Summary

Fundamentals of Strategy
Chapter 1. Introducing strategy
Strategy the long-term direction of an organisation (figure 1.1,
page 3).
- Long-term: strategies are typically measured over years.
o Three horizons framework suggests that every
organisation should think of itself as comprising
three types of business or activity, defined by
their horizons in terms of years (figure 1.2, page 5).
Horizon 1 businesses are the current core activities, need defending and
extending, but the expectation is that in the long term they will be flat or
declining in terms of profits.
Horizon 2 businesses are emerging activities that should provide new
sources of profit.
Horizon 3 possibilities are typically risky Research&Development projects,
start-up ventures, test-market pilots, etc. They are unsure.
- Strategic direction: typically managers try to set the direction of their strategy according to
long-term objectives. In private-sector businesses, the objective guiding strategy direction is
usually maximising profits for shareholders, but profit is not always the objective.
- Organisation: in strategy, it is always important to look inside organisations and to consider
the people involved and their different interests and views. Externally, organisations are
surrounded by important relationships (suppliers, customers, alliance partner, shareholders).
Strategy is also concerned with an organisations external boundaries.
Because strategy typically involves managing people, relationships and resources, the subject is
sometimes called strategic management.
Strategic decisions are likely to:
- Be complex in nature.
- Be made in situations of uncertainty.
- Affect operational decisions.
- Require an integrated approach (both inside and outside
an organisation).
- Involve considerable change.

Levels of strategy
- Corporate-level strategy concerned with the overall
scope of an organisation and how value is added to the
constituent businesses of the organisational whole.
o Geographical scope, diversity of products/services,
acquisitions of new businesses, how resources are
allocated between the different elements of the
organisation.
- Business-level strategy how the individual businesses should compete in their particular
markets (often called competitive strategy). These businesses might be stand-alone
businesses (entrepreneurial start-ups), or business units within a larger corporation.
o Innovation, appropriate scale, response to competitors moves.
- Operational strategies concerned with how the components of an organisation deliver
effectively the corporate- and business-level strategies in terms of resources, processes and
people.


Strategy statements
Strategy statement should have three main themes: the fundamental goals that the organisation
seeks, which typically draw on the organisations stated mission, vision and objectives; the scope or
domain of the organisations activities; and the particular advantages or capabilities it has to deliver
all of these.
- Mission: goals, the overriding purpose of the organisation. What business are we in?
central to the strategy.
- Vision: goals, the desired future state of the organisation. What do we want to achieve?
- Objectives: more precise and quantifiable statements of the organisations goals over some
period of time. What do we have to achieve in the coming period?
- Scope: domain of the organisations activities, three dimensions: customers/clients,
geographical location and extent of internal activities (vertical integration).
- Advantage: how the organisation will achieve the objectives it has set for itself in its chosen
scope/domain. In competitive environments, this refers to the competitive advantage. In the
public sector, advantage might refer simply to the organisations capability in general.

The exploring strategy model
Exploring strategy model includes understanding the strategic position of an organisation;
assessing strategic choices for the future; and managing strategy in action (figure 1.3, page 10).
Position, choices and action should be seen as closely related, and in practice none has priority over
another.
- Strategic position concerned with the impact on strategy of the external environment, the
organisations strategic capability (resources and competences), the organisations goals and
the organisations culture.
o Environment: opportunities and threats available to the organisation in their complex
and changing environment.
o Strategic capability: made up of its resources (e.g. machines and buildings) and
competences (e.g. technical and managerial skills). The question on capability
regards the organisations strengths and weaknesses.
o Strategic purpose: captured in their vision, mission and objectives. The strategic
purpose is a key criterion against which strategies must be evaluated. It is influenced
by both the governance structure of the organisation and its culture. What does the
organisation seek to achieve?
- Strategic choices involve the options for strategy in terms of both the directions in which
strategy might move and the methods by which strategy might be pursued.
o Business strategy: strategic choices in terms of how the organisation seeks to
compete at the individual business level. Crucial is deciding how to win against
competitors.
Strategies based on cost (e.g. economies of scale) or differentiation (e.g.
superior quality).
o Corporate strategy and diversification: diversification is the spread of products and
markets.
Which businesses to include in the portfolio, the relationship between the
various businesses, how does the corporate parent add value to the
individual businesses.
o International strategy: where internationally should the organisation compete?
o Innovation strategies: entrepreneurship (the creation of a new enterprise) is an
innovation. Is the organisation innovating appropriately?
o Mergers, acquisitions and alliances: choices about methods for pursuing their
strategies. Must we buy another company, ally or go alone?
- Strategy in action concerned with how chosen strategies are actually put into practice.
o Structuring an organisation to support successful performance.
 o Systems are required to control the way in which strategy is implemented.
o Managing strategic change.

Strategy development processes
- Rational-analytic view strategies are developed
through rational and analytical processes, led by top
managers. In this view, strategies are intended
(deliberate choices). There is a linear sequence.
o First, the strategic position is analysed.
o Then options are weighed up and choices are
made.
o Finally, structures, processes and change procedures are put in place to allow
effective implementation.
- Emerging strategy view strategies often do not develop as intended or planned, but tend to
emerge in organisations over time as a result of ad hoc, incremental or even accidental
actions. Good ideas and opportunities often come from practical experience at the bottom of
the organisation, rather than from top management and formal strategic plans.

Chapter 2. The environment
Frameworks for analysing changing and complex environments
(figure 2.1, page 20). Environment external analysis.
- Macro-environment: anonymous broad forces that impact
your business (and all other firms as well) / influences
from society.
o PESTEL-framework categorises environmental
influences into six main types. This PESTEL-
analysis provides the broad data from which to
identify key drivers for change, which can be used
to construct scenarios of alternative possible
futures.
Political: role of governments.
Economics: macro-economic factors (exchange rates, business cycles,
differential economic growth rates around the world).
Social: changing cultures and demographics.
Technological: innovations such as the Internet.
Environmental: green issues (pollution, waste).
Legal: legislative constraints or changes.
The direct influence on your business environment is the most important.
Focus on future impact.
The prioritised key drivers of change have differential impact on
industries, markets and companies.
Assumes that the combined impact of some factors will be more
important than other factors.
Difference between political and legal: political is lobbying and to
influence people, trying to change legislation, and legislation is
something that is already stated.

Key drivers for change the environmental factors likely to have a high impact on
the success or failure of strategy.
Vary by industry or sector.
 Helps managers to focus on the PESTEL factors that are most
important.

