Exploring strategy
,Chapter 1. Introducing strategy
1.1 Introduction
Strategy is concerned with the key issues for the future of the organisation. Often entrepreneurs and
top-management is working on management. Still, strategy is important to middle management too.
1.2 What is strategy?
Strategy is the long-term direction of an organisation (book definition).
1.2.1 Defining strategy
Definitions of several strategy theorists.
In this book strategy is defined as ‘’the long-term direction of an organisation’’, which has two
advantages:
1. The long-term direction of an organisation can include both deliberate, logical strategy and
more incremental, emergent patterns of strategy.
2. Long-term direction can include both strategies that emphasise difference and competition,
and strategies that recognise the roles of cooperation and even imitation.
Defining the elements of strategy:
- ‘The long-term’. The importance of a long-term perspective on strategy is emphasised by the
‘three-horizons framework’.
1. Horizon 1 businesses – defending and extending the core activities and expecting a
flattening or declining effect on profits.
2. Horizon 2 businesses – emerging core activities and profits.
3. Horizon 3 possibilities – typically risky R&D projects, start-up ventures, test-market
pilots or similar.
- ‘Strategic direction’. Businesses create a direction and setting objectives for some years.
Private-sector businesses may focus on maximising profit, while charity focus on public
objectives.
- ‘Organisation’. People and groups that depend on the organisation (stakeholders) and the
organisation upon itself are seen as the element ‘organisation’.
Strategy is involved with managing people, resources and relationships.
,1.2.2 The purpose of strategy: mission, vision, values and objectives
According to Montgomery, the strategy should address two questions:
1. How does the organisation make a difference;
2. and for whom does the organisation make that difference?
There are four ways in which organisations typically define their purpose:
1. A mission statement – aims to provide employees and stakeholders with clarity about what
the organisation is fundamentally there to do. ‘’What business are we in?’’.
2. A vision statement – is concerned with the future the organisation seeks to create. ‘’What do
we want to achieve?’’.
3. Statements of corporate values – communicate the underlying and enduring core ‘principles’
that guide an organisation’s strategy and define the way that the organisation should operate.
When values don’t change with circumstances, they are core and enduring.
4. Objectives – are statements of specific outcomes that are to be achieved. These are expressed
in financial terms, quantifiable market-based objectives or on the basis of competitive
advantage.
1.2.3 Strategy statements
Strategy statement should have three main themes: the fundamental goals (mission, vision or
objectives) that the organisation seeks; the scope or domain of the organisation’s activities; and the
particular advantages or capabilities it has to deliver all of these.
- Scope. The scope or domain refers to three dimensions: customers or clients; geographical
location; and extent of internal activities (‘vertical integration’).
- Advantage. The advantages describe how an organisation will achieve the objectives it has set
for itself in its chosen domain. Competitive environments refer often to competitive
advantages.
1.2.4 Levels of strategy
Inside an organisation, three main levels of strategies exist.
- Corporate-level strategy – is concerned with the overall scope of an organisation and how
value is added to the constituent business of the organisational whole.
, - Business-level strategy – is about how the individual businesses should compete in their
particular markets (often called the ‘competitive strategy’).
- Functional strategies – are concerned with how the components of an organisation deliver
effectively the corporate- and business-level strategies in terms of resources, processes and
people.
1.3 The exploring strategy framework
This book is structured around a three-part framework that emphasises the interconnected nature of
strategic issues: the exploring strategy framework. It includes understanding the strategic position of
an organisation; assessing strategic choices in the future; and managing strategy in action. It can be
seen as a sequence.
1.3.1 Strategic position
The strategic position is concerned with the impact on strategy of the macro-environment, the
industry environment, the organisation’s strategic capability (resources and competences), the
organisation’s stakeholders and organisation’s culture.
- Marco environment. Organisations are influenced by political, economic, social, technological,
ecological and legal forces (PESTEL). Focus on threats and opportunities.
- Industry environment. Organisations are influenced by competitors, suppliers and customers
and present challenges. Focus on threats and opportunities.
- Strategic capability. Capabilities are made up of an organisation’s resources and competences.
Focus on strengths and weaknesses.
- Stakeholders. These are people or groups which hold a ‘stake’ in the future of an organisation.
Corporate governance and corporate social responsibility and ethics are common terms.
- Culture. Culture can influence strategy too and depends often on history. A failure to create
necessary change because of history is called strategic drift.
