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Organization strategy Cheat Sheet by

Org strategy midterm

What is strategy - Diamond

A firm’s profit­ability is a function of industry and segmen­t-level forces, as well as firm-level choice­s.SWOT (S,W are internal, O, T are external)
Strategy: (1) an integrated set of choices that uniquely positions the firm in its industry so as to create sustai­nable advantage and superior value relative to compet­ition. (2) Operat­ional excellence is not Strategy. Types of positi­oning - Variety (subset of industry e.g. jiffy lube), need, and access (rural vs. urban) based. Strategy framework has five elements [strategy element are congru­ent/fit well], arenas (where, intern­ati­onal, local, service, manufa­ctu­ring) , vehicles (how, e.g. greenf­ield, JV, mergers) , differ­ent­iators (how will we win, cost or premium), staging (speed and sequence of moves, which move to make first and then), economic logic (how to obtain returns, premium or cost?)

Resource based strategy

Resources are tangible (real estate, PPE), intangible (IP, culture, brand), and human resources. Capabi­lities are the ability to do something productive with the resources. Sustained CE- establ­ished value creating strategy - not simult­ane­ously implem­ented by others and unable to duplicate the benefits. RBV - valuable (botto­mline contri?), rare (do others have?), inimitable (can others copy?), non-su­bst­itu­table (do same with smth else?) resource create SCE

Organi­zat­ional structure & Design

The more sectors that strongly impact the firm, the higher the enviro­nmental comple­xity. Enviro­nmental uncert­ainty can be assessed by enviro­nmental complexity and change (# of sectors that impact firm). Three goals of structure are, efficiency (minimize cost, time, effort), coordi­nation (ease info flow, coordinate diverse tasks), and adapta­bil­ity­/fl­exi­bility (scan env. and change)

ORGIII & Divers­ifi­cation II

Porter 3 test for divers­ifi­cation: cost of entry (should not capitalize all future profits), attrac­tiv­eness (new divers­ified industry should be attrac­tive), better off tests (either new unit must gain CA after linking or vice versa). CA from divers­ifi­cation - economies of scope (use a resource across multiple activities uses less of resources than if used indepe­nde­ntly), parenting advantage, economies from intern­alizing txs, internal labor market, internal capital market.

Divers­ifi­cation - M&A

How do you grow: M&A or organic. Modes of combining culture: separation (congl­ome­rates), domination (acqui­sit­ion), blending (merger). Altern­atives to M&A - long term cooper­ative relat, embed , big enough, small enough (niche). Modes of collab­oration (strategic alliance, JV, licensing, outsou­rcing, collective Research org). Potential partners - resource fit, strategic fit

Porter's Five Forces

Threat of entry (bid price down or cost up )barga­ining power of buyers (influence price), bargaining power of suppliers (influence cost), threat of substi­tutes (raise OC or lower WTP), and all of this work on intensity of rivalry (bid price down or cost up). Rivalry is destru­ctive if its based solely on price. Compet­itive analysis of industry focuses on relative bargaining power. Substitute about size of pie, others about division of pie

Personal Notes

Five forces framing is about the industry, not the firm. Buyers and suppliers can go multiple levels deep. The stronger the five forces, the less attractive the industr. Industry concen­tration (HHI and CRx) quantify intensity of rivalry.
The stronger the forces, the less attractive the industry. Cash is never a strategic resource. “core compet­encies” can become “core rigidi­ties”

Org II

Mechan­istic org design = cost leadership best. Structure Determines division of labor and accoun­tab­ility for results. Structural design dimensions are structural differ­ent­iation [how activities are divided: DOL, partit­ioning of tasks] and integr­ation (how activities are coordi­nated). Structural differ­ent­iation - vertical, horizo­ntal, and comple­xity. Integr­ation : centra­liz­ation, span of control, formal­iza­tion, standa­rdi­zation, liasion roles, and cross functional units

Vertical Integr­ation II

Corpor­ate­-level strategy- scope of firms activi­ties: (1) Vertical scope (integ­rat­ion): value adding activities should the firm encompass? e.g. Nike vs. Disney. (2) Product scope (diver­sif­ica­tion): How specia­lized should the firm be? GE vs. Gap. (3) Geographic scope: optimal geo spread of activi­ties? Peet’s vs. McDonalds
Busine­ss-­level strategy : How to compete in particular markets, SBUs. Operat­ional strategies : How subunits and functions of SBU contribute to business level strate­gies.



Generic Strategies

Sustained compet­itive advantage can be created using generic strate­gies.
BMW - differ­ent­iator, Walmart - cost leader, AE - focus.
Compet­itive advantage can be secured by only one cost leader but multiple differ­ent­iators. Stuck in the middle - engages in each of generic strategy but fails to achieve any one of them.

Other Notes

Positi­oning within industry
[1] Pick a strategic position : Generic strategy: cost, differ­ent­iation, focus
[2] Pick Key dimensions of compet­ition: Drivers of cost or WTP
[3[ Make tradeoffs Don’t get caught in the middle doing two things badly
[4] Hold that position :Growth, aspira­tions, wandering management

Value Chain Analysis

A VC analysis is used to analyze the choices of activities of the firm and assess the extent to which they fit together and with the strategy. Two type of activities in VC analysis: primary (contr­ibute to physical creation of produc­t/s­ervice, sale transfer and its service after sale), and support (add value by themselves or add value through relati­onship with other support and primary services).

Vertical Integr­ation

Vertical Integr­ation is ownership of multiple stages of an indust­ry/­product value chain. If transa­ction cost > admin cost => VI, or if greater control of env. is needed VI (flexi­bility as well). Backward - take ownership of own input or component. Forward - take ownership of activities previously undertaken by customers. VI likelihood is higher where transa­ction specific investment required.
V Integrate to increase efficiency when: (1) High uncert­ainty in demand­/supply
(2) Small-­numbers bargaining (related to asset specif­icity) (3) Bounded ration­ality leading to inform­ation asymmetry.
In-house - low powered incentive, outsource - high-p­owered
But VI compounds the risk (due to inhouse produc­tion). Type of Vertical relati­onship (franc­hise, vendors, long term contract)


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