STRAT 390 Strategic Management Review

Corporate Strategy

The set of choices that a corporation makes to create value through configuration and coordination of multi-market activities.

Competitive Strategy

Strategy that pertains only to individual business units.

Better-Off Test (Corporate Scope)

Does the presence of the corporation in a given market improve the total competitive advantage of business units over and above what they could achieve on their own?

Ownership Test (Corporate Scope)

Does ownership of the business unit produce a greater competitive advantage than an alternative arrangement would produce?

Economies of Scope

Using a resource across multiple activities uses less of that resource than when the activities are carried out independently.

Upstream (Backward) Integration

Moving ownership of activities backward in the value chain toward suppliers.

Downstream (Forward) Integration

Moving ownership of activities forward in the value chain closer to the end consumer.

Coase's Transaction Cost Rule

If transaction costs > coordination costs, choose vertical integration (make). If transaction costs < coordination costs, rely on the market (buy).

Asset Specificity

The extent to which the value of an asset is decreased or lost when used outside of a certain context.

CAGE Distance Framework

Assesses international differences across Cultural, Administrative/Political, Geographic, and Economic dimensions.

AAA Framework: Adaptation

Creating global value by changing one or more elements of a company's offer to meet local requirements or preferences.

AAA Framework: Aggregation

Creating economies of scale or scope by exploiting similarities among geographies rather than adapting to differences.

AAA Framework: Arbitrage

Exploiting differences between regions, such as buying low in one market and selling high in another (e.g., labor/capital differences).

International Strategy

Leveraging home-based core competencies by selling largely the same products or services in both domestic and foreign markets.

Multidomestic Strategy

Maximizing local responsiveness with the intent that local consumers perceive the company as a domestic entity.

Global-Standardization Strategy

Reaping significant economies of scale and location economies by pursuing a global division of labor at the lowest cost.

Transnational Strategy

Combining localization benefits (high local responsiveness) with global standardization (lowest-cost position), typically via a matrix structure.

7S Framework: Hard S's vs Soft S's

Hard S's (Strategy, Structure, Systems) are easier to define/adjust; Soft S's (Style, Staff, Skills, Shared Values) are harder to change but critical for execution.

Application: Amgen's Biosimilar Dilemma

Amgen entered biosimilars to capture a high-barrier market, managing ambidexterity while risking cannibalization of its own flagship biologics.

Application: Delta Airlines' Refinery Purchase

Delta forward-integrated into refining to hedge crack-spread volatility, offsetting peak geopolitical price shocks against high off-peak overhead.

Application: Nvidia's Strategic Tradeoffs

Designing chips yields core advantage, whereas manufacturing chips requires massive capital expenditure ($25B) outside core competencies.

Application: NFL's Revenue-Sharing Paradox

Strict league-wide revenue sharing creates parity, but individual franchise global marketing creates tension between shared brand building and solo growth.

Application: KitKat in Japan

Shifted from British branding to local adaptation ('Kitto Katsu' exam good luck token and regional flavors) to drive growth.

Application: Pernod Ricard's Decentralization Tradeoff

Operating 70+ autonomous geographic profit centers boosted local responsiveness but caused resource duplication and scale inefficiencies.

Application: M&A Premium Assumptions

Acquirers pay premiums based on assumptions that integration is costless, synergies will materialize, and acquiring firm B makes firm A more efficient.