Summary Strategic
Management
2020 - 2021
,Inhoudsopgave
Introduction........................................................................................................................................6
1. The Concept of Strategy: 4 BIG ISSUES .....................................................................................6
2. What is Strategy? ....................................................................................................................7
3. The role of analysis:.................................................................................................................7
4. Strategic plan hierarchy ...........................................................................................................8
5. What Makes a Successful Strategy? .........................................................................................8
6. Basic framework......................................................................................................................8
6.1. Link between the Firm and its Environment .........................................................................8
7. Sources of superior profitability ..............................................................................................9
8. Components of “Success” ........................................................................................................9
9. The evolution of strategic management ................................................................................ 10
10. Strategy making: design or process? ................................................................................. 10
11. Strategy Safari ................................................................................................................... 11
11.1. Ten schools .................................................................................................................... 11
11.1.1. The Design School Strategy: formation as a process of conception ............................. 12
11.1.2. The Planning School: Strategy formation as a formal process ..................................... 13
11.1.3. The Positioning School: Strategy formation as an analytical process ........................... 14
11.1.4. The Entrepreneurial School: ....................................................................................... 14
11.1.5. The Cognitive School: S .............................................................................................. 14
11.1.6. The Learning School: S ............................................................................................... 14
11.1.7. The Power School: S ................................................................................................... 15
11.1.8. The Cultural School: S ................................................................................................ 15
11.1.9. The Environmental School: S ...................................................................................... 15
11.1.10. The Configuration School: S.................................................................................... 16
12. Big issues 2, 3 and 4: see Besanko et.al. ............................................................................. 16
Chapter 2: horizontal boundaries of the firm .................................................................................... 17
1. Horizontal Boundaries ........................................................................................................... 17
2. Determinants Horizontal Boundaries ..................................................................................... 18
2.1. Economies of Scale ............................................................................................................ 18
2.2. Economies of Scope ........................................................................................................... 19
2.2.1. Sources of Economies of Scale/Scope......................................................................... 19
3. Innovation and Size ............................................................................................................... 22
3.1. Diseconomies of Scale ....................................................................................................... 23
3.2. The Learning Curve ............................................................................................................ 23
1
, 3.3. BCG’s Growth/Share Paradigm .......................................................................................... 24
3.4. Learning Curve and Scale Economies ................................................................................. 24
3.5. Why Diversify? .................................................................................................................. 25
3.6. Measuring “Relatedness” .................................................................................................. 26
3.6.1. Classification by Relatedness...................................................................................... 27
3.6.2. Conglomerates after WW II ........................................................................................ 27
3.6.3. Entropy Measure of Diversification ............................................................................ 27
3.6.4. Entropy Decline in the 1980s...................................................................................... 28
3.6.5. Ways to Diversify ....................................................................................................... 28
3.6.6. Why do Firms Diversify?............................................................................................. 28
3.6.7. Diversification: Long Term Performance..................................................................... 29
Chapter 3&4: organizing Vertical boundaries: vertical integration and alternatives ........................... 30
1. Vertical Boundaries ............................................................................................................... 30
1.1. Transaction cost theory: essentials (1) ............................................................................... 30
1.1.1. Example of transaction costs ...................................................................................... 32
1.2. The Trade-off in Vertical Integration .................................................................................. 32
1.3. Alternatives to Vertical Integration .................................................................................... 32
1.3.1. Tapered Integration ................................................................................................... 33
Tapered Integration: Advantages .............................................................................................. 33
Tapered Integration: Disadvantages .......................................................................................... 33
Tapered Integration in Gasoline Retailing .................................................................................. 33
1.3.2. Strategic Alliances and Joint Ventures ........................................................................ 33
Strategic Alliance....................................................................................................................... 33
1.3.3. Collaborative Relationships ........................................................................................ 34
1.3.4. Implicit Contracts ....................................................................................................... 34
Chapter 6: Entry and exit .................................................................................................................. 35
1. Forms of Entry ....................................................................................................................... 35
2. Forms of Exit ......................................................................................................................... 35
2.1. Evidence on Entry and Exit ................................................................................................. 36
2.1.1. DRS Findings on Entry and Exit ................................................................................... 36
2.1.2. Implication of DRS Findings for Strategy ..................................................................... 36
3. Cost Benefit Analysis for Entry ............................................................................................... 37
4. Typology of Entry Conditions ................................................................................................. 38
4.1. Barriers to Entry ................................................................................................................ 38
4.1.1. Types of Structural Barriers ........................................................................................ 38
Control of Essential Resources................................................................................................... 39
