In this document you will find the full summary of the exam material in the Advanced Management and Marketing course (BMO-21306).
The summary, like the exam, consists of two parts, namely the management part (summarizing Fundamentals of Strategy) and the marketing part (summarizing Marketing Mo...
Summary: Fundamentals of Strategy, ISBN: 9781292209067 Advanced Management and Marketing (Management part) (BMO21306)
Summary Fundamentals of strategy (4th Edition)
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BMO-21306
Advanced Management and Marketing
Management chapter 1: introduction
This course consists of both a management part and a marketing part. For the management
parts, we make use of the book ‘Fundamentals of Strategy’. For the marketing part, the book
‘Marketing Models: Multivariate Statistics and Marketing Analytics’ is going to be used. In this
lecture, we will discuss chapter one from FoS.
Learning outcomes:
- Summarise the strategy of an organisation in a strategy statement.
- Distinguish between corporate, business and functional strategies.
- Identify key issues for an organisation’s strategy according to the Exploring Strategy
Framework.
Defining strategy
The book Exploring Strategy defines strategy as the long-term direction of an organisation.
Defining it like this has two advantaged:
1. It can include both considered, logical strategy as well as more incremental,
emergent patterns of strategy.
2. It can include both strategies that emphasise difference and competition, as well as
strategies that recognise the roles of cooperation and even imitation.
Thera are three elements in this definition:
- Long-term: this is emphasised by the Three Horizons Framework. It suggests
organisations should think of themselves as comprising three types of businesses or
activities, defined by their ‘horizons’ in term of years. The first horizon takes into
account the corporate level: the overall scope of the organisation. The second
horizon takes into account the business level: it states how to compete with
concurrent organisations. The third horizon takes into account the functional level: it
describes how strategies are actually delivered.
- Strategic direction: typically, managers and entrepreneurs try to set the direction of
their strategy according to long-term objectives. In private-sector businesses, this is
usually maximising profits for shareholders, but this does not always have to be the
case. Public-sector and charity organisations may set their strategic directions
according to other objectives.
- Organisation: organisations typically have many internal and external stakeholders.
Internally, organisations are filled with people (typically with diverse, competing and
more or less reasonable views of what should be done). Externally, organisations are
surrounded by important relationships, such as suppliers, customers, alliance
partners, regulators, and investors.
Strategic decisions are likely to:
- Be complex in nature;
- Be made in situations of uncertainty;
- Affect daily decisions;
- Require an integrated approach (thus inside and outside an organisation);
- Involve considerable change.
Strategy statements
Strategy statements can be useful to persuade investors and lenders of its viability. Public-
sector organisations can use them to reassure clients, funders and regulators that their
,priorities are the right ones. Voluntary organisations need them to inspire volunteers and
donators.
Strategy statements should have three main themes: 1) the fundamental goals that the
organisation seeks; 2) the scope or domain of the organisation’s activity, and 3) the particular
advantages or capabilities it has to deliver all of these.
The fundamental goals
According to Montgomery, the goal of an organisation should address two related questions:
1. How does the organisation make a difference?
2. For whom does the organisation make a difference?
There are four components with which organisations typically define their purpose/goals:
1. Mission statement: this aims to provide internal and external stakeholders clarity
about what the organisation is fundamentally there to do.
2. Vision statement: this is concerned with the future that the organisation seeks to
create.
3. Corporate value statements: these communicate the underlying and enduring core
principles that guide an organisation’s strategy and define the way that the
organisation should operate. These values should be enduring, so if you ask the
question ‘would this change with circumstances?’ and the answer is yes, then it’s not
enduring.
4. Objective statements: these address the specific outcomes that are to be achieved.
These could for example be profits, levels of sales, market shares, customer services,
or repeated businesses.
The scope
An organisation’s scope or domain refers to three dimensions: 1) customers or clients, 2)
geographical location, and 3) the extent of internal activities (vertical integration).
Advantages
This describes how the organisation will achieve the objectives it has set for itself in its
chosen domain.
Levels of strategy
There are three main levels:
1. Corporate-level strategy: this is concerned with the overall scope of an organisation
and how value is added to the constituent businesses of the organisational whole. It
includes geographical scope, diversity of products or services, acquisitions of new
businesses and how resources are allocated between the different elements of the
organisation.
2. Business-level strategy: this is about how the individual businesses should compete
in their particular markets.
3. Functional strategy: this is concerned with how the components of an organisation
deliver effectively the corporate and business level strategies in terms of resources,
proce4sses and people.
