Introduction Strategy

Context- where does the concept fit in

(Source: Mckinsey quarterley-1980-Strategic Management and Competitive Advantage)

The word Strategy

The term strategy is derived indirectly from the Classic and Byzantine (330 A.D.) Greek strategos, which means general. While the term is credited to the Greeks, no Greek ever used the word. The Greek equivalent for the modern word strategy would have been strategike episteme or (generals knowledge) strategon sophia (generals wisdom). One of the most famous Latin works in the area of military strategy is written by Frontius and has the Greek title of Strategemata. Strategemata describes a compilation of strategema, or strategems, which are literally tricks of war.

Definition of StrategyStrategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.

Exhibit 1.1Strategic decisions

LEVELS OF STRATEGYCorporate level:It is concerned with overall purpose and scope of organization and how values will be added to different parts of the business in organizationCorporate level strategy is the basis of other strategic decisionsLarge decision scaleMeet expectations of stakeholders

Strategy is about choices firm make on Products and Markets and how they leverage their advantage.If we simplify this we can create a model of strategic choice for the business:Missions and goals of the firmAssessment of the competitive forces ranged against the firmThe competencies enjoyed by the firm

Definitions of StrategyStrategy can be defined as the determination of the basic long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.

Strategy and StructureChandler

Definitions of StrategyA strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of the firm to the challenges of the environment and that is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organisation.

Gluek & Jaunch

Definitions of StrategyThat activity which specifies for a business a course of action that is designed to achieve desired long-term objectives in the light of all major external and internal factors, present and future.

General Electric Company

Or put another way:Strategic GoalsStrategic Analysis

Strategic Choice

Strategic ImplementationWhat is our mission ?What is happening to our business ?What do we do about it ?

How do we do it ?

Business level (SBU) It is about to complete successfully in particular marketHow competitive advantage over the customers can be achievedStrategic decisions here are related with strategic business units. SBU is unit of an organization for strategy making purpose

OperationalIt is concerned with how the component parts of the organization deliver effectively the corporate and business level strategies in terms of resources, processes and people.

Definition of Enterprise Strategy

A strategy combines explicit statements and implicit beliefs and understandings in and around an enterprise about:

Its core purpose (mission) will it change in the future?A vision of its future direction and what it intends to achieveIts scope current and potential clientelesThe resources and competences that create value for its clientele. Will they have to change in the future to add value?The foundations of its present competitive standing and future sustainability.

The 5 Ps of StrategyPlan: overall understanding of aims and how they will be achieved.Ploy: combination of actions and tactics that will be employed. Perspective: assumptions and ways of thinking Position: can be based on market-share, reputation, brand image etc. Pattern: evolved stream of observed events.

Figure 1.2: Various Types of Strategy*Unplanned or emergent strategies are more common than often supposed. When they prove successful they are adopted permanently and become part of the future intended strategy.

* After Mintzberg (1978)

Exhibit 1.2The vocabulary of strategy

Strategic Management ProcessesStrategic management: a process which encompasses the ongoing activities of forming and implementing strategy.

Because these activities are ongoing, strategy content evolves over time, sometimes intentionally, sometimes not.

The Subtlety & Complexity of Strategic Management Skills

Strategic managers apply important artistic and craft skills that enable them to:

Demonstrate leadership.Innovate and encourage colleagues.Value adaptiveness, improvisation and timely, practical actions.Exercise personal political skills for negotiations.Establish clear priorities and achieve desired results.

Frames of Reference

The enterprises frame of reference (shared belief set):

Informs and constrains how its managers think about their strategic management processes (conduct).Influences the decisions and actions (strategy content) that emerge from these processes.

Figure 1.3: 4 Strategy Frames of Reference

2 Key Dimensions from Figure 1.3Should managers incorporate a singular or multiple profit-maximising objective?

Will the strategy have to be adapted if emerging unanticipitated events are expected?

The Rational-Planning Frame

Predominant mindset: strategy-as-grand-plan

CharacteristicsThe belief that a clear intent and detailed design enhances the chances of achieving a future-focused goal. Strategists that apply rational-planning try to optimize outcomes in relation to a goal (profit maximization).

