Introduction to Strategy & Strategist
Concept of Strategy
‘Strategy is the determination of the long-run 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 is the long-term direction of an organisation.
Example: The long-term direction of Amazon is from book retailing to internet services in general. The long-term direction of Disney is from cartoons to diversified entertainment.
Alfred Chandler from Harvard University, emphasises a logical flow from the determination of goals and objectives to the allocation of resources.
Michael Porter focuses on deliberate choices, difference and competition.
Peter Drucker suggests that it is a theory about how a firm will win.
Henry Mintzberg, however, takes the view that strategy is less certain and uses the word ‘pattern’ to allow for the fact that strategies do not always follow a deliberately chosen and logical plan, but can emerge in more ad hoc ways.
Sometimes strategies reflect a series of incremental decisions that only cohere into a recog- nisable pattern – or ‘strategy’ – after some time.
Long Term Direction (Strategy) has two advantages;
- First, the long-term direction of an organisation can include both deliber- ate, logical strategy and more incremental, emergent patterns of strategy.
- Second, long-term direction can include both strategies that emphasise difference and competition, and strate- gies that recognise the roles of cooperation and even imitation.
History of Strategy
- Rooted in the Military
- Originated in business with the emergence of the business schools (Wharton and Harvard)
- First known as Business Policy
- Used as a capstone course to bring business functions together
- Had little grounding in its own theory
- Real research in the area of “strategic management” only really began to take shape in the 1970’s
- Technically economics is the grounding for strategic management theory
- Rigid structure of neoclassical economics did not serve empirical evidence of firm performance well which lead to other disciplines such as Sociology, Psychology, Political Science, and Institutional theory as “alternative” explanations for strategy.
- Relaxation of the rigidities in economics in the 1980’s has put economics back in the forefront as a solid theoretical foundation for strategy
Stages of Management Action
The term strategic management is used to refer to the entire scope of strategic-decision making activity in an organisation. Strategic management is the process of examining both present and future environments, formulating the organisation’s objectives and making implementing, and controlling decisions focused on achieving these objectives in the present and future environments – by Garry D. Smith, Denny R Arnold, Bobby G. Bizzell)
- Policies: Policies include guidelines, procedures, rules, programs, and budgets established to support efforts to achieve stated objectives. Therefore policies become important management tools for implementing them.
- Strategies: “A Strategy is a unified, comprehensive, and integrated plan that relates the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organisation” – By William F. Glueck, and Lawrence R. Jauch
- Tactics: Tactics are specific actios the organisation might undertake in carrying its strategy.
- Control: Strategic control is concerned with tracking the strategy as it is being implemented, detecting problems or changes in the premises and making necessary adjustments.
Three Core Areas of Strategic Management
- Strategic Analysis
- Vision, Mission and Objectives
- Strategic Development
- Rational selection between options
- Finding the strategic route forward
- Resource implementation
- Resource allocation
- Strategic planning and control
- People issues and strategic changes
Why Strategic Management Important?
Because it deals with the fundamental issues that affect the future of the organisation
- involves the entire organisation
- is likely to concern itself with the survival of the organisation as a minimum objective
- and the creation of value add as a maximum objective
The Purpose of Strategy
What is Strategy For?
Harvard University’s Cynthia Montgomery argues that the core of a strategist’s job is defining and expressing a clear and motivating purpose for the organisation.
According to Montgomery, the stated purpose of the organisation should address two related questions: how does the organisation make a difference; and for whom does the organisation make that difference?
- Mission Statement: A mission statement aims to provide employees and stakeholders with clarity about what the organisation is fundamentally there to do. ‘What business are we in?
- Vision Statement: A vision statement is concerned with the future the organisation seeks to create. ‘What do we want to achieve?’
- Corporate Value: Statements of corporate values communicate the underlying and enduring core ‘principles’ that guide an organisation’s strategy and define the way that the organisation should operate.
