strategic capabilities to meet the needs of a changing environment.

Organizational knowledge is the collective experience accumulated through systems,routines, and activities of sharing across the organization.



o Explicit knowledge is codified and objective knowledge is transmitted in formal

systematic ways.

o Tacit knowledge is personal, context specific, and therefore hard to formalize

and communicate.

o Communities of practice developing and sharing information because it is

mutually beneficial.

Diagnosing strategic capabilities:

o The value chain and value network (page 110)

o Activity maps (page 114)

o Benchmarking (page 116)

o SWOT analysis (page 119)

Limitation in managing strategic capabilities:

o Competences are valued but not understood

o Competences are not valued

o Competences are recognized, valued, and understood.

Developing strategic capabilities:

o Adding and changing capabilities

o Extending capabilities

o Stretching capabilities

o Entrepreneurial bricolage

o Ceasing (stopping) activities

o External capability development

Managing people for capability development:

o Targeted training and development

o Staffing policies

o Organizational learning

o Develop people‟s awareness



CHAPTER 4: STRATEGIC PURPOSE

Stakeholders are those individuals or groups who depend on an organization to fulfill

their own goals and on whom, in turn, the organization depends.

Corporate governance is concerned with the structures and systems of control by

which managers are held accountable to those who have a legitimate stake in an organization. It becomes important for 3 main reasons:

o The separation of ownership and management control

o Corporate scandals

o Increase accountability to wider stakeholder interests

The governance chain illuminates the roles and relationships of different groups

involved in the governance of and organization.

The danger of principal-agents theory:

o Misalignment of incentives and control

o Self-interest

Benefits and disadvantages of governance systems (page 142)

Board of directors types (page 143):

o Delegates to management

o Engage with management

Ownership choices:

o Private or public ownership of equity

o Sale of all or part of the company

o Acquisition of another business

o Mutual ownership and partnership

o Privatization

Two levels of business ethics:o Macro level: the role of business and other organizations in society

o Individual level: the behavior and actions of the people in organizations

Corporate Social Responsibility (CSR) is concerned with the ways in which an

organization exceeds its minimum obligations to stakeholders specified through

regulation

CSR stances (page 146)

External stakeholders:

o Economic stakeholders (suppliers, competitors, distributors)

o Socio/political stakeholders (policy makers, regulators, government agencies)



o Technological stakeholders (key adopters, standard agencies, owner of

competitive technologies)

Common conflicts of expectations (page 155)

Stakeholder mapping identifies stakeholder expectations and power and helps in

understanding political priorities (page 156).

Power is the ability of individuals or groups to persuade, induce or coerce others

into following certain courses of action.

Source and indicators of power (page 161)

Core values are the underlying princip les that guide an organization‟s strategy.

A mission statement aims to provide employees and stakeholders with clarity about

the overall purpose and raison d‟etre of the organization.

A vision statement is concerned with what the organization aspires to be.

Objectives are statements of specific outcomes that are to be achieved.

Setting objectives:

o Objectives and measurement

o Objectives and control

o Simple rules (page 166)



CHAPTER 6: BUSINESS LEVEL STRATEGY

A Strategic Business Unit (SBU) is a part of an organization for which there is a

distinct external market for goods or services that is different from another SBU.

Competitive strategy is concerned with the basis on which a business unit might

achieve competitive advantage in its market. The strategy clock (page 225):

o Price-based strategies (page 227):

A „ no frills‟ strategy combines a low price, low perceived

product/service benefits and a focus on a price-sensitive market

segment.

A low-price strategy seeks to achieve a lower price that competitors

whilst trying to maintain similar perceived product or service benefits

to those offered by competitors.

o Differentiation strategy seeks to provide products or services that offer

benefits that are different from those of competitors and that are widely

valued by buyers. Two success factors:

Identifying and understanding the strategic customer

Identifying key competitors

o Hybrid strategy seeks simultaneously to achieve differentiation and a price

lower than that of competitors.

o Focused differentiation strategy seeks to provide high perceived

product/service benefits justifying a substantial price premium to a selected

market segment.

o Failure strategy is one that doesn‟t provide perceived value for money in

terms of product features, price or both. Sustaining competitive advantages:

o Sustaining price-based strategy:

Operating with lower margins

Win a price war

Reduce cost

Focused on specific segments

Danger in pursue a low-price strategy :

Competitors may able to do the same

Customer associate low price = low quality/low benefit



Inability to pursue a differentiation strategy o Sustaining differentiation-based advantage:

Create difficulties of imitation

Achieved imperfect mobility of resources/competences

Reinvest margin

o Strategic lock-in is where an organization achieves a proprietary position in its

industry; it becomes an industry standard. To achieved lock-in strategy, it‟s

depend on (page 235):

Size or market dominance

First mover dominance

Self reinforcing commitment

Insistence on the preservation

Responding to competitive threat (page 236)

Overcoming competitors‟ bases of strategic advantage:

o Imitation

o Strategic (re)positioning

o Blocking first mover advantage

o Overcoming barriers to entry

Characteristics of successful hypercompetitive strategies:

o Cannibalise bases of success

o Smaller moves may be more effective than bigger ones

o Disruption of the status quo

o Be unpredictable

o Mislead the competition

Competition and collaboration:

o Increase selling power

o Increase buying power

o Build barriers to entry or avoid substitution

o Gain entry and competitive power

o Share work with customers

o Gaining more leverage from public investment

Game theory is concerned with the interrelationships between the competitive moves of a set of competitors (rationality and interdependence)

Successful competitive strategy:



o “Get in the mind” of the competitors

o Think forwards and reason backwards

Dominant strategy is one that outperforms other strategies whatever rival choose.

Important strategic lessons:

o Timing of strategic moves

o Careful weighing of risk

o Potential benefits of bluff and counter bluff

o Establishing credibility and commitment

Changing the rules of the game:

o Clearer differentiation

o More transparent pricing

o More incentives for customer loyalty



CHAPTER 7: STRATEGIC DIRECT IONS AND CORPORATE -LEVEL STRATEGY

Corporate parent refers to the levels of management above that of the business

units, and therefore without direct interaction with buyers and competitors.

Strategic directions (ansoff matrix):

o Market penetration is where an organization gains market share. Two constraints:

Retaliation from competitors

Legal constraints

o Consolidation is where organization focus defensively in their current markets

with current products. Two forms of consolidation:

Defending market share

Downsizing or divestment

o Product development is where organizations deliver modified or new products

to existing markets.

o Market development is where existing products are offered in new markets.

Three forms of market development:

New segments

New users

New geographies

o Diversification is defined as a strategy that takes an organization away from

both its existing markets and its existing products.

Synergy refers to the benefits that are gained where activities or assets

complement each other so that their combined effect is greater than the sum of

the parts.

Reasons for diversification:o Efficiency gains

o Stretching corporate parenting capabilities

o Increasing market power

o Responding to market decline

o Spreading risk

o The expectations of powerful stakeholders

Related diversification is corporate development beyond current products and

markets but within the capabilities or value network of the organization



Vertical integration is backward or forward integration into adjacent activities in the

value network

Backward integration is development into activities concerned with the inputs into

the company‟s current business

Forward integration is development into activities concerned with the company

outputs

Horizontal integration is development into activities which are complementary to

present activities

Unrelated diversification is the development of the products or services beyond the

current capabilities and value network

Value-adding activities (page 272):

o Envisioning

o Coaching and facilitating

o Providing central services and resources

o Intervening

Value destroying activities (page 273):

o Adding management cost

o Adding bureaucratic complexity

o Obscuring financial performance

Portfolio manager is a corporate parent acting as an agent on behalf of financial

markets and shareholders.

The synergy manager is a corporate parent seeking to enhance value across business

units by managing synergies across business units. Three problems:

o Excessive cost

o Overcoming self interest

o Illusory synergies

Parental developer is a corporate parent seeking to employ its own competences as

a parent to add value to its business and build parenting skills that are appropriate

for its portfolio of business units. For challenges (pages 276):

o Identifying parental capabilities

o Parental focus

o The „crown jewel‟ problem

o Sufficient „feel‟

BCG matrix (pages 279)



GE-McKinsey matrix (page 281)

The parenting matrix (page 282)

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