Megs

Question 1

5 forces model views industry structure as stable and exogenous, but structure actually changes through dynamic/endogenous competition

Answer 1

Grant 2008

Question 2

Competitive strategy is about being different (choosing a different set of activities to deliver a unique mix of value) - each reinforces the other and supports strategy

Answer 2

Porter 1996

Question 3

Constant improvement in operational effectiveness is necessary to achieve superior profitability, but not sufficient. Leads to competitive convergence.

Answer 3

Porter 1996

Question 4

Strategic positioning can be: “variety-based”, “needs-based” or “access-based” - not mutually exclusive - according to…..?

Answer 4

Porter 1996

Question 5

For each cumulative doubling of experience total costs decline by 20-30% due to economies of scale, organisational leaning and technological innovation

Answer 5

BCG Experience Curve

Question 6

Maintain a balance between cash cows and stars, while allocating some resources to question marks (potential stars), and sell off dogs

Answer 6

BCG

Question 7

Deliberate plans are ‘realised as intended’ whereas emergent plans are ‘realised despite, or in the absence of, intentions’ Deliberate and emergent strategies can be seen as two ends of a continuum upon which real-world strategies lie.

Answer 7

Mintzberg and Waters 1985

Question 8

Comitting to a deliberate plan is focusing on a stable fantasy instead of responding to an evolving reality

Answer 8

Mintzberg and Waters 1985

Question 9

Finds significant mean reversion in ROIC - WACC for the Russell 3000 non-financial firms from 1999-2009. However, those at the top quartile stayed at the top quartile.

Answer 9

LMCM Analysis

Question 10

High performance never lasts - performance measures regress towards the mean - consistently high performance firms are statistical anomalies

Answer 10

Fama and French 2000

Question 11

Survivorship bias Shows study by “Zook and Allen” (n=1854) that most high performance firms focused on one set of core strategies would generate contrary conclusions if just 200 extra failures were included. Can correct for such bias by assuming a normal distribution of successes and failures.

Answer 11

Denrell 2005

Question 12

Strategically-related firm acquisition can generate abnormal returns to shareholders of bidding firm in imperfectly competitive markets (firms value synergies differently).

Answer 12

Barney 1988

Question 13

5 Forces example: Faces an industry with a similar product, so differentiates itself using brand awareness/unique shop experience (size names) to fight new entry

Answer 13

Starbucks

Question 14

Core competencies (which are knowledge-based/involve collective learning) are enhanced as they are applied - this suggests increasing marginal returns to their use

Answer 14

Prahalad and Hamel 1990

Question 15

Industry structure sets industry profitability in the medium and long-run “Forces” are those that can directly and independently affect competition and profitability - they are necessarily either good or bad

Answer 15

Porter 2008

Question 16

5 Forces model is useless for new entrants, since it says industries with the highest barriers to entry are the most profitable to be in

Answer 16

Aktouf et al 2005

Question 17

Criticisms of 5F

Answer 17

Selfish: Competing against buyers and suppliers. Ghoshal (2005) Useless for new entrants, “a good industry is one with high barriers to entry: Aktouf et al. (2005) Black-boxes the firm (Foss 1996). Need to combine with RBV.

Question 18

Profit from innovation accrue to owners of complementary assets, not the developer of the intellectual property

Answer 18

Teece 1986

Question 19

Not profiting from innovation examples

Answer 19

Sony created the first ebook reader but had no content. Amazon was the first one to make it work because theyh had the complementary assets. Microsoft made the first touch screen phone in the 90s. Apple made it successful due to design (Hargadon and Douglas) and knowing what the customer wanted.Â

Question 20

If a resource is to influence competitive advantage, then it must be VRIN Culture can be a source of sustained competitve advantage, since valuable and rare aspects become part of an unspoken, unperceived common sense of the firm

Answer 20

Barney 1991

Question 21

Acquirers only earn abnormal returns if they transfer their own resources to the target, creating inimitable synergies When they only recieve, it is likely that multiple bidders competed away all the abnormal returns from the successful bidder

Answer 21

Capron and Pistre 2002

Barney says the same in that bidding means that unless synergies are unique, no gains can be had

Question 22

RBV is not useful since it is tautogical and not empirically testable. It is also not “operationally valid”

Answer 22

Priem and Butler 2001

Question 23

Choices about areas of strategy influences future core competences - must chooses paths of flows to maintain inimitability and non-substitutability

Answer 23

Dierickx and Cool 1989

Question 24

Under increasing returns, many outcomes are possible, since insignificant circumstances become magnified by positive feedbacks to tip the outcome

Answer 24

Arthur 1989

Question 25

Example of Blue Ocean:

Answer 25

Southwest creating a new market

Question 26

Example of rapid follower

Answer 26

Examples?

