GJefgsGazal Gandhi

Assistant Professsor

Strategy: The unifying theme that gives coherence

and direction to the decisions of an organization
g
Strategic Management: Consisting of the analysis,
decisions, and actions an organization
undertakes in order to create and sustain
competitive advantages.
Or, the Strategic Management Process is:
Th full
The
f ll sett off commitments,
it
t d
decisions,
i i
and
d
actions required for a firm to create value and
earn above-average returns. (Hitt, Hoskinson, &
Ireland 2004,
Ireland,
2004 p.
p 4)
Strategic Management basically seeks to answer the
question: How and why do some firms

outperform others?

Oxford Dictionary: The art of war, especially the planning of

movements of troops and ships etc., into favorable positions;
plan of action or policy in business or politics etc.
Chester I. Barnard: Strategy is intended to focus on the
interdependence of the adversaries decisions and on their
p
about each others behavior.
expectations
Alfred D. Chandler Jr.: The determination of the long run goals
and objectives of an enterprise, and the adoption of courses
of action and the allocation of resources necessary for
carrying out these goals.
Kenneth Andrews: Strategy is the pattern of objectives,
purposes or goals
l and
d th
the major
j policies
li i and
d plans
l
for
f
achieving these goals, stated in such a way as to define what
business the company is in or is to be in and the kind of
company it iis or iis to
t b
be.

Know the other and know yourself: Triumph without peril.

Know Nature and know the Situation: Triumph completely.
- Sun Tzu (~360 B.C.)

Business strategy is a relatively young field of study

but its roots go back to early military strategy.
strategy
Strategy comes from the Greek word strategos, which
is formed from stratos, meaning army, and ag,
ag,
meaning to lead.
Carl von Clausewitz wrote in the early
y 1800s that
tactics[involve] the use of armed forces in the
engagement, strategy [is] the use of engagements for
the objects of war.
war

Not until very large companies with the ability to

i fl
influence
the
h competitive
i i environment
i
within
i hi their
h i
industries did strategic thinking in the business world
begin to be articulated.

Alfred Sloan
Sloan, CEO of GM
GM, 1923 1946 - One of the first to analyze
competition, Ford, and devise a strategic plan based on its strengths and
weaknesses.
Chester Barnard, Senior Executive of New Jersey Bell, 1930s - Argued
managers should pay attention to strategic
strategic factors
factors which depend on personal
personal
or organizational action.

Wartime (WWI and WWII) efforts also impacted strategic

g and use of formal strategic
g tools and concepts:
p
thinking

Allocation of scarce resources

Use of quantitative analysis in planning
The concept of learning curves
The concept of distinctive
distinctive competence
competence - first mentioned by Philip
Selznick, a sociologist, in a debate about whether or not to combine the
military forces into a single unit (i.e., no Army, Navy, Air Force, Marines,
just the US Military).

It wasnt until the 1950s that strategy was truly introduced in business
schools as a way of analyzing the competitive environment and setting
organizational goals and objectives to fit that environment.
Th
These
concepts
t serve as the
th ffoundation
d ti off strategic
t t i managementt study:
t d
Previous Business Policy perspectives looked at maintaining a balance
in accord with the underlying policies of the business as a whole.
Harvard
Kenneth Andrews SWOT Analysis was developed still in use today.
Theodore Levitts Marketing Myopia argued that when companies fail
it typically is because firms focus on the product rather than the changing
patterns of consumer needs and tastes.
p
Igor Ansoff argued, in response to Levitt, that a firms mission should
exploit an existing need in the market, rather than using the consumer as
the common thread in business. In reality a given type of customer will
q
y have a range
g of p
product missions or needs. Corporate
p
Strategy,
gy,
frequently
1965.
BCG developed the experience curve and portfolio analysis concepts.
McKinsey & Companys development of SBUs and the nine-block matrix.
Mintzberg
Mintzbergss Deliberate
Deliberate, Emergent & Realized Strategies
Strategies
Porters Generic Strategies

The Evolution of Strategic

g Management
g

DOMINANT
THEME

MAIN
ISSUES

KEY
CONCEPTS
&
TOOLS

MANAGEMENT
IMPLIC
IMPLICATIONS

1950s

1960s-early 70s

Mid-70s-mid-80s

Late 80s 1990s

2000s

Budgetary
planning &
control

Corporate
planning

Positioning

Competitive
advantage

Strategic
innovation

Financial
control

Planning
growth &diversification

Selecting
sectors/markets.
Positioning for
leadership

Focusing on
sources of
competitive
advantage

Reconciling
size with
flexibility &
agility

Capital
C
it l
budgeting.
Financial
planning

Forecasting.
F
ti
Corporate
planning.
Synergy

IIndustry
d t analysis
l i
Segmentation
Experience curve
Portfolio analysis

Resources &
R
C
Cooperative
ti
capabilities.
strategy.
Shareholder
Complexity.
value.
Owning
E-commerce.
standards.
Knowledge Management

Coordination
& control by
Budgeting
systems

Corporate
planning depts.
created Rise of
created.
corporate
planning

Diversification.
Restructuring.
Global strategies. Reengineering.
Matrix structures Refocusing.
Refocusing
Outsourcing.

Alliances &
networks
Self -organiz
ation & virtual
organization

Present
Mission
i i

New
Mission

Present
Product

New
Product

Market
Penetration

Product
Development

Market
Diversification
Development

*Categories
Categories define the common thread in an
organizations business/corporate strategy.

