Part I The four big questions you need to ask ‘The big questions in strategic management Strategic management is concemed with shaping the destiny of an organisation. It is about: Putting an organisation into an optimum business position. S Sustaining and improving that position by the deployment and acquisition of appropriate resources and by monitoring and responding to environmental changes. © Monitoring and responding to the demands of key stakeholders. For organisational strategists to achieve these aims they must be able to answer the following questions: 1 Where is the organisation now? 2 What options are open to the organisation? 3. What is the best way forward for the organisation? 4 How is this to be achieved? Our famework is based around these questions, and the better the answers to t es the better the chance of developing and implementing winning strategies. 1 these questions can be very difficult and the questions have therefore been component parts to make the process more manageable. Guidance note 1.0 We are not trying to suggest that effective strategic n frameworks and models blindly — we are suggesting # tools when employed by managers and students wi models, the limitations of the data available and the Our experience indicates that the appropriate and qu vehicle for learners, full-time students and pi management problems and processes. We that models are imperfect rep 0 thinking not as a substitute for it. allow potential and current strategy.1 The first big question: where is the organisation now? 1.1 Introduction It is logical to answer this question at two distinct organisational levels: 1 The corporate level or multi-strategic business unit (SBU) level. 2 The single business or SBU level. Guidance note 1.1 A strategic business unit (SBU) can be defined as a unit that which there is an identifiable group of customers. Divisions 6 defined on this basis, for example an adhesive c packaging division anda DIY division, anda unive Vu Australian Automotive Division). The with varying degrees of operational and st framework. Organisation structures andFigure 1.1 outines the basic corporate model. In mult-busines organisations, cach busines wit can be i jude in aim fs oes poten il a pee ‘tw the ‘The overall comorate strategy and the is} his influences both is6 The fous big questions you need to ask Who are the major stakeholders in the organisation? What are the iswes that are important to these stakeholders? ‘Now conduct an analysis of each busines, 1.2.2 Individual business analysis algorithm BL of the unit's B2__ Why dots customers choose this busines unt’s product? What need is being met? What exist outside the business unit that impact on its ability to provide goods and scevces? ‘What is likely to change and what is likely o remain the same? Are there new bandanas ‘models tha will challenge the now established order? Now feed this analysis into a summative corporate analysis. 1.23 Summative corporate analysis algorithm i SCI What is the retionship berween the componte cente and the individual business? ——_| ‘What are the key indicators of performance foreach business ~ why are these key? SC2 What are the reaionships berween the individual businewes? Are they supporting,Qrcz ‘What isthe formal organisation structure? organisation. Organisation of power between divisions and the Whereis the ogonisation now? 9 ‘Academic concepts © Organisation structures (Chapter 5) {Value chain analysis (Chapeer 9) Q-PC3. What are the financial and business results of each business? What isthe contribution of each busines to the overall financial performance of the whole? ‘This should be carried out at an ealy stage of the analysis. Ic is important to remember that Comparions over time and with other organisations are useful ways of gauging. organisation performance PCH — What is the product market mision of exch busines? Is the business an industry leader or follower? How do they fir together? Portfolio models can be used to evaluate the performance of individual busineses within the corporate whole, although this should not be done until each individual business analysed so that the daca that i fed into the portfolio models is as robust as possible, Portfolio models have been criticised but are useful if consructed from both a strategic and hod uound neh bageing arn eee psec ames ane ‘Academic concepts: ‘+ Financial and strategic performance analysis (Chapter 10) Portfolio analysis (Chapter 5) Guidance note 1.4 Auta ae clic conceal ih Rage ee ope eat agen era years) using financial resus indiators. A key priosty for a stategy analyst is alo ‘manufacturing needs to ensure that systems are controlled so that rejects are minimised and customers receive products when they want them, and ane and tran companies have 010. The four Big questions you ned to ask sao paige eh ep ai erage ere acy Ty Company sealyss should not be confined to ientifing resources and activites but should fnchude, wherever pouibe, an ienication of and the performance of the estes and rovfines chat vn Ye routed tad ice. oe better to ask smaller and related sub-questions, This ensures Parmenter Q010) discuss four Kinds of meats soos ork ad hat al prope i nd ifrmaon ee 1 Keppel i i ope sence aeons line managers and operators, for example late trains oF aircraft, cumulative reject ‘manufacturing, latenes of delivery, breakdowns in manufacturing. Pofomance indicators are concerned with average performance over longer periods and say be concerned with issues that are not causing immediate problems, such as the set a i aes a SRO eet ee these areata ao ital to the bxsinem concemed. 