Strategy in Global Context: Session 1

Strategy in Global Context
Session 1
Dilip dilip@bmaindia.com
Agenda
What is strategic management? Definitions of key terms. Historical development of the strategic
management discipline Contemporary perspectives on the nature of strategic management The strategic management model Understand the content and purpose of each element of the strategy process.
Strategy defined..
"Corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities."
Kenneth Andrews (1980) The Concept of Corporate Strategy p.18
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 Johnson et al (2005) Exploring Corporate Strategy p.9
Key elements of strategy

CONTENT (The what of strategy)
It determines scope of an organisations activities It determines the long-term direction It clarifies why the organisation exists (mission) and who for
(shareholders vs. stakeholders) It involves broad decisions about the mix and use of resources Competitive advantage is an essential aim of strategy
PROCESS (The how of strategy)

Strategy operates at different levels in an organisation
(corporate, business and operational) It is dynamic and evolves over time (emergent strategy) as environmental conditions change. It is not synonymous with formal planning
Brief History of Strategy Discipline

(Contemporary Strategy Analysis by Robert M Grant)
General management theory developed in response to the emergence
of large industrial organisations in Europe and the US in the early 20th century.
Key early contributors were:
Frederick Taylor scientific management Henri Fayol administration Elton Mayo motivation (Hawthorne experiments) Max Weber bureaucracy and structure
(http://www.kernsanalysis.com/sjsu/ise250/history.htm)
Fuelled by the consumer boom of the 1950s and 60s, organisations
grew in size and became more internationalised. This increased scale led to concerns for more effective long-term planning, co-ordination and capital budgeting.
The need to extend the planning horizon lead to the development of
formal corporate planning systems in large organisations in the 1960s. Typically, these systems produced detailed 5 year plans based on numeric analysis of economic (costs) and market forecasts (demand) containing precise objectives and plans.
History of strategy contd.
In the early 1970s, the competitive landscape began to get more congested and so firms became concerned with issues of diversification as they sought new sources of revenue growth. This was the peak of formal planning with significant resources devoted to elaborate planning by specialist planning departments. In the late 1970s three factors undermined confidence in formal planning. Firstly, the results of diversification were frequently disappointing. Secondly, economic instability was generated by the oil price shocks of 1974 and 1979. Thirdly, the growth of international competition especially from Japan and SE Asia.
In response firms became more concerned with positioning their organisations favourably in the competitive landscape. The focus was on targeting, product positioning, segmentation, and product development. Strategic planning gave way to strategic management where the emphasis was on a broader range of competitive issues and less certain of environmental stability/predictability. (Porter, 1980, 1996)
In the late 1980s and 1990s, difficulties in sustaining competitive advantage saw an increased focus on internal resources and competencies as firms sought new ways to enhance profits. This major shift is often referred to as the Resource Based View (RBV) of strategy. (Hamel and Prahalad, 1994). This trend has continued with a focus on intangible resources in particular (especially knowledge)
Levels of Strategy
Corporate Strategy Other Business Units Business Unit Strategy Focus: Portfolio management, diversification, corporate parenting. Focus: what product groups, segments, positioning and bases of competition to adopt. Focus: executing the decisions made above by translating them into detailed plans with budgets, etc. and implementing them.
Other functional plans
Marketing plan
The Strategy Development Process

External Environment Analysis
Business Mission
Objectives
Strategy selection
Action Programmes
Implementation
Internal Environment Analysis Feedback and Control
Simplified Strategy Process

STRATGEGIC ANALYSIS (Where are we now?) External analysis addresses the question: what challenges does our organisation face from its environment? Internal analysis addresses the question: Does our organisation have the resources and capabilities needed to meet its challenges? STRATEGIC CHOICE (Where do we want to be?) Corporate level: what business should we be in? Business level: what positioning maximises profits? STRATEGY IMPLEMENTATION (How do we get there?) Hard issues: planning, budgeting, restructuring, systems implementation, product/service development Soft issues: consensus building, politicking, conflict management, HR issues, culture change, etc. STRATEGIC CONTROL (Are we making good progress?) Data gathering, variance analysis, evaluation, corrective action.
Strategy process: Not linear, recursive!

Strategy development can start at any stage and regularly loops back on other stages to update, review and/or amend thinking
IMPLEMENTATION
Intended vs. Emergent strategy

(Mintzberg and Waters, 1985)
INTENDED STRATEGY
DELIBERATE SRATEGY
REALISED STRATEGY
Unrealised elements
Emergent elements
Strategy Development: Schools of Thought (1)*

Planning/Positioning School
STRATEGY PROCESS
Development and Implementation are related but separated Numerically oriented analysis favoured Actors are seen as rational objective decision makers. Top-down. Environmental analysis drives strategic choice Positioning in terms of activities performed, customer needs or customer access (Porter, 1996).
Contributors: Igor Ansoff, Michael Porter, Kenneth Andrews,

Roland Christensen, Alfred Chandler, Kenichi Ohmae.
* Note these schools are not mutually exclusive and will overlap in reality.
Strategy Development: Schools of Thought (2)

Logical Incrementalist/Resource Based View (RBV)
STRATEGY PROCESS
Opportunistic approach to strategy, i.e. seek flexibility to respond to emerging profit opportunities. Top-down/bottom-up process, i.e. good ideas can come from anywhere not just the top. Internal resources and capabilities drive content of strategy, i.e. work to your strengths Take up market positions that lend themselves to what you are good at.
Contributors: Birger Wernerfelt, Jay Barney, Henry Mintzberg,

James Quinn, Gary Hamel, C K Prahalad,.
Competitive Advantage
Discovering Core Competencies
Gained through Core Competencies
Strategic Competitiveness
Core Competencies
Sources of Competitive Advantage
Discovering Core Competencies
Above-Average Returns
Capabilities
Teams of Resources
Criteria of Sustainable Advantages

* * * * Valuable Rare Costly to Imitate Nonsubstitutable
Value Chain Analysis

* Outsource
Resources
* Tangible * Intangible
Strategy in Different Contexts

Small business Dominant issues are market intelligence, growth and meeting expectations of founders. Multinational Corporations Dominated by need to sustain profits through diverse business portfolio, complex organisations makes strategy difficult to implement, external shareholder expectations critical.
Strategy in Different Contexts

Professional Service Firms Key issues: the expectations and standards of professionals, the powerful influence of internal stakeholders (e.g. partners), increasingly, competitive positioning Public sector Key issues involve: public sector culture (service, public good, value), political imperatives (local and central govt), complex stakeholder structure, constraints on action (govt regulations).
Case study for discussion

Strategy in Global Context: Session 1

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Strategy in Global Context

Key elements of strategy

PROCESS (The how of strategy)

Brief History of Strategy Discipline

Fuelled by the consumer boom of the 1950s and 60s, organisations

History of strategy contd.

Other functional plans

The Strategy Development Process

Internal Environment Analysis Feedback and Control

Simplified Strategy Process

Strategy process: Not linear, recursive!

Intended vs. Emergent strategy

Strategy Development: Schools of Thought (1)*

Contributors: Igor Ansoff, Michael Porter, Kenneth Andrews,

Strategy Development: Schools of Thought (2)

Contributors: Birger Wernerfelt, Jay Barney, Henry Mintzberg,

Discovering Core Competencies

Gained through Core Competencies

Discovering Core Competencies

Criteria of Sustainable Advantages

Value Chain Analysis

Strategy in Different Contexts

Strategy in Different Contexts

Case study for discussion

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