1. The Concept of Strategy
Chapter 1
The Concept of Strategy

2. Learning Objectives
By the time you have completed this topic you will:
appreciate the contribution that strategy can make to successful performance, both for individuals and for organizations;
be aware of the origins of strategy and how views on strategy have changed over time;
be familiar with some of the key questions and terminology in strategy;
understand the debates that surround corporate values and social responsibility;
gain familiarity with the challenges of strategy making in not- for-profit organizations;
comprehend the basic approach to strategy that underlies this book.
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3. Common elements in successful strategies
Figure 1.1
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4. Effective implementation
Without effective implementation, the best-laid strategies are of little use.
Whether we look at warfare, chess, politics, sport, or business, the success of individuals and organizations is seldom the outcome of a purely random process, nor is superiority in initial endowments of skills and resources typically the determining factor.
Strategies that build on the basic four elements almost always play an influential role.
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5. CEO of our own careers
We must learn how to be the CEO of our own careers.
Success has gone to those who managed their careers most effectively—typically by combining the four strategic factors:
goals that are simple, consistent, and long term;
a profound understanding of the competitive environment;
objective appraisal of resources; and
effective implementation.
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6. A brief history of strategy
Strategy is concerned with winning the war
Enterprises need business strategies for much the same reasons that armies need military strategies:
to give direction and purpose,
to deploy resources in the most effective manner, and
to coordinate the decisions made by different individuals.
The mythological Trojan Horse refers to a military strategy the Greeks used to enter the city of Troy and win a 10-year war against the Trojans.
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7. Strategic decisions They are important.
Strategic decisions share three common characteristics:
They are important.
They involve a significant commitment of resources.
They are not easily reversible.
In the face of continuous change and relentless competition, strategy becomes less about building positions of sustained competitive advantage and more about developing the responsiveness and flexibility to create successive temporary advantages.
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8. The Distinction between strategy and tactics
Strategy is the overall plan for deploying resources to establish a favourable position.
A tactic is a scheme for a specific action.
Whereas tactics are concerned with the manoeuvres necessary to win battles, strategy is concerned with winning the war.
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9. Evolution of strategic management
Figure 1.2
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10. Definitions of strategy
Strategy today
Definitions of strategy
Strategy: a plan, method, or series of actions designed to achieve a specific goal or effect.
– Wordsmyth Dictionary
The determination of the long-run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.
– Alfred Chandler, Strategy and Structure
Strategy is the pattern of objectives, purposes, or goals and the major policies and plans for achieving these goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be.
– Kenneth Andrews, The Concept of Corporate Strategy
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11. Sources of superior profitability
Figure 1.3 Corporate versus business strategy
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12. How to we describe a firm’s strategy?
Figure 1.4
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13. How do we identify a firm’s strategy?
A hierarchy of strategy statements:
The mission statement is the basic statement of organizational purpose; it addresses “Why we exist.”
A statement of principles or values outlines “What we believe in and how we will behave.”
The vision statement projects “What we want to be.”
The strategy statement articulates “What our competitive game plan will be.”
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14. How do we identify a firm’s strategy?
The game plan should comprise three definitive components of strategy:
objectives,
scope (where we will compete), and
advantage (how we will compete).
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15. How do we identify a firm’s strategy?
Explicit statements of strategy need to be checked against decisions and actions:
Where is the company investing its money?
Notes to financial statements often provide detailed breakdowns of capital expenditure by region and by business segment.
What technologies is the company developing?
Identifying the patents that a company has filed indicates the technological trajectory it is pursuing.
What new products have been released, major investment projects initiated, and/or top management hires made?
A company’s news releases usually announce these strategic decisions.
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16. What roles does strategy perform?
Strategy as Decision Support
Improves the quality
of decision making
Creates consistency
and unity
Strategy as a Coordinating
Device
Improves performance
by setting
high aspirations
Strategy as Target
Motivates
and mobilizes
Strategy as Animation and Orientation
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17. Strategy as target
Often the most important role of strategy is to animate and orientate individuals within organizations so that they are:
mobilized,
encouraged, and
work in concert with each other to achieve focus and direction.
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18. Strategy: in who’s interest?
Shareholders versus stakeholders?
Most English-speaking countries have endorsed shareholder capitalism, where companies’ overriding duty is to produce profits for owners.
In continental European countries, companies are legally required to take account of the interests of employees, the state, and the enterprise as a whole.
Whether companies should operate exclusively in the interests of their owners or should also pursue the goals of other stakeholders is an ongoing debate.
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19. Profit and purpose
“Profits are to business as breathing is to life. Breathing is essential to life, but is not the purpose for living. Similarly profits are essential for the existence of the corporation, but they are not the reason for its existence.”
Source: Quote from an interview by Robert M. Grant with Dennis Bakke, founder of the international power company, AES.
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20. Mission statements
HENRY FORD: “I will build a motor car for the great multitude It will be so low in price that no man making good wages will be unable to own one and to enjoy with his family the blessing of hours of pleasure in God’s great open spaces When I’m through, everyone will be able to afford one and everyone will have one.” GOOGLE: To organize the world’s information and make it universally accessible and useful IKEA: To create a better everyday life for the many people. We make this possible by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. SAP: To define and establish undisputed leadership in the emerging market for business process platform offerings and accelerate business innovation powered by IT for companies and industries worldwide. GAIA HOUSE: (a Buddhist retreat centre in England) ‘Exists for the liberation of all beings from greed, hatred, and delusion’.
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21. Corporate social responsibility
Companies are increasingly accepting responsibilities that extend well beyond the immediate interest of shareholders:
for ethical reasons,
for reasons of self interest,
sustainability (it is in both society’s and the firm’s interests to sustain the ecosystem),
reputation (CSR enhances the firm’s reputation with consumers and third parties),
license to operate (firms need the approval and support of the constituencies on which they depend).
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22. Strategy as a link between the firm and its environment
The basic framework
Strategy as a link between the firm and its environment
THE REMOTE
ENVIRONMENT
Political drivers
Economic drivers
Social drivers
Technological drivers
Ecological drivers
Legal drivers
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23. CopyRIGHT
Copyright © 2015 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.