Summary Strategy
Lecture 1: Introduction
- Strategizing: Cognitive processes of individual strategists.
- Missioning and visioning: Purpose as the impetus for strategy activities.
- Strategy content: Combined decisions and choices that lead a company into the future.
- Strategy process: The manner in which strategies come about.
- Strategy context: Set of circumstances under which the strategy content and the strategy process
are determined.
- Strategy tensions as puzzles, dilemmas, trade-offs and paradoxes:
- Six different ways of dealing with a paradox:
o Navigating: Focus on one contrary element at a time (e.g. seeking synergies, then looking
for responsiveness).
o Parallel processing: Separate the contrary demands in different internal or external
organizational units (e.g. improving existing products, meanwhile developing new
generation of products)
o Balancing: Trade off elements of the opposing demands (e.g. following industry rules vs
changing others)
o Juxtaposing: Manage opposite demands (e.g. competing and collaborating (Apple vs
Samsung))
o Resolving: Develop a new synthesis between competing demands ((e.g. shareholder vs
societal value)
o Embracing: Embrace and actively use the tension as a source of creativity and opportunity
(e.g. assigning opposite personalities in management team)
- Paradox of profitability and responsibility:
o Profitability: To be an attractive investment, a firm must earn a higher return on the
shareholders equity
́ than could be realized at a bank.
o Responsibility: Acting in the interest of others, even when there is no legal imperative.
- Paradox of logic and creativity:
o Logic: The ability of managers to critically reflect on the assumptions they hold and to
make their tacit beliefs more explicit.
, o Creativity: The ability of managers to abandon the rules governing sound argumentation
and generate new understanding.
- Paradox of markets and resources:
o Market adaption: The ability to understand ‘the rules of the game’ in the market where
one is operating.
o Resources leverage: Creating value by controlling, disseminating assets across the business
and organizational system.
- Paradox of responsiveness and synergy:
o Business responsiveness: The ability to respond to the competitive demands of a specific
business area in a timely and adequate matter.
o Multi-business synergy: The additional value created by working in two or more business
areas, over and above the sum of the business parts.
- Paradox of competition and cooperation:
o Inter-organizational competition: The act of working against each other, where two or
more organizations’ goals are mutually exclusive.
o Inter-organizational cooperation: The act of working together with each other, where two
or more organizations’ goals are mutually beneficial.
- Paradox of deliberateness and emerge:
o Deliberate strategizing: The ability of acting intentionally; so thinking before acting.
o Strategy emergence: The ability of thinking and acting at the same time and letting strategy
emerge.
- Paradox of evolution and revolution:
o Revolutionary change: Change processes that do not build on status quo, yet overthrow it.
o Evolutionary change: Change processes whereby a constant stream of moderate changes
gradually accumulates over a longer period of time.
- Paradox of exploitation and exploration:
o Exploitation: Companies should focus on continuously improving their business model.
o Exploration: Companies should focus on breakthrough innovations that change the rules of
the competitive game.
- Paradox of compliance and choice:
o Firm compliance: The ability of companies to understand and adapt themselves to their
environment.
o Strategic choice: The ability to act without regarding the rules of the game.
- Paradox of globalization and localization:
o Global synergy: The ability to create value by leveraging resources, integrating activities
and aligning product offerings across two or more countries.
o Local responsiveness: The ability to remain attuned to specific national market demands,
responding adequately and timely to unique characteristics.
Chapter 1
- There are strongly differing opinions on most of the key issues, and the disagreements run so
deep that even a common definition of the term ‘strategy’ is illusive.
- Two approaches on learning:
o Tools-driven: First: Understanding each tool. Then: Combining them to solve real problems.
o Problem-driven: First: Understand the problem. Then: Search for appropriate tool, based
on the type of problem. The book is based on the assumption that the reader wants to
learn to actively resolve strategic problems.
,- Two important inputs for strategy:
o Strategizing: Cognitive processes of individual strategists.
o Missioning and visioning: Purpose as the impetus (=impuls) for strategy activities.
- The traditional view is that strategists are rational actors, but this belief has been challenged.
- Making strategy is not an end in itself, but a means for reaching particular objectives.
- Organizations exist to fulfil a purpose and strategies are employed to ensure that the
organizational mission and vision are realized.
- Some people argue that businesses exist to pursue shareholders’ interest (increasing stock value).
- Others believe that companies exist to serve interest of multiple stakeholders.
- Three dimensions of strategy that can be recognized in every real-life strategic problem
situation:
o Strategy content: The combined decisions and choices that lead a company into the future.
It is concerned with the what of strategy.
o Strategy process: The manner in which strategies come about. It is concerned with the
how, who and when of strategy.
o Strategy context: The set of circumstances under which both the strategy content and the
strategy process are determined. It is concerned with the where of strategy.
- These three dimensions interact.
- Strategy content: Three levels of strategy:
1. Functional level: Questions regarding specific functional aspects of a company (operations
strategy, marketing strategy, financial strategy, etc.).
2. Business level: Requires integration of functional level strategies for a distinct set of
products and/or services intended for a specific group of customers.
