Week 1 what is strategy

3BM020 Organisational Strategy and Decision Making Lecture Historical development: What is strategy? In the news 2014 – •JD Sports plans overseas expansion after doubling profits for second year •Pre-tax profits rise to £20 m as sales up 27% to start of August as firm plans to open 10 foreign stores by the end of January 2016 •JD Sports profits rise 45% as new stores open across Europe •JD Sports has revealed a 45% jump in annual profits after a surge in demand for women’s sports clothing •Retailer cashes in on ‘athleisure’ trend as rise in demand for women’s sportswear sees like-for-like sales rise by 11.6% https://www.theguardian.com/business/2014/sep/17/jd-sports-overseas-expansion-profits-rise https://www.theguardian.com/business/2016/apr/ 14/jd-sports-profits-rise-new-store-openingseurope In the news Question: Why would they this and what is driving this strategy? Learning outcomes • To introduce the concept and definitions of strategy • Understand the characteristics of strategic decisions and what is meant by strategy and strategic management, distinguishing them from operational strategy • Understand how strategic priorities vary by level: corporate, business and operational • Understand the basic vocabulary of strategy Focus Questions • What kind of ideas have shaped the development of strategic management? • Which writers and theorists have been involved in the process of development? • How useful are these ideas in understanding the formulation of strategy? • How these ideas relate to practical implementation? Definitions of strategy “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 “A pattern in a stream of decisions” Henry Mintzberg “Competitive strategy is about being different It means deliberately choosing a different set of activities to deliver a unique mix of value” Michael Porter “The long-term direction of an organisation” Exploring Strategy The three founding fathers • Kenneth R Andrews • Alfred D Chandler Jr • H Igor Ansoff • The first people to formally define the concepts, scope, content and methodologies associated with strategic management Kenneth R Andrews • Invented the case study methodology and with it the format of nearly all modern business management text books • Main work – The Concept of Corporate Strategy (1958) • Purpose – to understand and to manage complex organisations striving to make their way in an increasingly complicated world • Corporate strategy was thus concerned the organisation as a whole (not just the management of its component parts) and the way that it related to its environment Andrews’ Three Roles of CEO • Organisation Leader – To insist upon the achievement of planned results • Personal Leader – The team captain, humane, reasonable ethical • The architect of organisational purpose – Detached from day to day stuff, she/he takes the longer (strategic) view, and prepares for it Andrews’ comparison of Business with Corporate Strategy • Corporate strategy is thus “The pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving these goals and defines the range of business the company is to pursue, the kind of economic and human organisation it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers and communities” Why we need strategy? • Competition Without competition there would be no need for strategy • Monopoly providers are able to sell or distribute any quality of goods or services; competition changes this and informs an organisation’s strategy • Michael Porter argued that the essence of competitive strategy is getting closer to a monopolistic competition from the firm’s perspective • When a range of firms offer similar products and services then strategy is required as competition will arise – strategy positions specific products with specific differences Key term - Competitive Advantage Strategic decisions Strategic capabilities: Resources and competences • Strategic capabilities: “the capabilities of an organisation that contribute to its longterm survival or competitive advantage” • Resources: “the assets that organisations have or can call upon” (what we have) • Competences: “the ways those assets are used or deployed effectively” (what we well) Re-cap • Strategy is the long term direction of an organisation • Driven by competition with others organisations • Technology has a major influence upon strategic changes • Strategy develops as management’s response to environmental turbulence Levels of strategy Inside an organisation, strategies can exist at three levels: Corporatelevel strategy Business-level strategy Operational strategy Corporate-Level Strategy • Concerned with the overall purpose and scope of an organisation and how to add value to business units • Includes geographical scope, diversity of products and how resources are allocated between different elements of an organisation Corporate-Level Strategy: example – News Corp buys MySpace 2005: Bought to drive traffic to Fox TV sites due to the dominance of online advertising (changing environment) 2011: MySpace sold by News Corp Business-Level Strategy • How the individual businesses should compete in their particularly markets (business strategy is often called ‘competitive strategy’) • These may be e.g individual businesses and start-up businesses within a larger corporation (e.g Fox within News Corp) • Business level typically concerned with issues such as innovation, scale and response to competitors’ moves Business-Level Strategy: example The public sector Decisions about how units (e.g individual hospitals and schools) should provide best-value services Operational Level Strategy • Operational Level Strategy is concerned with how different parts of the organisation deliver the strategy in terms of managing resources, processes and people Operational Level Strategy: YSJU increasing student numbers • Staff expertise • Use of resources (Temple Hall redeveloped) Questions for strategy implementation Three main areas of strategy organisation’s internal resources; external environment within which the organisation operates; organisation’s ability to add value Re-cap (2) • Strategy is central to the development of sustainable competitive advantage in the organisation • It is crucial to value added • Corporate strategy covers the range and depth of the organisation’s activities • It directs the changing and evolving relationships of the organisation with its environment References  Andrews, K (1971) The Concept of Corporate Strategy, p28 Dow Jones – Irwin  Johnson, G & Scholes, K (2002) Exploring Corporate Strategy, 6th Edition, Prentice Hall  Johnson, G., Scholes, K & Whittington, R (2008) Exploring Corporate Strategy, 8th Edition, Prentice Hall  Johnson, G, Whittington, R, & Scholes, K (2011) Exploring Strategy, 9th edition Prentice Hall  Kay, J (1993) Foundations of Corporate Success, Oxford University press, Oxford, p4  Lynch, R (2006) Corporate Strategy, 4th edition, Prentice Hall  Nag, R, Hambrick, D C & Chen, M, J (2007) ‘What is strategic management really? Inductive derivation of the field’, Strategic Management Journal, Vol 28, pp935-955 ... and definitions of strategy • Understand the characteristics of strategic decisions and what is meant by strategy and strategic management, distinguishing them from operational strategy • Understand... https://www.theguardian.com/business/2 016 /apr/ 14 /jd-sports-profits-rise-new-store-openingseurope In the news Question: Why would they this and what is driving this strategy? Learning outcomes • To... ‘athleisure’ trend as rise in demand for women’s sportswear sees like-for-like sales rise by 11 .6% https://www.theguardian.com/business/2 014 /sep /17 /jd-sports-overseas-expansion-profits-rise https://www.theguardian.com/business/2 016 /apr/