CHAPTER 1
vision can be transformed into action.
WHAT IS STRATEGY AND WHY IS IT IMPORTANT
Expected Learning Outcomes
After studying the chapter, you should be able to...
1. Define Strategy and explain its role in a firm's
quest for competitive advantage.
2. Explain what competitive advantage is and
how can it be gained.
3. Know what strategy is not.
4. Explain what strategy can achieve.
5. Distinguish between a strategy and an
objective.
6. Explain the paradigm followed by an objective
such as Specific, Measurable, Actionable,
Relevant and Time-Based (SMART).
7. Illustrate how strategy relates to objective.
BASIC CONCEPT OF STRATEGY
Strategy is the quest to gain and sustain competitive
advantage.
 It is the managers' theories about how to gain and
sustain competitive advantage.
 It is about being different from your rivals.
 It is about creating value while containing cost.
 It is deciding what to do, and what not to do.
 It combines a set of activities to stake out a unique
position.
 It requires long-term commitments that are not
easily reversible.
WHAT IS A STRATEGY
- Strategy describes the goal-directed actions a firm
intends to take in its quest to gain and sustain
competitive advantage. The firm that possesses
competitive advantage provides superior value to
customers at a competitive price or acceptable value
at a lower price. Profitability and market share are the
consequences of superior value creation.
- A Strategy is an overarching approach taken to meet
or exceed one's goals and the actions taken relative to
the original and overall goal set by higher authority,
whether in a private enterprise or public
organizations.
- Strategy is about understanding where you are now,
where you are heading and how you will get there.
Effective strategic decision-making is vital - not just for
the Chief Executive Officer or Board deciding a
company's overall direction but for the managers at all
levels of the organization who will determine how that
- The important point here is that strategy is about
creating superior value, while containing or controlling
the cost to create it. It has been observed that the
greater the difference between value creation and
cost, the greater the economic contribution the firm
makes, and thus the greater the likelihood for
competitive advantage.
- To gain a competitive advantage, a firm needs to
provide either goods or services consumers value
more highly than those of the competitors, or goods
or services similar to the competitors' but at a lower
price. Making money to most businessmen was the
consequence of providing a product or service
consumers wanted.
- The essence of strategy, therefore, is being different
from rivals. Managers accomplish this difference
through strategic positioning, staking out a unique
position in an industry that allows the firm to provide
value to customers, while controlling costs.
- Strategy on how to compete provides managers with
a roadmap to navigate the competitive territory. The
more accurate the map, the better strategic decisions
managers can make. In the competitive world,
managers test their theories and assumptions in the
marketplace. Positive feedback validates managers'
strategic assumptions while negative feedback allows
managers to adjust their assumptions.
- A firm's relative performance in the competitive
marketplace provides managers with the necessary
feedback to assess how well their strategy works in
their quest for competitive advantage. The strategic
management process, therefore, is a never-ending
cycle of analysis, formulation, implementation and
feedback.
WHAT STRATEGY IS NOT
Although it is important to know what strategy is and
why it is important, it is also useful to appreciate what
strategy is not. There is much confusion about the
nature of strategy. Strategy is not:
 A vision or mission statement such as "Our
strategy is to be a leading-edge
provider/employer". This explains neither where
the firm is going nor how it will make progress.
Consequently, it is not a strategy.
 A goal, budget or business plan. Strategy is not a
goal such as "We aim to be the best or number
 one". This is, at best, an aspiration. Also, strategy
is neither a budget nor a business plan, although
elements of these may contribute to how a
strategy is implemented.
 Data analysis. Too often, data analysis leads to
strategy, when what should happen is that
strategic choices are made first and then refined
and explored further using data analysis.
Strategy is not, a zero-sum game - it is not always the
case that one party wins while all others lose. Many
strategic successes are accomplished when firms and
individuals cooperate with one another. Even direct
competitors cooperate occasionally to create win-win
scenarios. When competitors cooperate with one
another to achieve strategic objective, it is called co-
opetition.
Many people today refer to a host of different plans
and activities such as pricing strategy, alliance strategy,
operations strategy, marketing strategy and so on.
While all these elements may be part of a firm's
functional strategy to support its business model, the
term strategy should be reserved for describing the
firm's overall efforts to gain and sustain competitive
advantage.
Competitive benchmarking is not "strategy" * Best-in-
class practices such as just-in-time inventory system,
enterprise resource planning system and so on, all fall
under the "tools" for operational effectiveness. Being
best-in-class is a sufficient but not a necessary
condition for competitive advantage.
Operational effectiveness, marketing skills and other
functional expertise, along with best practices,
contribute to a unique strategic position but by
themselves, they are not a substitute for Strategy.
WHAT CAN STRATEGY ACHIEVE
The following are some of the significant benefits of
applying Strategy.
 An inspired and clearly considered strategy
provides the impetus for commercial success. A
clear and effectively communicated strategy is
crucial in developing a successful business.
 A focus on strategy will highlight where a unit or
group of businesses can be more successful as
well as those areas where it is weak, vulnerable,
or failing. It will show in detail where the business
is making its money and why.
 The process of developing and implementing
strategy enables managers to understand their
customers and competitors. The company is able
to develop its products and approach in line with
its customers' changing preferences.
 Developing and implementing strategy strengthen
a business by making sure that resources are
