What do you think?
Rate this book
Strategic Management
This book is written for current and future general managers who have or will have overall responsibility for a business. The authors provide a set of frameworks, tools, and concepts to build this capability. The goal of the book is to provide insights into organizations and strategy that will help general managers make strategic thinking in their firms pervasive, effective, and rewarding.
- GenresBusinessNonfiction
464 pages, Hardcover
First published October 16, 2000
7 people are currently reading
138 people want to read
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 6 of 6 reviews
October 28, 2024
A very readable and applicable book. The examples are dated but the frameworks are as relevant in assessing Google’s position versus ChatGPT as in thinking about if Amazon will be successful
Consistency and alignment being key in bringing the strategy to life
Strategic Management is very much a text book but still I would argue one of the three books from my MBA required reading that I think made the most an impression on me. Garth Saloner dives into what sets companies apart from each other, after initially setting out some basic definitions.
Strategy encompasses 1) Long term goals, often related to market position, directional, 2) Scope, defining markets, geographies, technologies and processes involved, including outsourcing, 3) Competitive advantage, the how, a compelling reason how the firm expects to be successful versus competitors (more value or lower costs) and 4) Logic linking the three elements together, containing the core argument why the firm will succeed
A vision articulates a view of a realistic, credible, attractive future for the organization.
Below are some thoughts per chapter. As long as you ignore questions if the internet is not a major hype, you can definitely enjoy and learn from reading this book.
Chapter 3:
Competitive advantage can stem from position (market leader or incumbent firm which has captured network effects, government supported domestic champions) or capabilities (excelling in design, innovation, customer intimacy, pricing, procurement etc)
Importance of tacit knowledge, not written down, and complexity or the capability based advantage, leading to casual ambiguity, making competitive advantage hard to copy by other market players
Natural monopoly or being the standard setter of a technology might mean that only the number one market position is profitable
Identify what part of the performance of a firm is simply the economical rent of owning a scarce resource like a patent or prime real estate
Differentiate in (perceived) quality of lower costs, cost-quality frontier of what is feasible
Chapter 4
Understand the problem the organization is supposed to solve
Focusing HR policies on not emphasizing industry experience makes building a distinctive corporate culture easier.
Less interdepence between teams make evaluating and incentivizing performance easier
Consistency and alignment being key in bringing the strategy to life
Coordination problem: balancing the gains from specialization and integration, mirrored in centralising dataflows and decisionmaking or decentralizing
The incentive problem is to elicit the right amount and type if effort in the presence of hidden information and hidden action (related to the self-interest of the actors)
Coordination: building the best road network
Incentive: making sure people go where you want them to go, using the road network
Architecture, routines and culture
Functional: grouping according to tasks performed (benefits of specialization)
Divisional: grouping based on technology, geography or customers (benefit of coordination among functions)
Tightly coupled: lots of interdependence between business units
Benchmarking to focus on relative over- or underperformance, excluding macroeconomic impacts
Relative importance of aggregate individual performance versus level of cooperation
Routines governing interfaces between employees, departments and business units, reducing the cost of information flow
Implicit contracts, based on common world views, encapsulated in culture of an organization
Chapter 5
Organisational design and competitive advantage enforcing each other = strategically aligned
Exploiters - mature markets, enhance further existing competitive advantage through efficiency, in general more cost centric
Explorers - changing markets, subject to technological advances, tries to capture new competitive advantage, in general more customer centric
The explorer is less likely to find the best path up one mountain but might find a better mountain to climb
Less variation in the results of exploiters, higher importance to be the first mover
Loosely coupled organisations are likely to have more redundancy (and less efficiency) than tight coupled organizations but, being less interdependent on the whole firm, be more suited for explorers
Building in organizational slack, like 20% research time at Google, to foster innovation
The cost of centralization is that the entire organization may be headed in the wrong direction, but this risk is relatively low for exploiter firms.
Is this true from the Nokia and Blackberry example?
