What is Strategy?
1 What is Strategy?
What is Strategy?
Chapter 1 What is Strategy?
Chapter 6 Assessing Organizational Performance
Chapter 2 The General Environment
Chapter 5 The Internal Environment: A Resource-Based View of Strategy
Chapter 3 The Competitive Environment
Chapter 4 The Internal Environment: Value Creating Activities
After completing this chapter you should be able to: • • • • • • Explain what is meant by strategy Describe a strategic management process Discuss the role of values, vision, and mission statements Explain what is meant by a theory of business Evaluate different perspectives on strategy formulation Explain the linkages between an organization’s strategy and its external and internal environment
What is strategy? How is strategy formulated and implemented? Are values important in determining which markets organizations seek to compete in? These are some of the questions that will be discussed in this ﬁrst chapter. We start the chapter with a discussion of what strategy is. There is general agreement that the purpose of strategy is to help organizations achieve a sustainable competitive advantage. Where this consensus begins to break down is when we discuss how this should be achieved. We can identify two broad perspectives that we can call the rationalist or positioning approach, and the resource-based view of strategy. Each of these perspectives will be evaluated in greater detail in subsequent chapters. For now, we will simply introduce these perspectives and some of their chief protagonists when we address different approaches to strategy formulation. This chapter also looks at a strategic management process which includes strategy analysis, formulation, and implementation. We note that this essentially linear framework is very useful for exposition but has limitations when seeking to explain strategy in practice. The role of an organization’s values, vision, and mission is explained as we discuss their importance in setting strategic goals, and the role of strategy in achieving these goals. We address an organization’s assumptions about its competitive environment or its theory of business and discuss how this can lead to organizational failure. We end the chapter with a discussion of a strategic management framework which will be useful for navigating subsequent chapters. • Section 1.2 explains what strategy is and discusses some of its military antecedents. • Section 1.3 deals with the strategic management process which explains strategy analysis, strategy formulation, and strategy implementation. • In Section 1.4 we discuss the impact of an organization’s values, vision, and mission in guiding decision making and employees’ behaviour. A theory of business is also discussed. • Section 1.5 brieﬂy discusses different types of strategy. These include corporate strategy, business strategy, and functional strategy • In Section 1.6 we look at the different approaches to strategic management and the changes that have taken place • Section 1.7 evaluates two different perspectives on strategy formulation: the positioning or design school, and the learning school.
part 1 What is Strategy?
• The chapter concludes with a strategic management framework which explains the linkages between an organization’s internal and external environment, its strategy, and its stakeholders.
1.2 What is Strategy?
The use of strategy has existed for many centuries although its use in management has a more recent history, dating back about 40 years. Strategy was borne out of military conﬂicts and the use of a superior strategy enabled one warring party to defeat another. Von Clausewitz, writing in the nineteenth century, states that the decision to wage war ought to be rational, that is, based on estimates of what can be gained and the costs incurred by the war (von Clausewitz 1982). War should also be...