STRATEGIC AND CHANGE

MANAGEMENT
1. BASIC CONCEPTS, DEVELOPMENT AND ACTUAL TRENDS
Dr.sc.soc. Evija Klave
[email protected]
What is a strategy?

www.menti.com
Code:
 “If you don’t have a strategy you
will be . . . part of somebody
else’s strategy.”

Alvin Toffler
(October 4, 1928 – June 27, 2016) was an American writer, futurist, and businessman known for his works
discussing modern technologies, including the digital revolution and the communication revolution, with
emphasis on their effects on cultures worldwide. He is regarded as one of the world's outstanding futurists.
Strategy is about making choices … which way to follow?
What do we have on global horizon?
• Climate Change
• Economic Booms &
Busts
• Pandemic
• Demographic Changes
• Energy
• Potable (drinkable)
water shortage
•…

What do all these potential things have in

common? CHANGE…
 The concept of strategy

Historically the concept of strategy comes from

the war planning actions

Greek word “stratçgos”; stratus (meaning army)

and “ago” (meaning leading/moving)
 What is Strategy?
Strategy
A set of actions that managers take to increase their
company’s performance relative to industry rivals.
 Strategy as Plan
• A strategic plan is a carefully crafted set of steps that a firm intends to
follow to be successful.
• Virtually every organization creates a strategic plan to guide its future

Reference: Edwards, J. (2014). Mastering Strategic Management – 1st Canadian Edition. Victoria, B.C.: BCcampus. Retrieved from
https://opentextbc.ca/strategicmanagement/.
 If you’re not going to have a strategy,
the only interesting question is…
‘Cause real
process is
pretty

X
unlikely!!
Will we be
going in circles
to the LEFT?

Or to the
RIGHT?

Reference: Edwards, J. (2014).

 Strategy as Ploy
• A strategic ploy is a specific move designed to outwit or trick competitors.
• Ploys often involve using creativity to enhance success
• Ploys can be especially beneficial in the face of much stronger opponents.
• Military history offers quite a few illustrative examples

Reference: Edwards, J. (2014).

 Strategy as Pattern
• Consistency of strategy over time
• Kmart began straying from its established strategic pattern, from discount
retailing and toward diversification including sporting goods (Sports
Authority), building supplies (Builders Square), office supplies (OfficeMax),
and books (Borders)
• In the 1990s, Kmart’s strategy was again adjusted to emphasize
information technology and supply chain management
• Then Kmart’s strategy was to compete directly with its much-larger rival,
Walmart. The resulting price war left Kmart crippled and eventually
bankrupt

Reference: Edwards, J. (2014).

 Strategy as Position
• Strategy as position—considers a firm and its competitors
• Refers to a firm’s place in the industry relative to its competitors, leader,
brand levels
• Very hard to change position….

Reference: Edwards, J. (2014).

 Strategy as Perspective
• Strategy as perspective refers to how executives interpret the competitive
landscape around them
• Because each person is unique, 2 different executives could look at the
same event—such as a new competitor emerging—and attach different
meanings to it
• One might just see a new threat to his or her firm’s sales; the other sees
newcomer as potential ally
• An old cliché “make lemons into lemonade”

Reference: Edwards, J. (2014).

 Classics of strategy: Sun Tzu
• In ancient China, strategist and philosopher
Sun Tzu offered thoughts on strategy that
continue to be studied carefully by business
and military leaders today.

• Sun Tzu’s best-known work is The Art of War.

As this title implies, Sun Tzu emphasized the
creative and deceptive aspects of strategy.

• One of Sun Tzu’s ideas that has numerous

business applications is that winning a battle
without fighting is the best way to win.
Apple’s behaviour in the personal computer
business offers a good example of this idea in
action. Reference: Edwards, J. (2014).
Classics of strategy: Niccolò Machiavelli
Niccolò Machiavelli’s 1532
book The Prince offers clever
recipes for success to government
leaders.
Some of the book’s suggestions
are quite devious, and the
word Machiavellian is used today
to refer to acts of deceit and
manipulation.

