SG7001 / Managing Strategy, Operations and Partnerships

Topic Overview – An Introduction into Strategy

1.1 Introduction
This topic overview introduces the field of strategy by elaborating on relevant terminology and concepts.

What is strategy? If a friend tells you that his "strategy" in basketball is to win, he is not telling you a strategy at all.
A strategy is a plan of action designed to achieve a goal – in the case of your friend, a more appropriately defined
strategy for his basketball game would be: "I am going to apply defensive pressure and force the opposing team to
make mistakes with the end goal of winning the game". In this week, you will learn that you must first clearly define
your goals before you develop strategies in order to achieve them. You will also learn that strategy in business is
similar to strategy in sports, war, or politics; the parallels are so close that early business strategists studied military
strategies in depth. The science of strategy development has developed beyond this by now, but the parallels still
exist.

1.2 Learning Outcomes from the Module Outline

LO.1 Define the meaning of strategy
LO.2 Explore the levels of strategy
LO.3 Identify the effective strategy

1.3 Introducing Strategy

1.3.1 What is Strategy?
Strategy is the direction and scope of an organisation over the long term which achieves advantage for the
organisation through its configuration of resources within a changing environment to meet the needs of markets and
to fulfil stakeholder expectations (Johnson, Scholes and Whittington, 2017). Moreover, the Cambridge Dictionary
defines strategy as ““a long-range plan for achieving something or reaching a goal, or the skill of making such
plans”).

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1.3.2 What is Strategy? by David Kryscynski's

The main aim of the following video (https://www.youtube.com/watch?v=TD7WSLeQtVw) is to provide a
discussion of what strategy is and what it isn’t, with the use of examples of well-known companies and interesting
illustrations. The publisher of the video, David Kryscynski has published extensively on issues related to strategic
management.

1.3.3 Strategy Dimensions: Content, Context, Practice

Purpose-any strategic problem or situation is three-dimensional because characteristics of all three dimensions must
be understood in order to fully comprehend the strategic problem or situation.
• Organisational purpose
Organisational purpose is necessary for the whole system of the company, as it drives both individuals and teams
when they are anticipating unforeseen situations (Appelo, 2011). A clear purpose provides to the whole
organizational system a direction and perspective, assists employees when managing their priorities and most
importantly, provides a ground for behaving in an assured manner when demanding and unclear work situations
arise (McCann and Selsky, 2012).

Figure 1: Strategy Dimensions

Context - Circumstances of the content and process

To formulate an effective strategy − one that has a good chance of helping companies to achieve their objectives − it
is crucial that to understand the external environment. In the broadest sense, the external environment consists of a
wide array of economic and sociopolitical factors. In the narrowest sense, the external environment is the specific
market arenas that the firm has chosen in its strategy. It is the external environment that provides the business
opportunities − ultimately in the form of its chosen arenas − to the firm. However, the external environment is also a

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source of threats − forces that may impede the successful implementation of a strategy. The external environment in
which firms compete exerts a strong influence on firms’ profitability.
• Industry
• Organisational
• International
Content - The product of the process; concerned with what is and what should be
In studying strategy, it is useful to distinguish between strategic issues at the business level and those at the
corporate level. Some firms are focused sharply on their business strategy: They compete in only one or very few
industries. Other firms compete in many industries. The opening vignette on Under Armour paints a picture of a firm
that has a very specific core business (athletic apparel). Some firms, such as General Electric (GE) or United
Technologies, are called conglomerates because they’re so diversified that it’s difficult to pigeonhole them into any
specific industry.
• Business level strategy
• Corporate level strategy
• Network level strategy
Process (Practice) -The way in which strategies are made
Industry conditions have an important effect on strategy formulation. One way to illustrate this effect is to examine
the threats and opportunities presented to a company during different phases of the industry life cycle. In other
words, in order to show how alternative strategies function under different life-cycle conditions, we’ll take
advantage of the fact that industry analysis gives us a “snapshot” view of an industry at a particular point in its life
cycle. In reality, of course, many industries are changing rapidly.
• Strategic thinking
• Strategy formation
• Strategic change

1.4 Deliberate and Emergent Strategies (De Wit and Meyer, 2010)
There are two perspectives regarding the way in which strategies are made:
A. Strategic Planning-Prescriptive (What to do) Planned/Designed (Ansoff)
✓ Strategies should be deliberately planned and executed

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✓ The process is systematic, orderly, consistent and logical