Question 27

Examples of Strategy Path Dependence

Answer 27

BA GM

Question 28

Incumbents are not always "creatively destroyed" (Schumpeter) by innovation - they can adapt to change by using market abilities/prior relationships

Answer 28

Rothaermel 2001

Question 29

The firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments (Link to Emergent strategy)Looks at processes (way things are done), positions (current assets), and paths (strategic alternatives). Managers must look for continuous improvement or combinations of these.

Answer 29

Teece et al. 1997

Question 30

Possibly translates RBV into a descriptive/usefully dynamic model - use "paths" to change the resources ("positions") and "processes" you have

Answer 30

Dynamic Capabilities

Question 31

Buyers are confronted everywhere with 'an excessive sameness' - this is often due to imitation

Answer 31

Hotelling

Question 32

Network competition has driven product standardisation - mutual incentive to imitate since consumers value products more if many others are using compatible equipment

Answer 32

Shapiro 1989

Question 33

Strategic Planning drives better performance/SCA in industries where less firms are already doing it, and where you acquire it at less than its fair value (imperfect factor markets)

Answer 33

Powell 2003

Question 34

Firms do not necessarily try to quickly imitate anything that seems profitable (technical complexity/market imperfections as well as internal resitance/cognitive differences)

Answer 34

Regner and Jonsson 2009

Question 35

The third view (vs. 5F and RBV) - you haven't got to compete for market share - focus on making other competition irrelevant

Answer 35

Blue Ocean Strategy

Question 36

Reputational Risk to innovation

Answer 36

Virgin Galactic: 2 of first 3 "Virgin Galactic’" test flight pilots died due to failure. Direct reputational risk to Virgin's core business of flights. ther examples?

Question 37

Possible ways to "stick to the knitting" , i.e. diversification may be based on: core competences, synergy" or fitting with managerial dominant logic - according to..?

Answer 37

Goold and Luchs 1993

Question 38

Firms that diversify into areas that draw related resources leads to higher profitability than unrelated conglomerates. Also, less diverse firms have larger market shares. Related diversification is better than unrelated diversification because of reputational benefits.

Answer 38

Rumelt 1982

Question 39

In the 15 years to 1991, there was an estimated 15% loss from diversification (measured by Tobin's q) - according to..? (n=3659) What's Tobin's q? Smaller loss when the firms are related

Answer 39

Berger and Ofek 1995

Question 40

U-shape model for diversification-performance relationship in emerging markets: must reach threshold before diversification becomes profitable - replicates the functions of absent instutitions

Answer 40

Khanna and Palepu 2000

Question 41

Findings indicate that there is a conglomerate discount, and a diversification premium (which is more significant for related diversification) n=12000

Answer 41

Villalonga 2004

Question 42

Differentiate between diversification based on scale-free resources (e.g. reputation) and capacity-constrained resources (e.g. number of managers). Latter cause bottenecks.

Answer 42

Levinthal and Wu 2010

Question 43

Logical Incrementalism: You can't predict all major precipitative events, so can't always plan formally. Strategies emerge as a blend - formed incrementally and opportunistically

Answer 43

Quinn 1978

Question 44

You may engage in M&A to extend into new products/regions more quickly M&A may be used as a substitute for R&D

Answer 44

No source

Question 45

Looks at how strategies actually emerge by analyzing an Internet firm. Two types of models: Evolutionary Search and Positioning search. Evolutionary: Bounded Rationality + limited plasticity plasticity (limited scope for strategic change) leads to incremental, satisfactory (local but not global maxima) changes. Based on heuristics and trial and error. Positioning: Strategy is concrete, is about actions and not cognition. TIME DEPENDENCY: Younger firms use evolutionary search and evolve to positioning search.

Answer 45

Gavetti and Rivkin 2007

Question 46

"Æ’" blaimed own hubris in adding too much tech (esp. vertical doors) to the "Æ’ ..."; did not consider implications for manufacturing or suppliers --\> production shortfalls

Answer 46

Tesla Model X

Question 47

A firm cannot just choose when and how to innovate. Instead, this will mainly be determined by the size of a firm and the nature of its accumulated technological competences. Firms don't always have choice in strategy trade-offs (leader vs follower/broad vs specialised) - strategy can be path dependent, and depend on company structure

Answer 47

Pavitt 1990

Question 48

Information about new products and processes leaks out to rivals within about a year

Answer 48

Mansfield 1985

Question 49

Reis 2011

Answer 49

Lean Startup; applied to learning and iteration

Question 50

Name the Five Forces What affects these forces? What is the framework good for?

