Slide 2.Johnson, Whittington and Scholes, Exploring Strat.docx

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Johnson, Whittington and Scholes, Exploring Strategy, 9th
Edition, © Pearson Education Limited 2011
Slide 11.*
Part III:
Strategy in Action
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Update slide – 9th edition and new title
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The focus of part 3:
strategy in action Criteria and techniques that can be used to
evaluate possible strategic options.How strategies develop in
organisations; the processes that may give rise to intended
strategies or to emergent strategies.The way in which
organisational structures and systems of control are important in
organising for strategic success.The leadership and management
of strategic change.Who strategists are and what they do in
practice.
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Strategy in Action
11: Evaluating Strategies
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Update slide – 9th edition and new title
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Learning outcomesEmploy three success criteria for evaluating
strategic options:
– Suitability: whether a strategy addresses the key issues
relating to the opportunities and constraints an organisation
faces.
– Acceptability: whether a strategy meets the expectations
of stakeholders.
– Feasibility: whether a strategy could work in
practice.For each of these use a range of different techniques
for evaluating strategic options, both financial and non-
financial.
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The SAFe criteria
Table 11.1 The SAFe criteria and techniques of evaluation
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Suitability
Suitability is concerned with assessing which proposed
strategies address the key opportunities & constraints an
organisation faces, through an understanding of the strategic
position of an organisation.
It is concerned with the overall rationale of the strategy: Does it
exploit the opportunities in the environment and avoid the
threats? Does it capitalise on the organisation’s strengths and
strategic capabilities and avoid or remedy the weaknesses?
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Suitability of strategic options in relation to strategic position
(1)
Table 11.2 Suitability of strategic options in relation to
strategic position
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Suitability of strategic options in relation to strategic position
(2)
Table 11.2 Suitability of strategic options in relation to
strategic position (Continued)
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Some examples of suitability (1)
Table 11.3 Some examples of suitability
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Some examples of suitability (2)
Table 11.3 Some examples of suitability (Continued)
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Suitability – screening techniques
There are several useful techniques:
Ranking.
Using scenarios.
Screening for competitive advantage.
Decision trees.
Life cycle analysis.
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The life cycle/portfolio matrix
Table 11.5 The industry life cycle/portfolio matrix

Source: Arthur D. Little
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Competitive position within an industry
Competitive position within an industry can be:A dominant
position which is rare in the private sector unless there is a
quasi-monopoly position. In the public sector there can be a
legalised monopoly status.A strong position where organisations
can follow strategies of their own choice without too much
concern for competition.A favourable position where no single
competitor stands out, but leaders are better placed.A tenable
position can be maintained by specialisation or focus.A weak
position where competitors are too small to survive
independently in the long run.
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Acceptability (1)
Acceptability is concerned with whether the expected
performance outcomes of a proposed strategy meet the
expectations of stakeholders.

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Acceptability (2)
There are three key aspects of acceptability - the ‘3 R’s’:
Risk. Return. Reactions (of stakeholders).
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RiskRisk concerns the extent to which the outcomes of a
strategy can be predicted.
Risk can be assessed using:
Sensitivity analysis.
Financial ratios – e.g. gearing and liquidity.
Break-even analysis.
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Sensitivity analysis
Illustration 11.3 A
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Sensitivity analysis (Continued)
Illustration 11.3 B
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Sensitivity analysis (Continued)
Illustration 11.3 C
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ReturnReturns are the financial benefits which stakeholders are
expected to receive from a strategy.Different approaches to
assessing return:
Financial analysis.
Shareholder value analysis.
Cost–benefit analysis.
Real options.
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Real options evaluation
Illustration 11.6
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Assessing profitability (1)
Figure 11.1 Assessing profitability

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Figure 11.1 Assessing profitability (Continued)
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Figure 11.1 Assessing profitability (Continued)
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Measures of shareholder value
Table 11.6 Measures of shareholder value

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Advantages of real options
There are four main benefits:
Bringing strategic and financial evaluation closer
together.
Valuing emerging options.
Coping with uncertainty.
Offsetting conservatism.
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Reaction of stakeholdersStakeholder mapping and the
power/interest matrix can be used to:
understand the political context of strategies.
understand the political agenda.
gauge the likely reaction of stakeholders to specific
strategies.
If key stakeholders find a strategy to be unacceptable then it is
likely to fail

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Feasibility
Feasibility is concerned with whether a strategy could
work in practice i.e. whether an organisation has the capabilities
to deliver a strategy
Two key questions: Do the resources and competences
currently exist to implement the strategy effectively? If not,
can they be obtained?
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Financial feasibility
Need to consider:
The funding required.
Cash flow analysis and forecasting.
Financial strategies needed for the different ‘phases’ of the life
cycle of a business.
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Financial strategy and the business life cycle
Table 11.7 Financial strategy and the business life cycle
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People and skills (1)
Three questions arise: Do people in the organisation currently
have the competences to deliver a proposed strategy? Are the
systems to support those people fit for the strategy? If not, can
the competences be obtained or developed?
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People and skills (2)
Critical issues that need to be considered:
Work organisation – will this need to change?
Rewards – are the incentives appropriate?
Relationships – will people interact differently?

Training and development – are current systems appropriate?
Staffing – are the levels and skills of the staff appropriate?
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Integrating resourcesThe success of a strategy depends on the
management of many resource areas, for example:
people,
finance,
physical resources,
information,
technology and
resources provided by suppliers and partners.It is essential to
integrate resources – inside the organisation and in the wider
value network.
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Evaluation criteria
Four qualifications:
Conflicting conclusions and the need for management
judgement.

Consistency between the different elements of a strategy is
essential.
The implementation and development of strategies might reveal
unanticipated problems.
Strategy development in practice – it isn’t always a logical or
even rational process.
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SummaryProposed strategies may be evaluated using the three
SAFe criteria:
Suitability is concerned with assessing which proposed
strategies address the key opportunities and constraints an
organisation faces. It is about the rationale of a strategy.
The acceptability of a strategy relates to three issues: the level
of risk of a strategy, the expected return from a strategy and the
likely reaction of stakeholders.
Feasibility is concerned with whether an organisation has or can
obtain the capabilities to deliver a strategy.
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Narrative:
For the past several weeks, we’ve spoken about and practiced a
little of what a strategic public relations leader does. This

week’s discussion and reading (chapter 9) takes a little different
focus. On page 98 of your text, the summary begins with,
“What this chapter has sought to demonstrate is that having
superior knowledge and consummate skill is not enough to be a
public relations leader.”
I’ve often wondered what would happen if I fell asleep for 50
years, woke up and went to a meeting of “PR professionals.” I
bet they still would be complaining about how they can’t get
any respect from their organization and leadership. My
perspective is that I’ve been in PR for 45 years and the question
hasn’t changed.
Why not?
Perhaps it’s because those people haven’t read the text. Or, that
they are operating at a tactics level rather than an organizational
leadership level. We tend to get the respect we’ve earned.
Go to page 87 of your text (bottom of the page) … “there are
four other factors that gain respect and organizational
influence” your books speaks about to help prepare senior
professionals for higher-level roles. I also like the Danny Moss
model of a senior public relations manager:
Monitor and advisor
Key policy and strategy adviser
Issues management expert
Troubleshooting/problem solver.
I could add more lists that your book has related to senior
leaders. And when I think about this, the senior public relations
leader needs to have a lot of organizational (both internal and
external) knowledge – almost the same as the chief executive.
And perhaps if we operated at that level, there would be more
PR leaders in the “front corner.”

