SIM336 Strategic Management Assignment Help L3

Aims of the Lecture

• Identify the key features of the classical perspective on strategy.

• Assess three generic competitive strategies.

• Apply the key concepts in your own analysis of organisations and strategic management.

• Explain the difficulties and limitations of this perspective.

The Classical Perspective – Key Features

• In classical strategy, the strategy formulation problem is often posed as follows:

– Where are we now?

– Where do we want to be? (outcomes)

– How will we get there? (processes)

• The process of strategy management is conceived as a deliberate, predetermined, programmed movement between two well-defined points, ‘now’ and ‘the future’.

Where are we now?– The current position

A mission statement explains what the organization does, for whom and the benefit.

A vision statement, on the other hand, describes how the future will look if the organization achieves its mission

A mission statement gives the overall purpose of an organization, while a vision statement describes a picture of the "preferred future."

University of Sunderland Mission

• To promote learning, research and training through partnerships between staff, students, industry and the community.

• To work together to improve quality of service, respond to diversity of needs and equip individuals with the skills for lifelong learning and for an effective contribution to society and the economy.

Where are we now? – The current position

• In the classical perspective, the foundation for successful strategy is the clear understanding of where the firm is now.

• The firm’s current position in its environment encapsulating its strengths and weaknesses.

• Recognising the opportunities and threats that face the organisation.

• The processes that are used to discover this current position are analytical, and the most enduring techniques to have come from the classical perspective are the SWOT and PEST analyses.

Competitive Environment

• Given the real difficulties of undertaking a comprehensive analysis of the organisation’s strengths and weaknesses in relation to an enormously complex environment, the focus of the classical perspective has settled on the position of the organisation in its competitive environment.

• The diagram below indicates in general the five competitive forces that are expected to have the strongest and most immediate effects on the strategic plans of an organisation.

Porter’s Five Forces

Where do we want to be? – Organisational Goals

• In classical microeconomic theory, the firm is a ‘black box’ whose objective is to maximise profits;

• ‘Organisational goals are best re-stated as the organisational purpose,

• Although strategists in the classical perspective have largely abandoned the idea of the ‘unitary goal of profit-maximisation’, they are still interested in ‘unity of direction'.

• The vehicle for this is the ‘mission statement’, which is a statement of purpose and policy designed to give a general flavour of the organisation’s strategic intentions.

• The goal says as much about ‘what’ an organisation will be as ‘where’ it will be.

• Analysis of where we want to be leads naturally to a consideration of the next key feature: ‘how do we get there?

How do we get there? – Strategic options

• Once the firm has some idea of its position with respect to its industry or market it can begin to trace its route towards its goals.

• All strategic choices will fall into one or other of the strategic directions listed in the next slide

Strategic Direction

• With the present product in the present market:

– Do nothing’.

– Withdraw.

– Consolidation.

– Market penetration.

• For a new product in the present market:

– Product/service development.

• For a current product in a new market:

– Market development.

• New product and new market-related diversification:

– Backward integration (diversifying into an industry that supplies your main activity).

– Horizontal integration (diversifying into an activity similar to your main activity).

– Forward integration (diversifying into the industry which distributes the output of your main activity).

• Unrelated diversification: moving into an industry unrelated to the one in which you have your main activity

Generic competitive strategies

Criticism of the Classical Perspectives

• Successful organisations seem to create as well as react to their environment.

• Success comes from contradiction as well as consistency.

• Organisational shifts in direction come from self-organising and self-regulating behaviour as well as management intention.

• ‘Irrational’ decision-making and political activity are always part of the decision-making processes. 

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