devoted to the most important customers in order
to retain their loyalty and get them to buy even
more of the company's products or services.
 A clear strategy shows managers where business
skills need to be added or strengthened. It also
highlights where productivity can be improved
and why particular initiatives and activities have
succeeded or failed.
 A strategy that employees understand provides a
guiding view of the future that influences
employees decisions, priorities and way of
working.
 For owners or stakeholders, strategy provide a
way of measuring their businesses" progress.
 A successful strategy benefits customer. The
crucial component of strategy is how it will result
in greater appeal to customers and how they can
achieve their goals.
STRATEGY VS OBJECTIVE
WHAT IS A STRATEGY?
* A strategy is an overarching approach taken to meet
or exceed your goals, and the actions taken must
relate to the original goal set by management. For
example, a marketing company's strategy can be to
increase the amount of written content on a
company's website; the execution of the strategy
includes hiring writers to streamline the process.
WHAT IS AN OBJECTIVE?
* An objective is a measurable action taken to execute
the strategy agreed on by management and the rest of
the organization. An objective follows the paradigm of
the SMART formula (Specific, Measurable, Actionable,
Relevant and Time-based). Thus, a series of objectives
must be assigned and completed in order to complete
the strategy and meet the company's primary goal.
How the SMART formula can be used in pursuing an
objective:
Specific
- This step details what you want to achieve. In fact,
the formulation of your goals and strategy should
meet the requirements of this step to proceed.
Double-check and ensure that this is the direction you
want to go and whether the steps in the strategy can
be easily understood. The more clarity you have, the
more likely it is to produce successful results.
Measurable
- Stating your evidence is crucial in finding out how
you are measuring your goal. Setting up milestones
can assist you inbreaking down a timeline to reach the
desired steps of your objectives. If you are applying for
a job, you can use this step as a benchmark to see the
number of positions you've applied to and amount of
interviews you landed. You can plan and adjust in case
you run into any disruptions and establish a rewards
system when you reach a milestone, too.
Achievable
- Ensure that the objective is one you can achieve and
is aligned with your strategy. Identifying your
motivations in meeting your objectives helps you keep
your focus on current tasks. Also, it can outline the
effort and resources needed to achieve your objective
and move onto the next one.
Relevant
- Make sure that the objectives are aligned with your
core values and with your long-term aspirations.
Rethink your objective if you continue to express
doubts about it representing your core values.
Time-based
- Decide on the appropriate timeline to complete this
objective and review if that pursuit is dependent on
the completion of other objectives. You want to
ensure that you can move forward after an objective's
conclusion. There are times where you will need to
consider variables that may affect the timeline of
certain tasks.
STRATEGY VS. OBJECTIVE: KEY DIFFERENCES
A strategy helps you create a plan for how you want to
achieve a goal, whereas an objective is a list of
documented steps that assist you in fulfilling the goals
of the strategy.
The differences between a strategy and an objective
also include:
Purpose
- A strategy is meant to solve problems and determine
a pathway towards a goal. An objective has measured
elements that relate to the execution of the strategy
and when it should be finalized.
Execution
- To build a strategy, you need to have an overview of
your core values and the motivations for why you are
coming up with a strategy. Consistent motivation is
the driver of diligence in the workplace. A robust
strategy can maximize the output of a team if it fully
buys into the mission of the organization. Preparing
objectives occurs once you have a finalized set of core
values and motivations. Objectives also assess how
you'll apply your core values and motivations to
perform tasks and find out how you can improve in
the process.
ILLUSTRATION OF HOW STRATEGY RELATES TO
OBJECTIVE
Here is an example of a strategy to increase a
company's client base and the objectives that follow:
Strategy
- A strategy is designed to measure a goal. For
example, a goal may be for a company to increase the
client base of Stevie's Marketing from five clients to 10
by the end of the year. To accomplish this goal, the
company needs to do the following:
 Increase the size of its sales staff.
 Clean up the lead generation software and have
management inspect for execution.
 Schedule proposal meetings and dates for the
sales manager to close sales.
 Hold weekly meetings on progress.
Objectives
Here are objectives that can lead to the success of the
strategy:
 Human resources will hire five new members of
the sales team by the end of September.
 Three members of the sales team will work on
inserting the right data into the lead generation
software and complete it by the end of November.
 The sales manager will be on proposal calls in
order to secure five in-person meetings with
prospects by Thanksgiving and will meet with the
prospects to close five deals to bring them
onboard.
  Sales team meetings are held on Monday
afternoon to report on the progress of these
meetings. Jan from human resources will take
notes on progress and action items for the team
to work on during the week. The CEO is
continually monitoring the progress to ensure the
completion of all objectives by the end of the year.
CHAPTER 2
THE DIFFERENT VIEWS OF STRATEGY
Expected Learning Outcomes
After studying the chapter, you should be able to...
1. Describe the different approaches of a strategist
mayadopt, namely,
 The Classical
 The Design Planner
 The Role Player
 The Competitive Positioner
 The Visionary Transformer
 The Self-Organizer
 The Turnaround Strategist
2.. Name and describe the situations a business firm
may be into. their typical challenges as well as the
benefits and opportunities.
3. Know the activities to be undertaken in choosing
the right strategies approach to adopt.
UNDERSTANDING THE DIFFERENT VIEWS OF
STRATEGY
In business, strategic thinking requires learning from
discoveries and insight of others. Anyone can set up a
business but there are more uncertainties in running
one. The more observable approaches are presented
