Strategic Management Thompson 2014 Chapters 1-2

PART ONE
Understanding strategy and

strategic management
Chapters 1 and 2
1. What is strategy and

who is involved?
2. Business and revenue models
Strategic Management: Awareness and Change 7e

Thompson • Scott • Martin
© 2014 Cengage Learning EMEA
Learning Objectives
Having read to the end of these chapters, you should be able to:
• define strategic management and strategic change, distinguishing

between different types of, and perspectives on, strategy (Section 1.1)
• comprehend the importance of strategy as practice (Section 1.2)
• apply Thompson’s E–V–R (Environment–Values–Resources) Congruence
model to organizations and their strategies (Section 1.3)
• clarify the three broad approaches to strategy creation, namely visionary
ideas, planning and emergence (Section 1.4)
• appreciate how different views of strategy have developed (Section 1.5).
• appreciate how organizations utilize business models to make strategic
decisions and identify ways of creating a winning business model (Section
2.1)
• understand how revenue models help organizations to maximize their
performance (Section 2.2)
• through examples, realize different types and contexts of business model
(Section 2.3).

Strategy Explained
Organizations that succeed and sustain that success over a period
of time will be able to demonstrate a number of achievements:
• there is a clear purpose for what they are doing – having
mastery of the so-called ‘big picture’. (see Fig 2.1 later)
• they working towards this big picture with (co-ordinated)
activities which cut across the various functional areas of the
business – the ‘little picture’.
Strategies are means to ends; involving:
– clarifying the desired ends
– mapping out a route for achieving them (creating strategies)
– putting those strategies into practice (implementation)
– changing what you are doing tactically in the face of competition and
unexpected issues that arise
– evaluating progress and performance.

What are Strategies?
Strategies, then, are means to ends
• relevant for the organization as a whole
• and for the individual businesses and/or functions
• they all have lifecycles and need changing, either marginally
or dramatically, at certain times.
To some extent all managers are strategy makers
• strategic management also involves smaller changes in
strategies for individual products and services and in particular
functions such as marketing and operations, in which decisions
have a strategic impact and contribute to strategic change.
• Strategic management is complex and fascinating but with no
‘right answers’: it is about issues and perspectives on
problems.

Explaining Strategic Management
Strategic management is a process involving creation,
implementation and change, with a number of components:
1. the strategy itself: the establishment of a clear direction for the

organization and for every business, product and service, and a means
for getting there which requires the creation of strong competitive
positions.
2. excellence in the implementation of strategies in order to yield effective
performance.
3. creativity and innovation to ensure that the organization is responsive
to pressures for change and that strategies are improved and renewed.
4. the ability to manage strategic change, both continuous, gradual,
incremental changes and more dramatic, discontinuous changes.

Five Ps of Strategy and Strategic Thinking
Mintzberg (1998) illustrates five Ps on strategy:
– Perspective – this is the ‘big picture’ discussed above
– Pattern – making sense of the past, bringing the organization to its
– Position – a clear understanding of the present
– Plan – looking ahead and trying to discern a clear picture of possible
courses of action
– Tactic – activities at the ‘little picture’ level in a dynamic and competitive
world.
Further, strategic thinking embraces the past, present and future:

• Figure 1.2: how strategies which link competencies with a
strategic vision for the future embrace learning from the past,
an awareness of existing competencies and some insight into
likely future trends, and organizational learning is required.

Figure 1.2 Organizational Learning

Strategic Thinking
• A reflection of how present strategies have emerged over time

• An understanding of current competencies and the strategic
value of particular resources and the linkages between them
• Knowledge of existing competitors and what they are doing at
the moment – and preparing to do in the future
• An appreciation of possible new sources of competition
• An awareness of wider environmental opportunities and threats
• An ability to share information with, and thus learn from, external
partners and contacts, including suppliers, distributors and
customers.

Synergy and Perspectives
on Strategic Analysis
There are three basic synergy opportunities:
1. Functional – sharing facilities, competencies, ideas and best practice.
2. Strategic – complementary competitive strategies.
3. Managerial – compatible styles of management and values in different
functions and businesses.
Three distinct perspectives of strategic analysis:

1. The strategic environment
2. The business as a competing organization
3. The individual strategist.

Figure 1.3 Levels of Strategy

Strategy as Practice & E-V-R Congruence
• Strategy and strategic management can be tacked from a
theoretical perspective
• But we also need to also factor in strategy as practice and look
at how subjectivity influences a more theoretical objective
perspective (Fig 1.4).
• Furthermore, as Fig 1.5 illustrates, it is important to ensure
congruence of:
– environment: key success factors;
– values and culture that determine whether the environment
and resources are currently matched, and whether they stay
congruent in changing circumstances; and
– resources: competencies and capabilities.

