Advanced Strategic Management

1. Professor Don Neubaum, Ph.D. 400E Bexell Hall 737-6036 Don.neubaum@bus.oregonstate.edu Office Hours: MW 11:00am to Noon T 3:00 to 4:00 pm Or by appointment Advanced Strategic Management

2. 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

3. 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%

4. Individual - Final Exam (30%) • Short answer/essay exam • Held during normally scheduled class during finals week

5. 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

6. 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.

7. 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

8. 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.

9. 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.

10. 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

11. Theories, frameworks and models

12. How should firms organize and manage themselves? • 1) Transaction cost economies • 2) Agency theory • 3) Resource dependence • 4) Stewardship

13. 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

14. Transaction Cost Economics • Factors that affect TCs include: • Frequency • Specificity • Uncertainty • Opportunistic behavior

15. Transaction Cost Economics 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

16. 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

17. 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

18. 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

19. 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

20. Organizations and their Environments • 1) Population ecology • 2) Institutional theory • 3) I/O economics • 4) 5 forces model

21. 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

22. Population Ecology Inertial pressures constrain firms’ efforts to adapt and evolve

23. 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

24. 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

25. Five Forces Model Foundation of the I/O model Determines 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.

26. 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

27. 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

28. Stakeholder Theory

29. Organizations and their Resources • 1) Resource-based view • 2) Dynamic capabilities • 3) Knowledge-based theory • 4)Absorptive capacity

30. 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

31. 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.

32. 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.

33. 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.