Management part MST21306 – Fundamentals of strategy 4 th edition
Chapter 1. Introducing strategy
1.2 What is strategy?
Strategic decisions are likely to…
- Be complex in nature
- Be made in situatons of uncertainty
- Affect daily decisions
- Require an integrated approach (thus inside & outside an organisatonn
- Involve considerable change
1.2.1 Defning strategy
Strategy is the long-term directon of an organisaton.
Defning strategy as ‘tthe long-term directon of
an organisaton’ has two advantage:
1. The long-term directon of an
organisaton can include both
deliberate, logical strategy and more
incremental, emergent paterns of
strategy.
2. Can include both strategies that
emphasise difference and competton, and strategies that reorganise the roles of
cooperaton and even imitaton.
Elements of the defniton:
- The long term
o The three horizons framework suggests organizatons
should think of themselves as comprising three types of
business or actvity defned by their ‘thorizons’ in terms of
years.
o Horizon 1: businesses are basically the current core
actvites.
o Horizon 2: businesses are merging actvites that should
provide new sources of proft.
o Horizon 3: possibilites (e.g. R&Dn.
- Strategic directon
o Follow objectves OR an emerging coherent patern.
- Organisaton
o Involve many relatonshipss external stakeholders.
1.2.2 The purpose of strategy: mission, vision, values and objectve
What is strategy for?
- To defne and express the motvatng purpose of an organizaton to stakeholders
1
, - Four ways to defne an organisaton’s purpose
o Mission statement: aims to provide employees and stakeholders with clarity about
what the organisaton is fundamentally there to do.
o Vision statement: is concerned with the future the organisaton seeks to create.
o Statement of corporate values: communicate the underlying and enduring core
‘tprinciples’ that guide an organisaton’s strategy and defne the way that the
organisaton should operate.
o Statement of objectves: specifc outcomes that are to be achieved. (Numbersn
1.2.3 Strategy statements
Three main themes:
- The fundamental goals (mission, vision, objectvesn of the organisaton
- The scope or domain of the organisaton’s actvites
o Refers to the three dimensions:
Customers or clients
Geographical locaton
Extent of internal actvites
- The partcular advantages or compettve superiority the organisaton has to offer
Strategy statement ideally in max 35 words.
1.2.4 Levels of strategy
Corporate-level strategy is concerned with the overall scope of an organisaton and how
value is added to the consttuent businesses of the organisaton whole.
o Geographical scope
o Diversity of products
o Acquisiton of new buyers
o How resources are allocated
Business-level strategy is about how the individual business should compete in their
partcular markets (also ‘tcompettve strategy’n
o Innovaton
o Appropriate scale
o Response to compettors moves
Functonal strategies are concerned with how the components of an organisaton deliver
effectvely the corporate- and business-level strategies in terms of resources, processes and
people.
1.3 Exploring Strategy Framework
2
,The Exploring Strategy Framework includes understanding the strategic positon of an organisatons
assessing strategic choices for the futures and managing strategy in actonn
1.3.1 Strategic positon
The strategic positon is concerned with the impact on strategy of the macro environment and
industry environment, the organisaton’s strategic capability (resources and competencesn, and the
organisaton’s stakeholders and culture.
- Macro environment
o Opportunites and threats
- Industry environment
o Compettors, suppliers and customers present challenges to an organisaton
- Strategic capability
o Made up on its resources and competences
o Strengths and weaknesses
- Stakeholders
Fundamental questons for strategic positon:
What are the macro-environmental opportunites and threats?
How can the organisaton manage industry forces?
What resources and capabilites support the strategy?
How are stakeholders aligned to the organisatonal purpose? How does culture ft the
strategy?
1.3.2 Strategic choices
Strategic choices involve the opton for strategy in terms of both the directon in which strategy
might move and the methods by which strategy might be pursued.
- Business strategy and models
- Corporate strategy and diversifcaton
- Internatonal strategy
- Entrepreneurship strategies
- Acquisiton and alliances
Fundamental questons for Strategic choice:
How should individual business units compete?
3
, Which businesses to include in the portolio?
Where should the organisaton compete internatonally?
Is the organisaton innovatng appropriately?
Should the organisaton buy other companies, form alliances or go it alone?
