Subject Strategic Business Leader (SBL)

Lecturer Mirjalni Janarthanan

Handout Number 3

Lesson Chapter 1 – The strategy process

Achievers ®

No. 39, Bauddhaloka Mw, Col-04 Tel: 011 759 0001 | 077 789 5900
Learning outcomes

Understand the overall Understand the multiple Apply the understanding

strategy process perspectives of strategy to scenarios

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Key topics of discussion

1) The 5 Ps of strategy.
2) The elements of strategy.
3) The levels of strategy.
4) Approaches to strategy formulation.
5) The strategic lens.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)
 The most commonly used
word in a board room
is……..strategy.

• ‘This strategy is very outdated’.

• ‘Let’s rethink our strategy’.

• ‘A new strategy will respond to this level of

competition’.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 What does strategy
mainly try to address?

A solution to changing and challenging

business environment.

It addresses where your organization is

going, how you'll win, who must do
what, and how you'll review and adapt
your strategy development.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Mostly strategy is a misunderstood and an imaginary concept….

Is it a plan?
Most people will say strategy is
a plan.
Can you plan it?

Is it a mere reaction to
environmental
conditions?

Who develops it? the top or

bottom level in an organisation. It is surprising to learn how the
‘actual process’ works.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Top down or bottom up?

• Each approach can be quite simple.

• The top-down approach goes from the general to the specific.

• And the bottom-up approach begins at the specific and moves to the general.

• These methods are possible approaches for a wide range of endeavors, such as
goal setting, budgeting, and forecasting.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Is strategy a plan?

The Oxford Dictionary defines a plan as ‘something that

you intend to do or achieve’.

Intentional is something which is rationally

formed and well thought out prior to the execution.

Plans may include business strategy, sports strategy,

game plan etc.

However can it be always planned?

Is strategic planning just another ‘Paradox’?

But what companies are

actually doing may be very different from their plan.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Is strategy really as straightforward as a plan?

The idea for the Post-it note was conceived in 1974 by Arthur Fry as a The company was 3 M
way of holding bookmarks in his hymnal while singing in the church
choir. He was aware of an adhesive accidentally developed in 1968 by
fellow 3M employee Spencer Silver. No application for the lightly sticky
stuff was apparent until Fry's idea. The product was

Kellogg was working with his brother Will on a new kind of wheat meal
for patients at the sanitarium when the process that resulted in Corn The grain was corn
Flakes was accidentally discovered. Rolling out wheat dough that had
been forgotten overnight, the brothers discovered that instead of loaves
of bread they got thin flakes. The company
and the product
was

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Is strategy really as straightforward as a plan?

Ferruccio Lamborghini, a successful tractor

manufacturer and a Ferrari owner, was not satisfied That man was Ferracio
Lamborghini!
with his Ferrari and walked up to Enzo Ferrari with
suggestions to improve the car. The discussion was
short and unpleasant, driving Ferruccio furious
enough to start his own car manufacturing. He decided to
make sports cars
Enzo Ferrari told Mr Ferracio ‘What do you know to settle this bet
about sports cars you only know about tractors!’ and Instead we
have today

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Is it a plan or
something else?

• Strategy is an imaginary concept /

notion.

• Therefore imaginary concepts need

to be looked from different viewpoints
to understand its true nature to avoid
confusion.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

What do you see?

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Strategy from different
viewpoints
• Strategy is not as direct as it seems.

• By considering different angles of strategy, we can

gain a deeper understanding of the situation, generate
more ideas, and avoid biases and assumptions.

• Viewing strategy from multiple aspects is a valuable

skill that can help businesses plan and solve problems
more effectively.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

1) The 5 Ps of strategy

➢ Henry Mintzberg argues that strategy

can be understood as 5 Ps.

✓ As a Plan
✓ As a Ploy
✓ As a Position
✓ As a Pattern
✓ As a perspective.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Dolphin's hunting strategy – Strategic ploy

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 What is so special about the lyrebird?
Natures greatest imitator - Strategic ploy

Lyrebirds are capable of imitating

almost any sound. As well as their
own calls, clicks and song, you will
usually hear them mimicking loud
clear sounds made by other birds and
mammals, including humans. They
have been heard to mimic the sounds
of chainsaws, horns, alarms and even
trains.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Business examples - Strategic ploy

A grocery chain might threaten to expand a

store so that a competitor doesn't move into the
same area.
A telecommunications company might buy up
patents that a competitor could potentially use
to launch a rival product.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Business examples - Strategic ploy

Boeing announced the development of Sonic Cruiser, a large airplane that would be really big and
accommodating for a large number of customers.

To remain in the competition, Airbus also took a step ahead and decided to give tough competition to
Boeing by developing the A380 that was intended to enter the market through a different route.

However, after some time, Boeing left the project and introduced 787 Dreamliner as the
replacement. This ploy in Boeing’s strategy left Airbus stranded at a place from where it was almost
impossible to go back.