R&D is not enough for exploiters, beside creating variation they also need to be able to select and retain products/opportunities arising from this R&D
Conversely, exploration without exploitation will soon be overtaken by other market parties, when patents don’t protect their innovations
Architecture of a firm is easier and faster to change than routines and culture; if multiple elements of organisational design need to be adressed the “construction” phase disruption will be longer and more impactful
The higher degree of change, the lower the employee investment in the new way of working, expected to pay off in the long term, risks to be
Chapter 6
Industry wherein it operates impacts roughly 20% of firm performance according to the author.
Basic conditions: supply and demand, elasticity, cyclical nature of the business, rate of growth
Market structure: barriers to entry, number of market players, product differentiation, integration
Conduct: pricing, advertising, investment
Porter five forces:
Industry competition
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products
Threat of new market entrants
PIE: potential industry earnings, split between suppliers, industry incumbents and buyers
Concentrated market share and more differentiated products in general leads to less competition and higher prices and margins
Regulation, brand recognition, existing product installed at clients, economies of scale/network effects all serve as entry barriers protecting incumbents
Value creation and value capture are not the same, think of farmers who earn no economic profit besides covering their opportunity costs, but create large surplus for consumers buying food and large producers of branded foodstuffs like Unilever, Mars and Mondelez who capture most of the supplier surplus, with supermarkets competing intensely against each other as well
Include close substitutes as perceived by customers in your industry analysis, with complements being separated if they are traded in separate markets
Chapter 7:
Perfect competition (agricultural produce), Niche markets (product differentiation or localized competition, think of clothing or gas stores), oligopoly (automobile manufacturers), dominant firm (computer operating systems, online advertising), monopoly (utilities, ASML)
Firm behavior (and pricing) drives industry profits in oligopoly
Mapping consumer preferences (and perception of your products) to guide product differentiation
Each product competes more intensely with products that are closer to it.
Vertical (general consensus from consumers on their preference given the same price point) and horizontal (more personal taste based) differentiation
In niche markets firms don’t compete with all carmakers but just the luxury car makers, making the whole industry divided into pockets (strategic groups) with less competition
Prices are higher when products are more differentiated, as geographic differentiation breaks down, industries become more competitive
Locate close to the customers (e.g. segments with high demand) and away from you competitors
A firm with market power can increase the price it gets by reducing its output and a (perfectly) competitive firm cannot
Balancing the gains from “milking” your existing clients through a higher price with the gains from capturing market share and revenues from your competitors
Chapter 8:
Price competition (and implicit capacity to cover the full market demand, like a market maker on the NYSE) is more intense than competition for capacity (like a refinery) which will never cover the entire market demand
Competition via advertising will be less intense (attracting market shares at the margin) and will increase overall consumption of the advertised good, not just the own brand.
In technology competition on product characteristics can be intense, with the first mover locking in much of the profit. Here R&D will eat into the industry PIE
Besides the first mover advantage there is also the cost of the foregone real options the firm incurs
Actions, timing, information, players and repetition influence the competition in a concentrated market
More market players lead to relatively lower costs per market player of increasing their production and reducing overall industry prices, since all the client bases are smaller
Dominant firms can set a price umbrella which profit their whole industry, but lowering these and increase competition would lead to a relative large drop in revenue, due to the dominant firms large market share
Chapter 9:
High fixed costs in comparison to the gross profits of the incumbent firms, forms a barrier to market entry
Minimum Economical Scale (MES) is the level at which long-run total average costs are minimized. This impedes market entry when the scale needed is large in comparison to demand
Learning economics occur when experience in the industry leads to cost savings. A moderate slope, versus a shallow or an initially steep slope, form the highest entry barrier to new firms
Consumer loyalty and brand recognition are other aspects that can form market entry barriers. Especially for experience goods, where consumers are loyal to one type of painkiller for instance, the market might be hard to enter, since consumers will not be easily willing to switch from their known brands and some potential consumers will not believe in the efficacy of painkillers in general.
Loyalty programmes, training and network effects are other barriers to market entry
Sunk costs of the incumbent make competition hard as well: the lesson here is that an incumbent who has no place to go is a formidable competitor.