2
, Economies of Scale and Scope ................................................................................................... 39
Marketing Advantage of Incumbency ........................................................................................ 40
4.1.2. Entry Deterring Strategies: strategic barriers to entry ................................................ 40
4.1.3. Excess Capacity and Entry Deterrence ........................................................................ 42
4.1.4. Evidence on the Use of Entry Deterring Strategies ........................................................... 44
Chapter 7: Dynamics: Competing across time ................................................................................... 45
1. Strategic Commitment .......................................................................................................... 45
2. Commitment Value of Announcements ................................................................................. 45
3. Strategic or tactical? .............................................................................................................. 46
4. Reversible and Irreversible Moves ......................................................................................... 47
5. Strategic Commitment and Competition ............................................................................... 47
a. Strategic Substitutes.............................................................................................................. 47
b. Strategic Complements ......................................................................................................... 47
c. Factors that Influence the Strategic Effect ............................................................................. 47
6. Flexibility and Option Value ................................................................................................... 47
a. Commitment-Flexibility Tradeoff ........................................................................................... 48
7. Dynamic Price Competition ................................................................................................... 48
7.1. Dynamic versus Static Models............................................................................................ 48
7.2. Cournot and Bertrand Models ........................................................................................... 49
7.3. Dynamic Model Scenarios.................................................................................................. 49
7.3.1. Cooperative Pricing as a dynamic model .......................................................................... 49
8. Market Structure, Cooperative Pricing ................................................................................... 50
8.1. Practices that Facilitate Cooperative Pricing ...................................................................... 50
9. Quality Competition .............................................................................................................. 50
9.1. Benefits from Improved Quality ......................................................................................... 50
9.2. Increase in Demand, Increase in Quality ............................................................................ 51
Chapter 8: Industry analysis .............................................................................................................. 52
1. Porter’s Five Forces Framework............................................................................................. 52
1.1. Internal Rivalry .................................................................................................................. 52
1.1.1. Internal Rivalry: Price Competition ............................................................................. 52
1.2. Entry ................................................................................................................................. 53
1.2.1. Factors that Affect the Threat of Entry ....................................................................... 53
1.3. Substitutes and Complements ........................................................................................... 53
1.4. Supplier Power .................................................................................................................. 53
1.4.1. Assessing Supplier Power ........................................................................................... 54
3
Management
2020 - 2021
,Inhoudsopgave
Introduction........................................................................................................................................6
1. The Concept of Strategy: 4 BIG ISSUES .....................................................................................6
2. What is Strategy? ....................................................................................................................7
3. The role of analysis:.................................................................................................................7
4. Strategic plan hierarchy ...........................................................................................................8
5. What Makes a Successful Strategy? .........................................................................................8
6. Basic framework......................................................................................................................8
6.1. Link between the Firm and its Environment .........................................................................8
7. Sources of superior profitability ..............................................................................................9
8. Components of “Success” ........................................................................................................9
9. The evolution of strategic management ................................................................................ 10
10. Strategy making: design or process? ................................................................................. 10
11. Strategy Safari ................................................................................................................... 11
11.1. Ten schools .................................................................................................................... 11
11.1.1. The Design School Strategy: formation as a process of conception ............................. 12
11.1.2. The Planning School: Strategy formation as a formal process ..................................... 13
11.1.3. The Positioning School: Strategy formation as an analytical process ........................... 14
11.1.4. The Entrepreneurial School: ....................................................................................... 14
11.1.5. The Cognitive School: S .............................................................................................. 14
11.1.6. The Learning School: S ............................................................................................... 14
11.1.7. The Power School: S ................................................................................................... 15
11.1.8. The Cultural School: S ................................................................................................ 15
11.1.9. The Environmental School: S ...................................................................................... 15
11.1.10. The Configuration School: S.................................................................................... 16
12. Big issues 2, 3 and 4: see Besanko et.al. ............................................................................. 16
Chapter 2: horizontal boundaries of the firm .................................................................................... 17
1. Horizontal Boundaries ........................................................................................................... 17
2. Determinants Horizontal Boundaries ..................................................................................... 18
2.1. Economies of Scale ............................................................................................................ 18
2.2. Economies of Scope ........................................................................................................... 19
2.2.1. Sources of Economies of Scale/Scope......................................................................... 19
3. Innovation and Size ............................................................................................................... 22
3.1. Diseconomies of Scale ....................................................................................................... 23
3.2. The Learning Curve ............................................................................................................ 23
1
, 3.3. BCG’s Growth/Share Paradigm .......................................................................................... 24
