Chapter 1 ~ Introducing strategy
Strategy: the long-term direction of an organisation
From goals and objectives to allocation of resources, differentiate from competition.
The long-term; divided into a 3-horizon framework; current core activities, emerging activities
providing new sources of profit and possibilities
The strategic direction; something only emerges after some time as a pattern, but usually it is
tried to state long-term objectives
The organisation; involves complex intern and extern relationships (stakeholders)
Levels of strategy:
Corporate-level strategy: overall scope of an organisation
Business-level strategy: how the individual businesses should compete in their particular
markets (competitive strategy)
Operational strategy: how the components of an organisation deliver effectively the other
strategies, in terms of resources, processes and people
Strategy statement
The fundamental goals, the scope (domain) and the particular advantages or capabilities of the
organisation.
Mission: purpose of the organisation, What business are we in?
Vision: desired future state of the organisation, What do we want to achieve?
Objectives: quantifiable statements of the goals over some time period, What do we have to
achieve in the coming period?
Scope: customers or clients, geographical location and extent of internal activities (vertical
integration)
Advantages: how will the organisation achieve their objectives
Exploring Strategy Model
Strategic position, strategic choices for the future and managing strategy in action.
Strategic position
Environment: political, economic, social and technological -> opportunities and threats
Strategic capability: resources and
competences -> strengths and weaknesses
Strategic purpose: (in their strategy
statement; mission, vision and objectives)
Corporate governance; managers stick to
the agreed purpose
Culture: culture can influence strategy,
history
Strategic choices (directions and methods)
Business strategy
Corporate strategy and diversification
International strategy
Innovation and entrepreneurship
Acquisitions and alliances
, Strategy in action (how strategies are formed and implemented)
Strategy performance and evaluation
Strategy development processes
Organising
Leadership and strategic change
Strategy practice
Strategy is integrated into jobs; managers have to understand their strategic objectives and try to aim
for these. They also have to communicate this to their teams. However, most (large) organisations
have separate strategic planners as well. Strategy relates to different disciplines as economics,
sociology and psychology. The 3 main branches of strategy:
strategy context: internal and external contexts of an organisation. Industry and cultural
analysis and a resource-based view
strategy content: strategic options and their probability of success. Research is done through
Strategy and Performance
strategy process: how strategies are formed and implemented. Done through strategic
planning, choice and chance and strategy-as-practice
The fundamentals of strategy are for most organisations similar, but the important issues differ as the
form of the organisation changes;
small businesses focus more on the environment, while their strategic choices might be more
limited
multinational corporations focus on their positioning in the global market, which makes the
positioning into cultures more difficult, as they might differ for different groups of customers
public sector and not-for-profits have a big role for the strategic purpose of the organisation
and a clear, focused objective might be harder to state.
Strategy lenses: ways of looking at strategy issues differently in order to generate additional insights.
Strategy as design - Strategy as variety
Strategy as experience - Strategy as discourse
These are used together to offer a more complete view of a strategic situation.
Chapter 2 ~ The environment
The environment creates opportunities and threats for organisations.
The business environment can be separated into 3 layers;
The macro-environment: use PESTEL to analyse broad environmental factors that affect
almost all organisations
The industry (or sector): organisations producing the same sorts of products/services. Use
the five forces framework to analyse this layer.
The competitors and markets: use strategic groups, market segments, and strategy canvas to
analyse this layer.
PESTEL framework
Categorises environmental factors into key types and shows there is also an important non-
market environment. The factors (discussed next) are often connected to each other.
Politics: role of the state and other political forces
, Economics: macro-economic factors (exchange rates, business cycles, growth rates
Social: changing cultures and demographics
Technological: influences and innovations (internet)
Ecological: climate-environmental
Legal: legislative and regulatory constraints or changes
In analyzing, only state the key drivers for change; the factors that are likely to have a high impact of
the future success or failure of strategy (of importance for the organisation).
Focus on change;
Megatrends; large-scale changes that typically slowly form, but which influence many other
factors and activities
Inflexion points; when trends shift in direction
Weak signals; advanced signs of future trends, helpful in identifying inflexion points.
How to carry out scenario analyses?
1. Define the scenario scope; its subject (industry, region, market, etc.) and the time span
2. Identify the key drivers for change (PESTEL can be used for this)
Important is the impact, uncertainty and independence of the factors
3. Develop scenario ‘stories’; think of plausible consequences of the key drivers for change
4. Identify the impacts of these scenario stories on the organisation
5. Establish early warning systems; identify indicators that point out the direction of the
(environmental) change
Five Forces Framework
Helps identify the attractiveness of an
industry in terms of 5 competitive forces,
that together constitute an industry’s
structure. This means that the industry
offers good profit potential.
- Competitive rivalry: the more rivalry
there is, the worse for organisations.
This is defined by 5 factors;
competitor balance (roughly equal size or dominant organisations in the market)
industry growth rate (strong growth -> easier for the organisation to grow as well)
high fixed costs (make it more rival, because to spread out costs, volumes increase -> cut
prices to sell products)
high exit barriers
low differentiation (there is little to stop customers from switching between organisations)
- Threat of entry
The greater this threat, the worse it is for incumbents in an industry. Important entry barriers
are scale and experience, access to supply or distribution channels, expected retaliation,
legislation or government action, and differentiation (increases customer loyalty).
- Threat of substitutes
Products that offer similar benefits to an industry’s products, but have a different nature.
Important are the price/performance ratio and extra-industry effects.
