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STRATEGY
An international perspective
Bob de Wit
Table of content
Chapter 1 Introduction.......................................................................................................................................3
Reading 1.1 Complexity: the nature of real world problems..........................................................................5
Reading 1.2 Managing strategic contradictions..............................................................................................6
Reading 1.3 Cultural constraints in management theories.............................................................................9
Chapter 2 Strategizing......................................................................................................................................10
Reading 2.1 Explicating dynamic capabilities................................................................................................13
Reading 2.2 Exploring intuition and its role in managerial decision making.................................................13
Reading 2.3 Psychological foundations of dynamic capabilities...................................................................14
Chapter 3 Missioning and visioning..................................................................................................................15
Reading 3.1 The social responsibility of business to increase its profits.......................................................19
Reading 3.2 Stockholders and stakeholders: a new perspective on corporate governance.........................19
Reading 3.3 Creating shared value...............................................................................................................19
Chapter 4 Business level strategy.....................................................................................................................20
Reading 4.1 Strategy from the outside in.....................................................................................................23
Reading 4.2 Firm resources and sustained competitive advantage..............................................................24
Reading 4.3 Dynamic capabilities and strategic management......................................................................25
Chapter 5 Corporate level strategy...................................................................................................................28
Reading 5.1. Strategy and the business portfolio.........................................................................................31
Reading 5.2 The core competence of the corporation.................................................................................33
Reading 5.3 Seeking synergies......................................................................................................................34
Chapter 6 Network level strategy.....................................................................................................................37
Reading 6.1 Collaborate with your competitors – and win...........................................................................40
Reading 6.2 Creating a strategic center to manage a web of partners.........................................................41
Reading 6.3 Coevolution in business ecosystems.........................................................................................43
Chapter 7 Strategy formation...........................................................................................................................45
Reading 7.1 Managing the strategy process.................................................................................................47
Reading 7.2 Logical incrementalism.............................................................................................................48
Reading 7.3 Strategic planning in a turbulent environment.........................................................................48
Chapter 8 Strategic change...............................................................................................................................50
Reading 8.1 Reengineering work: don’t automate, obliterate......................................................................53

Reading 8.2 Building learning organizations.................................................................................................54

Reading 8.3 Ambidextrous organizations: managing evolutionary and revolutionary change.....................55
Chapter 9 Strategic Innovation.........................................................................................................................57
Reading 9.1 Kaizen........................................................................................................................................60
Reading 9.2 The innovator’s dilemma..........................................................................................................60
Reading 9.3. Exploration and exploitation in organizational learning...........................................................61
Chapter 10 The industry context......................................................................................................................62
Reading 10.1 How industries evolve.............................................................................................................65
Reading 10.2 Blue ocean strategy.................................................................................................................66
Reading 10.3 Living on the fault line.............................................................................................................67
Chapter 11 The organizational context.............................................................................................................69
Reading 11.1 Defining leadership and explicating the process.....................................................................71
Reading 11.2 Strategy as order emerging from chaos..................................................................................72
Reading 11.3 Dual leadership.......................................................................................................................73
Chapter 12 The international context...............................................................................................................75
Reading 12.1 The globalization of markets...................................................................................................78
Reading 12.2 The myth of globalization........................................................................................................79
Reading 12.3 Clusters and the new economics of competition....................................................................81

Chapter 1 Introduction
There is no widespread definition of strategy. Therefore, it is not given in this chapter. The term cannot be
summarized into broadly agreed upon definitions, rules, matrices and flow charts because of different
opinions and disagreements on key concepts of strategy.
Abraham Maslow hammer and nail analogy: If the only tool you have is a hammer, you treat everything like a
nail. Do not only view strategic issues (nails) with only one theory (hammer).
2 approaches to look at issues:

- Tools driven
Problem driven; understanding problems comes first, while searching for the appropriate tools is based on
the types of problems. This approach is adopted by the book. Each chapter discusses a large strategy issue
led by paradoxes (page 13 figure 1.6). In the book, strategy tensions are presented as strategy paradoxes.
Overview of the book

Section I
Strategists: rational actors who identify, determine, evaluate, translate and carry out, based on rigorous
logic and extensive knowledge of all important factors (=cognitive process).
However, writers argue that the true nature of strategic thinking is more intuitive and creative (imagination
and judgement) than rational (analysis and logic).
Making strategy is a means for reaching particular objectives, and thus not an end in itself.
Organizations exist to fulfil a purpose and strategies are employed to ensure that the organizational mission
and vision are realized. The purpose of existence for organizations is not universal even though this purpose
might seen self-evident. E.g. make money (serve shareholders) versus fulfil interests of stakeholders (serve
stakeholders).
Three distinguishable dimensions of strategy that can be recognized in strategic problem situations:
- Strategy content (part II): the combined decisions and choices that lead a company into the future.
Concerned with the what of strategy.
- Strategy process (part III): the manner in which strategies come about. Concerned with the how,
who, when of strategy.
- Strategy context (part IV): the set of circumstances under which both the strategy content and the
strategy process are determined. Concerned with the where of strategy.
 Page 5 figure 1.1
The three dimensions interact. In order for a strategist to have a real depth of comprehension,
understanding of all three dimensions is needed. It is possible to focus on one dimensions whilst keeping the
other two in mind (e.g. to have a focused discussion).
Most strategy research is atomistic (>< holistic); focusing on just a few variables at once. E.g. focus on one
dimension of strategy.
Section II
Each strategy is essentially unique.

Most common levels of aggregation distinguished in the strategic management literature: functional,
business and corporate.
- Functional: refer to questions regarding specific functional aspects of a company (e.g. marketing,
finance, operations).


- Business: requires integration of functional level strategies for a distinct set of products and/or
services intended for a specific group of customers. Most often until this level.
 Should organization be market-driven (outside-in)or resource-driven (inside-out)?
- Corporate: aligns the various business level strategies. Only when there are many companies within
two or more businesses.
 Should organizations run as federations of autonomous business units or as highly
integrated organizations?
Add a higher level of aggregation to multi-company groups, called network level. It consists only of a few
parties (e.g. strategic alliances, joint ventures, value-adding partnerships).
 Should organizations develop long-term collaborative relationships with other firms or
remain essentially independent?
In real life, the three levels of strategy do not exist as tidy categories; they are interrelated and overlapping.
Section III
The strategy process is usually portrayed as a linear process. Usually, a split is made between the analysis
stage, strategy formulation stage, and strategy implementation phases. But this distinction has received
much criticism as the process is messier, and not simple. In their view, strategies are usually formed
incrementally letting strategies emerge as they think and act in small iterative steps. Also, strategies should
not be seen as made for the entire organization and that it can be changes radically all at once.
The alternative to the strategy process consists of strategy formation, strategic change, and strategic
innovation (page 9 figure 1.3). These are NOT phases/elements/steps/etc. but rather are different aspects of
the strategy process that are strongly linked and partially overlapping.
Section IV
Every strategy context is unique. There should be fit between the strategy content and process, and the
specific circumstances in the strategy context. But, the context is dynamic and cannot be influenced by
strategists, and thus, you should not be driven by context (debate).
The strategy context can be determined, instead of letting it determine!
 page 10 figure 1.4 ; aspects of strategy context
There is no universal agreement on how to solve strategic problems. If there would be right or wrong
approaches, the wrong ones will disappear automatically and thus finishing the debate. However, this
doesn’t seem to be the case in the field of strategy. Also, it is difficult if not impossible to identify so called
wrong theories.
It is wise for a problem solver to look at the problem from different angles, each suggesting a different
perspective on how to solve it, to combine the various theories.
Many of the major disagreements within the field of strategic management are rooted in the different
assumptions made about coping with the strategic tensions that strategists are challenged by.
Two kinds of problems:  page 15 figure 1.7

- Either/or problems: can be solved
 Puzzles: a challenging problem with an optimal solution, just like a puzzle.
 Dilemmas: a vexing problem with two possible solutions, neither of which is logically the
best, just like the prisoner’s dilemma. Leading to the ‘horns of a dilemma’ of neither choice
being comfortable.
- Both/and problems: can only be ‘managed’

 Trade-offs: a problem situation in which there are many possible solutions, each striking a
different balance between two conflicting pressures.
 Paradoxes: a situation in which two seemingly contradictory, or even mutually exclusive,
factors appear to be true at the same time. Has no real solution.
The chapters with the strategy paradoxes (=strategy tensions) aims for dialectical enquiry; by using two
opposite points of view, the problem solver attempts to arrive at a better understanding of the issue and a
higher level of resolution, integrating elements of both the thesis and anti-thesis.  page 15 figure 1.8.
The advantages: range of ideas, points of contention, stimulus for bridging, stimulus for creativity. (pages 14-
16).
How to manage paradoxes?

Note that not every solution will do when there is no one optimal solution! Some solutions can be
considered in a certain situation, whilst other cannot. The attractiveness of an option depends on the
specific company context (e.g. industry context and company culture). In practice, only a limited number of
options are available to a strategist.
However, literature has been written about how to deal with paradoxes in general as well using 6 different
options:
1. Navigating: to focus on one contrary demand at the time. The paradox is then managed over time by
a series of contrary initiatives, leading to a development path.
2. Parallel processing: to separate the contrary demands in different internal or external organizational
units.
3. Balancing: aka dynamic equilibrium is to manage opposite demands by trading off elements of
opposing demands and blending the most appropriate balance.
4. Juxtaposing: to simultaneously manage opposite demands on a permanent basis. The conflict
between the two opposites is accepted and the strategist will accommodate both factors at the
same time.
5. Resolving: developing a new synthesis (higher equilibrium) between competing demands or by
exploiting the tension. This creates a new balance between contrary elements that will sustain for
some time, but are eventually replaced by a new one.
6. Embracing: to embrace and actively use the tension as a source for creativity and opportunity.
This list is not a passive checklist for strategist but rather a menu of available strategizing options that can be
dynamically applied. Note that the goal is not to effectively manage the paradox! The capability is a
necessary means to manage paradoxes and create competitive advantage (=ultimate goal).
Strategy is an international affair. Therefore, the international context needs to be considered.
Reading 1.1 Complexity: the nature of real world problems

Mason and Mitroff
Main argument made: most strategic problems facing organizations are not ‘tame’ – they are not simple
problems that can be separated and reduced to a few variables and relationships , and then quickly be
solved. These problems are usually ‘wicked’; problems are complicated and interconnected, there is much
uncertainty and ambiguity, and there needs to be dealt with opposing views and conflicting interests.
However, this is also the useful resource for finding the better quality solutions.
Basically every real world policy problem is related to every other real world problem (exercise with matrix
on page 25). So, in order to solve a particular policy problem, one must have a comprehensive set of
concepts for dealing with any policy and a rich set of tools for acquiring the holistic information needed to
guide policy making. Thus; the solution to one problem, requires a solution to all other problems.
Complexity: the condition of being tightly woven or entwined together.

Two types of problems: problems of simplicity (aka tame problems) and problems of disorganized
complexity (aka wicked problems).
The tools we have available are applicable for solving simple problems. These simple problems are
separable, reducible and of a one-dimensional goal structure, and can therefore be bounded, managed and
‘tamed’.
Complex problems can the ‘tamed’ by statistical means only when the complexity is ‘disorganized’ – the
number of variables is very large and the variables are relatively disconnected. E.g. will a customer buy
product X?
When a problem situation meets the condition for random sampling – many individual elements exhibiting
independent, probabilistic behavior – there is a potential statistical solution to the problem.
The difficulty with connected systems of organized complexity is that deviations in one element van be
transmitted to other elements. The deviations are magnified, modified and reverberated causing the system
to take on an unpredictable life (e.g. insurance companies). Referred to as environmental connectedness
(Emery & Trist) in which the environment is turbulent.
Characteristic properties of wicked problems by Rittel (page 28):

- Ability to formulate the problem
- Relationship between problem and solution
- Testability
- Finality
- Tractability
- Explanatory characteristics
- Level of analysis
- Reproducibility
- Replicability
- Responsibility
6 other characteristics of wicked problems (page 29):

- Interconnectedness
- Complicatedness
- Uncertainty
- Ambiguity
- Conflict
- Societal constraints
Two implications for policy makers dealing with wicked problems:

1. There must be broader participation of affected parties, directly and indirectly, in the policy making
process.
2. Policy making must be based on wider spectrum of information gathered from a larger number of
sources.
New criteria for the design of real world problem solving methods: participative, adversarial, integrative, and
managerial mind supporting (page 30-31).
Reading 1.2 Managing strategic contradictions

Balanced strategic decisions are characterized by 2 criteria: 1. Distributive nature; decision on equal trade-
offs over time (compromise), and 2. Integrative nature: identification of synergies (integration). Balanced
strategic decisions require teams that can recognize and utilize conflict in stead of trying to solve it. The
environment of MT should be able to support them when in conflict, despite the urge for consistency.


A model for managing strategic contradictions:

- Cognitive frames: creating a context for complex strategic responses. The way you look at
something. Managerial cognitive frames result in organizational action by focusing the attention to
specific problems.
 Paradoxal frames: mental templates in which managers recognize and accept the existence
of contradicting forces.
- Cognitive processes: using behavioral routines and ways that managers use to think about answers
to certain information.
 Differentiation: recognizing and articulating differences. Clarifying differences in strategy
and organizational structures.
 Integration: the
levels of analysis
to identify
possible
relations.
Identification of
synergies
between strategy
and
organizational
structures.
How a team operates ():

Bottom-up operation including
different professionals vs. team
guided by a leader, who steers the
team and sets goals.
The most important element is to
come up with rational solutions by
considering all alternatives
(distributive results) vs. to focus on
achieving a total solution (integrative
results).
In order to deal with strategic

contradictions, it is important to firms
to able to both explore and exploit.

Reading 1.3 Cultural constraints in management theories

Hofstede
Hofstede concludes that universal management theories do not exist as each theory is culturally
constrained. Therefore, it is necessary to view strategic management and strategy theories form an
international perspective (refer to title of the book!).
‘Management’ has a different meaning in all countries. It takes historical and cultural insight into local
conditions to understand its processes, philosophies and problems.
Management is not a phenomenon that can be isolated from other processes taking place in a society.
Theories of management have to be multidisciplinary, especially today as national borders are being crossed.
Culture: the collective programming of the mind which distinguishes one group or category of people (i.e.
nation) from another.
Hofstede’s dimensions allow to make predictions on the way a society operates, including the management
processes and theories applicable to management. There are 6 dimensions:
1. Power distance: the degree of inequality among people which the population of a country considers
normal.
2. Individualism: the degree to which people in a country prefer to act as individuals rather than as
members of a group. >< collectivism.
3. Masculinity: the degree to which tough values (assertiveness, performance, success, and
competition) prevail over tender values (quality of life maintaining warm relationships, service, care
for the weak, and solidarity). >< femininity.
4. Uncertainty avoidance: the degree to which people in a country prefer structured (rigid; clear rules)
over unstructured (flexible) situations.
5. Long-term versus short-term orientation: the degree whether values are directed towards the
future (long-term) or towards the past and present (short-term).
6. Indulgence: the degree to which people give in to pleasure. >< restraint.
Stress on market processes versus stress on the individual versus stress on the managers (pages 47-48).

Chapter 2 Strategizing
Strategists are engaged n the process of dealing with strategic problems. Not problems in the negative sense
of troublesome conditions that need to be avoided, but in neutral sense of challenging situations that need
to be resolved.
Strategic problem: a set of circumstances requiring a reconsideration of the current course action either to
profit from observed opportunities or to respond to perceived threats.
Cognitive activities
Strategists engage in cognitive activities: mental tasks intended to increase the strategist’s knowing.
4 main cognitive activities in 2 major categories:
- Defining a strategic problem:
 Identifying/recognizing
 Diagnosing/analyzing
- Solving a strategic problem:
 Conceiving/formulating
 Realizing/implementing
Strategists do not always reason in this step-by-step
fashion. The identification of strategic problems is a
rather subjective interpretation by looking at the
world from a particular angle. Such sense-making
leads to attention being paid to some issues only.
Often, strategic options are not chosen from an
available repertoire of potential solutions, but they are invented – envisioned (eureka moment vs. arise over
time). The process of deciding on the solution may involve more judgement and calculation as it is
impossible to objectively prove which idea is the best solution.
Strategists feel they often must act first; they must have experience with a problem and know that the
current strategy will not be able to overcome to problem.
Cognitive abilities
Cognitive maps: simplified models of the real world, created by our brains because of the limitations to
people’s cognitive abilities.
3 causes to the limitations of human cognitive abilities:
1. Limited information sensing ability: physical inability to be everywhere, noticing everything due to
complexity of reality.
2. Limited information processing capacity: difficult for people to think through problems with many
variables, complex relationships, etc.
a. Cognitive heuristics: thinking through a problem making extensive use of mental shortcuts.
3. Limited information storage capacity: people can only store information selectively. Rules of thumb
(cognitive heuristics) make the memorization process manageable.
Instead of only cognitive heuristics, the mind has to work with more holistic cognitive maps.
Cognitive maps
Cognitive maps are representations in a person’s mind of how the world works. They are formed over time
through education, experience and interaction with others. They steer people’s senses whilst they are built
on past sensory data. They help to direct behavior by providing an existing repertoire of problem-solving
responses. A lot of knowledge is acquired by experience. People formulate implicit models and draw
conclusions unconsciously. So, cognitive maps evolve without people being aware. When people use their
intuition, it is not a mystical or irrational way of reasoning but thinking guided by the tacit knowledge they
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have acquired in the past (intuitive thinking >< analytical thinking). People’s cognitive maps are developed
in interaction with one another. Individuals can belong to different groups, and thus can be influenced by
different belief systems simultaneously (e.g. professional community and personal community). A cognitive
map is therefore a complex combination of elements taken from different group level dominant logics.
As shared beliefs are developed over time through interaction and are passed on through socialization, they
remain largely tacit. It is literally common sense: sense shared by a common group of people. However,
members of different groups can come into conflict with one another because of different behaviors based
on different cognitive maps.
Downside of cognitive maps is their high level of rigidity. People are generally not inclined to change their
mind and, thus, their cognitive maps. People tend to overestimate the value of information that confirms
their cognitive map (believing is seeing).
Strategizing: focused on understanding and shaping the future. Therefore, strategists must have the ability
to challenge current beliefs and to change their own mind.
The paradox of logic and intuition:

The intuition is built up through years of experience and contains a cast quantity of tacit knowledge.
As strategists must be acutely aware of unfolding opportunities and threats in the environment, and the
evolving strengths and weaknesses of the organization, they must be able to constantly re-evaluate their
views. This requires rigorous logical thinking as well as the ability to engage in intuitive thinking (“extinct by
instinct”). .
- Demand for logical thinking : conscious and rigorous, based on formal rules. A logical thinker will
draw a conclusion only if it is arrived at by a sound succession of arguments (cold cognition).
Strategists actively re-evaluate their own assumptions. It can be applied to:
 Identifying and diagnosing: helps to avoid emotional interpretations.
 Conceiving and realizing: avoid following outdated habits and (programmed courses of
actions that originally were deliberately conceived, but have been internalized and are used
automatically) by generating new ones.
 Aid in making a distinction between feasibility and fantasy.
- Demand for intuitive thinking: informal and holistic judgement process. The intuitive thinkers
includes multiple inputs, relates theses to the unconsciously stored large quantities of information to
detect and understand the inputs, and employs its emotions for judging situations (hot cognition).
Intuitive thinking opens the unconscious part of the brain: it connects many variables to another into
a whole without a sound explanation of why a correlation is assumed (‘make sense’). Intuitive
thinking helps to make the strategic reasoning process extended, flexible and fast. It can be applied
to:
 Identifying and diagnosing: old cognitive maps have a very compelling logic but lock people
into old patterns of thinking.
 Conceiving and realizing: new strategies are not analyzed into existence but need to be
generated.
Logical thinking makes strategic reasoning process rigorous, consistent and precise.
Intuitive thinking makes strategic reasoning process comprehensive, flexible and fast.
2 perspectives on strategizing:
1. Analytic reasoning perspective: strategic reasoning is a logical activity. To deal with strategic
problems, the strategist must first consciously and thoroughly analyze the problem situation. Data
must be gathered on developments external to the organization to pinpoint opportunities and
threats. Also the organization itself should be appraised to uncover strengths and weaknesses. It
requires well-developed analytical skills. Strategists must be able to rigorously, consistently and
objectively comb through huge amounts of data. They try to be as rational as possible. However, this
rationality is limited by incomplete information and imperfect cognitive abilities. Bounded
rationality: people act intentionally rational, but only limited so. The alternative to the rational
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approach is to be irrational and illogical (not desirable). Also intuitive thinking is not desired, but it
can be useful. Emotions and intuition have a small place in strategic reasoning process. Logical
thinking should be dominant.
2. Holistic reasoning perspective: logic is important. Problems are open to interpretation form a
limitless variety of angles. Also, there is no fixed set of solutions form which the strategist must
select the best one. Defining and solving problems is a judgement activity. Problem definitions are
highly subjective. Logic is more a hindrance than a help. Creativity is a supporting mean in intuitive
thinking. The essence is the ability to trust senses, generate new and unique ways of understanding,
and thinking and acting fast.
Suggestions to deal with the paradox of logic and intuition:

- Navigating: to build in mental ‘time-outs’ in daily routings to allow creative ideas to incubate.
 This type of creativity is allowed by analytical thinkers as useful contribution to a rational
process.
- Parallel processing: to organize company’s activities in separate units/departments as to process
logical and intuitive thinking in parallel in the organization.
- Embracing: to intentionally mix analytical and intuitive thinkers to capture the advantages of both.
The tension that is created leads to unexpected solutions and innovations.
The competitive field is changing. The means to gain competitive advantage are no longer what they used to
be. Sources of competitive advantage: flexibility, innovation, speed, integration.
An organization having dynamic capacities is able develop and put into process disruptive new technologies.
Examples of dynamic capacities are: 1. the ability to develop competences in order to adapt to changes in
the environment quickly, 2. routines to find resources to enter new business markets, 3. Processes that let
allow the organization to develop, strengthen and improve their routines.
Strategic thinking in international perspective:

The US and West-EU countries favor reason (analytical thinking) by either putting principles first (Spain,
France) or putting applications first (US). While China, Korea and Japan emphasize the normative value of
intuition over rule-based reasoning and follow a holistic route (intuitive thinking). Logic and reason prevail
over intuition in the West.
Some industries tend to demand either one way of thinking. E.g. biotechnology industry (holistic),
accountants (logic).
Behavior is jointly influence by the slow, deliberately controlled system, and the fast, intuitively automatic
system. Every individual has a natural tension towards either one of them. A decisional fit occurs when the
way in which a decision is made matches the preferred decision style of the decision maker. The
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environment has the most influential role for a preference thinking style. As a result, we generally avoid
environments where the opposite thinking style is required.
There is a continuum of decision-making styles where the two combine. Which one has the preference also
depends on the nature of the problem, and therefore experience and proficiency for a specific problem.
Reading 2.1 Explicating dynamic capabilities
Dynamic capabilities can be disaggregated into the capacity 1. To sense and shape opportunities and
threats, 2. To seize opportunities, and 3. To maintain competitiveness through enhancing, combining,
protecting, and, when necessary, reconfiguring the business enterprise’s intangible and tangible assets.
In fast-paced, globally competitive environments, the consumer needs, technological opportunities and
competitor activity are constantly in a state of flux.
Opportunities are detected by an enterprise because of 2 things:
1. Entrepreneurs can have differential access to existing information
2. New information and new knowledge can create opportunities
Opportunity creation and/or discovery by individuals requires both access to information and the ability to
recognize, sense and shape developments.
While certain individuals in the enterprise may have the cognitive and creative skills, the more desirable
approach is to embed scanning, interpretative and creative processes inside the enterprise itself. If not, they
will likely miss opportunities that are visible to others.
The identification of an opportunity is almost always followed by investments in development and

commercialization activity. The enterprise must select/create a business model that defines the
commercialization strategy and investment priorities.
Reading 2.2 Exploring intuition and its role in managerial decision making
For a long time, intuition was seen as a way of information processing different from rational or analytical
processes. Recently, psychologists have chosen a double processing method in which they plea for two
different types of information processing within humans:
1. The rather automatic and effortless processing and learning of information
2. Purposely process information to learn information, develop ideas and focus on analyses.
4 characteristics of the core of intuition:

1. Unconscious: intuition is an unconscious process. It happens outside the conscious thinking.
2. Holistic: intuition is the inclusion of holistic associations.
3. Fast: intuition is produced fast.
4. Affective judgement: intuition is the result of affect judgement. To differentiate process and product
elements from intuition, we use an intuitive judgement to indicate the intuition in the result.
Intuition are affective judgments the

result from fast, unconscious and
holistic associations.
2 sets of factors influencing the

effectivity of intuition ():
1. Domain knowledge factors;
P1 until P5
2. Task characteristics; P6 until
P8
13

Explicit = conscious/implicit = unconscious. Judgmental tasks include political, ethical, esthetical of

behavioral judgement. Intellectual tasks are rules, definitions and operations.
Organizations that want to facilitate effective communication should concentrate on improving continuous
and goal-oriented practices in suitable learning environments. It is advised by the authors of the article to
also apply intuition. E.g. managers should be aware of their environment in order to simplify implicit
learning. Also, when conscious managers view problems from different angles, they can distinguish new
cognitive categories. Managers should be cautious when using intuition when they are confronted with
intellectual tasks (i.e. rules, procedures). Often, intuition plays a key role in the decision making process in
fast changing environments.
Reading 2.3 Psychological foundations of dynamic capabilities

3 generic dynamic capabilities based on behavior that are the basis of evolutionary and economic ability of
organizations:
1. Detecting opportunities and threats
a. 2 assumptions:
i. Affective mechanism of cognitive change: organization, that are dependent on
technologies and that strengthen hot cognition as a mean to detect technologies,
will less likely be affected by cognitive blind spots and strategic slowness.
Practical steps include adopting routing that trigger managers to share emotions and
show empathy, using technics that connect the interpretation of strategic change
and the sustainable sources of pride.
ii. Integrating intuition in detection process: organizations doing this are more effective
at identifying and responding to opportunities and threats than organizations only
applying analytical approaches.
2. Respond to opportunities
a. 2 assumptions:
i. Evaluating and selecting new opportunities: the larger the effect of company’s
emotional connectedness during new investment opportunities, the bigger the
chance the company will respond to the investment opportunity.
ii. Unlocking fixations with current strategies: the larger the inclination of decision
making units to absorb negative affectivity in relation to existing actions, the smaller
the chance the organization will fail due to escalation of connection and relation
dysfunctional decisions.
3. Reorganization of the organization’s assets: the bigger the organization’s capacity to regulate
identity based affective reactions, the bigger the chance for strategic transformation.
++ Table 2.3.1 page 110
Affect and emotion are an integral element of cognition, through which

reasoning, learning and decision making in action are influenced. Core
dimensions of strategic cognition ():
The majority of the theory concentrates on the available conceptual
spaces; bottom-right quadrant of the circumflex. Ideally, it is focused in hot
cognition.
There is a bigger conceptual space connected to cognitive, affective and

behavioral micro basis of organizational adjustment.
The development of dynamic capabilities requires managers to use

reflexive and reflective capacities in order to use implicit and explicit cognitive and mental process in
harmony. This simplifies detecting, reacting and reorganizing.
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There is a need for means and practices that improve detecting, reacting and improve reorganizing through
cognitive and affective possibilities of individuals and teams. A new generation of instigators of knowledge
are needed according to the writer of the article.
Chapter 3 Missioning and visioning

Mission: from Latin mittere (to send). Some task duty or purpose that ‘sends someone on their way’- a
motive or driver propelling someone in a certain direction. A business’ fundamental principles.
Bestaansreden van de organisatie.
Corporate mission: the basic drivers sending the corporation along its way. The enduring set of principles
that forms the base of a firm’s identity and guides its strategic decision making. WHAT and WHO.
Vision: from Latin videre (to see). A broad conception of a desirable future state, of which the details remain
to be determined. A business’ ambition. Doel in de toekomst.
The strategic vision outlined the desired future at which the company hopes to arrive.
Hiërarchische definitie van strategie: missie

> visie > doelen > strategie.
Both mission and vision impact strategy.
The activities of the board of directions are

referred to as corporate governance – directors govern the strategic choices and action of the management
of the firm.  page 128 figure 3.2
4 elements of a corporate mission:

- Organizational purpose: the reason for which an organization exists.
- Organizational beliefs: the set of shared beliefs subscribed to by all organizational members. This
eases communication and decision making and makes the group more driven and confident.
- Organizational values: a common set of values shared by the organization’s members that
determine what they see as worthwhile activities, ethical behavior and moral responsibilities.
- Business definitions: a guiding principle, helping to distinguish opportunities from diversions. The
more clear the business definition, the better they can focus the organization’s attention and efforts.
 page 129 figure 3.3
The strength of the corporate mission depends on the fit between these 4 elements as they are mutually
enforcing.
4 elements of strategic vision:

- Envisioned contextual environment: the contextual factors impacting the organization’s
environment. Contextual factors are: socio-cultural, economic, political/regulatory, and
technological. Sometimes the development of the factors can be predicted, sometimes they can
change the business’ direction.
- Envisioned industry environment: the development of the contextual factors impacts the industry
environment that consists of suppliers, buyers, rivals, new entrants, and substitutes and
complementors.
- Desired future organizational position: the organization’s desired position in the future bearing in
mind the contextual factors and the industry environment.
- Time horizon: the time span over how many years the future position will be envisioned.
15

Corporate mission and strategic vision are articulated by means of a mission statement and a company
vision.
A corporate mission and strategic vision can provide:

- Direction: by defining boundaries within which strategic choices and action must take place, lead the
company in a direction.
- Legitimization: conveys to all stakeholders inside and outside the company that the organization is
pursuing valuable activities in a proper way. A clear philosophy increases chances for stakeholders to
support the organization.
- Motivation: one step further that legitimizing, it can inspire individuals to work together in a
particular way. Esprit de corps is developed that motivates people for a longer period of time.
Corporate governance is about managing top management by building in checks and balances to ensure that
the senior executives pursue strategies that are in accordance with the corporate mission. It encompasses all
activities that are intended to supervise and steer the behavior of top management.
Functions of corporate governance:
- Forming function: shaping, articulating and communicating the fundamental principles that will
drive the organization’s activities (e.g. determining purpose, setting priorities).
- Performance function: to contribute to the strategy process with the intention of improving the
future performance of the corporation (e.g. judge strategy initiatives).
- Conformance function: to ensure corporate conformance tot the stated mission and strategy (e.g.
monitor activities)
Each country has its own system of corporate governance and international differences are large.
3 characteristics of boards of directors:
- Board structure: two- tier structure (e.g. NL, China, Germany, Finland, Austria), one-tier structure
(e.g. Britain, Canada, USA, India, Greece, Spain, Sweden), and free-to-choose-countries (e.g.
Denmark, Japan, Slovenia, CH).  page 133 figure 3.5
 Two-tier structure: a formal division of power into a management board with executives,
and a supervisory board with non-executives monitoring and steering the management
board.
 One-tier structure: executive and non-executive directors sit together in one board.
- Board membership: laws that regulate the formation of boards (e.g. Germany; 50% labour, 50%
shareholders). But also the number of people making up the board, the stature and independence,
etc.
- Board tasks: the set of tasks that a board has differentiation them from more active or passive
boards (e.g. infrequent meetings to only vote proposals versus formulating proposals and selecting
new top managers).
Organizational purpose:
Lack of attention to organizational purpose due to widespread assumption that it is obvious why businesses
exist (i.e. to make profit). Recent years, the topic has gained attention due to a number of developments
(e.g. financial crisis, focus on CSR).
Managers must constantly make choices and seek solutions based on an understanding of what their
organization is intended to achieve. They are affected by different stakeholders each having their own
interests that need to be served by the company. Managers must determine the main beneficiary activities
of the firm that create value.
The paradox of profitability and responsibility:
16

In countries with a market economy, it is generally agreed that companies should pursue strategies that
ensure economic profitability, but they have a certain social responsibility that must be fulfilled as well. But
opinions of the relative importance of profitability and responsibility differ (debate).
On the one side, some people describe profitability is the very purpose of economic organizations and that
only social responsibility of a firm is to pursue profitability within the boundaries of the law.
On the other hand, other people argue that business corporations are not only economic entities but also
social institutions, embedded in a social environment which represents significant social responsibilities.
So the terms are at least partially contradictory, there is a tension.
The demand for economic profitability:

Organizations must be profitable in order to survive but this is not sufficient. Investors must have a financial
incentive to run a commercial risk (i.e. more equity than putting money on the bank). Where companies
have not been profitable in the past and cannot authoritatively project an attractive level of profitability for
the future, they will find it difficult to find new financing, which weakens their position and their
competitiveness. Profitability is not only a result but also a source of competitive power.
The demand for societal responsibility (acting in the interest of others even when there is no legal
imperative):
Companies are also networks of people working together towards a common goal. People in a group need to
develop an sense of ‘community’ if they are to function properly. For this, a level of trust is required – a
feeling of security that each individual’s interests will be taken into account.
It is beneficial to focus on societal responsibility both internally (acting in the interests of employees) and
externally (acting in the interest of other stakeholders) as this creates commitment (emotionally and
practically) and leads to loyalty. Employees will invest in the company and in developing themselves in the
company (no job-hopping).
As said, a tension between profitability and responsibility exists. Being socially responsible costs money, but
which brings increased ‘social dividend’. The optimization of one will be in conflict with maximizing the
other. What is the solution? The debate:
- Shareholder value perspective: those who argue that corporations are established to serve the
purpose of the owners.
 Companies belong to their owners.
 Corporations are instruments whose purpose it is to create economic value on behalf of
those who invest risk-taking capital in the enterprise. Operate in the best interest of the
owners.
 Common problem: to get top-management to work in the shareholders interest (principal-
agent problem). The agents (top-management) are tempted to serve their own interests.
 A majority of independent-minded outside directors on the board, preferably owning
significant amounts of the company’s stock themselves, is most preferred in this
perspective.
 This perspective doesn’t mean that they are blind for the demands placed on firms by other
stakeholders. They argue that it is in the interest of the shareholders to carry out
stakeholder analyses and to manage stakeholder relations, but there is no moreal obligation
to do (excluding regulatory parties). Yet, it is not the organization’s purpose to serve them.
 Proactive engagement is preferred over corporate isolationism.
- Stakeholder value perspective: those who argue that corporations should be seen as joint ventures
between all stakeholders (including shareholders). They all hold a stake in the organization and
therefore can expect that the corporation will undertake responsibility to develop business
strategies that are in accordance with their interests and values.
 Organization is a coalition between various resource suppliers, with the intention of
increasing their common wealth. A joint venture.
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 Managing stakeholder demands is not merely a pragmatic mean of running a profitable

business – serving stakeholders is an end in itself.
 2 interpretations of stakeholder management (that are often confused):
 Instrumental: an approach or technique for dealing with the essential participants in
the value-adding process.
 Normative: the fundamental notion that the organization’s purpose is to serve
stakeholders.
 Motivating a team is difficult if the team only serves one group’s interest (e.g. shareholders).
In that case, there will also be a lack of trust between all parties involved in the enterprise.
Each stakeholder feels that other are motivated by self-interest only. They will perceive a
constant risk. As a consequence, each party will guard their interests (‘every person for
themselves’). This is inferior to partnership-model where sharing, trust and symbiosis are
emphasized.
 Cooperation is more effective than competition.
The board of
directors
(corporate
governance) should be able to judge whether the interests of all stakeholders are being justly balanced.
Options: 1. Representatives of all stakeholder groups in the board, 2. Influence of employees on the choices
made by the organization (co-determination).
Managing the paradox of profitability and responsibility:

Shareholders and diverse stakeholders are managed parallelly (e.g. executive board manages shareholders,
finance manages tax authorities, production departments deal with environmentalists) at different levels of
the organization and by different people.
After the 2008 credit crisis, the pressure from environmental groups on businesses has been increased
(starting with the banking sector). Stakeholders are informed better and quicker, and have more means at
their disposal to pressure companies. Thus, the tension between profitability and responsibility has become
more prominent and a significant strategic issue. The opposing needs need to be BALANCED. Achieving a
balance at a higher level, creates shared value.
Internationally operating companies have to deal with different institutional contexts in host countries while
executing their mission, vision and purpose. When dealing with purpose, the context plays an important role
(e.g. institutional structure of a country).
Societal level:
Different ways to categorize national contexts. One is discussed, two other can be found in the book (page
147).
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Culture is not the most influential on the varieties of capitalism and organization purpose. It is the most
neglected one.
2 categories of the type of national context (dichotomy) by Hall & Soskice:

Rhineland model / CMEs (coordinated market Anglo-Saxon model / LMEs (liberal market
economies economies)
E.g. Germany, Japan, Sweden E.g. USA, UK
Coordination is achieved through non-market Coordination follows market conditions with a
means, investments in specific assets is preference for transferable assets.
preferred, and banks play a dominant role.
Industry level
Some industries are expected to have an inclination towards either stakeholder’s or shareholder’s
perspective. Financial sector; shareholder perspective more common. Service sector; stakeholder
perspective more common.
Impose parent country or host country norms and values in host country?
Reading 3.1 The social responsibility of business to increase its profits

Shareholder value perspective. Friedman: “there is one and only one social responsibility of business – to use
its resources and engage in activities designed to increase its profits so long as it stays within the rules of the
game, which is to say, engages in open and free competition without deception or fraud”. Economic freedom
is a mean for political freedom. Business should not be socially responsible. If there are any, they are the
social responsibilities of individuals, not of business. Primary purpose of business is to maximize shareholder
value.
Reading 3.2 Stockholders and stakeholders: a new perspective on

corporate governance
Stakeholder value perspective (Freeman). There has been a long tradition of management thinkers who
believe that corporations have a broader responsibility towards stakeholders other than just suppliers of
equity financing. The system of serving stakeholders is superior to that of shareholders. This is based on the
argument that stakeholders have the power to seriously affect the continuity of the corporation. Stakeholder
analysis is needed to understand stakeholders and their claims and power positions. Corporations have the
moral responsibility to work on behalf of all stakeholders. The consequence of stakeholder perspective on
corporate governance: stakeholders must participate in decision making.
Reading 3.3 Creating shared value

Profits involving a social purpose represent a higher form of capitalism, one that creates a positive cycle of
company and community prosperity. Consequently, the purpose of an organization must be redefined as
shared value ( = policies and operating practices that enhance the competitiveness of a company while
simultaneously advancing the economic and social conditions in communities in which it operates). Re-
invented capitalism (combining profitability and responsibility) will drive innovation and productivity growth.
Re-invented capitalism consists of 3 elements:
1. The need to create market ecosystems, especially when selling to poorest countries.
2. Expanding the value chains to include unconventional partners.
3. Creating new industrial clusters.
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Chapter 4 Business level strategy

Business environment and individual firms are dynamic systems, constantly in flux. To be successful, firms
need to gain sustained competitive advantage over rival organizations operating in the same business area –
advantage sustained over a longer period of time.
Business model: the configuration of resources (inputs), activities (throughput), and product/service
offerings (output) intended to create value for customers. The way a firm conducts its business.
If business model creates superior value, competitive advantage can be gained.
Competitive advantage: the ability to be able to supply a product/service more closely fitted to client needs
than rival firms. 3 components of competitive advantage ( page 179 figure 4.1):
1. Value proposition: A successful business model that creates superior value for customers.
2. Value chain: Ability to actually develop and supply the superior product offering.
3. Resource base: stock of assets to perform the value-adding activities (e.g. patents, money, brands,
facilities).
Value chain: the collection of value adding activities in a firm (e.g. R&D, marketing and sales, production,
logistics). For sales to be achieved, a firm must have a competitive value proposition – a cluster of physical
goods/services/additional attributes with a superior fit to customer needs.
Companies that do not focus on a limited set of product-market combinations run the following risks:
- Low economies of scale; low opportunities to organize value chain efficiently
- Slow organizational learning; slows the ability to build specific knowledge and capabilities
- Unclear brand image; fuzzy image in the market
- Unclear corporate image; lack of internal identity
- High organizational complexity; low opportunities to keep organization simple and manageable
- Limits to flexibility; being all things to all people requires choices due to operational necessity
Companies need to focus on a limited number of businesses within each business on a limited group of
customers and a limited set of products.
Determining a business starts by looking at boundaries of a business – meaningful delineating lines in the
environment, distinguishing one arena of competition from another. Ideally, the environment consists of
neatly compartmentalized businesses with clear borders. In reality, it is messy. 2 phases: 1. Delineating
industries, 2. Segmenting markets.
Industry: a group of firms making a similar type of product or employing a similar set of value-adding
processes or resources. Producers that are much alike (supply side similarity). 2 bases to define industries
on:
1. Product/service type (e.g. KLM is in airline industry)
2. Value chain similarity or resource similarity (e.g. consulting industry, oil industry)
Most common distinction is product-category based ( page 181 figure 4.2).
Market: a group of customers with similar needs. Buyers whose demands are much alike ( demand side
similarity). Market segment: a sub-segment of the market (e.g. AMS-CDG air vs. AMS-CDG train
transportation). Different ways to define a market; segmentation category > segmentation criteria > broad
market definition > narrow market definition (e.g. buyer demographics > geography > Canada > postal code
T5A). But, buyer demographics are indirect (predictive). Instead, use buying criteria/needs as a more direct
way. The advantage: more clearly identified wishes/behaviors. But, it is very difficult to gather such
information.
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Business: A competitive arena where companies offering similar products serving similar needs compete
against one another for the favor of the buyer. It refers to the domain where the producers and buyers
meet.
Defining and selecting businesses: 1. Selecting a limited number of businesses (Porter’s Five Forces
Analysis), 2. Focusing with each selected business.
Positioning within a business: where and how to compete? Determine which product-market combination to
enter. Common bases of product positioning for competitive advantage:
- Price
- Features
- Bundling (a package, one-stop shopping)
- Quality
- Availability (right place, right moment, right way)
- Image (brands)
- Relations
2 broad categories of competitive advantage by Porter: 1. Low cost, 2. Differentiation.

Each require their own type of business model. The risk of doing both is getting “stuck in the middle”.
3 generic competitive advantages by Tracey and Wiersema:

1. Operational excellence (no frills, standardized, lean and mean),
2. Product leadership (differentiated, state-of-the-art products, innovation),
3. Customer intimacy (client-specific, flexible, empowerment of employees close to client).
To turn a business model into action, a value chain needs to be created – an integrated set of value creation
processes leading to the supply of product/service offerings. Having a distinct value chain provides the basis
for competitive advantage because it allows to offer customers a unique value proposition.
Porter’s value chain distinguishes primary activities and support activities. Generic categories of primary
activities:
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and sales
- Service.
Support activities:
- Procurement
- Technology development
- HRM
- Firm infrastructure
To carry out activities and produce products, firms need resources – all means at the disposal of the
organization for the performance of value-adding activities (assets). Major distinctions of resources:
- Tangible vs. intangible resources; hardware vs. software (difficult in practice)
- Relational resources vs. competencies (both intangible).
 Competence: a firm’s fitness to perform in a particular field. (sometimes synonym for
capabilities, sometimes including below 3).
 Knowledge: the whole of rules and insights that can be extracted from and, help
make sense of , information.
 Capability: the organization’s potential for carrying out a specific activity or set of
activities.
21

 Attitude: the mindset prevalent within an organization.
Sustained competitive advantage: a competitive advantage that cannot be copied, substituted or eroded by
the actions of rivals, and is not redundant by developments in the environment. 2 main factors:
1. Competitive defendability:
a. The more distinct element, the stronger the competitive advantage.
b. Distinct business models.
2. Environmental consonance
a. Developments in the market.
The paradox of markets and resources:

There must be a fit between organization and environment (alignment). SWOT analysis suggests that a
sound strategy should match a firm’s Sand W to the O and T in the firm’s environment.
- Market adaptation: the ability to understand and adapt to the ‘rules of the game’ in the market. You
have to be able to adapt to changing demand from the market.
 Being agile in changing the product offering, value chain and resource base to remain in
constant alignment with the fluctuating external circumstances.
- Resource leveraging: the ability to build on the resource base to create value.
Perspectives on business level strategy:

- Outside-in perspective (positioning approach): firms shouldn’t be self-centered but should
continuously take their environment as the starting point when determining their strategy. Markets
are leading, resources are following. Developing strategy begins with an analysis of the environment
to identify attractive market opportunities. Market positioning, and understanding and responding
to external developments. Know ‘the rules of the game’. Firm resources and activities are important
for cashing in on market opportunities the firm has identified. Also, keep in mind S and W when
choosing an external position. Market-driven firms are often the first ones to realize new resources/
activities and therefore positioned to build up ‘first mover advantage’. High risk when environment
is dynamic. This causes chaos and might lead a firm not to be viable anymore.
 Companies with high market share, profit from economies of scale.
- Inside-out perspective: strategies should be built around a company’s strengths – a strong resource
base built up over an extended time. Thus, the starting point in strategy formation process is the
question of which resource base to pursue (e.g. difficult to imitate competencies), which require
major investments and also determines culture and identity of the organization. Having distinctive
competencies (intangible) can be very attractive basis for competitive advantage as rival firms
generally need a long time to catch up. Tangible assets can be easily copied and imitated. Core
competencies can also be core rigidities (‘nightmare scenario’: firm flexibility shifting from one
market demand to another with unrelated competencies).
Managing the paradox of markets and resources:

- Parallel processing: separating demands over different organizational units (e.g. R&D; resource,
Sales; market). Dual processing companies; spatial separation.
- Juxtaposing: the continuous process of creating and maintaining a dynamic equilibrium in the
paradox of markets and resources by employing dynamic capabilities – the distinct set of
skills/processes/procedures/organizational structures/decision rules/disciplines that form the basis
of a company’s ability to sensing, seizing and reconfiguring capabilities.
22

Business level strategy in international perspective:

There are elements on the societal level that can have an influence on whether companies within a societal
context prefer inside-out or outside-in thinking. 2 factors that influence this preference:
1. Mobility barriers: industry and market positions are more valuable if there are high mobility barriers
within the environment. E.g. government regulation (quotas, fiscal regulations) and union resistance,
high customer loyalty.
2. Resource mobility: resource employed across countries. In nations where the dominant industries
are populated by firm using relatively simple and abundant resources, market positions are more
important. If companies use a complex bundle of resources, the important is on these rather than
the market position.
General rule: primary sector industries are controlled through inside-out strategies. Companies in tertiary or
service sector focus more on outside-in strategies.
For some industries, their characteristics make it more logical to prefer either one of the perspectives (e.g.
Marketing).
Reading 4.1 Strategy from the outside in

Companies that focused on creating long-term value for stakeholders, have survived the business cycles of
the past 20 years due to the fact that they remained true to the purpose of their business: to create and to
keep customers. The opposite is true for the cost cutting companies.
Market leading firms stand out in their ability to continuously sense and act on trends and events in their
markets.
3 lessons taken from winning companies:

1. Approach strategy from the outside-in rather than from inside-out (market to strategy).
2. Use deep market insights to inform and guide their outside-in view.
3. The outside-in strategy focuses every part of the organization on achieving, sustaining and profiting
from customer value.
a. 4 customer value imperatives:
i. Be a customer value leader
ii. Innovate new value for customers
iii. Capitalize on the customer as an asset
iv. Capitalize on the brand as an asset
b. These 4 imperatives are the responsibility op top-management (C-suite).
Outside-in: standing in the customer’s shoes and viewing everything the company does through the
customer’s eyes. The purpose of a solution is to help our customers find value and make money to our
mutual benefit.
Inside-out: focusing on what the market can do for the company. Solutions in this approach are bundles of
products and services that help us sell more. Reasons that could encourage inside-out thinking:
- Positive reinforcement: gaining maximum returns from existing assets (increasing efficiency).
- Competing priorities: other stakeholders are often closer to the firm that customers, causing the firm
to focus on these stakeholders.
- Contemporary strategy theories: thinking from the resource-based view is a worthwhile goals but it
myopically narrows and anchors the dialogue in strategic thinking.
- Darwin in the enterprise: employees’ inherent drive for self-preservation, who are tempted to put
their own survival first.
Going with the flow: human trait to behave like the others around us (groupthink).
Firms adopting an outside-in approach have an advantage because of their ability to understand markets,
provide superior value over time, and attract and retain customers.
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Outside-in thinking will not necessarily lead to superior customer value position or outstanding economic
profits if it is not by deep market insights! This asks for e.g. smart investments in market intelligence. Most
valuable market insights:
- Accurate reflections of reality
- Actionable
- Not seen or understood by competitors
- Used in novel ways to influence strategy (e.g. Diageo and Johnnie Walker logo)
Market insight is difficult for a company to master and for competitors to imitate, making it a basis for
durable competitive advantage.
Market insights that answer questions about market structures, -responses, and -economics contribute to
strategy decisions in 4 ways:
1. Making fact-based decisions
2. Anticipating competitor’s moves and countermoves
3. Connecting with online and networked customers: the Internet has given power to customers.
4. Guiding growth and innovation
Reading 4.2 Firm resources and sustained competitive advantage

Firms obtain sustained competitive advantage by implementing strategies that:
1. Exploit their internal strengths (S)
2. Responding to environmental opportunities (O)
3. Neutralizing external threats (T)
4. Avoiding internal weaknesses (W)
Firm resources: all assets, capabilities, organizational processes, firm attributes, information, knowledge,
etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its
efficiency and effectiveness. // strengths that firms can use to conceive of and implement their strategies.
Competitive advantage: a firm is implementing a value-creating strategy not simultaneously being
implemented by any current or potential competitor.
Sustained competitive advantage: a firm is implementing a value-creating strategy not simultaneously being
implemented by any current or potential competitor and when these other firms are unable to duplicate the
benefits of this strategy. This doesn’t imply that it will last forever.
First movers advantage: the first firm in an industry to implement a strategy can obtain a sustained
competitive advantage over other firms.
Resource heterogeneity: the conception and implementation of strategies employs various firm resources.
The search for sources of sustained competitive advantage are focused on heterogeneity and mobility of firm
resources:
- A firm in an industry populated by identical firms having access to similar resources, it is impossible
to obtain sustained competitive advantage.
- In order for there to be a first mover advantage, firms in an industry must be heterogenous in terms
of the resources they control.
- Barriers to enter and mobility barriers could be a source of sustained competitive advantage when
the firm resources are heterogenous and immobile.
So, in order to build sustained competitive
advantage firm resources need to be
heterogenous and immobile.
For a firm resources to hold the potential of

sustained competitive advantages it must have
4 attributes:
24

1. Valuable in the sense that it exploits O and neutralizes T in a firm’s environment.

a. When they enable a firm to conceive of or implement strategies that improves its efficiency
and effectiveness.
2. Rare among a firm’s current and potential competitors.
a. If products are valuable but easy to obtain (not rare), these are not a source for competitive
advantage. There are valuable, not rare products used for the continuity of a firm. This is
only possible when the number of firms possessing this resource is smaller than the number
of firms needed to create perfect competition within the industry (demand > supply).
3. Imperfectly imitable.
a. Valuable and rare organizational resources can only be sources of sustained competitive
advantage (SCA) if firm that do not possess these resources cannot obtain them. Firm
resources can be imperfectly imitable for 3 reasons:
i. Unique historical conditions
ii. Causally ambiguous: when the link between a firm’s resources and its SCA is poorly
understood, it is difficult for firms that are attempting to duplicate a successful firm’s
strategy through imitation of its resources to know which resources it should
imitate.
iii. Socially complex: the generation of resources is socially complex
4. There are no strategically equivalent substitutes for the resources tat are valuable but neither rare
nor imperfectly imitable.
a. 2 forms of substitutability:
i. A firm may be able to substitute a similar resources that enables it to conceive of
and implement the same strategies.
ii. Very different firm resources may also be strategic substitutes.
Reading 4.3 Dynamic capabilities and strategic management

How do firms achieve and sustain competitive advantage? Dynamic capabilities.
Different models of strategy based on:
- Market power:
 Competitive forces:
 Porter
 The essence of competitive strategy formulation is relating a company to its
environment.
 5 industry level forces determine the profit potential of an (sub-segment of an)
industry:
 Entry barriers
 Threat of substitution
 Bargaining power of buyers
 Bargaining power of suppliers
 Rivalry among industry incumbents
 Fundamental unit of analysis: industry, firms, and products
 Strategic conflict:
 Game theory tools are used to analyze the nature of competitive interaction
between rival firms.
25

 Reveal how a firm can influence the behavior and actions of rival firms and thus the
market environment through irreversible commitment.
 E.g. investment in capacity, R&D, advertising
 Fundamental units of analysis: firms and products
- Efficiency
 Resource-based perspective:
 Firms should focus their strategies on developing unique resources and value chains.
 Focus on the power of the organization as it is (inside-out/ VRIO).
 Fundamental units of analysis: resources
 Dynamic capabilities approach:
 Dynamic capabilities: the ability to achieve new forms of competitive advantage
 Dynamic: the capacity to renew competences as to achieve congruence with
the changing business environment.
 Capabilities: appropriately adapting, integrating and reconfiguring internal
and external organizational skills/resources/functional competences to
match the requirements of the changing environment.
3 P’s for achieving dynamic capabilities:

1. Processes
a. The way things are done
b. 3 roles:
i. Coordination/integration (static concept)
1. The idea that managers are in charge over coordination and integration of
activities within the firm.
2. The extent to which internal coordination and integration is efficient and
effective can make the difference between failure and success.
3. The way processes are organized and maintained determine the differences
in competencies that can be achieved.
ii. Learning (dynamic concept)
1. Repetition and experimentation enable tasks to be performed better and
quicker, and new production opportunities to be identified.
2. It involves organizational and individual skills.
3. Learning processes are intrinsically social and collective
iii. Reconfiguration (transformational concept)
1. The ability to sense the need to reconfigure the firm’s asset structure, and to
accomplish the necessary internal and external transformation.
2. Constant surveillance of markets and technologies.
3. Willingness to adopt the best practice.
2. Positions
a. Current specific endowments.
b. Represent the current portfolio of the organization’s assets (plant and equipment) and the
knowledge assets. Internal positions refers to internal assets of the firm (e.g. technological,
complementary, financial, reputational, institutional, and market assets). The current
position of firms is determined by market assets and organizational boundaries.
3. Paths
a. The strategic alternatives available to a firm.
b. History matters; e.g. a firm’s previous investments constrain the future behavior.
c. Technological opportunities of a firm are dependent on how fast the industry evolves, and
the pace with which these scientific breakthrough are made.
26

Competences and capabilities of a firm rest fundamentally on processes shaped by positions and paths.
These competencies can provide CA if they are based on a collection of routines/skills/complementary
assets that are difficult to imitate (distinctive competences).
Imitation occurs when firms discover and simply copy a firm’s organizational routines and procedures.
Emulation occurs when firms discover alternative ways of achieving the same functionality.
Replication: transferring or redeploying competences from one concrete economic setting to another.
Competencies, capabilities and the routines one which these are based, are often difficult to replicate.
Imitation: the replication performed by a competitor.
Distinctive competencies are based on 3 P’s. Therefore, they are difficult to replicate and imitate.
27

Chapter 5 Corporate level strategy

A corporate strategy as a whole creates more value that the sum of its parts. If no synergy; higher costs and
destroying value. As a corporation, you want to create value.
Corporate configuration: the issue of deciding on the best array of businesses and relating them to one
another.
Determining the configuration of a corporations is based on 2 questions:

1. What businesses should the corporation be active in?
a. Corporate composition
b. Two or more businesses = multi-business firm
c. A corporation enters another line of business through internal growth or acquisition =
diversification
i. 2 main categories of diversification:
1. Vertical integration: when a firm enters other businesses upstream of
downstream within its own industry column.
2. Horizontal integration: when a firm integrates related businesses at the
same tier in the industry column.
2. How should this group of business be managed? (corporate management)
2 issues of corporate composition:

- Corporate scope: the more business components chosen, the broader the scope of the corporation.
- Corporate distribution: the distribution within the corporation is determined by the relative weight
of each business component. A matter of determining which lines of business receive more attention
than other. A certain balance might be beneficial.
A common way to depict corporate composition is

to plot all of the businesses in a portfolio matrix –
the set of business activities carried out by the
corporation. The size of the bubble reflects the
revenue generated with each activity. The number
of bubbles indicates the corporate scope.  BCG
matrix
Another example of a matrix is the GE business
screen  page 243 figure 5.2
++ Know the differences between the matrices (x-
and y- axes).
++ Advantage GE business screen: pie charts in
bubbles displays market share.
Deciding which portfolio to pursue, both in terms of scope and distribution, will depend on how the
corporate strategist intends to create value.
Multi-business firms should be organized into strategic business units (SBUs) (M form). Each unit is given
the responsibility to serve the particular demands of one business area (differentiation). The units are
labelled ‘strategic’ as each is driven by its own business level strategy. However, the level of differentiation
must be offset by a degree of integration to be able to address common issues and realize synergies.
3 key integration mechanisms for managers to achieve a certain level of harmonization between various
parts of the corporate whole:
- Centralization: division of labor between business units has not been applied. Resources and
activities will be kept together in one department.
28

- Coordination: ensuring that coordination (orchestration of work) is carried out between business
units.
- Standardization: standardizing resources, activities and product offering characteristics across
business unit boundaries in order to realize advantages of economies of scale and rapid competence
development.
2 organizational means to secure effective deployment of the integration mechanisms:

- Control: give someone the formal power to enforce centralization, coordination and standardization
(hierarchical authority). It often concerns indirect supervision by giving business units objectives that
must be met and discussing initiatives.
- Cooperation: business units might be willing to cooperate because it is in their/corporate interest to
do so. If Bus believe in importance of certain joint activities, this can be a powerful impetus to
collaborate.
3 corporate control styles emphasizing different levels of centralization, coordination and standardization by
Goold can Campbell:
- Financial control style: SBUs are highly autonomous from corporate center (low centralization).
Control is exerted by negotiating, setting and monitoring financial objectives.
- Strategic control style: SBUSs have a closer relationship with corporate center (some centralization).
Control is exerted by negotiating, setting and monitoring strategic objectives.
- Strategic planning style: SBUs have little autonomy (high centralization, low decentralization).
Control is exerted by means of direct supervision.
The paradox of responsiveness and synergy: realizing synergies between SBUs or defending SBUs
responsiveness.
- Responsiveness: the ability to respond to the competitive demands of a specific business area in a
timely and adequate manner. Single unit business, no connections with other SBUs.
- Synergy: value is created by working in 2 or more SBUs. Links with 2/multiple SBUs.
Realization of synergies comes at a price: additional management layer, more complexity, more meetings,
potential conflict of interest, additional bureaucracy (= OO).
- The demand for multi-business synergy:
 Diversification into a new business can only be justified if it leads to value creation.
 Entering another business can only result in increased shareholder value if 3 essential tests
are passed (Porter):
 Attractiveness test: the business must be structurally attractive or capable of being
made attractive. Only enter businesses where there is a possibility to build up a
profitable competitive position.
 Cost-of-entry test: the cost of entry must no capitalize all the future profits. Firms
should only enter new businesses if it is possible to recoup the investments made.
 Better-off test: either the new unit must gain competitive advantage from its link
with the corporation or vise versa. Firm should only enter new businesses if it is
possible to create significant synergies.
 3 categories of areas of relatedness that have the potential for creating synergy:
 Resource relatedness: synergy by leveraging resources; the resources can be
productively shared between two/more businesses. All types of resources can
essentially be shared (tangible and intangible) (e.g. transferring money (tangible)
and knowledge (intangible)). Achieve resource relatedness by either:
 Resource reallocation: transferring resources to other SBUs.
 Resource replication: resources are copied to other SBUs.
 Product offering relatedness: synergy by aligning positions; coordination between
product-market combinations. How?
29

 Improving bargaining position: offering a broad package of related

products/services to specific customer groups especially when these
products/services are complementary.
 Improving competitive position: BUs can team up to protect each other
from attacks and create barriers to entry into the industry/market.
 Activity relatedness: synergy by integrating value chain activities; an integration of
value chains is more efficient and effective that if they were totally separated. How?
 Sharing value-adding activities: e.g. logistics, production, marketing. If
sharing (horizontal) leads to significant scale advantages or quality
improvements only. Shared services; HRM, procurement, quality control,
R&D, etc.
 Linking value-adding activities: vertically (internalization) related resources
can have an internal customer-supplier relationship.
o Companies strive to integrate upstream or downstream activities
where one/more of the following conditions are important:
 Operational coordination
 Avoidance of transaction costs
 Increased bargaining power
 Learning curve advantages
 Implementing system-wide changes
- The demand for business responsiveness: a business unit is responsive if it has the capability to
tightly match its strategic behavior to the competitive dynamics in its business. Scope disadvantages
limit the ability to ensure business responsiveness. Major problems encountered by multi-business
(scope) firms:
 High governance costs: layers of management and bureaucratic processes can lead to
escalating costs.
 Slower decision-making: because of more layers (thus more meetings, bureaucracy, people
etc.).
 Strategy incongruence: some BUs might need to compromise, adapting their strategy to fit
corporate strategy. Such internal adaption might lead to misfit with business demands.
 Dysfunctional control: corporate center might not have the business’ know-how needed to
judge BUs strategies/activities/results. But corporate center feels they need to exert some
level of control.
 Dulled incentives: all above and limited autonomy can have negative effect on motivation to
perform.
Perspectives on corporate level strategy:

- Portfolio organized perspective: responsiveness is preferred over synergy. Multi-form business firms
should be viewed as portfolios (= the corporate center as active investor with financial stakes in a
number of stand-alone BUs) of autonomous BUs in which the corporation has a financial stake.
Business responsiveness is crucial. BUs must be responsible for their own competitive strategy. Only
limited financial synergies should be pursued. Each BU has their own strategy. BUs can be highly
responsive to competitive dynamics in business while being clear unit of accountability towards
corporate center (high BU autonomy). Reason to do this; leverage financial resources with financial
synergies.
 Ways to gain financial synergies:
 Having various businesses within one firm, the corporate center can economize on
external financing.
 The corporation can limit dependence on the whims of external capital providers,
who might be less inclined to finance some ventures.
30

 The firms larger size, debt capacity and creditworthiness can improve its bargaining
position in financial markets.
 Suited for diversification through acquisition as they only need to be linked to corporate
financial reporting and control systems and can be easily integrated into the corporation.
 Such non-synergistic acquisitions can be highly profitable. The acquirer can release the
untapped value potential of underperforming stand-alone businesses.
- Integrated organization perspective: corporations should be tightly integrated, with a strong central
core of shared resources. Firms built up around these strong synergy opportunities can create
significantly more value than is lost through limitations to responsiveness. A tightly knit team of BUs
grouped around a common core. Creates a significant competitive advantage over businesses on
business-by-business basis. A joint competitive strategy.
 Core competence centered corporation: a few competencies are at the heart of the
corporation and are leveraged across various BUs. By using these competencies in different
business settings, they can be further defined and leading to a virtuous circle of rapid
learning, profiting the whole corporation.
 Besides competencies at the core of the corporation, other synergies can be at the heart of
the firm:
 Variety of product offerings (e.g. PWC, Capgemini)
 Shared activities (e.g. Airlines with Cargo branch and passenger travel)
 Software (e.g. Disney)
 Core competencies
 Growth through acquisition is often difficult. Therefore they are infrequent.
 These type of firms prefer internal growth.
Managing the paradox of responsiveness and synegy:

- Navigating: focus on one demand at a time.
- Balancing: manage the new equilibrium of multi-business synergies or enhanced business
responsiveness.
- Resolving: manage the tension of frictions within the firm (e.g. between strategists and BU
managers)
by finding opportunities that combine the best-of-both.
 Excellent example: McDonald’s; being close to the market while capturing synergies.
Corporate level strategy in international perspective:

- National level: in most Western countries (e.g. US) the belief that focused companies are better at
increasing shareholder value and that diversification destroys value seems to prevail.
 Japan: keiretsu model; conglomerations of businesses linked by cross-shareholdings.
 Germany: highlighting the focus on heritage.
 Latin America/Turkey/India/South Korea: grupos économicos/holding companies/business
houses/chaebol; conglomerates with strong ties, hierarchy and loyalty between members of
the inner circle or the family.
- Industry level: the common investors in federations of businesses are banks. The paradox appears
more often in bank, insurance, chemicals, manufacturing and steel industries.
Reading 5.1. Strategy and the business portfolio

A complex corporation can be viewed as a portfolio of businesses, which each have their own competitive
arena to which they must be responsive. Separate strategies can be devised for each business in the
portfolio. All except smallest/simplest companies exist of more than one business.
The profit and growth potential of each business unit depends on two key variables:
1. Growth rate of the total business (a.k.a. total market)
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2. Relative market share of the business unit within its business

 BCG matrix
The fundamental determinant of strategy success for each business segments is relative competitive
position. Some businesses are competitively strong already, and do not present any strategic problem. The
difficulty of making a firm final choice on strategy for each business is that it must operate within constraints
of limited resources, particularly cash resources.
The importance of growth in strategy shaping is twofold:

1. The growth of a business is a major factor influencing the likely ease and cost of gaining market share. An
increase in market share will tend to require an actual volume reduction in competitor’s sales. Market share
is important for the long term profitability based on the experience curve effect.
2. the opportunity for investment by market share growth. The faster a business grows, the more
investment it will require to maintain that market share.
Growth consideration affect the rate at which a business will use cash. The relative competitive position of
the business will determine the rate at which the business will generate cash.  the stronger the company’s
position relative to its competitors, the higher its margins should be as a result of the experience curve effect.
Growth-share matrix:
- Stars: high growth, high share
 Rapid growth.
 Use large amounts of cash to maintain position.
 Self-sustaining in growth terms.
 Best profit growth and investment
opportunities.
 If growth slows (which it always will!!!!!), very
large cash returns will be obtained if share has
been maintained so that the business drops
into a cash cow.
- Cash cows: low growth, high share
 large cash surpluses are generated.
 Foundation in which company rests.
 Most desirable final position.
- Dogs: low growth, low share
 Poor competitive position delivers poor profits.
1. Little potential for gaining sufficient share to
achieve viable cost position.
2. Cash trap: a business that is likely to absorb cash
perpetually unless further investment in the
business is rigorously avoided.
3. Least favorable.
- Question marks: high growth, low share
1. Cash needs are high because of the growth, but
cash generation is small because of the low
share.
2. If nothing done; it will become dog.
3. There can only be one market leader and thus
many businesses are in this category.
4. Prevent high expenses, and get rid of these businesses when they are too costly.
The first goal should be to maintain position in the cash cows, but to guard against the frequent temptation
to reinvest in them excessively. The cash generated should be used as a first priority to maintain position in
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those starts that are not self-sustaining. Any surplus remaining can be used to fund a number of question
marks. Virtually all business have some dogs. Any absence of dogs probably indicates that the company has
not been sufficiently adventurous. At least two dogs should be suitable for investment into stars.
Thus, the appropriate strategy for a multi-business company involves striking a balance in the portfolio
(balanced portfolio versus unbalanced portfolio).
The essence of the portfolio approach is that strategic goals should differ from business to business. But in
practice often all businesses are maintained with the same goals. This causes cash cows to always exceed
profit objective, whilst dogs never make it.
Often question marks are treated as dogs causing companies to investment in them whilst this is actually a
waste of money. It is advisable to companies to focus on 2 or 3 dogs in the portfolio and to get rid of all
others if applicable.
Reading 5.2 The core competence of the corporation

With a corporate strategy, the development of core competence is aimed at in order to create synergy
between the business units. Business units all have their own competencies. Core competencies cover the
overall competencies of the organization. Each SBU tries to learn which leads to a collective learning element
within the organization, bring rise to creation of core competencies. Doing so is aimed at becoming more
efficient and cheaper.
The goal of corporate strategy: to integrate different competencies and core competencies. So competencies
of one SBU are relevant for other SBU’s turning them into the so called core competencies resulting in the
creation of extra value (synergy).
During a reorganization process, core competencies are not destroyed as they are based on the
competencies of the SBUs.
Competencies and resources in the hierarchy ():
Competitive advantage: in the short term, it is derived from

the price/performance attributes of the current products.
Long term advantage is created by lower costs and faster
production compared to competitor. This can be done through
the creation and application of the core competencies.
Core competencies: the collective learning in the organization, especially how to coordinate diverse
production skills and integrate multiple streams of technologies. To harmonize information flows, the
organization of the work, and the delivery of value. They don’t diminish with use! Is communication,
involvement and a deep commitment to working across organizational boundaries.
The cultivation of core competencies does not mean that the competitive position improves by investing
more in R&D than your rivals do.
At least 3 test can be applied to identify core competencies in a company:

1. A core competence provides potential access to a wide variety of markets.
2. A core competence should make a significant contribution to the perceived customer benefit of the
end product.
3. A core competence should be difficult for competitors to imitate.
Companies that haven’t invested in building core competencies will experience difficulties with entering
markets in emerging economies.
Core products: the tangible link between identified core competencies and end products.
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It is essential to make a distinction between core competencies, core products and end products because
global competition is played out by different rules and for different stakes at each level.
To sustain leadership in the chosen core competence areas, a company should seek to maximize their world
manufacturing share in core products.
A dominant position in core products allows a company to shape the evolution of applications and end
markets. Well-targeted core products can lead to economies of scale and scope.
Improvement of SBUs results in:

- Underinvestment in developing core competencies and core products: when an organization is
conceived of a multiplicity of SBUs, no single BU may feel responsible for maintaining a viable
position in core products or be able to justify the investment required to build world leadership in
the same competence.
- Imprisoned resources: the people who embody a core competence are seen as the sole property of
the business in which they grew up. SBU managers are unwilling to lend their competence carriers to
other SBUs but they may hide talent to prevent its redeployment in pursuit of new opportunities.
When competencies become imprisoned, the carries do not get assigned the most exciting
opportunities, leading to atrophy. Leverage competence carriers!
- Bounded innovation: if core competencies are not recognized, individual SBUs will pursue only those
innovation opportunities that are close at hand (e.g. geographic expansion, product-line extension).
A strategic architecture is a road map of the future that identifies which core competencies to build and
their constituent technologies. The architecture provides a logic for product and market diversification. The
strategic architecture should make resources allocation priorities transparent to the entire organization. It is
consistency of resource allocation and the development of an administrative infrastructure that breathes life
into a strategic architecture and creates a managerial culture, teamwork, capability to change, and a
willingness to share resources, to protect skills, and to think long-term. It is a tool for communicating with
customer and other external constituents. It reveals the broad direction without giving any step away.
Once overarching competencies are identified, businesses should be asked to identify the projects and
people closely connected to them. This shows that core competencies are corporate resources and an
individual business doesn’t own anyone.
Reading 5.3 Seeking synergies