Can you do a pro forma income statement for public relations?
I bet the marketing leaders can. Do you know and can you
articulate the legal implications of your media statement? And
so on. Aware of policies and their imact?
For the past several weeks, I’ve given you projects/papers to
position you in an organizational leadership position. You’ve
thought at a higher public relations level. You’ve responded
well. Environmental scans. Codes of conduct. Ethics
statements. Mission statements. Even job descriptions. You
can do all of these leadership things.
The Assignment
While I realize that we may not be able to begin at the level
I’ve discussed – we have to pay our dues - that doesn’t stop us
from thinking about what kind of a leader we would be. Or, if
we had a choice, for what kind of a leader we would want to
work. Certainly public relations knowledge would be part of
the equation, but what else? Your book talks about how good
practitioners may not be good senior leaders. Just what makes a
good senior leader? Think about this. It just might be a bit
aspirational. And that’s okay.
Finally, I’m reminded of my former job in telecommunications
where we would promote a good craftsperson into management.
We didn’t always get a good first -level supervisor but we
always lost a good craftsperson. Why is one person a good
technician but not a good leader?
Give me a few pages on what kind of person you want to lead
and work for in the public relation department. Tell me why.
And, if you have examples, great. Keep in mind hat PR is only
part of the equation.
Good luck

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Slide 6.*
Part II:
Strategic Choices
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Slide 6.*
The focus of part 2:
strategic choicesHow organisations relate to competitors in
terms of their competitive business strategies.How broad and
diverse organisations should be in terms of their corporate
portfolios.How far organisations should extend themselves
internationally.How organisations are creative and
innovative.How organisations pursue strategies through organic
development, acquisitions or strategic alliances.
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Strategic choices
Figure II.i Strategic choices
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Slide 6.*
Strategic Choices
6: Business Strategy
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Update – 9th edition and new title (Exploring Strategy) and
chapter title (Business Strategy)
Slide 6.*
Learning outcomes Identify strategic business units (SBUs) in
organisations.Assess business strategy in terms of the generic

strategies of cost leadership, differentiation and focus.Identify
business strategies suited to hypercompetitive conditions.Assess
the benefits of cooperation in business strategy.Apply principles
of game theory to business strategy.
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Business strategy
Figure 6.1 Business strategy
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Strategic business units (SBUs)
A strategic business unit (SBU) supplies
goods or services for a distinct domain of activity.A small
business has just one SBU.A large diversified corporation is
made up of multiple businesses (SBUs).SBUs can be called
‘divisions’ or ‘profit centres’SBUs can be identified by:Market
based criteria (similar customers, channels and
competitors).Capability based criteria (similar strategic
capabilities).

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The purpose of SBUsTo decentralise initiative to smaller units
within the corporation so SBUs can pursue their own distinct
strategy.To allow large corporations to vary their business
strategies according to the different needs of external
markets.To encourage accountability – each SBU can be held
responsible for its own costs, revenues and profits.
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Generic strategies Porter introduced the term ‘Generic Strategy’
to mean basic types of competitive strategy that hold across
many kinds of business situations.Competitive strategy is
concerned with how a strategic business unit achieves
competitive advantage in its domain of activity.Competitive
advantage is about how an SBU creates value for its users both
greater than the costs of supplying them and superior to that of
rival SBUs.

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Three generic strategies
Figure 6.2 Three generic strategies
Source: Adapted with the permission of The Free Press, a
Division of Simon & Schuster, Inc., from Competitive
Advantage: Creating and Sustaining Superior Performance
by Michael E. Porter. Copyright © 1985, 1998 by Michael E.
Porter. All rights reserved
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Cost-leadership
Cost-leadership strategy involves becoming the lowest-cost
organisation in a domain of activity.
Four key cost drivers that can help deliver cost leadership:
Lower input costs. Economies of scale. Experience.
Product process and design.
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Economies of scale and the experience curve
Figure 6.3 Economies of scale and the experience curve
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Costs, prices and profits for generic strategies
Figure 6.4 Costs, prices and profits for generic strategies
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Differentiation strategies
Differentiation involves uniqueness along some dimension that
is sufficiently valued by customers to allow a price premium.
Two key issues: The strategic customer on whose needs the
differentiation is based. Key competitors – who are the
rivals and who may become a rival.

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Differentiation in the US airline industry
Figure 6.5 Mapping differentiation in the US airline industry
Source: Simplified from Figure 1, in D. Gursoy, M. Chen and H.
Kim (2005), ‘The US airlines relative positioning’, Tourism
Management, 26, 5, 57–67: p. 62
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Focus strategies (1)
A focus strategy targets a narrow segment of domain of an
activity and tailors its products or services to the needs of that
specific segment to the exclusion of others.
Two types of focus strategy: cost-focus strategy (e.g.
Ryanair). differentiation focus strategy (e.g. Ecover).
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Focus strategies (2)
Successful focus strategies depend on at least one of three key
factors:
Distinct segment needs. Distinct segment value chains.
Viable segment economics.
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‘Stuck in the middle’?
Porter’s argues:It is best to choose which generic strategy to
adopt and then stick rigorously to it. Failure to do this leads to a
danger of being ‘stuck in the middle’ i.e. doing no strategy
well.The argument for pure generic strategies is controversial.
Even Porter acknowledges that the strategies can be combined
(e.g. if being unique costs nothing).
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Combining generic strategiesA company can create separate
strategic business units each pursuing different generic
strategies and with different cost structures.Technological or
managerial innovations where both cost efficiency and quality
are improved.Competitive failures – if rivals are similarly
‘stuck in the middle’ or if there is no significant competition
then ‘middle’ strategies may be OK.
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Strategy clock
Figure 6.6 The Strategy Clock
Source: Adapted from D. Faulkner and C. Bowman, The
Essence of Competitive Strategy, Prentice Hall, 1995
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Strategy clock - differentiationStrategies in this zone seeks to
provide products that offer benefits that differ from those
offered by competitors.A range of alternative strategies from:
differentiation without price premium (12 o’clock) – used to
increase market share.

differentiation with price premium (1 o’clock) – used to
increase profit margins.
focused differentiation (2 o’clock) – used for customers that
demand top quality and will pay a big premium.
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Strategy clock – low price
Low price combined with:
low perceived product benefits focusing on price sensitive
market segments – a ‘no frills’ strategy typified by low cost
airlines like Ryanair.
lower price than competitors while offering similar product
benefits – aimed at increasing market share typified by Asda
/Walmart in grocery retailing.
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Strategy clock - hybridSeeks to simultaneously achieve
differentiation and low price relative to competitors.Hybrid
strategies can be used:
to enter markets and build position quickly.

as an aggressive attempt to win market share.
to build volume sales and gain from mass production.
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Strategy clock – non-competitiveIncreased prices without
increasing service/product benefits.In competitive markets such
strategies will be doomed to failure.Only feasible where there is
strategic ‘lock-in’ or a near monopoly position.
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Strategic lock-in Strategic lock-in is where users become
dependent on a supplier and are unable to use another supplier
without substantial switching costs.Lock-in can be achieved in
two main ways:
Controlling complementary products or services. E.g. Cheap
razors that only work with one type of blade.
Creating a proprietary industry standard. E.g. Microsoft with its
Windows operating system.

