BUS 800 Chapter Notes - Chapter 1: W. M. Keck Observatory, Financial Statement, Business Ethics
Chapter 1: Strategy
Successful Strategy 4 Strategic Factors:
• Simple, consistent, long term goals- a strategy requires a single-minded commitment to
a clearly recognized goal that can be pursued steadfastly over a substantial period of
time
• Profound understanding of the competitive environment- a strategy requires a deep and
insightful appreciation of the context in which an organization is operating
• Objective appraisal of resources- a strategy should be effective in exploiting internal
strengths, while protecting areas of weakness
• Effective implementation
Strategies are needed to:
-give direction and purpose
-deploy resources in the most effective manner
-coordinate the decisions made by different individuals
3 Common Characteristics of Strategic Decisions: important, involve significant commitment of
resources, not easily reversible
-the evolution of business strategy has been driven more by the practical needs of business
than by the development of theory
Strategy- is the overall plan for deploying resources to establish a favourable position
Tactic- is a scheme for a specific action
Corporate Planning (long term planning)- was developed during the late 1950’s to guide long
term development of a firm, macroeconomic forecasts provided the foundation for new
corporate planning
-the typical format was 5 year corporate planning document that set: goals & objectives,
forecast key economic trends, established priorities for different products & business of the firm,
and allocated capital expenditures
-Proved particularly useful for developing and guiding the diversification strategies that many
large companies were pursuing in the 1960’s
Strategic Management- associated with increasing focus on competition as the central
characteristic of the business environment and competitive advantage as the primary goal of
strategy
Resource-based view- where resources and capabilities of a firm are the main source of
competitive advantage and primary basis for formulating strategy
-emphasis on internal resources and capabilities has encouraged firms to identify how they are
different from their competitors and design strategies to exploit these differences
-Strategy is about developing the responsiveness and flexibility to create successive temporary
advantage
Evolution of strategic management
1950: Financial Budgeting
• Discounted cash flow based capital budgeting
• Financial control through operating budgets
1960: Corporate Planning
• Medium term economic forecasting
• Formal corporate planning
• Diversification and quest for synergy
• Creation of corporate planning departments
1970: Strategy as Positioning
• Industry analysis
• Market segmentation
• The experience curve
• Profit impact of marketing strategy analysis
• Planning business portfolios
1980-1990: Quest for Competitive Advantage
• Analysis of resources and capabilities
• Shareholder value maximization
• Restructuring and re engineering
• Alliances
2000: Strategy for the New Economy
• Strategic innovation
• New business models
• Disruptive technologies
2009: Strategy in the New Millenium
• Corporate social responsibility and business ethics
• Competing for standards
• Winner take all markets
• Global strategies
Strategy- is the means by which individuals or organizations achieve their objectives OR
A plan, method, or series of actions designed to achieve a specific goal or affect
Corporate strategy- defines the scope of the firm in terms of the industries and markets in
which it competes. Corporate strategy decisions include investment in diversification, vertical
integration, acquisitions, and new ventures; the allocation of resources between the different
business of the firm; and divestments.
-typically the responsibility of the top management team
Business/Competitive strategy-is concerned with how the firm competes within a particular
industry or market. If the firm is to prosper within an industry, it must establish a competitive
advantage over its rivals.
-responsibility of divisional management