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Simons - Chapter 2

The document outlines the fundamentals of successful business strategy, emphasizing the importance of performance measurement and control systems in formalizing and monitoring strategic goals. It distinguishes between corporate strategy, which focuses on resource allocation across businesses, and business strategy, which is concerned with competition within specific markets. Additionally, it introduces the SWOT analysis and five-forces framework as tools for understanding market dynamics and formulating effective strategies.

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6 views24 pages

Simons - Chapter 2

The document outlines the fundamentals of successful business strategy, emphasizing the importance of performance measurement and control systems in formalizing and monitoring strategic goals. It distinguishes between corporate strategy, which focuses on resource allocation across businesses, and business strategy, which is concerned with competition within specific markets. Additionally, it introduces the SWOT analysis and five-forces framework as tools for understanding market dynamics and formulating effective strategies.

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jeromewevers717
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Basics for Successful Strategy TT iis tamer tovews te underionings for a successful business strategy. Some readers may have already studied parts of this material in a business-strategy or business-policy course, For others, the ideas and concepts will be new. Whatever your level of familiarity with this topic, we recommend that you review this chapter because the remainder of our analysis in the text builds on concepts that we introduce here. Business strategy is at the root of effective performance measurement and control for two reasons. First, performance measurement and control systems provide the ana- lytic discipline and communication channels to formalize business strategy and ensure that strategic goals are communicated throughout the business. Second, performance measurement and control systems are the primary vehicle to monitor the implementa- tion of these strategies. ‘The techniques and systems that we discuss in this text help managers of all orga nizations answer two critical questions: 1, How can we be sure that people understand what we are trying to achieve? 2. How can we ensure that we are reaching our strategic goals? CORPORATE STRATEGY AND BUSINESS STRATEGY Strategy is a word that is used in many different ways in business and other organiza tional settings. The first distinction that is important for our purposes is the distinction between corporate strategy and business strategy. Corporate strategy defines the way that a firm attempts to maximize the value of the resources it controls. Corporate strategy decisions focus on where corporate re- sources will be invested. Questions such as “What businesses should we compete in?” or “What level of resources should we invest actoss our portfolio of businesses?” arc typi cal of corporate-level resource allocation decisions. For example, managers at Boston Reiail can choose to compete in women’s clothing or in some entirely different product category. They may wish to branch out into men’s clothing, or even to home furnishings. In time, it may be possible to leverage existing distribution resources to enter an entirely unrelated business, such as apparel manufacturing or wholesale distribution. These deci- sions—which businesses and segments of the market to compete in—are necessary whenever a corporation decides to expand its scope beyond a single product market. rom Chapter 2 of Performance Measurement and Control Systems for Implementing Strategy: Text and Cases, First Baiion Robert Simons, Copyright © 2000 by Pearson Education, Inc. Published by Pearson Prentice Hall. All rights reserved, BASICS FOR SUCCESSFUL STRATEGY Business strategy, by contrast, is concerned with how to compete in defined prod- uct markets. Once managers have decided to compete in the women’s clothing market in Boston, they must attract customers and build market share, How will they differentiate themselves from competitors to create value in the marketplace? How can they offer something unique and valuable to their targeted customers? These are the questions that we tackle in this chapter. Figure | illustrates the distinction between corporate strategy and business strategy. Performance measurement and control techniques are important for the successful implementation of both corporate strategies and business strategies. The majority of top- ics in this text focus on creating value in specific product markets, which is the major issue for managers who run businesses. However, for firms operating in multiple mar- kets, special measurement and control systems are needed to implement corporate-level strategy effectively, The formal processes for formulating and implementing business strategy can be captured in the cascading hierarchy illustrated in Figure 2. Strategy formulation and im- plementation are multifaceted concepts, The cascading hierarchy of Figure 2 illustrates, that a mission—the broad purpose for which an organization exists—guides the forma- tion of business strategy. Business strategy, in turn, determines performance goals and measures, and, ultimately, patterns of action, FIGURE 1 Corporate and Business Strategy Corporate Strategy 4

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