Exploring Strategy 11th edition Chapter 1-16 STUDY GUIDE

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