Economies of scope, where it is more efficient to produce two or more products together (due to procurement of common inputs, expertise used in both processes, higher utilization rates and joint distribution channels)
Economic research indicates that a new entrant will only enter the market when conditions are considerably more favorable than those under which the first firm entered.
Chapter 10:
Market power is a prequisite to supplier or buyer market
In general monopoly power in one part of the value chain already captures so much overall industry profit that expansion and domination in other parts of the chain are not per definition beneficial for the monopolist. Any strategy that increase competition between buyers (downstream) of sellers (upstream) in the value chain would be better, from a microeconomics standpoint, for the monopolist than actually owning a company up- or downstream
Double marginalization leads to less profits accruing to the monopolist
Using two suppliers for all major parts of its supply chain is a tactic applied by Toyota, leading to competition and reduction of supplier power
Value creation is more cooperative and uses relation-specific investments to solidify links between buyers and sellers
Through pricing of various product types buyers can be induced to self select themselves into their preference for high or low priced products.
Tying a product, charging for consumables more than the initial products (like inkt cartridges or razorblades) is another way to raise revenues per client.
Vertical integration might undermine the ability to resell to higher margin market. Alcoa took over can manufacturers to be able to retain a monopoly on supplying high grade aluminum to plane manufacturers (and prevent reselling)
Chapter 11:
New entrants are often enabled through new technologies to battle incumbents their competitive advantage
Industry life cycle: Emergence, Growth, Maturity and Decline
Emergence: characterized by competing approaches and extreme uncertainty and no entry barriers (gold rush follower by a large shake up)
Technological uncertainty, demand uncertainty (IBM initially estimated that fewer than 20 computers was enough to satisfy world demand), organisational uncertainty (both capabilities and funding), strategic uncertainty (positioning and time of entry)
Growth: less competition due to cushion of growing market, incremental and process oriented improvements. Increase both the market potential industry earnings and the value capture of the firm of this value creation
Maturity: stable market share bar consolidation through M&A, capturing economies of scale by increasing the size and efficiency of operations
Decline: can be very profitable to exploit, dependent on the beliefs on how permanent the decline in business is or not and the associated exit costs
Vertical integration: architecture of a product under the direction of one party - benefits of coordination dominant or emergent technology/lack of market standards
Horizontal organisation: all parts in the chain are delivered by highly specialized separate companies - benefits of specialisation and competition dominant
Vertical integration is often the start of a nascent industry
Competence trap: firm so good in its current strategy and way of operating it doesn’t see new market opportunities. Specialization breeds rigidity
Modules (easily to adjust) versus architecture adjustments (disruptive to the whole business)
Underserved clients make it hard for incumbents to see the value of the market
Core innovation versus periphery innovation (which will diffuse through the company much slower)
Relation to core business and strategic importance determine if a venture should be insourced or spun-out/run as a separate venture
Chapter 12
The more people use the product, the more valuable the product gets to each of the users
Demand-side increasing returns
Standards
Metcalfe’s rule: value of the network is the nodes squared (N*N-1)
High switching costs, making installed bases very valueable since these create positive feedback loops
From competition in markets to competition for markets
Significantly better technology can break this spiral. Also a generational push, to capture youth and future users, might entail the same
Penetration pricing, with a low upfront fee or subsidized hardware to ensure convergence
Competition between ecosystems, with complements (also achieved by bundling products) to the offering being a key success factor
Anchor/catalyst client, open standards to capture market and achieve ubiquity (and use the incumbent advantage of familiarity with the standards), long term contracts to alleviate fears of monopoly pricing, leasing to reduce price hurdles for clients
Chapter 12
Minimum efficient scale requirements can form a catalyst to become a global firm. Also a replication of the competitive advantage the firm had in the home market is an often observed reason for geographic expansion. Outsourcing to capture cost efficiencies
Local responsiveness based on cultural similarities along the axes of individualistic/collective and egalitarian/hierarchical
Challenge of global efficiency, importing in political instability and the hurdles of effective intra-firm learning and coordination
Leveraging local innovations on a global level
Federated country level model (especially relevant if products require significant regionalisation per consumer group) or integrated global company
Chapter 13
Strategic spillovers may cause the business units jointly to operate more or less successfully than stand-alone. Enabling the first situation and avoiding the second is the role of corporate center
Positive spillovers are like positive externalities between the firms business units, with the same risk of underinvestment. Economies of scope (easier to sell a package of products) can go in reverse if the brand is damaged.
