Lecture One

MN3027

Dr George Panagiotou
Introduction to
Strategy
 The Origins and Evolution of Business strategy

Strategy derives from the Greek word strategós which is the position of the general leading large
divisions of stratós (army). Cummings (1993), states that the term coincides with the ancient Athenian
Kleisthénes who developed a new socio-political structure in Athens between 508-507 B.C., after
leading a successful uprising against the ruling of Sparta. As part of the restructure, he introduced
different divisions that acted as military and political units for the Athenian region. The head of each
division was named strategós and was offered a chair at the war council lead by Kleisthenes.

After that, the ancient Greeks took a great interest in strategy and soon became a line of function
requiring specific attributes from the strategists. For Kleisthénes strategy was recursive. Péricles
of Athens saw it as a goal of limiting risk while holding fast to essential points and principles.
Aineias the Tactician, was concerned with effective deployment of man power and other resources
to achieve advantages. Epaminóndas of Thebes emphasised the planning process and the
coordination of resources to achieve an organisational blend. Xénophon of Athens wanted
strategists to be knowledgeable and alert, careful and crafty, trusting and generous but also
greedy and suspicious.

Bose (2003) concurs and adds that Alexander of Macedonia, perhaps, the most known military
strategist, tactician and ruler in the world history was a strong advocate of intelligence gathering,
flexibility, contingency planning, training, clarity in roles, and transparency of actions.

McNeilly (1996) holds the same opinion and further articulates that while in the west the Greeks were
shaping strategy, in the East at around about 400 B.C. a Chinese general known as Sun Tzu from the
state of Ch’i, gained power and recognition because of his many victories at a time when China was
beleaguered by many warlords fighting for dominance. In order to pass down his knowledge of many
years in battles, he wrote a series of articles on the Art of War which, in time, became a significant point
of reference for military strategists in the East, and later on, in the West.
© Dr George Panagiotou 2009
 The origins and Evolution of Business
Strategy
Academic thought
and reflection

Business Strategy (1950s)

Industrial Organisation (1930s)

Economics (1770s)
Military Strategy
(from ancient times)

Time

© Dr George Panagiotou 2009

 Strategy: A Matching Profile
The Key Aspects of Strategy The Key Requirements and Qualities of the
Strategist

•Is undefined, abstract, unstructured and •Needs to have a deep corporate

complex. understanding, be alert, proactive and
•Can be formulated or formed. determined, and ‘have an eye’ for detail.
•Is interdependent with many other areas and •Be characterised by ingenuity and
disciplines and is thus a multidimensional imagination, able to function under pressure
activity. and have interdisciplinary skills.
•Needs to be clear, it requires objectives and •Have the capacity to cope with either too
provides direction. much or too little information.
•Is recursive, subject to corrective action and •Have analytical and interpretative skills.
has to be deployed in a timely fashion. •Able to make sense of fast paced and fast
•Requires effective matching and coordination changing business environments.
of resources and requires perseverance and on- •Be a good manager of people and activities
going refinement. and have good negotiation and coordination
•Needs to be adaptive and flexible and it skills.
entails risk and hard choices. •Be informed and able to second guess
•It involves observation, experience and trial competition.
and error. •Have foresight and perseverance.
•It requires trade offs and is subject to •Be visionary, reflective and a quick
opportunity cost. responder.
•Goes hand to hand with implementation. •Have good leadership skills and be a good
•Needs to be measurable over specific periods motivator.
of time. •Be a ‘bigger person’ to admit own mistakes
and shortcomings.

© Dr George Panagiotou 2009

 Punctuated Equilibrium
Environmental
Change

For example
changes occurring
in the wider
economic
environment or in
the organisation’s Strategic
industry. Fit

Strategic
Wear out

Strategic
Drift
Continuous Incremental Flux Transformational
stage stage stage stage

Time

Stability and Instability and

certainty uncertainty

Adapted from Johnson, Scholes and Whittington (2005)

Strategies in Different
Contexts
 Politico-Economic Framework
Economic Structure

Open economy

Emphasis on competition,
individual freedom and
ownership.
Guided by supply and
Political Ethos

demand, and free trade.

Democracy

my

Autocracy
n o
Eco
d
i xe
M
Emphasis on state control
through ownership and
resource allocation.
Supply and trade is
guided by the state.

Closed economy

Adapted from Worthington and Britton (2000)

 Varied Geographical Settings

Local Regional National

International
 Business Cycle
National
Output

Boom
Potential output
X
Boom Trend output
X Actual output

of
Levels ent erin
g
ploym co v
s of unem Re
Level t
m plo ymen
une Declini
ng X io n
ress
X n Dep
ssio
Rece

Time
Strategic Perspectives Over the Stages of the Industry-Life
cycle (ILC)
Outpu
t Introductio Growt Maturi Saturatio Declin
n h ty n e

Time
Challenges
Competition Little Growing High High Weakening
Products Basic Expanded Enhanced Diverse Withdrawing
Customers Little Increasing awareness High Sophisticated Sophisticated
awareness awareness

