Business Strategy

1
Business Strategy Lecture 4 Strategic Direction

• John Birchall

2
Our Focus Today (Harrison 2003 4)

• Strategic management is a process
• through which organizations analyse and learn
• from their internal and external environments,
• establish strategic direction,
• create strategies that are intended to move the
  organization in that direction, and
• implement those strategies,
• all in an effort to satisfy key stakeholders

3
Linking Purpose to Action
Strategy Context
Broad and Operating Environments
Strategy Content Business Definition, Competitive
Strategies
Organisational Purpose Vision, Mission, Ethics
Strategy Process
Involves Stakeholders

• Adapted from Harrison (2003 37) and De Wit
  Meyer (2005 5)

4
Mission and Purpose

• Why does the organisation exist?
• survive, serve, make profits, have fun?
• Nokia example (Harrison 2003 118-9)
• Making the most of digital opportunities
• Aiming for the next wave of growth and innovation
• Looking after the environment
• Providing safety and inspiration for staff
• Achieving financial benefits
• Gaining stakeholder acceptance

5
Beyond the Balance SheetCorporate Integrity

• Jeffrey Immelt
• CEO General Electric (since 2001)

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General Electric (GE website Oct 2007)

• No mission statement operating philosophy
  business objectives stated each year in letter to
  shareowners, employees and customers in the
  annual report.
• GE Values Imagine Solve Build Lead
• Imagination must be practiced within the
  boundaries of ethics,
• compliance and integrity
• Citizenship Every day, the people of GE seek to
  improve the world in which we live.
• Our Culture GE has many businesses, but one
  culture. GE culture develops leaders, offers
  diverse rewarding work environment, supports
  employees voluntary work

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Stakeholder Influences on Strategic Direction
The Operating Environment
Competitors
Activist Groups
Local Communities
Customers
Owners
Directors
Suppliers
The Organization
The Media
Managers
Employees
Unions
Financial Intermediaries
Government Agencies and Administrators
Harrison (2003 37)
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Stakeholder Analysis

• Freeman (1984) Strategic Management A
  Stakeholder Approach
• Donaldson and Preston (1995) The Stakeholder
  Theory of the Corporation Concepts, Evidence and
  Implications AMR
• Freeman, Harrison Wicks (2007) Managing for
  Stakeholders
• Classify rather than simply list
• Internal / Connected / External
• Positive / Negative
• Power / Influence
• Interest Nature / Intensity

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The Mendelow Grid
LEVEL OF INTEREST
Minimal effort
Keep informed
Low
POWER
Keep satisfied
Key players
High
Low
High

• Johnson, Scholes and Whittington (2005 182),
  citing Mendelow (1991)

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Organisational structure

• The legacy of past success
• The Icarus paradox
• Can create inertia (Harrison 2003 120)
• Do nothing is often a preferred option
• Comfort, stability, security are valued
• Ideology influences vision and mission
• Bounded rationality

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The Risk of Strategic Drift
Environmental change
Strategic change
5
3
Amount of change
2
4
1
Time
Phase 3/4 Transformational change or demise
Phase 1 Incremental change Jump 5 Strategic
innovation
Phase 2 Flux
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Expecting the UnexpectedMintzberg (198714)
Intended Strategy
Imposed Strategy
Unrealised Strategy
Realised strategy
Emergent Strategy
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Feedback loops (Harrison 2003 121) Freeing the
firm from bounded rationality
Feedback that Guides Impressions, Expectations
and Behavior
External Stakeholders
Broad Environment
Strategic Direction
Vision Mission Business Definition Growth
Orientation Organizational Ethics
Organizational Actions
Organizational Outcomes
Feedback that Guides Impressions, Expectations
and Behavior
Internal Stakeholders
History and Inertia
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Strategic Direction

• Must be clear and firm yet
• open to change
• Statements of vision, values, mission
• Make paradigms public, therefore open to question
  and transformation
• Business definition (Harrison 2003 124)
• Explains how the organisation wants to make its
  vision work
• Whose needs are being served?
• What is to be produced, or what services
  delivered - and how?

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Strategic Decisions

• Will commit a substantial share of the
  organisations resources in the medium or long
  term
• Can affect the firms overall scale and scope
• How big relative to competitors?
• How heavily focused on specific industries?
• How much control of the industry supply chain?
• Can change the pattern of relationships with key
  stakeholders

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Strategic Direction

• Now, you can begin to
• Identify stakeholder groups
• Assess their influence on strategy
• Explain what paradigms are and how they change
• Link organisational purpose to action