Strategic Management

Course structure
Introducing strategy
I. The strategic position
The environment
Strategic capabilities
Strategic purpose
Culture and strategy
II. Strategic choices
Business strategy
Corporate strategy and diversification
Internationalization strategy
Innovation and entrepreneurship
Mergers, acquisitions and alliances

Course structure (continued)

III. Strategy in action
Evaluating strategies
Strategy development processes
Leadership and strategic change
Definitions of strategy (2) ..the long-term direction of an organization Exploring Strategy
Introducing strategy
I. The strategic position
The environment
Strategic capabilities
Strategic purpose
Culture and strategy
II. Strategic choices
Business strategy
Corporate strategy and diversification
Internationalization strategy
Innovation and entrepreneurship
Mergers, acquisitions and alliances

Introducing
strategy
III. Strategy
in action
Course
Course structure
I. Evaluating
The strategic strategies
position
Course structure (continued)
The
environment
Strategy
development processes
Strategic capabilities
Leadership and strategic change
Strategic purpose

Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, Pearson Education Limited 2011
Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, Pearson Education Limited 2011

Course structure

Culture and strategy

II. Strategic choices

Business strategy
Corporate strategy and diversification
Internationalization strategy
Innovation and entrepreneurship
Mergers, acquisitions and alliances

III. Strategy
in action
structure
(continued)

Evaluating strategies
Strategy development processes
Leadership and
Course structure

Introducing strategy

I. The strategic position

The environment
Strategic capabilities
Strategic purpose
Culture and strategy

II. Strategic choices

Business strategy
Corporate strategy and diversification
Internationalization strategy
Innovation and entrepreneurship
Mergers, acquisitions and alliances
Johnson, W hittington and Scholes,

Exploring Strategy,

9th Edition, Pearson Education L imited 2011

Course structure (continued)

III. Strategy in action
Evaluating strategies
Strategy development processes

Leadership and strategic change

strategic change

Three horizons for strategy (1)

Horizon 1 :
Extend and defend core business.
Horizon 2 :
Build emerging businesses.
Horizon 3 :
Create viable options.
Stakeholders
Stakeholders are those individuals or groups that depend
on an organisation to fulfil their own goals and on whom, in turn,
the organisation depends.

Levels of strategy (2)

Corporate-Level Strategy is concerned with the overall
purpose and scope of an organisation and how to add value to
business units.
Business-Level Strategy is concerned with the way a
business seeks to compete successfully in its particular market.
Operational Level Strategy is concerned with how different
parts of the organization deliver the strategy in terms of
managing resources, processes and people.
Strategy statements
Strategy statements should have three
main themes:
the fundamental goals that the organization seeks, which draw
on the stated mission, vision and objectives
the scope or domain of the organisations activities
and the particular advantages or capabilities it has to deliver
all these.
Working with strategy (1)
All managers are concerned with strategy:
Top managers frequently formulate and control strategy but
may also involve others in the process.
Middle and lower level managers have to meet strategic
objectives and deal with constraints.
All managers have to communicate strategy to their teams.
All managers can contribute to the formation of strategy
through ideas and feedback.
Working with strategy (2)
Organisations may also use strategy
specialists:

 Many large organisations have in-house strategic planning or

analyst roles.
Strategy consultants can be engaged from one of many
general management consulting firms (e.g. Accenture, IBM
Consulting, PwC).
There are a growing number of specialist strategy consulting
firms (e.g. McKinsey &Co, The Boston Consulting Group).
Strategys three branches (1)
CONTEXT internal and external.
CONTENT strategic options.
PROCESS formation and implementation.

Strategic position (1)

The strategic position is concerned with the impact on strategy
of the external environment, the organisations strategic
capability (resources and competences), the organisations
goals and the organisations culture.
Strategic position (3)
Fundamental questions for Strategic
Position:
What are the environmental opportunities and threats?

 What are the organisations strengths and weaknesses?

What is the basic purpose of the organisation?
How does culture shape strategy?
Strategic choices (1)
Strategic choices involve the options for strategy in terms of
both the directions in which strategy might move and the
methods by which strategy might be pursued.
Strategic choices (3)
Fundamental questions for Strategic
Choice:
How should business units compete?
Which businesses to include in the portfolio?
Where should the organisation compete
internationally?
Is the organisation innovating appropriately?
Should the organisation buy other companies, form alliances
or go it alone?
Strategy in action (1)
Strategy in action is about how strategies are formed and how
they are implemented.
The emphasis is on the practicalities of managing.
Exploring strategy in
different contexts
The Exploring Strategy Model can be applied in
many contexts.
In each context the balance of strategic issues differs:
Small Businesses (e.g. Purpose and Growth issues)
Multinational Corporations (e.g. Geographical Scope and
Structure/Control issues)

 Public Sector Organisations (e.g. Service/Quality and

Managing Change issues)
Not For Profit Organisations (e.g. Purpose and Funding issues)
Chapter summary (1)
Strategy is the long-term direction of an organisation. A
strategy statement should cover the goals of an organisation,
the scope of the organisations activities and the advantages or
capabilities the organisation brings to these goals and activities.
Corporate-level strategy is concerned with an organisations
overall scope; business-level strategy is concerned with how to
compete; and operational strategy is concerned with how
resources, processes and people deliver corporate- and
business-level strategy.
Strategy work is done by managers throughout an
organisation, as well as specialist strategic planners and
strategy consultants.
Research on strategy context, content and process shows how
the analytical perspectives of economics, sociology and
psychology can all provide practical insights for approaching
strategy issues
The Exploring Strategy Model has three major elements:
understanding the strategic position, making strategic choices
for the future and managing strategy-in-action.
Strategic issues are best seen from a variety of perspectives,
as exemplified by the four strategy lenses of design, experience,
variety and discourse

Course 2

The PESTEL framework (1)

The PESTEL framework categorises environmental influences
into six main types:
political, economic,
social, technological,
environmental legal
Thus PESTEL provides a comprehensive list of influences on
the possible success or failure of particular strategies.
The PESTEL framework (2)
Political Factors: For example, Government policies, taxation
changes, foreign trade regulations, political risk in foreign
markets, changes in trade blocks (EU).
Economic Factors: For example, business cycles, interest
rates, personal disposable income, exchange rates,
unemployment rates, GDP trends.
Socio-cultural Factors: For example, population changes,
income distribution, lifestyle changes, consumerism, changes in
culture and fashion.
Technological Factors: For example, new discoveries and
technology developments, ICT innovations, rates of
obsolescence, increased spending on R&D.
Environmental (Green) Factors: For example,
environmental protection regulations, energy consumption,
global warming, waste disposal and re-cycling.
Legal Factors: For example, competition laws, health and
safety laws, employment laws, licensing laws, IPR laws
Key drivers of change
Key drivers for change:

 The environmental factors likely to have a high impact on the

success or failure of strategy.
For example, the birth rate is a key driver for those planning
nursery education provision in the public sector.
Typically key drivers vary by industry or sector
Using the PESTEL framework
Apply selectively identify specific factors which impact on the
industry, market and organisation in question.
Identify factors which are important currently but also consider
which will become more important in the next few years.
Use data to support the points and analyse trends using up to
date information
Identify opportunities and threats the main point f the
exercise!
Scenarios
Scenarios are detailed and plausible views of how the
environment of an organisation might develop in the future
based on key drivers of change about which there is a high level
of uncertainty.
Build on PESTEL analysis .
Do not offer a single forecast of how the environment will
change.
An organisation should develop a few alternative scenarios (2
4) to analyse future strategic options.
Carrying out scenario analysis (1)
Identify the most relevant scope of the study the relevant
product/market and time span.
Identify key drivers of change PESTEL factors that have the
most impact in the future but have uncertain outcomes.

