What is strategy?

The word strategy derives from the Greek word strategus (the art of the general).
This meaning is still central to the meanings of strategy, as it is the CEO or general manager who is responsible
for planning and executing strategy in the firm.
•traditional approach–document of long-term goals

•modern approach –prepared for future

Core question of strategy is –how? (How to reach good results, how to beat competitors, how to create
competitive advantage...),

Strategy culture cycle

Question of strategy
Key strategic questions by P. Drucker

What is our business mission?

•Who are our customers?

•What do our customers consider value?

•What have been our results?

•What is our plan?

Biggest questions of the strategy

•where are we now?

•where do we want to be?

•how will we get there?

Definition of strategy 5P strategy

•”strategy” is used in several different ways, the most common being:

1.strategy as a plan–goal oriented behaviour

2.strategy as a ploy–to confuse rivals

3.strategy as a pattern–logical system of strategic thinking

4.strategy as a position–location in environment (market, competitors)

5.strategy as a perspective–vision, ideas for future

Plan -intended course of action; guidelineto deal with a

situation; getting from here to there
Ploy -maneuverin a competitive gameintended to outwit an
opponent or competitor
Pattern -is a stream of actions; a pattern makes a strategy
consistent in behaviour
Position -environmentalfit and relationship with other
organizations; a specific means of locatinga firm in its
environment
Perspective -unique way of looking at the world, and interpreting
information from it, judging its opportunities choices and
acting; vision and direction
Different definitions of strategy

•Chandler–setting long-run goals of company, way how to meet them and allocation of resources to
accomplish goals

•Quinn–complex plan of goals, politics and activities

•Glueck–integrated plan to reach basic goals of company

•Keřkovský–ways how to meet goals

•Johnson and Scholes–direction and scope of an organisation over the long term

•Rasa Valier–is way how to be successful

•Norman–strategy is the art of creating value

•Porter–strategy is about being different

Definition of strategy

We can define strategy as a theory about how to gain competitive advantages.

Strategy describes actions which lead to meet goals.
To gain sustain competitive advantage:
•it is about being different from rivals,

•it is about creating value while containing cost,

•decision what to do, and what not to do,

•it combines activities to achieve unique position,

•it requires long-term commitments that are often not easily reversible.

Strategy at present
•is not only document about analysis of the company

•is not sentence about interest on strategy,

•is company's philosophy,

•is direction to execution of daily decisions to be in accord with long term objectives of the company.
Characteristics of strategy
•strategy is a set of actions arrived at by accident or design

•strategy develops resources

•delivering products and services that users find valuable

•meeting stakeholder objectives and constraints

•unique situation

•renewing advantages the environment changes

Importance of strategy for company
•strategic decisions influence long-run direction of organization
•strategy sets basic parameters of business (markets, products...)

•strategic decisions help to reach advantage

•strategy helps to adapt activities to conditions of environment

•strategy needs to make changes in resources

•strategy accents values of firm

•strategic decisions influence operational decisions

Why you need a strategy?

Why managers undervalue importance of strategy?

•managers are not well skilled in that branch

•it is negative impact of benchmarking

•decision making process of top managers is oriented to solve operational problems

Strategic decisions
•not all decisions contribute equally to its strategy

•strategic decision can be different from other types of decision in three ways:
–magnitude–big decisions, for huge part of company (division, function...)

–time-scale–over the medium to long term (it is different in each company, usually 3-5 years)

–commitment–strategic decisions involve making choices, and committing resources in ways that cannot be
reversed cheaply or easily
Strategic decision deals with the long-run future of the entire organization and have three characteristic
1. Rare-Strategic decisions are unusual and typically have no precedent to follow.
2. Consequential-Strategic decisions commit substantial resources and demand a great deal of commitment.
3. Directive-strategic decisions set precedents for lesser decisions and future actions through out the
organization.
The characteristics of strategic decisions

•Strategic decisions have major resource propositions for an organization.

•Strategic decisions deal with harmonizing organizational resource capabilities with the threats and
opportunities.

•Strategic decisions deal with the range of organizational activities.

•Strategic decisions involve a change of major kind since an organization operates in ever-changing
environment.

•Strategic decisions are complex in nature.

•Strategic decisions are at the topmost level, are uncertain as they deal with the future, and involve a lot of risk

Decision making process

•recognizing the problem of decision, information gathering

•building alternatives

•definition of decision criteria

•choosing the optimal solution

•giving directions for others

•solving the problem (execution)

•control (measuring the outcomes)

•analysis and feedback

Phases in development of strategic management

1. period –(50th and 60th of 20th cent.) long term planning
–External environment –constant, enough resources
–Planning was focused into internal processes

2. period –(end of 60th and beg. 70th) strategic planning

–Changes in external environment (energetic crises, new technologies,...)
–Planning was based on detailed scan of external (customers and competitors) and internal environment

3. period –(2nd half of 70th) system of strategic management

–Some important parts were added to strategic management –implementation, evaluation, and control with
feedback

4. period –(90th) many names (SM based on changes, hyper competition, cooperative strategies...)
–Changes of political systems in the world –turbulent environment
–Fast reaction (preparation) on changes
–New strategic alliances and networking
–Competition advantage as a main objective
Today
•Fast reaction on changes

•Establishment of new businesses

•Global competition

•Technologies –fast development

•Digital security

•CSR

•Quality of HR

•Seeking for talents

•Leaders

Levels of strategy

•strategy is broken into different hierarchical levels

•these levels are linked in reality, but they are studied separately for analytical purposes

•levels are differentiated based upon:

–the nature of the decisions

–who makes decisions

–how the decisions have impact on the firm

Corporate strategy focuses on decisions related to what types of business the firm should be in and which
businesses should they support for growth. To which of its businesses should the firm enter and allocate
resources in the future.

