Chapter 1 Introducing Strategy
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
Understand different people’s roles in strategy
work
Appreciate the importance of different
organizational contexts, academic disciplines and
theoretical lenses to practical strategy analysis
1.2 What is strategy?
Strategy: the long-term direction of an organisation. For
example: Disney from cartoons to diversified
entertainment. In the end becomes an organisation’s strategy, a ‘strategy statement’.
1.2.1 Defining strategy
Strategy is defined as ‘the long-term direction of an organisation’. This has 2 advantages:
1. The long-term direction can include both deliberate, logical strategy and more incremental,
emergent patterns of
strategy
2. The long-term direction
can include both
strategies that
emphasise difference
and competition, and
strategies that recognize
the roles of cooperation
and even imitation
Strategy has got 3 elements:
The long term: the three-horizons framework suggests organisations should think of
themselves as comprising three types of business or activity defined by their ‘horizons’ in
terms of years. Managers should avoid focusing on
the short-term issues.
o Horizon 1: Current core activities – extend
and defend these activities.
o Horizon 2: Develop emerging activities – to
generate new sources of growth and/or
profit.
o Horizon 3: Create viable strategic options for
the future – higher risk activities that may
take years to generate growth/profits.
Strategic direction: over the years, strategies follow some kind of long-term direction of
trajectory.
, Organisation: Organisations involve many relationships, both internally and externally. Those
are internal and external stakeholders: those individuals or groups that depend on an
organisation to fulfil their own goals and on whom, in turn, the organisation depends.
o Internally: organisations are filled with people, typically with diverse, competing and
more or less reasonable views of what should be done
o Externally: organisations are surrounded by important relationships, example:
suppliers, customers, alliance partners, regulators and investors.
1.2.2 The purpose of strategy: mission, vision, values and objectives
The core of a strategist’s job is defining and expressing a clear and motivating purpose for the
organisation. The stated purpose of the organisation should address 2 related questions:
1. How does the organisation make a difference?
2. For whom does the organisation make the difference?
If the stakeholders of an organisation can relate to such a purpose it can be highly motivating.
There are 4 ways in which organisations typically define their purpose:
1. A mission statement: aims to provide employees and stakeholders with clarity about what
the organisation is fundamentally there to do.
a. What business are we in?
b. What would be lost if the organisation did not exist?
c. How do we make a difference?
2. A vision statement: is concerned with the future the organisation seeks to create.
a. What do we want to achieve?
b. If we were here in twenty years what do we want to have created or achieved?
3. Statements of corporate values: communicate the underlying and enduring core ‘principles’
that guide an organisation’s strategy and define the way that the organisation should
operate.
a. NOTE: these values do not change by circumstances.
4. Objectives are statements of specific
outcomes that are to be achieved
a. Often stated in financial
terms (for example Profit).
b. May also be market-based
objectives (for example
Market Share).
c. May emphasise basis of
competitive advantage.
d. ‘Triple Bottom Line’ –
economic, social and
environmental objectives.
1.2.3 Strategy statements
Strategy statements should have three main themes:
Fundamental goals that the organisation seeks, which reflect the stated mission, vision and
objectives.
The scope/domain: refers to three dimensions: customers or clients, geographical location,
and extent of internal activities (‘vertical integration’).
, The (competitive) advantages: this part of a strategy statement describes how the
organisation will achieve the objectives it has set for itself in its chosen domain.
1.2.4 Levels of strategy
Strategy can exist at 3 main levels:
Corporate-level strategy: is concerned with the overall scope of an organisation and how
value is added to the constituent business units. Diversifying from the organisation’s original
activities into other activities (e.g. Tesla selling batteries for home use).
o Which goal?
o How create value?
o Which markets?
o Which diversity of products? How to distribute resources?
Business-level strategy: is concerned with the way a business seeks to compete successfully
in its particular market. Marketing and product improvement strategies (e.g. Developing a
lower cost, volume car for Tesla).
o How to be competitive in specific markets?
Functional strategy: is concerned with how different parts of the organisation deliver the
strategy effectively in terms of managing resources, processes and people. Tesla’s functional
strategies are geared to meeting its investment needs and raising finance.
o How to configurate processes, people and resources?
This need to link the corporate, business and functional levels underlines the importance of
integration in strategy. Each level needs to be aligned with the others. The demands of integrating
levels define an important characteristic of strategy: strategy is typically complex, requiring careful
and sensitive management. Strategy is rarely simple.
1.3 The exploring strategy framework
The Exploring Strategy Framework includes understanding the strategic position of an organisation,
assessing strategic choices for the future and managing strategy in action.
The 3 circles are overlapping and interdependent. Each of the chapters can be seen as asking
fundamental strategy questions and providing the essential concepts and techniques to help answer
them. Working systematically through questions and answers provides the basis for persuasive
strategy recommendations.
1.3.1 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), the
organisation’s stakeholders and the organisation’s culture.
Fundamental questions for Strategic position:
What are the macro-environmental opportunities and threats?
How can the organisation manage industry forces?
How are stakeholders aligned to the organisational purpose?
What resources and capabilities support the strategy?
How does culture fit the strategy?
1.3.2 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.
Fundamental questions for Strategic choice:
How should individual business units compete?
Which businesses to include in the portfolio?
Where should the organisation compete internationally?
Is the organisation innovating appropriately?
Should the organisation buy other companies, form alliances or
go it alone?
1.3.3 Stratgy in action
Strategy in action is about how strategies are formed and how they are implemented. The emphasis
is on the practicalities of managing.
Fundamental questions for Strategy in action:
Which strategies are suitable, acceptable and feasible?
What kind of strategy-making process is needed?
What are the required organisation structures and systems?
How should the organisation manage necessary changes?
Who should do what in the strategy process? Which people
and what activities?
