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INTRODUCTION TO STRATEGY

Definition
Strategy is the means by which objectives are consciously pursued and obtained over time. The word “strategy” derives from the Greek word strategos; which derives from two words: - "stratos" – meaning army. "ago" – which is the ancient Greek for leading/guiding/moving, Strategy can also be defined as “the determination of the basic long-term goals & objectives of an enterprise & the adoption of courses of action & the allocation of resources necessary for carrying out those goals”.

Strategy at Different Levels of a Business
Strategies exist at several levels in any organization - ranging from the overall business (or group of businesses) through to individuals working in it.

Corporate Strategy - is concerned with the overall purpose and scope of the
business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement".

Business Unit Strategy - is concerned more with how a business competes
successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc.

Operational Strategy - is concerned with how each part of the business is
organized to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on Challenges of resources,processes, people etc.

Strategic decisions
What are strategic decisions?
Johnson & Scholes (2002) suggest that strategic decisions are all about some of the following: •Long-term direction of an organization- strategic decision is likely to be concerned with the long-term survival of an organization.

•Securing advantage– strategic decisions also concern effective positioning in
relation to competitors to achieve advantage in the market.

•Scope of an organization’s activities– strategies decisions are likely to be
concerned with the scope of an organization’s activities.

•Using the links between the organization & the environment –strategy
can be seen as matching the activities of an organization to the environment in which it operates.

•Major resource change- strategies may require major resource changes for
an organization.

•Values & expectations– the strategy of an organization is affected not only by
environmental forces & resource availability, but also by the values & expectations of those who have power in & around the organization.

•Strategic decision affects operational decisions.

Strategic thinking
In thinking about strategy, three themes can be picked out:

•The long-term plan– thinking strategically mean’s raising one’s eyes from day-today problems to consider how the relationship between the organization & its environment is shaping up for the long term.

•Big Challenges– strategic thinking means converting an awareness of trends into
an overall picture of the environment & how the organization should relate to it.

•Interdependency – understanding the way that each of the big Challenges links to
the others enables the strategist to see the map as it changes.

Tests of good strategy
Tests of good strategy in application include the following:

•Value added: A good strategy will deliver increased value in the market place. This
might show itself in increased profitability, but might also be visible in gains in longerterm measures of business performance such as market share, innovative ability & satisfaction for employees.

•Consistency: A good strategy will be consistent with the circumstances that
surround a business at any point in time. It will take into account its ability to use its resources efficiently, its environment, which may be changing fast or slowly, & its organizational ability to cope with the circumstances of that time.

•Competitive advantage: For most organizations, a good strategy will increase the
sustainable competitive advantage of the organization. After going through the above discussion, one of the standard models for defining strategy is Five’s P for Strategy.

Five P’s for strategy
Mintzberg (1991) makes it clear that strategic thinking involves more than just following an ‘industry recipe’, a copying a competitor’s strategy or carrying on the same as before, unless these have been deliberately decided upon. He suggested that there are fives ways in which the term ‘strategy’ used.

Pattern Position Ploy

Perspective Plan Principle
There is no single definition of strategy; it is possible to consider & define strategy in different ways.

Assumption
Strategy is implemented in many different ways, often depending on the specific requirements at that time.

Elements Plan
Some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation.

Ploy
The ploy is a specific man oeuvre intended to directly outwit a competitor.

Pattern
A pattern is a consistent, intentional or unintentional pattern of behavior within a stream of actions.

Position
The Position is a means of defining an organization in relation to its competitive environment.

Perspective
The Perspective is the concept or character of an organization- its collective mind, intention or behavior.

Challenges
Understanding
The five Ps are simply labels to help develop appropriate strategic thinking. They should not define or restrict our thinking but should act as an aid to unravel the complexity implicit in strategy.

Compatibility
The 5P approaches are not mutually exclusive.

Flexibility
Plans, Position & ploys may be easily changed whereas Perspectives &Patterns are longer term & more fundamental.

Programme
A sixth “P” programme- an iterative process that aids progress towards achievement of a vision- might be added.

Applications As a definition & as an aid to strategy formulation
The term ‘strategy’ is sometimes ill-used. Use of the five definitions helps to prevent confusion & aids strategy formulation.

As a stimulus to lateral thinking
Consciously considering strategy in different ways can help people to think laterally & creatively about range of Challenges.

Assessment of strategy
The definitions can be used to analyze the breadth of strategic Challenges faced by an organization & to help assess strategy from different viewpoints.

