Strategy Strategic Mgt Ch.1

8/8/2019 Strategy Strategic Mgt Ch.1

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Strategy and StrategicStrategy and StrategicManagementManagement

Chapter 1Chapter 1


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Definitions of StrategyDefinitions of Strategy

"Strategy is the"Strategy is the directiondirectionandand scopescopeof an organization over theof an organization over the longlong--term:term: which achieveswhich achieves advantageadvantage forforthe organization through itsthe organization through itsconfiguration ofconfiguration ofresourcesresources within awithin a

challengingchallenging environmentenvironment, to meet, to meetthe needs ofthe needs ofmarketsmarketsand to fulfilland to fulfillstakeholderstakeholderexpectations".expectations".


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In other words, strategy isIn other words, strategy is

about:about:

Where is the business trying to get to in the longWhere is the business trying to get to in the long--term?term?((direction)direction)

Which markets should the business compete in and whatWhich markets should the business compete in and whattypes of activities are involved in such markets?types of activities are involved in such markets?((marketsmarkets;;scopescope))

How can the business perform better than theHow can the business perform better than thecompetition in those markets? (competition in those markets? (advantageadvantage))

What resources (skills, assets, finance, relationships,What resources (skills, assets, finance, relationships,technical competence, and facilities) are required in ordertechnical competence, and facilities) are required in orderto be able to compete? (to be able to compete? (resourcesresources))

What external environmental factors affect theWhat external environmental factors affect thebusinesses ability to compete? (businesses ability to compete? (environmentenvironment))

What are the values and expectations of those who haveWhat are the values and expectations of those who have

power in and around the business? (power in and around the business? (stakeholders)stakeholders)


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A strategy is a unified, comprehensive andA strategy is a unified, comprehensive and

integratedintegrated planplan that relates the strategicthat relates the strategicadvantages of the firm to the challenges of theadvantages of the firm to the challenges of the

environment and that is designedenvironment and that is designed to ensureto ensure

that the basic objectives of the enterprise arethat the basic objectives of the enterprise are

achievedachieved through proper execution by thethrough proper execution by theorganisation.organisation.

Gluek & JaunchGluek & Jaunch


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That activity which specifies for a

business a course of action that isdesigned to achieve desired long-termobjectives in the light of all majorexternal and internal factors, present and

future.

General Electric CompanyGeneral Electric Company


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Strategic ProcessStrategic Process

Strategic Goals

StrategicAnalysis

Strategic Choice

Strategic

Implementation

What is our mission ?

What is happening to ourbusiness ?

What do we do about it ?

How do we do it ?


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Sources of Strategy:Sources of Strategy:

TheoryTheory Planned Strategy (Deliberate orPlanned Strategy (Deliberate orPrescriptive Strategy)Prescriptive Strategy)

Competitive Positioning StrategyCompetitive Positioning Strategy

CoreCore--competence based Strategycompetence based Strategy

Emergent (Learning) StrategyEmergent (Learning) Strategy

KnowledgeKnowledge--based Strategybased Strategy


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Planned (Prescriptive)Planned (Prescriptive)

StrategyStrategy Focus is onFocus is on Long TermLong Term planning thatplanning that

tries to achieve a fit between thetries to achieve a fit between the

organization strategy and theorganization strategy and theenvironment in which it operatesenvironment in which it operates

WeaknessWeakness-- in todays quickly changingin todays quickly changing

environment, it may be unrealisticenvironment, it may be unrealistic


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Competitive PositioningCompetitive Positioning

StrategyStrategy Popular in the 1980sPopular in the 1980s

Based on the work ofPorterBased on the work ofPorter

Focused on aFocused on a strategic fitstrategic fitbetween thebetween theorganization and its environment toorganization and its environment togaingain competitive advantagecompetitive advantage

An outside in strategyAn outside in strategy

Useful strategy tools: Porters 5 forcesUseful strategy tools: Porters 5 forcesanalysis and generic strategyanalysis and generic strategy


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Emergent (Learning)Emergent (Learning)

StrategyStrategyApproach based on the weaknesses ofApproach based on the weaknesses of

the Planned (Prescriptive) Strategythe Planned (Prescriptive) Strategy

In a rapidly changing environment,In a rapidly changing environment,organizations mustorganizations mustincrementallyincrementallychangechange and adopt strategy based onand adopt strategy based on

organizational learningorganizational learning


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Core CompetenceCore Competence

ApproachApproach From the 1990sFrom the 1990s

Competitive advantage comes from anCompetitive advantage comes from an

organizationsorganizations core competencescore competences orordistinctive capabilitiesdistinctive capabilities

Unlike the competitive positioning approach,Unlike the competitive positioning approach,this approach isthis approach is inside outinside out

