BS L09 Defining Strategies

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    DEFINING

    STRATEGIES

    Prof.Dr.Dr.Dr.H.C. Cons tant in Brat ianu

    Facul ty of Business A dm inis t rat ion

    Academy of Econom ic Studies

    Bucharest, Romania

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    MEANING

    STRATEGY is a concept taken from the field of wars. In the ancient Greek city-states STRATEGOS had the

    meaning of a general who lead the army against its

    enemies. He was thinking HOW to lead his army on

    the battle field in order TO WIN.

    The purpose of any strategy was to win the victory

    by destroying the enemies.

    Thus, a strategy is about a future event, in

    conditions of uncertainty and it has the purpose of

    achieving a vital objective: destroying the enemies.

    Thinking the strategy and applying it on the battle

    field are two different sequences.

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    Sun Tzu - The art of war

    Conquerors estimate in their temple before the warbegins. They consider everything. The defeated also

    estimate before the war, but they do not consider

    everything. Estimating completely creates victory.

    Estimating incompletely causes failures.

    A general who wins all his battles by destroying other

    armies is not the ultimate warrior. The ultimate warrior

    is one who wins the war by forcing the enemy to

    surrender without fighting any battles.

    The best military strategy, then, is to use superior

    positioning. After that, use diplomacy. After that, use

    military force as a threat. Only after all else has failed,

    attack your enemy.

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    Sun Tzu - The art of war

    Ancient great warriors first made themselves invincible.Then, they awaited the enemys moment of

    vulnerability. Not to be conquered depends on oneself;

    to conquer depends on the actions of the enemy.

    A great general establishes his position where he

    cannot be defeated. He misses no opportunity to

    exploit the weakness of his enemy. A winning general

    creates the conditions of victory beginning the war.

    A skillful warrior moves his opponent; he does not

    allow the opponent to move him. One is strong if hecauses the enemy to respond to him; one is weak if one

    must respond to the enemy.

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    Sun Tzu - The art of war

    1. Learn to fight2. Show the way

    3. Do it right

    4. Know the facts

    5. Expect the worst

    6. Seize the day

    7. Burn the bridges

    8. Do it better

    9. Pull together

    10.Keep them guessing

    The 10

    principles

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    What is strategy and does i t matter? 2nd

    Edition, Thomson Learning, London, 2001.

    Richard Whit t ington

    Professor o f Strategic Management

    Sad Business Schoo l

    Oxford Universi ty, UK.

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    Profit-

    maximizing

    Plural

    Outcomes

    EmergentDeliberate

    Processes

    Classical Evolutionary

    Systemic Processual

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    Classical(Deliberate, Profit-maximizing)

    It is the approach you will find in books. Strategy is considered a rational process based on the

    economic theory that the purpose of any business is

    profit-maximization for increasing the value of

    shareholders. Strategy is a rational process of deliberate analysis

    designed to maximize the long-term advantage.

    The hypothesis is that future can be anticipated and

    predicted, such that a company can plan for the future. The main approach of this classical strategy is

    planning.

    Strategic planning means planning for achieving long-

    term objectives.

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    The determ ination o f the long run goals and

    ob ject ives of an enterpr ise and the adopt ion of

    courses of act ion and the allocat ion of resourcesnecessary for carry ing ou t these goals.

    Alfred D. Chand ler

    Professor Emeritus,

    Harvard Un iversity, USA

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    Alfred Sloan J r.

    Former President and

    CEO of General Moto rs,USA

    The strategic aim of any business is to earn a

    return on capital, and if in any part icu lar case the

    return in the long run is not satisfactory, the

    def ic iency should be corrected or the act iv i ty

    abandoned.

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    Classical(Deliberate, Profit-maximizing)

    Alfred Sloan defined the fundamental strategic problem

    as positioning the firm in those markets in which

    maximum profits could be earned.

    More recently, Michael Porter developed the theory of

    competitive advantage, focusing on the market.

    Competitive advantage does not maximize the profit in

    an absolute way, but in a relative way. That means that

    if you have a certain competitive advantage with respect

    to other competitors, you will have a higher profit than

    those competitors.

    For classical approach to strategy, profitability is the

    supreme goal of business, and rational planning is the

    means to achieve it.

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    Michael Porter

    Professor o f Strategic

    Management,Harvard Un iversity, USA

    Compet it ive strategy aim s to establ ish a prof i table

    and su stainable posi t ion against the forc es that

    determine indu stry com peti t ion.

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    Bruce HendersonFound er of the Boston

    Cons ult ing Group (BCG),

    USA

    Class ical econom ic theor ies of compet it ion are so

    simpl ist ic and s ter i le that they have been less

    contr ibut ion s to understanding than ob stacles. Thesetheories po stu late rat ional, self-interested behaviou r by

    indiv idu als who interact through m arket exchangers in a

    f ixed and s tat ic legal system o f property and con tracts.

