1. Strategic Management Evolution Interpretations Theorists/ Gurus/ Critics UCAN 28July98

2. Multi-disciplinary Nature Strategic Management Engineering Sociology Business Practice Business Practice Case Studies Case Studies Org Psychology Org Psychology Political Science Political Science Academics Military Industrial Economics Industrial Economics

3. Scope of Strategic Management Process and Content balance Improving organizational effectiveness Long term effects Broad knowledge of the organization Balancing internal capabilities & external realities Choosing between strategies Implementing action

4. Terminology Strategy - concepts used in the management discipline Strategic planning - use of the concepts to develop a plan of action Strategic management - analysis and practice of strategy including the implementation of strategic plans

5. Traditional Strategy Generalship - formulating manoeuvres to obtain a specific goal Drafting war plans and shaping campaigns and their component battles Using judgement, intuition and best available information to effect success Selection and maintenance of the aim - the basis of planned sequences to attain the objective

6. Sun Tzu & the Art of Business Capture your market without destroying it Avoid competitors’ strengths - attack weaknesses Use foreknowledge & deception to maximize the power of business intelligence Use speed & preparation to swiftly overcome the competition Use alliances & strategic control points in the industry to shape your opponents & make them conform to your will Develop your character as a leader to maximize the potential of your employees (McNeilly,1997)

7. Historical Evolution Previous management models Strategy & structure - Chandler Design school - Andrews Planning school - Ansoff Competitive strategy/ advantage - Porter Learning school - Mintzberg

8. Management Theory - Revision Scientific Management Classical Management & Organizational Theory Human Relations Precursor models to Strategic Management

9. Scientific Management F W Taylor - hence Taylorism Engineering concepts applied to human activity Task specialization Measure, analyze & control - time & motion Application to administrative tasks Productivity rewards based on output performance

10. Classical Management Development of rational principles of management & organization design Complementary to scientific management Fayol’s 14 principles & Weber’s Ideal bureaucracy Functional specialization, lines of authority, span of control, planning and controlling

11. Human Relations Paternalism - Victorian concept of authority & proper behaviour of workers Welfarism - employee support, morale and productivity links Motivation - Maslow’s hierarchy of human needs Perception - McGregor’s Theory X and Theory Y - notion of employees

12. Modern Developments Chandler Ansoff Porter Mintzberg

13. Alfred D Chandler Study of US firms’ evolution as business entities Determined stages of corporate structural development based on growth strategies used: entrepreneurial functional management multidivisional corporation

14. Chandler - Entrepreneurial Entrepreneur dominates & participates in all business Thrives on challenge THEN Expansion in production & employees adds complexity Greater administrative workloads Growing markets & competitors LEADS TO

15. Chandler - Functional Functional specialization by assigning executives to manage business functions GROWTH occurs due to: Vertical integration of suppliers/outlets Product diversification LEADS TO

16. Chandler - Multidivisional Corp More efficient allocation of resources, accountability for performance & coordination between units

17. Chandler - Conclusions Structures usually begin with a highly centralized, low formalization & low complexity organization. Structural change occurs depending on the growth strategies employed. Structure follows strategy

18. H. Igor Ansoff Andrews’ Design School - sought environmental fit - matching internal SW to external OTs Ansoff’s Planning School - concentrated on formulation of objectives - use highly rational & detailed strategic planning processes

19. H. Igor Ansoff Business policy decisions affect 3 main areas: –operational: improving current activities –administrative: supporting and organizing –strategic: shaping future activities Recurring operational problems indicate the need for strategic decisions

20. H. Igor Ansoff Planning Horizon - as far as you can see to predict the future with an accuracy of +/- 20% Concept of synergy - obtaining greater advantage from the combination of individual components of the organization - eg economies of scale leading to higher revenues

21. H. Igor Ansoff Strategic Issues Management - recognition & resolution Assumptions –manage issue that influence the organization –the organization is able to engage in the process and manage it –identify issues by SWOT& scanning –early discovery improves chances of resolution & enhanced organizational performance

22. H. Igor Ansoff Strategic options –existing products to existing markets –existing products to new markets –new products to existing markets –new products to new markets

