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Summary Exploring Strategy (Twelfth Edition)
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Summary Exploring Strategy for Strategic Management (International Tourism Management, NHL Stenden).
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Exploring strategies (Twelfth edition)Chapter 1 Introducing strategy
Strategy = The long-term direction of an organisation.
Two advantages to strategy:
1. The long-term direction of an organisation can include both deliberate, logical
strategy and more incremental emergent patterns of strategy.
2. Long term direction can include both strategies that emphasise difference and
competition and strategies that recognise the roles of cooperation and even
imitation.
Three-Horizon figure: The three-horizons framework suggests organisations should think of
their businesses or activities in terms of different “horizons” defined by time.
- Horizon 1: Businesses are the current core of activities.
- Horizon 2: Businesses are emerging activities that should provide new future sources
of profit
- Horizon 3: Possibilities that are more open and for which outcomes are even more
uncertain. These are typically risky research and development projects, start-up,
ventures, test-market pilots or similar.
The purpose of strategy:
1. Mission (Aims to provide employees and stakeholders with clarity about what the
organisation is fundamentally there to do).
2. Vision (Concerned with the future. What does the organisation eventually wants to
achieve).
3. Statements of corporate values (Communicate the underlying core ‘principles’. The
way the organisation should operate).
4. Objectives (Statements of specific outcomes that are to be achieved).
Level of strategy
1. Corporate-level strategy: concerned with the overall scope of an organisation and
how value is added to the constituent businesses of the organisational whole.
2. Business-level strategy: concerned with how the individual business should compete
in their particular markets.
3. Functional strategies: Are concerned with how components of an organisation deliver
effectively the corporate- and business level strategies in terms of resources,
processes and people.
Chapter 2 The environment
The business environment is organized in a series of layers: macro-environment, the
industry, competitors and the organisation.
,Macro-environment PESTEL analysis
Political, economic, social, technological, environmental and legal.
Also necessary identify key drivers for change. These are the environmental factors who
are likely have a high impact on the success or failure of a strategy.
Scenarios offer plausible alternatives views of how the business environment might develop
in the future, based on key drivers for change.
Chapter 3 The industry analysis
Porters 5 forces helps identify the attractiveness of an industry in terms of the five
competitive forces.
- Threat of entry attractive industry has high barriers of entry
- Threat of substitutes price/performance ratio
- Power of buyers is high when competition threat is high
- Power of suppliers supplier power
- Competitive rivalry Organisations with similar products
Monopolistic industry industry with just one firm, no competition
Oligopolistic industry few firms dominate an industry.
Hypercompetitive industry hyper competition occurs where the frequency, boldness and
aggression of the competitor interactions accelerate to create a condition of constant
change.
Perfect competitive industries barriers to entry are low, many equal rivals, similar
products and information about competitors is freely available.
Industry life cycle 5 stages. The industry life cycle underlines the need to make the
industry structure analysis dynamic.
Development stage Low rivalry, high differentiation
Growth stage low rivalry, high growth and weak buyers, low entry barriers
Shake-out stage Increasing rivalry, slower growth and some exits
Maturity stage stronger buyers, low growth and standard products, higher entry barriers
Decline stage Extreme rivalry, many exits and price competition
Market segment = a group of customers who have similar needs that are different from
customer needs in other parts of the market.
- Variation in customer needs
- Specialization
- Strategic customers
Blue ocean thinking = new market spaces where competition is minimized. Strategy here is
about finding gaps.
, Strategy canvas = compares competitors according to their performance on key success
factors in order to develop strategies based on creating new market spaces.
Features:
- Critical success factors
- Value curves (graphic depiction)
- Value innovation (creation of new market space)
Chapter 3 example questions
What are strategy canvas?
A strategy canvas compares competitors according to their performance on key success
factors in order to establish the extent of differentiation. It captures the current factors of
competition of the industry, but also others ways of challenging these and creatively trying
to identify new potential competitors.
- Give examples of oligopoly
Oligopoly arises when a small number of large firms have all or most of the sales in an
industry. For example, airlines, public transportations
- What happens with an industry at a shake-out stage?
At the shakeout stage, the growth rate of revenue, cash flows, and profit start slowing down
as the industry approaches maturity.
Chapter 4 Strategic capabilities
Managers need to understand how their organisation is different from their rivals
achieving competitive advantage and superior performance.
Competitive advantage and superior performance of an organisation is explained by the
distinctiveness of its capabilities.
Strategic capability Means the capabilities of an organisation that contribute to its long-
term survival or competitive advantage.
Two components of strategic capability: resources and competences.
- Resources: the assets that organizations have or can call upon.
- Competences: are ways those assets are used or deployed effectively.
Dynamic capability Are an organization’s ability to renew and recreate its strategic
capability to meet the needs of changing environment.
Three components
- Those concerned with sensing opportunities and threats
- Those with seizing opportunities
- Those with re-configuring the capabilities of an organisation
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