Henry: Understanding Strategic Management

1. Henry: Understanding Strategic Management What is Strategy? (Slides based on Chapter 1)

2. Key concepts we will cover: • Definitions of strategy • Strategy as “fit” - the matching concept (SWOT) • The Strategic Management Process • Vision and Mission • Theory of Business and strategic drift • Many perspectives on strategy

3. What is Strategy? • Strategy has a long antecedent – Sun Tzu The Art of War • Strategy is about achieving a competitive advantage • Meeting customer needs better than rivals • Porter (1996) competitive strategy is about being different

4. Some Definitions…. “Strategy noun: a plan of action designed to achieve a long-term or overall aim: time to develop a coherent economic strategy; [mass noun] shifts in marketing strategy” C Soanes and A Stevenson (Eds), “The Oxford Dictionary of English”, Oxford University Press, 2003 “Strategy is about how an organization sets about getting to where it wants to get” J Thompson and F Martin, “Strategic Management: Awareness and Change”, 5th Edition, Thomson, 2005, p.xvii “Strategy is the direction and scope of an organisation over the long term, which achieves advantage for the organisation” G Johnson and K Scholes “Exploring Corporate Strategy”, 6th Edition, Pearson, 2002, p10

5. What is Strategy? • Markides (1999) selecting a strategic position an organization can call its own based on: • Who should the organization target as customers? • What products or services should be offered? • How can the organization do this efficiently?

6. What is Strategy? • Kay (1993) an organization’s strategy is ‘…the match between its internal capabilities and external relationships’ • Internal: what the organization is capable of doing • External: Its relationship with employees, customers, shareholders, and suppliers. • The use of analytical techniques allows the firm to influence its position in the market

7. The Matching Concept:Strategy as “Fit” MATCHING Internal Analysis - Resources & Capabilities External Analysis - Environment PROCESS Strengths, Weaknesses Opportunities, Threats • SWOT is the most misused technique by students • Avoid a long list - what is really important? • Try to “match” SW with OT • Should be a summary of analysis useful as a basis to judge future options against

8. What is Strategy? • The process of creating a strategy is called strategic management • Strategic management consists of: strategy analysis, strategy formulation, and strategy implementation • In reality these elements are interdependent and should not be considered in isolation • Strategy analysis, formulation, and implementation all need to be considered if the organization is to meet the needs of its environment

9. What is Strategy? • Strategy analysis is a useful starting point for crafting strategy • It includes the general and competitive environment facing the organization • It also deals with the organization’s internal environment • Strategic analysis helps the organization evaluate how well it is positioned to exploit external opportunities

10. What is Strategy? • Strategy formulation usually takes place at the business and corporation level • Strategic analysis is important for strategy formulation • So too is creative insights which synthesize experiences that exist within the organization to form a novel strategy • An organization is seldom faced with only one strategy which means it is necessary to evaluate competing strategies

11. What is Strategy? • Strategy implementation requires the organization to be sufficiently flexible • A given strategy must be effectively communicated with stakeholders inside and outside the organization • The organization’s values are crucial in sign-posting to individuals what the organization considers important • An organization’s culture will determine how it responds to opportunities that exist

12. What is Strategy? • A vision is often associated with the founder of an organization • It represents a desired state the organization aspires to achieve in the future • A mission seeks to answer the fundamental question of why an organization exists • Campbell et al. (1990) make a distinction between mission and sense of mission

13. Komatsu’s Mission To Encircle Caterpillar - “Maru C” www.komatsu.com “Clarity of strategic intent can motivate an organisation to achieve its goals” G Johnson & K Scholes, “Exploring Corporate Strategy”, 5th Ed, Pearson, 1999, p265

14. Why the company exists Purpose The competitive position and distinctive competence What the company believes in Strategy Values Behaviour Standards The policies and behaviour patterns that underpin the distinctive competencies and the value system The Ashridge Mission Model

15. What is Strategy? • The assumptions on which an organization has been built and the basis on which it is run are its theory of business • It includes assumptions about markets, customers, competitors, and its internal capabilities • Organization encounter difficulties when their theory of business no longer fit with reality • A organization’s theory of business becomes obsolete when it has achieved its objectives

16. STRATEGIC DRIFT • Over time, paradigms about “what works” to deliver success can become entrenched. However reality of what is required may drift away from organisational “position” èStrategic Drift G Johnson and K Scholes “Exploring Corporate Strategy”, 6th Edition, Pearson, 2002, p81

17. What is Strategy? • Corporate strategy is concerned with which markets an organization wants to compete in • Business strategy deals with how an organization will compete in its chosen industry or market • Functional strategy occurs according to functional lines such as R&D, marketing and finance

18. What is Strategy? • The Design School seeks to match the capabilities of the organization to the opportunities within its competitive environment • This rationalist approach is exemplified by Michael Porter’s generic strategies • The Learning School emphasizes deliberate and emergent strategies • A deliberate strategy is one the organization intends to pursue • An emergent strategies involves managerial learning and experience that coalesce into a realised strategy

19. Intended vs Realised Strategy H Mintzberg “Five Ps for Strategy” in H Mintzberg, J Lampel, J B Quinn and S Ghoshal “The Strategy Process: Concepts, Contexts, Cases”, 4th Edition, Prentice Hall, 2003, p5