The essence of strategy lies in creating tomorrows

competitive advantage faster than competitors mimic

the ones you possess today.
Gary Hamel
C. K. Prahalad

LEARNING OBJECTIVES

1 Understand Strategic Decisions

2 Different Strategic Management Processes
3 Understand difference between Planned, Emergent
& Realized Strategy
4 Understand difference between Vision & Mission

WHAT MAKES DECISIONS STRATEGIC

1. Magnitude
2. Time-scale
3. Commitment

Rare, Consequential and directive

IDENTIFYING DECISIONS

H&M was founded by Erling Persson in 1947 in

Vsters, Sweden. It started off life as a retailer of
womens clothing, Hennes. In 1968 it acquired
another Swedish clothing retailer, Mauritz Widfors,
which sold menswear, and changed its name to
Hennes & Mauritz.

This was a strategic decision: it involved a major

outlay of capital, it increased the size and
complexity of the business; and it involved most of
the company. And it brought Hennes into contact
with a whole new customer segment men!

IDENTIFYING DECISIONS

In 1974 it went public and was quoted on the Stockholm stock exchange.
This is not a strategic decision. It
was a means of obtaining funds for
expansion. The expansion may well
have been a strategic decision, but
going public in itself was not.
Similarly, later statements that H&M
makes about expansion being
financed entirely from the firms own
internal funds are an indication of
how it intends to implement any
strategies it adopts, but are not
themselves strategies.

IDENTIFYING DECISIONS

Each year, for the past several years, H&M has

expanded into a new international market or
markets.

For other companies, that have not previously

expanded internationally, and H&M in the 1960s
when it opened its first store abroad (in
Norway), this would almost certainly be
a strategic decision; for H&M nowadays it is
arguably not always a strategic decision.
Expanding into new geographic areas is part of
its current strategy

STRATEGIC MANAGEMENT PROCESS

1-7

External
Audit

Vision
&
Mission

Long-Term
Objectives

Generate,
Evaluate,
Select
Strategies

Implement
Strategies:
Mgmt Issues

Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS

Measure &
Evaluate
Performance

Internal
Audit

1-8

1-9

Copyright 2001 Houghton Mifflin Company. All rights reserved.

1-10

THREE OVERARCHING THEMES

Implementing a good
strategy is at least as
important as creating
one, yet many
managers give too
little thought to
implementation

To succeed,
the formulation
of a good strategy
and its implementation should be
inextricably
connected

Firms and
industries are
dynamic in
nature

Strategic leadership is essential if a

firm is able to both
formulate and implement strategies that
create value

Strategic leadership
is responsible for

making
substantive resource
allocation decisions
and

developing keystakeholder support

of the strategy

11

IMPORTANCE OF EXECUTION

The important decisions, the

decisions that really matter, are
strategic . . . [But] more important
and more difficult is to make
effective the course of action
decided upon.
Peter Drucker

12

STRATEGY AND IMPLEMENTATION ITERATE

Strategy:
The process
of deciding
what to do

Compete as
discount retailer

WAL-MART EXAMPLE

Leverage inventory
and sourcing systems
to be low-cost leader

Implementation:
The process of
performing all the
activities necessary
to do what has been
planned

Invest heavily in
organizational structure,
systems, and processes

13

THE STRATEGIC MANAGEMENT PROCESS

Strategic analyses

Internal
External

Strategy
Vision and
mission

Fundamental
organizational
purpose

Organizational
values

Arenas
Vehicles
Differentiators
Staging
Economic logic

The central, integrated,

externally oriented
concept of how a firm
will achieve its
objectives

Implementation
levers
and
Strategic
leadership

14

Copyright 2001 Houghton Mifflin Company. All rights reserved.

RESULT: INTENDED AND EMERGENT STRATEGIES

Intended or Planned Strategies

Strategies an organization plans to put into action
Typically the result of a formal planning process
Unrealized strategies are the result of unprecedented changes and
unplanned events after the formal planning is completed

Emergent Strategies
Unplanned responses to unforeseen circumstances
Serendipitous discoveries and events may emerge that can open up new
unplanned opportunities
Must assess whether the emergent strategy fits the companys needs and
capabilities

Realized Strategies
The product of whatever intended strategies are actually put into action
and of any emergent strategies that evolve
1-15

INTENDED AND EMERGENT STRATEGIES

1-16

Source: Adapted from H. Mintzberg and

A. McGugh, Administrative Science
Quarterly, Vol. 30. No. 2, June 1985.
1-17

UNPLANNED ACTIONS CAN DRIVE STRATEGY

Intels original focus

(1970s & 1980s)
Design and manufacture
of Dynamic, RandomAccess Memory Chips
(DRAM)

Focus on microprocessor segment

By 1984, 95%
of Intel revenue
came from the
microprocessor
segment

Unplanned
experimental
venture to make
microprocessors
for Busicom, a
Japanese
calculator maker
18

BUSINESS STRATEGY DIAMOND

Arenas

Where will we be active? ( and with

Arenas

Staging

What will be our speed and

sequence of moves?
Speed of expansion?
Sequence of initiatives

Staging

Economic logic

How will returns be obtained?