- The power of buyers
Strategy: the long-term direction of an organisation
From goals and objectives to allocation of resources, differentiate from competition.
The long-term; divided into a 3-horizon framework; current core activities, emerging activities
providing new sources of profit and possibilities
The strategic direction; something only emerges after some time as a pattern, but usually it is
tried to state long-term objectives
The organisation; involves complex intern and extern relationships (stakeholders)
Levels of strategy:
Corporate-level strategy: overall scope of an organisation
Business-level strategy: how the individual businesses should compete in their particular
markets (competitive strategy)
Operational strategy: how the components of an organisation deliver effectively the other
strategies, in terms of resources, processes and people
Strategy statement
The fundamental goals, the scope (domain) and the particular advantages or capabilities of the
organisation.
Mission: purpose of the organisation, What business are we in?
Vision: desired future state of the organisation, What do we want to achieve?
Objectives: quantifiable statements of the goals over some time period, What do we have to
achieve in the coming period?
Scope: customers or clients, geographical location and extent of internal activities (vertical
integration)
Advantages: how will the organisation achieve their objectives
Exploring Strategy Model
Strategic position, strategic choices for the future and managing strategy in action.
Strategic position
Environment: political, economic, social and technological -> opportunities and threats
Strategic capability: resources and
competences -> strengths and weaknesses
Strategic purpose: (in their strategy
statement; mission, vision and objectives)
Corporate governance; managers stick to
the agreed purpose
Culture: culture can influence strategy,
history
Strategic choices (directions and methods)
Business strategy
Corporate strategy and diversification
International strategy
Innovation and entrepreneurship
Acquisitions and alliances
, Strategy in action (how strategies are formed and implemented)
Strategy performance and evaluation
Strategy development processes
Organising
Leadership and strategic change
Strategy practice
Strategy is integrated into jobs; managers have to understand their strategic objectives and try to aim
for these. They also have to communicate this to their teams. However, most (large) organisations
have separate strategic planners as well. Strategy relates to different disciplines as economics,
sociology and psychology. The 3 main branches of strategy:
strategy context: internal and external contexts of an organisation. Industry and cultural
analysis and a resource-based view
strategy content: strategic options and their probability of success. Research is done through
Strategy and Performance
strategy process: how strategies are formed and implemented. Done through strategic
planning, choice and chance and strategy-as-practice
The fundamentals of strategy are for most organisations similar, but the important issues differ as the
form of the organisation changes;
small businesses focus more on the environment, while their strategic choices might be more
limited
multinational corporations focus on their positioning in the global market, which makes the
positioning into cultures more difficult, as they might differ for different groups of customers
public sector and not-for-profits have a big role for the strategic purpose of the organisation
and a clear, focused objective might be harder to state.
Strategy lenses: ways of looking at strategy issues differently in order to generate additional insights.
Strategy as design - Strategy as variety
Strategy as experience - Strategy as discourse
These are used together to offer a more complete view of a strategic situation.
Chapter 2 ~ The environment
The environment creates opportunities and threats for organisations.
The business environment can be separated into 3 layers;
The macro-environment: use PESTEL to analyse broad environmental factors that affect
almost all organisations
The industry (or sector): organisations producing the same sorts of products/services. Use
the five forces framework to analyse this layer.
The competitors and markets: use strategic groups, market segments, and strategy canvas to
analyse this layer.
PESTEL framework
Categorises environmental factors into key types and shows there is also an important non-
market environment. The factors (discussed next) are often connected to each other.
Politics: role of the state and other political forces
, Economics: macro-economic factors (exchange rates, business cycles, growth rates
Social: changing cultures and demographics
Technological: influences and innovations (internet)
Ecological: climate-environmental
Legal: legislative and regulatory constraints or changes
In analyzing, only state the key drivers for change; the factors that are likely to have a high impact of
the future success or failure of strategy (of importance for the organisation).
Focus on change;
Megatrends; large-scale changes that typically slowly form, but which influence many other
factors and activities
Inflexion points; when trends shift in direction
Weak signals; advanced signs of future trends, helpful in identifying inflexion points.
How to carry out scenario analyses?
1. Define the scenario scope; its subject (industry, region, market, etc.) and the time span
2. Identify the key drivers for change (PESTEL can be used for this)
Important is the impact, uncertainty and independence of the factors
3. Develop scenario ‘stories’; think of plausible consequences of the key drivers for change
4. Identify the impacts of these scenario stories on the organisation
5. Establish early warning systems; identify indicators that point out the direction of the
(environmental) change
Five Forces Framework
Helps identify the attractiveness of an
industry in terms of 5 competitive forces,
that together constitute an industry’s
structure. This means that the industry
offers good profit potential.
- Competitive rivalry: the more rivalry
there is, the worse for organisations.
This is defined by 5 factors;
competitor balance (roughly equal size or dominant organisations in the market)
industry growth rate (strong growth -> easier for the organisation to grow as well)
high fixed costs (make it more rival, because to spread out costs, volumes increase -> cut
prices to sell products)
high exit barriers
low differentiation (there is little to stop customers from switching between organisations)
- Threat of entry
The greater this threat, the worse it is for incumbents in an industry. Important entry barriers
are scale and experience, access to supply or distribution channels, expected retaliation,
legislation or government action, and differentiation (increases customer loyalty).
- Threat of substitutes
Products that offer similar benefits to an industry’s products, but have a different nature.
Important are the price/performance ratio and extra-industry effects.
- The power of buyers