Scenario analyses carried out to allow for different possibilities and help prevent
managers from closing their minds about alternatives.
Alternative views of how the business environment might develop in
the future, based on key drivers for change about which there is a
high level of uncertainty.
Identify impacts contingency plans (what-if).
1. Identifying the scope: the subject of the scenario analysis and the time span.
2. Identifying key drivers for change: PESTEL-analysis.
3. Selecting opposing key drivers: generate a range of different but plausible
scenarios. Usually, select two key drivers which both have high uncertainty and
have the potential for producing opposing or divergent outcomes.
4. Developing scenario stories: knit together plausible stories that incorporate both
key drivers and other factors into a coherent whole.
5. Identifying impacts of alternative scenarios on organisation.
Robustness checks in the face of each plausible scenario.
Develop contingency plans.

- Meso-environment: the competitive forces of your industries. Industry (or sector)
organisations producing the same products or services, made up of several specific markets
(market a group of customers for specific products or services that are essentially the same
(e.g. a particular geographical market)).
o Static industry structure:
o Five forces framework understanding the
attractiveness of particular industries or sectors and
potential threats from outside the present set of
competitors. An attractive industry structure is one
that offers good profit potential. Where the five forces
are high, industries are not attractive to compete in.
Five forces, which constitute an industrys structure
(figure 2.2, page 26):
The threat of entry: an attractive industry has
high barriers to entry in order to reduce the
threat of new competitors. Barriers to entry
the factors that need to be overcome by new
entrants if they are to compete in an industry. Typical barriers are:
Scale and experience: economies of scale of current businesses make
it expensive for new entrants to match them. Experience gives
current businesses a cost advantage because they have learnt how
to do things more efficiently than an inexperience new entrant.
Access to supply and distribution channels: in many industries
manufactures have had control over supply/distribution channels
(vertical integration = direct ownership, or loyalty).
Expected retaliation: retaliation could take the form of a price war.
Legislation or government action: legal restraints on new entry
(patent protection, regulation of markets).
Differentiation: providing a product/service with higher perceived
value than the competition.
 The threat of substitutes product/services that offer a similar benefit to an
industrys products/services, but by a different process.
Can reduce demand and for a type of product as customers switch to
alternatives.
The price/performance ratio is critical.
Extra-industry effects are the core. Substitutes come from outside
the industry.
The power of buyers the organisations immediate customers, not
necessarily the ultimate consumers. Buyer power is likely to be high when:
Concentrated buyers: when a few large customers account for the
majority of sales, buyer power is increased.
Low switching costs: where buyers can easily switch between
suppliers, they have a strong negotiation position.
Buyer competition threat: if the buyer has the capacity to supply
itself, or if it has the possibility of acquiring such a capability, it tends
to be powerful. It can raise the threat of doing the suppliers job
themselves (backward vertical integration).
The power of suppliers those who supply the organisation with what it
needs to produce the product/service. Supplier power is likely to be high
when:
Concentrated suppliers: where just a few producers dominate
supply, suppliers have more power over buyers.
High switching costs: if it is expensive to change from suppliers, then
the buyer becomes relatively dependent.
Supplier competition threat: suppliers have increased power where
they are able to cut out buyers who are acting as middlemen
(forward vertical integration: moving up closer to the ultimate
customer).
The extent of rivalry between competitors: competitive rivals
organisations with similar products/services aimed at the same customer
group (i.e. not substitutes). Besides the previous four factors, there are a
number of additional factors directly affecting the degree of competitive
rivalry:
Competitor balance: where competitors are of roughly equal size
there is the danger of intensely rivalrous behaviour as one
competitor attempts to gain dominance over others, through
aggressive price cuts for example. Less rivalrous industries tend to
have one or two dominant organisations, with the smaller players
reluctant to challenge the larger ones directly.
Industry growth rate: in situations of strong growth, an organisation
can grow with the market, but in situations of low growth or decline,
any growth is likely to be at the expense of a rival, and meet with
fierce resistance.
High fixed costs: industries with high fixed costs, perhaps because
requiring high investments in capital equipment or initial research,
tend to be highly rivalrous. Companies will seek to spread their costs
by increasing their volumes.
High exit barriers: increases rivalry, fighting to maintain market
share.
Low differentiation: in a commodity market, where products or
services are poorly differentiated, rivalry is increased because there
 is little to stop customers switching between competitors and the
only way to compete is on price.
o Dynamic industry structure:
o Industry life cycle industries start small in their development stage, then go
through a period of rapid growth, then a period of shake-out, then a period of slow
or even zero growth (maturity), and finally the stage of decline (figure 2.3, page 34).
Development stage: experimental, typically few players, little direct rivalry,
highly differentiated products, weak five forces, profits may be scarce
because of high investments requirements.
Growth stage: rivalry low as there is plenty of market opportunity, barriers of
entry may be low because existing competitors have not built up much scale,
experience or customer loyalty.
Shake-out stage: increased rivalry forces the weakest of new entrants out of
the business.
Maturity stage: barriers to entry increase, products/service standardises.
Decline stage: extreme rivalry, high exit barriers.
o Comparative industry structure analyses (figure 2.4, page 35) power diminishes as
the axes go outwards.
Erosion of competitive advantage.
Changes in five forces.
Competitors overcoming adverse forces.
Cycles of competitive response.
When slow: long periods of established pattern of competition
built imitation barriers.
When fast: hyper competition, constant disequilibrium and change
sequence of short-lived moves.

- Micro-environment: the inner layer of the business environment. The concept of strategic
groups can help identify different kinds of competitors. Customers too can differ significantly
and these can be captured by distinguishing between different market segments.
o Strategic groups organisations within an industry or sector with similar strategic
characteristics, following similar strategies or competing on similar bases. Two
categories of different characteristics (figure 2.5, page 36):
Scope of an organisations activities: product range, geographical coverage,
range of distribution channels used.
Resource commitment: brands, marketing spend, extent of vertical
integration.
Strategic groups can be mapped on to two-dimensional charts. One method for
choosing key dimensions by which to map strategic groups is to identify top
performers (by growth or profitability) in an industry and to compare them with low
performers. Characteristics that are shared by top performers, but not by low
performers, are likely to be relevant for mapping strategic groups.
The strategic group concept is useful in at least three ways:
Understanding competition: focus on direct competitors in the strategic
group, rather than in the whole industry.
Analysis of strategic opportunities: strategic groups can identify the most
attractive strategic spaces within an industry.
Analysis of mobility barriers: these are obstacles to movement from one
strategic group to another.
o Market segments a group of customers who have similar needs that are different
from customer needs in other parts of the market. Market segment analysis:
 Variation in customer needs: table 2.1, page 39.
Specialisation.
Strategic customers the person(s) at whom the strategy is primarily
addressed because they have the most influence over which goods or
services are purchased.
o Blue Ocean Thinking Blue Oceans are new market spaces where competition is
minimised. Strategy here is about finding strategic gaps opportunities in the
environment that are not being fully exploited by competitors.
Strategy canvas compares competitors according to their performance on
key success factors in order to develop strategies based on creating new
market spaces (figure 2.7, page 41). Three features:
Critical success factors (CSFs) those factors that are either
particularly valued by customers or which provide a significant
advantage in terms of costs source of competitive advantage.
Value curves a graphic depiction of how customers perceive
competitors relative performance across the critical success factors.
Value innovation the creation of new market space by excelling on
established critical success factors on which competitors are
performing badly and/or by creating new critical success factors
representing previously unrecognised customer wants.
Two critical principles for Blue Ocean Thinking: focus and divergence.
Focus on just two factors, while maintaining adequate performance on the
other critical success factors where its competitors are already high
performers.
Creating a value curve that diverges from its competitors value curves,
creating a substantial strategic gap/Blue Ocean.

