Part A: Foundations
Overview of strategic management
Key takeaways
- Strategy is the long-term direction and scope of an organisation, which achieves advantage in a changing environment through its configuration of resources and competences, with the aim of fulfilling stakeholder expectations.
- Strategy is long-term, organisation-wide, involves major resource commitments and is difficult and costly to reverse once set in motion.
- The three strategy lenses see strategy differently: the design lens as deliberate, top-down analysis and planning, the experience lens as building on experience and culture, and the ideas lens as emerging from variety and innovation throughout the organisation.
- Realised strategy is deliberate strategy plus emergent strategy, so an organisation's actual strategy can only be read from what it did, not from its plan.
- Strategic decisions are long-term, organisation-wide, hard to reverse and set by top management or the board; tactical decisions are short to medium-term, departmental and set by middle management.
This final CS Advanced paper draws together governance and the board's own strategic role, from CS Corporate Governance and Ethics, and organisational structure, from CS Management Principles and Practice, into a dedicated study of strategy itself: how it is formed, analysed, implemented and controlled.
Concept of strategy
Strategy is the long-term direction and scope of an organisation, which achieves advantage in a changing environment through its configuration of resources and competences, with the aim of fulfilling stakeholder expectations.
Purpose of strategy
- Provides overall direction and a sense of purpose for the organisation
- Builds sustainable competitive advantage
- Guides how resources are allocated across competing priorities
- Aligns the organisation's actions with stakeholder expectations
Characteristics of strategy
- Long-term in horizon, not a single period's plan
- Organisation-wide in scope, shaping the whole entity's direction
- Involves major resource commitments
- Difficult and costly to reverse once set in motion
- Shaped by, and shapes, the organisation's environment (see the chapter on external analysis)
Advantages and disadvantages of strategic planning
| Advantages | Disadvantages |
|---|---|
| Provides clear direction and coordinates effort | Can become rigid, resisting change once set |
| Improves resource-allocation decisions | Time-consuming and resource-intensive to produce |
| Anticipates and prepares for future change | Can miss emergent opportunities not in the plan |
| Creates a basis for measuring performance (see the chapter on strategic control) | Risks strategic drift if not regularly revisited |
Strategy approaches
Mintzberg's distinction between intended and emergent strategy is the idea that most changes how candidates answer. Intended strategy is what the organisation planned. Deliberate strategy is the part of it that was actually realised. Unrealised strategy is the part abandoned. Emergent strategy is a pattern that formed from actions nobody planned as strategy, often decisions taken locally in response to events. Realised strategy is therefore deliberate plus emergent, which means an organisation's actual strategy can only be read from what it did, not from its plan.
Strategic versus tactical decisions
| Strategic decisions | Tactical decisions | |
|---|---|---|
| Time horizon | Long-term | Short to medium-term |
| Scope | Organisation-wide | Departmental or functional |
| Reversibility | Difficult and costly to reverse | Relatively easy to adjust |
| Level | Set by top management/the board | Set by middle management |
Patterns of strategy development
Exam tip
The three strategy lenses (design, experience, ideas) recur across this guide, particularly in the chapter on strategy development processes, so keep them distinct early since later chapters assume you already know them.
Self-check
(a) A company commits significant capital to a new market entry that would be very costly to reverse if it fails. Identify two characteristics of strategy this decision illustrates. (2 marks)
(b) Distinguish the design lens from the ideas lens as approaches to strategy. (3 marks)
(c) State one advantage and one disadvantage of formal strategic planning. (2 marks)
(d) Distinguish a strategic decision from a tactical decision on two dimensions. (3 marks)
Show worked answer
(a) Involves major resource commitments; difficult and costly to reverse once set in motion (2 marks).
(b) The design lens views strategy as a deliberate, rational process of analysis and planning by top management; the ideas lens views strategy as emerging from variety and innovation generated throughout the organisation, not only decided at the top, design is top-down and analytical, ideas is bottom-up and emergent (3 marks).
(c) Advantage: provides clear direction and coordinates effort. Disadvantage: can become rigid, resisting change once set (2 marks).
(d) Time horizon: strategic decisions are long-term, tactical decisions are short to medium-term. Level: strategic decisions are set by top management or the board, tactical decisions are set by middle management (3 marks).