Figure 1.4 Strategy as Practice

Figure 1.5a E-V-R Congruence

Figure 1.5b-d E-V-R (In)congruence

Figure 1.6 Congruence Restated

Strategy Creation and
Emerging Views of Strategic Management
How strategies are changed and by whom and how
new strategies are created:
• Opportunities for change (Fig 1.7)
• Planning and strategy creation (Fig 1.8)
• Adaptive and incremental change
• Visionary and entrepreneurial leadership
• Strategy at work (Fig 1.9)
• Emerging views of strategy (Fig 1.10)
• Strategic disturbance.

Figure 1.7 Strategic Change

Figure 1.8 Strategic Creation

Figure 1.9 Strategy at Work

Figure 1.10 Emerging Views of Strategy

Chapter 1 Select Cases
• 1.1 The Low-Price, No-Frills
Airline
• 1.3 McDonald’s
• 1.4 Richard Branson and Virgin
‘Overseas’

The Business and Revenue Models
The Business Model (Fig 2.1):
– is a clear picture what the organization is or isn’t
– identifies who will buy its products or services and why
– is a vehicle to deliver the purpose or mission (Chapter 3).
The Revenue Model focuses on activities, what business does to:
(a) conserve resources,
(b) manage its resources efficiently and
(c) prioritize those resources that create and build value
for customers.
In the context of our framework for the book, we are here asking:
- Why are our profits at the level they are – what is the trend – are we doing
better or worse than our leading rivals?
- Where are they going with current strategies – up or down?
- How do we improve the numbers – what do we have to do?

Figure 2.1 The Business Model

Figure 2.2 Strategic Evaluation and Choice

Summary
Summary of coverage in Chapters 1 and 2:
• Strategy explained and what are strategies

• Five Ps of strategy
• Strategic thinking and synergy
• Strategy as practice and E-V-R congruence
• Strategy creation
• The Business and Revenue Models

Main Points: What is it?
• Strategies are the means through which
organizations fulfill their mission and
objectives
• Strategic management – process of
connecting strategies with implementation,
innovation and change

Main Points: What are the
levels?
• Corporate:__________________
• Competitive:________________
• Functional: _________________

Main Points: How effective is it?
• Congruence with the organization’s:
– Environment (Opportunities/Threats)
– Resources (Strengths)
– Values (Purpose and Mission)

contexts?
Small Businesses
Targeted products and markets
Typically low resource base
Corporate strategic level inappropriate
Main challenge is scaling

Main points: What are the
contexts?
Global companies
Emphasis on corporate strategy
Seeking low-cost supplies and production
for competitive advantage
Main challenges are loss of local identity
and financial management

contexts?
Not-for-profit Organizations
Churches, museums, zoos
Profit objective is to reinvest or cause-
oriented, not reward stakeholders
Challenge is securing cash flow – seems
commercial and conflicting values

contexts?
Public-Sector Organizations
Government agencies
Increasingly privatized – conflicting interests
in stakeholders
Service-oriented, but influenced by political
agenda and private investments

Chapter 2 Select Cases
• 2.1 No-Frills Retailing (comparing
business models)
• 2.3 The Business Model for Dell
Computers and Enterprise Cars
(assessing business models)
• 2.4 Cirque du Soleil (adding value)
• 2.5 Daphne Shoes (changing a business
model)

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PART ONE

Understanding strategy and

1. What is strategy and

Strategic Management: Awareness and Change 7e

• define strategic management and strategic change, distinguishing

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

1. the strategy itself: the establishment of a clear direction for the

Strategic Management: Awareness and Change 7e

Further, strategic thinking embraces the past, present and future:

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

• A reflection of how present strategies have emerged over time

Strategic Management: Awareness and Change 7e

Three distinct perspectives of strategic analysis:

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Summary of coverage in Chapters 1 and 2:

• Strategy explained and what are strategies

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

Strategic Management: Awareness and Change 7e

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