Advanced Strategic Management

Professor Don Neubaum, Ph.D. 400E Bexell Hall737-6036Don.neubaum@bus.oregonstate.eduOffice Hours: MW 11:00am to Noon

T 3:00 to 4:00 pmOr by appointment

Text and Course Materials

Competing for Advantage, 2nd Edition Hoskisson, Hitt, Ireland and Harrison

Case packet – available at Bookstore Class material found on

http://classes.bus.oregonstate.edu/ba569/

Responsible for all reading and lecture material

Grading

Individual Assignments (50%) Final Exam 30% Case Summaries (6 @ 3.33% each) 20%

Group Assignments (50%) Strategic Issues Presentation 5% Case Presentation 15% Case Critiques (6 @ 2.25% each)

15% Group Case Exam 15%

Individual - Final Exam (30%)

Short answer/essay exam Held during normally scheduled class

during finals week

Individual - Case Summaries (20%)

We will be covering 7 cases this quarter (basically 1 a week) 1 your team will present, 6 other teams will present

For each of the 6 cases you are NOT presenting: 1-page, single spaced case analyses▪ Identify major issues/problems▪ Potential solutions/alternatives▪ Use of course language and material

On the second page of your analysis, you will answer the following question: What 3 pieces of information do you wish you had/need and

why? Graded on a 5 point scale Submit to me via turnitin.com

Group - Strategic Issues Summary (5%)

Form teams within your groups Team of 6 = 2 teams of 3 Team of 5 = team of 3 and a team of 2

Find an article about any aspect of strategy and make a short presentation to the class You might do additional research to complete the context

3-5 slides, 5-10 minutes and a 2-page, double spaced summary of the article

One slide with 2-3 questions intended to stir debate or discussion

Worth 5% of your grade I will pass out signup sheets for you to choose your

day.

Group - Case Presentation (15%)

25 minute presentation of case Analysis of current situation (update the

case if necessary) Recommendations/Alternatives going

forward Everyone in team is expected to

present Graded on the quality of your

presentation/ analysis and how well you address questions

No written assignment due

Group - Case Critiques (15%) Your team will critique the analyses of the other 6 teams’

presentations Work in your group 15-20 minutes after the presentation Key issues to include:

Inappropriate use of course material Incorrect assumptions Weak analyses Misinterpretations Flawed logic Lack of understanding of key issues You are not to critique their presentation (e.g. “your slides were

pretty”) Email your critique to me The purpose of this assignment is to learn how to identify the

strengths and weaknesses of strategic plans, and learn how to provide constructive feedback.

Group – Case Exam (15%) November 16th – No official class November 9th – provide you with a short

case On the morning of November 16th, I will

email the class the case questions to answer

Work in your group to answer the questions Can use official class time if you choose

Email your answers by midnight.

Participation

Not specifically graded Reserve the right to adjust your final

grade up/down a full letter grade based on my assessment of your engagement, participation and contribution to your team

Theories, frameworks and models

How should firms organize and manage themselves?

1) Transaction cost economies 2) Agency theory 3) Resource dependence 4) Stewardship

Transaction Cost Economics Organizations must exchange/transact with

internal and external actors TCE answers “What is the best way to

organize, manage and govern the exchange?” Transaction cost is a cost incurred in making an

economic exchange. Search and information costs Bargaining costs Monitoring, policing and enforcement costs i.e., the costs associated with exchanges between

suppliers/partners/customers

Transaction Cost Economics

Factors that affect TCs include: Frequency Specificity Uncertainty Opportunistic behavior

Transaction Cost Economics

Market

(external)

Hierarch

y(internal)

Costs and difficulties associated with market transactions sometimes favor hierarchies (or in-house production) and sometimes favor markets as an economic governance structure. Alternatively, an intermediate mechanism, called hybrid or relational exchange, between these two extremes is possible.

Hybrid

Agency Theory

Highlights the problems with principals/owners hire agents/managers to perform work A) the desires or goals of the principal and agent

conflict ▪ Agents are self interested, economically motivated,

rationally bounded, and risk adverse B) it is difficult or expensive for the principle to verify

what the agent is actually doing (information asymmetry)

Suggests various mechanisms to align principle/agent interests piece rates/commissions, profit sharing, efficiency

wages, the agent posting a bond, or fear of firing

Resource Dependence

“Power is held by those who provide resources to the organization”

Three key assumptions: 1) Organizations are comprised of internal and

external coalitions which emerge from social exchanges that influence and control behavior2) The environment contains scarce, valuable resources essential to organizational survival

3) Organizations have two related objectives: ▪ A) acquire control over resources that minimize their

dependence on other organizations ▪ B) control resources that maximize the dependence of other

organizations on themselves

Resource Dependence

TCE would say “Choose the governance mechanism with your exchange partners that will allow you to minimize your transaction cost” Economic/rational approach

Resource dependence would say “Choose the least-constraining device to govern relationship with your exchange partner that will allow you to minimize uncertainty and dependence and maximize your autonomy” Behavioral approach

Stewardship Theory

Rejects the notion of the “economic man” as the agents’/principles’ interests are not always in misalignment

Utility stewards gains through pro-organizational behaviors is higher than those gained through individualistic, self-serving behaviors.