Chapter 3. Strategic capabilities
Figure 3.1, page 50:
- Organisations are not identical, but have different capabilities.
- It can be difficult for one organisation to obtain or copy the capabilities of another.
- Managers need to understand how their organisations are different from their rivals.
Resource-based view (RBV) of strategy that the competitive advantage and superior performance
of an organisation is explained by the distinctiveness of its capabilities.

Internal analysis
Strategic capabilities the capabilities of an
organisation that contribute to its long-term
survival or competitive advantage. Two
components: resources and competences (table
3.1, page 52).
- Resources the assets that organisations
have or can call upon (what we have).
- Competences the ways those assets are
used or deployed effectively (what we do
well).

Dynamic capabilities an organisations ability to renew and recreate its strategic capabilities to
meet the needs of changing environments focus on innovativeness of the company.


Strategic capabilities: threshold and distinctive capabilities
(table 3.2, page 53)
Threshold capabilities those needed for an organisation to
meet the necessary requirements to compete in a given
market and achieve parity with competitors in that market.
- Threshold resources required to meet minimum customer requirements.
- Threshold competences required to deploy resources so as to meet customers requirements
and support particular strategies.
Distinctive capabilities those needed to achieve competitive advantage.
- Distinctive resources that underpin competitive advantage and that others cannot imitate or
obtain (e.g. long-established brand).
- Distinctive competences ways of doing things that are unique to that organisation and
effectively utilised so as to be valuable to customers and difficult for competitors to obtain or
imitate.

Core competences the linked set of skills (what people know/able), activities (what they do) and
resources (what you have in the company) that together deliver customer value, differentiate a
business from its competitors and can be extended and developed.

VRIN: strategic capabilities as a basis for sustainable competitive advantage (figure 3.2, page 59)
- V value of strategic capabilities when they provide potential competitive advantage in a
market at a cost that allows an organisation to realise acceptable levels of return.
o Taking advantage of opportunities and neutralising threats.
o Value: capabilities need to be of value both to customers and to the well being of the
organisation itself.
o Providing potential competitive advantage.
o Cost: the product/service needs to be provided at a cost that still allows the
organisation to make the returns expected of it.
- R rarity rare capabilities are those possessed uniquely by one organisation or by a few
others.
o Meeting customer need.
o Sustainability.
- I inimitability inimitable capabilities those that
competitors find difficult to imitate or obtain
advantage is to be determined by the way in which
resources are deployed and managed in terms of an
organisations activities.
o Superior performance.
o Linked competences: if the capability integrates
activities, skills and knowledge both inside and
outside the organisation in distinct and
mutually compatible ways, it is the linkages of the activities that go to make up
capabilities that can be important.
There are four reasons that may make capabilities difficult for competitors to imitate:
o Complexity.
Internal linkages: there may be linked activities and processes that together
deliver customer value.
External linkages: developing activities together with the customer such that
the customer becomes dependent on them.

 o Causal ambiguity: competitors find it difficult to discern the causes and effects
underpinning an organisations advantage.
Because the capability itself is difficult to discern or comprehend.
Or, because competitors may not be able to discern which activities and
processes are dependent on which others to form linkages that create core
competences.
o Culture and history: competences may become embedded in an organisations
culture. So coordination between activities occurs naturally because of taken-for-
granted activities.
o Change: if an organisation builds a basis of competitive advantage on resources or
capabilities that change as the dynamics of a market or the needs of customers
change, they will be more difficult to imitate.
- N non-substitutability: is the risk of capability substitution low?
o Product or service substitution: by other products or services (e.g. bike vs. car).
o Competence substitution: by a different approach (e.g. mortgage advise via Internet
vs. intermediary).

Diagnosing strategic capabilities
Value chain describes the categories of activities within an
organisation which, together, create a product or service.
- Primary activities directly concerned with the creation or
delivery of a product or service.
- Support activities help to improve the effectiveness or
efficiency of primary activities.
The value chain can be used to understand the strategic position of
an organisation in three ways:
1. As a generic description of activities understanding if there is a cluster of activities
providing benefit to customers located within particular areas of the value chain.
2. In analysing the competitive position of the organisation
using the VRIN-criteria identifying sources of sustainable
advantage.
3. To analyse the cost and value of activities of an organisation.

Value network the set of inter-organisational links and relationship
that are necessary to create a product or service.
1. Understanding cost/price structures across the value chain
network analysing the best area of focus and the best
business model.
2. The make or buy decision deciding which activities to do
in-house and which to outsource.
3. Partnering and relationships deciding who to work with and
the nature of these relationships.

SWOT
SWOT summarizes the strengths, weaknesses, opportunities and
threats likely to impact on strategy development SWOT-analysis is
not absolute but relative to competitors (always compare!).
Problems of SWOT-analysis:
- Can generate long lists: need to focus on key issues.
- Danger of over-generalisation: SWOT is not a substitute for
rigorous strategic analysis.
SWOT can help focus on future choices and the extent to which an organisation is capable of
supporting these strategies. A useful way to do this is to use a TOWS-matrix (figure 3.5, page 68)
each box can be used to identify options that address a different combination of the internal factors
(strengths and weaknesses) and the external factors (opportunities and threats).
TOWS-matrix:

Chapter 4. Strategic purpose
Mission statement provide employees and stakeholders with clarity about the overriding purpose
of the organisation (what business are we in?).
- Long-term purpose.
Vision statement concerned with the desired future state of the organisation (what do we want to
achieve?).
Statements of corporate values communicate the underlying and enduring core principle that
guide an organisations strategy and define the way that the organisation should operate.
Objectives statements of specific outcomes that are to be achieved (financial e.g. desired sales or
profit levels, rate of growth, dividend levels; market-based e.g. market share, customer service).
- Objectives and measurement