This article proposes a structured and practical framework for
analyzing a corporation’s synergy opportunities and synergy
approach, followed by an analysis of the most important policies
and characteristics.
The review framework involves taking stock of both synergy
opportunities available and the current corporate approach to cross-
company linkages. The effectiveness of the approach can be
assessed by testing how well it fits with the opportunities. This
analysis can then pinpoint new initiatives worth considering (
(see also page 280 in Strategy)).
The framework may not appeal to all companies. Some have a

culture that stresses more intuitive assessment of issues. Those may
find this analytical method too constraining.
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4 steps of the framework:

1. Synergy opportunities: developing a list of major synergy opportunities and judging how fully they
are being realized. The challenge is to find efficient ways of homing in quickly on possible areas of
high unexploited potential, and not detailed analysis. 3 useful prompts that can help to reveal
neglected potential:
a. Value chain overlaps: business with value chains that overlap or could overlap are obvious
candidates for linkage opportunities. Economies of scale and utilizing available from sharing
yields broad sizing benefits available in different areas.
b. Consensus judgement: a structured approach to eliciting consensus is frequently needed.
Variety of ways to draw out consensus judgement (e.g. questionnaires, focus groups,
systematic interviewing process). The method chosen should be tailored to circumstances.
c. Championing: strong and enthusiastic champions are important for the effective
implementation of new interventions. They can also provide a short cut to identifying
priority opportunity areas. There is little danger that champion will not be heard by
corporate parent. But frustrated champions welcome any chance to promote their projects.
Listen carefully to champions and give them objective hearing.
2. Synergy approach: to lay out the main features of the company’s approach to:
a. Corporate strategy: different companies place different emphases on horizontal and vertical
linkages. The review should document the priority given to the linkage issues versus other
forms of parenting and record the types of linkages that feature most prominently as key
sources of added value ( see exhibit 5.3.1 page 283 for sources of parenting value
creation).
b. Philosophy, attitudes and beliefs: companies have different underlying attitudes and beliefs
about how to best handle linkages. Different philosophies influence the sorts of synergies
that will be pursued and the means which will be used to pursue them.
c. Mechanisms and processes: the nature of the specific mechanisms and process that a
company typically uses to manage coordination differs per company. The review should
identify the mechanisms and processes that are most frequently used. Well-grooved
mechanisms are an important factor in gauging the ease with which a company’s synergy
intervention will be implemented.
i. Five lenses analysis: a means of describing
and analyzing the parent’s approach to
synergy issues through the use of five
interlinked lenses ( figure 5.3.2 page
285):
1. Mental maps
2. Structures, systems and processes
3. Functions, central services and
resources
4. People and skills
5. Decentralization contracts
(delegation of authority)
3. Effectiveness of approach: to assess effectiveness of the current synergy approach. 4 structured
questions to ask:
a. Biases in the overall approach: nearly all companies have biases in their linkage parenting,
and a value of the review is to lay out what they are. If biases can be made explicit, certain
synergy opportunities may be grasped.
b. Synergy killers: the corporate parent often inadvertently makes connections (linkages
between BUs) more difficult. When aware of this, a review of linkage parenting means
rooting out thing that are impeding linkages. Synergy killers: policies/characteristics of the
35

parent that are systematically inhibiting linkages. The following synergy killers negatively
influence the effectiveness of linkages:
i. Inhibiting corporate strategy
ii. Infighting between barons
iii. Culture of secrecy
iv. Misaligned initiatives
v. Excessive performance pressure
vi. Insulation form performance pressure
vii. Domineering corporate staff
viii. Mistrust
c. Business unit definitions: by changing the definition of a BU, the parent automatically
changes the nature of the potential links between BUs. Trade-offs between breath and focus
in BU definition is complex. Some BU definition issues:
i. Are there some important synergies that are never likely to be realized with the
current BU definitions?
ii. Are certain synergies harder to achieve because of the manner in which the
boundaries around the BU are set up and managed?
There are circumstances in which coordination between BUs is never likely to be achieved
(e.g. collective net benefits involve costs to one or more units that are hard or impossible to
compensate for).
The best way to achieve this synergy benefit is to redefine the business to encompass all the
separate units and giving responsibility for optimizing performance to one single MT. other
situations in which redefinition should be considered;
iii. Deeply embedded hostility and mistrust between senior managers in the different
units.
iv. Hard-to-allocate costs and revenues.
v. Need for speedy and continuous resolution of trade-off judgements.
d. Successes and failures: to test the effectiveness of the realized synergy opportunities. It is
essential to canvas the effectiveness of the current main systems and processes. Also, a
synergy opportunities review needs to be done to analyze the successes and failures. A
retrospective analysis of patterns of success and failure with previous synergy seem useful.
4. Agenda for change: the output of the review should be a short-list of possible new initiatives for
more detailed consideration. The list should embrace:
a. High priority unrealized synergy opportunities
b. Changes in underlying strategy that may increase overall effectiveness of approach
c. Changes in specific coordination processes or mechanisms as well as new initiatives that
should be considered
d. Possible changes in BU definitions
36

Chapter 6 Network level strategy

No firm is autarchic; they all have necessary interactions with organizations in their environment ( inter-
organizational relationships). 4 aspects of organizational relationships:
- Who (relational actors)
- Why (relational objectives)
- What (relational factors)
- How (relational arrangements)
4 issues of inter-organizational relationships (elaborated):

- Relational actors: who are potential relational
actors? 4 main categories of relationships
between a firm and other industry parties:
1. Upstream vertical (supplier) relations:
the providers of all production factors
(land, capital, labor, services,
technology, etc.) are called suppliers.
Considered upstream vertical as
economists draw the industry systems
as a column.
2. Downstream vertical (buyer) relations:
the actual users of the
product/service, or intermediaries
trading the output are considered
buyers.
3. Direct horizontal (industry insider)
relations: relations between firm and other industry incumbents that produce similar goods/
services. E.g. Apple and Samsung.
4. Indirect horizontal (industry outsider) relations: relations between firm and a company
outside the own industry. Commonly a relationship with the producers of complementary
goods/services (e.g. IT developers and automotive companies  self-driving car).
 Factors influencing the firm’s context (external environment): socio-cultural,
economic, political/legal, and technological actors (SEPTember).
- Relational objectives: where two or more
firms seek to work together with one
another, they generally do so because they
expect some value added – they assume
more befit from the interaction than if they
had proceeded on their own. 3 types of
relational objectives:
1. Leveraging resources: by sharing
resources, companies can improves
either the quantity of quality of the
resources they have at their disposal.
2 ways to reap benefit:
37

 Learning: when objective is to exchange knowledge/skills, or to engage in joint

pursuit of new know-how. With firms inside or outside own industry.
 Lending: one firm owning a resource that it cnanot make full use of, or another firm
can make better use of, it can be attrtactive to lend this resource (physical (lease
contract) and non-physical) to the other (e.g. technology).
2. Integrating activities: by integrating value chains with other organizations, firms can be more
efficient and effective than if totally separated. 2 ways to integrate activities:
 Linking: the vertical link between buyer and seller (e.g. exchange of
products/services).
 Lumping: where a firm brings together similar activities to gain economies of scale
(e.g. sharing operations (airline alliances), sales infrastructure (cross-selling deals),
logistic systems (postal partnerships), and payment facilities (inter-bank
settlements).
3. Aligning positions: coordinate the firm’s moves in the environment with the intention of
strengthening each other’s position. Improving the joint bargaining power of cooperating
parties. 2 position enhancing relationships:
 Leaning: two or more firms get together to improve their bargaining position vis-à-
vis other industry actors; they lean on each other to stand stronger.
 Lobbying: firms can cooperate with one another with the objective of gaining a
stronger position vis-à-vis the contextual actors.
- Relational factors: the development of the interorganizational relationship is influenced by the
objectives pursued by the parties. 4 general factors that influence the development of
interorganizational relationships:
1. Legitimacy: what is viewed as acceptable behavior. There is trust when all parties adhere to
the ‘rules of engagement’. But organizations do not always agree on ‘appropriate behavior’
as what is seen as legitimate can shift over time.
2. Urgency: relationships develop differently due to time (e.g. one organization is under
pressure to achieve results).
3. Frequency: the frequency of interaction and the expectations for future interaction (e.g.
one-off transaction causes different behavior than in a structural relationship).
4. Power: the power (difference) held by the organizations involved. Power is the ability to
influence others’ behavior. Many sources of power (e.g. having resources another
organization requires).
 4 categories of firm relationships
from the perspective of relative
power position:
 Mutual independence:
organizations will only
interact on their own
terms and they have the
ability to break-off the
relationship without any
penalty. Neither
organization has
significant influence over the other.
 Unbalance independence: two organizations working together and one has
more influence over the other, making this firm more independent.
 Mutual dependence: two firms having a tight relationship with an equal
amount of sway over their counterpart (interdependence).
 Unbalanced dependence: one party can dominate the other in a tight
relationship.
38

- Relational arrangements: the shaping of the relationship (e.g. collaboration, solving problems,
maintain the relationship). There are many organizational form between markets and hierarchies.
E.g. networks: strategies are coordinated and disputes resolved by mutual adaptation. Networks are
a continuous ‘handshake’ without (non-)visible guides. The organizations involved in networks can
employ different sorts of collaborative arrangements to structure their ties with one another. 2
major distinctions: 1. Bilaterial arrangements (2 parties), and 2. Multilateral arrangements (>2
parties). Commonly only multilateral arrangements are referred to as networks.
2nd distinction between arrangements: 1. Non-contractual, 2. Contractual, and 3. Equity-based
arrangements.
Collaborative arrangements are
dynamic; they result in a
relationship. Goal of the
collaboration is to profit of
some of the advantages of
vertical/horizontal integration,
without causing costs.
Advantage is that you don’t
carry all costs yourself.
1. Co-specialization: the
value adding activities
that are outsourced by
one become the
specialization of
another. Many activities cannot be outsourced to outsiders on the basis of normal market
relations due to risk of dependence or because of the need for structural coordination of
activities. In such cases, collaborative arrangements act as a synthesis of hierarchy and
market relations and, thus, catalyzing the process of specialization.
The paradox of competition and cooperation: companies fight with the tension that exists by both the urge
to cooperate with others, and the urge to strive for the firm’s own interests. Competition: the act of
working against others and where two or more organizations’ goals are mutually exclusive. The rivalry
behavior exhibited by organizations/individuals where one’s win is the other’s loss. Cooperation: the act of
working together with others where two or more organizations’ goals are mutually beneficial. The
collaborative behavior exhibited by organizations/individuals where both sides need each other to succeed.
- The demand for inter-organizational competition: to be competitive, the organization must have the
power to overcome its rivals and it must have the ability and will to use its power. The relative level
of resource dependence is the most determining element in determining the power. The more
independent the organization, the more other are dependent on it, the more power the organization
will yield. Calculation, bargaining, maneuvering, building coalitions and outright conflict are all
characteristics of competitive interaction between organizations.
- The demand for inter-organizational cooperation: creating conditions under which the long-term
shared interests prevail over the short-term temptation by some to cheat their partners
(competition). The pay-off for cooperative behavior is more enticing than the possibility to from
profit from the dependence for one’s partner. In order to commit high levels of interdependence,
firms on both sides of the relationship need to trust each other’s intentions and actions, while there
must be coordination and conflict-resolution mechanisms to solving evolving issues.
Perspectives on network level strategy:

- The discrete organization perspective: companies are seen as independent entities competing with
other organization in a hostile market environment. Individuals and companies are motivated by
self-interest and therefore competition is natural (neoclassic economics). Companies need to
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strengthen their competitive position in relation to external factors. Goal is to obtain market power
required to get good price/quality deals, ward off competitive threat, limit government demands
and even determine the development of the industry. The competitive situation is atomistic: each
self-interested firm strives to satisfy its own objectives, leading to rivalry and conflict with other
organizations. The key to competitive success is the ability to build a powerful position and to wield
this power in a calculated and efficient manner. Resource dependence should be avoided.
Collaboration is bad for a company’s long-term health, so network level strategies should not be
developed. They should strive for strategic self-sufficiency.
- The embedded organization perspective: business is about value creation, which brings together
organizations towards a common goal. No organization can efficiently perform all activities in-house,
as the division of labor has encouraged companies to specialize and outsource as may non-core
activities as possible. Firms are becoming increasingly integrated into webs of mutually dependent
organizations. In order to be willing to surrender independence, a firm must be assured that
partners are also willing to invest in the relationship and will not behave opportunistically. Durable
relationships are based on mutual dependence and reciprocity. Firms will recognize that they often
have parallel interests.
Managing the paradox of competition and cooperation:

- Navigating: focus on one contrary
element at a time and manage the
paradox by a series of contrary
initiatives. Cooperate first and compete
later. On some occasions it makes
strategic sense to join forces.
- Parallel processing: co-opetition:
companies interacting with partial
congruence of interests (e.g. Citroën,
Peugeot and Toyota sharing
components). Cooperating to reduce costs and competing for market share happens in different
organizational units, therefore it is called parallel processing.
- Juxtaposing: simultaneously managing competition and cooperation even with the same network
partners. The pattern of business co-evolution consists of a complex network of choices which
depends on what participants are aware of. Therefore, other firms cannot be labeled definite rivals
or allies. These positions are dynamic.
Network levels strategy in international perspective: companies in different countries have differing
behaviors towards the urge to compete or cooperate. Also significant variance within one country exists:
- Cross-border collaborations; e.g. to battle barriers to enter.
- Institutional environment; institutional structure (e.g. universities, government, banks, etc.) have
developed their own economic system.
- Market for corporate control: the more open the market, the easier vertical and horizontal
integration.
- Social networks and cultural norms: affect the focus on competition or cooperation (e.g. US is more
competitive than Japan due to higher levels of individualism).
- Groups can have negative effects; social networks can work against efficiency and effectiveness.
Reading 6.1 Collaborate with your competitors – and win

Collaboration between competitors is in fashion (e.g. General Motors and Toyota assembling automobiles).
Competitive collaboration (joint ventures, outsourcing agreements, product licensing, cooperative research)
has triggered unease about long-term consequences.
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A strategic alliance can strengthen both companies against outsiders even as it weakens one partner vis-à-vis
the other. Cooperation has become a low cost route for new competitors to gain technology and market
access (especially between Asian companies and western rivals).
Companies that benefit most from competitive collaboration adhere to a set of simple but powerful
principles:
- Collaboration is competition in a different form: new partners are out to disarm your company.
- Harmony is not the most important measure of success: occasional conflict may be the best evidence
of mutually beneficial collaboration.
- Cooperation has limits: defend against competitive compromise.
- Learning from partners is paramount: use the alliance to build skills in areas outside the formal
agreement and systematically diffuse new knowledge throughout the organization.
Why collaborate: 1. Strategic intent is an essential ingredient in the commitment to learning (e.g. new
technologies of skills) (Asian countries), 2. To avoid investments (western countries).
Conditions under which mutual gain is possible, at least for a time:

- The partners’ strategic goals converge while their competitive goals diverge
- The size and market power of both partners is modest compared to industry leaders
- Each partner believes it can learn from the other and at the same time limit access to proprietary
skills
Each partner must contribute something distinctive: basic research, product development skills,
manufacturing capacity, access to distribution. The challenge is to share enough skills to create advantage
vis-à-vis companies outside the alliance while preventing a wholesale transfer of core skills to the partner.
E.g. limit transparency by limiting scope of the formal agreement and establishing specific performance
requirements.
Collegiality is a prerequisite for collaborative success. Too much of it should set off warning bells to senior
managers.
Whether collaboration leads to competitive surrender or revitalization depends foremost on what

employees believe the purpose of the alliance to be. To learn, one must want to learn. Learning begins at the
top. Senior management must be committed to enhancing their companies’ skills as well as to avoiding
financial risk.
Collaboration doesn’t always provide an opportunity to internalize a partner’s skills.
It provides a way of getting close enough to rivals to predict how they will behave when the alliance unravels
or runs its course.
Knowledge acquired from partner is only valuable after it is diffused through the organization.
Reading 6.2 Creating a strategic center to manage a web of partners

Strategic alliances and inter-firms networks have gained popularity with many firms for their lower overhead
costs, increased responsiveness and flexibility, and greater efficiency of operations.
Networks that are strategically guided are often fast growing and on the leading edge.
The strategic center (central firm) (e.g. Nike, Apple, Nintendo) plays a critical role as a creator of value. Main
features of this role:
- Strategic outsourcing: outsource and share with more partners than the normal broker and
traditional firm.
- Capability: develop the core skills and competencies of partners to make them more effective and
competitive.
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- Technology: borrow ideas from others which are developed and exploited as a mean of creating and
mastering new technologies.
- Competition: explain to partners that the principle dimension of competition is between value chains
and networks. The network is only as strong as the weakest link. Encourage rivalry.
Although strategic center outsources more activities than most organizations, it is not hollow (hol). The
central firms have to develop some critical core competencies that are quite different from those stressed by
most managers. The agenda of central firms consists of:
1. The idea: creating a vision in which partners play a role.
2. The investment: a strong brand image and effective systems and support.
3. The climate: creating an atmosphere of trust and reciprocity.
4. The partners: developing mechanisms for attracting and selecting partners.
The most difficult battle that most firms face is not the battle for position, nor is it the battle between strong
and weak firms, it is the battle between firms adopting different strategies and approaches to the market. In
the latter battles, the winners are usually those who use fewer and different resources in novel
combinations. Central firms are good at this.
Strategy conception and implementation of ideas is shared between central firms and their webs of
partners. Here, they differ from the most conventional organizations, which neither share their conceptions
of strategy with other organizations nor insist that their partners share their ideas with them in a
constructive dialogue.
Partnerships (e.g. organization and supplier) barely require sharing ideas systematically.
Subcontracting relationships are deeper and more complex and many firms share their notions of strategy
with subcontractors. Limited sharing.
Alliances demand greater levels of commitment and interchange. It is common for firms involved in alliances
to exchange ideas about strategy and to look for strategic fit and even reshaping of strategic directions.
The way in which information is collected and shared in the system reveal show structure and strategy go
hand in hand. The gathering of information is a central activity in any organization. A strategic feature of a
network of alliances is that the firms in the system are closely linked for the sharing of information. They do
not only exchange hard data about best practices, but also ideas/feelings/thoughts about
customers/suppliers/general market trends.
The central firm structures the information systems so that knowledge is funneled to the areas that need it
the most.
Information leading to new ways of doing things emerges in a process of interaction with people and real-life
situations.
The information-ability of the firm depends on a scheme of interactions.
The generation of new information cannot be planned but has to emerge. This is difficult.
The availability of large amounts of high quality information on many aspects of the business facilitates more
rapid responses to market opportunities.
So critical information should not be guarded by an organization, but shared.
Whereas identifying opportunities for growth is facilitated by information sharing, responding to the
opportunity is more difficult. The central firms reject the idea of doing everything themselves. They seek
help from other to respond to the opportunities. The role of the center is to orchestrate the response so that
the whole system capitalizes on the opportunity.
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Often opportunities require an innovative response, it is then common for strategic centers to set up
learning races (partners are given a common goal with a price for the first to achieve the target).
Learning races can be destructive if the partners do not have the skills and resources.
Reading 6.3 Coevolution in business ecosystems

Behaviors in systems coevolve: a process in which interdependent species evolve in an endless reciprocal
cycle – changes in species A set the stage for the natural selection of changes in species B.
Coevolution is more important than cooperation and competition. A small number of the most effect firms in
the world develop new business advantages by learning to lead economic coevolution (e.g. HP, Shell). Their
executives must identify potential centers for innovation which can bring powerful benefits for customers
and producers.
As in nature, in business there are certain identifiable hot spots of rapidly accelerating evolutionary activity
in the global economy. Here, the speed of business is fast and loose. In a sense, they are renegades. They do
not respect traditional industry paradigms. They share a tendency to upend business and industry models
and to redraw increasingly porous boundaries (e.g. Sillicon Valley?). It is the end of industry as a useful
concept of contemplating business. ‘Industry’ is an artefact of the slowly paced business evolution.
There has been profound change in management thinking of senior executives: the industry boundaries are
blurring, and in many cases crumbling.
How to make a strategy in such ‘industries’? What is most needed is a new language, a logic for strategy, and
new methods for implementation. Many of the old ideas do not work anymore (e.g. diversification to find
attractive industries assume fixedness of industry structure).
Companies agitating to be leaders in the ‘new world’ must transform themselves profoundly and perpetually
as to defy categorization. E.g. is Walmart a wholesaler, or an information services and logistics company?
The alternative for ‘industry’ is suggested to business ecosystem: the microeconomic of intense coevolution
coalescing around innovative ideas. They span a variety of industries. The companies in them coevolve
capabilities around the innovation and work cooperatively and competitively to support new products,
satisfy customer needs, and incorporate the next round of innovation.
A second term is opportunity environment: a space of business possibility characterized by unmet customer
needs, unharnesses technologies, potential regulatory openings, prominent investors and many other
untapped resources.
Most prevailing ideas on strategy begin with the wrong-headed assumption that competition is bounded by
clearly defined industries. These ideas are nearly useless in the current business climate and will be even less
valid in the future.
We compete in a bifurcated world. Strategy must be viewed from two perspectives: 1. Executives must pay
attention to the wider opportunity environment and strive to lead in stabling business ecosystems that will
best utilize it, and 2. Executives must continue to see their companies in the traditional sense, as member of
homogenous industries clawing away at rivals for market share and growth.
The new approach is important for the following 3 reasons:

1. The conditions and challenges prevalent in the fastest-moving sectors of the global economy are
spreading inexorably to all the others.
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2. Some of the hottest centers of economic competition (e.g. computers, media, health care) are now
devising fresh approaches to strategy and leadership.
3. These ideas are already propagating across the general business landscape and thus are guaranteed
to have a dramatic and irreversible impact on how we do business from now on.
Unlike biological communities of coevolving systems, business communities are social systems that are
composed of real people who make decisions. A common characteristic however is that of conscious choice.
Consciousness is central to economic relationships.
Shared imagination is what holds together economies, societies and companies.
The larger patterns of coevolution are maintained by a complex network of choices which depend at least in
part on what participants are aware of. If you change the ideas in a system, you change the system itself.
As companies get more sophisticated in creating new ecosystem, the more the new level of consciousness
will become the dominant reality of business strategy.
The ultimate struggle among companies is for the souls of customers and the hearts of vast communities of
suppliers and other associated companies. Strategy based on conventional competition and cooperation
gives way to strategy based on coevolution – which defines a new level of competition.
The new ecology of business: the complex interplay between competitive and cooperative business
strategies is consistent from business to business. When an ecological approach to business becomes more
common, the pace of business change will accelerate at an exponential rate.
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Chapter 7 Strategy formation

Strategy: a course of action for achieving an organization’s purpose.
Behavior is not strategic if it doesn’t follow a pattern directed at achieving the organization’s purpose.
Strategy can be seen as an intended (pattern of decisions) or realized (pattern of actions) course of action.
Mintzberg & Waters say they are not contradictory, but complementary.
Strategy formulation: the process by which an intended strategy is created.

