ST384: Indicative marking guidance for External Examiner
May/June 2014
1. ‘Competitive advantage’ is an important idea in strategic management that is used by academics
and business people.
Discuss the following:

What are the potential upstream causes of ‘competitive advantage’? Ensure you draw upon
key concepts from the literature. [40%]
The students have applied the framework from Perren (2013) to the case-study for their
group and individual assignments. Here it is hoped they will draw upon the upstream causes
highlighted in this framework and the related literature (Barney, 1991; Porter, 1985;
Mahoney and Pandian, 1992; Crook et al, 2008; Powell, 2001):

Business practitioners and academics tend to portray the causes of ‘competitive advantage’
in different ways. Highlight the key differences and suggest why they may occur. [30%]
Perren (2013) compared academic and practitioner use of the term ‘competitive advantage’
and suggested the following:
The key differences expected to be identified include: time orientation, causal commitment,
justification, and causal complexity.

Assuming ‘competitive advantage’ is an interim outcome, what potential ‘causal
complications’ may influence performance? Ensure you provide some examples to illustrate
your observations. [30%]
Causal complications disrupt the relationship between competitive advantage and
performance (Perren, 2013; Powell, 2001):
Causal complications can for example be ‘appropriations’ by powerful stakeholders (e.g.
landlord, skilled employees) (see Crook et al, 2010) of value before it generates performance or
unexpected external events (e.g. severe weather and other ‘acts of God’) which may reduce or
improve performance.
2. Herbert Simon puts forward the notions of ‘perfect rationality’ and ‘bounded rationality’.

Contrast these two views of rationality. [30%]
‘Perfect rationality’ being that all environmental information is absorbed and processed for
so there is optimal decision-making. ‘Bounded rationality’ being the notion that there is too
much environmental information to be absorbed so frames, heuristics and search selectivity
lead to ‘satisficing decisions’ (Simon, 1978).

Assuming the idea of ‘bounded rationality’ is right, how might this help or hinder strategic
thinking? [40%]
The heuristics and frames of ‘bounded rationality’ may reduce information overload and
allow strategic decisions to be made quickly. If the heuristics are right this can lead to
strategic advantage. However, if the heuristics are wrong then this will lead to poor
decisions. The selectivity of information can lead to a lack of ‘peripheral vision’ so that shifts
in the environment are not noticed (Winter, 2004).

How important is intuition to strategic thinking? Ensure you draw upon concepts from the
literature. [30%]
The students have read and discussed Hodgkinson et al (2009) in seminar so it is hoped they
will call upon these ideas. They are summarised in this quote (Hodgkinson et al, 2009: 278279): “In our view, intuitive judgment is an indispensable component of strategic
competence... In recent decades, the possibility that much of human thought... is nonconscious has become a centrally important precept of modern cognitive science...
Reasoning is seen no longer as an exclusively conscious or deliberative process. Rather,
consciousness, as well as being, figuratively speaking, the ‘‘workshop’’ of the mind, is also
the ‘‘control panel’’ upon which signals from the ‘‘interior’’ appear to offer potential
guidance for individual judgment and decision making.”
3. ‘Positioning’ is one of the key concepts in strategic management.

What is strategic positioning? Give an example to illustrate your explanation. [40%]
Mintzberg et al’s (2009, 13) defines positioning as ‘locating particular products [and/or
services] in particular markets’. Building upon this general idea it is hoped students will
provide an example, perhaps drawing upon Porter’s generic strategies. They may also call
upon some of the assumptions identified by Mintzberg et al (2009 ) in chapter 4.

What are the strengths and weaknesses of such an approach? [30%]
It is expected that students will draw upon Mintzberg et al (2009) to identify strengths such
as: potentially helpful in stable environments, awareness of competitive situation, can be
appropriate where there are ‘high barriers to entry’, forces managers to make difficult
decisions (see Porter, 1996) and focuses on the drivers of competitive advantage.
Weaknesses from Mintzberg et al (2009) might include: action and thinking are separated,
too much focus on competition and not enough on other strategic drivers, may not be helpful
in turbulent environments, may discourages originality and perhaps more appropriate to
large businesses.

What sort of scanning activities are firms with a differentiated strategy likely to adopt?
Justify your suggestions. [30%]
Students read and discussed the paper by Jennings and Lumpkin (1992). It is hoped they will
call upon this work to explain that differentiating firms will have scanning activities that
emphasize identification of ‘opportunities and customer requirements’. This information
helps them differentiate further from their competitors by tailoring products and services
even more to their customers, whereas cost leaders are focused on checking for competitive
threats.
4. “... organizations need to be aligned with their environment...” (Ben-Menahem et al, 2013: 217)

Explain what is meant by a firm being aligned with its environment and why it is important.
[30%]
It is expected that students will draw upon Darwinian notions that to survive an organisation
must be adapted to its environment (Mintzberg et al, 2009). Here they may call upon ideas
from Hannan (2005), Hannan and Freeman (1984) and Mintzberg et al’s (2009)
environmental school.

