Strategic planning managment

Core argument for why the firm will succeed, How the goal, scope and competitive advantage comes together

Mission: A statement to describe firm’s reason for existing

Value: A list of virtues

• Clarify the firm’s goals
• Public relation statement
• Inform about the goal in NGOs

Vision: Describe the strategist’s plan for closing the gap between current reality and a potential future

Functions of a vision:

• Contribute formulate a good strategy
• Motivate the firm’s employees to achieve it

• Incentives
• Clarity
• Coordination
• Efficiency
• Evolution or adoption
• Change

• Identification
• Evaluation
• Option Development
• Option Evaluation
• Selection

• Corporate strategy defines the scope of the firm in terms of the industries and markets in which it competes. Corporate strategy decisions include choice over in diversification, vertical integration, acquisitions and new ventures; and the allocation of resources between the different businesses of the firm.

• Business strategy is concerned with how the firm competes within a particular industry or market. If the firm is to prosper within an industry, it must establish a competitive advantage over its rivals. Hence, this area of strategy is also referred to as competitive strategy.

Competitive advantage + action = Performance

Competitive advantage (Position, capabilities)

Action (Asset acquisition, asset deployment) 

• Cost Advantage (same product as competitors but cheaper)
• Product differentiation (better products than competitors)

• Brand Name (Apple, Coca cola)
• Status (Hotels, Rolex)
• Customer relationship (Ikea,nespress)
• Government protection and Support (hospitals, energy companies, algo)
• Distributuion channels (Ali express, Amazon, Ebay)
• Geographic incumbency (geographische unabhängikeit) (shell)
• installed base and de facto standards (Industriestrand) (Cisco, MP3)
• Gatekeepers in the flow of good or information (stock market)
• attractive industry structure
• heterogeneity within the industry (MC Donald’s)

They are Intrinsic to the firm such as routines, the hierarchy that determines formal authority, and the formal procedures and informal rules that the team or firm has develop to perform a complex task automatically.

• Distinctive competence
• A firm has high capabilities to generate a new product more efficiently to market, so it can decrease the cost
• A firm with a reputation for reliability, durability or aftersales services can increase the price

• Scarcity. If a resource or capability is widely available within the industry, then it may be essential to possess it in order to compete, but it will not be a sufficient basis for competitive advantage. 
• Relevance. A resource or capability must be relevant to the key success factors in the market. 

It depends on causal ambiguity 

Complexity of capability-Based advantage + tacit nautre of capability-based advantage

Resources and capabilities are imitable if they are transferable or replicable. 

- Durability Some resources are more durable than others and, hence, are a more secure basis for competitive advantage

- Transferability The simplest means of acquiring the resources and capabilities necessary for imitating another firm’s strategy is to buy them. 

• Geographical immobility of natural resources, large items of capital equipment and some types of employees may make it difficult for firms to acquire these resources without relocating themselves. 
• Imperfect information regarding the quality and productivity of resources creates risks for buyers. 
• Complementarity between resources means that the detachment of a resource from its “home team” causes it to lose productivity and value.
• Organizational capabilities, because they are based on teams of resources, are less mobile than individual resources

1. Benefit. Whether it's a good or service, you must be clear on the benefit your product provides. It must be something that your customers truly need and that offers real value. You must know not only your product's features, but also its advantages how they benefit your customers. That means being constantly aware of new trends that affect your product, especially new technology. For example, newspapers were slow to respond to the availability of free news on the internet.
    
2. Target market. Who are your customers? You've got to know exactly who buys from you, and how you can make their life better. That’s how you create demand, the driver of all economic growth. Newspapers' target market drifted to older people who weren't comfortable getting their news online.
    
3. Competition. That's more than just similar companies or products. It includes anything else your customer could do to meet the need you can fulfill

The Problem (Coordination, Incentive)

THe Levers (Architecture, routines, culutre)

Coordination problem

Incentives Problem

• It is the challenge of designing an optimal organization even when everyone in the firm fully internalizes its goals and puts self-interest aside in helping it to pursue those goals
• It is the form how the firm acquires and deploys the assets it controls
• E.g. designing systems that meet specified objectives 

• It is the challenge of inducing people whose private goals might diverge from the firm’s to take actions that are consistent with achieving the firm’s goals.
• E.g. economic rewards if objectives are achieved

• Tightly coupled when a subunit structure and linking mechanism that facilitate complex and frequent interconnexions
• Loosely coupled when the units are largely independent or when the interface between them is standardized

Architecutre, routines, culutre

• How the architecture affects hidden information and hidden actions

• Problem 1: Macroeconomic status
  • Good times: High compensation with amount of effort X
  • Bad times: Low compensation with same amount of effort X
  •  
• Problem 2: How to define performance in a design unit? What to do?
• Aligned the compensation with the subunit profit
• Compare how well other senior managers do in the industry
• Use multiple indicators to minimize biases • Define global indicators to help cooperation among subunits • Define subunit indicator

Routines are recognizable, repetitive patterns of interdependent action that govern work processes in organizations (Feldman and Pentland, 2003)

• They are a key mechanism by which organizations can change, adapt, and maintain stability over time
• Routines are ideal in frequent and repetitive tasks
• They are the interfaces among different parties interact when they face a process or problem (e.g. protocol)
• The routines come from experience (i.e. feedback, observation, and trial-and-error)
• Routines might cross boundaries among subunits, which helps the coordination problems

Commonly held values and beliefs of an organization that is sanction by the firm

Exploitation requires our complete concentration to do better what we are doing. It is the origin of efficiency and hence, productivity.

Exploration allows us to get away from our current reality—where we have the focus right now—to visit other realities and find new horizons. It is the origin of innovation.

You need to invest resources—time and money—to investigate, and no one can ensure that the result of this research will be worthwhile. There are no guarantees.

It makes you feel safe doing things the same way you always did. It feeds the narrow focus of your comfort zone. 

• A framework to organize the analysis in a systemic approach
• The premise is that the structure of the industry and the conduct (behavior) of its incumbent firms interact to create performance

• This framework was developed how governments might intervene to increase social welfare, its performance measure is social performance, not profitability

• Structure: those set of variables that are relatively stable over time and affect the behaviour of sellers and/or buyers. The way in which markets fail to follow perfect competition conditions, depends basically in the degree of:  supply concentration, demand concentration, product differentiation and market entrance barriers. Also, the structure of the market will always be determined by the nature of the product and the technology available.