The Essence of Strategy and Strategic Management Study Strategic Management Notes

Learning Outcomes

• Discuss fundamental ideas about the nature and content of strategies.
• Identify and critique definitions of strategic management processes and their underlying assumptions.
• Explain how the environmental context of an enterprise influences its strategy and how it is implemented.
• Understand and assess the design-plus approach to strategy management.

Introduction: The Nature and Significance of Strategy

• Common Perceptions of Strategy: People usually view strategy through four primary lenses:
  • Plans and planning.
  • Anticipating and forecasting the future.
  • Competing and being competitive.
  • Organizing to compete.
• Broad Definition: Strategy is alternatively viewed as something involving future intentions, decisions, and consequent actions.

Strategic Management in Theory and Practice

• The Experiential Perspective in Historical Context:
  • Strategies of profit enterprises: Historical examples include Standard Oil, Ford Motor Company, and General Motors.
  • Strategies of non-profit enterprises: Example includes the Oxfam charity.
• The Scholarly Perspective: This involves research and observation conducted by academics and consultants.
• The Search for General Prescriptions: The particular content of whatever prescription an enterprise adopts constitutes its strategy.

Important Strategy Concepts

• Strategic Management: This involves contests over significant ideas and controversial opinions, frequently creating disagreements and conflicts among senior decision makers.
• Strategy: Defined as a pattern of decisions in a company that reveals its objectives, purposes, and goals. It also indicates the range of business the company intends to pursue.

The Strategic Management Task

• Essential Identifications for the Enterprise:
  • Clients (both current and potential).
  • Benefits of current relationships.
  • Benefits of future relationships.
• Nature of Benefits: Benefits are classified as both economic and non-economic.

Stakeholders

• Definition: Stakeholders are the various actors and agencies in society that benefit from or are harmed by an enterprise's actions.
• Categories of Stakeholders:
  • Clienteles.
  • Owners.
  • Employees.
  • Other parties.

Three Basic Forms of Enterprise (Figure $1.1$)

• Businesses:
  • Sole traders.
  • Partnerships.
  • Independent, limited-liability private companies.
  • Publicly-quoted, national corporations.
  • Multi-divisional, transnational corporations.
• Mutual Agencies:
  • Private clubs.
  • Friendly societies.
  • Traditional building societies.
  • Credit unions.
  • Religious organizations.
• Social Agencies:
  • Charities.
  • Government executive agencies (e.g., DVLA).
  • National Government-controlled agencies (e.g., NHS).
  • Quangos (Quasi-Autonomous Non-Governmental Organizations) and 'think tanks'.
  • Local Government agencies (e.g., Social Services).

Definition of Enterprise Strategy

• A strategy combines explicit statements and implicit beliefs/understandings in and around an enterprise regarding:
  • Core Purpose (Mission): Assessing if this purpose will change in the future.
  • Vision: A vision of the future direction and what the enterprise intends to achieve.
  • Scope: Identifying current and potential clienteles.
  • Resources and Competences: Assessing those that create value for clienteles and determining if they must change in the future to add value.
  • Foundations: Evaluating the present competitive standing and future sustainability.

The 5 P’s of Strategy

• Plan: Overall understanding of aims and how they will be achieved.
• Ploy: Combination of actions and tactics that will be employed.
• Perspective: Assumptions and ways of thinking.
• Position: Can be based on market-share, reputation, brand image, etc.
• Pattern: An evolved stream of observed events.

Types of Strategy

• Unplanned/Emergent Strategies: These are more common than often supposed.
• Adoption: When emergent strategies prove successful, they are adopted permanently and become part of the future intended strategy (after Mintzberg, $1978$).

Ethical Relationships, Social Responsibility, and Strategic Change

• Relationship-Building Elements of Strategy:
  • Understanding the outputs (products and services).
  • Establishing convenient and cost-effective ways for end users.
  • Managing employees engaged in value-creating activities.
  • Ensuring employees and contractors have access to necessary resources and skills to perform activities well.
  • Managing and sustaining fair and appropriate rewards and benefits.
• Strategic Change Dimensions: An enterprise must adapt its strategy over time by:
  • Perceiving new opportunities.
  • Offering new value-adding activities.
  • Conforming behavior to societal and ethical pressures (e.g., respecting the environment, eliminating pollution, reducing energy consumption).

Corporate-level and Business-level Strategies

• Single-Activity Enterprise: Uses business-unit strategy (Example: Sunseeker).
• Multi-Unit Enterprise: Requires corporate strategy (Example: BBC).
• Evaluation: Strategy must be understood and judged at different organizational levels.