Organizations should focus on develop theirOrganizations should focus on develop theirdistinctive resources, capabilities anddistinctive resources, capabilities andcompetences to take advantage of theircompetences to take advantage of theirenvironmentenvironment


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Learning and KnowledgeLearning and Knowledge

Based StrategyBased StrategyAn approach that uses all parts of anAn approach that uses all parts of an

organization (resources, capabilities,organization (resources, capabilities,

core competences and activities)core competences and activities) andandits interactions with the environmentits interactions with the environment

Belief that competitive advantageBelief that competitive advantage

depends on the development ofdepends on the development ofnewnewandand superior knowledgesuperior knowledge through athrough aprocess ofprocess oforganizational learningorganizational learning


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Strategy Evaluation

Strategic Change

and Implementation

Strategy

Learning

Cultural, structural, systemic

Change and leadership

ResourceAllocation

Competence BuildingFunctional Strategies

Feasability

Suitability

Acceptability

Strategy DevelopmentCore Competence

Generic Strategy

Knowledge

Strategic Direction

External

Competitive

Environment

Internal

Resources

CompetenciesActivities

Culture

Structure

Products


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Different Levels ofDifferent Levels of

StrategyStrategyAt different levels of an organization,At different levels of an organization,

strategy decisions differ in:strategy decisions differ in:

scopescope

time horizontime horizon

degree of certaintydegree of certainty

complexitycomplexity


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Different Levels ofDifferent Levels of

StrategyStrategy StrategicStrategic concerned with getting aconcerned with getting a

sustainable competitive advantage andsustainable competitive advantage and

involves setting long term goals andinvolves setting long term goals andobjectivesobjectives

TacticalTactical Focuses on howFocuses on howorganizational goals are met and howorganizational goals are met and howstrategies are donestrategies are done

OperationalOperational Focuses on shortFocuses on short--termtermobjectives and dayobjectives and day--toto--dayday

managementmanagement


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Congruence (fit)Congruence (fit)

Successful strategies will haveSuccessful strategies will havecongruence, or fit, between all 3congruence, or fit, between all 3

levelslevels

In other words, once strategic levelIn other words, once strategic levelobjectives are set, tactical andobjectives are set, tactical and

operational level strategies mustoperational level strategies mustagree in order to achieve the overallagree in order to achieve the overallstrategystrategy


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Where strategy is carriedWhere strategy is carried

outout Network strategyNetwork strategy

Corporate strategyCorporate strategy

Business strategyBusiness strategy

Functional strategyFunctional strategy


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Missions, Goals & ObjectivesMissions, Goals & Objectives

Setting Strategy


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Missions & Goals of the FirmMissions & Goals of the Firm

Stakeholder TheoryStakeholder Theory

Mission Statements &Mission Statements &StrategyStrategy

ObjectivesObjectives


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Stakeholders of aStakeholders of a

FirmFirmInside ClaimantsInside Claimants

ExecutivesExecutives

Board ofBoard of

DirectorsDirectors ShareholdersShareholders

EmployeesEmployees

Outside ClaimantsOutside Claimants

CustomersCustomers SuppliersSuppliers

GovernmentsGovernments

CompetitorsCompetitors Local CommunitiesLocal Communities

General PublicGeneral Public


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The moral obligation of business is

to increase its profits

- Milton Friedman


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Stockholder TheoryStockholder Theory

Businesses must maximize profitsBusinesses must maximize profits

Stockholders are the most importantStockholders are the most importantconcern of an organizationconcern of an organization

Failure to do so will reduce businessFailure to do so will reduce businessperformance and negatively affectperformance and negatively affect

other stakeholdersother stakeholders


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Stakeholder TheoryStakeholder Theory

Shareholders (stockholders) are NOTShareholders (stockholders) are NOTthe sole concern of organizationsthe sole concern of organizations

Other groups are affected and shouldOther groups are affected and shouldbe consideredbe considered


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Stakeholder MappingStakeholder Mapping

Stakeholder Mapping is an important partStakeholder Mapping is an important part

of making strategy.It consists of makingof making strategy

.It consists of makingjudgements on three issues:judgements on three issues:

How likely each stakeholder group is toHow likely each stakeholder group is toimpress its expectations on the firm.impress its expectations on the firm.

Whether they have the means to do soWhether they have the means to do so --power of the stakeholder group.power of the stakeholder group.