in this chapter.
The different approaches to strategic decision-making
and what will be most effective for an organization will
depend on circumstances such as the issues faced by
an organization as well as the style and preferences of
its leaders. In a complex world, a mix of approaches
and styles is needed. The precise mix will depend on
the personalities of those making the decisions and a
good understanding of the strengths and weaknesses
of the organization, its environment and current
position in order to establish, sustain and acquire the
competencies that are required, and to adopt the
most appropriate leadership style to see the overall
strategy realized.
But whatever approach is adopted, the following
management themes from earlier ideas should be
included:
 The need for leadership and sound decision-
making to be present at every level.
 The need to manage uncertainty and get the best
from new situations - problems as well as
opportunities (the challenge of "leading change").
 The need to manage in adversity, such as a market
collapse or the failure of a product. An
organization's structure and its cultures and
control systems must be flexible enough to enable
swift decision-making and action to get matters
back on course.
THE DIFFERENT VIEWS/APPROACHES OF STRATEGY
A. Classical Administrator
In the classical school of management, a set of
common activities and principles are developed.
These include planning, organizing, commanding,
coordinating and controlling. These fine sections are
described below.
 Planning involves considering the future,
deciding the aims of the organization and
developing a plan of action.
 Organizing involves marshalling the resources
necessary to achieve these aims and
structuring the organization to complete its
activities. Both roles remain crucial.
 Commanding may be a term that is out of
fashion in the egalitarian, politically correct
and empowered world of many Western
organizations, but the concept remains
significant. It is important to achieve the
optimum return from people, frequently the
most expensive component of a business.
 Co-ordinating involves focusing and, in
particular, unifying people's efforts to ensure
success.
 Controlling involves monitoring that
everything works as planned, making
adjustments where necessary and feeding this
information back so that it can of value in the
future.
This classical-administrator approach to decision-
making is largely concerned with measuring and
improving skills and processes within organizations. It
is characterized by hierarchy, usually in the form of
top-down planning and control, formal target setting
and performance measurement, structured
programmes for functional improvements through
"scientific" engineering and a formal organization
structure.
B. Design Planner
The design planning approach emphasized that the
principal role of a leader is to plan the development of
an organization beyond the short term. This heralded
the arrival of strategic thinking in organizations, as
distinct firm of focusing on continuing management
activities.
In this approach, strategy results from a controlled
and conscious thought process, achieving long-term
competitive advantage and success through answering
questions such as: Where are we now? Where do we
want to be? How are we going to get there?
Design planning requires expertise in two areas:
 Anticipating the future environment, with the
help of analytical techniques and models;
 Devising appropriate strategies matching the
external opportunities and threats to the
organization's resources, internal strengths
and weaknesses.
Once the strategy s planned, it is simply a matter of
using the techniques of the classical administrator to
plan its implementation by, for example, having a
master plan that schedules key tasks and budget-
controlled activities.
The result was that strategic decision-making had
been given a separate focus. Decision types were
identified, covering strategy, policy, programmes and
standard operating procedures.
These decisions are
 Strategic, focusing on the dynamic issues of
products and markets;
 Administrative, concerned with structure and
resource allocation;
 Operating, focusing on supervision and
control.
C. Role Player
The role-player approach views the job of the strategic
decision-maker as more than that of a reflective and
analyzing planner and controller. In this approach,
vision, communication and negotiation, as well as the
need to be able to react quickly to disturbances and to
change tactics at short notice, are of greatest
importance. The decision-maker's role becomes one
of learning, supporting and positively enabling rather
than directing. The long-term result is incremental
progress rather than a big bang, but it is no less real
and over the long term may be more valuable.
D. The Competitive Positioner
The competitive positioner understands the power of
the external environment and focuses almost
exclusively on achieving competitive advantage. The
underlying premise is the belief that market power
produces above-average profits in a marketplace
where competition is the defining characteristic. The
competitive positioner's main tasks are to understand
and decide where the organization is competing and
then align it so that it is able to gain advantage over its
competitors.
Competitive forces include
(a) customers and suppliers,
(b) substitute products (which are increasing in
significance because of the flexibility and choice
provided by the online marketplace), and
(c) present and potential competitors.
Future competitors may not be those that we
recognize today, and new competitors may well enter
the market by changing the rules of competition.
To compete successfully against all this, the positioner
may need to do any combination of the following:
(1) erect barriers to entry to its market;
(2) attract price premiums for its products;
(3) reduce operating costs below those of its
competitors.
Lastly, this approach emphasizes market
differentiation and the need to make decisions that
build customer loyalty as well as delivering higher
quality and productivity.
E. The Visionary Transformer
The success of a visionary approach depends
ultimately on pragmatism: the ability to achieve a
vision by listening, acting and learning rather than
adopting plans or rigid approaches. In particular, it is
essential that visions are achievable and that visionary
transformers are able to make progress in achieving
them. Scenario planners can help an organization keep
in touch with reality, both internally and with the
external competitive environment.

