Strategy - what is strategy?

Strategy is a decision about how to use available resources to secure a major objective in the face of possible obstructions such as competitors, public opinion, legal status, taboos, and similar forces - -Koontz and ODonnellIn other words, strategy is about:

Where is the business trying to get to in the long-term (direction) Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope) What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)? How can the business perform better than the competition in those markets? (advantage)? What are the values and expectations of those who have power in and around the business? (stakeholders) What external, environmental factors affect the businesses' ability to compete? (environment)?

Strategic plan set up by the top management do no need to be fully communicated to tactical level mangers in detail, all they have to do is to trust the senior managers and to follow their instructions. Strategy at Different Levels of a Business Strategies exist at several levels in any organisation - ranging from the overall business (or group of businesses) through to individuals working in it. Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement". Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc. Operational Strategy - is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

Nishan Wimalachandra MABE, MAFE W: www.nishanw.org E: nishan@consultant.com M: 0773 236 237

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How Strategy is Managed - Strategic Management Strategic management as a discipline originated in the 1950s and 60s. Although there were numerous early contributors to the literature, the most influential pioneers were Alfred Chandler, Philip Selznick, Igor Ansoff, and Peter Drucker. In practice, a thorough strategic management process has three main components, shown in the figure below:

1.

STRATEGIC ANALYSIS

This is all about the analysing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including: PEST Analysis - a technique for understanding the "environment" in which a business operates Scenario Planning - a technique that builds various plausible views of possible futures for a business Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry Market Segmentation - a technique which seeks to identify similarities and differences between groups of customers or users Directional Policy Matrix - a technique which summarises the competitive strength of a businesses operation in specific markets Competitor Analysis - a wide range of techniques and analysis that seeks to summarise a businesses' overall competitive position Critical Success Factor Analysis - a technique to identify those areas in which a business must outperform the competition in order to succeed SWOT Analysis - a useful summary technique for summarising the key issues arising from an assessment of a businesses "internal" position and "external" environmental influences.

Nishan Wimalachandra MABE, MAFE W: www.nishanw.org E: nishan@consultant.com M: 0773 236 237

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CORPORATE STRATEGY AND PLANNING TUTORIAL 1 LAST UPDATED - 02/01/2011

2.

STRATEGIC CHOICE

This process involves understanding the nature of stakeholder expectations (the "ground rules"), identifying strategic options, and then evaluating and selecting strategic options. 3. STRATEGY IMPLEMENTATION

Often the hardest part. When a strategy has been analysed and selected, the task is then to translate it into organisational action.

4.

STRATEGIC INTENT

A strategic intent is a company's vision of what it wants to achieve in the long term. It must convey a significant stretch for your company, a sense of direction, discovery, and opportunity that can communicated as worthwhile to all employees. It should not focus so much on today's problems, which are normally dealt with by company visions and missions, but rather on tomorrow's opportunities. "To achieve great things, you need ambitious visions. And it does not matter that vision cannot be laid out in details. It is the direction that counts." What is Strategic planning? Strategic planning consists of the process of developing strategies to reach a defined objective. As we label a piece of planning "strategic" we expect it to operate on the grand scale and to take in "the big picture" (in contradistinction to "tactical" planning, which by definition has to focus more on the tactics of individual detailed activities). "Long range" planning typically projects current activities and programs into a revised view of the external world, thereby describing results that will most likely occur (whether the planner wants them or not!) "Strategic" planning tries to "create" more desirable future results by (a) influencing the outside world or (b) adapting current programs and actions so as to have more favorable outcomes in the external environment. The grandiose ambitions, sense of power/influence and substantial egos associated with planners have helped to make the terms "strategic plan", "strategic planning" and "strategic planner" more common than their tactical equivalents, at least outside the military. Strategic planning takes place primarily in military situations, in business activities and in government. Within business, strategic planning may provide overall direction (called strategic management) to a company or give specific direction in such areas as: Financial strategies Human resource/organizational development strategies Information technology deployments Marketing strategy

Within government, strategic planning provides guidance for organizational management similar to that for business, but also provides guidance for the evolution or modification of public policy and laws. Areas of such public policy include: Funding of infrastructure and rate-setting (streets, water-supplies, sewers, and parks) Functional plans such as for land use, transportation, and water resources Growth management and/or comprehensive planning

Nishan Wimalachandra MABE, MAFE W: www.nishanw.org E: nishan@consultant.com M: 0773 236 237

