Elaborate summary of the book Understanding Strategic Management 3rd edition. Can be used for the course Strategy for the second year (first module, called module 5) of the program International Business Administration at the University of Twente. Contains chapters 1 to 8 and the article 'How busin...
,Chapter 1
Purpose of strategy: to help organizations achieve a competitive advantage
Strategy = a unique way of sustainable value creation
Stratos Agein = lead your army
- Value creation
- Sustainable
- Unique
- Way
Value creation = products, services, for customers
Sustainable = hard to copy, returns, stakeholders’ interests
Unique = not 100% different or similar
Way = not a plan, writing, etc. but processes, actions and routines
Strategy (Michael Porter) = deliberately choosing a different set of activities to deliver a
unique mix of value
- Not just better, but different
- Unique activities
- Requires tradeoffs and choices
Outperform its rivals by
1. Providing a differentiated product or service which is more highly values by
customers, enabling it to charge a premium price
2. Provides products with the same quality as a competitor offering, but charges a
lower price
Strategic position questions
- Who should the company target as customers?
- What products or services should the company offer the targeted customers?
- How can the company do this efficiently?
Distinctive capabilities = what each can do better than other organizations, and compete in
the markets which exploit these capabilities
Elements of strategy
1. Diagnosis
2. Guiding policy
3. Set of coherent actions
Diagnosis = defines or explains the nature of the challenge which faces the organization,
done by identifying which aspects of the situation are critical
Purpose: to simplify the complexity of the situation facing the organization
Guiding policy = overall approach which managers have chosen to deal with the obstacles
identified in the diagnosis, it directs management action in certain directions, but does not
tell them exactly what to do
Set of coherent actions = the steps which are coordinated to work together to accomplish
the guiding policy
Key success factors = those elements in the industry that keep customers loyal and allow the
organization to compete successfully
Different perspectives on strategy
1. Planning school
2. Positioning school
3. Competence school (resource based)
4. Ecosystem school (evolution, innovation)
Planning school = (Jack Welch) strategy is straightforward, you pick a general direction and
implement
Risk of technocracy = the world responds, how do you act?
Positioning school = knowing the environment you are in and adapting to that (example
train track through veggie market)
Competence school = knowing your core strength and building on trust in that strength
Ecosystem school = look at the market as an ecosystem, a system where all kinds of
companies live (a changing world) (examples amazon and apple)
Vision = associated with the founder of an organization and represents a desired state that
the organization aspires to achieve in the future
- Does not change over time
- Must tap into the personal goals and values of the organization’s employees
- Leaders must be authentic
Mission = seeks to answer the question why an organization exist
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