This trick by Boeing caused Airbus, their European rival, to suffer a huge loss – at the beginning of
their new venture.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Strategy as a position – In the past Vs Today…..

Industry Past Present

Dairy ‘Cow’ milk which is the standard. Vegan solutions, other types of milk (goat,
camel).

Apparel High street stores. Online shopping.

Education Standard courses - Physical lectures offer face-to- Online education / E – Learning.
face interaction.

Watches Luxury, expensive, mechanical. Smart watches, Fitness watches.

Automobiles Big engine, large cars, standard colours. Electric, efficient small engines, SUVs, bold
colours.

Telecommunication Basic call and text message features. Smart phones with various features.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Business examples - Strategy as a position

Apple positioned itself in the music and media industry.

Southwest Airlines positioned itself in the market
iTunes integrated very well with all the devices,
as a low-cost airline, choosing not to compete with
including Macintosh computers. This gave them an edge
larger airlines on long-haul and international
over their competitors for people looking for computers
flights, and instead focusing on short-haul, point-
to serve as media centers. Apple combined design,
to-point flights with low fares, making air travel
ergonomics, and ease of use in a device and then tied it
accessible to a wider customer base. A unique take
into a platform that kept that device updated with music
on Southwest Airlines Strategy.
without any hassles.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The pattern of strategy – Business examples

Apple's strategy of decreasing the prices of its older

McDonald’s Strategy of consistency and
models on the same day as the new ones are
replicability across its global outlets shows a
released. This allows the company to increase
pattern. Despite changes in the market and
combined device and services profits by dropping the
adaptations to local tastes, the fast-food chain
entry-level price. Meanwhile, the top-end price is
maintains a pattern of speedy service and
kept the same since they view it as delivering
familiar, reliable product offerings.
sufficient units to meet supply and demand curve
equilibrium.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The pattern of strategy – Business examples

2. Star wars approaches Mattel to make

1. Mattel Inc has the 3. Star Wars then approached
action figure but Mattel turned down the
competencies in making famous ‘Kenner’ another toy maker
offer as they saw no demand for ‘boys
barbie dolls. to license this production.
toys’.

4. The toy became a best seller 5. Mattel now realizes the 6. The toys did not perceive well in the
and made action figures as well missed opportunity and market therefore Mattel decided to
with revenue around $100m made toys for a popular make their own organically made toys
during 1978. space TV show. to differentiate the toy in the market .

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The pattern of strategy – Business examples

8. They made ‘He 9. Since this cartoon was so

7. Mattel created their own prime
Man’ a role model that gave children successful that they
time cartoon since the movies
moral lessons since parents were the decision decided to go after the teen girls
helped to sell the toys.
makers to buy toys. Market by introducing ‘She-Ra’.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Business examples – Perspective of strategy

Subway perceives itself as a company that Harley Davidson has become much more than a simple
emphasizes healthy food with excellent service. In Motorcycle Company. Owning a Harley Davidson is
every country it operates around the world, Subway associated with lots of things. Harley Davidson is almost
maintains a consistent approach to quick service, a “lifestyle”. That is why everyone loves its Motorbikes.
standardized processes, low cost, healthy options,
and clean dining areas. Here, strategy is a They created different versions to Test the Market.
perspective, with its content consisting not just of a Depending on the Market reaction, they acted
chosen position but of an ingrained way of perceiving accordingly.
the world.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 What exactly is strategy trying to achieve?

Expectations
Stakeholders End result

Capabilities - Vision, mission, goals

Resources and and objectives.
competencies
Rapidly changing and
challenging business
Configure resources to take environment
advantage of environmental
opportunities and challenges

Strategy is the course of action

Organisation

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

So what is strategy about?

Either intended or unintended course of action an organisation follows.

Which configures its resources and competencies (organizational

capabilities).

To direct itself within a rapidly changing and

challenging business environment (strategic positioning).

To achieve a Competitive advantage and survive in that environment (grow

and compete).

To fulfil stakeholder expectations (the main reason why organizations exist

in the first place!).

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

2) The elements of strategy

➢ Think of three elements that make up organizational strategy which is

similar to elements which make up any matter, that is competitive
strategy, financial strategy, investment and resource strategy.

➢ These elements are essential and can either be ‘planned’ in advance

or which can ‘emerge’ as the organisation actually moves along its
path.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Three elements of strategy

The competitive strategy will

define how the firm intends to The investment and resource
The finance strategy means how a
create and maintain a competitive strategy is a plan designed to help
company will meet its short- and
advantage with respect to individual investors achieve their
long-term goals to stay financially
competitors. Holding a financial and investment goals.
viable. Also handles raising funds to
competitive advantage over
invest in strategic capabilities
competitors means to be more Deals with building and investing
(resources and competencies).
profitable than competitors over in capabilities to support the
the long term. competitiveness – building the
Financial strategies include financial
necessary strategic capabilities in
planning, budgeting and assessing
That is, how to competitively the form of resources and
costs and resources.
position / sustain competitive competencies.
advantage.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The link between the three elements of strategy

Competitive strategy

How do we compete and on what

basis? How do we sustain it? How
do we grow?
Cash flows
Strategic capabilities are built are created
to drive competitive strategy

Investment and resource

Financial Strategy
Strategy
How and where do we raise required
What strategic capabilities in the Establish finances / investments finances and for what do we use
form of resources and competencies
existing cashflows?
need to be developed and in place?

