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Summary of readings Strategic Management B&M (EBB649C05) - Contemporary Strategy Analysis
Summary of the required readings for the course of Strategic Management B&M. It offered a nice basis for exam prep!
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Strategic Management ReadingsWeek 1
Chapter 1: The concept of Strategy
Four characteristics of strategy:
1. Goals that are consistent and long term
2. Profound understanding of the competitive environment
3. Objective appraisal of resources
4. Effective implementation
The task of business strategy is to determine how the firm will deploy its
resources within its environment and so satisfy its long-term goals and
how it will organize itself to implement that strategy.
Strategy as a link between the firm and its environment
Strategic fit is fundamental to the view of strategy as a link between the
firm and its external environment. Strategic fit refers to the consistency
of a firms strategy with the firm’s external environment and with its
internal environment, especially with its goals and values and resources
and capabilities. An effective strategy is one in which all the decisions and
actions that make up the strategy are aligned with one another to create a
consistent strategic direction. 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.
,The concept of strategic fit is one component of a set of ideas known as
contingency theory. Which postulates that there is no single best way of
organizing or managing, but the best way depends on the circumstances
and characteristics of the organization’s environment.
Why do firms need strategy?
Strategy assists the effective management of organizations by enhancing
the quality of decision-making, by facilitating coordination, and by
focusing organizations on the pursuit of long-term goals.
Strategy as decision support – strategy is a pattern that gives
coherence to the decisions of an individual or organization. Bounded
rationality: seeking a decision that is good enough, rather than the best
possible decision.
Strategy as a coordinating device – strategy acts as a communication
device to promote coordination, and can be communicated to all
organizational members when translated into goals, commitments, targets
etc.
Strategy as a target – strategy establishes the direction for the firm’s
development and sets aspirations: strategic intent. However this can
create some implications, which is that strategy should embrace stretch
and resource leverage and not be overly constrained by considerations of
strategic fit.
There are four types of statements through which companies
communicate strategy:
1. The mission statement: it describes organizational purpose and
addresses “why we exist”.
2. A statement of principles or values outlines “what we believe in and
how we will behave”
3. The vision statement projects “what we want to be”.
4. The strategy statement articulates the company’s competitive game
plan, which typically describes objectives, business scope and
advantage.
However, all these statements are intentions, and strategic intent is NOT
necessarily realised. Ultimately, strategy is realized as an action and is
observable in where and how a firm competes.
Corporate and business strategy
To answer these questions define the two major areas of firm’s strategy:
corporate strategy and business strategy.
Corporate strategy defines the scope of the firm in terms of the
industries and markets in which it competes. The decisions include choices
,over diversification, vertical integration, acquisitions and new ventures as
well as the allocation of resources between different businesses of the
firm.
Business strategy is concerned with how the firm competes in a
particular industry or market, and a firm must establish a competitive
advantage over its rivals. This area of strategy is also called competitive
strategy.
The difference between the two is that corporate strategy is the
responsibility of corporate top management. Business strategy is
primarily the responsibility of the senior managers of divisions and
subsidiaries. It also corresponds to the primary sources of superior profit
for a firm. Through corporate strategy this is done by locating with
industries that offer attractive rates of profit. And through business
strategy this is done by establishing a competitive advantage over rivals
within an industry:
There are two dimensions of strategy, static and dynamic.
, How is strategy made?
A pattern of consistency in decisions can be identified as a strategy.
There’s Design versus Emergence. Mintzberg distinguishes the following
approaches to strategy design:
1. Intended strategy: strategy as conceived by the leader or top
management team. Intended strategy may be less of a product or
rational deliberation and more of an outcome of inspiration,
negotiation, bargaining and compromise among those involved in
the strategy-making process.
2. Realized strategy: the actual strategy that is implemented. Only
partly related to that which was intended. (only 10%-30% of
intended strategy is realized)
3. Emergent strategy: the primary determinant of realized strategy.
These are the decisions that emerge from the complex processes in
which individual managers interpret the intended strategy and adapt
it to changing circumstances. (flexible response to changing
circumstances = emergence)
The design school is the view of strategy as a rational, analytical process
of deliberate planning. The process or learning school of strategy is the
view of strategy as an emergent process.
In practice strategy is both thought and action. Top-down rational design is
combined with decentralized adaptation:
The design aspect of strategy compromises organizational processes
through which strategy is deliberated, discussed and decided.
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