 For each key driver select opposing outcomes where each

leads to very different consequences.
Develop scenario stories - That is, coherent and plausible
descriptions of the environment that result from opposing
outcomes
Identify the impact of each scenario on the organisation and
evaluate future strategies in
the light of the anticipated scenarios.
Scenario analysis is used in industries with long planning
horizons for example, the oil industry or airlines.
Industries, markets and sectors
An industry is a group of firms producing products and services
that are essentially the
same. For example, automobile industry and airline industry.
A market is a group of customers for specific products or
services that are essentially the same (e.g. the market for luxury
cars in Germany).
A sector is a broad industry group (or a group of markets)
especially in the public sector (e.g. the health sector)
Porters five forces framework
Porters five forces framework helps identify the attractiveness
of an industry in terms of five competitive forces:
the threat of entry,
the threat of substitutes,
the bargaining power of buyers,
the bargaining power of suppliers and
the extent of rivalry between competitors.
The five forces constitute an industrys structure.

The five forces framework (2)

The Threat of Entry & Barriers to Entry
The threat of entry is low when the barriers to entry
are high and vice versa.
The main barriers to entry are:
Economies of scale/high fixed costs
Experience and learning
Access to supply and distribution channels
Differentiation and market penetration costs
Government restrictions (e.g. licensing)
Entrants must also consider the expected retaliation from
organisations already in the market
Threat of Substitutes
Substitutes are products or services that offer a similar benefit to
an industrys products or services, but by a different process.
Customers will switch to alternatives (and thus the threat
increases) if:
The price/performance ratio of the substitute is superior (e.g.
aluminium maybe more expensive than steel but it is more cost
efficient for some car parts)
The substitute benefits from an innovation that improves
customer satisfaction (e.g. high speed trains can be quicker than
airlines from city centre to city centre)
The bargaining power of buyers
Buyers are the organisations immediate customers, not
necessarily the ultimate consumers.
If buyers are powerful, then they can demand cheap prices or
product / service improvements to reduce profits .
Buyer power is likely to be high when:
Buyers are concentrated
Buyers have low switching costs

Buyers can supply their own inputs (backward vertical

integration)
The bargaining power of suppliers
Suppliers are those who supply what organizations need to
produce the product or service. Powerful suppliers can eat into
an organisations profits.
Supplier power is likely to be high when:
The suppliers are concentrated (few of them).
Suppliers provide a specialist or rare input.
Switching costs are high (it is disruptive or expensive to
change suppliers).
Suppliers can integrate forwards (e.g. low cost airlines have
cut out the use of travel agents).
Rivalry between competitors
Competitive rivals are organisations with similar products and
services aimed at the same customer group and are direct
competitors in the same industry/market (they are distinct from
substitutes).
The degree of rivalry is increased when :
Competitors are of roughly equal size
Competitors are aggressive in seeking leadership
The market is mature or declining
There are high fixed costs
The exit barriers are high
There is a low level of differentiation
Implications of five forces analysis
Identifies the attractiveness of industries which
industries/markets to enter or leave.

 Identifies strategies to influence the impact of the forces, for

example, building barriers to entry by becoming more vertically
integrated.
The forces may have a different impact on different
organisations e.g. large firms can deal with barriers to entry
more easily than small firms.
Issues in five forces analysis
Apply at the most appropriate level not necessarily the whole
industry (e.g. the European low cost airline industry rather than
airlines globally).
Note the convergence of industries particularly in the high
tech sectors (e.g. digital industries - mobile
phones/cameras/mp3 players).
Note the importance of complementary products and services
(e.g. Microsoft Windows and McAfee computer security systems
are complements). This can almost be considered as a sixth
force
Types of industry (1)
Monopolistic industries - an industry with one firm and
therefore no competitive rivalry. A firm has monopoly power if it
has a dominant position in the market. For example, BT in the
UK fixed line telephone market.
Oligopolistic industries - an industry dominated by a few
firms with limited rivalry and in which firms have power over
buyers and suppliers.
Perfectly competitive industries - where barriers to entry are
low, there are many equal rivals each with very similar products,
and information about competitors is freely available. Few (if
any) markets are perfect but may have features of highly
competitive markets, for
example, mini-cabs in London.

Hypercompetitive industries - where the frequency, boldness

and aggression of competitor interactions accelerate to create a
condition of constant disequilibrium and change.
Hypercompetition often breaks out in otherwise oligopolistic
industries (e.g. mobile phones).
Organisations interact in a series of competitive moves in
hypercompetition which often becomes extremely rapid and
Strategic Groups
Strategic groups are organisations within an industry or sector
with similar strategic characteristics, following
similar strategies or competing on similar bases.
These characteristics are different from those in other strategic
groups in the same industry or sector.
There are many different characteristics that distinguish
between strategic groups.
Strategic groups can be mapped on to two dimensional charts
maps. These can be useful tools of analysis.
Uses of strategic group analysis
Understanding competition - enables focus on direct
competitors within a strategic group, rather than the whole
industry (E.g. Tesco will focus on Sainsburys and Asda; in RO:
Carrefour vs. Auchan / Cora)
Analysis of strategic opportunities - helps identify attractive
strategic spaces within an industry.
Analysis of mobility barriers i.e. obstacles to movement
from one strategic group to another. These barriers can be
overcome to enter more attractive groups. Barriers can be built
to defend an attractive position in a strategic group.
Market segments

