Business Strategy – SMO306

Week 10, SMO306

Dr. Fangrong Li
Dr. Ewout van der Schaft
February-May 2025
Module specification
• Module Learning Outcomes:
On successfully completing this module you will be able to:
A. Identify and analyze the consequences of a business's current objectives, market
position and direction
B. Evaluate the likely consequences of strategic choices and recommend strategies to
meet the objectives of a business
C. Recommend appropriate methods of implementing strategies and demonstrate how
management information can be used subsequently to measure and monitor strategic
performance
D. Present the lessons learned from the business simulation game exercise
Week 1-6
Week Number Location Topic/Theme/Title Pre-reading
Week 1
Lecture Introduction of the module.
Lecture room: DBG19 Key concepts of strategy including basic theories for simulation Selected theory textbook
game. Introduction to the Business Simulation Game

Week 2 TAs' simulation experience sharing;

Workshop 3 flat rooms ES building
Business Simulation Game – LM online tutorial material
Practice Round
Week 3 Workshop

3 flat rooms ES building Business Simulation Game –Round 1 + Round 2 LM online tutorial material

Week 4 Workshop

3 flat rooms ES building Business Simulation Game – Round 3 + Round 4 LM online tutorial material

Week 5 Workshop

3 flat rooms ES building Business Simulation Game – Round 5 + Round 6 LM online tutorial material

Week 6 Workshop

3 flat rooms ES building Business Simulation Game – Round 7 + Round 8 LM online tutorial material
Week 7-13
Week Number Location Topic/Theme/Title Pre-reading
Week 7
Mission, vision, and values.
Lecture
Lecture room Macro-environment analysis. Selected theory textbook
PESTEL + scenarios
Week 8 Industry analysis + Porter’s 5 Forces. Resources and
Lecture Capabilities, VRIO. SWOT/TOWS. Stakeholders and
Lecture room Selected theory textbook
governance. Stakeholder mapping, CSR.

Week 9 Value Chain, Blue Ocean strategy. Disruptive innovation.

Lecture Entrepreneurial life cycle, first-mover advantage. Competitive
strategies, strategic clock.
Lecture room Selected theory textbook

Week 10
Diversification, Ansoff Matrix, BCG Model
Lecture
Global-Local. Strategic fit, alliances. SAFe criteria, gap analysis
Lecture room Selected theory textbook
Deliberate vs. emergent strategies, strategic planning.

Week 11
Lecture
Labour Day; public holiday

Week 12
Lecture International Strategy. Organisation structures
Lecture room Selected theory textbook
Types of strategic change

Week 13
Lecture
Lecture room Review Selected theory textbook
Grading
 Presentation about the lessons learned from the business
simulation game (30%). Includes peer review.

 Final exam, 3 hour in class, containing essay questions based

on short case studies (70%)
• Corporate strategy and
diversification
Corporate strategy directions (Ansoff)

Source: Adapted from H.I. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6 . Ansoff originally had a matrix with four separate boxes, but in practice strategic directions involve
more continuous axes. The Ansoff matrix itself was later developed – see Reference 2.
Oreo in China
Corporate strategy directions (Ansoff)

Source: Adapted from H.I. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6 . Ansoff originally had a matrix with four separate boxes, but in practice strategic directions involve
more continuous axes. The Ansoff matrix itself was later developed – see Reference 2.
Market penetration implies increasing share of current markets with
the current product range.

This strategy:
• builds on established strategic capabilities;
• means the organisation’s scope is unchanged;
• leads to greater market share and increased power vis-à-vis
buyers and suppliers;
• provides greater economies of scale and experience curve
benefits.
 ‘Economic
Legal
Retaliation constraints
constraints
from e.g. market
e.g. restrictions
competitors downturn,
imposed by
e.g. price wars public sector
regulators
funding crisis
Product development is where an organisation delivers modified or
new products (or services) to existing markets.

This strategy:
• involves varying degrees of related diversification (in terms of
products);
• can be expensive and high risk;
• may require new resources and strategic capabilities;
• typically involves project management risks.
Market development involves offering existing products to new
markets.

This strategy involves:

• new users (e.g. extending the use of aluminium to the automobile
industry);
• new geographies (e.g. extending the market to new areas –
international markets being the most important);
• meeting the critical success factors of the market;
• new strategic capabilities (e.g. in marketing).
Conglomerate (or unrelated) diversification takes the organisation
beyond both its existing markets and its existing products and
radically increases the organisation’s scope.

Potential benefits to an acquired business is that it gains from the

reputation of the group and potentially lowers financing costs.

Potential costs arise because there are no obvious ways to generate

additional value.
Synergy
Synergy refers to the benefits gained where activities or assets
complement each other so that their combined effect is greater than the
sum of the parts. (e.g. A film company and a music company can add
value by working together).

N.B. Synergy is often referred to as the

‘2 + 2 = 5’ effect.
• Vertical integration describes entering activities where the
organisation is its own supplier or customer.

• Backward integration refers to development into activities concerned

with the inputs into the company’s current business.

• Forward integration refers to development into activities concerned

with the outputs of a company’s current business.
Outsourcing is the process by which activities previously carried out
internally are subcontracted to external suppliers.

