Understanding Strategic Management: Strategy, Scope, Capabilities, and Advantage, Apuntes de Negocios Internacionales

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STRATEGIC MANAGEMENT

Academic year 2015-2016 THEME 1: Introduction to Strategic

Management

Theme 1: Introduction to the strategic

process

The start of strategic management and strategicattitude

Strategy: concept and components

The strategic management process

Levels of strategy and strategic business units

References:

Dess, G.G.; Lumpkin, G.T. & Eisner, A.B. (2010):

Strategic management. Text

and cases, 5th. Edition, McGraw-Hill, NY. Chapter 1

Grant, R.M. (2010):

Contemporary Strategy Analysis, 7th. Edition, John Wiley

& Sons, Chichester. Chapter 1

Johnson, G.; Whittington, R.; Scholes, K.; Angwin, D. & Regnér, P. (2014):

Exploring strategy. Text & cases, 10th. Edition, Prentice Hall.Chapter 1

1.2. Strategy: concept and components

STRATEGY is the long-term direction of an organization

(Johnson et al., 2011: 3). Through the strategy, the firm is able to

achieve an advantage in a changing environment through the configuration of its resources and capabilities and, in so doing,

satisfy its stakeholders’ needs and expectations

‘the determination of the long-run goals and objectives of an

enterprise and the adoption of courses of action and the allocation of

resource necessary for carrying out these goals’

Alfred D. Chandler

‘Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value’

Michael Porter

‘a pattern in a stream of decisions’

Henry Mintzberg

1.2. Strategy: concept and components

STRATEGY components:

Activity scope

Distinctive capabilities (core competences)

Competitive advantage

Synergy

Activity scope

1.2. Strategy: concept and components

ACTIVITY: Product (technology + functions) + market (customers)

EXAMPLE: CONTAINER INDUSTRY

CUSTOMERS (markets)

TECHNOLOGY

FUNCTIONS (needs)

Contain the productProtect the productFacilitate commercialization

Manufacturersof alcoholicbeverages

Glass

Metal

Cardboard

Plastic

Manufacturersof soft drinks

Food industry

Pharmaceuticalindustry

1.2. Strategy: concept and components

Distinctive capabilities (core competences)

They

are

a

key

element

of

the

set

of

resources

and

capabilities,

current

and

potential,

that

a

company

owns

and

controls,

and

thus

a

key

driver

of

competitive

advantage

TANGIBLE

Physical resourcesFinancial resources

INTANGIBLE

PatentsHuman capitalReputation

Competitive

advantage

Core competences

CAPABILITIES

People’s skills and personal characteristicsOrganizational systems and processes

RESOURCES

1.2. Strategy: concept and components

Synergy

Fundamental characteristic of systems: the value of the systemas a whole is different than the added separate value of its parts

Function: improve management by coordinating - in a positivesynergistic way - the choice of activity scope, distinctivecapability development, and competitive advantage building

1.3. The strategic management process

Classic process of strategyformulation

Mission, Vision, Values

Aspirations

Environment

analysis

Opportunities and

threats

Internal analysis

Capabilities

Business goals

Analysis of the strategic gap

Currentstrategy

Strategic

analysis

1.3. The strategic management process

Classic process of strategyformulation

Mission, Vision, Values

Aspirations

Environment

analysis

Opportunities and

threats

Internal analysis

Capabilities

Business goals

Analysis of the strategic gap

Currentstrategy

Strategic

analysis

Search of potential strategies

Evaluation of alternative strategies

and choice of the strategy

Strategy

formulation

P&C

Systems

Strategy

implementation

Organizational

structure

Leadership

style

Organizational

culture

HRM

Practices

1.4. Levels of strategy and strategic business units

Aims at defining the relationship of

the company with the

environment, by specifying the activity scope and the distinctive

capabilities required

WHERE TO COMPETE

Corporate strategy

Strategic business unit 1Strategic business unit 2

R+D

Manufacturing

Marketing

HHRR

Finance

Strategic business unit 3

Diversified firm

1.4. Levels of strategy and strategic business units

Aims at defining the relationship of

the company with the

environment, by specifying the activity scope and the distinctive

capabilities required

WHERE TO COMPETE

Corporate strategy

Strategic business unit 1Strategic business unit 2

R+D

Manufacturing

Marketing

HHRR

Finance

Strategic business unit 3

Diversified firm

Business strategy

Aims at defining how to compete

and the distinctive capabilities

necessary to sustain an

advantageous position in each of

the businesses

HOW TO COMPETE

Aims at defining how to optimize

resources and capabilities withineach of the business functions in

order to deploy business and

corporate strategies

Functional / operational strategy