The likely impact that stakeholderThe likely impact that stakeholderexpectations will have on future strategiesexpectations will have on future strategies


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Stakeholder MappingStakeholder Mapping --

Power/Dynamism MatrixPower/Dynamism Matrix

PREDICTABILITY

POWER

High Low

Low

High

A B

Few Problems Unpredictable but

Manageable

C D

Powerful but Greatest Danger or

Predictable Opportunities


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StakeholderMappingStakeholderMapping --

Power/Interest MatrixPower/Interest Matrix

LEVEL OF INTEREST

POWER

Low High

Low

High

A B

Minimal Effort Keep Informed

C D

Keep Satisfied Key Players


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Mission, Stakeholders &Mission, Stakeholders &

StrategyStrategy

Inside Claimants Outside Claimants

Mission Statement

Strategy Formulation


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Identifying and PrioritizingIdentifying and Prioritizing

Key StakeholdersKey Stakeholders

Assessing Their NeedsAssessing Their Needs

Collecting Ideas FromCollecting Ideas From

ThemThem

Integrating this KnowledgeIntegrating this Knowledge

into the Strategicinto the Strategic

Management ProcessManagement Process

Identifying and PrioritizingIdentifying and Prioritizing

Key StakeholdersKey Stakeholders

Assessing Their NeedsAssessing Their Needs

Collecting Ideas FromCollecting Ideas From

ThemThem

Integrating this KnowledgeIntegrating this Knowledge

into the Strategicinto the Strategic

Management ProcessManagement Process

The MostSuccessful Organizations AnalyzeThe MostSuccessful Organizations Analyzeand Manage Their Stakeholders Welland Manage Their Stakeholders WellThe MostSuccessful Organizations AnalyzeThe MostSuccessful Organizations Analyzeand Manage Their Stakeholders Welland Manage Their Stakeholders Well

Stakeholder AnalysisStakeholder Analysis


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Mission Statement & itsMission Statement & its

PurposePurpose

Sense ofPurpose & AspirationSense ofPurpose & Aspiration

Company ImageCompany Image

Statement of Company Values,Statement of Company Values,Culture and EthicsCulture and Ethics

Role as a Guide for the StrategyRole as a Guide for the StrategyProcessProcess


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Definition of

the Business

Who is being

satisfied ?

What is being

satisfied ?

Customer Groups Customer Needs

How are Customer Needsbeing Satisfied ?

Distinctive Competencies


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BMW Group worldwide mission statement is:

"To be the most successful premiummanufacturer

in the industry."


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Example: BMWExample: BMW

What is BMW Group strategy?What is BMW Group strategy?

Identifying potential and encouraging growthIdentifying potential and encouraging growth

Knowing what we representKnowing what we represent

Recognising where our strengths lie and making the best use ofRecognising where our strengths lie and making the best use ofevery opportunityevery opportunity

Following a clear strategyFollowing a clear strategy

These are the philosophies that underpin BMW Group. TheyThese are the philosophies that underpin BMW Group. Theyinfluence the company's structure and how decisions are made. Theinfluence the company's structure and how decisions are made. Theresult is hopefully a success which sees that BMW Group continues inresult is hopefully a success which sees that BMW Group continues inits strong position.From research through to sales, BMW Group isits strong position.From research through to sales, BMW Group iscommitted to the very highest in quality for all its products andcommitted to the very highest in quality for all its products andservices.services.


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Example: McDonaldsExample: McDonalds

"McDonald's vision is to be the world's best quick service

restaurant experience. Being the best means providing outstanding

quality, service, cleanliness and value, so that we make everycustomer in every restaurant smile. To achieve our vision, we are

focused on three worldwide strategies:

Be the best employer for our people in each community around

the world,

Deliver operational excellence to our customers in each of ourrestaurants, and

Achieve enduring profitable growth by expanding the brand and

leveraging the strengths of the McDonald's system through

innovation and technology."


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Discussion QuestionsDiscussion Questions

What is strategy?What is strategy? What are the sources of strategy?What are the sources of strategy? H

ow do the mission and values of theH

ow do the mission and values of theorganization relate to strategy?organization relate to strategy? Why are stakeholders important in strategy?Why are stakeholders important in strategy? What is BMWs aspiration and purpose? ItsWhat is BMWs aspiration and purpose? Its

desired public image? Quality and servicedesired public image? Quality and serviceaspirations?aspirations?

Which stakeholders do McDonalds considerWhich stakeholders do McDonalds considerin their mission?in their mission?


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ReviewReview

Definition ofStrategyDefinition ofStrategy

Theories on StrategyTheories on Strategy

Levels ofStrategyLevels ofStrategy

Where strategy is made?Where strategy is made?

Missions, goals and objectivesMissions, goals and objectives Stakeholder influenceStakeholder influence


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For Next WeekFor Next Week

Find the mission statement of a realFind the mission statement of a realcompany. Write a one (1) pagecompany. Write a one (1) page

description of the business definition,description of the business definition,major goals, and philosophy, andmajor goals, and philosophy, andidentify the stakeholders considered.identify the stakeholders considered.

Read Chapter 2,Read Chapter 2, Business StrategyBusiness Strategy,,pp.31pp.31--4646

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Strategy Strategic Mgt Ch.1

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