Conglomerates hardly add value, is a company worth more part of the group than as stand-alone company
Resource allocation: financial capital as a disciplinary boundary
Human capital development by postings within the conglomerate
Permanent problem of information required to manage and the fact that business unit management is bound to provide an overly flattering view of its business (and would be foolish to not spend on these influence costs, assuming its peer business units do the same)
Autonomy to decide on the business unit level unless major spillover effects are involved
Over time, an inward-looking firm can find itself with a collection of mediocre assets (about the essential need to benchmark versus the market)
Chapter 15:
Identify (and test via data/research) key assumptions underlying mental models in respect to the strategy. What’s critical to success?
Understand progress from rivals and the relative location on the cost-quality frontier your firm has compared to the other market players
Page 387 is basically a summary of the whole book
Internal targets on performance and market growth drive strategy formulation and adjustment
Intentional (top-down, formal, senior manager driven) versus autonomous (bottom-up, middle manager driven) strategy processes. In actuality most firms have a combination. Exploiters, in more stable environments versus explorers in change filled environments, provide an indication where the most weight will need to be
Real options: uncertainty makes lumpy investments and commitments potentially costly, through staging investments the potential losses are less large (showing the value of flexibility)
Cost cuts allow firms with pricing power to price lower on the demand curve, making market entry harder. Making a most favored client clause, ensuring price cuts are applicable to the whole customer base, shows a commitment to not cut prices. Warranty/guarantee on resale value is signaling of high quality product
Consistency and alignment being key in bringing the strategy to life
Strategic Management is very much a text book but still I would argue one of the three books from my MBA required reading that I think made the most an impression on me. Garth Saloner dives into what sets companies apart from each other, after initially setting out some basic definitions.
Strategy encompasses 1) Long term goals, often related to market position, directional, 2) Scope, defining markets, geographies, technologies and processes involved, including outsourcing, 3) Competitive advantage, the how, a compelling reason how the firm expects to be successful versus competitors (more value or lower costs) and 4) Logic linking the three elements together, containing the core argument why the firm will succeed
A vision articulates a view of a realistic, credible, attractive future for the organization.
Below are some thoughts per chapter. As long as you ignore questions if the internet is not a major hype, you can definitely enjoy and learn from reading this book.
Chapter 3:
Competitive advantage can stem from position (market leader or incumbent firm which has captured network effects, government supported domestic champions) or capabilities (excelling in design, innovation, customer intimacy, pricing, procurement etc)
Importance of tacit knowledge, not written down, and complexity or the capability based advantage, leading to casual ambiguity, making competitive advantage hard to copy by other market players
Natural monopoly or being the standard setter of a technology might mean that only the number one market position is profitable
Identify what part of the performance of a firm is simply the economical rent of owning a scarce resource like a patent or prime real estate
Differentiate in (perceived) quality of lower costs, cost-quality frontier of what is feasible
Chapter 4
Understand the problem the organization is supposed to solve
Focusing HR policies on not emphasizing industry experience makes building a distinctive corporate culture easier.