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Establishing strategic lock-in
Size or market
dominance
First-mover
dominance
Self-reinforcing
commitment
Insistence on
preservation
of position
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HypercompetitionHypercompetition describes markets with
continuous disequilibrium and change e.g. popular music or
consumer electronics.Successful hypercompetition demands
speed and initiative rather than defensiveness.
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Interactive price and quality strategies
Figure 6.7 Interactive price and quality strategies
Division of Simon & Schuster, Inc., from Hypercompetition:
Managing the Dynamics of Strategic Manoeuvring by Richard
D’Aveni with Robert Gunther. Copyright © 1994 by Richard
D’Aveni. All rights reserved
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Interactive strategies in hypercompetitionFour key principles:
Cannibalise bases of success.
A series of small moves rather than big moves.
Be unpredictable.
Mislead the competition.
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Cooperating with rivals
Figure 6.9 Cooperating with rivals
Division of Simon & Schuster, Inc. from Competitive Strategy:
Techniques for Analyzing Industries and Competitors by
Michael E. Porter. Copyright © 1980, 1998 by The Free Press.
All rights reserved
Supplier
Buyer
Rival C
Rival B
Rival A
Entrant
Substitute
Increased supplier
power
Standardisation benefits
Improved costs or benefits
reduces substitution threat Increased
purchasing
power
Standardisation
benefits

Improved costs or benefits
reduces entry threat Coordinated retaliation
Improved
competitiveness
Industry
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Game theory
Game theory encourages an organisation to consider
competitors’ likely moves and the implications of these moves
for its own strategy.
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Prisoner’s dilemma
Figure 6.10 Prisoner’s dilemma game in aircraft manufacture
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Lessons from game theoryGame theory encourages managers to
consider how a ‘game’ can be transformed from ‘lose–lose’
competition to ‘win–win’ cooperation. Four principles:
Ensure repetition.
Signalling.
Deterrence.
Commitment.
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Summary (1)Business strategy is concerned with seeking
competitive advantage in markets at the business rather than
corporate level.Business strategy needs to be considered and
defined in terms of strategic business units (SBUs).Different
generic strategies can be defined in terms of cost-leadership,
differentiation and focus.Managers need to consider how
business strategies can be sustained through strategic

capabilities and/or the ability to achieve a ‘lock-in’ position
with buyers.
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Summary (2)In hypercompetitive conditions sustainable
competitive advantage is difficult to achieve. Competitors need
to be able to cannibalise, make small moves, be unpredictable
and mislead their rivals.Cooperative strategies may offer
alternatives to competitive strategies or may run in
parallel.Game theory encourages managers to get in the mind of
competitors and think forwards and reason backwards.
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Slide 4.*
The Strategic Position
4: Strategic Purpose

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Update
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Learning outcomesConsider appropriate ways to express the
strategic purpose of
an organisation in terms of statements of purpose, values,
vision, mission or objectives.Identify the components of
the governance chain of an
organisation.Understand differences in governance
structures and the
advantages and disadvantages of these.Identify differences
in the corporate responsibility stances taken
by organisations and how ethical issues relate to strategic
purpose.Undertake stakeholder analysis as a means of
identifying the
influence of different stakeholder groups in terms of their
power and interest.
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Influences on strategic purpose
Figure 4.1 Influences on strategic purpose

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Who are the stakeholders?
Stakeholders are those individuals or groups who depend on an
organisation to fulfil their own goals and on whom, in turn, the
organisation depends.
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Mission statementsA mission statement aims to provide
employees and stakeholders with clarity about the overriding
purpose of the organisationA mission statement should answer
the questions:
‘What business are we in?’
‘How do we make a difference?’
‘Why do we do this?’
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Vision statementsA vision statement is concerned with the
desired future state of the organisation; an aspiration that will
enthuse, gain commitment and stretch performance.
A vision statement should answer the question :
‘What do we want to achieve?’
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Statement of corporate valuesA statement of corporate values
should communicate the underlying and enduring core
‘principles’ that guide an organisation’s strategy and define the
way that the organisation should operate.Such core values
should remain intact whatever the circumstances and constraints
faced by the organisation.
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ObjectivesObjectives are statements of specific outcomes that

are to be achieved.Objectives are frequently expressed in:
financial terms (e.g. desired profit levels)
market terms (e.g. desired market share)
and increasingly
social terms (e.g. corporate social
responsibility targets)
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Issues in setting objectivesDo objectives need to be specific and
quantified targets?The need to identify core objectives that are
crucial for survival.The need for a hierarchy of objectives that
cascade down the organisation and define specific objectives at
each level.
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Corporate governance
Corporate governance is concerned with the structures and
systems of control by which managers are held accountable to
those who have a legitimate stake in an organisation.

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The growing importance of governanceThe separation of
ownership and management control – defining different roles in
governance.Corporate failures and scandals (e.g. Enron) –
focussing attention on governance issues.Increased
accountability to wider stakeholder interests and the need for
corporate social responsibility (e.g. green issues).
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The governance chain
Figure 4.2 The chain of corporate governance: typical reporting
structures
Source: Adapted from David Pitt-Watson, Hermes Fund
Management
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The principal-agent modelGovernance can be seen in terms of
the principal agent modelPrincipals pay agents to act on their
behalf (e.g. beneficiaries/trustees pay investment managers to
manage funds, Boards of Directors pay executives to run a
company).Agents may act in their own self interest.
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Issues in governance (1)The key challenge is to align the
interests of agents with those of the principals.Misalignment of
incentives and control – e.g. beneficiaries may require long
term growth but executives may be seeking short term profit.
Responsibility to whom – should executives pursue solely
shareholder aims or serve a wider constituency of stakeholders?
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Issues in governance (2)Who are the shareholders – should

boards respond to the demands of institutional investment
managers or the needs of the ultimate beneficiaries?The role of
institutional investors – should they actively intervene in
strategy?Establishing the specific role of the board – in
particular the role of non-executive directors.Scrutiny and
control – statutory requirements and voluntary codes to regulate
boards.
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Different governance systems
Table 4.1 Benefits and disadvantages of governance systems
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The role of boardsOperate ‘independently’ of the
management – the role of non-executives is crucial.Be
competent to scrutinise the activities of managers.Have time to
do their job properly.Behave appropriately given expectations
for trust, role fluidity, collective responsibility, and
performance.

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Corporate social responsibility
Corporate social responsibility (CSR) is the commitment
by organisations to ‘behave ethically and contribute to
economic development while improving the quality of life of
the workforce and their families as well as the local community
and society at large’.1
1 World Business Council for Sustainable Development.
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Corporate social responsibility stances
Table 4.2 Corporate social responsibility stances
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Questions of corporate social responsibility – internal aspects
(1)
Table 4.3 Some questions of corporate social responsibility
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Questions of corporate social responsibility – external aspects
(2)
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Table 4.3 Some questions of corporate social responsibility
(Continued)
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The ethics of individuals and managers
Ethical issues have to be faced at the individual level : The
responsibility of an individual who believes that the strategy
of the organisation is unethical – resign, ignore it or take
action. ‘Whistle-blowing’ - divulging information to the

authorities or media about an organisation if wrong doing
is suspected.
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Texas instruments’ guidelinesIs the action legal? . . . If no, stop
immediately.Does it comply with our values? . . . If it does not,
stop.If you do it would you feel bad? . . . Ask your own
conscience if you can live with it.How would this look in the
newspaper? . . . Ask if this goes public tomorrow would you do
it today?If you know it’s wrong . . . don’t do it.If you are not
sure . . . ask; and keep asking until you get an answer.
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Stakeholders of a large organisation
Figure 4.3 Stakeholders of a large organisation
Source: Adapted from R.E. Freeman, Strategic Management: A
Stakeholder Approach, Pitman, 1984. Copyright 1984 by R.
Edward Freeman.

