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Week 1 Lecture 2 –10/02/Introduction Session 1b Strategy is: Strategy is the direction and scope of an organisation 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.  Th...

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Week 1 Lecture 2 –10/02/2021

Introduction Session 1b Strategy is: Strategy is the direction and scope of an organisation 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.  The advantage for businesses are not always the same. “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” Sun Tzu Resources + competences = capabilities Stakeholders Individuals or groups that depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends.

Strategic Plans Long term direction for company Scope for the companies activities Gaining advantage over competitors Values and expectations of stakeholders

3 Horizon for Strategy How to make profit over time. Strategy is long term. We need to consider what is happening in our business right now. ‘core business’ – it won’t last forever what’s making you different and unique right now because competitors will come along. We need to consider how to change our product and make it different. 1 – extend and defend core business. 2 – build emerging businesses. 3 – Create viable options.

Different level of strategies Corporate-level is concerned with the overall scope of an organisation and how value is added to the constituent business units. (Top of the pyramid) -

Strategy that guides the organisation as a whole

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Vice Media diversifying from the original magazine into other activities e.g., retail/publishing and video

Business-level is concerned with the way a business seeks to compete successfully in its particular market. (Middle tier of pyramid) -

Marketing and content improvements in the Vice magazine to attract more readers. Business “units” that can plan independently (e.g. subsidiaries)

Operational is concerned with how different parts of the organisation deliver the strategy in terms of managing resources, processes and people. (base of pyramid) -

related to “business functions”. Vice’s operational strategies are geared to meeting its investment needs and raising finance.

3 major elements of strategic management Strategic position(covered over the next couple of weeks) concerned with the impact on strategy of the external environment, the organisation’s strategic capability (resources and competences), the organisation’s goals and the organisation’s culture.

Questions asked for position: What are the environmental opportunities and threats? What are the organisation’s strengths and weaknesses? What is the basic purpose of the organisation?

Strategic choices Involve the options for strategy in terms of both the directions in which strategy might move and the methods by which strategy might be pursued. Questions asked for choices: How should individual business units compete? Which businesses to include in the portfolio? Where should the organisation compete internationally? Is the organisation innovating? Strategy in action Is about how strategies are formed and how they are implemented. The emphasis is on the practicalities of managing.

Questions asked for strategy in action: Which strategies are suitable, acceptable & feasible? What kind of strategy making processes are needed? What are the required organisation structures and systems? How should the organisation manage the change needed? Week 2 Lecture 1 – 15/02/21

Session 2a Relevance and Importance of Strategy Strategic Management is the big picture of a business. IT cuts across the whole spectrum of business and management. It involves communications from manager to employees, type of place of work. What should a manager do to gain success? Having no strategy is okay because every day work is the business’ strategy. The real-life strategy – if you don’t plan for it, it will happen eventually. Examples The uncertainty with return to work after Covid, in supply chain, office work etc. Strategy has been there from the beginning. There was always project management, supply chain etc. that impacted the outcome of a business, project etc.  Apple, Ryanair, Artist Origins of Strategy Strategy is seen from the early days – 500/400 BC, Sun Tzu – China, Napoleon, Caesar. There is always going to be a cross over. Strategy includes planning, tactics, trying to move the organisation in the right direction. There is no wasted location, time, or effort.

What do we mean by strategy? A company’s strategy consists of the competitive moves and business approaches devises by management to produce successful performance. Some source of competitive advantage. E.g., Pepsi over coke, Netflix over Sky. Company needs to ask – “what are we known for?”, “what’s out USP”, “what’s our goals” – big picture.

