Strategy and business

Question 1

What is strategy?

Answer 1

Strategy is the direction and scope of an organisation over the long
term, which achieves advantage for the organisation through its
configuration of resources within a changing environment, to meet the
needs of the markets and to fulfil stakeholder expectations (Johnson,
Scholes and Whittington)

Question 2

What makes planning strategic?

Answer 2

 It considers the longer term.
 It considers the whole organisation (not just individual Strategic Business
Units (SBUs).
 It considers the resources and external environment.
 It considers all stakeholders (internal and external).
 It looks at how to gain a sustainable competitive advantage.

Question 3

Strategic planning – the rational
approach: Flow chart

Answer 3

Internal analysis &External analysis

Corporate
appraisal

Mission and
objectives

GAP

Strategic
choice

Strategy
implementation

Review and
control (back up)

(Analysis
Choice
Implementation)

Question 4

Merits and demerits of strategic planning: Merits

Answer 4

 Provides a framework
 Encourages long-term
planning
 Goal congruence
 Considers the needs of
stakeholders
 Optimised use of
resources
 Considers changes in the
business environment
 Monitors progress

Question 5

Merits and demerits of strategic planning: Demerits (Mintzberg)

Answer 5

 Lack of evidence to prove
that it leads to success
 Businesses may need to
be more dynamic and
react to problems as they
occur
 Formal planning reduces
initiative and innovative
thinking
 Political infighting can
disrupt the process

Question 6

Emergent strategies

Answer 6

Emergent strategies are behaviours which are adopted and which
have a strategic impact. These are strategies that emerge over time in
response to the environment.
Strategies are tried and developed as they are implemented.
This is also known as the bottom up approach.

Question 7

Different grades of strategy (Mintzberg)

Answer 7

1. Intended strategy (Conscious decision)
2. Deliberate strategy (put into practice)
3. Realised strategy ( resultant strategy)

1a. Unrealised strategy (Strategy not implemented)
3a. Emergent strategies (Strategies that develop over time)

Question 8

Suitability of the emergent approach

Answer 8

This approach is often adopted by organisations who:
 Operate in dynamic environments and require quick decision-making
 Have flexible, decentralised organisational structures allowing local managers
to make decisions when issues or opportunities arise.

Question 9

Developing a strategic advantage

Answer 9

When developing a strategic advantage, the organisation must decide whether to
identify opportunities to exploit their existing strengths or to adapt meet the needs of
the customer.

Question 10

Developing a strategic advantage: Resource-based vs positioning approach

Answer 10

Resource-based (‘inside-out’):
 Focus on developing
internal resources and
competences which are
hard to imitate and find or
create markets to exploit
these strengths

Positioning (‘outside-in’):
 Focus on analysing the
external environment to
identify customer needs
and adapting to meet these
needs

Question 11

Developing a strategic advantage:Resource-based (‘inside-out’):Risk

Answer 11

The organisation may fail to react
to long-term industry trends and
may find their existing resources
and competences are no longer
valued by the customer

Question 12

Developing a strategic advantage:Positioning (‘outside-in’):Risk

Answer 12

As customer’s needs change over
time the organisation is forced to
constantly evolve and develop
new competences

Question 13

Planning horizon

Answer 13

Management need to balance short-term results with longer-term strategic
development of the business. The balance can be affected by a number of different
influences.

Question 14

Influences on planning horizons:

Answer 14

Nature of ownership – some shareholders may demand quick returns compared to not for profit organisations that are building a charity for long term provision

Capital structure – banks may expect returns over a longer period of time to
match the assets securing the loan

Nature of industry – industries that require a high level of capital, such as an
aircraft developer, would expect returns to be generated over a longer period of
time

Nature of business environment – in a dynamic industry, where emergent
strategies are more suitable, it may be better to plan short term and react to the
current market

Nature of management – long term planning is a skill and some entrepreneurial managers may lack the time or skill to plan long-term.

Question 15

Strategy, sustainability and ESG

Answer 15

With increasing focus on the environment and sustainability issues, including climate
change, stakeholders are putting greater pressure on organisations to incorporate
sustainability into their strategies

Question 16

Benefits of being sustainable

Answer 16

Demonstrating a greater commitment to sustainability can increase the competitive
advantage that an organisation enjoys, in the following ways:
 Attracting customers who are themselves committed to sustainable practice
 Attracting and retaining skilled staff
 Building positive relationships with like-minded suppliers
 Demonstrating to shareholders an ability to deliver reliable returns

Question 17

Environmental, Social and Governance (ESG)

Answer 17

Organisations wishing to demonstrate sustainable commitment could incorporate
ESG factors into strategic planning:
 Environmental e.g. strategies in respect of harmful emissions, use of
renewable energy, waste management
 Social e.g. workplace health and safety, labour standards in the supply chain,
diversity
 Governance e.g. executive pay, business ethics, internal controls