,Chapter 1. Introducing strategy
1.1 Introduction
Strategy is concerned with the key issues for the future of the organisation. Often entrepreneurs and
top-management is working on management. Still, strategy is important to middle management too.
1.2 What is strategy?
Strategy is the long-term direction of an organisation (book definition).
1.2.1 Defining strategy
Definitions of several strategy theorists.
In this book strategy is defined as ‘’the long-term direction of an organisation’’, which has two
advantages:
1. The long-term direction of an organisation can include both deliberate, logical strategy and
more incremental, emergent patterns of strategy.
2. Long-term direction can include both strategies that emphasise difference and competition,
and strategies that recognise the roles of cooperation and even imitation.
Defining the elements of strategy:
- ‘The long-term’. The importance of a long-term perspective on strategy is emphasised by the
‘three-horizons framework’.
1. Horizon 1 businesses – defending and extending the core activities and expecting a
flattening or declining effect on profits.
2. Horizon 2 businesses – emerging core activities and profits.
3. Horizon 3 possibilities – typically risky R&D projects, start-up ventures, test-market
pilots or similar.
- ‘Strategic direction’. Businesses create a direction and setting objectives for some years.
Private-sector businesses may focus on maximising profit, while charity focus on public
objectives.
- ‘Organisation’. People and groups that depend on the organisation (stakeholders) and the
organisation upon itself are seen as the element ‘organisation’.
Strategy is involved with managing people, resources and relationships.
,1.2.2 The purpose of strategy: mission, vision, values and objectives
According to Montgomery, the strategy should address two questions:
1. How does the organisation make a difference;
2. and for whom does the organisation make that difference?
There are four ways in which organisations typically define their purpose:
1. A mission statement – aims to provide employees and stakeholders with clarity about what
the organisation is fundamentally there to do. ‘’What business are we in?’’.
2. A vision statement – is concerned with the future the organisation seeks to create. ‘’What do
we want to achieve?’’.
3. Statements of corporate values – communicate the underlying and enduring core ‘principles’
that guide an organisation’s strategy and define the way that the organisation should operate.
When values don’t change with circumstances, they are core and enduring.
4. Objectives – are statements of specific outcomes that are to be achieved. These are expressed
in financial terms, quantifiable market-based objectives or on the basis of competitive
advantage.
1.2.3 Strategy statements
Strategy statement should have three main themes: the fundamental goals (mission, vision or
objectives) that the organisation seeks; the scope or domain of the organisation’s activities; and the
particular advantages or capabilities it has to deliver all of these.
- Scope. The scope or domain refers to three dimensions: customers or clients; geographical
location; and extent of internal activities (‘vertical integration’).
- Advantage. The advantages describe how an organisation will achieve the objectives it has set
for itself in its chosen domain. Competitive environments refer often to competitive
advantages.
1.2.4 Levels of strategy
Inside an organisation, three main levels of strategies exist.
- Corporate-level strategy – is concerned with the overall scope of an organisation and how
value is added to the constituent business of the organisational whole.
, - Business-level strategy – is about how the individual businesses should compete in their
particular markets (often called the ‘competitive strategy’).
- Functional strategies – are concerned with how the components of an organisation deliver
effectively the corporate- and business-level strategies in terms of resources, processes and
people.
1.3 The exploring strategy framework
This book is structured around a three-part framework that emphasises the interconnected nature of
strategic issues: the exploring strategy framework. It includes understanding the strategic position of
an organisation; assessing strategic choices in the future; and managing strategy in action. It can be
seen as a sequence.
1.3.1 Strategic position
The strategic position is concerned with the impact on strategy of the macro-environment, the
industry environment, the organisation’s strategic capability (resources and competences), the
organisation’s stakeholders and organisation’s culture.
- Marco environment. Organisations are influenced by political, economic, social, technological,
ecological and legal forces (PESTEL). Focus on threats and opportunities.
- Industry environment. Organisations are influenced by competitors, suppliers and customers
and present challenges. Focus on threats and opportunities.
- Strategic capability. Capabilities are made up of an organisation’s resources and competences.
Focus on strengths and weaknesses.
- Stakeholders. These are people or groups which hold a ‘stake’ in the future of an organisation.
Corporate governance and corporate social responsibility and ethics are common terms.
- Culture. Culture can influence strategy too and depends often on history. A failure to create
necessary change because of history is called strategic drift.