Strategic purpose
1. Governance structure / corporate governance
concerned with the structures and systems of
control by which managers are held accountable to
those who have a legitimate stake in an organisation.
o Separation of ownership and management
control hierarchy or chain of governance.
o Governance chain shows the roles and
relationships of different groups involved in the governance
of an organisation reveals the links between ultimate
beneficiaries and management.
o To whom are executives responsible, who are the
shareholders (owners), what is the role of institutional
investors, what means of scrutiny and control exist?
o Problems: lack of clarity on end beneficiaries, unequal
division of power, different (levels of) access of information.
o Principal-agent model principals pay agents to act on their
behalf. Problem:
 Self-interested agents (e.g. striving for promotion).
Misalignment of incentives and control: decisions may reflect agents self-
interests rather than those of end beneficiaries.
o Shareholder model: shareholders those that have a legitimate claim to the
assets/profits of the firm the organisation as a tradable stream of future cash
flows.
o Stakeholder model: stakeholders those
individuals or groups who depend on an
organisation to fulfil their goals and on
whom, in turn, the organisation depends
the organisation enables the realisation of
their interests.
2. Corporate social responsibility (CSR) the
commitment by organisations to behave ethically
and contribute to economic development, while
improving the quality of life of the workforce and
their families as well as the local community and
society at large.
o Concerned with the ways in which an
organisation exceeds it minimum obligations
to stakeholders specified through regulation. Stances on CSR:
o Laissez-fair view the only responsibility of business is to make a profit and provide
for the interests of shareholders. Organisation should meet the minimum obligations
set by the government.
o Enlightened self-interest justification for social action is that it makes good
business sense (reputation).
o Forum for stakeholder interaction incorporates multiple stakeholder interest and
expectations as influences on organisational purposes/strategies.
o Shapers of society activists, seeking to change society and social norms, financial
considerations are of secondary importance.
3. Stakeholder expectations.
o External stakeholders.
Economic: suppliers, competitors, distributors, shareholders.
Social/political: policy-makers, regulators, government agencies.
Technological: key adopters, standards agencies.
Community: are affected by what an organisation does, e.g. those who live
close to a factory.
o Internal stakeholders: departments, geographical
locations or different levels in the hierarchy.
o Stakeholder mapping identifies stakeholder
expectations and power and helps in understanding
political priorities (figure 4.4, page 91).
Power the ability to persuade, induce, or
coerce others into following certain courses of
action.
Level of interest how likely does the
stakeholder show an interest to support or
oppose a strategy.
Questions with stakeholder mapping:
In determining purpose and strategy, which stakeholder expectations need
to be considered?
 How do the actual levels of interest and power reflect the corporate
governance framework?
Who are the key blockers and the facilitators of strategy?
Can levels of interest or power of key stakeholders be maintained?
4. Organisational culture the taken-for-granted assumptions and behaviours that make sense
of peoples organisational context.
o Values: the formally stated ones and the underlying values.
o Beliefs: how people talk about issues the organisation faces
o Behaviours: day-to-day way in which an organisation operates.
o Taken-for-granted assumptions: the aspects of organisational life which people find
difficult to identify and explain paradigm the set of assumptions held in
common and taken for granted in an organisation.
The effect of culture on strategy (figure 4.5, page 97):
o Faced with a stimulus for action, managers first try to improve implementation of
existing strategy (e.g. lower costs, improve efficiency).
o If this is not effective, a change of strategy may occur, but a change in line with the
existing culture.
o Change of culture.

Cultural web shows the behavioural, physical and symbolic manifestations of a culture
(figure 4.6, page 99).
o Paradigm as the core of the web.
o Routines: the way we do things around here on a day-to-day basis.
o Rituals: particular activities or events that emphasize or highlight what is important
in the culture.
o Stories.
o Symbols: objects, events, acts or people that convey, maintain or create meaning
over and above their functional purpose.
o Power structures: distributions of power to groups of people in an organisation.
o Organisational structures: the roles, responsibilities and reporting relationships in
organisations.
o Control systems: the formal and informal ways of monitoring and supporting people
within and around an organisation.

Strategic drift
- This is the tendency for strategies to develop incrementally on the basis of historical and
cultural influences, but fail to keep pace with a changing (business) environment.
- When the organisations strategy gradually moves away from relevance to the forces in the
wider environment.
- How to break out of a (downward) reinforcing cycle?

Chapter 5. Business strategy
Strategic business unit (SBU) any business that supplies goods or services to a distinct domain of
activity (figure 5.1, page 110).
Competitive strategy concerned with how a strategic business unit achieve competitive advantage
in its domain of activity.
Competitive advantage about how an SBU creates value for its users both greater than the costs of
supplying them and superior to that of rival SBUs.
- To be competitive, the SBU must ensure that users (customers/funders) see sufficient value
that they are prepared to pay more than the costs of supply.
- To have an advantage, the SBU must be able to create greater value than competitors.


Generic competitive strategies
1. Cost-leadership: large economies of scale, tight cost
discipline.
o Becoming the lowest-cost organisation in a
domain of activity. Four key cost drivers:
Input costs (labour, raw material): e.g.
locating labour-intensive operations in
countries with low labour costs.
Economies of scale: increasing scale
reduces the average costs of operation
over a particular time period
spreading fixed costs over high levels
of output. For the cost-leader, the output level must be equal to the
minimum efficient scale (figure 5.3, page 113).
Experience: the experience curve implies that the cumulative experience
gained by an organisation with each unit of output leads to reductions in unit
costs (figure 5.3, page 113) the more experience an organisation has in an
activity, the more efficient it gets at doing it.
First, there are gains in labour productivity as staff learn to do things
more cheaply over time (learning curve effect).
Second, costs are saved through more efficient designs or equipment
as experience shows what works best.
Product/process design.

Two options for cost-leaders:
Parity (equivalence) with competitors in product or service features valued
by customers. This allows the cost-leader to charge the same prices as the
average competitor in the market, while translating its cost advantage wholly
into extra profit (figure 5.4, page 114).
Proximity (closeness) to competitors in terms of features partially passing
on extra margin.
2. Differentiation involves uniqueness along some dimension that is sufficiently valued by
customers to allow a price premium. Identify potential for differentiation by using perceptual
mapping of their products/services against those of competitors (figure 5.5, page 117).
Differentiation allows higher prices, but usually comes at a cost. Therefore, additional
investments are required, but these costs must not exceed the gains in price.
Two key factors:
o The strategic customer: identify the strategic customer on whose needs the
differentiation is based.
o Key competitors.
3. Focus strategy targets a narrow segment of domain of activity and tailors its products or
services to the needs of that specific segment to the exclusion of others.
o Cost focus: targeting price-conscious consumers.
o Differentiation focus: higher price for distinctive products
Three key factors:
o Distinct segment needs.
o Distinct segment value chains.
o Viable segment economics.


