BUSINESS STRATEGYDR DOUGLAS NISBET

PGDBA 101 Strategic Leadership and Management Skills

Learning Objectives

Following study of this topic you should understand the following:•Strategy: decisions that add value in the long run •Reasons for studying managing strategy•How managers develop strategies•Planning, learning and political views•Tools for external and internal analysis•Levels of strategy – corporate and business unit•Ways to deliver strategy

Strategic decisions

• What is to be achieved, for whom and how?• Decisions that commit substantial resources and

shape long-term future• Examples:

– P&G – changed focus form rich to poor economies– Nestlé – increased emphasis on healthy foods

• Not-for-profits (NFP) bodies also need strategies

What is Strategy?Strategy is about how people decide to organise major resources to enhance performance:•Typically the responsibility of senior management•Decisions are part of the formal planning process•Includes how to organise activities to add most value•Major decisions with long term implications

Strategy• Process

– Gathering information– Strategic Analysis– Strategy Formulation

• Content– What products? What markets? What resources?– Competitive Advantage

• Context– Type of organisation– External Environment (PESTEL)

Why study managing strategy?

Sets direction and scope of the enterprise, issues vary with setting, for example:

– MNCs – structure and control of global activities– SMEs – influence of founders, lack of capital– Operations – competitive advantage of products or

services– Innovative firms – speed of NPD and culture of

questioning and challenge– Public Sector – competing for resources to create

best value– Voluntary and NFP – ideology and funding

Perspectives on the strategy process

• Planning view– Prescriptive; belief that complexity requires

formalised approach• Learning view

– strategy is an emergent or adaptive process• Political view

– ‘bounded rationality’ recognises human limits– subjectivity influences behaviour– ‘satisficing’, incremental behaviour

A linear view

Figure 8.1 The planning view of strategy

An emergent view

Forms of strategySource: Mintzberg (1994a)

Making sense – external and internal analysis

Strategy matches external conditions and internal capabilities• External environment• Internal environment

– Aim for strategic capability by combining• Resources (tangible, intangible, unique?) AND• Competences – activities and processes that enable it to

use resources effectively– Core competences – those that others cannot imitate

SWOT analysis

• Draws out strategic implications

• Strengths,Weaknesses, Opportunities, Threats

• Internal S & W(compare with competition)

• External O & T (Five Forces and PESTEL)

Strengths

Opportunities Threats

Weaknesses

Making sense – value chain analysis

• Analysing value chain activities – Activities most critical in reducing cost or adding

value (e.g. quality)– Key cost or value drivers in the value chain

• Focus on linkages which most– Reduce cost– Enhance value– Discourage imitation

Identifying the opportunities

Identifying the organisation’s opportunities (Boddy, 2011)

Levels of strategy

Figure 8.7 Levels of strategy

Identifying mission as a basisfor goals and strategies

• Mission statements clarify principal activities, aims, values and stakeholders

• Weaknesses – Can be unrealistic– Management fails to develop wide belief in

the mission– Fail to recognise capabilities

The Strategy Cycle

Business unit strategies

• Cost leadership• Differentiation• Focus

• All need support of suitable functional strategies

Generic Strategy Links

Mass Focus

Cost Leader-ship

MRP Lean

Differentiation J ITECR

FMSAgile

Trade-off Paradigm

Capacity Fixed Costs Variable Costs

Process Labour Capital

Inventory Hold Make toorder

Quality Design Inspection

Operations performance

objectives

The impact of the product life cycle

Introduction Growth Maturity DeclineStage

Low Rapid growth High and level DecliningVolume

Innovators Early adopters Bulk of market LaggardsCustomers

Few/noneIncreasing

number Stable numberDeclining numberCompetitors

High customization

Increasingly standardised

Emerging dominant types

Commodity standardization

Variety of product or

service

Performance or novelty

Low price, dependable

supplyLow priceLikely order

winners

Quality, product range

Price, product range

Product range, quality

Dependable supply

Likely order qualifiers

FlexibilityQuality

Speed Dependability

Quality

CostDependability

Cost

Availability ofquality products

and services

OHP15

The operation’s strategic performance objectives

The activities of operations managers

Input Output

Transformed resources

MaterialsInformationCustomers

Transforming resources

FacilitiesStaff

Design

Planning & control

Improvement

Operations strategy

The operation’s competitive role and position

OHP7

Links: Corporate>Ops: Strategy Implementation

• CORPORATE• Structures

• Resource Plans

• Managing Change

• OPERATIONS• Global Manufacturing• Global Logistics• Technology• Global Structures• Quality Improvement• Supply Chain

Imporvement

Making things happen – deciding how to deliver strategy

• Internal development– Expand or redeploy resources – retains control

(HMV)• Merger and acquisition

– Allow rapid entry into new areas, though difficultyof merging cultures (Google buying up smallplayers for expertise – also HMV bought MAMA)

• Joint developments and alliances– Limits risk, allows learning (GSK’s drug strategy)

Ansoff MatrixAnsoff Matrix

Making revisions – implementing and evaluating

• Implementing turns strategic plan into action – which may demonstrate opposition

• Financial analysts routinely compare achievements with plans, and are critical if they vary

• Ideally, evaluation leads to learning

Integrating themes

Sustainable performanceSustainable environmental performance only commercially sustainable if part of strategy

Governance and controlEvidence of directors now taking more responsibility for strategy, as well as for narrow governance responsibilities

InternationalisationInternational strategies often fail as directors underestimate complexity of working overseas

Conclusion

• Adding value depends on strategy• Process, Content and Context• Requires External and Internal Analysis• Making Choices –Strategic Direction (Porter’s 5

Forces, Porters Generic Strategies, Ansoff Matrix) • Implementing Strategy – internal development,

mergers/acquisitions, joint developmnet/alliances