Organizational Strategy

Strategy ishellipbull Derived from the word Stratagem bull hellipquoted in the Concise Oxford Dictionary as

meaning1 the art of war2 the management of an army or armies in a

campaign 3 the art of moving troopsships aircraft etc into

favourable positions (TACTICS)bull 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

STRATEGYbull The specific pattern of decisions and actions that

managers take to use core competences to achieve a competitive advantage and outperform competitors

bull 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

bull Increase value for stakeholders customersbull Can also be called as Planning Mode or

Evolutionary mode

The Nature Of Strategy

bull Defined bull Vaguebull Planned bull Loosebull Proactive bull Reactivebull With detail bull No detail

Range Of Strategic Format

The Purpose of Strategybull Provides directionbull Provides coherencebull Allows day-to-day processes to be designedbull Should give direction for lsquoone offrsquo procedures

lsquoThe essence of strategy is coping with competition

The corporate strategistrsquos 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 favourrsquoMichael E Porter

The Nature of Strategic Decisions

bull Magnitudendash BIG DECISIONS

bull Time-scalendash Medium to long term

bull Commitmentndash Locks in resources locks out altern

2-7

Why Some Organizations Fail

bull Too much emphasis on short-term financial performance

bull Failing to take advantage of strengths and opportunities

bull Neglecting operations strategybull Failing to recognize competitive threats

2-8

Why Some Organizations Fail

bull Too much emphasis in product and service design and not enough on improvement

bull Neglecting investments in capital and human resources

bull Failing to establish good internal communications

bull Failing to consider customer wants and needs

2-9

MissionStrategyTactics

How does mission strategies and tactics relate todecision making and distinctive competencies

StrategyStrategy TacticsTacticsMissionMission

2-10

Strategy

bull Missionndash The reason for existence for an organization

bull Mission Statementndash States the purpose of an organization

bull Goalsndash Provide detail and scope of mission

bull StrategiesndashPlans for achieving organizational goals

bull Tacticsndash The methods and actions taken to accomplish strategies

What is Mercerrsquos Mission Statement and Goals

2-11

Planning and Decision Making

Mission

Goals

Organizational Strategies

Functional Goals

Finance Strategies

MarketingStrategies

OperationsStrategies

Tactics Tactics Tactics

Operatingprocedures

Operatingprocedures

Operatingprocedures

Figure 21

2-12

Strategy Example

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 lifebull Goal Successful career good incomebull Strategy Obtain a college educationbull Tactics Select a college and a majorbull Operations Register buy books take

courses study graduate get job

Example 1

2-13

Banks ATMsConvenienceLocationLocation

DisneylandNordstroms

Superior customer service

ServiceService

Burger KingSupermarkets

VarietyVolume

FlexibilityFlexibility

Express Mail FedexOne-hour photo UPS

Rapid deliveryOn-time delivery

TimeTime

Sony TVLexus CadillacPepsi Kodak Motorola

High-performance design or high quality Consistent quality

QualityQuality

US first-class postageMotel-6 Red Roof Inns

Low CostPricePrice

Examples of Operations StrategiesTable 22

2-14

Strategy Formulation

bull Distinctive competenciesbull Environmental scanningbull SWOTbull Order qualifiersbull Order winners

2-15

Strategy Formulation

bull Order qualifiers ndash Characteristics that customers perceive as

minimum standards of acceptability to be considered as a potential purchase

bull Order winnersndash Characteristics of an organizationrsquos goods or

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

2-16

bull Economic conditionsbull Political conditionsbull Legal environmentbull Technologybull Competitionbull Markets

Strategy FormulationKey External Factors

2-17

bull Human Resourcesbull Facilities and equipmentbull Financial resourcesbull Customersbull Products and servicesbull Technologybull Suppliers

Strategy FormulationStrategy FormulationKey Internal FactorsKey Internal Factors

Influences on strategic choices

bull Organizational Purposebull The Macro-Environmentbull The Industry Environmentbull Competitive Positioningbull Resourcesbull The Value Chainbull Organizational Structurebull Organizational Culture

Organizational PurposeBusiness Ethicsbull Which purposesshould be prioritisedbull Why

Organizational Purposesbull Vision Mission

bull Objectives

Stakeholdersbull Whom does the organization serve

Cultural Contextbull Which purposes are prioritisedbull Why

Corporate Governancebull Whom should the organization servebull How should purposes be determined

