Exploring Corporate Strategy

7th Edition

Part I

Introduction

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Exploring Corporate Strategy

7th Edition

Chapter 1

Introducing Strategy

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Introducing Strategy Outline

What is strategy and strategic management? Strategic priorities at corporate, business and operational level Vocabulary of strategy Exploring Corporate Strategy strategic management model

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Definition of Strategy
Strategy 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.

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Strategic decisions

Exhibit 1.1
Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

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Strategic Decisions are About

The long-term direction of the organisation The scope of an organisations activities Gaining advantage over competitors Addressing changes in the business environment Building on resources and competences (capability) Values and expectations of stakeholders which affect operational decisions
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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Strategic Decisions are Likely to :

Be complex in nature Be made in situations of uncertainty Affect operational decisions Require an integrated approach (both inside and outside an organisation) Involve considerable change

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Strategic Business Unit (SBU)

A strategic business unit (SBU) is a part of an organisation for which there is a distinct external market for goods or services that is different from another SBU

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

LEVELS OF STRATEGY
Corporate level
Determine overall scope of the organisation Add value to the different business units Meet expectations of stakeholders

Business level (SBU)

How to compete successfully in particular markets

Operational
How different parts of organisation deliver strategy
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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

The vocabulary of strategy

Exhibit 1.2
Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

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The Vocabulary of Strategy

Mission overriding purpose Vision/strategic intent desired future state Goal general statement of aim or purpose Objective quantification or more precise statement of goal Strategic capability resources, activities and processes Business model how product, service and information flow Control monitoring of action steps
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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Strategy and Operations

Strategic Management Conceptualisation of issues Creating new directions Operational Management Techniques and actions Organisation-wide, holistic Routinised

Managing existing resources Developing new resources Operating within existing strategy Ambiguous/uncertain Operationally specific

Long term

Day to day issues

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Elements of Strategic Management

Understanding the strategic position of an organisation Making strategic choices for the future Turning strategy into action

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

A model of the elements of strategic management

Exhibit 1.3
Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

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Strategic Position (1)

The Organisations Environment
Political Economic Social Technological Legal Environmental Sources of Competition Opportunities and Threats

Strategic Capability of the Organisation

Resources and Competences Strengths and Weaknesses

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Strategic Position (2)

Expectations and Purposes
Corporate Governance, Stakeholders, Ethics and Culture Sources of Power and Influence Communication of Purpose: Mission and Objectives

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Strategic Choices
Bases of competitive advantage at business level Scope of activities at corporate level
Portfolio Market spread, e.g. international Value added by corporate parent (parenting)

Directions and methods of development

Directions: Product/Market Methods: Internal/organic, M&A, strategic alliances
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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Strategy into Action

Structuring the organisation Marshalling resources (people, information, finance, technology) Managing change

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Processes of Strategy Development

Intended strategies
Deliberate management intent

Emergent strategies
Develop out of social and political processes in and around organisations
Most strategies are a combination of intended and emergent processes

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Strategy as a Subject of Study

1960s 60/70s 1980s Harvard case study Corporate planning Adaptive processes (Quinn) What would you do if you were CEO? Systematised and analytical approach Complexity and uncertainty. Influence of experience, politics, culture, history

1980s
1980s

Market positioning (Porter)

Resource based theory (Hamel, Prahalad)

Assessing competitive forces (5 forces) and positioning

Unique resources, core competences

1990s

Firms as organisms Innovation to deal with change (Eisenhardt, Stacey)

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Different Contexts for Strategy (1)

Small Business Multinational Corporation Single market. Limited product/service range. Competitive strategy. Strategic capability. Restricted funds. Diverse products/markets/businesses. Structure/control/parenting. Competitive strategy. Portfolio management. Resource coordination.

Manufacturing/ Manufacturing physical product often augmented with Service service, brand image for competitive advantage. Services Organisations no physical product, competitive advantage based on intangibles

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Different Contexts for Strategy (2)

Public Sector Ideology. Direct/indirect external influence (e.g. government). Competition for resource inputs. Best value in outputs. Interagency cooperation Diverse sources of funds. Values and ideology. Lobbying. Stakeholder management.

Voluntary and Not-for-Profit

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Challenges of Strategic Management

Prevent strategic drift
Progressive failure to address strategic position Deterioration of performance

Understand and address contemporary issues

Internationalisation E-Commerce Changing purposes Knowledge and learning

View strategy in more than one way

Three strategy lenses Design, Experience, Ideas
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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

The risk of strategic drift

Exhibit 1.4
Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

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Contemporary Strategy Themes (1)

Internationalisation
Size of market Range of competitors Relationships overseas Institutional/cultural orientation to strategy and profit orientation

E-Commerce
Speed and direction of technology change Expectations about how to do business E-commerce capability Service small markets

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

Contemporary Strategy Themes (2)

Changing purposes
Change from pure profit driven Corporate scandals Corporate social responsibility AND drive for shareholder value Public sector more business-like target setting and service orientation

Knowledge and Learning

Innovation Generate and integrate knowledge/promote learning New ways of doing business People interactions
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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

The Strategy Lenses (1)

Strategy as design
Logical analytical process Planned implementation Top manager driven

Strategy as experience
Adaptation of past strategies based on experience Influenced by taken for granted assumptions (culture) Bargaining and negotiation
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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

The Strategy Lenses (2)

Strategy as ideas
Importance of variety and diversity for innovation Emergent strategy from within and around the organisation Top managers create the conditions for this to take place

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Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

The role of the paradigm in strategy formulation

Exhibit I.i
Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

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Conditions of adaptive tension

Exhibit I.ii
Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

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Simple rules

Source: Reprinted with permission from Harvard Business Review. Adapted from K.M. Eisenhardt and D.N. Sull, Strategy as simple rules, January 2001, Copyright 2001 by the Harvard Business School Publishing Corporation, all rights reserved.

Exhibit I.iii
Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

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Three strategy lenses: a summary

Exhibit I.iv
Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

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Three strategy lenses

Exhibit I.v
Exploring Corporate Strategy, Seventh Edition, Pearson Education Ltd 2005

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