LECTURE NOTES FOR CORPORATE STRATEGY AND GOVERNANCE

1996

Copy-edited and typeset by Povey-Edmondson Okehampton and Rochdale, England 1 Introduction: the context and background of effective strategy 1 Introduction 1 Elements 2 The rules of strategy 10 Sources of strategy 10 Conclusions 26 2 Strategic management in practice 28 Introduction 28 Strategic performance targets and indicators 33 Effective staff 42 The Chief Executive 47 Developing the human resource 50 Change agents and change catalysts 53 Conclusion 56 Work assignments and discussion questions 57 3 Strategic and environmental analysis 58 Introduction 58 Means and methods of strategy analysis 59 Conclusion 79 Work assignments and discussion questions 79 4 Generic strategies 81 Introduction 81 Models 81 Key factors 99 Conclusion 119 Work assignments and discussion questions 121 5 Competitive activity 122 Introduction 122 v v1 Contents Competition 122 Rivalry 126 Competitive positioning 129 The threat of entry and barriers to entry 133 Exit barriers 138 Risk 141 Segmentation 143 Nature of offerings 150 Conclusion 157 Work assignments and discussion questions 158 6 Ethics and standards 159 Introduction 159 Models and frameworks 161 Conclusions 182 Work assignments and discussion questions 183 7 Behavioural influences on strategy 185 Introduction 185 Negativity 185 Positivity 189 Motivation 192 Perception 195 The behavioural needs of customers and consumers 197 Conclusion 200 Work assignments and discussion questions 202 8 Sectoral strategies 203 Introduction 203 Manufacturing and production strategies 203 Service strategies 212 New products, research and development 219 Public service strategies 226 Conclusion 231 Work assignments and discussion questions 232 9 Strategy development 233 Introduction 233 Expansion and growth strategies 234 Brands and branding 238 Consolidation 246 Withdrawal, retrenchment and contraction 246 Diversification 247 Synergy 249 Integration 249 Takeovers and acquisitions 251 Mergers 252 Collaborative strategies and alliances 252 Managerial aspects of joint ventures and collaboration networks 254 Other influences 257 Conclusion 261 Work assignments and discussion questions 262 10 Implementation Introduction 263 263 Gaining commitment 263 Priorities 263 Assumptions 264 Activities 264 Making strategic decisions and choices 266 Harmonisation of activities 270 Resource allocation 273 Control mechanism and activities 274 Critical paths and networks 275 Monitoring and review processes 277 Organisation design 277 Human resource strategies 281 Marketing strategies 283 Purchasing and supply strategies 284 Distribution strategies 285 Strategic drift 285 Contents VII Other problems in development and implementation 287 Projections of success 291 Ad hoc strategies 292 Conclusions 292 Work assignments and discussion questions 292 11 Strategies for change and the management of change 294 Introduction 294 Forces for change 294 Barriers to change 299 Change management 304 Customers 307 Culture change 308 Other factors 309 Changes in technology and production 311 Changes in name 312 Conclusions 316 Work assignments and discussion questions 319 v1u Contents 12 Conclusion: the future 320 The future 320 Changes 320 Contractors and specialists 326 Management as a distinctive field of expertise 327 Changing structures 328 The future of public services 328 Health and education 329 Other public sector services 329 Conclusions 331 Bibliography 333 Index 335

