CEO and strategy fit

The chief executive officer is an important person. Can anything important be learnt by watching a video of the CEO?

Cultivate your network

Once you have created a social network, it has to be maintained. In this note I describe three strategies to help you maintain your network. This is part two of three.

Create a network at university

Business schools are ideal places to create and extend your social network. In this note I describe five useful strategies. This is part one of three.

Is the growth-share matrix (aka BCG matrix) useful?

The growth-share matrix was created by BCG, the consultancy, in the late 1960s based on work with a paper mill. Paper manufacturing is dependent on economies of scale and economies of learning, so market share went on the x-axis. Companies want to grow, so growth went on the y-axis. This model turned out to be immensely successful for BCG and it was implemented by many companies in the 1970s. 

Should the international community allow ethnicity to determine country borders as a principle?

The Ukrainian region Crimea is predominantly ethnically Russian (or at least Russian speaking). If the citizens living in this region want to secede and join Russia or form their own nation state, should they be allowed? According to the Ukrainian constitution, secession is not allowed by a plebiscite unless all Ukrainian are allowed to vote. I find this question quite fascinating and we are likely to face many such questions in the future. 

Morphing political parties in Sweden

Sweden has two elections this year, one for the European Parliament and one for the Swedish Parliament. I am going to write a bit about Swedish politics from time to time on this blog. I came across the site Political Compass, which uses a modified version of what is normally called the Nolan chart; consider it the standard map to describe political parties. 

Setting the stage for disappointment in online advertising

This note is about the difficulties of forecasting. The investment analysts are generally very optimistic about the future. When coupled with a focus on individual companies, they can end up forecasting that all companies will increase their market share. I will illustrate with the online advertising industry. The chart below highlights nine important companies in the industry. Google is the leader with more than 50% of the market. Facebook, Baidu and Twitter are the promising up-and-coming companies. Microsoft, AOL, and Yahoo are yesterday's companies.

Synergies

Synergy is a catch-all term used to describe the financial consequences of two business-units belonging to the same corporate parent as opposed to being two independent companies.

Business unit 1  +  Business unit 2  +  Synergy   =  Combined value

What can the resource-based view of the firm teach managers?

A lot of academic writing in management has dealt with the resource-based view of the firm and dynamic capabilities. This short note argues that these two ideas are not very useful to understand strategic management. Instead I argue that the value chain and core competencies are much more useful ideas for managers.

Facebook's acquisition of Whatsapp

This note looks at Facebook's acquisition of Whatsapp. Before writing the note, I was inclined to believe Damodaran's conclusion that the acquisition price was astronomical. However, after running some models I have concluded that the acquisition is okay given Facebook's high current valuation. The key issue for Facebook is to justify its current valuation, not justifying the acquisition of Whatsapp.

The Swedish establishment's schizophrenia

I have lived ten years in multi-cultural Singapore and I thought I should put down my reflections on the current immigration debate in Sweden. This note is written for people that already have some understanding of Sweden.

Disruptive basics

This note will summarise the idea of disruptive technology.

Forecast of the upcoming Swedish election

I have always been interested in politics, so let me provide a forecast of the future Swedish election results. I conclude that the left-wing is likely to win the upcoming election as well as the subsequent three elections.

Mobile handset manufacturing

The mobile handset market can be characterised by a lot of failing companies and a few winners. The following diagram plots the development of the industry from 2003 to 2012 using the strategy possibility frontier model. All companies with a worldwide market share above 1% have been included in the diagrams. All companies with a market share above 5% are furthermore highlighted in bold.

Economics of learning

This note is primarily directed to students. It is the fourth and final in a series on strategic cost analysis. This note will focus on the experience curve (also called the learning curve).

Additional topics on the strategy possibility frontier

This is the sixth and final posting in a series on business-unit strategy. This posting deals with the following topics not covered earlier:

• Stuck in the middle (strategic advantage)
• Stuck in the middle (strategic scope)
• Movement of companies position over time
• Movement of the strategy possibility frontier

Food retailing in Singapore revisited

This is the fifth posting in a series on business-unit strategy.

The objective of this posting is to show how the strategy possibility frontier can be applied to the Singapore food retailing industry. I am not an expert on the industry so this is work in progress. The posting is mostly relevant to students of strategy that would like to perform similar analyses for other product categories. I have previously written about the model (start reading here) and the industry (here). It is helpful to revisit those postings before continuing.

