Strategic Management Key Theories

1. Slide 12.1
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
OVERVIEW OF THE UNIT

2. Slide 12.2
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
COMMON ELEMENTS IN SUCCESSFUL
STRATEGIES
Simple,
consistent,
long-term
goals
Profound
understanding
of the
competitive
environment
Objective
appraisal of
resources
Implementation
Robert M Grant Contemporary Strategy Analysis

3. Slide 12.3
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
ANALYSING THE MAIN ELEMENTS OF THE ENVIRONMENT
Environment
Resources
Purpose
Options
Options
Options
Choice Implement

4. Slide 12.4
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Analysing the strategic environment – 1
The nine basic analytical tools
Company or
public sector
organisation
Environment
basics
Degree of
turbulence
PESTEL
analysis
Industry
life cycle
Key
factors for
success
Five
Forces
analysis
Four Links
analysis
Competitor
analysis
Customer
analysis
See: Lynch, Chapter 3

5. Slide 12.5
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
OUTSIDE IN – V – INSIDE OUT
Outside-In Perspective Inside-Out Perspective
Emphasis on Markets over resources Resources over markets
Orientation Opportunity-driven
potential)
Strength-driven (internal
potential)
Starting point Market demand and
industry structure
Resource base and
system
Fit through Adaptation to environment Adaptation of
Strategic focus Attaining advantageous
position
Attaining distinctive
resources
Strategic moves External positioning Building resource base
Tactical moves Acquiring necessary
resources
External positioning
Competitive
weapons
Bargaining power and
mobility barriers
Superior resources and
imitation barriers
5
De Wit and Meyer p 127

6. Slide 12.6
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Identifying key success factors (from Grant 2010)
6

7. Slide 12.7
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Few
customers,
few
competitors
Development Growth Shakeout Maturity Decline
Industry Life Cycle
Entry of
competitors,
fighting for
share, un-
differentiated
products.
May be
many
competitors,
seeking
volume,
shakeout of
weak
players.
Rely on repeat
purchase.
Hard to take
share
Emphasis on
efficiency (and
maybe NPD)
Drop-off in
usage
Exit of
some
competitors

8. Slide 12.9
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Threshold
Resources
•Tangible
• Intangible
Threshold
Competences
Core
Competences
Unique
Resources
• Tangible
• Intangible
Resources Competences
Threshold
capabilities
Capabilities for
competitive
advantage
STRATEGIC CAPABILITIES AND COMPETITIVE
ADVANTAGE
9
Johnson, Scholes and Whittington Corporate Strategy

9. Slide 12.10
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
PHASE 1
Incremental
Change
Environmental
Change
AMOUNT
OF
CHANGE
TIME
PHASE 2
Strategic drift
PHASE 4
Demise or
fundamental change
PHASE 3
Flux
Grinyer & Spender (1979)

10. Slide 12.11
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
STAKEHOLDER MAPPING
Power
Interest High
High
A
Minimal
Effort
B
Keep
Informed
C
Keep
Satisfied
D
Key
Players
Low
Low
(Adapted from Mendelow,

11. Slide 12.12
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009What determines the 5 forces (from Grant 2010)
12

12. Slide 12.13
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Competitive Advantage
Lower Cost Differentiation
Broad
Target
Narrow
Target
DifferentiationCost
Leadership
Cost Focus Differentiation
Focus
(Porter, 1980)
13
CompetitiveScope

13. Slide 12.14
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
14
STRATEGY FORMULATION
Increasing cost and
time to return
Increasing cost and
time to return

14. Slide 12.15
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
PRODUCT PORTFOLIO ANALYSIS

15. Slide 12.16
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
PORTFOLIO
MATRIXES
-THE BALANCE OF THE PORTFOLIO
-THE ATTRACTIVENESS OF THE
BUSINESS UNITS
-THE ‘FIT’ OF THE BUSINESS UNITS
• BCG Matrix – determines the attractiveness and balance
of a portfolio

16. Slide 12.17
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
PORTFOLIO MATRIXES
• The Directional Policy (GE-McKinsey) Matrix
17
Invest for
growth
Invest
selectively for
growth
Develop
for income
Invest
selectively and
build
Develop
selectively for
income
Harvest
or divest
Develop
selectively Harvest Divest
Industry Attractiveness
Attractive Unattractive
CompanyStrength
Strong
Weak
IS – PESTEL, Five Forces Analysis
CS – SWOT SRC

17. Slide 12.18
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
18HOW TO ADD VALUE?
(LYNCH)
• Internal Advantages
• Economies of scope
• Core competencies
• Shared activities
• External advantages
• Vertical integration
• Market power
• Competitor blocking

18. Slide 12.19
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
NON-ORGANIC OPTIONS

19. Slide 12.20
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
VERTICAL/HORIZONTAL
INTEGRATION

20. Slide 12.21
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
KEY CONSIDERATIONS
How many firms are there in the
vertically adjacent activity?
Is transaction-specific investment
needed?
Are market transactions subject to
taxes or regulations?
Are the two stages similar in terms
of the optimal scale of operation?
Are the two stages strategically
similar (KSF, common resources and
capabilities)?
If few, greater transaction costs, VI
more attractive
If yes, VI more attractive
If yes, VI can avoid them
If yes, VI could be an option
If yes, VI could be an option
How uncertain is market demand? If unpredictable, outsourcing is better
Does VI compound risk? Heavier investment needs, greater
independent risks, VI too risky
Grant (2010, P.361)

21. Slide 12.22
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
COMPARING ACQUISITIONS, ALLIANCES
AND ORGANIC DEVELOPMENT
Johnson Whittington and Scholes, 2012)

22. Slide 12.23
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
INTERNATIONALISATION DRIVERS
Figure 8.2 Drivers of internationalisation
Source: Adapted from G. Yip, Total Global Strategy II, Financial Times Prentice Hall, 2003, Chapter 2
Link to Porters
diamond........

23. Slide 12.24
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
ORGANISATIONAL STRUCTURE
© 2013 Robert M. Grant. P.156
www.contemporarystrategyanalysis.com

24. Slide 12.25
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
STRUCTURES

25. Slide 12.26
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
MCKINSEY 7-S FRAMEWORK
Figure 13.8 The McKinsey 7 Ss (Johnson et al., 2011, p. 453)

26. Slide 12.28
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
STRATEGY EVALUATION
Strategy
perspective
Example Example of scorecard measure – called a Key
Performance Indicator (KPI)
Financial
perspective
Shareholders’ views
of performance
• Return on capital
• Economic value added
• Sales growth
• Cost reduction
Customer
perspective
Customer
satisfaction
• Customer satisfaction
• Customer retention
• Acquisition of new customers
Internal
perspective
Assess quality of
people and
processes
• Manufacturing cost
• Job turnover
• Product quality
• Stock turnover and inventory management
Future
perspective
Examine how an
organisation learns
and grows
• New product development record
• R&D core competences
• Employee retention
• Employee profitability

27. Slide 12.29
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
STRATEGY EVALUATION