CONTEMPORARY STRATEGY

ANALYSIS
(7th edition, John Wiley & Sons Ltd., 2010)

Robert M. Grant

Chapter 1 The Concept of Strategy

2010 Robert M. Grant www.contemporarystrategyanalysis.com

The Concept of Strategy

OUTLINE

The role of strategy in success A framework for strategy analysis The evolution of strategic management What is strategy? Strategy making: Design or process? The role of strategy
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2010 Robert M. Grant www.contemporarystrategyanalysis.com

Components of Success
MADONNA GIAP & NORTH VIETNAMESE LANCE ARMSTRONG

GOALS

Single-minded quest for stardom.

Reunification of Vietnam under Communist rule.

Winning the Tour de France

UNDER-STANDING Identified emerging trends Intimate knowledge of THE in popular culture. terrain Understanding ENVIRONMENT Understood key success U.S. political system. factors in showbiz

Diagnosis of the physical, psychological and strategic determinants of individual and team performance

RESOURCE APPRAISAL

Recognized limited raw talent. Exploited strengths in self-promotion, product development & relationship management

Recognized economic Systematic development and military of individual stamina and weaknesses and core team capabilities political strengths

IMPLEMENTATION

Commitment and discipline. Charismatic leadership. Team building. Attention to detail.

Tight control. Longterm commitment. Effective propaganda. Inspirational leadership.

2010 Robert M. Grant www.contemporarystrategyanalysis.com

Clear delineation of individual roles. Alignment of incentives with team goals. Nurturing esprit de corp 3

What Makes a Successful Strategy?

Successful strategy

EFFECTIVE IMPLEMENTATION
Long-term, simple and agreed objectives Profound understanding of the competitive environment Objective appraisal of resources

2010 Robert M. Grant www.contemporarystrategyanalysis.com

The Basic Framework Strategy: the Link between the Firm and its Environment

THE FIRM
Goals & Values
Resources & Capabilities Structure & Systems

THE INDUSTRY ENVIRONMENT

STRATEGY STRATEGY
Competitors

Customers
Suppliers

2010 Robert M. Grant www.contemporarystrategyanalysis.com

The Evolution of Strategic Management

1950s
Financial budgeting:
Operational budgeting Capital budgeting (the wonders of DCF) 3 key changes:

1960s & early 1970s

Corporate planning:
Corporate plans based on 5-10 yr economic forecasts Diversification

1. Changing concept of strategy 2. Changing processes of strategy formulation 1990s & early 2000s 3. New tools of strategy analysis Quest for Shareholder Value: Late 1970s & 1980s

Refocusing, outsourcing, delayering, cost

cutting

Quest for Competitive Advantage:

Emphasis on resources & capabilities Flexibility & innovation Collaborationalliances, networks Succeeding in dynamic (Schumpeterian) markets

Emergence of Strategic Management: Industry analysis

Competitive positioning Strategic priorities: locating in attractive industries & establishing market leadership 6

What is Strategy?
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.

Characteristics of strategic decisions:

Important. Involve a significant commitment of resources. Not easily reversible.
2010 Robert M. Grant www.contemporarystrategyanalysis.com

Sources of Superior Profitability

INDUSTRY

ATTRACTIVENESS

RATE OF PROFIT ABOVE THE COST OF CAPITAL

Which businesses should we be in?

CORPORATE STRATEGY

How do we make money?

COMPETITIVE ADVANTAGE

How should we compete?

2010 Robert M. Grant www.contemporarystrategyanalysis.com

BUSINESS STRATEGY
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Describing Strategy: Competing for the Present; Preparing for the Future.
STATIC Where are we competing? - Product market scope - Geographical scope - Vertical scope How are we competing? DYNAMIC What do we want to become? - Vision statement

What do we want to achieve? - Mission statement - Performance goals

How will we get there? - Guidelines for development - Priorities for capital expenditure, R&D - Growth modes: organic growth, M&A, alliances PREPARING FOR THE FUTURE
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- What is the basis of our competitive advantage?)

COMPETING FOR THE PRESENT

2010 Robert M. Grant www.contemporarystrategyanalysis.com

Strategic Making: Design or Process?

Strategy as Design
Planning and rational choice

Strategy as Process
Many decision makers responding to multitude of external and internal forces

INTENDED STRATEGY REALIZED STRATEGY

EMERGENT STRATEGY

Mintzbergs 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.
2010 Robert M. Grant www.contemporarystrategyanalysis.com

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Strategic Making Processes within the Company: Multiple Roles of Strategy

Strategy as Decision Support

Improves the quality of decision making

Strategy as Coordination and Communication

Creates consistency and unity

Strategy as Target

Improves performance by setting high aspirations

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2010 Robert M. Grant www.contemporarystrategyanalysis.com

The Role of Analysis

Strategy analysis improves decision processes, but doesnt give answers. Strategy analysis assists us to identify and understand the main issues. Strategy analysis helps us to manage complexity. Strategy analysis can enhance flexibility and innovation by supporting learning.
2010 Robert M. Grant www.contemporarystrategyanalysis.com

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