Henry: Understanding Strategic

Management

Chapter 1: What is Strategy?

 What is Strategy?
• Strategy has a long antecedent – Sun Tzu The Art
of War

• Strategy is about achieving a competitive advantage

• Meeting customer needs better than rivals

• Porter (1996) competitive strategy is about being

different. It means deliberately choosing a different
set of activities to deliver a unique mix of value.
 What is Strategy?
• Markides (1999) selecting a strategic position an
organization can call its own, based on:

• Who should the organization target as customers?

• What products or services should be offered to the

targeted customers?

• How can the organization do this efficiently?

 What is Strategy?
• Kay (1993) an organization’s strategy is ‘…the
match between its internal capabilities and
external relationships’
• Internal: what the organization is capable of
doing
• External: Its relationship with employees,
customers, shareholders, and suppliers.
• The use of analytical techniques allows the firm
to influence its position in the market
 What is Strategy?
• The process of creating a strategy is called strategic
management

• Strategic management consists of: strategy analysis,

strategy formulation, and strategy implementation

• In reality these elements are interdependent and should

not be considered in isolation

• Strategy analysis, formulation, and implementation all

need to be considered if the organization is to meet the
needs of its environment
 What is Strategy?
• Strategy analysis is a useful starting point for crafting
strategy

• It includes the general and competitive environment

facing the organization

• It also deals with the organization’s internal environment

• Strategic analysis helps the organization evaluate how

well it is positioned to exploit external opportunities
 What is Strategy?
• Strategy formulation usually takes place at the business
and corporation level

• Strategic analysis is important for strategy formulation

• So too is creative insights which synthesize experiences

that exist within the organization to form a novel strategy

• An organization is seldom faced with only one strategy

which means it is necessary to evaluate competing
strategies
 What is Strategy?
• Strategy implementation requires the organization to be
sufficiently flexible

• A given strategy must be effectively communicated with

stakeholders inside and outside the organization

• The organization’s values are crucial in sign-posting to

individuals what the organization considers important

• An organization’s culture will determine how it responds

to opportunities that exist
 What is Strategy?
• A vision is often associated with the founder of an
organization

• It represents a desired state the organization aspires to

achieve in the future

• A mission seeks to answer the fundamental question of

why an organization exists

• Campbell et al. (1990) make a distinction between

mission and sense of mission
 What is Strategy?
• The assumptions on which an organization has been
built and the basis on which it is run are its theory of
business

• It includes assumptions about markets, customers,

competitors, and its internal capabilities

• Organization encounter difficulties when their theory of

business no longer fit with reality

• A organization’s theory of business becomes obsolete

when it has achieved its objectives
 What is Strategy?
• Corporate strategy is concerned with which markets an
organization wants to compete in

• Business strategy deals with how an organization will

compete in its chosen industry or market

• Functional strategy occurs according to functional lines

such as R&D, marketing and finance
 What is Strategy?
• The Design School seeks to match the capabilities of the
organization to the opportunities within its competitive
environment

• This rationalist approach is exemplified by Michael Porter’s

generic strategies

• The Learning School emphasizes deliberate and emergent

strategies

• A deliberate strategy is one the organization intends to pursue

• An emergent strategies involves managerial learning and

experience that coalesce into a realised strategy
 What is Strategy?
A strategic management framework

A strategy must
take account of
the organization’s
stakeholders if it is
to succeed

Figure 1.3