Lecture 1

Introduction to
Strategic

A. Introduction
The terms business policy, strategy, strategic
management and corporate strategy tend to be
used interchangeably by many management
writers.
This shows that the subject is a relatively new
academic discipline - where definitions and
interpretations are still evolving.
Irrespective of the difficulty in finding one single
meaning to the subject, it should be understood
that its practice is a critical part of the
management of most organizations.
In view of this, this lecture would try and explore
a number of definitions and frameworks by
writers with the aim of establishing a broad
appreciation of the strategic management
process, so that we can understand how the tools
and techniques of strategic analysis, soon to be
studied in the rest of this course contributes to
the strategic management process.

B.WHAT IS STRATEGY
The question could be well answered from
different perspective including a historical
perspective.
Historical: the word comes from from the
ancient
Athenian
political
word
of
strategos.
Strategos referred to a general in
command of an army.
The elected strategos from the different
districts of Athens together comprised the
strategoi, or council of war.
In concept, the word strategy had much to
do with the State and, in particular, the
conduct of war and therefore the art of the
generals.

B.1 Definition of Strategy

Hax says that:Strategy becomes a fundamental

framework through which an organization can assert
its vital continuity, while at the same time
purposefully managing its adaptation to the
changing
environment to gain competitive
advantage.
Strategy includes the formal recognition that the
recipients of the results of a firms actions are the
wide constituency of its stakeholders.
Therefore is to address stakeholder benefits
to provide a base for establishing the host of
transactions and social contracts that link a firm to
its stakeholders.
Johnson and Scholes: define the subject based
on its certain characteristics as would be seen in the
coming slide, as:
The direction and scope of an organization
over the long term, which achieves advantage
in a changing environment through its
configuration of resources and competences
with
the
aim
of
fulfilling
stakeholder

B.2 What is Policy?

Policies define the ground rule for
implementation of strategy.
Flowing from the selected strategy,
policies provide the guidance for
decision
making,
an
action
throughout the organization.

B.3 Characteristics and Concepts

of Strategy
Johnson and
Scholes defined strategy by first
looking at the characteristics of the subject as
indicated in the definition and how it defers from other
decision making in organisation.
They characterised it as being about:
affecting the long term direction of the organization.
achieving an advantage, frequently over the
competition.
the scope of the organizations activities.
the
matching
of
an
organization
to
its
environment.
building on an organizations resources and
competences.
the requirement for major resource changes
within an organization.
having an impact on operational decisions across
the organization.
the values and expectations of the organization.

B.3 Characteristics and Concepts

of Strategy (2)
They went on to say that because of these

characteristics, strategic decision making is likely to:

Be complex in nature- (especially those with wide
geographical scope, or wide range of products and
services, for Dell, the need to coordinate its activities
over wide geographical areas. )
Be made in situations of uncertainty-(for Dell,
difficult to predict with much clarity where digital
technologies were moving)
Affect operational decisions- (Such as finding new
suppliers and building strong new brands.)
Require an integrated approach (both inside and
outside an organization) require to cross functional
and operational boundaries and to come to agreement
with other managers with different interests and
priorities.
Involve considerable change-(Consider the heritage
of resources and culture, especially where merger
becomes inevitable, two different cultures need to be
brought together or close, at least learn how to
tolerate each other.

C. Levels of Strategy

C.1 Levels of Strategy

There are three main different levels
of
strategy
existing
in
most
organization as illustrated in the
figure shown in the previous slide.
These levels are:
Corporate
Business (SBU)
Functional or Operational

C.2 The corporate strategy

corporate-level strategy, is concerned with
the overall scope of an organization and how
value will be added to the different parts (business
units)of the organization.
This could include issues of geographical
coverage, diversity of products/services or
business units, and how resources are to be
allocated between the different parts of the
organization.
It is linked to the most senior level of the
organizations management structure, typically
the Board of Directors for the whole organization.
Decisions at this level tend to be concerned with
the overall purpose and scope of the organization,
and in managing the expectations of key
stakeholders, particularly shareholders.
Frequently, decisions revolve around balancing
and prioritizing the demands for resources coming
from the divisions and operating companies.

