THE CONCEPT OF

STRATEGY

Reading Recommendations:
2. What is Strategy? Michael Porter, Harvard Business Review, 1996.
3. Marketing Myopia Theodore Levitt, Harvard Business Review, 1960.
4. Of Strategies, Deliberate and Emergent, Mintzberg & Waters, Strategic
Management Journal, 1985.

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 Definitions of Strategy
Oxford Dictionary: The art of war, especially the planning of
movements of troops and ships etc., into favorable positions; plan
of action or policy in business or politics etc.
Alfred D. Chandler Jr.: The determination of the long run goals and
objectives of an enterprise, and the adoption of courses of action
and the allocation of resources necessary for carrying out these
goals.
Kenneth Andrews: Strategy is the pattern of objectives, purposes or
goals and the major policies and plans for achieving these goals,
stated in such a way as to define what business the company is in
or is to be in and the kind of company it is or is to be.

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 The Origins of Strategy
Know the other and know yourself: Triumph without peril.
Know Nature and know the Situation: Triumph completely.
- Sun Tzu (~360 B.C.)
Business strategy is a young field but its roots go back to
early military strategy.
Strategy comes from the Greek word strategos, which is
formed from stratos, meaning army, and ag, meaning to
lead.
Carl von Clausewitz wrote in the early 1800s that
tactics[involve] the use of armed forces in the
engagement, strategy [is] the use of engagements for the
objects of war.

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 Strategic Management - Defined
Strategy: The unifying theme that gives coherence and
direction to the decisions of an organization
(entails choices among alternatives and signals organizational
commitments, competitive approaches, and ways of doing
business)

D&L: Strategic management consists of the analysis,

decisions, and actions an organization undertakes in
order to create and sustain competitive advantages.

(strategic management = active)

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 More Recent Historical Development of Business
Strategy
Not until very large companies with the ability to influence the
competitive environment within their industries did strategic
thinking in the business world begin to be articulated.
Alfred Sloan, CEO of GM, 1923 1946 - One of the first to analyze competition,
Ford, and devise a strategic plan based on its strengths and weaknesses.
Chester Barnard, Senior Executive of New Jersey Bell, 1930s - Argued managers
should pay attention to strategic factors which depend on personal or
organizational action.
Wartime (WWI and WWII) efforts also impacted strategic
thinking and use of formal strategic tools and concepts:
Allocation of scarce resources
Use of quantitative analysis in planning
The concept of learning curves
The concept of distinctive competence - first mentioned by Philip Selznick, a
sociologist, in a debate about whether or not to combine the military forces into a
single unit (i.e., no Army, Navy, Air Force, Marines, just the US Military).

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 Historical Development - 2
These concepts serve as the foundation of strategic management study:
Previous Business Policy perspectives looked at maintaining a balance in
accord with the underlying policies of the business as a whole. Harvard
Kenneth Andrews SWOT Analysis was developed still in use today.
Theodore Levitts Marketing Myopia argued that when companies fail it
typically is because firms focus on the product rather than the changing
patterns of consumer needs and tastes.
Igor Ansoff argued, in response to Levitt, that a firms mission should exploit
an existing need in the market, rather than using the consumer as the
common thread in business. In reality a given type of customer will
frequently have a range of product missions or needs. Corporate Strategy,
1965.
BCG developed the experience curve and portfolio analysis concepts.
McKinsey & Companys development of SBUs and the nine-block matrix.
Mintzbergs Deliberate, Emergent & Realized Strategies
Porters Generic Strategies

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 Ansoffs Product / Mission Matrix*
Present New
Product Product

Present Market Product

Mission
Penetration Development

New Market
Mission Diversification
Development

*Categories define the common thread in an organizations business/corporate

strategy.

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BCGs Growth-Share Matrix

High Low
Share Share

High Question
Growth Star
Mark

Slow Cash
Growth Dog
Cow

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 Forms of Strategy

Unrealized Realized
Strategy Strategy

**Normally emergent strategy comes from

Emergent learning and dissemination within the organization.
Strategy
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 Sources of Superior Profitability

INDUSTRY
ATTRACTIVENESS

CORPORATE
Which industries STRATEGY
RATE OF PROFIT should we be in?
ABOVE THE
COMPETITIVE
LEVEL

How do we make
money?
COMPETITIVE
ADVANTAGE

How should we BUSINESS

compete? STRATEGY

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 Porters Generic Strategies
Competitive Advantage
Lower Cost Differentiation

Strategy 1 Strategy 2
Broad
Target Cost Differentiation
Leadership
Competitive
Scope Strategy 3A Strategy 3B

Narrow
Cost Focus Differentiation
Target
Focus

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 Why Are Strategies Needed ?

To proactively shape how a companys business will be conducted.

To mold the independent actions and decisions of managers and
employees into a coordinated, company-wide game plan.
To help the organization to succeed against its competition!!

Key Attributes of Strategic Management:

Directs the organization toward overall goals and objectives.

Involves the inclusion of multiple stakeholders in decision making.

Needs to incorporate short-term and long-term perspectives.

Recognizes tradeoffs between efficiency and effectiveness.

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 Strategy, Survival and Success
The ultimate goal of the organizations is to be successful
success is:
Survival (long-term success)
Achievement of Goals
Profitability (probably most important, because it
determines the ability to achieve the above two)
Strategy can help achieve success, but it doesnt guarantee it
certain features of strategy directly contribute to success:
1. Goals that are simple, consistent, and long-term.
2. Profound understanding of the competitive environment.
3. Objective appraisal of resources.
4. Effective implementation.
These observations concerning the role of strategy can be made
in relation to most human endeavors be it warfare, chess,
politics, sport or business.
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Competition and Competitive Advantage
Competition provides the rationale for strategy without

competition, strategy is of no concern.

The essence of strategy is the interdependence of

competitorsor the establishment of sustainable competitive

advantage over rivals.

The study of strategy involves how we go about identifying,

establishing, and sustaining competitive advantage.

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 Thinking Strategically:
The Three Big Strategic Analysis Questions

1. Where are we now? What is our situation?

2. Where do we want to go?
Business(es) we want to be in and market positions we
want to stake out
Buyer needs and groups we want to serve
Outcomes we want to achieve
3. How will we get there?

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 The Strategy Concept
Key Elements
Performance

Strategic Control

Strategy
Strategy Strategy
Formulation Implementation

Environment Organization

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 The Strategy Concept
Levels of Analysis
Where to Compete? Corporate
Strategy

How to Compete? Business

Strategy

How to Contribute? Functional

Strategy

Choice of Products
Choice of Markets
Choice of Competitors
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 The Strategy Concept
Sources or Drivers of Strategy

Mission

Vision Goals

Objectives

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 The Evolution of Strategic Management

1950s 1960s 1970s 1980s early late

1990s 1990s

Financial Corporate Corporate Positioning Quest for Strategic

THEME & planning & planning strategy competitive innovation
ISSUES control advantage &
shareholder
value

Budgeting Forecasting & Portfolio Analysis of Resource Dynamic

project appraisal investment planning. industry & analysis. sources of
CONCEPTS/ planning Synergy competition Case advantage
TECHNIQ- market competencies Knowledge
UES share management
cooperation

Emphasis on The rise of Diversifi- Industry and Restructuring Virtual orga-

IMPLEMENT- financial corporate planning cation. market select- BPR. nization.
ATIONS management departments Quest for ivity. Active Refocussing Alliances
& formal global asset Outsourcing competing
planning market share management for the future

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