Reference: Edwards, J. (2014).

 Classics of strategy: Carl von Clausewitz (1780 -1831)

A Prussian general and military theorist who stressed the psychological and political aspects of war. His
most notable work, Vom Kriege (On War), was unfinished at his death.

Reference: Edwards, J. (2014).

 What is the Difference between
Strategy and Tactics?

Distinguishing strategy from tactics:

• Strategy is the overall plan for deploying
resources to establish a favorable position.
• Tactic is a scheme for a specific maneuver

https://www.youtube.com/watch?v=uRgQlW4q
RTo
Strategic management
Definition: The term ‘strategic management’ is used to denote a branch of
management that is concerned with the development of strategic vision, setting
out objectives, formulating and implementing strategies and introducing
corrective measures for the deviations (if any) to reach the organization’s strategic
intent.

It has two-fold objectives:

•To gain competitive advantage, with an aim of
outperforming the competitors, to achieve
dominance over the market.

•To act as a guide to the organization to help in

surviving the changes in the business
environment.
 Strategic management
• Strategic management helps answer the key
question: “why do some firms outperform
other firms?”
• Examines how actions and events involving
top executives, firms, and industries influence a
firm’s success or failure
• Various tools exist to analyse and
understanding these relationships
• Creativity is central to strategic management
• Mastering strategy is therefore part art and
part science.

Reference: Edwards, J. (2014).

Strategic management
Strategic management is also a process that requires the ability to
manage change:
• executives must be careful to evaluate the current strategy and
performance,
• to monitor and to interpret the events in their environment,
• to take appropriate actions when change is needed,
• and to monitor their performance to ensure that their firms are able
to survive and, it is hoped, thrive over time.
Basic stages of the strategic management
process
Without a strategy
managers have:
• No well-defined business path to follow
• No roadmap to manage by
• No cohesive, reasoned action plan to
produce successful performance
 Helps company managers avoid
• the trap of trying to move in too many directions at once

• the trap of being so confused about the company's long-

term direction that no effective actions are taken to move
decisively in ANY direction

Reference: Edwards, J. (2014).

 Where Does Strategy Come From?
•The creation of strategy is an interactive process that involves not only the
Top Management Team but also feedback from frontline managers and
customers (or end users depending on the firm)

•As a strategy is implemented it is important to note who is affected and

when they are affected

•A strategy is implemented to create a competitive advantage over other

companies
 Why do some organizations
succeed while others fail?
• Strategic Leadership- Effectively managing a company’s
strategy-making process

• Strategy Formulation- Determining & selecting strategies

• Strategy Implementation- Putting strategies into action to

improve company’s efficiency & effectiveness

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017, 2015 Cengage Learning WCN: 02-200-202 Charles W. L. Hill
Melissa A. Schilling Gareth R. Jones
Summarizing discussion on the
concept of strartegy
1.Who makes the strategic decisions for most organizations?

2.Why is it important to view strategic management as a

process?

3.What are the four steps of the strategic management process?

4.How is chess relevant to the study of strategic management?

What other games might help teach strategic thinking?
Superior Performance

“Maximizing shareholder
value is the ultimate goal of
profit making companies…”
Determinants of Shareholder Value

To increase shareholder value, managers must pursue

strategies that increase the profitability of the company and
grow the profits.
 Superior performance

• Profitability - The return a company makes on the capital

invested in the enterprise.
• Return on invested capital (ROIC) - Net profit over the capital
invested in a firm.
• Result of how efficiently the capital is used to satisfy customer
needs.

