Strategy and Strategic

Management

Chapter 1
Definitions of Strategy

 "Strategy is the direction and scope

of an organization over the long-
term: which achieves advantage for
the organization through its
configuration of resources within a
challenging environment, to meet
the needs of markets and to fulfill
stakeholder expectations".
In other words, strategy is
about:
 Where is the business trying to get to in the long-term?
(direction)
 Which markets should the business compete in and what types
of activities are involved in such markets? ( markets; scope)
 How can the business perform better than the competition in
those markets? (advantage)
 What resources (skills, assets, finance, relationships, technical
competence, and facilities) are required in order to be able to
compete? (resources)
 What external environmental factors affect the businesses’
ability to compete? (environment)
 What are the values and expectations of those who have power
in and around the business? (stakeholders)
 Definitions of Strategy

‘A strategy is a unified, comprehensive and

integrated plan that relates the strategic
advantages of the firm to the challenges of the
environment and that is designed to ensure
that the basic objectives of the enterprise are
achieved through proper execution by the
organisation.’

Gluek & Jaunch

 Definitions of Strategy

‘That activity which specifies for a

business a course of action that is
designed to achieve desired long-term
objectives in the light of all major
external and internal factors, present and
future.’

General Electric Company

Strategic Process

• Strategic Goals • What is our mission ?

• Strategic Analysis • What is happening to our
business ?
• Strategic Choice • What do we do about it ?

• Strategic • How do we do it ?
Implementation
Sources of Strategy:
Theory
 Planned Strategy (Deliberate or
Prescriptive Strategy)
 Competitive Positioning Strategy
 Core-competence based Strategy
 Emergent (Learning) Strategy
 Knowledge-based Strategy
Planned (Prescriptive)
Strategy
 Focus is on Long Term planning that
tries to “achieve a fit between the
organization strategy and the
environment in which it operates”
 Weakness- in today’s quickly changing
environment, it may be unrealistic
Competitive Positioning
Strategy
 Popular in the 1980’s
 Based on the work of Porter
 Focused on a strategic fit between the
organization and it’s environment to gain
competitive advantage
 An “outside in” strategy
 Useful strategy tools: Porter’s 5 forces
analysis and generic strategy
Emergent (Learning)
Strategy
 Approach based on the weaknesses of
the Planned (Prescriptive) Strategy
 In a rapidly changing environment,
organizations must incrementally
change and adopt strategy based on
organizational learning
Core Competence
Approach
 From the 1990’s
 Competitive advantage comes from an
organization’s core competences or
distinctive capabilities
 Unlike the competitive positioning approach,
this approach is inside out
 Organizations should focus on develop their
distinctive resources, capabilities and
competences to take advantage of their
environment
Learning and Knowledge
Based Strategy
 An approach that uses all parts of an
organization (resources, capabilities,
core competences and activities) and
its interactions with the environment
 Belief that competitive advantage
depends on the development of new
and superior knowledge through a
process of organizational learning
 Strategy Development Knowledge
Core Competence
Generic Strategy Strategic Direction

Feasability

External Strategy
Strategy Evaluation
Competitive Learning
Environment Suitability

Acceptability

Internal
Resources
Competencies
Activities
Culture
Strategic Change
Structure
Products and Implementation
Resource Allocation
Cultural, structural, systemic
Competence Building
Change and leadership
Functional Strategies
Different Levels of
Strategy
 At different levels of an organization,
strategy decisions differ in:

scope
time horizon
degree of certainty
complexity
Different Levels of
Strategy
 Strategic – concerned with getting a
sustainable competitive advantage and
involves setting long term goals and
objectives
 Tactical – Focuses on how organizational
goals are met and how strategies are
done
 Operational – Focuses on short-term
objectives and day-to-day management
Congruence (“fit”)

 Successful strategies will have

congruence, or “fit”, between all 3
levels
 In other words, once strategic level
objectives are set, tactical and
operational level strategies must
“agree” in order to achieve the overall
strategy
Where strategy is carried
out
 Network strategy
 Corporate strategy
 Business strategy
 Functional strategy
Setting Strategy

