ADVANCED

STRATEGIC MANAGEMENT AND

GLOBALIZATION

Muhammad Atiq (PhD)

What is Strategy?

Strategy is the direction and scope of an

organisation over the long term, which
achieves advantage in a changing
environment through its configuration of
resources and competences with the aim of
fulfilling stakeholder expectations.
Implications of Strategic Decisions
Strategic decisions:

Are complex in nature

Most often made in situations of uncertainty

Affect operational decisions

Require an integrated approach both inside and

outside an organization
Involve change (sometimes considerable and

sometimes incremental)
Levels of Strategy

Corporate Level
Strategy

Business Level
Strategy

Operational
Strategy
Levels of Strategy
Corporate Level Strategy
Concerned with the overall purpose and scope of the
whole organization and how value will be added to the
different business units of the organization
Resource allocation, geographical coverage and diversity
of products or business units

Business Level Strategy

Concerned with how to compete successfully in particular
markets
Each strategic business unit (SBU) develops its own
strategy
Levels of Strategy

Operational Strategies
Concerned with how the components of an organization
deliver effectively the corporate and business level
strategies in terms of resources, processes and people

Integration of operational decisions and strategy is of

great importance
Strategic Management
Strategic management includes
understanding the strategic position of
an organization, making strategic
choices for the future, and managing
strategy in action.
Strategic Management
Strategic Position
Concerned with the impact on strategy of the external environment, an
organizations strategic capability and the expectations and influence of
stakeholders

Strategic Choices
Concerned with the options for strategy in terms of both the directions in
which strategy might move and the methods by which strategy might be
pursued

Strategy in Action
Concerned with ensuring that chosen strategies are actually put into
practice
Introducing and implementing change, monitoring and evaluating
implemented strategies is crucial
Key Terms Used in Strategic Management
Vision

Mission

Goal

Objective

Strategic Capability

Competitive advantage
Key Terms Used in Strategic Management
Vision
Where the organization wants to be in the future
Engro Foods will continue to make investments aimed at impacting lives and
delighting consumers each day, every day, in a multitude of ways

Mission
What the organization stands for
Reason for existence
Scope of organizations markets and products
Provides legitimacy
Arif Habib Corporations Mission:

Our mission is to excel in perceiving, developing and executing innovative projects across

business sectors with the aim of maximizing returns for stakeholders, while playing a

significant role in developing Pakistans economy and its integration into the world markets
Key Terms Used in Strategic Management

Goal
It is the desired future state
It is set for the long-term

Objective
More precise aim in line with the goal
Quantified and short-term oriented
Key Terms Used in Strategic Management

Strategic Capability
Resources and competences of an organization needed
for it to survive and prosper

Competitive Advantage
Anything that a firm does especially well compared to rival
firms or owns something which the rival firms dont
Strategic management is all about gaining and sustaining
competitive advantage
Views of Strategy Development

Rational View of strategy development

Vs.
Emergent View of strategy development
 Views of Strategy Development
Rational view is also known as:
Analytic View
Linear model (Chaffee, 1985)
Design and positioning school(Mintzberg,
1990; 1994)
Classical perspective (Whittington, 2001)

Assumes that strategy is process-based, structured,

imposed and developed formally by strategic
leadership in consultation with various stakeholders
 Views of Strategy Development
Emergent view is also known as:
Logical incremental (Quinn, 1980)
Adaptive (Chaffee, 1985)
Incremental strategy development (Johnson et al.,
2008; 2009)
Learning school (Brews and Hunt,1999)

Assumes that strategy emerges through everyday routines,

activities and processes in organizations

Organizational politics, culture and resource allocation

processes have a key role to play in strategy development
The Practice of Strategy
Strategy-as-practice perspective is concerned with the
practicalities of strategy making
What gets done inside the process

Strategists:
Who?

