Corporate Strategy Overview

Corporate Strategy Study Notes

• Definition of Strategy: Strategy originates from Greek words meaning "army" and "to lead." It involves the long-term direction and scope of an organization, achieving competitive advantage, and aligning resources to meet stakeholder expectations.

Key Concepts in Strategic Management

• Levels of Strategy:
  • Corporate Level: Overall direction for multi-business firms (e.g., resource allocation).
  • Business Level: Competitive strategy within specific markets or business units.
  • Functional Level: Coordination of individual functions (e.g., marketing, finance) supporting business-level strategy.
• Why Strategy Matters: Strategies encourage a holistic organizational view, aid future planning and adaptation, and contribute to long-term sustainability and competitive advantage.

Key Components of Strategic Decisions

• Context: External environment and industry dynamics.
• Content: Specific strategic actions and plans.
• Process: Implementation and development of strategies.

Strategic Fit

• Firms' goals and values should be aligned.

Adding Value

• Defined as market value of outputs minus input costs (Lynch, 2018).
• Crucial for creating and maintaining value amid change (e.g., McDonald's case study).

Skills for Strategic Thinking

• Integrating diverse knowledge.
• Simplifying complexity and addressing uncertainty.
• Evaluating options and implementing decisions effectively.

Competitive Advantage

• Refers to significant benefits an organization has over competitors, increasing value in the market (Lynch, 2018).

Porter's Generic Strategies

• Cost Advantage: Aiming to be the lowest-cost producer.
• Differentiation Advantage: Offering unique products or services (e.g., quality, branding, design).
• Focus Strategy: Targeting a specific market segment to achieve cost or differentiation advantage.
• Hybrid Strategies: Combining cost and differentiation strategies effectively (e.g., IKEA, Dell).

Sustainable Competitive Advantage (SCA)

• Defined as an advantage competitors find difficult to imitate, relying on environmental consonance (Lynch, 2018).

Conditions for Sustainable Competitive Advantage

• Recognition of Change: Monitoring market shifts and reacting flexibly.
• Innovation: Maintaining relevance through internal creativity.
• Isolating Mechanisms: Barriers to imitation, like non-disclosure of key information, strong supplier relationships, and patents.

Approaches to Strategy, Environment-Based View (EBV), and Environmental Analysis

• Prescriptive Strategy: Defined objectives and pre-planned processes (e.g., Ansoff, Chandler); inflexible, mismatch between intended and realized strategies.
• Emergent Strategy: Adaptive and evolving during implementation (e.g., Mintzberg, Pettigrew); less control, challenges in resource allocation.
• Environment-based view (EBV): Strategy focuses on external opportunities and threats. tools like PESTEL and Porter's 5 forces. "Fit" resources to market needs.
• Resource-based view (RBV): Strategy leverages internal resources and competencies. Focus on unique strengths (core competencies). "Stretch" resources to shape markets.

Environmental Analysis

• Purpose: Identifying opportunities and threats to devise proactive strategies.
• Levels:
  • Macro-Environmental Analysis: PESTEL analysis (Political, Economic, Sociocultural, Technological, Environmental, Legal); scenario analysis (e.g., Shell's New Lens).
  • Industry Analysis: Porter's 5 forces (buyer/supplier power, competition).
  • Intra-Industry Analysis: Competitor profiling and strategic group analysis.

PESTLE Analysis

Provides insights into external macro-environmental factors influencing an organization. Categories: Political, Economic, Social, Technological, Legal, Environmental.

Resource-Based View (RBV) and Resource Analysis

• Definition: Successful companies develop a strong resource base to support market opportunities.
• Key Concepts:
  • Fit: Aligning resources with external opportunities.
  • Stretch: Leveraging unique resources to create competitive advantages.
  • Resource Development: Focusing on building physical, human, and knowledge assets.
• Categorization of Resources:
  • Tangible: Physical assets (e.g., equipment, finances).
  • Intangible: Relationships, competencies, and reputation.
• VRIO Framework (Barney, 2002): Evaluates resource contributions to competitive advantage (valuable, rare, inimitable, organized).

