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What is Strategy? "How firms compete successfully" (Questions…

- - - - creation of a unique and valuable position
      - different set of activities
      - trade-offs in competing
      - creating fit among company's activities
  - - - integrates both elements plan & action
        :arrow_right: neither plan or action :arrow_right: theory
    - - 1. strategy formulation (plan)
        :arrow_right: Where are we? (Point A)
        :arrow_right: S & W Analysis
        :heavy_plus_sign: Intended Strategy
      - 2. strategy implementation (action)
        :arrow_right: Where must we be?
        :arrow_right: emergent strategy
        :heavy_plus_sign: O & T Analysis
    - - Integration of both plan & action
      - leveraging the concept
        
        explanation
        
        prediction
      - requiring replications & experimentations
      - understanding difficulty of strategic change
        
        accepted due to past success :arrow_right: doesn't guarantee future success
        
        performance data challenge current strategy
        
        :<3: Microsoft
        :arrow_right: New CEO (2014) Satya Nadella implemented new theory:
        "To empower every person and every organization on the planet to achieve more"
        :arrow_right: restructuring to eliminate destructive internal competition
        :arrow_right: products and platforms no longer exist as separate groups
        :arrow_right: change offered employees new sense that their work has a meaning
        
        Strategy & management :arrow_right: human beings!
- - - - people in developed countries feared to loose jobs ( high end & low end manufacturing jobs)
      - emerging economies accused MNEs to destroy local companies & culture
    - - Terroristic attack 9/11
    - - Great Recession
        
        economic recovery slow in developed countries
        
        economic recovery faster in emerging economies
- - - - operations (R&D, Sales & Distribution, etc) located in other countries
      - activities need NOT be under full control of MNE
    - - aimed to gain controlling stake into foreign-based company
      - can be new company (Greenfield FDI) or existing company (M&A)
      - expansion possible in foreign country without FDI (using local financial market)
    - - Scale:
        financial power & economies of scale across functions of firm
      - Scope:
        breadth and diversity of assets & capabilities :arrow_right: geographic & innovation-related options :arrow_right: superior profits
  - - - Knowledge
        :arrow_right: secret to firm's competitiveness :arrow_right: use of knowledge sets
        :arrow_right: firm specific advantage / ownership advantage
- - - - Tacit collusion
        :arrow_right: firms indirectly coordinate actions by signalising intention
        :<3: new competitor enters market :arrow_right: majority of incumbents lower price below new entrant to force new entrant out of market
      - Explicit collusion
        :arrow_right: firms directly negotiate output, fix pricing and divide markets
- - - - Natural Market Imperfections
        
        Pricing of public good (Knowledge)
        
        Transaction costs
        :arrow_right: Weather conditions
        :<3: Price of vanilla increased due to heavy rain in Chile :arrow_right: Grow vanilla yourself to reduce risk of market imperfection
      - Man Made market imperfections
        
        Government imposed
        :arrow_right: Tariff, FX control, Regulations on FDI
    - - Licensing
        :arrow_right: agreement to give another firm rights to use own technology
        :arrow_right: trademark for royalty fee paid to own firm by other firm
      - Dissemination risk
        :arrow_right: licensee uses firm-specific know how for other purposes than intended
      - FDI
        :arrow_right: provides tighter control over foreign operations
        :arrow_right: more expensive than licensing #
- - - - :<3: Luxury Furniture Company "De Sede"
        :arrow_right: theory of firm: Swiss handmade furniture pieces
        :arrow_right: max. level of internationalisation Export mode
        :arrow_right: had subsidiary in Germany (labour costs cheaper, but 40% higher waste of material production :arrow_right: inefficiency and :arrow_up: production costs
        :arrow_right: Swiss efficiency and export mode only
    - - :<3: Skype 2003
        :arrow_right: registered in Luxembourg, used American Bank finances & team of software developers in Ballin & Estonia
        :arrow_right: simultaneous expansion of service on global level
- - - - Asset-type
        
        Tangible
        :arrow_right: technology, Machinery, Equipment
        
        Intangible
        :arrow_right: Knowledge, Information to utilise tangible assets
      - Transaction type
        
        Organisational based
        :arrow_right: Ability to manage company
        
        Institutional based
        :arrow_right: knowledge of institutions
        
        External market based
        :arrow_right: knowledge where to buy products and best sell them
      - Recombinant type
        
        Ability to recombine own assets with other internal & external assets
    - - Exogenous L advantages
        natural assets independent of development stage
        :arrow_right: culture, norms, religion
        :arrow_right: rainfall, climate, land availability
      - Fundamental L advantages
        
        Basic Infrastructure
        :arrow_right: Healthcare
        :arrow_right: Transport, Public Transport
        :arrow_right: Primary schools
        
        Legal Infrastructure
        :arrow_right: Legal system
        :arrow_right: Security & police
        :arrow_right: Tax & Property rights
        
        Regulations & Policy
        :arrow_right: Incentives
        :arrow_right: Industrial policy
        :arrow_right: Competition Policy
        :arrow_right: Regulatory agencies
        :arrow_right: Capacity to enforce regulation
        