A market segment is a group of customers who have similar

needs that are different from customer needs in
other parts of the market.
Where these customer groups are relatively small, such market
segments are called niches.
Customer needs vary. Focusing on customer needs that are
highly distinctive is one means of building a secure segment
strategy.
Customer needs vary for a variety of reasons these factors
can be used to identify distinct market segments.
Not all segments are attractive or viable market opportunities
evaluation is essential.
Who are the strategic customers?
A strategic customer is the person(s) at whom the strategy is
primarily addressed because they have the most influence over
which goods or services are purchased.
Examples:
For a food manufacturer it is the multiple retailers (e.g.
Carrefour) that are the strategic customers, not the ultimate
consumer.
For a pharmaceutical manufacturer it is the health authorities
and hospitals, not the final patient.
Critical success factors (CSFs)
Critical success factors are those factors that are either
particularly valued by customers or which provide a significant
advantage in terms of cost.
Critical success factors are likely to be an important source of
competitive advantage if an organization has them (or a
disadvantage if an organisation lacks them).
Different industries and markets will have different critical
success factors (e.g. in low cost airlines the CSFs will be

punctuality and value for money whereas in full service airlines it

is all about quality of service).
Blue ocean thinking
Blue oceans are new market spaces where competition is
minimised.
Red Oceans are where industries are already well defined
and rivalry is intense.
Blue Ocean thinking encourages entrepreneurs and managers
to be different by finding or creating market spaces that are not
currently being served.
A strategy canvas compares competitors according to their
performance on key success factors in order to develop
strategies based on creating new market spaces.
Course 3
Resource-based strategy
The resource-based view (RBV) of strategy asserts that the
competitive advantage and superior performance of an
organisation are explained by the distinctiveness of its
capabilities.
Resources and competences
Resources are the assets that organizations have or can call
upon (e.g. from partners or suppliers), that is, what we have .
Competences are the ways those assets are used or
deployed effectively, that is, what we do well.
Redundant capabilities
Capabilities, however effective in the past, can become less
relevant as industries evolve and change.
Such capabilities can become rigidities that inhibit change
and become a weakness.

Dynamic capabilities
Dynamic capability is the ability of an organisation to renew
and recreate its strategic capabilities to meet the needs of
changing
environments.
Threshold and distinctive capabilities (1)
Threshold capabilities are those needed for an organisation
to meet the necessary requirements to compete in a given
market and achieve parity with competitors in that market
qualifiers.
Distinctive capabilities are those that critically underpin
competitive advantage and that others cannot imitate or obtain
winners.
Core competences
Core competences1 are the linked set of skills, activities and
resources that, together:
deliver customer value
differentiate a business from its competitors
potentially, can be extended and developed as markets
change or new opportunities arise.
Strategic capabilities and competitive advantage
The four key criteria by which capabilities can be assessed in
terms of providing a basis for achieving sustainable competitive
advantage are:
value,
rarity,
inimitability and
non-substitutability

VRIN1
V Value of strategic capabilities
Strategic capabilities are of value when they:
take advantage of opportunities and neutralise threats
provide value to customers
provide potential competitive advantage
at a cost that allows an organisation to realize acceptable
levels of return
R Rarity
Rare capabilities are those possessed uniquely by one
organisation or by a few others only. (E.g. a company may have
patented products, have supremely talented people or a
powerful
brand.)
Rarity could be temporary. (Eg: Patents expire, key individuals
can leave or brands can be de-valued by adverse publicity.)
I Inimitability
Inimitable capabilities are those that competitors find difficult to
imitate or obtain.
Competitive advantage can be built on unique resources (a
key individual or IT system) but these may not be sustainable
(key people leave or others acquire the same systems).
Sustainable advantage is more often found in competences
(the way resources are managed, developed and deployed) and
the
way competences are linked together and integrated.
N - Non-substitutability
Competitive advantage may not be sustainable if there is a
threat of substitution.
Product or service substitution from a different industry/market.
For example, postal services partly substituted by e-mail.
Competence substitution. For example, a skill

substituted by expert systems or IT solutions

Organisational knowledge is the collective intelligence,
specific to an organisation, accumulated through both formal
systems and
the shared experience of people in that organisation.
Some of this knowledge is Tacit knowledge that is, more
personal, context-specific and hard to formalise and
communicate so it is difficult to imitate, for example, the
knowledge and relationships in a top R&D team.
Benchmarking is a means of understanding how an
organisation compares with others typically competitors.
Two approaches to benchmarking:
Industry/sector benchmarking comparing performance
against other organisations in the same industry/sector against a
set of
performance indicators.
Best-in-class benchmarking - comparing an organisations
performance or capabilities against best-in-class performance
wherever that is found even in a very different industry.
The value chain
The value chain describes the categories of activities within
an organisation which, together, create a product or service.
The value chain invites the strategist to think of an organisation
in terms of sets of activities sources of competitive advantage
can be analysed in any or all of these activities.
Uses of the value chain
A generic description of activities understanding the discrete
activities and how they contribute to consumer benefit and how
they add to cost.

 Identifying activities where the organization has particular

strengths or weaknesses
Analysing the competitive position of the organisation using the
VRIN criteria thus identifying sources of sustainable
advantage.
Looking for ways to enhance value or decrease cost in value
activities (e.g. outsourcing)
The value network
The value network comprises the set of interorganisational
links and relationships that are necessary to create a product or
service.
Competitive advantage can be derived from linkages within the
value network.
Uses of the value network
Understanding cost/price structures across the value network
analysing the best area of focus and the best business model.
Identifying profit pools within the value network and seek to
exploit these.
The make or buy decision: deciding which activities to do inhouse and which to outsource.
Partnering and relationships deciding who to work with and
the nature of these relationships.
Mapping activity systems (1)
Identify higher order strategic themes that is, how the
organisation meets the critical success factors in the market.
Identify the clusters of activities that underpin these themes
and how they fit together.
Map this in terms of how activity systems are interrelated.
Using activity system maps
A means of identifying strategic capabilities in terms of
linkages of activities

 Internal and external links are identified (e.g. in terms of the

needs of customers).
Therefore helps identify bases of competitive advantage.
And sustainable advantage, for example, in terms of bases of
inimitability.
SWOT analysis
SWOT summarises the strengths, weaknesses, opportunities
and threats likely to impact on strategy development.
INTERNAL STRENGTHS WEAKNESSES
ANAYSIS
EXTERNAL OPPORTUNITIES THREATS
ANALYSIS
Uses of SWOT analysis
Key environmental impacts are identified using the analytical
tools explained in Chapter 2.
Major strengths and weaknesses are identified using the
analytic tools explained in Chapter 3.
Scoring (e.g. + 5 to - 5) can be used to assess the
interrelationship between environmental impacts and the
strengths and weaknesses.
SWOT can be used to examine strengths, weaknesses,
opportunities and threats in relation to competitors.
SWOT can be used to generate strategic options using a
TOWS matrix.
Dangers in a SWOT analysis
Long lists with no attempt at prioritisation.
Over generalisation sweeping statements often based on
biased and unsupported opinions.

