C HAPTER 1: I NTRODUCING STRATEGY

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l OM oA RcPSD |26 683 34 1.2 What is strategy?

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Strategy: The long term direction of an organisation.

oThe long term strategies are typically measured over years, decades or more. This long-term perspective is emphasised by the ‘three horizons’. This theory is based on managers who need to avoid focussing on the short-term issues of their existing activities. The three horizons framework suggests that every organisation should think of itself as consisting of three types of business or activity, defined by their ‘horizons’ in terms of years.

Horizon 1 business:

the current core business.

Horinzon 2 business:

emerging activities that should provide new sources of profit.

Horizon 3 possibilities:

nothing is sure, risky start-ups or research & development projects.Pushing out 1 as far as possible, while looking to horizons 2 and 3 ‘uncertainty’.oStrategic direction. Sometimes this is a coherent pattern over time and are set according to long- term objectives. Usually maximsing profects is the strategic direction, howerver profits are not always the applicable (private sector/charity organisations). Objectives behind the strategic direct need close research.oOrganisations involve compex relationships, both internally (people within the company) and externally (suppliers, customers, alliance partners, regulators and shareholders). Strategy is crucially concerned with an organisation’s external boundaries (what to include and what to keep outside).Good strategy is about managing as well as strategizing.

Three main levels of strategies:

oCorporate-level strategy = concerned with the overall scope of an organisation and how value is added to the constituent business of the organisational whole.Being clear is important, the basis of other strategic decisions (includes; geographical scope, diversity of products or services, acquisitions of new businesses).oBusiness-level strategy = about how the individual businesses should compete in their particular markets, also called ‘competitive strategy’.It concerns issues as innovation, appropriate scale and response to competitors move (might be; stand-alone businesses, entrepreneurial start-ups of units within a larger corporation).oOperational strategies = how the components of an organisation deliver effectively the corporate- and business-level strategies in terms of resources, processes and people.Each level needs to be aligned with the others.Strategy statements: summarize of the organisation’s strategy. Less than 35 words long.It should have three main themes: the fundamental goals that the organisation seeks (vision/mission/objectives), the scope or domain of the organisation’s activities and the particular advantages or capabilities it has to deliver all of these.Mission: the central to the strategy and keeps the focus (‘What business are we in?’) Vision: Relates to goals and refers to the desired future state (‘What do we want to achieve?’) Objectives: Quantifiable statements of the organisation’s goals over some period of time (‘What do we have to achieve in the coming period?’)

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l OM oA RcPSD |26 683 34 Scope: Refers to three dimensions. Customers or clients; geographical location; and extent of internal activities.Advantage: How the organisation will achieve the objectives in its chosen domain. In order to achieve a particular goal, the organisation needs to be better than others seeking the same goals.A strategy statement is not only for the organisation itself, it could also be necessary to persuade investors and lenders, to reassure external clients and to inspire volunteers and donors.

1.3 Working with strategy Managers have to communicate strategy to their teams, and will achieve greater performance from them the more convincing they are in doing so. Strategy is not just about abstract organisations: it is a kind of work that real people do.

1.4 Studying strategy

The book covers equally the three main branches of strategy as a subject:

oStrategy context Refers to both the internal and the external contexts of organisations. All organisations need to look at the opportunities and threats of their external environments. Industry analysis looks at what makes industries attractive (or not) to operate in. Cultural analysts have used sociological insights into human behaviour. Resource-based view researchers focus on internal context (the unique characteristics of each organisation).oStrategy content Concerns the content (or nature) of different strategies and their probability of success. The focus lies on the merits of different strategic options. Strategy and performance researchers started, they examine innovation strategies, different kinds of internationalisation and all the complex kinds of alliance and networking strategies. ‘Which strategies pay best and under what conditions’.oStrategy process Examines how strategies are formed and implemented. Research here provides a range of insights to help managers of managing strategy (strategic planning, choice and change and strategy-as- practice researchers).Issues need to be explored from different points of view. A complete analysis will typically need the insights of economics, psychology and sociology.The Exploring Strategy Model: Includes understanding the strategic position of an organisation (contexts); assessing strategic choices for the future (content); and managing strategy in action (process).At first you have to understand the strategic position, then making strategic choices and finally turning strategy into action. Position, choices and action should be seen as closely related, and in practice none has priority over another. The three elements (circles) are overlapping and non-linear.Strategic position: Is concerned with the impact on strategy of the external environment, the organisation’s strategic capability (resources and competences), the organisation’s goals and the organisation’s culture.oEnvironment Organisations operate in a complex political, economic, social and technological world.oStrategic capability Each organisation has its own strategic capabilities, made up of its resources (machines and buildings) and competences (technical and managerial skills). Capability regards to the strengths and weaknesses.oStrategic purpose Most organisation claim for themselves a particular purpose; encapsulated in their vision, mission and objectives. What does it seek to achieve?oCulture Organisational cultures can also influence strategy. How does culture shape strategy?

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