Stewardship as a governance mechanism is a function of: Individual’s psychological context – e.g., intrinsic

motivation, identification with the organization Organization’s situational contexts – e.g.,

involvement orientation, culture

Organizations and their Environments

1) Population ecology 2) Institutional theory 3) I/O economics 4) 5 forces model

Population Ecology

Similar to the idea of natural selection in biology The environment “selects” organizations to

survive/fail Survival a function of luck, chance, and

randomness Managerial abilities/talents have very little to do

with organizational success. New organizations are continually being

formed as established firms are weeded out Those that evolve (which is seriously

questioned) will survive

Population Ecology

External Constraints Internal Constraints

Legal and fiscal barriers to entry/exit from markets prevent firms from abandoning certain activities.

Plant, equipment, and specialized personnel

Imperfect information about relevant external environment. Organizational specialization constrains the kind of the information obtain and how it can be processed and utilized.

Imperfect information on activities within firms

Efforts to maintain legitimacy Efforts to maintain political equilibria

Collective rationality problem History, standard operations and procedures, and the allocation of tasks and authority

Inertial pressures constrain firms’ efforts to adapt and evolve

Institutional Theory

Institutional theory suggests that institutional structures (e.g., social, economic, and political factors, schemas, rules, norms, and routines) become established as authoritative guidelines for social behavior

Institutions are social structures that are composed of A) cultural-cognitive B) normative C) regulatory

Institutions operate at different levels of analysis, from world systems to interpersonal relationships

Institutions connote stability but are subject to incremental and discontinuous change

In order to survive, organizations must conform to the rules and belief systems prevailing in the environment

Organizations gain legitimacy by “evolving” toward widely accepted institutional norms, which leads to isomorphism

Rejection of rational-actor models

Industrial/Organization Economics Model

External environment determines firm profitability Assumptions▪ A) all firms are equal▪ B) resources are mobile across firms

Firm success is a function of finding the right “place” to compete

Five Forces Model

Foundation of the I/O modelDetermines the attractiveness of an industry

These five industry forces affect the costs and prices of goods/services the industry offers, thus affecting the expected level of profitability in that industry.

Punctuated Equilibrium

Environmental change is not always gradual Major environmental change is often caused

by technological discontinuity, which triggers a period of instability, which is followed by the emergence of a dominant design or business paradigm

The introduction of a disruptive, or competence destroying innovation is considered a punctuation that interrupts the existing static conditions

Generally not predictable

Stakeholder Theory

Firm’s can alter their environment, and hence their performance, by the manner in which they manage their network of stakeholders.

Stakeholder’s are individuals/groups who can effects, and are affected by, the strategic outcomes of the firm, and who have enforceable claims on the firm’s performance.

Three broad categories of stakeholders Capital market – shareholders and suppliers of capital Product market – customers, suppliers, communities,

unions Organizational – employees

Stakeholder Theory

Organizations and their Resources

1) Resource-based view 2) Dynamic capabilities 3) Knowledge-based theory 4)Absorptive capacity

Resource Based View of the Firm

Resources determines firm profitability Assumptions▪ A) firms are unique▪ B) some resources are not mobile across

firms Firm success is a function of finding the

right “way” to compete as firms’ unique resource base provides the basis for competitive advantages

Dynamic Capabilities

The ability to integrate, build, and reconfigure internal and external competencies to address rapidly-changing environments

Dynamic resources help a firm adjust its resource mix and thereby maintain the sustainability of the firm’s competitive advantage, which otherwise might be quickly eroded

Extends RBV to consider how : resources are developed how they are integrated within the firm how they are released and leveraged

RBV emphasizes resource choice, or the selecting of appropriate resources, dynamic capabilities emphasize resource development and renewal.

Knowledge Based View

Extends the RBV Knowledge as the most strategically significant

resource of the firm Knowledge is embedded and carried through multiple

entities including organizational culture and identity, policies, routines, documents, systems, and employees.

Knowledge is: difficult to imitate socially complex Heterogeneous

Therefore, knowledge capabilities are major determinants of sustained competitive advantage and superior corporate performance.

Absorptive Capacity

Firm’s ability to identify, assimilate, transform, and apply valuable external knowledge. rate or quantity of scientific or

technological information that a firm can absorb.

When absorption limits exist, they provide one explanation for firms to develop internal R&D capacities.