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Stakeholder conflicts of expectations
Table 4.4 Some common conflicts of expectations
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Stakeholder mapping
Stakeholder mapping identifies stakeholder expectations
and power and helps in understanding political priorities.
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Stakeholder mapping: the power/interest matrix
Figure 4.4 Stakeholder mapping: the power/interest matrix
Source: Adapted from A. Mendelow, Proceedings of the Second

International Conference on Information Systems, Cambridge,
MA, 1986
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Stakeholder mapping issuesDetermining purpose and strategy –
whose expectations need to be prioritised?Do the actual levels
of interest and power reflect the corporate governance
framework?Who are the key blockers and facilitators of
strategy?Is it desirable to try to reposition certain
stakeholders?Can the level of interest or power of key
stakeholders be maintained?Will stakeholder positions shift
according to the issue/strategy being considered.
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Power
Power is the ability of individuals or groups to persuade,
induce or coerce others into following certain courses of action.

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Sources of power
Table 4.5 Sources and indicators of power
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Indicators of power
Table 4.5 Sources and indicators of power (Continued)
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Summary (1)An important managerial task is to decide how the
organisation should express its strategic purpose through
statements of mission, vision, values or objectives.The purpose
of an organisation will be influenced by the expectations of its
stakeholders.The influence of some key stakeholders is

represented formally within the governance structure of an
organisation. This can be represented in terms of a governance
chain, showing the links between ultimate beneficiaries and the
managers of an organisation.
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Summary (2)There are two generic governance structures
systems: the shareholder model and the stakeholder model
though there are variations of these
internationally.Organisations adopt different stances on
corporate social responsibility depending on how they perceive
their role in society. Individual managers may face ethical
dilemmas relating to the purpose of their organisation or actions
it takes.Different stakeholders exercise different influence on
organisational purpose and strategy, dependent on the extent of
their power and interest. Managers can assess the influence of
different stakeholder groups through stakeholder analysis.
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Slide 3.*

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3: Strategic Capabilities
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Update slide – change to 9th edition and title to Exploring
Strategy
Slide 3.*
Learning outcomesIdentify what comprises strategic capabilities
in terms of
organisational resources and competences and how these
relate to the strategies of organisations.Analyse how
strategic capabilities might provide sustainable competitive
advantage on the basis of their value, rarity, inimitability and
non-substitutability (VRIN). Diagnose strategic capability by
means of benchmarking, value chain analysis, activity mapping
and SWOT analysis.Consider how managers can develop
strategic capabilities for their organisations.
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Slide 3.*
Strategic capabilities: the key issues
Figure 3.1 Strategic capabilities: the key issues

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Slide 3.*
Resource-based strategy
The resource-based view (RBV) of strategy asserts that the
competitive advantage and superior performance of an
organisation is explained by the distinctiveness of its
capabilities.
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Slide 3.*
Resources and competencesResources are the assets that
organisations have or can call upon (e.g. from partners or
suppliers),that is, ‘what we have’ .Competences are the ways
those assets are used or deployed effectively, that is, what we
do well’.
*
Slide 3.*

Components of strategic capabilities
Table 3.1 Components of strategic capabilities
*
Slide 3.*
Redundant capabilitiesCapabilities, however effective in the
past, can become less relevant as industries evolve and
change.Such ‘capabilities’ can become ‘rigidities’ that inhibit
change and become a weakness.
*
Slide 3.*
Dynamic capabilities
Dynamic capability is the ability of an organisation to
renew and recreate its strategic capabilities to meet the needs of
changing environments.
*
Slide 3.*

Threshold and distinctive
capabilities (1)Threshold capabilities are those needed for an
organisation to meet the necessary requirements to compete in a
given market and achieve parity with competitors in that market
– ‘qualifiers’.Distinctive capabilities are those that critically
underpin competitive advantage and that others cannot imitate
or obtain – ‘winners’.
*
Slide 3.*
Threshold and distinctive capabilities
Table 3.2 Threshold and distinctive capabilities
*
Slide 3.*
Core competences
Core competences1 are the linked set of skills, activities
and resources that, together:deliver customer valuedifferentiate
a business from its competitorspotentially, can be extended and
developed as markets change or new opportunities arise.

1G. Hamel and C.K. Prahalad, ‘The core competence of the
corporation’, Harvard Business Review, vol. 68, no. 3 (1990),
pp. 79–91.
*
Slide 3.*
Strategic capabilities and
competitive advantage
The four key criteria by which capabilities can be assessed
in terms of providing a basis for achieving sustainable
competitive advantage are: value, rarity, inimitability and
non-substitutability
1 Jay Barney: ‘Firm resources and sustained competitive
advantage’, Journal of Management, vol. 17 (1991), no. 1,
pp. 99–120.
VRIN1
*
Slide 3.*

VRIN (1)
V – Value of strategic capabilities
Strategic capabilities are of value when they: take advantage of
opportunities and neutralise threats, provide value to
customers provide potential competitive advantage at a cost that
allows an organisation to realise acceptable levels of return
*
Slide 3.*
VRIN (2)
R – RarityRare capabilities are those possessed uniquely by one
organisation or by a few others only. (E.g. a company may have
patented products, have supremely talented people or a powerful
brand.)Rarity could be temporary.
(Eg: Patents expire, key individuals can leave or brands
can be de-valued by adverse publicity.)
*
Slide 3.*
VRIN (3)
I – Inimitability
Inimitable capabilities are those that competitors find difficult
to imitate or obtain. Competitive advantage can be built on

unique resources (a key individual or IT system) but these
may not be sustainable (key people leave or others acquire the
same systems). Sustainable advantage is more often found in
competences (the way resources are managed,
developed and deployed) and the way competences are linked
together and integrated.
*
Slide 3.*
Criteria for the inimitability of strategic capabilities
Figure 3.2 Criteria for the inimitability of strategic capabilities
*
Slide 3.*
VRIN (4)
N - Non-substitutability
Competitive advantage may not be sustainable if there is a
threat of substitution.Product or service substitution from a
different industry/market. For example, postal services partly
substituted by e-mail.Competence substitution. For example, a
skill substituted by expert systems or IT solutions
*

*
Criteria for the inimitability of strategic capabilities
Figure 3.3 VRIN
*
Slide 3.*
Organisational knowledge
Organisational knowledge is the collective intelligence,
specific to an organisation, accumulated through both formal
systems and the shared experience of people in that
organisation.
Some of this knowledge is ‘Tacit’ knowledge that is, more
personal, context-specific and hard to formalise and
communicate – so it is difficult to imitate, for example, the
knowledge and relationships in a top R&D team.
*
Slide 3.*

Benchmarking
Benchmarking is a means of understanding how an
organisation compares with others – typically competitors.
Two approaches to benchmarking:Industry/sector
benchmarking - comparing performance against other
organisations in the same industry/sector against a set of
performance indicators.Best-in-class benchmarking - comparing
an organisation’s performance or capabilities against ‘best-in-
class’ performance – wherever that is found even in a very
different industry. (E.g. BA benchmarked its refuelling
operations against Formula 1).
*
Slide 3.*
The value chainThe value chain describes the categories of
activities within an organisation which, together, create a
product or service.The value chain invites the strategist to think
of an organisation in terms of sets of activities – sources of
competitive advantage can be analysed in any or all of these
activities.
*
Slide 3.*
VRIN summary

Figure 3.4 The value chain within an organisation
*
Slide 3.*
The value networkThe value network comprises the set of inter-
organisational links and relationships that are necessary to
create a product or service.Competitive advantage can be
derived from linkages within the value network.
*
Slide 3.*
The value network
Figure 3.5 The value network

