Book: Exploring Strategy with Tekst & Cases, 13th edition
Chapter 1: Introducing strategy
Strategy = the long-term direction of an organization
The three horizons framework suggests organisations should think of their businesses or
activities in terms of different ‘horizons’, defined by time (fig. 1.3)
Horizon 1 > extend and defend core business
e.g. Tesla: includes the original Tesla Roadster car and subsequent models
Horizon 2 > build emerging businesses
e.g. Tesla: includes the new mega-battery business
Horizon 3 > create viable options
e.g. Tesla: includes further solar electric initiatives, and maybe other types of transportation
Strategy statements should have three main themes: the fundamental goals (purpose, vision,
mission or objectives) that the organization seeks; the scope or domain of the organisation’s
activities; and the particular advantages or capabilities it has to deliver all of these (fig. 1.4)
• Goals:
Purpose > the reason why a company exists
Vision > concerned with the future the organization seeks to create
Mission > aims to provide clarity about what the organization is fundamentally there to do on a
daily basis
Objectives > statements or specific outcomes that are to be achieved
• Scope > refers to three dimensions, customers or clients; geographical location; and extent of
external activities
• Advantage > how the organization will achieve the objectives it has set for itself in its chosen
domain (competitive advantage)
Levels of strategy (fig. 1.5):
• Corporate-level strategy > concerned with the overall scope of an organization and how value is
added to the constituent businesses of the organizational whole
• Business-level strategy > about how the individual businesses (or operating units) should
compete in their particular markets
• Functional-level strategy > concerned with how the components of an organization deliver
effectively the corporate- and business- level strategies in terms of resources, processes and
people
, Chapter 3: Macro-environment analysis
Macro-environment > consists of broad environmental factors that impact, to a greater or lesser
extent, many organizations, industries and sectors
PESTEL analysis > 6 environmental factors in particular: political, economic, social,
technological, ecological and legal
Political > highlights the role of the state and other political factors in the macro-environment (fig 3.3)
Economical > macro-environment is also influenced by macro-economic factors such as currency
exchange rates, interest rates and fluctuating economic growth rates around the world (fig 3.4)
Social > demographics; distribution; geography; culture
Technological > research and development budgets; patenting activity; citation analysis; new product
announcements; media coverage
Ecological > pollution; waste; climate action (fig 3.7)
Legal > labour, environmental and consumer regulations; taxation and reporting requirements; rules on
ownership, competition and corporate governance
The key drivers for change are the environmental factors likely to have a high impact on industries and
sectors, and the success or failure of strategies within them
Forecasting takes three fundamental approaches to the future based on varying degrees of certainty:
single-point, range and multiple-futures forecasting
Scenarios offer plausible alternative views of how the macro-environment might develop in the future,
typically in the long term (fig 3.9)
, Chapter 4: Industry analysis
Porter’s Five Forces framework assists industry analysis and helps to identify industry
attractiveness in terms of five competitive forces: (i) extent of rivalry between competitors; (ii)
threat of entry; (iii) threat of substitutes; (iv) power of buyers; and (v) power of suppliers (fig 4.2)
(i) Extent of rivalry > organisations aiming at the same customer groups and with similar
products and services
- Competitor concentration and balance
- Degree of differentiation
- Industry growth rate
- High fixed costs
- High exit barriers
(ii) Threat of entry > the factors that need to be overcome by new entrants if they are to compete
in an industry
- Economies of scale
- Customer switching costs
- Capital requirements
- Access to supply or distribution channels and other incumbency advantages
- Expected retaliation
(iii) Threat of substitutes > products or services that offer the same or a similar function and
benefit to an industry’s own products or services but have a different nature
- Extra-industry effects
- The price/performance ratio
(iv) Power of buyers > organization’s immediate customers, not necessarily the ultimate
consumers, is likely high when some of the following 4 conditions prevail:
- Concentrated buyers
- Low switching costs
- Buyer competition threat
(v) Power of suppliers > supply the organization with what it needs in order to produce the
product or service, is likely high when there are:
- Concentrated suppliers
- High switching costs
- Supplier competition threat