Levels of Organizational Strategy

CorporateStrategy

BusinessStrategy

FunctionalStrategy

Corporate Head Office

Division BDivision A

R amp D

Human Resources

Finance

Production

MarketingSales

R amp D

Human Resources

Finance

Production

MarketingSales

Brief Overview of Corporate Strategy

bull 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

1 What businesses should the corporationenterprise be in

2 How should the corporateGO office manage the array of business units (GBUrsquosSBUrsquos Wholly owed subsidiaries)

Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts

Key Questions of CorporateFirm-level Strategies

Corporate (and International) Strategies

bull Three directions for corporate strategyndash Growth

bull MampA JV and SA (external growth)bull International (internal growth)

ndash Stability (internal growth)ndash Renewal (internal growth)

bull Retrenchmentbull Turnaroundbull Increase the four capabilities via core

competencies

The Macro-Environmentbull Political- Taxation Policy Foreign Trade

Regulationsbull Economic- Interest Rates Inflation

Unemploymentbull Sociocultural- Attitudes to work and leisure

Income distribution Levels of educationbull Technological- New discoveries developments

Spending on researchbull Environmental- Emission levels Planning

regulationsbull Legal -Monopolies Commission Employment Law

The Industry Environment Threat of

newentrants

Bargainingpower ofcustomer

Threat ofsubstitute

products or

Bargainingpower ofsuppliers

BargainingpThe Industry Jockeying

for position amongst current competitors

customer

Competitive Positioning

bull Market segmentationbull Product differentiatorbull 1048708 The low cost leaderbull 1048708 Nicher

Resources

bull 1048708 Capabilities and competenciesbull 1048708 Learning and knowledgebull 1048708 Analysing competitive advantage

Organizational Structure

bull Structure typesbull Organizational designbull Communication

Organizational Culture

bull Leadership behaviourbull 1048708 Reward systemsbull 1048708 Language

Types of Strategybull Competitive Advantage ndash something which gives

the organisation some advantage over its rivalsbull Cost advantage ndash A strategy to seek out and

secure a cost advantage of some kind - lower average costs lower labour costs etc

Types of Strategybull Market Dominancebull Achieved through

ndash Internal growthndash Acquisitions ndash mergers and takeovers

bull New product development to keep ahead of rivals and set the pace

bull ContractionExpansion ndash focus on what you are good at (core competencies) or seek to expand into a range of markets

Types of Strategybull Price Leadership ndash through dominating the

industry ndash others follow your price leadbull Global ndash seeking to expand

global operationsbull Reengineering ndash thinking outside the box ndash

looking at news ways of doing things to leverage the organisationrsquos performance

Types of Strategyndash Internal business level strategies ndash

bull Downsizing ndash selling off unwanted parts of the business ndash similar to contraction

bull Delayering ndash flattening the management structure removing bureaucracy speed up decision making

bull Restructuring ndash complete re-think of the way the business is organised

THE STRATEGY IMPERATIVEEnvironmental

Factors and

Organizationalcapabilities

Structure

Strategy

Four Basic Strategies

High

Cost pressures

Low

Low High

GlobalStrategy

TransnationalStrategy

Multi domesticStrategy

InternationalStrategy

Pressures for local responsiveness

Strategic Choices

TransnationalExploit experienced

based cost and location economies transfer core competencies

within the firm and pay attention to local

responsiveness needs

TransnationalExploit experienced

based cost and location economies transfer core competencies

within the firm and pay attention to local

responsiveness needs

Internationalcreate value by

transferring skills to local markets where

skills are not present

Internationalcreate value by

transferring skills to local markets where

skills are not present

Multidomesticoriented toward

achieving maximumlocal

responsiveness

Multidomesticoriented toward

achieving maximumlocal

responsiveness

Globalincrease profitability

through cost reductions from

experience curve effects and location

economies

Globalincrease profitability

through cost reductions from

experience curve effects and location

economies

The Advantages and Disadvantages of the Four Strategies

Strategy Advantages Disadvantages

Global Exploit experience curve effects

Exploit location economies

Lack of localresponsiveness

International

Transfer distinctive competencies to

Foreign Markets

Lack of localresponsivenessInability to realizelocation economiesFailure to exploit experience curve effects

The Advantages and Disadvantages of the Four Strategies

Strategy Advantages Disadvantages

Multi-domesticCustomize product offeringsand marketing in accordancewith local responsiveness

Inability to realize locationeconomies

Failure to exploitexperience curve effects

Failure to transferdistinctive competenciesto foreign markets

TransnationalExploit experience curveeffects

Exploit location economiesCustomize product offeringsand marketing in accordancewith local responsiveness

Reap benefits of global learning

Difficult to implement due to organizationalproblems

Strategy and Centralization

Global

CentralizeMulti-domestic

Decentralize

International

Centralize for core competencies

Decentralize for operating decisions

Transnational

Both CentralizeAnd Decentralize