3. Corporate level: Aligns the various business level strategies.
4. Network level: Firms often cluster together into groups of two or more collaborating
organizations.
- Strategy process:
1. Analysis: Strategists identify the opportunities and threats in the environment, as well as
the strengths and weaknesses of the organization.
2. Formulating: Strategists determine which strategic options are available to them, evaluate
each and choose one.
3. Implementation: The selected strategic option is translated into a number of concrete
activities, which are then carried out.
, - The division of the strategy process in sequential phases has drawn heavy criticism. In reality, no
such identifiable stages exist.
- Strategy context: Every strategy context is unique:
1. Organizational Context: Whether organizational circumstances largely determine the
strategy process and strategy content followed, or whether the strategist has a significant
amount of control over the course of action adopted.
2. Industry Context: Whether the industry circumstances set the rules to which companies
must comply, or whether companies have the freedom to choose their own strategy and
even change the industry conditions.
3. International Context: Whether adaptation to the diversity of the international context is
strictly required or whether companies have considerable freedom to choose their strategy
process and content irrespective of the international context.
Lecture 2: Missioning and Visioning
- Ronald Coase on Why Firms Exist:
o The “costs of using the price system” came to be called transaction costs.
o The main reason why it is profitable to establish a firm would seem to be that there is a
cost of using the price mechanism.
o The size of the firm is not its output (Q), but the number of transactions or activities within
its boundaries.
o Firms exist in order to economize on buying and selling everything.
o Firms exist to reduce transaction costs.
- The size of the organization is determined by the number of transactions.
- Gaining by specializing: Firm A and firm B have both a certain Value (V). Firm A is a distributer,
firm B is a supermarket. Because these firms are related, integration of the two will cause a
synergy:
V A +V B >V AB
Firm C is a furniture company. When it is integrated with firm B, it won’t cause a synergy:
V B + V C < V BC
- Firms are formed when benefits can be obtained from individuals working as a team.
- Sometimes the sum of what individuals can produce as a team is greater than the sum of what
they can produce alone.
- Why doesn’t the firm expand forever? Firms can become too big. Sometimes, outsourcing creates
more value for a company.
- For example Philips:
o At first, Philips was one company with three parts: Health (H), Lighting (L) and Consumer
electronics (C).
V HLC
o Secondly, Philips was split up in two parts.
V HLC <V H +V LC
o Recently, Philips was further split up.
V HLC <V H +V LC <V H +V L +V C
- Organization: An organization is an association of productive assets (including people) who
voluntarily come together to accomplish a set of goals.
o In the case of the business organization this goal means gaining an economic advantage.
Lecture 1: Introduction
- Strategizing: Cognitive processes of individual strategists.
- Missioning and visioning: Purpose as the impetus for strategy activities.
- Strategy content: Combined decisions and choices that lead a company into the future.
- Strategy process: The manner in which strategies come about.
- Strategy context: Set of circumstances under which the strategy content and the strategy process
are determined.
- Strategy tensions as puzzles, dilemmas, trade-offs and paradoxes:
- Six different ways of dealing with a paradox:
o Navigating: Focus on one contrary element at a time (e.g. seeking synergies, then looking
for responsiveness).
o Parallel processing: Separate the contrary demands in different internal or external
organizational units (e.g. improving existing products, meanwhile developing new
generation of products)
o Balancing: Trade off elements of the opposing demands (e.g. following industry rules vs
changing others)
o Juxtaposing: Manage opposite demands (e.g. competing and collaborating (Apple vs
Samsung))
o Resolving: Develop a new synthesis between competing demands ((e.g. shareholder vs
societal value)
o Embracing: Embrace and actively use the tension as a source of creativity and opportunity
(e.g. assigning opposite personalities in management team)
- Paradox of profitability and responsibility:
o Profitability: To be an attractive investment, a firm must earn a higher return on the
shareholders equity
́ than could be realized at a bank.
o Responsibility: Acting in the interest of others, even when there is no legal imperative.
- Paradox of logic and creativity:
o Logic: The ability of managers to critically reflect on the assumptions they hold and to
make their tacit beliefs more explicit.
, o Creativity: The ability of managers to abandon the rules governing sound argumentation
and generate new understanding.
- Paradox of markets and resources:
o Market adaption: The ability to understand ‘the rules of the game’ in the market where
one is operating.
o Resources leverage: Creating value by controlling, disseminating assets across the business
and organizational system.
- Paradox of responsiveness and synergy:
o Business responsiveness: The ability to respond to the competitive demands of a specific
business area in a timely and adequate matter.
o Multi-business synergy: The additional value created by working in two or more business
areas, over and above the sum of the business parts.
- Paradox of competition and cooperation:
o Inter-organizational competition: The act of working against each other, where two or
more organizations’ goals are mutually exclusive.
o Inter-organizational cooperation: The act of working together with each other, where two
or more organizations’ goals are mutually beneficial.
- Paradox of deliberateness and emerge:
o Deliberate strategizing: The ability of acting intentionally; so thinking before acting.
o Strategy emergence: The ability of thinking and acting at the same time and letting strategy
emerge.
