S0 - Intro to Strategy Flashcards
How is strategy defined within “Exploring Strategy” and give the benefits of this definition
In this book, strategy is defined as ‘the long-term direction of an organisation’. This has two advantages. First, the long-term direction of an organisation can include both deliberate, logical strategy and more incremental, emergent patterns of strategy. Second, long-term direction can include both strategies that emphasise difference and competition, and strategies that recognise the roles of cooperation and even imitation.
What are other definitions of strategy from the following therorists:
- Alfred D. Chandler
- Michael Porter
- Peter Drucker
- Henry Mintzberg
Define “The Long-Term” in regards to Strategy
The long term - Strategies are typically measured over years, for some organisations a decade or more. The importance of a long-term perspective on strategy is emphasised by the ‘three horizons’.
The three-horizons framework suggests organisations should think of themselves as comprising three types of business or activity, defined by their ‘horizons’ in terms of years.
Horizon 1 businesses are basically the current core activities. Horizon 1 businesses need defending and extending, but the expectation is that in the long term they will likely be flat or declining in terms of profits (or whatever else the organisation values).
Horizon 2 businesses are emerging activities that should provide new sources of profit. For Tesla, that might include the new mega-battery business.
Finally, there are Horizon 3 possibilities, for which nothing is sure. These are typically risky research and development (R&D) projects, start-up ventures, test-market pilots or similar. Horizon 3 might generate profits a few years from the present time. In a pharmaceutical company, where the R&D and regulatory processes for a new drug take many years, Horizon 3 might be a decade ahead.
While timescales might differ, the basic point about the ‘three-horizons’ framework is that managers need to avoid focusing on the short-term issues of their existing activities. Strategy involves pushing out Horizon 1 as far as possible, at the same time as looking to Horizons 2 and 3.
Summary:
Horizon 1:
- Current core activities – extend and defend these activities.
Horizon 2:
- Develop emerging activities – to generate new sources of growth and/or profit.
Horizon 3:
- Create viable strategic options for the future – higher risk activities that may take years to generate growth/profits.
Define “Strategic Direction” in regards to Strategy
Strategic direction - Over the years, strategies follow some kind of long-term direction or trajectory. Sometimes a strategic direction only emerges as a coherent pattern over time. Typically, however, managers and entrepreneurs try to set the direction of their strategy according to long-term objectives. In private-sector businesses, the objective guiding strategic direction is usually maximising profits for shareholders. However, profits do not always set strategic direction.
First, public-sector and charity organisations may set their strategic direction according to other objectives: for example, a sports club’s objective may be to move up from one league to a higher one.
Second, even in the private sector profit is not always the sole criterion for strategy. Thus family businesses may sometimes sacrifice the maximisation of profits for family objectives, for example passing down the management of the business to the next generation. The objectives behind strategic direction always need close scrutiny.
Define “Organisation” in regards to Strategy
Organisation - Organisations are not treated as discrete, unified entities. Organisations involve many relationships, both internally and externally. This is because organisations typically have many internal and external stakeholders, in other words people and groups that depend on the organisation and upon which the organisation itself depends. Internally, organisations are filled with people, typically with diverse, competing and more or less reasonable views of what should be done. At Tesla, co-founder and original CEO Martin Eberhard was fired by new Chairman Elon Musk. In strategy, therefore, it is always important to look inside organisations and to consider the people involved and their different interests and views. Externally, organisations are surrounded by important relationships, for example with suppliers, customers, alliance partners, regulators and investors. For Tesla, relationships with investors and advertisers are crucial. Strategy therefore is also vitally concerned with an organisation’s external boundaries: in other words, questions about what to include within the organisation and how to manage important relationships with what is kept outside.
Defien the purpose and benefits of strategic decisions
Strategic Decisions are about:
- The long-term direction of the organisation
- The scope of an organisation’s activities
- Think in the longer term, for future success
- Gaining advantage over competitors
- Addressing changes in the business environment in order to gain strategic fit (internal and external)
- Building on the organisations resources and competences (exploiting strategic capability)
- Values and expectations of stakeholders which affect strategic and operational decisions
Strategic Decisions are likely to :
- Be complex in nature (context and perspective)
- Be made in situations of uncertainty
- Affect operational decisions
- Involve relationships and networks outside the organisation
- Require an integrated approach (both inside and outside an organisation)
- Involve considerable change
What is the Prescriptive definition of strategic management?
Strategic management can be described as the identification of the purpose of the organisation and the plans and actions to achieve that purpose.
