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Part 1: Introduction  What is strategy?

Definitions & quotations
„Strategy“

„Strategy: is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.“
Johnson/Scholes/Whittington, Exploring Corporate Strategy (2006)

„Corporate Strategy can be described as the identification of the purpose of the organisation and the plans and actions to achieve that purpose.“
Richard Lynch, Corporate Strategy (2006)

„Strategy is the pattern of objectives, purposes, or goals and the major policies and plans for achieving these goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be“
Kenneth Andrews, The Concept of Corporate Strategy (1971)

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Part 1: Introduction  What is strategy?

Definitions & quotations
„Strategy“

„Strategy: a plan, method, or series of actions designed to achieve a specific goal or effect.“
Wordsmyth Dictionary

„The determination of the long-run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.“
Alfred Chandler, Strategy and Structure (Cambridge, MA: MIT Press,1962)

„Business strategy is less a function of grandiose predictions than it is a result of being able to respond rapidly to real changes as they occur. That‘s why strategy has to be dynamic and anticipatory“
Jack Welch, in: Straight From the Gut, Warner Business Books (2001)

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Part 1: Introduction  What is strategy?

Success factors
3 examples Rich. Williams Madonna Goal Understanding of competitive environment Objective appraisal of resources Implementation
Superstar at all costs

General Giap
Unification of Vietnam under a communistic leadership - Best knowledge of combat zone - knowledge of the political environment in the US - Limited military and economic resources - Political strength - Control - Long term operation - Effective propaganda - Leadership based on inspiration

(Father of Venus und Serina) Prosperity and status

Emerging trends in Pop culture - Impact of sex - Multiple distribution channels Limited talent; Focus on: - Self-portrayal - Image development - Networking - Discipline - Hard work - Leadership based on inspiration - Focus on details

Detailed analysis of physical and psychological success factors in women’s professional tennis Systematic building of physical, mental and social abilities from childhood on - Flexible, precise role definition (father, trainer, manager) - Guidance by uninterrupted instructions

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Part 1: Introduction  What is strategy

Components of a successful strategy
Hypotheses

 Long-term, simple and shared goal  Profound understanding of competitive environment  Objective appraisal of abilities and resources  Effective implementation

Successful strategy

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Part 1: Introduction  What is strategy?

What is strategy?

 Difference between strategy and tactics
- Strategy is the comprehensive plan of using resources to achieve a preferred position - Tactic is an action in line with a strategy, a specific maneuver

 Characteristics of strategic decisions
- Of big importance for the decision maker - Requires the use of significant resources - Hard to revise

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Part 1: Introduction  What is strategy?  Evolution

Evolution of strategic management: dominant themes in the early days

Financial budgeting • NPV, capital budgeting • Financial control through operating budgets

Corporate planning • Medium-term economic forecasting • Formal corporate planning • Diversification • Corporate planning departments

Strategic positioning • Industry analysis • Market segmentation • Experience/cost curve • PIMS analysis • Business portfolios
1970 1980

1950

1960

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Part 1: Introduction  What is strategy?  Evolution

Evolution of strategic management: contemporary themes

Competitive Advantage • Resources and capabilities • Shareholder value maximization • Restructuring & reengineering
1980 1990

Web Economics • Strategic innovation • New business models

“Green & global” • Corporate and social responsibility (CSR) • Business ethics

• Disruptive technologies • Blurring boundaries of industries and companies
2000

• Competing for standards
• Globalization continued
2010

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Part 1: Introduction  Corporate Strategy

Corporate Strategy as a link between the company and its environment

Corporate Strategy

The company  Goals and values  Resources and capabilities  Structures and systems

The industrial environment  Competitors/Partners  Customers  Suppliers/Service providers

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Part 1: Introduction  Corporate Strategy vs. Business Unit Strategy

„Where and how to compete to make money?“

Value creation – How to generate profits?

Attractiveness of branch/industry – Investment in which industries?

Corporate Strategy

Competitive advantages – How to operate?