Answer 50

Substitutes Bargaining power of Buyers Bargaining power of suppliers Threat of new entrants (high costs, comp. adv., retaliation, regulatory). Note high costs easily overcome with capital markets/cash stock. Intensity of rivalry: Collusive vs. competitive outcomes 5F assesses the long-run profitability of an industry and identifies the key external constraints on profitability. Thats it! Don't get carried away.

Question 51

Industry life cycle framework

Answer 51

Johnson et al. 2011

Question 52

Later entrants take more profits from innovation as they have complementary assets, infrastructure, brand name, and are able to adapt the innovation to the customers needs. Uses example of Betamax and VHS, strategic maneuvering and formign alliances allowed VHS to succeed. Rapid followers follow quickly enough to materialize first-mover benefits, while exploiting those that come from being a leader - can create complementary assets

Answer 52

Cusumano et al. 1992

Question 53

First mover advantages Technological leadership (Learning curve + continued success in R&D) Preemption of assets (First movers can pick their niche) Buyer switching costs Second mover advantages (First mover disadvantages) Free-rider effects on R&D, infrastructure, and education Less uncertainty Taking advantages of shifts in preferences and technology Incumbent inertia Argues second mover advantages can pay off

Answer 53

Lieberman and Montgomery 1988

Question 54

Competitive advantage stems from: 1. Resource heterogeneity 2. Ex-post limits to competition (imperfect imitability/substitutability) 3. Ex-ante limits to competition (rents offset acquisition costs) 4. Imperfect resource mobility (rents bound to firm

Answer 54

Peteraf 1983

Question 55

Given incomplete factor markets, critical assets are accumulated, not acquired (like Barney argues) Sustainability of advantage depends on how easily assets can be subsituted or imitated. Imitability depends on: 1. Time compression diseconomies (R&D has compounding advantages: doing it longer is better than faster) 2. Asset mass efficiencies: Historical success translates into favorable initial asset stock positions which in turn facilitate further asset accumulation. Pauslon and Co. for example. 3. Inter-connectedness: Accumulating a stock may depend not just on the level of that stock, but also on the level of other stocks. E.g. to the extent that new product developments find their origin in customer suggestions, it may be harder to develop technological know-how for firms who do not have an extensive service network. 4. Asset erosion: assets decay over time brand awareness erodes because the consumer population is not stationary. 5. Causal ambiguity: R&D investment increases the probability of hitting the in the pharmaceutical industry but it does not rule out chance.

Answer 55

Dierickx and Cool 1989

Question 56

Examples of second mover advantages through reducing uncertainty.

Answer 56

Rocket Internet

Question 57

Examples of second mover advantages through complementary assets

Answer 57

Tesla in the self-driving car race. Google started working on them since 2010 (led by Sebastian Thurn), but since Tesla can field a larger fleet, has an order of magnitude as much data as Google alr.

Question 58

Cost vs Demand Advantages

Answer 58

Cost Advantage: leads to price competitionDemand Advantage: diffrential between WTP and cost. Leads to diffrentiation strategy. HTC vs Apple as an example

Question 59

Generic Strategies

Answer 59

Porter 1980 Cost, diffrentiation, or focus

Question 60

Information about new products and processes leaks out to rivals within about a year

Answer 60

Mansfield 1985

Question 61

Diversification works when there are conomies of scale and scope due to shared activities and competencies. Examples?

Answer 61

P&G: It's businesses rely on common marketing expertise & salesforce, distribution system, strategic planning unitDisney: producy extensions, synergies in brand

Question 62

Why diversify?

Answer 62

1. Economies of scale and scope 2. Market power 3. Superior internal financial structure 4. Risk reduction

Question 63

Answer 63

Palich et al. 2000

Question 64

Problems with studying diversification

Answer 64

Endogeneity: Whether a firm diversifies is not independent of past performance Undersampling of failure: Few studies are entirely comprehensive Causality: Diversification is not always the only cause of increased (or decreased) profitability

Question 65

Reasons for mergers and acquisitions

Answer 65

There are 10. 1-4 are the same as from diversification 5. Bargain purchase price: Another company has essential, but underused underavlued assets. Buying may be cheaper than making (esp. if intangible) 6. Broader market access: (Amazon acq. of Souq. Alibaba acq. of Lazada) 7. Technology acquisition: (Deepmind,4G license) 8. Filling some gap: sales force, patents, etc. (Acquihires) 9. Financial resilience:Earnings smoothing and Long term growth / profitability strategy 10. Short-term growthÂ

Question 66

Christensen et al. 2011

Answer 66

Most reasons for acquisition are our typical reasons (see reasons for acquisitions card) A less-familiar reason for making an acquisition is to fundamentally change a company growth trajectory.The acquirer uses the target's business model as a platform for growth. Because the business models with the most transformative potential are often disruptive, they can be difficult to evaluate, and CEOs often believe that such acquisitions are overpriced. In fact, however, those are the ones that can pay off spectacularly. Google as an example, agressive acquisitions of moonshots.