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Crafting a
Montblanc

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

3) The levels of strategy

➢ Operational / functional strategy - What should the individual

units / functions do to drive the business unit strategy?

➢ Business strategy - How should the business units compete in

their own markets to achieve their individual mission?

➢ Corporate strategy - What should be the long-term direction and

nature of the organization as a whole be?

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The levels of strategy

What should be the long-term

direction and nature of the
organization as a whole be ?
How should the business
units compete in their
own markets to achieve
their individual mission?

What should the individual units/ functions

do to drive the business unit strategy?

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The levels of strategy for TATA Group

TATA Group

TATA Motors TATA Steel TAJ Hotels

Manufacturing Finance Marketing

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Business models used for analysis

PESTEL analysis, Porters five forces, Porters

Corporation diamond, BCG matrix, Ansoff Matrix,
Expansion method matrix.

SBU 1 SBU 2 SBU 3

PESTEL analysis, Porters five forces,

Porters generic strategy, Bowman's
strategic clock.

Manufacturing Finance Marketing

Porters Value chain, POPIT model.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 The John Keells group

The company has many different

Subsidiaries focusing on
different markets and segment
types.

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John Keells Group: Industry groups and sectors

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Nestle: Industry groups, sectors and companies

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The levels of strategy – a summary
Corporate strategy – Business strategy – Operational strategy –
Long - term How each
direction of the overall business and Strategies
business unit competes in its of each function to support the
‘defining’ it in the light of chosen markets to deliver its own
environmental changes. (creating overall business strategies.
mission (choices of competitive
business units organically and or strategy).
inorganically) geographic
expansions, new product categories,
capturing cross business synergies,
technology implementation across
businesses, organizational policies.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

4) Approaches to strategy formulation

➢ Rationally planned strategies.

➢ Emergent strategies.

➢ Incrementalism.

➢ Freewheeling Opportunism.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Rationally planned strategy

➢ This is a systematic approach involving several sequential steps of an organization’s formal and
deliberate strategy which is developed ahead of its execution.

➢ This is generally developed by a team at the top and communicated for implementation down the line.
(Top-down approach with independent consultants involved).

➢ Most approaches towards rational planning involves,

• Definition of the problems and/or goals;
• Identification of alternative plans/policies;
• Evaluation of alternative plans/policies;
• Implementation of plans/policies;
• Monitoring of effects of plans/policies.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The rational planning model

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The rational planning model – a detail

Position audit
(internal Review and
environment) control

Rationally planned strategy assumes linearity and analysis is done ahead

of execution

Mission and Strategic Strategy

Corporate Strategy
objectives option evaluation and
appraisal implementation
generation choice

1. Strategic analysis 2. Strategic choice 3. Strategic execution

Environmental
analysis

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Strategic Planning

The linear approach of strategic planning

consisting of,

1. Analysis
2. Strategy formulation
3. Execution
4. Review and control

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The strategic planning process

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The strategic planning process – a detail

Position audit Monitoring and review

• Ratio analysis. • External environment.

• Value chain. Strategic analysis Strategic choice Strategic execution • Internal Environment.
• POPIT. • Risks.
• Matrix Analysis. • Performance measures.
• Ms Model. • Finance.
• Benchmarking.

Mission and Corporate Option Option

Objectives Appraisal evaluation Implementation
Strategic
and choice
• Vision, mission, goals
• SWOT analysis. option • Project Management.
and objectives. • Culture and change
• Stakeholder analysis. • TOWS matrix. generation • SAF criteria Management.
• CSF of business. • POPIT.
• RACES

External environment Inorganic growth

Options for competitive
Analysis Strategies for Growth Strategies to execute
advantage • Mergers and
growth Acquisitions.
• PESTEL.
• Porters Generic strategy. • Ansoff matrix Strategies • Joint ventures and
• Porters 5 Forces.
• Lock in strategies. for managing decline. • Organic and Alliances.
• Porters Diamond.
• Bowmans strategic clock. • Turnaround strategies. Inorganic development. • Franchises and
• Strategic groups.
• Resource and competencies. License.
• Scenario Planning. • Turnkey and contract.
Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)
Advantages as well as problems

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

In the world of business can we predict what happens tomorrow????

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Can humans be rational? Is there any thing as rationally planned strategy?

