2.key concepts in strategic management
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The whole conceptual factors that lean in strategic ManagementTRANSCRIPT
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STRATEGIC STRATEGIC MANAGEMENTMANAGEMENT
KEY CONCEPTSKEY CONCEPTS
Eugene Miheso SwinnerstoneEugene Miheso Swinnerstone
Strategy
Strategy is the statement of action that the company will undertake to generate and multiply the firm’s competitive advantage.
A strategy is a long-term plan or course of action that will enable the firm attain its objectives
Waterman et al(1980) define strategy as a coherent set of actions aimed at gaining a sustainable competitive advantage over competitors or improving its position visa vis its customers
Glueck et al (1988) defines a strategy as a unified,comprenhensive and integrated plan that relates the strategic advantages of the firm to the challenges of environment.
Strategy contd… Henry Mintzberg presents five
dimensions of strategy which have been referred to as characteristics of a good strategy
Strategy as plan-course of action consciously and purposely developed well in advance to achieve certain goals
Strategy as ploy – a specific maneuver to out wit an opponent crafted with a lot of creativity and uniqueness
Strategy contd..
Strategy as a pattern- a stream or a series of actions or activities
Strategy as position- a means of locating an organization in the environment. A good strategy should put the firm in a certain desirable position
Strategy as perspective- a strategy should direct the entire organization to a common thinking that is aimed at achieving certain goals
Aspects of Strategy
Strategy as a statement of ends, purpose, and intent – creating new visions for the future to inspire the organization to greater efforts or wider scope
Strategy as a high level plan – answering questions of: who, when, where, how and with what?
Strategy as the means of beating the competition
Aspects of Strategy
Strategy as an element of leadership – setting strategy is one of the main responsibility of a leader
Strategy as positioning for the future – positioning the enterprise for the future
Strategy as building capability – maintaining a lead in specific technical skills or investing to sustain a general ability to react fast to unexpected circumstances
Aspects of Strategy
Strategy as fit between capabilities and opportunities- success results from a good match between the capabilities of the enterprise and the opportunities to serve the needs of customers better than competitors
Strategy as a result of deep involvement with the business – deep involvement of managers with the business rather than doing abstract exercises in strategy formulation
Aspects of Strategy
Strategy as a pattern of behavior resulting from embedded culture – the strategies that an enterprise may adopt are partly determined by its culture and this may be a source of competitive (dis) advantage
Strategy as an emerging pattern of successful behavior – part of strategy may be ingrained in recognizing the patterns that seem to have led to success even if these patterns arose by chance
Types of strategies
Planned strategies – carefully planned set of decisions and actions worked out in some detail to achieve the objectives and goals of the firm
Strategy is as a result of a scientific process of thought,analysis,decision making and action programming that is focused on crystallizing the best method or approach to achieve the specified objectives and goals of the firm
Emergent and incremental strategies – emerge from with in the organization without any formal plan
Strategies are often the emergent response to unforeseen circumstances
Mintzberg argues that emergent strategies are often successful and may be more appropriate than intended strategies
Strategic Intent
This is a corporate ambition, challenge that an organization sets itself to achieve in a period of say 10-20 years e.g. Makerere – “To be the Harvard of Africa”
It is an obsession to win at all levels in the organization sustained over a long period of time.
Strategic intent encompasses an active management process which includes focusing the organization's attention on the essence of winning; motivating people by communicating the value of the target; leaving for individual and team contribution, sustaining enthusiasm by providing new operational definitions as circumstances change and using intent consistently to guide resource allocation.
Intent contd..
Underlying the concept of strategic intent is the notion that strategy formulation involve setting ambitious goals which stretch the company and then finding ways to build the resources and capabilities necessary to attain those goals
Classic examples of strategic intent from multinational companies include;
General Electric- “To be No.1 or No.2 in every market”
Coca-Cola – “To put coke with in the arms reach of every customer in the world”
Komatsu – “To encircle caterpillar”
Stretch
A stretch is a strategic planning period adopted by an organization
The period depends on the goals the company sets itself to achieve as well as the changes in the environment
It normally ranges between 5-10 years
Competitive Advantage
Competitive advantage refers to that internal factor that enables a business firm to have market superiority or leverage over its competitors on a sustainable basis
It entails having an edge over competitors and achieving above industry average profitability that will maintain that position
Competitors advantage explains why some companies perform better than others in the same industry
Generic building blocks of Competitive Advantage
Superior efficiency
Superior Quality
Competitive Advantage
SuperiorInnovation
SuperiorCustomer
responsiveness
Distinctive Competences
Competences refer to things that a corporation can do exceedingly well.
