Lecture 1 - The Concept Of Strategy 1362b

The Concept of Strategy OUTLINE • The role of strategy in success • A framework for strategy analysis • The evolution of strategic management • Corporate strategy and business strategy • Strategy making: Design or process? • The role of strategy

Components of Success MADONNA GOALS

Single-minded quest for stardom.

GIAP & NORTH VIETNAMESE Reunification of Vietnam under Communist rule.

LANCE ARMSTRONG Winning the Tour de

UNDERIdentified emerging Intimate knowledge of STANDING THE trends in popular culture. terrain Understanding ENVIRONMENT Understood key success U.S. political system. factors in showbiz

Diagnosis of the physical, psychological and strategic determinants of individual and team performance

RESOURCE APPRAISAL

Recognized limited raw talent. Exploited strengths in selfpromotion, product development & relationship management

Recognized economic and military weaknesses and core political strengths

Systematic development of individual stamina and team capabilities

IMPLEMENTATION

Commitment and discipline. Charismatic leadership. Team building. Attention to detail.

Tight control. Longterm commitment. Effective propaganda. Inspirational leadership.

Clear delineation of individual roles. Alignment of incentives with team goals. Nurturing esprit de corp

What Makes a Successful Strategy? Successful Strategy

EFFECTIVE IMPLEMENTATION

Long-term, simple and agreed objectives

Profound understanding of the competitive environment

Objective appraisal of resources

What is Strategy? • Distinguishing strategy from tactics: – Strategy is the overall plan for deploying resources to establish a favorable position. – Tactic is a scheme for a specific maneuver.

• Characteristics of strategic decisions: – Important. – Involve a significant commitment of resources. – Not easily reversible.

The Evolution of Strategic Management

DOMINANT THEME

MAIN ISSUES

KEY CONCEPTS & TOOLS

MANAGEMENT IMPLICATIONS

1950s

1960s-early 70s

Mid-70s-mid-80s

Late 80s –1990s

Budgetary planning & control

Corporate planning

Positioning

Competitive advantage

Strategic innovation

Financial control

Planning growth &diversification

Selecting sectors/markets. Positioning for leadership

Focusing on sources of competitive advantage

Reconciling size with flexibility & agility

Capital budgeting. Financial planning

Forecasting. Corporate planning. Synergy

Industry analysis Segmentation Experience curve Portfolio analysis

Resources & Cooperative capabilities. strategy. Shareholder Complexity. value. Owning E-commerce. standards. — Knowledge Management—

Coordination & control by Budgeting systems

Corporate planning depts. created. Rise of corporate planning

Diversification. Restructuring. Global strategies. Reengineering. Matrix structures Refocusing. Outsourcing.

2000s

Alliances & networks Self -organiz ation & virtual organization

The Basic Framework Strategy: the Link between the Firm and its Environment

THE FIRM • Goals & Values • Resources & Capabilities • Structure & Systems

THE INDUSTRY ENVIRONMENT STRATEGY STRATEGY

• Competitors • Customers

• Suppliers

Sources of Superior Profitability INDUSTRY

ATTRACTIVENESS

RATE OF PROFIT ABOVE THE COMPETITIVE LEVEL

How do we make money?

Which businesses should we be in?

CORPORATE STRATEGY

COMPETITIVE ADVANTAGE

How should we compete?

BUSINESS STRATEGY

Strategy Making : Design or Process? Strategy as Design

Strategy as Process

Planning and rational choice

Many decision makers responding to multitude of external and internal forces

INTENDED STRATEGY

EMERGENT STRATEGY

REALIZED STRATEGY 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.

Strategy Making Processes within the Company: Multiple Roles of Strategy Strategy as Decision

Improves the quality of decision making

Strategy as Coordination and Communication

Creates consistency and unity

Strategy as Target

Improves performance by setting high aspirations

The Role of Analysis • Strategy analysis improves decision processes, but doesn’t give answers. • Strategy analysis assists us to identify and understand the main issues. • Strategy analysis helps us to manage complexity. • Strategy analysis can enhance flexibility and innovation by ing learning.