*
Slide 3.*
Uses of the value chainA generic description of activities –
understanding the discrete activities and how they both
contribute to consumer benefit and how they add to
cost.Identifying activities where the organisation has particular
strengths or weaknessesAnalysing the competitive position of
the organisation using the VRIN criteria – thus identifying
sources of sustainable advantage.Looking for ways to enhance
value or decrease cost in value activities (e.g. outsourcing)
*
Slide 3.*
Uses of the value networkUnderstanding cost/price structures
across the value network – analysing the best area of focus and
the best business model .Identifying ‘profit pools’ within the
value network and seek to exploit these.The ‘make or buy’
decision: deciding which activities to do ‘in-house’ and which
to outsource.Partnering and relationships – deciding who to
work with and the nature of these relationships.
*

*
Mapping activity systems (1)Identify ‘higher order strategic
themes’ that is, how the organisation meets the critical success
factors in the market.Identify the clusters of activities that
underpin these themes and how they fit together.Map this in
terms of how activity systems are interrelated.
*
Slide 3.*
Mapping activity systems (2)
Illustration 3.5 Activity systems at Geelmuyden.Kiese
*
Slide 3.*
Using activity system mapsA means of identifying strategic
capabilities in terms of linkages of activitiesInternal and
external links are identified (e.g. in terms of the needs of
customers).Therefore helps identify bases of competitive
advantage.And sustainable advantage for example, in terms of
bases of inimitability.

*
Slide 3.*
SWOT analysis
SWOT summarises the strengths, weaknesses,
opportunities and threats likely to impact on strategy
development.
INTERNAL STRENGTHS WEAKNESSES
ANAYSIS
EXTERNAL OPPORTUNITIES THREATS
ANALYSIS
*
Slide 3.*
Uses of SWOT analysisKey environmental impacts are
identified using the analytical tools explained in Chapter
2.Major strengths and weaknesses are identified using the
analytic tools explained in Chapter 3.Scoring (e.g. + 5 to - 5)
can be used to assess the interrelationship between
environmental impacts and the strengths and weaknesses.SWOT
can be used to examine strengths, weaknesses, opportunities and
threats in relation to competitors.SWOT can be used to generate

strategic options– using a TOWS matrix.
*
Slide 3.*
The TOWS matrix
Figure 3.6 The TOWS matrix
*
Slide 3.*
Dangers in a SWOT analysisLong lists with no attempt at
prioritisation.Over generalisation – sweeping statements often
based on biased and unsupported opinions.SWOT is used as a
substitute for analysis – it should result from detailed analysis
using the frameworks in Chapters 2 and 3.SWOT is not used to
guide strategy – it is seen as an end in itself.
*
Slide 3.*

Developing strategic capabilities (1)
Internal capability development:Leveraging capabilities –
identifying capabilities in one part of the organisation and
transferring them to other parts (sharing best practice).
Stretching capabilities - building new products or services out
of existing capabilities.
*
Slide 3.*
Developing strategic capabilities (2)External capability
development – adding capabilities through mergers, acquisitions
or alliances.Ceasing activities – non-core activities can be
stopped, outsourced or reduced in cost.Monitor outputs and
benefits – to understand sources of consumer benefit and
enhance anything that contributes to this.Managing the
capabilities of people – training, development and organisation
learning.
*
Slide 3.*
Chapter summary (1)Strategic capabilities comprise both
resources and competences.The concept of dynamic capabilities
highlights that strategic capabilities need to change as the
market and environmental context of an organisation

changes.Sustainability of competitive advantage is likely to
depend on an organisation’s capabilities being of at least
threshold value in a market but also being valuable, relatively
rare, intimable and non-substitutable.
*
Slide 3.*
Chapter summary (2)
Ways of diagnosing organisational capabilities include:
Benchmarking as a means of understanding the relative
performance of organisations. Analysing an organisation’s
value chain and value network as a basis for understanding
how value to a customer is created and can be developed.
Activity mapping as a means of identifying more
detailed activities which underpin strategic capabilities.
SWOT analysis as a way of drawing together an
understanding of strengths, weaknesses, opportunities and
threats an organisation faces.
*
*
Update slide – change to 9th edition and title to Exploring
Strategy
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Slide 2.*

Slide 2.*
Part I:
*
Change to 9th Edition and change title to Exploring Strategy.
Update design
Slide 2.*
The Focus of part 1:
The strategic position
How to analyse an organisation’s position in the external
environment.
How to analyse the determinants of strategic capability –
resources, competences and the linkages between them.
How to understand an organisation’s purposes, taking into
account corporate governance, stakeholder expectations and
business ethics.
How to address the role of history and culture in determining an
organisation’s position.
*
*

*
Slide 2.*
2: The Environment
*
Update: Change to 9th edition and title to Exploring Strategy
Slide 2.*
Learning outcomes (1)
Analyse the broad macro-environment of organisations in terms
of political, economic, social, technological, environmental
(‘green’) and legal factors (PESTEL).
Identify key drivers in this macro-environment and use these
key drivers to construct alternative scenarios with regard to
environmental change.
*
Slide 2.*

Learning outcomes (2)
Use Porter’s five forces analysis in order to define the
attractiveness of industries and sectors and to identify their
potential for change.
Identify successful strategic groups, valuable market segments
and attractive ‘Blue Oceans’ within industries.
Use these various concepts and techniques in order to recognise
threats and opportunities in the marketplace.
*
Slide 2.*
Layers of the business environment
Figure 2.1 Layers of the business environment
*
Slide 2.*
The PESTEL framework (1)
The PESTEL framework categorises environmental
influences into six main types:
political, economic,
social, technological,

environmental legal
Thus PESTEL provides a comprehensive list of influences
on the possible success or failure of particular strategies.
*
Slide 2.*
Political Factors: For example, Government policies, taxation
changes, foreign trade regulations, political risk in foreign
markets, changes in trade blocks (EU).
Economic Factors: For example, business cycles, interest rates,
personal disposable income, exchange rates, unemployment
rates, GDP trends.
Socio-cultural Factors: For example, population changes,
income distribution, lifestyle changes, consumerism, changes in
culture and fashion.
*
Slide 2.*

Technological Factors: For example, new discoveries and
technology developments, ICT innovations, rates of
obsolescence, increased spending on R&D.
Environmental (‘Green’) Factors: For example, environmental
protection regulations, energy consumption, global warming,
waste disposal and re-cycling.
Legal Factors: For example, competition laws, health and
safety laws, employment laws, licensing laws, IPR laws.
*
Slide 2.*
Key drivers of change
Key drivers for change:
The environmental factors likely to have a high impact on the
success or failure of strategy.
For example, the birth rate is a key driver for those planning
nursery education provision in the public sector.
Typically key drivers vary by industry or sector.
*
Slide 2.*

Using the PESTEL framework
Apply selectively –identify specific factors which impact on the
industry, market and organisation in question.
Identify factors which are important currently but also consider
which will become more important in the next few years.
Use data to support the points and analyse trends using up to
date information
Identify opportunities and threats – the main point of the
exercise!
*
Slide 2.*
Scenarios
Scenarios are detailed and plausible views of how the
environment of an organisation might develop in the future
based on key drivers of change about which there is a high level
of uncertainty.
Build on PESTEL analysis .
Do not offer a single forecast of how the environment
will change.
An organisation should develop a few alternative
scenarios (2–4) to analyse future strategic options.
*

*
Carrying out scenario analysis (1)
Identify the most relevant scope of the study – the relevant
product/market and time span.
Identify key drivers of change – PESTEL factors that have the
most impact in the future but have uncertain outcomes.
For each key driver select opposing outcomes where each leads
to very different consequences.
*
Slide 2.*
Carrying out scenario analysis (2)
Develop scenario ‘stories’ - That is, coherent and plausible
descriptions of the environment that result from opposing
outcomes
Identify the impact of each scenario on the organisation and
evaluate future strategies in the light of the anticipated
scenarios.
Scenario analysis is used in industries with long planning
horizons for example, the oil industry or airlines.
*

