This contains a summary of the book Foundation of Strategy for the course Strategy & Management for the academic year 2016/2017. Per chapter the most important subjects are summarized.
Strategic management perspectives in the context of automobile industry
SAMENVATTING 'Foundations of Strategy' - Grant & Jordan
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Universiteit Utrecht (UU)
Economics and Business Economics
Strategy and Management (ECB3SM)
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Summary Foundaton of Strategy
Chapter 1.
Four common factors that are important for a successful strategy
1) A simple, consistent and long term goal
2) Profound understanding of the compettte entironment
3) Objectte appraisal of resources (objectete beoordeling tan je middelen)
4) Effectte implementaton
Success goes to: the people that are goals focused, who know the entironment, who know their own
strengths and weaknesses and who can implement their career strategies with commitment, consistency
and determinaton.
Strategy is the oterall plan for deploying resources to establish a fatourable positon, while a tactc is a
scheme for a specifc acton. Whereas tactcs are concerned with the manoeutres to win batles, strategy
is concerned with winning the war. Strategic decisions share three common characteristcs
1) They are important
2) They intolte a signifcant commitment of resources
3) They are not easily retersible
! Corporate planning (also known as long-term planning) was deteloped in the late 1950s to serte the
purpose to detelop a strategy more based on the long term instead of the short term. The typical format
was a fte-yea corporate planning document that sets goals and objecttes, forecast key economic trends,
established priorites for different products and business areas of the frm and allocated capital
expenditures. By the mid 1960s most large US and EU companies had set up a corporate planning
departments. During the 1970s and early 1980s, confdence in corporate planning and infatuaton with
scientfc approaches to management were seterely shaken. Due to oils shocks and instability it was hard
to detelop a three or fte year plan. The result was a shif in emphasis from planning to strategy making,
where the focus was less on the detailed management of companies’ growth paths than on positoning
the company in markets and in relaton to compettors in order to maximize the potental for proft. This
shif from corporate planning to strategic management was associated with increasing focus on
competton as the central characteristc of the business entironment and compettte adtantage as the
primary goal of strategy. This also directed atenton to business performance such as proft within the
industry entironment. During the 1990s the focus on strategy analysis shifed from the sources of proft in
the external entironment to the sources of proft within the frm. The resources and capabilites of the
frm became regarded as the main source of compettte adtantage and the primary basis for formulatng
strategy. The resource-bases view.
“what is strategy?” “compettte strategy is about being differen.t tt means deliberately choosing a
different set of acttites to deliter a uniuue mix of talue. Aka Micheal Porter” oowadays it is important to
make less plans but more about create talue for the future, for example by seeking for blue oceans. The
challenge for the 21st century are encouraging new thinking about the purpose of business. !
Strategy = is the means by which inditiduals or organisatons achiete their objecttes. tt has become less
concerned with detailed plans and more about the uuest for success.
- Corporate strategy: defnes the scope of the frm in terms of the industries and markets in which
it competes. Which industry should we be in?
- Business strategy: is concerned with how the frm competes within a partcular industry or
market. How should we compete? Also referred to as competitive strategy.
Strategy is not about competng for today, but also concerned with competng for tomorrow. This
dynamic concept of strategy intoltes establishing objecttes for the future and determining who they will
be achieted. Future objecttes relate to the oterall purpose of the frm (mission), what it seeks to become
(tision) and specifc performance targets.
(fgure 1.5!)
Strategy is located in three places: tn the leads of the chief executte, senior managers and other
members of the organisatonn tn the top management team’s artculatons of strategy in speeches and
writen documentsn And in the decisions through which strategy is enacted. Only last two are obsertable.
Hierarchy of strategy statements, made by Collis and Rukstad:
Mission statement: the basic statement of organizatonal purposen it addresses why we exist
1
,Statement of principles or values: outlines what we beliete in and how we will behate
Vision statement: projects what we want to be
Strategy statements: artculates what our compettte game plan will be
C&R argue that the game plan comprise three defnitte components of strategy: objecttes, scope (where
we will compete), and adtantages (how we will compete).
Ditision of strategies by Henry Mitzberg:
1) Intended strategy: is strategy as conceited of by the top management team. tt is less a product of
ratonal deliberaton and more an outcome of negotaton, bargaining and compromise among
the many inditiduals and groups intolted in the progress.
2) Realized strategy: howeter, is the actual strategy that is implemented. This is always partly
related to what which was intended.
3) Emergent strategy: the primary determinant of realized strategy. The decisions that emerge from
the complex process in which inditidual managers interpret the intended strategy and adapt to
changing external circumstances.
Planned emergence: strategic planning combines design and emergence. The balance between the two
depends greatly upon the stability and predictability of a company’s business entironment.
Bounded rationality: your decision analysis was subject to the cognitte limitatons that constrain all
human beings.
Strategy improtes decision making, because:
1) tt simplifes by constraining the range of decision alternattes considered and by actng as a
heuristc (helpen bij het tinden) that reduces the search reuuires to fnd an acceptable soluton to
a decision problem.
2) tt permits the knowledge of different inditiduals to be pooled and integrated
3) tt facilitates the use of analytc tools
The talue created by a company are distributed oter: employees’ (wages), lenders (interests), landlords
(rent), goternment (taxes) and owners (proft).
Stakeholder approach: The tiew of a business organizaton as coalitons of interest groups where top
management’s role to balance these different, ofen connictng, interests.
Stakeholder analysis is a useful tool for identfying, understanding and prioritzing the needs of key
stakeholders.
Key steps in stakeholder analysis:
- tdentfcaton of the list of potental stakeholders
- Ranking stakeholders according to their importance and innuence
- For each stakeholder identfying the criteria that stakeholders would use to judge the
organizaton’s performance or the extent to which it is meetng their expectatons
- Deciding how well the organizaton is doing form stakeholders perspectte
- tdentfying what can be done to satsfy each stakeholder
- tdentfying and recording longer-term issues with inditidual stakeholders and stakeholders as a
group
Power interest grid:
2
, Response towards each stakeholder:
Profts are to business as breathing is to life. Breathing is essental to life, but it is not the purpose for
liting. Similarly, profts are essental for the existence of the corporaton, but they are not the reason for
its existence.
Corporate social responsibility: Milton Friedman declared CSR to be both unethical and undesirable.
Unethical because is intolted management spending owners’ money on projects that owners had not
approted of and undesirable because it intolted corporate executtes determining the interests of
society.
Some of the main arguments for prioritzing shareholders’ interests and seeking to maximize profts
rather than returns to other stakeholders are:
- Competton: competton erodes proftability.
- The market for corporate control.
- Conterge of stakeholder interests
- Simplicity
The property concepton: tiews the frm as a set of assets owned by stockholders
Social entty concepton: tiews the frm as the community of inditiduals that is sustained and supported
by its relatonships with its social, politcal, economic and natural enrtironment.
The frm as property tiew: implies that management’s responsibility is to operate in the interests of
shareholders
The frm as social entty: implies a responsibility to maintain the frm within its oterall network of
relatonships and dependencies.
Approach from the book:
Read book short alinea about their approach
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