4 Results indicators are those factors that are below the key results indicators. They are not Jess important than key results indicators, rather they are components of key results that ‘an help manager: make decisions about furure strategies and their implementation, and ako to identify products to focus on and what products need revaluating. Financial: revenue per product, profit per product, goverment funding per project, ete:‘Where isthe onganisation now? 13 there ate three area that need to be considered when we answer this question: ional, internation, socio-economic, politcal and technological environments, munications and social medi, terrorism, ecology. aay explicit or implicit competition between business units for funds, which is ‘within the corporate strategy part of the algorithm (see Q-SC3). BS Whatarethe resources within and rsd the organisation tallow te oration aan Met ha cutmen wil buy? To what extent can the busines perform- aaaeianed by an underanding of a organsaon’s resource?Whar isthe oporisation now? 15 “The proces of answering there questions will ineviably lead to a discussion of options and ‘whether the company should pursue any of the identified options. ‘Academie concept: ic approaches to CSR should be evs eee 1.5 Summative corporate analysis | QSCI What is the relationship between the corporate centre and the individual businesses? What are the processes by which strategy develops in the business units and in the organisation a8 a whole? ‘Campbell et al’s (1995a, 1995b) research indicates that successful organisations develop relation ships beeween the parent and its subsidiary that vary from the distant to the close. They have developed a typology that clasifies these relationships 2s: mites and threats that exist for tis business? ent ant to ae the sn om an xem penpecive (ne Q-B10 fora rd discussion of this issue). aa Swategic planning relationships are defined as relationships in which the centre actively paricipates in strategy development and implementation. This is an appropriate relationship when the portfolio is made up of related businesses and centre managers have a ‘fel’ for the busineses in the portfolio. Ie can encourage the development of long-term perspectives and lead to businesses sharing and developing capabilites chat can confer strategic advantage toa number ‘of product groups. In inappropriate circumstances it can lead to irrelevant procedures and ‘paper work, lack of ownership of tasks by those undertaking them, demoralisation ional managers and strategy being developed by senior managers who aze out of touch ‘marketplace. : Financial contol relationships are defined as relationships in which the centre's main concern is setting financial targets but delegates strategy development to the business unit tis appropriate for ‘corporations that are unelatedy diversifed, where the direction and contol from the centre isQSC3___Wharare che factors ouside the organisation chat influ ic sector organisations in the UK in the 1980s and 1990s were either {to operate in quasi-markets using the management tools developed from Whereis the onaniation now? 17 and weakness assessment should 2 The ektoudip between eieeras ete doe eae QSC5.___ What are the opportunities and threats that exist for this organisation? “The opportnities and treats faced by each busines shouldbe taken into account and the impact of these on the corporate entity should be considered, The opporcunites and threats asessment should consider ‘© External opportunities and threas: © The impact of outside factors on each business. fo The net effect of outside factors on groups of individual business. © The sum of the effect of outside factors on the corporate whole. ‘© Internal opportunities: © The possibilty that some intemal resource or strong capability may be the source of a ‘market opportunity not yet obvious from extemal monitoring. QSC6__Whatis the overall strategic postion of the organisation? ‘A-key question in answering this question relates to whether the corporate porflio is balanced ‘nd if is self-fanding and financially strong. Also, are che individual businesses more effective in the corporate portfolio than outside the portfolio, and if they are, why? The analysis of the {question should also include an assessment ofthe following isues (which are very similar to those sven for an individual business unit): ‘© What are its strengths and weaknesses? ‘© Does the organisation have more strengths than weaknesses, a balance of strengths and weak -nesses or more weaknesses than strengths? ‘© Does the organisation's management have a clear vision of where they want this busines to bbe? Doce it have a clear view of ts opportunities and threats? Is it in a position to manage festions will inevitably lend to a discussion ald pursue any of them (asi did for a single business wsAcademie concepts: Portfolio analysis and strategic fit (Chapter 5) Corporate parenting (Chapter 5) pability (Chapters 4 and 9) @ Dynamic ca References r 0987) Comorate strategy (revised ed.). London: Penguin. A eT eT aad Alewod 1995a) The quest for parenting advantage. Harvard Business Campbell, A., Goold, M. and Alexander, M. ( Review, March-April, 122-32. " old, M. and Alexander, M. (1995b) The value of the parent company. California ‘Management Review, 38(1), Campbell, A. |). 79-97. Campbell, A, Goold, M., Alexander, M. and Whitehead, J. (2014) Strategy for the corporate level: where to hal 10 cut back and how to grow organisations with multiple divisions (2nd ed.). New York, NY: John invest, Wiley & Sons. Grant, R. M. (2008) Contemporary strategy analysis: concepts techniques applications (6th ed.). Oxford: Blackwell. 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