*
Scenarios for the global financial system, 2020
Illustration 2.2
*
Slide 2.*
Industries, markets and sectors
An industry is a group of firms producing products and
services that are essentially the same. For example, automobile
industry and airline industry.
A market is a group of customers for specific products or
services that are essentially the same (e.g. the market for luxury
cars in Germany).
A sector is a broad industry group (or a group of markets)
especially in the public sector (e.g. the health sector)
*
Slide 2.*

Porter’s five forces framework
Porter’s five forces framework helps identify the attractiveness
of an industry in terms of five competitive forces:
the threat of entry,
the threat of substitutes,
the bargaining power of buyers,
the bargaining power of suppliers and
the extent of rivalry between competitors.
The five forces constitute an industry’s ‘structure’.
*
Slide 2.*
Division of Simon & Schuster Adult Publishing Group, from
Competitive Strategy: Techniques for Analyzing Industries and
Competitors by Michael E. Porter. Copyright © 1980, 1998 by
The Free Press. All rights reserved
The five forces framework (1)
Figure 2.2 The five forces framework
*
Slide 2.*

The Threat of Entry & Barriers to Entry
The threat of entry is low when the barriers to entry are high
and vice versa.
The main barriers to entry are:
Economies of scale/high fixed costs
Experience and learning
Access to supply and distribution channels
Differentiation and market penetration costs
Government restrictions (e.g. licensing)
Entrants must also consider the expected retaliation from
organisations already in the market
*
Slide 2.*
Threat of Substitutes
Substitutes are products or services that offer a similar
benefit to an industry’s products or services, but by a different
process.
Customers will switch to alternatives (and thus the threat
increases) if:
The price/performance ratio of the substitute is
superior (e.g. aluminium maybe more expensive than
steel but it is more cost efficient for some car parts)
The substitute benefits from an innovation that
improves customer satisfaction (e.g. high speed trains
can be quicker than airlines from city centre to city

centre)
*
Slide 2.*
The bargaining power of buyers
Buyers are the organisation’s immediate customers, not
necessarily the ultimate consumers.
If buyers are powerful, then they can demand cheap prices
or product / service improvements to reduce profits .
Buyer power is likely to be high when:
Buyers are concentrated
Buyers have low switching costs
Buyers can supply their own inputs (backward vertical
integration)
*
Slide 2.*
The bargaining power of suppliers
Suppliers are those who supply what organisations need to
produce the product or service. Powerful suppliers can eat into

an organisation’s profits.
Supplier power is likely to be high when:
The suppliers are concentrated (few of them).
Suppliers provide a specialist or rare input.
Switching costs are high (it is disruptive or expensive to change
suppliers).
Suppliers can integrate forwards (e.g. low cost airlines have cut
out the use of travel agents).
*
Slide 2.*
Rivalry between competitors
Competitive rivals are organisations with similar products
and services aimed at the same customer group and are direct
competitors in the same industry/market (they are distinct from
substitutes).
The degree of rivalry is increased when :
Competitors are of roughly equal size
Competitors are aggressive in seeking leadership
The market is mature or declining
There are high fixed costs
The exit barriers are high
There is a low level of differentiation
*

*
Implications of five forces analysis
Identifies the attractiveness of industries – which
industries/markets to enter or leave.
Identifies strategies to influence the impact of the forces, for
example, building barriers to entry by becoming more vertically
integrated.
The forces may have a different impact on different
organisations e.g. large firms can deal with barriers to entry
more easily than small firms.
*
Slide 2.*
Issues in five forces analysis
Apply at the most appropriate level – not necessarily the whole
industry. E.g. the European low cost airline industry rather than
airlines globally.
Note the convergence of industries – particularly in the high
tech sectors (e.g. digital industries - mobile
phones/cameras/mp3 players).
Note the importance of complementary products and services
(e.g. Microsoft windows and McAfee computer security systems
are complements). This can almost be considered as a sixth
force.

*
Slide 2.*
The value net
Figure 2.3 The value net
Reprinted by permission of Harvard Business Review. From
‘The Right Game’ by A. Brandenburger and B. Nalebuff, July–
August 1996, pp. 57–64. Copyright © 1996 by the Harvard
Business School Publishing Corporation. All rights reserved
*
Slide 2.*
Comparative industry structure analysis
Figure 2.5 Comparative industry structure analysis
*
Slide 2.*

Types of industry (1)
Monopolistic industries - an industry with one firm and
therefore no competitive rivalry. A firm has ‘monopoly power’
if it has a dominant position in the market. For example, BT in
the UK fixed line telephone market.
Oligopolistic industries - an industry dominated by a few firms
with limited rivalry and in which firms have power over buyers
and suppliers.
Perfectly competitive industries - where barriers to entry are
low, there are many equal rivals each with very similar
products, and information about competitors is freely available.
Few (if any) markets are ‘perfect’ but may have features of
highly competitive markets, for example, mini-cabs in London.
*
Slide 2.*
Types of industry (2)
Hypercompetitive industries - where the frequency, boldness
and aggression of competitor interactions accelerate to create a
condition of constant disequilibrium and change.
Hypercompetition often breaks out in otherwise oligopolistic
industries (e.g. mobile phones).
Organisations interact in a series of competitive moves in
hypercompetition which often becomes extremely rapid and
aggressive as firms vie for market leadership.

*
Slide 2.*
Cycles of competition
Figure 2.6 Cycles of competition
Division of Simon & Schuster, Inc., from Hypercompetitive
Rivalries: Competing in Highly Dynamic Environments by
Richard A. D’Aveni with Robert Gunther. Copyright © 1994,
1995 by Richard A. D’Aveni. All rights reserved
*
Slide 2.*
The industry life cycle
Figure 2.4 The industry life cycle
*
Slide 2.*

Strategic Groups
Strategic groups are organisations within an industry or
sector with similar strategic characteristics, following similar
strategies or competing on similar bases.
These characteristics are different from those in other
strategic groups in the same industry or sector.
There are many different characteristics that distinguish
between strategic groups.
Strategic groups can be mapped on to two dimensional
charts – maps. These can be useful tools of analysis.
*
Slide 2.*
Characteristics for identifying strategic groups
Figure 2.7 Some characteristics for identifying strategic groups
*
Slide 2.*
Strategic groups in the Indian pharmaceutical industry
Figure 2.8 Strategic groups in the Indian pharmaceutical
industry
Source: Developed from R. Chittoor and S. Ray,

‘Internationalisation paths of Indian pharmaceutical firms: a
strategic group analysis’, Journal of International Management,
vol. 13 (2009), pp. 338–55
*
Slide 2.*
Uses of strategic group analysis
Understanding competition - enables focus on direct
competitors within a strategic group, rather than the whole
industry. (E.g. Tesco will focus on Sainsburys and Asda)
Analysis of strategic opportunities - helps identify attractive
‘strategic spaces’ within an industry.
Analysis of ‘mobility barriers’ i.e. obstacles to movement from
one strategic group to another. These barriers can be overcome
to enter more attractive groups. Barriers can be built to defend
an attractive position in a strategic group.
*
Slide 2.*
Market segments
A market segment is a group of customers who have similar
needs that are different from customer needs in other parts of

the market.
Where these customer groups are relatively small, such
market segments are called ‘niches’.
Customer needs vary. Focusing on customer needs that
are highly distinctive is one means of building a secure
segment strategy.
Customer needs vary for a variety of reasons -these
factors can be used to identify distinct market segments.
Not all segments are attractive or viable market
opportunities – evaluation is essential.
*
Slide 2.*
Bases of market segmentation (1)
Table 2.1 Some bases of market segmentation
*
Slide 2.*
Who are the strategic customers?
A strategic customer is the person(s) at whom the strategy is
primarily addressed because they have the most influence
over which goods or services are purchased.

