Summary of the lectures of the course Strategy and Decision-making (SB) in the lecture year This course will be given at the VU to Students Administration and Organizational Science, students in the minor Organizational Science, and premaster Policy, Communication and Organization (BCO) ). These n...
LECTURE 1 l Introduction Strategy and Decision-making
Today → introduction to the course:
Course outline → learning objectives, timetable & practical information.
What is strategy and strategic management?
o Foundations and historic development.
o Benefits of strategic management.
Strategy formation processes → deliberate and emergent strategies.
Directive strategies → organizational purpose, mission, vision, values (the broader
strategies, the strategies that give the purpose to the organization → the mission, the vision,
what do they mean, why are they important and what are the components of those
strategies?).
Learning objectives
After completing the course, students can explain, apply, compare and critically discuss:
The most important theories and common approaches in the field of Strategic Management
How an organization’s strategy can contribute to its long-term viability or success → the
survival and thriving of the organization in the longer term: strategy plays an important role in
that process.
The connection of the organization to its environment.
The ability of the organization to actually implement its strategy.
Foundations of Strategy & Strategic Management:
Greek word ‘strategos’, meaning ‘a general’ which in turn comes from roots meaning ‘stratos: army’
and ‘agein: to lead’ → the person that leads the army.
Many terms we associate today with ‘strategy’ (e.g. objectives, mission, strengths,
weaknesses) were developed by the military.
Having a broader plan of how you are going to act in the battlefield, how you are going to
overcome the enemy, how you are going to deploy the soldiers/army/weapons that you’ve got
and how you are going to position the army and resources on the battlefield → the beginning
of strategic thinking and terminology and explains to some extent some of the terms and
language that we use in strategic management → there is more focus on competition than
cooperation.
Normally we associate the strategy with the
executives / senior people in the
organization, who have access to the
overall picture of the organization and the
information.
What is Strategy? → different
definitions of strategy:
Chandler: emphasis on achieving
long-term goals and then how you
are going to deploy the resources
in the most effective and efficient
way in order to achieve those
goals.
Porter: emphasis on being different and creating value → how you are going to differentiate
as an organization compared to anyone else, and how you are going to provide an unique
value.
Drucker: emphasis on how you gain competitive advantage → it's looking more at the market
and other providers and it's about how you compare to them and how you provide something
that the others don’t provide.
, Mintzberg: emphasis on that strategy is a pattern in a stream of decisions → there are
decisions that are made day in - day out, and when you are reflect on them, you can see that
there is an consistency in those decisions → many of them were not planned in advance, but
they were developed as the enterprise/organization was operating.
What is strategy?
Strategy is the direction and scope of an organization over the long term which achieves advantage for
the organization through its configuration of resources within a changing environment to meet the
needs of markets and to fulfill stakeholder expectations.
There is an element that looks internally within the organization (as the deployment of
resources that the organization has), but this happens in a context where the organization
operates (it's in the market and about the needs of the markets and there are stakeholders
inside and outside the organization → the stakeholders have expectations about how the
organization should be organized, how priorities should be set and what the appropriate
course of action for the organization is).
Mintzberg, ‘The ten schools of strategy’ → strategy as a...
1. Design: a process of conception → a design (a fit between the resources internally of the
organization, and you reflect on the weaknesses and strengths of the organization internally,
and how those fit opportunities and threats in the external environment).
2. Planning: a formal process → a plan (where you analyse data, you do it in a systematic way
and then you develop a plan).
3. Positioning: an analytical process → a position (Porter: an organization needs to have a
clear position in the market/industry in which it operates → the leader in costs, or leader in
quality? → you need to choose).
4. Entrepreneurial: a visionary process → a vision (reflects on key individuals → how that
company can be imagined as a great company).
5. Cognitive: a judgmental process → a perception (reflects on key individuals).
6. Learning: an emergent process → a pattern (the environment is very complex/ambiguous, so
when can not plan ahead or predict the future → we need to do things and as we do, we learn
→ we take small incremental steps).
7. Political: a process of negotiation → an agenda (different people within the organization have
different interests and different power → battle of negotiation).
8. Cultural: a collective process → a belief (there is no point of creating a strategy if it doesn't fit
the culture of the organization, if it doesn't align with the culture, believes and main
assumptions of the people in the organization).
9. Environmental: a reactive process → a response (the organization is unable to influence the
environment, it is better to reflect and react to the conditions that there are given in the
environment).
10. Configuration: a process of transformation → a stage (the strategy is mainly stable, but there
are certain stages that can transform and completely change things).
The first 3 schools are prescriptive/normative schools → they suggest how strategies should be done.
The rest of them are more pragmatic (how strategies actually / in the real world are formed).
Strategy as a plan: Strategy as a pattern:
Specify future choices Without preconception
Made in advance of action Driven by actions, not design
Calculated towards Consistency in behaviour (whether or not intended) →
achieving objectives we are doing, and then we reflect → so we learn from
Conscious and purposeful it.
