Lesson 1: Introduction Flashcards
What are the characteristics of strategic decisions?
Long term perspective
Create strategic and competitive advantages
Concerning the scope of the organisation
Involves big amounts of resources
Influence operational decisions
Reproduce the power balance between stakeholders
What is the definition of strategy?
Strategy is the direction and scope of an organisation over the long term which achieves advantages in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholders’ expectation.
Or the long term development of the firm.
What are the 3 horizons for strategy?
1) Horizon 1: extend and defend core business. Implementing the existing strategy.
2) Horizon 2: build emerging businesses: new products
3) Horizon 3: create viable options: 5/8y: discover new markets.
What are the levels of strategy?
1) Strategy at the functional level
2) Strategy at the corporate level
3) Strategy at the SBU level (Strategic Business Unit)
4) Operational strategy
What is the strategy at the corporate level
Finance and legal
Aim and scope of the organisation
Value creation for the shareholders
Portfolio management
Organisational design and human resource management
Accounting and finance –> to have control over the different departments
Corporate values
Corporate communication with key stakeholders
What is the strategy on the level of SBU?
Marketing and Technology
Strategic business unit level
Competitive strategy
Price strategy and marketing
Choice of distribution channels
Market and product development
Production and services
Choices of production technology
Resource allocation within the SBU
Structuring and control within the SBU
Strategy levels on the operational level?
Integration of resources, processes, people and skills
Strategy implementation
What is strategy level at the functional level
Marketing strategies
Organisational development
Control strategies
Investment and risk strategies
Purchase, production and distribution strategies
What is a mission?
Definition: overriding purpose of the organisation. The reason for existing.
What business are we in.
Eg. To transport people over long distances very fast = airline.
Personal example: be healthy and fit
What is a vision?
Vision or strategic intent is a desired future state = the aspiration of the organisation.
Eg. To be the leading company in Europe.
Personal example: to run the London Marathon.
What are goals?
General statement of aim or purpose (qualitative)
Deliver a good service to a reasonable price to all customer segments.
Personal example: lose weight and strengthen muscles.
What are objectives?
Quantitative or more specific statements of goals.
Eg: number of passengers, market share, return on investment.
Personal: lose 5 kilos by end of the year
What is strategy?
Long term direction, goals, action poan, timable and budgets.
Eg. Buy 25 new airplanes, buy new gates, develop booking system.
Personal example: diet program, exercise program.
What are the elements in strategic management?
1) Strategic positioning = strategic analysis:
Analysing the environment, company, political and cultural context
2) Strategic choices = strategy development
Developing competitive strategies, corporate and growth strategies, internationalisation, strategies for innovation
3) Strategy in practice = strategy implementation
Strategy through organisational design, design of management systems, functional design, managing changes
What is the strategy in small businesses?
The manager is often also the owner.
Strategy have the form of a vision in the owners head.
Action, analysing and thinking happens simultaneously.
Strategy have the form of flexibility, moving fast and niche.
What is the strategy in multinational companies?
Geographical and business scope of the organisation
Strategy is about organisational structuring and resource allocation
Management is about control, finances and communication.
Focus on corporate values
What is the strategy in professional service firms?
Professional standards and norms set the strategy
Strategy is about positioning and development of competences
Strategy is a dialog and and emergent process
It is the professional that negotiates the strategy
What is the strategy in public organisations?
Strategy is divided between politicians and administrators
Strategy is a discourse
Strategy is about political power, efficiency/quality and legitimacy.
Strategy is very often of symbolic nature
What are challenges for strategic management?
1) Strategic drift
Gap between organisation and stakeholder expectations
Often connected to a strong culture and earlier successes
2) Continued pressure on strategy development
Globalisation and international competition
It and technology
Politics and legislation
New cultural trends
Economic development
What are some other dilemmas in strategic management?
Complexitiy and ambiguity
Combining of both vision and action
To be both analytical and creative
To build a bridge between different stakeholder
Create new posibilities
Create continuity and efficiency on one hand and change and innovation on the other hand.
Why do we combine strategy and economic theory?
The strategy field is highly fragmented and is made up by many concepts and models.
There is a need for getting an economic overview of strategic managment
A need to uncover the assumptions, ideas and theories behind the strategy models and concepts.
What are the models for economic value creation by positioning of the firm?
Porter’s Five Forces model and Generic Competitive Strategies
Draw on the SCP paradigm and neoclassical theory = monopoly rent.
B&O as an example.
What is value creation through developing competences?
Categories for resources, competences and VRIO
Resource based theory and Penrose (Ricardo Rent) and evolutionary theory
Danske Bank as an example.
What is value creation through organising?
Diversification, growth methods and the corporate structure
Transaction cost theory
FLSmitdh as an example
What is value creation through management?
Managing the stakeholder balance, decision-making and logical incrementalism
Behaviourism
TDC as an example
What is value creation as long term commitment and moderation?
Mission, vision, strategy and values
Neoinstitutional and consitutional political economics theory
Novo Nordisk as an example.
What is neoinstititutional theory?
Explains why we have firms
We have firms and strategy in order to solve problems concerning uncertainty and payment of the stakeholders
What is constitutional theory?
Explains why we ought to hold on to the same strategy for a long time.
Strategies solve a time inconsistent problem among the stakeholders through a constitution and thereby create competences and identity over time.
What is transactions cost theory?
Explains when it is most efficient to organisa transactions through the market, alliances and through organisations.
Strategy is about determining the scope of the organisation
What is evolutionary and resource based strategy?
Explains how firms develop.
Strategy is about variation and selection of activities and insitutionalism of actions over time = transmission
What is behaviourism?
Explains strategy development processes
Strategy is all about managing the balance of stakeholders, optimising the decision-making capacity and make sure of learning and adoption.
What is managerialism?
Explains the difference between goals of the owners and managers.
Strategy is about the balance between return, risk and growth.
What is the principal agent theory
Explains how we create incentives to pursue specific goals
Strategy is about organising the formal government structure
Neoclassical theory and the SCP paradigm
Explains how competitive forms and price forms and price formation
Strategy is about positioning and creating a monopoly like situation within the industry
What are the implications for practice about the different types of economic theories
Firms can not only create strategy from one set of theories and models
In reality strategy development typically includes the following areas:
Analyses of the environment and the competences
Managing stakeholders
Developing, competitive, corproate and growth strategies
Long term commitment through formulation of mission, vision, strategy and values.
Handling information and strategy development process.