Examples:
For a food manufacturer it is the multiple retailers (e.g.
Tesco) that are the strategic customers not the
ultimate consumer.
For a pharmaceutical manufacturer it is the health
authorities and hospitals not the final patient.
*
Slide 2.*
Critical success factors (CSFs)
Critical success factors are those factors that are either
particularly valued by customers or which provide a significant
advantage in terms of cost.
Critical success factors are likely to be an important source of
competitive advantage if an organisation has them (or a
disadvantage if an organisation lacks them).
Different industries and markets will have different critical
success factors (e.g. in low cost airlines the CSFs will be
punctuality and value for money whereas in full service airlines
it is all about quality of service).
*
Slide 2.*

Blue ocean thinking
‘Blue oceans’ are new market spaces where competition is
minimised.
‘Red Oceans’ are where industries are already well defined and
rivalry is intense.
Blue Ocean thinking encourages entrepreneurs and managers to
be different by finding or creating market spaces that are not
currently being served.
A ‘strategy canvas’ compares competitors according to their
performance on key success factors in order to develop
strategies based on creating new market spaces.
*
Slide 2.*
Strategy canvas
Figure 2.9 Strategy canvas for electrical components companies
Source: Developed from W.C. Kim and R. Mauborgne, Blue
Ocean Strategy, 2005, Harvard Business School Press
*
Slide 2.*

Chapter summary (1)
Environmental influences can be thought of as layers around an
organisation, with the outer layer making up the macro-
environment, the middle layer making up the industry or sector
and the inner layer strategic groups and market segments.
The macro-environment can be analysed in terms of the
PESTEL factors, from which key drivers of change can be
identified. Alternative scenarios about the future can be
constructed according to how the key drivers develop.
Industries and sectors can be analysed in terms of Porter’s five
forces – barriers to entry, substitutes, buyer power, supplier
power and rivalry. Together, these determine industry or sector
attractiveness.
*
Slide 2.*
Chapter summary (2)
Industries and sectors are dynamic, and their changes can be
analysed in terms of the industry life cycle, comparative five
forces radar plots and hypercompetitive cycles of competition.
In the inner layer of the environment, strategic group analysis,
market segment analysis and the strategy canvas can help
identify strategic gaps or opportunities.
Blue Ocean strategies characterised by low rivalry are likely to
be better opportunities than Red Ocean strategies with many
rivals.
The most important reason for environmental analysis is to
identify OPPORTUNITIES AND THREATS

*
Slide 1.*
1: Introducing Strategy
*
Need to change to 9th Edition and change title to Exploring
Strategy – the rest is OK.
Slide 1.*
Learning outcomes
Summarise the strategy of an organisation in a ‘strategy
statement’.
Identify key issues for an organisation’s strategy according to
the Exploring Strategy model.
Distinguish between corporate, business and operational
strategies.
Understand how different people contribute to strategy at work.
Appreciate the contributions of different academic disciplines
and theoretical lenses to practical strategy analysis.
*

Slide 1.*
Definitions of strategy (1) ‘..the determination of the long-
run goals and objectives of an enterprise and the adoption of
courses of action and the allocation of resource necessary for
carrying out these goals’
Alfred Chandler
‘Competitive strategy is about being different. It means
deliberately choosing a different set of activities to deliver
a unique mix of value’
Michael Porter
Sources:
A.D. Chandler, Strategy and Structure: Chapters in the History
of American Enterprise, MIT Press, 1963, p. 13
M.E. Porter, ‘What is strategy?’, Harvard Business Review,
1996, November–December,
p. 60
*
Slide 1.*
Definitions of strategy (2) ‘..a pattern in a stream of
decisions’
Henry Mintzberg

‘..the long-term direction of an organisation’
Exploring Strategy
Sources:
H. Mintzberg, Tracking Strategy: Toward a General
Theory, Oxford University Press, 2007, p. 3
*
Slide 1.*
Strategic decisions
*
Slide 1.*
Three horizons for strategy (1)Horizon 1 :
Extend and defend core business.Horizon 2 :
Build emerging businesses.Horizon 3 :
Create viable options.
*

Slide 1.*
Three horizons for strategy (2)
Figure 1.2 Three horizons for strategy
Source: M. Baghai, S. Coley and D. While, The Alchemy of
Growth, 2000, Texere Publishers: Figure 1.1, p. 5
*
Slide 1.*
Stakeholders
Stakeholders are those individuals or groups that depend
on an organisation to fulfil their own goals and on whom, in
turn, the organisation depends.
*
Slide 1.*
Levels of strategy (1)
Operational strategy

Business-level
strategy
Corporate-
level
strategy
News Corporation diversifying from print journalism into social
networking.
Website and marketing improvements at My Space to attract
more users.
MySpace engineers increasing processing
Capacity.
*
Slide 1.*
Levels of strategy (2)Corporate-Level Strategy is concerned
with the overall purpose and scope of an organisation and how
to add value to business units.Business-Level Strategy is
concerned with the way a business seeks to compete
successfully in its particular market.Operational Level Strategy
is concerned with how different parts of the organisation deliver
the strategy in terms of managing resources, processes and
people.
*

Slide 1.*
Strategy statements
Strategy statements should have three main themes: the
fundamental goals that the organisation seeks, which draw on
the stated mission, vision and objectivesthe scope or domain of
the organisation’s activitiesand the particular advantages or
capabilities it has to deliver all these.
*
Slide 1.*
Working with strategy (1)
All managers are concerned with strategy:Top managers
frequently formulate and control strategy but may also involve
others in the process.Middle and lower level managers have to
meet strategic objectives and deal with constraints.All managers
have to communicate strategy to their teams.All managers can
contribute to the formation of strategy through ideas and
feedback.
*

*
Working with strategy (2)
Organisations may also use strategy specialists:Many large
organisations have in-house strategic planning or analyst
roles.Strategy consultants can be engaged from one of many
general management consulting firms (e.g. Accenture, IBM
Consulting, PwC).There are a growing number of specialist
strategy consulting firms (e.g. McKinsey &Co, The Boston
Consulting Group).
*
Slide 1.*
Strategy’s three branches (1)CONTEXT – internal and external.
CONTENT – strategic options.
PROCESS – formation and implementation.
*
Slide 1.*
Strategy’s three branches (2)
Figure 1.3 Strategy’s three branches

*
Slide 1.*
The exploring strategy model
Figure 1.4 The Exploring Strategy Model
*
Slide 1.*
Strategic position (1)
The strategic position is concerned with the impact on
strategy of the external environment, the organisation’s
strategic capability (resources and competences), the
organisation’s goals and the organisation’s culture.
*
Slide 1.*

The
Strategic
Position
Environment
Culture
Purpose
Capability
*
Slide 1.*
Fundamental questions for Strategic Position:
• What are the environmental opportunities and threats?
• What are the organisation’s strengths and weaknesses?
• What is the basic purpose of the organisation?
• How does culture shape strategy?
*
Slide 1.*
Strategic choices (1)
Strategic choices involve the options for strategy in terms

of both the directions in which strategy might move and the
methods by which strategy might be pursued.
*
Slide 1.*
Strategic
Choices
Business-
level
Innovation
International
Corporate-
level
Acquisitions &
Alliances
*
Slide 1.*
Fundamental questions for Strategic Choice:
• How should business units compete?