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,

2015
30
 Superior performance
• Profit growth - The increase in net profit over time,
achieved by:
• selling products in rapidly growing markets.
• gaining market share from rivals.
• selling more to existing customers.
• expanding overseas or diversifying into new businesses.
• To boost profitability and profit growth, managers must:
• use strategies to give their company a competitive advantage
over rivals.
• deliver high profitability and sustainable profit growth.
Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,
2015
31
 Sources of Superior Profitability

INDUSTRY
ATTRACTIVENESS

Which CORPORATE
RATE OF PROFIT businesses STRATEGY
ABOVE THE should we be
COMPETITIVE in?
LEVEL

How do we
make
money? COMPETITIVE
ADVANTAGE

How should BUSINESS

we compete? STRATEGY
Strategic Management: An Integrated
Approach, Theory & Cases, i2e © 2017, 2015
 Profitability/Profit Growth

Overall performance
of industry relative
to other industries

Company’s relative success in

industry compared to
competitors
Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,
2015
 Strategic Competitiveness
Formulation and
implementation of
a superior value-
creating strategy

Commitments and actions to achieve above-

average performance and returns

What the firm Competitive What the firm

will do advantage will not do

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,

2015
 Competitive advantage

• Occurs when a company’s profitability is greater than

the average profitability of firms in its industry.
• Sustained competitive advantage – A company’s
strategies that enable it to maintain above-average
profitability for a number of years.

Superior Economic Performance Is Viewed as

Evidence of Competitive Advantage

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017, 2015 Cengage Learning WCN: 02-200-202 Charles W. L. Hill
Melissa A. Schilling Gareth R. Jones 35
 Competitive advantage
The Ability to Create More Economic
Value Than Competitors
• if all firms’ strategies were the same, no firm would have a
competitive advantage
• competitive advantage is the result of doing
something different and/or better than competitors

Two Types of Difference

1. Preference for the firm’s output
2. Cost advantage vis-à-vis competitors

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,

2015
 Competitive advantage
Temporary & Sustainable
• competitive advantage typically results in high profits
• profits attract competition, competition limits the duration of
competitive advantage in most cases

Therefore,
• most competitive advantage is temporary competitors imitate
the advantage or offer something better

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017, 2015 Cengage Learning WCN: 02-200-202 Charles W. L. Hill
Melissa A. Schilling Gareth R. Jones
 Competitive Advantage

Competitive Advantage Economic Returns

Advantage Above Normal

• exceeding expectations

Parity Normal
• meeting expectations

Disadvantage Below Normal

• failing expectations
Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,
2015
 Company’s Business Model
“…a conception of how a set of should work together
as a whole to enable company to gain competitive
advantage and achieve superior profitability and profit
growth …
Encompasses how the company will:
• Select customers • Deliver goods/services to
• Define/differentiate product market
offerings • Organize activities within
• Create value for customers company
• Acquire/keep customers • Configure its resources
• Produce goods/services • Achieve/sustain a high
• Lower costs profitability
• Grow business over time
Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,
2015
 Strategic management of not-for-profit
organizations
Applying Strategy Analysis to Not-For-Profits
Organizations in Organizations in Organizations sheltered from
competitive competitive competition
environments that environments that
charge users provide free services
Examples Royal Opera House Salvation Army European Central Bank
Guggenheim Museum Habitat for Humanity New York Police Dept.
Stanford University Linux World Health Organization
Analysis of goals Identifying mission, goals, and performance indicators and ensuring
and performance consistency among them is a key area of strategy analysis for all non-profits
Analysis of the Main tools of Main arena for Not important. However,
competitive competitive analysis competition and agencies compete for public
environment are the same as for competitive strategy is funding.
for-profit firms the market for funding
Analysis of Identifying and exploiting distinctive resources Analysis of resources and
resources and and capabilities critical to design strategies capabilities essential in
capabilities that create competitive advantage determining priorities and
designing strategies
Strategy The basic principles of organizational design, performance management, and
implementation leadership are common to all organizational types
The most characteristic parameters of small and
medium business strategies
▪ Most small businesses use intuitive strategies that are not
formalized in any way in the company and are mostly based on the
entrepreneur's vision of future development.

