Lecture 3

Strategy & Organization

Learning Outcomes
Students should be able to:
Describe organisations purpose and strategy.
Explain Top Management role in organisation
direction.
Explain Mintzbergs 5Ps for strategy.
Discuss Michael E. Porters competitive
strategies.
Elaborate Miles & Snows strategy typology.
Explain how strategy affects organisation
design.
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Air Asia Strategy

What is strategy?
Johnson

and Scholes (
Exploring Corporate Strategy) define strategy as
follows:

"Strategy is the direction and scope of an

organisation over the long-term: which achieves
advantage for the organisation through its
configuration of resources within a challenging
environment, to meet the needs of markets and to
fulfill stakeholder expectations".

It

is a plan for interacting with the competitive

environment to achieve organisation goals (Daft,
2007)
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What is strategy? (cont)

In other words, strategy is about:
Where is the business trying to get to in
the long-term (direction)
Which markets should a business compete
in and what kind of activities are involved
in such markets? (markets; scope)
How can the business perform better than
the competition in those markets?
(advantage)?
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What is strategy? (cont)

What

resources (skills, assets, finance,

relationships, technical competence,
facilities) are required in order to be able
to compete? (resources)?
What external, environmental factors
affect the businesses' ability to compete?
(environment)?
What are the values and expectations of
those who have power in and around the
business? (stakeholders)
6

Top Management Role in Organization

Direction, Design, and Effectiveness
External Environment
Opportunities
Threats
Uncertainty
Resource Availability

Organization
Design
Strategic Direction

CEO, Top
Management
Team

Internal Situation
Strengths
Weaknesses
Distinctive Competence
Leadership Style
Past Performance

Define
mission,
official
goals

Select
operational
goals,
competitive
strategies

Structural Form
learning vs.
efficiency
Information and
control systems
Production
technology
Human resource
policies,
incentives
Organizational
culture
Interorganizational
linkages

Effectiveness
Outcomes
Resources
Efficiency
Goal attainment
Competing values

Source: Adapted from Arie Y. Lewin and Carroll U. Stephens, Individual Properties of the CEO as Determinants of Organization
Design, unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, CEO Attributes as Determinants of
Organization Design: An integrated Model, Organization Studies 15, no. 2 (1994): 183-212

SPIRIT AIRLINES (ULCC - US)

Already the low fare leader, Spirit becomes the

transparency leader by providing customers detail
about fuel usage cost, delivering the fairest fare in the
air
Spirit Airlines has announced an innovative approach
to ensure transparency in fuel costs, making sure you
as our customer know how much of your fare is fuel
cost. You will now have this important information
available to make smart travel decisions. For
example, when a fare is $137 and fuel makes up $78
of that fare, you can decide if the remaining $59
makes this a good time to buy.
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SPIRIT AIRLINES
Mileage

Gallons

PerPassenger

Range

Used*

Gallons
*

MPG

Upto399

595

5.1

400to599

897

600to799

FuelPricePerGallon

FPTPer

Passenger

Price**

Misc***

Total

39

$1.92

$0.25

$2.17

$11.10

7.7

52

$1.92

$0.25

$2.17

$16.74

1,331

11.5

52

$1.92

$0.25

$2.17

$24.85

800to999

1,467

12.6

63

$1.92

$0.25

$2.17

$27.38

1,000to1,199

1,762

15.2

66

$1.92

$0.25

$2.17

$32.89

1,200to1,599

2,042

17.6

68

$1.92

$0.25

$2.17

$38.12

1,600to1,999

2,618

22.6

71

$1.92

$0.25

$2.17

$48.88

2,000to2,499

3,378

29.1

69

$1.92

$0.25

$2.17

$63.06

2,500+

4,077

35.1

71

$1.92

$0.25

$2.17

9
$76.11

Mintzberg's 5 Ps for Strategy

Plan

Consciously intended course of action, a guideline (or set of

guidelines) to deal with a situation. By this definition strategies have
two essential characteristics: they are made in advance of the actions
to which they apply, and they are developed consciously and
purposefully.

Ploy

A strategy can be a ploy too, really just a specific maneuver intended

to outwit an opponent or competitor.

Pattern

A pattern in a stream of actions. Strategy is consistency in behaviour,

whether or not intended. The definitions of strategy as plan and pattern
can be quite independent of one another: plans may go unrealised,
while patterns may appear without preconception. Patterns are
realised strategy

Position

Specifically a means of locating an organisation in an "environment".

By this definition strategy becomes the mediating force, or "match",
between organisation and environment, that is, between the internal
and the external context.

Perspective

Its content consisting not just of a chosen position, but of an ingrained

way of perceiving the world. Strategy in this respect is to the
organisation what personality is to the individual. What is of key
importance is that strategy is a perspective shared by members of an
organisation, through their intentions and / or by their actions. In effect,
when we talk of strategy in this context, we are entering the realm of
the collective mind - individuals united by common thinking and / or
behaviour.

Sample Mission Statements

CITI GROUP:

FORD

Our goal for Citigroup is to be the most respected global

financial services company. Like any other public company,
we're obligated to deliver profits and growth to our
shareholders. Of equal importance is to deliver those profits
and generate growth responsibly.
We are a global family with a proud heritage passionately
committed to providing personal mobility for people around the
world.