Strategising Strategising
activities: methodologies:
What? Which?
The Practice of Strategy
Strategy has to be made, by the right people doing
the right things in the right way

Strategists choose and enact both the strategizing

activity and the strategy methodologies

Their choice can make a real difference to final

outcomes
The Strategists
Top Managers and Directors
Conventional view strategy is the business of top managers

CEO the chief strategist; ultimately responsible for all strategic

decisions

Successful CEOs often become corporate Heroes

Jeff Bezos, Jack Welch, Steve Jobs, Bill Gates

However, strategy responsibility should not be centralized

Overconfident CEOs often lead to spectacular failures

In case of failure, CEO is fired rather than examining the internal

reasons of failure
Top Managers and Directors
Top Management Team (TMT)

Includes the executive directors of a corporation

Should be able to challenge CEO and increase strategic

debate

Are appointed by CEO and carry operational responsibilities

May suffer from groupthink

Groupthink can be minimized by fostering diversity in the TMT

 Top Managers and Directors
Non-Executive Directors
No executive management responsibility within the organization

Should be able to offer an external and objective view on strategy

Their role is consultative, reviewing and challenging strategy

proposals that come from the TMT

Ensuring that organization has a rigorous system in place for the

development and reviewing of strategy

Should be authoritative, independent from TMT and experienced

individuals
Strategic Planners
Also called corporate development managers

Have a formal responsibility for contributing to the strategy

process

Do not take strategic decisions themselves, rather they

engage in:
Information and analysis
Assist and guide managers at SBU level in developing
their own strategy
Work on special projects with middle managers or
external consultants
Middle Managers
Conventional management theory excludes middle managers from strategy
making

Seen as lacking objective and long-term perspective, because of involvement in

operations

Involving middle managers can provide substantial benefits

Have direct, up-to-date experience of the realities of their organization and its
markets

Better positioned to implement strategy because of their direct contact with first
line managers and their sub-ordinates

Thus, involving middle managers can lead to better strategic decisions and
implementation
Strategy Consultants
Often used for strategy development in large organizations
Big names are Boston Consulting Group, Bain, Monitor, and
McKinsey & Co.
Consultants aid in:

Analyzing, prioritising,
prioritizing,
and generating options

Transferringknowledge
Transferring knowledge

Promoting strategic decisions

Implementing strategic change

Who to include in Strategy?

The Access/Execution Paradox

High

High
Who to include in Strategy?

No single correct answer about who should participate in

strategy

People involved should vary according to the nature of the issue

(McKinsey & Co. research)

Highly urgent issues and those implying high strategic change

should be approached by small project teams (e.g. acquisitions
and mergers)

Issues, which are less urgent but imply high strategic change,
can benefit from a broader participation (e.g. global/domestic
growth opportunities)
Who to include in Strategy?

Routine, but highly urgent issues, require limited participation

(e.g. competitors price moves/advertising strategies)

Less urgent and routine issues are part of ongoing strategic

conversation open participation (How can we increase our
revenues/cut costs?)

The point is that strategy should be made by the right people

Otherwise, there can be strategy implementation issues

Strategizing Activities
What people have to do in strategizing

Strategy Analysis

Strategic Issue Selling

Strategic Decision Making

Communicating the Strategy

In practice, these activities may not follow a linear sequence

Strategy Analysis
Analysis is an important input into strategy development

Analysis is costly in terms of both finance and time

With regards to time, there is risk of paralysis by analysis

Analysis may serve purposes other than the input into good strategic
decisions

May be used for procrastination

Can be symbolic and/or political

Prestigious consulting firms are often used for political and symbolic
analyses
Strategic Issue Selling
Strategic issue an unresolved question requiring a decision

The process of winning the attention and support of top management and
other important stakeholders for strategic issues

What gets top management attention is not necessarily the most important
issues

Champions bias To exaggerate in favors of your proposal

Managers have to sell their particular strategic issues

Four important aspects to be considered in selling strategic issues are:

Issue Packaging (framing)
Formal or Informal Channels
Sell alone or in Coalitions
Timing
Strategic Decision Making
Decision making is not always rational

Prone to sunflower syndrome following the lead of the most senior

person in the decision-making process

Conflict in decision making teams can be positively useful

Some decision makers are over-optimistic and some are risk-averse (in
situations where little data is available)

To make better and quicker decisions, strategists should:

Build multiple, simultaneous alternatives
Track real-time information
Seek the views of trusted advisors
Aim for consensus
 Communicating the Strategy
Strategy needs to be communicated in order to ensure its
implementation

