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37 Cards in this Set
- Front
- Back
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What are the two fundamental parameters considered in determining a strategy according to Hedley (1977) |
Market growth Relative Competitive Position |
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What does portfolio planning provice? |
A framework for selecting the best combination of individual business strategies available, whilst keeping within the boundaries set by the company's overall constraints. |
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Why is growth so important in shaping strategy choice? |
1) It is a major factor influencing ease/cost of gaining market share 2) Provides opportunity for investment |
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What is the BCG matrix by Hedley (1977) |
The Growth-Share Matrix Stars generate, ánd use large amounts of cash to maintain position. Self sustained. Cash gows, high profit, pay dividend and interest, provide debt capacity etc Dogs, takes money from investments Question marks, high cost, low revenue |
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What is the portfolio strategy? |
Maintain position in cash cows, but guard against the temptation to reinvest excessively. Cash from cash cows should be used to consolidate position in stars which are not self sustaining. Surplus can be used to fund a selected number of question marks. The fundamentally weak position of the dog should be recognized for what it is. The appropriate strategy for a multi-business company involves striking a balance in potfolio. |
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What is common critique on the Business Portfolio? |
It has a narrow view (only takes into considertaion two dimensions) |
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What is corporate strategy? Porter (1987) |
The overall plan for a diversified company. What businesses should the company be in? How should thr corporate off |
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What are the premises of corporate strategy? (Porter 1987) |
1. Competition occurs at business unit level.
2. Diversification inevitably adds costs and contstraints to business units 3. Shareholders can readily diversify themselves. |
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When doen corporate strategy add value? (Porter 1987) |
If it passes the three conditions: 1. The attractiveness test 2. The cost-of-entry test 3. The better-off test |
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What are the concepts of corporate strategy? What are the main differences between the first and last 2? |
Portfolio Management - Diversification through acquisition. Corporation buys autonomous units. The first focus on autonomous BU's, the last exploit interrelationships between BU's. |
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How does corporation add value in Portfolio Management? |
1. Use expertise to spot attractive acquisition candidates 2. Provide capital on favourable terms (reflect corporate wide fundraising ability) 3. Introduce professional management skills & discipline 4. Provides high quality review and coaching |
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In what way have the benefits of Portfolio Management eroded? |
1. Firms can easily fund strategy withour parenting company. 2. Attractive firms are easily found 3. Top management is not necessarily found in larg companies, managers are nothing without industry-specific knowledge and experience. 4. Portfolio management doesn't necessarily provide dispassionate review 5. Giving BU's autonomy is questionnable 6. Complexity of the management task is major setback |
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What is the greatest pitfall of Restructuring? |
It is hard to dispise of unit once this is restructured and works well |
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What are the value activities in Transferring? |
Primary activities - create the product or service: inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities - provide the input and infrastructure that allow the primary activites to take place: company infrastructure, human resource management, technology, and procurement |
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What are two types of interrelationships that create synergy in the value chain? |
1. A company's ability to transfer skills or expertise among similar value chains. 2. Ability to sahre activities |
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When do opportunities arise for a firm to exploit interrelationships? |
When business units have similar buyers or channels, similar value activities, similarities in the broad configuration of the value chain, or the same strategic concept. This allows the sharing of knowledge. |
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What are the conditions for similaties to lead to competitive advantage in transferring skills? |
1. The activities in the business are similar enough that sharing expertise is meaningful. 2. Transferring skills involves activities important to competitive advantage. 3. The skills transferred represent a significant source of competitive advantage |
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How does sharing activities create competitive advantage? |
Lowering costs or raising differentiation |
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What are corporate strategies? |
Portfolio Management - Autonomous SBU's acquired Restructuring - SBU's with unrealized potential bought, restructured and sold Transferring Skills - Knowledge about how to perform activity is transferred accross units (value chains) Sharing Activities - Multiple units and the parent are involved in the same activity |
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How can sharing lower cost? |
1) Achievement of eceonomies of scale 2) Efficiency utilization boos 3) Helping a company move rapidly down learning curve |
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What are the prerequisits for transferring? |
