fit & stretch

From: Gerry Johnson and Kevan Scholes Exploring Corporate Strategy 5th Edition 1999

Strategy and

Competitiveness

AN INTRODUCTION


DEFINITION

Overriding purpose in line with the values or expectations of stakeholders

Desired future state: the aspiration of the organisation

General statement of aim or purpose

Resources, processes or skills which provide ‘competitive advantage’

TERM

Mission

Vision or strategic intent

Goal

Core competences

Exhibit 1.1a The vocabulary of strategy


TERM

Strategies

Strategic architecture

Control

DEFINITION

Long-term direction

Combination of resources, processes and competences to put strategy into effect

The monitoring of action steps to:assess effectiveness of strategies and actionsmodify strategies and/or actionsas necessary

Exhibit 1.1b The vocabulary of strategy


Ambiguous

Complex

Organisation-wide

Fundamental

Long-term implications

Routinised

Operationally specific

Short-term implications

Exhibit 1.2 Characteristics of strategic management and operational management

STRATEGICMANAGEMENT

OPERATIONALMANAGEMENT


Strategicanalysis

Strategicchoice

Exhibit 1.3 A basic model of the strategic management process

Strategyimplementation


Strategicanalysis

Strategicchoice

Strategyimplementation

Exhibit 1.4 A summary model of the elements of strategic management

Expectations andpurposesExpectations

and purposes

Organisationstructure and

design

Managingstrategicchange

Resourceallocation and

controlStrategicoptions

Basesof strategic

choice

Strategyevaluation and

selection

Resources,competencesand capability

Theenvironment


ASPECT OF

STRATEGY

ENVIRONMENTAL-

LED ‘FIT’

RESOURCE-LED

‘STRETCH’

Underlying basis of

strategy

Competitive

advantage

through ...

Strategic fit between

market opportunities

and organisation’s

resources

‘Correct’ positioning

Differentiation directed

by market need

Leverage of resources to

improve value for money

Differentiation based on

competences suited to or

creating market need

Exhibit 1.5a The leading edge of strategy: fit or stretchSource: Adapted from G. Hamel and C.K. Prahalad, Competing for the Future, Harvard Business School Press, 1994


ASPECT OF

STRATEGY

ENVIRONMENTAL-

LED ‘FIT’

RESOURCE-LED

‘STRETCH’

How small players

survive ...

Risk reduction

through ...

Corporate centre

invests in ...

Find and defend a

niche

Portfolio of products/

businesses

Strategies of divisions

or subsidiaries

Change the ‘rules of the

game’

Portfolio of competences

Core competences

Exhibit 1.5b The leading edge of strategy: fit or stretchSource: Adapted from G. Hamel and C.K. Prahalad, Competing for the Future, Harvard Business School Press, 1994


A DEFINITION OF STRATEGY

Strategy is the direction and scope of anorganisation over the long term which

achieves advantage for the organisationthrough its configuration of resources withina changing environment to meet the needs

of markets and to fulfill stakeholderexpectations.


LEVELS OF STRATEGY (1)

Corporate Level strategic decisions are concerned with:overall purpose and scopeadding value to shareholder investmentportfolio issuesresource allocation between SBUsstructure and control of SBUscorporate financial strategy



Business Unit strategy is concerned with:competitive strategydeveloping market opportunitiesdeveloping new products/servicesresource allocation within the SBUstructure and control of the SBU



Operational Strategies are concerned with:the integration of resources, processes, people andskillsto implement strategy


STRATEGIC MANAGEMENT IN DIFFERENT CONTEXTS (1)

In small businesses, the importance of:the expectations of individuals (e.g. owners andfounders)competitive positioning

In the multi-national corporation, the importance of:product and geographic scopeportfolio decisionscorporate structure and control



In the public sector, the importance of:powerful stakeholder influence (e.g. by government)constraints or guidelines on strategic decision making by governmentcompetition for resourcesdelivery of ‘best value’within a political context



In professional service organisations, theimportance of:the expectations and standards of professionalsthe powerful influence of internal stakeholders (e.g.partners)increasingly, competitive positioning


THE CHALLENGE OF STRATEGIC MANAGEMENT

The management of complexity and ambiguityThe ability to analyse and conceptualise strategic issuesThe reconciliation of the influences of a changing environment, stakeholder expectations and resource capabilitiesTo identify or create strategy opportunitiesAnd manage change


Patterns of strategy development

Explanations of strategy developmentstrategy as:

Outcome ofManagerial cultural and Externally

intent political imposedprocesses

Configurations of process

Challenges for strategy development

The cultural Strategic drift The learningweb organisation

Exhibit 2.1 A framework for understanding strategic management in practice


Exhibit 2.3 Strategic evolution and consolidation

.

