1. Hitt, Ireland and Hoskisson, 2007 7e Edition Daniel Degravel Strategic Management 1

2. Ch.1 Strategic Management and Competitiveness Strategy Strategic Competitiveness Competitive Advantage Average Return AR Above Average Return AAR Risk Strategic Management Process Strategic Flexibility Organizational Slack Strategic Intent Strategic Mission Stakholders (three groups) Corporate Culture Strategic Leaders (Who are they, What’s their work, Prediction of outcomes) 2 Challenges of Strategic Management Necessity of Strategy? Hyper Competition Globalization Technology -Rate of Change -Information -Knowledge Intensity Two basic Strategic Approaches Definitions … I/O Model RB Model

3. Ch.2 External Environment: O,T Competition and Competitor Analysis General Environment Industry Environment Competitor Analysis OpportunityThreatIndustry Market micro structure P5F Model New Entrants Products Substitution Barriers to Entry BTE Economies of Scale EoSca Switching Costs Strategic Group Competitor Analysis Competitor Intelligence 3 General Environment PEST Model Demographic Global Segment Technology Definitions Box Political Economic Socio- Cultural Industry Environment P5F Model Strategic Mapping (Strategic Groups) Competitor Analysis

4. Ch.2 External Environment: O,T Competition and Competitor Analysis (Ctd.) 4 General Environment Industry Environment P5F Model BPS S R BPC PS NE Strategic Mapping (Strategic Groups) Competitor Analysis Firms - - + +

5. Ch.3 Internal Environment: Resources and Competences Firm = Bunch of resources Value Competitive Advantage Strategic Competitiveness Resource Competence or Capability Value Chain Outsourcing 5 Resources Environments: MIGHT DO vs. CAN DO Value Creation Resource Definition Box… Competences (Core) …CompetitiveAdvantage Strategic Competitiveness Choice of Business Strategy Core Competence + Position in PxM = Competitive Advantage TangibleFinance Physical assets Technology IntangibleHROrganizationReputationPatentsNetwork Competence C = R+A+R CharacteristicsValuableRareCostly-to-imitate Non Substituable Outsourcing Advantages Disadvantages Concept of Value-Chain Primary Support Core Rigidities Decisions concerning R&C: -Uncertainty -Complexity -Intra-Org. Conflict LIMITED LIFE

6. Ch.4 Business-level Strategies BL Strategy = integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific businesses p.105 Deliberate choie about how firm will perform the value chain activities in ways that create unique value p.111 Market segmentation p.108 FMS p.127 Information networks (CRM, ERP) p.129 TQM p.130 6 Customer = key CL Strategy: Which businesses in portfolio? BL Strategy: How do you compete in each business? Creation of value for stakeholders Purposeful Linked with Mission and Intent Alignment R&C with environment 3 Attributes ReachRichnessAffiliation 3 dimensions Who?What?How? Clients are the foundation Returns earned from relationships with customers is lifeblood of organizations Perform different or differently Superior fit among activities of the value-chain Integrated C-D COSTDIFF Focused COST Focused DIFF Five generic BL strategies M. Porter Analysis of COST and DIFF with the value- chain Analysis of the five generic strategies for each of the five forces of P5F model BPS, BPC, NE, PS and R

7. Success Ch.5 Competitive Dynamics and Rivalry 7 Competitive - Rivalry - Behavior - Dynamics Multimarket Competition Market Commonality Resource Similarity Dependence on the market First Mover Second Mover Late Mover Competitive - Action - Response StrategicTacticalReputation Slow-Fast markets Definition Box… Strategic behavior Anticipation Action Model of competitive Rivalry (Competitors) MC MS Drivers A, M, A, D Perceived Gain/Loss Rivalry Likelihood of attack Likelihood of response Movers -Quality -Size Type of competitive action Reputation Dependence Competitive Dynamism (All firms) Slow-cycle market Standard-cycle market Fast-cycle market

8. Corporate-level strategy = actions taken to gain a competitive advantage by selecting and managing a group of different businesses competing in different industries, the portfolio of businesses Objective: Earn AAR Degree to which the businesses are worth more under the management of the firm than they would be under any other (separate) ownership(s) DIV has best effect if interaction of resources, motives and incentives DIV appropriate for the R&C and O&T Model of Related Diversification and performance p193 Ch.6 Corporate-level Strategies Concentration CON Diversification DIV Fundamental Option: Increase or Decrease Portfolio by engaging in new businesses or exiting businesses you are presently running 8

9. I Value-creating Diversification Economies of Scope RDIV II Value-Neutral Diversification III Value- Reducing Diversification Operational relatedness (sharing activities) Corporate relatedness (transferring competences) Market Power RDIV Multipoint Competition (blocking competitors) Vertical Integration Financial Economies Efficient internal capital allocation (asymmetry of access to information) Business Restructuring Anti trust regulation Tax law Low performance Uncertain future cash flow Risk reduction for firms Tangible resources Intangible resources Reduction of top management employment risk Size and complexity increase compensation Ch.6 Corporate-level Strategies Reasons for Diversification 9

