Organizational Strategy

Strategy is…..
• Derived from the word Stratagem • …quoted in the Concise Oxford Dictionary as meaning; 1. the art of war. 2. the management of an army or armies in a campaign. 3. the art of moving troops,ships, aircraft, etc. into favourable positions (TACTICS). • a plan of action or policy in business or politics the way in which an organization uses its knowledge and other resources to achieve its economic purpose.

• The specific pattern of decisions and actions that managers take to use core competences to achieve a competitive advantage and outperform competitors. • The determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of courses of action and the allocation of resources necessary for carrying out these goals. • Increase value for stakeholders, customers • Can also be called as Planning Mode or Evolutionary mode

The Nature Of Strategy
Range Of Strategic Format
• Defined • Planned • Proactive • With detail • Vague • Loose • Reactive • No detail

The Purpose of Strategy
• • • • Provides direction Provides coherence Allows day-to-day processes to be designed Should give direction for ‘one off’ procedures

‘The essence of strategy is coping with competition. The corporate strategist’s goal is to find a position in the market where his or her company can best defend itself against the collective industry forces or can influence them in its favour.’ Michael E. Porter

The Nature of Strategic Decisions
• Magnitude – BIG DECISIONS • Time-scale – Medium to long term • Commitment – Locks in resources, locks out altern

Why Some Organizations Fail
• Too much emphasis on short-term financial performance • Failing to take advantage of strengths and opportunities • Neglecting operations strategy • Failing to recognize competitive threats


Why Some Organizations Fail
• Too much emphasis in product and service design and not enough on improvement • Neglecting investments in capital and human resources • Failing to establish good internal communications • Failing to consider customer wants and needs


Mission Strategy Tactics

How does mission, strategies and tactics relate to decision making and distinctive competencies?


• Mission

The reason for existence for an organization States the purpose of an organization Provide detail and scope of mission

• Mission Statement

• Goals

– Plans for achieving organizational goals

• Tactics

The methods and actions taken to accomplish strategies

What is Mercer’s Mission Statement and Goals?

Planning and Decision Making
Figure 2.1
Mission Goals

Organizational Strategies
Functional Goals Finance Strategies Marketing Strategies Operations Strategies

Tactics Operating procedures

Tactics Operating procedures

Tactics Operating procedures

Strategy Example
Example 1

Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably

Mission: • Goal: • Strategy: • Tactics: • Operations:

Live a good life
Successful career, good income
Obtain a college education Select a college and a major

Register, buy books, take courses, study, graduate, get job


Examples of Operations Strategies
Table 2.2

Price Quality Time Flexibility Service Location

Low Cost

U.S. first-class postage Motel-6, Red Roof Inns

High-performance design Sony TV or high quality Consistent Lexus, Cadillac quality Pepsi, Kodak, Motorola Rapid delivery On-time delivery Variety Volume Superior customer service Convenience Express Mail, Fedex, One-hour photo, UPS Burger King Supermarkets Disneyland Nordstroms Banks, ATMs


Strategy Formulation
• • • • • Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners


Strategy Formulation
• Order qualifiers
– Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase

• Order winners
– Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition


Strategy Formulation: Key External Factors
• • • • • • Economic conditions Political conditions Legal environment Technology Competition Markets


Strategy Formulation: Key Internal Factors
• • • • • • •

Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers

Influences on strategic choices
• • • • • • • • Organizational Purpose The Macro-Environment The Industry Environment Competitive Positioning Resources The Value Chain Organizational Structure Organizational Culture

Organizational Purpose
Corporate Governance • Whom should the organization serve? • How should purposes be determined? Business Ethics• Which purposes should be prioritised? • Why?

Organizational Purposes • Vision / Mission • Objectives

Stakeholders • Whom does organization serve?


Cultural Context • Which purposes prioritised? • Why?