Dissecting Strategy

The essence of strategy is the delivery of VALUE. Strategy is more than a plan. Fundamental problem of strategy is to establish a sustainable competitive advantage over rivals. Competitive Advantage – something we ask the customer to buy. Something we can provide that our competitor can’t. Modern Evolution of Strategy Strategic planning school of thought – 60/80’s. We must stick to the plan we set out for 5 years. A Michael Poter view. An old school approach, sticking to our natural environment but they aren’t so stable always. Positioning school – we may follow a planning, formulation approach, but thing of competitive advantage. Still like Poter’s view. Resources-based view – about teams, bundle of resources. The people, systems. (review in week 4) Process and learning schools – about the question HOW. How do we plan, how will it work. Strategic management – most up-to-date version. What the organisation fits between its internal and external environment. Planning and position should intertwine to develop a change of strategy of the organisation given the environment.

Johnson Definition of strategy (the book) “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 markets and to fulfil stakeholder expectations”. Porter (1979)  “The essence of strategy (formulation) is coping with competition”.

Strategic fit We must create a fit.  Identify opportunities in the business environment and adapt resources and competences so as to take advantage of these.

Crafting Strategy - Mintzberg (1987) https://hbr.org/1987/07/crafting-strategy We have to start thinking about how we read, interpret and reproduce articles. The crafting image (versus the planning image) better capture the process by which effective strategies come to be. Craft evokes traditional skill, dedication, perfection through the mastery of detail. Action is key. When you look at Porter, tool of analysis is important – Mintzberg shows we need to try and plan for emerging situations. The intimate connection between thought and action is key to craft and so also to the crafting of strategy.

Smart strategists appreciate that they can’t always be smart enough to think through everything in advance. Being able to be planning oriented and flexible enough to incorporate change is key. “Yet large organisations try to separate the work of hands and minds. They often sever the vital feedback link between the two”. Purely deliberate strategy precludes learning once the strategy is formulated: emergent strategy fosters it. People take actions one by one and respond to the,, so patterns eventually form. A purely emerging means we have no control.  Learning must be coupled with control. There is no one best way to make strategy.  Senior management sets board guidelines. Lower people within an organisation have different perspectives. Long term vs short term approach – we need to always think of stability but open to change. Known as Brief Quantum Leaps (punctuated equilibrium). A Fundamental dilemma of strategy-making is the need to reconcile the forces for stability and for change, by attending first to one and then to the other. Pursue given strategic orientation: “managing strategy is mostly managing stability”. The real challenge in crafting strategy lies in detecting the subtle discontinuities that may undermine a business in the future. The 5 P’s for strategy – Mintzberg (1987) 1. Plan  What do intentions really mean? A consciously and purposefully developed plan. An intended course of action, a guideline to deal with a situation. Plans can be general or specific. Made in advance of the actions to which they apply. Developed consciously and purposefully. E.g. Military  drafting, shaping and deciding.

2. Ploy  ostensible, to be taken at face value. Static or dynamic? A specific manoeuvre to outwit a competitor. Corporation expands plant capacity to discourage a competitor from building a new plant (real strategy is the threat, not expansion) Porter ‘competitive strategy’ ‘market signal’ ‘the fighter brand’.

3. Pattern  actions, behaviours, consistency Defining strategy as plan is insufficient, resulting behaviour?  a pattern in a stream of actions. Strategy may be consistency in behaviour, whether intended or not. Plans may go unrealised; patterns may appear without preconception. 4. Position  context, environment, competition Strategy is the match between organisation (internal) and environment (external)

Strategy as position compatible with all proceedings e.g. aspired through a ploy, or found through a pattern of behaviour.

5. Perspective  intention + behaviour + reflection + action Strategy is a concept. No on has ever seen a strategy or touched one. Strategy is shared. Consists of an ingrained way of seeing the world, a personality, culture etc. E.g., an organisation aggressive or passive? Ideology built on marketing e.g., Cocacola. While plans and positions may be dispensable, perspective is immutable. (perspective can become more like pattern than plan).

