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Samenvatting Understanding Strategic Management, ISBN: 9780199662470 strategic management
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Strategy - Understanding Strategic Management - 3rd edition (Anthony E. Henry)
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Summary book HenryChapter 1 – what is strategy?
The purpose of strategy is to help organizations achieve a competitive advantage (when an
organization is implementing a value creating strategy that is not being implemented by
competitors).
A strategy should be rational, based on estimates of what can be gained, and the costs
incurred by it. A strategy should be to achieve one goal: victory. The objective should be
clear, otherwise the implementation of the strategy will not be successful.
In the modern business, organization are increasingly aware of the competition. You have a
competitive advantage when you better meet the consumer needs than its rivals. The
differences between you and your competitors are the basis for your advantage.
The use of strategy is the primary way in which managers take account of a constantly
changing environment. An effective strategy allows managers to use the organization’s
capabilities to exploit opportunities and limit threats in the environment.
For individuals, a strategy is to help achieve a certain goal and this is all about choices. At the
organizational level, the choices and trade-off are extremely complex.
Defining strategy
Strategy is about being different. The company must choose activities in which it can deliver
a unique mix of value to the customer. Differentiation when:
1. The company provides a differentiated product / service which is more highly valued
by customers for a premium price.
2. The company provides products with the same quality as a competitor but for a
lower price (more efficient).
Strategic position when you have the answers to:
- Who should the company target as customers?
- What products or services should the company offer the targeted customers?
- How can the company do this efficiently?
A company’s strategy describes the link between what they are good at and their
relationship with customers, suppliers and competitors.
Distinctive capabilities = it must be highly valued by the consumer and difficult for your
competitors to imitate.
A strategy should acknowledge challenges being faced by a company and how to overcome
these. 3 elements of a strategy: diagnosis, guiding policy and a set of actions. A diagnosis
explains the nature of the challenge which faces the organization to simplify the complexity.
The guiding policy is the overall approach which managers have chosen to deal with the
obstacles identified in the diagnosis. The set of actions is needed to carry out the guiding
policy.
1
,The diagnoses appear to make an overwhelming complex situation into a simpler story. This
allows all people involved to understand the situation.
Strategic management
The purpose of undertaking a strategy is strategic management. Strategic management is
about analyzing the situation facing the firm. This analysis will allow managers to formulate
strategies for dealing with the situation or challenge. This all to achieve competitive
advantage over its rivals.
There is a relationship between analysis, formulation and implementation.
- Analysis: it deals with evaluating the organization.
- Strategy Formulation: after making a good analysis, managers know what they want
to achieve. A key part of strategy formulation is strategy evaluation which recognizes
that an organization is seldom faced with one strategy but requires a criterion to
judge competing strategies. The formulation takes place at 2 different levels:
business level and the corporate level. Corporate strategies deal with fundamental
question of what markets the company wants to compete it. Business strategy deals
with how a company competes in its chosen market.
- Strategy Implementation: effective implementation requires the organization to be
sufficiently flexible in its organizational structure and design. Strategies need to be
communicated, understood and coordinated with stakeholders inside and outside
the organization. There should be an organizational culture where employees are
confident enough to try out new ideas and innovate.
Vision, values and mission
A vision represents a desired state that the organization aspires to achieve int eh future.
Vision tends not to change over time. It must tap into the personal goals and values of the
organization employees if it is to be internalized by them.
A mission seeks to answer the question why an organization exists. A mission statement is a
way in which the organization communicates the business it is in to the outside world. It
should also motivate employees.
2
, Chapter 4 – internal environment (value creating)
Differential firm performance
- Should a company focus on the characteristics of its industry or the characteristics of
its own organization? For Porter, industry characteristics are vital. Therefore, his
theory is also called ‘’positioning school’’: the organization is viewed as capable of
adopting a strategy which allows it to position itself within the industry to take
advantage of the prevailing industry structure.
- For Porter, the profitability of an industry is determined by his 5-force framework.
- Hawawini suggest the external environment is more important than firm-specific
factors.
Value chain analysis
- Value chain analysis looks at the activities that go to make up a product / service with
a view to ascertaining how much value each activity adds. This to help assess its
internal resources based on the difference between revenue it makes and total costs
of that product.
- Upstream and downstream value?
Primary activities
- To assess all activities, it is important to do this at the level of a strategic business
unit (SBU). The activities within the value chain are classified by Porter as primary
activities and support activities.
- Those activities are directly involved in the creation of a product or service. Support
activities are those which ensure that the primary activities are carried out efficiently.
These activities are the link between the strategy and the implementation.
-
https://www.youtube.com/watch?v=a9LWp9y2fMw
- The primary activities are divided into 5 categories:
1. Inbound logistics;
2. Operations;
3. Outbound logistic;
4. Marketing & sales;
5. Service;
3
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