➢ Post rationalization

In psychology and logic, rationalization or rationalisation (also known as making excuses is a defense mechanism in which
controversial behaviors or feelings are justified and explained in a seemingly rational or logical manner to avoid the true explanation,
and are made consciously tolerable—or even admirable and superior—by plausible means.) It is also an informal fallacy of reasoning.

➢ Bounded rationality

A term coined by Herbert Simon where the rationality of individuals is limited by the information they have, the cognitive limitations
of their minds, and the finite amount of time they have to make a decision.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

JSW Approach: A Simplified Rational Model

➢ They argue the strategy process has three stages to it.

➢ Rather than have a linear process as in rational planning,

➢ They argue it is an interlinked iterative process.

➢ Instead of presenting these linearly, it recognises interdependencies.

➢ A similar view is also held by Mintzberg.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The stages of strategic planning

Strategic analysis Strategic choice Strategy in action /implementation

Analysis of the external environment-

regulations, competitors, Generation of strategic options
demographics. Creating organization-systems,
(Competitiveness, growth, methods
processes
of development).
Analyse the strategic capabilities of
the organization(resources and Enabling resources to support the
Evaluation of options for its relative
competencies). strategy.
merits.

Analyse the culture, beliefs and Managing the needed strategic

Selection of the strategic options for
assumptions of the organization change in implementation.
implementation.
Analyse the stakeholders.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Are plans always followed?

➢ Mostly if you notice what you actually do or are

doing is at times very different from what you
planned to do?

➢ In the same manner what organizations actually do

(their realised strategy) can be very different from
what they originally planned to do and at times
what they actually do can also have remainder of
the original plan.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Does it always go as planned? Their start………

Started off as – Grocery Started off as – Paper Mill. Started off as – Stationery
trading store. Store.
Today - Communication
Today – Electronics. devices. Today - Luxury Jewellery.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Emergent strategy

➢ Emergent strategy is an action model coined by author Henry Mintzberg that describes a business
strategy that develops over time as a business balances its goals with changing circumstances.

➢ These strategies emerge after a business carries out a set of actions repeatedly to develop a
pattern in its habits.

➢ This is a type of business strategy that is not the result of pre-planning, but rather emerges over
time in response to changes in the environment.

➢ It is therefore a set of actions, or behavior, consistent over time “a realized pattern [that] was not
expressly intended” in the original planning of strategy.

➢ The term emergent strategy implies that an organization is learning what works in practice and the
strategy has a more evolutionary angle to it building over time.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)
Planning Vs Crafting a strategy

Planning Crafting
A map for guidance. The path which takes you to your destination.
Leads to programs. Leads to planning.
Future oriented. Action oriented.
Takes assumptions. Based on practical experiences.

Example – Example –

What the organization wants - To increase online sales by 20% What springs to mind is not so much thinking and reason as
over the next two quarters. involvement, a feeling of closeness and harmony with the
materials at hand, developed through long experience and
Strategy (how the organization will get it) - Increase online commitment.
marketing and social media presence by 25% in the two quarters.
Formulation and implementation merge into a fluid process of
learning through which creative strategies evolve.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Planning Vs Crafting a strategy – a quick summary…...…...

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 What is That Part of the plan
intended. that is effectively
rationally realized
planned in
advance

Due to lack of
stakeholder support, lack
of resources and
competencies, Consistencies in
environmental change the absence of
intentions

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

In a nutshell…..…

Strategy

Strategies can emerge

from the plan

Thought of in Planned Emerge via

From past
advance rationally experiences
patterns of
behavior and
learning and
unexpected
Emerged strategies can situations
be planned forward

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 The Hulk in grey

➢ In the original depiction of the Hulk, Stan Lee wanted him to be

grey to give the Hulk a scary presence. His original concept for the
character was based on the story of Dr. Jekyll and Mr. Hyde.

➢ When Lee went to print the first issue, however, due to ink
problems, the Hulk became green.

➢ This prompted the comic mogul to change the color of his skin to
the classic green color we’ve known for nearly 60 years!

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The story of Fanta……..

➢ Because of the war, there was no shipping between Nazi Germany and the
United States.

➢ Therefore, the German bottling plant could no longer get Coca-Cola syrup.

➢ To overcome the issues Keith uses left overs for other German industries
such as apple fiber (left over from lollipops) and whey (from cheese makers).

➢ He creates a ‘new drink’ and asks employees to name the drink letting their
'Fantasie’ run wild.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 The story of Nutella……...

➢ After the Second World War, cocoa was extremely scarce.

➢ Founded as an Italian pastry shop in Piedmont, Italy, Ferrero turned this

problem into a smart solution, creating a sweet paste made from
hazelnuts, sugar, and just a little of the rare cocoa and Supercrema
gianduja was born.

➢ The ancestor of Nutella was born.

