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(1991) Due to competition between bidders, all the gains of a related acquisition may accrue to the target firm.
(1984) Introduced RBV by analysing firms on the 'resource side rather than from the product side'
(1962) Changes in organisational strategy create admin problems that therefore prompt structure changes.
Two factors that make 'Red Oceans' undesirable
(2010) 'If your company went out of business tomorrow would anyone miss it?'
(1997) Acquisitions are often the strategy of choice for overconfident, egotistic CEOs
(1978) Proposes 'logical incrementalism' (no 'massive decision matrix) Managers must marry formal planning with precipitating circumstances making commitments as late as possible
(2000) DCs could be interpreted as the ordinary capability of being able to learn how to learn
(2009) Strategic planning has integrative effects through activities of participation and communication to unite diverse units
(1986,_) 3 factors affecting how innovation profits are distributed: regimes of _, _ _ paradigm and _ assets
State owned ___ acquire German waste management co. in order to acquire technological knowledge in their goal of modernising economy
_ _ responded to publicity that there was insufficient meat content with strong multi-channel marketing. Ultimately increased positive brand sentiment.
(1986) Acquisition is a quick and risk minimising way of accessing 'markets, products, technology, resources, or management talent'
(2008) Liberal paternalism (nudging)
(1999) Egotistic managers have a proven tendency to overestimate their own relative skill
(1974) Decision makers are affected by heuristic biases (representativeness, availability and adjustment and anchoring) which can lead to systematic and predictable errors
(1982) Evolutionary theory is positive but economists want a normative explanation
(1988) A trade off under uncertainty faced by managers is between focusing resources on one scenario and spreading resources on several scenarios, thus maintaining flexibility’
Intangibles such as __ and __ may also be sources of SCA.
(2007) A DYNAMIC CAPABILITY is 'the capacity of an organisation to purposefully create, extend, or modify its resource base'
__ have kept net profit margins between 3 and 3.5% for the last 20 years as revenues have grown. Extremely persistent profitability.
(2004) Causes of hypercompetitivity: globalisation, improved substitutes, deregulation, lower entry barriers
(2009) The link between strategy and performance is foggy and so success stories should be treated as inspiration rather than Bible
(2012) Pioneer when there are network effects, the expected category life is short and product value is subjective
atiCa
(1993) Described 4 conditions for sustained competitive advantage: heterogeneous resources, ex-post + ex-ante limits to competition, imperfect resource mobility
(1987) For an acquisition to work: the industry must be attractive, cost-of-entry must not exceed future profits and the new business unit should have a competitive advantage
(2000) Advocates a systemic view of strategy which o draws from many areas of life such as policy, culture and education and ‘arms managers with sardonic self-awareness’
__ View: Social and other contexts are vital to strategic thought. In some certain situations then, the other views may make sense EX-POST
(1989) Alliances can protect firms from third parties and are a lower cost, lower risk way of exploring new tech and markets
(1995) Thinking alliances through to their conclusions is important. A firm should look to add value as well as learn from the partner. The best success comes from ‘alliances of
Atica
(2002) Only a minority of firms achieve superior performance (ROA statistically significantly above average) and it rarely persits
(1993) Diversified companies face a resource allocation problem between the various business units
The creative destruction of innovation makes analysis of static industry structure fairly redundant
2 types of firm structure
(2011) 'Strategy involves focus and, therefore, choice. And choice means setting aside some goals in favour of others.'
(1995) Game theory is limited in practice by 'concsious reasoning' of finite depth
IP protection is a large factor in _. Strategies include leaving blueprints at home, or only using older technology
(1996) Strategic positioning could be needs-based, access-based, or variety-based
___ funded the development of rival ____'s OS. Co-opetition
'Naive Realism' - we are biased to think are own views are developed from reason whereas everyone else is being irrational or PC etc.
__ Isomorphism. Organisations cluster in form because of political pressure to conform. The pressure to appear legitimate
Industry factors do explain performance
Joint ventures require trust. One multinational CEO achieves this in _ by teaching management in the _ Party school to grow credibility
(2011) An essential starting point of strategy is diagnosis of what the problem actually is. E.g. why is Greece borrowing too much?
