Session 1: Corporate strategy
1. Dynamic capabilities at corporate level
2. 4C framework – synergy operators
Lecture 1: Corporate strategy
Corporate strategy Business strategy
In which businesses we compete How we compete in a business
Creating corporate advantage Creating competitive advantage
Competitors can assemble same portfolio Competitors are main rivals in industry
To hold the potential of sustained competitive advantage, a firm resource must have four
attributes: it must be valuable, it must be rare among a firm’s current and potential
competitors, it must be imperfectly imitable, and there cannot be strategically equivalent
substitutes
Corporations add to rent generating potential through control, coordination, and organization;
they act as a (dynamic) capability, and drive resource creation.
Dynamic capabilities are “the firm’s processes that use resources—specifically the processes to
integrate, reconfigure, gain and release resources—to match and even create market change.
Dynamic capabilities thus are the organizational and strategic routines by which firms achieve
new resource configurations as markets emerge, collide, split, evolve, and die.”
They can be disaggregated into the capacity
(1) to sense and shape opportunities and threats,
(2) to seize opportunities, and
(3) to maintain competitiveness through enhancing, combining, protecting, and, when
necessary, reconfiguring the business enterprise’s intangible and tangible assets.”
Article: Bowman & Ambrosini (2003)
SBU → Strategic Business Unit
RBV → Resource Based View, applies essentially to competitive strategy for SBU’s or single
firms. Although it can address corporate strategy too. Focuses on VRIN-examination and
collection in firms and is considered as a static theory (concentrates on identifying resources at
a single point in time).
DCV → Dynamic Capability View, evolved version of RBV that addresses need for constant
change due to rapidly changing environments. It helps SBU’s and corporate level build dynamic
capabilities (ability to alter resource base by creating, integrating, recombining, and releasing
resources).
Competitive strategy (1) vs. Corporate strategy (2)
1. Strategy for single firms/ SBU’s of larger firms competing in a particular
industry/market.
2. Strategy for corporations in managing a set of businesses. A corporation has a lower
level (semi-autonomous SBUs) and higher level (the corporate centre/ overseeing HQ).
,Dynamic capability types
1. Reconfiguration processes (transforming and recombining assets/resources, e.g.
consolidation of support or core processes) A common form of resource creation
through reconfiguration is consolidation, which usually occurs after an acquisition or
merger. Resource creation at the center. Economies of scale and cost advantage.
2. Leveraging existing resources (e.g. extending scope of resources to more SBUs) The
centre may for instance directly control a strong brand that could be extended across a
wider range of products. Extending the resource in this way may be done at low cost,
probably at lower costs than those required by an individual SBU to build a brand from
scratch. (brand is resource and expertise is the one that is replicated)
3. Learning (learning at all corporation levels, influenced by the corporation centre, e.g.
supportive culture, tough regime or R&D, etc.) the centre can indirectly influence the
learning processes in SBUs by:
a. encouraging SBUs to devote resources to innovation;
b. allowing SBUs time to explore new ideas;
c. introducing into SBUs new perspectives and knowledge;
d. encouraging experiments and tolerating failures;
e. establishing dialogue across SBUs;
f. funding R&D at SBU level.
4. Integration (essentially coordination of resources/assets)
Dynamic capabilities at corporate level:
The way a company creates value through the configuration and coordination of its multi-
business activities:
,Design parameters for dynamic capabilities:
- SBU strategic autonomy (scope and discretion of SBU strategy to take decisions)
- SBU similarity (similarity can stimulate resource creation, it is between BU’s)
- Coordination across levels (lower <> higher level between central units ex. HQ & BU)
- Coordination between SBU (lower level <> lower level, level of inter-BU coordination)
- Performance measures & SBU orientation (measures used to judge BU performance
and degree of corporate identification)
6 Basic dynamic capabilities (a.k.a. configurations modes): can be seen as alternative corporate
strategies that the HQ could employ (usually only one)
1. Provoked learning configuration (rewards based on financial target achievement)
2. Encouraged learning configuration (rewards from financial and non-financial)
3. Reconfiguring support activities (HQ reconfigures and centralizes support)
4. Reconfiguring core processes (HQ delivers new resources by reconfiguring core
processes to exploit economies of scale)
5. Leverage configuration (replication or resource scope extension to create new
resources)
6. Creative integration configuration (HQ encourages/facilitates SBU learning that leads to
innovation)
, In conclusion, in a multi-business corporation the corporate centre (HQ) either provides
resources or has processes that create resources (a.k.a. dynamic capabilities). If HQ support to
SBUs causes lower costs or are more effective than SBU internal support activities, then the HQ
service is a resource. A HQ must either be a resource of create resources for SBUs, which they
can do through six configuration strategies.
Article: Collis & Montgomery (1998)
Corporate strategy → strategy to compete as a collection of multiple businesses. It
encapsulates integration of resources, businesses, and organization (see triangle).
Corporate advantage → Way a firm creates value through configuration and coordination of
multi-business activities, a.k.a. how to turn the triangle in an integrated whole and can
capture/coordinate its synergy.
