Lecture 1

What is Strategy?
Outcomes of today’s session
1. What is strategy?
2. Key strategy terms
3. Strategic drift
3. Internal and external fit
4. Honda Case Study
 Origins of Strategy
Stratēgos
stratos (army) and ago (leading)

A Strategy is a long term plan of action

designed to achieve a particular goal or ‘the
long term direction of an organisation’
(Johnson & Scholes, 1984)
No agreement as to what strategy actually is!

Messy and complex

Frequently involves change and has to be

made in situations of uncertainty

Strategy is concerned with the organisation

obtaining a sustainable long-term fit with its
environment – strategic fit

Strategy is different to tactics which are

immediate actions with resources at hand
(strategy is premeditated)
Strategy: the link/fit between the Firm and its Environment

THE FIRM

Goals & THE

Values INDUSTRY
ENVIRONMENT
Resources & STRATEGY
STRATEGY
Capabilities Competitors
Customers
Structure & Suppliers
Systems

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 What is Strategy?
• Issues, decisions and actions affecting
the firm as a whole.
• Issues, decisions and actions that deal
with the direction and scope of the firm.
• Issues, etc. with a time horizon; long term
but with intermediary goals.
• Issues etc with resource implications;
financial, physical, human and
‘knowledge’ resources.
 • Close scrutiny of PESTEL
Environmental environment, competitive forces
analysis etc.

• Resources
Resource • Capabilities
analysis
• Vision
Identifying • Mission
• objectives
 What is the
purpose/mission of an
organisation?
 Purpose of Business?
“The social responsibility of
business is to increase its profits”

Milton Friedman

“We should ….. measure

success in terms of outcomes for
others as well as for ourselves”

Charles Handy
 Purpose (Mission) of a company is
affected by ethics (CSR)
• There is an important ethical dimension in most kinds of
business decision-making: business affects people and society
in its operations
• A business has responsibilities beyond those to shareholders
i.e. to all stakeholders
• Ethics are values or beliefs based on right and wrong and
standards governing behaviour and conduct
• Businesses need to factor in long termism – equity (fairness),
climate change, biodiversity, environmental degradation and
poverty prevention.
• Many, many examples of businesses ignoring this and we will
return to this in a later lecture on CSR e.g.
http://www.youtube.com/watch?v=nlSQevNPBd4

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 The basics……………………….
The organisation first sets its vision, mission (purpose) and
objectives and then analyses how to achieve them

Strategy is only a means to an end, that end being the

purpose/mission of the organisation

Impossible to develop strategy if the organisation’s

purpose/mission is unclear

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 Strategic Vision
• Vision is imagining a possible and desirable
future end-state for the organisation:
“where we want to be, or get to”
• Not the same as purpose/mission: vision is
the future picture, whereas purpose is more
immediate and the broader role and tasks
the organisation chooses to define, given its
current situation
• Vision may also lead to a change in purpose
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 Strategic Vision
Reasons for developing vision are as follows:
• In competing for business and resources, most
organisations benefit from a vision that shows where
they wish to be
• Stimulates development of mission and objectives
• Explores new strategic
opportunities
• Challenge for management
• Helps all workers to see
what they are trying to
acheive
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 Shaping Purpose/Mission
Five main questions to be considered are as follows:

1. What is our main area of activity – and what should it

be?
2. What kind of organisation do we wish to be? Reflects
culture and values
3. What is the relative importance of shareholders and
stakeholders?
4. Do we want to grow the organisation?
5. What is our relationship with our immediate environment
and with society in general? CSR

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 Shaping Purpose/Mission
1. The importance of value added

2. The balance between shaping and being

shaped by the environment

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Mission, Objectives, Strategy

• Mission: outlines the broad directions that it

should and will follow and the logic and
values that underlay it
• Objectives, are then more specific
commitments consistent with the mission
over a particular time period
• Finally, are strategies to achieve these
objectives

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 What is Strategic Drift?

Strategic drift is the tendency for

strategies to develop
incrementally on the basis of
historical and cultural influences
but fail to keep pace with a
changing environment

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 Strategic Drift

Source: Johnson & Scholes (2008)

 Mission: “make the world a better place”
 No-advertising campaigns: public relations e.g.
first location between 2 funeral parlours; it
gained “loyalty beyond branding”
Recycling policy: ecological concern
 Franchising: cheaper way to expand and good
brand management
 Honda Case

Read Honda Case A and B on Blackboard

1959: entered US motorcycle market; 1966: 63% market share!

Two DIFFERENT views of what went on!

A Consulting and business school account: rational analysis and strategic fit

B The insider account by managers involved:

- “We had no strategy other than the idea of seeing if we could sell something in
the US”.
- Focus on import market, large bikes but ended up selling small ones (first)
- Aimed to sell direct but ended up selling through distributor (Sears)

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