The strategy process Strategic management in practice

Organisation structure and design Resource allocation and control Managing strategic change Strategy evaluation and selection Bases of strategic choice Strategic choice Strategy implemen- tation Strategic analysis Resources, competences and capability Expectations and purposes The environment Figure 1.4 A summary model of the elements of strategic management From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition Strategic options

Why strategy is non-rationalistic zStrategy strongly influenced by ‘paradigm’ zStrategy dependent on politics ySelf interest (agency theory) yPowerful individuals yInfluential stakeholders zTypical strategy processes have limitations yPlanning / enforced choice / learning / command

ContinuityIncremental Flux Transformational Figure 2.2 Patterns of strategy development From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition

Stories Symbols Powerstructures Rituals and routines ControlsystemsOrganisationalstructures Theparadigm Figure 2.10 The cultural web of organisation From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition

Source: Adapted from E. Schein, Organisation Culture and Leadership, Jossey-Bass, Paradigm Taken-for-granted assumptions Beliefs Values Figure 5.10 Culture in three layers From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition

Source: Adapted from P. Grinyer and J.-C. Spender,Turnaround: Managerial recipes for strategic success, Associated Business Press, 1979, p. 203 The paradigm Development of strategy mplementation Implementation Corporateperformance ifunsatisfactory Step 1 Tighter control Step 2 Reconstruct or develop new strategy Step 3 Abandon paradigm and adopt a new one Figure 2.11 The dynamics of paradigm change From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition

Environmentalchange Strategicchange Amount of change Phase 1 Incremental change Phase 2 Flux Phase 3/4 Transformational change or demise Time Figure 2.12 The risk of strategic drift From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition

Corporate planning z1960s - 70s view zSeparate strategic planning dept yFormal use of techniques yBased on the premise that planning is ‘rational’ zNumerous limitations yPlanners isolated yHard to link well with implementation yCumbersome

Strategic management zNot separated from the organisation yStrategic management as ‘what senior management does’ zRecognise link between strategy and action zBottom-up and well as top-down strategy zEmergent strategy and strategic intent

Strategic decisions eg Product launch Acquisition Divestment Overseas expansion Strategies evolve and inform strategic decisions, which in turn consolidate strategic direction Evolvingstrategicdirection Figure 2.3 Strategic evolution and consolidation From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition

Corporate governance Oversee organisation to ensure it is managed in the interests of shareholders or stakeholders

Agency theory zAgents CEOs of public companies have a responsibility to act as agents for the owners. zAgency problem Managers may seek to maximise their own self interest at the expense of shareholders.

Source: David Pitt-Watson, Braxton Associates with permission Beneficiaries Trustees Investment managers Board Executive directors Senior executives Managers Reports received Limited reports Limited investment performance reports Accounts Analysts' reports Company briefings Budgets/qualitative reporting Budgets/other operating reports Figure 5.2 The chain of corporate governance: typical reporting structure From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition

Stakeholder management zMultiple groups and interests may be considered ‘stakeholders’ yLocal communities, customers, employees, government regulators etc zStakeholders may exert power yShell and the Brent Spar y‘Dangerous’ radio masts, ‘ugly’ cables zEnlightened approach can yMinimise costly errors yServe the interests of both sides

Source: Adapted from A. Mendelow, Proceedings of 2nd International Conference on Information Systems, Cambridge, MA, A B C D Minimal effort Keep informed Keep satisfied Key players Low High POWER LEVEL OF INTEREST Low High Figure 5.5 Stakeholder mapping: the power/interest matrix From: G Johnson and K Scholes, Exploring Corporate Strategy, 4th edition !

Reducing uncertainty zStakeholders can be a major source of environmental uncertainty zHigh power, high interest stakeholders yReduce uncertainty by forming alliances xSimilar principle to co-opetition xDifference of objectives may remain zLower interest and/or power stakeholders yMaintain active 2-way communication

Shareholder M (-) Toulouse office (-) Customer X (+) French minister (-) Marketing (-) IT supplier A (+) Customer Y (-) Frankfurt Office (+) Corporate finance (+) Customer Z German minister Example: likely situation High interest High power Low interest Low power

Example: desired situation Shareholder M (-) Toulouse office (-) Marketing (-) IT supplier A (+) Customer X (+) Customer Y (+) Frankfurt Office (+) Corporate finance (+) Customer Z German minister High interest High power French minister Low interest Low power