Lecture 1 The Nature and the Value of Strategic Management

Without a strategy the organization is like a ship without a rudder.

Joel Ross and Michael Kami

What is 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".
Johnson and Scholes (2008)

So Strategy Includes..
Direction Where is the business trying to get in the long term Markets & scope Which markets should a business compete in and what kind of activities are involved in such markets?

Advantage How can the business perform better than the competition in those markets?

Resources What resources are required in order to be able to compete? (skills, assets, finance, relationships, & technical Competencies etc.)

So Strategy Includes..
Stakeholders What are the values & expectations Of those who have power in and Around the business?

Environment What external environmental factors Affect the businesses ability to compete?

Strategy Development
A simple process
Includes three elements

Strategic Analysis

Strategic Choice

Strategic Implementation

Strategy and Operations

Strategic Management Organisation-wide, holistic Conceptualisation of issues Operational Management Routinised Techniques and actions

Creating new directions

Managing existing resources

Developing new resources

Operating within existing strategy

Ambiguous/uncertain

Operationally specific

Long term

Day to day issues

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Levels of Strategy
Corporate
strategy Business

strategy
Functional strategy

Why Strategy is Important?

Motivate managers to proactively shape how the

firms business will be conducted

Achieve higher performance levels relative to

competitors
Provides a systematic approach to uncertainties Coordinates and focuses employees
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Making a Winning Strategy

GOODNESS OF FIT TEST
How well does strategy fit the firms situation?

COMPETITIVE ADVANTAGE TEST

Does strategy lead to sustainable competitive advantage?

PERFORMANCE TEST
Does strategy boost firm performance?

OTHER CRITERIA:
Internal consistency and unity among all pieces of the strategy Degree of risk the strategy poses as compared to alternative

strategies

Degree to which the strategy is flexible and adaptable to changing

circumstances

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Strategies Evolve Over Time

A companys strategy is a work in progress

Changes may be necessary to react to

Shifting market conditions Technological breakthroughs

Fresh moves of competitors

Evolving customer preferences Emerging market opportunities New ideas to improve strategy Crisis situations
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