- Objectives: Objectives are statements of specific outcomes that are to be achieved. (Financial Achievement)
David Collis and Michael Rukstad at the Harvard Business School argue that all entrepreneurs and managers should be able to summarise their organisation’s strategy with a ‘strategy statement’. Strategy statements should have three main themes:
- the fundamental goals (mission, vision or objectives) that the organisation seeks;
- the scope or domain of the organisation’s activities; and ( An organisation’s scope or domain refers to three dimensions:
- customers or clients;
- geographical location; and
- extent of internal activities (‘vertical integration).
- the particular advantages or capabilities it has to deliver all of these. (This part of a strategy statement describes how the organisation will achieve the objectives it has set for itself in its chosen domain. In competitive environments, this refers to the competitive advantage )
Collis and Rukstad suggest that strategy statements covering goals, scope and advantage should be no more than 35 words long. The three themes are deliberately made highly concise. Brevity keeps such statements focused on the essentials and makes them easy to remember and communicate.
Level of Strategy
- Corporate Level Strategy: It is concerned with the overall scope of an organisation and how value is added to the constituent businesses of the organisational whole. Corporate-level strategy issues include geographical scope, diversity of products or services, acquisitions of newbusinesses, and how resources are allocated between the different elements of the organisation.
- Growth (a. concentration; b. diversification)
- Retrenchment (economizing)
- Stability (status quo)
- Combination (multiple strategies)
- Business Level Strategy: It is about how the individual businesses should compete in their particular markets (this is often called ‘competitive strategy’). These might be stand-alone businesses, for instance entrepreneurial start-ups, or ‘business units’ within a larger corporation. Business-level strategy typically concerns issues such as innovation, appropriate scale and response to competitors’ moves.
- Michael Porter’s Competitive Strategies:
- low cost
- Adaptive business level strategies:
- Product life cycle:
- introduction stage
- growth stage…..
- Michael Porter’s Competitive Strategies:
- Functional Strategies: Functional strategies are concerned with how the components of an organisation deliver effectively the corporate- and business-level strategies in terms of resources, processes and people.
- Human resources
- Operations & Etc.
The Exploring Strategy Framework
The Exploring Strategy Framework includes understanding the strategic position of an organisation; assessing strategic choices for the future; and managing strategy in action.
- Strategic Position: The strategic position is concerned with the impact on strategy of the macro-environment, the industry environment, the organisation’s strategic capability (resources and compe- tences), the organisation’s stakeholders and the organisation’s culture.
- Macro environment – What are the Macro-environmental opportunities and treats?
- Stakeholders (Corporate social responsibility and ethics) – how can the organisation be aligned around a common purpose?
- Culture – How does culture fit with the required strategy?
- Resources (Fixed assets, – Strengths and weakness, Competences – Technical and Managerial skills) – where is it at a competitive advantage or disadvantage? / What resources and capabilities support the strategy?
- Industry environment (Competitors, Suppliers and Customers present challenges to an organisation) – How can the Organisation manage industry Forces?
- 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.
- Business Strategy and Model (how the organisation seeks to compete at the individual business level?) – what strategy and what business model should a company use to compete?
- International Strategy – where should the organisation compete internationally? – diversification, but into new geo- graphical markets)
- Mergers, Acquisitions and Alliance – Should the organisation buy other companies, ally or go to alone?
- Entrepreneurship (is the organisation innovating appropriately?)
- Corporate Strategy (which businesses to include in the portfolio)
- Strategy in actions: This is about how strategies are formed and how they are imple- mented.
- Performance & Evaluating – What strategies suitable, acceptable and feasible?
- Organizing – what kinds of structures and systems are required for the chosen strategy?
- Practice – who should do what in the strategy process?
- Leadership and Change – how should the organisation man- age necessary changes entailed by the strategy?
- Strategy Development Processes – what kind of strategy process should an organisation have?
Three Branches of Strategy research
A. Strategy Context:
Strategy context refers to multiple layers of environment, internal and external to organisations. All organisations need to take into account the opportunities and threats of their external environments.
- Macro-environmental analysis has been an enduring theme in strategy with early recognition of multiple pressures upon industries in the 1960s.
