ch01rnp establish strategy

7/23/2019 Ch01rnp Establish Strategy

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Establish Strategy



Strategy

• Defines a desired objective and

communicates what will be done, by

whom, how, for whom, and why the output

is valuable



What are the characteristics of

effective strategy?

1 !ommunicate a compelling purpose orvision to others

" !onnect organi#ational strengths with

environmental opportunities

$ E%ploit current success while e%ploringnew opportunities

& 'enerate more resources than it uses( !oordinate and guide activities

) *espond to new conditions over time



+igure 11 - .isual Definition of

Strategy



Strategy is about saying /no0

• Strategy defines and communicates whatthe organi#ation is not

• What does the firm 234 ma5e?

• Who does 234 do the wor5?

• Where does the firm 234 have activities?

• When 234?

• Who is 234 offered the results?

• What will they 234 pay?



Strategy is about saying /no0

• When there are too many priorities, thereare 23 priorities

• /6y success is that 7 have focused on afew things0 8 9ill 'ates

• /4he art of leadership is saying :no;, notsaying :yes;, it is very easy to say :yes;0 84ony 9lair



Southwest -irlines and Saying :2o;

• 9usiness Wee5 /Will Southwest -irlines e%pandinternationally? 7f so, when?0

• <erb =elleher, !o>founder, !hairman /7t;s a uestion of

priorities @ou only have so many airplanes 4hey;ree%pensive and you try to send them where they will dothe most good for our people;s job security within theshortest period of time 8 and do the most good for theprofit sharing we;ve got 1AB of the domestic mar5et at

the present time and 7 thin5 that wor5s out to CAB whichisn;t ours0

Source Business Week , December "&, "AA$



.ision 6ission

• .ision statements provide a compellingimage of what the company should be ordo

8 /the ability to thin5 about the future withimagination or wisdom0

• 6ission statements are more detailed and

e%plicit than vision statements about whatwill be done, why whom, how, for whom,and why



Sample .ision 6ission !oca !ola

4o achieve sustainable growth, we have established a Vision with cleargoals

• People: 9eing a great place to wor5 where people are inspired to be thebest they can be

• Planet: 9eing a responsible global citi#en that ma5es a difference

• Portfolio: 9ringing to the world a portfolio of beverage brands thatanticipate and satisfy peoples desires and needs• Partners: 2urturing a winning networ5 of partners and building mutual

loyalty• Profit: 6a%imi#ing return to shareowners while being mindful of our

overall responsibilities

Everything we do is inspired by our enduring Mission• To Refresh the Worldin body, mind, and spirit• To Inspire Moments of Optimismthrough our brands and our actions• To Create Value and Make a Differenceeverywhere we engage



Strategy !onnects 3rgani#ational Strengths

with Environmental 3pportunities

• Strategy has many definitions that we will

discuss in this courseF one of the most basic is

that it is an attempt to organi#e thoughts about

action alternatives• - simple but useful $>part organi#ing framewor5

for understanding the situation within which

action occurs includes

8 E%ternal macro>environment

8 7ndustry environment

8 7nternal company environment



4he Strategic Environment

Figure 1.2: An Overview of the Context of Business Strategy



Defining Strategy =ey Gropositions

• -ll of these distinctions are /fu##y0 8 7t is increasingly difficult to define organi#ational boundaries

Hproduction, for e%ample, can be within the firm or by partnersoutside the firmI

8 7t is increasingly difficult to define industry boundaries Ha shoe,

for e%ample, can be part of sports or fashionI 8 7t is increasingly difficult to predict macro factors Heg <ow

strong will the JS economy be? What scientific inventions willbecome available?I 9ut these un5nowns are what ma5estrategy so interesting and important

• =ey uestion of strategy HWill we be able to ma5eenough money to pay our creditors and survive?Ireuires understanding connections between companyactions, industry actions and events in the macro>environment



What strategy is 234

• -n idea that /springs to mind full>blown0 8 Eg Keus and the birth of -thenaL6inerva who

sprang full>grown in armor from his forehead

• 3ften :5ernel; of strategy is sudden insight,but there is a long way to go beforeorgani#ational strategy can be e%pressed