Communications should focus on the key components of strategy

and avoid unnecessary details

Corporate emails, newsletters, company website can be used to

communicate strategy

Face-to-face communications are important too in order to

demonstrate personal commitment of top managers

Communications is not the end-point of strategy making process

Rather, it is a feedback mechanism identifying new strategic issues

Strategy Methodologies
Approaches to managing the strategizing process

Ways of carrying out strategizing activities

Strategy workshops

Strategy projects
Hypothesis testing

Business cases and strategic plans

 Strategy Workshops
Often called strategy retreats, away-days or off-sites

Involve groups of executives working intensively for one

or two days, often away from the office, on

organisational strategy

Typically involve senior managers but middle managers

can also be included

 Strategy Workshops
Used to formulate or reconsider strategy, address strategy

implementation issues and communicate strategy to a larger

audience

Workshops may not be able to produce new ideas especially if

they are reduced to a routine activity and involve senior

managers only

Objectives of attending strategy workshops should be clear to

participants and they should come prepared beforehand

 Strategy Projects
Strategy workshops often lead to a set of strategy projects

These involve teams of people assigned to work on particular

strategic issues over a defined period of time

Purpose can be to analyse a problem in-depth, explore

opportunities or implement agreed elements of a strategy

A strategy project should have:

A clear mandate
Top management commitment
Milestones and reviews
Appropriate resources
Hypothesis Testing

Strategy projects need to deliver solutions to complex

problems under tight time constraints
Therefore, they engage in hypothesis testing
It is used for setting priorities in investigating problems
and/or opportunities

Generation of Prescriptive
Testing of
Descriptive Hypothesis /
Hypothesis
Hypothesis solution
 Business Cases and Strategic Plans
A business case provides the data and argument in support of

a particular strategy proposal

Strategic plan is more comprehensive, taking an overall view

of the organisations direction over the long-term

Strategic plan should contain goals, objectives, environmental

analysis, organisational analysis, proposed strategy and the

resource requirement for pursuing the chosen strategy
Organisational Culture and Strategy
What is organisational culture?

How organisational culture influences corporate strategy?

What is strategic drift and how it leads to corporate

failure?

How strategists undertake cultural analysis?

Organisational Culture
Organizational culture is the basic assumptions and

beliefs that are shared by members of an organization,

that operate unconsciously and define in a basic taken-
for-granted fashion an organization's view of itself and its
environment

Culture can also be defined as socially established

structures of meaning
Organisational Culture in Four Layers
Organisational Culture in Four Layers
Values
Are often written statements of the degree of importance an organisation
attaches to certain factors
Can defines organisation beliefs and behaviours

Can be vague and broad statements

The core values of Lucky Cement are: ethics and integrity, excellence,
innovation, customer focus, social responsibility and entrepreneurship
(source: Annual Report, 2011)

Beliefs
More specific, but may not be written down

We do not face any intense competition in Pakistan. We do not consider

Engross as our competitor (Regional Manager KPK, Nestle Pakistan
Limited)
Organisational Culture in Four Layers
Behaviours
Day to day way (routines) in which an organisation operates

Can be seen by people both inside and outside the organisation

Paradigm
Difficult to identify and explain because they are not talked about too

often

They are taken for granted assumptions and beliefs like we exist to

make money; we can overcome challenging situations; we are

people oriented organisation;
 Organisational Cultures Influence on
Strategy
Culture is difficult to manage because it is difficult to observe,
identify and control that which is taken for granted

When faced with environmental changes, managers try to

deal with such changes within the bounds of their
organisations culture

This implies that they are captured by their culture and refuse
to change their culture

Therefore, culture is an unintended driver of corporate

strategy
Organisational Cultures Influence on Strategy
Strategic Drift

Strategic drift is the tendency for strategies to develop

incrementally on the basis of historical and cultural

influences but fail to keep pace with a changing
environment

This concept helps explain why organizations fail over

time by sticking to their cultural roots and close to what

they know well
Strategic Drift
Strategies Change Incrementally
Firms rely on tried and tested ways of doing things

In successful businesses, there is relative continuity

Relative continuity established strategy remains largely unchanged

or changes very incrementally

Three main reasons for relative continuity

Alignment with environmental change

Success of the past
Experimentation around a theme

Challenges for managers

The tendency towards strategic drift
A companys strategy does not keep pace with the changes in the

external environment

Organisational routines become rigid and difficult to change and

managers persist with tried and tested ways of doing things

Environmental changes can be spotted but their significance is harder

to interpret

The effects of such drift are not visible earlier on and the organisation

may continue to perform better

 A Period of Flux
Now the downturn in performance begins!

