Page 3 Part 1: Introduction  What is strategy?

Definitions & quotations

„Strategy“

„Strategy: is the direction and scope of an organization over the long

term, which achieves advantage in a changing environment through
its configuration of resources and competences with the aim of
fulfilling stakeholder expectations.“
Johnson/Scholes/Whittington, Exploring Corporate Strategy (2006)

„Corporate Strategy can be described as the identification of the

purpose of the organisation and the plans and actions to achieve
that purpose.“
Richard Lynch, Corporate Strategy (2006)

„Strategy is the pattern of objectives, purposes, or goals and the major

policies and plans for achieving these goals, stated in such a way as
to define what business the company is in or is to be in and the kind
of company it is or is to be“
Kenneth Andrews, The Concept of Corporate Strategy (1971)
Page 4 Part 1: Introduction  What is strategy?

Definitions & quotations

„Strategy“

„Strategy: a plan, method, or series of actions designed to achieve a

specific goal or effect.“
Wordsmyth Dictionary

„The determination of the long-run goals and objectives of an enterprise,

and the adoption of courses of action and the allocation of resources
necessary for carrying out these goals.“

Alfred Chandler, Strategy and Structure (Cambridge, MA: MIT Press,1962)

„Business strategy is less a function of grandiose predictions than it is a

result of being able to respond rapidly to real changes as they occur.
That‘s why strategy has to be dynamic and anticipatory“

Jack Welch, in: Straight From the Gut, Warner Business Books (2001)
Page 5 Part 1: Introduction  What is strategy?

Success factors
3 examples

Rich. Williams
Madonna General Giap (Father of Venus
und Serina)

Goal Superstar at all costs Unification of Prosperity and status

Vietnam under a
communistic
leadership
Understanding Emerging trends in - Best knowledge of Detailed analysis of
of competitive Pop culture combat zone physical and
- Impact of sex - knowledge of psychological
environment - Multiple distribution the political success factors in
channels environment in women’s
professional tennis
the US
Objective Limited talent; - Limited Systematic building
appraisal of Focus on: military and of physical, mental
- Self-portrayal economic resources and social abilities
resources - Image development - Political strength from childhood on
- Networking
Implementation - Discipline - Control - Flexible, precise
- Hard work - Long term role definition
- Leadership based operation (father, trainer,
on inspiration - Effective manager)
- Focus on details propaganda - Guidance by
- Leadership based uninterrupted
on inspiration instructions
Page 6 Part 1: Introduction  What is strategy

Components of a successful strategy

Hypotheses

 Long-term, simple
and shared goal

implementation
 Profound understanding

 Effective
of competitive Successful
environment strategy

 Objective appraisal
of abilities and
resources
Page 7 Part 1: Introduction  What is strategy?

What is strategy?

 Difference between strategy and tactics

- Strategy is the comprehensive plan of using resources to
achieve a preferred position
- Tactic is an action in line with a strategy, a specific maneuver

 Characteristics of strategic decisions

- Of big importance for the decision maker
- Requires the use of significant resources
- Hard to revise
Page 8 Part 1: Introduction  What is strategy?  Evolution

Evolution of strategic management: dominant themes

in the early days

Financial budgeting Corporate planning Strategic positioning

• NPV, capital • Medium-term • Industry analysis

budgeting economic forecasting
• Market segmentation
• Financial control • Formal corporate
through operating planning • Experience/cost curve
budgets
• Diversification • PIMS analysis

• Corporate planning • Business portfolios

departments
1950 1960 1970 1980
Page 9 Part 1: Introduction  What is strategy?  Evolution

Evolution of strategic management: contemporary

themes

Competitive Web Economics “Green & global”

Advantage
• Strategic innovation • Corporate and social
• Resources and responsibility (CSR)
capabilities • New business models
• Business ethics
• Shareholder value • Disruptive
maximization technologies • Competing for
standards
• Restructuring & re- • Blurring boundaries of
engineering industries and • Globalization
companies continued
1980 1990 2000 2010
Page 10 Part 1: Introduction  Corporate Strategy

Corporate Strategy as a link between the company and

its environment

Corporate Strategy

The company The industrial environment

 Goals and values  Competitors/Partners

 Resources and capabilities  Customers

 Structures and systems  Suppliers/Service providers

Page 11 Part 1: Introduction  Corporate Strategy vs. Business Unit Strategy

„Where and how to compete to make money?“

Attractiveness of
branch/industry
Corporate
–
Strategy
Investment in which
industries?
Value creation
–
How to generate
profits?
Competitive
advantages Business Unit
– Strategy
How to operate?
Page 12 Part 1: Introduction  What is strategy ?  Different levels

Strategy levels of Multibusiness-corporates

Corporate Corporate Center

Strategy
Central
functions

Business Unit Business Business Business

Strategy unit A unit B unit C

 R&D
 Sales &
Marketing Functional
 Production &
strategies
Logistics
Page 13 Part 1: Introduction  What is strategy  How does strategy emerge

How does strategy emerge: conception or evolution?

