CHAPTER 1 levels of the organization who will determine how that

vision can be transformed into action.

WHAT IS STRATEGY AND WHY IS IT IMPORTANT
- The important point here is that strategy is about
Expected Learning Outcomes
creating superior value, while containing or controlling
After studying the chapter, you should be able to... the cost to create it. It has been observed that the
greater the difference between value creation and
1. Define Strategy and explain its role in a firm's cost, the greater the economic contribution the firm
quest for competitive advantage. makes, and thus the greater the likelihood for
2. Explain what competitive advantage is and competitive advantage.
how can it be gained.
3. Know what strategy is not. - To gain a competitive advantage, a firm needs to
4. Explain what strategy can achieve. provide either goods or services consumers value
5. Distinguish between a strategy and an more highly than those of the competitors, or goods
objective. or services similar to the competitors' but at a lower
6. Explain the paradigm followed by an objective price. Making money to most businessmen was the
such as Specific, Measurable, Actionable, consequence of providing a product or service
Relevant and Time-Based (SMART). consumers wanted.
7. Illustrate how strategy relates to objective.
- The essence of strategy, therefore, is being different
BASIC CONCEPT OF STRATEGY from rivals. Managers accomplish this difference
through strategic positioning, staking out a unique
Strategy is the quest to gain and sustain competitive position in an industry that allows the firm to provide
advantage. value to customers, while controlling costs.
 It is the managers' theories about how to gain and - Strategy on how to compete provides managers with
sustain competitive advantage. a roadmap to navigate the competitive territory. The
 It is about being different from your rivals. more accurate the map, the better strategic decisions
 It is about creating value while containing cost. managers can make. In the competitive world,
 It is deciding what to do, and what not to do. managers test their theories and assumptions in the
 It combines a set of activities to stake out a unique marketplace. Positive feedback validates managers'
position. strategic assumptions while negative feedback allows
 It requires long-term commitments that are not managers to adjust their assumptions.
easily reversible.
- A firm's relative performance in the competitive
WHAT IS A STRATEGY marketplace provides managers with the necessary
- Strategy describes the goal-directed actions a firm feedback to assess how well their strategy works in
intends to take in its quest to gain and sustain their quest for competitive advantage. The strategic
competitive advantage. The firm that possesses management process, therefore, is a never-ending
competitive advantage provides superior value to cycle of analysis, formulation, implementation and
customers at a competitive price or acceptable value feedback.
at a lower price. Profitability and market share are the WHAT STRATEGY IS NOT
consequences of superior value creation.
Although it is important to know what strategy is and
- A Strategy is an overarching approach taken to meet why it is important, it is also useful to appreciate what
or exceed one's goals and the actions taken relative to strategy is not. There is much confusion about the
the original and overall goal set by higher authority, nature of strategy. Strategy is not:
whether in a private enterprise or public
organizations.  A vision or mission statement such as "Our
strategy is to be a leading-edge
- Strategy is about understanding where you are now, provider/employer". This explains neither where
where you are heading and how you will get there. the firm is going nor how it will make progress.
Effective strategic decision-making is vital - not just for Consequently, it is not a strategy.
the Chief Executive Officer or Board deciding a  A goal, budget or business plan. Strategy is not a
company's overall direction but for the managers at all goal such as "We aim to be the best or number
 one". This is, at best, an aspiration. Also, strategy to develop its products and approach in line with
is neither a budget nor a business plan, although its customers' changing preferences.
elements of these may contribute to how a  Developing and implementing strategy strengthen
strategy is implemented. a business by making sure that resources are
 Data analysis. Too often, data analysis leads to devoted to the most important customers in order
strategy, when what should happen is that to retain their loyalty and get them to buy even
strategic choices are made first and then refined more of the company's products or services.
and explored further using data analysis.  A clear strategy shows managers where business
skills need to be added or strengthened. It also
Strategy is not, a zero-sum game - it is not always the
highlights where productivity can be improved
case that one party wins while all others lose. Many
and why particular initiatives and activities have
strategic successes are accomplished when firms and
succeeded or failed.
individuals cooperate with one another. Even direct
 A strategy that employees understand provides a
competitors cooperate occasionally to create win-win
guiding view of the future that influences
scenarios. When competitors cooperate with one
employees decisions, priorities and way of
another to achieve strategic objective, it is called co-
working.
opetition.
 For owners or stakeholders, strategy provide a
Many people today refer to a host of different plans way of measuring their businesses" progress.
and activities such as pricing strategy, alliance strategy,  A successful strategy benefits customer. The
operations strategy, marketing strategy and so on. crucial component of strategy is how it will result
While all these elements may be part of a firm's in greater appeal to customers and how they can
functional strategy to support its business model, the achieve their goals.
term strategy should be reserved for describing the
STRATEGY VS OBJECTIVE
firm's overall efforts to gain and sustain competitive
advantage. WHAT IS A STRATEGY?
Competitive benchmarking is not "strategy" * Best-in- * A strategy is an overarching approach taken to meet
class practices such as just-in-time inventory system, or exceed your goals, and the actions taken must
enterprise resource planning system and so on, all fall relate to the original goal set by management. For
under the "tools" for operational effectiveness. Being example, a marketing company's strategy can be to
