Business Strategy – Lecture 4
Strategic Direction
John Birchall
Our Focus Today
(Harrison 2003: 4)
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“Strategic management is a process
through which organizations analyse and
learn
from their internal and external
environments,
establish strategic direction,
create strategies that are intended to move
the organization in that direction, and
implement those strategies,
all in an effort to satisfy key stakeholders”
Linking Purpose to Action
Strategy Context
Broad and Operating Environments
Organisational
Purpose
Vision, Mission,
Ethics
Strategy Process
Involves Stakeholders
Strategy Content
Business Definition,
Competitive
Strategies
Adapted from Harrison (2003: 37) and De Wit & Meyer (2005: 5)
Mission and Purpose
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Why does the organisation exist?
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survive, serve, make profits, have fun?
Nokia example (Harrison 2003: 118-9)
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Making the most of digital opportunities
Aiming for the next wave of growth and innovation
Looking after the environment
Providing safety and inspiration for staff
Achieving financial benefits
Gaining stakeholder acceptance
Beyond the Balance Sheet:
Corporate Integrity
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Jeffrey Immelt
CEO General Electric (since 2001)
General Electric (GE website Oct
2007)
No mission statement: operating philosophy & business
objectives stated each year in letter to shareowners,
employees and customers in the annual report.
GE Values: Imagine Solve Build Lead
“Imagination must be practiced within the boundaries of ethics,
compliance and integrity”
Citizenship: Every day, the people of GE seek to improve
the world in which we live.
Our Culture: GE has many businesses, but one culture. GE
culture develops leaders, offers diverse & rewarding
work environment, supports employees’ voluntary work
Stakeholder Influences on
Strategic Direction
The Operating
Environment
Activist
Groups
Suppliers
Unions
Competitors
Local Communities
Owners
Directors
The Organization
Managers
Financial
Intermediaries
Employees
Customers
The Media
Government Agencies
and Administrators
Harrison (2003: 37)
Stakeholder Analysis
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Freeman (1984) Strategic Management: A Stakeholder
Approach
Donaldson and Preston (1995) The Stakeholder Theory of
the Corporation: Concepts, Evidence and Implications AMR
Freeman, Harrison & Wicks (2007) Managing for
Stakeholders
Classify rather than simply list
Internal / Connected / External
Positive / Negative
Power / Influence
Interest: Nature / Intensity
The Mendelow Grid
LEVEL OF INTEREST
Low
Minimal
effort
Keep
informed
High
Keep
satisfied
Key
players
POWER
Low
High
Johnson, Scholes and Whittington (2005: 182), citing Mendelow (1991)
Organisational structure
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The legacy of past success
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The Icarus paradox
Can create inertia (Harrison 2003: 120)
‘Do nothing’ is often a preferred option
Comfort, stability, security are valued
Ideology influences vision and mission
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Bounded rationality
The Risk of Strategic Drift
Environmental
change
Amount
of
change
5
3
2
1
Phase 1
Incremental change
Jump 5
Strategic innovation
Strategic
change
4
Time
Phase 3/4
Phase 2
Transformational
Flux
change or demise
Expecting the Unexpected
Mintzberg (1987:14)
Intended
Strategy
Imposed
Strategy
Unrealised
Strategy
Emergent Strategy
Realised
strategy
Feedback loops
(Harrison 2003: 121)
Freeing the firm from bounded rationality
Broad
Environment
Feedback that Guides
Impressions,
Expectations and
Behavior
External
Stakeholders
Strategic Direction
Vision Mission
Business Definition
Growth Orientation
Organizational Ethics
Internal
Stakeholders
History and
Inertia
Organizational
Actions
Organizational
Outcomes
Feedback that Guides
Impressions,
Expectations and
Behavior
Strategic Direction
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Must be clear and firm – yet
open to change
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Statements of vision, values, mission:
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Make paradigms public, therefore open to
question and transformation
Business definition (Harrison 2003: 124)
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Explains how the organisation wants to make its
vision work
Whose needs are being served?
What is to be produced, or what services delivered
- and how?
Strategic Decisions
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Will commit a substantial share of the
organisation’s resources in the medium or
long term
Can affect the firm’s overall scale and scope
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How big relative to competitors?
How heavily focused on specific industries?
How much control of the industry supply chain?
Can change the pattern of relationships with
key stakeholders
Strategic Direction
Now, you can begin to;
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Identify stakeholder groups
Assess their influence on strategy
Explain what paradigms are and how
they change
Link organisational purpose to action