•Business strategy focuses on decisions about how a specific business competes in its particular market for
product or service emphasis.

•Functional and operating strategies occur in the functional and operational levels of the business. They
provide critical input into the formulation of a business strategy at the functional and operational levels within
the firm.

Strategic managers
•they are linchpins in the strategy-making process

•must take responsibility for formulating strategies to attain competitive advantage

•responsibility for putting strategies into effect

•leaders of strategy-making process

Strategic managers –must be strategic leaders !!!

Strategic managers
Guiding questions for manager in strategic management process:
•What does not fit?

•Is my organization consistent with my strategy?

•Do I understand why we do it this way?

•What might be the long-term consequences?

Strategic leaders
•develop a vision and helps the members of the organisation to learn how to convert the objectives into action

•inspire and motivate others working towards accomplishing the objectives in the long run

•believe human capital as important factor in innovation and the creation of core competencies

•attach consideration in building their organization’s resources, capabilities and competencies in order to gain
sustain competitive advantage

Strategic leaders key characteristics:

•vision focused
•ability to see the big picture
•capable of matching organization’s objectives with the changing environment
•creative approach to problem solving
•build a strong team of capable people
•clear about their choices
•excellent communicator
•articulation of the business model
•being well informed
•willingness to empower
•high emotional intelligence

How to choose strategic manager(leader)?

1.why do you want this strategic manager job?

2.what challenges are you looking for in this strategy manager position?

3.describe a typical work for strategy manager position!

4.what is your biggest weakness?

5.why should we hire you as strategy manager position?

6.what do you know about our company?

7.why do you want to work with us?

8.did the salary we offer attract you to this job?

9.do you have any questions to ask us?

Strategic leadership

Visionary, managerial and strategic leader

Become a strategic leader

10 principles of strategic leadership

Strategic management process

is set of managerial decisions influencing long-run performance of the company

•includes activities to reach consistency among vision, objectives, resources, internal and external environment

•influenced by external trends (globalisation, ecology...) –need to use visionary approach

•is continual process –„never ending story“

•strategic management is about change

•managerial decisions are about making big decision

Specifics of the strategic management

•unique situation occurrence (difficult to predict)

•unclear structure of the problem

•the most important information comes from external sources

•determines new objectives (controversial) and there is no experience hoe to meet them

•meeting strategic objectives should be evaluated after longer period

The strategic management process(SMP)

•steps of the strategic management process help to reduce mistakes

•SMP –is a sequential set of activities –analyses and choices that can increase likelihood that a firm will choose
a good strategy, that is, a strategy that generates competitive advantages

1 Vision, Mission
2 Objectives
3 Analysis (external and internal)
4 Strategic choice

5 strategy implementation

6 competitive advantage

Vision, mission
•basic orientation and philosophy of the company

•vision –future

•mission –present

•vision is decomposed into objectives

•objectives –specific statement of the vision

External and internal analysis

•external and internal analysis usually occur simultaneously
•in external analysis a firm identifies the critical threats and opportunities in its competitive environment and
what implications that evolution has for the threats and opportunities a firm is facing

•internal analysis helps a firm identify its organizational strengths and weaknesses, can be used by firms to
identify those areas of its organization that require improvement and change

Strategic choice
•armed with a mission, objectives and completed external and internal analysis, a firm is ready to make its
strategic choices

•strategic choice is theory of how to gain competitive advantage

•strategic choice leads to strategies -business-level strategies, corporate-level strategies, functional strategies

strategic choice is a process to choose a strategy that (requirements for strategy):

–support the firm's mission

–is consistent with a firm's objectives

–exploits opportunities in a firm's environment with a firm's strengths

–neutralizes threats in a firm's environment while avoiding a firm's weaknesses

Strategy implementation
•creating and choosing a strategy means nothing if that strategy is not implemented

•strategy implementation occurs when a firm adopts organizational policies and practices that are consistent
with its strategy

•three specific organizational policies and practices are particularly important in implementing a strategy
–a firm's formal organizational structure

–management control systems

–employees compensation policies

Competitive advantage
•competitive advantage is the ultimate objective of the strategic management process

•firm has a competitive advantage when it is able to create more economic value than rival firms

•economic value is the difference between the perceived benefits gained by a customer that purchases a firm's
products or services and the full economic cost of these products or services

•the size of a firm's competitive advantage is the difference between economic values a firm is able to create
and the economic value its rivals are able to create
Five criteria of sustainable competitive advantage
•unique

•difficult to replicate

•sustainable

•superior to the competition

•applicable to multiple situations

Types of competitive advantages

Competitive parity
When a firm creates the same economic value as its rivals

Competitive advantage
When a firm creates more economic value than its rivals

Competitive disadvantage
When a firm creates less economic value than its rivals

Temporary competitive advantages

Competitive advantages that last a short time

Sustained competitive advantages

Competitive advantages that last a long time

Temporary competitive disadvantages

Competitive disadvantages that last a short time

Sustained competitive disadvantages

Competitive disadvantages that last a long time

Competitive Advantage and Firm Performance

Competitive advantage economic return

Advantage ------------------------------------------------- Above normal

Parity -----------------------------------------------Normal

disadvantage-----------------------------------------------below normal