Exploring Strategy 11th Edition
Chapter 1: introduction strategy 9
1.1. What is strategy? 9
1.1.1 Defining strategy 9
1.1.2 The purpose of strategy: mission, vision, values and objectives 11
...
Exploring Strategy 11th Edition
Chapter 1: introduction strategy 9
1.1. What is strategy? 9
1.1.1 Defining strategy 9
1.1.2 The purpose of strategy: mission, vision, values and objectives 11
1.1.3 Strategy statements 11
1.1.4 Levels of strategy 12
1.2. The exploring strategy framework 12
1.2.1 Strategic position 13
1.2.2 Strategic choices 13
1.2.3 Strategy in action 14
1.3. Working with strategy 15
1.4. Studying strategy 15
1.5. Exploring strategy further 16
1.5.1 Exploring strategy in different contexts 16
1.5.2 Exploring strategy through different ‘strategy lenses’ 17
Chapter 2: Macro-environment analysis 18
2.1 Introduction 18
2.2 PESTEL analysis 19
2.2.1 Politics 19
2.2.2 Economics 21
2.2.3 Social 22
2.2.4 Technology 24
2.2.5 Ecological 25
2.2.6 Legal 26
2.2.7 Key drivers for change 26
2.3 Forecasting 27
2.3.1 Forecast approaches 27
2.3.2 Direction of change 27
2.4 Scenario analysis 28
Chapter 3: Industry and sector analysis 30
3.1 Introduction 30
3.2 The competitive forces 30
3.2.1 Competitive rivalry 30
3.2.2 The threat of entry 31
3.2.3 The threat of substitutes 31
3.2.4 The power of buyers 31
3.2.5 The power of suppliers 32
3.2.6 Complementors and network effects 32
3.2.7 Defining the industry 33
3.2.8 Implications of the Competitive Five Forces 33
3.3 Industry types and dynamics 33
3.3.1 Industry types 33
3.3.2 Industry structure dynamics 34
3.4 Competitors and markets 35
3.4.1 Strategic groups 35
3.4.2 Market segments 35
3.4.3 Critical success factors and ‘Blue Oceans’ 36
3.5 Opportunities and threats 37
Chapter 4: Resources and capabilities 38
4.1 Introduction: The strategic importance of organizations’ resources and capabilities 38
4.2 Foundations of resources and capabilities 38
4.2.1 Resources and capabilities 38
4.2.2 Threshold and distinctive resources and capabilities 39
4.3 Distinctive resources and capabilities as a basis of competitive advantage 39
4.3.1 V – value of resources and capabilities 39
4.3.2 R – rarity 40
4.3.3 I – inimitability 40
4.3.4 O – organisational support 41
4.3.5 Organisational knowledge as a basis of competitive advantage 41
4.4 Diagnosing resources and capabilities 42
4.4.1 VRIO analysis 42
4.4.2 The value chain and value system 42
4.4.3 Activity systems 44
4.4.4 Benchmarking 45
4.4.5 SWOT 45
4.5 Dynamic Capabilities 46
Chapter 5: Stakeholder and governance 48
5.1 Introduction 48
5.2 Stakeholders 48
5.2.1 Stakeholders groups 48
5.2.2 Stakeholder mapping 49
5.2.3 Owners 51
5.3 Corporate Governance 52
5.3.1 The governance chain 52
5.3.2 There are two governance models: 53
5.3.3 How boards of directors influence strategy ? 54
5.4 Social Responsibility and ethics 54
5.4.1 Corporate social responsibility (CSR) 54
5.4.2 The ethics of individuals and managers 55
Chapter 6: History and culture 56
6.1 Introduction 56
6.2 Why is history important? 56
6.2.1 Path dependency 56
6.2.2 Historical as a resource 57
6.2.3 Historical analysis 57
6.3 What is culture and why it is important? 58
6.3.1 Geographically-based cultures 58
6.3.2 Organisational fields 58
6.3.3 Organisational culture 59
6.3.4 Culture’s influence on strategy 60
6.3.5 Analysing culture: the cultural web 60
6.3.6 Undertaking cultural analysis 61
6.4 Strategic drift 62
Chapter 7: Business Strategy 64
7.1. SBU and business models 64
7.2. Generic competitive strategies 65
7.2.1 Cost-leadership strategy 65
7.2.2. Differentiation strategies 67
7.2.3 Focus strategy 67
7.2.4 Hybrid strategy: combination of different generic strategies 67
7.2.5. The strategy clock 68
7.3. Interactive Strategies 69
7.3.1. Interactive price and quality strategies 69
7.3.2. Cooperative strategy 70
7.3.3. Game theory 71
7.4. Business Models 72
7.4.1 Value creation, configuration and capture 72
Chapter 8: corporate strategy and diversification 74
8.1. Introduction 74
8.2 Strategy directions 74
8.2.1. Market penetration 75
8.2.2. Product development new products/services on the market 75