The strategy clock
The Strategy Clock has two distinctive features:
1. It is based on prices, not costs, so it is easier to
compare competitors on prices in the market than
internal costs.
2. The circular design allows for more continuous
choices.
Three zones of feasible strategies, one zone leading to
ultimate failure:
1. The differentiation zone: building on high
perceptions of product or service benefits to the selected market segment (niche).
o Premium products, heavily branded (e.g. Harrods).
o Difficult when the SBU-focus strategy is only part of an organisations overall
strategy.
o Pitfalls: possible conflict with stakeholder expectations, new ventures start off
focused but need to grow, market situation may change which reduces differences
between market segments.
2. The low-price zone: combinations of low prices and low perceived value.
o Lower price than competitors low cost achieved in ways that competitors cannot
match to give sustainable advantage.
o Maintain similar product/service benefits.
o Year on year efficiency gains.
o Dangers: margin pressured (competitor reaction), customers associate low price with
low benefit, cost reductions may result in inability to pursue differentiation strategy.
3. The hybrid strategy zone: involve both lower prices than differentiation strategies, and higher
benefits than low-price strategies.
4. Non-competitive strategies: low
benefits, high prices, infeasible.

Interactive strategies
Business strategy options to interact with
competitors.
- Interactive price and quality strategies
(competitive): business strategy in
light of competitors moves. Though,
problem of excalation or
hypercompetition.
- Cooperative strategy (figure 5.8, page
126).

Chapter 6. Corporate strategy and diversification
Scope concerned with how far an organisation should be diversified in terms of
products and markets.

Strategy directions
Diversification increasing the range of products or markets served by an
organisation (be in other businesses as well).
Differentiation: want to be different than your competitors.
Related diversification diversifying into products or services with relationships to the existing
business.

Figure 6.2, page 135
1. Market penetration increasing share of current markets
with the current product range. Three constraints:
o Retaliation from competitors: increased rivalry might
involve price wars or expensive marketing battles,
which may cost more than any market-share gains
are actually worth.
o Legal constraints: greater market penetration can
raise concerns from official competition regulators
concerning excessive market power.
o Economic constraints.
2. Product development where organisations deliver modified or new products (or services)
to existing markets (related diversification). Can be expensive and high-risk for two reasons:
o New strategic capabilities: product development involves mastering new processes
or technologies that are unfamiliar.
o Project management risk: risk of delays and increased costs due to project
complexity and changing project specifications over time.
3. Market development offering existing products to new markets. Two basic forms:
o New users.
o New geographies.
It is essential that market development strategies be based on products or services that meet
the critical success factors of the new market.
4. Conglomerate diversification diversifying into products or services with no relationships to
the existing business (new product, new market) (unrelated diversification).

Diversification drivers
1. Exploiting economies of scope: efficiency gains through applying the organisations existing
resources or competences to new markets or services.
2. Stretching corporate management competences (dominant logics): the potential for
applying the skills of talented corporate-level managers. Dominant logic the set of
corporate-level managerial competences applied across the portfolio of businesses.
3. Exploiting superior internal processes.
4. Increasing market power synergy.

Where diversification creates value, it is described as synergistic. Synergy the benefits gained
where activities or assets complement each other so that their combined effect is greater than the
sum of the parts. Some drivers for diversification involve negative synergies (value destruction):
1. Responding to market decline: let shareholders find new growth investment opportunities
for themselves, rather than invest spare funds in a new business.
2. Spreading risk.
3. Managerial ambition.

Vertical integration
Vertical integration entering activities where the organisation is its own supplier or customer.
- Backward integration development into activities concerned with the inputs into the
companys current business (i.e. further back in the value network).
- Forward integration development into activities
concerned with the outputs of a companys current
business (i.e. further forward in the value network).
Figure 6.3, page 142!
Horizontal integration: (related) diversification.

Outsourcing the process by which activities previously carried out internally are subcontracted to
external suppliers.

The decision to integrate or subcontract (outsource) rests on the balance between two distinct
factors:
- Relative strategic capabilities: does the subcontractor have the potential to do the work
significantly better?
- Risk of opportunism: is the subcontractor likely to take advantage of the relationship over
time?

Value creation and the corporate parent
Value-adding activities, by which a corporate parent can add value:
- Envisioning: the corporate parent can provide a clear overall vision or strategic intent for its
business units to guide and motivate the business unit managers in order to maximise
corporation-wide performance through commitment to a common purpose.
- Coaching and facilitating: the corporate parent can help business unit managers develop
strategic capabilities, by coaching them to improve their skills. They can also facilitate
cooperation and sharing across business units, so improving the synergies.
- Providing central services and resources.
- Intervening: to ensure appropriate performance
(monitoring/controlling).

Value-destroying activities, by which the corporate parent may
destroy value:
- Adding management costs.
- Adding bureaucratic complexity.
- Obscuring financial performance.

Corporate parenting types (figure 6.4, page 147)
- Portfolio manager operates as an active investor in a
way that shareholders in the stock market are either too dispersed or too inexpert to be able
to do.
o Seek to keep the cost of the centre low, set clear financial targets for the chief
executives of the business units, offering high rewards if they achieve them and likely
loss of position if they dont.
- Synergy manager corporate parent seeking to enhance value for business units by
managing synergies across business units.
o Envisioning to build a common purpose, facilitating cooperation across businesses,
providing central services and resources.
o Three challenges:
Excessive costs: the benefits in sharing and cooperation need to outweigh
the costs of undertaking such integration.
Overcoming self-interest: managers need to cooperate.
Illusory synergies.
- Parental developer seeks to employ its own central capabilities to add value to its
businesses.
o Focus on the resources or capabilities they have as parents which they can transfer
downwards to enhance the potential of business units.
o Services the business units, investing (e.g. Unilever).



The BCG (or growth/share) matrix
Boston Consulting Group (BCG) matrix uses market share and market growth criteria for
determining the attractiveness and balance of a business portfolio.
- Balance, e.g. in relation to its markets and the needs of the corporation.
- Attractiveness of the business units in terms of how strong they are individually and how
profitable their markets or industries are likely to be.
Four sorts of businesses:
- Star: high market share in a growing market spending much to keep up with growth, but
high market share should yield sufficient profits.
- Question mark: not yet high market share in a growing market heavy investment needed
to develop into stars.
- Cash cow: high market share in a mature market investments needs are less, profitable,
helping to fund investments in question marks.
- Dogs: low market share in static/declining market recommend divestment/closure.
Three problems:
- Definitional vagueness: hard to decide what high/low growth and share means.
- Capital market assumptions.
- Unkind to animals (dogs/cows): causes motivation problems as managers see little point in
working hard for the sake of other businesses.

