Detailed summary of the Strategy and Organisation textbook (9781784481896)
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Course
Strategie En Organisatie (ECB1SO)
Institution
Universiteit Utrecht (UU)
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The summary will help you to optimally prepare for the exam and catch up with the reading for the Strategy and Organisation course at Utrecht University (ECB1SO). It will further provide a background of how to analyse the performance of the business using different strategic approaches.
Strategy And Organization (ECB1SO) | Samenvatting | ISBN: 9781784481896
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STRATEGY AND ORGANISATION NOTES
TOPIC 1 – INTRODUCING STRATEGY
WHAT IS STRATEGY?
In this book, strategy is defined as the long-term directions of an organisation. The strategy of
Amazon goes from book retailing to internet services, Disney long-term direction is from cartoons
to diversified entertainment.
There are three main definitions of strategy given by the three main strategy theorists:
• “The determination of the basic, long-term goals and objectives of an enterprise, and the
adoption of courses of action and the allocation of resources necessary for those goals.”
ALFRED D. CHANDLER
• “Competitive strategy is about being different. It means deliberately choosing a different
set of activities to deliver a unique mix of value.
MICHEAL PORTER
• “A carefully intended course of action whose resulting behaviour can be identified. Hence,
strategy is a pattern—particularly, a pattern within a series of actions.”
HENRY MINTZBERG
Chandler emphasises a logical flow from the determination of goals and objectives to the
allocation of resources; Porter focuses on deliberate choices, difference and competition;
Mintzberg uses the word “pattern” to allow for the fact that strategies do not always follow a
logical and deliberately chosen plan but can emerge in more ad hoc ways (different routes to
reach the same goal, created for a specific situation). Sometimes this happens through a series of
incremental decisions (decisions making divided into small steps) that cohere in a pattern (or
strategy) after some time.
As already mentioned, this book uses “The long-term directions of an organisation” as definition of
strategy and this has two advantages:
1. The long-term direction can contain both deliberate, logical strategy and incremental
decision making that cohere in a pattern.
2. The long-term direction can include both strategies that emphasise difference and
competition, and strategies that recognise the role of cooperation and even imitation.
These elements can be explained further:
• The long-term: Strategies are typically measured over the years, sometimes decades. The
importance of a long-term perspective on strategies is emphasised by the three-horizons
framework*
• Strategic direction: refers to the plans that need to be implemented for an organisation to
progress towards its vision and fulfil its goals. Over the years strategies follow some kind of
direction or trajectories (sometimes, as already said, it emerges over time). Usually managers
and entrepreneurs try to set the direction of their strategy based on their long-term objectives.
, • Organisation: Organisations involve complex relationships, both internally and externally.
There are people and groups that depend on the organization and upon which the
organisation itself depends.
Internally, organisations are filled with people with diverse, competing and more or less
reasonable views of what should be done (this is why in strategy is important to consider
people involved and their different points of view).
Externally, organisations have many important relationships such as with customers,
suppliers and advertisers. (for the example of Vice at page 5, the relationship with
advertiser has been crucial for the company growth).
*THE THREE-HORIZONS FRAMEWORK
This framework suggest that organisations should define themselves as the joint combination of
three types of businesses defined by their horizons in terms of years.
• HORIZON 1, businesses are the current core activity. This horizon includes that the
expectations of this horizon are likely to decline in terms of profit or whatever the
company goal is. (for Vice is the original magazine) → SHORT TERM PLANS
• HORIZON 2, businesses are emerging activities that should provide new sources of profit
(for Vice China and India markets) → MEDIUM TERM PLANS
• HORIZON 3, which includes are long-term innovation research and development projects,
start-up ventures, test-market or similar. These are likely to generate profit in the long
term (for a pharmaceutical company this might be 10 years, while for Vice this could be 2
to 3 years). → LONG TERM PLANS
Figure 1.2 - Page 6
LEVELS OF STRATEGY
,Inside an organization, there are three possible main levels of strategy:
• Corporate-level strategy, which is concerned with the overall scope of an organisation and
how the value is added to the constituent (being part of the whole) businesses of the
organisation. This can include diversity of products and services, acquisition of new businesses
and how resources are allocated between the different elements of the organization. In other
words are concerned with the corporation as a whole.
• Business-level strategy, which is about the individual businesses should compete in their
markets. This type of strategy usually involves issues such as innovation, response to
competitors moves etc.
• Operational strategy, which is concerned with how the components of an organisation deliver
effectively the Corporate- and Business-level strategies in terms of resources, processes and
people. In most businesses, successful business strategies mostly depend on activities and
decisions at the operational level.
NOTE
Every level of strategy has to be aligned with the others; integration is the key for a successful
strategy.
STRATEGY STATEMENTS
David Collins and Micheal Rukstad (Harvard Business School) claim that all entrepreneurs and
managers should be able to summarise their organisation strategy with a strategy statement.
These statements should include three main themes:
1. The fundamental goals: mission, vision or objectives.
2. The scope or domain of the organisation activities.
3. The advantages or capabilities.
• Mission: This refers to the main purpose of the organization.
“What kind of business are we in?”
• Vision: It refers to the desired future state of the organisation and it is an aspiration which
can help members of the organisation to activate passion and energy.
“What do we want to achieve?”
, • Objectives: These are more precises and quantifiable statements of the organisation goals
over a period of time.
“What do we want to achieve in the coming period?”
• Scope or domain: It refers to three dimensions which are customers or clients;
geographical location; vertical integration (the extent of internal activities). For a university
the questions could be:
“Which academic departments should we have?”
“Which activities should we do internally, and which activities should we externalise to
subcontractors”
• Advantage: It describes how the organisation will achieve the objectives it has set in the
chosen domain.
“How will we achieve our objectives”.
David Collins and Micheal Rukstad suggest that a strategy statement should not be longer than
35 words in order to keep the statement focused on the essential.
A good example for Vice could be “To build the world’s strongest online media group, focused
on youth and with competitive advantages in terms of diversity and international range of our
businesses and the strength of our relationship with key partners”.
Why are strategy statements important?
The ability to give a good strategy statement is a good test of managerial competence in an
organisation.
Strategy statements are important for a wide range of organisations:
• Start-ups can use strategy statement to persuade investors to finance their growth.
• Volunteer organizations can use statements to convince donors to donate.
*strategy statements for public and private sectors examples at page 9 of the book.
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