Organizational Strategy

Strategy is…..
• Derived from the word Stratagem
• …quoted in the Concise Oxford Dictionary as
meaning;
1. the art of war.
2. the management of an army or armies in a
campaign.
3. the art of moving troops,ships, aircraft, etc. into
favourable positions (TACTICS).
• a plan of action or policy in business or politics
the way in which an organization uses its
knowledge and other resources to achieve its
economic purpose.
 STRATEGY
• The specific pattern of decisions and actions that
managers take to use core competences to
achieve a competitive advantage and outperform
competitors.
• The determination of the basic long-term goals
and objectives of an enterprise, and the adoption
of courses of action and the allocation of courses
of action and the allocation of resources
necessary for carrying out these goals.
• Increase value for stakeholders, customers
• Can also be called as Planning Mode or
Evolutionary mode
 The Nature Of Strategy

Range Of Strategic Format

• Defined • Vague
• Planned • Loose
• Proactive • Reactive
• With detail • No detail
 The Purpose of Strategy
• Provides direction
• Provides coherence
• Allows day-to-day processes to be designed
• Should give direction for ‘one off’ procedures

‘The essence of strategy is coping with

competition.
The corporate strategist’s goal is to find a position
in the market where his or her company can
best defend itself against the collective industry
forces or can influence them in its favour.’
Michael E. Porter
 The Nature of Strategic Decisions
• Magnitude
– BIG DECISIONS
• Time-scale
– Medium to long term
• Commitment
– Locks in resources, locks out altern
 Why Some Organizations Fail

• Too much emphasis on short-term financial

performance
• Failing to take advantage of strengths and
opportunities
• Neglecting operations strategy
• Failing to recognize competitive threats

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 Why Some Organizations Fail
• Too much emphasis in product and service
design and not enough on improvement
• Neglecting investments in capital and human
resources
• Failing to establish good internal
communications
• Failing to consider customer wants and
needs

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 Mission/Strategy/Tactics

Mission Strategy Tactics

How does mission, strategies and tactics relate to

decision making and distinctive competencies?

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 Strategy
• Mission
– The reason for existence for an organization
• Mission Statement
– States the purpose of an organization
• Goals
– Provide detail and scope of mission
• Strategies
– Plans for achieving organizational goals
• Tactics
– The methods and actions taken to accomplish strategies

What is Mercer’s Mission Statement and Goals?

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 Planning and Decision Making
Figure 2.1

Mission

Goals

Organizational Strategies

Functional Goals

Finance Marketing Operations

Strategies Strategies Strategies

Tactics Tactics Tactics

Operating Operating Operating

procedures procedures procedures
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 Strategy Example
Example 1

Rita is a high school student. She would like to have a

career in business, have a good job, and earn enough
income to live comfortably
Mission: Live a good life
• Goal: Successful career, good income
• Strategy: Obtain a college education
• Tactics: Select a college and a major
• Operations: Register, buy books, take
courses, study, graduate, get job

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 Examples of Operations Strategies
Table 2.2
Price Low Cost U.S. first-class postage
Motel-6, Red Roof Inns

Quality High-performance design Sony TV

or high quality Consistent Lexus, Cadillac
quality Pepsi, Kodak, Motorola

Time Rapid delivery Express Mail, Fedex,

On-time delivery One-hour photo, UPS

Flexibility Variety Burger King

Volume Supermarkets

Service Superior customer Disneyland

service Nordstroms

Location Convenience Banks, ATMs

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 Strategy Formulation
• Distinctive competencies
• Environmental scanning
• SWOT
• Order qualifiers
• Order winners

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 Strategy Formulation

• Order qualifiers
– Characteristics that customers perceive as
minimum standards of acceptability to be
considered as a potential purchase
• Order winners
– Characteristics of an organization’s goods or
services that cause it to be perceived as better
than the competition

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 Strategy Formulation:
Key External Factors
• Economic conditions
• Political conditions
• Legal environment
• Technology
• Competition
• Markets

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 Strategy Formulation:
Key Internal Factors
• Human Resources
• Facilities and equipment
• Financial resources
• Customers
• Products and services
• Technology
• Suppliers

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 Influences on strategic choices
• Organizational Purpose
• The Macro-Environment
• The Industry Environment
• Competitive Positioning
• Resources
• The Value Chain
• Organizational Structure
• Organizational Culture
 Organizational Purpose
Corporate Governance
Business Ethics• Which
• Whom should the
purposes
organization serve?
should be prioritised?
• How should purposes be
• Why?
determined?

