1. Business Economics and Finance Business Economics & Strategy

2. outline  Strategy as a distinct type of thinking  Examples & characteristics  Strategy & neoclassical economics  Transaction cost economics perspectives  Resource-based approach  Revision of course so far

3. examples u corporate merger or acquisition u producing a new product or service u entering a different geographical market u selling to different customer group u identifiable public aspects noticed by customers, competitors and suppliers u consequences internal to company – long term planning processes u militaristic metaphors u sociological element – power, consensus and legitimacy

4. strategy as a type of thinking activity of strategy hierarchy of decision and activity exists “strategic” – “operational” or “strategic” – “within strategy.” if markets worked efficiently – two aspects collapse into one companies as zones of administration and planning, alongside markets, ushers in dual approach

5. characteristics  exercise of power, subject to social pressures of legitimacy  one party making credible threats to use its resources as sanctions or rewards to get another part to do something that they would otherwise not do  Implicit, usually multi-directional  exercised legitimately, illegitimately  objectives uncertain, imprecise

6. u draw upon strategies – plans or orientations u assumptions, bounds and coherence for operations u not easily reviewed against objective reference standards u perpetuate feelings of cohesion and security u choices are real and irreversible u cannot be recreated for the purposes of some later review u do not determine operational decision-making

7. strategy, firms & market structures u collapses strategic & operational, or strategic outwith model u oligopoly – monopoly power, interdependence, particular outcome unknown u game theory u collaborative or coordinated outcome u incentive to cheat u one shot, or repeated u self-interest, tit-for-tat, altruism

8. One-off prisoner’s dilemma 7 7 0 0 10 1 1 confessdon’t confess confess don’t confess player two player one Source, Kay, J. 1995, p. 37

9. Repeated prisoner’s dilemma 7 7 5 5 10 1 1 confessdon’t confess confess don’t confess player two player one Source, Kay, J. 1995, p. 39

10. strategy and transaction cost economics strictly interpreted – limited strategic freedom undersocialised market oversocialised company market competition – selection creating dependence

11. resource-based approach capabilities or competencies activities requiring complementary similar & dis-similar capabilities on-going relations between companies strategy affected by company’s learned, accumulated experience history shapes resources available to decision-makers within analytical framework – behavioural

12. identify opportunities u perception affected by what agents know from personal and shared experiences u accumulated in one corporate and industrial setting, or across different corporate and industrial settings u interpret ‘objective’ opportunities differently u access to different types of resources supplied through that company’s historical development, u resources not fixed to a market-industry setting

13. aligning resources u managerial skills and knowledge (resources) u tend towards routine u free up managerial resources for further initiatives u distinct from cost focus of learning-by-doing u freed-up resources almost free resources u resources not values in themselves u only in context of being applied in activities

14. managerial discretion inevitable  experimental  process of knowledge accumulation  absorbed within a company  experience not easily available – no markets  absorbed as tacit, local, personal  require codification or articulation systems and incentives.  Managerialism will not do

15. Concluding remarks u imprecisely-specified goals – difficult to review u providing shared assumptions and bounds u meaningful decision-making – uncertainty u does not determine other decisions u neoclassical theory of the firm limited u exception oligopolistic market structure u transaction cost economics – constraining framework u resource-base theory of the firm – learning organisation