Summary Fundamentals of strategy

ISBN-10 1408221195 ISBN-13 9781408221198
132 Flashcards & Notes
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This is the summary of the book "Fundamentals of strategy". The author(s) of the book is/are Gerry Johnson, Kevan Scholes, Richard Whittington. The ISBN of the book is 9781408221198 or 1408221195. This summary is written by students who study efficient with the Study Tool of Study Smart With Chris.

Summary - Fundamentals of strategy

  • 1 Introducing Strategy

  • 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

  • Strategic decisions are likely to 

    • be complex in nature
    • be made in situations of uncertainty
    • affect operational decisions
    • require an integrated approach
    • involve considerable change
  • 3 levels of strategy: corporate, business and operational level

  • corporate strategy

    overall purpose and scope of the organisation, and how value is added to the constituent businesses of the organisational whole

  • business strategy

    how the individual businesses should competer in their particular markets -> competitive strategy

  • operational strategy

    how the component parts of an organisation deliver effectively the strategies in terms of resources, processes and people

  • strategic management

    • organisation-wide, holistic
    • conceptualisation of issues
    • creating new directions
    • developing new resources
    • ambiguous/uncertain
    • long term orientation
  • operational management

    • routinised
    • techniques and actions
    • managing existing resources
    • operating within existing strategy
    • operationally specific
    • day to day issues
  • 3 horizons for strategy

    1. extend and defend core business
    2. build emerging buisinesses
    3. create viable options
  • strategy statements

    three main themes:

    • the fundamental goals (mission, vision objectives) of the organization
    • the scope or domain of the organisation's activities
    • the particular advantages or competitive superiority
  • mission

    the overriding purpose of the organization 

    (what business are we in?)

  • vision (or strategic intent)


    desired future state of the organization

    (what do we want to achieve?)

  • objectives

    statements of specific outcomes that are to be achieved (often financial)

  • scope

    domain of the organization's activities


    refers to three domains

    • customers
    • geographical location
    • extend of internal acitivities  -> vertical integration
  • advantage

    how the organization will achieve the objectives set regarding its chosen scope


    commercial -> competitive advantage

  • exploring strategy includes understanding the trategic position of an organization, assessing strategic choices for the future and managing strategy in action

  • 2 The Environment

    1. Macro -> what broad factors impact almost all firms?
      - PESTEL
      - scenarios
    2. Meso -> what are (changes in) the competitive forces (of your industries)
      - Porter's five forces model
      - industry life cycle
      - comparative industry structure analysis
    3. Micro -> What dominates the inner layer of the business environment?
      - strategic groups
      - market segments
      - blue ocean thinking

    • Political
    • Economic
    • Sociocultural
    • Technological
    • Environmental
    • Legal

    what environmental factors are affecting the organisation?

    which of these are the most important at the present time? In the next few years?


  • Macro: PESTEL

    • it categorizes societal influences into six main types
    • the focus should be on their future impact
    • the prioritised key drivers of change have differential impact on industries, markets, and companies
    • assumes that the combined impact of some factors will be more important than other factors
  • Macro: Building scenarios

    • identify the (opposing) key drivers
      'the macro-environmental factors that are likely to have a high impact on the success or failure of a strategy'
    • develop scenario 'stories'
      = plausible alternative views of how the business environment might develop in the future, based on the key drivers for change about which there is a high level of uncertainty
    • identify impacts -> firm contingency plans
  • Meso: Static industry structure

    Porter's Five Forces Model on the industry

    • to determine the attractiveness of an industry
    • affects the way individual companies compete
    • influences decisions on product/market strategy

    management questions:

    • which industries should we enter or leave?
    • what influence can we exert on the industry
    • how are competitors differently affected?
  • Threat of Potential entrants (high), inverse to barries to entry (low)

    • scale and experience
    • acces to supply and distribution channels
    • expected retaliation
    • legislation or government action
    • differentiation
  • the power of buyers/suppliers

    • are buyers/suppliers concentrated?
    • what are the costs of switching (by suppliers/buyers)
    • does backward/forward vertical integration exist?
  • Meso: Dynamic industry structure
    The comparative five forces analysis


    • Erosion of competitive advantage
      - Changes in five forces
      - competitors overcoming adverse forces
    • cycles of competitive response
      - when slow: long periods of established pattern of competition -> built imitation barriers
      - when fast: hyper competition, constant disequilibrium and change -> sequence of short-lived moves
  • Micro: to differentiate customers

    Blue Ocean Thinking

    Find new market spaces where competition is minimised -> find strategic gaps


  • Strategy canvas compares competitors according to their performance on CSFs, to develop strategies, based on creating new market spaces

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corporate strategy
business strategy
operational strategy
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