Possible interrelationships between the 5 P’s 1. Conventional Hierarchy Is strategy a plan or does it give rise to a plan? 2. Formalising on emergent strategy within a perspective e.g., Honda in US 3. Pattern (or position) producing perspective. E.g., what works? The way we do things. 4. Perspective constraining shift in perspective

Week 2 Lecture 2- 17/02/21 Guest Speakers  Niall, JP and Roy  all work for Smartbear, Galway. Is strategy relevant to business, sport etc? Yes  to have a plan when you want to achieve something, it sets out your goals, how youre going to achieve it and motivation. It will show what your strength and weakness are.  Individual strategies, to management strategies etc. In theory  any type of strategies will be beneficial.

In Smartbear  is strategy relevant? Yes it is used every-day. We see things in the market, competitors etc. and we use this to fill the gap, we build on the opportunities.  In a business to make money, progression plans, achieve your goals  strategy/game-plan needs to be in place.

Week 3 Lecture 1 – 22/02/21 3a: The Strategic Position: The Environment – MACRO/PESTEL The exploring Strategy Model The strategic position is concerned with the impact on strategy of the external environment.

(NB**)Pestel framework Categorises environmental factors into 6 key types.  It helps provide a list of potential important issues influencing strategy.  Important to assess the impact of each factor.

1. Political Factors The role of the state  Owner, customer, suppler, foreign trade. E.g. Brexit

2. Economic Factors The role of macro-economic factors  Includes business cycles, interest rates, exchange rates, unemployment, growth rate worldwide.

3. Social Factors Changing cultures and demographics  Ageing population in western society, income distribution, lifestyle, change in culture and fashion.

4. Technological factors New discoveries and technology developments  Internet development, nanotechnology, rise of new composite materials 5. Ecological Factors ‘green’ environmental issues  pollution waste, climate change.  Environmental protection, energy problems, recycling.

6. Legal factors Legislative and regulatory constraints or changes.  IPR, competition law, legal law, health and safety law, employment law. KEY FACTORS IN ORGANISATIONS and for STRATEGY.

Key drivers of change Not just a list of influences but you need to understand key drivers of change.  Key drivers vary by industry or market. The environmental factors likely to have a high impact on the success or failure of strategy.  Focus is on future impact of environmental factors. Drivers of change have differential impact on industries, markets, and organisations. Combined effect of some of the factors most important e.g, retailers forced to embrace eCommerce.

WHAT CAN PESTEL FRAMEWORK UNCOVER? 1. Megatrends – large-scale changes that are slow to form but influence many other activities over decades to come. Examples include ageing populations and increase economic growth in Asia. Example: ageing population in Western society. Heart of the market becoming more powerful. 2. Inflexion points – when trends shift sharply upwards or downwards . Example: sub-Saharan Africa may have reached an inflexion point after decades of stagnation (and may embark on a period of rapid growth). Example: video market was huge but change in technology wert from renting DVDs to Using internet media streaming services. 3. Weak signals – advanced signs of future trends that may help to identify inflexion points – often unstructured and fragmented bits of information. Examples: mortgage failures in California in 2007 were a weak signal for the financial crisis that hit the global economy in 2008.

How to use PESTEL framework • Apply selectively – identify specific factors which impact on the industry, market, and organisation in question. • Identify factors which are important currently but also consider which will become more important in the next few years. • Use data to support the points and analyse trends using up-to-date information. • Identify opportunities and threats.

Scenarios plausible views of how the environment of an organisation might develop in the future based on key drivers of change about which there is a high level of uncertainty. Build on PESTEL analysis and drivers of change.  Offer more than a single view  An organisation will typically develop a few alternative scenarios (2–4) to explore and evaluate future strategic option. Scenario analysis is used in industries with long planning horizons, e.g., the oil industry or airlines industry.

Carrying out Scenario examples: • Identify the most relevant scope of the study – the relevant product/market and time span. • Identify key drivers of change – PESTEL factors which will have the most impact in the future but which have uncertain outcomes and are mutually independent.    