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But strategic planning can occur in a wide variety of activities from election campaigns to athletic competitions, as well as in strategic games such as chess. This article looks at strategic planning in a generic way so its content can apply to any of the above areas. An effective strategy will: Have the capability to obtain the desired objective Fit well both with the external environment and with an organization's resources and core competencies - it should appear feasible and appropriate Have the capability of providing an organization with a sustainable competitive advantage - ideally through uniqueness and sustainability Prove dynamic, flexible, and able to adapt to changing situations Suffice on its own - specifically providing value or favorable outcomes without the need for cross-subsidization

Vision Vision is a short, succinct, and inspiring statement of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms. Vision refers to the category of intentions that are broad, all-intrusive and forward-thinking. It is the image that a business must have of its goals before it sets out to reach them. It describes aspirations for the future, without specifying the means that will be used to achieve those desired ends. The corporate success depends on the vision articulated by the chief executive or the top management. For a vision to have any impact of the employees of an organization it has to be conveyed in a dramatic and enduring way. The most effective visions are those that inspire, usually asking employees for the best, the most or the greatest. Make sure you keep stretch in your vision, communicate it constantly, and keep linking the events of today to your vision, underscoring the relationship between the two. Warren Bennis, a noted writer on leadership, says: "To choose a direction, an executive must have developed a mental image of the possible and desirable future state of the organization. This image, which we call a vision, may be as vague as a dream or as precise as a goal or a mission statement." At General Electric (GE) the vision is 'We bring good things to life'. The Ford Motor Company vision is 'to become the world's leading Consumer Company for automotive products and services'. Mission Statement A mission statement is an organization's vision translated into written form. It makes concrete the leader's view of the direction and purpose of the organization. For many corporate leaders it is a vital element in any attempt to motivate employees and to give them a sense of priorities. A mission statement should be a short and concise statement of goals and priorities. In turn, goals are specific objectives that relate to specific time periods and are stated in terms of facts. The primary goal of any business is to increase stakeholder value. The most important stakeholders are shareholders who own the business, employees who work for the business, and clients or customers who purchase products and/or services from the business.

Nishan Wimalachandra MABE, MAFE W: www.nishanw.org E: nishan@consultant.com M: 0773 236 237

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Mission statements and vision statements Organizations sometimes summarize goals and objectives into a mission statement and / or a vision statement: A Definition of Vision in a dictionary: 'An Image of the future we seek to create'. A vision statement describes in graphic terms where the goal-setters want to see themselves in the future. It may describe how they see events unfolding over 10 or 20 years if everything goes exactly as hoped. A definition of Mission in a dictionary: purpose, reason for being

Many people mistake vision statement for mission statement. They are fundamentally different. Mission statement defines the purpose or broader goal for being in the existence or in the business. It serves as a guide in times of uncertainty, vagueness. It is like guiding light. It has no time frame. The mission can remain same for decades if crafted correctly. While vision is more specific in terms of objective and time frame of its achievement. Vision is related to some form of achievement if successful. For example, "We help transport goods and people efficiently and cost effectively without damaging environment" is a mission statement. Ford's brief but powerful slogan, "Quality is Job 1" could count as a mission statement. While "We will be one amongst the top three transporters of goods and people in North America by 2010" is a vision statement. It is very concrete and unambiguous goal. To make mission statement effective it needs to be aligned with the prevailing culture in that organization. Mission and Values go hand in hand. Lofty mission statement means nothing if it is not in congruent with the values practiced by the organization. Good example is Enron. A mission statement can resemble a vision statement in a few companies, but that can be a grave mistake. It can confuse the people. While mission statement helps inculcate values in employees, the vision statement has direct bearing on the bottomline and success of the organization. The vision statement can galvanize the people to achieve defined objectives even if they are stretch objectives provided the vision is SMART (Specific, Measurable, Achievable, Realistic and Time Bound). Mahatma Gandhi had a simple vision of getting rid of British rule in India and establish a vibrant democracy in India. He had a specific image of post British India in his mind and he talked of that image at every opportunity and to every one who was willing to listen. The effect of such a powerful vision and articulation of this powerful vision in a simple to understand language was dramatic in the history of India. He and his followers defeated British without using any weapons or any violance. Their mission statement was not to use any violence and to love even the enemy. The 'Satyagraha' was not targetted towards the British people but to unjust, unlawful British imperial rule on India. They could come up with different strategies to achieve their vision while remaining loyal to their mission statement. So the mission and vision both served as a guide. Nelson Mandela used the same tactics in South Africa later. These two examples should be enough to demonstrate the profound impact a powerful vision can have on entire mass of humanity or even on entire generation. Powerful vision statements are very important for any organization to succeed in today's world.

