1. Topic 1: The Concept of Strategy and the Strategic Management Process
Business Policy
Strategy Formulation
Topic 1: The Concept of Strategy and the Strategic Management Process

2. Lecture Plan What is a strategy? The strategic management process
Why strategic management is an ongoing process
Who performs the tasks of SM?
Benefits of a strategic approach
point out that strategic thinking is required not only in large multinational businesses
students must develop their own strategic approach to undertaking a degree course
even small farmers (my uncle Pats) must make strategic decisions:
- invest in bulk milk cooler?
- keep or lease milk quota?
- stay in dairy cows or move to beef cattle?

3. What is a strategy?
‘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 for carrying out these goals’’
Chandler
‘a commitment to undertake one set of actions rather than another’
Oster
Point out that each definition demonstrates a flavour of strategic management
Point out that strategy has two distinct meanings:
can be viewed by looking at past and inferring, after the fact, a meaning to decisions made
can be viewed by looking forward: developing a plan for the future.
Both meanings often used interchangeably
Definitions also demonstrate this:
Chandlers is from design point of view: emphasis on defining and attaining goals
Oster is from entrepeneurial point of view: emphasis on energinsing firm through commitment; also emphasises that choice must be made; usually on basis of judgement

4. What is a Strategy? (2)
‘...the “game plan” management has for positioning the company... entails choice among alternatives and signals organisational commitment to specific markets, competitive approaches, and ways of operating.’
Thomson and Strickland
T+S emphasis the notion of patterns ie. inferring strategy from pattern of decisions made; also emphasise attainment of goal: org. performance
Christiansen: emphasis here is on internals and externals and the matching between these: competence to opportunity

5. The strategy pyramid
Corporate
Influence
Business
Function
Operating
Uniting the strategy-making effort through vertical and horizontal linkages.
Co-ordination through mutually reinforcing vision, objectives & strategies.

6. Different Levels of Strategy
Corporate - what business?
Business - how to compete in each business
Functional - in support of business level

7. The Strategic Management Process
Analyze
Environment
Identify
opps / threats
Identify
current
mission,
objectives
& strategies
Formulate
Strategies
SWOT ANALYSIS
Implement
Strategies
Identify
strengths &
weaknesses
Analyze
Resources
Evaluate
Results
‘Management’, Robbins, S. & Coultar, M. 1996p. 259

8. Strategy Making - Process or Event?
Strategy making is an ongoing process
Boundaries between tasks:conceptual not real
Managers have many other responsibilities
Crafting/ implementing happens erratically
Much interplay / recycling among the parts of the SM process
Change occurs in an unpredictable way and the implications for strategy may be easy or hard to decipher. Therefore reviewing and adjusting the strategic plan takes an unpredictable amount of management time.

9. Intended and Adaptive Strategy
‘strategy is a combination of planned actions and on-the-spot adaptive reactions to freshly developing industry and competitive events.’
Respond to external/internal environment
Emergent Strategy

10. Who Performs the five tasks?
CEO and other managers
Strategic planners
Board of directors
Some larger companies will have strategic planning depts. eg Eagle Star. These depts help to focus the rest of the organisation on the strategic issues but don’t formulate or implement the strategies.
Boundary-spanning - identifying the issues
A guiding role.

11. The Three Strategy Making Tasks
Develop a strategic vision/ business mission
Set objectives
Craft a strategy

12. ‘Chesire Puss’ she (Alice) began ...
‘Would you please tell me which way I ought to go from here’
‘That depends on where you want to get to,’ said the cat.
Lewis Carroll
‘If you don’t know where you’re going,
any old road will take you there’.
Anonymous

13. Mission Present Defines the current boundaries
Defines the business position
-’Who are we?’
- ‘What do we do?’
Mission
Present

14. What Business are you in: Coca Cola
soft drinks? Competition is Pepsi, Finches
beverages? Competition is tea, coffee, softdrinks
thirst -quenching?
Competition is water & all liquids!
Note: answer to this question changes the way you look at competition: if beverages is answer then you have many more competitors to deal with
- and also much more opportunity

15. Broad / Narrow Business Definition
Beverages Fizzy drinks
Children’s entertainment Toys for toddlers
Furniture Waterbeds
Travel River cruises in Egypt

