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Summary Strategic Management 344
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Summaries of the textbook for the chapters covered in 2021: Document contains chapters: 1; 2; 3; 4; 5; 6; 7; 8; 10; 12; 13
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Strategic Management 344Study Notes
Chapter 1
Introduction: The Nature of Strategic Management
Learning Outcomes
Explain the essence of strategy
Demonstrate an understanding of strategy development and perspectives of
strategy
Discuss the nature and role of strategy
Explain the concept of strategic management
Formulate an argument on the different perspectives of managing strategically
Identify and explain the elements of the strategic management process
Managing an organisation in the 21st century is a complex task. It involves and impacts
organisational leadership, strategies, and organisational architecture:
Increasingly competitive business practices
Inclination towards strategic flexibility to accommodate change
Emergence of networked organizations
Concern for sustainability and business ethics in the global arena
Thinking strategically about an organisation includes questions such as:
Where are we now?
Where do we want to go?
How will we get there?
How are we doing?
The extent to which an organization successfully implements its strategies will be
determined by the approach to sustainability it adopts – there is a need for organisations to
manage their own resources while at the same time being responsible and sustainable
global corporate citizens. All organizations require strategy to achieve their purpose.
Sustaining a competitive advantage is influenced by the organizations engagement with the
government, environmental focus, and socio-economic development. As managers gain a
better understanding of markets, they have to continually rethink and reconfigure every
element of their business model (plan of how an organization creates value for its
customers while simultaneously generating sufficient revenue or surplus to have above-
average returns).
The Essence of Strategy
Strategy Conceptualised
Strategy is considered a key element of managerial activity. It is very important for
competitive advantage, and is a very complex concept. A strategy is a number of things. It is:
A plan, method or series of actions designed to achieve a specific goal or effort
, 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
The pattern/plan that integrates an organization’s major goals, policies and action
sequences into a cohesive whole; helps marshal and allocate an organization’s
resources into a unique and viable posture based upon its relative internal
competencies and shortcomings, anticipated changes in the environment and
contingent moves by intelligent opponents
About competitive advantage – to enable a company to gain, as efficiently as
possible, a sustainable edge over its competitors
About making choices, trade-offs – deliberately choosing to be different
The direction and scope of an organization of the long run, which achieves
advantage for the organization through its configurations of resources within a
changing environment and to fulfil stakeholder expectations
The Historical Origins of the Concept of Strategy
The word strategy is derived from the Green word strategos (a general), and strategos is
derived from stratos (the army) and agein (to lead). The first formal article on strategy was:
Sun Tzu’s seminal work, the art of war, and it only became popular in the business world in
the 20th century. Military and business operations share some common concepts and
principles:
o Tactic: plan for a specific action
o Strategy: overall scheme of leveraging resources to obtain a competitive advantage
Strategy Development in the 20th and 21st Century
Authors Contributions in defining management tasks
F.W. Taylor Identify the best way for employees to perform a task
Henri Fayol Emphasised formal structures and processes for the
adequate performance of all important tasks
Henry Ford (1908 – 1915) Innovative technology, mechanization, quality standards,
redesign and cost cutting
Alfred Sloan Emphasized rapid model changes; niche marketing
The Harvard Business Introduced a capstone course in business policy
School
Strategy in the 20th Century
The development of strategy was accelerated by:
The accelerated rate of change
Pressure to analyse external environment
Focus on internal organizational environment
The greater spread of wealth
Research focused on the general management and business policy issues to develop better
ways of making decisions and maintaining coordination in increasingly large and complex
organisations. Rational planning was preferred to the haphazard working of the market
economy – it contributed towards what became known as the perspective and predictive
approaches to strategy generation.