Core Competence Analysis

• Definition: Skills, knowledge, and technologies providing unique customer value.
• Characteristics: Adding value, differentiation, transferability across the organization
• Strategic implications: Identifying essential competencies for future goals and filling gaps.

Value Chain Analysis

• Purpose: Analyzing value-adding activities contributing to competitive advantage.
• Components: Primary activities (inbound logistics, operations, outbound logistics, marketing, and service); support activities (infrastructure, HR, technology, procurement).

Strategic Choice (TOWS and SAFe Frameworks)

• TOWS Matrix: Extending SWOT analysis to identify actionable strategies based on internal/external factors. Maps strengths/opportunities, strengths/threats, weaknesses/opportunities, and weaknesses/threats.
• SAFe Framework: Evaluating strategic options based on suitability, acceptability, and feasibility. Includes stakeholder expectations, resource availability, and risk/return balance.

Strategic Choice Criteria

• Consistency: Aligning with organizational mission and objectives.
• Suitability: Leveraging strengths, addressing opportunities, and mitigating weaknesses/threats.
• Validity: Based on sound analysis and assumptions.
• Feasibility: Practical implementation with available resources.
• Risk/Return: Balancing acceptable risks with potential returns.
• Stakeholders: Acceptable to internal and external stakeholders.

Strategic Change

• Pressures for change: Environmental shifts (economic, competition, legislation), business relationships, technology, and people (cultural shifts, expectations, work methods).
• Kurt Lewin's Change Model: Unfreezing, moving, refreezing.
• Resistance to change: Anxiety, opposition to strategy, workload concerns.
• Overcoming resistance: Open communication, stakeholder involvement, support/incentives, symbols of change.
• Perspectives on change: Discontinuous (radical, organisation-wide, swift); Continuous (gradual, evolutionary).

International Differences in Change Approaches

• Discontinuous (USA/UK): Top-down, bureaucratic, reactive to short-term pressures.
• Continuous (Japan/China): Team-oriented, long-term focus, greater employee involvement.

Innovation Strategy

• Types of Innovation: Invention, extension, duplication, synthesis.
• Innovation sources: Market pull (market need), technology push (technological advancements); specific sources like unexpected successes/failures and industry changes.
• Innovation strategy perspectives: Planned/prescriptive (analyzing changes/resource allocation); emergent/controlled chaos (free idea generation, adaptive practices).
• First-mover advantage/disadvantage: Establishing standards and gaining efficiencies but potentially at high development costs or with competitive threats that offer improvements.
• Strategic Options for Technological Innovation: Block, run, team-up strategies.

Blue Ocean Strategy

• Definition: Creating uncontested market spaces, where demand is created, competition is irrelevant, and rapid profitable growth is possible.
• Key concepts: Compete differently, create new market spaces, redefine value, align activities to increase value and reduce costs.
• Characteristics: Rejects trade-offs, market boundary reshaping, innovative use of existing technologies (e.g., Ford assembly line).

Barriers to imitation:** economic advantages, hard to replicate cognitive and organizational factors.

Entrepreneurial Strategy & Effectuation

• Differences Between Small and Large Firms:
  • Structure: Small firms are often flat, unstructured, whereas large firms are bureaucratic.
  • Resources: Small firms have limited resources, whereas large firms have deep resources.
• Strategic Planning in Small Businesses: Challenges include lack of resources, focus on operations over long-term strategy, and susceptibility to external change.
• Benefits: Clarity of objectives and resource allocation; improved financial management; attracting investors.
• Effectuation: Focuses on starting with available means and iterating based on stakeholder commitments.
  • Principles of Effectuation: Bird-in-hand, affordable loss, crazy quilt, lemonade, pilot-in-the-plane.

Explore the fundamentals of corporate strategy, including its definition, key levels, and the importance of strategic management in achieving competitive advantage. This quiz will help you understand the components that guide strategic decisions within an organization.