Lowest costs through scale

advantages?
Lowest costs through scope
and replication advantages
Premium prices due to
unmatchable service?
Premium prices due to
proprietary product features?

Economic
logic

how much emphasis?)

Which product categories?
Which channels?
Which market segments?
Which geographic areas?
Which core technologies
Which value-creation strategies?

Vehicles

Vehicles

How will we get there?

Internal development?
Joint ventures?
Licensing/franchising?
Experimentation?
Acquisitions?

Differentiators
Differentiators

How will we win?

Image?
Customization?
Price?
Styling?
Product reliability?
Speed to market?

19

JET BLUE STRATEGY

Arenas

Low fare commercial air carrier

Underserved but over-priced US cities
Start from scratch and achieve all growth

Vehicles

internally (i.e., do not purchase a regional airline)

Objective
To bring
humanity
back to air
travel

High level of service compared to low fare competitors

Differentiators

Strategy

(e.g., leather seating, satellite TV)

Grow from one route between two cities to serving 20

cities in just 3 years

Secure cost advantage by being willing and able to

Economic logic

perform key tasks differently

One type of plan
JFK home base
Secondary location
20

FRAMEWORK FOR STRATEGY IMPLEMENTATION

Key Factors of Strategy Implementation

Implementation levers

Intended
Strategy

Organizational structure
Systems and processes
People and rewards

Realized
and
Emergent
Strategies

Strategic leadership

Lever- and resource-allocation decisions

Decision support among stakeholders

21

The Environment Threats & Opportunities

GOAL
Implementation Levers:

Managements values &

attitude toward risk

Organization structure
Systems and processes
People and rewards

STRATEGY

Strategic Leadership:
Lever and resource
allocation decisions
Develop support among
stakeholders

Organizations resources
and capabilities Strengths & Weaknesses
Performance
22

PULLING A USD 15 BILLION COW OUT OF A DITCH

The fall from

the nifty 50

Xerox introduces
the Xerox 914
copier in 1959.
This copier
transformed the
work place

Xerox was charter

member of the
nifty 50-50 stocks
most favored by
institutional
investors

Since 1970s,

however, Xerox
has been crippled
by competition
(mostly Japanese)

Mulcahy takes
over

She lends a
turnaround

October 2001, Xerox Refines Xerox vision

reports first quarterly
loss in16 years.
Mulcahy is not
obvious choice for
top position

She lacks product

development and
financial expertise

She gets it because

the board has
confidence in her
strategic mind.

and reminds people

of core values

Aligns operation with

the refined mission
and values

Sells Xeroxs China

and Hong Kong
operations and half
of a stake in a joint
venture with Fuji

Closes down inkjet

business

Xerox
reaches
profitability

Annual expenses cut

by USD 1.7 billion

Sold USD 2.3 billion

worth of non-core
assets

Reduced long-term

debt to USD 9.2 billion

from USD 15.6 billion

Xerox returns to

profitability in 2002,
generating USD 1.9
billion in operating
cash flow and USD 91
million in net income
on USD 15.8 billion in
sales
23

UP STATE TOURISM DEVELOPMENT CORPORATION

The mission of the corporation as laid down in its memorandum of association are:
To promote, take over, develop, start, purchase, construct, take on lease, maintain,
manage and operate hotels, restaurants, motels, travelers, lodges, guest houses and
other places for the purpose of boarding, lodging and stay of the tourists.

To enter into any arrangement for taking over any or all of the assets and liabilities of
any department of the Government of UP connected with the development of tourism.

To establish and manage transport units, travel and transport counters, import,
purchase lease and run or otherwise operate buses, trucks, aircraft, helicopter etc. and
to act as travel agents for airlines, railways etc.

To produce, distribute and sell tourist publicity material: edit design, print, publish, sell
or otherwise deal with books, magazines, periodicals and other materials for the
purpose of giving publicity.