Demand Slow Growing High Static Declining

Strategies
Objectives Enter and survive Establish and grow Maintain Hold Harvest
Communications Initiate Increase Frequent Frequent Reduce
Brand Build Establish and achieve Achieve customer Safeguard Exploit
preference loyalty

Product Basic offer Differentiate Maintain Maintain Rationalise

Distribution Fragmented Wider Intensive Intensive Selective
Price High Lower Low Lowest Rising
Systems Minimal Build Maintain Streamline Select
 Key Features of Varied Market Types
Key Characteristics

Number of firms Product features Freedom of entry Key aspects Examples

One firm dominates the market. Government owned companies

There is no direct competition. such as electricity, water and
The firm enjoys economies of scale. prescription drugs.
The firm has considerable control over its prices. Potentially, private-sector
Restricted or totally Demand for the firm’s products and services is companies with high market share
Monopoly One. Unique in the market. blocked by the inelastic. (>40%) and high market power.
government. There is no choice in the market. For example, the Microsoft
Quality and service issues can be minimal. Corporation.

Two firms dominate the market.

Competition is limited.
Restricted, but mostly Firms enjoy economies of scale.
owed to capital There is the danger of the two firms creating a For example, Airbus and Boeing.
Duopoly Two. Some differentiation. requirements. cartel and agreeing to fix prices between them to
eliminate price-based competition.
Limited choice in the market.

Between four and
twenty, but usually a
Oligopoly few large firms hold
the majority share in
the market.
Competitive markets.
Unrestricted. Range of products and services. Most industries in developed
However, from a business The few large firms dominate the market and countries with open or mixed
perspective, there are drive competition. economies. For example, banking,
obstacles to overcome Potential economies of scale. supermarkets, white goods,
Differentiated. when entering established Strong competition among the large firms. telecommuni-cations and so on.
markets. The large firms ‘keep an eye’ on each other and
match competitive activities.

Usually associated with retailing.

Output and pricing decisions do not have a
Monopolistic Competition significant impact on competition. Examples can be builders,
Several. Differentiated. Unrestricted. Limited potential for economies of scale. plumbers, electricians, restaurants
Ease of entry. and so on.

This type of market is a hybrid of Examples can be independent

Contestable Markets Very many. Differentiated. Unrestricted. monopolistically and perfectly competitive airlines and hotels.
Ease of entry. markets.

Usually associated with small retailers.

No firm has a significant power or share of the For example, the numerous small
market. producers and sellers of snacks and
Could be differentiated but There is little differentiation among sellers. drinks operating from small
Perfect Competition Very many usually is very similar. Unrestricted. Producers and consumers and highly aware of premises or selling on the street.
Ease of entry. market characteristics.
 Different Market Sectors

Sector Key Characteristics

Consumer markets
(For example, FMCG)
Industrial markets
(For example, capital
projects)
Manufacturing
Service Offering
Public
(For example, government
owned businesses )
Not-for-profit
(For example, public
hospitals, schools, charities,
and voluntary organisations).
• Broad in scope.
• Many customers and suppliers.
• Many transactions but low individual volume.
• A lot of market and product information available.
• Individual consumer buying behaviour.
• Mass production processes.
• Mass promotion and selling techniques.
• Marketing driven approaches.
• Narrow in scope.
• Few customers and suppliers.
• Fewer transactions but high individual volume.
• Information tends to be less rich.
• Organisational buying behaviour.
• Production tailored to customer needs.
• Relationship marketing and personal selling techniques.
• Focus on the physical aspects of the business.
• Emphasis on product features.
• Tends to be tall in structure and autocratic in style.
• Strict in control.
• Top-down in organisational communications.
• Focus on the diverse intangible aspects that make the service.
• Emphasis on advice and service.
• Tends to be flatter in structure and democ ratic in style.
• People orientated.
• Open in organisational communications
• Owned by the government.
• Strategy is mostly driven by political agenda rather than market
conditions.
• Decisions on resource allocation and budgets are made by the
government.
• Tends to be more bureaucratic and less flexible.
• Responds slowly to market needs.
• Emphasis on stakeholders.
• Usually operates as a monopolist
• Exist to serve the needs of the society and protect the vulnerable.
• Not driven by profit but by expectations and causes.
• Receive funds through government and other sponsors.
• Strategies reflect ideologies and values.
• Decision making tends to be slow due to the involvement of diverse
stakeholders.
Different Organisational Types and Sizes
Organisation Key Characteristics
• Restricted funds.
Small • Limited expertise and limited access to
information.
• Usually single market local players.

• Limited funds.
Medium • More expertise available but still limited
access to information.
• Usually single market players but with
regional potential.

• Better access to funds.

Large • Additional expertise available and better
access to information.
• Broad market players

• High accessibility to funds

Multinational • Diverse expertise available and able to
generate required information.
• Broad in scope and international players.

• Emphasis on the physical aspects of the

Manufacturing business and the physical features of
products.
• Emphasis on providing information and
Service-offering service augmentation paired with
sophisticated levels of customer service.

• Emphasis on providing expertise and

Professional services customer advice and support.
• Primarily business-to-business players.

• Emphasis on serving the public interests

Public and needs and maintaining societal
welfare.