✓ Since this is deliberate it involves: direction, commitment, co-ordination, optimisation and programming

B. Strategic Incrementalism-Descriptive (How to do it) Chaos/Process (Mintzberg/Stacey)

✓ Strategies emerge over time
✓ The process involves innovation and organisational development
✓ Since this is emergent it involves: opportunism, flexibility, learning, entrepreneurship and support

Management Mania: "Hierarchy of Strategies"

Hierarchy of strategies describes a layout and relations of corporate strategy and sub-strategies of the organization.
Individual strategies are arranged hierarchically and logically consistent at the level of vision, mission, goals and
metrics.
Sometimes the designation logical framework of strategic planning and management is used. Methods used in
strategic planning: top-down, bottom-up and bidirectional planning. Hierarchy of Strategies of an organization may
look like this:

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Figure 2: Hierarchy of Strategies of an organization

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1.5 Levels of strategy (Units of Analysis)- Strategy Content

• Network-it is important to remember that an organisation does not stand alone, but is involved with many
people and entities, both internal and external to the organisation. In considering strategy these different
relationships need to be considered (Johnson, Scholes and Whittington, 2017).

• Corporate-identifies the scope or range of the organisation as a whole. Geographic location/s, product
diversity, business acquisition and resource allocation are all part of the corporate strategy (Johnson, Scholes and
Whittington, 2017).
o Overall purpose and scope
o Resource allocation between SBUs
o Adding value to shareholder investment
o Resource allocation between SBUs
o Structure and control of SBUs
o Corporate financial strategy

• Business-is also called the competitive strategy and is concerned with how each business competes in its
market. This includes business units within a large corporation (Johnson, Scholes and Whittington, 2017).
o Competitive strategy
o Developing market opportunities
o Developing new products/services
o Resource allocation within the SBU
o Structure and control of the SBU
o Identify the SBUs key competitors- assist in competitive position analysis and comparative analysis

• Functional-each functional part of an organisation must meet the corporate- and business level strategies.
The functional-level strategies should be developed to be in line with the higher-level strategies. Integration of
strategies is key (Johnson, Scholes and Whittington, 2017).

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Figure 3: Levels of Strategy

1.5.1 Business Strategy

Business strategy refers to the ways a firm goes about achieving its objectives within a particular industry or
industry segment. In other words, one of GE’s business strategies would be how it pursues its objectives within the
jet engine business. This strategy may encompass such things as how it competes against Rolls-Royce for contracts
from Boeing and Airbus, how it cooperates with other suppliers of technology it uses in designing its engines, and
the decision to ramp up scale in an effort to reduce its costs. When Under Armour managers decide how to compete
with Nike for consumer dollars, they, too, are engaged in business strategy. Business strategy, therefore, focuses on
achieving a firm’s objectives within a particular business line.

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Increasingly, business strategy also takes into account the changing competitive landscape in which a firm is located.
Two critical questions that business strategy must address are (1) how the firm will achieve its objectives today,

when other companies may be competing to satisfy the same customers’ needs, and (2) how the firm plans to
compete in the future.
business strategy -> Strategy for competing against rivals within a particular industry or industry segment.
corporate strategy -> Strategy for guiding a firm’s entry and exit from different businesses, for determining how a
parent company adds value to and manages its portfolio of businesses, and for creating value through diversification.

1.5.2 Corporate Strategy

Many firms are involved in more than one line of business. Large corporations like 3M and GE can be involved in
dozens or hundreds of separate business activities. Under Armour started with a focus on men’s performance
apparel, but has expanded into other apparel like footwear. Corporate strategy addresses issues related to three
fundamental questions associated with managing a company that operates in more than one business:
1. In what businesses will we compete? In the 1970s and 1980s, for instance, Sears chose to branch out of
retailing into credit cards, stock brokerage, and real estate. Later, it decided that many of these moves were ill-
advised and it divested most of these new businesses. GE managers address corporate-strategy questions when
deciding whether the firm should enter a new business. All of the decisions about what businesses to compete in
(including decisions to exit businesses) are issues of corporate strategy.
2. How can we, as a corporate parent, add value to our various lines of business? At GE, for instance, senior
management might be able to orchestrate synergies and learning across its commercial- and consumer-finance
groups, which are two separate business units. Under Armour sees an opportunity to create synergies by operating in
the related businesses of performance apparel and athletic footwear. These synergies, if they are to materialize, will
require the corporate office to help the business units to work in a cooperative manner. Sears once thought that it
could provide one-stop shopping at retail outlets for everything from tools to life insurance. Thus, corporate strategy
also deals with finding ways to create value by having two or more owned businesses cooperate and share resources.
3. How will diversification or our entry into a new industry help us to compete in our other industries? Under
Armour thinks that by entering athletic footwear they may be better positioned to sell more performance apparel. In
addition, because Nike operates in both markets, it puts them in a better competitive position in both industries

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relative to this large incumbent. Wal-Mart has found that diversification into the grocery business segment of
retailing has increased retail foot traffic and boosted sales of nongrocery retail products.