Less interdepence between teams make evaluating and incentivizing performance easier
Consistency and alignment being key in bringing the strategy to life
Coordination problem: balancing the gains from specialization and integration, mirrored in centralising dataflows and decisionmaking or decentralizing
The incentive problem is to elicit the right amount and type if effort in the presence of hidden information and hidden action (related to the self-interest of the actors)
Coordination: building the best road network
Incentive: making sure people go where you want them to go, using the road network
Architecture, routines and culture
Functional: grouping according to tasks performed (benefits of specialization)
Divisional: grouping based on technology, geography or customers (benefit of coordination among functions)
Tightly coupled: lots of interdependence between business units
Benchmarking to focus on relative over- or underperformance, excluding macroeconomic impacts
Relative importance of aggregate individual performance versus level of cooperation
Routines governing interfaces between employees, departments and business units, reducing the cost of information flow
Implicit contracts, based on common world views, encapsulated in culture of an organization
Chapter 5
Organisational design and competitive advantage enforcing each other = strategically aligned
Exploiters - mature markets, enhance further existing competitive advantage through efficiency, in general more cost centric
Explorers - changing markets, subject to technological advances, tries to capture new competitive advantage, in general more customer centric
The explorer is less likely to find the best path up one mountain but might find a better mountain to climb
Less variation in the results of exploiters, higher importance to be the first mover
Loosely coupled organisations are likely to have more redundancy (and less efficiency) than tight coupled organizations but, being less interdependent on the whole firm, be more suited for explorers
Building in organizational slack, like 20% research time at Google, to foster innovation
The cost of centralization is that the entire organization may be headed in the wrong direction, but this risk is relatively low for exploiter firms.
Is this true from the Nokia and Blackberry example?
R&D is not enough for exploiters, beside creating variation they also need to be able to select and retain products/opportunities arising from this R&D
Conversely, exploration without exploitation will soon be overtaken by other market parties, when patents don’t protect their innovations
Architecture of a firm is easier and faster to change than routines and culture; if multiple elements of organisational design need to be adressed the “construction” phase disruption will be longer and more impactful
The higher degree of change, the lower the employee investment in the new way of working, expected to pay off in the long term, risks to be
Chapter 6
Industry wherein it operates impacts roughly 20% of firm performance according to the author.
Basic conditions: supply and demand, elasticity, cyclical nature of the business, rate of growth
Market structure: barriers to entry, number of market players, product differentiation, integration
Conduct: pricing, advertising, investment
Porter five forces:
Industry competition
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products
Threat of new market entrants
PIE: potential industry earnings, split between suppliers, industry incumbents and buyers
Concentrated market share and more differentiated products in general leads to less competition and higher prices and margins
Regulation, brand recognition, existing product installed at clients, economies of scale/network effects all serve as entry barriers protecting incumbents
Value creation and value capture are not the same, think of farmers who earn no economic profit besides covering their opportunity costs, but create large surplus for consumers buying food and large producers of branded foodstuffs like Unilever, Mars and Mondelez who capture most of the supplier surplus, with supermarkets competing intensely against each other as well
Include close substitutes as perceived by customers in your industry analysis, with complements being separated if they are traded in separate markets
Chapter 7:
Perfect competition (agricultural produce), Niche markets (product differentiation or localized competition, think of clothing or gas stores), oligopoly (automobile manufacturers), dominant firm (computer operating systems, online advertising), monopoly (utilities, ASML)
Firm behavior (and pricing) drives industry profits in oligopoly
Mapping consumer preferences (and perception of your products) to guide product differentiation
Each product competes more intensely with products that are closer to it.
Vertical (general consensus from consumers on their preference given the same price point) and horizontal (more personal taste based) differentiation
In niche markets firms don’t compete with all carmakers but just the luxury car makers, making the whole industry divided into pockets (strategic groups) with less competition
Prices are higher when products are more differentiated, as geographic differentiation breaks down, industries become more competitive
Locate close to the customers (e.g. segments with high demand) and away from you competitors
A firm with market power can increase the price it gets by reducing its output and a (perfectly) competitive firm cannot
Balancing the gains from “milking” your existing clients through a higher price with the gains from capturing market share and revenues from your competitors
Chapter 8:
Price competition (and implicit capacity to cover the full market demand, like a market maker on the NYSE) is more intense than competition for capacity (like a refinery) which will never cover the entire market demand
Competition via advertising will be less intense (attracting market shares at the margin) and will increase overall consumption of the advertised good, not just the own brand.
