Strategic Management, Leadership and Organizational change (HPI 4008)
Tutorial group 1 07-02-2020
Week 1: Strategic management
Strategic management (SM)
Setting goals/direction for long term (what). Organisational leadership and management play key roles
in formulating strategies and integrating them into mission, visions and goals. Doing things better than
rivals. SM helps organisations to respond to threats and opportunities from the changing external
environment. An integrative management field that combines analysis, formulation, and
implementation in the search for competitive advantage (CA) and uniqueness. It is a dynamic, iterative
and cyclic process of:
Goal formulation: what is the goal of the organisation
Environmental scanning: in which environment are we working
Strategy formulation: which strategy are we going to determine
Strategy evaluation: are we on track
Implementation
Strategic control: monitoring the strategy, are you actually taking a step forward
Strategy
Strategy is the development of a plan prescribing a way in which a business competes and
collaborates, sets goals, and establishes policies to carry out goals in order to achieve the
organizational mission. It occurs at all levels of organisations. Strategies must be flexible to adapt to
the changing competitive and external environment but significant enough to sustain competitive
advantage. Failure often occurs due to bad implementation.
Two important functions of strategy:
1. Strategy should improve decisions about allocation to produce long-term benefits for the
organisation; delegate limited resources to maximize outcomes.
2. Developing strategies should challenge existing assumptions and be open to new possibilities.
Operational effectiveness and strategy are both essential to superior performance. A company can
outperform its rivals only if it can establish a difference that it can preserve. It must deliver:
- Greater value to customers higher unit price
- OR create comparable value at a lower cost; greater efficiency lower unit price.
CA arises from performing particular activities more efficiently than competitors. Differentiation
arises from the choice of activities and how they are performed basic units of CA.
Operational effectiveness (OE): performing the activities (into creating, producing, selling and
delivering a product or service) better (faster or with fewer inputs and defects) than rivals perform
them. It includes but is not limited to efficiency; refers to any number of activities that allow a
company to better utilize its inputs.
Productivity frontier: the maximum value a company can deliver at a given cost, given the best
available technology, skills, and management techniques. OE competition shifts the productivity
frontier outward, effectively raising the bar for everyone.
Strategic positioning: attempts to achieve sustainable CA by preserving what is distinctive about a
company. It means performing different activities from rivals or performing similar activities in
different ways. Deliberately choosing a different set of activities to deliver a unique mix of value.
the result is CA.
Strategy is the creation of a unique and valuable position, involving a different set of activities.
Strategic position emerges from three distinct sources:
a. Serving few needs of many customers (producing a subset of an industry’s products or services
variety based positioning (based on choices of products or service varieties rather than
customer segments). Example: an automotive lubricants (smeermiddelen) does not offer other
car repair services, but can produce faster and at lower cost than rivals who have more car
repair services.
1
, b. Serving broad needs of few customers (needs-based positioning sort of targeting a segment
of customers); when there are groups of customers with differing needs and when a tailored set
of activities can serve those needs best. Example: Ikea.
c. Serving broad needs of many customers in a narrow market (access based positioning
segmenting customers who are accessible in different ways; it requires a different set of
activities to reach the customer in the best way. Example a cinema less expensive than in big
cities but also with less equipment, low-cost theatre complexes and lower quality movies).
Types of strategy
Mintzberg
Intended strategy (strategy planned to implement)
realized strategy (which was actually
implemented) can be the same, but not always the
case.
Emergent strategy: try to influence intended strategy
(not per se negatively). An unplanned strategy that
arises in response to unexpected opportunities and
challenges
Deliberate strategy: strategy which have been
realised as intended; trade-offs; it’s about
deliberately choosing to do something. The parts of
the intended strategy that the firm continues to
pursue over time.
Intended = deliberate + un-realized. Emergent + deliberate realized.
Porter: 2 ways of strategy
A firm could obtain strategic advantage by concentrating on either cost or uniqueness/differentiation.
1. Cost leadership strategy: being the low-cost producer in an industry for a given level of
acceptable quality (Aldi). Companies work on their inputs and processes to maintain low prices.
People have to be price sensitive, otherwise this strategy fails (in health care people are mostly
not price sensitive). Delivering products or services at a lower cost than competitors resulting in
CA. Example: Kia.
2. Differentiation strategy: requires that a firm provides a product or service that offers unique
attributes. These attributes must be valued by customers and perceived to be better than those of
the competitors' product. The value may allow the firm to charge a premium price for the
product or service. Organizations can also differentiate products by improving customer
service processes (simplifying ordering and delivery). Example: Apple.
application to health care: harder, because people need different things. More networks. Cost-
leadership is not ethical in health care. In health care there is competition, but not at the cost of other
hospitals.
Focus strategy: focus on niche market: it should be based on some important characteristics
(population, political boundaries). Example: specialized hospitals. CA is achieved by matching an
appropriate strategy to the target market:
a. Focus cost leadership: low cost + narrow target market
b. Focus differentiation: uniqueness and narrow target market
Blue and red ocean strategy
Red ocean: refers to ocean with a lot of competitors messy environment. Competing for the
same thing/customers in existing markets though competition, cost issue important role.
Blue ocean: create something new many of the competitors have difficulty to catch up with you
comfortable situation. Example: apple (now a little bit less than 10 years back; iPhone).