Missions, Goals & Objectives

 Missions & Goals of the Firm

 Stakeholder Theory
 Mission Statements &
Strategy
 Objectives
Stakeholders of a
Firm
Inside Claimants Outside Claimants
 Customers
 Executives  Suppliers
 Board of  Governments
Directors  Competitors
 Shareholders  Local Communities
 Employees  General Public
“The moral obligation of business is
to increase its profits”

- Milton Friedman
Stockholder Theory

 Businesses must maximize profits

 Stockholders are the most important
concern of an organization
 Failure to do so will reduce business
performance and negatively affect
other stakeholders
Stakeholder Theory

 Shareholders (stockholders) are NOT

the sole concern of organizations
 Other groups are affected and should
be considered
Stakeholder Mapping
Stakeholder Mapping is an important part of
making strategy. It consists of making
judgements on three issues:
 How likely each stakeholder group is to impress
its expectations on the firm.
 Whether they have the means to do so - power of
the stakeholder group.
 The likely impact that stakeholder expectations
will have on future strategies
 Stakeholder Mapping -
Power/Dynamism Matrix
PREDICTABILITY

High Low

Low A B
Few Problems Unpredictable but
Manageable
POWER
C D
Powerful but Greatest Danger or
High Predictable Opportunities
 Stakeholder Mapping -
Power/Interest Matrix

LEVEL OF INTEREST
Low High

Low A B
Minimal Effort Keep Informed
POWER
C D
Keep Satisfied Key Players
High
 Mission, Stakeholders &
Strategy

Inside Claimants Outside Claimants

Mission Statement

Strategy Formulation
 The Most Successful Organizations Analyze
and Manage Their Stakeholders Well
Stakeholder Analysis
 Identifying and Prioritizing
Key Stakeholders
 Assessing Their Needs
 Collecting Ideas From Them
 Integrating this Knowledge
into the Strategic
Management Process
 Mission Statement & its
Purpose

 Sense of Purpose & Aspiration

 Company Image

 Statement of Company Values,

Culture and Ethics
 Role as a Guide for the Strategy
Process
Mission Statement
 Business Definition
 Major Goals of the
Firm
 Philosophies
 Guiding Principles
 Considerations of
stakeholders
 Customer Groups Customer Needs

Who is being What is being

satisfied ? satisfied ?

Definition of
the Business

How are Customer Needs

being Satisfied ?

Distinctive Competencies
BMW Group worldwide mission statement is:
"To be the most successful premium manufacturer
in the industry."
Example: BMW
 What is BMW Group strategy?

 Identifying potential and encouraging growth

 Knowing what we represent

 Recognising where our strengths lie and making the best use of every
opportunity

 Following a clear strategy

 These are the philosophies that underpin BMW Group. They influence
the company's structure and how decisions are made. The result is
hopefully a success which sees that BMW Group continues in its strong
position. From research through to sales, BMW Group is committed to
the very highest in quality for all its products and services.
 Example: McDonalds

"McDonald's vision is to be the world's best quick service

restaurant experience. Being the best means providing outstanding
quality, service, cleanliness and value, so that we make every
customer in every restaurant smile. To achieve our vision, we are
focused on three worldwide strategies:
Be the best employer for our people in each community around
the world,
Deliver operational excellence to our customers in each of our
restaurants, and
Achieve enduring profitable growth by expanding the brand and
leveraging the strengths of the McDonald's system through
innovation and technology."
Discussion Questions
 What is strategy?
 What are the sources of strategy?
 How do the mission and values of the
organization relate to strategy?
 Why are stakeholders important in strategy?
 What is BMW’s aspiration and purpose? It’s
desired public image? Quality and service
aspirations?
 Which stakeholders do McDonalds consider
in their mission?
Review

 Definition of Strategy
 Theories on Strategy
 Levels of Strategy
 Where strategy is made?
 Missions, goals and objectives
 Stakeholder influence
For Next Week

 Find the mission statement of a real

company. Write a one (1) page
description of the business definition,
major goals, and philosophy, and
identify the stakeholders considered.
 Read Chapter 2, Business Strategy,
pp.31-46