best-in-class is a sufficient but not a necessary increase the amount of written content on a
condition for competitive advantage. company's website; the execution of the strategy
includes hiring writers to streamline the process.
Operational effectiveness, marketing skills and other
functional expertise, along with best practices, WHAT IS AN OBJECTIVE?
contribute to a unique strategic position but by
themselves, they are not a substitute for Strategy. * An objective is a measurable action taken to execute
the strategy agreed on by management and the rest of
WHAT CAN STRATEGY ACHIEVE the organization. An objective follows the paradigm of
the SMART formula (Specific, Measurable, Actionable,
The following are some of the significant benefits of
Relevant and Time-based). Thus, a series of objectives
applying Strategy.
must be assigned and completed in order to complete
 An inspired and clearly considered strategy the strategy and meet the company's primary goal.
provides the impetus for commercial success. A
How the SMART formula can be used in pursuing an
clear and effectively communicated strategy is
objective:
crucial in developing a successful business.
 A focus on strategy will highlight where a unit or Specific
group of businesses can be more successful as
well as those areas where it is weak, vulnerable,
or failing. It will show in detail where the business
is making its money and why.
 The process of developing and implementing
strategy enables managers to understand their
customers and competitors. The company is able
- This step details what you want to achieve. In fact, - A strategy is meant to solve problems and determine
the formulation of your goals and strategy should a pathway towards a goal. An objective has measured
meet the requirements of this step to proceed. elements that relate to the execution of the strategy
Double-check and ensure that this is the direction you and when it should be finalized.
want to go and whether the steps in the strategy can
be easily understood. The more clarity you have, the
more likely it is to produce successful results. Execution
Measurable - To build a strategy, you need to have an overview of
your core values and the motivations for why you are
- Stating your evidence is crucial in finding out how
coming up with a strategy. Consistent motivation is
you are measuring your goal. Setting up milestones
the driver of diligence in the workplace. A robust
can assist you inbreaking down a timeline to reach the
strategy can maximize the output of a team if it fully
desired steps of your objectives. If you are applying for
buys into the mission of the organization. Preparing
a job, you can use this step as a benchmark to see the
objectives occurs once you have a finalized set of core
number of positions you've applied to and amount of
values and motivations. Objectives also assess how
interviews you landed. You can plan and adjust in case
you'll apply your core values and motivations to
you run into any disruptions and establish a rewards
perform tasks and find out how you can improve in
system when you reach a milestone, too.
the process.
Achievable
ILLUSTRATION OF HOW STRATEGY RELATES TO
- Ensure that the objective is one you can achieve and OBJECTIVE
is aligned with your strategy. Identifying your
Here is an example of a strategy to increase a
motivations in meeting your objectives helps you keep
company's client base and the objectives that follow:
your focus on current tasks. Also, it can outline the
effort and resources needed to achieve your objective Strategy
and move onto the next one.
- A strategy is designed to measure a goal. For
Relevant example, a goal may be for a company to increase the
client base of Stevie's Marketing from five clients to 10
- Make sure that the objectives are aligned with your
by the end of the year. To accomplish this goal, the
core values and with your long-term aspirations.
company needs to do the following:
Rethink your objective if you continue to express
doubts about it representing your core values.  Increase the size of its sales staff.
 Clean up the lead generation software and have
Time-based
management inspect for execution.
- Decide on the appropriate timeline to complete this  Schedule proposal meetings and dates for the
objective and review if that pursuit is dependent on sales manager to close sales.
the completion of other objectives. You want to  Hold weekly meetings on progress.
ensure that you can move forward after an objective's
Objectives
conclusion. There are times where you will need to
consider variables that may affect the timeline of Here are objectives that can lead to the success of the
certain tasks. strategy:
STRATEGY VS. OBJECTIVE: KEY DIFFERENCES  Human resources will hire five new members of
the sales team by the end of September.
A strategy helps you create a plan for how you want to
 Three members of the sales team will work on
achieve a goal, whereas an objective is a list of
inserting the right data into the lead generation
documented steps that assist you in fulfilling the goals
software and complete it by the end of November.
of the strategy.
 The sales manager will be on proposal calls in
The differences between a strategy and an objective order to secure five in-person meetings with
also include: prospects by Thanksgiving and will meet with the
prospects to close five deals to bring them
Purpose
onboard.
  Sales team meetings are held on Monday competencies that are required, and to adopt the
afternoon to report on the progress of these most appropriate leadership style to see the overall
meetings. Jan from human resources will take strategy realized.
notes on progress and action items for the team
to work on during the week. The CEO is But whatever approach is adopted, the following
continually monitoring the progress to ensure the management themes from earlier ideas should be
completion of all objectives by the end of the year. included:
 The need for leadership and sound decision-
making to be present at every level.
CHAPTER 2  The need to manage uncertainty and get the best
from new situations - problems as well as
THE DIFFERENT VIEWS OF STRATEGY opportunities (the challenge of "leading change").
Expected Learning Outcomes  The need to manage in adversity, such as a market
collapse or the failure of a product. An
After studying the chapter, you should be able to... organization's structure and its cultures and
control systems must be flexible enough to enable
1. Describe the different approaches of a strategist swift decision-making and action to get matters
mayadopt, namely, back on course.

