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Summary Exploring Strategy, ISBN: 9781292145129 Strategic Management
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lOMoARcPSD|6254061Summary Exploring Strategy - chapter
1-15
Strategy (NHL Stenden Hogeschool)
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CHAPTER 1: INTRODUCING STRATEGY
1.2 What is strategy?
Strategy: The long term direction of an organisation.
o The long term strategies are typically measured over years, decades or more. This long-term
perspective is emphasised by the ‘three horizons’. This theory is based on managers who need to
avoid focussing on the short-term issues of their existing activities.
à The three horizons framework suggests that every organisation should think of itself as consisting
of three types of business or activity, defined
by their ‘horizons’ in terms of years.
Horizon 1 business:
the current core business.
Horinzon 2 business:
emerging activities that should provide new
sources of profit.
Horizon 3 possibilities:
nothing is sure, risky start-ups or research &
development projects.
Pushing out 1 as far as possible, while
looking to horizons 2 and 3 ‘uncertainty’.
o Strategic direction. Sometimes this is a coherent pattern over time and are set according to long-
term objectives. Usually maximsing profects is the strategic direction, howerver profits are not
always the applicable (private sector/charity organisations). Objectives behind the strategic direct
need close research.
o Organisations involve compex relationships, both internally (people within the company) and
externally (suppliers, customers, alliance partners, regulators and shareholders). Strategy is crucially
concerned with an organisation’s external boundaries (what to include and what to keep outside).
Good strategy is about managing as well as strategizing.
Three main levels of strategies:
o Corporate-level strategy = concerned with the overall scope of an organisation and how value
is added to the constituent business of the organisational whole.
Being clear is important, the basis of other strategic decisions (includes; geographical scope,
diversity of products or services, acquisitions of new businesses).
o Business-level strategy = about how the individual businesses should compete in their
particular markets, also called ‘competitive strategy’.
It concerns issues as innovation, appropriate scale and response to competitors move (might
be; stand-alone businesses, entrepreneurial start-ups of units within a larger corporation).
o Operational strategies = how the components of an organisation deliver effectively the corporate-
and business-level strategies in terms of resources, processes and people.
Each level needs to be aligned with the others.
Strategy statements: summarize of the organisation’s strategy. Less than 35 words long.
It should have three main themes: the fundamental goals that the organisation seeks
(vision/mission/objectives), the scope or domain of the organisation’s activities and the
particular advantages or capabilities it has to deliver all of these.
Mission: the central to the strategy and keeps the focus (‘What business are we in?’)
Vision: Relates to goals and refers to the desired future state (‘What do we want to achieve?’)
Objectives: Quantifiable statements of the organisation’s goals over some period of time (‘What do
we have to achieve in the coming period?’)
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Scope: Refers to three dimensions. Customers or clients; geographical location; and extent of internal
activities.
Advantage: How the organisation will achieve the objectives in its chosen domain. In order to achieve
a particular goal, the organisation needs to be better than others seeking the same goals.
A strategy statement is not only for the organisation itself, it could also be necessary to persuade
investors and lenders, to reassure external clients and to inspire volunteers and donors.
1.3 Working with strategy
Managers have to communicate strategy to their teams, and will achieve greater performance from
them the more convincing they are in doing so. Strategy is not just about abstract organisations: it is a
kind of work that real people do.
1.4 Studying strategy
The book covers equally the three main branches of strategy as a subject:
o Strategy context
Refers to both the internal and the external contexts of organisations. All organisations need to
look at the opportunities and threats of their external environments. Industry analysis looks at
what makes industries attractive (or not) to operate in. Cultural analysts have used sociological
insights into human behaviour. Resource-based view researchers focus on internal context (the
unique characteristics of each organisation).
o Strategy content
Concerns the content (or nature) of different strategies and their probability of success. The focus
lies on the merits of different strategic options. Strategy and performance researchers started,
they examine innovation strategies, different kinds of internationalisation and all the complex
kinds of alliance and networking strategies. ‘Which strategies pay best and under what conditions’.
o Strategy process
Examines how strategies are formed and implemented. Research here provides a range of insights
to help managers of managing strategy (strategic planning, choice and change and strategy-as-
practice researchers).
Issues need to be explored from different points of view. A complete analysis will typically need
the insights of economics, psychology and sociology.
The Exploring Strategy Model: Includes understanding the strategic position of an organisation
(contexts); assessing strategic choices for the future (content); and managing strategy in action (process).
At first you have to understand the strategic position, then making strategic choices and finally turning
strategy into action. Position, choices and action should be seen as closely related, and in practice none
has priority over another. The three elements (circles) are overlapping and non-linear.
Strategic position: Is concerned with the impact on strategy of the external environment, the
organisation’s strategic capability (resources and competences), the organisation’s goals and
the organisation’s culture.
o Environment
Organisations operate in a complex political, economic, social and technological world.
o Strategic capability
Each organisation has its own strategic capabilities, made up of its resources (machines and
buildings) and competences (technical and managerial skills). Capability regards to the strengths
and weaknesses.
o Strategic purpose
Most organisation claim for themselves a particular purpose; encapsulated in their vision,
mission and objectives. What does it seek to achieve?
o Culture
Organisational cultures can also influence strategy. How does culture shape strategy?
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Strategic choices: Involves the options for strategy in terms of both the directions in which strategy
might move and the methods by which strategy might be pursued.
Typical strategic choices with their fundamental questions are:
o Business strategy
How the organisation seeks to compete at the individual business level. Mostly based on cost or
differentiation. ‘How should the business unites compete?’
o Corporate strategy and diversification
The highest level of an organisation is concerned with corporate-level strategy, focused on
questions of portfolio scope. ‘Which business to include in the portfolio?’
o International strategy
Internationalisation is a form of diversification, but into new geographical markets.
‘Where internationally should the organisation compete?’
o Innovation and entrepreneurship
Organisations have to innovate constantly. Entrepreneurship is an act of innovation too. ‘Is
the organisation innovating appropriately?’
o Acquisitions and alliances
Many organisation prefer to grow by building with their own resources. Other organisations might
develop through mergers and acquisitions. ‘Whether to buy another company, ally or to go it alone?’
Managing strategy in action: About how strategies are formed and how they are implemented.
The issues with their own fundamental questions are:
o Strategy evaluation
‘Are the options suitable in terms of matching opportunities and threats; are they acceptable in the
eyes of significant stakeholders; and are they feasible in terms of the capabilities the organisation
has available?’
o Strategy development processes
Strategies are often developed through formal planning processes. In practice, the strategies
an organisation actually pursues are often emergent.
‘What kind of strategy process should an organisation have?’
o Organising
As the strategy is developed, the organisation needs to organise for successful implementation
with structures and systems.
‘What kinds of structures and systems are required for the chosen strategy?’
o Leadership and strategic change
Managing change involves leadership, which includes different styles and different levers.
‘How should the organisation manage necessary changes entailed by the strategy?’
o Strategy practice
‘Who should do what in the strategy process?’
The Exploring Strategy Model can vary in three important contexts:
o Small businesses
They need to attend closely to the environment, because they are vulnerable to change. The
most important positioning issue will often be strategic purpose.
o Multinational corporations
Positioning in a complex global marketplace will be very important. Strategic choices are likely to be
dominated by international strategy questions about which geographies to serve.
o Public sector and not-for-profits
Positioning issues of competitive advantage will even be important in these contexts (schools
and hospitals within quality or service).
1.6 The strategy lenses
Strategy lenses: Ways of looking at strategy issues differently in order to generate many insights.
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