        Financial Infrastructure
        :arrow_right: Banking, Insurance, Stock exchange
      - Knowledge related L advantages
        
        Knowledge Infrastructure
        :arrow_right: Education, Universities
        :arrow_right: Public Research institutes
      - Structural L advantages
        
        Market & demand Structure
        :arrow_right: Income level & distribution
        :arrow_right: Size of potential market
        :arrow_right: Wage rates
        :arrow_right: Skilled employee availability
        :arrow_right: Competitors
      - Co location L advantages
        
        Advantages from presence of other actors in same locations
        :arrow_right: Agglomeration economies
        :arrow_right: Network of suppliers
        :arrow_right: Network of customers
        :arrow_right: Presence of support industries
        
        Industral policy
        :arrow_right: Specific policies associated with given industry
        
        Advantages from location-bound O advantages of other actors
        :arrow_right: Presence of significant customer
        :arrow_right: Presence of significant supplier
    - - 1. Ownership advantage over foreign rivals
        NO - remain domestic
      - 2.Locational advantage in foreign country?
        NO - Export
      - 3. Advantage from internalising production?
        NO - Licence
        YES - FDI
- - - - Market-seeking
      - Efficiency seeking
        :arrow_right: Buy better and Sell more
      - Natural resource seeking
      - Escape
        :arrow_right: regulations, currency, from uncertaintytext
      - Trade-supportive
        :arrow_right: internalisation, be the retailer
    - - Strategic asset seeking
        :arrow_right: Upgrade
- - - - Factor endowments
        :arrow_right: Educations system
        :arrow_right: High Skilled engneers
      - Firm Strategy, Structure & Rivalry
        ::arrow_right: Multiple players
        :arrow_right: severe competition
      - Related and supporting Industries
        :arrow_right: Semi conductor industry
        :arrow_right: Micro-process engineering
      - Demand condistions
        :arrow_right: Sophisticated consumers
        :arrow_right: Early adapters
      - Criticism on Model:
        :arrow_right: assumption that countries compete is the misunderstanding that countries, like companies, are somehow in competition with one another.
        :arrow_right: Does not mean country becomes internationally competitive, even if the companies located there are internationally competitive.
        :arrow_right: productivity is purely a domestic matter and has nothing to do with international competitiveness of a country (Krugman 1998)
        :arrow_right: model does not include trade relationships between countries to gain a full understanding at the nation level
        :arrow_right: on the role of home based companies when the driving force is the multinational company
        :arrow_right: missing how national culture influence competitiveness
        
        :<3: Example
        :arrow_right: Japanese preference for close and long-lasting supplier relationships in the automobile industry
        :arrow_right: Japanese cultural preferences for long term employment and incremental growth within a particular sector leads businesses to specialize.
        :arrow_right: Specialization increases the interdependence of enterprises and so the need to co-ordinate activities and strategies to reduce uncertainty.
        :arrow_right: Japanese social ties and obligation allow Japanese to build strong bonds with different groups of people with different backgrounds.
        :arrow_right: These cultural factors are some of the reasons for the formation of Japanese business system of Kereitsu.
  - - - Low context culture vs Hight context culture
        :arrow_right: low context culture :arrow_right: Communication is at face value without unspoken context
        :arrow_right: High context culture :arrow_right: Communication relies on unspoken context
      - :<3: Example - INDITEX first Zara franchise in Germany (Hamburg)
        :arrow_right: contract Germans vs. Spanish
        :arrow_right: Germans: Worst case scenario in contract, Spanish felt insulted - Trust is highly valuable in Spain
        :arrow_right: contract implied Germans don't "trust" Spanish
        :arrow_right: nearly failed to sign contract because of cultural differences
        :arrow_right: cross-cultural management can be source of competitive advantage #
- - - - Inbound Logistics
        :<3: Quality Control,Raw Materials,Supply Schedules
      - Operation
        :<3: Manufacturing, Packaging, Production, Quality control, maintenance
      - Outbound logistics
        :<3: Finishing goods, Order handling, Delivery, Invoicing
      - Sales & Marketing
        :<3: Customer Management, Order Taking, Promotion, Sales Analysis, Market Research
      - Servicing
        :<3: Education & training, Upgrades
    - - Firm Infrastructure
        :<3: Legal, Administrative, Financial Management
      - Human Resources
        :<3: Personnell, lay recruitment, Training, Staff planning,
      - Technological Development
        :<3: Product & process Design, Production engineering, Market testing, R & D
      - Procurement
        :<3: Supplier management, Funding, Subcontracting, Specification
    - - Yes
        Do we have the resources & capabilities to add value in a better way than competitors?
        
        Yes
        :arrow_right: Keep doing it
        
        No
        :arrow_right: acquire necessary resources & capabilities inhouse
        :arrow_right: Access resources & capabilities through strategic alliances
      - No
        :arrow_right: Outsource, Sell Unit, Lease service to other firms