Levels of Organizational Strategy
Corporate Strategy
Corporate Head Office

Business Strategy

Division A R&D Human Resources

Division B R&D Human Resources

Functional Strategy

Production Marketing/Sales

Production Marketing/Sales

Brief Overview of Corporate Strategy
• Those strategies concerned with the broad and long-term questions of what business(es) the organization is in and what it wants to do with those businesses

Key Questions of Corporate/Firm-level Strategies
1. What businesses should the corporation/enterprise be in? 2. How should the corporate/G.O. office manage the array of business units (GBU’s/SBU’s/ Wholly owed subsidiaries)

Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts

Corporate (and International) Strategies
• Three directions for corporate strategy – Growth
• M&A , JV, and SA (external growth) • International (internal growth)

– Stability (internal growth) – Renewal (internal growth)
• Retrenchment • Turnaround • Increase the four capabilities via core competencies

The Macro-Environment
• Political- Taxation Policy, Foreign Trade Regulations • Economic- Interest Rates, Inflation, Unemployment • Sociocultural- Attitudes to work and leisure, Income distribution, Levels of education • Technological- New discoveries, developments, Spending on research • Environmental- Emission levels, Planning regulations • Legal -Monopolies Commission, Employment Law

The Industry Environment
Threat of new entrants
Bargaining pThe Industry Jockeying for position amongst current competitors customer

Bargaining power of suppliers

Bargaining power of customer

Threat of substitute products or

Competitive Positioning
• • • • Market segmentation Product differentiator 􀂄 The low cost leader 􀂄 Nicher

• 􀂄 Capabilities and competencies • 􀂄 Learning and knowledge • 􀂄 Analysing competitive advantage

Organizational Structure
• Structure types • Organizational design • Communication

Organizational Culture
• Leadership behaviour • 􀂄 Reward systems • 􀂄 Language

Types of Strategy
• Competitive Advantage – something which gives the organisation some advantage over its rivals • Cost advantage – A strategy to seek out and secure a cost advantage of some kind - lower average costs, lower labour costs, etc.

Types of Strategy
• Market Dominance:
• Achieved through:
– Internal growth – Acquisitions – mergers and takeovers

• New product development: to keep ahead of
rivals and set the pace

• Contraction/Expansion – focus on what you are
good at (core competencies) or seek to expand into a range of markets?

Types of Strategy
• Price Leadership – through dominating the industry – others follow your price lead • Global – seeking to expand global operations • Reengineering – thinking outside the box – looking at news ways of doing things to leverage the organisation’s performance

Types of Strategy
– Internal business level strategies –

• Downsizing – selling off unwanted parts of the business – similar to contraction • Delayering – flattening the management structure, removing bureaucracy, speed up decision making • Restructuring – complete re-think of the way the business is organised

Environmental Factors and Organizational capabilities




Four Basic Strategies
Global Strategy Transnational Strategy

Cost pressures
International Strategy Multi domestic Strategy

Low Low High Pressures for local responsiveness

Strategic Choices
International create value by transferring skills to local markets where skills are not present. Multidomestic oriented toward achieving maximum local responsiveness. Global increase profitability through cost reductions from experience curve effects and location economies. Transnational Exploit experienced based cost and location economies, transfer core competencies within the firm, and pay attention to local responsiveness needs.

The Advantages and Disadvantages of the Four Strategies
Strategy Global International Advantages Exploit experience curve effects Exploit location economies Transfer distinctive competencies to Foreign Markets Disadvantages Lack of local responsiveness Lack of local responsiveness Inability to realize location economies Failure to exploit experience curve effects

The Advantages and Disadvantages of the Four Strategies
Strategy Advantages Disadvantages Multi-domesticCustomize product offerings Inability to realize location and marketing in accordance economies with local responsiveness Failure to exploit experience curve effects Failure to transfer distinctive competencies to foreign markets Transnational Exploit experience curve Difficult to implement effects due to organizational Exploit location economies problems Customize product offerings and marketing in accordance with local responsiveness Reap benefits of global learning

Strategy and Centralization
Global Centralize Multi-domestic Decentralize

International Centralize for core competencies Decentralize for operating decisions

Transnational Both Centralize And Decentralize