Chapter 1
The Concept of Strategy
© 2013 Robert M. Grant www.contemporarystrategyanalysis.com 1

The Concept of Strategy
OUTLINE

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The role of strategy in success
A framework for strategy analysis
The evolution of strategic management
What is strategy? Who do we describe it?
How is strategy made?
Strategy and not-for-profit organizations

© 2013 Robert M. Grant www.contemporarystrategyanalysis.com 2

Ingredients of Success
Queen Elizabeth & The
House of Windsor

Lady Gaga and the Haus of
Gaga

Goals

Life-long dedication to role as head of state and reigning monarch Single-minded quest for stardom through her Lady Gaga persona Understanding the
Environment

Alertness to the changing political environment
Sensitive to the mood and needs of the British people

Awareness of the new economics of the music business, the marketing potential of social networking and needs of Generation Y

Resource Appraisal

Recognized lack of formal authority and need to exploit traditional loyalties and informal influence

Exploited her innate theatricality, eccentricity, design capability and musical skills Implementation

Resolute commitment; strong self discipline; emphasis on building an effective family team supported by loyal professionals Devotion to living the Lady
Gaga character; wiliness to create new images on almost a daily basis

© 2013 Robert M. Grant www.contemporarystrategyanalysis.com 3

What Makes a Successful Strategy?
Successful Strategy

EFFECTIVE IMPLEMENTATION

Long term, simple and agreed objectives

© 2013 Robert M. Grant www.contemporarystrategyanalysis.com Profound understanding of the competitive environment

Objective appraisal of resources 4

The Basic Strategy Framework

Strategy as a Link Between the Firm and its Environment

THE FIRM
•Goals & Values
•Resources &
Capabilities
•Structure &
Systems

© 2013 Robert M. Grant www.contemporarystrategyanalysis.com STRATEGY

THE INDUSTRY
ENVIRONMENT
•Competitors
•Customers
•Suppliers

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The Evolution of Strategic Management
1950s:
Financial Budgeting
•Operational budgeting
•DCF capital budgeting
Three Key Changes
1. Changing concept of strategy
2. Changing processes of strategy formulation 3. New tools of strategy analysis
21st Century:
Adapting to Turbulence
•Exploiting information & communications technology
•The quest for flexibility & strategic innovation
•Strategic alliances
•Social and environmental responsibility © 2013 Robert M. Grant www.contemporarystrategyanalysis.com 1960s & Early 1970s:
Corporate Planning
•Corporate plans based on medium-term economic forecasts
•Diversification planning
•Establishment of corporate planning departments Late 1970s & 1980s
Emergence of Strategic Management
•Strategy as quest for profit
•Industry analysis and competitive positioning

1990s
The Quest for Competitive Advantage
•Emphasis on resources and capabilities
•Shareholder value maximization
•Refocusing, outsourcing, delayering and cost cutting 6

Ryanair’s Activity System
Low Operating Costs
Job flexibility
High aircraf utilization Boeing 737s only 25 minute turnaround Point-to-point routes Secondary airports © 2013 Robert M. Grant www.contemporarystrategyanalysis.com No frills product offering High labor productivity Single class, no reserved seating
Low prices:
Charges for all additional services

Direct sales only Internet-only check-in No baggage transfer 7

What is Strategy?
• Distinguishing strategy from tactics

o Strategy is the overall plan for deploying resources to establish a favorable position o Tactic is a scheme for a specific manoeuvre

• Characteristics of strategic decisions

o Important o Involve a significant commitment of resources o Not easily reversible

© 2013 Robert M. Grant www.contemporarystrategyanalysis.com 8

Definitions of Strategy
Strategy: a plan, method or series of actions designed to achieve a specific goal or effect
Wordsmythe Dictionary (http://www.wordsmyth.net)
Strategy is the pattern of