➢ In 1963, Ferrero's son Michele Ferrero revamped Supercrema gianduja

with the intention of marketing it throughout Europe. Its composition was
modified, and it was renamed "Nutella".

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Honda’s emergent strategy in the USA

➢ No one knew how Honda's entry to the US would turn out.

➢ They only planned to compete with the likes of Harley Davidson big bikes.

➢ The strategy had operational problems during implementation and Honda

executives used ‘small 50 cc’ bikes for official purposes.

➢ American consumers saw these small bikes and inquired from dealers
where they could get these.

➢ It became clear a better opportunity had emerged.

➢ Honda's management team recognised this and concluded that Honda

embraces the small bikes as their official strategy.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Sometimes strategies emerge from your own experiences……...

In December 2011 Uber launched

So, where did Uber start? On a cold winter internationally in the same city where
evening in Paris in 2008 two friends Travis the idea was born 3 years earlier.
Kalanick and Garrett Camp couldn't get a
ride. They asked themselves: “What if you In July 2012 For the first time in Uber's
could request a ride simply by tapping your history, riders could request on-
phone?” They realised a lot would demand ice cream delivery in 7 cities
experience this similar problem and across the US.
developed a smartphone app.
In October 2013 together with animal
shelters across the US, Uber launched
By 2018 Uber operates in more than 21 UberKITTENS.
countries across 5 continents, with close
to 10 billion trips! The companies “Once the kittens arrive, you and your
market value is over USD 50Bn! friends will get to enjoy 15 minutes of
kitten cuteness!” and all proceeds
benefited local shelters. By 2015 Uber
had reached 1 billion trips!

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The story of BOSE……..
Amar Bose, as a graduate of the
Massachusetts Institute of Technology,
purchased a stereo system and was
disappointed with its overall performance.

Eight-years later when he founded Bose corporation in

1964 he started with the slogan of “Better Sound Through
Research” and used this ethos to inspire research into the
factors that he saw as fundamental weaknesses plaguing
high-end audio system industry. These weaknesses
revolved around the failure to take into account the
different acoustics involved in different listening spaces and
by aiming to address these problems. Mr Bose set the
platform for what makes Bose products unique and of such
high quality.

Today the company employs over

7,000 people producing many
products based on its core principles.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The story of IKEA….….
Ingvar Feodor Kamprad was born on 30 March 1926, on a small farm called Elmtaryd near the village of Agunnaryd, in the Swedish
province of Småland.

Kamprad displayed entrepreneurial skills as a boy when he began selling matches to neighbours. To reward him for doing
well in school, Ingvar’s father gave him a small sum of money which he used to set up a company.

With it, Ingvar founded a business IKEA in 1943 which is named after the initials of founder Ingvar Kamprad,
Elmtaryd, the farm on which he grew up, and Agunnaryd, the nearby village.

IKEA founder Ingvar Kamprad was always determined to offer the best
possible prices but not at the expense of quality. He was aware that some
of his competitors were cheating on quality to keep prices down,
something he was not prepared to do. In the 1948–1949 issue of the
brochure “ikéa-nytt” he explained how IKEA prices could be kept so low.
“Our low prices – by far the lowest in the land – are possible thanks to a
high turnover, direct delivery from the factory and very low overheads.”
Ingvar’s original idea to offer products with both a low price and good
quality is alive and well to this very day and has become a cornerstone of
the IKEA culture and identity.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Rationally planned Vs emergent strategy

Analysis Choice Execution

Rational planning -
A linear approach.

During
implementation
new strategies may
emerge…..these may
Analysis Choice Execution be analysed.

Emergent strategy –
A repetitive approach.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Sometimes the environment dictates
it…….. Imposed strategy

➢ In an Imposed strategy, the strategy comes from outside the

organization, its imposed on the organization. This means that the
environment can directly force the organization into a pattern in its
stream of actions regardless what the central control does.

➢ For example, with the Corona Virus a lot of organizations were ‘forced’
into strategies they would have not implemented otherwise (work from
home) or as governments imposing restrictions on vehicle imports
which the companies are forced to comply.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Imposed strategy – a real example….….

During the 2008 recession, many companies had to change their

strategic direction, often just to survive. Other companies thrived with
the imposed strategy required by the financial situation. For instance,
when the US economy was facing a strong downturn at the time, Lego
turned its attention to European and Asian markets. These markets were
not as badly affected and although the company adopted this strategy in
response to financial pressure in its main market, this worked out very
well for the company, as it went on to record some of its highest profits
during that time.

Most companies, especially those which are publicly listed, have a

certain level of exposure to imposed strategy due to financial market
conditions.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Incremental strategy

Incremental approach in strategic management

and planning is a gradual, step-by-step process
of continuous improvement of the existing
mechanisms as well as their revision for making
necessary strategic movements that implies the
involvement of different groups of
stakeholders.

When the strategy is incremental it is

developed in logical incremental small steps
usually based on what has worked in the past.