16. Vision Prepares company for the future Not simply ‘making a profit’
Defines the business position
‘Who are we?’
‘What do we do?
Defines target market
Establishes long-term direction
‘Where are we going?’
Not simply ‘making a profit’
Vision
A statement that says what the company is trying to do/ become
Vision / mission interchangeable
Making a profit is not sufficient: all companies aim to make a profit - that alone does not provide sufficient long term direction/ ability to choose between alternatives
vision/mission also applies to public, not for profit organisations eg. hospitals, religious orders
example: Concern: vision supposedly ‘to help the poorest of the poor’ but not applied; this inhibited people from working together eg.
- someone used only local materials, unpaid labour and little equipment
- another used much equipment, paid labour and produced far more
all this led to inconsistency among workers and customers/ bickering
Future
Importance of COMMUNICATING the vision

17. Objectives Strategic vs. Financial? Long range vs. short range?
companies that consistently pass up opportunities to strengthen long term position in order to realise short term gains risks diluting its competitveness and getting left behind due to lack of re-investment
need both long term and short term
short term as stepping stones / building blocks
Stretch - objectives should stretch an organisation to achieve its potential - to energise the org and its strategies
some people argue that objectives should be so bold and aggressive that people are stretched to the limit but this could lead to undermining of objectives as they are never seen to be realistic
Challenging but achievable
Measurable

18. Strategic vs. financial objectives?
focus is on competitors
eg. becoming the top company in the industry
Financial
focus is on financial performance
eg. acceptable profit margin/ ROI
Both are neccessary
company must survive in both short and long term

19. Long vs. Short term? Long term forces Short term encourages
early action
long term implications considered
Short term encourages
speedy progress

20. Challenging but Achievable
objectives must be realistic
but should stretch
funds/ resources must be available to execute the strategy

21. Measurable Objectives must be measureable Deadlines must be set
eg. growth in market share of 5%
Deadlines must be set
eg. by December next
‘You cannot manage what you cannot measure’

22. Objectives needed at all levels
Parts supporting the whole
Top-down objective-setting
- cohesion
- leadership

23. Corporate Strategy Builds portfolio of businesses
Harnesses synergies between businesses
Eg pepsi: cola sold via restaurant chain
Makes resourcing/ investment decisions
Reviews/ unifies business unit strategies

24. Business Strategy
Aims to strengthen long-term competitive position & build sustainable competitive advantage
Build competencies and capabilities
Respond to changing circumstances
Unify functional strategies

25. Functional Strategy Support the business strategy
Eg. Bank: more automated transactions
Defined for a function of the business
Eg. IT function ensures 99% up-time for atms by having superior software and backup/ recovery mechanisms

26. Operational strategy Lower level units of the organisation
Specific means and approaches for these units
Eg. Software development group trains people in use of GUI/ client-server development

27. Approaches to performing the strategy making tasks
Master strategist: manager is chief architect
Delegate to others
Collaborative approach
Champion approach

28. Factors that shape strategy
External
Society
political
regulatory
Industry
Attractive-
ness
Opportunity
threat
Craft a
Strategy
Evaluation
Choice
Company’s strategic situation
Strengths
weakness
Manager
values /
ambitions
Culture
Internal

29. Societal, Political, Regulatory Conditions
Limit the strategic actions that a company can or should take
May cause company to change strategy
anti-smoking lobby (direct mkg/advertising)
lead-free petrol (eg Pura)
recycling
PR pressure
Opportunity to make a good impression

30. Industry Attractiveness
Strategy must be matched to industry and competitive conditions eg.
technology shift
change in cost structure of industry

31. Market Opportunities and Threats
Be open to opportunities
Aim at capturing best growth opportunities
Defend against threats to well-being and future performance
Have the structure that allows people to recognise opportunities and to be flexible enough to take advantage of them

32. Organisational Strengths and Weaknesses
Strategy must be well-matched to the company’s strengths
strategy should be grounded in what company is good at doing
perilous to depend on what it’s not good at

33. Manager’s Values, Beliefs and Ambitions
Management play a pivotal role
Strong leadership builds commitment
Management communication - ‘buy-in’

34. Strategy formulation: deciding what to do
what you might do: opportunity
what you can do: resources
what you’d like to do: values/ ambitions
what you ought to do: ethics

35. Tests for a good strategy
Goodness of fit test
matches well the company’s situation
internal
external
Competitive advantage test
leads to sustainable competitive advantage
Performance test
leads to superior performance
profitability
long term business/ market position strength
Use Ben and Jerry as example
- good fit eg. consumers based purchase decision on flavour; B&J provided a line of exotic flavours, regularly updated
- competitive adv: difficult for Hagen Daaz to compete against B&J home-town image without destroying HD’s own sophisticated, urbane image
- performance: financial results have consistently been good

36. Benefits of a Strategic Approach
Direction
Adaptable / in-tune with environment
Basis for budget/resource allocation
Unifies decisions across organisation
Encourages pro-active management
Requires strategic thinking rather than gut-feel/drift