How can a firm remain aligned with its environment? Ensure you draw upon key concepts
from the literature. [40%]
Here the students have a number of conceptual resources they have read and discussed.
These include, for example:
From Ben-Menahem et al (2013): “We argue that a firm’s absorptive capacity is a key
mechanism underlying the alignment of internal and external rates of change. Accordingly,
we conjecture that the higher a firm’s potential absorptive capacity (i.e., its ability to identify
and assimilate external knowledge), the more likely it will be able to adjust the rate of
strategic renewal actions to the environmental rate of change.” (page 225)
From Winter (2004): “Like biological organisms, organisations have sensors to inform them
of threats and opportunities. The process by which these sensors are developed is ‘selection,
adaptation and learning’, or SAL. While SAL’s influence is helpful, it is not always on the side
of the organisation. However there are systems that can help an organisation detect
oncoming challenges. These include: leveraging the peripheral vision of the CEO; improving
general purpose sensors; a better reading of specialised sensors; and installing new
specialised or routine sensors in areas where none presently exists.” (page 163)
From Ghosal and Nohria: “What drives fit [in MNCs] is the principle of requisite complexity –
the complexity of a firm’s structure must match the complexity of its environment” (page 23)

What happens if a firm become misaligned with its environment? Consider a number of
possibilities. [30%]
The students should consider a range of possibilities from the firm not surviving through to
the firm going through a major transformation. Here they may call upon ideas from
Mintzberg’s et al’s configuration school; the ideas of Miller and Friesen (1984) are
particularly germane. They may also consider the strategic formation diagram in the final
chapter of Mintzberg et al (2009:386):
References
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management,
17(1), 99—120
Ben-Menahem, S.M., Kwee, Z., Volberda, H.W. and Van Den Bosch, F.A.J. (2013) Strategic renewal
overtime: the enabling role of potential absorptive capacity in aligning internal and external rates of
change, Long Range Planing, 46, 216-235
Crook, T. R., Ketchen, D. J., Combs, J. G., & Todd, S. Y. (2008). Strategic resources and performance: A
meta-analysis. Strategic Management Journal, 29, 1141—1154
Durand, R., & Vaara, E. (2009). Causation, counterfactuals and competitive advantage. Strategic
Management Journal, 30, 1245—1264
Ghoshal, S. and Nohria, N. (1993) Horses for Courses: Organizational Forms for Multinational
Corporations Sloan Management Review, 34(2), 23-35
Hannan, M.T. (2005) ‘Ecologies of Organizations: Diversity and Identity’, Journal of Economic
Perspectives, 19(1), 51-70
Hodgkinson, G.P., Sadler-Smith, E., Burke, L.A., Claxton, G. and Sparrow, P.R.(2009) Intuition in
Organizations: Implications for Strategic Management, Long Range Planning, 42, 277-297
Maitlis, S. and Sonenshein, S. (2010) ‘Sensemaking in Crisis and Change: Inspiration and Insights form
Weick (1998)’, Journal of Management Studies, 47(3), 551-580
Jennings, D.F. and Lumpkin, J.R. (1992) ‘Insights between environmental scanning activities and
Porter’s Generic Strategies: an empirical analysis’, Journal of Management, 18(4), 791-803
Miller, D., and Friesen, P. H. (1984) Organizations: A Quantum View, Englewood Cliffs, NJ: Prentice
Hall
Mintzberg, H. (1987) ‘The Strategy Concept I: Five Ps For Strategy’, California Management Review,
30 (1), 11-24
Mintzberg, H., Ahlstrand, B. and Lampel, J. (2009) Strategy Safari: Your complete guide through the
wilds of strategic management, Second Edition, Harlow: Pearson
Mahoney, J. T. and Pandian, J. R. (1992). The resource-based view within the conversation of
strategic management, Strategic Management Journal, 13, 363—380
Perren, L. (2013) ‘Strategic Discourses of 'Competitive Advantage': Comparing Social
Representation of Causation in Academia and Practice’, Scandinavian Journal of Management, 29(3),
235-246
Porter, M. E. (1980) Competitive strategy: Techniques for analyzing industries and competitors. New
York: Free Press
Porter, M.E. (1996) What is Strategy? Harvard Business Review, March-April, 61-78
Powell, T. C. (2001). Competitive advantage: Logical and philosophical considerations. Strategic Management
Journal, 22, 875—888
Simon, H. (1978) Rational Decision-making in business organizations, Nobel Memorial Lecture, 8
December, 1978
Winter, S.G. (2004) Specialised Perception, Selection, and Strategic Surprise: Learning from the
Moths and Bees, Long Range Planning, 37 (2), 163-169