1.2 What is strategy?
Strategy is the long-term direction of an organization.
Chandler: emphasises a logical flow from the determination of goals and objectives to the
al ocation of resources.
Porter: deliberate choices, difference and competition.
Mintzberg: “pattern” → al ow for the fact that strategies do not always fol ow a deliberately
chosen and logical plan, but can emerge in more ad hoc ways.
The textbook defines strategy as: “the long-term direction of an organization”
This definition has two advantages:
1. the long-term direction of an organization can include both deliberate, logical strategy
and more incremental, emergent patterns of strategy.
2. long-term direction can include both strategies that emphasise difference and
competition, and strategies that recognise the roles of cooperation and even
Three elements in this definition are long-term, direction, and organisation.
● The long-term. The importance of a long-term perspective is emphasised by the
“three-horizons” framework. The three-horizons framework suggests organisations
should think of themselves as comprising three types of business or activity, defined
by their “horizons” in terms of years. Horizon 1: businesses are basical y the current
core activities. Horizon 1 businesses need defending and extending but the
expectation is that in the long-term they wil likely be flat or declining in terms of profit.
Horizon 2: Businesses are emerging activities that should provide new sources of
profit. Horizon 3: These are typical y research and development projects, start-up
ventures, test-market pilots
or similar. Basic point of the
“three horizons” framework
is that managers need to
avoid focusing on the
short-term issues of their
existing activities. Strategy
involves pushing out
Horizon 1 as far as
possible, at the same time
as looking to Horizons 2
● Strategic direction. Over the years, strategies fol ow some kind of long-term direction
or trajectory. Sometimes a strategic direction only emerges as a coherent pattern
over time. Typical y, however, managers and entrepreneurs try to set the direction
of their strategy according to long-term objectives. For private-sector businesses
this long-term objective is usual y maximizing profits for shareholders. However this
is not always the case. Public-sector and charity organizations may set their strategic
direction according to other objectives, for example a footbal club wants to promote
into a higher division. Family companies may not have maximum profits as their
long-term objective, but instead focus on prolongation of the company within the
● Organisation. Organisations involve complex relationships, both internal y and
external y. This is because organisations have both internal and external
stakeholders. In strategy it is always important to look inside organisations and to
consider the people involved and their different interests and views. External y,
organisations are surrounded by important relationships. Strategy therefore is als
crucial y concerned with an organisation’s external boundaries: questions about
what to include within the organisation and how to manage important relationships
with what is kept outside.
Levels of strategy
Within an organisation, strategies can exist at three main levels.
● Corporate-level strategy is concerned with the overal scope of an organisation and
how value is added to the constituent business of the organisational whole.
Examples of issues on this level of strategy are: geographical scope, diversity of
products or services, acquisitions of new businesses, and how resources are
al ocated between the different elements of the organisation.
● Business-level strategy is about how the individual businesses should compete in
their particular markets (often cal ed competitive strategy). Business-level strategy
typical y concerns issues such as innovation, appropriate scale and response to
competitors’ moves. For the public-sector, the equivalent of business-level strategy is
decisions about how units should provide best-value services (hospitals, schools).
● Operational strategies are concerned with how the components of an organisation
deliver effectively the corporate- and business-level strategies in terms of resources,
processes and people. In most businesses, successful business strategies depend to
a large extent on decisions that are taken, or activities that occur, at the operational
The need to link the corporate, business and operational levels underlines the importance of
integration in strategy. Each level needs to be aligned with the others. The demand of
integrating levels defines an important characteristic of strategy: strategy is usual y
complex, requiring careful and sensitive management.