8.2.3. Market development 76
8.2.4. Conglomerate (or unrelated) diversification 76
8.3. Diversification drivers 76
8.4. Diversification and performance 77
8.5. Vertical integration 77
8.5.1. Forward and backward integration 77
8.5.2. To integrate or to outsource? 78
8.6. Value creation and the corporate parent 78
8.6.1. Value-adding and value destroying activities of corporate patents 78
8.6.2. The portfolio manager 80
8.6.3. The synergy manager 80
8.6.4. The parental developer 80
8.7. Portfolios matrices 81
8.7.1. The BCG (or growth/share) matrix 81
8.7.2. The directional policy (GE-McKinsey) matrix 82
8.7.3. The parenting matrix 82
Chapter 9: International Strategy 84
9.1 Introduction 84
9.2 Internationalisation drivers 85
9.3 Geographic sources of advantage 86
9.3.1. Local advantage: Porter’s Diamond 86
9.3.2 The international value system 87
9.4 International strategies 88
9.5 Market selection and entry 89
9.5.1 Country and market characteristics 89
9.5.2 Competitive characteristics 90
9.5.3 Entry mode strategies 90
9.6 Subsidiary roles in an international portfolio 91
9.7 Internationalisation and performance 92
Chapter 10: Entrepreneurship and innovation 93
10.1 Entrepreneurship 93
10.1.1 Opportunity recognition 93
10.1.2 Steps in the entrepreneurial process 94
10.1.3 Stage of entrepreneurial growth 95
10.1.4 Social entrepreneurship 96
10.2 Innovation dilemmas 96
10.2.1 Technology push or market pull 96
10.2.2 Product or process innovation 97
10.2.3 Open or closed innovation 98
10.3 Innovation Diffusion 99
10.3.1 Pace of diffusion 99
10.3.2 The diffusion S-curve 100
10.4 Innovation & imitators 101
10.4.1 First movers advantages & disadvantages 101
10.4.2 The incumbent response 102
Chapter 11: Mergers, Acquisitions and Alliances 104
11.1 Introduction 104
11.2 Organic Development 104
11.3 Mergers and acquisitions 105
11.3.1 Types of M&A 105
11.3.2 Timing of M&A 105
11.3.3 Motives for M&A 106
11.3.4 M&A processes 107
11.3.5 M&A strategy over time 110
11.4 Strategic Alliances 110
11.4.1 Types of strategic alliance 110
11.4.2 Motives for alliances 110
11.4.3 Strategic alliance processes 111
11.5 Comparing acquisitions, alliances and organic development 113
11.5.1 Buy, ally or DIY? 113
11.5.2 Key success factors 114
Chapter 12: Evaluating strategies 115
12.1 Introduction 115
12.2 Organisational performance 115
12.2.1 Performance measures 115
12.2.2 Performance comparisons 116
12.2.3 Gap analysis 116
12.2.4 Complexities of performance analysis 116
12.3 Suitability 116
12.3.1 Ranking 118
12.3.2 Screening through scenarios 118
12.3.3 Screening for bases of competitive advantage 118
12.3.4 Decision trees 118
12.3.5 Life cycle analysis 118
12.4 Acceptability 119
12.4.1 Risk 119
12.4.2 Return 119
12.4.3 Reaction of stakeholders 120
12.5 Feasibility 121
12.5.1 Financial feasibility 121
12.5.2 People and skills 121
12.5.3 Integrating resources 121
12.6 Evaluation criteria: 4 qualifications 122
Chapter 13: Strategy development processes 123
13.1 Introduction: « How do strategies actually develop? » 123
13.2 Deliberate Strategy Development 123
13.2.1 The role of the strategic leader 123
13.2.2 Strategic planning systems 124
13.2.3 Externally imposed strategy 124
13.3 Emergent strategy development 125
13.3.1 Logical incrementalism: 125
13.3.2 Strategy as the outcome of political processes 125
13.3.3 Strategy as the product of structures and systems 126
13.4 Implications for managing strategy development 127
13.4.1 Strategy development in different contexts: 127
13.4.2 Managing deliberate and emergent strategy: 128
Chapter 14 : Organising and strategy 129
14.1 Introduction 129
14.2 Structural types 129
14.2.1 The functional structure 129
14.2.2 The divisional structure 130
14.2.3 The matrix structure 130
14.2.4 Multinational/transnational structure 131
14.2.5 Project-based structure 132
14.2.6 Strategy and structure fit 133
14.3 Systems 133
14.3.1 Planning systems 134
14.3.2 Cultural systems 134
14.3.3 Performance targeting systems 135
14.3.4 Market systems 135
14.4 Configurations and adaptability 136
14.4.1 The McKinsey 7-Ss 136