C.2 The corporate strategy

(2)whether to sell some
For Yahoo! example,
of its existing businesses is clearly a
crucial corporate-level decision.
In general, corporate-level strategy is also
likely to be concerned
with the
expectations of owners the shareholders
and the stock market for example.
Read further on Yahoo Case study
from J&S:
Yahoo!s peanut butter manifesto

C.3 Business Level Strategy(SBU)

This level of strategy is frequently referred to as

competitive strategy because the focus is upon
competitive activity such as the development of
new
products/services
and
new
market
opportunities.
Business strategies are the province of the
divisions and/or operating companies within the
organization, often referred to as strategic business
units. (SBU)
A strategic business unit is a part of an
organization for which there is a distinct
external market for goods or services that is
different from another SBU.
Yahoo!s strategic business units include businesses
such as Yahoo! Photos and Yahoo! Music.
So in short, Business-level strategy is about
how to compete successfully in particular markets.

C.4 Functional or Operational

strategies

This is linked to operating functions of the

organization, frequently at the level of
individual
business
units,
but
often
transcending hierarchical levels to cover the
organization as a whole.

the human resources strategy or finance

strategy being possible examples.

Some authors believe that main purpose of

operational
strategies
is
to
ensure
implementation of corporate or business level
strategies though, as we will see, this view has
its limitations.
The primary concern of strategic management
is with corporate strategies and business
strategies, though implications for functional
strategies cannot be ignored.
Further, as we shall see, the divisions between
these different levels of strategy are permeable,
with each affecting and being affected by the

C.4 Functional or Operational

Strategies (2)

The development of a new product

range for a pottery company can be seen
primarily as an example of business
strategy.

However, the consequences of the

decision have implications for marketing
plans, manufacturing, investment
and staff development: all these being
examples of functional strategies.
It also becomes clear that the new
product development raises issues of
corporate strategy, particularly in
terms of shareholder expectations
and the scope of the future business as
it aims to move up-market.

D. STRATEGY AS ANALYSISCHOICE-IMPLEMENTATION
To understand strategy as a managerial
process two major frameworks, that is:
Strategy as Analysis to Choice to
Implementation and
Strategy as a Process to content to
context are
used for a better
understanding.
Johnson and Scholes outlined a model of
the elements of strategic management,
which underpins the structure of their
textbook as shown in the next slide.

Elements of strategic
management

D. STRATEGY AS ANALYSIS-CHOICEIMPLEMENTATION (2)

In using the model Elements of strategic

management, J&S argue that the process
of managing strategy involves three
elements within the model:
strategic analysis - understanding the
strategic position of the organization.
strategic choice - the formulation and
evaluation of potential courses of action.
strategy
implementation
the
planning and managing of required
change to argue their case.
Each of the elements of the model is
explored in more depth to examine how
they provide an insight into the strategic
management of a real-life organization.

D.1 Strategic Analysis

This involves first understanding the strategic
position.
Understanding the strategic position is concerned
with identifying the impact of strategy on the
external environment, an organization's strategic
capability (resources and competences) and the
expectations and influence of stakeholders.
The environment: The organization exists in the
context of a complex political, economic, social,
technological, environmental (i.e. green) and legal
world.
This environment changes and is more complex for
some organizations than for others.
How this affects the organization could include an
understanding of historical and environmental effects,
as well as expected or potential changes in
environmental variables.
Many of those variables will give rise to opportunities
and others will exert threats on the organization or
both.

D.1 Strategic Analysis

(2)
The
strategic
capability
of
the

organization made up of resources and

competences.
The strategic capability of an organization
helps
to consider its strengths and
weaknesses (for example, where it is, at a
competitive advantage or disadvantage).
The aim is to form a view of the internal
influences and constraints on
strategic choices for the future.
It is usually a combination of resources and
high levels of competence in particular
activities
(core
competences)
that
provide advantages which competitors find
difficult to imitate.

D.2 Strategic Choices

Strategic choices involve the options
for strategy in terms of both the
directions in which strategy might move
and the methods by which strategy
might be pursued.
For example , an organization might have
to
choose
between
alternative
diversification
moves,
for
example
entering into new products and markets.

For diversification, it has different

methods available to it, for example
developing a new product itself or
acquiring an organization already active in
the area.
Details of such options and methods are
discussed in week 9.

D.3 Strategy
Implementation
How strategy is translated into action

is the third element of Johnson and

Scholes framework of strategic
management.

They argue that this involves

consideration
of
issues
like
organizational
structure,
resource
planning
and
the
management of strategic change.

E. STRATEGY AS PROCESSCONTENT-CONTEXT

Analysis-choice-implementation
model
provided a useful insights into the
elements of strategic management.
Yet it is not the single framework useful
in providing such a useful insight to
strategic management.
Collins and Porras in their work Good to
Great stress the need to pay attention
to continuity and change when
thinking about strategy and in doing so
have provided a simple framework,
establishing that Strategy and its
management is an unending task, as
seen in the next slide.

