🎯Business Strategy and Policy Unit 2 – Strategic Management: Process & Intent

Key Concepts and Definitions

• Strategic management involves the formulation, implementation, and evaluation of cross-functional decisions that enable an organization to achieve its long-term objectives
• Strategy refers to the direction and scope of an organization over the long term, which achieves advantage for the organization through its configuration of resources within a changing environment to meet the needs of markets and fulfill stakeholder expectations
• Strategic intent is an ambitious and compelling vision that provides emotional and intellectual energy for the journey to the future, serving as a unifying focal point of effort and galvanizing members of the organization to action
• Vision statement articulates the long-term direction and aspirations of the company, painting a vivid mental image of the organization's future
  • Should be inspirational, clear, and concise (Amazon's vision: "To be Earth's most customer-centric company")
• Mission statement defines the organization's purpose, business, and values, answering the question of why the company exists
• Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies, providing potential access to a wide variety of markets
• Competitive advantage is a superiority gained by an organization through providing the same value as its competitors but at a lower price, or charging higher prices by providing greater value through differentiation

Strategic Management Process Overview

• The strategic management process is a sequential set of analyses and choices that can increase the likelihood of a firm selecting and implementing a good strategy
• Consists of four main stages: environmental analysis, strategy formulation, strategy implementation, and evaluation and control
  1. Environmental analysis involves scanning and evaluating the external and internal factors that affect the organization's performance
  2. Strategy formulation includes defining the company's mission and goals, identifying and evaluating alternative strategies, and selecting appropriate strategies
  3. Strategy implementation puts the chosen strategy into action through the design of organizational structure, resource allocation, and managing change
  4. Evaluation and control monitor and adjust the implemented strategies based on actual performance and changing conditions
• The process is iterative and ongoing, requiring continuous reassessment and adaptation to ensure the organization remains competitive in a dynamic environment
• Effective strategic management requires a clear understanding of the organization's strategic intent and vision, guiding the entire process
• The process involves the participation and collaboration of managers and employees from all levels and functional areas of the organization
• Successful implementation of the strategic management process can lead to improved organizational performance, competitive advantage, and long-term sustainability

Strategic Intent and Vision

• Strategic intent is the leveraging of a firm's internal resources, capabilities, and core competencies to accomplish the firm's goals in the competitive environment
• Provides a sense of direction, a focus for strategic planning, and a rallying point for all stakeholders
• Hamel and Prahalad (1989) introduced the concept, emphasizing the need for organizations to have a clear and ambitious long-term goal that goes beyond mere survival or incremental improvements
• A well-crafted strategic intent should be inspirational, challenging, and create a sense of urgency for the organization to stretch its capabilities and achieve its aspirations (Samsung's strategic intent: "Beat Sony")
• Vision statement is a concise, forward-looking declaration of the organization's aspirations and serves as the foundation for the company's mission, objectives, and strategies
• An effective vision statement should be memorable, inspirational, and provide a clear picture of the organization's desired future state
  • Characteristics of a good vision statement: concise, clear, future-oriented, stable, challenging, and inspiring
• The vision statement should align with the company's values, purpose, and strategic intent, providing a unified direction for all members of the organization
• Developing a compelling vision involves the participation and input of various stakeholders, including top management, employees, customers, and shareholders

Environmental Analysis

• Environmental analysis is the process of scanning and evaluating the external and internal factors that affect an organization's performance and its ability to achieve its objectives
• External analysis focuses on the macro-environment (PESTEL factors) and industry environment (Porter's Five Forces) in which the organization operates
  • PESTEL analysis examines the political, economic, social, technological, environmental, and legal factors that impact the organization
  • Porter's Five Forces model assesses the competitive intensity and attractiveness of an industry by analyzing the bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitutes, and rivalry among existing competitors
• Internal analysis evaluates the organization's resources, capabilities, and core competencies using tools such as SWOT analysis and Value Chain analysis
  • SWOT analysis identifies the organization's internal strengths and weaknesses, as well as its external opportunities and threats
  • Value Chain analysis examines the primary and support activities that create value for customers and identifies areas for improvement and differentiation
• The insights gained from environmental analysis inform the strategy formulation process, helping the organization identify strategic opportunities, mitigate potential threats, and create sustainable competitive advantages
• Effective environmental analysis requires continuous monitoring and adaptation to changes in the external and internal environment, as well as the ability to anticipate future trends and disruptions

