sm lecture one : introducing strategy

Strategic Management BUSM 3200

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These Lecture Slides summarize the key points covered in the respective chapters in your

recommended text; these slides do NOT substitute, at all, the required reading of the assigned

chapter from the text. These slides also may contain additional supplementary material extracted

from other texts and sources outside your text book.

BUSM 3200- Strategic Management (Jan 2013) GDS

The Required Text:

The text is COMPULSORY

• To do the assignment

• Case studies as shown in the lecture schedule needs to be read from the text

• Examination topics and content taken from this book

• PLEASE PURCHASE ASAP!

1-2 BUSM 3200- Strategic Management (Jan 2013) GDS

Learning outcomes for Chapter One:

• Summarise the strategy of an organisation in a ‘strategy statement’.

• Identify key issues for an organisation’s strategy according to the Exploring Strategy model.

• Distinguish between corporate, business and operational strategies.

• Understand how different people contribute to strategy at work.

• Appreciate the contributions of different academic disciplines and theoretical lenses to practical strategy analysis.


Definitions of strategy (1)

‘..the determination of the long-run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resource necessary for carrying out these goals’ Alfred Chandler

‘Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value’ Michael Porter Sources: A.D. Chandler, Strategy and Structure: Chapters in the History of American Enterprise, MIT Press, 1963, p. 13 M.E. Porter, ‘What is strategy?’, Harvard Business Review, 1996, November–December, p. 60


Definitions of strategy (2)

‘..a pattern in a stream of decisions’

Henry Mintzberg

‘..the long-term direction of an organisation’

Exploring Strategy Sources:

H. Mintzberg, Tracking Strategy: Toward a General Theory, Oxford University Press, 2007, p. 3


From the text:


“If you don’t have a strategy you will be . . . part of somebody else’s strategy.”

- Alvin Toffler

Another good interpretation of Strategy:

This definition reminds us of the importance of staying ahead of

the game in SM; if not you will be overtaken and subsumed by

your rivals!


1–8 Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

WHAT DO WE MEAN BY STRATEGY ?

♦ What is our present situation?

● Business environment and industry conditions

● Firm’s financial and competitive capabilities

♦ Where do we want to go from here?

● Creating a vision for the firm’s future direction

♦ How are we going to get there?

● Crafting an action plan that will get us there


WHAT IS STRATEGY ABOUT?

♦ Strategy is all about How:

● How to outcompete rivals.

● How to respond to economic and market

conditions and growth opportunities.

● How to manage functional pieces of the

business.

● How to improve the firm’s financial and

market performance.

Strategic decisions



WHY CRAFTING AND EXECUTING STRATEGY ARE IMPORTANT TASKS

♦ Strategy provides:

● A prescription for doing business.

● A road map to competitive advantage.

● A game plan for pleasing customers.

● A formula for attaining long-term standout

marketplace performance.

Good Strategy + Good Strategy Execution =

Good Management


WHY DO STRATEGY ?

♦ A firm does strategy:

● To improve its financial performance.

● To strengthen its competitive position.

● To gain a sustainable competitive.

advantage over its market rivals.

♦ A creative, distinctive strategy:

● Can yield above-average profits.

● Makes competition difficult for rivals.


1.1 Identifying a Company’s Strategy—What to Look For


Does strategic planning always lead to success?

The formal planning model does not consider:

♦ The unpredictability of the real world (turbulence)

♦ The role of lower-level managers- they may not

implement effectively

♦ That success is often unplanned or serendipitous

(element of luck and timing?)

♦ Other reasons?

♦ So there is always an interesting debate as to whether

strategic planning always lead to higher performance

Three horizons for strategy (1)

Horizon 1 :

Extend and defend core business.

Horizon 2 :

Build emerging businesses.

Horizon 3 :

Create viable options.


Three horizons for strategy (2)

Figure 1.2 Three horizons for strategy Source: M. Baghai, S. Coley and D. While, The Alchemy of Growth, 2000, Texere Publishers: Figure 1.1, p. 5


Stakeholders

Stakeholders are those individuals or groups that depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends.

Later in the course, we will cover the implementation issues of SM

Here you will learn that decision making is a highly politicized process and many stakeholders will be involved


Levels of strategy (1)

Corporate-Level Strategy is concerned with the overall purpose and scope of an organisation and how to add value to business units.

Business-Level Strategy is concerned with the way a business seeks to compete successfully in its particular market.

Operational Level Strategy is concerned with how different parts of the organisation deliver the strategy in terms of managing resources, processes and people.


Levels of Strategic Management


Different levels of strategy

Strategy success depends on the conceptualization at the top and implementation down the levels

Each lower level needs to translate strategy into operational plans

Shows the importance of integration and coordination.