 SWOT is used as a substitute for analysis it should result

from detailed analysis using the frameworks in Chapters 2 and
3.
SWOT is not used to guide strategy it is seen as an end in
itself.
Developing strategic capabilities (1)
Internal capability development:
Leveraging capabilities identifying capabilities in one part of
the organisation and transferring them to other parts (sharing
best practice).
Stretching capabilities - building new products or services out
of existing capabilities.
External capability development adding capabilities through
mergers, acquisitions or alliances.
Ceasing activities non-core activities can be stopped,
outsourced or reduced in cost.
Monitor outputs and benefits to understand sources of
consumer benefit and enhance anything that contributes to this.
Managing the capabilities of people training, development
and organisation learning.
Course 4
A mission statement aims to provide employees and
stakeholders with clarity about the overriding purpose of the
organisation
A mission statement should answer the questions:
What business are we in?
How do we make a difference?
Why do we do this?

A vision statement is concerned with the desired future state of

the organisation; an aspiration that will enthuse, gain
commitment
and stretch performance.
A vision statement should answer the question :
What do we want to achieve?
A statement of corporate values should communicate the
underlying and enduring core principles that guide an
organisations strategy and define the way that the organisation
should operate.
Such core values should remain intact whatever the
circumstances and constraints faced by the organisation.
Objectives are statements of specific outcomes that are to be
achieved.
Objectives are frequently expressed in:
financial terms (e.g. desired profit levels)
market terms (e.g. desired market share) and increasingly
social terms (e.g. corporate social responsibility targets)
Issues in setting objectives
Do objectives need to be specific and quantified targets?
The need to identify core objectives that are crucial for survival.
The need for a hierarchy of objectives that cascade down the
organisation and define specific objectives at each level.
Corporate governance is concerned with the structures and
systems of control by which managers are held accountable to
those who have a legitimate stake in an organisation.
The growing importance of governance
The separation of ownership and management control
defining different roles in governance.
Corporate failures and scandals (e.g. Enron) focussing
attention on governance issues.

 Increased accountability to wider stakeholder interests and the

need for corporate social responsibility (e.g. green issues).
The principal-agent model
Governance can be seen in terms of the principal agent model
Principals pay agents to act on their behalf (e.g.
beneficiaries/trustees pay investment managers to manage
funds, Boards of Directors pay executives to run a company).
Agents may act in their own self interest.
Issues in governance (1)
The key challenge is to align the interests of agents with those
of the principals.
Misalignment of incentives and control e.g. beneficiaries may
require long term growth but executives may be seeking short
term profit.
Responsibility to whom should executives pursue solely
shareholder aims or serve a wider constituency of stakeholders?
Who are the shareholders should boards respond to the
demands of institutional investment managers or the needs of
the
ultimate beneficiaries?
The role of institutional investors should they actively
intervene in strategy?
Establishing the specific role of the board in particular the
role of non-executive directors.
Scrutiny and control statutory requirements and voluntary
codes to regulate boards.
The role of boards
Operate independently of the management the role of nonexecutives is crucial.
Be competent to scrutinise the activities of managers.

 Have time to do their job properly.

Behave appropriately given expectations for trust, role fluidity,
collective responsibility, and performance.
Corporate social responsibility (CSR) is the commitment by
organisations to behave ethically and contribute to economic
development while improving the quality of life of the workforce
and their families as well as the local community and society at
large.1
The ethics of individuals and managers
Ethical issues have to be faced at the individual level :
The responsibility of an individual who believes that the
strategy of the organisation is unethical resign, ignore it or
take action.
Whistle-blowing - divulging information to the authorities or
media about an organization if wrong doing is suspected.
Stakeholder mapping identifies stakeholder expectations and
power and helps in understanding political priorities.
Stakeholder mapping issues
Determining purpose and strategy whose expectations need
to be prioritised?
Do the actual levels of interest and power reflect the corporate
governance framework?
Who are the key blockers and facilitators of strategy?
Is it desirable to try to reposition certain stakeholders?
Can the level of interest or power of key stakeholders be
maintained?
Will stakeholder positions shift according to the issue/strategy
being considered.

Power is the ability of individuals or groups to persuade, induce

or coerce others into following certain courses of action.
Course 5
A strategic business unit (SBU) supplies goods or services for a
distinct domain of activity.
A small business has just one SBU.
A large diversified corporation is made up of multiple
businesses (SBUs).
SBUs can be called divisions or profit centres
SBUs can be identified by:
Market based criteria (similar customers, channels and
competitors).
Capability based criteria (similar strategic capabilities).
The purpose of SBUs
To decentralise initiative to smaller units within the corporation
so SBUs can pursue their own distinct strategy.
To allow large corporations to vary their business strategies
according to the different needs of external markets.
To encourage accountability each SBU can be held
responsible for its own costs, revenues and profits.
Generic strategies
Porter introduced the term Generic Strategy to mean basic
types of competitive strategy that hold across many kinds of
business situations.
Competitive strategy is concerned with how a strategic
business unit achieves competitive advantage in its domain of
activity.

 Competitive advantage is about how an SBU creates value

for its users both greater than the costs of supplying them and
superior
to that of rival SBUs.
3Generic Strategies:
1.Cost-leadership strategy involves becoming the lowest-cost
organisation in a domain of activity.
Four key cost drivers that can help deliver cost leadership:
Lower input costs.
Economies of scale.
Experience.
Product process and design.
2.Differentiation involves uniqueness along some dimension
that is sufficiently valued by customers to allow a price premium.
Two key issues:
The strategic customer on whose needs the differentiation is
based.
Key competitors who are the rivals and who may become a
rival.
3.A focus strategy targets a narrow segment of domain of an
activity and tailors its products or services to the needs of that
specific segment to the exclusion of others.
Two types of focus strategy:
cost-focus strategy (e.g. Ryanair).
differentiation focus strategy (e.g. Ferrari).
Successful focus strategies depend on at least one of three key
factors:
Distinct segment needs.
Distinct segment value chains.

 Viable segment economics.

Stuck in the middle?
Porters argues:
It is best to choose which generic strategy to adopt and then
stick rigorously to it.
Failure to do this leads to a danger of being stuck in the
middle i.e. doing no strategy well.
The argument for pure generic strategies is controversial. Even
Porter acknowledges that the strategies can be combined (e.g. if
being unique costs nothing).
Combining generic strategies
A company can create separate strategic business units each
pursuing different generic strategies and with different cost
structures.
Technological or managerial innovations where both cost
efficiency and quality are improved.
Competitive failures if rivals are similarly stuck in the middle
or if there is no significant competition then middle strategies
may be
OK.

Strategy clock - differentiation

Strategies in this zone seeks to provide products that offer
benefits that differ from those offered by competitors.
A range of alternative strategies from:
differentiation without price premium (12 oclock) used to
increase market share.
differentiation with price premium (1 oclock) used to
increase profit margins.
focused differentiation (2 oclock) used for customers that
demand top quality and will pay a big premium.
Strategy clock low price
Low price combined with:

low perceived product benefits focusing on price sensitive

market segments a no frills strategy typified by low cost
airlines like
Ryanair.
lower price than competitors while offering similar product
benefits aimed at increasing market share typified by
Carrefour
in retailing.
Strategy clock - hybrid
Seeks to simultaneously achieve differentiation and low price
relative to competitors.
Hybrid strategies can be used:
to enter markets and build position quickly.
as an aggressive attempt to win market share.
to build volume sales and gain from mass production.
Strategy clock non-competitive
Increased prices without increasing service/product benefits.
In competitive markets such strategies will be doomed to
failure.
Only feasible where there is strategic lock-in
or a near monopoly position.
Strategic lock-in is where users become dependent on a
supplier and are unable to use another supplier without
substantial
switching costs.
Lock-in can be achieved in two main ways:
Controlling complementary products or services. E.g. Cheap
razors that only work with one type of blade.