10. Corporate Strategy Ch.6 Corporate-level Strategies Concentration CON Diversification DIV The big Picture StabilityRetrenchmentDevelopment No Change STOP GO Directional Strategy Portfolio Strategy No strategic change Improvement of operational efficiency Sell out/Divestment Bankruptcy Turnaround (contraction/expansion) Product Market Old New Expansion Diversification Marketing Product DIVMP Diversification Marketing Market DIVMM Strategic Diversification DIV Deployment Strategy Internal growth External growth Partnerships … Vertical Integration Horizontal Integration Internationalization … 10

11. Merger = Integration of operations on a relatively co-equal basis Acquisition = a firm controls 100% interests in another firm Take over = special type of acquisition in herein the target firm does not solicit the acquiring firm’s bid. Many are referred as hostile Ch.7 Acquisition and Restructuration Strategies Popular means of development Several waves of Acquisition and Mergers 11 Acquisition Reasons for Acquisition Restructuring Problems Ways of dealing with problems

12. Ch.7 Acquisition and Restructuration Strategies (Ctd.) REASONS FOR ACQUISITION 1- Market power Horizontal, Vertical and related Acquisition 2- Overcoming BTE 3- Cost of Product development and speed to market 4- Increased diversification 5- Reshaping firm competitive scope 6- Learning and developing capacities 12 Reasons for Acquisition Restructuring Restructuring = 1- Downsizing 2- Downscoping 3- Leveraged Buyouts

13. Ch.7 Acquisition and Restructuration Strategies (Ctd.) POTENTIAL PROBLEMS… Lots of failures or very incomplete achievements 1- Integration phase 2- Inadequate evolution of target 3- Debt 4- Instability to achieve synergy Synergy Transaction cost 5- Over-diversification 6- Over-focus of managers on acquisition 7- Too large acquisition 13 Ways of dealing with problems Problems TO ENHANCE SUCCESS… 1- Complementary assets 2- Groomed before (test) 3- Friendly acquisition 4- Effective dire diligence process 5- Financial slack 6- Innovation 7- Flexibility 8- Adaptability 9- experience of managers 10- Effective integration

14. Ch.8 Internationalization Strategies 1- Why do you Internationalize? Opportunities 14 Contents of chapter 8 2- What type of International strategy do you choose? International strategies 3- What does the environment “tell” you? Environmental trends 4- How do you make it practically? Choice of international entry mode 5- What are consequences for you in terms of competitiveness? Strategic competitiveness outcomes 6- How hard is it? Complexity of managing multinational firms

15. CLASSIC RATIONALE FOR INTERNATIONAL DIVERSIFICATION 1- Product life-cycle 2- Secure needed resources 3- More universal product demand and globalization 4- EoSca 5- Pressure for cost reduction 6- Size of potential market 7- Currency fluctuations, decreasing risk of devaluation 8- Need for local operations 9- Laws and regulations 15 Ch.8 Internationalization Strategies (Ctd.) FOUR BASIC BENEFITS 1- Increased market size 2- Return On Investment Recoup more rapidly R&D and development expenses 3- EoSca, EoSco and learning 4- Location advantages 1- Why do you Internationalize?

16. 16 Ch.8 Internationalization Strategies (Ctd.) BASIC OUTCOMES 1- INT DIV increases Returns 2- INT DIV increases Innovation 5- What are consequences for you in terms of competitiveness? 2- What type of International strategy do you choose? International strategies INTERNATIONAL STRATEGIES 1- Business level strategies Porter’s Diamond of competitiveness (factors of production) 2- Corporate level strategies -Multi-domestic (several independent countries) -Transnational (global integration) -Global (Both multi-domestic and Transnational)

17. ENVIRONMENTAL TRENDS 17 Ch.8 Internationalization Strategies (Ctd.) Regionalization Triad Liability of foreigners RISKS and LIMITS Political Risk Economic Risk Organizational limit Economic limit 3- What does the environment “tell” you? Environmental trends 6- How hard is it? Complexity of managing multinational firms

18. Ch.8 Internationalization Strategies (Ctd.) Exporting 18 Entry Modes Licensing Strategic Alliances Acquisitions New wholly owned subsidiary Time Degree of Involvement + + 0 0 - Dynamics of mode of entry - Mode best suited to situation - Sequentially or back-and-forth or skip entry modes 4- How do you make it practically? Choice of international entry mode

19. 19 Ch.8 Internationalization Strategies (Ctd.) Another typology of international mode of entry 1- Exportation 2- Foreign Direct Investment FDI 3- Contractual arrangements Direct and indirect exportation Commercial, administrative, production or research subsidiaries License sale or leasing Franchise Sale of technology “Turn-key” contracts and engineering and international consultancy

