Welcome to E3: Strategic Management!
Hello there! Welcome to your study notes for the first part of the Strategy Process. If you’ve ever felt that "strategy" sounds like a fancy word used by bosses to sound important, you’re not alone. But don't worry—by the end of this chapter, you’ll see that strategy is simply about making choices to ensure a business succeeds in the long run. Whether you are aiming for a first-time pass or just need a refresher, these notes are designed to make these concepts stick!
In this chapter, we are looking at the Types of Strategy. We will explore the different levels where strategy happens and the different ways managers actually "do" strategy.
1. The Three Levels of Strategy
Strategy doesn't just happen at the very top. It happens at three distinct levels within an organization. Think of it like a professional sports team: the owners have one goal, the coach has another, and the players focus on their specific roles.
Level 1: Corporate Strategy
This is the "Big Picture" level. It is concerned with the overall scope of the organization. Questions asked here: What businesses should we be in? Which markets should we enter or leave? How do we add value to the different parts of the company?
Example: A massive company like Disney deciding to launch its own streaming service (Disney+) is a corporate-level strategy. They are deciding the overall direction of the entire "kingdom."
Level 2: Business Strategy (SBU Level)
This level is about how to compete in a specific market. Large companies are often divided into Strategic Business Units (SBUs). Each SBU focuses on its own products and competitors.
Example: Within Disney, the "Theme Parks" division has a strategy to compete against Universal Studios, while the "Studio Entertainment" division has a strategy to compete against Netflix and Warner Bros.
Level 3: Functional (Operational) Strategy
This is where the "doing" happens. It focuses on how the specific departments (Finance, Marketing, HR, IT) will deliver the business and corporate strategies.
Example: The Marketing department at Disney+ deciding to offer a "bundle" deal with Hulu is a functional strategy designed to support the business's growth goals.
Quick Review:
- Corporate: Where do we compete? (The Whole Pie)
- Business: How do we win? (The Slice)
- Functional: How do we execute? (The Ingredients)
2. The Rational Model vs. Emergent Strategy
How is strategy actually made? There are two main schools of thought here. Don't let the technical names scare you; the concepts are very logical!
The Rational (Planned) Model
This is a formal, top-down approach. Managers follow a step-by-step process: Analysis -> Strategic Choice -> Implementation. It assumes the world is predictable and that if we plan well enough, we will succeed.
Analogy: Using a GPS to drive to a specific address. You have a clear destination, a set path, and you follow the instructions exactly as planned.
Emergent Strategy
Proposed by Henry Mintzberg, this view argues that the world is too messy for perfect plans. Instead, strategy "emerges" over time as managers learn from what works and what doesn't. It is flexible and responsive.
Analogy: Exploring a new city without a map. You might start walking toward a museum, but you see a cool local market on the way and decide to spend the afternoon there instead. Your "strategy" changed based on what you discovered!
Did you know? Many famous products were emergent strategies. For example, the Post-it Note was originally a failed attempt to create a super-strong glue. The "strategy" changed when someone realized a "weak" glue was actually very useful for bookmarks!
3. Mintzberg’s 5Ps of Strategy
Henry Mintzberg suggested that "strategy" can't be defined in just one way. He offered five different viewpoints, known as the 5Ps:
1. Plan: A consciously intended course of action (e.g., "We will increase sales by 10% next year").
2. Ploy: A specific maneuver intended to outwit a competitor (e.g., a supermarket lowering the price of bread just to get people in the door and away from the shop next door).
3. Pattern: Consistency in behavior over time. If a company always focuses on high-end luxury, that "pattern" becomes their strategy, even if it wasn't written in a formal plan.
4. Position: How the organization fits into its environment (e.g., being the "low-cost leader" or the "niche luxury provider").
5. Perspective: The organization’s "personality" or way of doing things (e.g., Apple’s perspective is all about "thinking differently" and design-led innovation).
Memory Aid: Think of the 5Ps as five different pairs of glasses. Depending on which pair you put on, you see a different version of what "strategy" means!
4. The Strategy Stream (Deliberate vs. Emergent)
It is important to understand how a "plan" turns into "reality." Mintzberg identified several types of strategy in this flow:
- Intended Strategy: The plan you start with.
- Deliberate Strategy: The parts of the intended strategy that you actually successfully carry out.
- Unrealized Strategy: The parts of the plan that failed or were dropped (maybe because the market changed).
- Emergent Strategy: Unplanned actions that worked and became part of the strategy.
- Realized Strategy: What the company actually ended up doing (a mix of Deliberate and Emergent).
Common Mistake: Students often think "Unrealized Strategy" is a bad thing. Not always! It's often better to drop a plan that isn't working than to stubbornly follow it into bankruptcy.
Quick Summary Table:
Intended Plan - Unrealized Parts + Emergent Actions = Realized Strategy
5. Strategic Drift
This is a vital concept in E3. Strategic Drift happens when an organization’s strategy gradually moves away from the realities of the environment. The company keeps doing what it has always done, but the world changes around it.
The Four Stages of Strategic Drift:
1. Incremental Change: The company makes small, sensible adjustments.
2. Strategic Drift: The environment changes faster than the company. A "gap" starts to open up.
3. Flux: Management realizes something is wrong. There is lots of arguing, various strategies are tried, but there is no clear direction.
4. Transformational Change or Death: Either the company makes a massive, radical change to catch up, or it goes out of business (like Kodak or Blockbuster).
Key Takeaway: To avoid drift, managers must constantly scan the environment and be willing to challenge their own "Perspective" (from Mintzberg's 5Ps).
Chapter Summary
1. Strategy happens at three levels: Corporate (Whole group), Business (SBU/Competitive), and Functional (Departments).
2. Strategy isn't always a formal plan: It can be a Rational (planned) process or an Emergent (learned) process.
3. Mintzberg’s 5Ps: Strategy can be viewed as a Plan, Ploy, Pattern, Position, or Perspective.
4. Realized Strategy: Is rarely exactly what was intended; it is a blend of deliberate plans and emergent responses.
5. Watch out for Strategic Drift: If you don't change as fast as the world, you will eventually fall into "flux" and fail.
Don't worry if these terms feel a bit abstract right now! As we move through the rest of the "Strategy Process" section, we will see exactly how managers use tools to perform analysis and make these choices. You're doing great!