• Which businesses to include in the portfolio?
• Where should the organisation compete
internationally?
• Is the organisation innovating appropriately?
• Should the organisation buy other companies, form
alliances or go it alone?
*
Slide 1.*
Strategy in action (1)
Strategy in action is about how strategies are formed and
how they are implemented.
The emphasis is on the practicalities of managing.
*
Slide 1.*
Strategy
in Action
Processes
Changing
Evaluating

Organising
Practice
*
Slide 1.*
Fundamental questions for Strategy in Action
• Which strategies are suitable, acceptable and feasible?
• What kind of strategy-making process is needed?
• What are the required organisation structures and systems?
• How should the organisation manage necessary changes?
• Who should do what in the strategy process?
*
Slide 1.*
Exploring strategy in
different contexts
The Exploring Strategy Model can be applied in many
contexts.
In each context the balance of strategic issues differs:
Small Businesses (e.g. Purpose and Growth issues)

Multinational Corporations (e.g. Geographical Scope
and Structure/Control issues) Public Sector Organisations (e.g.
Service/Quality and Managing Change issues) Not For
Profit Organisations (e.g. Purpose and Funding issues)
*
Slide 1.*
The strategy lenses (1)
The strategy lenses are ways of looking at strategy issues
differently in order to generate many insights. Looking at
problems in different ways will raise new issues and new
solutions.
*
Slide 1.*
The strategy lenses (2)
Strategy can be seen as:DesignExperienceVariety
(Ideas)Discourse
*

Slide 1.*
Strategy as design
Figure C.i Design lens
*
Slide 1.*
Strategy as experience
Figure C.ii Experience lens
*
Slide 1.*
Strategy as variety
Figure C.iii Variety lens
*

Slide 1.*
Strategy as discourse
Figure C.iv Adaptive tension
*
Slide 1.*
The strategy lenses summary
Table C.ii A summary of the strategy lenses
*
Slide 1.*
Chapter summary (1)Strategy is the long-term direction of an
organisation. A ‘strategy statement’ should cover the goals of
an organisation, the scope of the organisation’s activities and
the advantages or capabilities the organisation brings to these
goals and activities.Corporate-level strategy is concerned with
an organisation’s overall scope; business-level strategy is

concerned with how to compete; and operational strategy is
concerned with how resources, processes and people deliver
corporate- and business-level strategy.Strategy work is done by
managers throughout an organisation, as well as specialist
strategic planners and strategy consultants.
*
Slide 1.*
Chapter summary (2)
Research on strategy context, content and process shows how
the analytical perspectives of economics, sociology and
psychology can all provide practical insights for approaching
strategy issues
The Exploring Strategy Model has three major elements:
understanding the strategic position, making strategic choices
for the future and managing strategy-in-action.
Strategic issues are best seen from a variety of perspectives, as
exemplified by the four strategy lenses of design, experience,
variety and discourse.
*
1

BUSM3200 Strategic Management
Detailed assignment guide
Semester 1, 2014
Assignment: Strategic Analysis and Strategy Evaluation
Weighting This assignment accounts for 40% of the assessment
in this Course.
Due Date TBA
Due Time By 7.00pm (Singapore time)
Place TBA
Format Report
Length 2500 - 3000 words, double-line spaced, 12 point Times
New Roman.
Note: The word count does not include references or appendices
You will work in pairs (a group of two (2)) with those in the
same class to conduct a strategic analysis and
strategy evaluation, and write a report on a real-life business.
Please note that this report will focus on
business-level strategy.

The assessment will be discussed in the Modules 1 and 2. You
are required to select a real-life organisation (or
a strategic business unit (SBU)) for this assignment. You are
advised to conduct a preliminary research (e.g.,
browse organisation websites and annual reports) prior to
deciding which organisation (or its SBU) will be
selected for your assignment so as to make an informed choice.
You should report the firm for your
assignment to your local lecturer by Week 4.
Write a 2500 - 3000 word report, including 200 words of an
executive summary, but excluding references and
appendix. In this report, you are required to perform the
following tasks:
1. Describe briefly the background information (strategic
context) of the firm (or SBU) you have
selected. This information should be brief and relevant to the
discussion of your assignment and thus
may include ownership, history, size, business scope, major
products/services, and major markets of
the firm (or SBU) selected.
2. Conduct a macro-environment analysis for the entire industry

within which the firm (or SBU)
operates. You should use the analytical framework provided in
the textbook. Foci will be placed on the
understanding of the purpose of this analysis, the identification
of key factors and their implications
in terms of key opportunities and threats, and the discussion of
their overall impact on the
industry growth in the future. Draw your conclusion based on
your macro-environment analysis.
3. Undertake an industry (competitive) analysis using Porter’s
5-forces model. You are required
to pay attention to the purpose of this analysis, the inter-
connectedness of different aspects
of the competitive forces, the links between the competitive
forces and macro-environment,
and their overall impact on the industry and the organization
selected in terms of main
driving forces in the competitive environment. Draw your
conclusions based on your five-
force analyses.

2
4. Identify those resources and competences of the firm (or
SBU) that are likely to provide sustainable
competitive advantage. Justify why these resources and
competences can be regarded as strategic
capabilities using the four criteria covered in the textbook.
5. Identify and discuss the generic type of business strategy the
firm (or SBU) implements by examining
its strategy statement and/or its value chain activities.
6. Evaluate the suitability of the firm’s current business strategy
based on the outcomes of your analysis
and integration above (e.g., the identification of the firm’s
current business strategy and the most
significant factors affecting the firm’s performance, and your
understanding of business strategy).
References should be utilised within this Report to validate the
information presented, and should be drawn
from academic sources and organisational information such as
the website and annual reports. The business
press may be used sparingly to identify relevant issues.

Learning outcome/s and capability development
Completing this assignment can help you develop your
capabilities in the following areas:
analytical concepts covered from the relevant
Modules (1-4, 6, 11) in this Course;
nt
concepts and theories to the organisation
selected, particularly in analysing its strategic position, and
evaluating its suitability;
existing strategic concepts, analytical
frameworks, and theories; and
career in the areas of team work,
communication, and report writing.
Advisory notes for this assignment
• You should conduct an extensive information search on the
organisation selected.
• Company websites, annual reports, and media reports are
important sources of such information, but their
objectives, and thus credibility, should be carefully analysed

and evaluated.
• You should use appropriate concepts and analytical tools in
your report.
• The report should be written in prose; however limited use of
dot points is acceptable.
• This advice should be read in conjunction with RMIT
assessment policy and the course guide.
Guide for assignment presentation
Written assignments must be presented in a professional format.
Quality of presentation, especially literacy,
will be considered in the marking criteria. Written
communication skills are an essential component of RMIT
University’s courses. In line with RMIT policy, all sources of
information must be fully referenced using
standard Harvard or APA referencing systems. You are
encouraged to use referencing software such as
Endnote for referencing and formatting. The assignment should
be in report format and use Times New Roman
font size 12, double line spacing.

3
Assignment submission
You are required to submit your assignment in both hard and
soft copies. The hard copy should be attached
with a coversheet, which can be downloaded from the Course
Blackboard, signed by both students. For the
soft copy, Please submit it via the course Blackboard and note:
• Use only ONE student log-in account for your group/pair to
submit the group/pair assignment into the
course Blackboard. Otherwise your Turnitin report will have a
high similarity percentage.
• Staff have access Turnitin information
• Further submission instructions will be given in the seminars.

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