_'s current share price is just _% of its peak
cost minimisation is not competitive in the long run as it is not innovative. It will make a firm bad at responding to competitors.
(1962) Surveyed the largest industrial firms of the time. Most had a decentralised multidivisional structure.
(2007) strategy is more reacting than planning
(2006) Strategy is an organics process and the best initiatives may arise unexpectedly from unexpected sources (such as lower down in the organisation)
(2001) Criticise RBV for: tautology, ignoring capabilities, having little prescriptive value
(1988) Innovative late entry can be the winning strategy (e.g. Kindle)
I of VRIN
__ __ asks his employees at Google to dedicate some of their time to radical experimentation to ensure that they stay ahead of the game
(1983) Firm similarity is encouraged by three types of forces: coercive, mimetic and normative
(2007) Sustained competitive advantage is distinct from superior performance. Resource asymmetries at a point in time give superior cash flows
(1999) Innovation trumps imitation because only it can drive society forward
(1991) Managerial blind spots in terms of the contingent decisions of competitors include winner’s curse, nonrational escalation of commitment, overconfidence, limited perspectiv
(1989) Argued that increasing returns to adoption can lead to technological lock-in. (the founder effect)
(2006) Performed a study of artificial music markets and found persistent consequences of chance events
(1968) Described increasing returns to adoption in the case of science scholarship
Porter's descriptive model of sustained competitive advantage
3rd of Porter's conditions for an acquisition to be successful
(1993) Market status serves as a competitive advantage
(1971) Not enough effort is made to learn from failed companies.
(1990) Demonstrate the experience curve in the truck manufacturing industry (negative relationship between experience time to produce)
(1999) Diversification into unfamiliar industries can lead to conservative reactions from analysts who simply don’t know enough about the new situation
Strategic asset ___ (e.g. reputation, expertise) are accumulated by choosing appropriate time paths of ___ (e.g. marketing/R&D budget)
Patents such as Apple's _ to _ can be designed around
_ pioneered Diet Cola but the profits were seized by the _ _ Company
(1975) Market share increases ROI through market power, economies of scale and the associated good management.
(1999) Discuss 'standards wars' that are especially bitter when markets are subject to network effects
aticA
(1997) Having core capabilities can inhibit innovation because they also bring core rigidities
(1990) Managers should realise that they alone can't make change happen - they have to create a culture of improvement in the organisation
(1986) The process of the acquisition itself can have a significant effect on the 'ultimate success of the deal'
HintAnswer
(1986) Firms can expect to learn more about the future relative to their competitors by analysing their own skills and capabilities rather than the industry environment. (yay RBV)
(2007) Suggest that superior performance may be explained through the failures of competitors to 'imitate perfectly-imitable resources' and solve 'solvable problems'
V of VRIN
__ ___ killed by the substitute MP3 Player
(1995) If one firm innovates then it can create industrial breathing space
(2001) Takeovers made by relatively inefficient firms are failures on average
(1993) Correcting errors may have unintended consequences (e.g. correcting overconfidence may worsen risk aversion)
(1995) Alliances formed between fierce competitors (to stem competition) are likely to fail because of tension between the partners.
(2012) Late enter when there are _ standards to compare products and low costs of _
(2005) Merging prevents the merged firms from becoming the outsider - so share price up even when profits squeezed.
(2005) TCE and property rights economics support RBV because the conditions of resource ownership affect the value of the resources. Thus, TCE is relevant to strategy
__ acquired ___. Resounding success and clear synergies
(1997) Despite the existence of uncertainty, managers shouldn’t adopt a binary view and assume that analysis has absolutely no worth
(2000) Little evidence that high investment in innovation pays
2nd of Porter's conditions for an acquisition to be successful
(2012) FMA makes a brand the psychological standard (e.g. Coca-Cola)
N of VRIN
(2004) Hypercompetitivity in the manufacturing industry. SCA lasts fleetingly. Only soln: keep finding SCAs.