1.3.3 Strategy in acton
Managing strategy in acton is about how strategies are formed and how they are implemented
- Structuring
- Systems
- Leading strategic change
Fundamental questons for strategy in acton:
Which strategies are suitable, acceptable and feasible?
What kind of strategy-making process is needed?
What are the required organisaton structures and systems?
How should the organisaton manage necessary changes?
Who should do what in the strategy process? Which people and what actvites?
1.4 Strategy development processes
Two broad accounts of strategy development:
o The ratonal-analytc view
Strategies are developed through ratonal and analytcal processes, led by top managers.
Strategic plan
Strategies are intended / the product of deliberate choices
o Alfred Chandler
o Michael Porter
o The emergent strategy view
Strategies ofen do not simply develop as intended or planned, but emerge over tme as a
result of ad hoc, incremental or even accidental actons.
Good ideas come from practcal experience at the botom of the organisaton, not top
management.
4
, Chapter 2. Macro-environment analysis
2.1 Introducton
The macro-environment consists of broad environmental factors that impact to a greater or lesser
extent many organisatons, industries and sectors.
2.2
PESTEL analysis
PESTEL analysis highlights six environmental factors in partcular: politcal, economic, social,
technological, ecological and legal.
- Market environment: suppliers, customers and compettors
- Non-market environment: involves primarily the social, politcal, legal and ecological factors,
but can also be impacted by economic factors.
2.2.1 PESTEL factors
- Politics
o Role of the state
o Exposure to civil society organisatons (e.g. lobbyists, campaign groups, social median
o Government policies
o Taxaton changes
o Foreign trade regulatons
o Politcal risk in foreign markets
o Change in trade blocks (e.g. BREXITn
Politcal risk analysis is the analysis of threats and opportunites arising from potental politcal
change.
Two key dimensions :
• The macro–micro dimension – macro risk is that which ataches to whole countries (e.g. Middle
East countries assessed as high risk.ns micro risk is that which ataches to the specifc organisaton.
• The internal–external dimension – internal factors relate to issues within a country (e.g.
government changens external factors arise outside a country but have an impact within it (e.g. OPEC
oil pricesn.
- Eiconomiics
o Business cycles
5
Chapter 1. Introducing strategy
1.2 What is strategy?
Strategic decisions are likely to…
- Be complex in nature
- Be made in situatons of uncertainty
- Affect daily decisions
- Require an integrated approach (thus inside & outside an organisatonn
- Involve considerable change
1.2.1 Defning strategy
Strategy is the long-term directon of an organisaton.
Defning strategy as ‘tthe long-term directon of
an organisaton’ has two advantage:
1. The long-term directon of an
organisaton can include both
deliberate, logical strategy and more
incremental, emergent paterns of
strategy.
2. Can include both strategies that
emphasise difference and competton, and strategies that reorganise the roles of
cooperaton and even imitaton.
Elements of the defniton:
- The long term
o The three horizons framework suggests organizatons
should think of themselves as comprising three types of
business or actvity defned by their ‘thorizons’ in terms of
years.
o Horizon 1: businesses are basically the current core
actvites.
o Horizon 2: businesses are merging actvites that should
provide new sources of proft.
o Horizon 3: possibilites (e.g. R&Dn.
- Strategic directon
o Follow objectves OR an emerging coherent patern.
- Organisaton
o Involve many relatonshipss external stakeholders.
1.2.2 The purpose of strategy: mission, vision, values and objectve
What is strategy for?
- To defne and express the motvatng purpose of an organizaton to stakeholders
1
, - Four ways to defne an organisaton’s purpose
o Mission statement: aims to provide employees and stakeholders with clarity about
what the organisaton is fundamentally there to do.
o Vision statement: is concerned with the future the organisaton seeks to create.
o Statement of corporate values: communicate the underlying and enduring core
‘tprinciples’ that guide an organisaton’s strategy and defne the way that the
organisaton should operate.
o Statement of objectves: specifc outcomes that are to be achieved. (Numbersn
1.2.3 Strategy statements
Three main themes:
- The fundamental goals (mission, vision, objectvesn of the organisaton
- The scope or domain of the organisaton’s actvites
o Refers to the three dimensions:
Customers or clients
Geographical locaton
Extent of internal actvites
- The partcular advantages or compettve superiority the organisaton has to offer
Strategy statement ideally in max 35 words.
