Chapter 1: About strategic management Flashcards
Strategy:
greek ‘strategos’ which means ‘office or command of a general, generalship’.
Stratus= army, ag= leader)
Andrews (1965)
‘pattern of major objectives, purposes, goals and essential policies and plans for achieving those 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.’
Definition of strategy
strategy is the dynamics of the firm’s relation with its environment for which the necessary actions are taken to achieve its goals and/or to increase performance by the rational use of resources”.
Elements of strategy
- Strategy is the manner firm and environment are linked.
Link between firm and environment: mutual influence - Many strategic decisions exist, but all share common purpose of seeking to make the firm more competitive. Improving performance is key when choosing strategy.
- Stakeholders: paties prenantes
Content of strategy:
- Long term management
- Creation of opportunity
- Definition of the scope of the firm (key component)
Main characteristics of a strategic decision: (6)
- complex
- high uncertainty
- impact the whole firm on all levels
- organization must adopt a holistic approach
- firm creates/maintains network of outside relations
- tend to require changes in the organization
LEVELS OF STRATEGY (3)
- corporate
- competitive
- functional
- Corporate strategy
Purpose is to establish a firm’s general guidance in the identification of the operations it wants to pursue.
Must know well things like mission, vision, goals.
Examples of corporate decisions: launching new business, taking over other company, internationalization.
Competitive strategy / Strategic business unit
Purpose: to compete more effectively in a series of activities, businesses or strategic business units*.
Examples: improve quality of product, investing in technology, etc.
*Strategic business units, or business units (SBUs)= homogeneous set of activities from a strategic perspective.
A diversifies corporation needs SBUs because its heterogeneity of different businesses makes it impossible to have one single strategic approach, so SBUs put in place.
- Functional strategies
Involves how to use and apply resources and capabilities within each operational area in each business unit. Level at which goals from previous level are achieved.
Purpose: maximizing the productivity of these resources.
Examples of such areas: marketing, HR, operations, financing.
To resume levels of strategy
- Higher-level strategies condition lower-level strategies
- Need for interaction, coherence and coordination between levels
- Different aspects of the same strategic problem
THE PROCESS OF STRATEGIC MANAGEMENT AND ITS RESPONSIBILITY: 2 issues:
- define activities required to pursue strategy
- identify key people responsible for the process
PHASES OF THE STRATEGIC MANAGEMENT PROCESS (3)
- analysis
- formulation
- implementation
Strategic analysis consists of 3 parts:
- Mission and goals: give consistency to business operations as a whole
- External analysis: identify threats and opportunities in environment
- Internal analysis: identify strengths and weaknesses of the firm
Strategic formulation
Based on strategic analysis. At all 3 levels (corporate, competitive, functional)
- Corporate strategies: used to define a firms future directions of development (specialization, diversification), the methods of development (internal, external), or the most appropriate level of internationalization and what channels to use accordingly
- Competitive strategies: cost leadership, differentiation
- Functional strategies: implementation of strategies in the firm’s different operations.
Strategic implementation:
completed through strategic planning and control
Representation of the process of strategic management:
RESPONSIBILITY FOR STRATEGIC DECISIONS
Identification of people involved in the adoption of strategic decisions. Certo and Peter say: senior management, board of directors, and staff involved in strategic planning or corporate development.
Top management duties: (5)
- Align strategic management with mission, vision and goals.
- Obtain, develop, mobilize resources and capabilities, and coordinate them.
- Seek corporate returns (create value for the capital invested)
- Handle conflicts of interest between firms stakeholders
- Liaise between agents and environment to seek opportunities and avoid threats.
Board of directors:
- Responsible for overall supervision of the process and control of top managers in their tasks.
Staff:
- Group of specialists, who gather information, processes it, analyses it, and gives recommendations.
Adoption of a rational strategic process:
- More systematic, logical and rational analysis of the decision to be adopted
- Firm will be more proactive
- Gives understanding to all the organisations members
- Helps evaluate lower level decision-making
- Facilitates assessment and control of strategy and its progress in future
- Allows more involvement of more people in the process
Rational process takes place under 3 conditions:
- uncertainty
- complexity
- conflict.
Critical view about rational strategic process:
- The rationality of the decision-maker: incomplete information, search for alternatives, process feedback
- Learning in the process: learn from your failures, process of trial and error, fragmented process
- Political aspects of the process: all people involved, conflicts may arise, groups with different objectives
- Chance: always a margin for unforeseen circumstances, luck, intuition, uncontrollable aspects
FIT AND CHANGE IN THE STRATEGIC MANAGEMENT PROCESS
Strategic management process must be consistent: match between strategic and organisational. Meaning there must be a match between context and strategy itself.
Strategic fit=
- exploiting opportunities and drawing upon firms strengths.
- l’exploitation des opportunités et tirant parti des forces de l’entreprise.
organisational fit
match between chosen strategy and the organisational characteristics of the firm.
strategic change
When/if goals, environment, allocation of resources and capabilities change, then that invalidates the firms traditional strategies.
In which case need to do an organisational change too.
