Week 2 - What Is Strategy Flashcards
Historical rotes of strategic management
- term strategy comes from greek term strategies which means ‘a general’ or ‘military general’
- the very strategy means ‘plan the destruction of ones enemies through effective use of resources’
- the ancient chinese text ‘the art of war’ by Sun Tzu been widely cited as particularly influential on modern business thinking in relation to strategy and strategic management
Following the second world war, strategy in business contest began to have more relevance
- Igor Ansoff (the ‘father of strategic planning’) highlighted two factors for this change
1) Rate of change within organisations
2) Increased application of technology and science
- Military models of bureaucracy in organisations include: strict timetabling, uniforms, linear hierarchy based on rank, divisions of labour and expertise
Definitions and progression of Strategy
WIN THE WAR
1) ‘A set of rules for making decisions about whatever situation might arise. Predict and react to the enemy’ - Sun Tzu
GROW TO MEET DEMAND
2) “The determination of the long-run goals and objectives of an enterprise and the adoption of courses of actions and the allocation of resources for carrying out these goals’ - Alfred Chandler
DIFFERENTIATE TO CREATE VALUE
3) “A firms theory about how to gain competitive advantage’ - Peter Drucker
The** long-term direction of an organisation (Tesler example)
- Horizon 1: Current core actives - extend and defend these activities (moter vehicles, electric cars business. Huge valuation/investment, no profit)
- Horizon 2: Develop emerging activities - to generate new sources of growth and/or profit (Automation and driverless cars)
- Horizon 3: Create viable strategic options for the future - higher risk activities that may take years to generate growth/profits (Electric/automated trucks to change face of the logistics industry)
The basic point of the ‘three-horizons’ framework is:
- For organisations/strategists to avoid focusing on the short-term issues of their existing activities
- Explore future horizons (i.e. 2 and 3) as opportunities for diversification, growth and profit generation
Stakeholders
- organisations involved many relationships
- because they typically have internal and external stakeholders
- Stakeholders are those individuals or groups that depend on an organisation to fulfil their own goals and whom in turn, the organisation depends
- organisations are pluralistic in nature. Internal & external demands/conflict are commonplace. Basic message is that organisations are made up of diverse and complex structures and stakeholders
Levels of Strategy (Linked to 3 fundamental elements/pillars of strategy)
1) Corporate-level strategy: concerned with the overall scope of an organisation and how value is added to the constituent business units (Where should a business compete)
2) Business-level strategy: concerned with the way a business seeks to compete successfully in its particular market (How should a business compete)
3) Functional (operational)-level strategy: concerned with how different parts of the organisation deliver the strategy effectively in terms of managing resources, processes and people (How should a business execute its strategy?)
Porter 1996 - What is strategy
- Operational effectiveness is not strategy.
- Operational effectiveness means performing similar activities better than rivals perform them - Porter says Strategy is better positioning
Porter 1996 definition of strategy
- strategy is the creation of a unique and valuable position, involving a different set of activities’
- sustainable positioning, though, requires trade-offs to prevent imitation (e.g. pound-shops make a loss on some items to sustain an image of value for money).
- “the essence of strategy is choosing what not to do”
The purpose of Strategy
- to define and express the purpose of an organisation to stakeholders
- organisations (though not all) will typically develop a strategic plan to execute its strategy over time. The purpose of strategy is to have some sort of plan for the future
We think of purpose in two ways:
- defining the purpose of an organisation (vision, mission, statement)
- defining the purpose of strategy itself (long-term direction of an organisation)
Organisations/strategists can define and express strategic goals through 4 different techniques
- Mission statement
- Vision statement
- Statement of values - Statement of objectives
… The scope of the organisations should also be outlined. As should the capabilities or key advantages of an organisation
. … These (or some of these) should be summarised into an overall strategy statement, which is used to define and express a clear and motivating purpose for organisations
Mission statement
- aims to provide employees and stakeholders with clarity about what the organisation is fundamentally there to do … What business are we in? What would be lost if the organisation did not exist? How do we make a difference?
Vision statement
- is concerned with the future the organisation seeks to create… What do we want to achieve? If we were here in twenty years what do we want to have created or achieved?
Statement of Values
- communicates the underlying and enduring core ‘principles’ that guide an organisations strategy and define the way that the organisation should operate