In technology competition on product characteristics can be intense, with the first mover locking in much of the profit. Here R&D will eat into the industry PIE
Besides the first mover advantage there is also the cost of the foregone real options the firm incurs
Actions, timing, information, players and repetition influence the competition in a concentrated market
More market players lead to relatively lower costs per market player of increasing their production and reducing overall industry prices, since all the client bases are smaller
Dominant firms can set a price umbrella which profit their whole industry, but lowering these and increase competition would lead to a relative large drop in revenue, due to the dominant firms large market share
Chapter 9:
High fixed costs in comparison to the gross profits of the incumbent firms, forms a barrier to market entry
Minimum Economical Scale (MES) is the level at which long-run total average costs are minimized. This impedes market entry when the scale needed is large in comparison to demand
Learning economics occur when experience in the industry leads to cost savings. A moderate slope, versus a shallow or an initially steep slope, form the highest entry barrier to new firms
Consumer loyalty and brand recognition are other aspects that can form market entry barriers. Especially for experience goods, where consumers are loyal to one type of painkiller for instance, the market might be hard to enter, since consumers will not be easily willing to switch from their known brands and some potential consumers will not believe in the efficacy of painkillers in general.
Loyalty programmes, training and network effects are other barriers to market entry
Sunk costs of the incumbent make competition hard as well: the lesson here is that an incumbent who has no place to go is a formidable competitor.
Economies of scope, where it is more efficient to produce two or more products together (due to procurement of common inputs, expertise used in both processes, higher utilization rates and joint distribution channels)
Economic research indicates that a new entrant will only enter the market when conditions are considerably more favorable than those under which the first firm entered.
Chapter 10:
Market power is a prequisite to supplier or buyer market
In general monopoly power in one part of the value chain already captures so much overall industry profit that expansion and domination in other parts of the chain are not per definition beneficial for the monopolist. Any strategy that increase competition between buyers (downstream) of sellers (upstream) in the value chain would be better, from a microeconomics standpoint, for the monopolist than actually owning a company up- or downstream
Double marginalization leads to less profits accruing to the monopolist
Using two suppliers for all major parts of its supply chain is a tactic applied by Toyota, leading to competition and reduction of supplier power
Value creation is more cooperative and uses relation-specific investments to solidify links between buyers and sellers
Through pricing of various product types buyers can be induced to self select themselves into their preference for high or low priced products.
Tying a product, charging for consumables more than the initial products (like inkt cartridges or razorblades) is another way to raise revenues per client.
Vertical integration might undermine the ability to resell to higher margin market. Alcoa took over can manufacturers to be able to retain a monopoly on supplying high grade aluminum to plane manufacturers (and prevent reselling)
Chapter 11:
New entrants are often enabled through new technologies to battle incumbents their competitive advantage
Industry life cycle: Emergence, Growth, Maturity and Decline
Emergence: characterized by competing approaches and extreme uncertainty and no entry barriers (gold rush follower by a large shake up)
Technological uncertainty, demand uncertainty (IBM initially estimated that fewer than 20 computers was enough to satisfy world demand), organisational uncertainty (both capabilities and funding), strategic uncertainty (positioning and time of entry)
Growth: less competition due to cushion of growing market, incremental and process oriented improvements. Increase both the market potential industry earnings and the value capture of the firm of this value creation
Maturity: stable market share bar consolidation through M&A, capturing economies of scale by increasing the size and efficiency of operations
Decline: can be very profitable to exploit, dependent on the beliefs on how permanent the decline in business is or not and the associated exit costs
Vertical integration: architecture of a product under the direction of one party - benefits of coordination dominant or emergent technology/lack of market standards
Horizontal organisation: all parts in the chain are delivered by highly specialized separate companies - benefits of specialisation and competition dominant
Vertical integration is often the start of a nascent industry
Competence trap: firm so good in its current strategy and way of operating it doesn’t see new market opportunities. Specialization breeds rigidity
Modules (easily to adjust) versus architecture adjustments (disruptive to the whole business)
Underserved clients make it hard for incumbents to see the value of the market
Core innovation versus periphery innovation (which will diffuse through the company much slower)