The strategy is more evolutionary rather than

revolutionary. Individual experiences and
learning as well as collective experiences and
learning (culture) can play a crucial role in the
strategy formulation.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The evolution of Haagen – Dazs….….

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)
Logical Incrementalism -
Lindblom

➢ This model was developed by Charles Lindblom in the 1950s.

➢ A small number of alternatives and consequences are considered at

each stage of the decision-making process.

➢ As a result, the costs of making a decision are minimized.

➢ As each step is proposing only a small change; the immediate effect is

minimal and usually not disruptive.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Logical Incrementalism - Lindblom

➢ Organizations are deeply built upon their past actions in identifying their future course of action. These
past actions serve as a basis of the future of an organization. Since the resources of the organization are
limited, actions that are a slight variant from the current state are the most economic ones.

➢ Hence, most change is considered an expansion of the history of an organization or a succession of

consecutive limited comparisons to past actions.

➢ Since these cannot be met in practice incrementalism emphasizes the plurality of policy actors involved
in the policy-making process and predicts that policy makers will build on past policies, focusing on
incremental changes rather than wholesale changes.

➢ Given this Lindblom argues that political policy actors will avoid radical policies and do things based on
what they have done and has worked in the past…….logically incrementally moving forward. However in
reality this approach is not recommended.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

National Aeronautics and Space Administration’s (NASA’s) journey to strategic agility through successively
shifting to three different strategic alignments over the last six decades……….

National Aeronautics and Space Administration’s

(NASA’s) journey to strategic agility through
successively shifting to three different strategic
alignments over the last six decades and suggests that
logical incrementalism may be an unappreciated
driver of this process. Three successive alignment
models exhibit important shifts in technology strategy,
competencies, and values of the organization. The
three phases of incremental changes in shifting from
one alignment model to the next are the emergence
of new approaches, the embeddedness of these
approaches in particular contexts, and their expansion
to other organizational contexts.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Logical incrementalism - How it works…………

Radical strategy Environmental change

Level of change

Logical incrementalism

In the face of especially disruptive

technology, most companies can face
decline with logical instrumentalization.

Strategy development Time

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The strategic drift
Strategic drift occurs when a business fails to adapt to its
surroundings and does not adapt its strategy in response to Strategic drift can be broken down into four distinct
changes in its wider environment. Many factors can lead to phases leading up to a transformational shift across an
strategic drift, and it can severely impact a business's entire business. Those phases are: incremental change,
success - if left unchecked, it can even cause a business to strategic drift itself, flux, and transformational change.
fail.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Business examples for strategic drift

If you fail to adapt to your environment your business will suffer.

Kodak's failure to seriously pursue digital photography in favor of film The introduction of the Apple iPhone, which BlackBerry
photography, their established business line, plunged them into didn't take seriously, caused a loss of market share that
bankruptcy. BlackBerry couldn't recover from. More competitors
entered the smartphone space, eventually crowding
In a market where people were looking for something more than a BlackBerry out.
‘phone to take calls and send messages, Nokia was focusing on
upgrading their user friendly ‘Symbian’ software and quality and design
of phones.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Business examples for strategic drift

Blockbuster's failure to adapt to emerging technologies and changing Samsung was working with android software from google
consumer behaviours played a crucial role in its decline. The company and focused on developing smart phones with extended
failed to recognise the potential of the internet and digital technology functionality.
in transforming the entertainment industry.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Strategic drift of Kodak……….

Eastman Kodak was founded by George Eastman and Henry A. Strong

on in 1888. During most of the 20th century, Kodak held a dominant
position in photographic film. From the company's founding. Kodak
followed the razor and blades strategy of selling inexpensive cameras
and making large margins from consumables – film, chemicals, and
paper. As late as 1976, Kodak commanded 90% of film sales and 85% of
camera sales in the U.S. Kodak developed and patented the first
handheld digital camera in 1975 but the product was dropped for fear
it would threaten Kodak's main income; its photographic film
business.

The company made incorrect conclusions about the future of

traditional photography and its ability to compete with innovations
that started to penetrate the market. In such a way, Kodak's dismissive
response to new trends was one of the primary causes of the strategic
drift.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Logical Incrementalism – by Quinn

➢ James Quinn takes a more positive view of incrementalism and recommends it.

➢ Similar to philosophy shared by Mintzberg, Quinn's approach is based on the

assumption the incremental processes are, and should be, the prime mode used for
strategy setting.

➢ He believed in a planned transformation and organized the transition.

➢ An approach to decision making wherein there is a mixture of strategic planning and

spontaneous adaptation to change.

➢ Incremental change enhances the confidence amid employees and decreases

organizational dependence on outsiders to give impetus for strategic change.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Logical Incrementalism – by Quinn

➢ A normative approach to strategic planning in organizations that combine elements

of the classic, formal strategic planning process with the power-behavioural
perspective; it also embeds the emergent processes of strategy formation that have
been observed in organizations.

