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Summary MG14 - Business strategy 2
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Summary Exploring strategy 11th edition BUAS1. Introducing strategy
Strategy – the long term direction of an organization (years or even a decade).
Three horizons framework – organizations should think of themselves as compromising three
types of business or activity defined by their ‘horizons’ in terms of years.
Horizon 1 – the current core activities, it needs defending and extending.
Horizon 2 – emerging activities that should provide new sources of profit.
Horizon 3 – possibilities, for which is nothing sure. These are typically risky research
and development (R&D) projects , ventures, or test-market pilots.
Strategy involves pushing out Horizon 1 as far as possible, at the same time as looking to
Horizons 2 and 3.
Because strategy typically involves managing people, relationships and resources, the subject is
sometimes called ‘strategic management’.
The stated purpose of the organization should address two related questions: how does the
organization makes a difference; and for whom does the organization makes that difference?
The fundamental goals/purposes of an organization include:
- A mission statement, this aims to provide employees and stakeholders with clarity about
what the organization is fundamentally there to do. (What business are we in? How do we
make the difference?)
- A vision statement, this is concerned with the organizations future that they seek to
create. (What do we want to achieve?)
- Statements of corporate values, this communicate the underlying and enduring core
‘principles’ that guide an organization’s strategy and define the way they should operate.
(Those values should not change under any circumstances)
- Objectives, those are statements of specific outcomes that are to be achieved.
Organizations are also setting ‘the triple bottom line’ objectives which is not meant only
economic objectives but also environmental and social objectives.
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,Strategy statements – the fundamental goals (mentioned above), the scope of the activities and
particular advantages or capabilities to deliver all of these. (To make an effective and memorable
strategy statement, it should not contain more than 35 words)
We have three levels of strategy:
- Corporate-level strategy, is concerned with the overall scope of an organization and
how value is added to the constituent business of the organizational as a whole.
- Business-level strategy, is about how the individual businesses should compete in their
particular markets. ( Often called ‘competitive strategy’)
- Functional strategies, are concerned with how the components of an organization
deliver effectively the corporate- and business-level strategies in terms of resources,
processes and people.
Exploring strategy framework – this includes understanding the strategic position of an
organization; assessing strategic choices for the future; managing strategy in action.
The strategic position, is concerned with the impact of the macro-environment (external
influences), the industry environment (competition), the organization’s strategic capability
(resources and competences), the organization’s stakeholders (who is involved) and the
organization’s culture (history).
Strategic choices, those involve the options for strategy in terms of both the directions in which
the strategy might move and the methods by which strategy might be pursued. This includes the
following:
- Business strategy and models
- Corporate strategy and diversification
- International strategy
- Entrepreneurship and innovation
- Mergers, acquisitions and alliances
Strategy in action, is about how strategies are formed and how they are implemented. This
includes the following:
- Strategy performance and evaluation
- Strategy development process
- Organizing
- Leadership and strategic changes
- Strategy practice
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, The exploring strategy framework can arise different issues per organization context which are:
Small businesses, multinational corporations and public sector/nonprofit organizations.
Strategy lenses – those are ways of looking at strategy issues differently in order to generate
additional insights. A brief introduction to the lenses:
- Strategy as design. This is about being systematic, analytical and logical.
- Strategy as experience. This is about people’s personal experience in organizational
culture.
- Strategy as variety. This is about seeing strategy emerge from new ideas in response to
an uncertain and changing environment.
- Strategy as discourse. In this way, managers shape the strategy in their favor to gain
influence and power because of self-interest.
2. Macro-environment analysis
Macro-environment – consists of the broad environmental factors that impact to a greater or
lesser extent many organizations, industries and sectors.
A key tool for analyzing the broad macro-environment of an organization is the PESTEL analysis.
PESTEL analysis – highlights six environmental factors: Political, Economic, Social,
Technological, Ecological and Legal. Organizations need to consider both market and nonmarket
aspects of strategy.
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