1. UNIT 2: THE CONCEPT OF STRATEGY

2. A. Definition
“Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations”. (Johnson Scholes & Whittington, 2008)

3. In other words, strategy is about:
 Where is the business trying to get to in the long-term (direction)
Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)
How can the business perform better than the competition in those markets? (advantage)?
What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?
What external, environmental factors affect the businesses' ability to compete? (environment)?
What are the values and expectations of those who have power in and around the business? (stakeholders)

4. Strategic decisions are about:
The long-term direction of an organization
The scope of an organization’s activities
Gaining advantage over competitors
Addressing changes in the business environment
Building on resources and competences (capabilities)
Values and expectations of stakeholders

5. Therefore they are likely to:
Be complex in nature
Be made in situations of uncertainty
Affect operational decisions
Require an integrated approach (both inside and outside an organization)
Involve considerable change

6. B. Characteristics Business domain
Scope of an organization’s activities.
Product/market scope.
What the organization will do and what it will not do.

7. Long term direction of an organization
Where are we going?
Organizational vision

8. Strategic fit
Matching of the activities of an organization to the environment.
Environment dependence

9. Competitive advantage
Basis for attracting customers
Cost leadership
Differentiation
Focus
- Positioning

10. C. Strategy Company strategies are concerned with:
How to grow the business
How to satisfy customers
How to out compete rivals
How to manage each functional area
To develop requisite capabilities
How to achieve company objectives

11. Strategy
Strategy is partly proactive and partly reactive
Proactive actions to improve performance
Reactions to unforeseen developments

12. D. Levels Corporate strategy
Overall purpose and scope of the business to meet stakeholder expectations
Overall business domain
Corporate resource allocation
Value addition to the different parts of the organization
(“2+2=5”); Out sourcing; core business)
Principal focus → Effectiveness

13. Business strategy Competition with other business in the market
Achievement of competitive advantage
Focus on the “strategic Business Unit (SBU)
SBU-Part of the organization for which there is a distinct market for goods and services
Note: Distinct markets require different strategies.
- Principal focus →Effectiveness

14. Functional (Operational) strategy
How the various functional areas contribute to achieving business and corporate strategy.
Organizational processes
Principal focus →Efficiency

15. “Without strategy, the organization is like a ship without a rudder, going around in circles”.