Product launch

Acquisition

Divestment

Overseas expansion

Strategies evolve andinform strategic

decisions, which in turn consolidate

strategic direction

Evolving strategic direction

Strategic decisions e.g.


Exhibit 2.4 Strategy development routes

Unrealised strategy

Intended strategy

3

5

Planned implementation 1

2

5

Realised strategy

Strategy as outcome(of cultural and

political processes)

Imposed strategy

4


Exhibit 2.7 The role of the paradigm in strategy formulation

Opportunitiesand threats

Strengths andweaknesses

Performance

Environmentalforces

Organisational capabilities

THE PARADIGM

Strategy


THE PARADIGM

... The beliefs and assumption held in commonand taken for granted in an organisation.


THE BENEFITS OF FORMAL PLANNING SYSTEMS

A structured means of analysis and thinking about strategic problems.Encouraging questioning and challenging of the taken for granted.The involvement of people in strategy development.Contributing to ownership and co-ordination of strategy.A means of communication of intended strategy.A means of control against agreed objectives.


DANGERS AND PROBLEMS OF FORMAL PLANNING SYSTEMS

The neglect of cultural and political dimensions of organisations.Delegating responsibility to specialistsFailure to achieve ownership of plansIndividuals understanding parts rather than the whole of plansDetail rather than visionInformation overloadStrategy as ‘the plan’The search for the mythical ‘right strategy’.


STRATEGY DEVELOPMENT DIMENSIONS (1)

The Planning Dimensionstrategies are the outcome of rational, sequential, planned andmethodical proceduresdefinite and precise strategic objectives are setthe organisation and environment are analysedpotential strategic options are generated and the optimum solution chosendefined procedures for implementation and the achievement of the strategic objectives are developedthe strategy is made explicit in the form of detailed plans



The Incremental Dimensionevolutionary but purposeful strategy developmentstrategy is developed as issues arisestrategy is continually adjusted to match changes in the operating environmentearly commitment to a strategy is tentative and subject to reviewstrategic options are continually assessed for fitsuccessful options gain additional resourcesstrategic options are developed from existing strategies by experimentation and through gradual implementation



The Cultural Dimensiona “way of doing things” in the organisation guides strategic directionstrategies evolve in terms of a core set of shared assumptions based on past experience, values and beliefs held by the organisation’s membersthe shared assumptions guide

the selection of goals and objectivesthe identification of strategic issuesthe selection of informationthe selection of strategies



The Political Dimensionstrategies are developed by negotiation and bargaining between interest groupsthe interest groups seek to realise their own desired objectivestheir influence on strategy development increases with powerpower comes from the ability to create or control the flow of scarce resources and the control and provision of informationa strategy acceptable to powerful interest groups is achieved bya process of accommodation and mutual adjustment



The Command Dimensionan individual is the driving force behind the organisation’s strategy.strategy is primarily associated with the institutionalised power of an individual or small group.the strategy represents the aspirations for the organisation’sfuture of this individual.the strategic direction may be related to a “vision” based on rational understanding and intuition, or experience and intuition.the individual becomes the representation of the strategy for the organisation.



The Enforced Choice Dimensionstrategic choice is prescribed or limited by external forces which the organisation is unable to control or influence.organisations respond to environmental imperatives.strategic change is instigated from outside the organisation.barriers in the environment severely restrict strategic mobility.


IMPLICATIONS: STRATEGIC MANAGEMENT PROCESSES

Beware equating strategic management with strategic planning.You need to understand how strategies develop in your organisation:

to account for strategic directionto manage formulation processesto manage strategic change

Managing strategic change means managing changes to the realised strategy - not just the intended strategy.