Strategy development

Strategy development

Introduction

Chapter 2 deals with 2 main questions

• How strategy is developed within a company?

• What are the main types of strategies that can be observed in most industries?

Contents of chapter 2

1. Intended & emergent strategies

2. Competitive advantage

3. Porter’s generic strategies

1. Intended & emergent strategies

1.1 Intended strategy

Expression of desired strategic direction deliberately formulated or planned by managers

• Aims?

o Preparing the organization’s future

o Controlling the power within the organization

• The critics (80’s)

o Impossible to forecast a company’s future

o Risks of separating what is strategic from what is operational

o Excess of formalization (rigidities; plan is not flexible)

• Still useful nowadays?

o Yes but…

o Its role is limited

o Helps anticipating major problems/treats & encourages discussion between managers

1.2 Emergent strategy: an alternative

Henry Mintzberg (prof. McGill Univ.)

• New visions of strategy

• It comes about trough everyday routines, activities and process in organizations

• Meaning? Adaptation!

2. Competitive advantage

• Definition of CA: when a firm creates more economic value than rival firms.

• Aim of a firm’s strategy = building & protecting a CA

• Sustainable CA

• Sources of CA?

The first source of CA is the cost control.

• How do you identify (a potential) source of CA?

• Concept of value chain (Michael Porter)

o Distinction between 2 types of activites

 Primary activities (they create value for the company)

 Support activities (they don’t create value but help primary activities to operate inside the company)

• Step 1: Optimization of every activity

• Step 2: Identification of the most value creating activity

• Step 3: Building a CA in this activity

o Focusing resources on it

o Make or buy dilemma

3. Porter generic strategies

• Michael Porter (prof at HBS.)

• Identifies 3 generic strategies in most of industries

3.1 Cost strategy

Definition: low costs > low prices > high volume of sales > high market share

• Advantages

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