,Strategy was looked at as a process comprising of sup=b-processes:
Identifying and analysing threats and opportunities
Responding to them by formulating a strategic plan
Implementing strategic plans
Designing control systems for implementation processes
Strategy in the 21st Century
They began rethinking components of the business model
Application of game and complexity theories to business – how to incorporate the
unpredictable conditions of non-linearity, uncertainty and ambiguity into an
organization’s strategy to ensure the sustained management of innovation and
change
Analysis of the disruptive effects of technology
2008-2009 recession
Renewed interest in incorporating corporate social responsibility, business ethics
and sustainability
Competitive advantage using blue ocean strategies
The Nature and Role of Strategy
The 5 P’s of Strategy
These provide insight into how strategy is defined by the different perspectives and
processes used in formulating and implementing strategy. No 1 definition takes preference
over another – they should all be seen as being complementary and interrelated.
1. Strategy as a Plan: This provides and overall direction as a course of action. This
views strategy decision-making as a formal, logical, top-down structured process in
which strategy is formulated by means of a rational analysis of the organization, its
performance and the external environment. Strategy formulation is a formal process
of conception implemented though organizational layers, structures and control
systems.
Strategy is intended – it seeks to attain a match or a strategic link between
the internal organizational capabilities and external opportunities, forming
the basis of the sustainable resource-based and dynamic capabilities
perspective.
It is criticised for being too rational, top-down and for not being realistic
enough given the unpredictability of the 21st century’s competitive environ.
However, formal planning systems contribute towards better strategic
decision-making, and have a positive impact on organisational performance.
2. Strategy as a Position: This concerns the determination of particular products in
particular markets – a matching of internal and external environments. It looks
downwards (meeting customer needs) and outwards (towards the competitive
market). It has an outside-in perspective.
3. Strategy as a Perspective: This is the organisation’s way of doing things. Future
strategies are formed by adapting past strategies based on the collective experience
of individuals and the way of doing things embedded in the cultural web of an
organisation. A product of the minds and ideologies of individuals, groups and
, management in the organisation. Strategy looks inside the organisation (inside the
mindset of strategists) and upwards towards the strategic purpose, intent and direct
of the organisation. Becoming more important in developing a competitive
advantage by creating better value propositions through people and processes. It is
and inside-out perspective.
4. Strategy as a Ploy: This is a specific manoeuvre to outwit a competitor. The real
strategy is not the expansion itself, but the treat.
5. Strategy as a Pattern: This is consistent behaviour over time. It has evolved over
time and encompasses a series of behaviours that results in a strategy, whether
intended or not. When the pattern that realises is not explicitly intended, this is
known as an emergent strategy. The challenge is to maintain balance between
deliberate and emergent strategies. Management is responsible for evaluating the
appropriateness of emergent strategies.
Figure 1.2: Deliberate and Emergent Strategies
Management compares the emergent strategy with the organisations external environment
and internal factors and assess whether there is a strategic link between them, and whether
there is alignment with the organisational purpose. It is normal to peruse an umbrella
strategy (broad outlines are deliberate while the details emerge within)
Levels of Strategy
1. Corporate Level Strategy: This sets the purpose, direction and scope of an
organisation, and determines how value can be added at all business levels and lines.
It also defines what type of business the organisation conducts (the geographic
coverage, diversity of products and services, turning cross-business into competitive
advantage and divestments. The CEO and senior managers are responsible, with
input from the key senior executives who head up the business.
2. Business Level Strategy: How the organization competes to strengthen its market
position and attain a competitive advantage in each area of its business units. Here,
it is important to note the strategic link between internal capabilities and external
relationships.
3. Functional Level Strategy: This is the operational level strategy, and it underpins
business level strategy by implementing business strategies through the functional
areas. To support the overall business strategy and competitive approach by
performing strategy-critical activities. The decision-making responsibility resides with
the heads of the respective functional areas, and with the general manager at
business level, who approves the content of these strategies. If there is no clear
direction at business level, functional level strategies are unlikely to be mutually
supportive and consistent – there should be synergy and cooperation between the
functional areas in and organisation to achieve a competitive advantage.
Cohesion should be achieved between these 3 levels of strategy
Strategy Level Strategic Key Qs Decision-Making
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