20. 18 Ch.9 Cooperative Strategies Cooperative strategy = organizations working together to achieve a shared objective Collusive strategy = organizations cooperating to raise prices above the fully competitive level Strategic alliance = cooperative strategy in which organizations combine some of their resources and capabilities to create a competitive advantage Strategic Alliances Joint Venture Equity strategic alliance Non-Equity strategic alliance Why? Because you create value together that you could not create alone -Slow-cycle market -Standard-cycle market -Fast-cycle market

21. 19 Ch.9 Cooperative Strategies (Ctd.) B-L Cooperative Strategies Complementary Strategic alliance -Share R&C -Vertical -Horizontal Competitive Strategy -Strategic response -Response to attack Reducing uncertainty Strategy Hedge against risk and uncertainty Reducing Competition Strategy -Explicit collusion -Tacit collusion -Mutual forbearance

22. 20 Ch.9 Cooperative Strategies (Ctd.) C-L Cooperative Strategies Diversifying Strategic alliance -DIV or CON on core businesses Synergetic Strategic alliance EoSca Franchising Cross-border Strategic alliance To grow through means different than M&A Fewer resources needed Greater flexibility Testing process for future potential M&A International Corporate strategy Network Cooperative strategy -Multiple partnerships -Stable alliance network -Dynamic alliance network

23. 21 Ch.9 Cooperative Strategies (Ctd.) Risks 1- Partner acts opportunistically 2- Organization has misrepresented R&C it can bring 3- Organization will not make it available for its partners 4- Organization makes a specific investment to the alliance and the partner does not Cost minimization management Opportunity maximization management Importance of Trust Effectively managed, cooperative strategy can be rich and effective Managing Cooperative strategies

24. Corporate Governance = relationhip between stakeholders used to dsetermine and control the strategic direction and performance of the Organization Ensure that strategic decisions are made effectively Ch.10 Corporate Governance Four roles of Corporate Governance Establish order between parties Reflects and reinforce Values Oversight when stakeholders may have a conflict of interest Corporate Governance sometimes fails but well- functioning CG can create a competitive advantage 22

25. Ownership Concentration Ch.10 Corporate Governance (Ctd.) Four CG mechanisms (3 internal, 1 external) Board of Directors Executive Compensation Market for Corporate Control Corporate Governance in International contexts Examples of Germany and Japan Corporate Governance and Ethics At least the minimal interests of Stakeholders should be met Organization is very much vulnerable to its agents’ unethical behavior 23

26. Ownership Concentration Ch.10 Corporate Governance (Ctd.) Board of Directors Separation Ownership and management Agency relationship Diversification as a problem Agency costs Managerial opportunism Ownership concentration Institutional owners SHo activism Board of Directors Insider Outsider Related Outsider Enhancing effectiveness of Board: 1- Diversity 2- Internal management and accounting control systems 3- Formal process to evaluate Board’s performance 4- “Lead” Director 5- Compensation of Directors (Decrease stock options) Three characteristics for Directors 24

27. Executive Compensation Ch.10 Corporate Governance (Ctd.) Market for Corporate Control Executive Compensation Align Organization and top managers’ interests Complicated CG mechanism because difficult to link managers’ Action and Performance Variations in compensation (direct vs. indirect, short term vs long term) Market for corporate control Loss of job? Managerial defense tactics MfCC may not be totally efficient 25

28. Structure = formal reporting relationships, procedures, controls and authority and decision-making processes: « how to do the job ». Structure is the Framework within which strategies are designed and implemented Necessary Fit « Strategy-Structure » STABILITY vs FLEXIBILITY Change of Strategy implies often Change of Structure But Organizational Inertia CONTROL Actual – Expected ACtual – Reference Point (Industry) Strategic Control Financial Control Ch.11 Organizational Structure and Controls Strategy Structure 26

29. Structure and Strategy evolve: -Volume -Geography -Vertical Integration -Diversification So in response : SimpleFunctionalDivisional Three main Dimensions: Ch.11 Organizational Structure and Controls (Ctd.) Structure Formalization Centralization Departmentalization 27

30. Ch.11 Organizational Structure and Controls (Ctd.) StructureStrategies 28

31. BUSINESS LEVEL F COSTDIFFINTEG CORPORATE LEVEL D Cooperative D SBU Form D Competitive DIV Related Constrained DIV Related Linked DIV Unrelated INTERNATIONALINT Geographic Area INT Product Divisional INT Combination INT Multidomestic INT Global INT Transnational COOPERATIVEN N Alliance N Franchise N International Cooperative Alliance (Vertical Horizontal) Franchise Strategic Network Ch.11 Organizational Structure and Controls (Ctd.) 29

32. Ch.12 Strategic Leadership Model #1 SIY p.375 Leadership and the SMP Role of Leaders in the process Model #2 EOM p.377 Determinants of Managerial Discretion Which variables influence managers’ decisions / actions? Key Strategic Leadership Actions Ethics and CSR Directions Resources Portfolio Magt Culture Magt Models … Control of the Organization Issue: Top Management teams and role of stakeholders (Corporate Governance) Issue: Managers as a key organizational Resource 30