F. The Self-Organizer
In a complex and fast-moving business environment,
there is an advantage in being a "learning
organization" that adapts to change. Petere Senge,
author of The Fifth Discipline, highlighted this in 2006.
Self-organizing businesses need to be designed and
led by people who can create an organization where
its constituent parts and, above all, its people
continually self-organize strategic issues, fluidly
developing. In this way, accepted formulas and
perspective are constantly challenged and revised.

To achieve this, organizations need the ability to

develop learning communities (networks of people
together without traditional top-down management
to improve effectiveness) to generate innovative
solutions for commercial opportunities. Innovation
and collaboration are crucial competencies for
operating in environments that change rapidly and are
difficult to control.

G. The Turnaround Strategist

This decision-making approach focuses on turning
around the performance of an organization in decline,
perhaps when a visionary leader has failed. It is
autocratic, ruthless and swift, and it is more context-
specific. Invariably, the requirement is to operate
when an organization is in a state of crisis.

To achieve turnaround success, it is important to

implement new control systems quickly, and to focus
on the reasons for decline and reverse them while
going for the easiest route to immediate growth.
Short-term issues are critical, and a dramatic change
of overall perspective is required.

The turnaround strategist faces several significant

challenges. Many can be classed as cultural challenges
that focus on the need to change not only what is
being done but, crucially, that way that employees
operate and how they work.
CHOOSING THE RIGHT APPROACH

Typically, there are six situations those heading a

business face, each of which presents its own
challenges. Figure 2.1 presents these situations.