14.4.2 Agility and resilience 136
Chapter 15: Leadership and strategic change 137
15.1 Introduction 137
15.2 Leadership and strategic change 137
15.2.1 Strategic leadership roles 137
15.2.2 Leadership styles 137
15.3 Diagnosing the change context 138
15.3.1 The change kaleidoscope 138
15.3.2 The forcefield analysis 139
15.4 Types of strategic changes 140
15.5 Levers for strategic change 141
15.6 Problems of formal change programmes 143
Chapter 16 : The practice of strategy 144
16.1 Introduction 144
16.2 The strategists 144
16.2.1 Top managers and directors 144
16.2.2 Strategic planners 145
16.2.3 Middle managers 145
16.2.4 Strategy consultants 146
16.2.5 Who to involve in strategy development 146
16.3 Strategising 147
16.3.1 Strategy analysis 147
16.3.2 Strategic issue-selling 147
16.3.3 Strategic decision making 147
16.3.4 communicating the strategy 148
16.4 Strategy methodologies 149
16.4.1 Strategy workshops 149
16.4.2 Strategy projects 149
16.4.3 Hypothesis testing 150
16.4.4 Business cases and strategic plans 150
Chapter 1: introduction strategy
Example 1: Tesla Motors: the future is electric p.5
Example 2: strategy statements p.9 Example 3: strategists p.17
1.1. What is strategy?
Strategy is the long-term direction of an organisation. This section examines the practical implication of this definition of strategy; distinguishes between different levels of strategy; and explains how to summarise an organisation’s strategy in a ‘strategy statement’.
1.1.1 Defining strategy
Figure 1.1 shows the strategy definitions of several leading strategy theorists.
Chandler emphasises a logical flow from the determination of goals and objectives to the allocation of resources.
Porter focuses on deliberate choices, difference and competition.
Drucker suggests that it is a theory about how a firm will win.
Mintzberg, however, takes the view that strategy is less certain and uses the word ‘pattern’ to allow for the fact that strategies do not always follow a deliberately chosen and logical plan, but can emerge in more ad hoc ways.
Strategy is defined as ‘the long-term direction of an organisation’. This has two advantages. First, the long-term direction can include both deliberate, logical strategy and more incremental, emergent patterns of strategy. Second, long-term direction can include both strategies that emphasise difference and competition, and strategies that recognise the roles of cooperation and even imitation.
1. The long term Strategies are typically measured over years. It is emphasised by the ‘three horizons’ framework in Figure 1.2. The three-horizons framework suggests organisations should think of themselves as comprising three types of business or activity, defined by their ‘horizons’ in terms of years:
o Horizon 1 businesses are basically the current core activities. In the case of Tesla Motors, Horizon 1 includes the original Tesla Roadster car and subsequent models.
o Horizon 2 businesses are emerging activities that should provide new sources of profit.
o Finally, there are Horizon 3 possibilities, for which nothing is sure. These are typically risky research and development (R&D) projects, start-up ventures, test-market pilots or similar.
While timescales might differ, the basic point about the ‘three-horizons’ framework is that managers need to avoid focusing on the short-term issues of their existing activities. Strategy involves pushing out Horizon 1 as far as possible, at the same time as looking to Horizons 2 and 3.
2. Strategic direction. Over the years, strategies follow direction or trajectory. Managers and entrepreneurs try to set the direction of their strategy according to long-term objectives. In private-sector businesses, the objective guiding strategic direction is usually maximising profits for shareholders. However, profits do not always set strategic direction. But profit is not always the most important thing. For example, a family businesses may sometimes sacrifice the maximisation of profits for family objectives, for example passing down the management of the
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