The Exploring Strategy Framework includes understanding the strategic position of an
organisation, assessing strategic choices for the future, and managing strategy in action. The
interconnected circles are designed to emphasise the potentially non-linear nature of
strategy.
Strategy development process
There are two broad accounts of strategy development:
, 1. The rational-analytic view of strategy development is the conventional account. Here,
strategies are developed as a linear, planned processes, typically led by top
managers.
2. The emergent strategy view is the alternative broad explanation how strategies
develop. In this view, strategies often do not simply develop as intended or planned,
but tend to develop as incremental adaptation, often inspired by actions low down in
the organisation.
Both views have validity, and it is unwise to rely on just one. Not only strategic choices come
about as a result of simple rational analysis: cultural and political processes in organisations
can also drive changes in strategy.
Educational approach of Fundamental of Strategy
Strategic position
The strategic position is concerned with the impact on strategy of the macro environment, the
industry environment, the organisation’s strategic capability (resources and competences),
and the organisation’s stakeholders and culture.
- Marco environment: at the macro level, organisations are influenced by political,
economic, social, technological, ecological, and legal forces. It relates to opportunities
and threats for the organisation.
- Industry environment: at the industry level of analysis, competitors, suppliers, and
customers present challenges to an organisation. It also presents opportunities and
threats.
- Strategic capability: these are made up of its resources (machines, buildings) and
competences (technical and managerial skills). What are the organisation’s strengths
and weaknesses?
- Stakeholders: an organisation’s key stakeholders should define their purposes. This
is because every stakeholder could have another goal and this might help in
achieving the purpose together.
Strategic choices
Strategic choices involve 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 are:
- Business strategy and models: the fundamental question is ‘what strategy and what
business model should a company use to compete?’
- Corporate strategy and diversification: entering a new international market, the
question is ‘which international business strategy should we use?’
Strategy in action
Managing strategy in action is about how chosen strategies are actually put into practice.
There are three issues:
1. Structuring an organisation to support successful performance;
2. Systems are required to control the way in which strategy is implemented;
3. Leading strategic change is typically an important part of putting strategy into action.
, Management chapter 2: macro-environment analysis
Environments can be considered in terms of a series of ‘layers’. The macro-environment
consists of broad environmental factors that impact to a greater or lesser extent many
organisations, industries and sectors. Examples of macro-environmental factors are the
internet, economic growth rates, climate change and aging populations. The second layer
involves the industry or sector. It consists of organisations producing the same sorts of
products or services. The third layer is that of specific competitors and markets immediately
surrounding organisations. This chapter focuses on organisations’ macro-environments, the
outermost layer.
PESTEL analysis
Pestel analysis highlights six environmental factors in particular: political, economic, social,
technological, ecological and legal. Organisations need to consider both market (economic)
and non-market (political, social, legal, ecological) aspects of strategy.
- Political: the political element within PESTEL highlights the role of the state and other
political factors in the macro-environment. It is useful to identify systematically;
o The role of the state;
o The exposure to civil society organisations.
- Economic: a key concept or analysing macro-economic trends is the economic cycle.
Some industries are particularly vulnerable to economic cycles, for example;
o Discretionary spend industries: for example housing, restaurants and cars
tend to be highly cyclical because many people can choose to delay or curtail
spending on these for a while.
o High fixed cost industries: industries such as airlines, hotels and steel suffer
from economic downturns because high fixed costs in plant, equipment or
labour tend to encourage competitive price-cutting to ensure maximum
capacity utilisation when demand is low.
- Social: social elements of the macro-environment can influence the specific nature of
demand. Social elements can also shape the network character of organisations
within the environment. Social elements influencing demand can be analysed under
the following four headings;
o Demographics: for example, in an aging population, the demand for elderly
related services will increase, as the labour to look after the elderly will
decrease;
o Distribution: changes in wealth distribution influence the relative sizes of
markets;
o Geography: industries and markets can be concentrated in particular
locations;
o Culture: changing cultural attitudes can also raise strategic challenges, for
example the rise of digital natives.
Small worlds exist where the large majority of a network’s members is closely
connected. They give members a good deal of protection and effectiveness, however,
outsider organisations will have difficulty penetrating small world networks on their
own and will typically require
Brokers between different networks are often sources of innovation.
Hubs connect many members in networks, and can become powerful if individual
members have to go via them in order to be in touch with other members of the
network.
- Technology: there are five primary indicators of innovative activity;
o Research & development budgets;
o Patenting activity;
o Citation analysis;
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