3.4. Learning Curve and Scale Economies ................................................................................. 24
3.5. Why Diversify? .................................................................................................................. 25
3.6. Measuring “Relatedness” .................................................................................................. 26
3.6.1. Classification by Relatedness...................................................................................... 27
3.6.2. Conglomerates after WW II ........................................................................................ 27
3.6.3. Entropy Measure of Diversification ............................................................................ 27
3.6.4. Entropy Decline in the 1980s...................................................................................... 28
3.6.5. Ways to Diversify ....................................................................................................... 28
3.6.6. Why do Firms Diversify?............................................................................................. 28
3.6.7. Diversification: Long Term Performance..................................................................... 29
Chapter 3&4: organizing Vertical boundaries: vertical integration and alternatives ........................... 30
1. Vertical Boundaries ............................................................................................................... 30
1.1. Transaction cost theory: essentials (1) ............................................................................... 30
1.1.1. Example of transaction costs ...................................................................................... 32
1.2. The Trade-off in Vertical Integration .................................................................................. 32
1.3. Alternatives to Vertical Integration .................................................................................... 32
1.3.1. Tapered Integration ................................................................................................... 33
Tapered Integration: Advantages .............................................................................................. 33
Tapered Integration: Disadvantages .......................................................................................... 33
Tapered Integration in Gasoline Retailing .................................................................................. 33
1.3.2. Strategic Alliances and Joint Ventures ........................................................................ 33
Strategic Alliance....................................................................................................................... 33
1.3.3. Collaborative Relationships ........................................................................................ 34
1.3.4. Implicit Contracts ....................................................................................................... 34
Chapter 6: Entry and exit .................................................................................................................. 35
1. Forms of Entry ....................................................................................................................... 35
2. Forms of Exit ......................................................................................................................... 35
2.1. Evidence on Entry and Exit ................................................................................................. 36
2.1.1. DRS Findings on Entry and Exit ................................................................................... 36
2.1.2. Implication of DRS Findings for Strategy ..................................................................... 36
3. Cost Benefit Analysis for Entry ............................................................................................... 37
4. Typology of Entry Conditions ................................................................................................. 38
4.1. Barriers to Entry ................................................................................................................ 38
4.1.1. Types of Structural Barriers ........................................................................................ 38
Control of Essential Resources................................................................................................... 39
2
, Economies of Scale and Scope ................................................................................................... 39
Marketing Advantage of Incumbency ........................................................................................ 40
4.1.2. Entry Deterring Strategies: strategic barriers to entry ................................................ 40
4.1.3. Excess Capacity and Entry Deterrence ........................................................................ 42
4.1.4. Evidence on the Use of Entry Deterring Strategies ........................................................... 44
Chapter 7: Dynamics: Competing across time ................................................................................... 45
1. Strategic Commitment .......................................................................................................... 45
2. Commitment Value of Announcements ................................................................................. 45
3. Strategic or tactical? .............................................................................................................. 46
4. Reversible and Irreversible Moves ......................................................................................... 47
5. Strategic Commitment and Competition ............................................................................... 47
a. Strategic Substitutes.............................................................................................................. 47
b. Strategic Complements ......................................................................................................... 47
c. Factors that Influence the Strategic Effect ............................................................................. 47
6. Flexibility and Option Value ................................................................................................... 47
a. Commitment-Flexibility Tradeoff ........................................................................................... 48
7. Dynamic Price Competition ................................................................................................... 48
7.1. Dynamic versus Static Models............................................................................................ 48
7.2. Cournot and Bertrand Models ........................................................................................... 49
7.3. Dynamic Model Scenarios.................................................................................................. 49
7.3.1. Cooperative Pricing as a dynamic model .......................................................................... 49
8. Market Structure, Cooperative Pricing ................................................................................... 50
8.1. Practices that Facilitate Cooperative Pricing ...................................................................... 50
9. Quality Competition .............................................................................................................. 50
9.1. Benefits from Improved Quality ......................................................................................... 50
9.2. Increase in Demand, Increase in Quality ............................................................................ 51
Chapter 8: Industry analysis .............................................................................................................. 52
1. Porter’s Five Forces Framework............................................................................................. 52
1.1. Internal Rivalry .................................................................................................................. 52
1.1.1. Internal Rivalry: Price Competition ............................................................................. 52
1.2. Entry ................................................................................................................................. 53
1.2.1. Factors that Affect the Threat of Entry ....................................................................... 53
1.3. Substitutes and Complements ........................................................................................... 53
1.4. Supplier Power .................................................................................................................. 53
1.4.1. Assessing Supplier Power ........................................................................................... 54
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