Nishan Wimalachandra MABE, MAFE W: www.nishanw.org E: nishan@consultant.com M: 0773 236 237

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Features of an effective vision statement may include: Clarity and lack of ambiguity Paint a vivid and clear picture, not ambiguous Describing a bright future (hope) Memorable and engaging expression Realistic aspirations, achievable Alignment with organizational values and culture, Rational Time bound if it talks of achieving any goal or objective

In order to become really effective, an organizational vision statement must (the theory states) become assimilated into the organization's culture. Leaders have the responsibility of communicating the vision regularly, creating narratives that illustrate the vision, acting as rolemodels by embodying the vision, creating short-term objectives compatible with the vision, and encouraging others to craft their own personal vision compatible with the organization's overall vision. Setting Goals The major outcome of strategic road mapping and strategic planning, after gathering all necessary information, is the setting of goals for the organization based on its vision and mission statement. A goal is a long-range aim for a specific period. It must be specific and realistic. Longrange goals set through strategic planning are translated into activities that will ensure reaching the goal through operational planning. Setting Objectives Setting objectives involves a continuous process of research and decision-making. Knowledge of yourself and your unit is a vital starting point in setting objectives. Strategic planning takes place at the highest levels; other managers are involved with operational planning. The first step in operational planning is defining objectives - the result expected by the end of the budget (or other designated) cycle. The objectives must be: be focused on a result, not an activity be consistent be specific be measurable be related to time be attainable

Nishan Wimalachandra MABE, MAFE W: www.nishanw.org E: nishan@consultant.com M: 0773 236 237

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Why strategic plans fail? In general, strategic plans can fail for two types of reasons: inappropriate strategy and poor implementation. Inappropriate strategies may arise due to: Failure to define end states (objectives) correctly Incomplete SWOT analysis with respect to the desired end state(s) Lack of creativity in identifying possible strategies Strategies incapable of obtaining the desired objective Poor fit between the external environment and organizational resources* infeasibility

Poor implementation of a strategy can happen due to: Over-estimation of resources and abilities Failure to co-ordinate Ineffective attempts to gain the support of others or resistance Under-estimation of time, personnel, or financial requirements Failure to follow the plan

What is Strategic management? It is the process of specifying an organization's objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. It is the highest level of managerial activity, usually performed by the company's Chief Executive Officer (CEO) and executive team. It provides overall direction to the whole enterprise. An organizations strategy must be appropriate for its resources, circumstances, and objectives. The process involves matching the companies' strategic advantages to the business environment the organization faces. One objective of an overall corporate strategy is to put the organization into a position to carry out its mission effectively and efficiently. A good corporate strategy should integrate an organizations goals, policies, and action sequences (tactics) into a cohesive whole. Strategic management can be seen as a combination of strategy formulation and strategy implementation. Strategy formulation involves: Doing a situation analysis: both internal and external; both micro-environmental and macro-environmental. Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives. These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.

This three-step strategy formation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. These three questions are the essence of strategic planning.

Nishan Wimalachandra MABE, MAFE W: www.nishanw.org E: nishan@consultant.com M: 0773 236 237

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Strategy implementation involves: Allocation of sufficient resources (financial, personnel, time, computer system support) Establishing a chain of command or some alternative structure (such as cross functional teams) Assigning responsibility of specific tasks or processes to specific individuals or groups It also involves managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary. When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.

Strategy formation and implementation is an on-going, never-ending, integrated process requiring continuous reassessment and reformation. Strategic management is dynamic. It involves a complex pattern of actions and reactions. It is partially planned and partially unplanned. Strategy is planned and emergent, dynamic, and interactive. Some people (such as Andy Grove at Intel) feel that there are critical points at which a strategy must take a new direction in order to be in step with a changing business environment. These critical points of change are called strategic inflection points. Strategic management operates on several time scales. Short term strategies involve planning and managing for the present. Long term strategies involve preparing for and preempting the future. Marketing strategist, Derek Abell (1993), has suggested that understanding this dual nature of strategic management is the least understood part of the process. He claims that balancing the temporal aspects of strategic planning requires the use of dual strategies simultaneously.

Corporate Strategy and Planning 7 June 2010 Q2. Analyzing and understanding organizations strategic capabilities is essential in developing effective corporate strategies. a). Evaluate the importance of assessing strategic capabilities when developing strategic plans. (10 marks) b). Critically assess the key steps in systematically analyzing an organizations capabilities for developing strategic plans. (15 marks) (Total 25 marks)

Strategy is an elaborate and systematic plan of action

Nishan Wimalachandra MABE, MAFE W: www.nishanw.org E: nishan@consultant.com M: 0773 236 237 Page 8

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