Strategy Formulation

• Strategy formulation is the process of defining the organization's mission and goals, identifying and evaluating alternative strategies, and selecting appropriate strategies to achieve the desired objectives
• Involves a series of strategic choices and decisions based on the insights gained from the environmental analysis
• The mission statement defines the organization's purpose, business scope, and values, providing a foundation for strategy formulation
• Strategic objectives are specific, measurable, achievable, relevant, and time-bound (SMART) goals that align with the organization's mission and vision
• Generic strategies, as proposed by Michael Porter, include cost leadership, differentiation, and focus, which describe how an organization can achieve competitive advantage in its industry
  • Cost leadership strategy aims to achieve the lowest production and distribution costs to offer products at lower prices than competitors
  • Differentiation strategy seeks to create unique products or services that are valued by customers and command a premium price
  • Focus strategy concentrates on a narrow market segment and tailors its products or services to the specific needs of that segment
• Strategy formulation also involves corporate-level strategies, such as diversification, vertical integration, and strategic alliances, which define how the organization manages its portfolio of businesses and resources
• The selected strategies should be feasible, consistent with the organization's mission and vision, and create a sustainable competitive advantage
• Effective strategy formulation requires a thorough understanding of the organization's strengths, weaknesses, opportunities, and threats, as well as the ability to anticipate and adapt to changes in the competitive landscape

Strategy Implementation

• Strategy implementation is the process of translating the chosen strategies into action through the design of organizational structure, resource allocation, and managing change
• Involves aligning the organization's resources, capabilities, and activities with the selected strategies to achieve the desired objectives
• Organizational structure refers to the formal arrangement of roles, responsibilities, and reporting relationships within the company
  • The structure should be designed to support the implementation of the chosen strategies and facilitate effective decision-making, communication, and coordination
• Resource allocation involves the distribution of financial, human, technological, and physical resources to support the implementation of the strategies
  • Effective resource allocation requires prioritizing initiatives, managing trade-offs, and ensuring that the allocated resources are sufficient to achieve the desired outcomes
• Managing change is a critical aspect of strategy implementation, as it involves guiding the organization and its members through the transition from the current state to the desired future state
  • Requires effective communication, employee engagement, and leadership to overcome resistance to change and foster a culture that supports the new strategies
• Successful strategy implementation depends on the alignment and coordination of various organizational elements, including structure, systems, processes, people, and culture
• Monitoring and controlling the implementation process is essential to identify and address any deviations from the plan, as well as to make necessary adjustments based on changing conditions

Evaluation and Control

• Evaluation and control is the process of monitoring and assessing the performance of the implemented strategies, comparing actual results with the desired objectives, and making necessary adjustments to ensure the organization stays on track
• Involves establishing performance metrics, setting targets, and regularly measuring and reporting on the progress of the implemented strategies
• Key performance indicators (KPIs) are quantifiable measures used to evaluate the success and effectiveness of the implemented strategies
  • KPIs should be aligned with the organization's strategic objectives, measurable, and actionable
  • Examples of KPIs include financial metrics (revenue growth, profitability), customer metrics (customer satisfaction, retention), and internal process metrics (efficiency, quality)
• Benchmarking is the process of comparing the organization's performance against industry best practices or leading competitors to identify areas for improvement
• The Balanced Scorecard, developed by Kaplan and Norton, is a performance management tool that provides a comprehensive view of the organization's performance across four perspectives: financial, customer, internal processes, and learning and growth
• Regular review meetings and progress reports help to keep the organization focused on the implementation of the strategies and facilitate timely decision-making and corrective actions
• Effective evaluation and control require a culture of accountability, continuous improvement, and adaptability to changing conditions
• The insights gained from the evaluation and control process feed back into the strategic management process, informing future environmental analysis, strategy formulation, and implementation decisions

Real-World Applications and Case Studies

• Apple's successful strategy of product differentiation and innovation, focusing on design, user experience, and ecosystem integration (iPhone, iPad, Mac, Apple Watch)
• Amazon's customer-centric approach and continuous expansion into new markets and services, leveraging its core competencies in technology, logistics, and data analytics (e-commerce, Amazon Prime, Amazon Web Services)
• Tesla's disruptive strategy in the automotive industry, combining product differentiation (electric vehicles) with vertical integration (in-house manufacturing, direct sales) and a mission-driven approach to sustainable transportation
• Netflix's strategic shift from DVD rental to streaming services, leveraging its customer insights, content creation capabilities, and global expansion to become a leader in the entertainment industry
• Walmart's cost leadership strategy, achieving economies of scale through efficient supply chain management, bargaining power with suppliers, and a focus on everyday low prices
• Airbnb's platform-based business model, disrupting the traditional hospitality industry by connecting travelers with local hosts and leveraging technology to create unique accommodation experiences
• Starbucks' focus differentiation strategy, creating a "third place" experience for customers through high-quality products, personalized service, and a welcoming atmosphere
• General Electric's corporate strategy of diversification and strategic acquisitions, building a portfolio of businesses across various industries (aviation, healthcare, renewable energy) while leveraging its core competencies in technology and innovation