Organizational Purposes
• Vision / Mission
• Objectives

Cultural Context
Stakeholders
• Which purposes are
• Whom does the
prioritised?
organization serve?
• Why?
Levels of Organizational Strategy

Corporate Corporate Head Office

Strategy

Division A Division B
Business
Strategy R&D R&D

Human Resources Human Resources

Functional Finance Finance

Strategy Production Production

Marketing/Sales Marketing/Sales
Brief Overview of Corporate Strategy

• Those strategies concerned with the

broad and long-term questions of what
business(es) the organization is in and
what it wants to do with those
businesses
Key Questions of Corporate/Firm-level
Strategies
1. What businesses should the
corporation/enterprise be in?

2. How should the corporate/G.O. office

manage the array of business units
(GBU’s/SBU’s/ Wholly owed subsidiaries)

Corporate Strategy is what makes the corporate whole

add up to more than the sum of its business unit parts
Corporate (and International) Strategies

• Three directions for corporate strategy

– Growth
• M&A , JV, and SA (external growth)
• International (internal growth)
– Stability (internal growth)
– Renewal (internal growth)
• Retrenchment
• Turnaround
• Increase the four capabilities via core
competencies
 The Macro-Environment
• Political- Taxation Policy, Foreign Trade
Regulations
• Economic- Interest Rates, Inflation,
Unemployment
• Sociocultural- Attitudes to work and leisure,
Income distribution, Levels of education
• Technological- New discoveries, developments,
Spending on research
• Environmental- Emission levels, Planning
regulations
• Legal -Monopolies Commission, Employment Law
 The Industry Environment
Threat of
new
entrants

Bargaining
Bargaining pThe Industry Jockeying Bargaining
power of for position amongst power of
suppliers current competitors customer
customer

Threat of
substitute
products or
 Competitive Positioning
• Market segmentation
• Product differentiator
• 􀂄 The low cost leader
• 􀂄 Nicher
 Resources
• 􀂄 Capabilities and competencies
• 􀂄 Learning and knowledge
• 􀂄 Analysing competitive advantage
 Organizational Structure
• Structure types
• Organizational design
• Communication
 Organizational Culture
• Leadership behaviour
• 􀂄 Reward systems
• 􀂄 Language
 Types of Strategy
• Competitive Advantage – something which gives
the organisation some advantage over its rivals
• Cost advantage – A strategy to seek out and
secure a cost advantage
of some kind - lower average costs, lower labour
costs, etc.
 Types of Strategy
• Market Dominance:
• Achieved through:
– Internal growth
– Acquisitions – mergers and takeovers

• New product development: to keep ahead of

rivals and set the pace
• Contraction/Expansion – focus on what you are
good at (core competencies) or seek to expand into a
range of markets?
 Types of Strategy
• Price Leadership – through dominating the
industry – others follow your price lead
• Global – seeking to expand
global operations
• Reengineering – thinking outside the box –
looking at news ways of doing things to leverage
the organisation’s performance
 Types of Strategy
– Internal business level strategies –
• Downsizing – selling off unwanted parts of the
business – similar
to contraction
• Delayering – flattening the management
structure, removing bureaucracy, speed up
decision making
• Restructuring – complete re-think
of the way the business is organised
 THE STRATEGY IMPERATIVE
Environmental
Factors
and
Organizational
capabilities
Strategy

Structure
 Four Basic Strategies
High
Global Transnational
Strategy Strategy

Cost
pressures
International Multi domestic
Strategy Strategy
Low

Low High
Pressures for local responsiveness
Strategic Choices

International Global
create value by increase profitability
transferring skills to through cost reductions
local markets where from experience curve
skills are not present. effects and location
economies.
Multidomestic
oriented toward Transnational
achieving maximum Exploit experienced
local responsiveness. based cost and location
economies, transfer core
competencies within the
firm, and pay attention
to local responsiveness
needs.
 The Advantages and Disadvantages of
the Four Strategies

Strategy Advantages Disadvantages

Global Exploit experience curve Lack of local
effects responsiveness
Exploit location Lack of
International economies local responsiveness
Transfer distinctive Inability to realize
competencies to location economies
Failure to exploit
Foreign Markets
experience curve
effects
 The Advantages and Disadvantages of
the Four Strategies
Strategy Advantages Disadvantages
Multi-domesticCustomize product offerings Inability to realize location
and marketing in accordance economies
with local responsiveness Failure to exploit
experience curve effects
Failure to transfer
distinctive competencies
to foreign markets
Transnational Exploit experience curve Difficult to implement
effects due to organizational
Exploit location economies problems
Customize product offerings
and marketing in accordance
with local responsiveness
Reap benefits of global learning
Strategy and Centralization

Global
Multi-domestic
Centralize
Decentralize

International
Transnational
Centralize for
Both Centralize
core competencies
And Decentralize
Decentralize for
operating decisions