Strategy and Strategic Management (PowerPoint) by RushenChahal


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									Strategy and Strategic

Prof. Rushen Chahal

                Prof. Rushen Chahal
Definitions of Strategy

   "Strategy is the direction and scope
    of an organization over the long-
    term: which achieves advantage for
    the organization through its
    configuration of resources within a
    challenging environment, to meet
    the needs of markets and to fulfill
    stakeholder expectations".
                  Prof. Rushen Chahal
In other words, strategy is
   Where is the business trying to get to in the long-term?
   Which markets should the business compete in and what
    types of activities are involved in such markets?
    (markets; scope)
   How can the business perform better than the
    competition in those markets? (advantage)
   What resources (skills, assets, finance, relationships,
    technical competence, and facilities) are required in order
    to be able to compete? (resources)
   What external environmental factors affect the
    businesses’ ability to compete? (environment)
   What are the values and expectations of those who have
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    power in and around the business? (stakeholders)
 Definitions of Strategy

‘A strategy is a unified, comprehensive and
  integrated plan that relates the strategic
  advantages of the firm to the challenges of the
  environment and that is designed to ensure
  that the basic objectives of the enterprise are
  achieved through proper execution by the

Gluek & Jaunch
                       Prof. Rushen Chahal
 Definitions of Strategy

‘That activity which specifies for a
  business a course of action that is
  designed to achieve desired long-term
  objectives in the light of all major
  external and internal factors, present and

General Electric Company
                     Prof. Rushen Chahal
Strategic Process

• Strategic Goals    • What is our mission ?
• Strategic Analysis • What is happening to our
                       business ?
• Strategic Choice   • What do we do about it ?

• Strategic           • How do we do it ?
                    Prof. Rushen Chahal
Sources of Strategy:
   Planned Strategy (Deliberate or
    Prescriptive Strategy)
   Competitive Positioning Strategy
   Core-competence based Strategy
   Emergent (Learning) Strategy
   Knowledge-based Strategy

                   Prof. Rushen Chahal
Planned (Prescriptive)
   Focus is on Long Term planning that
    tries to “achieve a fit between the
    organization strategy and the
    environment in which it operates”
   Weakness- in today’s quickly changing
    environment, it may be unrealistic

                   Prof. Rushen Chahal
Competitive Positioning
   Popular in the 1980’s
   Based on the work of Porter
   Focused on a strategic fit between the
    organization and it’s environment to
    gain competitive advantage
   An “outside in” strategy
   Useful strategy tools: Porter’s 5 forces
    analysis and generic strategy
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Emergent (Learning)
   Approach based on the weaknesses of
    the Planned (Prescriptive) Strategy
   In a rapidly changing environment,
    organizations must incrementally
    change and adopt strategy based on
    organizational learning

                  Prof. Rushen Chahal
Core Competence
   From the 1990’s
   Competitive advantage comes from an
    organization’s core competences or
    distinctive capabilities
   Unlike the competitive positioning approach,
    this approach is inside out
   Organizations should focus on develop their
    distinctive resources, capabilities and
    competences to take advantage of their
                     Prof. Rushen Chahal
Learning and Knowledge
Based Strategy
   An approach that uses all parts of an
    organization (resources, capabilities,
    core competences and activities) and
    its interactions with the environment
   Belief that competitive advantage
    depends on the development of new
    and superior knowledge through a
    process of organizational learning
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                                   Strategy Development
         Core Competence                                              Knowledge
         Generic Strategy                                             Strategic Direction


External         Strategy
                                                      Strategy Evaluation
Competitive      Learning
Environment                                                               Suitability


                                 Strategic Change
Products                        and Implementation
                                                             Resource Allocation
               Cultural, structural, systemicRushen Chahal
                                          Prof.              Competence Building
               Change and leadership
                                                             Functional Strategies
Different Levels of
   At different levels of an organization,
    strategy decisions differ in:

    time horizon
    degree of certainty
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Different Levels of
   Strategic – concerned with getting a
    sustainable competitive advantage and
    involves setting long term goals and
   Tactical – Focuses on how
    organizational goals are met and how
    strategies are done
   Operational – Focuses on short-term
    objectives and day-to-day
    management    Prof. Rushen Chahal
Congruence (“fit”)

   Successful strategies will have
    congruence, or “fit”, between all 3
   In other words, once strategic level
    objectives are set, tactical and
    operational level strategies must
    “agree” in order to achieve the overall
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Where strategy is carried
   Network strategy
   Corporate strategy
   Business strategy
   Functional strategy