High
Sh
Share

Low
Sh
Share

High
g
Growth

Star

Question
Mark

Slow
Growth

Cash
Cow

Bark!!

Dog

Forms of Strategy
Mi t b
Critique
C iti
F
l Strategic
St t i Planning:
Pl
i
Mintzbergs
off Formal
The fallacy of prediction the future is
unknown
The fallacy of detachment -- impossible to
di
divorce
formulation
f
l ti
from
f
implementation
i l
t ti
The fallacy of formalization --inhibits flexibility,
spontaneity, intuition and learning.

Unrealized
Strategy

Emergent
Strategy

Realized
Strategy

**Normally emergent strategy comes from

learning and dissemination within the organization.

Porters Generic Strategies

Competitive Advantage
Lower Cost
Differentiation
Strategy 1

Broad
Target
Competitive
Scope
Narrow
N
Target

Cost
Leadership
Strategy 3A

Cost Focus

Strategy 2

Differentiation

Strategy 3B

Differentiation
Focus

Provides a framework for thinking about the business

Creates a fit between the organization and its external
environment.
Provides a process of coping with change and organizational
renewal
Fosters anticipation, innovation, and excellence
Facilitates consistent decision-making
Creates organizational focus
Acts as a process of organizational leadership.
Finally and most importantly: To help the organization to
succeed (outperform) against its competition!!

The ultimate goal of the organizations is to be

successful success is:

Strategy can help achieve success, but it doesnt

guarantee itcertain features of strategy directly
contribute
ib
to success:
1.
2.
3.
4.

Survival (long
(long-term
term success)
Achievement of Goals
Above average returns/Profitability (probably most important,
because it determines the ability to achieve the above two)

Goals that are simple, consistent, and long-term.

Profound understanding of the competitive environment.
Objective appraisal of resources.
Effective implementation.

These observations concerning

g the role of strategy
gy
can be made in relation to most human endeavors be
it warfare, chess, politics, sport or business.

Competition provides the rationale for

strategy without competition,
competition strategy is of
no concern.
The essence of strategy
gy is the
interdependence of competitorsor the
establishment of sustainable competitive
advantage over rivals.
rivals
The study of strategy involves how we go
about identifying,
fy g, establishing,
g, and sustainingg
competitive advantage.

Thinking Strategically:
The Three Big Strategic Analysis
Analysis Questions
1. Where are we now? What is our situation?
2. Where do we want to go?
Business(es) we want to be in and market
positions we want to stake out
Buyer needs and groups we want to serve
Outcomes we want to achieve

3. How will we g
get there?

Differing Perspectives of the Strategic

Management Process
I/O Model

RBV Model

External Environment

Resources

Industry Attractiveness

Capability

Strategy Formulation

Sustainable CA

Assets/Skills Assessment

Strategy Formulation

Implementation

Implementation

1. The external environment is assumed to possess

2.

3.

4.

pressures and constraints that determine the strategies

that would result in above
above--average returns.
Most firms competing within a particular industry are
assumed
d to
t control
t l similar
i il strategically
t t i ll relevant
l
t
resources and to pursue similar strategies in light of
those resources.
Resources used to implement strategies are highly
mobile across firms.
Organizational
g
decision makers are assumed to be
rational and committed to acting in the firms best
interests, as shown by their profit
profit--maximizing behaviors.

Both the I/O and RBV perspectives are

useful to managers and essential to
understanding the strategic management
process.
O essentially
One
i ll takes
k an outward-in
d i (I/O)
perspective while other takes an inward-out
(RBV) perspective.
perspective

Strategiic Controol (6)

Formulating Directions
- Develop Vision/Mission (1)
-Set Objectives (2)

Organizational Culture
St k h ld Influence
I fl
Stakeholder
Values / Ethics

Strategic Analyses (3)

Opportunities and Threats

from Economic, Political,
Technological etc Sources

External Environment
Competitor/Stakeholder
Internal Organization

Strategy Formulation (4)

-Formulate and Consider
Alternatives
-Make Strategy Choice

Opportunities and Threats

from Competition and
Key Stakeholders
Organizational Culture
Stakeholder Influence
Values / Ethics

Context of Strategy
(type of organization, culture, values,
life cycle competitive position)

Birnbaums Strategy 21 Process

Examine the Current Business
Model
Go Beyond the Current Business
Model
Design a Grand Strategy
Develop a Compelling Vision
Assure
A
Enablers
E bl
off Strategy
S

Strategic
Intellectual Capacity
Formulation and
Processes
I l
Implementation
t ti
Organizational Structures
Technologies
External Relationships
Capital Resources

Set Objectives to Measure Success

Similar to
Internal and
Competitive
A l i
Analysis
Similar to
Internal and
Competitive
Analysis
Basic Decision
to Make Major
Change or Not

Related Issues to
M it
Monitor
Implementation
Process

Hambrick & Fredrickson, 2001

The Strategy
gy Concept
p
Levels of Analysis
Where to Compete?

Corporate
Strategy

How to Compete?

Business
Strategy

How to Contribute?

Functional
Strategy

Choice of Products
Choice of Markets
Ch i off C
Choice
Competitors
tit

INDUSTRY
ATTRACTIVENESS

RATE OF PROFIT
ABOVE THE
COMPETITIVE
LEVEL

How do we
make
money?

Which
Whi
h
businesses
should we be
in?

CORPORATE
STRATEGY

COMPETITIVE
ADVANTAGE

How should
we compete?

BUSINESS
STRATEGY