When these competences are superior to those of the competitors they are often called distinctive competences.
Distinctive or core competences are the companies’ characteristic areas of expertise and consist of the synergy of resources such as innovativeness, creativity, employee motivation and knowledge, technological and professional expertise.
Strategic competition
Competing for long term survival. Business managers have to recognize that
competition is not just a short term phenomenon for short term gains but a long term effort to guarantee a better future that can not be easily overturned.
It requires business strategists to apply intelligence, imagination, accumulated resources and coordinated actions for their enterprises to survive and thrive for along time.
Basic elements of competitive behavior
ability to understand competitive behavior as a system in which competitors,customers,money and other resources continually interact
ability to use this understanding to predict how a given strategic move will rebalance the competitive equilibrium
Resources that can be permanently committed to new uses even though the benefits are differed
Ability to predict risk and return with reasonable accuracy and confidence to justify the commitment of resources
Competitive exclusion
The principle of competitive exclusion was developed by Prof.G.f Gause of Moscow university
He carried out an experiment involving two pairs of protozoa
He put together the two pairs of protozoa of the same genesis in two bottles with adequate food supply.
One pair was exactly identical and the other was not. After some time the identical pair had died while the identical were still alive
Competitive exclusion condt …
Results were that if animals were of different species they would survive and persist together longer than if they were identical
This experiment was purely biological but has turned out to be useful in business .Lessons learned from the experiment ;
Two companies can not coexist if they make their living in an identical way
Competitive exclusion condt …
Companies that are exactly alike can not survive for long. Those that are significantly different will coexist and survive longer
To compete favorably and grow business enterprises must create a sustainable difference from each other
Survival and growth of any enterprise is always and at the expense of another
Strategic thinking
This refers to long-term thinking It involves looking ahead and
plotting the obsolescence of what now produces your livelihood
It involves being obsessed with the future-building scenarios of the future and plotting backwards to see how the future can be influenced by the present actions
Strategic thinking contd…
A strategic thinker usually exhibits two major behaviors
Ability to understand the significance of the events without being influenced by the current opinion or changing attitudes
Ability to take decisions quickly without being deterred by the perceived danger
Strategic fit
This refers to the attempt to align, fit or match a company’s resources and capabilities to the demands of the environment in which the company operates.
The aim of strategic fit is to match the company strengths and weaknesses with environmental opportunities and threats
Key success factors
KSF refer to variables that can significantly affect the overall competitive positions of all companies with in any particular industry
They are determinants of success with in any industry
Key success factors in the banking industry may include sound capital base, high skilled people, state-of-the-art-technology, security etc
Vision
Vision is a mental perception of the kind of the environment an individual or an organization aspires to create with in a broad time horizon and the underlying conditions for the actualization of this perception
It is a concept for a new and desirable future reality that can be communicated throughout the organization
It is central to the process of direction setting and represents a big picture of the desired future state of business that business manager has in his mind
Mission
This is the basic reason for the organization's existence-tells what the company is providing to the society
Defines the fundamental unique purpose that sets a company apart from others of its kind
Identifies the scope of the company's operations in terms of products offered and markets served
Mission contd ..
A mission statement should identify; Customers to be served Needs to satisfied Means of satisfying these needs in
terms of products, processes and technology
Core purpose
This is the organization's reason for being as seen from the public’s point of view
An effective purpose reflects people’s idealistic motivations for doing the company work e.g. the core purpose of Hewlett-Packard is “to make technical contributions for the advancement and welfare of humanity”
Where as you might achieve a goal or complete a strategy you can not fulfill a purpose, it is like a guiding star on the horizon-forever pursued but never reached
Core values
These are the essential and enduring tenets of an organization
A set of timeless principles that have intrinsic value and importance to those inside the organization
These are values that the organization holds so dear and they guide its people’s behavior
An organization decides for itself what values it holds to be core depending on the current environment, competitive requirements or management fads.
Core values contd…
Companies tend to have only a few core values usually between three to five e.g. the core values for Merck are;
Corporate social responsibility Unequivocal excellence in all aspects
of the company Science based innovation Honesty and integrity Profits, but profits from work that
benefits humanity
Corporate philosophy
This refers to basic beliefs, values aspirations and philosophical priorities that strategic decision makers are committed to and that guide the management of the company
It tells how the company intends to do business and often reflects the company's recognition of its social and ethical responsibility
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“Limitations live only in our minds. But if we use our imaginations, our possibilities
become limitless”
Jamie Paolinetti
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