Business Unit Strategy

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Part 1: Introduction  What is strategy ?  Different levels

Strategy levels of Multibusiness-corporates

Corporate Strategy

Corporate Center Central functions

Business Unit Strategy

Business unit A
R&D Sales & Marketing Production & Logistics

Business unit B

Business unit C

Functional strategies

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Part 1: Introduction  What is strategy  How does strategy emerge

How does strategy emerge: conception or evolution?
Strategy through conception Planning, Rational decisions Strategy as a result of a process
Multitude of decisions as a result of internal and external influences

Intended Strategy realized strategy

Evolutionary Strategy

Criticism of Mintzberg on formal strategic planning  The fallacy of prediction – unable to predict the future  The fallacy of detachment – unable to separate the development of a strategy from its implementation  The fallacy of formalization – hampers creativity, flexibility and learning

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Part 1: Introduction  What is strategy  Strategy development

Strategy development in corporations
Application areas and linked targets

Strategy to support the decision process Strategy as an instrument to communicate and coordinate

Improve quality of decision results

Ensure uniformity and traceability

Strategy as a process to determine the goals

Improve performance by setting challenging goals

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Part 1: Introduction  What is strategy  How does strategy emerge

Importance of formal analysis for the process of strategy development
 Formal analysis improves the decision making process, but gives no answers to strategic questions  Formal analysis supports the identification of relevant questions  Formal analysis should reduce complexity  Formal analysis can stimulate flexibility and creativity, but cannot replace them

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Part 1: Introduction  Summary

Summary of conceptional systematics: „Strategic management“

Formal analysis…
Resources Environment Positioning Corporation Targets

… supports…

SM
Levels/ Sections Implementation

Organization

BU Function Management

Ability

… Strategic management
Source: Johnson/Scholes/Whittington (2005).

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Part 1: Introduction  Vocabulary

Vocabulary
Selection
Term Mission Definition Superior meaning of the venture and its right to exist, derived from the expectations of the relevant stake holders The ventures‘/corporations‘ aspired future state A general statement about intentions or objectives A quantified or precise statement about the „Goal“ Resources, abilities and processes; some of them could be unique and result in a competitive advantage Long-term directional reference Examples from personal area/life Preservation of healthiness and fitness

Vision, strategic intent Goal Objective

Participate in the „Frankfurt Marathon“ Reduce weight and build-up of muscles Loose 5 kg of weight until 01.09.2007 and participate in the marathon next year Living close to a jogging track, Knowledge of a successful and healthy diet; Trainer Frequent training, test runs, follow the diet plan

Strategic Capability Strategy

Source: on the basis of Johnson/Scholes/Whittington (2005).

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Part 1: Introduction  Vocabulary

Vocabulary
Selection
Term Business Model Definition Organization of product, service and information flow between all involved persons Supervision of activities: - Determination of the effectiveness of strategies and arrangements - Basis to adjust strategies and implementations Examples from personal area/life Join a group of like-minded people/runners Supervision of weight, mileage kilometers and time need

Control

Source: on the basis of Johnson/Scholes/Whittington (2005).

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Part 1: Classification  Introduction  What is strategy  How does strategy emerge

Exercise 1
 Check the websites of some corporations in a specific industry, e.g. Airlines, Automotive Industry,…  Compare the use of the strategic vocabulary  Which conclusions can be drawn?  Prepare your conclusions for the next lesson so you can present them.

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Appendix

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Part 1: Introduction  What is strategy  Example

Example Madonna
Professional management
Distribution channels
 

In 1992 Madonna founded the Maverick Recordings label, amongst others signing Alanis Morrisette 2007: Music business is changing: Madonna is already the best paid artist in the Pop-Business. Now the "Material Girl" is planning another coup: for 120 million Dollar she wants to change to another label, which is primarily a concert agency In addition to selling music the promotion is supported by books, movies (in their particular context) and fashion

Choreography

Madonna‘s shows are developed and designed by the best choreographers and rehearsed to perfection

Technology

Madonna only uses the best technicians und DJs to produce her songs

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Part 1: Introduction  What is strategy  Example

Frequent image-changes as a trademark: the trend defining Pop Diva

1985

1987

1989

1990

1993

1995

1997

1998

1999

2000

2001

2002

?
2003 2004 2005 2006 2007 2010

Source: Spiegel Online, 23.2.2007.

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Part 1: Introduction  What is strategy  Example

Systematic provocation and allusion to taboos: sex, violence, religion - examples
1996 mother, sold first pictures of her daughter to ABC, Vanity Fair bought the rights to print the diary during her pregnancy for more than 100.000 USD. Finally an illustrated book was published for Christmas in 1996 describing all stages of her pregnancy  Spectacular video clips, e.g. by her husband Guy Ritchie, in which Madonna drives a sports car ending in a severe accident. This demolition spree is an allusion to Oliver Stones‘ "Natural Born Killers", judged by MTV to exalt violence, it is therefore not shown at prime time.  To support the promotion activities of "Erotica" the illustrated book "Sex" is published; der Spiegel (German magazine) "Szenen vom Raffinement einer Reeperbahn-Inszenierung"

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