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Setting Strategy

Missions, Goals & Objectives

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    Missions & Goals of the Firm

 Stakeholder Theory
 Mission Statements &
 Objectives

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Stakeholders of a
Inside Claimants Outside Claimants
                              Customers
   Executives                Suppliers
   Board of                  Governments
    Directors                 Competitors
   Shareholders              Local Communities
   Employees                 General Public
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“The moral obligation of business is
    to increase its profits”

              - Milton Friedman

                 Prof. Rushen Chahal
Stockholder Theory

   Businesses must maximize profits
   Stockholders are the most important
    concern of an organization
   Failure to do so will reduce business
    performance and negatively affect
    other stakeholders

                   Prof. Rushen Chahal
Stakeholder Theory

   Shareholders (stockholders) are NOT
    the sole concern of organizations
   Other groups are affected and should
    be considered

                   Prof. Rushen Chahal
Stakeholder Mapping
     Stakeholder Mapping is an important part
    of making strategy. It consists of making
    judgements on three issues:
   How likely each stakeholder group is to
    impress its expectations on the firm.
   Whether they have the means to do so -
    power of the stakeholder group.
   The likely impact that stakeholder
    expectations will have on future strategies
                      Prof. Rushen Chahal
   Stakeholder Mapping -
   Power/Dynamism Matrix
                 High                                   Low

        Low    A                               B
               Few Problems                    Unpredictable but
               C                               D
               Powerful but                    Greatest Danger or
        High   Predictable                     Opportunities
                         Prof. Rushen Chahal
 Stakeholder Mapping -
 Power/Interest Matrix

                       LEVEL OF INTEREST
                 Low                                   High

        Low    A                              B
               Minimal Effort                 Keep Informed
               C                              D
               Keep Satisfied                 Key Players
                        Prof. Rushen Chahal
   Mission, Stakeholders &

Inside Claimants                                   Outside Claimants

                    Mission Statement

                   Strategy Formulation
                             Prof. Rushen Chahal
        The Most Successful Organizations Analyze
        and Manage Their Stakeholders Well
Stakeholder Analysis
   Identifying and Prioritizing
    Key Stakeholders
   Assessing Their Needs
   Collecting Ideas From
   Integrating this Knowledge
    into the Strategic
    Management Process
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    Mission Statement & its

 Sense of Purpose & Aspiration
 Company Image

 Statement of Company Values,
  Culture and Ethics
 Role as a Guide for the Strategy
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Mission Statement
   Business Definition
   Major Goals of the
   Philosophies
   Guiding Principles
   Considerations of
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 Customer Groups                      Customer Needs

Who is being                                What is being
 satisfied ?                                 satisfied ?

         Definition of
         the Business

       How are Customer Needs
       being Satisfied ?

        Distinctive Competencies
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BMW Group worldwide mission statement is:
"To be the most successful premium manufacturer
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in the industry."
Example: BMW
   What is BMW Group strategy?

   Identifying potential and encouraging growth

   Knowing what we represent

   Recognising where our strengths lie and making the best use of
    every opportunity

   Following a clear strategy

   These are the philosophies that underpin BMW Group. They
    influence the company's structure and how decisions are made. The
    result is hopefully a success which sees that BMW Group continues in
    its strong position. From research through to sales, BMW Group is
    committed to the very highest in quality for all its products and
                                 Prof. Rushen Chahal
   Example: McDonalds

   "McDonald's vision is to be the world's best quick service
restaurant experience. Being the best means providing outstanding
quality, service, cleanliness and value, so that we make every
customer in every restaurant smile. To achieve our vision, we are
focused on three worldwide strategies:
Be the best employer for our people in each community around
the world,
Deliver operational excellence to our customers in each of our
restaurants, and
Achieve enduring profitable growth by expanding the brand and
leveraging the strengths of the McDonald's system through
    innovation and technology." Rushen Chahal
Discussion Questions
   What is strategy?
   What are the sources of strategy?
   How do the mission and values of the
    organization relate to strategy?
   Why are stakeholders important in strategy?
   What is BMW’s aspiration and purpose? It’s
    desired public image? Quality and service
   Which stakeholders do McDonalds consider
    in their mission?
                     Prof. Rushen Chahal

   Definition of Strategy
   Theories on Strategy
   Levels of Strategy
   Where strategy is made?
   Missions, goals and objectives
   Stakeholder influence

                   Prof. Rushen Chahal
For Next Week

   Find the mission statement of a real
    company. Write a one (1) page
    description of the business definition,
    major goals, and philosophy, and
    identify the stakeholders considered.
   Read Chapter 2, Business Strategy,

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