STRATEGIC CONCEPTS 1. Text Chapter 1Presentation Transcript
STRATEGIC CONCEPTS 1. Text Chapter 1 Reading Recommendations : 2. “What is Strategy?” Michael Porter, Harvard Business Review , 1996. 3. “Marketing Myopia” Theodore Levitt, Harvard Business Review , 1960. 4. “Of Strategies, Deliberate and Emergent,” Mintzberg & Waters, Strategic Management Journal , 1985. 5. Wall Street Journal 6. BusinessWeek
Definitions of Strategy
Oxford Dictionary : The art of war, especially the planning of movements of troops and ships etc., into favorable positions; plan of action or policy in business or politics etc.
Alfred D. Chandler Jr .: The determination of the long run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.
Kenneth Andrews : Strategy is the pattern of objectives, purposes or goals and the major policies and plans for achieving these goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be.
Business strategy is a young field – but its roots go back to early military strategy.
Strategy comes from the Greek word strategos , which is formed from stratos , meaning army, and –ag , meaning to lead .
Carl von Clausewitz wrote in the early 1800’s that “tactics…[involve] the use of armed forces in the engagement, strategy [is] the use of engagements for the objects of war.”
How do you define Strategic Management?
Strategy : The unifying theme that gives coherence and direction to the decisions of an organization
(entails choices among alternatives and signals organizational commitments, competitive approaches, and ways of doing business)
D&L: “Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.”
Note: Also known as analysis, formulation, and implementation
(strategic management = active)
More History of Business Strategy
Not until very large companies with the ability to influence the competitive environment within their industries did strategic thinking in the business world begin to be articulated.
Alfred Sloan, CEO of GM, 1923 – 1946 - 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.”
Wartime (WWI and WWII) efforts also impacted strategic thinking and use of formal strategic tools and concepts:
Allocation of scarce resources
Use of quantitative analysis in planning
The concept of “learning curves”
The concept of “distinctive competence (capability)” - 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).
It wasn’t until the 1950’s that strategy was truly introduced in business schools as a way of analyzing the competitive environment and setting organizational goals and objectives to fit that environment.
These concepts serve as the foundation of strategic management study:
Previous “Business Policy” perspectives looked at maintaining a “balance in accord with the underlying policies of the business as a whole.” – Harvard
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.
Max Weber’s “traditional bureaucracy”- this started research on Organizational Theory, but gives us a strong example of strategy.
Weber’s (1947) description of the ideal type of bureaucracy:
Hierarchy of Authority
Division of Labor
Technically Competent Participants
Procedures for Work
Rules for Incumbents
Ansoff’s Product / Mission Matrix *Categories define the common thread in an organization’s business/corporate strategy. Market Penetration Product Development Market Development Diversification Present Product New Product Present Mission New Mission
BCG’s Growth-Share Matrix ? Bark!! Star Question Mark Cash Cow Dog High Share Low Share High Growth Slow Growth
Deliberate Strategy Forms of Strategy Realized Strategy Intended Strategy Unrealized Strategy Emergent Strategy **Normally emergent strategy comes from learning and dissemination within the organization.
To proactively shape how a company’s business will be conducted.
To mold the independent actions and decisions of managers and employees into a coordinated, company-wide game plan.
To help the organization to succeed against its competition !!
Key Attributes of Strategic Management (D&L) :
Directs the organization toward overall goals and objectives.
Involves the inclusion of multiple stakeholders in decision making.
Needs to incorporate short-term and long-term perspectives.
Recognizes tradeoffs between efficiency and effectiveness.
Strategy, Survival and Success
The ultimate goal of the organizations is to be successful – success is:
Survival (long-term success)
Achievement of Goals
Profitability (probably most important, because it determines the ability to achieve the above two)
Strategy can help achieve success, but it doesn’t guarantee it—certain features of strategy directly contribute to success:
Goals that are simple, consistent, and long-term.
Profound understanding of the competitive environment.
Objective appraisal of resources.
These observations concerning the role of strategy can be made in relation to most human endeavors be it warfare, chess, politics, sport or business.
Competition and Competitive Advantage
Competition provides the rationale for strategy – without competition, strategy is of no concern.
The essence of strategy is the interdependence of competitors—or the establishment of sustainable competitive advantage over rivals.
The study of strategy involves how we go about identifying, establishing, and sustaining competitive advantage .
Difference between competitive advantage, sustainable competitive advantage, and distinctive competency.
Will be seen in Princess Bride Video.
Competitive advantage through Life-Time customer (customer service).
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?
The Strategy Concept Key Elements
D&L Where are we now? Where do we want to go? How will we get there? Chapter 1 Analyzing Goals and Objectives Chapter 2 Analyzing the External Environment Chapter 3 Analyzing the Internal Environment Chapter 4 Assessing Intellectual Capital Chapter 5 Formulating Business-Level Strategies Chapter 7 Formulating International Strategies Chapter 6 Formulating Corporate-Level Strategies Chapter 8 Formulating Internet Strategies Chapter 9 Implementation: Strategic Controls Chapter 10 Implementation: Organization Design Chapter 11 Strategic Leadership: Excellence, Ethics, and Change Chapter 12 Strategic Leadership: Fostering Entrepreneurship Strategy Analysis Strategy Formulation Strategy Implementation Chapter 13 Case Analysis