 The Classical THE DIFFERENT VIEWS/APPROACHES OF STRATEGY

 The Design Planner
 The Role Player A. Classical Administrator
 The Competitive Positioner In the classical school of management, a set of
 The Visionary Transformer common activities and principles are developed.
 The Self-Organizer These include planning, organizing, commanding,
 The Turnaround Strategist coordinating and controlling. These fine sections are
described below.
2.. Name and describe the situations a business firm
may be into. their typical challenges as well as the
 Planning involves considering the future,
benefits and opportunities.
deciding the aims of the organization and
3. Know the activities to be undertaken in choosing developing a plan of action.
the right strategies approach to adopt.  Organizing involves marshalling the resources
necessary to achieve these aims and
structuring the organization to complete its
UNDERSTANDING THE DIFFERENT VIEWS OF activities. Both roles remain crucial.
STRATEGY  Commanding may be a term that is out of
fashion in the egalitarian, politically correct
In business, strategic thinking requires learning from and empowered world of many Western
discoveries and insight of others. Anyone can set up a organizations, but the concept remains
business but there are more uncertainties in running significant. It is important to achieve the
one. The more observable approaches are presented optimum return from people, frequently the
in this chapter. most expensive component of a business.
 Co-ordinating involves focusing and, in
The different approaches to strategic decision-making particular, unifying people's efforts to ensure
and what will be most effective for an organization will success.
depend on circumstances such as the issues faced by  Controlling involves monitoring that
an organization as well as the style and preferences of everything works as planned, making
its leaders. In a complex world, a mix of approaches adjustments where necessary and feeding this
and styles is needed. The precise mix will depend on information back so that it can of value in the
the personalities of those making the decisions and a future.
good understanding of the strengths and weaknesses This classical-administrator approach to decision-
of the organization, its environment and current making is largely concerned with measuring and
position in order to establish, sustain and acquire the
improving skills and processes within organizations. It vision, communication and negotiation, as well as the
is characterized by hierarchy, usually in the form of need to be able to react quickly to disturbances and to
top-down planning and control, formal target setting change tactics at short notice, are of greatest
and performance measurement, structured importance. The decision-maker's role becomes one
programmes for functional improvements through of learning, supporting and positively enabling rather
"scientific" engineering and a formal organization than directing. The long-term result is incremental
structure. progress rather than a big bang, but it is no less real
and over the long term may be more valuable.
B. Design Planner
The design planning approach emphasized that the D. The Competitive Positioner
principal role of a leader is to plan the development of The competitive positioner understands the power of
an organization beyond the short term. This heralded the external environment and focuses almost
the arrival of strategic thinking in organizations, as exclusively on achieving competitive advantage. The
distinct firm of focusing on continuing management underlying premise is the belief that market power
activities. produces above-average profits in a marketplace
where competition is the defining characteristic. The
In this approach, strategy results from a controlled competitive positioner's main tasks are to understand
and conscious thought process, achieving long-term and decide where the organization is competing and
competitive advantage and success through answering then align it so that it is able to gain advantage over its
questions such as: Where are we now? Where do we competitors.
want to be? How are we going to get there?
Competitive forces include