23. Michael Porter Introduced economic view to field Deterministic approach: STRUCTURE-CONDUCT- PERFORMANCE Market structure determines conduct of firm which determines performance Need to select a strategy that provides a competitive advantage

24. Michael Porter First: Determine Industry Attractiveness

25. Michael Porter Next: Select a strategy for the Industry Low cost or Differentiation strategy Achieved by –cost leadership –differentiation –focus cost focus differentiation focus

26. Michael Porter Cost Leadership - being the lowest cost producer in the industry –Compete on price, sell for less, still make profit eg No Name goods, Hyundai cars –Hold price to that of rivals and make higher profits as costs are lower

27. Michael Porter Differentiation - unique in one or more lines valued by buyers eg Honda motorcycles, Body Shop products Focus - tailored strategies to serve selected segments or a group of segments in an industry

28. Porter’s Generic Strategies Appropriate for commodity products & high price elasticity markets Consider: investing in plant & equipment riding the experience curve to economies of scale stringent cost control & minimization marginal contribution analysis & aggressive pricing Low Cost Producer Differentiation Product is market unique in design, special features, quality or service. The greater the breadth of purchaser motives the greater the opportunities for differentiation. Focussed Niche Specialization in chosen product market - may be geographic, related to customer groups or to product function.

29. Henry Mintzberg Definitions of strategy: –as Plan - intended course of action –as Pattern - consistency in stream of decisions and actions –as Position - firm’s location in the environment –as Perspective - collective view of the world based on experience

30. Henry Mintzberg Intended strategy Realized strategy Unrealized strategy Emergent strategy Deliberate strategy

31. Henry Mintzberg Criticism of strategic planning ‘fallacies’: Fallacy of Prediction - unreasonable to expect any accuracy in forecasts Fallacy of Detachment - impossible to adopt fully dispassionate approach in planning Fallacy of Formalization - difficult to formalize the irrational nature of the market or its operations

32. *Planned & emergent strategy *Environmental scan: qualitative & quantitative *Term 5 years plus *Operations: MIS & Business IS *Planning hierarchy: strategic, corporate operational *Capital budget > recurrent *Planned & emergent strategy *Environmental scan: qualitative & quantitative *Term 5 years plus *Operations: MIS & Business IS *Planning hierarchy: strategic, corporate operational *Capital budget > recurrent *Constrained strategy *Environmental scan: quantitative emphasis *Longer term (3 years) *Operations MIS *Control / accountability *More external focus *Devolved operations *Outputs / results *Extended budget *Constrained strategy *Environmental scan: quantitative emphasis *Longer term (3 years) *Operations MIS *Control / accountability *More external focus *Devolved operations *Outputs / results *Extended budget Planning Effectiveness Planning Effectiveness *Strategy by accident *Short term *Operations *Control *Annual Budget *Inputs focus *Strategy by accident *Short term *Operations *Control *Annual Budget *Inputs focus *Learning *Path dependencies *Complementary assets *Complementary technologies *Transaction costs *Strategic HRM *Learning *Path dependencies *Complementary assets *Complementary technologies *Transaction costs *Strategic HRM PHASE 1 Basic Financial Planning PHASE 1 Basic Financial Planning PHASE 2 Corporate Planning PHASE 2 Corporate Planning PHASE 3 Strategic Planning PHASE 3 Strategic Planning PHASE 4 Strategic Management PHASE 4 Strategic Management Evolution of Strategic Management

33. PLANNING SYSTEM PLANNING SYSTEM MANAGEMENT CONTROL SYSTEM MANAGEMENT CONTROL SYSTEM ORGANIZATION STRUCTURE ORGANIZATION STRUCTURE COMMUNICATIONS & INFORMATION SYSTEM COMMUNICATIONS & INFORMATION SYSTEM MOTIVATION & REWARDS SYSTEM MOTIVATION & REWARDS SYSTEM HUMAN RESOURCES ORGANIZATION CULTURE HUMAN RESOURCES ORGANIZATION CULTURE ORGANIZATIONAL PLANNING & IMPLEMENTATION