Wiley Encyclopedia of Management, 2015

As editors of the Wiley Encyclopedia of Management 3e, Vol. 12 Strategic Management, we aim to provide business practitioners, academics, and students of the field with a comprehensive reference relating to strategy concepts, methods, and techniques to reflect the dynamism of industry practice and academic knowledge. The juxtaposition of concepts, methods and techniques reflects the need for clarity in strategic thought as well as practicality in strategy implementation. As an encyclopedia, this volume provides a broad coverage of the field and an accessible framework for investigating its subject matter. The Strategic Management volume has been compiled through a collaborative network of over 50 professors and industry leaders from universities, business schools, and business organizations from all parts of the globe. The result is a contemporary, dynamic, and global view of strategy, which represents cutting edge thinking in the world of corporate and societal management. The text is designed to be accessible to readers from different backgrounds who contribute to the design, implementation, and use of strategy at various levels in their organizations. The ease of access to the wealth of information embodied in the encyclopedia is made possible through the modular nature of the publication whereby each strategy concept can be searched online and retrieved separately. We developed a comprehensive list of contemporary strategy topics for the third edition by looking at research published over the past decade in top academic journals, reputable industry publications, and the dominant logic of the frameworks of strategy in academic textbooks.We then organized these topics into distinct strategy themes to enable individual topics to be related to broader streams of strategic thought. The result was a significantly updated list of topics from previous editions, made up of 210 topics, 36 of which are new additions with most of the remainder being heavily revised. The new entries come mainly from the rapidly evolving nature of strategy as reflected in the content of popular textbooks on strategy and new approaches to strategic leadership advocated in business schools. There are three distinct fields that are attracting more attention in the field of strategy, which may not constitute a new core but will certainly enrich the way we think about strategy. The new themes revolve around three areas: complex behavior in organizations and industries, the psychological foundations of strategy, and strategic innovation as an area that focuses on the renewal of managerial cognition and on the responses of organizations and industries to contentious and difficult environments. Another area that has gained more citations and more interest from academics and executives in the past few years is cooperation and collaboration, which is being linked to our understanding of complex adaptive behavior. The evolution of the key terms and concepts in the encyclopedia reflects a move toward organizational strategies and resource-based views that have emerged in response to competition, regulation, social trends, and technological innovation. Our approach to building this compendium of strategic management is both conceptual and practical. Strategic management is a performance-driven discipline, with an ingrained competitive stance, that sets out to condition long-term futures. With this mindset in place, one of the major shifts in strategic thinking has been to recognize the centrality of resources and capabilities as the foundation of long-term superior results and the need to create and execute strategic plans that utilize these resources. Therefore, the resource-based view has a much more significant influence in the field of strategy. The practicalities of how the resource-based view can be captured into workable core competences and later on into dynamic capabilities that outpace the competition, will be on center stage in the foreseeable future. The nature of dynamic capabilities links back to complex adaptive behavior, a field that is yet to evolve into a robust practical toolbox for strategic decision makers. The third edition is being published in the aftermath of the 2008 financial crisis, a crisis that has shattered many comfortable illusions about the stability of the global economy and the health and resilience of many important parts of it. The year 2014 also marks a point at which the long period of globalization and intensive technological change can be observed in new structures and strategies around the world, both political and corporate. Thus the context of the field of strategy has changed immensely and we ought to ask if it has changed the nature of strategic thinking itself. The most obvious observation to make is that the nature and importance of competition has been clearly intensified. Falling real incomes have created more demand for low price offerings and differentiated offerings have to show their value proposition more clearly. Everything we know about competition is in many senses reinforced with an override that observes that time horizons have become more compressed, strategies need to pay off earlier, and value propositions will have to be readjusted more frequently. This raises a more complex point. The tension between short-term and long-term thinking has been greatly exacerbated. The 2008 crisis pointed toward rapid financial readjustments, the primacy of cost-driven survival strategies and simultaneously the need for longer term repositioning so as to be able to create the resources and flexibility for strategies to be more reactive, more adaptive and yet more durable. Are we to see more trade-offs toward the short term or do we take from 2008 that more importance should be given to long-term durability? Part of the long-term thinking of corporations is investment and technological change. The invasion of consumer buying habits by innovations such as social networks is provoking fundamental changes in retailing and in consumer goods marketing with consequent implications for investment back down the supply chain. The pace of technical change and consumer buying habits shows no sign of diminishing. As further fuel to these changes, the significance of emerging markets has been very evident in the aftermath of 2008 with considerable visibility of China’s development into a world economic superpower (or is it going to run into bottleneck constraints and revert to more normal growth). Alongside this strand of thinking is a rethinking of globalization as a strategy. The emphasis is now on regional power coupled with increasing free trade. This is a more intricate paradigm than global standardization requiring correspondingly more complex patterns of internationalization. So change is even more positively on the agenda and the capacity to interpret and respond to contextual shifts and rapidly evolving new competitors will become a requisite core competence. Fundamentally, strategic advantage in any and all contexts is driven and fueled by the resources and capabilities of firms. The resource-based view is gaining more attention and will gain more traction in reality as firms begin to work out how to define, measure, and create core competences. The resource based view is a theory waiting for major practical advancement. Without core competences, firms are destined to be price competitors or at best rapid imitators. Long-term superior performance will accrue to those who know what are their strategic assets. The principle focus of strategy regarding the creation of wealth will continue to dominate and will remain critical to the competitive survival of firms. However, the definition of wealth in the economic literature is starting to shift toward a more holistic view that integrates financial and societal well being – a reflection probably of broader public opinion. The effect on the field of strategy is an increase in importance of areas such as corporate social responsibility as well as providing ammunition for the need for organizations to take an even longer view in spite of current short-term financial pressures. The implementation of strategy is an area that requires more attention in terms of providing a working framework of how to execute the wide variety of strategic models available in the literature. Implementation remains a minefield of mobilising financial, human, organizational and social capital, in the form of industry networks. Strategic Management Vol. 12 is a rich collection of the latest thinking on strategic management. We are indebted to our colleagues in international business schools and corporations across the globe, who have contributed with their ideas, opinions, best practices, and latest research finding. It has been a privilege to be part of this great network of strategic minds that have created this comprehensive collection of strategic management concepts.