Strategic Management Processes

• Definition: A process encompassing the ongoing activities of forming and implementing strategy.
• Evolution: Because activities are ongoing, strategy content evolves over time, sometimes intentionally and sometimes not.

Subtlety and Complexity of Strategic Management Skills

• Strategic managers apply 'artistic' and 'craft' skills to:
  • Demonstrate leadership.
  • Innovate and encourage colleagues.
  • Value adaptiveness, improvisation, and timely, practical actions.
  • Exercise personal 'political' skills for negotiations.
  • Establish clear priorities and achieve desired results.

Frames of Reference

• The enterprise’s shared belief set (frame of reference) performs two functions:
  • Informs and constrains how managers think about strategic management processes (conduct).
  • Influences the decisions and actions (strategy content) that emerge.

Four Strategy Frames of Reference (Figure $1.3$)

• Dimensions of Comparison:
  • Objectives: Singular, profit-maximising vs. Multiple (plural), potentially conflicting objectives.
  • Processes: Deliberate, logical strategic processes vs. Emergent, adaptive-intuitive processes.
• The Rational-Planning Frame:
  • Mindset: Strategy-as-grand-plan.
  • Characteristics: Belief that clear intent and detailed design enhance goal achievement; focuses on optimizing outcomes/profit maximization.
  • Example: Beaver & Tapley.
• The Systemic Frame (Socio-cultural Systemic):
  • Mindset: Open system.
  • Characteristics: Enterprise viewed as containing many actors, systems, subsystems, and embedded routines; multiple priorities must be accommodated through continuous adjustment.
  • Example: BBC.
• The Power-process Frame (Negotiated):
  • Mindset: Pluralist.
  • Characteristics: Scepticism toward rational management; strategy is a compromise between influential actors using political skills; associated with governmental politics.
  • Example: British Labour Party.
• The Evolutionary Frame:
  • Mindset: Evolution/Adaptation.
  • Characteristics: Strategy must be adaptive; draws on Darwinian natural selection; involves entrepreneurial, innovative, or chaotic environments where exploratory responses produce visible variations.
  • Example: EasyJet.

Significance of Reference Frames

• Reinforces accepted beliefs about strategic management conduct.
• Helps secure agreement on strategic decisions.
• Informs standards of risk tolerance.
• Predictability: Without an obvious frame, future strategies become less predictable.

The ‘Design-plus’ Strategic Management Framework

• Three Linked Phases:
  • Phase $1$: Situation assessment (What the actual position is).
  • Phase $2$: Identification and evaluation of key strategic issues and choices (What is possible and realistic).
  • Phase $3$: Action planning and implementation (What is to be done and how).

Detailed Breakdown of Design-plus Process (Figure $1.4$)

• Phase $1$: Situation Assessment:
  • Environment & competitor analysis.
  • Resources & competences analysis.
  • Position analysis: Identifying Threats & Opportunities and Strengths & Weaknesses.
• Phase $2$: Choices and Decisions:
  • Strategic intent, mission, and broad goals.
  • Envisioning strategic options.
  • Options evaluation and decision-making leading to "The Strategy."
  • Mission confirmation.
• Phase $3$: Results and Implementation (Action Plans):
  • Organization structures (How the company organizes).
  • Crucial, distinctive resources and capabilities (Basis of value-creation).
  • Business processes/Routines, procedures, and systems to achieve results.
  • Human Resource Management (People, their skills, needs, recruitment, and training).
  • Desirable culture/ethos (The values and attitudes expected).
  • Key targets and performance outcomes (Results needed).

Comprehensive Phase Analysis

• Phase $1$ Context: Identifying relevant issues in the macro-environment, industry sector environments, internal mission/vision, and value-creating resources.
• Phase $2$ Alternatives: Changing mission/vision, selecting future clienteles, enhancing distinctiveness, and judging acceptable risks. Alternatives involve analytical frameworks, business-unit levels, innovation, diversification, acquisitions/mergers, and global strategies.
• Phase $3$ Action: Ensuring strategy is coherent/consistent; strategy content must penetrate functional areas like marketing, finance, operations, and HRM.

Challenges of Doing Strategy

• Complacency and aversion to change.
• The complexity of the operating environment.
• Apparent contradictions.
• Sustaining creativity and imagination.
• Integrating and co-ordinating coherent actions.
• Reduced thinking and reaction time.