Resource that provides CA range along a resource continuum: specialized towards general. A
firm’s location on the continuum constraints the set of businesses it should compete in and
limits corporate design in the following dimensions:
1. Scope of business
2. Coordination mechanisms
3. Control systems
4. Corporate office size
1. Dynamic capabilities at corporate level
2. 4C framework – synergy operators
Lecture 1: Corporate strategy
Corporate strategy Business strategy
In which businesses we compete How we compete in a business
Creating corporate advantage Creating competitive advantage
Competitors can assemble same portfolio Competitors are main rivals in industry
To hold the potential of sustained competitive advantage, a firm resource must have four
attributes: it must be valuable, it must be rare among a firm’s current and potential
competitors, it must be imperfectly imitable, and there cannot be strategically equivalent
substitutes
Corporations add to rent generating potential through control, coordination, and organization;
they act as a (dynamic) capability, and drive resource creation.
Dynamic capabilities are “the firm’s processes that use resources—specifically the processes to
integrate, reconfigure, gain and release resources—to match and even create market change.
Dynamic capabilities thus are the organizational and strategic routines by which firms achieve
new resource configurations as markets emerge, collide, split, evolve, and die.”
They can be disaggregated into the capacity
(1) to sense and shape opportunities and threats,
(2) to seize opportunities, and
(3) to maintain competitiveness through enhancing, combining, protecting, and, when
necessary, reconfiguring the business enterprise’s intangible and tangible assets.”
Article: Bowman & Ambrosini (2003)
SBU → Strategic Business Unit
RBV → Resource Based View, applies essentially to competitive strategy for SBU’s or single
firms. Although it can address corporate strategy too. Focuses on VRIN-examination and
collection in firms and is considered as a static theory (concentrates on identifying resources at
a single point in time).
DCV → Dynamic Capability View, evolved version of RBV that addresses need for constant
change due to rapidly changing environments. It helps SBU’s and corporate level build dynamic
capabilities (ability to alter resource base by creating, integrating, recombining, and releasing
resources).
Competitive strategy (1) vs. Corporate strategy (2)
1. Strategy for single firms/ SBU’s of larger firms competing in a particular
industry/market.
2. Strategy for corporations in managing a set of businesses. A corporation has a lower
level (semi-autonomous SBUs) and higher level (the corporate centre/ overseeing HQ).
,Dynamic capability types
1. Reconfiguration processes (transforming and recombining assets/resources, e.g.
consolidation of support or core processes) A common form of resource creation
through reconfiguration is consolidation, which usually occurs after an acquisition or
merger. Resource creation at the center. Economies of scale and cost advantage.
2. Leveraging existing resources (e.g. extending scope of resources to more SBUs) The
centre may for instance directly control a strong brand that could be extended across a
wider range of products. Extending the resource in this way may be done at low cost,
probably at lower costs than those required by an individual SBU to build a brand from
scratch. (brand is resource and expertise is the one that is replicated)
3. Learning (learning at all corporation levels, influenced by the corporation centre, e.g.
supportive culture, tough regime or R&D, etc.) the centre can indirectly influence the
learning processes in SBUs by:
a. encouraging SBUs to devote resources to innovation;
b. allowing SBUs time to explore new ideas;
c. introducing into SBUs new perspectives and knowledge;
d. encouraging experiments and tolerating failures;
e. establishing dialogue across SBUs;
f. funding R&D at SBU level.
4. Integration (essentially coordination of resources/assets)
Dynamic capabilities at corporate level:
The way a company creates value through the configuration and coordination of its multi-
business activities:
,Design parameters for dynamic capabilities:
- SBU strategic autonomy (scope and discretion of SBU strategy to take decisions)
- SBU similarity (similarity can stimulate resource creation, it is between BU’s)
- Coordination across levels (lower <> higher level between central units ex. HQ & BU)
- Coordination between SBU (lower level <> lower level, level of inter-BU coordination)
- Performance measures & SBU orientation (measures used to judge BU performance
and degree of corporate identification)
6 Basic dynamic capabilities (a.k.a. configurations modes): can be seen as alternative corporate
strategies that the HQ could employ (usually only one)
1. Provoked learning configuration (rewards based on financial target achievement)
2. Encouraged learning configuration (rewards from financial and non-financial)
3. Reconfiguring support activities (HQ reconfigures and centralizes support)
4. Reconfiguring core processes (HQ delivers new resources by reconfiguring core
processes to exploit economies of scale)
5. Leverage configuration (replication or resource scope extension to create new
resources)
6. Creative integration configuration (HQ encourages/facilitates SBU learning that leads to
innovation)
, In conclusion, in a multi-business corporation the corporate centre (HQ) either provides
resources or has processes that create resources (a.k.a. dynamic capabilities). If HQ support to
SBUs causes lower costs or are more effective than SBU internal support activities, then the HQ
service is a resource. A HQ must either be a resource of create resources for SBUs, which they
can do through six configuration strategies.
Article: Collis & Montgomery (1998)
Corporate strategy → strategy to compete as a collection of multiple businesses. It
encapsulates integration of resources, businesses, and organization (see triangle).
Corporate advantage → Way a firm creates value through configuration and coordination of
multi-business activities, a.k.a. how to turn the triangle in an integrated whole and can
capture/coordinate its synergy.
Resource that provides CA range along a resource continuum: specialized towards general. A
firm’s location on the continuum constraints the set of businesses it should compete in and
limits corporate design in the following dimensions:
1. Scope of business
2. Coordination mechanisms
3. Control systems
4. Corporate office size
