Strategy is a unifying theme that gives coherence and direction to the actions and decisions of an
individual or an organization
Factors that are conductive to success :
• goals that r consistent and long term
• Profound understanding of the competitive environment
• Objective appraisal of resources
• Effective implementation
An individuals success is seldom because of a random process
Those who achieved outstanding success in their careers managed their careers most effectively,
often by combining those four factors
The Basic Framework for Strategy Analysis
The four elements of a successful strategy shown in
figure 1.1 are divided into two groups: the firm and the
industry environment - strategy links the two
Firm embodies three elements of 1.1:
• Goals and values ( simple, consistent, long-term)
• Resources and capabilities ( objective appraisal of
resources)
• Structure and systems ( effective implementation)
Industry Environment embodies embodies the fourth element :
• Firms relations with competitors, customers, suppliers ( profound understanding of the
competitive environment)
This view of strategy as a link between the firm and its industry environment has close similarities
with the SWOM framework, HOWEVER, a two way classification of internal and external forces is
superior to the four-way swot framework
Task of business strategy:
• Determine how the firm will deploy its resources within its environment and satisfy its long term
goals
• How it will organize itself to implement that strategy
Strategic Fit
Strategic fit refers to the consistency of a firm’s strategy with the firm’s external environment and
its internal environment - especially with its goals, values, resources and capabilities
Companies often fail because their strategy lacks of consistency with either the internal or the
external environment
Example: Nokia : failed to account for a major change in its external environment : the consumer
demand for smartphones
Strategic fit also relates to the internal consistency among the different elements of a firms
strategy
Effective strategies are ones where functional strategies and individual decisions are aligned with
one another to create a consistent strategic position and direction of development
The notion of internal fit is central to Porter’s conceptualization of the firm as an activity system
,Porter states that ‚Strategy is the creation of a unique and differentiated position involving a
different set of activities‘
key is how these activities fit together to form a consistent, mutually reinforcing system
Strategic fit is one component of a set of ideas known as contingency theory
Contingency theory suggests that there is no single best way of organizing or managing
The best way to design, manage and lead an organization defends n the circumstances
A Brief History of Business Strategy
Origins and Military Antecedents
• Strategy gives direction and purpose
• Strategy derived from the greek word strategy which means ‚generalship‘
• Business strategy derives from military strategy and both share a number of common concepts
• Strategy = overall plan for deploying resources to establish a favorable position
• Tactic = scheme for a specific action
• Tactic = concerned with the maneuvers necessary to win battles
• Strategy = concerned with winning the war
Strategic decisions share 3 common characteristics:
• They are important
• They involve a significant commitment of resources
• They are not easily reversible
Principle of military strategy that have been applied to business situations :
• Relative strengths of offense and defensive strategies
• Merits of outflanking over frontal assault
• Roles of graduated responses to aggressive initiatives
• Benefits of surprise
• Potential for deception, envelopment, escalation and attrition
Differences between business competition and military conflict:
• Objective of war : defeat enemy
• Purpose of business rivalry : seek to coexist with rivals
Game theory = gave rise to the hope that a general theory of competitive behavior would emerge
Game theory has revolutionized the study of competitive interaction
From Corporate Planning to Strategic Management
Corporate planning (also known as long-term planning) was developed during the late 1950s to
serve the purpose of developing systematic approaches to long-term development
• Macroeconomic forecasts provided the foundation for corporate planning
• The techniques of corporate planning were useful for guiding the diversification strategies many
large companies pursued during the 1960s
• During the 1970s and 1980s diversification failed and asian firms stepped onto the world stage,
therefore firms were not able to forecast that far ahead( previously firms planned 5 years ahead )
• Result : shift in emphasis from planning to strategy making - focus now on market selection and
competitive positioning in order to maximize the potential for profit
• This transition from corporate planning to what became called strategic management involved a
focus on competition as the central characteristic of the business environment, and on
performance maximization as the primary goal of strategy
• Then, emphasis on strategy directed attention o the sources of profitability, so that the focus in
the 1970s and 1980s was on how a firms competitive environment determined its potential for
profit
• Later in the 1990s the focus of strategy analysis shifted from the sources of profit in the external
environment to the sources of profit within the firm
,• The resources and capabilities of the firm became regarded as the main source of competitive
advantage - this emphasis has been called the resource-based view of the firm and
represented a substantial shift in thinking about strategy
• Emphasis on internal resources and capabilities has encouraged
firms to identify how they are different from their competitors and
design strategies that exploit these differences
• During the 21st century digital technologies had a massive impact on
the competitive dynamics of many industries, creating winner-take-all
markets and standards wars
• Strategy has become lass about plans and more about creating
options of the future, fostering strategic innovation, and seeking
the ‚blue oceans‘ of uncontested market space
• Being self—sufficient is no longer viable for most firms - alliances
and other forms of collaboration are common
• The financial crisis in 2008-2009 triggered new thinking about
strategy; interest in corporate social responsibility, ethics,
sustainability and the role of legitimacy in long-term corporate
success have renewed
Strategy Today
What is Strategy?
• Strategy is the means by which objectives are achieved
• Involves allocating resources
• Implies some consistency, integration or
cohesiveness of decisions and action
• Strategy has become more about guidelines
for success
• The more turbulent the environment, the
more must strategy embrace flexibility and
responsiveness
• Strategy becomes more important when
unforeseen threats and new opportunities re
constantly appearing
Why do firms need strategy?
Strategy assists the effective management of organizations by :
1. Enhancing the quality of decision making
2. Facilitating coordination
3. Focusing on organizations on the pursuit of long-term goals
• Strategy as Decision Support : improves decision making in several ways:
- simplifies decision making by constraining the range of decision alternatives considered
- the strategy-making process permits the knowledge of different individuals to be pooled and
integrated
- it facilitates the use of analytic tools
• Strategy as a Coordinating Device : strategy acts as a communication device to promote
coordination; CEO can communicate identity, goals, and positioning of the company
- strategy can be translated into goals, commitments and performance targets
• Strategy as Target : establish direction for the firms development and set aspirations that can
motivate and inspire members of the organization
, Where do we find strategy?
• For the entrepreneur the starting point of strategy is the idea for a new business
• Most companies see value in communicating their strategy to employees, customers, investors
and business partners
• 4 types of statement through which companies communicate their strategies.
1. Mission statement : describes organizational purpose
2. statement of principles or values
3. The vision statement
4. Strategy statement
• Ultimately strategy becomes enacted In the decisions and
actions of an organizations member
Corporate and Business Strategy
Strategic choices can be distilled into two questions :
1. Here to compete?
2. How to compete?
Corporate strategy Business strategy
- defines the scope of the firm in terms of the - concerned with how the firm competes within a
industries and markers in which it competes particular industry or market
- decisions include choices over : - also referred to as competitive strategy
- diversification
- vertical integration
- acquisition and new ventures
- the allocation of resources between the different
businesses of the firm
- responsbility of corporate top management - responsibility of the set managers of divisions and
subsidiaries
- where to compete? Industry attractiveness How to compete? Competitive advantage
Describing Strategy
The questions ‚where is the firm competing?‘ And ‚How is it competing?‘ Also provide the basis
upon which we can describe the strategy
‚where‘ has multiple dimensions
Strategy is also concerned with ‚competing for tomorrow‘
Future objectives relate to the overall purpose of the firm (mission), what it seeks to become
(vision) and how it will meet specific
performance targets
Static and dynamic dimensions of
strategy
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