Creating a proprietary industry standard. E.g. Microsoft with

its Windows operating system.
Hypercompetition describes markets with continuous
disequilibrium and change e.g. pop music or consumer
electronics.
Successful hypercompetition demands speed and initiative
rather than defensiveness.
Hypercompetition describes markets with continuous
disequilibrium and change e.g. pop music or consumer
electronics.
Successful hypercompetition demands speed and initiative
rather than defensiveness.
Game theory encourages an organisation to consider
competitors likely moves and the implications of these moves
for its own
strategy.
Game theory encourages managers to consider how a game
can be transformed from loselose competition to win
wincooperation.
Four principles:
Ensure repetition.
Signalling.
Deterrence.
Commitment.
In hypercompetitive conditions sustainable competitive
advantage is difficult to achieve. Competitors need to be able to
cannibalise,
make small moves, be unpredictable and mislead their rivals.

 Cooperative strategies may offer alternatives to competitive

strategies or may run in parallel.
Game theory encourages managers to get in the mind of
competitors and think forwards and reason backwards.
Course 6

Market penetration refers to a strategy of

increasing share of current markets with the
current product range.
This strategy:
builds on established strategic capabilities;
means the organisations scope is unchanged;
increased power (leads to greater market share and with
buyers and suppliers);
economies of scale (and provides greater and experience
curve benefits).
Constraints of market penetration
Retaliation from competitors

Legal constraints
Economic Constraints (recession or funding crisis)
Consolidation refers to a strategy by which an organisation
focuses defensively on their current markets with current
products.
Retrenchment refers to a strategy of withdrawal from marginal
activities in order to concentrate on the most valuable segments
and products within their existing business.
Product development refers to a strategy by which an
organisation delivers modified or new products to existing
markets.
This strategy :
involves varying degrees of related diversification (in terms of
products);
can be expensive and highly risky
may require new strategic capabilities
typically involves project management risks.
Market development refers to a strategy by which an
organisation offers existing products to new markets
This strategy involves varying degrees of related
diversification (in terms of markets) ; it
may also entail some product development (e.g. new
styling or packaging);
can take the form of attracting new users (e.g. extending
the use of aluminium to the automobile industry);
can take the form of new geographies (e.g. extending the

market covered to new areas international markets

being the most important);
must meet the critical success factors of the new market
if it is to succeed;
may require new strategic capabilities especially in marketing.
Conglomerate (or unrelated) diversification takes the
organization beyond both its existing markets and its
existing products and radically increases the organisations
scope.
Drivers for diversification
Exploiting economies of scope efficiency gains through
applying the organisations existing resources or competences
to new
markets or services.
Stretching corporate management competences (dominant
logics).
Exploiting superior internal processes.
Increasing market power.
Synergy refers to the benefits gained where activities or assets
complement each other so that their combined effect is greater
than the sum of the parts.
N.B. Synergy is often referred to as the
2 + 2 = 5 effect.
Value-destroying diversification drivers Some drivers for
diversification which may involve value destruction (negative
synergies):
Responding to market decline,
Spreading risk and

N.B. Despite these being common justifications for

diversifying, finance theory suggests these are misguided.
Managerial ambition.
Vertical integration describes entering activities where the
organisation is its own supplier or customer.
Backward integration refers to development into activities
concerned with the inputs into the companys current business.
Forward integration refers to development into activities
concerned with the outputs of a companys current business.
Outsourcing is the process by which activities previously
carried out internally are subcontracted to external suppliers
The decision to integrate or subcontract rests on the balance
between two distinct factors:
Relative strategic capabilities:
Does the subcontractor have the potential to do the work
significantly better?
Risk of opportunism:
Is the subcontractor likely to take advantage of the relationship
over time?
Value-adding activities
Envisioning Coaching and facilitating
Providing central services and resources
Intervening
Value-destroying activities
Adding management costs
Adding bureaucratic complexity
Obscuring financial performance
Corporate rationales (2)

 The portfolio manager operates as an active investor in a

way that shareholders in the stock market are either too
dispersed or too
inexpert to be able to do.
The synergy manager is a corporate parent seeking to
enhance value for business units by managing synergies across
business
units.
The parental developer seeks to employ its own central
capabilities to add value to its businesses.

Portfolio matrices
Growth/Share (BCG) Matrix
Directional Policy (GE-McKinsey) Matrix
Parenting Matrix
The growth share (or BCG) matrix (2)
A star is a business unit which has a high market share in a
growing market.
A question mark (or problem child) is a business unit in a
growing market, but it does not have a high market share.
A cash cow is a business unit that has a high market share in
a mature market.
A dog is a business unit that has a low market share in a static
or declining market.
Problems with the BCG matrix:
definitional vagueness,
capital market assumptions,
motivation problems,
self-fulfilling prophecies and

possible links to other business units.

The parenting matrix (2)
1. Heartland business units - the parent understands these well
and can add value. The core of future strategy.
2. Ballast business units - the parent understands these well but
can do little for them. They could be just as successful as
independent companies.
If not divested, they should be spared corporate bureaucracy.
3. Value-trap business units are dangerous. There are attractive
opportunities to add value but the parents lack of feel will result
in more harm than good. The parent needs new capabilities to
move value-trap businesses into the heartland. It is easier to
divest to another corporate parent which could add value.
4. Alien business units are misfits. They offer little opportunity to
add value and the parent does not understand them. Exit is the
best strategy.
Course 7
International strategy refers to a range of options for operating
outside an organisations country of origin.
Global strategy involves high coordination of extensive
activities dispersed geographically in many countries around the
world.
Porters Diamond explains why some locations tend to
produce firms with sustained competitive advantages in some
industries more than others.
The four drivers in Porters Diamond stem from:
local factor conditions
local demand conditions

local related and supporting industries

local firm strategy structure and rivalry.
Global sourcing refers to purchasing services and components
from the most appropriate suppliers around the world regardless
of their location.
The advantages include:
Cost advantages include labour costs, transportation and
communications costs, taxation and investment incentives.
Unique local capabilities.
National market characteristics and reputation
The globallocal dilemma relates to the extent to which
products and services may be standardised across national
boundaries or
need to be adapted to meet the requirements of specific national
markets.
Four elements of the PESTEL framework are particularly
important in comparing countries for entry:
Political. Political environments vary widely between countries
and can alter rapidly.
Economic. Key comparators are levels of Gross Domestic
Product and disposable income which indicate the potential size
of the market.
Social. Factors like population characteristics and lifestyle as
well as cultural differences.
Legal. Countries vary widely in their legal regime.
The CAGE framework