Appreciation of strategy Challenges
The model can help to define both the formal & informal Challenges impacting on strategy & its development.

INTRODUCTION TO BUSINESS STARTEGY

Any business has to deal with three things ENVIRONMENT which it operates, INDUSTRY which it competes & PRODUCT which it produces. Business level strategy is the firm specific strategy that facilitates in gaining competitive advantage in the market. The business level strategy of the organization outlines the methodologies of the organization regarding competing with rival firms in the market. Basic idea is used behind the formulation of ENVIRONMENT STRATEGY is to exploit opportunities in the environment by drawing its competitive strengths. The models discussed in this topic are:

 Geo business model  PESTILED  Porter’s Diamond.

INTRODUCTION TO ENVIRONMENT ANALYSIS
In the very broadest sense ‘the environment means that which is external to& within which some entity exists’. If in discussing the environment we take the individual organization or firm as our reference point, the boundaries of the firm conveniently define on the one side an internal environment within which its members work & the firm’s resources are organized & the other the external environment outside those firm boundaries. The external environment we are concerned with comprises the whole set of relevant strategic conditions surrounding the firm. This can be termed as the strategic environment.

PESTLIED

ECONOMICAL TECHNICAL POLITICAL LEGAL DEMOGRAPHIC INTERNATIONAL SOCIAL ORGANISATIONA L ENVIRONMENTAL

Principle
PESTLIED is a mnemonic which represents various environmental factors that can be addressed when analyzing an organization.

Assumption
Various factors in the environment can have significant impact on the performance of organization operating within their sphere of influence. Elements Political Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. •Government type and stability •Freedom of press, rule of law and levels of bureaucracy and corruption •Regulation and de-regulation trends •Social and employment legislation • Tax policy, and trade and tariff controls •Environmental and consumer-protection legislation •Likely changes in the political environment

Economic:
•Stage of business cycle

•Current and project economic growth, inflation and interest rates •Unemployment and labor supply •Labor costs •Levels of disposable income and income distribution •Impact of globalization •Likely impact of technological or other change on the economy •Likely changes in the economic environment

Social:
•Population growth rate and age profile •Population health, education and social mobility, and attitudes to these •Population employment patterns, job market freedom and attitudes to work •Press attitudes, public opinion, social attitudes and social taboos •Lifestyle choices and attitudes to these •Socio-Cultural changes. These factors comprise social trends & tolerance towards the organization &its product.

Technological:
•Impact of emerging technologies •Impact of Internet, reduction in communications costs and increased remote working •Research and Development activity •Impact of technology transfer These factors include emergence of new technologies, access to technical know-how, foreign as well as indigenous.

Legal matters
Legislation may affect the organization & can inhibit or enhance its performance.

Environmental
These factors are environmental constraints on factory operation such as ‘green Challenges’

Demographic
Demographic factors comprise the availability of workforce, & age difference, which impinge upon organizational performance.

Challenges Negative & positive factors
Several PESTLIED factors may interact negatively or positively.

Relative importance of factors
The importance of the various PESTLIED factors varies according to the nature of the organization.

Other factors

Besides PESTLIED factors, there are other factors or environments that affect the organization.-for example, the competitive environment.

Applications Analysis & audit
PESTLIED may be used in the analysis & audit of organization.

Planning
The model may be used as a checklist in the planning process to ensure that the forecast effects of PESTLIED factors are taken into account.

Management development
The use of the list of PESTLIED factors encourages managers to become less insular & to consider the impact of external influences upon their organizations.

GEO BUSINESS MODEL

CONTROL

MOTIVATIONAL

CONDITIONI NG VARIABLES

VARIABLES

VARIABLES

Principle
There is a comprehensive framework for explaining & predicting international business.

Assumptions
There are three main interacting forces that affect firm’s international business action.

Elements Conditioning variables
Product-specific variables: conferring competitive advantages for the foreign investor for example, R&D, product differentiation, product processing, management skills, knowhow, economics of scale. Country-specific characteristics: helping to sustain competitive advantages of firms. For example, economics size of home market, nature of domestic competition, resource scarcity or surplus.

Inter-nation variables: for example, tariffs, international finance. Motivational variables

strategic

alliances,

This category of variable is concerned with competitive strategy .Market-seeking measures: horizontal/forward integration. Resource-seeking measures: vertical/backward integration. Production efficiency-seeking measures: for example, lower resource cost. Technology-seeking measures: securing access to foreign technology orskilled labour.Risk avoidance measures: for example, minimizing possibilities of production interruption, improving market control. Exchange-of-threat measures: waging a counter-offensive strategy to disarm a competitor, especially in their home market.