Examples include:
• Subcontracting the manufacture of components to a specialist
supplier.
• Outsourcing non-core activities to a cheaper location (e.g. call
centres).
• Outsourcing to a specialist supplier (e.g. IT).
BCG (or growth/share) matrix – uses market share and
market growth criteria for determining the
attractiveness and balance of a business portfolio.
• A star is a business unit which has a high market share in a growing
market.
• A question mark (or problem child) is a business unit in a growing
market, but it does not yet have a high market share.
• A cash cow is a business unit that has a high market share in a
mature market.
• A dog is a business unit that has a low market share in a static or
declining market.
Business Strategy

• Evaluating Strategies
Evaluating strategies
Performance comparisons
Performance is measured in relation to:
• Organisational targets. Management will typically set targets for sales
growth or profitability.
• Trends over time. Is performance improving or declining over a
significant period of time (but be aware of cycles)?
• Comparator organisations. Typically firms can benchmark
themselves against key competitors (but beware of high risk rivals).
Table: The SAF criteria and techniques of evaluation
Suitability
Suitability is concerned with assessing which proposed strategies
address the key opportunities and threats an organisation faces.
It is concerned with the overall rationale of the strategy:
• Does it exploit the opportunities in the environment and avoid the
threats?
• Does it capitalise on the organisation’s strengths and avoid or
remedy the weaknesses?
Table: Some examples of suitability
(1 of 2)
Table: Some examples of suitability
(2 of 2)
Acceptability
Acceptability is concerned with whether the expected performance
outcomes of a proposed strategy meet the expectations of
stakeholders.

There are three important aspects to acceptability:

• Risk;
• Return;
• Stakeholder reactions.
Risk
Risk concerns the extent to which strategic outcomes are
unpredictable, especially with regard to negative outcomes.

Risk can be assessed using:

• Sensitivity analysis
• Financial risk
• Break-even analysis
Return
These are a measure of the financial effectiveness of a strategy.

Different approaches to assessing return:

• Financial analysis
• Shareholder value analysis
• Cost–benefit analysis
• Real options
Feasibility (1 of 2)
Feasibility is concerned with whether a strategy could work in
practice, i.e. whether an organisation has the capabilities to deliver a
strategy.
Two key questions:
• Do the resources and competences currently exist to implement
the strategy effectively?
• If not, can they be obtained?
Feasibility (2 of 2)
Need to consider:

• Financial feasibility – funding and cash flow.

• People and skills – competences, knowledge and experience.

• Integrating resources – obtaining and integrating new resources.

Business Strategy

• Strategy Development
processes
Deliberate and emergent strategy development

Source: Adapted from H. Mintzberg and J.A. Waters, ‘Of strategies, deliberate and emergent’, Strategic Management Journal, vol. 6, no. 3 (1985), p. 258 , with permission from
John Wiley & Sons Ltd.
Deliberate strategy
Deliberate strategy involves intentional formulation or planning.

Deliberate strategy can come about through:

• Strategic leaders;
• Strategic planning mechanisms;
• External imposition.
Deliberate Strategy: Strategic leadership
Strategy may be the deliberate intention of a leader. This may manifest
itself in different ways:
• Strategic leadership as command.
• Strategic leadership as vision.
• Strategic leadership as decision making.
• Strategic leadership as the embodiment of strategy.
Deliberate Strategy: Stages of strategic
planning
Initial guidelines from corporate centre

Business-level planning

Corporate-level integration of business plans

Financial and strategic targets agreed

Source: R. Grant, Strategic Management Journal Vol 24 (2003) pp.491-517

Benefits of planning
Additional benefits:
• can provide opportunities for involvement.
• leads to a sense of ownership.
• provides security to managers.
• re-assures managers and stakeholders that the strategy is
‘logical’.
Deliberate Strategy: risks of planning
Some dangers in planning:
• Confusing managing strategy with planning.
• Detachment from reality.
• Paralysis by analysis.
• Over-complex planning processes.
• Dampening of innovation.
Externally imposed strategy
Strategies may be imposed by powerful external stakeholders.
Examples include:
• Government can determine strategy in public sector
organisations (e.g. schools).
• Government can shape strategy in regulated industries (e.g.
public utilities).
• Multinational companies may have elements of strategy imposed
by host governments (e.g. the requirement to form local
alliances).
• Business units may have their strategy imposed by head office
(e.g. part of a global strategy).
• Venture capital firms may impose strategy on companies they
buy into.
Emergent strategy
Emergent strategy: strategies emerge on the basis of a series of
decisions, which forms a pattern that becomes clear over time.

Strategy is not a ‘grand plan’ – managers draw together emerging themes

of strategy from lower down the organisation rather than direct strategy
from the top.
Emergent Stratgey: Logical incrementalism
Logical incrementalism is the development of strategy by
experimentation and learning ‘from partial commitments rather than
through global formulations of total strategies’.
Emergent Strategy: Learning Organisation
Learning organisation – an organisation capable of continual regeneration from
the variety of knowledge, experience and skills within a culture that encourages
questioning and challenge.
Proponents of learning organisations argue:
• Formal systems stifle creativity.
• Top managers should facilitate rather than direct strategy – encouraging new
ideas from below.
• Experimentation is the norm.
Emergent Strategy: Outcome of Political Processes
The political view of strategy development is that strategies develop as the
outcome of bargaining and negotiation among powerful interest groups (or
stakeholders).
The approach of different people to strategic problems is influenced by:
• Position and personal experience.
• Competition for resources and influence.
• The relative influence of stakeholders.
• Different access to information.
The challenge of strategic drift
Strategic drift may be a natural outcome of the influence of political processes,
organisational structure and systems and prior strategic decisions.

Strategy development processes in organisations need to encourage people to

have the capacity and willingness to challenge and change their core assumptions
and ways of doing things.
Thank you!