- Paradox of evolution and revolution:
o Revolutionary change: Change processes that do not build on status quo, yet overthrow it.
o Evolutionary change: Change processes whereby a constant stream of moderate changes
gradually accumulates over a longer period of time.
- Paradox of exploitation and exploration:
o Exploitation: Companies should focus on continuously improving their business model.
o Exploration: Companies should focus on breakthrough innovations that change the rules of
the competitive game.
- Paradox of compliance and choice:
o Firm compliance: The ability of companies to understand and adapt themselves to their
environment.
o Strategic choice: The ability to act without regarding the rules of the game.
- Paradox of globalization and localization:
o Global synergy: The ability to create value by leveraging resources, integrating activities
and aligning product offerings across two or more countries.
o Local responsiveness: The ability to remain attuned to specific national market demands,
responding adequately and timely to unique characteristics.
Chapter 1
- There are strongly differing opinions on most of the key issues, and the disagreements run so
deep that even a common definition of the term ‘strategy’ is illusive.
- Two approaches on learning:
o Tools-driven: First: Understanding each tool. Then: Combining them to solve real problems.
o Problem-driven: First: Understand the problem. Then: Search for appropriate tool, based
on the type of problem. The book is based on the assumption that the reader wants to
learn to actively resolve strategic problems.
,- Two important inputs for strategy:
o Strategizing: Cognitive processes of individual strategists.
o Missioning and visioning: Purpose as the impetus (=impuls) for strategy activities.
- The traditional view is that strategists are rational actors, but this belief has been challenged.
- Making strategy is not an end in itself, but a means for reaching particular objectives.
- Organizations exist to fulfil a purpose and strategies are employed to ensure that the
organizational mission and vision are realized.
- Some people argue that businesses exist to pursue shareholders’ interest (increasing stock value).
- Others believe that companies exist to serve interest of multiple stakeholders.
- Three dimensions of strategy that can be recognized in every real-life strategic problem
situation:
o Strategy content: The combined decisions and choices that lead a company into the future.
It is concerned with the what of strategy.
o Strategy process: The manner in which strategies come about. It is concerned with the
how, who and when of strategy.
o Strategy context: The set of circumstances under which both the strategy content and the
strategy process are determined. It is concerned with the where of strategy.
- These three dimensions interact.
- Strategy content: Three levels of strategy:
1. Functional level: Questions regarding specific functional aspects of a company (operations
strategy, marketing strategy, financial strategy, etc.).
2. Business level: Requires integration of functional level strategies for a distinct set of
products and/or services intended for a specific group of customers.
3. Corporate level: Aligns the various business level strategies.
4. Network level: Firms often cluster together into groups of two or more collaborating
organizations.
- Strategy process:
1. Analysis: Strategists identify the opportunities and threats in the environment, as well as
the strengths and weaknesses of the organization.
2. Formulating: Strategists determine which strategic options are available to them, evaluate
each and choose one.
3. Implementation: The selected strategic option is translated into a number of concrete
activities, which are then carried out.
, - The division of the strategy process in sequential phases has drawn heavy criticism. In reality, no
such identifiable stages exist.
- Strategy context: Every strategy context is unique:
1. Organizational Context: Whether organizational circumstances largely determine the
strategy process and strategy content followed, or whether the strategist has a significant
amount of control over the course of action adopted.
2. Industry Context: Whether the industry circumstances set the rules to which companies
must comply, or whether companies have the freedom to choose their own strategy and
even change the industry conditions.
3. International Context: Whether adaptation to the diversity of the international context is
strictly required or whether companies have considerable freedom to choose their strategy
process and content irrespective of the international context.
Lecture 2: Missioning and Visioning
- Ronald Coase on Why Firms Exist:
o The “costs of using the price system” came to be called transaction costs.
o The main reason why it is profitable to establish a firm would seem to be that there is a
cost of using the price mechanism.
o The size of the firm is not its output (Q), but the number of transactions or activities within
its boundaries.
o Firms exist in order to economize on buying and selling everything.
o Firms exist to reduce transaction costs.
- The size of the organization is determined by the number of transactions.
- Gaining by specializing: Firm A and firm B have both a certain Value (V). Firm A is a distributer,
firm B is a supermarket. Because these firms are related, integration of the two will cause a
synergy:
V A +V B >V AB
Firm C is a furniture company. When it is integrated with firm B, it won’t cause a synergy:
V B + V C < V BC
- Firms are formed when benefits can be obtained from individuals working as a team.
- Sometimes the sum of what individuals can produce as a team is greater than the sum of what
they can produce alone.
- Why doesn’t the firm expand forever? Firms can become too big. Sometimes, outsourcing creates
more value for a company.
- For example Philips:
o At first, Philips was one company with three parts: Health (H), Lighting (L) and Consumer
electronics (C).
V HLC
o Secondly, Philips was split up in two parts.
V HLC <V H +V LC
o Recently, Philips was further split up.
V HLC <V H +V LC <V H +V L +V C
- Organization: An organization is an association of productive assets (including people) who
voluntarily come together to accomplish a set of goals.
o In the case of the business organization this goal means gaining an economic advantage.
