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Strategy Development Processes

Strategy Development Processes

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Strategy Development Processes

  1. 1. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Lesson 10: Strategy Development Processes BM3040 Strategic Management Pro. Wasantha Rajapakshe, PhD Associate Professor, SLIIT Business School, SLIIT, Malabe.
  2. 2. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Learning Outcomes • Understand what is meant by deliberate and emergent strategy development. • Identify deliberate processes of strategy development in organisations including: the role of strategic leadership, strategic planning systems and externally imposed strategy. • Identify processes that give rise to emergent strategy development such as: logical incrementalism, political processes, strategy as continuity and organisational systems. • Consider the implications and challenges of managing strategy development in organisations.
  3. 3. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Strategy Development Processes • We are familiar with successful strategies: Google’s dominance of the internet; Ryanair becoming one of the most profitable airlines in the world; Apple’s development of the iPhone and iPad; Zara’s internationalization in the fashion market. • We also know about failed strategies: Kodak in photography, the Royal Bank of Scotland in banking; Saab’s attempted internationalization in automobiles. • How do strategies actually develop ? 3
  4. 4. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Deliberate and Emergent Strategy Development Source: Adapted from H. Mintzberg and J.A. Waters, ‘Of strategies, deliberate and emergent’, Strategic Management Journal, vol. 6, no. 3 (1985), p. 258.
  5. 5. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Deliberate Strategy Deliberate strategy involves intentional formulation or planning. Deliberate strategy can come about through: – Strategic leaders – Strategic planning mechanisms – External imposition by powerful external stakeholders. Eg: Government
  6. 6. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Strategic leadership Strategy may be the deliberate intention of a leader. This may manifest itself in different ways: • Strategic leadership as command owner-managed small firms, • Strategic leadership as vision • Strategic leadership as decision making • Strategic leadership as the embodiment of strategy. A founder or chief executive of an organisation may represent its strategy. See Illustration 12.1
  7. 7. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 On envisioning the future 2 • Quotes from one of history’s most famous fast food retailing leaders reveal what Ray Kroc was thinking as he built McDonald’s: ‘That night (in 1954) in my motel room I did a lot of heavy thinking about what I’d seen during the day. Visions of McDonald’s restaurants dotting crossroads all over the country paraded through my brain.’ ‘The McDonald brothers were simply not on my wavelength at all. I was obsessed with the idea of making McDonald’s the biggest and the best. They were content with what they had; they didn’t want to be bothered with more risks and more demands.’ 7
  8. 8. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Strategic planning systems Strategic planning takes the form of systematic analysis and exploration to develop an organisation’s strategy. See Illustration 12.2
  9. 9. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Externally imposed strategy Strategies may be imposed by powerful external stakeholders. Examples include: • Government can determine strategy in public sector organisations (e.g. schools). • Government can shape strategy in regulated industries (e.g. public utilities). • Multinational companies may have elements of strategy imposed by host governments (e.g. the requirement to form local alliances). • Business units may have their strategy imposed by head office (e.g. part of a global strategy). • Venture capital firms may impose strategy on companies they buy into.
  10. 10. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Emergent strategy An emergent strategy: Strategy is not a ‘grand plan’ but a developing pattern in a stream of decisions. Top managers draw together emerging themes of strategy from lower down the organisation rather than direct strategy from the top.
  11. 11. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Emergent strategy development processes
  12. 12. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Logical incrementalism (1) Logical incrementalism is the development of strategy by experimentation and learning ‘from partial commitments rather than through global formulations of total strategies’. See Illustration 12.3 ‘You know there is a simple analogy you can make. To move forward when you walk, you create an imbalance, you lean forward and you don’t know what is going to happen. Fortunately, you put a foot ahead of you and you recover your balance. Well, that’s what we’re doing all the time, so it is never comfortable.’ 1
  13. 13. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Logical incrementalism (2) There are three main characteristics of logical incrementalism: • Environmental uncertainty – constant environment scanning and change • General goals – avoiding too early commitment to specific goals • Experimentation – building a strong but flexible core business but engaging in ‘side bet’ ventures to test out new strategies.
  14. 14. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Strategy and political processes The political view of strategy development is that strategies develop as the outcome of bargaining and negotiation among powerful interest groups (or stakeholders).
  15. 15. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Strategy as continuity Continuity is likely to be a feature of strategy because of: • Emergent strategy as managed continuity – each strategic move is informed by the rationale of the previous move – see Figure 12.3. • Path-dependent strategy development – strategic decisions can be a result of historical pre-conditions. • Organisation culture and strategy development – strategy is the outcome of the taken-for-granted assumptions, routines and behaviours in organisations.
  16. 16. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Strategy and political processes The approach of different people to strategic problems is influenced by: • Personal experience from their roles within the organization. • Competition for resources and influence between the different subsystems in the organization and people within them who are likely to be interested in preserving or enhancing their positions. • The relative influence of stakeholders on different parts of the organization. For example, a finance department may be especially sensitive to the influence of financial institutions • Different access to information. given their roles and functional affiliations. 16
  17. 17. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Strategy and organisational systems Strategy development as the outcome of managers making sense of, and dealing with, strategic issues by applying established ways of doing things. Strategy development is influenced by the systems and routines with which managers are familiar in their particular context.
  18. 18. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Implications for managing strategy development • Multiple strategy development processes – most organisations develop strategy through several different processes. • There is no one right way to develop strategy but the context can be important.
  19. 19. Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014 Summary • Deliberate strategy is the desired strategic direction deliberately planned by managers. • Emergent strategy develops in a less deliberate way from the behaviors and activities inherent within an organization. • Typically strategy development is described in terms of a deliberately formulated strategy as a result of planning systems. • Deliberate strategy may also come about on the basis of central command, the vision of strategic leaders or the imposition of strategies by external stakeholders. • There are likely to be other emergent processes evident in organizations.

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