STRATEGIC MANAGEMENT:

AN INTRODUCTION

1. AN INTRODUCTION: WHAT IS
STRATEGY?

A DEFINITION OF STRATEGY
Strategy 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!

Attributes
Vitality, intelligence, empathy, magnetism
Singer /musician, songwriter but not outstanding

So, what are characteristics of her successful

strategy?
Simple, consistent long-term goals
Relentless drive for stardom

LADY GAGA: Strategy in Action!

Profound understanding of competitive
environment
Changing economics of music industry
Potential of social networking

Objective appraisal of resources

Awareness of limitations of own talent
Exploited capabilities & resources of support team
Awareness of emerging social trends

LADY GAGA: Strategy in Action!

Effective implementation
Developed & promoted her celebrity image
Exploited changing digital / social networking
Focused on building empathy with target audience
Built 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 future
Its purposes and ambitions ie Vision
Its resources
How it reacts with the world around it
+ adding value
Long-term horizon
The larger view strategy not tactics
Key programmes

What, where, how, who, when

WHY DOES STRATEGY MATTER?

A changing world with growing interdependence between nations and between
companies be pro-active
Its about the lifeblood of the business the
fundamental issues;
Survival means maximising value added

Sustaining competitive advantage

Integrates all company functions (disciplines)

SOME DEFINITIONS

SOSTAC MODEL (just one of many models)

Situation analysis
Objectives
Strategy
Tactics
Action
Control

Where the company is now

Where it wants to go
How it is going to get there
The means of getting there
Making it happen
Reviewing & adjusting to
ensure success

SOME CHARACTERISTICS OF
STRATEGY?
Strategy is not the same as tactics
Strategy is the overall planto deploy resources
to achieve a favourable position
Tactics are specific moves /actions that contribute
to the achievement of the (bigger) strategy

Strategies:
Are important, the bigger picture
Involve significant resources
Not easily reversed

LEVELS OF STRATEGY
Corporate strategies
Strategies 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 Unit

part of the overall business for which strategies can
be developed independently of the rest of the
business (eg. BMEC is an SBU)

Functional
Depends 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 PROFITABILITY
Survival requires:
Return on Capital Employed (ROC) > Cost of Capital
2 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

STRATEGY
Corporate strategy
Where the firm competes
Scope of firm in terms of industries & markets in
which it competes
Big decisions:

Diversification (new products and markets)

Vertical integration (expanding the range of activities)
Acquisitions
Univ. of Sussex had
strategies to:
New ventures
Entry
Start Business studies
Exit Estates Management
Or maybe SBU
Exit

CORPORATE and BUSINESS

STRATEGY
Business strategy
How the firm competes within a particular industry
or market
To 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 example
Where?
Product /market scope (industry sectors)
Soft drinks industry
Supplies concentrate
Bottles own brand & third party brands (eg Schweppes)

Geographic scope
World-wide (key markets: US 27%, Mexico, Brazil,
Japan, China)

Vertical scope
Product development, brand management, concentrate
manufacture / distribution
Production & distribution of drinks

A theoretical diversion
Notice that we analysed:
Products & markets
Geographic scope

We will return to this when we use Ansoffs

matrix
We 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 example

How? Competing in the present
Differentiation
Seeks market leadership through mass marketing
Close relationships with leading bottlers

How? Preparing for the future

Vision (what it seeks to become): to refresh the
world
Mission (the overall purpose):
3-4% long term volume growth
5-6% revenue growth
6-8% Operating Profit

Coca-Cola as an example, continued

Achieved by:

Growing sales of still drinks

Exploiting growth opportunities in emerging markets
Accelerating innovation
Building core capabilities

Note that the above are STRATEGIES (ie about

the big picture)

SO, MORE GENERALLY

DESCRIBING A FIRMS STRATEGY
Competing in the present
Where are we competing?
Product /market scope
Geographic scope
Vertical scope

How are we competing? What is the basis of our

competitive advantage?
Low cost?
Differentiation? (cf typically when competitive
intensity is high)

DESCRIBING A FIRMS STRATEGY

Preparing for the future
What do we want to become?
Vision statement

What do we want to achieve?

Mission statement
Our performance goals (usually specific)

How will we get there?

Capital Expenditure
- Balance Sheet, not P&L

Development guidelines
Priorities for CAPEX, R&D
Growth modes: organic, M&A, alliances

4. STRATEGIC PLANNING:
A Consultants Model

STRATEGIC PLANNING: A Model

3 core stages
Strategic analysis
Profiling the business
External & internal environment
Organisational purpose
Competitive environment

Strategy development
Generation of strategic options
Evaluation & ranking of options
Choice of strategy

(Strategy) implementation

STRATEGIC ANALYSIS:
PROFILING THE BUSINESS
Description of the business

Mission statement & broad description

Customer analysis
Geographic analysis
Product analysis
Key capabilities & resources
Production processes
Finance, people, buildings, markets, distributionother functional C &
R
Constraints on capacity & expansion

Outline organisational chart

Sales & Gross Profit analysis

Strategic 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 ENVIRONMENT

3 layers of analysis:
External environment facing all firms
Competitive environment
The company itself