Anthony E Henry Understanding Strategic Management Chapter 1

Anthony E. Henry: Understanding Strategic Management Chapter 1: What is Strategy? © Oxford University Press, 2018. All rights reserved.

Learning objectives • Explain what is meant by strategy • Understand the role of values, vision, and mission in facilitating strategy • Describe the changes in the approach to strategy • Identify different perspectives on strategy formulation • Develop a strategic management framework Henry: Understanding Strategic Management, 3 rd edition

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 Henry: Understanding Strategic Management, 3 rd edition

What is strategy? • Markides (1999) selecting a strategic position an organization call its own based on: – Who should the organization target as customers? – What products or services should be offered? – How can the organization do this efficiently? Henry: Understanding Strategic Management, 3 rd edition

What is strategy? • Kay (1993) defines an organization’s strategy as ‘…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 Henry: Understanding Strategic Management, 3 rd edition

Strategic management • The process of creating a strategy is called strategic management • Strategic management consists of: strategy analysis, strategy formulation, and strategy implementation – Strategy formulation usually takes place at the business and corporation level – Strategic analysis is important for strategy formulation – Strategy implementation requires the organization to be sufficiently flexible Henry: Understanding Strategic Management, 3 rd edition

Strategic management • Strategy analysis, formulation, and implementation all need to be considered if the organization is to meet the needs of its environment • In reality these elements are interdependent and should not be considered in isolation Henry: Understanding Strategic Management, 3 rd edition

Values, vision, and mission in strategy • 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 Henry: Understanding Strategic Management, 3 rd edition

Values, vision, and mission in 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 Henry: Understanding Strategic Management, 3 rd edition

Example of organizational values Organizational values at Johnson & Johnson: How does their Credo guide strategy? Henry: Understanding Strategic Management, 3 rd edition

Changes in the approach to strategy • Sustained competitive advantage is decided by the marketplace – It includes assumptions about markets, customers, competitors, and its internal capabilities • The resource-based view sees the determinant as being from the firm-level resources and capabilities – The dynamic capability approach insists that an organization develops new capabilities to sustain competitive advantage rather than relying on market barriers for advantage Henry: Understanding Strategic Management, 3 rd edition

Different perspectives on strategy formulation • This Rationalist School is exemplified by Michael Porter’s generic strategies - SWOT • 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 realized strategy Henry: Understanding Strategic Management, 3 rd edition

Example of strategy formulation Honda’s Dominance of the US Motorcycle Industry: Deliberate or Emergent Strategies? Henry: Understanding Strategic Management, 3 rd edition

A framework of strategic management A strategy must take account of the organization’s stakeholders if it is to succeed Henry: Understanding Strategic Management, 3 rd edition