_ Paid The NFL $_ Million To Use Its Tablets, But Announcers Are Calling Them iPads
_'s operating system was based on code from the 1990s which meant it couldn't be easily transformed into an iPhone killer
___ want to create a shift in their public perception. They want to be seen as a software co. with consistent sales rather than volatile hardware
Firms that were very profitable (ROA>15%) in 2003 had an 83% chance of being very profitable in 2013. Previous odds about 50%
(1975) Having a larger market share leads to competitive advantage
(2006) Despite the criticisms, formal planning was found in 81% of large corporations in a study
Famously failed to profit from copier innovation
(1985) M form might solve some of the resource allocation and agency problems with diversification
(2004) Most alliances and acquisitions fail. Choice should depend on useful resources, potential synergies and market factors
(2010) Bank execs aren't surprised to hear that their employees can't answer 'why should i choose you over the competition?'
(1974) successful diversification requires shared core competences
(1997) Core capabilities are embedded with company values and so are slow to change when they become outdated (rigidities)
(1963) Firms make decisions on two levels (financial viability and assessment of whether the decision will improve the company’s position)
After US DoJ announced its mission to block the takeover of (1) by (2), (1)'s stock price rose and (2)'s fell
__ bought __'s £1bn __ factory for just $__m - quite a lucky break!
(2000) Dynamic capabilities are best conceptualised as tools that manipulate resource configurations
____ focused on producing new graphics cards in 6 month cycles to beat the industy's 18 months. They had 3 development teams on rolling basis. Focus
_'s diversification strategy might not be best measured in terms of profitability but in user base growth (rocketed ahead of __)
_ became blinded by its own success according to _
(1991) industry is not a major determinant of performance
(1991) 3 sources of network externalities: network-based products, _ products, _ _ costs
survived through radical change from paper mill to phone company
(1999) Abnormal returns from SCA may be consumed by stakeholders other than shareholders (e.g. employees)
(1999) Found a high prevalence of formal planning in a survey of executives but also found that flexibility and regular adjustment is essential
3 conditions to imitate: _ of what to imitate, _ to do it and _ to do it
(2012) Lucky people have to ability to create it through: intention to seek opportunities, receptiveness, ability to recover, and connection (can't be lucky alone).
(1992) Argues that a lot of historic failure with diversification is down to the fact that core competencies are so vital to success
(2000) Related diversification is more likely to work and moderate diversification beats limited and extensive diversification
(1990) Consequences of small random events can persist due to positive feedback effects (e.g. increasing returns to adoption)
(2006) Suggests that firms are 'hostages of their industries' and so should look to cooperate (not just compete)
(1965) SWOT analysis - integrates internal and external factors.
(1997) From a TCE logic suggests that alliances will be more hierarchical when contractual hazards (that create moral hazard) are high
(1999) R&D alliances barely ever develop into an acquisition.
(1988) With uncertainty there is a trade-off between acting early and acting later after the uncertainty is resolved.
(1982) Evolutionary models of strategy discard profit maximisation as the driving force of economies
(2011) Companies in every category fall on the path to sameness. 'companies have lost sight of their mandate...to create meaningful grooves of separation from one another'
(2005) Blue Ocean Strategy
__ View: faced with great uncertainty companies' best bet to survive is to maximise efficiency day-to-day
(1982) In evolutionary models, firms have processes, such as how they go about R&D. These act as the 'genes' of the model
(2004) Even sustained high performance might be caused by chance events having persistent consequences
_ _ is arguably an extension of RBV with similar critiques
(1997) Dynamic capabilities are used in 'rapidly changing environments'
(1997) Alliances lie on a market-hierarchy continuum. Firms should be wary of how an alliance makes valuable intellectual property vulnerable to appropriation
(2005) After M&A announcement, the target firm usually sees its share price rise, acquirers break even - total effect is positive
(1994) Describes potential causes of diversifying phenomena: managers striving for market power, agency problems or a solution to excess capacity
(2011) Alliances are sometimes not pursued because firms are unsure how to divide value created.