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    Evolutionary(Emergent, Profit-maximization)

    Evolutionary approaches to strategy are less

    confident about top managements ability to plan

    and to act rationally.

    Rather than relying on managers, they expect

    markets to secure profit maximization. That can be

    done by competitive processes based on natural

    selection.

    Planning does not matter since only the fittest

    survive and performs. Economic models areconstructed by analogy with the natural law of the

    jungle (the strong animal eats the weak animal).

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    Evolutionary(Emergent, Profit-maximization)

    Some authors proposed the biological principle ofnatural selection to develop an evolutionary theory of

    the firm that downgraded managerial strategy and

    emphasized environmental fit.

    Markets, not managers, choose the prevailingstrategies within a particular environment.

    For evolutionary strategy the message is clear:

    Differentiate or die. Also, it is important to focus on

    reducing costs and increasing efficiency.

    Many theorists of evolutionary strategy emphasize the

    limited capacity of organizations to anticipate and

    respond purposively to changes in the business

    environment.

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    Henry Min tzberg

    Professor o f Strategic

    Management, McGil lUniv ersity, Canada

    A pattern in a stream of decis ion s.

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    Processual(Emergent, Plural)

    Processual approaches to strategy generally share

    the evolutionary scepticism about rational strategy

    making, but are less confident about markets

    ensuring profit-maximization outcomes.

    The best processual advise is not to strive after the

    unattainable ideal of rational fluid of action, but to

    accept and work with the world as it is.

    Processual strategy is based on the awareness of

    the limits of human cognition and on need of thepolitical compromise in organization, not on profit-

    maximization computation.

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    Processual(Emergent, Plural)

    The notion of emergence in strategy finds increasing

    support in chaos theory, the new science of complex

    adaptive systems. This new science is concerned with

    how order tends naturally to spring from chaos. It

    doesnt take precise planning from the top, only a fewsimple rules guiding action from the bottom.

    However attractive market opportunities might be, entry

    strategies will fail in the implementation if the firm lacks

    the requisite skills and resources internally. What matters in strategy is the long-term construction

    and consolidation of distinctive internal competences.

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    J . C. Spender

    I def ine strategizing as the judgment or imaginat ive

    response to what is NOT known, to the su rpr is ing ,

    unexpected, incom plete, or i l log ical nature of whatarises throu gh our pract ice.

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    Systemic(Deliberate, Plural)

    Systemic theorists do have faith in the capacity oforganizations to plan for forward and to act effectively

    within their environments.

    Systemic theorists consider that strategies depend on

    the specific context, that there are no general validstrategies.

    Systemic theorists propose, therefore, that companies

    differ according to the social and economic systems in

    which they are embedded. They are not all perfect

    profit-maximization, like in Classical theory.

    That means that there are differences between countries

    due to their different social, political and cultural

    environments.

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    Systemic(Deliberate, Plural)

    In the USA and UK culture strongly emphasizes the

    individualistic entrepreneurship and corporate

    governance, without any support from the state.

    In Germany and in Japan, state plays an important role

    in developing policies and strategies for the economic

    development that help companies in their own

    strategies.

    On the other hand, in countries with a strong Muslim

    culture, future events appear as acts of God and thatindividuals are powerless in designing their own

    strategies. That is a deterministic culture that reduce

    uncertainty, but also the liberty of people of thinking for

    the future in terms of their own interests.

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    Iku j i ro Nonaka

    Strategy is the art of gett ing job s done. Engaging in

    strategy allows peop le to s hare a sense of pu rpose,attaches meaning to their actions, pulls everyones

    effor ts in the chosen direct ion against al l odds.

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    CREATE SCENARIOS

    A scenario is a vivid representation of what you think the future

    environment will be down the road.

    It is like a story of both events and outcomes that you can anticipate.

    It is not just a single forecast, but a range of reasonable or plausible

    outcomes that could unfold in pursuit of your strategic target.

    Scenarios are important because they channel your thought process

    with regard to opportunities and hazards into a plan.

    Scenarios allow you to assess the uncertainties, complexities, andunpredictability of the future. The ability to look ahead in the face of

    uncertainty and act on your insights and experience allows you to be

    prepared for whatever really happens, whether it is positive or

    negative.

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    Profit-

    maximizing

    Plural

    Outcomes

    EmergentDeliberate

    Processes

    Classical Evolutionary

    Systemic Processual

    Strategy

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    Time

    Uncertainty

    Goal

    Designed Strategy

    Emergent

    Strategy

    Cultural Context