1.2.4 Levels of strategy
Corporate-level strategy is concerned with the overall scope of an organisaton and how
value is added to the consttuent businesses of the organisaton whole.
o Geographical scope
o Diversity of products
o Acquisiton of new buyers
o How resources are allocated
Business-level strategy is about how the individual business should compete in their
partcular markets (also ‘tcompettve strategy’n
o Innovaton
o Appropriate scale
o Response to compettors moves
Functonal strategies are concerned with how the components of an organisaton deliver
effectvely the corporate- and business-level strategies in terms of resources, processes and
people.
1.3 Exploring Strategy Framework
2
,The Exploring Strategy Framework includes understanding the strategic positon of an organisatons
assessing strategic choices for the futures and managing strategy in actonn
1.3.1 Strategic positon
The strategic positon is concerned with the impact on strategy of the macro environment and
industry environment, the organisaton’s strategic capability (resources and competencesn, and the
organisaton’s stakeholders and culture.
- Macro environment
o Opportunites and threats
- Industry environment
o Compettors, suppliers and customers present challenges to an organisaton
- Strategic capability
o Made up on its resources and competences
o Strengths and weaknesses
- Stakeholders
Fundamental questons for strategic positon:
What are the macro-environmental opportunites and threats?
How can the organisaton manage industry forces?
What resources and capabilites support the strategy?
How are stakeholders aligned to the organisatonal purpose? How does culture ft the
strategy?
1.3.2 Strategic choices
Strategic choices involve the opton for strategy in terms of both the directon in which strategy
might move and the methods by which strategy might be pursued.
- Business strategy and models
- Corporate strategy and diversifcaton
- Internatonal strategy
- Entrepreneurship strategies
- Acquisiton and alliances
Fundamental questons for Strategic choice:
How should individual business units compete?
3
, Which businesses to include in the portolio?
Where should the organisaton compete internatonally?
Is the organisaton innovatng appropriately?
Should the organisaton buy other companies, form alliances or go it alone?
1.3.3 Strategy in acton
Managing strategy in acton is about how strategies are formed and how they are implemented
- Structuring
- Systems
- Leading strategic change
Fundamental questons for strategy in acton:
Which strategies are suitable, acceptable and feasible?
What kind of strategy-making process is needed?
What are the required organisaton structures and systems?
How should the organisaton manage necessary changes?
Who should do what in the strategy process? Which people and what actvites?
1.4 Strategy development processes
Two broad accounts of strategy development:
o The ratonal-analytc view
Strategies are developed through ratonal and analytcal processes, led by top managers.
Strategic plan
Strategies are intended / the product of deliberate choices
o Alfred Chandler
o Michael Porter
o The emergent strategy view
Strategies ofen do not simply develop as intended or planned, but emerge over tme as a
result of ad hoc, incremental or even accidental actons.
Good ideas come from practcal experience at the botom of the organisaton, not top
management.
4
, Chapter 2. Macro-environment analysis
2.1 Introducton
The macro-environment consists of broad environmental factors that impact to a greater or lesser
extent many organisatons, industries and sectors.
2.2
PESTEL analysis
PESTEL analysis highlights six environmental factors in partcular: politcal, economic, social,
technological, ecological and legal.
- Market environment: suppliers, customers and compettors
- Non-market environment: involves primarily the social, politcal, legal and ecological factors,
but can also be impacted by economic factors.
2.2.1 PESTEL factors
- Politics
o Role of the state
o Exposure to civil society organisatons (e.g. lobbyists, campaign groups, social median
o Government policies
o Taxaton changes
o Foreign trade regulatons
o Politcal risk in foreign markets
o Change in trade blocks (e.g. BREXITn
Politcal risk analysis is the analysis of threats and opportunites arising from potental politcal
change.
Two key dimensions :
• The macro–micro dimension – macro risk is that which ataches to whole countries (e.g. Middle
East countries assessed as high risk.ns micro risk is that which ataches to the specifc organisaton.
• The internal–external dimension – internal factors relate to issues within a country (e.g.
government changens external factors arise outside a country but have an impact within it (e.g. OPEC
oil pricesn.
- Eiconomiics
o Business cycles
5
