The Need for Strategy Chapter 1

Learning Objectives Today's two strategic imperatives. Define "strategy" and the 5 questions which frame the field. Evolution and the importance of strategy in business. Connect strategy with ethics and leadership. Describe the strategy process.

Today’s Strategic Imperatives Opportunity Recognition Value Creation Technology, "big data," rapid communication Globalization Ease of access to finance & markets 24/7 pace of work Rapid change & evolving conditions Balance between continuity and change

Strategy: Deliberate & Emergent (Source: Mintzberg & Waters, 1985)

Five Questions Define Strategy Why are firms different? How are competitive differences sustained? What is special about strategic decisions? What is the nature of strategy in a multi- divisional firm? How is strategic effectiveness measured?

Why are strategic decisions special? Ill-structured and non-routine Significantly affect all departments in firm Involve significant resource commitments over time Involve making a clear choice among alternatives Are difficult to reverse Are easily identified with success or failure

How is strategy effectiveness measured? Financial performance metrics Qualitative assessments Stakeholder goals (external and internal) Important dimensions (see Chapter 2) Summary performance of firm Relative to competition Over the long run

History of Strategy Sun Tzu, 550 BC, "The Art of War" Pericles, 450 BC, "Strategos" (art of the general) Early 1900s – Large firms emerged, management removed from laborers 1962 – Alfred Chandler, "Strategy & Structure" 1970s-80s – Loss of U.S. competitiveness

Vision, Ethics, Leadership Managing for the long term Pressures in the short term Performance for stockholders Performance for stakeholders Leadership at the top Leadership from the bottom

Strategic Management Process