The Concept of
Strategy
Christian Grandorf
Allen Hicks
Alex Raney
Braden Walker
Anthony Brown
Strategy
• A unifying theme that gives coherence and direction to the
actions and decisions of an individual or an organization.
• Strategy is NOT a detailed plan or program of instructions
Lady Gaga
• Produced and
maintains her ‘brand’
• Emphasizes her
image as a part of
her strategy
• Made her fans or
‘monsters’ part of
her strategy
James Dyson
• Success was not
immediate, Dyson relied
on himself, the teachings
of others, and constant
persistence
• Explored different
markets than his home
in order to get his idea
off the ground
• Moved production from
UK to Malaysia to reduce
costs
• 5000 prototypes before
‘dual cyclone’
Alex Ferguson
• Revolutionary approach to
teambuilding paved the
way for long term success
• Scouting was extended
globally rather than locally
• Focused on Team rather
than individuals
• Team rotations based on
who worked best, planning
for individual opponents in
a whole new way, focused
on strengths and
weaknesses of opposing
teams
Four Common Factors
•
•
•
•
Goals that are simple, consistent, and long term.
Profound understanding of the competitive environment.
Objective appraisal of resources.
Effective implementation.
Origins of Strategy
• Enterprises need business strategy for the same reasons
militaries need strategy
• To give direction and purpose
• To use resources effectively
• To coordinate decisions
Origins of Strategy
• Derived from the Greek word strategia, meaning generalship
• First evidence of strategy came from Sun Tzu’s Art of War
Strategy vs. Tactics
• Tactics are a scheme for a particular action
• Win battles
• Strategy is the over all plan
• Win the war
• Three characteristics of strategy
• They are important
• They involve a commitment of resources
• They are not easily reversible
Dyson Case 1.2
• Dyson’s decision to move the bag less to Malaysia
• Moving to Malaysia is not easily reversible, therefore it is a
strategy
• Dyson’s decision to sue Hoover for patent infringement
• A law suit is reversible, therefore this was a tactic
• The outcome was important, and required significant resources
The Evolution of Business
Strategy
• Corporate planning was developed in the 1950’s
• Macroeconomic forecasting provided the foundation
• Typically five year plans were made
• Strategic management evolved from corporate planning
• Oil shocks of the 70’s caused macroeconomic instability
• Firms couldn’t plan five years ahead
• Involved an increased focus on competition
The Resource Based View
• 1990’s marked a shift from external profits to sources of profit
within the firm
• Competing for new markets vs. differentiation
What is Strategy?
• A plan, method, or series of actions designed to achieve a
specific goal or purpose. -Wordsmyth Dictionary
• The determination of the long-run goals and objectives of an
enterprise and the adoption of courses of action and the
allocation of resources necessary for carrying out these goals.
-Alfred Chandler, Strategy and Structure
• Strategy is the pattern of objectives, purposes, or goals and
the major policies and plans for achieving these goals, stated
in such a way as to define what business the company is in or
is to be in and the kind of company it is or is to be. -Kenneth
Andrews, The Concept of Corporate Strategy
Quest for Success
• The conception of strategy has changed a lot in the last half
century.
• Strategy as a plan
Strategy as a direction
• In an environment of uncertainty and change, a clear sense of
direction is essential to the pursuit of objectives.
Corporate vs. Business
• Corporate Strategy- defines the scope of the firm in terms of
the industries and markets in which it competes. Corporate
strategy decisions include investment in diversification,
vertical integration, acquisitions, and new ventures; the
allocation of resources between the different businesses of
the firm; and divestments.
• Business Strategy- Is concerned with how the firm competes
within a particular industry or market. If the firm is to prosper
within an industry, it must establish a competitive advantage
over its rivals.
Distinction Between the two
• Every firm must answer, How do we make money? The answer
relies on these two questions:
• Where should we compete?
• Which industries and markets?
• How should we compete?
• The difference between corporate and business strategy
comes down to the organizational structure.
• Corporate Strategy relies on the top management team and
Business Strategy falls on the divisional management.
• This book focuses on business strategy because a company’s
success relies on competitive advantage.
Identifying Strategy
• Strategy is located in 3 places:
• In the heads of the chief executive and senior managers
• In top management team’s articulations of strategy (speeches
and documents)
• In the decisions through which strategy is enacted
• A business’s games plan should comprise 3 components of
strategy:
• Objectives, Scope (where we will compete), and Advantage (how
we willcompete)
How is Strategy made?
• Strategy is the result of managers engaging in deliberate,
rational analysis, or is it?
• Strategy may also emerge through adaptation to
circumstances.
• Henry Mintzberg is a leading critic of rational approaches to
strategy design.
• He distinguishes intended, realised, and emergent strategies.
Quote
• “The notion the strategy is something that should happen way
up there, far from the details of running an organization on a
daily basis, is one of the great fallacies of conventional
strategic management.”
How is Strategy made?
• Strategy is continually enacted through decisions that are
made by every member or the organization.
• In all the companies we are familiar with, strategic planning
combines design and emergence – a process the Grant has
referred to as planned emergence. The balance between the
two depends greatly on stability and predictability of a
company’s business environment.
What roles does Strategy
perform?
•
•
•
•
Strategy as decision support
Strategy as a coordinating device
Strategy as target
Strategy as animation and orientation
Strategy as Decision Support
• Strategy simplifies decision making by constraining the range
of decision alternatives and by acting as a heuristic(rule of
thumb) which reduces the search to find a solution.
• Permits the knowledge of different individuals to be pooled
and integrated.
• Facilitates the use of analytic tools.
Strategy as a Coordinating Device
• It’s a communication device
• Provides a forum in which views are exchanged and consensus
developed. Once formulated, the implementation of strategy
through goals, commitments and performance targets that are
monitored over the strategic planning period also provides a
mechanism to ensure forward movement in a consistent
direction.
Strategy as Target
• Establishes a direction of the firms development and sets
aspirations that can motivate and inspire the members of the
organization.
• Ambitious goals are good.
Strategy as Animation and
Orientation
• Animates and orientates individuals within organizations so
that they are mobilized, encouraged, and work in concert with
each other to achieve focus and direction.
In whose interest?
• Profit is defined as a surplus of revenues over costs and
represents that that part of the value created by the firm that
is available for distribution to its owners.
• Every company’s goal is to produce a profit and that profit
goes to its owners; who are the shareholders and stakeholders
of the company.
Kraft takeover Cadbury
• http://www.youtube.com/watch?v=2suHFP20Pm4#t=54
Profit and Purpose
• There is more to business than just making
money.
• The pursuit of profit often fails to realize its goal.
• Managers need to know what determines
profit,
• Managers must be able to motivate
• A sense of purpose.
Corporate Social Responsibility
• What are a company’s obligations to society as a
whole.
• Unethical and undesirable?
Accepting responsibility
• William Allen
• “Firm as property”
• “Firm as social entity”
Narrowing the focus
• The focus in this book are on private sector firms operating in
market economies assuming that the firms owners are looking
to maximize profits in the long run.
1.
2.
3.
4.
Competition
The market for corporate control
Convergence of stakeholder interests
Simplicity
The basic framework for
strategy analysis
Strategic fit
• For a strategy to be successful, it must be consistent with the
firm’s external environment and with its internal environment
– its goals and values, resources and capabilities and structure
and systems.
Summary
Summary
Summary