Example: Beaver & Tapley

The Systemic Frame (Socio-cultural Systemic)

Predominant mindset: open system

CharacteristicsSystemic managers view their enterprises as open systems containing many actors, systems, subsystems and embedded routines.Multiple priorities and viewpoints have to be accommodated, progress must be managed and priorities are adjusted continuously.

Example: BBC

The Power-process Frame

Predominant mindset: pluralist

Characteristics Collective scepticism over whether strategic management can proceed in a wholly rational way. Strategies are always a compromise that reflects whatever the more influential actors can agree on.Influential actors exercise political skills.Usually associated with governmental politics.

Example: British Labour Party

The Evolutionary Frame

Predominant mindset: evolution (adaptation)

CharacteristicsAssumption that strategy needs to be adaptive.Characterises entrepreneurial, innovative, chaotic business enterprises.Draws on Darwinian concept of natural selection.Exploratory responses from strategic management processes produce visible changes (variations).

Example: EasyJet

The Significance of Reference Frames

Reinforces accepted beliefs about strategic management conduct.Helps to secure agreement to strategic decisions.Alternative frames imply different standards of risk tolerance.There is no obvious frame in use, its future strategies become less predictable.

The Design-plus Strategic Management Framework3 linked phases of the Design-Plus approach

Phase 1: The Importance of Understanding Context

The Enterprise identifies and assesses relevant issues in the external and internal organizational environment.

ExternalMacro-environmental influences (ch. 2)Competitor & industry sector environments (ch. 3) InternalMission, vision, core values (ch. 4)Value-creating resources & capabilities (ch. 5)

Phase 2: The Importance of Identifying Strategic Alternatives

This phase involves the need to:

Change the mission or vision if necessary.Make choices about future clienteles.Enhance future value-creating performance and distinctiveness of the enterprise.Make judgements about acceptable risks.

Strategic alternatives must be considered with respect to:

Analytical frameworks (ch. 7)Business-unit level strategies (ch. 8)Innovation strategies (ch. 9)Enterprise diversification strategies (ch. 10) Acquisitions, mergers & alliance strategies (ch. 11) Multinational & global strategies (ch. 12)

Phase 2: The Importance of Identifying Strategic Alternatives

Phase 3: The Importance of Action

Strategy needs to be coherent as a whole and its various elements are mutually consistent. Many important elements of strategy content will penetrate into the domains of many functional areas (marketing, finance, operations and human resources management etc).

The Challenges of Doing StrategyComplacency & aversion to change.The complexity of the operating environment.Apparent contradictions.Sustaining creativity and imagination.Integrating & co-ordinating coherent actions.Less thinking & reaction time.

Chapter SummaryNature of StrategiesImportant Strategy ConceptsStrategic Management TaskStrategic Frames of ReferenceDesign-plus FrameworkChallenges of Doing Strategy

The Vocabulary of StrategyMission overriding purposeVision/strategic intent desired future stateGoal general statement of aim or purposeObjective quantification or more precise statement of goalStrategic capability resources, activities and processesBusiness model how product, service and information flowControl monitoring of action steps

Strategy and Operations

Strategic ManagementOperational ManagementOrganisation-wideRoutinisedConceptualisation of issuesTechniques and actionsCreating new directionsManaging existing resourcesDeveloping new resourcesOperating within existing strategyAmbiguous/uncertainOperationally specificLong termDay to day issues

There are many ways of looking at strategy:

Strategic Drift It is the situation where the strategy progressively fails to address the strategic position and of the organization and performance deteriorates

Strategic Drift The organization undergo a long process through a long period of time of relative continuity of strategy in which an strategy remain unchanged or change incrementally which leads to strategic drift, it is followed by period of flux but in no clear direction, which leads to transformational change in the direction of strategy.

The risk of strategic driftExhibit 1.4Johnson, Scholes & Whittington (2005) Irregular surface is punctured equilibrium where punctured equilibrium is the tendency of strategy to develop incrementally with periodic transformational change

Thankyou

Everyone has a plan till they get punched in the mouth Mike Tyson.

*Integrated approach: if the operations are not in line with strategy then the the strategy will failChange : heritage and culture issue in mergers and acquistions***2*3*4***********************