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High decentralization: little coordination (little opportunity for costs, willingness to pay, creating value through connection between businesses) Little decentralization: functional firm => lot of coordination (realize more coordination, synergies,…): you should be the best in this all the time.Where do you position yourself? Some conclusions There is not one success formula for corporate strategy. Value can be created in several ways. There is no one size fits all framework for the corporate strategy => standalone, across businesses, one time, continuous,…It is important to have a good story and be careful with synergies! Synergy is often talked about but is difficult to implement (dirty word) There are a lot of failures in mergers and acquisitions: they talk a lot about synergies but they do not do it in practice Verspreiden niet toegestaan | Gedownload door Lindsey VL ([email protected])lOMoARcPSD
Theoretical benefits are not easy to capture in practice Moderns organizational structures make capturing of synergies more difficult => the needed organizational restructuring does not happen all the time. Implementation and organizational design are in integral part of corporate strategy. Lecture 5: Competitive Dynamics “70-75% of managers consider competitors in making product and pricing decisions, only 8% report thinking future competitive behaviour in the context of product introductions and 15% in the context of price changes” –Urbany, Montgomery and Moore (2005) In reality, game theory is not used very much => very important insight of game theory but in practice it does not happen. When is it useful and what is useful? It is in the interest of companies to use the insights => why don’t they use it? If I introduce a new product, I do not think about ‘how is my competitor going to react?’ or ‘What is going to happen in the business if I do it?’What will happen to the price? Very few companies actually think about it => although it can give them very important insights. Refining Rivalry: competitive dynamics Game theory oWhat is a game? oStatic games oDynamic games Competitor profiling: what is the competitor going to do? Look at the CV Connecting game theory and competitor profiling Strategic groups Elements of a game Players oThose playing the game: competitor, supplier, firms, … depends on the model: who is in, who is out? Strategies oWhat the players can do: plan of action => important differences between static (action) game and dynamic (specify: investment => what is competitor going to do => impact on price) action. The dynamic game is more complicated! Verspreiden niet toegestaan | Gedownload door Lindsey VL ([email protected])lOMoARcPSD
Pay offs oOutcomes as function of players’ strategies: advantage of game theory =>making this connection between what might happen and pay offs is important! It reveals a lot of information => important for competitive strategies!