Strategy formation: the process by which a realized strategy is formed. It is includes both formulation and
action of the intended strategy, and leads to strategic behavior in practice.
The WHO and WHAT of strategy formation; answers are needed in order to be able to attain desired
strategic behavior. Since the organizational context involves many different people, with different
experiences/values/perspectives/personalities/interests/etc., the exchange of information and ideas,
decision-making procedures, communication channels, the allocation of resources and the coordination of
actions needs to be structured.
8 building blocks of the strategy formation process (a logical sequence of steps, but do not necessarily occur
in this order in practice):
1. Identification activities: all activities
contributing to a better understanding of
what should be viewed as problematic.
a. Mission setting: the mission has its
effect on what is a strategic issue.
b. Agenda setting: attention-focusing
factors (e.g. cognitive map of
strategist, group culture) determine
what is seen as strategic issue.
2. Diagnosing activities: the process of
comprehending the problem/issue’s
structure and underlying causes.
a. External assessment: the activity of investigating the structure and dynamics of the
environment surrounding the organization.
b. Internal assessment: the activity of investigating the capabilities and functioning of the
organization.
3. Conception activities: a potential solution is identified that will relate the organization to its
environment in order to achieve its purpose.
a. Option generation: creating potential strategies.
b. Option selection: the potential solutions are evaluated and the best one is selected.
4. Realization activities: concrete actions taken to resolve the problem/issue.
a. Action taking: a potential solution is carried out (intended actions become realized actions).
b. Performance control: the measuring if the actions taken are in line with the option selected
and if the results are as anticipated.
These steps need to be carried out in all strategy formation processes.
Different roles in the strategy formation process (due to different vision of labor):
- Top vs. middle vs. bottom role: depending on the organization, strategic activities might be
delegated or carried out together with people in a lower hierarchical level ( empowerment). Top
management generally retains the responsibility for deciding on strategic direction.
- Line vs. staff roles: line managers are responsible for realization of strategic options pertaining to
primary process. Many organizations have staff members involved in strategic formation process
(from all existing departments OR special strategy department).
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- Internal vs. external roles: strategy formation can be done by the organization itself or it can be
outsourced to consulting firms.
The paradox of deliberateness and emergence:

Strategy is about the future. This future is
unknown. So; design the future by figuring out in
advance (deliberateness) versus finding out along
the way (emergence)? Few strategies are purely
deliberate or emergent, but usually a mix between
the two.
- Deliberate strategizing: acting
intentionally.
1. Plan: an intended course of action
stipulating which measures a
person/organization proposes to
take.
2. A plan is a means towards an end.
3. Plans can exist without explicit objectives. Then, the plan incorporates both ends and means.
4. Advantages:
 Direction
 Commitment
 Coordination
 Optimization
 Programming
- Strategy emergence: becoming apparent.
1. Iterative process of thinking and doing.
2. ≠ ad hoc behavior as a coherent pattern of actions evolves (incrementalism).
3. Advantages:
 Opportunism
 Flexibility
 Learning
 Entrepreneurship
 Support
2 perspectives on strategy formation:

- Strategic planning perspective: strategies should be deliberately planned and executed. Anything
that emerges (pattern of actions) is not really a strategy. Once a strategic plan is adopted, action
should be swift, efficient and controlled. Advantages:
1. Strategic planning provides organizations with direction because they cannot act rationally
without intentions. Organizations get ‘organized’.
2. It allows for formalization and differentiation of strategy tasks, because of the highly
structured and sequential nature.
3. It encourages long-term thinking and commitment as it directs attention to the future.
Difficulty of strategic planning is that plans are always based on assumptions about how future
events will unfold. An solution is to do contingency planning where a number of alternative plans
based on different future scenarios are held in reserve.
Strategic incrementalism perspective: strategy formation process is about flexibly shaping the course of
action by gradually blending together initiatives into coherent pattern of actions. Planning and control
are valuable for routine activities that need to be organized efficiently only. Strategy formation is an
innovation process that is non-routine and which, thus, cannot be planned. Planning is also
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inappropriate when dealing with wicked problems (unique and highly complex problems). Strategic
problems are wicked. Weaknesses of planning when dealing with wicked problems  see page 359.
You can work deliberately by planning activities, but it should be possible to let the strategy emerge
when unforeseen circumstances appear.
Managing the paradox of deliberateness and emergence:
2 options to deal with the paradox:

1. Balancing: elements of opposing demands are traded off to find the most appropriate balance.
Scenario process is popular among organizations (e.g. Shell); a formal process that develops multiple
scenarios and provides opportunity for intuitive and entrepreneurial inputs. A balanced approach to
strategy formation.
2. Juxtaposing (naast elkaar plaatsen van zaken om een effect te krijgen): a corporate manager is
involved in different strategy formation processes. Being engaged in such a variety of processes, the
strategizing manager needs to be juxtaposing.
Strategy formation in international perspective:

It depends on the culture whether planning system (USA, UK, Australia, NZ) or incremental system (Italy,
Japan) is preferred. The cultures that prefer a planning system score high on individualism and prefer a
market economy. Central planning and top-down control due to a strong labor division. The more
incremental countries distrust corporate planning (Japan). The tendency to engage in formal planning is
likely to be influenced by the level of professionalism of the country’s management: internal control versus
external control.
- Internal control: cultures with collectivistic nature trust individual team players, thus formal control
mechanisms are not necessary.
- External control: time orientation. Countries with LTO = strategic incrementalism.
The role of leaders is to mediate between the two opposites.
Reading 7.1 Managing the strategy process

Strategic planning perspective. A formal planning system will not lead to effective strategy formation if it is
not linked to other organizational systems; it needs to interact with the monitoring, control, learning,
incentives and staffing system. 5 steps of the strategy process ( page 366):
1. Objectives setting: to determine a strategic direction for the firm.
2. Strategic programming: to develop strategies (step 1) and define cross-functional programs needed
to implement chosen strategy.
3. Budgeting: to define a strategic (contribution of functional departments) and operating (resources to
functional departments) budget for the form.
4. Monitoring, control and learning: to meet the key milestones in the strategic budget and on
adhering to planned spending schedules.
5. Incentives and staffing.
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Reading 7.2 Logical incrementalism

Strategic incrementalism perspective. Incrementalism is a proactive approach (not ‘muddling through’) to
strategy formation = logical incrementalism (logical; reasonable, well considered). Muddling through is
incremental in nature but reactive and ad hoc - improvisation to deal with unplanned and poorly controllable
circumstances.
Incrementalism helps to:
- Cope with cognitive and process limits on each major decision
- Build the logical-analytical framework these decision require
- Create the personal and organizational awareness, understanding, acceptance and commitment
needed to implement strategies effectively.
Incremental logic applies to subsystems of corporate strategy. Examples are: diversification subsystem (e.g.
R&D), divestiture subsystem (afstoten), reorganization subsystem, and government-external relations
subsystem.
Formal planning doesn’t exist in incrementalism. Leaders create broadly orientated goals (logical
incrementalism). Later on, these result in new goals from within the organization. So, this does give
direction. Dynamic process because future vision is reshaped and, thus, strategies followed. Flexible and
experimental. With incrementalism, goals become concrete as close to realization as possible so the latest
‘information’ is used and the uncertainty of the future is as little as possible.
The formulation of strategy is a political process. Rational planning is characterized by both analytical and
logical processes.
Reading 7.3 Strategic planning in a turbulent environment

Debate between the strategic planning (rational design school) and strategic incrementalism (emergent
process school). Aims for planned emergence in which strategic planning systems provide a mechanism for
coordinating decentralized strategy formulation within a structure of demanding performance targets and
clear corporate guidelines. Planning systems foster adaptation and responsiveness but has little innovation
and analytical sophistication.
The principal stages of planning process common to all companies ( page 382 figure 7.3.2.):
1. Planning guidelines 6. Corporate plan
2. Draft business plans 7. Board approval
3. Discussion with corporate 8. Performance targets
4. Revised business plans 9. Performance appraisal
5. Annual capital and operating budgets
Functions of corporate planning departments:

- Providing technical and administrative support to strategic management activities.
- Preparing economic, political and market forecasts, risk analyses, competitor analyses, and other
investigations of the business environment to assist strategic planning.
- Fostering communication between corporate and business management.
- Internal consulting.
Increased volatility and uncertainty in the external environment led to 2 changes in responsibilities of
strategic planning:
1. A shift in decision making from corporate to business level managers.
2. A shift of planning responsibilities from planning staff to line managers.
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3 trends in the changes in the content of strategic plans:

1. Shortening of time horizon.
2. A shift from detailed planning (deliberateness) to strategic direction (incrementalism) (!!!)
3. Increased emphasis on performance planning.
2 key processes through which the corporate planning processes contributed to quality of business level
strategic management:
1. Influencing the methodologies and techniques of strategic planning.
2. Providing channels and forums for communication and knowledge sharing.
The effectiveness of companies’ strategic planning has deteriorated in 3 aspects:

1. The foreshortening of planning horizons (4-5 years)
2. The transfer of strategic planning responsibilities from staff planners to line managers in strategic
direction.
3. More focus on performance planning.
Over the last two decades, strategic planning has become more informal, less steered by personnel due to
the difficulties in the dynamic and uncertain environment. Strategic plans have become more goal oriented
and shorter term focused.
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Chapter 8 Strategic change

Change is inevitable in today’s dynamic world. Not all change is strategic in nature, most is operational
change (‘fine tuning’; directed at increasing the performance of the firm within the confines if the existing
system. Strategic change has an effect on the way the firm does business (business model) and on the way it
has been configured (organizational system).
Strategic alignment: the process of constantly enacting strategic changes to remain in harmony with
external conditions.
2 fundamental distinctions within a firm:

- Business model (value creating system): the way a firm conducts its business. // how a firm makes
money. // the specific configuration of resources, value adding activities and product/service
offerings directed at creating value for customers.
- Organizational system: the way a firm gets its people to work together to carry out the business. //
how a firm is organized. // how the individuals populating a firm have been configured and related
to one another, with the intention of facilitating the business model.
1. Components of organizational system:
 Structure
 The clustering of tasks and
people into smaller groups.
 Division of labor is needed to
function efficiently and
effectively.
 Structuring criteria  page 404
figure 8.4
 Horizontal differentiation
through formal authority;
appointing managers etc.
 Vertical differentiation through
authority of board of directors.
 Processes
 The arrangements, procedures and routines used to control and coordinate
the various people and units within the organization.
 Culture
 The worldview and behavioral patterns shared by the members of the same
organization.
 The shared belief system is emotionally charged.
 A common language.
 Not always homogenous (sub-cultures)
 Powerful integration mechanism as it gets people abide by ‘the way we do
things around here’.
 members
The organizational system supports its business model, with the organizational members at its base ( page
402 figure 8.2).
- Firms having equal business formula: they are having the same business model.
- Firms having equal business form: they subscribe to same organizational system.
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The magnitude of change: the size of the steps being

undertaken in the strategic alignment process of change.
2 components of change magnitude:
- Scope of change:
1. Broad: many aspects and parts of the firm
are aligned at the same time.
2. Narrow: a more piecemeal change
process.
- Amplitude of organizational change:
1. High: the new business model, culture,
structure, processes or people are a
radical departure from the previous situation.
2. Low: the step proposed is a moderate adjustment to the previous circumstances.
The pace of change: the relative speeds at which the step are being taken. 2 components of pace of change:
- Timing of change: the moment at which the changes are initiated.
1. Intermittent: wait for the right moment.
2. Constant: the exact moment of kicking of new set of measures is less important as long as
there is no peak at any one moment in time.
- Speed of change: the time span within which change takes place.
1. High: major change in short period of time, speed is high.
2. Low: time span for implementation is longer, the speed can be lower.
The paradox of revolution and evolution: revolutionary and evolutionary change need to be balanced.
Radical result (strategic change) can be pursued by both revolutionary and evolutionary means.
- The demand for revolutionary change processes:
1. Revolution: disruptive change, strategic.
2. Revolution: a process whereby an abrupt and radical change takes place within a short
period of time. // overthrow status quo.
3. Typical sources of organization rigidity (revolutionary change is needed):
 Psychological resistance to change
 Cultural resistance to change
 Political resistance to change
 Investment lock-in; e.g. when large investment is made to product portfolio, it locks
the organization in.
 Competence lock-in; the better a firm becomes at something, the more a firm
becomes focused on becoming even better still (virtuous circle of competence-
building).
 Systems lock-in; switching from technology system cannot be done gradually and
slowly because of dependence on it.
 Stakeholder lock-in; e.g. long term contracts with buyers/suppliers, warranties,
commitments to government/local community, etc.
4. Common triggers for revolutionary change:
 Competitive pressure; competitive pressure and eroding market position requires a
rapid and dramatic response.
 Regulatory pressure; e.g. by government or regulatory agencies
 First mover advantage; wanting to be the first firm to introduce new
product/service/technology and to build barriers to entry.
- The demand for evolutionary change:
1. Evolution: gradual change, operational. Metamorphosis approach.
2. Evolution: the process whereby a constant stream of moderate changes gradually
accumulates over a longer period of time.
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3. Learning is a relatively slow process, whereby know-how is accumulated over and extended
period of time.
4. Often power is too dispersed for revolutionary changes to be imposed upon the firm. So
evolutionary change is the viable alternative.
Revolutionary and evolutionary change are complementary. It is suggested to be ambidextrous: applying
both types of changes contingent upon internal and external conditions.
Perspectives on strategic change:

Revolutionary change is necessary to create discontinuity in the alignment process (radical and swift).
Evolutionary change is necessary to create continuity in the alignment process (moderate and gradual).
- Discontinuous alignment perspective:
1. Revolutionary change, although difficult to achieve, is at the heart of alignment, while
evolutionary changes can only figure in a supporting role.
2. The more significant the change, the more intense the shock (just like with an earthquake).
3. People and organizations have a preference for stability and are thus reluctant to change.
4. The stability of an organization is high when the elements form a consistent and cohesive
configuration.
5. Short-term orientation
6. A level of stability is required to function efficiently, and constant change would only create
a mess leading to insecurity, stress and conflict.
7.  Long periods of relative stability are necessary for the proper functioning of firms.
8. Down side of stability is rigidity: the unwillingness/inability to change even when it is
urgently required.
9. Initiated by top management.
10. To overcome rigidity, a big shove is needed; revolution.
11. Episodes of revolutionary change are generally not freely chosen, but triggered by crises.
12. Battling sources of rigidity and turning crisis into opportunity. An abrupt break of status quo.
- Continuous alignment perspective:
1. Evolutionary change, although difficult to sustain, is at the heart of alignment, while
revolutionary changes are a fall-back alternative, if else fails.
2. The situation of change is like running a marathon (and not the earthquake!).
3. Revolution does not only cause unnecessary disruption and dysfunctional crisis, but is
usually the substitute for diligence (ijver).
4. Long-term orientation.
5. Development is gradual, piecemeal and undramatic, but as it is constantly maintained over a
longer period of time, the aggregate level of change can still be significant.
6. Continuous learning and continuous adapting.
7. Firm-wide effort.
Managing the paradox of revolution and evolution: the pattern of environmental change is episodic: periods
of relative stability are interrupted by short and dramatic periods of instability (punctuated equilibrium).
Strategists need to navigate the company during periods of stability by evolutionary adaptation, and during
instable times be revolutionary.
Strategic change in international perspective:

- Machine bureaucracy: clear hierarchical authority relationships, strict differentiation of tasks and
highly formalized communication/reporting/budgeting/planning and decision-making (UK, US, FR).
Once formed, they are difficult to change. Revolution is usually the potent mode of change to make
significant changes. Discontinuous alignment is preferred.
1. A system into which people have been brought.
2. The people work FOR the organization.
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3. Individualistic.
- Organic organizations (clan-like organizations): management and production activities are not
strictly separated, extensive informal communication and consultation (DE, NL, JA). Strong
preference for continuous alignment (evolution).
1. A group of people into which a system has been brought.
2. The people ARE the organization
3. Collectivistic.
Role of top management:

Top management is considered the central processing unit of the company, making the hey decisions and
commanding the behavior of the rest of the organizational machine in certain countries.
- Discontinuous alignment (revolution)
Other countries see top management as the captains of the team and leadership as less direct and less
visible. Here, top managers facilitate change among the members of the group.
- Continuous alignment (evolution)
Reading 8.1 Reengineering work: don’t automate, obliterate

At the heart of reengineering is the notion of discontinuous thinking – of recognizing and breaking away
from the outdated rules and fundamental assumptions that underlie operations. We cannot achieve
breakthroughs in performance by cutting fat or automating existing processes. We must challenge old
assumptions and shed the old rules that made the business underperform.
The current patterns of work become so ingrained that despite their drawbacks, it is hard to conceive of
work being accomplished any other way. They lack the integration necessary to maintain quality and service.
In reengineering, managers break loose from outmoded business processes and the design principles
underlying them and create new ones. Reengineering requires looking at the fundamental processes of the
business from a cross-functional perspective. One way to ensure that reengineering has this perspective is to
assemble a team that represents the functional units involved in the process being reengineered and all the
units that depend on it.
Reengineering effort strives for dramatic levels of improvement. It must break away from the conventional
wisdom and the constraints of organizational boundaries and should be broad and cross-functional in scope.
Use information technology not to automate existing processes but to enable a new one.
Principles of reengineering that help jump start your organization in its reorganizing effort:
- Organize around outcomes, not tasks
- Have those who use the output of the process perform the process
- Subsume information-processing work into the real work that produces the information
- Treat geographically dispersed resources as though they were centralized
- Link parallel activities instead of integrating their results
- Put the decision point where the work is performance and build control into the process
- Capture information once and at the source
Reengineering triggers changes of many kinds, not just business process itself. E.g. also job design,
organizational structures, etc. it is an effort that mandates change in many areas of the organization.
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Reading 8.2 Building learning organizations

“The rate at which companies learn may become the only substantial source of competitive advantage”.
Human beings are designed for learning. But, by focusing on performance for someone else’s approval,
corporates create the very conditions that predestine them to mediocre performance. Over the long run,
superior performance depends on superior learning.
The need for understanding how organizations learn and accelerating that learning is greater today than
ever before.
The prevailing view of learning organizations emphasizes increased adaptability. But this is only the first
stage in moving toward a learning organization. The impulse t learn is an impulse to be generative, to expand
our capability. Leading operations are therefore focusing on generative learning (creating) instead of
adaptive learning (coping).
Generative learning requires new wats of looking at the world. It requires seeing the systems that control
events. If we are not able to do this, the best thing to do is adaptive learning.
Leaders in a learning organization start with the principle of creative tension. Creative tension comes from
seeing clearly where we want to be (vision) and telling the truth about where we are now (current reality).
The gap between the two generates a natural tension.
Creative tension can be resolved in 2 ways:

1. By raising current reality toward the vision
2. By lowering the vision toward current reality
Without vision, there is no creative tension. It cannot be generated from current reality alone. Also, creative
tension cannot be generated from vision alone; it demands an accurate picture of the current reality as well.
Leading through creative tension is different from solving problems. In problem solving, the energy for
change comes from attempting to get away from an aspects of current reality that is undesirable. With
creative tensions, the energy for change comes from the vision juxtaposed with current reality.
Critical roles of leadership in learning organizations:

- Leader as designer; the function of design are rarely visible; they take place behind the scenes. The
consequences that appear are the result of work done in the past. Work done today will show
results in the future. Design tasks of leadership:
1. Formulate the policies, strategies and structures that translate guiding ideas into business
decisions.
2. Formulate policies, strategy and structures.
3. Create effective learning processes.
- Leader as teacher; this does mean a leader as an authoritarian expert whose job it is to teach people
the correct view of reality. It is about helping everyone in the organization to gain more insightful
views of current reality. This is in line with seeing leaders as coaches/guides/facilitators. The role of
leader as teacher starts with bringing to the surface people’s mental models of important issues.
What we carry in our heads are assumptions. Working with mental models goes beyond revealing
hidden assumptions. The leaders help to restructure their views of reality to see beyond the
superficial conditions and events into the underlying causes of problems and therefore seeing new
possibilities.
1. Leaders can influence people to view reality at 3 distinct levels: events > patterns of behavior
> systematic structure.
 Contemporary society focuses mainly on events. The media reinforces this. This
results in explaining things based on events. However, also pattern-of-behavior
explanations also occur in our society; trend analysis.
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 All 3 levels of explanation are equally true. Their usefulness is different.

 Leaders in learning organizations focus on all 3 levels, but focus especially on
systematic structure.
- Leader as steward; the subtlest role of leadership. It is solely a matter of attitude. Leader’s sense of
stewardship operates on 2 levels:
1. Stewardship for people they lead
2. Stewardship for the larger purpose or mission that underlies the enterprise.
New leadership roles require new leadership skills. They can be developed through life long commitment. 3
critical areas of skills:
- Building shared vision
1. Encouraging personal vision
2. Communicating and asking for support
3. Visioning as an ongoing process
4. Blending extrinsic and intrinsic visions
5. Distinguishing positive from negative visions
- Surfacing and testing mental models
1. Seeing leaps of abstraction
2. Balancing enquiry and advocacy
3. Distinguishing espoused theory from theory in use
4. Recognizing and defusing defensive routines
- Systems thinking
1. Seeing interrelationships (not things) and processes (not snapshots)
2. Moving beyond blame
3. Distinguishing detail complexity from dynamic complexity
4. Focusing on areas of high leverage
5. Avoiding symptomatic solutions
Reading 8.3 Ambidextrous organizations: managing evolutionary and

revolutionary change
All managers face problems in overcoming inertia and implementing innovation and change. To remain
successful over long periods, managers and organizations must be ambidextrous – able to implement both
incremental and revolutionary change. Success often precedes failure.
2 illustrations of the pattern why which organizations evolve:

1. Periods of incremental or evolutionary change;
2. Discontinuous or revolutionary change.
Long-term success is marked by increasing alignment among strategy, structure, and people and culture
through incremental or evolutionary change punctuated by discontinuous or revolutionary change that
require the simultaneous shift in strategy, structure, people and culture.
The process of adaptation occurs gradually over long time periods. The process is assumed ne of variation,
selection and retention. But what if environment is characterized by periodic discontinuities instead of
gradual change? Then, reliance on gradual change is a ticket to extinction. Discontinuities require a different
version of Darwin theory; that of punctuated equilibria in which long periods of gradual change were
interrupted periodically by massive discontinuities. Under these conditions, survival or selection goes to
those species with the characteristics needed to exploit the new environment. So it seems to be with
organizations.
All organizations evolve following the S-curve. Success flowed not only from having a new product with
desirable features, but also from the ability of the organization to design, manufacture, market and the
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distribute the new product. As a result of growth, several inexorable changes occur; the firm gets larger, and
the strategy has to change. The longer the growth period, the more changes needed. As the product class
matures, the basis of competion shifts.
To succeed over the long haul, firms have to periodically reorient themselves by adopting new strategies and
structures that are necessary to accommodate changing environmental conditions. These shifts often occur
through discontinuous changes. If an environment is stable and changes only gradually, it is possible for an
organization to evolve slowly through continuous incremental change.
Another more fundamental process occurring resulting in punctuated change: technology cycles – the
dynamic of product/service and process innovation, dominant designs, and substitution events. In any
product/service class, there is a common pattern of competition that describe the development of the class
over time.
Technology cycles begin with a proliferation of innovation in products/services as the new product/service
gains acceptance. As demand increases over time, competition increases. Then the basis of competition
shifts from basic product/service design to price and
features. The emergence of this dominant design
transforms competition in the product class. Then,
competition shifts to innovation when dominant design
has emerged. Successful strategies now emphasize
compatibility with the standard and productivity
improvement. This competition continues until there is
a major new product/service or process. Then, the
technological cycle will start all over again ().
Successful companies learn what works well and incorporate this into their operations. This is what
organizational learning is about; using feedback from the market to continually refine the organization to get
better and better at accomplishing its mission.
A lack of congruence is usually associated with a firm’s current performance problems.
With evolutionary change, managers are able to incrementally alter their organizations. These changes are
relatively small; the incongruence injected by change is controllable.
The process of making incremental changes is well known and the uncertainty created for people affected by
such changes is within tolerable limits. The overall system adapts, but it is not transformed.
2 drawbacks of companies becoming larger and older:

1. Structural inertia: a resistance to change rooted in size, complexity and interdependence in the
organization’s structures, systems, processes and procedures.
2. Cultural inertia: learning is embedded in the shared expectation about how things are to be done
(informal norms, values, social networks). The more successful the organization, the more
institutionalized or ingrained the norms, values and lessons become, and the greater the cultural
inertia – complacency and arrogance.
In the short run, managers must constantly increase the fit/alignment of strategy, structure and culture. In
the long run, they may be required to destroy the very alignment that has made the organization successful.
Ambidextrous organizations are needed if the success paradox is to be overcome. The ability to
simultaneously pursue both incremental and discontinuous innovation and change results from hosting
multiple contradictory structures, processes and cultures within the same firm.
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Chapter 9 Strategic Innovation

Operational change: change aimed at maintaining the current business model and organizational system.
Strategic change: change directed at aligning the business model and organizational system with the
environment.
Strategic innovation: renewing the firm’s business model to create or sustain a competitive advantage. It is
aimed to achieve a successful and long-term corporate life.
The issue of strategic renewal: even though eternal life is not possible, organizations can stay young and vital
for hundreds of years (e.g. Shell). Even though companies can become much older than human beings, their
average age turns out to be much lower.
Strategic renewal processes are the most complex processes to bring to a successful ending because it
consists of 4 different processes that are, in combination, very demanding. 4 constituting elements of
strategic innovation are:
- Strategic innovation as strategizing process: strategists should be aware of the potential
opportunities and threats in the context, and the current developed strengths and weaknesses.
Strategist focus on strategic renewal and are the architects, who are working in a context of
bounded creativity. Potential pitfall: tunnelvision.
- Strategic innovation as entrepreneurial process: strategists can identify new markets for existing
products/services, apply new technologies to current markets, and develop new
businesses/activities. They see growth possibilities. Visionaries.
- Strategic innovation as change process: the business model
and elements of the organizational system have to be adapted.
The below elements are subject to adaptation or change due to
strategic innovation:
1. Organizational culture: does the change fit the culture?
How to change culture to make it fit for new business?
Change requires the organizational culture to adapt
because strategic innovation requires this because of
the way of thinking and the development of skills.
2. Organizational processes:
3. Organizational structure:
- Strategic innovation as investing process: strategic
innovation requires resources such as money, time, and
requires management capabilities. It then requires a
positive return on invested resources. Investments in
strategic innovations compete with other investment
categories (e.g. mergers, acquisitions, entering new
countries). Investments that promise great return are
often riskier than short-term options. It is therefore
more uncertain as results are expected over a longer
term.
Inhibitors of strategic innovation:

- The effects of innovation results: past experiences
influence how alternatives are valued and evaluated.
Strategists have learned what worked and what didn’t.
positive results to innovation routing leads to replicating this routine and building up relevant
innovation process competencies. These lead to increased chances for success. How, what worked in
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the past is no guarantee for the future. Success lead to bias in evaluating innovation process, inertia
builds up over time, and the organization loses the ability to value different innovation patterns.
- The effects of inertia (traagheid) and bias: never change a winning team; when an organization is
successful now, they are reluctant to chance. This causes them to miss out on competitors’
innovations. However, keeping up and up-to-date is a requirement for viability of organization.
- The effects of feedback: when the innovation outcomes are successful, strategists often do not
consider potentially even more successful outcomes. Continuous feedback of the innovation
portfolio complicates business model renewal processes, especially for innovations with a longer
development time. The key to bringing long-term investment projects to a successful end is to define
milestones with clearly defined mid-term targets.
The 4 challenging process and the 3 main inhibitors may explain why most companies are unable to
approach a century enduring corporate life. Strategic renewal is the key strategic issue for a company’s long-
term success.
Business model renewal: In order to prepare for a competitive future that is yet unknown, strategizing
managers need to renew several elements of the business model; improve current products/service, and
develop new products/services. Strategists do not only react to changes, they also initiate changes by
innovating activities. They can renew each elements of the company’s business model; product offering,
value chain, and resource base. 3 possibilities for renewal:
1. Outside-in renewal: renew the value proposition to
customers by increasing the perceived product/service
value, and by lowering prices (e.g. Hyundai). Or create new
markets or market segments for existing knowledge (e.g.
ice cream to adult consumers).
2. Inside-out renewal: renew the resource base to create
new products/services and improve existing ones (e.g.
Philips).
3. Value chain renewal: renew some or all elements of the
value chain (e.g. IKEA).
The paradox of exploitation and exploration: should the company renew itself by improving the current
situation (exploitation) or by radically rejuvenating the organization through disrupting technologies and
processes (exploration)?
- The demand for sustained renewal: The process of permanently improving products/services to
strengthen the competitive position (exploitation). Sustained renewal is based on factual
information (e.g. customer feedback, market research). A company needs to improve, even to
maintain current position, because without engaging in this permanent process of improvement, the
firm will lag behind competitors and eventually deteriorate.
- The demand for disrupting renewal: The process in which current competitive position are
challenged by introducing new technologies and business models (exploration). Disruptive
innovations do not follow from facts, but need to be invented. Creative thinking is essential. Often
logic is used afterwards to justify an idea that was generated by creative means.
Sustained and disruptive renewal are opposites and partially incompatible. Revenue model (verdien model)
as primary element of business model is also of importance (e.g. Swapfiets; disruptive revenue model).
Perspectives on strategic innovation:

- Strategic improvement perspective (exploitation): companies should focus on improving their
business model. The point of departure is the permanent battle between rivalling companies that
fight for the same customer group. Improved products/services attract more customers, increase
market share, and generate more returns. Therefore they are a key success factor in the competitive
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game. Things can always be advanced. Game-changing innovations provide a significant competitive
advantage to the innovator. However, it is a risky route with moderate chance of success. To
increase the chance for success; allocate best resources (e.g. Weber BBQ’s).
- Radical rejuvenation perspective (exploration): companies should focus on breakthrough innovations
that change the rules of the competitive game rather than becoming better at playing by the current
rules. The more radical the departure, the more difficult it will be or competitors to follow, and the
high the benefits for the innovator. Old ways must be discarded before new methods can be
adopted (creative destruction). Strong leadership is essential as disruptive innovation is also
disrupting the organization itself. It is crucial for the disruptive renewal project to be a success,
because, in absence, there is the danger of failure trap: failure promotes the search for even newer
ideas and thus more exploration. Improvements are useful to help companies defend and
strengthen their competitive positions; however, it comes at a high price.
Managing the paradox of exploitation and exploration:

- Parallel processing: separating
exploitation and exploration processes in
different organizational units
(differentiation), while integration takes
place at a different (higher)
organizational level (= spatial
separation) making such organizations
ambidextrous. 2 distinct parallel
processing practices:
1. Internally: e.g. to build a
seperated R&D department.
2. With external partners: outsource one of the processes to an external strategic partner.
Advantage: it effectively combines the contradicting core capabilities of two firms. Pitfall: the
partner’s strategic objectives may change and become conflicting. E.g. with alliance, joint
venture.
- Navigating: first explore than exploit.
- Balancing: sustaining renewal processes have a short-term focus whilst disrupting processes have a
long-term focus. Processes may be combined in the same unit and then, thus, the agenda consists of
both short- and long-term innovation projects. The balance is company specific and dynamic as
priorities change. It is more complex than parallel processing.
The dynamics of the S-curve: the composition of a successful

leadership team (LT) should differ over the S-curve. First, the LT
should mainly be composed of leaders employing visionary
feedforward-thinking with a passion to explore the unknown. In the
mature phase, the LT should mainly consist of analytic feedback-
thinking leaders. The key role in constantly changing the
composition is the CEO. This person needs to have complexity
maturity: the ability to engage in paradoxical thinking.
Strategic innovation in international perspective:

National level: countries differ in the strategies they prefer. Asian
countries prefer a gradualist approach, whilst western companies generally prefer the great-leap approach
(innovation). It generally boils down to cultural explanations. More individualistic countries prefer innovation
more as they foster internal competition. The more a country avoids uncertainty, the less it prefers radical
innovation as this yields unexpected and unintended outcomes. However, culture cannot explain everything.
Government support and rules and regulations also play a decisive role.
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Reading 9.1 Kaizen

Change is easily taken for granted in companies. The Kaizen concept explains why Japanese firms cannot
always stay the same. The essence of Kaizen is continuous improvement of everything and everyone (incl.
managers and employees).
Kaizen versus innovation (v):
When innovation has been achieved, it

should be followed by a series of Kaizen
activities in order to maintain and improve
the innovation.
Improvement is always slow, gradual and often invisible. But

it bears effects that can be felt a long time. The lack in Western management is the focus on improvement.
There is no internal system in place in Western management that rewards activities focused on
improvement. Instead, everyone’s work related achievement are judged based on results. This focus on
results has led to an innovation-dominated approach in the West. This certainly doesn’t imply that the
Japanese approach doesn’t focus on innovation. But Japanese managers follow the Kaizen principle even
when they are involved in innovation.
Reading 9.2 The innovator’s dilemma

The innovator’s dilemma has to do with the continuous confirmation whether you are doing things right or
not. This makes it harder to depart from. If profits are good, customers and stakeholders are satisfied, it is
harder to implement change.
The failure frame/frame of failure is based on 3 findings:

- Sustainable vs. disruptive technologies: disruptive technologies are innovations that result in poorer
product achievements for a short period of time. These innovations create failing organizations that
quickly lose market share. Disruptive technologies tend to be cheaper, easier, smaller and often have
a higher ease of use.
- Market need improvement vs. technology improvement: technologies could evolve faster than the
market demand. Often suppliers exceed their market because they are too focused on delivering
better products at higher prices to make higher margins than the competition. They give clients
more than they want or that they are willing to pay for.
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- Disruptive technologies vs. rational investments: aggressive investments in disruptive technologies is

not a rational financial decision: disruptive products are easier and cheaper, disruptive technologies
are introduced to upcoming and unclarified markets.
The most profitable customers of leading organizations often are not able and do not want to use products
based on disruptive technologies.
Why good management can fail:

- Companies depend on clients and suppliers for resources
- Small markets do not solve the growth needs of large companies
- Markets that do not exist, cannot be analyzed either
- The capacities of organizations also define their limitations
- Technology input doesn’t equal market demand
Principles in identifying disruptive threats and opportunities:

- Do not invest aggressively in products/services that solely want the most profitable customers.
- The task of the innovator is to make sure the innovation is taken seriously within the organization,
without the need to put current customers that offer growth and profit in danger.
- Problems can be solved when: 1. New markets are being considered and developed, 2. The scope
and the interest of the organization matches the unique needs to the customers in the market.
Reading 9.3. Exploration and exploitation in organizational learning

Exploration includes everything that is captured in terms of searching, varying, risk taking, experimenting,
playing, discovering, innovation and flexibility.
Exploitation includes refining, producing, selecting, implementing, executing, choice and efficiency.
As people are used to routines, it is difficult to deviate from these routines. The circumstances don’t matter;
even if the competition is severe.
- Exploration/exploitation trade-off
- Mutual learning in development of knowledge
- Knowledge and ecologies of the competition
- Small models and old wisdoms
Companies need both exploration and exploitation in order to

achieve persistent success. They should be practiced in a
balance, because both are fundamentally disproportionate
().
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Chapter 10 The industry context

It is essential to know the environment well as strategic management is about relating a firm to its
environment. Understanding of competitors/buyers/suppliers/substitutes/new entrants and structural
factors that influence their behavior is valuable for determining a successful strategy.
The issue of industry development:

Industry rules are the demands dictated to the firm
by the industry context, limiting scope of potential
strategic behaviors. They stipulate what must be
done to survive and thrive in a line of business. The
rules of the competitive game.
The rules arise from industry structure. Porter’s Five
Forces can impose constraints on a firm’s freedom of
action. Strict rules mean less degrees of freedom for
the strategist. Looser rules mean more leeway to
maneuver.
As industries develop, rules of competition change.
Strategists need to know which characteristics of industry structure and which aspects of competitive
interaction change.
Dimensions of industry development: the structure of the industry changes. 5 groups of industry actors by
Porter: competitors, buyers, suppliers, new entrants, and substitutes.
The industry structure can be decomposed into elements, each of which can change, causing a shift in
industry rules. 4 structural characteristics along which significant industry developments can take place:
- Convergence-divergence:
1. Convergence: the business models of firms start to resemble each other based on the
adaptation to a firm with a dominant design (e.g. airline industry).
2. Divergence: many firms introduce new business models on the basis of e.g. mutation of
existing firms (e.g. restaurant industry).
- Concentration-fragmentation:
1. Concentration: an increasing share of the market is in the hands of only a few companies
(e.g. aircraft industry). Due to mergers and acquisitions.
2. Fragmentation: the average market share of the largest companies starts to decrease (e.g.
telecom services industries). Due to new entrants to the market or entry of existing firms
into the industry.
- Vertical integration-vertical fragmentation:
1. Vertical integration: firms in the industry are becoming involved in more value-adding
activities in the industry column (e.g. media and IT).
2. Vertical fragmentation: firms in the industry are withdrawing from various value-adding
activities and ‘go back to the core’ (e.g. automotive industries).
- Horizontal integration-horizontal fragmentation:
1. Horizontal integration: the boundaries between different businesses in an industry become
increasingly fuzzy (e.g. consumer electronics and defense).
2. Horizontal fragmentation: firms are becoming more strictly confined to their own business
(e.g. construction and airline)
- International integration-international fragmentation:
1. International integration: the international boundaries separating various geographic
segments of an industry become increasingly less important (e.g. food retailing and business
education).
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2. International fragmentation: the competitive interactions in an industry are increasingly

confined to a region or country (e.g. internet retailing).
- Expansion-contraction:
1. Expansion: an industry is experiencing an ongoing increase in demand. Growth phase of
industry life cycle.
2. Contraction: demand is constantly receding. Decline phase of industry life cycle.
Paths of industry development (): popular ways to

track the development of an industry is by the
pattern of expansion and contraction,
vertical/horizontal/international integration, or the
level of concentration (market share).
4 generic patterns of industry development

describing the type of transition for the old dominant
model to the new ():
1. Gradual development: one business model
is dominant for a long period of time and is
slowly replaced by an alternative that is a
slight improvement. Adapting to the new
rules of the game is not difficult (stability).
Companies with an established position have
a strong advantage.
2. Continuous development: changes to the
dominant model are more frequent, but still
relatively modest in size. Adjusting to new
model is not difficult if you keep up with the
pace of improvement. Rapid adaptation
strengthens competitive position.
3. Discontinuous development: one business
model is dominant for a long period of time
and is then suddenly displaced by a radically better one. The model innovator can be an outsider as
well. This rule breaker generally has a large advantage over companies that need to adjust to the
entirely new set of rules.
4. Hypercompetitive development: models are frequently pushed aside by radically better ones. Rules
of the game constantly change, making it difficult to build up a sustainably dominant position. The
only defense here is offense – being able to outrun existing competitors, being innovative and being
able to outperform new rule breakers at their own game.
Drivers of industry development:

internal and external drivers to the
industry. The contextual drivers
(external) can be split in socio-
cultural, economic,
political/regulatory, and technological
forces for change. The change drivers
in the industry (internal) are
suppliers, buyers, incumbent rivals,
new entrants, substitutes and
complementors.
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When one firm is the major driver of industry development, it can claim industry leadership. If there is no
industry leader and the evolution of the industry is due to the complex interaction of many different change
drivers, the industry dynamics determine the path of industry development.
Inhibitors of industry development:

- Underlying conditions: some rules might be immutable because the underlying industry conditions
cannot be changed. E.g. economies of scale are desired in merchant shipping but not in wedding
services.
- Industry integration: some industries are particularly rigid because of the complex linkages between
various aspects of the industry.
- Power structures: powerful industry incumbents often have little to gain or to lose, which makes
them reluctant to support changes to the rules of the game.
- Risk averseness (weerhoudendheid): change is not only risky for the rule breaker but also for other
parties involved (e.g. customers). The more risk averse, the more rigid the industry rules.
- Industry recipes: a widely held perception among industry incumbents regarding the actual rules of
the game in the industry. The cognitive amp shared by incumbents about the structure and demand
of an industry.
- Institutional pressures: companies experience strong pressures from governments, professional
associations, customers, consultatnt, trade unions, pressure groups etc. prescribing permissible
strategies and actions and internalize behavioral standards.
The paradox of compliance and choice:

- The demand for compliance: no organization has the ability to shape the entire world to fit its needs.
All organizations need to understand the context in which they operate and need to play by most of
the rules of the game. Common cause of corporate death is misalignment between the organization
and its environment. To achieve compliance with the rules, firms must develop structures, processes
and a culture in which listening and adapting to the environment become engrained. Firms must
become customer- and market-oriented. Reacting to the PULL of the market instead of PUSHING it.
Avoid the pitfall of organizational arrogance – knowing better than the market and imposing an
approach that no one desires.
- The demand for strategic choice: to be unique and develop a competitive advantage, firms need to
do something different that doesn’t fit within the current rules of the game. The more innovative the
rule breaker, the larger the competitive advantage. The more radical the change, the more difficult it
is for rivals to imitate/catch up. Firms must develop structures, processes and a culture in which the
current recipe is constantly questioned, challenged and changed. Escape the pitfall of organizational
conformity – the strict adherence to current industry rules.
Perspectives on the industry context:

- The industry dynamics perspective: the industry evolution perspective. Individual firms have the
power to shape their industry. But, the illusion of control is tempting. It is a fallacy. In reality,
industries are complex systems with a large number of forces interacting simultaneously, none of
which can significantly direct the long-term development of the whole. Firms are small players in a
large game. Survival and growth of company depends on their fit with the environment. As
organizations do not vary at random, they have more flexibility to evolve along with unfolding
industry dynamics. Co-evolution: the process of mutual adaptation and development between
entities within a system. Winning big by changing the rules sounds easy, but changing the rules is
difficult, slow and hazardous.
- The industry leadership perspective: the belief that some rules of the game must be respected whilst
others can be ignored in the search for new strategic option. Strategists must recognize both the
limits of the possible and the limitless possibilities. A firm must have the intellectual ability to
envision the industry’s future, and is able to communicate this vision in a manner that other firms
64

and individuals are willing to buy into. To actually change the rules of the game, a firm must move
beyond a compelling vision and work out a new competitive business model and develop new
competencies and standards for the new model to function properly. Industry leadership is not easy.
It requires perseverance and commitment to be a successful industry shaper.
Managing the paradox of compliance and choice:

- balancing: some rules
are not to be moulded
(e.g. importance of
brands and economies
of scale). Larger firms
active in multiple
businesses are multi-
balancing.
- Parallel processing:
business unit managers
play by the rules of the environment, whilst the strategists of large firms are often engaged in
initiatives that may well change the industry context.
- Juxtaposing: industry characteristics determine which industry rules are malleable by strategists’
actions. Large majority of rules cannot be broken.
The industry context in international perspective:

On national level, countries with a culture focusing on an internal locus of control (e.g. US), the industry
leadership perspective is dominant. Cultures in which people have an external locus of control (e.g. Asia), the
industry dynamics perspective is dominant. When companies are not part of a network of long-term
relationships, they are better off positioned towards the leadership perspective that focusses on breaking
the breakable rules.
Reading 10.1 How industries evolve

You cannot increase profitability without a thorough understanding of the structural changes shaping the
industry concerned, based on the Five Forces framework by Porter and the S-curve framework by Foster.
The Five Forces framework is essentially static: it provides an approach for determining the financial
performance of an industry, and thus it attractiveness for investors at a specific point in time.
The S-curve framework is dynamic – it focuses on how industries evolve over time – it does not deal with
how companies move across product generations (i.e. across S-curves).
A new framework: how to increase profitability in the firm depends largely on which of 4 models best
characterizes the nature of innovation in the industry. Distinction between architectural (2 out of 4 models)
and non-architectural (2 out of 4 models) change. Architectural change: any innovation that disrupts the
industry’s established relationship with both suppliers and customers. This can be based on new or existing
technologies. Non-architectural change involves innovation through established customers or supplier
relationships.
Reasons why the S-curve and Product Life Cycle (PLC) models are difficult to use:
- Life cycle phases are difficult to see
- Industry boundaries are hard to identify
- The S-curve and PLC models offer little help for adapting an organization across generations
- The difficulties are widespread
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Four models of industry evolution: receptive, blockbuster, radical organic,

and intermediating.
- Model 1 Receptive: firms achieve returns of their investments
incrementally as the investments are made. Information quickly
arrive on whether the firm’s approach is viable in the market.
 More stable
 Distribution, transportation, manufacturing (e.g. Unilever)
- Model 2 Blockbuster: nearly all costs of developing new products and technologies are incurred
before the sponsor learns whether markets will respond favorably.
 Pharmaceuticals, applications software, cellular telephone service.
- Model 3 Radical organic: change is driven by radical innovation in the capabilities that support both
customer and supplier relationships. New technologies offer new services.
 Computers
- Model 4 Intermediating: industries in which there are discontinuities in the value chain itself. The
information is topical because information technology is lowering transaction costs in some
industries and creating potential for disintermediation/reintermediation.
 Distribution channels; home delivery or actual shopping.
 Page 531 figure 10.1.3
How to analyze industry evolution: 3 different perspectives:

- Assessment of the current environment
- Evaluation of historical trends
- Evaluation of prospective returns
Analytical steps that need to be taken:
1. Map the existing industry structure and competitive environment
2. Look back at how critical resources have developed
3. Identify major investment initiatives
4. Decide whether information is architectural
5. Evaluate the implications
Reading 10.2 Blue ocean strategy

- Red ocean: existing industries. Known market space in which rules are laid out. Firms are trying to
perform better in order to gain more market share. When the market space becomes more dense,
the chances for profit and growth decline. Higher level of competition.
- Blue ocean: non-existing industries. Unknown market space in which there is no competition yet
either. Demand is created instead of fought for. Plenty of opportunity for fast growth and fast
profits. 2 options: 1. Value creation for customers at higher costs (differentiation), or 2. Average
value creation at average costs (low cost strategy). These strategies can both be applied in a blue
ocean environment. Doing so creates value for buyers and the firm itself. This is a sustainable
strategy in which the whole system needs to be aligned.
RED OCEAN STRATEGY BLUE OCEAN STRATEGY
- Compete in existing market space - Create uncontested market space
- Beat the competition - Make the competition irrelevant
- Exploit existing demand - Create and capture new demand
- Make the value/cost trade-off - Break the value/cost trade-off
- Align the whole system of a company’s - Align the whole system of a company’s
activities with its strategic choice of activities in pursuit of differentiation and
differentiation or low cost low cost
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The paradox of strategy: most companies seem becalmed in their red oceans. Why? 2 reasons. 1. We have a
tendency to win from rivals, and 2. Corporate strategy is heavily influenced by its roots in military strategy
(e.g. ‘officers’). This describes the battlefield that is about confronting and opponent (=red ocean). This
means that distinctive strength of business world is denied - the capacity to create new market space that is
uncontested.
Towards blue ocean strategies: What strategic logic is needed to guide creation of blue oceans?
- Blue oceans are not about technology innovation, it is not the defining feature. The underlying
technology was often already in existence.
- Incumbents often create blue oceans and usually within their core businesses. Most blue oceans are
created from within.
- Company and industry are the wrong units of analysis as they have little explanatory power when it
comes to analyzing how and why blue oceans are
created.
- Creating blue oceans builds brands and create brand
equity for years.
Red and blue oceans have always existed and will continue to do
so. Companies should acknowledge the differences in the logic
of both approaches. Only then, they will be able to focus more
on creating blue ocean strategies.
Reading 10.3 Living on the fault line

