Lecture 1: Strategy process

Question 1

Strategic Management definition

Answer 1

Important field in business that brings together insights from multiple subjects.
- Why do companies do the thing they do?
- Why do some companies perform better than others?
- How companies achieve their goals?

(goes beyond finance)
Main aim–> to analyse, formulate and systematically implement strategic decisions to improve performance regarding strategic issues.

Question 2

Strategy hierarchy

Answer 2

1. Corporate strategy
   -> where to compete?
   ->Scope of company in terms of markets and industry
   -> directed by top management team (CEO, CFO, etc)
2. Business strategy
   -> How to compete?
   -> Competitive approach in an industry and market
   ->steered by management of specific market/industry branches of the company.
3. Functional area strategy
   ->How to implement the chosen business strategy?
   ->Steered by heads of different functional areas (marketing, R&D, supply chain)
4. Operating strategy
   ->Steered by middle management
   ->aims to execute the functional area strategy

Question 3

What does Michael Porter think IS and IS NOT a strategy?

Answer 3

Strategy IS NOT:
->about operational effectiveness
->about practice or benchmarking
->doing everything, failing to choose
->pure focus on individual activities
->short-term thinking

Strategy IS:
about choosing to
->Perform activities differently (do what others do but in a better way)
->Perform different activities than competitors (do smth different than everyone else)

Question 4

To define strategy company can ask 3 questions…

Answer 4

*What is our current situation?
*Where do we want to go?
*How do we get there?–> MOST IMPORTANT QUESTION further divided into sub questions

Question 5

Strategy devision in 3 parts

Answer 5

1. Analysis:
   IDENTIFY the fundamental issues in competitive environment that strategy addresses
2. Decision:
   FORMULATE a strategy that addresses these issues (leads to a decision: what not to do?)
3. Actions:
   Create a plan IMPLEMENTING the strategy (actions: what functional area is going to do what?)

Question 6

Strategic analysis: Internal analysis

Answer 6

To what extent does a company’s strategy fit its resources and capabilities, goals, values, structure, systems.
Internal factors:
*Strengths- what features/resources give you advantage over the competitors
*Weaknesses- features/resources that are disadvantages over competitors

Question 7

Strategic analysis: External analysis

Answer 7

To what extent does company’s strategy fit its external environment (customers, competitors, suppliers)
External factors:
*Opportunities- external elements that a company can exploit
*Threats- external elements that pose a challenge/risk.

Question 7

Competitive advantage vs. Sustainable competitive advantage

Answer 7

Competitive advantage-
achieved when company meets its customer’s needs more effectively or efficiently than its competitors thanks to a successful strategy.

Sustainable competitive advantage-
is connected to elements that give customer a reason to return continuously. Stay loyal to the company and choose one company over others.

Question 8

Strategy process overview

Answer 8

You have a strategic issue and start with strategic analysis of both internal and external environment (SWOT ex) –>
Gain deep insights –>
Company able to develop: values, vision, mission, goals.

Question 9

Values

Answer 9

Values are norms, traits, beliefs expected of the management and employees in a company which serves as a guideline for adhering to the company’s mission and vision.

Most companies have small set of core values.
ex. Deloitte “Lead the way, serve with integrity, take care of each other, foster inclusion and collaborate for measurable impact.”

Question 10

Vision

Answer 10

“Where do we want to go?”
Vision is created by the management’s aspiration for the future.
Clear vision should set the course and direction for the long-term, be: concise, sincere, distinctive.
Various functions:
*serves as motivation for employees
*can provide guidelines for the management (reduce likelihood of aimless decisions)
*helps company to prepare for future

ex. “We want to become a market leader” –> NOT clear, general
“We want to make London the safest city in world”–> IS clear vision

Question 11

Mission

Answer 11

Mission statement- focuses on the short-term company’s current operations and goals.
“Who are we now?”
“What are we doing?”
“Why do we do this?”
Main functions:
*identify which customer demand groups/market serve
*give company its own identity
*specify how the company makes customers happy
*identify company’s products and services (MOST IMPORTANT)

ex. “To connect the world’s professionals to make them productive and successful.”

Question 12

Goals

Answer 12

To convert vision and mission of the company to specific targets.
Serve as a function to:
*concentrate, keep actions aligned
*provide standard for performance evaluation (also serves as motivation for employees)
*motivate and inspire employees

Financial goals VS. Strategic goals

Question 13

What happens after creating intended strategy?

Answer 13

Intended strategy becomes either:
A) Realised strategy
strategy that company chooses to implement and realise- partly proactive (intended), partly reactive (emergent).

OR

B) Unrealised strategy

OR

C) Emergent strategy (reactive)
usually a bottom-up strategy
(ex. employee discovers an opportunity and gives it to top-management)
Continuous and adapted based on the current situation and all influential factors. Extensive involvement, spontaneous implementation.

Question 14

What happens after the strategic analysis is created –> values, vision, mission, goals are set?

Answer 14

Development of intended strategy.
Intended strategy- detailed strategic plan for the future.

(proactive) top-down strategy, usually developed by decision-making at highest management level, then communicated down.
Cyclical, most factors predetermined by managers who plan out strategy. Established rules and procedures.