▪ Strategic choices are formed based on the entrepreneur's

personality: personal characteristics, value systems, future goals
strategies have little effect on the organizational structure.

▪ Companies maintain compactness by creating only the jobs they

need to run their businesses
▪ In small organizations, it is very important to link the goals to the
resources available to the organization, which are more limited than
in large organizations.

▪ Therefore, it is desirable to be realistic and credible planning

horizons are shorter for small companies than for large ones due to
the unstable external environment.

▪ It is important for small businesses to be able to react as quickly as

possible to market changes,

▪ thus taking advantage of the opportunities it offers there is a strong

tendency for small businesses to specialize in certain activities
A successful strategy
gives potential donors
and investors a
compelling message
about why they should
contribute
1. WHERE ARE WE NOW?
Involves thinking strategically about:
• the company's external market
environment
• its internal situation and
capabilities
2. WHERE DO WE WANT TO GO?
Involves thinking strategically about:
• What top management wants the company to be like
in 5-10 years:
• What levels of performance management wants to
reach by when
• What FINANCIAL outcomes to achieve
• What STRATEGIC outcomes to achieve
3. HOW WILL WE GET THERE?

Involves thinking about:

what STRATEGY the company should pursue to

perform successfully and get from where it is to
where it wants to go.
Strategic view
Splendid
future

Idea, dream

Organization
today Way

Analysis
 To successfully chart an organization's future
direction, company managers must:

• know where the organization is now

• have a clear view of where it ought to be headed
• recognize when it is time to shift to a new direction

Company strategies are partly visible

and partly hidden to outsiders.
Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,
2015
 1950s: 1960s & early 1970s:
Financial budgeting Corporate planning
• Operational budgeting • Corporate plans based on medium-term
• DCF capital budgeting economic forecasts

The Evolution of
Strategic Late 1970 & 1980s:
Emergence of Strategic Management
Management • Strategy as a quest for profit
• Industry analysis and competitive positioning
21st century:
Adapting to Turbulence
• Adapting to and exploiting
digital 1990s:
• The quest for flexibility & The Quest for Competitive Advantage
strategic innovation • Emphasis on resources & capabilities
• Strategic alliances • Shareholder value maximization
• Refocusing, outsourcing, delayering, cost
• Social and environmental
cutting
responsibility
Strategic management levels
General managers
• Bear responsibility for a company’s overall performance or
for one of its major self-contained subunits or divisions

Functional managers
• Responsible for supervising a particular function, task,
activity, or operation

Multidivisional company
• Competes in several different businesses and has a separate
self-contained division to manage each
 Levels of Strategic Management

Strategic Management: An Integrated

Approach, Theory & Cases, i2e © 2017,
2015
 Corporate-level managers

• Oversee the development of strategies for the entire

organization
• Provide a link between people concerned with the
firm’s strategic development and the shareholders
• Ensure that business strategies pursued by the company
are consistent with maximizing profitability and profit
growth

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,

2015
 Business-level managers
• Heads of business units
• Business unit: Self-contained division that provides a
product or service for a particular market
• Translate statements of intents into concrete
strategies for individual businesses
• Are concerned with strategies specific to a particular
business

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,

2015
 Functional- level managers
• Responsible for specific business functions
• Develop functional strategies to fulfill the strategic
objectives set by business- and corporate-level
general managers
• Provide information that helps formulate realistic and
attainable strategies

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,

2015
 Strategy-Making Process
Select corporate mission & major corporate goals.
Analyze external competitive environment to identify
opportunities/threats.
Analyze organization’s internal environment to identify
strengths/weaknesses.
Select strategies that:
• Build on organization’s strengths and correct weaknesses– to take
advantage of external opportunities & counter external threats
• Are consistent with organization’s mission and major goals
• Are congruent and constitute a viable business model
Implement the strategies.
Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,
2015
Strategy Formulation
& Implementation
Feedback