(1950) An analogy of firm survival could be drawn from the theory of evolution
(2006) Emphasise the importance of praxis, as distinct from practice and practitioners
(1996) Feels that strategic competency comes second to other core competencies e.g. knowledge of ‘how to design great motorcycle engines’
(1993) Even innovation that doesn't work can be profitable because it imparts STATUS on the innovating firm.
(1987) The average stock market reaction (negative) to diversification is often used as a warning sign, however, this stock price movement is based on potential nervousness and the
(1997) Since dynamic capabilities must be built, there is a need in organisations for managers who build.
(1999) Firms should aim to be as different as possible whilst retaining the legitimacy of familiarity
(2007) Link CEO narcissism to ‘strategic dynamism and grandiosity’ i.e. acquisitions (but no systematic underperformance)
Strategic planning is an oxymoron
(2000) Long term competitive advantage lies in resource configurations, not dynamic capabilities.
(1993) If skilled management is the make or break of success then it follows that well managed firms should look to diversify widely
A 1% increase in market share is only associated with a 0.1% increase in ROI. Focus should therefore be on other factors such as prod/service quality
(1985) Emergent strategy is not chaos but ‘unintended order’ when management is ‘open, flexible and responsive’.
HintAnswer
__ realised that their furniture had to be taken apart to fit into a car - realised that customers would have the same problem
_'s initial strength became its eventual weakness. It has 2 _s which helped at first but eventually made them slow
(1992) Described how VHS overcame Betamax despite a lack of first mover advantage
(1979) Pioneered industry analysis
(2006) Success depends both on firm and industry and so rival firms may sometimes cooperate to increase an industry's attractiveness
(2008) Players of Deal or no Deal exhibit path dependent attitudes to risk
(1962) The multidivisional structure of firms was a reaction to opportunities presented by transport and communication technology. Structure followed strategy.
(1985) Game theory can plot the path of competitive interaction
(1980) Strategy actually might follow structure - a multi-divisional firm is better placed to pursue diverse opportunities
__ View: dubious of planning but less worried about ruthless markets than evolutionaries. Strategy is an emergent process of learning and adaptation
(1989) Formal planning systems are inextricably linked to the social structures of organisations acting as ‘a king of glue within the social interactive processes’
If firm performance is inherently complex and multivariate then research must investigate a variety of factors that might be behind it.
(1989) Partners should look to learn from each other and each should contribute something distinctive
Strtegic relatedness means NPV of combined firm is greater than sum of NPVs of separate firms.
(2001) Humans are not great at doing game theory in practice. They may well make the wrong choices
(1929) Firms must trade off between imitation and innovation since customers are drawn to the status quo but exact imitation leads to price wars
Related acquisition does not generate abnormal returns to shareholders of bidder
FT described potential acquisition of ___ by ___ as a 'major trophy' for the CEO. Does this reflect a culture of CEO worship/egotism?
(1963) Firms are ‘coalitions of groups’, are satisficers instead of maximisers, have five real goals (production, inventory, market share, sales and profit)
(1989) Imitiation is important because of the need for compatability to meet network demands
(1992) Economies of scale transformed the soft drink industry with distribution changing from ‘systems of independent bottlers to captive bottling subsidiaries’
(2011) Complained that thousands of organisations do not have strategy but instead goals that they pretend are strategy. E.g. US end terrorism
aTica
(2013) Forumla 1 firms naturally tend to innovate because of culture.
_ pioneered a better tire but had no system of complimentary assets (e.g. trained mechanics) to create profit
(1997) Competitive success comes from experience and efficiency acquired in the past and managers should aim to commit to a long-term trajectory of competence development
(1990) 'structure follows strategy...as the left foot follows the right'
(1963) Decisions are made on two fundamental levels: will it improve our position and is it financially viable.
