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Organizational Strategy

Nov 17, 2014



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 StrategyRange Of Strategic Format Defined Planned Proactive With detail Vague Loose Reactive 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 strategists 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


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


Mission/Strategy/TacticsMission Strategy Tactics

How does mission, strategies and tactics relate to decision making and distinctive competencies?


Strategy Mission

The reason for existence for an organization States the purpose of an organization Provide detail and scope of mission

Mission Statement


Strategies Plans for achieving organizational goals


The methods and actions taken to accomplish strategies

What is Mercers Mission Statement and Goals?2-10

Planning and Decision MakingFigure 2.1Mission Goals

Organizational StrategiesFunctional Goals Finance Strategies Marketing Strategies Operations Strategies

Tactics Operating procedures2-11

Tactics Operating procedures

Tactics Operating procedures

Strategy ExampleExample 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: Goal: Strategy: Tactics: Operations:

Live a good lifeSuccessful career, good incomeObtain a college education Select a college and a major

Register, buy books, take courses, study, graduate, get job


Examples of Operations StrategiesTable 2.2

Price Quality Time Flexibility Service Location

Low Cost

U.S. first-class postage Motel-6, Red Roof Inns

High-performance design Sony TV or high quality Consistent Lexus, Cadillac quality Pepsi, Kodak, Motorola Rapid delivery On-time delivery Variety Volume Superior customer service Convenience Express Mail, Fedex, One-hour photo, UPS Burger King Supermarkets Disneyland Nordstroms Banks, ATMs


Strategy Formulation Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners


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 organizations goods or services that cause it to be perceived as better than the competition


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


Strategy Formulation: Key Internal Factors 2-17

Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers

Influences on strategic choices Organizational Purpose The Macro-Environment The Industry Environment Competitive Positioning Resources The Value Chain Organizational Structure Organizational Culture

Organizational PurposeCorporate Governance Whom should the organization serve? How should purposes be determined? Business Ethics Which purposes should be prioritised? Why?

Organizational Purposes Vision / Mission Objectives

Stakeholders Whom does organization serve?


Cultural Context Which purposes prioritised? Why?


Levels of Organizational StrategyCorporate StrategyCorporate Head Office

Business Strategy

Division A R&D Human Resources

Division B R&D Human Resources

Functional Strategy

FinanceProduction Marketing/Sales

FinanceProduction 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 Strategies1. What businesses should the corporation/enterprise be in? 2. How should the corporate/G.O. office manage the array of business units (GBUs/SBUs/ 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 EnvironmentThreat of new entrantsBargaining pThe Industry Jockeying for position amongst current competitors customer

Bargaining power of suppliers

Bargaining power of 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 ofrivals and set the pace

Contraction/Expansion focus on what you aregood 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 organisations 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

Environmental Factors and Organizational capabilities




Four Basic StrategiesHighGlobal Strategy Transnational Strategy

Cost pressuresInternational Strategy Multi domestic Strategy

Low Low High Pressures for local responsiveness

Strategic ChoicesInternational create value by transferring skills to local markets where skills are not present. Multidomestic oriented toward achieving maximum local responsiveness. Global increase profitability through cost reductions from experience curve effects and location economies. Transnational Exploit experienced 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 StrategiesStrategy Global International Advantages Exploit experience curve effects Exploit location economies Transfer distinctive competencies to Foreign Markets Disadvantages Lack of local responsiveness Lack of local responsiveness Inability to realize location economies Failure to exploit experience curve effects

The Advantages and Disadvantages of the Four StrategiesStrategy Advantages Disadvantages Multi-domesticCustomize product offerings Inability to realize loc