Example how would a decision to move in a strategic direction affect business functions such as marketing, HR, finance, operations, etc

Also important to note this because later in this course we will learn the differences between

Corporate Level Strategy

Business Level Strategy

20 BUSM 3200- Strategic Management (Jan 2013) GDS

Levels of strategy (2): an example

Operational strategy

Business-level

strategy

Corporate- level

strategy

News Corporation diversifying from print journalism into social networking.

Website and marketing improvements at My Space to attract more users.

MySpace engineers increasing processing Capacity.

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Management (Jan 2013)

GDS

Strategy statements

Strategy statements should have three main themes:

the fundamental goals that the organisation

seeks, which draw on the stated mission, vision and objectives

the scope or domain of the organisation’s activities

and the particular advantages or capabilities it has to deliver all these.


Working with strategy (1)

All managers are concerned with strategy:

Top managers frequently formulate and control strategy but may also involve others in the process.

Middle and lower level managers have to meet strategic objectives and deal with constraints.

All managers have to communicate strategy to their teams.

All managers can contribute to the formation of strategy through ideas and feedback.


Working with strategy (2)

Organisations may also use strategy specialists:

Many large organisations have in-house strategic planning or analyst roles.

Strategy consultants can be engaged from one of many general management consulting firms (e.g. Accenture, IBM Consulting, PwC).

There are a growing number of specialist strategy consulting firms (e.g. McKinsey &Co, The Boston Consulting Group).


Strategy’s three branches (1)

CONTEXT – internal and external.

CONTENT – strategic options.

PROCESS – formation and implementation.


Strategy’s three branches (2)

Figure 1.3 Strategy’s three branches


The exploring strategy model

Figure 1.4 The Exploring Strategy Model

1-27

Note this very

well !!

BUSM 3200- Strategic Management (Jan 2013) GDS

Strategic position

The strategic position is concerned with the impact on strategy of the external environment, the organisation’s strategic capability (resources and competences), the organisation’s goals and the organisation’s culture.


Strategic position: the key areas


Strategic position

Fundamental questions for Strategic Position:

• What are the environmental opportunities and threats?

• What are the organisation’s strengths and weaknesses?

• What is the basic purpose of the organisation?

• How does culture shape strategy?


Strategic choices

Strategic choices involve the options for strategy in terms of both the directions in which strategy might move and the methods by which strategy might be pursued.


Strategic choices: the key areas


Strategic choices

Fundamental questions for Strategic Choice:

• How should business units compete?

• Which businesses to include in the portfolio?

• Where should the organisation compete

internationally?

• Is the organisation innovating appropriately?

• Should the organisation buy other companies, form alliances or go it alone?


Strategy in action

Strategy in action is about how strategies are formed and how they are implemented.

The emphasis is on the practicalities of managing.


Strategy in action: the key areas


Strategy in action

Fundamental questions for Strategy in Action

• Which strategies are suitable, acceptable and feasible?

• What kind of strategy-making process is needed?

• What are the required organisation structures and systems?

• How should the organisation manage necessary changes?

• Who should do what in the strategy process?


The strategy checklist


Strategy is Evolving

A key aspect of strategy is that it changes over time

Initially a planned or deliberate strategy could be implemented BUT:

Changes will occur

The planned strategy may need to be modified or abandoned altogether

In the process, new strategies may ‘emerge’

This is the work of Professor Henry Mintzberg


Emergent and Deliberate Strategies


Re: Mintzberg


Why a Firm’s Strategy Evolves over Time

♦ Managers modify strategy in response to:

● Changing market conditions

● Advancing technology

● Fresh moves of competitors

● Shifting buyer needs

● Emerging market opportunities

● New ideas for improving the strategy

Exploring strategy in different contexts

The Exploring Strategy Model can be applied in many contexts. In each context the balance of strategic issues differs: Small Businesses (e.g. Purpose and Growth issues) Multinational Corporations (e.g. Geographical Scope and Structure/Control issues) Public Sector Organisations (e.g. Service/Quality and Managing Change issues) Not For Profit Organisations (e.g. Purpose and Funding issues; Multiple Stakeholders)


The issues and challenges of doing SM in these different contexts will be unique

The strategy lenses (1)

The strategy lenses are ways of looking at strategy issues differently in order to generate many insights. Looking at problems in different ways will raise new issues and new solutions.

This topic reminds us that there is always the ‘human dimension’ in SM

Lenses = Perspectives to planning


The strategy lenses (2)

Strategy can be seen as:

Design

Experience

Variety (Ideas)

Discourse


Read the Commentary on

Strategy Lenses starting on page

27 of the text.

