Power Point Set 001_ Definitions of Strategy_Spring 2012

8/12/2019 Power Point Set 001_ Definitions of Strategy_Spring 2012

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Strategic Management/

Business Policy

Power Point Set #1:

Definitions of Strategy


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The Wisdom of Choice:

To try and fail is at least to learn; to fail to try is to suffer

the inestimable loss of what might have been.

Chester Barnard, The Functions of the Executive


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6

Identify

current

mission

and

strategic

goals

Conduct

competitive

analysis:strengths

weakness

opportunity

threats

Develop

specific

strategies:

corporate

business

functional

carry outstrategic

plans

maintainstrategic

control

assess

organisational

factors

assess

environmental

factors

Strategy implementationStrategy formulation


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What Is Strategic Management About?

Sustainable competitive advantageoccurs

when a firm implements a value-creatingstrategy of which other companies areunable to duplicate the benefits or find ittoo costly to imitate.

An important basis for sustainablecompetitive advantage is the developmentof resources and capabilities.

Core competencies are resources andcapabilities (often related to functional-levelskills) that serve as a source of competitiveadvantage for a firm over its rivals.


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Key Characteristics Of Strategic Decisions

Important;

Typically, under some Uncertainty;

Involves Alternatives, Consequences, and Choice;

Significant Commitment of Resources; and

Not Easily Reversible.


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Strategy Making : Design or Process?Strategy Making : Design or Process?

Strategy as Design

Planning and

rational choice

INTENDED

STRATEGY

Many decision makers

responding to multitude of

external and internal forces

REALIZED STRATEGY

EMERGENT

STRATEGY

Strategy as Process

Mintzbergs Critique of Formal Strategic Planning:

The fal lacy of predict ion the future is unknown

The fal lacy of d etachment -- impossible to divorce formulation from

implementation

The fallacy of formalization --inhibits flexibility, spontaneity,

intuition and learning.

Mintzbergs Critique of Formal Strategic Planning:

The fal lacy of predict ion the future is unknown

The fallacy of detachment -- impossible to divorce formulation from

implementation

The fal lacy of formal izat ion --inhibits flexibility, spontaneity,

intuition and learning.


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The Evolution of Strategic ManagementThe Evolution of Strategic Management

DOMINANT

THEME

MAINISSUES

CONCEPTS

&

TECHNIQUES

IMPLEMENT-

ATION

1950s 1960s Early -m id Late1970s Late 1980s Late 1990s

1970s ear ly 1980s early 1990s early 2000s

Budgetary Corporate Corporate Analysis of Quest for Strategic

planning & planning strategy industry & competitive innovation

control competition advantage The New

Economy

Financial control Planning growth Diversifica- Positioning Competitive Innovation &ion advantage knowledge

Budgeting Forecasting & Portfolio Analysis of Resource Dynamic

project appraisal investment planning. industry & analysis. sources of

planning Synergy competition Case advantage

market competences Knowledge

share management

cooperation

Emphasis on Rise of Diversifi- Industry/market Restructuring Virtual orga-

financial corporate planning cation. selectivity. BPR. nization.

management departments Quest for Active asset Refocusing Alliances

& formal global management Outsourcing Quest for

planning market share critical mass


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The Basic Framework

Strategy: the Link between the

Firm and its Environment

The Basic Framework

Strategy: the Link between the

Firm and its Environment

THE FIRM

Goals &

Values

Resources &

Capabilities

Structure &

Systems

THEINDUSTRY

ENVIRONMENT

Competitors

CustomersSuppliers

STRATEGYSTRATEGY


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How Does It Compare to Other

Business Classes?

Mktg. Oper.

Strategy

Finance

Acctg. H.R.

Task

environment

Macro level

environment

The

firm


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Task Environment

Customers and Markets:

Distributors

End users

Competitors:

Competitors for Markets

Competitors for Resources

Suppliers:Suppliers of physical resourcesSuppliers of financial resources

Suppliers of human resources


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Task Environment

Regulatory Groups:

Government

Unions

Special Interest Groups

Technology:

Rate of Development

Substitutes

Stage of Product or Industry


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The Role of Strategy In Business is to Generate and Sustain Value

via the Linkages Between Position, Resources, and Organization

Positioning

Resources

& CapabilitiesOrganization


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Resources & Capabilities

Tangible Resourcese.g., physical capital

Organizational Capabilitiese.g., routines and standard operating procedures

Intangible Resources

e.g., trademarks, know-how


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Organization

StructureFormal Definition of authority

Conflict Resolution

Systems

Rules, Routines, Evaluation and rewards

Processes

Informal communication, networks, recruitment


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Definitions of Strategy

The term strategy is intended to focus on the interdependence

of the adversaries decisions and on their expectations about eachothers behavior (Thomas Schelling The Strategy of Conflict)

Strategy can be defined as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of

courses of action and the allocation of resources necessary forcarrying out those goals.