Chapter 7. International strategy
International strategy a range of strategic options for operating outside
an organisations country of origin.
Global strategy one kind of strategic option, involves high coordination
of extensive activities dispersed geographically in many countries around
the world.

Internationalisation drivers
Yips globalisation framework sees international strategy potential as
determined by market drivers, cost drivers, government drivers and competitive drivers (figure 7.2,
page 163).
- Market drivers: standardisation of market
characteristics.
o Similar customer needs and tastes.
o Global customers.
o Transferable marketing: brands can be
successfully marketed in very similar
ways across the world.
- Cost drivers: costs can be reduced by operating
internationally.
o Scale economies, due to increasing
volume beyond what a national market
might support.
o Country-specific differences: take
advantage of variations (e.g. cheap
labour) (global sourcing).
o Favourable logistics: costs of moving products or services across borders relative to
their final value.
- Government drivers: tariff barriers, technical standards, subsidies to local firms, etc.
- Competitive drivers.
 o Interdependence between country operations: increase the pressure for global
coordination.
o Globalised competitors: increase the pressure to adopt a global strategy in response.

National and international sources of advantage
Two opportunities: the exploitation of locational advantages (often in the companys home country),
and sourcing advantages overseas via an international value network.
- Locational advantage: Porters Diamond suggests that locational advantages may stem
from local factor conditions, local demand conditions, local related and supporting
industries, and from local firm strategy structure and rivalry (figure 7.3, page 166).
o Factor conditions: the factors of production that go into making a product or service
(i.e. raw materials, land and labour).
o Home demand conditions: dealing with sophisticated and demanding customers at
home helps train a company to be effective overseas.
o Related and supporting industries: local clusters of related an supporting industries
can be a source of competitive advantage.
o Firm strategy, industry structure and rivalry.

The international value network
For international companies, advantage can be drawn from the
international configuration of their value network (exploit location
advantages).
Global sourcing purchasing services and components from the most
appropriate suppliers around the world, regardless of their location.
Different locational advantages can be identified:
- Cost advantages: labour costs, transportation and communications costs, and taxation and
investment incentives (e.g. labour where it is cheapest).
- Unique local capabilities: developing strategic capabilities by drawing on capabilities found
elsewhere in the world.
- National market characteristics: develop differentiated product offerings aimed at different
market segments.

International strategies
Global-local dilemma the extent to which products and
services may be standardised across national boundaries or
need to be adapted to meet the requirements of specific
national markets.

Coordination the extent to which operations in different
countries are managed in a decentralised way or a centrally
coordinated way.
Configuration the geographical dispersion or concentration
of activities.
Four basic international strategies:
- Simple export: concentration of activities in one country, marketing of the exported product
is very loosely coordinated overseas. Typically chosen by organisations with locational
advantage, but where the organisation has insufficient managerial capabilities to coordinate.
- Multidomestic: very loosely coordinated internationally, but dispersion overseas of various
activities. Instead of export, goods and services are produced locally in each national market.
Each market is treated independently, with the needs of each local domestic market.
Typically chosen when there are few economies of scale and strong benefits to adapting to
local needs (responsiveness).
 - Complex export: location of most activities in a single country, but coordinated marketing.
Typically chosen by companies from emerging economies, as they retain some locational
advantages from their home country, but seek to build a stronger brand and network
overseas.
- Global strategy: highly coordinated activities dispersed geographically around the world.
Typically chosen for the specific locational advantage for each activity efficiency prime.

Market selection and entry
Market characteristics:
PESTEL framework: at least four elements are important in comparing countries for entry:
- Political: environments vary widely between countries consider political risk.
- Economic: gross domestic product, disposable income stability of currency (currency risk).
- Social: availability of a well-trained workforce, size of market segment, cultural variations.
- Legal: policing.

CAGE framework emphasises the importance of cultural, administrative, geographical and
economic distance.
- Cultural distance: differences in language, ethnicity, religion and social norms.
- Administrative and political distance: traditions, colonial heritage, political preferences.
- Geographical distance: miles, size, communications infrastructure, sea access.
- Economic distance: wealth distances, market requirements.

Competitive characteristics:
Retaliation relates to rivalry in the five forces framework. Three criteria:
- Market attractiveness to the new entrant, based on the PESTEL and CAGE frameworks (figure
7.6, page 176).
- Defenders reactiveness, a defender will be
more reactive if the markets are important to it
and it has the managerial capabilities to
coordinate its response.
- Defenders clout the power that the defender
is able to muster in order to fight back.

Entry modes (figure 7.7, page 179):
- Exporting: product must be easily transported
from country to country.
- Licensing/franchising.
- Joint ventures.
- Wholly owned subsidiaries.

Chapter 8. Innovation strategies
Innovation dilemmas
Invention the conversion of new knowledge into a new product,
process or service.
Innovation the conversion of new knowledge into a new
product, process or service and the putting of this new product, process or service into actual use.
1. Technology push or market pull?
o Technology push: the new knowledge created by technologists or scientists pushes
the innovation process supplier/producer driven.
o Market pull: organisations should listen in the first place to users rather than their
own scientists and technologists lead-user driven. Marketing and sales functions
 identify the lead-users of a field and then scientists and technologists translate their
inventive ideas into commercial products, processes or services.
2. Product or process innovation?
o Product innovation: relates to the final
product to be sold, especially with regard to
its features newly developing industries.
o Process innovation: relates to the way in
which this product is produced and
distributed, especially with regard to
improvements in cost or reliability
maturing industries.
3. Open or closed innovation?
o Open innovation the deliberate import
and export of knowledge by an organisation in order to accelerate and enhance its
innovation.
Produce better products more quickly than when using an internal, closed
approach. Speedier and superior products are what are needed to keep
ahead of the competition.
Platform leadership how large firms consciously nurture independent
companies through successive waves of innovation around their basic
technological platform.
o The balance between open and closed innovation depends on:
Competitive rivalry: closed innovation is better where such rivalrous
behaviour can be anticipated.
One-shot innovation: open innovation works better where innovation is
more continuous, so encouraging more reciprocal behaviour over time.
Tight-linked innovation: open innovation risks introducing damagingly
inconsistent elements, with knock-on effects throughout the product range.
4. Technological or business-model innovation?
o Business model describes how an organisation manages incomes and costs
through the structural arrangement of its activities.
o Two basic areas for potential business-model innovation:
The product: redefine what the product or service is and how it is produced.
The selling: change the way in which the organisation generates its revenues,
with implications for selling and distribution.