Read up especially the sections

on “implications for management”

Strategy as design

Figure C.i Design lens


Strategic management is seen as a process that is analytical and rational. Need to evaluate and look for the ‘best option’ Planning is top-down

Strategy as experience

Figure C.ii Experience lens


Strategy is a result of decisions arising from the ‘cumulative wisdom or experiences’ of the mangers who are involved in decision making Strategy is likely to build on what was done before; limited change.

Strategy as variety

Figure C.iii Variety lens


Strategy is not necessarily planned or directed from the top Rather it ‘emerges’ from within and around the organization as it responds to changes. New ideas emerge as a result of unpredictable and competitive pressures.

Adaptive tension (page 37)

Figure C.iv Adaptive tension


Simple Rules


Strategy as discourse


Strategy here focuses on the dynamics of interactions between the manager and subordinates – one of engaging in problem framing, debating and then communicating the decisions. It focuses on the complexities of human dynamics in SM

The strategy lenses summary

Table C.ii A summary of the strategy lenses


Just for INFO only

Professor Henry Minztberg, well known academic in Strategic Management has an excellent text on SM called the “Strategy Safari”

The term safari is used because strategy is complex and mangers are in search of the ideal approach.

In this book he highlights the different “schools of thought” in Strategy

If you don’t read the book you can always Google the essence of his writing


A Key Issue in SM

Competitive Advantage

As you do you complete the chapter readings and assignment in the weeks to come, keep thinking about how the different topics you are covering affect the issue of competitive advantage

This is the key issue in SM

How to gain and how to sustain competitive advantage

The work of Professor Michael Porter focuses on this. We cover this in great detail in Lecture 5.



The Quest for Competitive Advantage

♦ Competitive Advantage

● Meeting customer needs more effectively,

with products or services that customers

value more highly, or more efficiently, at

lower cost.

♦ Sustainable Competitive Advantage

● Giving buyers lasting reasons to prefer a

firm’s products or services over those of its

competitors.


IS OUR STRATEGY A WINNER?

Winning

Strategy

The Strategic

Fit Test

The Competitive

Advantage Test

The Performance

Test


WHAT MAKES A STRATEGY A WINNER?

♦ A winning strategy must pass three tests:

● The Fit Test

Does it exhibit dynamic fit with the external and

internal aspects of the firm’s overall situation?

● The Competitive Advantage Test

Can it help the firm achieve a significant and

sustainable competitive advantage?

● The Performance Test

Can it produce good performance as measured

by the firm’s profitability, financial and

competitive strengths, and market standing?


STRATEGIC APPROACHES

♦ Building a competitive advantage by:

1. Striving to become the industry’s low-cost

provider (efficiency).

2. Outcompeting rivals on differentiating

features (effectiveness).

3. Focusing on better serving a niche market’s

needs (efficiency and\or effectiveness).

4. Offering the lowest (best) prices for

differentiated goods (best-cost provider).

Chapter summary (1)

Strategy is the long-term direction of an organisation. A ‘strategy statement’ should cover the goals of an organisation, the scope of the organisation’s activities and the advantages or capabilities the organisation brings to these goals and activities.

Corporate-level strategy is concerned with an organisation’s overall scope; business-level strategy is concerned with how to compete; and operational strategy is concerned with how resources, processes and people deliver corporate- and business-level strategy.

Strategy work is done by managers throughout an organisation, as well as specialist strategic planners and strategy consultants.


Chapter summary (2)

• Research on strategy context, content and process shows how the analytical perspectives of economics, sociology and psychology can all provide practical insights for approaching strategy issues

• The Exploring Strategy Model has three major elements: understanding the strategic position, making strategic choices for the future and managing strategy-in-action.

• Strategic issues are best seen from a variety of perspectives, as exemplified by the four strategy lenses of design, experience, variety and discourse.


PRACTICE ESSAY QUESTIONS

IMPORTANT NOTE: →

These questions are provided for your reference only – they are only INDICATIVE of the standard of questions you might expect in the final exam.

DO NOT use these questions to “spot”

The RMIT examiner will post advice on the exam on the Learning Hub closer to the exam; you are required to pay attention to that advise

The questions here show the range of topics that could be tested from this lecture; they are NOT exhaustive

To score a high grade it is important to LINK the theory to applications and examples. Where from?

You have been assigned specific cases to read from the text. Each case study will show you the kinds of strategic decisions the case company needs to make. You can draw from these examples.

You have selected a case company for your project; you may use examples from there.

You are supposed to read widely from the business press about local, regional and international companies strategies. You can use examples from there as well.


Sample Essay Question

Our understanding of how strategy development in organizations can be enhanced through employing different strategy lenses. Give examples to illustrate your understanding.


sm lecture one : introducing strategy

Documents

definitions of strategy

tracking strategy

strategy source

elses strategy

strategy atwork

distinctive strategy

strategic management

good strategy execution