For each key driver select opposing outcomes where each leads to very different consequences. Develop scenario ‘stories’  That is, coherent and plausible descriptions of the environment that result from opposing outcomes. Identify the impact of each scenario on the organisation and evaluate future strategies in the light of the anticipated scenarios. Establish early warning systems. Identify indicators that might give an early warning of the way the environment is changing and monitor such indicators.

Example: The Global Fashion Industry, 2025

2009 – 2010 Drivers of change – aging population, decreasing natural resources 2 drivers high degree of uncertainty, divergent outcomes, interconnectivity, and speed of change.

Week 3 Lecture 2 – 24/02/21 3b – Industry Analysis Level – Porter’s 5 Forces

Learning Outcomes 

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Use Porter’s five forces analysis in order to define the attractiveness of industries and markets and to identify their potential for change.  like PESTEL and other strategic analysis e.g. SWOT, they can be used in different scenarios. E.g. high or low level, it is a tool used for years but it still useful.  The speed of change in these sectors is much faster than when Porter came up with this. Analyse strategic and competitor positions in terms of strategic groups, market segments and ‘Blue Oceans’.  relevant to discuss but NOT going to go into depth about it right now, we will do a full lecture on it. Use these various concepts and techniques in order to recognise threats and opportunities in the marketplace.

1. An industry is a group of firms producing products and services that are essentially the same. Example: the automobile industry and the airline industry. 2. A market is a group of customers for specific products or services that are essentially the same e.g. the market for luxury cars in Germany.

3. A sector is a broad industry group (or a group of markets) especially in the public sector. e.g. the health sector involves a wide variety of organisations, GPS, Hospitals, Pharmacists. Porter’s 5 forces Framework Porter’s Five Forces Framework helps identify the attractiveness of an industry in terms of five competitive forces. Most of this information applies to markets too. 1. 2. 3. 4. 5.

Rivalry between existing competitors The Threat of Entry The threat of substitutes The Bargaining power of buyers The bargaining power of suppliers

1. Rivalry between existing competitors Competitive rivals are organisations with similar products and services aimed at the same customer group and are direct competitors in the same industry/market (distinct from substitutes).  There is no single agreed measure of competitive advantage, but you want to sustain a stable competitive advantage over time.

The degree of rivalry increases when Competitors are of roughly equal size  Competitors are aggressive in seeking leadership  The market is mature or declining  There are high fixed costs  The exit barriers are high  There is a low level of differentiation.

2. The Threat of Entry Barriers to entry are the factors that need to be overcome by new entrants if they are to compete.  The threat of entry is low when the barriers to entry are high and vice versa. The main barriers to entry are Economies of scale/high fixed costs  Experience and learning Access to supply and distribution channels Differentiation and market penetration costs.  Legislation or government restrictions (e.g. licensing)  Expected retaliation from incumbents.  An organisation in a fixed industry, our competition is weakened. If it Is easy for others to enter our industry ( low barriers )  then the threat is high. E.g. Grocery Market, Tesco, Dunnes, Aldi.  Lidl took 8 years to get open in Knocknacarra why?  Competition, protest with other competitors e.g. Dunnes and Joyce’s.  Banking industry, why is the main barrier?  What new entrance have we had in the last couple of years?  Revolut. What has helped Revolut to get into the banking industry to enter the market?  More to digital, don’t need physical accounts, time saving. 3. The Threat of Substitutes Substitutes are products or services that offer a similar benefit to an industry’s products or services, but have a different nature i.e. they are from outside the industry. Customers will switch to alternatives (and thus threat increases) if The price/performance ratio of the substitute is superior (e.g. Aluminium is more expensive than steel but it is more cost efficient for car parts) The substitute benefits from an innovation that improves customer satisfaction (e.g. high speed trains can be quicker than airlines from city centre to city centre on short haul routes).

4. The Bargaining power of Buyers Buyers are the organisation’s immediate customers, not necessarily the ultimate consumers. If buyers are powerful, then ...