8 Eg 2apster 8 Eg +ederal E%press Hgrade ! at @ale Schoolof 6anagementI



What Strategy 7s

• !onnected objectives

• .iable position in an environment

• Mogic for coordinating activities• E%ploitation of current capability and

possibly e%ploration of new opportunities

• Source of more resources generated thanconsumed



SW34 -nalysis

• Summari#es the firm;s strengths and

wea5nesses, along with environmental

opportunities and threats

• When used thoughtfully, can summari#e

the evolution of strategy over time



Strategy E%ploits !urrent Success

while E%ploring 2ew 3pportunities

• Exploitation: Successfule%ploitation strategies developadditional value from currentresources and activities

• -bility to E%ploit 8 7ncremental innovation

8 !ontinuous innovation

8 /Do better0 innovations

8 Evolutional change

8 Efficiency 8 Groductivity

• Eg better contracts with e%isting

buyersLsuppliers, better

euipment, new training programs

• Exploration: successfule%ploration strategies create newvalue from unfamiliar resourcesand activities

• -bility to E%plore 8 *adical innovation

8 Discontinuous innovation

8 /Do different0 innovations

8 Step change

8 +le%ibility• E%ample Eg Napan *ailways

East bottled water



Strategy generates more resources

than it uses

• Strategy generates substantial resources

8 income, as well as reputation, employee

commitment, brand identity and other

intangibles

• 9alance between using and creating

resources is critical imbalance Hheavy

useI from beginning



Strategy responds to new conditions

over time

• Strategi#ing ongoing process of

discovering purpose, creating and using

resources and guiding supporting activities

• 7ntended strategy set of ideas, usually

made e%plicit, that the strategist uses to

inspire and direct activities

• *eali#ed strategy illustrated by pattern ofactual behavior over time



+igure 1$ Si% +unctions of Strategy



<ow are strategists influenced by

other strategists?

• Strategy is rarely developed by just one

individual Heg !E3, GresidentI

• 3ne person can rarely come up with all

the ideas

• Different individuals, interest groups, and

organi#ations care about and e%pect to

have a role in specifying a firm;s strategic

objectives and activities



+igure 1& Mevels of Strategi#ing



• 2etwor5 strategy coordinates actions among alliesF definespurposes no one participant could achieve alone when strategistsally with others they do not formally control

• !orporate strategy ma5es broad domain and funding decisions fora porfolio of business units 8 Eg identifies industryHiesI in which subunits of the organi#ation will

engage• 9usiness Hor organi#ationalI strategy reuires more specific

decisions at the business level around what, whom, how, for whomand why 8 Eg focus on one, or a related cluster, of competitive domains

• +unctional Hor operatingI strategy supports business strategy in

areas such as information technology, human relations, *D,mar5etingF more detailed level and necessary to achieve desiredoutcomes from business activity

• 7ndividual strategy direct efforts by individuals, inside or outsideorgani#ations, to protect and enhance their own welfare

+ive Mevels of Strategi#ing



Sta5eholders influence strategists

across organi#ational boundaries

• Sta5eholders individuals and groups who are

potentially affected by an organi#ation;s activities

and may attempt to influence its strategy

8 .ary in power and attentiveness 8 -ffect how purpose is defined, resources are

gathered and used and who benefits from this activity

8 Each sta5eholder has uniue perspective and may

conflict, even within the firm• Synergies enable one resource to increase the

impact of others



+igure 1( 9usiness>Mevel

Sta5eholders



Sensegiving 4as5 of Strategists



Sensema5ing and Sensegiving

• Sensema5ing

8 9y individuals or groups

8 !aptures something important about

e%perience in words and sentences

• Sensegiving

8 -ttempts to persuade others of the reality and

appropriateness of a strategic unit;ssensema5ing efforts



Why are the successes and failures

of other organi#ations important?

• *ivals offer similar products, services or

e%periences to similar clients or customers

• 3rgani#ations are compared by

sta5eholders

• 7nteracting with strong competitors can

strengthen a firm;s capabilities



Gerformance differences shape

sta5eholder e%pectations

• Economic profits level of return after all

costs of the unit;s activities have been

subtracted from revenue

• !ompetitive advantage revealed when a

firm is more profitable than its rivals or

e%ceeds them on other valued

performance measures

ch01rnp establish strategy

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