AN INTRODUCTION TO STRATEGY & LEADERSHIP
1.7 – 1.14
What are the ways strategies can be developed?
Approaches to understanding strategy:
❖ Rational - based on a model in which the conception and execution of strategy are treated as discrete, sequential activities.
Chandler (1962) defined strategies as a straightforward process made up of two chronological activities.
The following steps are typical of the method employed in this approach: 1. The establishment of clear strategic objectives
2. The analysis of an organisation’s strategic situation, its external environment, and its internal resources and capabilities. 3. The generation, evaluation and choice of strategic options based on their potential to optimise the achievement of the established objectives 4. Implementation of the chosen strategic option, which is usually expressed in a strategic plan.
Michael Porter’s (1980) five forces model is an example of the rational approach. This approach has an external focus.
❖ Processual – this approach view strategy formulation and implementation as entangled activities, and not separate stages. Processualist, because of their belief that external markets and environments are unpredictable and imperfect, focus more on competencies of the organisation in a concern to build the requisite internal skills and resources.
❖ Evolutionary – this approach argues that market forces, rather than managerial actions, will determine which organisations will survive and prosper and which will fail. The ‘environment’ will select organisations for either success or failure as markets are too unpredictable and uncontrollable for planned strategies to be effective. Therefore, an organisation’s leaders should work on achieving competitive advantage by improving operational efficiencies in the short term, and also focus on creating a range of innovative products and services, improving the odds that the market will ‘select’ at lease one of these.
❖ Systemic – this perspective builds on the importance of culture and politics in the strategy process, arguing that strategy is embedded in the cultural values, norms and rules of the organisation and the society in which it operates. Strategy can therefore be understood as an outcome of an organisation’s culture and traditional values, or the ways in which organisational members think that they should be operating and the types of goals they should be aiming for.
In summary, this view argues that in order to understand strategy we need to understand the social and economic context in which strategy takes place.
1.17 – 1.21
The strategy process
❖ Defining organisational purpose (Where are we going?) ❖ Understanding and analysing the external environment outside the organisation ❖ Understanding and analysing the internal environment inside the organisation (What is the gap between where we are now and where we want to be?) ❖ Formulating and implementing strategy (How do we get there? And what are the financial aspects of value creation?)
Levels of strategy
❖ Corporate – this embraces all of a diversified company’s businesses and determines how the scope of these businesses is managed and coordinated to contribute to corporate performance.
❖ Business – for a single business or company, corporate and business strategy are one and the same. The distinction is relevant only for diversified firms. Business strategy aims to build and strengthen the long-term competitive position in the marketplace.
❖ Functional – this strategy operates at the level of the department or functional activity within the business (e.g. marketing, finance, operations, R&D, HR) and adds detail to the overall business strategy.
1.29 – 1.30
Leadership style and approaches
❖ Traits – this approach argues that there is a biological basis for...
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