Design planning requires expertise in two areas: (a) customers and suppliers,
 Anticipating the future environment, with the (b) substitute products (which are increasing in
help of analytical techniques and models; significance because of the flexibility and choice
 Devising appropriate strategies matching the provided by the online marketplace), and
external opportunities and threats to the (c) present and potential competitors.
organization's resources, internal strengths
and weaknesses. Future competitors may not be those that we
recognize today, and new competitors may well enter
Once the strategy s planned, it is simply a matter of the market by changing the rules of competition.
using the techniques of the classical administrator to
plan its implementation by, for example, having a To compete successfully against all this, the positioner
master plan that schedules key tasks and budget- may need to do any combination of the following:
controlled activities. (1) erect barriers to entry to its market;
(2) attract price premiums for its products;
The result was that strategic decision-making had (3) reduce operating costs below those of its
been given a separate focus. Decision types were competitors.
identified, covering strategy, policy, programmes and
standard operating procedures. Lastly, this approach emphasizes market
differentiation and the need to make decisions that
These decisions are build customer loyalty as well as delivering higher
 Strategic, focusing on the dynamic issues of quality and productivity.
products and markets;
 Administrative, concerned with structure and E. The Visionary Transformer
resource allocation; The success of a visionary approach depends
 Operating, focusing on supervision and ultimately on pragmatism: the ability to achieve a
control. vision by listening, acting and learning rather than
adopting plans or rigid approaches. In particular, it is
C. Role Player essential that visions are achievable and that visionary
The role-player approach views the job of the strategic transformers are able to make progress in achieving
decision-maker as more than that of a reflective and them. Scenario planners can help an organization keep
analyzing planner and controller. In this approach,
in touch with reality, both internally and with the
external competitive environment.

F. The Self-Organizer
In a complex and fast-moving business environment,
there is an advantage in being a "learning
organization" that adapts to change. Petere Senge,
author of The Fifth Discipline, highlighted this in 2006.
Self-organizing businesses need to be designed and
led by people who can create an organization where
its constituent parts and, above all, its people
continually self-organize strategic issues, fluidly
developing. In this way, accepted formulas and
perspective are constantly challenged and revised.

To achieve this, organizations need the ability to

develop learning communities (networks of people
together without traditional top-down management
to improve effectiveness) to generate innovative
solutions for commercial opportunities. Innovation
and collaboration are crucial competencies for
operating in environments that change rapidly and are
difficult to control.

G. The Turnaround Strategist

This decision-making approach focuses on turning
around the performance of an organization in decline,
perhaps when a visionary leader has failed. It is
autocratic, ruthless and swift, and it is more context-
specific. Invariably, the requirement is to operate
when an organization is in a state of crisis.

To achieve turnaround success, it is important to

implement new control systems quickly, and to focus
on the reasons for decline and reverse them while
going for the easiest route to immediate growth.
Short-term issues are critical, and a dramatic change
of overall perspective is required.

The turnaround strategist faces several significant

challenges. Many can be classed as cultural challenges
that focus on the need to change not only what is
being done but, crucially, that way that employees
operate and how they work.
CHOOSING THE RIGHT APPROACH

Typically, there are six situations those heading a

business face, each of which presents its own
challenges. Figure 2.1 presents these situations.