Relation to core business and strategic importance determine if a venture should be insourced or spun-out/run as a separate venture
Chapter 12
The more people use the product, the more valuable the product gets to each of the users
Demand-side increasing returns
Standards
Metcalfe’s rule: value of the network is the nodes squared (N*N-1)
High switching costs, making installed bases very valueable since these create positive feedback loops
From competition in markets to competition for markets
Significantly better technology can break this spiral. Also a generational push, to capture youth and future users, might entail the same
Penetration pricing, with a low upfront fee or subsidized hardware to ensure convergence
Competition between ecosystems, with complements (also achieved by bundling products) to the offering being a key success factor
Anchor/catalyst client, open standards to capture market and achieve ubiquity (and use the incumbent advantage of familiarity with the standards), long term contracts to alleviate fears of monopoly pricing, leasing to reduce price hurdles for clients
Chapter 12
Minimum efficient scale requirements can form a catalyst to become a global firm. Also a replication of the competitive advantage the firm had in the home market is an often observed reason for geographic expansion. Outsourcing to capture cost efficiencies
Local responsiveness based on cultural similarities along the axes of individualistic/collective and egalitarian/hierarchical
Challenge of global efficiency, importing in political instability and the hurdles of effective intra-firm learning and coordination
Leveraging local innovations on a global level
Federated country level model (especially relevant if products require significant regionalisation per consumer group) or integrated global company
Chapter 13
Strategic spillovers may cause the business units jointly to operate more or less successfully than stand-alone. Enabling the first situation and avoiding the second is the role of corporate center
Positive spillovers are like positive externalities between the firms business units, with the same risk of underinvestment. Economies of scope (easier to sell a package of products) can go in reverse if the brand is damaged.
Conglomerates hardly add value, is a company worth more part of the group than as stand-alone company
Resource allocation: financial capital as a disciplinary boundary
Human capital development by postings within the conglomerate
Permanent problem of information required to manage and the fact that business unit management is bound to provide an overly flattering view of its business (and would be foolish to not spend on these influence costs, assuming its peer business units do the same)
Autonomy to decide on the business unit level unless major spillover effects are involved
Over time, an inward-looking firm can find itself with a collection of mediocre assets (about the essential need to benchmark versus the market)
Chapter 15:
Identify (and test via data/research) key assumptions underlying mental models in respect to the strategy. What’s critical to success?
Understand progress from rivals and the relative location on the cost-quality frontier your firm has compared to the other market players
Page 387 is basically a summary of the whole book
Internal targets on performance and market growth drive strategy formulation and adjustment
Intentional (top-down, formal, senior manager driven) versus autonomous (bottom-up, middle manager driven) strategy processes. In actuality most firms have a combination. Exploiters, in more stable environments versus explorers in change filled environments, provide an indication where the most weight will need to be
Real options: uncertainty makes lumpy investments and commitments potentially costly, through staging investments the potential losses are less large (showing the value of flexibility)
Cost cuts allow firms with pricing power to price lower on the demand curve, making market entry harder. Making a most favored client clause, ensuring price cuts are applicable to the whole customer base, shows a commitment to not cut prices. Warranty/guarantee on resale value is signaling of high quality product
February 4, 2025
As a textbook to accompany a course it’s not too bad, but overall it’s terribly long and somewhat outdated. I’m convinced there are better textbooks with more recent illustrative examples to help bring the concepts to light. There’s is also a tendency to just say everything that could possible be said about a topic which makes for long laundry lists of eventualities which tends to dilute the core messages. Not really recommended if you don’t HAVE to read it. If you have to… then I guess plough through it and try to remember the key concepts without getting bogged down in the details.
August 4, 2018
Great introductory book.
April 12, 2015
Much recommended for MBA students (as a general introduction if not as a textbook) for strategy in business. Also fairly comprehensive. Slightly more rigorous and much more accessible than some of the others in this genre (Thompson/Strickland/Gamble, Ghemawat, Rigsby/Greco).
On the downside, could be better in terms of citations. Also has a few typos.
On the downside, could be better in terms of citations. Also has a few typos.
December 30, 2012
This was a great introduction to business strategy that I'd recommend to anyone in the business management field. It is complete, thorough, and in-depth at a level appropriate for a newcomer to the private sector.
Displaying 1 - 6 of 6 reviews