- Industry analysis took off as a research tradition in the early 1980s, when Michael Porter showed how the tools of economics could be applied to understanding what makes industries attractive (or unattractive) to operate in.
- From the 1980s too, cultural analysts have used sociological insights into human behaviour to point to the importance of shared cultural understandings about appropriate ways of acting. In the internal context, cultural analysts show that strategies are often influenced by the organisation’s specific culture.
- Resource-based view researchers focus on internal context, looking for the unique characteristics of each organisation.
B. Strategy content:
Strategy content concerns the content (or nature) of different strategies and their probability of success. Here the focus is on the merits of different strategic options. The aim is to establish which types of strategies pay best and under what conditions
B. Strategy Process:
Strategy process, broadly conceived, examines how strategies are formed and implemented. Research here provides a range of insights to help managers in the practical processes of managing strategy.
The strategy lenses are ways of looking at strategy issues differently in order to generate additional insights. Different perspectives will help you criticise prevailing approaches and raise new issues or solutions.
Four lenses are:
- Strategy as design views strategy development as ‘designed’ in the abstract, as an architect might design a building using pens, rulers and paper. Taking a design lens to a strategic problem means valuing hard facts and objectivity. It’s about being systematic, analytical and logical.
- Strategy as experience recognises that an organisation’s future strategy is often heavily influenced by its experience and that of its managers. Taken-for-granted assumptions and ways of doing things, embedded in people’s personal experience and in organisational culture, will drive strategy. Strategy is likely to build on rules of thumb, appeals to precedent, standard fixes, biases and routines of key decision-makers.
- Strategy as variety; Neither of the above lenses is likely to uncover radical new ideas in strategy as a design approach risks being too rigid and top-down and experience builds too much on the past. The variety lens sees strategy as emergent from within and around organisations as new ideas bubble up through an unpredictable process in response to an uncertain and changing environment.
- Strategy as discourse focuses attention on the ways managers use language to frame stra- tegic problems, make strategy proposals, debate issues and then finally communicate strategic decisions. Strategy discourse becomes a tool for managers to shape ‘objective’ strategic analyses in their favour and to gain influence, power and legitimacy – strategy ‘talk’ matters.
Common Elements in Successful Strategy
What is the ultimate goal of strategy for a firm?
- Maximize shareholder value
- “Monopoly” power
- Bigger can be better
- Profits – above average
- Success – but what is success?
- Staying in business/survival/killing competition????
- How do we position ourselves to achieve sustainable above average profits in long run?
Strategy Must be ………
- a visionary, meaningful mission statement
- a clear and simple approach
- define how to get more than a fair share
- committed to calculated moves and signal commitment to competitors
- Able to follow through on commitments continually and retaliate quickly and aggressively to counter moves
- continually innovated
- Strategy is the long-term direction of an organisation.
- The work of strategy is to define and express the purpose of an organisation through its mission, vision, values and objectives.
- Ideally a strategy statement should include an organisation’s goals, scope of activities and the advantages or capabilities it 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 functional strategy is concerned with how corporate- and business-level strategies are actually delivered.
- The Exploring Strategy Framework has three major elements: understanding the strategic position, making strategic choices for the future and managing strategy in action.
- Strategy work is done by managers throughout an organisation, as well as specialist strategic planners and strategy consultants.
- Research on strategy context, content and process shows how the analytical perspectives of economics, finance, sociology and psychology can all provide practical insights for approaching strategy issues.
- Although the fundamentals of strategy may be similar, strategy varies by organisational context, for example, small business, multinational or public sector.
- Strategic issues can be viewed critically from a variety of perspectives, as exemplified by the four strategy lenses of design, experience, variety and discourse.
This material is for educational purpose only and we don’t have authority to resell for any business purpose.
Book: Exploring Strategy, 11th edition
- Publisher: Pearson Publication
- Writer: Gerry Johnson, Richard Whittington, Kevan Scholes, Duncan Angwin, Patrik Regner