Introduction to Strategic Management

Chapter 1: What Is Strategy?

Reference: Henry “Understanding Strategic Management”, chapter 1

Learning Objectives:
After completing this topic you should be able to:

 Explain what is meant by strategy;

 Describe a strategic management process;
 Discuss the role of values, vision, and mission statements;
 Explain what is meant by a theory of business;
 Evaluate different perspectives on strategy formulation;
 Explain the linkages between an organization's strategy and its
external and internal environment.
Introduction
 What is strategy?
 The strategic management process.
 strategic analysis
 strategy formulation
 strategy implementation
 Values, visions and mission
 The theory of business
 Types of strategy
 Perspectives on strategy formulation
 A strategic management framework
What is Strategy?
 The pattern of major objectives, purposes, goals and essential policies or
plans for achieving those goals, stated in such a way as to define what
business the company is in or is to be in. (Andrews 1971)
Chandler’s definition of strategy

“the determination of the basic long-term goals and objective of an enterprise

and the adoption of courses of action and the allocation of resources
necessary for carrying out these goals”

Chandler AD (1962), Strategy and Structure:….., MIT Press,

Cambridge, MA.
Few famous thinkers

 Xenophon
 Niccolo Machiavelli (16th century)
 Peter Drucker (1909-2005)
 Alfred Chandler (1918-2007)
 Henry Mintzberg (1939-)
 Michael Porter (1943-)
 What is Strategy?

Mintzberg’s 5Ps of Strategy

 a plan
 a ploy
 a pattern of behaviour
 a position in relation to others
 a perspective

MINTZBERG, H (1987), Five P’s for Strategy, California

Management Review, 30, 11-24.
 Mintzenberg’s 5P
Mintzberg’s definitions of strategy:
 Plan – guidelines set to deal with situations
 Ploy - specific manoeuvres
 Pattern - a stream of actions (may appear without preconception)
 Position - means of locating an organisation in an “environment”
 Perspective -  individuals united by common thinking and / or behaviour
 What is Strategy? – various definitions
Markides (1999) selecting a strategic position an
organization can call its own based on:

 Who should the organization target as customers?

 What products or services should be offered?

 How can the organization do this efficiently?

 What is Strategy? – various definitions
Kay (1993) an organization’s strategy is ‘…the match
between its internal capabilities and external
relationships’

 Internal:what the organization is capable of doing

 External: its relationship with employees, customers,
shareholders, and suppliers.

The use of analytical techniques allows the firm to

influence its position in the market
The Strategic Management Process

 Select the mission

 Analyze the external competitive environment
 Analyze the organization’s internal environments
 Define the vision, major strategic goals and measurable long-
term strategic objectives
 Define action plans, benchmarks and individual responsibility
for attaining strategic objectives
 Implement the strategy
What is Strategic Analysis?

Strategy analysis is a useful starting point for crafting strategy

‘competitive’, ‘immediate’,
‘general’, ‘contextual’, ‘far’
‘operational’, ‘near’
 It includes the general and competitive environment facing the
organization
‘external
 It also deals with the organization’s internal environment environment’

 Strategic analysis helps the organization evaluate how well it is

positioned to exploit external opportunities
Strategy Formulation also evaluation and
choice
Note: Strategy formulation usually takes place at the business
and corporate levels

 Strategic analysis is important for identifying

“strategic fit”

 So too is creative insight which synthesize

experiences that exist within the organization to form
a novel strategy

 An organization is usually faced with a choice of

competing strategies which must be evaluated
Strategy Implementation
 Strategy implementation requires the organization to be sufficiently
flexible

 A given strategy must be effectively communicated with

stakeholders inside and outside the organization

 The organization’s values are crucial in sign-posting to individuals

what the organization considers important

 An organization’s culture will determine how it responds to

opportunities that exist
Values, Visions and Mission Statements

A vision is often associated with the founder of an

organization
It represents a desired state that the organization
aspires to achieve in the future

A mission seeks to answer the fundamental question

of why an organization exists

Campbell et al. (1990) make a distinction between

mission and sense of mission
The Theory of Business
 The assumptions on which an organization has been built and
the basis on which it is run are its theory of business (Drucker
1995)

 It includes assumptions about markets, customers,

competitors, and its internal capabilities

 Organization encounter difficulties when their theory of

business no longer fit with reality

 A organization’s theory of business becomes obsolete when it

has achieved its objectives
Types (or levels) of Strategy
 Business strategy deals with how an organization will compete
in its chosen industry or market

 Corporate strategy is concerned with which markets an

organization wants to compete in

 Functional strategy relates to functions within an organization

such as R&D, marketing and finance

-- also “international strategy”

Different Perspectives on Strategy Formulation
 The Design School seeks to match the capabilities of the
organization to the opportunities within its competitive environment
This rationalist approach is exemplified by Michael Porter’s generic
strategies

 The Learning School emphasizes deliberate and emergent strategies

A deliberate strategy is one the organization intends to

pursue

 An emergent strategy involves managerial learning and

experience that coalesce into a realised strategy
A strategic management framework

Figure 1.3

A strategy must take account of the organization’s

stakeholders if it is to succeed
Lecture review
 What is strategy?
 The strategic management process.
 strategic analysis
 strategy formulation
 strategy implementation
 Values, visions and mission
 The theory of business
 Types of strategy
 Perspectives on strategy formulation
 A strategic management framework
Virtual Learning and Seminar

VLH
See the question on the discussion board, do your
research and make at least one contribution to the
discussion
Seminar
Come along prepared to discuss the lecture material
and in particular the review questions and the
discussion question at the end of Henry chapter 1
Review and discussion questions
Review Questions
1. What is strategy?
2. Explain the difference between the learning and
design schools in strategy formulation.
Discussion Question
“To understand which companies will survive and
which will fail, one has only to look at the
management in each company and evaluate their
theory of business” Discuss.