Springer eBooks, 2022

Corporate Strategy and Implementation This chapter focuses on practical actions that business leaders are taking at the firm level to implement a more stakeholder-oriented approach that integrates ESG risks and opportunities into their core business strategy and operations across their value chain. Business leaders have four overriding priorities in any company that aims to create sustainable enterprise value and deliver on the principles of stakeholder capitalism: Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons. org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence and indicate if changes were made. The images or other third party material in this chapter are included in the chapter's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the chapter's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.

Corporate strategy, the overall plan for a diversified company, is both the darling and the stepchild of contemporary management practice—the darling because CEOs have been obsessed with diversification since the early 1960s, the stepchild because almost no consensus exists about what corporate strategy is, much less about how a company should formulate it. A diversified company has two levels of strategy: business unit strategy and corporate strategy. Competitive strategy concerns how to create competitive advantage in each of the businesses in which a company competes. Corporate strategy concerns two different questions: what businesses the corporation should be in and how the corporate office should manage the array of business units. Corporate strategy is what makes the corporate whole add up to more than the sum of its business unit parts. The track record of corporate strategies has been dismal. I studied the diversification records of 33 large, prestigious U.S. companies over the 1950-1986 period and found that most of them had divested many more acquisitions than they had kept. The corporate strategies of most companies have dissipated instead of created shareholder value. The need to rethink corporate strategy could hardly be more urgent. By taking over companies and breaking them up, corporate raiders thrive on failed corporate strategy. Fueled by junk bond financing and growing acceptability, raiders can expose any company to takeover, no matter how large or blue chip. Recognizing past diversification mistakes, some companies have initiated large-scale restructuring programs. Others have done nothing at all. Whatever the response, the strategic questions persist. Those who have restructured must decide what to do next to avoid repeating the past; those who have done nothing must awake to their vulnerability. To survive, companies must understand what good corporate strategy is. Concepts of Corporate Strategy My study has helped me identify four concepts of corporate strategy that have been put into practice-portfolio management, restructuring, transferring skills, and sharing activities. While the concepts are not always mutually exclusive, each rests on a different mechanism by which the corporation creates shareholder value and each requires the diversified company to manage and organize itself in a different way. The first two require no connections among business units; the second two depend on them. While all four concepts of strategy have succeeded under the right circumstances, today some make more sense than others. Ignoring any of the concepts is perhaps the quickest road to failure. PORTFOLIO MANAGEMENT The concept of corporate strategy most in use is portfolio management, which is based primarily on diversification through acquisition. The corporation acquires sound, attractive companies with competent managers who agree to stay on. While acquired units do not have to be in the same industries as existing units, the best portfolio managers generally limit their range of businesses in some way, in part to limit the specific expertise needed by top management. The acquired units are autonomous, and the teams that run them are compensated according to unit results. The corporation supplies capital and works with each to infuse it with professional management techniques. At the same time, top management provides objective and dispassionate

Objective: Strategic Management has traditionally borrowed and translated insights from Economic Sociology and Sociology of Organizations. Throughout this discipline, students will be exposed to seminal articles that theorized on how firms' and individuals' strategic action is allowed and constrained by social structures. Further, students will explore how scholars have translated these insights into empirical research into strategic management discipline.