Chapter 6: Strategy: Responsible competiveness
Strategic management is the process of crafting ad implementing organizational strategies
with the goal of achieving a sustained competitive advantage. The broad
perspective/business case perspective refers to any advantage that business could
potentially reap from activities related to society and the natural environment. While the
narrow perspective on responsible management and strategy refers to the field of strategic
management. The strategic management process can be subdivided into four phases:
1) Phase 1: Vision, mission, objectives
2) Phase 2: Environmental analysis
3) Phase 3: Strategy formulation
4) Phase 4: Implementation & Control
5)
The overall goal is responsible competiveness which is the achievement of a competitive
advantage for an organization through the strategic management process while also creating
above average responsible business performance. The three levels of responsible
competiveness:
1) Level-zero responsible competiveness: an organization is competitive at the cost of
society and the environment
2) Level-one responsible competiveness: achieved by pure coexistence of socioenvironmental competitiveness and economic competitiveness
3) Level-two responsible competiveness: achieved when a company is able to leverage
its responsible business excellence to increase its economic competitiveness
Phase 1: formulating the mission, vision and strategic objectives
A vision statement delineates what an organization aims to become and achieve. While a
mission statement defines what the business is and does right now. It is of utmost important
to search for mutually reinforcing relationships. The strategic objectives and goals translate
the often-lofty directions given by vision and mission statements into concrete medium- and
long-run “to-dos”. It is important to understand that while the direction-setting process
constituted by vision, mission and objectives have to be continuously readjusted.
Phase 2: analyzing the strategic environment
The internal environment can be represented by the company’s value chain. The value chain
describes all the different functions establishing the internal processes such as marketing,
HRM, and accounting. The external environment can be subdivided into two layers, metaenvironment and macro-environment.
There is a strong mutually influencing relationship between responsible management
activity and the company environments. Porter and Kramer specify this relationship, inside
out linkages describe how the business’s internal environment influences the external
environment, while outside-in linkages describe the influence of external factors on internal
productivity and strategy execution. The essence is to harness those linkages in order to
support strategy development and execution and to ultimately achieve strategic competitive
advantage.
External environment analysis:
Porter’s Five Forces of industry environment: threat of new entrants, suppliers’ bargaining
power, competitors, buyer’s bargaining power, and threat of substitutes.
Internal environment analysis:
The basic purpose of the value chain is to describe the complete company and all its
activities as they are bundled into business functions such as human resources,
procurement, and marketing.
Resource based view: aims at explaining how company resources and their management
contribute to the achievement of competitive advantage. A competence is merely
something a company is good at, while a core competence is central to a company’s strategy
and competitiveness. The most valuable type of a competence is a distinctive competence,
being a competitively valuable activity that a company performs better than competitors
and which therefore leads to a competitive advantage.
4 types of advantages:
1) Sustained competitive advantage
2) Temporary competitive advantage
3) Competitive parity
4) Competitive disadvantage
SWOT-analysis
The most frequently used tool is the SWOT-analysis or Strength Weakness Opportunity
Threats analysis. It is about the Internal (SW) and the External (OT) that can influence the
company.
Phase 3: crafting the strategy
a) Corporate level strategy
Defines how to manage a company that is competing more than one market, each being
covered by another business unit. Diversification is the process of increasing business units
and markets in which the company competes (vs. divestment). Horizontal integration the
process of managing the no. of parallel businesses competing in unconnected markets.
While the process of managing different businesses on a number of different levels of the
value chain in the same industry is called vertical integration. A related diversification is
diversification into new business activity that has an obvious link to a company’s actual
business activity, while an unrelated diversification misses such a relationship.
b) Business Unit Level Strategy
Is an integrated and coordinated set of commitments and actions a firm uses to gain a
competitive advantage by exploiting core competencies in specific product markets. The
different strategies are: cost leadership, differentiation, differentiation focus or cost focus.
A tool to shape business level strategy is Michael Porter’s activity map.
c) Functional Level Strategy
While the business unit level strategy aims at the achievement of a strategic position in a
specific market, the functional level strategy seeks to develop strategies supporting the
business unit strategic positioning from the inside of a specific function such as marketing,
and sales or accounting. In order to reach cost leadership, functions have to facilitate low
costs by highly efficient processes.
Phase 4: executing and evaluating strategy
The task of aligning business on all levels and in all spheres with the casted strategy, to bring
the strategy into every instance of the business, is the main task of strategy implementation.
After it has been implemented, companies should enter into a process of scrutinizing the
effects of the strategy and use this to readjust parts.
Hardwiring of a responsible management strategy refers to its implementation in the
organizational infrastructure, while soft wiring implements responsible management
throughout the organization’s social fabric. Companies often make the mistake of
overemphasizing the hardwiring activities while neglecting soft wiring. Strategy
implementation always require a certain change process. The more powerful the strategy,
the more drastic. Hardwiring is commonly achieved by using two main tools: 1)
organizational governance mechanisms ensure the congruence between strategic goals and
performance and the owners’ expectations. 2) ensuring the alignment of organizational
structure is a design that best supports strategy.
Organizational controls guide the use of strategy, indicate how to compare actual with
expected results, and suggest corrective actions when the difference between actual and
expected results is unacceptable. The balanced scorecard is an excellent tool for controlling
the social, environmental and economic indicators leading to responsible competitiveness.