HARLEY DAVIDSON

We fulfill dreams through the experience of motorcycling, by

providing to motorcyclists and to the general public an
expanding line of motorcycles and branded products and
services in selected market segments.
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Michael E. Porters Competitive

Strategies
Framework
Low

for 3 competitive strategies:

cost leadership

Increase

market share by emphasising low cost

compared to competitor e.g. Air Asia, Walmart

Differentiation
Distinguishing

products or services from others in

the industry e.g. Harley Davidson, Jaguar

Focus
Organisation

concentrates on a specific regional

market or buyer group.

Focused low cost leadership

Focused differentiation
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Michael E. Porters
Competitive Strategies
Competitive
Scope
Broad
Broad
Narrow

Narrow

Competitive
Advantage
Low Cost

Strategy

Example

Low-Cost
Leadership

WalMart

Uniqueness

Differentiation

Starbucks
Coffee Co.

Low Cost

Focused Low-Cost
Leadership

Spirit Airlines
(Ultra Low Cost
Apple

Uniqueness

Focused
Differentiation

Carrier)

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Competitive Advantage
Competitive Advantage

Broad
Narrow

Competitive Scope

low cost

uniqueness

Low cost
Leadership

Differentiation

Focused Low
cost leadership

Focused
Differentiation

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Miles and Snows Strategy Typology

Formulated

strategies are congruent

with the external environment.
Prospector

Values creativity, risk-taking, and innovation

Suited to a dynamic, growing environment.
Eg. Fed-Ex, Microsoft

Defender

Efficiency orientation; centralized authority and tight cost

control
Emphasis on production efficiency, low overhead

Close supervision; little employee empowerment

Source: Based on Michael Treacy and Fred Wiersema, How Market Leaders Keep Their Edge, Fortune February 6,
1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), 100-113; and Raymond E. Miles,
Charles c. Snow, Alan D. Meyer, and Henry L. Coleman, Jr., Organizational Strategy, Structure, and Process,Academy of Management Review 3 (1978), 546-562

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Miles and Snows Strategy Typology

(contd)
Analyzer

Balances efficiency and learning; tight cost control with

flexibility and adaptability
Efficient production for stable product lines; emphasis on
creativity, research, risk-taking for innovation
Eg. Sony Corp. defend position in traditional consumer
electronics but also build business in integrated home
entertainment.

Reactor

No clear organizational approach; design characteristics may

shift abruptly depending on current needs
Eg. Xerox, Kodak struggling now because they failed to
adopt strategy consistent with consumer trends

Source: Based on Michael Treacy and Fred Wiersema, How Market Leaders Keep Their Edge, Fortune February 6, 1995, 88-98; Michael Hitt, R. Duane
Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), 100-113; and Raymond E. Miles, Charles c. Snow, Alan D. Meyer, 16
and Henry L. Coleman, Jr., Organizational Strategy, Structure, and Process, Academy of Management Review 3 (1978), 546-562

How Strategy affects Organisation

Design
Porters Competitive Strategy
Strategy:

Differentiation
Organisation Design
Learning

orientation; acts in a flexible way,

with strong horizontal coordination.
Strong capability in research;
Values & builds in mechanisms for customer
intimacy;
Rewards employee creativity, risk taking, and
innovation.
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How Strategy affects Organisation

Design (cont)
Porters Competitive Strategy
Strategy:

Low -Cost Leadership

Organisation Design
Efficiency orientation;
Strong central authority and tight cost control with
frequent detailed control reports;
Standard operating procedures;
Highly efficient procurement and distribution
systems;
Close supervision; routine tasks; limited employee
empowerment.

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How Strategy affects Organisation

Design (cont)
Miles & Snows Strategy Typology
Strategy:

Prospector
Organisation Design
Learning

orientation;
Flexible, fluid, decentralised structure;
Strong capability in research.

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How Strategy affects Organisation

Design (cont)
Miles & Snows Strategy Typology
Strategy:

Defender
Organisation Design
Efficiency

orientation;
Centralised authority & tight cost control;
Emphasis on production efficiency;
Close supervision;
Little employee empowerment.
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How Strategy affects Organisation

Design (cont)
Miles & Snows Strategy Typology
Strategy:

Analyzer
Organisation Design
Balances

efficiency and learning;

Tight cost control with flexibility and
adaptability;
Efficient production for stable product lines;
Emphasis on creativity, research, innovation.
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How Strategy affects Organisation

Design (cont)
Miles & Snows Strategy Typology
Strategy:

Reactor
Organisation Design
No

clear organisational approach

Design characteristics may shift abruptly,
depending on current needs.

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Summary
Organisations

exist for a purpose and

strategies are developed to achieve this
purpose.
Two models for formulating strategies are:
Porters

Competitive Strategies
Miles & Snows Strategy Typology
Organisation

design needs to fit the firms

competitive approach.
Source of notes: Daft.R.L., Understanding the Theory & Design of Learning (2007); Chapter 5 & Mintzberg, H.
(1987). "Strategy Concept I: Five P's for Strategy." California Management Review 30(1): 11-24.

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