(1990) Small firms innovate radically, large firms broadly. Medium firms stuck in the middle
(2008) Managers are more likely to learn from failure than success - success actually 'plants the seeds of failure'
_ exploited exogenous change to become a pioneer of a new location of the pay day loan industry
(2011) Two types of acquisitions: 1. Those that intend to boost the current position 2. Those that look to take the company in a new direction
Factors specific to individual (blanks) are neglected by the 5 Forces model
(1985) Most strategy lies on a continuum between formal planning and emergent
(2011) 70-90% failure rate of acquisitons
(1993) Decision makers ‘have a strong tendency to consider problems as unique’ which leads to misinterpretation of risk and an inside view of problems
atIca
__ __ acquired ___. Failure of this merger blamed on clash of cultures
Constant improvement in operational efficiency is necessary but not sufficient for SCA
(1997) what matters is an organisation's capacity to sense opportunities, seize them and transform the resource base.
1st of Porter's conditions for an acquisition to be successful
FT report that the CEO of ___ was trying to prevent the firm's split into life and general insurance wings. Agency problems + manager pay linked to firm size
Novo Nordisk CEO: CSR is maximizing company value over a long period of time, because in the long term, social and environmental issues become financial issues
rule of 10%
R of VRIN
(1992) Finds that planning has the largest correlation with performance within industries with a ‘planning disequilibrium’ (where levels of formal planning vary considerably)
__ Isomorphism. Organisations copy each other's structures and processes in order to deal with uncertainty. Japan in 19th c.
Multinationals should form joint ventures with companies that share similar goals r.e. growth and profitability - e.g. small firms in _
(1993) The fact that many diversifications failed in the past shows that they rely on more than just good management
__ View: rational decision making
(1997) Core capabilities are unique combinations of skills and knowledge that, combined with resources, create competitive advantage
(1988) 3 sources of FMA: _ leadership, _ of assets, buyer _ costs
_-_ has made related diversifications into Innocent smoothies and Chi Ltd. a Nigerian dairy drink company.
___ in a normal year was as profitable as ___ in an excellent year (low oil price). No one's going to build competing rail lines.
(2000) Little evidence that high investment in innovation is profitable
(1989) Valuable assets are non-tradable and therefore must be built
(2011) Strategy IS focus; focus on HOW to achieve desired goals (e.g. Steve Jobs saving Apple from bankruptcy)
(2007) study of market entry found that the decision to enter was based ‘on evaluations of their own competence and paid little attention to the strength of the competition
(2007) Strategy is time dependent – ‘what can be changed and how intelligently it can be changed- shift over time.
(2013) Dynamic capabilities are distinct from ordinary capabilities because they are path dependent, idiosyncratic and cannot merely be purchased.
(1984) Selection forces favour reliable and accountable firms. A negative by-product is that these firms suffer inertia and are resistant to change (and innovation)
Rule of 3
(1996) Inter-firm interdependence means that co-opetition should be pursued to increase the size of the pie.
According to this model, profits occur when entry is impossible
Over ___ unicorns in Silicon Valley totalling $500bn. Numbers picked out of thin air lead to costly acquisitions
According to this model, profits occur when there is heterogeneity in costs
The variety in intra-industry performance is demonstrated by __ __ and _ who were top 10 profitability in 2015 despite a bad year for the industry
_ _ was a rushed and tehnologically faulty reaction to the _
(1991) The (failed) assumption that good management can make any diversification successful led to positive stock market reactions in the 60s
(2007) Further develop RBV's imitability condition and stress that the time period of imitation could be a new axis of analysis
(2002) Acquirers can only expect abnormal returns if they integrate their own resources with those of the new business
(1988) Relatedness is not sufficient for a successful diversification - must be a valuable resource creating an advantage
__ Isomorphism. Professionalisation brings a shared set of knowledge and networks that mean that organisations are made up of people who see things the same way.
(2000) As organisations age they get more efficient at innovating but at the same time their areas of innovation become less relevant
5 Forces assumes industry structure is constant but actually it is endogenous and changes. e.g. changes in taxi driving industry
(2009) Strategic planning is what brings ideas and people together
(2004) Explains how the effects of both chance and skilled management could appear the same and so essentially, high performance does not prove skilled management was there

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