Strategy through Strategy as a result

conception of a process
Planning, Multitude of
decisions as a
Rational
result of internal
decisions and external
influences

Intended Evolutionary
Strategy Strategy
realized
strategy

Criticism of Mintzberg on formal strategic planning

 The fallacy of prediction – unable to predict the future
 The fallacy of detachment – unable to separate the development of a strategy
from its implementation
 The fallacy of formalization – hampers creativity, flexibility and learning
Page 14 Part 1: Introduction  What is strategy  Strategy development

Strategy development in corporations

Application areas and linked targets

Strategy to Improve quality

support the decision of decision results
process

Strategy as an
instrument to Ensure
communicate and uniformity
coordinate and traceability

Strategy as a
process to determine Improve
the goals performance by setting
challenging goals
Page 15 Part 1: Introduction  What is strategy  How does strategy emerge

Importance of formal analysis for the process of

strategy development

 Formal analysis improves the decision making process, but

gives no answers to strategic questions

 Formal analysis supports the identification of relevant

questions

 Formal analysis should reduce complexity

 Formal analysis can stimulate flexibility and creativity, but

cannot replace them
 Page 16 Part 1: Introduction  Summary

Summary of conceptional systematics:

„Strategic management“

Formal analysis… … supports…

Re-
sources
Environ-
Targets
ment

Position-
ing

Corpor-
ation
SM Organi-
zation
Levels/ Implemen-
Sections tation

BU Ability

Func- Manage-
tion ment

… Strategic management

Source: Johnson/Scholes/Whittington (2005).

 Page 17 Part 1: Introduction  Vocabulary

Vocabulary
Selection

Term Definition Examples from personal

Mission Superior meaning of the venture and its
right to exist, derived from the
expectations of the relevant stake
holders
Vision, strategic intent The ventures‘/corporations‘ aspired
future state
Goal A general statement about intentions or
objectives
Objective A quantified or precise statement about
the „Goal“
Strategic Resources, abilities and processes;
Capability some of them could be unique and
result in a competitive advantage
Strategy Long-term directional reference
area/life
Preservation of healthiness
and fitness
Participate in the „Frankfurt
Marathon“
Reduce weight and build-up of
muscles
Loose 5 kg of weight until
01.09.2007 and participate in
the marathon next year
Living close to a jogging track,
Knowledge of a successful and
healthy diet; Trainer
Frequent training, test runs,
follow the diet plan

Source: on the basis of Johnson/Scholes/Whittington (2005).

 Page 18 Part 1: Introduction  Vocabulary

Vocabulary
Selection

Term Definition Examples from personal

area/life
Business Model Organization of product, service and Join a group of like-minded
information flow between all involved people/runners
persons
Control Supervision of activities: Supervision of weight, mileage
- Determination of the effectiveness of kilometers and time need
strategies and arrangements
- Basis to adjust
strategies and implementations

Source: on the basis of Johnson/Scholes/Whittington (2005).

Page 19 Part 1: Classification  Introduction  What is strategy  How does strategy emerge

Exercise 1

 Check the websites of some corporations in a specific

industry, e.g. Airlines, Automotive Industry,…
 Compare the use of the strategic vocabulary
 Which conclusions can be drawn?
 Prepare your conclusions for the next lesson so you can
present them.
Page 20

Appendix
Page 21 Part 1: Introduction  What is strategy  Example

Example Madonna
Professional management

Distribution channels

 In 1992 Madonna founded the Maverick Recordings label, amongst others

signing Alanis Morrisette
 2007: Music business is changing: Madonna is already the best paid artist in
the Pop-Business. Now the "Material Girl" is planning another coup: for 120
million Dollar she wants to change to another label, which is primarily a concert
agency
 In addition to selling music the promotion is supported by books, movies
(in their particular context) and fashion

Choreography

 Madonna‘s shows are developed and designed by the best choreographers

and rehearsed to perfection

Technology

 Madonna only uses the best technicians und DJs to produce her songs
 Page 22 Part 1: Introduction  What is strategy  Example

Frequent image-changes as a trademark: the trend

defining Pop Diva

1985 1987 1989 1990 1993 1995

1997 1998 1999 2000 2001 2002

?
2003 2004 2005 2006 2007 2010

Source: Spiegel Online, 23.2.2007.

Page 23 Part 1: Introduction  What is strategy  Example

Systematic provocation and allusion to taboos: sex,

violence, religion - examples

 1996 mother, sold first pictures of her daughter

to ABC, Vanity Fair bought the rights to print the
diary during her pregnancy for more than
100.000 USD. Finally an illustrated book was
published for Christmas in 1996 describing all
stages of her pregnancy
 Spectacular video clips, e.g. by her
husband Guy Ritchie, in which Madonna drives a
sports car ending in a severe accident.
This demolition spree is an allusion to Oliver
Stones‘ "Natural Born Killers", judged by
MTV to exalt violence, it is therefore not shown
at prime time.
 To support the promotion activities of "Erotica"
the illustrated book "Sex" is published;
der Spiegel (German magazine) "Szenen vom
Raffinement einer Reeperbahn-Inszenierung"