External Analysis:
Opportunities Designing
and Threats Organization
Existing Business Model

Structure
Strategies:
Functional,
Mission, Designing
SWOT Strategic Business, Governance
Vision, Values, Organization
Choice Global, and and Ethics
and Goals Culture
Corporate-
Level
Designing
Internal Analysis: Organization
Strengths and Controls
Weaknesses

Strategic Formulation Strategic Implementation

 Why is a company’s strategy constantly evolving?
Because companies often need to react to:

• Changing market conditions

• Moves of competitors
• Evolving buyer needs and preferences
• Political and regulatory changes
• New windows of opportunity
• Fresh ideas to improve the current strategy
• A crisis situation
• New technologies and production capabilities
Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,
2015
Criticisms of Formal Planning
Model
1) Uncertainty, complexity, and ambiguity can
adversely affect strategic plans.

2) Too much importance is attached to the role of

top management, particularly the CEO, while
ignoring lower-level managers
3) Radical new technology changes the dominant
paradigm in an industry.
4) Many strategies are a result of serendipity
rather than strategic planning.
 Intended & Emergent Strategies
Intended/Planned Strategies
o Strategies organization plans to implement
o Result of formal planning process
o Unrealized strategies are unprecedented changes & unplanned events after
formal planning complete

Emergent Strategies
o Unplanned responses to unforeseen circumstances
o Serendipitous discoveries/events emerge that open up unplanned opportunities
o Assess emergent strategy fits needs & capabilities

Realized Strategies
o Intended strategies put into action & emergent strategies evolve
 Emergent & Deliberate Strategies

Source: Adapted from H. Mintzberg and A. McGugh, Administrative Science Quarterly, Vol. 30. No. 2, June 1985.
 Strategy Making : Design or Process?
Strategy as Design Strategy as Process

Planning and Many decision makers

rational choice responding to multitude of
external and internal forces

INTENDED EMERGENT
STRATEGY STRATEGY

REALIZED STRATEGY

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,

2015
 Mintzberg’s Critique of Formal Strategic
Planning:

• The fallacy of prediction – the future is

unknown
• The fallacy of detachment - impossible to
divorce formulation from implementation
• The fallacy of formalization - inhibits flexibility,
spontaneity, intuition and learning.

Strategic Management: An Integrated Approach, Theory & Cases, i2e © 2017,

2015
Strategic Management Process for Intended Strategies
Missions
and Goals

External Strategic Internal

Analysis Choice Analysis

INTENDED STRATEGY

Organizing for
Implementation
Strategic Management: An Integrated
Approach, Theory & Cases, i2e © 2017,
2015
Strategic Management Process for Emergent Strategies

External Missions Internal

Analysis and Goals Analysis

Strategic Choice
Does It Fit?

EMERGENT STRATEGY

Organizational
Strategic Management: An Integrated
Grassroots Approach, Theory & Cases, i2e © 2017,
2015
Strategies - Examples

Reference: Edwards, J. (2014).

 Scenario Planning

▪ Scenario planning involves formulation plans that are based

upon “what-if” scenarios about the future.
▪ Teams of managers are asked to develop specific strategies to
cope with each scenario.
▪ The great virtue of the scenario approach is that it can push
managers to think outside the box.

Read more about scenario planning and Royal Dutch Shell:

http://www.gbn.com/about/scenario_planning.php Strategic Management: An Integrated
Approach, Theory & Cases, i2e © 2017,
2015
 Scenario Planning

Strategic Management: An Integrated

Approach, Theory & Cases, i2e © 2017,
2015
 Summarising discussion

• Think about the best and worst companies you know.

• What is extraordinary (or extraordinarily bad) about

these firms? Are their strategies clear and focused or
difficult to define?

• Video material: https://www.youtube.com/watch?v=VcWI3WVXmFk