Strategy as a position: Strategy as a perspective:
A match between the Collective concept
organization and context A world view → how people in the organization see
A unique place in the the world.
environment: a niche Intensely shared
Beat competition or avoid The ‘character’ of an organization
direct competition
,Benefits of Strategic Management:
Ties the organization together with a common sense of purpose and shared values.
Can often help improve organization’s financial performance.
Provides the organization with a clear self-concept, specific goals, and guidance as well as
consistency in decision making.
Helps managers understand the present, think about the future, and recognize the signals
that suggest change.
Requires managers to communicate both vertically and horizontally.
Improves overall coordination within the organization.
Encourages innovation and change within the organization to meet the needs of dynamic
situations.
There are 3 key components in strategic management:
1. Strategic thinking
2. Regular strategic planning process
3. Execution: practice, action, implementation of those plans.
Having a coherent, consistent and clear strategy for the longer term helps the organization to
set direction → it creates action.
Strategic Management is not:
Not a quick fix
Not a technique or gimmick
Not just a yearly planning retreat
Not paper intensive
Not a regulatory document
Not just an extension of last year’s plan
Not just based on forecasts of current operations
Development of strategic management:
1. Long-Range Planning → planning for the longer term, this evolved into strategic planning.
2. Strategic Planning → not only planning for anything that might happen in the future, but also
starting having plans and the actioning of those plans.
, 3. Strategic Management → with the three components: thinking, philosophy, formal planning
process and the practice.
a. ‘Structure follows strategy’ → strategy is more important than structure (Drucker:
‘culture eats strategy for breakfast’ → even if you have the most amazing strategy, if
this doesn’t reflect the culture of the place, the strategy will not be implementable).
Key strategic thinkers: Edith Penrose, Igor Ansoff, Andrew Pettigrew, Philip Selznick.
What have we done in the first part of the lecture?
Outlined and introduced the course
Started discussing key concept (strategy, strategic management, the evolution/foundations of
the field etc.)
Now: reflecting on strategy formation (how
strategies are being formed, concluded with an
reflection on the organizational purpose of
strategies).
Strategies deliberate and emergent:
The realized strategy might come without any
plan/preconception, it might be completely
irrelevant if we have a plan or not → emergent
strategy.
Are decisions and strategies developed in a
rational, systematic way, or is there a creative
element in there? → The Map and the
Compass.
The map (it’s always the same map)
Analytical or rational approach
Logical sequence of steps
Specific processes
Better known worlds
The compass (do you want to know north, south, west or east) → you have to learn if you walk,
but you got to have a clear sense of direction and purpose → ‘what way are we going and why are we
going in that direction?’
Emergent approach
Relies on learning
Leadership sets direction
Better in uncharted worlds
Paradox → the deliberateness versus the emergence of strategy:
Deliberate strategizing → the ability of acting intentionally; so thinking before acting.
Strategic emergence → the ability of thinking and acting at the same time and letting strategy emerge.
You need some analytic, rational processes, but you are not going to be able to understand
everything, so you need to be flexible enough and change course of action if needed.
Management has got 3 components: a science component (analytics), a craft component
(action) and an art component (imagination), you need to combine all three.
Deliberate Strategizing:
, It gives you a sense Advantages:
of:
Direction Without plans and objectives organizations would be adrift → organizations
get lost
Commitment Plans enable early commitment to a course of action
Coordination Plans have the benefit of coordinating all strategic initiatives within a firm to
cohesive pattern
Programming Plans are a means for programming all organizational activities in advance
Strategy Emergence:
It gives you a sense Advantages:
of:
Opportunism Organizations must keep an open mind to grab unforeseen opportunities
Flexibility Organizations must keep their opinions open and not commit themselves
too early
Learning The best way to find out what works is to give it a try
Entrepreneurship Different people in the organization will have different ideas
Support Getting things done in firms includes understanding political and cultural
dynamics
If you plan and develop a particular strategy, does it really fit the power base in the organization? (the
interests of the key players in the organization), is it realistic in that sense? does it fit the beliefs in the
organization?
How does strategic thinking arise? → Rational versus Intuitive approach.
Organizational purpose: what is the
organization here for?
Strategy process: pattern of decisions and
key choices (who is a part of that and in what
level?)
1) Network strategy (Philips): do you collaborate
with other organizations to develop a particular course
of action? → Philips developed the Senseo coffee
machines with a coffee company (how do we create
an alliance and network with other organizations?) →
partner up with a company that give us a particular
knowledge and skills.
2) Corporate strategy (Philips): Philips is not just
one business (they are into healthcare, wellbeing,
lighting) → these are quite different business levels.
3) Business strategy (Philips): whenever we focus
on one of the businesses (for example: in lighting)
then all the different functional strategies (how do we
make the different strategies fit together? → e.g.
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