Miles and snow
Managers seek strategy to connect with organization’s external environment. Can be different types:
2
Tutorial group 1 07-02-2020
Week 1: Strategic management
Strategic management (SM)
Setting goals/direction for long term (what). Organisational leadership and management play key roles
in formulating strategies and integrating them into mission, visions and goals. Doing things better than
rivals. SM helps organisations to respond to threats and opportunities from the changing external
environment. An integrative management field that combines analysis, formulation, and
implementation in the search for competitive advantage (CA) and uniqueness. It is a dynamic, iterative
and cyclic process of:
Goal formulation: what is the goal of the organisation
Environmental scanning: in which environment are we working
Strategy formulation: which strategy are we going to determine
Strategy evaluation: are we on track
Implementation
Strategic control: monitoring the strategy, are you actually taking a step forward
Strategy
Strategy is the development of a plan prescribing a way in which a business competes and
collaborates, sets goals, and establishes policies to carry out goals in order to achieve the
organizational mission. It occurs at all levels of organisations. Strategies must be flexible to adapt to
the changing competitive and external environment but significant enough to sustain competitive
advantage. Failure often occurs due to bad implementation.
Two important functions of strategy:
1. Strategy should improve decisions about allocation to produce long-term benefits for the
organisation; delegate limited resources to maximize outcomes.
2. Developing strategies should challenge existing assumptions and be open to new possibilities.
Operational effectiveness and strategy are both essential to superior performance. A company can
outperform its rivals only if it can establish a difference that it can preserve. It must deliver:
- Greater value to customers higher unit price
- OR create comparable value at a lower cost; greater efficiency lower unit price.
CA arises from performing particular activities more efficiently than competitors. Differentiation
arises from the choice of activities and how they are performed basic units of CA.
Operational effectiveness (OE): performing the activities (into creating, producing, selling and
delivering a product or service) better (faster or with fewer inputs and defects) than rivals perform
them. It includes but is not limited to efficiency; refers to any number of activities that allow a
company to better utilize its inputs.
Productivity frontier: the maximum value a company can deliver at a given cost, given the best
available technology, skills, and management techniques. OE competition shifts the productivity
frontier outward, effectively raising the bar for everyone.
Strategic positioning: attempts to achieve sustainable CA by preserving what is distinctive about a
company. It means performing different activities from rivals or performing similar activities in
different ways. Deliberately choosing a different set of activities to deliver a unique mix of value.
the result is CA.
Strategy is the creation of a unique and valuable position, involving a different set of activities.
Strategic position emerges from three distinct sources:
a. Serving few needs of many customers (producing a subset of an industry’s products or services
variety based positioning (based on choices of products or service varieties rather than
customer segments). Example: an automotive lubricants (smeermiddelen) does not offer other
car repair services, but can produce faster and at lower cost than rivals who have more car
repair services.
1
, b. Serving broad needs of few customers (needs-based positioning sort of targeting a segment
of customers); when there are groups of customers with differing needs and when a tailored set
of activities can serve those needs best. Example: Ikea.
c. Serving broad needs of many customers in a narrow market (access based positioning
segmenting customers who are accessible in different ways; it requires a different set of
activities to reach the customer in the best way. Example a cinema less expensive than in big
cities but also with less equipment, low-cost theatre complexes and lower quality movies).
Types of strategy
Mintzberg
Intended strategy (strategy planned to implement)
realized strategy (which was actually
implemented) can be the same, but not always the
case.
Emergent strategy: try to influence intended strategy
(not per se negatively). An unplanned strategy that
arises in response to unexpected opportunities and
challenges
Deliberate strategy: strategy which have been
realised as intended; trade-offs; it’s about
deliberately choosing to do something. The parts of
the intended strategy that the firm continues to
pursue over time.
Intended = deliberate + un-realized. Emergent + deliberate realized.
Porter: 2 ways of strategy
A firm could obtain strategic advantage by concentrating on either cost or uniqueness/differentiation.
1. Cost leadership strategy: being the low-cost producer in an industry for a given level of
acceptable quality (Aldi). Companies work on their inputs and processes to maintain low prices.
People have to be price sensitive, otherwise this strategy fails (in health care people are mostly
not price sensitive). Delivering products or services at a lower cost than competitors resulting in
CA. Example: Kia.
2. Differentiation strategy: requires that a firm provides a product or service that offers unique
attributes. These attributes must be valued by customers and perceived to be better than those of
the competitors' product. The value may allow the firm to charge a premium price for the
product or service. Organizations can also differentiate products by improving customer
service processes (simplifying ordering and delivery). Example: Apple.
application to health care: harder, because people need different things. More networks. Cost-
leadership is not ethical in health care. In health care there is competition, but not at the cost of other
hospitals.
Focus strategy: focus on niche market: it should be based on some important characteristics
(population, political boundaries). Example: specialized hospitals. CA is achieved by matching an
appropriate strategy to the target market:
a. Focus cost leadership: low cost + narrow target market
b. Focus differentiation: uniqueness and narrow target market
Blue and red ocean strategy
Red ocean: refers to ocean with a lot of competitors messy environment. Competing for the
same thing/customers in existing markets though competition, cost issue important role.
Blue ocean: create something new many of the competitors have difficulty to catch up with you
comfortable situation. Example: apple (now a little bit less than 10 years back; iPhone).
Miles and snow
Managers seek strategy to connect with organization’s external environment. Can be different types:
2
