Strategic management

2. Acceptability

Acceptability is concerned with the expected performance outcomes of a strategy.

These can be of three broad types:

• Returns are the benefits which stakeholders expect to receive from a strategy.
  • Profitability analyses
    • ROCE
    • Payback period
    • Discounted cash flow
      • Limitations: Only tangible costs / benefits; no context taken into consideration; designed to assess single projects
  • Cost-benefit
    • Takes not only direct returns into consideration
    • Used to make a decision based on a broader analysis.
      • Limitation: difficult to quantify non-financial benefits
  • Real options
    • Decisions are made sequentially: if the volatility is high, the decision should be deferred as far as possible.
  • Shareholder value analysis
    • Different measurement tools focusing on shareholders value
    • i.e. Total Shareholder Returns (TSR)
      • = (increase in price of share + dividends per share) / price of share at the start of the ear
      • also used for more value-based goals
• Risk concerns the probability and consequences of the failure of a strategy.
  • Financial ratios
    • Break-even analysis
    • Change in capital structure
    • Remaining liquidity
  • Sensitivity analysis
    • “what if?” analysis
    • Tests factors individually against assumptions
      • -> what would be the effect on performance if market demand only grew by 1 percent
• Stakeholder reactions
  • Stakeholder mapping
  • Game theory
    • Assesses political dimension

3. Feasibility

Feasibility is concerned with whether an organization has the resources and competences to deliver a strategy.

• Financial feasibility
  • Funds flow forecasting
    • Seeks to identify the funds which would be required for any strategy and the likely sources of this funds.
  • (break even analysis)
• Resource deployment
  • To what extent would the current capabilities (resources and competences) need to change to reach the threshold requirements for the strategy
  • How can unique resources / core competences be developed to sustain competitive advantage.
  • Some important questions in resource deployment
    • Staying in business
      • Do we lack any necessary resources?
      • Are we performing below threshold on any acitivity?
    • Competing successfully
      • Which unique resources already exist?
      • Which core competences already exist?
      • Could better performance create a core competence?
      • What new resources or activities could be unique or core competences?

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A forcefield analysis provides a view of change problems that need to be tackled, by identifying forces for and against change.

• What aspects of the current situation might aid change in the desired direction, and how might these be reinforced?
• What aspects of the current situation would block such change, and how can these be overcome?
• What needs to be introduced or developed to aid change?

Education and communication involve the explanation of the reasons for and means of strategic change.

Collaboration or participation in the change process is the involvement of those who will be affected by strategic change in the change agenda.

Intervention is the coordination of and authority over processes of change by a change agent who delegates elements of the change process.

Direction involves the use of personal managerial authority to establish a clear future strategy and how change will occur.

Coercion is the imposition of change or the issuing of edicts about change. (extreme directive style, change through use of power)

A change agent is the individual or group that effects strategic change in an organization.

• Expert for strategic changes (can be from the company or outsider)

From Outside: advantages: different type of view, objective, „new“; disadvantages: doesn’t know culture of company.

(Normally works with a team of people who are from within the company)

Leadership is the process of influencing an organization (or group within an organization) in its efforts towards achieving an aim or goal.

• Charismatic leaders focus on building a vision and energizing people to achieve it. (beneficial impact when organization faces uncertainty)
• Instrumental or transactional leaders focus more on designing a system and controlling the organization’s activities. (beneficial impact when it comes to improving the current situation)

The management of strategic change should include different roles in the change process, including those of strategic leaders, middle managers and outsiders.

Visible short-term wins encourage the change process.

Routines are the organizationally specific “ways we do things around here” which tend to persist over time and guide people’s behavior.

Symbols are objects, events, acts or people which express more than their intrinsic content.

The manipulation of organizational resources, the relationship with powerful stakeholder groups and elites, activity with regard to subsystems in the organization and, again, symbolic activity may all be used to: 1. Build a power base, 2. Encourage support or overcome resistance, and 3. Achieve commitment to a strategy or course of action.

• To be effective it is important that change is communicated in such a way that complexity has a meaning.
• Clarify and simplify further priorities of the strategy.
• Choices of media by which to communicate the strategy and elements of change program.
• Involvement of members in the strategy development process or planning itself is also a means of communication and can be very effective.
• Two-way process: Feedback is important
• Communication also ́happens because members need to make sense of what is happening with themselves (rumors, gossip and storytelling)

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• The greater the degree of change needed, the more it may be useful to build on actual or perceived crisis. If members of the organization perceive a higher risk in maintaining the status quo than in changing it, they are more likely to change.
• Windows of opportunity such as
  • New owners
  • New executive
  • Arrival of a major competitive threat
• The timing of job losses is very important. Should be done before the change program, so the change itself doesn’t get associated with something negative. Can be a good chance to remove people who are against change.
  • There should be a caring approach to those who lose their jobs to show the remaining employees that the organization cares.