Cultural distance
Administrative and political distance
Geographic distance
Economic/ wealth Distance
Assessing country markets
Country markets can be assessed according to three criteria:
Market attractiveness to the new entrant
The likelihood and extent of defenders reaction
Defenders clout the relative power of defenders to fight
back.
The staged international expansion model proposes a
sequential process whereby companies gradually increase their
commitment
to newly entered markets, as they build market knowledge and
capabilities. This is challenged by two phenomena:
Born-global firms - new small firms that internationalise
rapidly (usually in new technologies)
Emerging-country multinationals - building unique
capabilities in the home market but exploiting them in
international markets very quickly.
Modes of entry
Exporting
Joint ventures and alliances
Licensing
Foreign direct investment
Exporting

Advantages
No need for operational facilities in host country
Economies of scale in the home country
Internet can facilitate exporting marketing opportunities
Disadvantages
Lose any location advantages in the host country
Dependence on export intermediaries
Exposure to trade barriers
Transportation costs
Joint ventures and alliances
Advantages
Shared investment risk
Complementary resources
Maybe required for market entry
Disadvantages
Difficult to find good partner
Relationship management
Loss of competitive advantage
Difficult to integrate and coordinate
Foreign direct investment
Advantages
Full control
Integration and
coordination possible
Rapid market entry through acquisitions
Greenfield investments are possible and may be subsidised
Disadvantages
Substantial investment and commitment
Acquisitions may create integration/ coordination issues
Greenfield investments are time consuming and unpredictable

Licensing
Advantages
Contractual source of income
Limited economic and financial exposure
Disadvantages
Difficult to identify good partner
Loss of competitive advantage
Limited benefits from host nation
Internationalisation and performance
Inverted U-curve complexity may erode the advantages of
internationalisation
Service sector disadvantages internationalisation may only
work
well for manufacturing firms
Internationalisation and product diversity
Internationalisation potential in any particular market is
determined by Yips four drivers: market, cost, government
and competitors strategies.
Sources of advantage in international strategy can be drawn
from both global sourcing through the international value
network and national sources of advantage, as captured in
Porters Diamond.
There are four main types of international strategy, varying
according to extent of coordination and geographical
configuration: simple export, complex export, multidomestic and
global.
Market selection for international entry or expansion
should be based on attractiveness, multidimensional
measures of distance and expectations of competitor
retaliation.
Modes of entry into new markets include export,

licensing and franchising, joint ventures and overseas

subsidiaries.
Internationalisation has an uncertain relationship to financial
performance, with an inverted U-curve warning against overinternationalisation.
Subsidiaries in an international firm can be managed by
portfolio methods just like businesses in a diversified firm.
Course 8

Advantages of organic development

Knowledge and learning can be enhanced.
Spreading investment over time easier to finance.
No availability constraints no need to search for suitable
partners or acquisition targets.
Strategic independence less need to make compromises or
accept strategic constraints.
Corporate entrepreneurship refers to radical change in the
organisations business, driven principally by the organisations
own capabilities.
For example, Amazons development of Kindle using its own in
house development.

 A merger is the combination of two previously separate

organisations, typically as more or less equal partners.
An acquisition involves one firm taking over the ownership
(equity) of another, hence the alternative term takeover
Motives for M&A:Financial,strategic, managerial
Strategic motives can be categorised in three ways:
Extension of scope in terms of geography, products or
markets.
Consolidation increasing scale, efficiency and market
power.
Capabilities enhancing technological knowhow (or other
competences).
There are three main financial motives:
Financial efficiency a company with a strong balance sheet
(cash rich) may acquire/merge with a company with a weak
balance sheet (high debt).
Tax efficiency reducing the combined tax burden.
Asset stripping or unbundling selling off bits of the acquired
company to maximise asset values.
M&A may serve managerial self-interest for two reasons:
Personal ambition financial incentives tied to short-term
growth or share-price targets; boosting personal reputations;
giving friends
and colleagues greater responsibility or better jobs.

Bandwagon effects managers may be branded as

conservative if they dont follow a M&A trend; shareholder
pressure to merge or
acquire; the company may itself become a takeover target.
Target choice in M&A
Two main criteria apply:
Strategic fit does the target firm strengthen
or complement the acquiring firms strategy? (N.B. It is easy to
over-estimate this potential synergy).
Organisational fit is there a match between the management
practices, cultural practices and staff characteristics of the target
and the acquiring firm?
Valuation in M&A
Getting the offer price correct is essential:
Offer the target too little, and the bid will be unsuccessful.
Pay too much and the acquisition is unlikely to make a profit
net of the original acquisition price (the winners curse).
Acquirers do not simply pay the current market value of the
target, but also pay a premium for control.
Integration in M&A
Approaches to integration:
Absorption strong strategic interdependence and little need
for organisational autonomy. Rapid adjustment of the acquired
companys strategies, culture and systems.
Preservation little interdependence and a high need for
autonomy. Old strategies, cultures and systems can be
continued much as before.
Symbiosis strong strategic interdependence, but a high

need for autonomy. Both the acquired firm and acquiring

firm learn and adopt the best qualities from each other.
Holding a residual category with little to gain by integration.
The acquisition will be held temporarily before being sold on, so
the acquired unit is left largely
alone.
A strategic alliance is where two or more organisations share
resources and activities to pursue a strategy.
Collective strategy is about how the whole network of
alliances of which an organization is a member competes
against rival networks
of alliances.
Collaborative advantage is about managing alliances better
than competitors.
Types of strategic alliance
There are two main kinds of ownership in strategic alliances:
Equity alliances involve the creation of a
new entity that is owned separately by the partners involved.
Non-equity alliances are typically looser, without the
commitment implied by ownership.
Equity alliances
The most common form of equity alliance is the joint venture,
where two organisations remain independent but set up a new
organization jointly owned by the parents.
A consortium alliance involves several partners setting up a
venture together.
Non-equity alliances
Non-equity alliances are often based on contracts.
Three common forms of non-equity alliance:

Franchising.
Licensing.
Long-term subcontracting.
Motives for alliances
Scale alliances lower costs, more bargaining power and
sharing risks.
Access alliances partners provide needed capabilities (e.g.
distribution outlets or licenses to brands).
Complementary alliances bringing together complementary
strengths to offset the other partners weaknesses.
Collusive alliances to increase market
power. Usually kept secret to evade competition regulations.
Strategic alliance processes
Two themes are vital to success in alliances:
Co-evolution the need for flexibility and change as the
environment, competition and strategies of the partners evolve.
Trust partners need to behave in a trustworthy fashion
throughout the alliance.
Comparing acquisitions, alliances and
organic development
Four key factors in choosing the method of strategy
development :
Urgency internal development may be too slow,
alliances can accelerate the process but acquisitions are
quickest.
Uncertainty an alliance means risks are shared and thus a
failure does not mean the full cost is lost.