It must involve activities significant for competitive advantage. and Benefits must kill coordination costs. |
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How does a company choose its corporate strategy? |
1. Identifying interrelationships among already existing portfolio of BU's 2. Selecting cose businesses that will be foundation of corporate strategy 3. Creating horizontal organizational mechanisms to facilitate interrelationships between core businesses and lay groundwork for future related diversification 4. Pursuing diversification opportunities that allow shared activities 5. Pursuing diversification opportunities through transfer of skills if opportunities for sharing activities are limited 6. Pursuing strategy of restructuring if this fits skills of management or no good opportunities exist for forging corporate interrelationships 7. Paying dividends so that the shareholders can be the portfolio managers |
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Why would a firm create a corporate theme? |
It's a good way to ensure corporation creates sharehold value, and having the right theme helps unite efforts of units and reinforces ways they interrelate (+ it guides the choice of new businesses to enter) |
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According to Prahalad & Hamel (1990) where does competitiveness derive from? |
on the short run from price/performance attributes of current products. In the long run, from an ability to build, at lower cost and more speedily than competitors, the core competencies that spawn unanticipated products. The real sources of advantage are to be found in management's ability to consolidate corporatewide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities. |
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What tests can identify core competencies? |
A core competence: 1. provides potential access to a wide variety of markets. 2. should make significant contribution to the perceived customer benefit of the end product 3. should be difficult to imitate |
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What is the link between core competencies and end products? |
Core proucts - the physical embodiments of one or more core competencies |
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How do Prahalad & Hamel critique the view of a corporation as seperate BU's? |
1. It leads to underinvestment in developing core competencies and core products. 2. Imprisoned resources, as these are seen as "owned" by the person or BU that developed it. |
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What is a strategic architechture? |
A road map of the future that identifies which core competencies to build and their constituent technologies. |
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Why did strategic alliances & inter-firm networks gain popularity? |
Lower overhead costs, higher responsiveness and flexibility and greater operations efficiency. |
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What are the three dimensions of a strategic centre? |
The creator of value for partners. The leader, rule setter and capability builder. Simultaneously structuring and strategizing |
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What are the main features of the role of the Strategic Centre? |
1. Strategy Outsourcing - Outsource and share with more partners, and require them to be problem solvers and initiators. 2. Capability - Develop the core skills and competencies of partners to make them more effective and competitive. Force members of the network to share their expertise with other in the network, and with the central firm. 3. Technology - Borrow ideas from other which are developed and exploited as a means of creating and mastering new technologies. 4. Competition - Explain to partners that the principle dimention of competition is between value chains and networks. The network is only as strong as its wakest link. Envourage rivalry inside network. |
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What do Lorentzoni & Badem-Fuller (1995) link to different articles? |
1. The borrow-develop-lend principle links to sharing activities & transferring skills (Corporate Strategy by Porter). 2. It is critical to develop Core Competencies (Hamel & Prahalad) |
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What does the agenda of the central firm consist of? |
The Idea - Creating a vision in which partners play a crucial role The Investment - A strong brand image and effective systems and support The Climate - Creating an atmosphere of trust and recipocity. The Partners - Developing mechanisms for attracting and selecting partners |
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What is borrow-develop-lend and why is this formula used by central firms? |
Borrow - The strategic center buys or licenses some existing technological ideas from a third party. This formula stretches the organization and forces it to grow its capabilities and competencies. It demands a new way of thinking. |
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Why do Campbell, Goold & Alexander (1995) suggest Parenting? |
Most chief execs fail to address two crucial questions: 1. What businesses should this company, rather than rivals own and why? 2. What organizational structure, management processes and philosophy will foster superior performance from its businesses? |
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What are the categories that parenting characteristics fall into? |
1. Mental maps that guide parent managers 2. Corporate structure, management systems and processes 3. Central functions, services and resources 4. Nature, experience and skills of managers 5. Extent to which companies decentralized by delegating respobsibilities to BU managers. |
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What types of analyses help strategists identify parenting opportunities? |
1. Strategists list major challenges facing business, examine each challenge (contains parent opportunity?). 2. Strategists document most important influences parent has on business, then judge whether those influences are addressing |