Features:
- Remedial (correct/improve)
- Regimented
- Known in advance
- Required
- Detailed in advance
Prescriptive (intended) strategy is sequential, logical & view of strategy and assumes that:
- objectives are defined in advance.
- future is predictable and the environment is stable.
- it never changes over time.
Deliberately formulated/planned by managers
What are the assumptions and problems with Perscriptive strategy
What is the Emergent definition of strategic management?
Strategic management can be described as finding market opportunities, experimenting and developing competitive advantage over time.
Features:
- Flexible
- Responsive
- Result of experiment
- New
- Develops over time
- Organic
Emergent strategy:
- Is an ongoing process and strategy develops over time.
- Has unclear objectives (but become clearer over time).
- Corresponds with actual practice in organisations.
- Takes account of people and organisational culture.
What are the assumptions and problems with Emergent strategy
What are the three levels of strategy?
Horizon 1:
Current core activities – extend and defend these activities.
Horizon 2:
Develop emerging activities – to generate new sources of growth and/or profit.
Horizon 3:
Create viable strategic options for the future – higher risk activities that may take years to generate growth/profits.
Define the Corporate Level Strategy
Corporate-level strategy is concerned with the overall scope of an organisation and how value is added to the constituent businesses of the organisational whole. Corporate-level strategy issues include geographical scope, diversity of products or services, acquisitions of new businesses, and how resources are allocated between the different elements of the organisation. For Tesla, moving from car manufacture to battery production for homes and businesses is a corporate-level strategy. Being clear about corporate-level strategy is important: determining the range of businesses to include is the basis of other strategic decisions, such as acquisitions and alliances.
Define the Business level strategy
Business-level strategy is about how the individual businesses should compete in their particular markets (this is often called ‘competitive strategy’). These might be stand-alone businesses, for instance entrepreneurial start-ups, or ‘business units’ within a larger corporation. Business-level strategy typically concerns issues such as innovation, appropriate scale and response to competitors’ moves. For Tesla this means rolling out a lower cost electric car to build volume and capture market share in advance of potential competitor entry. In the public sector, the equivalent of business-level strategy is decisions about how units (such as individual hospitals or schools) should provide best-value services. Where the businesses are units within a larger organisation, business-level strategies should clearly fit with corporate-level strategy.
Define the functional level strategies
Functional strategies are concerned with how the components of an organisation deliver effectively the corporate and business-level strategies in terms of resources, processes and people. For example, Tesla continues to raise external finance to fund its rapid growth: its functional strategy is partly geared to meeting investment needs. In most businesses, successful business strategies depend to a large extent on decisions that are taken, or activities that occur, at the functional level. Functional decisions need therefore to be closely linked to business-level strategy. They are vital to successful strategy implementation.
Define the following terms:
- Mission:
- Vision or strategic intent:
- Goal:
- Objective:
- Strategic Capability/advantage:
- Scope:
- Business model:
- Control:
Define the following terms:
- Mission: overriding purpose in line with the values or expectations of stakeholders
- Vision or strategic intent: desired future state or aspiration of an organisation
- Goal: general statement of aim or purpose
- Objective: quantification or more precise statement of goal
- Strategic Capability/advantage: resources, activities and processes (competences) - some of which are unique and provide competitive advantage
- Scope: three dimensions; customers/geography/internal activities
- Business model: how product, service and information flow between participating parties
- Control: monitoring of action steps to assess effectiveness of strategies and actions and modify as necessary
Define each section of the attached image.
Define the features of:
- Strategic Position
- Strategic Choices
- Strategy in Action
- Strategic Position:
The impact of the organisation’s external macro-environment
- PESTEL
- Sources of Competition
- Opportunities and Threats
Strategic capability of the organisation
- Resources and Competences
- Strengths and Weaknesses
Expectations and purposes of stakeholders
Sources of power and attention/influence
Cultural and historical influences
- Strategic Choices:
Understanding the underlying bases for future strategy/competitive advantage (business, corporate and international level)
Innovation and Entrepreneurship
Options for developing strategy in terms of Directions and Methods of development
- Directions: Product and Market variances
- Methods: Internal/organic, mergers and acquisitions, strategic alliances
- Strategy into Action:
About how strategies are formed and how they are implemented.
The emphasis is on the practicalities of managing to achieve success.
- Strategy development processes
- Structuring the organisation
- Resource strategies and managing resource areas (people, information, finance, technology)
- Managing change
- Practice of strategy