 Type of capabilities acquisitions work best with hard

resources (e.g. production units) rather than soft resources
(e.g. people). Culture clash is the big issue.
Modularity of capabilities if the needed capabilities can be
clearly separated from the rest of the organisation an alliance
may be best.
Course 9
Suitability is concerned with assessing which proposed
strategies address the key opportunities & constraints an
organisation faces, through an understanding of the strategic
position of an
organisation.
It is concerned with the overall rationale of the strategy:
Does it exploit the opportunities in the environment and avoid
the threats?
Does it capitalise on the organisations strengths and strategic
capabilities and avoid or remedy the weaknesses?\
Suitability screening techniques
There are several useful techniques:
Ranking.
Using scenarios.
Screening for competitive advantage.
Decision trees.
Life cycle analysis.\
Competitive position within an industry can be:

 A dominant position which is rare in the private sector unless

there is a quasi-monopoly position. In the public sector there can
be a legalised monopoly status.
A strong position where organisations can follow strategies of
their own choice without too much concern for competition.
A favourable position where no single competitor stands out,
but leaders are better placed.
A tenable position can be maintained by specialisation or
focus.
A weak position where competitors are too small to survive
independently in the long run.
Acceptability is concerned with whether the expected
performance outcomes of a proposed strategy meet the
expectations of stakeholders.
There are three key aspects of acceptability - the 3 Rs:
Risk.
Return.
Reactions (of stakeholders).
Risk concerns the extent to which the outcomes of a strategy
can be predicted.
Risk can be assessed using:
Sensitivity analysis (what-if analysis).
Financial ratios e.g. gearing and liquidity.
Break-even analysis.
Returns are the financial benefits which stakeholders are
expected to receive from a strategy.
Different approaches to assessing return:
Financial analysis.

Shareholder value analysis.

Costbenefit analysis.
Real options.\
Advantages of real options
There are four main benefits:
Bringing strategic and financial evaluation closer together.
Valuing emerging options.
Coping with uncertainty.
Offsetting conservatism.
Reaction of stakeholders
Stakeholder mapping and the power/interest matrix can be
used to:
understand the political context of strategies.
understand the political agenda.
gauge the likely reaction of stakeholders to specific
strategies.
If key stakeholders find a strategy to be
unacceptable then it is likely to fail
Feasibility is concerned with whether a strategy could work in
practice i.e. whether an organisation has the capabilities to
deliver a
strategy
Two key questions:
Do the resources and competences currently exist to
implement the strategy effectively?

 If not, can they be obtained?

Financial feasibility
Need to consider:
The funding required.
Cash flow analysis and forecasting.
Financial strategies needed for the different phases of the
life cycle of a business.
People and skills (1)
Three questions arise:
Do people in the organisation currently have the competences
to deliver a proposed strategy?
Are the systems to support those people fit for the strategy?
If not, can the competences be obtained or developed?
Critical issues that need to be considered:
Work organisation will this need to change?
Rewards are the incentives appropriate?
Relationships will people interact differently?
Training and development are current systems
appropriate?
Staffing are the levels and skills of the staff appropriate?
Integrating resources
The success of a strategy depends on the management of
many resource areas, for example:
people,

finance,
physical resources,
information,
technology and
resources provided by suppliers and partners.
It is essential to integrate resources inside the organisation
and in the wider value network.
Evaluation criteria
Four qualifications:
Conflicting conclusions and the need for management
judgement.
Consistency between the different elements of a strategy is
essential.
The implementation and development of strategies might
reveal unanticipated problems.
Strategy development in practice it isnt always a logical or
even rational process.
Course 10
An intended strategy is deliberately formulated or planned by
managers.
This may be the result of strategic leadership, strategic planning
or the external imposition of strategy.
Strategic leadership

Strategy may be the deliberate intention of a leader. This may

manifest itself in different ways:
Strategic leadership as command.
Strategic leadership as vision.
Strategic leadership as decision-making.
Strategic leadership as symbolic
Strategic planning systems take the form of systematised,
step-by-step, procedures to develop an organisations strategy.
Stages of strategic planning
Initial guidelines from corporate centre
Business-level planning
Corporate-level integration of business plans
Financial and strategic targets agreed
The role of strategic planning
Strategic planning may play several roles within an organisation:
Formulating strategy - a means by which managers can
understand strategic issues.
Learning - a means of questioning and challenging the takenfor-granted.
Co-ordinating business-level strategies within an overall
corporate strategy.
Communicating intended strategy and providing agreed
objectives or strategic milestones.
Benefits of planning
There are additional psychological benefits:
can provide opportunities for involvement,
leading to a sense of ownership,

provides security to managers and

re-assures managers that the strategy is logical.
Dangers associated with planning
Confusing strategy with the plan.
Detachment from reality.
Paralysis by analysis.
Lack of ownership.
Dampening of innovation.
Externally imposed strategy
Strategies may be imposed by powerful external
stakeholders:
Government can determine strategy in public sector
organisations (e.g. police).
Government can shape strategy in regulated
industries (e.g. utilities).
Multinational companies may have elements of strategy
imposed (e.g. forming local alliances).
Business units may have their strategy imposed by head
office (e.g. part of a global strategy).
Venture capital firms may impose strategy on companies they
buy into.
An emergent strategy comes about through a series of
decisions - a pattern which becomes clear over time:
not a grand plan, but a developing pattern in a stream of
decisions.

Logical incrementalism is the development of strategy by

experimentation and learning from partial commitments rather
than through formulations of total strategies.
Logical incrementalism (2)
Four characteristics of logical incrementalism:
Environmental uncertainty constant scanning of the
environment and adapting to change.
General goals avoiding too early commitment to specific
goals.
Experimentation side bet ventures to test
out new strategies.
Co-ordinating emergent strategies drawing together an
emerging pattern of strategy from subsystems.
Learning organisation an organization that is capable of
continual regeneration from the variety of knowledge,
experience
and skills within a culture that encourages questioning and
challenge.
The political view of strategy development is that strategies
develop as the outcome of bargaining and negotiation among
powerful interest groups (or stakeholders).
Strategy continuity and prior decisions
Continuity is likely to be a feature of strategy because of:
Emergent strategy as managed continuity each strategic
move is informed by the rationale of the previous move.
Path-dependent strategy development strategic
decisions can be a result of historical pre-conditions.

