STRATEGIC MANAGEMENT:AN INTRODUCTION

1. AN INTRODUCTION: WHAT ISSTRATEGY?

A DEFINITION OF STRATEGYStrategy is the great work of the organisation. In situations of life or death, it is the Tao of survival or extinction. Its study cannot be neglected.

Sun Tzu, The Art of War

LADY GAGA: Strategy in Action!AttributesVitality, intelligence, empathy, magnetismSinger /musician, songwriter but not outstandingSo, what are characteristics of her successful strategy?

Simple, consistent long-term goalsRelentless drive for stardom

LADY GAGA: Strategy in Action!Profound understanding of competitive environmentChanging economics of music industryPotential of social networking

Objective appraisal of resourcesAwareness of limitations of own talentExploited capabilities & resources of support teamAwareness of emerging social trends

LADY GAGA: Strategy in Action!Effective implementationDeveloped & promoted her celebrity imageExploited changing digital / social networkingFocused on building empathy with target audienceBuilt loyal support team with wide range of talents

WHAT IS STRATEGY?A Definition Corporate strategy is the pattern of major objectives, purposes or goals and essential policies or plans for achieving these goals .stated in such a way as to define what business the company is in andthe kind of company it is or is to be

Kenneth Andrews, The Concept of Strategy

WHAT IS STRATEGY?A companys direction for the futureIts purposes and ambitions ie VisionIts resourcesHow it reacts with the world around it + adding value

Long-term horizonThe larger view strategy not tacticsKey programmesWhat, where, how, who, when

WHY DOES STRATEGY MATTER?A changing world with growing inter-dependence between nations and between companies be pro-activeIts about the lifeblood of the business the fundamental issues;Survival means maximising value addedSustaining competitive advantageIntegrates all company functions (disciplines)

SOME DEFINITIONS

SOSTAC MODEL (just one of many models)Situation analysisWhere the company is nowObjectivesWhere it wants to goStrategyHow it is going to get thereTacticsThe means of getting thereActionMaking it happenControlReviewing & adjusting to ensure success

SOME CHARACTERISTICS OF STRATEGY?Strategy is not the same as tacticsStrategy is the overall planto deploy resourcesto achieve a favourable positionTactics are specific moves /actions that contribute to the achievement of the (bigger) strategyStrategies:Are important, the bigger pictureInvolve significant resourcesNot easily reversed

LEVELS OF STRATEGYCorporate strategiesStrategies for the whole business (eg. Univ of Sussex has strategies to increase student numbers to 18,000 or to invest in a new building programme)Strategic Business Unitpart of the overall business for which strategies can be developed independently of the rest of the business (eg. BMEC is an SBU)FunctionalDepends on organisational structure, for example:

- Marketing- R&D- HR- Production- IT- Accounts- etc

2. DISTINGUISHING BETWEEN CORPORATE & BUSINESS STRATEGY

CORPORATE & BUSINESS STRATEGY: SOURCES OF SUPERIOR PROFITABILITYSurvival requires:Return on Capital Employed (ROC) > Cost of Capital2 possible routes:Compete in an industry with high ROC (Lecture 2)Achieve competitive advantage within an industry & earn ROC > industry average (Lecture 4)Sostrategic choice is about:Where to compete?How to compete?

CORPORATE and BUSINESS STRATEGYCorporate strategyWhere the firm competesScope of firm in terms of industries & markets in which it competesBig decisions:Diversification (new products and markets)Vertical integration (expanding the range of activities)AcquisitionsNew venturesOr maybe SBU EntryExitUniv. of Sussex had strategies to:Start Business studiesExit Estates Management

CORPORATE and BUSINESS STRATEGYBusiness strategyHow the firm competes within a particular industry or marketTo succeed, establish a competitive advantage

Our focus this term is on both Corporate and Business Strategy

3. DESCRIBING A FIRMS STRATEGY

DESCRIBING A FIRMS STRATEGY:Coca-Cola as an exampleWhere?Product /market scope (industry sectors)Soft drinks industrySupplies concentrateBottles own brand & third party brands (eg Schweppes)Geographic scopeWorld-wide (key markets: US 27%, Mexico, Brazil, Japan, China)Vertical scopeProduct development, brand management, concentrate manufacture / distributionProduction & distribution of drinks

A theoretical diversionNotice that we analysed:Products & marketsGeographic scopeWe will return to this when we use Ansoffs matrixWe looked at Vertical scope. We will return to this when we look at Vertical Integration using the Value Chain

BACK TO COCA-COLA as an exampleHow? Competing in the presentDifferentiationSeeks market leadership through mass marketingClose relationships with leading bottlersHow? Preparing for the futureVision (what it seeks to become): to refresh the worldMission (the overall purpose):3-4% long term volume growth5-6% revenue growth6-8% Operating Profit

Coca-Cola as an example, continuedAchieved by:Growing sales of still drinksExploiting growth opportunities in emerging marketsAccelerating innovationBuilding core capabilities

Note that the above are STRATEGIES (ie about the big picture)

SO, MORE GENERALLYDESCRIBING A FIRMS STRATEGYCompeting in the presentWhere are we competing?Product /market scopeGeographic scopeVertical scopeHow are we competing? What is the basis of our competitive advantage?Low cost?Differentiation? (cf typically when competitive intensity is high)

DESCRIBING A FIRMS STRATEGYPreparing for the futureWhat do we want to become?Vision statementWhat do we want to achieve?Mission statementOur performance goals (usually specific)How will we get there?Development guidelinesPriorities for CAPEX, R&DGrowth modes: organic, M&A, alliancesCapital Expenditure- Balance Sheet, not P&L

4. STRATEGIC PLANNING:A Consultants Model

STRATEGIC PLANNING: A Model3 core stages Strategic analysisProfiling the businessExternal & internal environmentOrganisational purposeCompetitive environmentStrategy developmentGeneration of strategic optionsEvaluation & ranking of optionsChoice of strategy(Strategy) implementation

STRATEGIC ANALYSIS: PROFILING THE BUSINESSDescription of the businessMission statement & broad descriptionCustomer analysisGeographic analysisProduct analysisKey capabilities & resourcesProduction processesFinance, people, buildings, markets, distributionother functional C & RConstraints on capacity & expansionOutline organisational chartSales & Gross Profit analysisStrategic Business Units (SBUs)Usually product /market pairings (eg. Laptop exports, sporting bicycles, IT consultancy)Often a reflection of how the organisation is structured

STRATEGIC ANALYSIS: EXTERNAL AND INTERNAL ENVIRONMENT3 layers of analysis:

External environment facing all firms

Competitive environment

The company itself