Innovation diffusion
Diffusion the process by which innovations spread among users. The pace of diffusion on the
supply side is determined by product features such as:
- Degree of improvement in performance above current products.
- Compatibility with other factors (complementary products and services).
- Complexity: simplicity.
- Experimentation: the ability to test products before commitment to a final decision.
- Relationship management: how easy it is to get information, place orders and receive
support.
On the demand side:
- Market awareness.
- Network effects: the way that demand growth for some products accelerates as more people
adopt the product.
- Customer innovativeness: the distribution of potential customers from early-adopter groups
through to laggards.
The diffusion S-curve:
S-curve reflects a process of initial slow adoption
of innovation, followed by a rapid acceleration in
diffusion, leading to a plateau representing the
limit to demand (figure 8.3, page 196).
- Height: the extent of diffusion.
- Shape: speed.
Four decision points:
- Timing of the tipping point where demand for a product or service suddenly takes off, with
explosive growth usually explosive where there are strong network effects.
- Timing of the plateau: slowdown in demand growth.
- Extent of diffusion: the S-curve does not necessarily lead to 100 per cent diffusion among
potential users.
- Timing of the tripping point when demand suddenly collapses.

Innovators and followers
First-mover advantage where an organisation is better off than its competitors as a result of being
first to market with a new product, process or service.
- Experience curve benefits: greater expertise than later entrants.
- Scale benefits: establish earlier than competitors the volumes necessary for mass production.
- Pre-emption of scarce resources.
- Reputation.
- Buyer-switching costs exploited: locking in their customers with privileged or sticky
relationships.
Late-movers have two potential advantages:
- Free-riding: imitate technological and other innovation at less expense (no sunk costs).
- Learning: observe what worked out well and what did not work well (lower risks).

Three factors to consider in choosing between innovating and imitating:
- Capacity for profit capture:
o Imitation is likely if the innovation is easy to replicate.
o Imitation is facilitated if intellectual property rights are weak.
- Complementary assets: possession of the assets or resources necessary to scale up the
production and marketing of the innovation is often critical.
- Fast-moving arenas: first-movers are unlikely to establish a durable advantage in fast-moving
markets.

Disruptive innovation creates substantial growth by
offering a new performance trajectory that, even if
initially inferior to the performance of existing
technologies, has the potential to become markedly
superior (figure 8.4, page 201). Incumbents can follow
two policies to help keep them responsive to potentially
disruptive innovations:
- Develop a portfolio of real options: companies
that are most challenged by disruptive
innovations tend to be those built upon a single business model and with one main product
or service. Real options are limited investments that keep opportunities open for the future.
o Positioning options: the market is broadly known, but the technologies are uncertain.
o Scouting options: have strong technology, but uncertain about appropriate markets
explore which markets are best (figure 8.5, page 202).
o Stepping stone options: high market and technology uncertainties.
 - Develop new venture units.

Chapter 9. Mergers, acquisitions and alliances
Relying on internal capabilities organic development where a strategy is pursued by building on
and developing an organisations own capabilities. Four advantages:
- Enhance knowledge and learning: own sales force instead of sales agents.
- Spreading investment over time: versus one-off expenditures (makes it easier to
reverse/adjust a strategy).
- No availability constraints: not dependent on availability of suitable acquisition targets.
- Strategic independence: no need to make compromises.
Corporate entrepreneurship radical change in the organisations business, driven principally by the
organisations own capabilities.

Mergers and acquisitions
External methods to pursue strategies:
Acquisition one firm taking over the ownership (equity) of
another, hence the alternative term takeover.
Merger the combination of two previously separate
organisations, typically as more or less equal partners.

Motives for mergers and acquisitions:
- Strategic motives: improving the actual business of the organisation.
o Extension: extend the reach of a firm in terms of geography, products or markets.
o Consolidation: consolidate the competitors in an industry.
o Capabilities: increase a companys capabilities.
- Financial motives: optimal use of financial resources.
o Financial efficiency: strong balance sheet combined with weak balance sheet.
o Tax efficiency: tax advantages from bringing together different companies.
o Asset stripping or unbundling: buy a company and sell of different business units.
- Managerial motives: self-serving rather than efficiency-driven.
o Personal ambition.
o Bandwagon effects.

M&A processes:
1. Target choice.
o Strategic fit: the extent to which the target firm strengthens or complements the
acquiring firms strategy.
o Organisational fit: the match between the management practices, cultural practices
and staff characteristics between the target and the acquiring firms.
2. Valuation: negotiating the right price for an acquisition target.
3. Integration.
o The extent of strategic interdependence: high interdependence means tight
integration.
o The need for organisational autonomy:

Acquisition integration matrix (figure 9.2, page 217):
- Absorption: strong strategic interdependence, little
need for organisational autonomy rapid
adjustment of the acquired companys old strategies
to the needs of the new owner.
 - Preservation: little interdependence, high need for autonomy allows old strategies,
cultures and systems to continue, with little changes.
- Symbiosis: strong strategic interdependence, high need for autonomy both firms learn
the best qualities from the other.
- Holding: low strategic interdependence and autonomy leave the acquired firm alone.

Strategic alliances
Strategic alliance where two or more organisations share resources and activities to pursue a
strategy.
Collective strategy about how the whole network of relationships of which an organisation is
member competes against rival networks of relationships.

Types of strategic alliances:
- Equity alliances: the creation of a new entity that is owned separately by the partners
involved.
o Joint venture where two organisations remain independent, but set up a new
organisation jointly owned by the parents.
o Consortium alliance involves several partners setting up a venture together.
- Non-equity alliances: without the commitment implied by ownership, based on contracts.
o Franchising where one organisation gives another organisation the right to sell the
franchisors products or services in a particular location in return for a fee/loyalty.
o Licensing allowing partners to use intellectual property such as patents/brands in
return for a fee.

Motives for alliances:
- Scale alliances: organisations combine in order to achieve necessary scale.
o Economies of scale for output and input, shared risk.
- Access alliances: ally in order to access capabilities of one another.
- Complementary alliances: combine to bolster each others
gaps/weaknesses.
- Collusive alliances: secretly collude together in order to increase market power.

Strategic alliance processes:
- Co-evolution: underlines the way in which partners, strategies, capabilities and environments
are constantly changing emphasis on flexibility and change
- Trust: highly important to the success of alliances over time.

Strategic alliance evolution process:
1. Courtship.
o Main resource commitment is managerial
time.
o Process should not be rushed, affects
willingness.
o Strategic fit, organisational fit.
2. Negotiation.
 o Carefully negotiate mutual roles at the outset.
o Equity alliances, also negotiate proportion of ownership.
o Wise to include an option for renegotiating initial terms.
3. Start-up.
o First, the initial operation puts the original alliance agreements to the test.
o Second, adjustments are made and misunderstandings are smoothened.
4. Maintenance.
o Ongoing operation of the strategic alliance.
o Managing to allow for changing external circumstances.
5. Termination.
o Often an agreed time span or purpose.
o Successful? Amicable separation, extension of alliance or selling agreement.
o Has to be managed carefully and with mutual trust.

