Strategy and Strategic Management

Prof. Rushen Chahal

Prof. Rushen Chahal

Definitions of Strategy


"Strategy is the direction and scope of an organization over the longlongterm: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet environment, the needs of markets and to fulfill stakeholder expectations".
Prof. Rushen Chahal

In other words, strategy is about:

 

 

 

Where is the business trying to get to in the long-term? long(direction) Which markets should the business compete in and what types of activities are involved in such markets? (markets; scope) markets; scope) How can the business perform better than the competition in those markets? (advantage) (advantage) What resources (skills, assets, finance, relationships, technical competence, and facilities) are required in order to be able to compete? (resources) (resources) What external environmental factors affect the businesses ability to compete? (environment) (environment) What are the values and expectations of those who have Prof. Rushen Chahal power in and around the business? (stakeholders) (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
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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
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Strategic Process
Strategic Goals What is our mission ? Strategic Analysis What is happening to our business ? What do we do about it ? Strategic Choice Strategic Implementation How do we do it ?
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Sources of Strategy: Theory



   

Planned Strategy (Deliberate or Prescriptive Strategy) Competitive Positioning Strategy CoreCore-competence based Strategy Emergent (Learning) Strategy KnowledgeKnowledge-based Strategy
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Planned (Prescriptive) lanned Strategy



Focus is on Long Term planning that ocus tries to achieve a fit between the organization strategy and the environment in which it operates WeaknessWeakness- in today s quickly changing environment, it may be unrealistic

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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
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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

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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
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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
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Core Competence Generic Strategy

Strategy Development

Knowledge Strategic Direction

Feasability External Competitive Environment

Strategy Learning

Strategy Evaluation
Suitability Acceptability

Internal Resources Competencies Activities Culture Structure Products

Strategic Change and Implementation

Cultural, structural, systemicRushen Chahal Prof. Change and leadership

Resource Allocation Competence Building Functional Strategies

Different Levels of Strategy



At different levels of an organization, strategy decisions differ in: scope time horizon degree of certainty complexity
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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 shortobjectives and day-to-day day-tomanagement
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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
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Where strategy is carried out

   

Network strategy Corporate strategy Business strategy Functional strategy

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Setting Strategy

Missions, Goals & Objectives

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Missions & Goals of the Firm

Stakeholder Theory  Mission Statements & Strategy  Objectives


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Stakeholders of a Firm
Inside Claimants Outside Claimants
  

 

Executives Board of Directors Shareholders Employees

    

Customers Suppliers Governments Competitors Local Communities General Public

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The moral obligation of business is to increase its profits - Milton Friedman

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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

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Stakeholder Theory


Shareholders (stockholders) are NOT the sole concern of organizations Other groups are affected and should be considered

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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
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Stakeholder Mapping Power/Dynamism Matrix

PREDICTABILITY High Low POWER C Powerful but Predictable
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Low B Unpredictable but Manageable D Greatest Danger or Opportunities

A Few Problems

High

Stakeholder Mapping Power/Interest Matrix

LEVEL OF INTEREST Low Low POWER C Keep Satisfied High
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High B Keep Informed

A Minimal Effort

D Key Players

Mission, Stakeholders & Strategy

Inside Claimants Outside Claimants

Mission Statement

Strategy Formulation
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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
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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

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Mission Statement
 

  

Business Definition Major Goals of the Firm Philosophies Guiding Principles Considerations of stakeholders
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Customer Groups

Customer Needs

Who is being satisfied ? Definition of the Business

What is being satisfied ?

How are Customer Needs being Satisfied ?

Distinctive Competencies
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BMW Group worldwide mission statement is: "To be the most successful premium manufacturer in the industry."
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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.
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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." Rushen Chahal Prof.

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?
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Review
     

Definition of Strategy Theories on Strategy Levels of Strategy Where strategy is made? Missions, goals and objectives Stakeholder influence
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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, Strategy, pp.31pp.31-46
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