Chapter 8 · Formulating Strategy

Mission/vision; internal analysis; external analysis; choose and develop strategy.

Each step links purpose, resources and environment and informs the others.

A statement of the organization's fundamental purpose.

It explains what it does, whom it serves and how it differs.

A statement of what the organization strives to become.

It expresses longer-term aspirations, typically five or more years ahead.

Future oriented, inspiring, challenging, brief, clear and stable.

A vision should guide and motivate without needing annual rewriting.

A strength is internal; an opportunity is external.

Both can help goals, but their location in SWOT differs.

Physical, human and intangible.

Money/equipment, expertise, and systems/culture require different analysis.

An ability or resource essential for achieving organizational goals.

A distinctive competency additionally surpasses competitors' comparable capabilities.

Valuable, rare, inimitable and non-substitutable.

These resource characteristics can support an effective sustainable strategy.

Other resources cannot easily achieve the equivalent strategic outcome.

A different resource bundle can sometimes replace an apparently unique asset.

Supplier power, customer power, substitutes, new entrants and rivalry.

The framework analyzes industry conditions affecting opportunity and threat.

An offering from a different industry that satisfies the same customer need.

For example, video calls can replace some business travel.

Higher barriers reduce the threat of new entrants.

Costs, regulations and economies of scale can make entry difficult.

Many competitors, slow growth, overcapacity, low switching costs, high fixed costs or weak differentiation.

Such conditions increase competition for the same customers.

Lower financial costs than rivals for similar offerings.

Lower cost can support a margin advantage, lower prices or both.

Offering unique features whose extra cost is less than buyers' willingness to pay for them.

A difference must matter to customers to support the strategy.

Targeting a narrow segment rather than the broad market.

Focus can accompany cost leadership or differentiation.

Reducing negative socio-ecological externalities while remaining financially viable.

It need not maximize profit from each improvement.

Creating positive externalities by adding value to overlooked or wasted resources.

Transformation can involve people as well as materials.

Combining minimizer and transformer strategies.

It reduces harmful effects and creates positive well-being.

Corporate strategy selects the industries/SBUs; business strategy acts within an industry.

Diversified organizations need both levels.

Expansion at the same production or distribution level.

Acquiring a similar firm differs from acquiring an input supplier.

Producing inputs or selling outputs through additional stages of the value chain.

The chapter calls these upward and downward integration.

Star, cash cow, question mark and pet.

They combine high/low market share with high/low industry growth.

Sustainable development and restorativeness.

The axes track reducing negative and creating positive externalities.

Two financial orientations × three ecological effects × three social effects.

A firm can be positive in one well-being dimension and negative in another.

Analysis and decisions to formulate and implement strategy.

Analysis and decisions to formulate and implement strategy.

A diversified organization with strategic business units in unrelated industries.

A diversified organization with strategic business units in unrelated industries.