Strategy and Strategic Management

1. Strategy and Strategic Management

3. Definitions of Strategy �Strategy can be defined as the determination of the basic long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.� Strategy and Structure Chandler

4. 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

5. 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

6. Mintzberg�s 5 P�s Plan strategies Ploy Strategies Pattern Strategies Position Strategies Perspective Strategies

9. Sources of Strategy: Theory Planned Strategy (Deliberate or Prescriptive Strategy) Competitive Positioning Strategy Core-competence based Strategy Emergent (Learning) Strategy Knowledge-based Strategy

10. 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

11. Prescriptive Strategy Development Traditional Strategic Management Process Situation Analysis--Strengths, Weaknesses, Opportunities and Threats (SWOT) Strategies should take advantage of strengths and opportunities or neutralize or overcome weaknesses and threats Environmental Determinism--the best strategy involves adapting to environmental, technical and human forces Strategy is deliberate (always planned and intended by management)

12. Adaptation--strategy involves submitting to existing forces. Deliberate--intended by management (planned) Resource-based View Organization is made up of resources: financial, physical, human, general organizational (structure, systems, culture, reputation, relationships with stakeholders). Sustainable competitive advantage--Comes from a resource that is valuable in the market, possessed by only a small number of firms (rare), and costly or difficult to imitate in the short term. Effective development or acquisition of organizational resources may be the most important reason that some organizations are more successful than others. Prescriptive Strategy Development

13. 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

14. 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

15. 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

16. 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

17. What approach to use Learning and Knowledge based strategy, taking into account all perspectives

19. Different Levels of Strategy At different levels of an organization, strategy decisions differ in: scope time horizon degree of certainty complexity

20. 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

21. Where strategy is carried out Network strategy Corporate strategy Business strategy Functional strategy

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23. Missions & Goals of the Firm Stakeholder Theory Mission Statements & Strategy Objectives

24. Stakeholders of a Firm Inside Claimants Executives Board of Directors Shareholders Employees Outside Claimants Customers Suppliers Governments Competitors Local Communities General Public

26. 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

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

28. Stakeholder Mapping Stakeholder Mapping is an important part of Strategy Formulation. 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

29. Stakeholder Mapping -Power/Dynamism Matrix

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31. Mission, Stakeholders & Strategy

33. Mission Statement Business Definition Major Goals of the Firm Philosophies Guiding Principles

34. Nokia Example In 1992 Nokia�s strategic intent was expressed in four criteria Focused Global Telecommunications-orientated High value-added Its vision was the voice will go wireless In 1997 the strategic intent was articulated in terms of a mobile information society and bring the internet to everyone�s pocket

35. Nokia 2 The Nokia vision in 1992 led to the company divesting a broad range of businesses that contributed some 90 percent of its revenues and to focus on the manufacture of handsets and network equipment The leaders set a further goal of doubling market share by the end of the decade. This was achieved by 1997 and by 1999 Nokia had overtaken Motorola as market leader. The 1997 vision further consolidated Nokia�s market position and led to the development of the picture phone and the mobile internet etc.

36. Mission Statement & its Role Sense of Purpose & Aspiration Company Image Statement of Company Values, Culture and Ethics Role as a Guide for the Strategy Process

38. What is in a Mission Statement ? Philosophy and Self Concept Desired Public Image Concern for Different Stakeholders : Customers Employees Shareholders Quality, Product and Service Aspirations

39. Live Examples GSK Pfizer and http://www.pfizer.com/are/mn_about_vision.html BAe Systems BAT Pearson BP Nike

41. ORGANIZATIONAL PURPOSE Paradox of Profitability and Responsibility SHAREHOLDER VALUE STAKEHOLDER VALUES Emphasis on Profitability over responsibility Responsibility over profitability Organizations are Instruments Joint-ventures Purpose To serve owners To serve all parties involved Measure of success Share price & dividend Stakeholder satisfaction Major challenge Principal-agent problem Balancing interests Governance by Independent outside directors Stakeholder representation Social responsibility Up to individuals Up to individuals and organizations Society served by Pursuing self-interest Pursuing joint-interests

42. Ashridge Diamond Model A model that links Mission, Sense of Vision and Organisational Values with Strategy

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44. Balanced Scorecard Model Links Objectives - Internal and External to the Firm with Financial and Developmental Performance

45. Balanced Scorecard The Balanced Scorecard is a way of reconciling these elements � Developed by Kaplan and Norton and used by many companies. The Scorecard shows how Vision translates into Strategy and Strategic Outcomes

46. Balanced Scorecard - Vision & Strategy

47. Balanced Scorecard Model

48. Balanced Scorecard Elements Financial Perspective Return on Capital Employed Cash Flow Project profitability Sales Backlog Profit Forecasts Customer Perspective Customer Ranking Survey Customer Satisfaction Pricing Index Market Share Key Accounts Data

49. Balanced Scorecard Elements Internal Business Perspective Tender Success Rate Time spent with Customers on new work Reworking Orders Project Performance Innovative & Learning Perspective % Revenue from New Sales Staff Improvement Index Revenue per Employee

50. Identifying and Prioritizing Key Stakeholders Assessing Their Needs Collecting Ideas From Them Integrating this Knowledge into the Strategic Management Process The Most Successful Organizations Analyze and Manage Their Stakeholders Well

51. Review Definition of Strategy Theories on Strategy Levels of Strategy Where strategy is made? Missions, goals and objectives Stakeholder influence

52. 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.

53. Example: McDonalds

54. Discussion Questions What is strategy? What are the sources of strategy? Which approach is best? 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?

55. For Next Week Read Chapter 2, Business Strategy, pp.31-46 For Next Wednesday read and prepare case study �Pilkington and its float glass innovation,� pp.313-317