Business Strategy Fundamentals

Introduction to the Strategic Process

• Strategic management is about creating the future and thinking strategically.
• Dynamic and static analyses are used to predict the future.
• Financial planning is crucial for achieving the current budget.
• Environments can be stable, complex, dynamic or uncertain; turbulent implies complexity, dynamism and uncertainty.
• A strategic attitude is extroverted, proactive, anticipatory and self-critical.

Types of Environment

• Complexity: the diversity and difficulty in controlling changes.
• Dynamism: speed and depth of change.
• Uncertainty: difficulty in predicting future developments.

Strategy: Concept and Components

• Strategy is about key long-term business issues.
• It involves a long-term management approach.
• Gaining a competitive advantage is crucial.
• Stakeholder expectations must be considered.
• Strategy involves resource allocation to achieve goals.
• Strategy is the long-term direction of an organization.
• It achieves competitive advantage through the configuration of resources and capabilities, achieving stakeholder expectations and needs.

Scope of Activity

• Scope of activity: the set of businesses or activities in which a firm operates now and wants to operate in the future.
• Businesses are defined as technology, functions and market.

Resources & Capabilities

• Resources and capabilities are essential for competitive advantage.
• Tangible resources include physical and financial resources.
• Intangible resources include human capital, reputation and organizational systems.
• Capabilities are the ability to put resources together to do something.

Competitive Advantages

• Competitive advantage is about being better than competitors.
• Differentiation is about offering unique products or services.
• Cost advantage is about offering lower costs.

Synergy

• Synergy is when the value of a whole system is different from the combined values of its parts.
• Improved management results from coordinating activity scope, distinctive capability development and competitive advantage.

Classic Process of Strategy Formulation

• Includes mission, vision, values, environmental and internal analysis, strategy selection, implementation and control.
• A cyclical process that is constantly assessed and updated.
• Strategic fit & organizational fit are important considerations.
• Internal and external analysis are needed for successful strategies.
• Rational and emerging processes are both considered.

Levels of Strategy and Strategic Business Units (SBU)

• Corporate strategy defines the relationship of the company with the environment.
• Business strategy defines how to compete in each business.
• Functional strategy defines how to optimize resources within functional areas of the company.
• The interconnectedness of these levels is crucial .

Corporate Governance

• Mechanisms of control guide company management and ensure stakeholder interests align.
• External controls involve markets for goods and services, capital, and labor.
• Internal controls involve incentive systems and direct supervision mechanisms.

Mission, Vision, Values, and Objectives

• Mission: the identity and personality of the company (present and future).
• Vision: how the organization should be in the future.
• Values: beliefs and attitudes that guide the organizational culture.
• Objectives: measurable goals to achieve the mission and vision.

Stakeholder Mapping - Power/Interest Matrix

• Stakeholders are groups affected by and affecting the organization.
• Identifying stakeholder power and interest can help management and stakeholders.
• Understanding their influence can help develop successful strategies.

Corporate Social Responsibility

• CSR is the set of obligations beyond legal requirements that businesses feel a need to fulfill
• Includes economic, social and environmental factors.
• CSR considers the impact on stakeholders and the company's role in society.

External Analysis (Advanced Environmental Analysis)

• PESTEL analysis (Political, Economic, Social, Technological, Environmental, Legal) identifies macro-environmental factors.
• The purpose of external analysis is to understand current and potential influence of the environment on a company.
• Identifying threats and opportunities from the environment is crucial for strategizing.
• The five forces framework by Porter helps understand industrial structure, like the threat of new entrants and supplier/buyer power.

Intra-Industry Analysis (Strategic Groups)

• Strategic groups are aggregations of similar companies within an industry by following similar strategies, characteristics and actions.
• Strategic groups can be mapped on a 2-dimensional map using key variables (size, technology, customer focus, etc.).
• Analysing similarities within groups and contrasts between groups can show useful points about the industry structure.

Advanced techniques for environmental analysis

• Projection of past situations into the future according to certain assumptions (extrapolation).
• Foresight techniques aim at projecting future possibilities by considering and modelling uncertainties.
• The creation of scenarios can be done by different methods, one of them is the Delphi method; scenario method.

Internal Analysis (Resources, Capabilities and Competitive Advantage)

• Internal analysis studies a company's resources and capabilities and how they can create competitive advantage.
• Tangible resources are the physical and financial resources available to a company (property, equipment, cash).
• Intangible resources are less tangible or observable assets like knowledge, reputation or organizational attributes.
• Capabilities are the abilities to efficiently combine resources for different activities; it's a more dynamic concept than resources and it's how resources are combined in order to perform activities.
• Competitiveness depends on the proper identification of internal strengths and weakness that will determine if a company has a competitive advantage or not and comparing them against the competition.

Competitive Strategies

• A competitive advantage is a characteristic that sets a company apart from its competitors and enables it to achieve superior profitability.
• Companies can gain this advantage by focusing on differentiation, low-cost or focus (combination of these).
• The choice of competitive strategy will affect many other crucial aspects like the target market and the resources needed.

SWOT Analysis

• SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) consolidates internal and external analysis findings.
• Strengths and weaknesses assess internal attributes, whereas opportunities and threats come from external ones.
• SWOT helps identify the proper strategies and their alignment.

Corporate Strategies

• Diversification strategies allow companies to enter new product markets, either related or unrelated.
• Internal and external growth strategies are both methods to facilitate diversification strategies.
• A portfolio analysis helps manage the balance between various organizational units.