Strategies are changed but dont yield results

Management changes at the very top of the organisation

Blame games

Leads to further deterioration in in organisational performance

(decreased sales, loss of market share and customers, declining

share price)
 Transformational Change or Death
Organisation may die (liquidated), it may get acquired, or it

may go through transformational change

Transformational change means: job cuts, changes in

products and markets, change in organisational structure,

change in organisational culture (values, beliefs and
routines)
Transformational Change or Death
Transformational change takes place as a result of major

downturn in performance

By then, significant corporate value has been destroyed

Competitive position, customer loyalty and jobs lost

Top managers most visibly make a difference through

transformational changes and that becomes their success story

Analyzing Culture: the Cultural Web
The cultural web shows the behavioral, physical and symbolic
manifestations of a culture that inform and are informed by the taken
for granted assumptions of the organization
Elements of Cultural Web
Rituals
Activities or events that emphasize, highlight or reinforce what is
especially important in the culture

Can be formal or informal

Training programmes, sales conferences, annual reviews,

promotion and assessment procedures, gossips in the corridors
or over lunch

Stories
are about the successes, disasters, heroes, villains

Flag up important events and personalities

Elements of Cultural Web
Symbols
are objects, events, acts or people that convey, maintain or create
meaning over and above their functional purpose

Offices, office layouts, cars, titles, organizational logo, people, language

etc.

Power Structures
Powerful executives have strong association with long established ways
of doing things

Control Systems
Vis--vis performance measurement and reward systems

Organizational Structure
Reflects power and shows important roles and relationships
The Environment
How do we analyze the macro environment of an organization?

What is industry analysis and how do we go about it?

How do we identify our close and remote competitors and our

strategic customers?

Why environment is a source of both opportunities and threats?

Analyzing Business Environment
Environment gives organizations their means of survival

Changes in the environment affect firms and they need to adapt the

environment

Environment is a source of both opportunities and threats

Therefore, it is imperative that corporate managers analyze their

business environments carefully in order to anticipate and influence

environmental changes
Analyzing Business Environment
PESTEL
PESTEL
Understanding how these factors are changing now and how

they will change in future is vital to developing corporate strategy

These factors are inter-linked and drawing out their implications

for the firm is important

However, such analysis can produce a long and complex list

Therefore, key drivers for change are identified

Key Drivers for Change
They are environmental factors that are likely to have a

high impact on the success or failure of strategy

Key drivers vary by industry

Key drivers are then used in building alternative scenarios

for developing corporate strategy

Building Scenarios
Scenarios are detailed and plausible views of how the

business environment of an organization might develop in the

future based on key drivers for change about which there is a
high level of uncertainty

Building scenarios helps prevent managers from closing their

minds about alternatives

Managers should evaluate and develop contingency plans for

each scenario
Building Scenarios
Typically better to have two or four scenarios, avoiding an

easy mid-point
Scenarios are especially useful where:

There are a limited number of key drivers

There is a high level of uncertainty about such influences

Outcomes could be radically different

Organizations have to make substantial commitments into

the future that may be highly inflexible and hard to reverse
Industry Analysis
Industry is a group of firms producing products or services

that are perceived by customers as meeting the same needs

Every industry comprises of market participants (firms

competing with one another, suppliers, customers, potential

entrants and firms producing substitutes)

Market participants engage in a continual struggle for a

share of industry profits

Industry Analysis

A firms profitability depends partly on the intensity of

competition and partly on the influence of market

participants

Industry analysis helps managers in:

Identifying opportunities to increase profits

Recognizing threats to existing profits

Deciding whether to enter or exit an industry

Industry Analysis
The most widely used framework for analysing industry
attractiveness is Porters five forces framework

Identifies the important factors affecting an industrys

profitability and helps strategists judge their relative
influence

The five forces at play in any industry are:

Threat of potential entrants
Threat of substitutes
Power of buyers
Power of suppliers
Competitive rivalry
 Industry Analysis
Threat of potential entrants
New entrants increase competition, driving down prices and
profit

Threat of entry depends on the how easy it is to enter an

industry

Typical barriers to entry are:

Scale and experience
Access to supply and distribution channels
Expected retaliation
Legislation or government action
Differentiation
 Industry Analysis
Threat of Substitutes
Substitutes reduce demand for a particular class of
products as customers switch to the alternatives

Offer similar benefit, but by a different process

The simple risk of substitution puts a cap on the prices that

can be charged in an industry

Therefore, two factors need to be considered:

Price/performance ratio
Extra-industry effects
Industry Analysis

Power of Buyers
The most immediate customers of the firm

Buyer power is high when there are:

Concentrated buyers

Low switching costs

Buyer competition threat (backward vertical integration)

Industry Analysis
Power of Suppliers
Those who supply the firm with the necessary inputs like
raw material, equipment, labor, fuel, finance etc.

Supplier power is high when there are:

Concentrated suppliers

High switching cost

Supplier competition threat (forward vertical

integration)
 Industry Analysis
Competitive Rivalry
Organizations producing similar products aimed at the same
customer group are competitive rivals

The four forces discussed previously have a direct impact on

competitive rivalry in an industry

Besides the four forces, other factors affecting the intensity of

competition in an industry are:
Competitor balance
Industry growth rate
High fixed costs
High exit barriers
Low differentiation
Implications of Five Forces Analysis

Which industries should we enter or leave?

What influence can be exerted?

How are competitors differently affected?

Key Issues in Using the Five Forces
Framework
Defining the right industry

Determine whether industries are converging

Convergence is where previously separate industries begin to

overlap in terms of activities, technologies, products and

customers

Identify complementary products

Complementary products are worth more together than separately

Co-operation Vs. Antagonism

Industry Life Cycle
Competitors and Markets
Many industries contain a range of companies, each of which

has different capabilities and competes on different bases

Customers too can differ significantly in their needs and values

So we need to be mindful of two things:

With whom we are competing directly

In which market segment we are competing

We also need to know what are the critical success factors for
competing successfully in our chosen segment
Competitors and Markets

Strategic Groups
Organisations within an industry with similar strategic

characteristics, following similar strategies or competing

on similar bases.

These characteristics are different from those in other

strategic groups in the same industry or sector

Competitors and Markets

Characteristics for Identifying Strategic Groups

Scope of activities Resource commitment

Extent of product Extent of branding
diversity Marketing effort
Extent of geographic Extent of vertical
coverage integration
Number of segments Product quality
served Technological
Distribution channels leadership
Organizational size
Competitors and Markets

Benefits of Identifying Strategic Groups

Understanding competition

Analysis of strategic opportunities

Analysis of mobility barriers

Competitors and Markets

Market Segments
The concept of market segment focuses attention on

differences in customer needs

A market segment is a group of customers who have

similar needs that are different from customer needs in

other parts of the market
Competitors and Markets
Some bases of Market Segmentation
Competitors and Markets
Strategic Customer
Strategic customer is the person(s) at whom the strategy is

primarily addressed because they have the most influence over

which goods or services are purchased
Unless there is clarity on who the strategic customer is, managers

can end up analysing and targeting the wrong people

However, it does not mean that the needs and requirements of the

ultimate consumers are not important

It simply means that the requirements of strategic customers are of

paramount importance
Competitors and Markets
Critical Success Factors
Are those product features that are particularly valued by a group of

customers and, therefore, where the organization must excel to

outperform competition
Case-in-Point: Current Account segment of banking sector in

Pakistan
Customers value branch network, customer service, free online

banking, free POs/DDs, free cheque books, free debit card, free
SMS banking, free business and cash insurance
Faysal Business First, HBL Freedom Account, NIB Saudagar

Account
Strategic Capability
Strategic capability is the resources and competences of an

organization needed for it to survive and prosper

All companies in an industry compete in the same

environment, yet some are outperformers and some are

underperformers

Strategic capabilities distinguish one company from another

Strategic Capability
Organizations are not identical, but have different capabilities

