Chapter Two
The concept of strategy
By: Mr. Daniel Tekle
Discussion point
• What is strategy?
• How it is important?
• Who is responsible to design?
• What are the process?
• What are the challenges?
• How it is related to HRM?
Strategy
• In a military term strategy is
– The art of a commander-in-chief;
– the art of projecting and directing the larger
military movements and operations of a campaign’
• In business it is the ultimate responsibility of
the head of the organization,
Strategy
• Strategy is about deciding where you want to go
form where you are and how you mean to get
there.
• A strategy is a declaration of intent: ‘what we
want to do and how we intend to do it.’
• The company’s long term plan for how it will
balance its internal strengths and weaknesses
with its external opportunities and threats to
maintain a competitive advantage
Strategy
• Strategy is
– the determination of the basic long-term goals and objectives of
an enterprise,
– the adoption of courses of action
– the allocation of resources necessary for carrying out these
goals. - (Chandler, 1962)
• Strategy is a set of fundamental or critical choices about
the ends and means of a business (Child, 1972).
Concepts Related to Strategy
1. Competitive advantage: anything that
provide the firm an advantage to win in a
competition.
– It provides the firm the most advantageous
position.
Michael porter’s (1985) generic Strategy
• Cost leadership,
• Differentiation, and
• Focus
Distinctive Capabilities
• DC is competence that can be described as an important
feature & confers superiority of the organization.
• Distinctive capabilities: characteristics that cannot be
replicated by competitors or can only be imitated with
great difficulty. (core competency)
• Reproductive capabilities: are those that can be bought
or created by any company with reasonable management
skills, diligence and financial resources.
Strategic Intent
• Strategy could be described as an expression of
the intentions of the organization
– what it means to do and how
• Strategic intent is a very broad statement of
vision or mission and/or it could more
specifically spell out the goals and objectives to
be attained over the longer term.
Strategic Capability
• the ability of an organization to develop and implement
strategies that will achieve sustained competitive
advantage.
• Capacity
– to select the most appropriate vision,
– to define realistic intentions,
– to match resources to opportunities and
– to prepare and implement strategic plans.
Resource-based View
• view that sustained competitive advantage stems
from the acquisition and effective use of bundles
of distinctive resources that competitors cannot
imitate.
• Argue that strategic capability depends on
resource capability.
Strategic Management
• The process of identifying and executing the
organization’s strategic plan, by matching the
company’s capabilities with the demands of its
environment.
• The focus on
– identifying the organization’s mission and strategies,
– making the resource base required to succeed.
Process of Strategic Management
1. Defining the organization’s mission,
2. Analyzing the internal and external environment,
3. Exercising strategic choice,
4. Formulating corporate and functional strategies
and goals,
5. Implementing strategies and
6. Monitoring and evaluating progress in
achieving goals.
Strategic Goals
• define where the organization wants to be.
• They may be specified in terms of actions,
quantified in terms of growth, or expressed in
general terms as aspirations rather than
specifics.
Strategic plans
• formal expressions of how an organization
intends to attain its strategic goals.
• is sets of strategic choices
Types of Strategies
A. Corporate strategy
• Company wide level (corporate level)
• E.g. In which industry the firm should invest
(education sector; college)
– Diversification- expand by adding new product lines
– Vertical integration – expands by producing its own
raw material
Cont.
B. Competitive Strategy (Business level )
• A specific business strategy
• E.g. how large we need to engaged (number of
faculty)
• How to build and strengthen the business’s long
term competitive position in the market place
• Strategies like
– Cost leadership, low cost leader, dell by direct selling
– Differentiation, Firm seeks to be unique,
– Focusers, Carve out a market niche
Cont.
C. Functional strategy
• Operation level strategy
• Business composed of departments –
manufacturing, selling, finance, HRM
• This identify the basic courses of action that each
department will pursue in order to help the business
attain its competitive goals
Strategy Formulation
Step1 - define the current Business
• Choose the terrain on which it will compete –
– what product it will sell,
– where it will sell them,
– how to differentiate products from its competitors
• Vision – A general statement of its intended
direction that evokes emotional feelings in
organization members
• Mission – What our main task are now
Cont.
Step 2 – Perform external and internal audits
• Analyzing external and internal situations
• SWOTs
• SWOT analysis
Step 3 : Formulate new Business and mission statements
• Based on situation analysis
– What should our business be
– What products
– Where it will sell
– How to differentiate from competitors
– New vision and mission
Cont.
Step 4 : Translate the mission into strategic goals
• Operationalizing the mission for managers –
– strategic goals for each department
Step 5 : Formulate strategies to achieve the strategic
goals
• Strategies(Course of action) – how to move from
the current business to what it wants to
Cont.
Step 6 : Implement the strategies
• Translating strategies into action
– Hiring, firing people, building plants, adding products,
product lines
• This include managerial functions like Planning,
organizing, staffing, leading, and controlling
Step 7 : Evaluate performance
• Management Monitors the extend to which the firm
meeting its strategic goals
• Strategic Control – keep strategy up to date based on
– the environmental changes
– Competitors action