Re-engineering is a radical or break-through change in the business process. Re-engineering seeks dramatic orders of magnitude as distinguished from incremental improvement in business value. 


Key value creation processes involving manufacturing operations include order fulfillment (the customer supply chain process), product development, order creation (selling and configuration) and customer service (post-product delivery processes). (Nixon et at)

Re-engineering is the fundamental re-thinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service. (Hammer and Champy)

TQM is meant to be a long term process striving for continuous improvement in every part of the organization and not just manufacturing mistakes.

All parts of the organization should consider themselves both customers and suppliers of goods and services, creating customer chains within the organization, as product flow through that organization.

Two basic strands to quality:

• Meeting customer requirements
• Conformance specification

TQM has been traditionally associated with continual incremental improvement, whereas BPR envisages radical change or a root and branch reform:

“It means starting all over again, starting from scratch with a clean sheet of paper BPR is directed at a big bang improvement”

• inability and/or unwillingness to use cognitive and reflective capacities in anything other than narrow and circumspect ways.
• lack of reflexivity, a disinclination to require or provide justification, and avoidance of substantive reasoning.
• elements of cognition, motivation, and emotion. 

Stage 1: Denial (‘We have always done things this way, Why change

we are making a profit, aren’t we?’)

Stage 2: Defence. Earlier discussion leads to concrete programmes and plans of change.

Stage 3: Discarding. Initially a process of perception. People come to see that the change is both inevitable and/or necessary.

Stage 4: Adaptation. Rarely do new systems, procedures, structures or machines work effectively first time. Trial and error.

Stage 5: Internalization. Now the people involved have created a new system, process and organization. 

 A cluster is a concentration or group of businesses and institutions that interact in the same industry or value system, which are geographically close, generating formal and informal relations that can be spontaneous or deliberate, and therefore contributing to a collective efficiency 

A community of practice (CP) is a structure through which knowledge is created, transferred and generalized among its members in a first step and then, once the management validates this knowledge, it can be transferred to the entire organization. 

the potential stage refers to the benefit of sharing basic practices when having common interests

• coalition stage: greater willingness to generate and sharing knowledge, since the community finds and recognizes the expertise and up to this point it defines common practices, beginning the generation of knowledge

• active stage: members develop commitment and obligations through the systematic action towards the generation of knowledge, and start to add value to the organization

• stage of scatter the CP is already a major center for sharing and generating knowledge, contacts and meetings

• memorable stage where the community has lost relevance for its members 

Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.

Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.

• Be complex in nature
• Be made in situations of uncertainty
• Affect operational decisions
• Require an integrated approach
• Involve considerable change

Corporate-level strategy is concerned with the overall purpose and scope of an organization and how value will be added to the different parts (business units) of the organization.

Business-level strategy is about how to compete successfully in particular markets.

A strategic business unit (SBU) is a part of an organization for which there is a distinct external market for goods or services that is different from another SBU.

Operational strategies are concerned with how the component parts of an organization deliver effectively the corporate- and business-level strategies in terms of resources, processes and people.

Overriding purpose in line with the values or expectations of stakeholders. (What is our business)

(Or strategic intent) Desired future state: the aspiration of the organization. (Who do we want to become)

(unique resources and core competences)

Resources, activities and processes. Some will be unique and provide “competitive advantage”.

How product, service and information “flow” between participating parties.

Strategic management includes understanding the strategic position of an organization, strategic choices for the future and turning strategy into action.

• The strategic position is concerned with the impact on strategy of the external environment, an organization’s strategic capability (resources and competences) and the expectations and influence of stakeholders.
• Strategic choices involve understanding the underlying bases for future strategy at both the business unit and corporate levels and the options for developing strategy in terms of both the directions and methods of development.
• Strategies into action is concerned with ensuring that strategies are working in practice

Strategic drift is where strategies progressively fail to address the strategic position of the organization and performance deteriorates.

• The design lens views strategy development as the deliberate positioning of the organization through a rational, analytic, structured and directive process.
• The experience lens views strategy development as the outcome of individual and collective experience of individuals and their taken-for-granted assumptions (strategy results from adaption to experience of the past)
• The ideas lens sees strategy as the emergence of order and innovation from the variety and diversity which exists in and around organizations.

Key drivers of change are forces likely to affect the structure of an industry, sector or market.

A scenario is a detailed and plausible view of how the business environment of an organization might develop in the future based on groupings of key environmental influences and drivers of change about which there is a high level of uncertainty.

Convergence is where previously separate industries begin to overlap in terms of activities, technologies, products and customers.

the porters five forces model

as stated in graph