Control variables
These comprise administrative actions-i.e. laws & policies of home & host governments that directly or indirectly influence international business through positive incentives & or negative controls.

Challenges International relevance
The model applies to the international business action of all firms, not just those multinationals.

Interdependence
The variables are interlinked- for example, wage controlled, low labour costs in a particular country may be classified as a country-specific variable(conditioning) & a production-efficiency seeking measures (motivation).Wage control would also be a control variable.

Effect on organizations
The variables will impact in different ways, depending on the organization’sspecific activities.

Influence of variables
The organization perceives the conditioning variables (opportunities for competitive advantage), responds appropriately (motivational variables-competitive strategy) but has no influence over control variables.

Applications Growth strategies
The model may be used in the assessment & development of international business growth strategies.

Growth potential assessment
Another application lies in the assessment of the potential for growth given a change in international conditions.

Evaluation
The model can help in the evaluation of international competitors & markets

Decision-making
The model is an aid in deciding whether or not to embark upon international business activities.

Assessment
The model may be used to assess the relative importance & interaction of the different variables to the organization.

PORTER’S DIAMOND
Porter introduced this model in his book: the Competitive Advantage of Nations, after having done research in ten leading trading nations. The book was the first theory of competitiveness based on the causes of the productivity with which companies compete instead of traditional comparative advantages such as natural resources and pools of labor. This book is considered required reading for government economic strategists and is also highly recommended for corporate strategist taking an interest in the macroeconomic

FIRM STRATEGY, STRUCTURING, & RIAVLRY

FACTOR CONDITIONS

DEMAND CONDITION S

RELATED & SUPPORTING INDUSTRIES

Principle
The model shows how a nation’s international success within a specified industry depends upon four specific attributes which promote or impede competitive advantage. Traditionally, economic theory mentions the following factors for comparative advantage for regions or countries: A. Land B. Location C. Natural resources (minerals, energy)D. Labor, and E. Local population size.

Assumption
The individual points on the diamond and the diamond as a whole affect four ingredients that lead to a national comparative advantage. These ingredientsare:1.the availability of resources and skills,2.information that firms use to decide which opportunities to pursue with those resources and skills,3.the goals of individuals in companies,4.The pressure on companies to innovate and invest.

Elements Factor conditions
Factor’s conditions are the state of the nation’s factors of production, such as labour, land, capital, natural resources & infrastructure.

Demand conditions

•When the market for a particular product is larger locally than in foreign markets, the local firms devote more attention to that product than do foreign firms, leading to a competitive advantage when the local firms begin exporting the product. •A more demanding local market leads to national advantage. •When the market for a particular product is larger locally than in foreign markets, the local firms devote more attention to that product than do foreign firms, leading to a competitive advantage when the local firms begin exporting the product. •A more demanding local market leads to national advantage. •A strong, trend-setting local market helps local firms anticipate global trends. A strong, trend-setting local market helps local firms anticipate global trends.

Related & supporting industries
•When local supporting industries are competitive, firms enjoy more cost effective and innovative inputs. •This effect is strengthened when the suppliers themselves are strong global competitors.

Strategy, structure, rivalry
Firm’s strategy, structure & rivalry describes how organizations are created, managed & compete within the industry.

Challenges
Competitive environment
The four attributes interact to create the competitive environment in which the organizations operate.

Relationships between attributes
Increase in one attribute can stimulate other attributes.

Prosperity
Organizations prosper particularly with access to specialized assets & skills, best information, effective management, Investment & innovation.

Reasons for failure

Even when the four attributes are strong some organizations fail because they either do not take advantage of opportunities or they possess relatively low levels of skills & resources.

Further attributes
Two further attributes can influence national competitive advantage; chance events an organization’s control (such as technological innovations), &government actions (such as investment & taxation).

Industry clusters
Nations succeed not in individual industries but in clusters of industries whose performance reflects the state of the national economy.

Applications Audit
The model may be applied to individual industries, organizations or business units in order to audit strength of the four attributes & so assess competitive advantage.

Strategy review
Strategy may be reviewed to improve utilization of factors of production & so contribute towards improving competitive advantage of the organization or business unit.

Strategic alliances
Understanding the model can encourage the formation of strategic alliance between the industries to improve the state of related & supporting industries.

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