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Lecture 1

The Nature and the Value ofStrategic Management

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Without a strategy theorganization is like a ship

without a rudder.

Joel Ross and Michael Kami

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What is Strategy? "Strategy is the direction and scope of an

organization over the long-term: which

achieves advantage for the organizationthrough its configuration of resourceswithin a challenging environment, to meetthe needs of markets and to fulfill

stakeholderexpectations".

Johnson and Scholes (2008)

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So Strategy Includes..DirectionWhere is the businesstrying to get in the long term Markets & scope

Which markets should a businesscompete in and what kind of activitiesare involved in such markets?

Advantage

How can the business performbetter than the competition inthose markets?

ResourcesWhat resources are requiredin order to be able to compete?(skills, assets, finance,relationships,& technicalCompetencies etc.)

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So Strategy Includes..StakeholdersWhat are the values & expectationsOf those who have power in and

Around the business?

EnvironmentWhat external environmental factorsAffect the businesses ability to compete?

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Strategy Development

A simple process

Includes three elements

StrategicAnalysis

Strategic

Choice

Strategic

Implementation

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Strategy and Operations

RoutinisedOrganisation-wide, holistic

Day to day issuesLong term

Operationally specificAmbiguous/uncertain

Operating within existing strategyDeveloping new resources

Managing existing resourcesCreating new directions

Techniques and actionsConceptualisation of issues

Operational ManagementStrategic Management

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Levels of Strategy

Corporate

strategyBusiness

strategy

Functional strategy

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Why Strategy is Important? Motivate managers to proactively shape how the

firms business will be conducted

Achieve higher performance levels relative tocompetitors

Provides a systematic approach to uncertainties

Coordinates and focuses employees

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Making a Winning Strategy GOODNESS OF FIT TEST

How well does strategy fit the firms situation?

COMPETITIVE ADVANTAGE TEST

Does strategy lead to sustainable competitive advantage?

PERFORMANCE TEST

Does strategy boost firm performance?

OTHER CRITERIA:

Internal consistency and unity among all pieces of the strategy

Degree of risk the strategy poses as compared to alternativestrategies

Degree to which the strategy is flexible and adaptable to changing

circumstances 10

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Strategies Evolve Over Time

A companys strategy is awork in progress

Changes may be necessary to react to Shifting market conditions

Technological breakthroughs

Fresh moves of competitors

Evolving customer preferencesEmerging market opportunities

New ideas to improve strategy

Crisis situations

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