(Alfred D. Chandler Strategy and Structure)

Strategy is: The pattern or plan that integrates an organizations

major goals, policies, and action sequences into a cohesive whole.A well formulated strategy helps to marshal and allocate anorganizations resources into a unique and viable posture basedon its relative internal competencies and shortcomings, anticipatedchanges in the environment, and contingent moves by intelligentopponents. (James Brian Quinn, Logical Incrementalism)


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Defining the Business: The Starting Point of Strategy

Example: Fall of the Railroads

They let others take customers away from them because

they assumed themselves to be in the railroad business rather

than in the transportation business. The reason they defined

their industry wrong was because they were railroad

oriented instead of transport oriented; they were product

oriented instead of customer oriented.

Theodore Levitt Market Myopia


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Mission Statement and Goals

It is the function of the top management team to

provide the firmspurpose or strategic intent.

Chester Barnard The Functions of the Executive

Alfred Sloan My Years with General Motors

Komatsu---> Encircle CaterpillarCanon---> Beat Xerox

Kodak ---> Be the leader in the imaging sector

Coca Cola ---> To put a Coke within arms reach of

every consumer in the world.


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The Managers role in balancing expectations

Business Roundtable:

Balancing the shareholders expectations of maximum returnagainst other priorities is one of the fundamental problemsconfronting corporate management.

Understanding corporate strategy means understanding thecompeting value claims of multiple stakeholders.

Stakeholdersare the individuals and groups who can affect, andare affected by, the strategic outcomes achieved and who have

enforceable claims on a firms performance.


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Key Drivers of Value Creation and Sustainable

Competitive Advantage:

Generating economic valuecan be accomplished

through:

REVENUE drivers

COST drivers

RISK drivers


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Value and Cost Drivers

Figure 2.5


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Sources of Superior Profitability

RATE OF PROFIT

ABOVE THECOMPETITIVE

LEVEL

How do we

make

money?

INDUSTRY

ATTRACTIVENESS

Which

businesses

shou ld we bein?

COMPETITIVE

ADVANTAGE

How should

we com pete?

CORPORATE

STRATEGY

BUSINESS

STRATEGY


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The Levels of Strategy

R&D

HR

Finance

Production

Mktg/Sales

Division A

R&D

HR

Finance

Production

Mktg/Sales

Division B

R&D

HR

Finance

Production

Mktg/Sales

Division C

Corporate

HeadquartersCorporate - General Electric

Business- Home Appliances

Functional- e.g., Production


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Corporate Strategy

At the corporate level, value creation can occur if theindividual parts of a firm are integrated into a

coherent whole.

Corporate strategyis the way a company creates

value through the configuration and coordination of

its multi-market activities.


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29BARTOL, MANAGEMENT: A PACIFIC RIM FOCUS 3EMcGraw-Hill Australia 20019

Managers as

decision makersAssumptions of the

Rational Model

Managers as

decision makers

Assumptions of theRational Model

Rational

decision

making

Rationaldecision

making

An optimal decision

is possible

An optimal decision

is possible

All relevant information

is available

All relevant information

is available

All relevant information is

understandable

All relevant information is

understandable

All alternatives are knownAll alternatives are known

All possible outcomes knownAll possible outcomes known


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Our Learning Goals:

Pushing Down Through Blooms Taxonomy

Our Learning Goals:

Pushing Down Through Blooms Taxonomy1. Knowledge: remember

material; know terms, facts,procedures, basic concepts

2. Comprehension:grasp meaning; understandfacts, interpret charts,translate verbal to mathestimate consequences

3. Application: usematerial in new situations;apply concepts to realsituations, follow a procedure

1. Knowledge: remembermaterial; know terms, facts,procedures, basic concepts

2. Comprehension:grasp meaning; understandfacts, interpret charts,translate verbal to mathestimate consequences

3. Application: usematerial in new situations;apply concepts to realsituations, follow a procedure

4. Analysis: break materialinto components & understandstructure; recognize logicalfallacies, distinguish fact and

inference, evaluate relevancy ofdata

5. Synthesis: integrate partsto make a new whole, integratelearning to solve a problem

6. Evaluations: judge logicalconsistency, judge whetherconclusions are supported byfacts

4. Analysis: break materialinto components & understandstructure; recognize logicalfallacies, distinguish fact and

inference, evaluate relevancy ofdata

5. Synthesis: integrate partsto make a new whole, integratelearning to solve a problem

6. Evaluations: judge logicalconsistency, judge whetherconclusions are supported byfacts


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Summary Takeaways

Providing PURPOSE is an important function forthe executive.

One important purpose is to CREATE VALUE.

Value creation can lead to SUSTAINABLE

COMPETITIVE ADVANTAGE.

Documents

Power Point Set 001_ Definitions of Strategy_Spring 2012