1. THE CONCEPT OF STRATEGY AND STRATEGIC MANAGEMENT
G. Tyge Payne, PhD

2. Strategic Management
Strategy: The unifying theme that gives coherence and direction to the decisions of an organization
Strategic Management: Consisting of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.
Strategic Management basically seeks to answer the question: How and why do some firms outperform others?

3. Historical Development of Business Strategy
The Influence of Large Companies and Competition.
Alfred Sloan, CEO of GM, 1923 – One of the first to analyze competition, Ford, and devise a strategic plan based on its strengths and weaknesses.
Chester Barnard, Senior Executive of New Jersey Bell, 1930s - Argued managers should pay attention to “strategic factors” which depend on “personal or organizational action.”
The Influence of Wartime (WWI and WWII):
Allocation of scarce resources
Use of quantitative analysis in planning
The concept of “learning curves”
The concept of “distinctive competence” - first mentioned by Philip Selznick, a sociologist, in a debate about whether or not to combine the military forces into a single unit (i.e., no Army, Navy, Air Force, Marines, just the US Military).

4. More Historical Development
1950s: Strategy was largely introduced in business schools as a way of analyzing the competitive environment and setting organizational goals and objectives to fit that environment.
Since then, major developments include:
Kenneth Andrews’ SWOT Analysis was developed – still in use today.
Theodore Levitt’s “Marketing Myopia” argued that when companies fail it typically is because firms focus on the product rather than the changing patterns of consumer needs and tastes.
Igor Ansoff argued, in response to Levitt, that a firm’s mission should exploit an existing need in the market, rather than using the consumer as the common thread in business. “In reality a given type of customer will frequently have a range of product missions or needs.” Corporate Strategy, 1965.
BCG developed the “experience curve” and portfolio analysis concepts.
McKinsey & Company’s development of SBUs and the nine-block matrix.
Mintzberg’s “Deliberate, Emergent & Realized Strategies”
Porter’s Generic Strategies

5. The Evolution of Strategic Management
1950s 1960s-early 70s Mid-70s-mid-80s Late 80s –1990s s
Budgetary Corporate Positioning Competitive Strategic
planning & planning advantage innovation
control
Financial Planning Selecting Focusing on Reconciling
control growth &- sectors/markets. sources of size with
diversification Positioning for competitive flexibility &
leadership advantage agility
Capital Forecasting. Industry analysis Resources & Cooperative
budgeting. Corporate Segmentation capabilities. strategy.
Financial planning. Experience curve Shareholder Complexity.
planning Synergy Portfolio analysis value. Owning
E-commerce. standards.
— Knowledge Management—
Coordination Corporate Diversification. Restructuring. Alliances &
& control by planning depts. Global strategies. Reengineering. networks
Budgeting created. Rise of Matrix structures Refocusing. Self -organiz
systems corporate Outsourcing. ation & virtual
planning organization
DOMINANT
THEME
MAIN
ISSUES
KEY CONCEPTS&
TOOLS
MANAGE-MENT
IMPLIC-
ATIONS

6. Ansoff’s Product / Mission Matrix*
Market
Penetration
Product
Development
Diversification
Present
New
Mission
*Categories define the common thread in an organization’s business/corporate strategy.

7. BCG’s Growth-Share Matrix
Star
Question
Mark
Cash
Cow
Dog
High
Share
Low
Growth
Slow ?
Bark!!

8. Forms of Strategy Intended Strategy Realized Strategy Emergent
Mintzberg’s Critique of Formal Strategic Planning:
The fallacy of prediction – the future is unknown
The fallacy of detachment -- impossible to divorce formulation from implementation
The fallacy of formalization --inhibits flexibility, spontaneity, intuition and learning.
Deliberate Strategy
Realized
Strategy
Unrealized
Strategy
Emergent
Strategy
**Normally emergent strategy comes from
learning and dissemination within the organization.

9. Porter’s Generic Strategies
Strategy 1
Cost
Leadership
Strategy 2
Differentiation
Strategy 3A
Cost Focus
Strategy 3B
Focus
Competitive Advantage
Lower Cost Differentiation
Competitive
Scope
Broad
Target
Narrow

10. Industry Attractiveness Assets/Skills Assessment
Differing Perspectives of the Strategic Management Process
I/O Model
RBV Model
External Environment
Resources
Industry Attractiveness
Capability
Strategy Formulation
Sustainable CA
Assets/Skills Assessment
Strategy Formulation
Implementation
Implementation

11. Strategy, Survival and Success
The ultimate goal of the organizations is to be successful – success is GAS:
Goal Achievement
Above average returns/Profitability (probably most important, because it determines the ability to achieve the above two)
Survival (long-term success)

12. The Balanced Scorecard
Vision
& Strategy
CUSTOMER
“To achieve our vision, how should we appear to our customers?”
Objectives
Measures
Targets
Initiatives
FINANCIAL
“To succeed financially, how should we appear to our shareholders?”
INTERNAL BUSINESS PROCESSES
“To satisfy our shareholders and customers, what business processes must we excel at?”
INNOVATION AND LEARNING
“To achieve our vision, how will we sustain our ability to change and improve?”
Lagging
Hard
Leading
Soft

13. Thinking Strategically: The Three Big Strategic “Analysis” Questions
1. Where are we now? What is our situation?
2. Where do we want to go?
Business(es) we want to be in and market positions we want to stake out
Buyer needs and groups we want to serve
Outcomes we want to achieve
3. How will we get there?

14. Formulating Directions - Develop Vision/Mission (1)
-Set Objectives (2)
Organizational Culture
Stakeholder Influence
Values / Ethics
Opportunities and Threats
from Economic, Political,
Technological etc Sources
Strategic Analyses (3)
Strategic Control (6)
External Environment
Opportunities and Threats
from Competition and
Key Stakeholders
Competitor/Stakeholder
Internal Organization
Organizational Culture
Stakeholder Influence
Values / Ethics
Strategy Formulation (4)
-Formulate and Consider
Alternatives
-Make Strategy Choice
Implementation (5)
Context of Strategy
(type of organization, culture, values,
life cycle competitive position)

15. Hambrick & Fredrickson, 2001

16. The Strategy Concept Levels of Analysis
Where to Compete?
How to Compete?
How to Contribute?