Exploring Corporate Strategy

7th Edition

Part I
Introduction

Slide 1.1
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Exploring Corporate Strategy
7th Edition

Chapter 1
Introducing Strategy

Slide 1.2
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Introducing Strategy – Outline
• What is strategy and strategic management?
• Strategic priorities at corporate, business and
operational level
• Vocabulary of strategy
• Exploring Corporate Strategy strategic
management model

Slide 1.3
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Definition of Strategy
Strategy is the direction and scope of an
organisation over the long term, which
achieves advantage in a changing
environment through its configuration of
resources and competences with the
aim of fulfilling stakeholder expectations.

Slide 1.4
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategic decisions

Exhibit 1.1 Slide 1.5

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategic Decisions are About…
• The long-term direction of the organisation
• The scope of an organisation’s activities
• Gaining advantage over competitors
• Addressing changes in the business
environment
• Building on resources and competences
(capability)
• Values and expectations of stakeholders
which affect operational decisions

Slide 1.6
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategic Decisions are Likely to :
• Be complex in nature
• Be made in situations of uncertainty
• Affect operational decisions
• Require an integrated approach (both inside
and outside an organisation)
• Involve considerable change

Slide 1.7
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategic Business Unit (SBU)
• A strategic business unit (SBU) is a part of
an organisation for which there is a distinct
external market for goods or services that is
different from another SBU

Slide 1.8
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 LEVELS OF STRATEGY
• Corporate level
– Determine overall scope of the organisation
– Add value to the different business units
– Meet expectations of stakeholders
• Business level (SBU)
– How to compete successfully in particular markets
• Operational
– How different parts of organisation deliver strategy
Slide 1.9
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 The vocabulary of strategy

Exhibit 1.2 Slide 1.10

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 The Vocabulary of Strategy
• Mission – overriding purpose
• Vision/strategic intent – desired future state
• Goal – general statement of aim or purpose
• Objective – quantification or more precise
statement of goal
• Strategic capability – resources, activities and
processes
• Business model – how product, service and
information flow
• Control – monitoring of action steps
Slide 1.11
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategy and Operations
Strategic Management Operational Management
Organisation-wide, holistic Routinised
Conceptualisation of Techniques and actions
issues
Creating new directions Managing existing
resources
Developing new resources Operating within existing
strategy
Ambiguous/uncertain Operationally specific
Long term Day to day issues
Slide 1.12
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Elements of Strategic Management

• Understanding the strategic position of an

organisation
• Making strategic choices for the future
• Turning strategy into action

Slide 1.13
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
A model of the elements of strategic management

Exhibit 1.3 Slide 1.14

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategic Position (1)
• The Organisation’s Environment
– Political Economic Social Technological Legal
Environmental
– Sources of Competition
– Opportunities and Threats
• Strategic Capability of the Organisation
– Resources and Competences
– Strengths and Weaknesses

Slide 1.15
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategic Position (2)
• Expectations and Purposes
– Corporate Governance, Stakeholders, Ethics and
Culture
– Sources of Power and Influence
– Communication of Purpose: Mission and Objectives

Slide 1.16
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategic Choices
• Bases of competitive advantage at business
level
• Scope of activities at corporate level
– Portfolio
– Market spread, e.g. international
– Value added by corporate parent (parenting)
• Directions and methods of development
– Directions: Product/Market
– Methods: Internal/organic, M&A, strategic alliances
Slide 1.17
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategy into Action
• Structuring the organisation
• Marshalling resources (people, information,
finance, technology)
• Managing change

Slide 1.18
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Processes of Strategy Development

• Intended strategies
– Deliberate management intent
• Emergent strategies
– Develop out of social and political processes in
and around organisations

Most
Most strategies
strategiesare
areaacombination
combinationof
of
intended
intendedand
andemergent
emergent processes
processes

Slide 1.19
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Strategy as a Subject of Study
1960s Harvard case study What would you do if you were CEO?
60/70s Corporate planning Systematised and analytical approach

1980s Adaptive processes Complexity and uncertainty. Influence of

(Quinn) experience, politics, culture, history

1980s Market positioning Assessing competitive forces (5 forces) and

(Porter) positioning
1980s Resource based Unique resources, core competences
theory (Hamel,
Prahalad)
1990s Firms as organisms Innovation to deal with change
(Eisenhardt, Stacey)

Slide 1.20
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Different Contexts for Strategy (1)

Small Single market. Limited product/service range. Competitive

Business strategy. Strategic capability. Restricted funds.
Multinational Diverse products/markets/businesses.
Corporation Structure/control/parenting. Competitive strategy. Portfolio
management. Resource coordination.
Manufacturing/ Manufacturing – physical product often augmented with
Service service, brand image for competitive advantage. Services –
Organisations no physical product, competitive advantage based on
intangibles

Slide 1.21
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Different Contexts for Strategy (2)

Public Sector Ideology. Direct/indirect external influence (e.g.

government). Competition for resource inputs. Best value in
outputs. Interagency cooperation
Voluntary and Diverse sources of funds. Values and ideology. Lobbying.
Not-for-Profit Stakeholder management.

Slide 1.22
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
Challenges of Strategic Management
• Prevent strategic drift
– Progressive failure to address strategic position
– Deterioration of performance
• Understand and address contemporary issues
– Internationalisation
– E-Commerce
– Changing purposes
– Knowledge and learning
• View strategy in more than one way
– Three strategy lenses – Design, Experience, Ideas
Slide 1.23
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 The risk of strategic drift

Exhibit 1.4 Slide 1.24

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Contemporary Strategy Themes (1)
• Internationalisation • E-Commerce
– Size of market – Speed and direction
of technology change
– Range of competitors
– Expectations about
– Relationships how to do business
overseas – E-commerce
– Institutional/cultural capability
orientation to strategy – Service small
and profit orientation markets

Slide 1.25
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Contemporary Strategy Themes (2)
• Changing purposes • Knowledge and
– Change from pure Learning
profit driven – Innovation
– Corporate scandals – Generate and
– Corporate social integrate
responsibility knowledge/promote
– AND drive for learning
shareholder value – New ways of doing
– Public sector more business
“business-like” – – People interactions
target setting and
service orientation Slide 1.26
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 The Strategy Lenses (1)
• Strategy as design
– Logical analytical process
– Planned implementation
– Top manager driven
• Strategy as experience
– Adaptation of past strategies based on experience
– Influenced by taken for granted assumptions
(culture)
– Bargaining and negotiation

Slide 1.27
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 The Strategy Lenses (2)
• Strategy as ideas
– Importance of variety and diversity for innovation
– Emergent strategy from within and around the
organisation
– Top managers create the conditions for this to
take place

Slide 1.28
Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 The role of the paradigm in strategy
formulation

Exhibit I.i Slide 1.29

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Conditions of adaptive tension

Exhibit I.ii Slide 1.30

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Simple rules

Source: Reprinted with permission from Harvard Business Review. Adapted from K.M. Eisenhardt and D.N. Sull, ‘Strategy as simple rules,’ January 2001, Copyright
© 2001 by the Harvard Business School Publishing Corporation, all rights reserved.

Exhibit I.iii Slide 1.31

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Three strategy lenses: a summary

Exhibit I.iv Slide 1.32

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005
 Three strategy lenses

Exhibit I.v Slide 1.33

Exploring Corporate Strategy, Seventh Edition, © Pearson Education Ltd 2005