1.6 Strategy Formulation

So now we know that strategy formulation means deciding what to do. Some strategies result from rational and
methodical planning processes based on analyses of both internal resources and capabilities and the external
environment. Others emerge over time and are adopted only after an unplanned pattern of decisions or actions
suggests that an unfolding idea may unexpectedly lead to an effective strategy. Sometimes the recognition of a
strategically good idea is accidental or “lucky,” but corporate innovation and renewal are increasingly the products
of controlled experiments and the opportunistic exploitation of surprise.
As you can see in Figure 4, these different aspects of strategy are referred to as intended, deliberate, realized,
emergent, and unrealized.

Figure 4: Intended and Realized Strategies (adapted from Mintzberg, 1987)

You can think of intended strategy as the initial plan, whereas the realized strategy is what actually is put in place
and succeeds. Thus, parts of the realized strategy can be credited to deliberate choices and actions (i.e., intended

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strategies that are realized), and parts are due to unplanned ones (i.e., realized strategies that were not deliberate but
nevertheless emerged). Finally, some aspect of the initial strategic plan is not realized at all, and drops by the
wayside.

You can see these various aspects of intended and realized strategy through the experience of Intel. During its early
years, for instance, the chipmaker Intel was consciously focused on the design and manufacture of dynamic,
random-access memory chips (DRAMs), and through the 1970s and early 1980s virtually all of the firm’s revenue
came from DRAMs. Intel’s participation in the DRAM market was intentional and planned virtually from the
moment of its founding. By 1984, however, 95 percent of the company’s revenue came from the microprocessor
segment of the industry. Ironically, Intel’s participation in this segment of the industry was not planned by senior
management. Rather, it evolved from an experimental venture to make processors for Busicom, a Japanese maker of
calculators. Unbeknownst and unforeseen by top management was the fact that market demand was shifting
dramatically from DRAMs to microprocessors. Only through the Busicom experiment − and Intel’s willingness to
follow the signals this experiment sent them in terms of market-demand shifts − was the firm able to dramatically
change its business strategy. To this day, Intel officials give credit for the firm’s dominance in the microprocessor
market to a strategy that emerged originally from a lower-level management initiative − one that, at the time, wasn’t
greeted with unanimous enthusiasm by senior management (Burgelman 1994, Grove 1996).
Since their lucky foray into the microprocessor market, Intel managers have obviously focused on effective
strategies for maintaining the firm’s advantages in the segment while at the same time promoting experiments and
exploiting surprises like Busicom to keep abreast of significant underlying market-demand shifts.

1.7 Summary
In this introductory week of the module, we have set the basis for analysing the concept of Strategy. In the following
week, we will examine the theories of strategy.

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References
Appelo, J. (2011) Management 3.0: leading agile developers, developing agile leaders, Upper Saddle River NJ:
Pearson Education.

Brown, S. and Eisenhardt. K. (1998) Competing on the Edge, Boston: Harvard Business School Press.

Burgelman, R. A. (1994) “Fading memories: A process theory of strategic business exit in dynamic environments.”
Administrative Science Quarterly, 39: 24–56.

Burgelman, R. A. and Sayles L. (1986) Inside Corporate Innovation, New York: Free Press.

De Wit, B. and Meyer, R. (2010) Strategy: Process, Content, Context. Andover: Cengage.

Grove, A. S. (1996) Only the Paranoid Survive. New York: Doubleday.

Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2017) Exploring Strategy: Text and Cases.
Harlow: Pearson.

McCann, J.E. and Selsky, J.W. (2012) Mastering turbulence: the essential capabilities of agile and resilient
individuals, teams and organizations, Jossey-Bass, San Francisco, CA.

Mintzberg, H. (1987) ‘The Strategy Concept I: Five Ps for Strategy’, California Management Review 30: 1 11−24

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