E. STRATEGY AS PROCESS-CONTENTCONTEXT (2)

What is clear from this is that strategy is
essentially paradoxical because they
indicate that neither can strategy be
defined and explained by a clear set of
rules and actions.

The Paradox of Strategy

E. STRATEGY AS PROCESS-CONTENTCONTEXT(3)
Bob De Wit and Ron Meyers in their
textbook strategy: process; content
and context also points to an alternative
model of the dimensions of strategy
the key features of this framework are
illustrated in Figure 1.3. in the next slide.
It is used in identifying
three key
dimensions of strategy to be process,
content and context, which they explore
by wrestling with the tensions in the field
surrounding them.

E.1 Strategy Process

This is more to do with some of the issues of

strategy process - how strategies come about.
It is the process by which organizations develop
strategy - formulating strategies, taking
strategic decisions and ensuring strategic
change - is a key dimension of strategic
management.
At one level, it provides a link back to Johnson
and Scholes framework of the elements of
strategic management.
Johnson and Scholes emphasis that their model
does not assume a linear form of three
sequential stages, this raises the central debate
about strategy process - the extent to which
strategy is, a planned or incremental process.
In most organizations strategy arises out of a
mix of both formal planning and a mix of
decisions and actions taken in response to
events and organizational pressures.

E.2 Strategy Content

This describes the
what of

the

strategy - the content.

The content of a strategy should be the
product of the strategy process.
Strategy can take many forms and each
organisations strategy is and should be
unique.
There are numerous debates about the
form strategy should take and many of
these are related to different levels of
strategy.
Since strategy can apply to functions,
business units, corporations or networks
the content tensions are related.

E.2 Strategy Content

The three paradoxes we wrestle within in relation to

process as identified by De Wit and Meyer are :
Business Markets and Resources (how to sustain
competitive advantage) do we adapt to the
market place and focus on satisfying the customer
or do we build on our own unique qualities and
focus on where we can offer a clear advantage
Corporate Responsiveness and Synergy (how to
manage what business we are in ) do we aim to
quickly react autonomously to the demands of the
environment and our specific circumstances or do
we add value by creatively bringing things together
coordinating and cooperating across businesses
Network Competition and Cooperation (what types
of relationships do we want with others) do we want
independence and power to assert our own
interests or do we want to cooperate in joint
undertakings to create stability and minimise risk.

E.3 Strategy Context

If process is the how, and content the what, the
context can be seen to be the where, when, who and
why of strategic management
Our context for strategy is always at multiple levels, there is
the wider, often competitive context of the industry or
sector we belong to,
there is the internal organisational context of the
resources and activities that make up our organisations
and
there is the geographic context of the world in which we
operate.
The three paradoxes we wrestle within in relation to context
as identified by De Wit and Meyer are
Industry Compliance and choice do we adhere to the
rules of the game in our industry or sector or do we seek to
shape the industry or sector in which we operate
Organisational Control and chaos do we order and
regulate behaviour to set standards or allow for selforganising emergence in shaping our organisations
Geographic Global and local do we coordinate across
boundaries of geography through integration, standardisation
and similarity or do we allow for dissimilarity and
fragmentation to meet local demands.

F. TOOLS & TECHNIQUES OF

STRATEGIC ANALYSIS
The development of strategy within an organization
requires the application of a range of tools and
techniques.
By their nature they tend to be analytical, but it would
be too restrictive to say that they are all limited to the
first element of the analysis-choice-implementation
model mentioned above.
Many of the techniques are used to assist in the
analysis and evaluation of different options (choice) and
others can assist in identifying problems in changing the
organization, designing new structures or assisting in
resource allocation and control (all elements of
implementation).
Indeed, many of the tools can be used, in slightly
different ways, to address many of these elements.

For example, the technique of SWOT (Strengths,

Weaknesses, Opportunities and Threats) Analysis can
be used to assess the external and organizational
environments, evaluate strategic options and identify
resource gaps.
With an overall understanding of strategic management

G. SUMMARY
The nature of strategy as a subject has meant that it not
possible or desirable to provide a single definition of
strategy or strategic management, rather a variety of
aspects have been outlined:
The characteristics of strategy and strategic decisions.
The levels of strategy.
The analysis-choice-implementation framework.
The process-content-context framework.
In passing, a number of the central debates and issues of
strategy were highlighted:
Is strategy a planned or incremental process?
How do organisations achieve competitive
advantage?
How do complex, multi-business organisations achieve
synergy?
What is the impact of context upon strategic
management?
The overall frameworks of strategic management also
assist in creating an understanding of where and how to
use particular tools and techniques of strategic
analysis.