➢ He describes how 10 large companies actually arrived at their most important

strategic changes. He argues that the formal "rational“ planning is often more
substitute for control instead of a process for stimulating innovation and
entrepreneurship.

➢ Quinn suggests that the most effective strategies of major enterprises tend to
emerge step by step from an iterative process in which the organization probes the
future, experiments, and learns from a series of partial (incremental) commitments
rather than through global formulations of total strategies.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Vision and goals

Actual strategy

Modified vision and

Organisation
goals

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Incrementalism – A summary………..

In fast-changing environments, it may be unrealistic to effectively undertake the full strategic planning process. Instead it is more
practical to develop a short term strategy based on the consensus of opinion of major stakeholders.

An incrementalist approach was adopted by many businesses during the economic downturn of the late 2000s as uncertainty made it hard
to make accurate long-term predictions. Instead they typically planned for no more than a few months at a time so they could wait and see
what would happen to the market and adapt accordingly.

The strategy is then developed regularly using a series of small-scale changes as dictated by the changing environment. Another situation where
incrementalism is common is in the public sector, which, while not a rapidly changing environment, is one where there are a wide variety of
stakeholder needs to satisfy. It can, therefore, be hard to agree clear long-term objectives to keep every stakeholder content, and so a shorter term
‘middle ground’ view is taken that satisfies all groups.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Free wheeling opportunism – why even bother with planning!

Freewheeling opportunists do not like planning. They prefer to

see and take opportunities as they arise. It is probable that the
approach is adopted more for psychological reasons. Some
people simply do not like planning. They prefer to remain more
entrepreneurial and see and grab opportunities as they arise.
Intellectually, this is justified by saying that planning takes too
much time and is too constraining.

Often such people are entrepreneurs who enjoy taking risks and
the excitement of setting up new ventures. However, once the
ventures are up and running, the owners lose interest in the day-
to-day repetitive administration needed to run a business.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Business example of free wheeling opportunism...…..

Multinational company Virgin could be considered an example of this type of approach. Richard Branson began his
empire with a just record store, then he launched a record label, and as you’re probably aware he didn't stop there.
Whatever industry, wherever Branson feels he has an opportunity, he moves into. Whether it be wine, airlines,
telecoms or hotels, the lack of formal processes within the structure makes the possibility of change quick and easy.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Free wheeling opportunism – A summary………

Freewheeling opportunism is most common in small

companies with an entrepreneurial leader who can
direct and focus their organisation down each new
track, based on the opportunities they identify and wish
to pursue. The lack of formal processes makes change
quick and easy.

Directors dictate the business direction by taking

whatever opportunities are available at a particular
point in time. This allows the business to be very
flexible and take opportunities that companies using a
more formal approach to strategy development would
be slow to take.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Incremental strategy Vs Free wheeling opportunism – An example….….

Meet Bob! Bob runs a small sandwich shop, Bob's Lunchbox, in

Anytown. The shop employs five people and has few direct competitors
in Anytown. Bob read in the trade press that Snackpack, the large
multinational sandwich chain, is looking for a site to open in Anytown
within two years. To meet the challenge, Bob wants to increase the
amount of shops he has and double his sales and profits.

Incrementalist strategy Freewheeling opportunism

So, were Bob to follow an incrementalist strategy, instead of committing to a

long term plan to open 20 new stores over five years, he might consider What if Bob's friend Dave was looking to sell his successful garden
opening one more outlet in the short term and testing it in the market. On centre and retire to Spain? Here's an opportunity for Bob to buy a
the basis of how well the new store is received, he might then open a further thriving garden centre with high turnover and great profitability. The
store; or he might see that the market is shifting to street food and launch a new influx of cash to the combined company would certainly help
street stall instead. After that, he might notice that app-driven home delivery Bob's Lunchbox survive the competition from Snackpack, but no one
is where consumers are spending, so he might orient his next year's would have predicted that lateral move. The opportunity just came up.
development towards that market. Each time, Bob would be making a move This is known as freewheeling opportunism. In this model there is no
that's right in the short term, without committing to a long-term plan in formal approach to strategy development.
which all options are considered and a single direction agreed.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Approaches to strategy formulation – Summing it up…………..

Rationally planned strategy –

A more deliberate approach to strategy where the strategy is ‘designed’ after

careful rational analysis and choice. The strategy is developed ahead of
implementation.

Emergent strategy –

The strategy is more a reaction to unexpected changes in environmental

circumstances involving more adaptation and can be superior to the indented
course. The strategy in a pattern that arises out of an absence of intention.

Incremental strategy –

The strategy is developed along more logical extensions as the organization learns
what works and what doesn’t avoiding radical moves that take it outside its existing
paradigm.

Freewheeling opportunism –

The strategy is more flexible taking advantage of opportunities as they arise.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

5) The Strategic Lens –
Johnson, Scholes, and Whittington
These lenses are

➢ Is the glass half full or half empty? Well, that depends on your perspective.