It is difficult for one organization to obtain or copy the capabilities of

another (Reason: Money + Tacit Knowledge)

Thus, an organization achieves competitive advantage on the

basis of capabilities that its rivals do not have or have difficulty in

obtaining

This view is known as the resource-based view of strategy

Elements of Strategic Capability Explained

Resources
Anything which provides benefit to the organization is an
organizational resource

Tangible vs. intangible resources

Physical resources, financial resources, human resources,

intellectual capital (brands, patents, copyrights etc

Intellectual capital is a function of knowledge workers and the skills

they bring to their organization

Competences: the skills and abilities by which resources are

deployed effectively through an organization's activities and
processes
Elements of Strategic Capability Explained
Threshold Capabilities
Those capabilities needed for an organization to meet the

necessary requirements to compete in a given market

Unique Resources
Those resources that critically underpin competitive advantage and

that others cannot easily imitate or obtain

Core Competences
the skills and abilities by which resources are deployed through an

organization's activities and processes such as to achieve

competitive advantage in ways that others cannot imitate or obtain
Strategic Capability and Competitive Advantage
To survive and prosper, an organization needs to address the

challenges of the environment

It must be capable of performing in terms of critical success factors

However, the strategic capability to do so is dependent on the

resources and competences it has

These must reach a threshold level in order for the organization to

survive
Achieving competitive advantage requires organization to have

strategic capability that the competitors find difficult to obtain or

imitate
Cost Efficiency
A key strategic capability is the management of cost efficiency

Customers benefit from cost efficiencies in terms of lower prices

or more product features for the same price

Cost efficiency could also be a basis for achieving competitive

advantage
If prices rise too high then customers will sacrifice value and opt

for lower prices

Therefore, appropriate level of value needs to be offered at an

acceptable price
Competitive rivalry also requires firms to focus on reducing costs
Cost Efficiency
Sources of Cost Efficiency

Economies of scale

Supply costs

Product/process design

Experience
Experience Curve
An organisation undertaking any activity develops

competences in this activity over time based on experience,

resulting in cost efficiencies

Experience curve suggests that:

Growth is not optional

Unit costs should decline year on year based on cumulative

experience
First mover advantage is important
Experience Curve
Capabilities for Achieving and Sustaining Competitive
Advantage
Strategic capability should be:

Valuable (Motor bike consumers are important for us. So what we have done for them is that

we have introduced Biker Zone for them on our sites where there is a proper bike mechanic
available who can change the bikes oil and provides maintenance services for the bike)
Rare

Inimitable

Non-substitutable

Dynamic (We are smaller and new. This means we are more compact and able to take quick

decisions. If you ask dealers, they will tell you that a problem which Shell resolves in six
months, TOTAL resolves that problem in one month. )
Diagnosing Strategic Capability
The Value Chain
Managers need to understand which activities they undertake are

especially important for creating value for customers

A value chain describes the categories of activities within and

around an organization, which together create a product or service

Consists of primary activities and support activities

A Typical Value Chain
The Value Chain
Primary activities are directly concerned with the creation or

delivery of a product and consist of:

Inbound logistics: activities concerned with receiving, storing and

distributing inputs to the product

Operations: the processes of transforming inputs into the final

product

Outbound logistics: collecting, storing and distributing the

product to customers
The Value Chain

Marketing and sales: activities concerned with making

customers aware of the product and enabling them to

purchase it

Service: activities that maintain or enhance the value of a

product after sale has been made, e.g. warranty,

installation, repair and spares
The Value Chain
Support activities help to improve the effectiveness or efficiency of

primary activities and consist of:

Procurement: the activities concerned with acquiring the various

resource inputs to the primary activities

Technology development: developing technologies and

technological know-how for different products and processes

Human resource management: activities involved in recruiting,

managing, training, developing and rewarding people within the

organisation
Infrastructure: the formal systems of planning, finance, quality

control, information management, structures and routines

The Value Chain
Analysing value chain can enable an organisation to determine its

own strengths and weaknesses by comparing itself with the

competitors value chains

Value chain analysis is helpful in determining the cost and value of

activities

Value chain analysis also helps in understanding which corporate

activities are providing the most value to the customers