Corporate strategy (COS) Summary
Chapter 1 - Introducing
Strategy Definition „Corporate strategy is the long-term direction of an organization.“
- … a pattern resulting in a stream of decisions – Henry Mintzberg
- … a firm’s theory about how to gain competitive advantage. – peter Drucker
- … 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.
- Competitive strategy is about being different. It means deliberately choosing different sets
of activities to deliver a unique mix of value.
- Purpose of strategy: mission, vision, values and objectives. Why and for whom does the
organization make a difference.
Analyzing strategy:
- Understand how the company had been successful to date
- Challenges posed by competitors and the broader opportunities and threats from the wider
environment
- What resources, processes, and people are supporting the current strategy and what might
support international expansion.
Strategic decisions Strategic decisions are about:
- The long-term direction of an organization
- The scope of an organization’s activities
- Gaining advantage over competitors
- Addressing changes in the business environment
- Building on resource and competences (capability)
- Values and expectations of stakeholders
Therefore, they are likely to:
- Be complex in nature
- Be made in situations of uncertainty
- Affect operational decisions
- Require an integrated approach (both inside and outside an organisation)
- Involve considerable change
Three aspects of strategy:
Long-term: importance of a long-term perspective is emphasized by the three horizons.
Three horizons for strategy
,Horizon 1: businesses need defending and extending of core business but the expectation is that
they will likely be flat or declining in terms of profit.
Horizon 2: emerging activities that should provide new sources of profit.
Horizon 3: risky R&D projects, start-up ventures, test-market pilots.
Basic point: managers need to avoid focusing on the short-term issues of their existing activities.
Strategic direction: sometimes only emerges as a coherent pattern over time.
- Give direction by setting long-term objectives.
- Profit maximization for shareholders is not always the sole criterion for strategy.
- Sometimes businesses may sacrifice the maximization of profits for family objectives
Organization: discrete, unified entities that involve many relationships both internally and externally.
- Because organizations have many internal and external stakeholders
- Boundaries: what to include within the organization and how to manage important
relationships with what is kept outside.
Stakeholders are those individuals or groups that depend on an organization to fulfil their own goals
and on whom, in turn, the organization depends.
Four ways to define purpose:
- Mission statement: aims to provide employees and stakeholders with clarity about what the
organization is fundamentally there to do.
o Why do we exist? What difference do we make?
- Vision statement: the future the organization seeks to create.
o What do we want to achieve?
- Statement of corporate values: communicate the underlying and enduring core principles
that guide an organization’s strategy and define the way that the organization should
operate. Would those values change with circumstances?
- Objectives: statements of specific outcomes that are to be achieved.
o Triple bottom line: not only economic objectives but also environmental and social
objectives that deal with corporate responsibility to wider society.
Strategy statements: three main themes
- Fundamental goals (mission, vision, or objective) the organization seeks
- The scope or domain of the organization’s activities
- The particular advantages or capabilities it has to deliver all of these
Strategy statements should be no more than 35 words long. The three themes are deliberately made
highly concise to keep such statements focused on the essentials and make them easy to remember
and communicate.
Scope refers to three dimensions: customers or clients, geographical location, and extent of internal
activities.
Advantage: how the organizations will achieve the objectives it has set for itself in its chosen
domain.
- Competitive environments: competitive advantage, how a company will achieve goals in face
of competition
- Public sector: organization’s capability in general.
Corporate-level strategy overall scope of an organization and how value is added to the constituent
business units.
, - Geographical scope, diversity of products or services, acquisitions of new businesses, and
how resources are allocated between the different elements of the organization.
Business-level strategy the way a business seeks to compete successfully in its particular market.
- Innovation, appropriate scale and response to competitors’ moves.
Operational strategy how different parts of the organization deliver the strategy in terms of
managing resources, processes and people.
Exploring strategy framework: understanding the strategic position of an organization; assessing
strategic choices for the future, and managing strategy in action.
- The practices of strategy do not always follow this linear sequence. Choices often have to be
made before the position is fully understood.
- Interconnectedness or circles are designed to emphasize this potential non-linear nature of
strategy
The strategic position is concerned with the impact on strategy of the external environment, the
organization’s strategic capability (resources and competences), the organization’s goals and the
organization’s culture.
- Macro-environment: influenced by political, economic, social, technological, ecological, and
legal forces. E.g. opportunities and threats.
- Industry environment: competitors, suppliers, and customers present a challenge to the
organization. How can an organization manage industry forces?
- Strategic capability: each organization has its own strategic capabilities, made up of its
resources and competences.
- Stakeholders: How can the organization be aligned around a common purpose?
- Culture: product of an organizations history. Consequences are strategic drift, and failure to
create necessary change. How does culture fit with the required strategy?
Strategic choices the options for strategy in terms of both the directions in which strategy might
move and the methods by which strategy might be pursued.
- Business strategy and models: how the organization seeks to compete at the industrial
business level. What strategy and business model should the company use to compete?
- Corporate strategy and diversification: which businesses to include in a portfolio.
, - International strategies: form of diversification, but into new geographical markets.
- Entrepreneurship and innovation: most existing organizations have to innovate constantly to
survive. Is the organization innovating appropriately?
- Mergers, acquisitions and alliances: Should the organization buy other companies, ally or go
at it alone?
Strategy in action how strategies are formed and how they are implemented. The emphasis is on
practicalities of managing.
- Strategy performance and evaluation: managers have to decide whether existing and
forecasted performance is suitable, acceptable and feasible.
- Strategy development process: Often developed through planning processes but sometimes
strategies actually pursue a emergent factor (ad hoc decisions, bottom-up initiatives and
rapid responses to the unanticipated.
- Organizing: once a strategy is developed, the organization needs to organize for successful
implementation. What kind of structures and systems are required for the chosen strategy?
- Leadership and strategic change: managing change involves leadership, both at the top of
the organization and lower down. How should the organization manage necessary changes
entailed by the strategy.
- Strategy practice: inside the broad processes of strategy development and change there is a
lot of hard, detailed work. Who should do what in the strategy process?
Working with strategy
- Top managers frequently formulate and control strategy but may also involve others in the process.
- Middle and lower level managers have to meet strategic objectives and deal with constraints.
- All managers have to communicate strategy to their teams.
- All managers can contribute to the formation of strategy through ideas and feedback.
Strategy’s three branches
- CONTEXT – multiple layers of environment, internal and external to organizations.
Internal context, cultural analysists show that strategies are often influenced by the organization/s
specific culture. External context, they show how strategies often have to fit with the surrounding
industry or national cultures.
Resource based view – focus on internal context, looking for the unique characteristics of each
organization. The psychological analysis of perceptual or emotional biases, and the sociological
analysis of organisational cultures should reveal the particular characteristics (resources) that
contribute to an organisation’s specific competitive advantages and disadvantages
- CONTENT – content or nature of different strategies and their probability of success.
- PROCESS - formation and implementation of strategies.
- Strategy as practice researchers have been using micro-sociological approaches to closely
examine the human realities of formal and informal strategy processes.
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