- Differentiated products
Chapter 1: Introducing strategy
Strategy = the long-term direction of an organization
The three horizons framework suggests organisations should think of their businesses or
activities in terms of different ‘horizons’, defined by time (fig. 1.3)
Horizon 1 > extend and defend core business
e.g. Tesla: includes the original Tesla Roadster car and subsequent models
Horizon 2 > build emerging businesses
e.g. Tesla: includes the new mega-battery business
Horizon 3 > create viable options
e.g. Tesla: includes further solar electric initiatives, and maybe other types of transportation
Strategy statements should have three main themes: the fundamental goals (purpose, vision,
mission or objectives) that the organization seeks; the scope or domain of the organisation’s
activities; and the particular advantages or capabilities it has to deliver all of these (fig. 1.4)
• Goals:
Purpose > the reason why a company exists
Vision > concerned with the future the organization seeks to create
Mission > aims to provide clarity about what the organization is fundamentally there to do on a
daily basis
Objectives > statements or specific outcomes that are to be achieved
• Scope > refers to three dimensions, customers or clients; geographical location; and extent of
external activities
• Advantage > how the organization will achieve the objectives it has set for itself in its chosen
domain (competitive advantage)
Levels of strategy (fig. 1.5):
• Corporate-level strategy > concerned with the overall scope of an organization and how value is
added to the constituent businesses of the organizational whole
• Business-level strategy > about how the individual businesses (or operating units) should
compete in their particular markets
• Functional-level strategy > concerned with how the components of an organization deliver
effectively the corporate- and business- level strategies in terms of resources, processes and
people
, Chapter 3: Macro-environment analysis
Macro-environment > consists of broad environmental factors that impact, to a greater or lesser
extent, many organizations, industries and sectors
PESTEL analysis > 6 environmental factors in particular: political, economic, social,
technological, ecological and legal
Political > highlights the role of the state and other political factors in the macro-environment (fig 3.3)
Economical > macro-environment is also influenced by macro-economic factors such as currency
exchange rates, interest rates and fluctuating economic growth rates around the world (fig 3.4)
Social > demographics; distribution; geography; culture
Technological > research and development budgets; patenting activity; citation analysis; new product
announcements; media coverage
Ecological > pollution; waste; climate action (fig 3.7)
Legal > labour, environmental and consumer regulations; taxation and reporting requirements; rules on
ownership, competition and corporate governance
The key drivers for change are the environmental factors likely to have a high impact on industries and
sectors, and the success or failure of strategies within them
Forecasting takes three fundamental approaches to the future based on varying degrees of certainty:
single-point, range and multiple-futures forecasting
Scenarios offer plausible alternative views of how the macro-environment might develop in the future,
typically in the long term (fig 3.9)
, Chapter 4: Industry analysis
Porter’s Five Forces framework assists industry analysis and helps to identify industry
attractiveness in terms of five competitive forces: (i) extent of rivalry between competitors; (ii)
threat of entry; (iii) threat of substitutes; (iv) power of buyers; and (v) power of suppliers (fig 4.2)
(i) Extent of rivalry > organisations aiming at the same customer groups and with similar
products and services
- Competitor concentration and balance
- Degree of differentiation
- Industry growth rate
- High fixed costs
- High exit barriers
(ii) Threat of entry > the factors that need to be overcome by new entrants if they are to compete
in an industry
- Economies of scale
- Customer switching costs
- Capital requirements
- Access to supply or distribution channels and other incumbency advantages
- Expected retaliation
(iii) Threat of substitutes > products or services that offer the same or a similar function and
benefit to an industry’s own products or services but have a different nature
- Extra-industry effects
- The price/performance ratio
(iv) Power of buyers > organization’s immediate customers, not necessarily the ultimate
consumers, is likely high when some of the following 4 conditions prevail:
- Concentrated buyers
- Low switching costs
- Buyer competition threat
(v) Power of suppliers > supply the organization with what it needs in order to produce the
product or service, is likely high when there are:
- Concentrated suppliers
- High switching costs
- Supplier competition threat
- Differentiated products