➢ The same can be said when reviewing a strategy.

➢ Johnson, Scholes and Whittington suggest that decision makers can improve a strategy by
examining it from different angles.

➢ To help with this concept, they devised the three lenses process through which an
organisation's strategy should be viewed.

➢ Each lens offers the viewer a different perspective on the strategy.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

 Importance of the strategic lens…….

➢ The term ‘lens’ is used to give an analogy of how we can view or

provides an insight to the strategy development process.

➢ In reality the actual strategy process is a more cognitive and

complex one affected by different bias, learning etc.

➢ Looking at the process from multiples lenses / angles provides a

complete view of the overall process and avoids bias.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Why Is the Mona Lisa Painting So Famous? Why does the Mona Lisa look at you from every angle?

Based on the mid-sixteenth century biography of Leonardo da Vinci by Giorgio

Vasari, many historians believe the painting is a portrait of Madam Lisa
Giocondo, wife of a wealthy Florentine. It is from Vasari that the painting
received the name Mona Lisa, also known as La Gioconda in Italian or La
Joconde in French.

There is no doubt that the Mona Lisa is a very good painting.

It was highly regarded even as Leonardo worked on it, and his contemporaries
copied the then novel three-quarter pose.

The writer Giorgio Vasari later extolled Leonardo's ability to closely imitate
nature. Indeed, the Mona Lisa is a very realistic portrait.

“With a slightly sideward glance, you may still feel as if you were being looked
at. This was perceived as if the portrayed person were looking at your ear, and
corresponds to about 5 degrees from a normal viewing distance. But as the
angle increases, you would not have the impression of being looked at.”

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The 3 strategic lens

Similar to a machine

Design lens Orderly and clockwork

- Planned and
deliberate
strategy

Ideas lens Experience lens

- Creative and - Emergent and

innovative experienced Similar to a culture
strategy strategy
Individual and
Similar to a living thing evolving collective
learning
Natural selection and innovation

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

The 3 strategic lens – a detail……….

Design lens Experience lens Ideas lens

This view suggests that a strategy is a This lens moves away from the idea that Now that we've looked at a couple of the
logical process that is based on internal strategy is a logical process and instead lenses, can you work out what strategy as
and external analysis, and rational suggests that strategies are influenced by the ideas may be? Well, unsurprisingly this lens
thought, and is the most commonly held experience of people and that strategy comes really emphasises the continuous
belief about how strategy is developed. from learning from, and adapting to, real- application of new innovations and
world experience. business and process change.
Does this analytical and evaluative
approach sound like any other strategies The characteristic of reliance on the This strategy relies on the organisation
that we have already looked at in this experience of the organisation's employees, being set up to allow for staff and structural
chapter? (especially that of the decision makers), to be flexibility, entrepreneurship and idea
able to take advantage of new opportunities generation, because there is far less
That’s right! The rational planning model. sounds a little familiar, that's because it's very planned direction from the top of the
similar to the emergent strategy that we have organisation. This sounds like freewheeling
already looked at. opportunism, doesn’t it?

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Using the lens……...
We've now linked three of the lenses to strategies we've already discussed, so why do we need them?

Well, as we mentioned earlier, each lens offers a different perspective and if managers only view a strategy through one of these
lenses, they may miss out on developments or opportunities that could lead to the organisation’s success.

For example, let’s imagine that a big organisation is only viewing its strategy through a logical and analytical
approach that is formed by managers at the top of the organisation.

We know that it is strategy by design and is one of the most common approaches, so what's wrong with doing just
that? Well it may overlook any exciting new developments that appear and so the organisation would lose out by not
taking advantage of them.

A problem that could have been avoided if the managers had also viewed their strategy through the lens of ideas!

And that is why Johnson, Scholes and Whittington suggest viewing an

organisation's strategy through each of the four lenses; the strategist
can see the fuller picture and gain different insights as well as making
sure they have considered other options to the one they are putting in
place!
Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)
 1. The 5 Ps of strategy.

Core 2. Elements of strategy.

concepts 3. Levels of Strategy.

4. Rational Planning Model.

5. Emergent strategy.

6. Incremental Strategy.

7. Free Wheeling opportunism.

8. Strategic Lens.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)

Conclusion

• Strategy is not always required to be planned in advance, it can also be a

series of intended actions an organisations follows to direct itself in complex
business environment to fulfill the needs of various stakeholders.

• In the real world strategy could be planned (deliberately developed well

ahead of implementation) and emergent (pattern of action that develops over
time from previous learning or changes in environmental conditions – political /
cultural aspects).

• Strategy should be viewed from multiple lenses / perspectives in order to

obtain a real unbiased understanding of strategy.

Mirjalni Janarthanan, FCCA, BSc (Hons) in Applied Accounting (First class)