Strategic Analysis

21/12/2016 1 BUSM3200 Strategic Management Module 1 Introducing Strategy Dr Xueli (Charlie) Huang School of Management Learning Objectives •After studying this module, you should have a good understanding of – Strategy –Definitions –Three levels of strategy and their major focuses – Strategy statements: vision, mission statement and their role in organizations’ strategic management . –The strategic management process and its three interrelated and principal activities –Strategic management perspective – How does this course differ from others? RMIT University@2017 2 School of Management Why study strategic management? •One of the fundamental questions of strategic management is – Why some organizations can outperform others in a long run? – This translates to: – How can my organization perform better than my competitors? RMIT University@2017 3 School of Management 21/12/2016 2 What do we know the following companies? How do they compete? RMIT University@2017 School of Management 4 What is strategy? (1/4) •Strategy has its military origin – The word of strategy derives from Greek word strategia , which means “ generalship ”. –The battle of Red Cliff: http:// www.youtube.com/watch?v=pfgBYreWHMo –What strategic insights we can gain from this battle? •Strategic decisions in business context, as in military, have three characteristics –They are important –They involve a significant commitment of resources –They are not easily reversible RMIT University@2017 5 School of Management What is strategy? (2/4) •Definitions of strategy –The determination of the long -run goals and objectives of an enterprise, and the adoption of course of action and the allocation of resources necessary for carrying out these goals (Alfred Chandler 1962). •Strategy is a pattern in a stream of actions (activities) /decisions (Henry Mintzberg). –Strategy is consistency in behaviour, whether or not intended (Mintzberg, et. al, 2003) •Question : What is the major difference between these two definitions of strategy? RMIT University@2017 School of Management 6 21/12/2016 3 What is strategy? (3/4) •Strategy is the direction and scope of an organization over the long term (Johnson, Scholes, Whittington, 2008). –It enables the organization to outperform competitors and/or fulfill stakeholders’ expectations through the development and deployment of resources and competency within the changing environment •Strategy is the long -term direction of an organisation (Johnson, Whittington, 2011). RMIT University@2017 7 School of Management What is strategy? (4/4) •In summary, strategy is about “HOW” –It is a major means to achieving organization's objectives; –It is action -oriented; and –It is forward thinking. How can we get from the present position to our future position? RMIT University@2017 8 School of Management Key elements in the concept of strategy Strategy: long -term scope and directions Competitive advantages Stakeholder satisfaction Organizational performance External environment Organisation’ s resources and skills Organization purpose and stakeholder expectation RMIT University@2017 10 School of Management 21/12/2016 4 Level of strategy •Corporate -level strategy – It is concerned with the overall purpose and scope of an organization and how value can be added to different parts of the organization. – e.g., Apple Corp, Haier, Google, Baosteel, Lenova –Business -level strategy (at SBU level) – A strategic business unit (SBU) is a part of an organisation for which there is a distinct external market for goods or services that is different from another SBU. – How should a firm compete successfully in particular market? – e.g., Most SMEs, a division in a large corporation, such as Ikea China, Singapore airline cargo business in Singapore Airlines, Companies owned by Temasek Corp RMIT University@2017 11 Corporate Business Function (e.g., marketing, HR ) School of Management Level of strategy (cont’d) •Functional or operational strategy – It is concerned with how the component parts of an organization deliver effectively the corporate - and business - level strategies in terms of resources, process and people . – How should each function of the business contribute towards achieving the business strategy formed? – e.g., marketing strategy, HR strategy, production strategy, IT strategy. RMIT University@2017 12 School of Management •“What is strategy” (first 12 minutes) by Michael Porter http://www.youtube.com/watch?v=KvYwKM 5bY0s •Key points to listen to: –What is strategy? –The difference between business strategy and corporate strategy? –What are the two major factor influencing business performance? RMIT University@2017 School of Management 13 21/12/2016 5 Some strategy terminologies •Vision (What do we want to be in the future?) •Mission (What business are we in?) •Goal/ Strategic objectives •Strategy statement RMIT University@2017 14 School of Management Vision •Organizational vision –It is the organisation’s goal that is “massively inspiring , overarching , compelling and long term ” –It answers the question: “ What do we want to be ?” •A powerful vision statement can –attract commitment and energize employees and stakeholders; –create meaning in workers' lives; –establish a standard of excellence; and –bridges the present and the future . RMIT University©2017 15 School of Management 15 Mission statement •Mission statement –It is a set of goals that include the purpose of the organization, its scope of operations, and the basis of its competitive advantage – It addresses the question: “ What business are we in ?” RMIT University@2017 School of Management 16 21/12/2016 6 Example of vision and mission statement •Vision –McDonald’s vision statement: To be the world's best quick service restaurant experience. –The Commonwealth Bank of Australia: To be Australia’s finest financial services organisation through excelling in customer service •Mission statement –FedEx Corporation: FedEx will produce superior financial returns for its shareowners by providing high value -added logistics, transportation and related information services through focused operating companies. RMIT University©2017 17 School of Management 17 A Hierarchy of Goals RMIT University@2017 18 G “Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion .” Jack Welch, former Chairman, General Electric. School of Management The relationships among vision, mission, strategy and strategic management Vision Mission statement Goals and strategic objectives Strategies: decisions and actions Strategic management: Analysis, decision - making, implementation Guides Guides support Support RMIT University@2017 School of Management 19 21/12/2016 7 Strategic management •Definition –“the superordinate and the continuous organizational process for maintaining and improving the firm’s performance by managing, that is, enabling , formulating , and realizing , its strategies ” (Farjoun, 2002) – SM consists of the analyses, decisions and actions an organization undertakes in order to create and sustain competitive advantages . – It involves three broad sets of managerial tasks: Strategic analysis, strategic choice, and strategy implementation. RMIT University@2017 20 School of Management Strategic management (cont) •Strategic position/analysis –Internal and external environment of the firm –Organization's purpose and stakeholder expectation •Strategic choices/strategy formation – Business strategy: How should we compete in those industries? –Corporate strategy: W hat industries should we compete in? –International strategy: international expansion –Merger and acquisition (M&A) •Strategy in action / strategy implementation –Designing the organization to bring intended strategies to reality; strategic control and corporate governance –Leadership and managing strategic changes –Practicing strategy RMIT University@2017 21 School of Management RMIT University@2017 A model of strategic management - The exploring strategy model 22 These three sets of managerial tasks are inter - related School of Management 21/12/2016 8 Strategic management perspective: Its unique focus Field of study Level of analysis Macroeconomics The economy Microeconomics Industries and markets Strategy Firms and Businesses Finance Investment project Marketing Products and services Organizational behaviour Individual Operations management Plants RMIT University@2017 23 School of Management Module summary (1) •Strategy is the long -term direction of an organisation. A ‘strategy statement’ should cover the goals of an organisation, the scope of the organisation’s activities and the advantages or capabilities the organisation brings to these goals and activities. •Corporate -level strategy is concerned with an organisation’s overall scope; business -level strategy is concerned with how to compete; and operational strategy is concerned with how resources, processes and people deliver corporate - and business -level strategy. RMIT University@2017 School of Management 24 Module summary (2) •The Exploring Strategy Model has three major elements: understanding the strategic position , making strategic choices for the future and managing strategy -in-action . RMIT University@2017 School of Management 25 21/12/2016 9 Preparation for next lecture •Read Chapter 2 for lecture on the environment •Read the assignment guide, form a group of 2, and identify a company (or SBU) for your assignment. RMIT University@2017 26 School of Management