Niche strategy

This is the fourth posting in a series on business-unit strategy.

We have so far assumed that the the competition occurs on a fairly broad level of the market. In addition to the previous two strategies, a third strategy focuses on one particular market niche. This strategy has some interesting implications illustrated in the figure 1.

Uniqueness strategy

This is the third posting in a series on business-unit strategy.

Uniqueness competition. The area labelled [b] is the realm of uniqueness competition (or differentiation). In contrast to the low-cost competition, there is generally more than one way to be unique. Companies 5, 6, 7 and 8 all have unique positions as indicated by them all being on the strategy possibility frontier. Think about companies with different advertising image, product development focus and/or customer service. (The diagram should ideally be represented in (n+1) dimensions. There are n dimensions of uniqueness and one dimension of low cost.)

Figure 1.

Low-cost strategy

This is the second posting in a series on business-unit strategy.

Low-cost competition. The area labelled [a] is the realm of price-oriented competition. Since the companies do not offer much uniqueness the only remaining way to compete is to offer the buyers lower prices. Company 1 has been the most successful in achieving a low-cost position. Company 2 and 3 both have a higher cost position (and slightly lower in terms of uniqueness). A higher cost position is often the result of lower economies of scale, but can also be due to other factors (e.g. capacity utilisation, economies of learning, location, better designed value chain).

Figure 1.

The strategy possibility frontier

This is the first posting in a series on business-unit strategy.

Product-category. A good level to understand a company's strategy is to consider the product-category level. A product category includes the individual products that fulfil a similar need for the buyers. The definition of a product category is often straightforward, but not always. Here are a few examples of product categories:

• Carbonated sweet softdrinks. In the US market this is a distinct product category, even though the definition has become somewhat blurred due to the popularity of non-carbonated softdrinks as well as bottled water. In the Asian context the definition also needs to deal with tea-based drinks.
• Packaging containers for beverages. This would include aluminium, glass, plastic and waxed paper. However, it could be argued that each raw-material should be a separate product-category. 
• Commuter transportation. This would include metropolitan rail as well as bus services in large cities. 
• Smartphones. Since a smartphone is able to function like a computer it should be seen as a different product category compared to the traditional mobile phone.

When in doubt regarding the exact definition of a product category it is necessary to explore the different options available. The considerations are similar to the ones made when analysing substitutes for an industry analysis.

The product category often corresponds to a business-unit inside a company. However, there is no guarantee that there will be a direct correspondence. If a company has more than one business-unit for a particular product-category we should consider the different business-units separately. And if a business-unit includes several product-categories we should consider the different product-categories separately.

Example of a low cost strategy in ecommerce

In my strategy class we have talked about there only being room for one successful low-cost strategy company in each industry. Boxed could be an example. They only sell around 600 necessities (e.g. diapers, toilet paper), but in larger packs compared to Amazon. The company claims that if customers buy in larger quantity, prices can be up to 20% lower than Amazon. To accomplish such low prices the company needs to be very cost focused. For instance: they only have an iphone/android application, no website, they only deliver to a few US states that are densely populated.

HTC shifted from a unique strategy to a copy-cat strategy, guess what happened?

There are strong forces towards conformity in society; for instance individuals dress in similar fashion and eat similar food. Human beings are social animals and it is easier for us to belong if we conform. I am not denying the existence of non-conformity, just stating that there are forces towards conformity in society.

A similar force towards conformity can be found among companies strategies. Academics use the fancy word isomorphism to describe the situation. Isomorphism can be created by CEOs having similar background, CEOs copying seemingly successful companies, CEOs' compensation contract, government regulation, and a number of other factors. This note will illustrate the disastrous effect of isomorphism on HTC, a company producing mobile phones.

Book review: "The Circle"

David Eggers have written a fascinating book about the future of work and social life. The book is a futuristic novel, but it could equally well be considered a business book. I will not be surprised if The Financial Times will short-list this book for its annual business book award.

Strategy assessment - initial perspective

Strategy is about a consistent set of policies that has a good fit with the external environment. It could take several years to perfect a strategy. Unfortunately, every time a company changes its strategy it risks getting a misfitting new strategy. Despite the difficulties it is sometimes necessary to change a strategy. This note will look at successful and unsuccessful changes to a company's strategy, and how the stock market tends to evaluate these changes.