Organisation culture and strategy development strategy

is the outcome of the taken-for-granted assumptions, routines
and
behaviours in organisations.
Strategy and organisational systems
Strategy development as the outcome of managers making
sense of and dealing with strategic issues by applying
established ways
of doing things.
Strategy development is influenced by the systems and
routines with which managers are familiar in their particular
context.
Two useful explanations of how this occurs:
The resource allocation process (RAP).
The attention-based view (ABV).
Challenges for managing strategy development
Multiple strategy development processes most organisations
will develop strategy involving several approaches.
There is no one right way to develop strategy but the context
can be important.
Organisational ambidexterity exploiting existing capabilities
while exploring new capabilities.
Perceptions of strategy development strategy will be seen
differently by different people:
Senior executives see strategy in terms of intended, rational,
analytic planned processes, whereas middle managers see
strategy as the result of cultural and political processes.

Managers in public-sector organisations see strategy as

externally imposed because their organisations are answerable
to government
bodies.
People who work in family businesses see more evidence of
the influence of powerful individuals, who may be the owners of
the businesses.
Strategy development processes will differ according to context:
Organisational characteristics differ in size, technology and
diversity.
The nature of the environment differs it may be stable or
dynamic; simple or complex.
Life cycle effects development processes will evolve and
change over the life cycle.
Managing intended and emergent strategy
There are four important implications:
Awareness is the intended strategy actually being
realised?
The role of strategic planning needs to be clear (and it
may be more about co-ordinating emergent strategies).
Managing emergent strategy even established routines
and cultural norms can be managed.
The challenge of strategic drift recognizing that strategy
can come adrift and making the required changes in culture and
the paradigm.
It is important to distinguish between intended strategy the
desired strategic direction deliberately planned by managers
and emergent strategy which may develop in a less deliberate

way from the behaviours and activities inherent within an

organisation.
Course 11
Key elements in managing strategic change
Diagnosis
Leading and managing change
Levers for change
Managing change
Managing change key issues
Four key premises:
Strategy matters in identifying the need for change and
the direction of change.
Context matters the right approach to change depends on
the circumstances.
Inertia and resistance getting people to change from
existing ways of doing things is essential.
Leadership matters good leadership of change at all
levels is needed.
Diagnosing the change context
Types of change
Context of change
Forcefield analysis
Types of strategic change
Four types of strategic change:
Adaptation can be accommodated with the existing culture
and can occur incrementally.

Reconstruction rapid change but without fundamentally

changing the culture.
Revolution fundamental changes in both strategy and
culture.
Evolution cultural change is required but this can be
accomplished over time.
A forcefield analysis provides an initial view of change
problems that need to be tackled by identifying forces for and
against change.
Various concepts and frameworks are useful here:
Mapping activity systems.
Stakeholder mapping.
The culture web.
The 7-S framework
Leadership is the process of influencing an organisation (or
group within an organisation) in its efforts towards achieving an
aim or goal.
Three key roles in leading strategic change:
Envisioning future strategy.
Aligning the organisation to deliver that strategy.
Embodying change.\
Newcomers and outsiders
Outsiders can also play an important role in strategic change.
These could include:
A new chief executive from outside the organisation can bring
a new perspective.

 New management from outside can also increase the diversity

of ideas.
Consultants are used to help formulate strategy or to plan the
change process.
Styles of strategic leadership
Situational leadership successful strategic leaders are able
to adjust their style of leadership to the context they face.
Two approaches:
Theory E: the pursuit of economic value; top-down; hard
levers of change; emphasis on changes of structures and
systems, financial incentives, portfolio changes, downsizing.
Theory O: the development of organisational capability;
emphasis on culture change, learning, participation in change
programmes and experimentation.
A combination of the two approaches may be required and can
be beneficial.
Styles of managing change (1)
Education and delegation Small group briefings to discuss
and explain things. The aim is to gain support for change by
generating
understanding and commitment.
Advantages Spreads support for change. Ensures a wide
base of understanding.
Disadvantages Takes a long time. For radical change it may
not be enough to convince people of the need for change. Easy
to voice support, then do nothing.
Collaboration Widespread involvement of the employees on
decisions about what and how to change.
Advantages Spreads not only support but ownership of
change by increasing levels of involvement.

 Disadvantages Time-consuming. Little control over

decisions made. May lead to change within existing paradigm.
Participation Involvement of employees in how to deliver the
desired changes. May include limited collaboration over aspects
of how to change as well as what to change.
Advantages Spreads ownership and support of change, but
within a more controlled framework. Easier to shape decisions.
Disadvantages Can be perceived as manipulation.
Direction Change leaders make the majority of decisions
about what to change and how. Use of authority to direct
change.
Advantages Less time-consuming. Provides a clear change
of direction and focus.
Disadvantages Potentially less support and commitment, and
therefore proposed changes may be resisted
Coercion Use of power to impose change.
Advantages Allows for prompt action.
Disadvantages Unlikely to achieve buy-in without a crisis.
Levers for change
A compelling case for change
Challenging the taken-for-granted
Changing operational processes and routines
Symbolic changes
Power and political systems
Change tactics

 Timing:
Building on an actual or perceived crisis.
Exploiting windows of opportunity.
Symbolic signalling of time frames.
Visible short-term wins the demonstration of such wins can
galvanise commitment to the wider change strategy.
A turnaround strategy is where the emphasis is on speed of
change and rapid cost reduction and/or revenue generation.
Elements of turnaround strategies:
Crisis stabilisation.
Management changes.
Gaining stakeholder support.
Clarifying the target market(s) and core
products.
Financial restructuring.
Managing revolutionary change
Managing change in such circumstances is likely to involve:
Clear strategic direction.
Combining rational and symbolic levers.
Multiple styles of change management.
Working with aspects of the existing culture.
Monitoring change.
Managing evolutionary change
Managing change as evolution involves transformational
change, but implemented incrementally. This requires:

An empowering organisation.
Clear strategic vision.
Continual change and commitment to
experimentation.
Identifying interim stages and targets.
Use of irreversible changes.
Sustained top management commitment.
Winning hearts and minds.
Why change programmes fail
Research into why change programmes fail indicates seven
main failings:
Death by planning.
Loss of focus.
Reinterpretation of change in terms of current culture.
Disconnectedness.
Behavioural (only) compliance.
Misreading scrutiny and resistance.
Broken agreements and violation of trust by
management.
Types of strategic change differ in terms of:
extent of culture change required;
incremental change or urgency
Aspects of organisational context (as shown in the

Change Kaleidoscope) include:

the resources and skills that need to be preserved,
the degree of homogeneity or diversity in the organisation,
the capability, capacity and readiness for change,
the power to make change happen.
Different approaches to managing change are likely according
for different types of change and context.
blockages to change and potential levers for change.
Situational leadership suggests that strategic leaders need to
adopt different styles of managing strategic change according to
different contexts and in relation to the involvement and interest
of different groups.
Levers for managing strategic change need to be considered
in terms of the type of change and context of change. Such
levers include building a compelling case for change,
challenging the taken-for-granted, the need to change
operational processes, routines and symbols, the importance of
political processes, and other change tactics.