BUS 800 Chapter Notes - Chapter 1: Strategic Management, Strategic Planning, Economic Forecasting
24 Feb 2017
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BUS 800 Ch.1
The Role of Strategy in Success:
Introduction and Objectives:
• Strategy is a unifying theme that gives coherence and direction to the actions and decisions of
an individual/organization
o Not a detailed plan or program of instructions
The Role of Strategy in Success:
• 4 factors that are conductive to success:
1. Goals that are simple, consistent and long term
2. Profound understanding of the competitive market (understand the context in which the
organization is operating)
3. Objective appraisal of resources: strategy should be effective in exploiting internal strengths
and protect areas of weakness
4. Effective implementation: need to be able to reach decisions, implement them and create
loyalty among subordinates
o Without effective implementation, the best-laid strategies are of little use
• successful not based on greatest innate abilities→success goes to those who manage their
careers most effectively using the 4 factors
A brief History of Strategy:
Origins:
• Strategies are needed because they give direction and purpose, to deploy resources in the most
effective manner and to coordinate the decisions made by different individuals
• Strategy derives from the Greek word
• Strategy: overall plan for deploying resources to establish a favourable position (i.e manoeuver
to win a war)
• Tactic: scheme for a specific action (i.e manoeuvers to win a battle)
• Strategic decisions have 3 characteristics:
o Are important
o Involve a significant commitment of resources
o Are not easily reversible
Evolution of Business Strategy:
• Evolution of business strategy has been driven more by the practical needs of business than by
the development of theory
• During the 50s and 60s there was difficult in coordinating decisions and maintaining control in
companies that were growing in size and complexity
o Financial budgeting only provided short term control and did little for long term
development
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o Corporate planning: adoption of a systematic approach to setting corporate objectives,
making strategic decisions and checking progress toward achieving objectives
o Corporate planning was developed during the late 50s to set goals and objectives,
forecast key economic trends (I.e market demand/share, revenue, costs, margins), est.
priorities for products and business areas and allocate capital expenditures for a 5 year
plan
o Corporate planning was useful for guiding the diversification strategies being used
• During the 70s and early 80s diversification ailed to deliver the anticipated synergies
o Oil shocks caused economic instability
o Increased international competition from Japanese, European and Southeast Asian firms
o The turbulent business environment made It hard to forecast 3-5 years into the future
• During the late 70s and into the 80s Porter focused on sources of profit within the industry
environment →how profits were distributed between the different firms in an industry was also
studied
• During the 1990s focus of strategy analysis switched from sources of profit in the external
environment to sources within the firm
o Resources and capabilities of the firm were regarded as the main source of competitive
advantage and the primary basis for formulating strategy
o Resource-based view: theoretical perspective that highlights the role of resources and
capabilities as the principal basis for firm strategy
o Resource based view caused firms to stop pursuing similar strategies and instead
identify how firms are different from competitors and design strategies that exploit the
differences
o Competitive strategy is about being different and choosing different activities to deliver
a unique mix of value
• First decade of the 20th century: technology, media, telecommunications was growing and
reshaped industries
• There is continuous change and a lot of competition so strategy is more about developing
responsiveness and flexibility to create successive temporary advantages than about building
positions of sustained competitive advantages
• Stateg does’t ol oe fo top aageet, poesses ad paties of eeda
organizational life produce strategic outcomes (i.e strategy shapes and is shaped by the
management team)
Evolution of Strategic management:
Financial budgeting (1950):
• Discontinued cash flow based capital
budgeting
• Financial control through operating
budgets
Corporate Planning (1960-70):
• Medium term economic forecasting
• Formal corporate planning
• Diversification and quest for synergy
• Creation of corporate planning
departments
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Strategy as Positioning (1970-80):
• Industry analysis, market segmentation
• Experience curve
• Profit impact of marketing strategy
analysis
• Planning business portfolios
Quest for competitive advantage (1990):
• Analysis of resources and capabilities
• Shareholder value maximization
• Restructuring and re-engineering
• Alliances
Strategy for the new economy (2000):
• Strategic innovation
• New business models
• Disruptive technologies
Strategy in the new millennium (2009)
• CSR and business ethics
• Competing for standards
• Winner take all markets
• Global strategies
Strategy in Turbulent times (2014)
• Corporate governance and social
responsibility
• Org. ambidexterity
• Managing risk and uncertainty
• New form of leadership
Strategy Today:
What is Strategy?
• Strategy: means by which individuals or organizations achieve their objectives
o It is focused on achieving certain goals, that there must be an allocation of resources
and that strategy implies some consistency, integration or cohesiveness
• Strategy is less concerned with detailed plans and more with the quest for success since the
business environment is more unstable and unpredictable
o Strategy needs to embrace flexibility and responsiveness in order to guide firms through
uncertain times
• Corporate strategy: defines the scope of the firm in terms of the industries and markets in
which it competes
o Industry attractiveness and the industries they should be in
o Decisions include investment in diversification, vertical integration, acquisitions and new
ventures, allocation of resources between the different businesses and the firm and
divestments
o Vertical integration/diversification: what happens when a firm extends its activities
into the preceding or succeeding stages of the production process
o Responsibility of top management team and corporate strategy staff
• Business strategy/competitive strategy: concerned with how the firm competes within a
particular industry/market (competitive advantage and how they should compete)
o To prosper the firm must est. a competitive advantage
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