Session 1

COMPETITIVE STRATEGY

INTRODUCTION:

THE STRATEGY PROCESS

Welcome!

STRM043 - Competitive Strategy

and Innovation

Overview

What is strategy?Why strategy? The pros & cons of strategyThe many faces of strategyThe evolution of strategyThe strategy process

What is Strategy?

A much used, if not over-used, wordThink about how you use the word strategy in relation toYour lifeYour workMilitary origins:Comes from Greek term strategos used in military operations and focused upon how to win battles

What is Strategy?

Research the word strategy on GoogleDevelop your own understanding and definitionHere are some important definitions:

What is Strategy?

The determination of the long run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resource necessary for carrying out these goals Chandler (1963)The long term direction of an organisationJohnson & Scholes (2011)A pattern in a stream of decisions Mintzberg (2007)

What is Strategy?

Objective of strategy

Make a return greater than cost of capital

Or in other words be

Faster, better, cheaper

than the competition

What is Strategy?

More than a planImplies a long term perspectiveInvolves a processDynamic, interactiveFar reaching within the organisationDepartments and DivisionsStaffOnly visible after the event? What is the significance of this comment by Mintzbergs?

Strategy vs tactics:

Strategy is the overall analysis and plan for deploying resources to establish a favorable position.Tactics are a scheme for a specific initiativeAttributes of strategic decisions:Important: involve a commitment of resourcesNot easily reversibleCombine hard and soft elementsHard / quantitative side: involves the language of ROI (return on investment) cost of capital, risk, economics etcSoft / qualitative side: involves people, history, corporate culture, motivation, etc

Distinguishing features

According to Robert Grant

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6

What is Strategy?

This module focuses on the strategy process in the first of four sections in this module:A: Concepts & Tools: FoundationsB: Contexts & Cases: ApplicationsC: Forces & Issues: ReflectionsD: Innovation & Creativity: Projections

(Workshop)

Strategy

sets direction

Chart a course Create and maintain cohesion Wrong direction

Why Strategy:

For better and for worse

Strategy
focuses effort

Promotes coordination Reduces disorder No peripheral vision Groupthink

Why Strategy:

For better and for worse

Strategy defines

the organization

Captures essential meaning Creates shared identity Loss of richness stereotyping

Why Strategy:

For better and for worse

Strategy provides

consistency

Reduces ambiguity Explains the world Can reduce creativity Simplify to the point of distortion

Why Strategy:

For better and for worse

Specify future choicesMade in advance of action Calculated towards achieving objectives

The Faces of Strategy

Without preconceptionDriven by actions; not designConsistency in behaviour
(whether or not intended)

The Faces of Strategy

A match between organization
and contextA unique place in the environmentFinding and sustaining
rent creating situations

The Faces of Strategy

Collective conceptA world view Intensely shared The character of an organization

The Faces of Strategy

Strategies deliberate and emergent

The Faces of Strategy

Mintzbergs Critique of Formal Strategic Planning:

The fallacy of prediction the future is unknownThe fallacy of detachment - impossible to divorce formulation from implementationThe fallacy of formalization - inhibits flexibility, spontaneity,

intuition and learning.

The Evolution of Strategy

Corporate Planning `(1950-70s) Forecasting, diversifying

Competitive strategy (1980-90s) Industry analysis, portfolio planning

Strategic Management (1990s)Re-engineering, alliances

Strategic Innovation (2000+)New technology, CRM, innovation

Crisis Management (2007-2013)Managing in a recession

2014 onwards??CSR, social impact, globalisation

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In response

Ten Schools of Strategy

1. Design: a process of conception

2. Planning: a formal process

3. Positioning: an analytical process

4. Entrepreneurial: a visionary process

5. Cognitive: a judgmental process

6. Learning: an emergent process

7. Political: a process of negotiation

8. Cultural: a collective process

9. Environmental: a reactive process

10. Configuration: a process of transformation

Evolution of the Ten Schools

Evolution of the Ten Schools (contd)

Late 1990s & early 2000s

Quest for Shareholder Value:

Refocusing, outsourcing, delayering, cost cutting

Quest for Competitive Advantage:

Emphasis on resources & capabilities Flexibility & innovation Collaborationalliances, networks Succeeding in dynamic (Schumpeterian) markets learning to live with disruption Blue Ocean Strategy: create own space with no competitors

Where are we now?

2014+?