The technology adoption life cycle (TALC) models the response of any given population to the offer of a
discontinuous innovation, one that forces the abandonment of traditional infrastructure and systems for the
promise of a heretofore unavailable set of benefits. The response is represented in a bell curve consisting of
5 sub populations with the percentage of people predicted to adopt one or another of the five different
strategies for determining when and why to switch from the old to the new:
- Technology enthusiast strategy: adopt the new technology upon its first appearance. The actual
benefits provided may not even be of interest but just to explore the properties.
- Visionary strategy: adopt the new technology as a means for capturing a dramatic advantage over
competitors who do not adopt it. To be first to deploy an advantages system and use that head start
to leapfrog over the competition.
- Pragmatist strategy: opposed to visionary; to use the wisdom of the marketplace to sort out what is
valuable and then to be a fast follower once the new direction has clearly emerged.
- Conservative strategy: to stick with the old technology for as long as possible 1. Because it works, 2.
Because it is familiar, 3. Because it is paid for. They avoid hitting the learning curve, making
themselves more productive in the short term.
- Sceptic strategy: to debunk the entire technology as a false start and refuse to adopt it at all. A
winning tactic for those technologies that never do gain mainstream market acceptance.
A person is capable of choosing a different strategies for different offers.
 Page 557 table 10.3.1
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The model segments the evolution of a technology-based market as follows:

- Early market: early adopters take up the innovation while the pragmatic majority holds back. Goal is
to gain few prestigious flagship customers who help to publicize the technology and celebrate its
potential benefits.
- Chasm: a period of no adoption, when the early adopters have already made their choices, but the
pragmatist majority is still holding back.
- Bowling alley: specific niches of pragmatic customers adopt the new technology before the general
pragmatist population.
- Tornado: niche adoption is transformed into mass
adoption, creating an enormous uptick in demand
for the new technology across a wide range of
sectors.
- Main street: the technology has been broadly
deployed and with the support of conservatives,
now settles down to a long engagement as the
incumbent technology. Goal is to continuously
improve the value of the offering, decreasing base
costs and recouping margins by increasing the
number of value-adding extensions that can supplement it.
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Chapter 11 The organizational context

Inheritance is often the source of organizational rigidity and inertia. Inheritance limits organizational
plasticity: the capacity of the organization to change shape. For strategic alignment to take place, some
inherited characteristics should be preserved but others need to be changed (evolution/revolution).
The issue of organizational development:

Leadership: the act of influencing the views and behaviors of organizational members with the intention of
accomplishing a particular organizational aim. The act of getting organizational members to follow.
Not all managers are leaders, and not all leaders are managers.
 Manager: individuals with a formal position in the organizational hierarchy with
associated responsibilities and authority.
 Leaders: individuals who have the ability to sway other people in the organization to
get something done.
Sources of leadership influence:

1. Legitimate power: the formal authority to determine certain organizational behaviors and other
employees agree to comply with this situation.
2. Coercive power: the capability to punish or withhold rewards to achieve compliance.
3. Reward power: the ability to offer something of value to a person in return for compliance.
4. Expert power: organizational members are willing to comply because of a person’s superior
knowledge or skills in an important area.
5. Referent power: organizational members let themselves be influenced by a person’s charismatic
appeal.
Numbers 1 until 3: determined by organizational position of leaders. Numbers 4 and 5: personal in nature.
Levers of leadership influence: 3 generic ways to seek influence:

- Throughout control: getting involved hands-on in the activities of others either by suggesting ways
of working, engaging in a discussion on how things should be done, leading by example, or telling
others what to do. MOST DIRECT IN IMPACT, LOWEST LEVERAGE.
- Output control: reaching agreement on certain performance targets and then monitoring how well
they are being lived up to.
- Input control: shaping the circumstances preceding and surrounding the actual work; assign people
to tasks, who is hired, etc. LEAST DIRECT, HIGHEST LEVERAGE.
In practice, leaders combine elements of all 3 styles.
Arenas of leadership influence: 3 main organizational arenas leaders need to influence directly to achieve
strategic changes:
- Political arena: for top management to gain control of the organization, they must build a coalition
of supporters, not only to get favorable strategic decisions made, but also to ensure acceptance and
compliance during the period of implementation. However, it can be very difficult to gain political
support if strategic views and interests of individuals and departments vary. Cultural and personality
clashes can add to the complexity.
- Cultural arena: to be able to change an organization, a leader must be able to change people’s
beliefs and associated behavioral patterns. Question the shared values, ideas and habits from the
inside is difficult. It requires the skills of a visionary (to develop a new image of a desired future state
for the firm) and a missionary (to develop a new set of beliefs and values to guide the firm). Leaders
often have to ‘sell’ their view of the new culture.
- Psychological arena: leaders must win both the hearts and the minds of the members of the
organization. People must be willing to ‘follow the leader’ actively. To achieve followership, leaders
must gain respect and trust of their colleagues.
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The paradox of control and chaos: the duality of wanting to control the development of the organization,
while understanding that letting go of control is often beneficial, is the key strategic tension when dealing
with organizational context. The need for top-down imposition and bottom-up initiative are conflicting
demands.
- The demand for top management control: managers cannot realize the objective of ensuring that
organization changes in accordance with the environment, without some level of control. The power
needed to make the necessary changes (positional/personal) needs to be applied towards gaining
sufficient support in the all 3 arenas. The type of control needed is different from day-to-day control.
They need strategic control (>< operational control).
- The demand for organizational chaos: chaos means disorder as disorganization is often a
prerequisite for strategic renewal. Unfreezing existing structures/processes/routines/beliefs >
opening people up to alternatives > refreeze in new position. Chaos encourages self-organization.
Perspectives on the organizational context:

- The organization leadership perspective: top management should take charge over the organization.
A lack of control will lead to strategic drift. In order to be successful, managers need quite a level of
personal power, they need to be trusted, admired and respected. Finding and developing new
leaders has high priority for top management. Ideas could come from anywhere in the organization,
however leaders are responsible for leading the organization in a certain direction and achieving
goals. Concluding, the highest levels of management can steer the strategic process and they need
to lead.
 Not all managers have the qualities needed to be effect leaders – either by nature or
nurture.
- The organizational dynamics perspective: strong leaders are an exception, not a norm. The political,
cultural and learning dynamics give a leader little direct power. In general, they can react to their
minimal ability to exert control in two 2 basic ways: 1. Squeeze tighter, 2. Let go. Organizational
chaos can be a source for development – the most important task of managers is to make sure the
‘self-organization’ functions properly.
Managing the paradox of control and chaos:

- balancing: blend
elements of opposite
demands for top
management control and
organizational chaos into
a balance. Organizational
culture is another factor
influencing the blend of
opposite demands.
- Juxtaposing: the different activities leaders participate in require different organizational leadership
styles, and thus the strategizing manager needs to juxtapose between different opposites of blends
simultaneously.
- Embracing: placing opposite individuals together stimulates creativity and opportunities (dynamic
duo’s). There are different leadership styles in an organization, which complement each other. A
deadly combination is having two management teams with one focused on control and one on
chaos.
The organizational context in international perspective:

Consensus style in Scandinavian countries (lower power distance and masculinity). Germany and Austria see
leadership as working towards a common goal. The French style is ‘managing from a distance’ by using a
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hierarchic setting. UK, Ireland and Spain ‘lead from the front’ and relies on the belief that it is the skills and
charisma of individuals at the top that are responsible for the success/failure of the organization.
People with an internal locus of control believe that they can shape events and have impact on their
environment, while those with an external locus of control believe they are caught up in events they can
hardly influence. Hofstede calls this uncertainty avoidance. 2 types of organizations:
1. In the mechanistic view, organizations exist as systems that are staffed with people.
2. Organic organizations exist as groups of people into which some system has been brought.
Reading 11.1 Defining leadership and explicating the process

3 broad functions that a leader performs:
1. Organizational function: the development of the organizational structure and the selection of
people to manage the various segments of an organization. The determination of the goal structure
and the control of the internal and external information flows. The leader needs to make certain that
the participant in the organization and the relevant groups external to the organization are
knowledgeable about the organization.
2. Interpersonal function: the maintenance of morale in the organization. Reflects the degree of
concern about the humanness of the organization. The leader needs to pay attention to individual
concerns.
3. Decision function: the making of decisions that must be made in order for the organization to
progress toward the achievement of its goals. Originally associated with leadership.
Nature of leadership: the leader is attempting to have the participants in the organization behave in the
ways that the leader believes are desirable. The desirability is determined by the goals of the organization.
The leader should heavily influence the process of determining the goals of the organization. The goal
structure represents the vision of the leader and of the organization’s other members. The vision in the goal
structure is essentially a map that is used as a guide for the direction of the organization. At the top
leadership position, a number of broad principles are specified to guide the overall construction of the
vision.
The goal is important in the leading of an organization.
Definition of leadership: the leader controls the allocation of the attention focus of the participants in the
organization. The leader of any organization affects the allocation of attention by participants.
Second definition of leadership: a leader must bring about conformity between subgroup goals and the glad
of the central organization.
Every leader must perform some managerial functions even though every manager cannot take a leadership
role.
The leader recognizes that it is necessary to focus the attention of participants on factors that will change
performance. The leader makes changes in structure for their effect on attention focus, not because they
believe that organizational structure alone can change the performance of participants.
Methods of leadership: 3 approaches to implementation of leadership:

1. Communication: it is one of the most important mechanisms of leadership. The leader must have a
clear understanding of the message that is communicated. The goal of the communication is to
influence the allocation of attention of the organization’s members.
2. Role model: leaders must take into account the impact of their own behavior on the attention focus
participants. Their actions must clearly represent the ideas they consider to be important.
3. Reward system: a leader can use rewards (honor/money) to reinforce the priority system for
attention allocation that is established. A reward system cannot guarantee that performance will
improve.
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Participants in an organization behave in accordance with their focus attention. Behavior follows from the
items on which they focus. The key is that the leader must believe is what he/she is expressing. A leader
must have the ability and the knowledge needed t select the right items for the attention focus of
participants.
Reading 11.2 Strategy as order emerging from chaos

Vier belangrijke punten:
1. Chaos is instabiliteit waarbij de specifieke toekomst op lange termijn onkenbaar is: de toekomst op de
lange termijn van een creatieve organisatie is absoluut onkenbaar en niemand kan zijn toekomstige richting
op de lange termijn plannen of er de baas over zijn.
2. In chaos zijn er grenzen rond de instabiliteit: chaos is een onvoorspelbare variëteit binnen herkenbare
categorieën gedefinieerd door onregelmatige kenmerken, dat wil zeggen, een onafscheidelijke
verwevenheid van orde en wanorde.
3. Een onvoorspelbare nieuwe orde (netjes/structuur/) kan uit chaos komen door een proces van spontane
zelforganisatie: de ontwikkeling van nieuwe strategische richting vereist de chaos van strijd en conflict, en de
zelforganiserende processen van politieke interactie en complex leren.
4. Chaos is een fundamentele eigenschap van niet-lineaire feedbacksystemen, een categorie die menselijke
organisaties omvat: een krachtige reeks krachten trekt elke organisatie naar een stabiel evenwicht
(ossificatie) en een andere krachtige reeks krachten trekt het naar een explosief evenwicht (desintegratie).
Succes ligt aan de grens tussen deze staten, waar managers doorgaan met het veranderen van systemen en
structuren om aantrekking van desintegratie of ossificatie te voorkomen. Bijvoorbeeld: organisaties zwaaien
doorgaans naar centralisatie in de ene periode, naar decentralisatie in een andere, en later opnieuw.
Organisaties zijn complex, chaos. Er is echter wel een patroon in chaos te herkennen. Dit systeem laat zich
moeilijk voorspellen, omdat de feedback alle kanten op gaat. Organisatie is zelfs mogelijk binnen een
systeem van chaos. Managers creëren de chaos die voortvloeit uit het uitdagen van bestaande percepties en
het bevorderen van de omstandigheden waarin spontane zelforganisatie kan plaatsvinden. Ze maken het
mogelijk dat innovatie en een nieuwe strategische richting opkomen.
Acht stappen om waarbij je chaos creëert om zodoende orde te scheppen. De volgende condities creëren
managers om:
1. Ontwikkelen nieuwe perspectieven over de betekenis van controle
2. Ontwerp het gebruik van machtconflicten zijn zo slecht nog niet. Mensen moeten wisselen tussen conflict
en consensus, tussen verwarring en duidelijkheid.
3. Moedig zelfsturende groepen aan
4. Provoceer meervoudige culturen  roteer mensen tussen functies en bedrijfseenheden.
5. Presenteer ambigue uitdagingen in plaats van duidelijke lange termijn doelstellingen en visies
6. Stel de organisatie aan uitdagende situaties bloot
7. Besteed expliciete aandacht aan het verbeteren van groepsvaardigheden
8. Creëer een speling voor de resource (= resource slack): inzetten om condities te creëren waarbij
werknemers zelf het initiatief kunnen nemen
Recente ontdekkingen over de aard van dynamische feedbacksystemen maken duidelijk dat causale
oorzaken en gevolgen in innovatieve menselijke organisaties verdwijnen, waardoor het mogelijk wordt om
hun lange termijn toekomst te plannen. Vanwege dit gebrek aan causaal verband tussen specifieke acties en
specifieke resultaten, kunnen nieuwe strategische richtingen alleen ontstaan door een spontaan, zelf-
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organiserend politiek- en leerproces. De planningsaanpak kan worden gezien als een specifieke aanpak die
van toepassing is op het korte termijn beheer van de bestaande activiteiten van een organisatie, een taak die
even belangrijk is als de ontwikkeling van een nieuwe strategische richting.
Reading 11.3 Dual leadership

Onderzoek naar snelgroeiende bedrijven en leiderschap.
Veel snelgroeiende organisaties begonnen door dynamische leiderschap duos: één richt zich op het externe
en de ander op het interne. Zij moeten de spanning kunnen managen tussen chaotische innovatieve
organisaties en meer top-down gestructureerde uitvoering van ideeën. De internal outside leiderschap duo
heeft drie dimensies: 1. Focus op relaties en producten: een focust op ondernemingsrelaties (consumenten,
investeerders, andere omgevingspartijen), terwijl de ander focust op logische ideeën m.b.t.
productontwikkeling, processen en systemen. 2. Gericht op innovatie en onderzoek: een managet de interne
structuur (probleem oplossen voor discipline) terwijl de ander vooruit kijkt door mogelijkheden te verkennen
en vorm te geven (onderzoek). Balans tussen het huidige systeem managen en op zoek gaan naar innovaties.
3. Het vermogen om tegelijk te managen: alle ballen moeten in de lucht gehouden worden. Huidige
structuur moet gemanaged worden, omgeving moet onderzocht worden en naar kansen en innovatie moet
gekeken worden.
Ad 1 Focus op relaties en producten Breakaway marketingleiders en innovatieleiders Bedrijven met een hoge
groei zijn: Uitstekend in communiceren (communicators). Ze bezitten de persoonlijke chemie, zelfs
charisma, waardoor ze de kloven tussen alliantieleden overbruggen. Meestal is dit de CEO. Uitstekende
innovators. Deze leiders, meestal de oprichters van het bedrijf, richten zich meer op het product in plaats
van op externe relaties.
Meer belangrijke rollen in snelgroeiend management Drie andere belangrijke rollen zijn: 1. Procesmanagers:
leiders van de waardeketen. Ze zijn controlerend en procesgericht. 2. Organisatiemanagers: zijn thuis in een
zorgzame rol. Ze bevorderen een meer sympathieke sfeer in de organisatie en zullen hun best doen om het
te behouden. 3. Operationeel leiderschap: deze rol vormt de complementaire helft van het dynamische duo.
Het is de interne tegenhanger van de externe CEO. Wordt vervuld door the chief operation officer (COO).
Drie verrassende inzichten Drie niet intuïtieve inzichten van snelgroeiende bedrijven: De meeste mensen
gaan ervan uit dat de meeste leiders eerder ervaring hadden met het werken in kleinere bedrijven. Dat is
73

niet waar. Er lijkt een overtuiging te zijn dat de oprichters zelden bij het bedrijf bleven tot het bedrag van 1
miljard aan inkomsten. Dat is niet waar. Oprichters zijn van hetzelfde ras, dat stereotype van de jonge, pizza
schrokken, briljante school verlater. Ook dit is niet waar.
Ad 2 gericht op innovatie en onderzoek Kalm in het midden van de storm Snel groeiende bedrijven weten
kalm te blijven in het midden van de storm. Het geheime wapen is het hebben van consistente waarden met
het vermogen om zichzelf te corrigeren. Er zijn twee gelijk drivers van consistentie: 1. Consistent gedrag,
communicatie en berichtenuitwisseling 2. Consistente waarden op beslissende momenten
Leiders die een consistent communicatieplan en visie uitstippelen (en met oprechte waarden handelen zelfs
in een crisis) zijn van cruciaal belang om een organisatie te mobiliseren voor consistent gedrag.
Bedrijven met een hoge groei innoveren omdat ze een innerlijke drive hebben om te verkennen. Deze
verkenning is niet beperkt tot producten. Het omvat nieuwe markten, nieuwe allianties, nieuwe klanten en
nieuwe bedrijfsmodellen. Hoewel pijn verandering kan veroorzaken, komt het vaak te laat om van veel nut
te zijn (zoals het bij traditionele bedrijven gaat).
Ad 3 Vermogen om tegelijk te managen De leiders kunnen het lot van hun bedrijf effectief vorm geven in het
licht van intense onzekerheden. Daarnaast kunnen is het volgende belangrijk: Superieure
probleemoplossers: de leiders zijn probleemoplossers. Ze kunnen navigeren en uitvoeren in de context van
groeistrategie. Ze kunnen problemen afbreken ter hoogte van onzekere uitkomsten. Passie voor het bedrijf:
de leiders werken samen: zij houden het team, medewerkers, klanten, etc. gepassioneerd over de richting
en uitvoering van het bedrijf. Belangrijke punten:
- Bedrijfsleiders met een hoge groei verwoorden hun passie als een die ook relevant is voor de klant,
vaak in termen die hogere orde voordelen opleveren.
- Leiders hadden een constante wilskracht om uit te voeren (execute)
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Chapter 12 The international context

Process of globalization: lower international variety and tighter international linkages.
Process of localization: higher international variety and loose international linkages.
Dimensions of globalization:
- Worldwide scope: global is used as a geographic term to describe a spatial dimension. Globalization
is the process of international expansion on a worldwide scale.
1. E.g. McDonald’s is globalizing, but not yet global as it only operates in half of the countries of
the world.
- Worldwide similarity: global refers to homogeneity around the world to describe the variance
dimension. Globalization is the process of declining international variety.
1. E.g. McDonald’s is relatively global due to highly standardized approach across the world.
Note the leeway for local adaption, however.
- Worldwide integration: global refers to the world as one tightly linked system to describe the
linkages dimension. Globalization is the process of increasing international interconnectedness.
1. E.g. McDonald’s is only slightly global as it is not tightly linked across the globe as activities
are centralized. There is little need for concerted action.
Localization is characterized by decreasing scope/similarity/integration. The most extreme form of
localization is when there is no similarity/integration between countries (e.g. hairdressers, driving schools).
This can do down to national level as well; state/province/district/etc.
Levels of globalization:
- Globalization of companies: micro level. Debate about individual companies are becoming global.
Globalization of specific products and value-adding activities doesn’t entail globalization of all others.
- Globalization of businesses: meso level. Debate about particular businesses are becoming global.
1. Globalization of markets: growing similarity of worldwide customer demand and the
growing ease of worldwide product flows. E.g. crude oil markets.
2. Globalization of industries: the emergence of a set of producers that compete with one
another in a worldwide scale. E.g. automobile and consumer electronics industries.
- Globalization of economies: macro level. Debate about the world’s economies are experiencing a
convergence trend. Different point of views/approaches: 1. Macroeconomics dynamics of
international integration, 2. Political realities constraining and encouraging globalization, and 3.
Dynamics of technological, institutional and organizational convergence.
International firm: a firm operating in 2 or more countries.

Internationalization: a firm starting up value-adding activities in yet another country.
 Page 607 figure 12.2 international growth options
When establishing a foreign subsidiary, the firm must decide whether to purchase an existing local company
(entry by acquisition) or to start from scratch (greenfield entry).
The issue of international composition deals with where the firm wants to have a certain level of
involvement; 2 parts:
1. International scope: the countries selected to do business in (the geographic spectrum covered).
2. International distribution: the distribution of value-adding activities across the countries selected
(scope).
The GE Business Screen matrix can be used to display the portfolio of foreign sales markets. Y = country
attractiveness, X = competitive position.
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International management: internationalization is only economically rational if the international whole is

more than the sum of the country parts; so if enough cross-border synergies can be reaped to offset the
extra cost of foreignness and distance. 3 integration mechanisms used in international management:
1. Standardization: to do the same in each country in order to achieve economies of scale.
2. Coordination: to align the varied activities in different countries by means of cross-border
coordination. This could lead to competitive success.
3. Centralization: to integrate the firm’s activities at one central location (e.g. home country),
motivated by the drive for economies of scale.
4 generic organizational models for international firms each with its own mix of the above integration
mechanisms (zie afbeelding):
- Decentralized federation: the organization is organized along geographic lines, each with full-scale
country subsidiary largely self-sufficient and autonomous from international HQ in the home
country. Few centralized activities, little coordination across borders, and low standardization.
1. Multinational/multidomestic organizational model
- Coordinated federation: the firm is organized along geographic lines, but the country subsidiaries
have a closer relationship with international HQ in home country. Many centralized activities (e.g.
process, product, core competency, technology development), some standardization and
coordination through formalized control systems.
1. International organizational model
- Centralized hub: national units are relatively unimportant as all main activities are carried out in the
home country. High standardization, centralization and coordination from HQ to the local markets.
1. Global organizational model
- Integrated network: the country subsidiaries have a close relationship with international HQ and
also have a close relationship with each other. Very little centralization, and a certain level of
coordination and standardization.
1. Transnational organizational model
The paradox of globalization and localization: the liberty to standardize versus the pressure to adapt.
- The demand for global synergy: globalization. Striving for as much cross-border synergy as possible
is a way to enhance competitive advantage. The ability to create value by using resources,
integrating activities and match the offer of products in 2 or more countries. 3 categories of synergy:
1. 1. Synergy by aligning positions: to align market positions in the countries a firm operates in.
necessary in 2 circumstances:
76

 Dealing with cross-border customers

 Dealing with cross-border competition
2. 2. Synergy by integrating activities: to link activity systems of the firm in its various national
markets. 2 ways of doing so:
 Reaping scale advantages (economies of scale)
 Reaping location advantages
3. 3. Synergy by leveraging resources: to share resources across national markets. 2 ways:
 Achieving resource reallocation
 Achieving resource replication
- The demand for local responsiveness: localization. The ability to continue to attune specific demands
of each national market and retain the ability to respond to these characteristics in a timely and
adequate manner. Business responsiveness becomes more pressing when differences between
various national markets are large. Differences between countries exist in the following areas:
1. Market structure 6. Media structure
2. Customer needs 7. Infrastructure
3. Buying behavior 8. Supply structure
4. Substitutes 9. Government regulations
5. Distribution channels
Perspectives on the international context:

- The global convergence perspective: globalization. Global convergence is largely driven by the ease,
low cost and frequency of international communication, transport and travel. This has diminished
the importance of distance. We now have a ‘global village’ in which goods, services, and ideas are
easily exchanged. Therefore, an unstoppable process towards cultural, political, technological, and
economic convergence is set in motion. This makes countries more linked to each other and local
differences are superseded by global norms. The demands for standardization, centralization and
coordination require a global firm with a strong center responsible for the global strategy, instead of
a federation of autonomous national subsidiaries focused on being responsible in their local
circumstances.
- The international diversity perspective: localization. As cultural norms and values remain rigid, and
habits changing slowly , it is not possible to have one product fitting in with all the cultural diversity
that exists. Divergence is more difficult to spot than convergence. The continued existence of
international diversity and political obstacles will limit the extent to which nations can become fully
integrated into one borderless world. Not all activities can realize economies of scale.
Managing the paradox of globalization and localization:

- Balancing: companies have to trade off their demands for global synergy and local responsiveness to
find a balance. The tension will remain when companies have found this balance. Therefore,
continuously search for a better balance.
- Navigating: manage with a series of corporate initiatives that sequentially focus on capturing
synergy, responsiveness and then synergy again.
- Resolving: glocalization; solving the paradox with a synthesis; going global while adapting to local
conditions. It is hard to find an international company that does not need local adaptations (e.g.
McDonald’s India versus USA).
- Embracing: international operations create not only tensions, they can also be exploited. Companies
should not be searching for one global standard, but instead combine the countries’ relative
advantages. By blending the country-specific differences, the paradox can be seen as an
opportunity.
The international context in international perspective: the level of nationalism plays a role in the strategies in
international context. Strategists from countries that are nationalistic will most likely strive for the
77

international diversity perspective, whilst strategists from less nationalistic countries will likely strive for
more the international convergence perspective. The size of the country is also of importance. Strategists
from smaller countries, to whom adaptation to international variety has become a second nature, will favour
the view that international diversity will remain. Strategists from larger countries will be more inclined to
emphasize the growing similarities and to seek opportunities for international standardization.
Reading 12.1 The globalization of markets

Modern technologie (communicatie, transport, reizen) heeft mensen dichter bij elkaar gebracht. Het
resultaat is een nieuwe commerciële realiteit – het samenvloeien van markten tot globale wereldmarkten
voor allerlei consumentenproducten. Deze grote wereldmarkten hebben gigantische schaalvoordelen.
Verschillen in nationale of regionale voorkeuren verdwijnen. Multinationaal is een oud begrip: niet langer
bedient een bedrijf meerdere landen, maar de gehele wereld door overal hetzelfde product te verkopen dat
relatief goedkoop gehouden wordt door de schaalvoordelen van massaproductie.
The hedgehoc knows De fox: weet veel over een heleboel dingen. De hedgehoc: weet alles van één groot
ding. Ik pleit niet voor het systematisch negeren van lokale of nationale verschillen. Maar de gevoeligheid
van een bedrijf voor dergelijke verschillen vereist niet dat het de mogelijkheden om dingen anders of beter
te doen negeert.
Een mislukking in de mondiale verbeelding Veel bedrijven hebben geprobeerd de wereldpraktijk te

standaardiseren door binnenlandse producten en processen te exporteren zonder huisvesting of
verandering en hebben gefaald.
- De behoeften in de wereld worden meer homogeen.
- Klanten accepteren eerder dat het product niet volledig naar wens te specificeren is, omdat de
kwaliteit – prijs verhouding zo goed is door schaalvoordelen.
- Iedereen tegelijkertijd kwalitatief hoogwaardige, min of meer gestandaardiseerde producten
aanbieden tegen optimale lage prijzen.
- Marktsegmenten wereldwijd verschillen weinig (marginaal). Organisatie moet markten vinden die
vergelijkbaar zijn met markten die zij reeds bediend en daar producten aanbieden.
- Multinationaal is een vos: weet een beetje over allerlei landen & markten, en speelt in op deze
verschillen. Globale organisatie is een egel: zij weet alles over één bepaald product / markt en tracht
daarin de beste te worden. Hoe minder product-markten een organisatie onderscheidt, hoe meer
schaalvoordelen. Als de prijs laag genoeg is, hoeft het product niet te voldoen aan alle individuele
eisen.
- Convergentie, neiging om alles te worden zoals al het andere
- Standaardisatie van High Tech- en High Touch-producten: McDonald's, Coca-Cola, Pepsi, Sony
Televisies, Revlon-cosmetica, Levi-jeans, Hollywood-films.
- Levitt's bewering "Niets is vrijgesteld." Geen staal, geen auto's, geen voedsel, geen kleding.
Verscheidenheid kost geld en de moderne consument eiste het beste voor minder geld.
- Als een bedrijf de kosten en prijzen omlaag dwingt en de kwaliteit en betrouwbaarheid verhoogt
(met behoud van een redelijke zorg voor beschikbaarheid) zullen klanten de voorkeur geven aan
gestandaardiseerde producten van wereldformaat.
- Productbetrouwbaarheid, kwaliteit en agressief lage prijzen, verkoopcompensatiepakketten en
getransformeerde distributiesystemen zijn de sleutel tot succes. Maar sommige verschillen tussen
naties zijn niet aflatend. Geen goed antwoord, het hangt af van bedrijf, capaciteiten, reputaties,
middelen en zelfs de culturen.
Hierbij moet de organisatie kunnen aanvoelen waar behoefte aan bestaat. Het is niet zo dat elk product dat
goedkoop is, overal ter wereld verkocht kan worden. Het is echter ook niet vereist om alle eigenschappen in
het product op te nemen die de consument wenst (uiteindelijk beslist de portemonnee bij de consument).
78

Gezamenlijke eigenschap alle markten: behoefte aan lage prijzen. Globale organisatie springt in op deze
behoefte. McDonalds: het proces kan gestandaardiseerd zijn, maar het product is dat niet, het menu is
aangepast. Coca-Cola en Pepsi Merknamen zijn wereldwijd, maar het product is anders in termen van
zoetheid. Het succesvolle wereldwijde bedrijf verzaakt niet aan aanpassing of differentiatie voor de vereisten
van markten die verschillen in productvoorkeuren, bestedingspatronen, winkelvoorkeuren en institutionele
of juridische regelingen. Maar internationale bedrijven accepteren en passen zich schoorvoetend aan deze
verschillen aan, alleen nadat ze hun onveranderlijkheid meedogenloos hebben getest.
Reading 12.2 The myth of globalization

Het doel van dit artikel is om kritisch te kijken naar het idee dat succes op internationale markten aanpassing
van een strategie van wereldwijde producten en merken noodzakelijk maakt.
Het traditionele perspectief op internationale marketing strategie De traditionele discussie over de

internationale bedrijfsstrategie is gepolariseerd rond het debat over het streven naar een uniforme strategie
wereldwijd versus aanpassing aan specifieke lokale marktomstandigheden. Een sterke kracht drijft de wereld
nu naar een enkele convergerende overeenkomst (commonality). Het resultaat is een nieuwe commerciële
realiteit: de explosieve opkomst van wereldwijde markten voor wereldwijd gestandaardiseerde producten,
gigantische markten op wereldschaal met voorheen onvoorstelbare groottes. Uit het onderzoek blijkt dat er
een aantal gevaren bestaat in het omhelzen van een filosofie van wereldwijde standaardisatie voor alle
producten en diensten, en in relatie tot alle markten wereldwijd. Bovendien zijn er tal van moeilijkheden en
beperkingen om een dergelijke strategie in veel markten te implementeren, die het gevolg zijn van externe
marktomstandigheden en van de huidige structuur en organisatie van de bedrijfsactiviteiten.
De wereldwijde standaardisatiefilosofie: de onderliggende aannames

Belangrijke onderliggende aannames:
- Homogeniteit: behoefte en interesse van klanten worden wereldwijd steeds homogener. Valkuilen:
1. Gebrek aan bewijs van homogeniciteit: veel bedrijven verdienen juist veel geld door in te
spelen op verschillen tussen markten.
2. Groei van prijsgevoeligheid van de intra-landsegmentatie: onderzoeken bewijzen dat
homogeniteit op slechts een paar markten een succes is en op andere markten weinig
effectief is.
- Universele voorkeur voor lage prijzen tegen acceptabele kwaliteit: mensen over de hele wereld zijn
bereid om voorkeuren op te offeren in producteigenschappen, functies, ontwerp en dergelijke voor
lagere prijzen van hoge kwaliteit. Valkuilen:
1. Gebrek aan bewijs: geen bewijs dat consumenten inderdaad een lagere prijs hoger
waarderen dan een ‘geschikt’ product dat aansluit bij hun behoeften.
2. Lage prijzen positionering is een zeer kwetsbare strategie: er kan maar één de goedkoopste
zijn, de rest heeft geen concurrentievoordeel
3. Gestandaardiseerde lage prijzen kunnen in sommige landen te duur zijn en in andere landen
te goedkoop
- Schaalvoordelen van productie en marketing: aanzienlijke schaalvoordelen in productie en
marketing kunnen worden bereikt door het leveren van wereldwijde markten. Valkuilen:
1. Ontwikkelingen in flexibele fabrieksautomatisering: nieuwe technieken maken het mogelijk
om goedkoop in kleine oplagen te produceren. Massaproductie is geen vereiste meer voor
prijsvoordelen.
2. Productiekosten zijn vaak een klein onderdeel van de totale kosten: massaproductie heeft
dus maar een kleine invloed op de totaalprijs.
3. De standaardiseringsfilosofie is primair productgericht: globalisatie focust op de prijs van het
product en gaat voorbij aan andere onderdelen van strategie / marketing als
producteigenschappen, promotie en plaatsing.
79

Vereiste voorwaarden voor wereldwijde standaardisatie

Globale strategie van homogeniteit is een gepaste strategie, indien men rekening houdt met de volgende
factoren:
- Bestaan van globale marktsegmenten: er moet een daadwerkelijke wereldwijde markt zijn voor het
product dat je wil leveren, alleen dan is er niets mis met globalisatie. Dit is afhankelijk van de grootte
en levensvatbaarheid van de markt, behoefte aan een wereldmerk en de mogelijkheid deze markt te
bereiken.
- Synergie door combineren van markten: globalisatie voordelig en nuttig.
- Beschikbaarheid van een internationale communicatie- en distributie infrastructuur: effectiviteit
globale strategie afhankelijk van netwerk en infrastructuur waar organisatie gebruik van kan maken.
Operationele beperkingen voor effectieve implementatie van een standaardisatiestrategie

Er zijn zowel externe als interne beperkingen aan globalisatie.
- Externe beperkingen:
1. Regerings- en handelsbeperkingen: tarief- en handelsbelemmeringen, product-, prijs- of
promotieregulering, quota’s.
2. De aard van de marketingstructuur: zoals de beschikbaarheid en effectiviteit van
promotiemedia. Tv reclame andere invloed in EU dan AF.
3. Afhankelijkheid met resource markten: beschikbaarheid en kosten personeel & materialen
afhankelijk per regio.
4. De aard van de concurrentiestructuur: sommige gebieden ontbreekt concurrentie of alleen
concurrentie op prijs.
- Interne beperkingen:
1. Bestaande netwerk van activiteiten in binnen- en buitenland: leveranciers die onvrede
hebben dat bedankt wordt voor hun diensten in een nieuwe globale strategie.
2. Lokale managementmotivatie en –attitudes: eigen personeel die protesteert tegen
standaardisatie als gevolg van globalisatie, zij krijgen immers minder zeggenschap over de te
voeren strategie binnen de regio.
Een kader voor het classificeren van globale strategie-opties

Deze herziening van de wereldwijde standaardisatie strategie suggereert dat deze alleen geschikt is in
verband met bepaalde productmarkten of marktsegmenten met bepaalde marktomstandigheden en
afhankelijk is van de bedrijfsdoelstellingen en –structuur. In wezen houdt een wereldwijd perspectief in dat
de planningsstrategie betrekking heeft op de wereldwijde markten in plaats van op een landelijke basis (land
per land).
Globale strategie vraagt om inrichten van de strategie

per markt, niet zozeer per regio / land. Kansen op
globalisatie moeten zorgvuldig afgewogen worden, want
niet ieder bedrijf / tak leent zich ervoor. De ontwikkeling
van een effectieve wereldwijde strategie vereist dus een
zorgvuldig onderzoek van alle internationale opties in
termen van standaardisatie versus aanpassing voor het
bedrijf. De internationale activiteiten van een bedrijf
worden waarschijnlijk gekenmerkt door een mix van
strategieën, waaronder niet alleen wereldwijde
producten en merken, maar ook enkele regionale
producten en merken en enkele nationale producten en
merken. Hybride strategieën stellen een bedrijf in staat
om te profiteren van de voordelen van standaardisatie
en potentiële synergiën van het werken op
80

internationale schaal, zonder deze voordelen te verliezen door aanpassing aan specifieke landkenmerken en
klantvoorkeuren.
De eerste is alles gestandaardiseerd, andere uiterste is alles gedifferentieerd. De tussenvorm zijn deels
dingen gestandaardiseerd en deels dingen gedifferentieerd. Bijvoorbeeld dat je per land, regio of cluster
dingen standaardiseert. Een combinatie van deze alternatieve kan ook geïmplementeerd worden.
Reading 12.3 Clusters and the new economics of competition

De huidige economische kaart van de wereld wordt gedomineerd door wat ik clusters noem: kritieke massa's
- op één plek - van ongewoon concurrerend succes op bepaalde gebieden. Clusters zijn een opvallend
kenmerk van vrijwel elke nationale, regionale, nationale en zelfs grootstedelijke economie, vooral in
economisch meer ontwikkelde landen.
Het ontwarren van de paradox van locatie in een mondiale economie biedt inzicht in hoe bedrijven continu
concurrentievoordeel creëren. Clusters zijn van invloed op het concurrentievermogen in landen en over
nationale grenzen heen. Clusters vertegenwoordigen een nieuwe manier van denken over locatie, waarbij
een groot deel van de conventionele wijsheid wordt uitgedaagd over hoe bedrijven moeten worden
geconfigureerd, hoe instellingen zoals universiteiten kunnen bijdragen aan competitief succes en hoe
overheden economische ontwikkeling en welvaart kunnen bevorderen.
Wat is een cluster? Clusters zijn geografische

concentraties van onderling verbonden
bedrijven en instellingen op een bepaald
gebied. Clusters omvatten een reeks onderling
verbonden industrieën en andere entiteiten
die belangrijk zijn voor concurrentie. Ze
omvatten bijvoorbeeld leveranciers van
gespecialiseerde inputs, zoals componenten,
machines en diensten, en aanbieders van
gespecialiseerde infrastructuur. Clusters
strekken zich vaak ook stroomafwaarts uit tot
kanalen en klanten en lateraal tot fabrikanten
van complementaire producten en tot
bedrijven in sectoren die zijn gerelateerd aan
vaardigheden, technologieën of
gemeenschappelijke inputs.
De grenzen van een cluster worden bepaald door de koppelingen en complementariteit tussen sectoren en
instellingen die het belangrijkst zijn voor concurrentie. Clusters bevorderen zowel concurrentie als
samenwerking. Rivalen concurreren intensief om klanten te winnen en te behouden. Zonder krachtige
concurrentie zal een cluster falen. Toch is er ook samenwerking, grotendeels verticaal, waarbij bedrijven in
aanverwante industrieën en lokale instellingen worden betrokken. Concurrentie en samenwerking kan
vreedzaam naast elkaar bestaan, omdat ze zich voordoen op verschillende dimensies en tussen verschillende
spelers.
Waarom clusters cruciaal zijn voor concurrentie

Met een cluster kan elk lid profiteren alsof het een grotere schaal heeft of alsof het met anderen is
samengevoegd zonder de flexibiliteit op te offeren. Clusters beïnvloeden de concurrentie op drie manieren:
1. Productiviteit: door de productiviteit van bedrijven in het gebied te vergroten. Deel uitmaken van
een cluster stelt bedrijven in staat om productiever te werken in:
81

a. Betere toegang tot werknemers en leveranciers: bedrijven in levendige clusters kunnen

gebruikmaken van een bestaande pool van gespecialiseerde en ervaren werknemers,
waardoor hun zoek- en transactiekosten bij het werven worden verlaagd.
b. Toegang tot gespecialiseerde informatie: uitgebreide markt-, technische en
concurrentiegevoelige informatie verzamelt zich binnen een cluster en leden hebben er de
voorkeur aan gegeven.
c. Complementariteit: in een typisch toeristisch cluster, bijvoorbeeld, hangt de kwaliteit van de
beleving van een bezoeker niet alleen af van de aantrekkingskracht van de primaire attractie,
maar ook van de kwaliteit en efficiëntie van complementaire bedrijven zoals hotels,
restaurants, winkelcentra en transportfaciliteiten. Omdat leden van het cluster van elkaar
afhankelijk zijn, kan een goede uitvoering door één het succes van de anderen vergroten.
d. Toegang tot instellingen en openbare goederen: investeringen van de overheid of andere
openbare instellingen, zoals overheidsuitgaven voor gespecialiseerde infrastructuur of
educatieve programma's, kunnen de productiviteit van een bedrijf verhogen. Het vermogen
om werknemers te werven die zijn opgeleid in lokale programma's, verlaagt bijvoorbeeld de
kosten van interne training.
e. Betere motivatie en meting: collegiale druk, trots en de wens om er goed uit te zien in de
gemeenschap om leidinggevenden te overtuigen elkaar te overtroeven.
2. Innovatie: clusters spelen een vitale rol in het voortdurende vermogen van een bedrijf om te
innoveren. Clusters doen meer dan kansen voor innovatie zichtbaarder maken. Ze bieden ook de
capaciteit en de flexibiliteit om snel te handelen. Een bedrijf binnen een cluster kan vaak sneller
informatie verzamelen over wat het nodig heeft om innovaties te implementeren. Bedrijven binnen
een cluster kunnen tegen lagere kosten experimenteren en kunnen grote toezeggingen uitstellen tot
ze er meer zeker van zijn dat een bepaalde innovatie zal uitblinken. Versterking van de andere
voordelen voor innovatie is de pure druk (concurrentiedruk, groepsdruk, constante vergelijking) die
optreedt in een cluster.
3. Vorming van nieuwe bedrijven: clusters zijn om verschillende redenen bevorderlijk voor de vorming
van nieuwe bedrijven:
a. Personen die in een cluster werken, kunnen gemakkelijker hiaten in producten of diensten
waarrond ze bedrijven kunnen bouwen, waarnemen.
b. Belemmeringen voor toegang zijn lager.
c. Benodigde assets, vaardigheden, input en personeel zijn vaak direct beschikbaar op de
clusterlocatie.
d. Lokale financiële instellingen en investeerders die al bekend zijn met het cluster, kunnen een
lagere risicopremie op kapitaal eisen.
Geboorte, evolutie en achteruitgang

Ontstaan van een cluster
- Historische omstandigheden
- Ongewone, verfijnde of strenge lokale vraag
- Een of twee innovatieve bedrijven die de groei van vele andere clusters stimuleren
Zodra een cluster zich begint te vormen, bevordert een zichzelf versterkende cyclus zijn groei, vooral
wanneer lokale instellingen ondersteunend zijn en de lokale concurrentie krachtig is. Naarmate het cluster
zich uitbreidt, neemt ook de invloed toe op de overheid en openbare en particuliere instellingen. Een
groeiend cluster signaleert kansen en de succesverhalen helpen het beste talent aan te trekken. Op het
kruispunt van clusters komen inzichten en vaardigheden uit verschillende velden samen, waardoor nieuwe
bedrijven ontstaan. Clusters evolueren voortdurend als nieuwe bedrijven en industrieën ontstaan of
achteruitgaan en als lokale instellingen zich ontwikkelen en veranderen. Ze kunnen en zullen echter hun
concurrentievoordeel verliezen door zowel externe als interne krachten. Achteruitgang van clusters ontstaan
door:
82

- Technologische discontinuïteiten zijn misschien wel de belangrijkste van de externe bedreigingen,

omdat ze vele voordelen tegelijk kunnen neutraliseren.
- Een verschuiving in de behoeften van de kopers, waardoor er een verschil ontstaat tussen lokale
behoeften en behoeften elders, vormt een andere externe bedreiging.
- Overconsolidering, wederzijdse afspraken, kartels en andere beperkingen van de concurrentie
ondermijnen de lokale rivaliteit.
In de nieuwe economie van concurrentie is het belangrijkste niet inputs en schaalvoordelen, maar
productiviteit - en dat geldt in alle sectoren. De term hightech heeft de misvatting geschapen dat slechts een
handvol bedrijven op geavanceerde manieren concurreren. In feite bestaat er niet zoiets als een low-tech
industrie. Er zijn alleen low-tech bedrijven - dat zijn bedrijven die technologie niet gebruiken om de
productiviteit en innovatie te verbeteren.
Concreet voegt begripscluster de volgende vier kwesties toe aan de strategische agenda:
1. Locaties kiezen: globalisering en het gemak van transport en communicatie hebben ertoe geleid dat veel
bedrijven hun activiteiten geheel of gedeeltelijk hebben verplaatst naar locaties met lage lonen, belastingen
en energiekosten.
2. Lokaal inmengen: de sociale lijm die clusters aan elkaar verbindt, vergemakkelijkt ook de toegang tot
belangrijke bronnen en informatie.
3. Het cluster upgraden: omdat de gezondheid van de lokale bedrijfsomgeving belangrijk is voor de
gezondheid van het bedrijf, moet het upgraden van het cluster onderdeel zijn van de agenda van het
management.
4. Collectief werken: de manier waarop clusters opereren suggereert een nieuwe agenda voor collectieve
actie in de private sector.
Clusters bieden een constructieve manier om de aard van de dialoog tussen de publieke en de private sector
te veranderen.
Economische geografie in een tijdperk van wereldwijde concurrentie vormt dus een paradox. In een
wereldeconomie - die beschikt over snel transport, snelle communicatie en toegankelijke markten - zou men
verwachten dat de locatie in belang zou afnemen. Maar het tegenovergestelde is waar. De blijvende
concurrentievoordelen in een wereldeconomie zijn vaak sterk lokaal, als gevolg van concentraties van zeer
gespecialiseerde vaardigheden en kennis, instellingen, rivalen, gerelateerde bedrijven en geavanceerde
klanten.
Leiders van bedrijven, overheden en instellingen hebben allemaal een belang - en spelen een rol - in de
nieuwe economie van de concurrentie. Clusters onthullen de wederzijdse afhankelijkheid en collectieve
verantwoordelijkheid van al deze entiteiten voor het scheppen van de voorwaarden voor productieve
concurrentie. De lijnen tussen publieke en private investeringen vervagen. Door het proces te onthullen
waarmee rijkdom daadwerkelijk in een economie wordt gecreëerd, openen clusters nieuwe publiek-private
wegen voor constructieve actie.
83

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Summary Strategy an international

perspective Bob de Wit 6th edition

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Reading 8.2 Building learning organizations.................................................................................................54

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2 approaches to look at issues:

Overview of the book

Each strategy is essentially unique.

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Two kinds of problems:  page 15 figure 1.7

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How to manage paradoxes?

Strategy is an international affair. Therefore, the international context needs to be considered.

Reading 1.1 Complexity: the nature of real world problems

Complexity: the condition of being tightly woven or entwined together.

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Characteristic properties of wicked problems by Rittel (page 28):

6 other characteristics of wicked problems (page 29):

Two implications for policy makers dealing with wicked problems:

Reading 1.2 Managing strategic contradictions

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A model for managing strategic contradictions:

How a team operates ():

In order to deal with strategic

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Reading 1.3 Cultural constraints in management theories

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The paradox of logic and intuition:

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Suggestions to deal with the paradox of logic and intuition:

Strategic thinking in international perspective:

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The identification of an opportunity is almost always followed by investments in development and

4 characteristics of the core of intuition:

Intuition are affective judgments the

2 sets of factors influencing the

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Explicit = conscious/implicit = unconscious. Judgmental tasks include political, ethical, esthetical of

Reading 2.3 Psychological foundations of dynamic capabilities

Affect and emotion are an integral element of cognition, through which

There is a bigger conceptual space connected to cognitive, affective and

The development of dynamic capabilities requires managers to use

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Chapter 3 Missioning and visioning

Hiërarchische definitie van strategie: missie

Both mission and vision impact strategy.

The activities of the board of directions are

4 elements of a corporate mission:

4 elements of strategic vision:

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A corporate mission and strategic vision can provide:

The paradox of profitability and responsibility:

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The demand for economic profitability:

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 Managing stakeholder demands is not merely a pragmatic mean of running a profitable

Managing the paradox of profitability and responsibility:

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