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Summary - Strategic Management
- Cours
- Strategic Management
- Établissement
- Vrije Universiteit Brussel (VUB)
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SAMENVATTINGSTRATEGIC MANAGEMENT
CHAPTER 1: CONCEPTS AND SCHOOLS OF THOUGHTS
THE CONCEPT OF STRATEGY: 4 BIG ISSUES
1. Concepts and evolution of strategic “schools of thought” WHAT?
2. Boundaries of the firm: WHERE? = corporate strategy
o Horizontal: size of the company (producing how much?) → not in the same value chain (how many
different products are we going to produce?)
▪ Example a lot of car sellers also sell insurance with in nowadays
▪ Example as an IT company, are we only selling software or also hardware?
o Vertical: what will we produce? Ourselves (“make or buy”?) → up- or downstream integration
▪ Making the product but also the packaging and also distributing them
▪ Example flagship stores which are often in the hands of the producers
o Corporate (company as a whole): on which market(s) do we want to be?
▪ Horizontally segmented markets or vertically segmented markets
▪ Expanding should be because of efficiency reasons, not managerial reason (doomed to fail)
3. Competition: WHO and HOW? = competitive sstrategy → important to know who your competitors are
o Type of market business is operating in: WHO?
▪ E.g. airplane industry versus consumer products (e.g. Boeing versus Unilever)
o Kind of interaction of rivals: HOW? how are the dynamics? We know they are others in the market as
well, how does everyone behave?
▪ Example explicit price cooperation is illegal, cooperation on price does happen
4. Positioning and dynamics: WHY? = competitive and corporate strategy → what are the strengths and weaknesses?
Given the resources and the capabilities – how are we going to position ourselves in the market?
o Where do we want to be? low cost, differentiation, …
o Which competitive advantage do we want to have? Do we have the resources and capabilities for that?
WHAT IS STRATEGY
Distinguishing strategy from tactics:
→ Strategy is the overall design and philosophy to plan for deploying resources to establish a favourable position /
reach success → long term and involves a significant investment of resources
→ Our resources are: friends, family, education level from high school and bachelor’s
→ Tactic is a scheme for a specific manoeuvre
→ Cheating for example is a short term decision to get closer to the degree and it’s easily reversible (you can
stop doing it).
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,Characteristics of strategic decisions:
→ Important
→ Involve a significant commitment of resources: we spend years studying to obtain the degree
→ Not easily reversible: at a certain period it’s not easily reversible
THE ROLE OF ANALYSIS
Every organisations from tiny to big has its own strategy.
→ Strategy analysis improves/supports decision processes, but doesn’t give answers
→ Supports: strategy doesn’t replace decision making → they take decision based on your input
→ Strategy analysis assists us to identify and understand the main challenges of organisations/businesses
→ Strategy analysis helps us to manage complexity
→ Strategy analysis can enhance flexibility and innovation by supporting learning
Strategy Making Processes within the Company: Multiple Roles of Strategy
Strategy as decision support:
• It improves part if decision making (when the decision maker
gets what you mean).
Strategy as communication and coordination
• You should only commit to resources or project which is not in
line with the strategy= alignment and consistency. This gets clear
by the organisations mission and values.
Strategy as a target
• Strategy helps to reach the goals and ambitions.
STRATEGIC PLAN HIERARCHY
Strategic plan (10 – 20 years)
→ Every organisations start with values
→ It creates a vision: what’s the ambition
→ The mission stands for the contribution of the vision
→ What was achieved to get there? What’s needed to get there.
Action plan (1 year): short term implementing strategy. Translating strategic into clear business segments in company
→ Objectives
→ Actions plans
→ KPI’s: how many customers have you reached yesterday or in the last month, how many customers really bought $
something?
→ Important for companies to combine the 3 P’s
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, WHAT MAKES A SUCCESFUL STRATEGY
Knowledge of what going out in and outside the organisation is crucial in order
to reach the long term objectives.
BASIC FRAMEWORK
Link between firm and environment:
• There is never a vacuum: there are changes every time ->
industries are always changing
• Strategy is what links the firm with the industry environment
SOURCES OF SUPERIOR PROFITABILITY
Strategy is not a mission, it is a means to get to the mission
→ The mission is not always ‘making money’, the mission could also be; treat more patients/ better service at the
hospitals
→ There are many perceptions on mission and the strategy too: profit/budget maximisation
There are always 2 question that need to be asked:
1. In what business do we do it?
→ Which market are we going to get in to?
2. When we’re in the business and market, how do we compete?
→ What are we going to do in the market?
COMPONENTS OF “SUCCES”
Everyone starts with a goal the team believes to be realisable. Then they
have a look at the environment (is it fierce, how is the environment
working and who else is in the environment?). Then the team gets
assembled: who and what do you need?. It’s also important to know
who is already in the team and what role they have – is there a good
manager etc?. Then they start implementing the strategy by using the
resources and the skills etc.
When we’re talking about profit it doesn’t necessarily mean money. Profit can mean different things in different
organisations:
→ Maximizing service in hospitals e.g. more beds to secure more patients
→ Maximizing the budget in monetary institutions
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, THE EVOLUTION OF STRATEGIC MANAGEMENT
o More recent years: mathematics and statistics are
getting more and more important
o Resilience and reinventing in the new world= strategies
in 2020
▪ Linked with digitalization
STRATEGY MAKING: DESIGN OR PROCESS?
Strategy as design means that you gather plans as managers and you just implement
because that was the intended action to do.
Strategy as a process: strategy is not just a baseline, you can start off with a baseline but you
need to see how the market dynamically involves. → have a look at how the environment
and the chances change in the market and whether it’s beneficial for you or not.
Mintzberg says it’s both: it starts as a design (ambition) but you need to keep your eyes open for changes in the dynamics. This
is why strategic manager are needed.
→ What do we need to know: there is a truth but no one has it. There are tools you need to use and they linked to the 10
schools. It is important to look from different perceptions.
Mintzberg’s Critique on Formal Strategic Planning:
→ The fallacy of prediction: the future is unknown
→ The fallacy of detachment: impossible to divorce formulation from implementation. Sometimes we have a very nice
idea for an ambition and we formulate a strategy to reach that ambition but we sometimes don’t have the need to
reach it
→ The fallacy of formalization: inhibits flexibility, spontaneity, intuition and learning. There is a strategy so let’s just
follow it, however, this is not how managers work since they need to take the customers need etc. in account. So
formalization is good but the organisation should also be flexible and agile
STRATEGY SAFARI
“and over here, ladies and gentlemen: the strategic management beast”.
→ Ancient Sufi tale: the blind men & the elephant
→ Analogy of the blind men trying to describe an elephant → the 10 men touch the elephant and describe it but they’re
all touching different parts so they all have a different explanation of what the elephant looks like → same goes to the
10 different schools since it depends on what angle you look at the issue
→ Ten schools – groupings: framework that can be used to categorize the field of strategic management but many
managers combine different schools
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