Quest for Stakeholder Value:

New goal of long term shareholder value not short term profit maximisation Fairer distribution of the rewards of business?

Quest for Competitive Advantage:

New and growing concept of shared value (CSR) Social media and customer insights New two way conversation with customers The VUCA world (Volatile/Uncertain/Complex/Ambiguous) Implications for Governance, leadership and management Organisational structures

Where are we heading?

Strategy Safari
Core text book

Core text books (both available as e-books)Johnson & Scholes (2011), Exploring Strategy, 9th edition, Pearson for core techniques,Mintzberg et al (2009) Strategy Safari, Prentice Hall for thinking about strategyDue to Rapid change in the business worldLong run evolution in strategic thinkingReference book for approaches to strategyCritically reviews each school of strategyExcellent read for deep understanding

Complementary Reading

Other good strategy text booksGrant (2010) Contemporary Strategy Analysis, 8th Edition, WileyDe Wit & Meyer (2010) Strategy: Process, Content, Context 4th Edition, CengageMintzberg, Lampel etc al (2014) The Strategy Process, 5th Edition, Pearson (Highly recommended)Financial Times: www.ft.com Available free to all NBS students via NILEThe EconomistWeekly review of the news, good strategic coverage of industriesKey academic articles from leading thinkersCase studies

Case Studies:
Key component of the module

Cases give an insight into real lifeUsually involve a management decisionNeed reading 2 or 3 times to benefitMust be read before the class discussion Be prepared to discussOpportunity to work in sub-groupsSimilar to Harvard Business SchoolAssignments are case basedGroup presentationIndividual written case analysis

The Strategy PROCESS

We now start to look at the basics of strategy and the strategy processCompanies are assumed to be seeking competitive advantage:How to identify and meet customer needs faster, better, cheaper than competitorsTraditionally only possible 2 of 3

The Strategy Process

Decisions aboutWhich industries to be inHow to compete in themKey concept of FIT between:Internal resourcesExternal environmentBalance between:Competing for the presentPreparing for the future

THE FIRM

Goals &

Values

Resources &

Capabilities

Structure &

Systems

THE

INDUSTRY

ENVIRONMENT

Customer needs

Competitor actions

Suppliers - source of key resources

STRATEGY

The Basics of Strategy:
Fit between the Organisation and its Environment

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Long-term, simple and agreed objectives

Objective appraisal of resources

EFFECTIVE IMPLEMENTATION

Strategic Success

Profound understanding of the competitive environment

What Makes a Successful Strategy?

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4

The Strategy Process

Where are we now?Where do we want to get to?How do we get there?

with some reflection on

Fit with The business environment and customer needs?Our mission, history, culture and staff?Our resources and risk profile?

The Strategy Process

Internal AnalysisExternal AnalysisSWOT AnalysisSecond stage synthesis tool!Generate Strategic OptionsEvaluate OptionsImplementation PlanMonitor and Reflect on results

SWOT

Analysis

2nd stage tool

Strategy the hard side

Adapted from: http://management-class.co.uk/management-class.co.uk/courseware/learners/strat_process.htm

McKinseys 7 S Framework

Hard & soft elements combined

Light blue hard elements. Dark blue soft elements

A useful over-arching framework. We will return to this later in the module

Strategic analysisimproves decision processesbut doesnt give answersassists us to identify and understand the main issuesbut we need to explore the drivers of future changeshelps us to manage complexitybut we must recognise that our strategy concepts & models are simplifications of reality; they help us ask the right questions, thereafter critical thinking and judgment are keyenhances flexibility and innovationby supporting learning

The Role of Strategic Analysis

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11

Case study:
ROBIN HOOD

Please read this very short case at least 3 times once to orientate yourself, second time for detail and third for deeper insights.

Despite its brevity, this case study is very rich with many layers, and can be looked at from a variety of perspectives eg HR, marketing etc. Robin needs help to be able to see his organisation from a holistic point of view, and to assess his goals and objectives.

Task

Your tutor is Robin Hood and you are a consultant brought in to advise Robin on his future strategy. Working in groups of 3-4 you are asked to

Undertake a strategic analysis of the present position of Robin HoodIdentify his strategic options Make clear recommendations as to which strategy he should adopt and why

Readings & references

Core text books

Mintzberg et al Strategy Safari, Ch 1Johnson & Scholes, Exploring Strategy, Ch 1

Key academic article (available on the web)

Porter, M.E. (1996) What is Strategy. HBR, Nov-Dec

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