Chapter 10. Strategy in action
Structural types
- Functional (or unitary) structure divides responsibilities according to the organisations
primary specialist roles such as production, research and sales.
















- Multidivisional structure built up of separate divisions on the basis of products, services or
geographical areas.















 - Matrix structure combines different structural dimensions simultaneously, for example
product divisions and geographical territories or product divisions and functional specialisms.
















Project-based structure one where teams are created, undertake the work, and then are dissolved.
- For large/expensive items and/or limited time events.
- Constantly changing organisational structure (collection of project teams, created and
steered by small corporate group).
- Ad hoc taskforces (temporary), for new elements of
strategy, to provide momentum.

Organisational systems
- Planning systems plan and control the allocation of
resources and monitor their utilisation. Three strategy
styles:
o Strategic planning: strong planning influence
on strategic direction from the corporate
centre with relaxed performance
accountability for the business units.
o Financial control: business units each set their own strategic plans, and then are held
strictly accountable for the results.
o Strategic control: consensual development of the strategic plan between the
corporate centre and the business units and moderate levels of accountability. The
centre will function as a coach. This system relies on strong cultural systems to
foster trust and understanding aim to standardise norms of behaviour within an
organisation in line with particular objectives. Three cultural systems:
Recruitment: selection of appropriate staff.
Socialisation: social processes once employees are at work.
Reward: through pay, promotion or symbolic processes.
- Performance targets focus on the outputs of an organisation such as product quality,
revenues or profits. These targets are known as key performance indicators (KPIs). The
performance of an organisation is judged on its ability to meet these targets. Problems:
o Inappropriate measures of performance.
o Inappropriate target levels (e.g. they can be easily met).
o Excessive internal competition.
Balanced scorecard sets performance targets according to a range of perspectives, not only
financial. Combines:
o Financial perspective: profit margins/cash flows.
 o Customer perspective:
delivery times/service levels.
o Internal perspective:
effectiveness.
o Innovation and learning
perspective: long-run
performance
(investment/research).

Organisational configuration: the McKinsey 7-S framework
Configuration the set of organisational design elements that interlink in order to support the
intended strategy.
McKinsey 7-S framework highlights the importance of fit between strategy, structure, systems,
staff, style, skills and super-ordinate goals (shared values) to asses both organisational structure
and systems-compatibility.
- Style: leadership style of top managers.
- Staff.
- Skills: capabilities.
- Super-ordinate goals: overarching goals or
purpose of the organisation as a whole (mission,
vision, objectives).

Leading strategic change
Types of strategic change (figure 10.6, page 244):
- The extent of change: whether change can occur
in line with the current business model and
culture (realignment) or does it require
significant cultural change (transformation)?
- The nature of change: incremental (building on the skills, routines and beliefs of those in the
organisation), or big bang (on occasion).
- Four types of strategic change:
o Adaption: within current culture, incrementally.
o Reconstruction: rapid, not change culture.
o Revolution: rapid and major change.
o Evolution: cultural change over time.

Strategic change programmes:
- Reconstruction: turnaround strategy.
o Emphasis on speed of change and rapid cost
reduction and/or revenue generation.
o Crisis stabilisation: reducing operational costs and increase productivity gains.
o Management changes.
o Gaining stakeholder support.
o Focusing on the target markets and core products.
o Financial restructuring.
- Revolutionary strategic change.
o Need for fast change and cultural change.
o The need for change is not that evident to people.
o Clear strategic direction formulated.
o Combining rational and symbolic levers.
o Working with the existing culture.
o Monitoring change.
 - Evolutionary strategic change.
o Transformational change, incrementally.
o Empowering the organisation.
o A clear strategic vision.
o Continual change and a commitment to experimentation.
o Stage of transition.
o Irreversible changes.
o Sustained top management commitment.
o Winning hearts and minds.

Strategic leadership: roles and styles:
Leadership the process of influencing an organisation (or group within an organisation) in its efforts
towards achieving an aim or goal. Three key roles in leading strategic change:
- Envisioning future strategy.
- Aligning the organisation to deliver that strategy ensure commitment, motivation and
empowerment to deliver those changes.
- Embodying change: a strategic leader is symbolically significant in the change process and
needs to be a role model for future strategy.
Roles in leading change:
- Middle managers:
o Sense-making of strategy explain and make sense of the strategy in specific
contexts.
o Reinterpretation and adjustment of strategic responses as events unfold.
o Advisers to senior management.
- Consultants:
o Help formulate strategy or plan the change
process.

Theory E: change based on the pursuit of economic value,
associated with the top-down use.
Theory O: change based on the development of
organisational capability, emphasis on cultural change,
learning and participation in change programmes.
Styles of strategic leadership (table 10.1, page 252):
- Education: persuading others of the need for and
means of strategic change. Four phases:
o Convince employees that change must be done and why this is the best way to do it.
o Make changes clear to everyone, gather feedback.
o Ensure ongoing communication of the process of change.
o Reinforce behavioural guidelines in line with the change and reward achievements.
- Collaboration: involvement of those affected by strategic change in setting the change
agenda.
- Participation: coordination of and authority over processes of change by a strategic leader
who delegates elements of the change process.
- Direction: use of personal managerial authority to establish clarity on strategy and how
change will occur top down management of strategic change.
- Coercion: imposition of change, use of power.

Appendix. Evaluating strategies
SAF suitability, acceptability and feasibility.
- Suitability assessing which proposed strategies address the key opportunities and
constraints an organisation faces through an understanding of the strategic position of an
organisation.
o Exploit opportunities in environment and avoids threats.
o Capitalises on the organisations strength and avoids or remedies weaknesses.
Use a ranking system: possible strategies are assessed against key factors relating to the
strategic position and a score is given for each option.
Or use scenarios, screening for competitive advantage, decision trees or life cycle analysis.
- Acceptability the expected performance outcomes of a proposed strategy meet the
expectations of stakeholders. Three types:
o Risk the extent to which the outcomes of a strategy can be predicted.
o Returns the financial benefits which stakeholders are expected to receive from a
strategy.
o Reaction of stakeholders stakeholder mapping.
- Feasibility whether a strategy could work in practice.
o Do the resources and competences currently exist to implement a strategy
effectively? If not, can they be obtained? Three issues:
Financial feasibility: cash flow analysis and forecasting (funding).
People and skills: do we have the competences to deliver the strategy?
Strategic change: what implications?