Question 67

Andrande et al. 2001

Answer 67

Study of 4256 deals from 1973 to 1998. Acquisition premia is 38%. Why? Hayward and Hambrick (1997): Proxies of CEO hubris are associated with overpayment in 107 deals, with R^2 of 20%

Question 68

Coase

Answer 68

1937

Question 69

Costs include contracting issues: complex and difficult to enforce contracts Humans are subject to Bounded Rationality (Simon, 1947) Assumes at least some agents act opportunistically: this threat increases transaction costs. This is why asset specificity becomes an issue.‘As assets become more specific, governance costs escalate.

Answer 69

Williamson 1981

Question 70

Make or buy

Answer 70

Make if: No partner available Asset specificity is high Low uncertainty about investment needed Buy if: No anti-trust issues Firms can be integrated Value of combined firms is higher than operating independently

Question 71

Alternatives to make or buy

Answer 71

1. Explicit contracts and sanctions (Tesla, Mobileye contract) 2. Joint ventures 3. Equity investment (Corporate venture capital: GV, GE Ventures, Â

Question 72

Governments/regulators seen as the second greatest effect on company's economic value after customers

Answer 72

McKinsey Global Survey results 2012

Question 73

Fisher Bodies proves this case of transaction costs for high specificity assets. Was originally a contractor for GM but eventually acquired by GM Had location specificity and specificity in facilities (was ready to build GM's cars.

Answer 73

Klein et al. 1978

Question 74

Emergent strategy unhelpful, it is waste on endless experimentation. Can't just learn from experience, must implement strategic plan and adapt if required.

Answer 74

Goold 1996

Question 75

Bounded Rationality: Planned Strategy is unlikely to be rational after all if acting under bounded rationality.

Answer 75

Simon 1947

Question 76

Honda Effect: where formal strategic planning is retrospectively attributed to actions where no strategy existed

Answer 76

Pascale 1996

Question 77

Three fallacies Predetermination: complexities of markets = impossible to predict future. Detachment: aggregated data = detail lost/relies on quantitative measures. Formalization: Planning sucks compared to strategic learning where information is internalised and comprehended

Answer 77

Mintzberg 1994

Question 78

Study claims planning/performance correlation is strong in very unstable environments. (n=656) Argues that both planning and learning are needed, plans must be reworked and improved, even abandoned!

Answer 78

Brews and Hunt 1999

Question 79

Focusing on operations abandons the concept of a strategy and becomes generic Operations are a stepping stone/requirement to be successful, not a determinant of success. Need operational effectiveness as well as strategy

Answer 79

Hayes and Pisano 1994

Question 80

Fallacy of pre-determination we can't predict tech. change, so must remain flexible, forward thinking and cooperative between levels

Answer 80

Mintzberg 1994

Question 81

Disruptive technologies: strong incumbents rarely stay at the top of their industry during technological changeSuccessful fail since they rely too heavily on existing customers (future tech. considered uncertain)Advocates looking for new markets using smaller and independent organizations

Answer 81

Bower and Christensen 1995

Question 82

Case study on Polaroid. Organizational inertia (business model didn't change despite changing technology) and ignoring new developments in capabilities meant Polaroid failed

Answer 82

Tripsas and Gavetti 2000

Question 83

Importance of design to accepting new innovations. Using the example of Edison. He modelled his systems on existing gas systems, amking them "palatable" and easy to accept.

Answer 83

Hardagon and Douglas 2001

Question 84

What source is generic strategies?

Answer 84

Porter 1980

Question 85

Strategic factor markets. Firms compete on acquiring resources. Strategy arises from imperfect pricing, the rest is luck.

Answer 85

Barney 1986

Question 86

Firms form a Zipf distribution. If firm size is a proxy for performance, then not everyone can be high performing.

Answer 86

Axtell 2001

Question 87

Technology diffusion depends on geographic and networks (more central = faster diffusion)

Answer 87

Greve 2009

Question 88

Firms do not necessarily try to quickly imitate anything that seems profitable (technical complexity/market imperfections as well as internal resitance/cognitive differences)

Answer 88

Regner and Jonsson 2009

Question 89

The more complicated a firm’s strategy, the more difficult it is to imitate.

Answer 89

Rivkin (2000)

Question 90

Success fosters structural and strategic inertia, failure stimulates experimentation.

Answer 90

Starbuck et al 2008