Business Strategy

Unit 1

Introduction

Class of 2025
Semester 3
June 2024 – Sept 2025

Introduction to Strategic Management 1

 Introduction to Strategic Management
Topics Learning Outcomes
1 Introduction to Strategic • Understand what is meant by strategy, strategic management
Management and the characteristics of strategic decisions

2 Strategic vs. Operational • Distinguish between Strategic Management and Operational

Management Management

3 Strategic Management Process • Map the strategy management process

4 Levels of Strategy (Corporate, • Distinguish between corporate, business and functional

Business, Functional) strategies

5 Evolution of Strategic Thinking – • Be able to comment on the evolution of strategic thinking and
Views of Eminent Thinkers debate the views of eminent thinkers

Introduction to Strategic Management 2

 Definitions of Strategy
‘. . .the determination of the long-run goals and objectives of an
Logical Flow to
enterprise and the adoption of courses of action and the allocation of resources
end results
necessary for carrying out these goals’
Alfred D. Chandler

Competitive strategy is about being different. It means deliberately choosing a Deliberate Choices
different set of activities to deliver a unique mix of value’ to be made
Michael Porter

‘a firm’s theory about how to ‘a pattern in a stream of ‘the long-term direction of an

gain competitive advantages’ decisions’ organisation’
Peter Drucker Henry Mintzberg Exploring Strategy

How to win Emergent Time frame

Sources: A.D. Chandler, Strategy and Structure: Chapters in the History of American Enterprise, MIT Press, 1963, p. 13; M.E. Porter, ‘What is strategy?’,Harvard Business Review, November–December 1996, p. 60; P.F. Drucker, ‘The theory of business’, Harvard
Business Review, September–October 1994, pp. 95–106; H. Mintzberg, Tracking Strategies: Towards a General Theory, Oxford University Press, 2007, p. 3.

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 Five Ps for Strategy
Strategy requires a number of definitions, five in particular
Mintzberg 1987

Strategy as …
1 Plan A direction, a guide of course of action
2 Pattern Consistency in behaviour over time – evolve patterns out of their past
3 Position Locating of particular products in particular markets – looks down to
where the product meets the customers

4 Perspective An organisations fundamental way of doing things – strategy looks in –

inside the organisation but also looks up – to the grand vision of the
enterprise

5 Ploy A specific “manoeuvre” intended to outwit an opponent or competitor

Source: Mintzberg, H., The Strategy Concept I: Five Ps For Strategy, California Management Review, 1987

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 Three horizons for strategy

Horizon 1 Current core activities Extend and defend these activities

Horizon 2 Develop emerging activities To generate new sources of growth and/or profit
Horizon 3 Create viable strategic options for the future Higher risk activities that may take years to generate growth/profits
Note: ‘profit’ on the vertical axis can be replaced by non-profit objectives; ‘business’ can refer to any set of activities; ‘time’ can refer to a varying number of years.
Source: M. Baghai, S. Coley and D. White, The Alchemy of Growth, Texere Publishers, 2000. Figure 1.1, p. 5.

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 Strategy is the long term direction of an organisation
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 about: Therefore they are likely to:

1. The long-term direction of an • Be complex in nature
organisation • Be made in situations of uncertainty
2. The scope of an organisation’s activities • Affect operational decisions
3. Gaining advantage over competitors • Require an integrated approach (both inside
4. Addressing changes in the business and outside an organisation)
environment • Involve considerable change
5. Building on resources and competencies
(capability)
6. Values and expectations of stakeholders
The 6 characteristics of strategy
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 Let’s understand the definition with an example …

Caselet Discussion

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 Strategic Decisions
Long Term Direction
• ‘To offer a wide range of well-designed, functional home furnishing products at
prices so low that as many people as possible will be able to afford them.
• Inexpensive, fashionable furniture to young white collar customers all over the
world

The Don’ts
• Does not compete in high end furniture segment
• No customised orders
• No self manufacturing

Introduction to Strategic Management 8

 Strategic Decisions
Scope

• Across the world

• Large cities
• Young white collar professionals

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 Strategic Decisions
Advantage over competition
• Retail outlets
• Range of products
• Price
• Customer understanding
• Logistics
• Relationships with manufacturers
• Flat box packing
• Furniture assembled at home
• Fashionable furniture

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 Strategic Decisions
Strategic Fit with the business environment

• Growing population of young professionals all over the world looking

• Space constraints of urban living
• Demand for low price stylish furniture

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 Strategic Decisions
Organisations resources and competencies
• Design capability
• Flat packs
• Logistics
• Mass production
• Privately held – focus on long term

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 Strategic Decisions
Values and Expectations
• Leadership by example
• Constant desire for renewal
• Togetherness and enthusiasm
• Cost-consciousness
• Striving to meet reality
• Humbleness and will power
• Daring to be different
• Accept and delegate responsibility
• Constantly being “on the way”

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 The Strategy Process

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 Strategic Management Process
The set of decisions and actions that result in the formulation and
implementation of plans designed to achieve a company’s objective.
Strategic Mission

A firm’s values and purpose and the scope of its operations in product and
market terms

Strategy Strategic Plan

Formulation
How a firm positions itself in the market and develops and leverages internal
(SF) resources and capabilities to accomplish its strategic mission

Strategy Strategic Actions

Implementation Individual actions taken to execute the strategic plan in pursuit of the strategic
(SI) mission

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 Strategic Management Pedagogical Model
STRATEGY STRATEGY STRATEGY
FORMULATION IMPLEMENTATION EVALUATION
Situation Strategic Generation Making
Analysis Thinking Of Options Choices

Step 2 Decision Making

Perform
External
Assessment

Step 1 Step 4 Step 5 Step 6 Step 7 Step 8

Develop
Vision & Mission Establish Evaluate Measure and
Generate Implement
Statement Long-term and Select Evaluate
Strategies Strategies
Objectives Strategies Performance

Step 3

Perform
Internal
Assessment

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 Tool Kit

If the only tool you have is

a hammer, you treat
everything like a nail.

Abraham Maslow (1908-

1970), American
psychologist

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 Strategic Management Pedagogical Model
STRATEGY STRATEGY STRATEGY
FORMULATION IMPLEMENTATION EVALUATION
Situation Strategic Generation Making Evaluating the Strategy
Analysis Thinking Of Options Choices

Decision Making
• PESTEL Step 2
• Porter’s Five Forces
Perform
Model
External
Assessment

Step 1 Step 4 Step 5 Step 6 Step 7 Step 8

Develop Establish Evaluate and Measure and

Generate Implement Evaluate
Vision & Mission Long-term Select
Strategies Strategies Performance
Statement Objectives Strategies

Step 3
Perform
Internal
Assessment

• Formulating • Value Chain • Ansoff’s • SWOT Analysis • Business Modelling • McKinsey 7 S • Balanced Scorecard
Strategy Analysis Matrix • TOWS Matrix • Financial Modelling • Balanced Scorecard • Projected Financial
Statement • VRIO Analysis • Strategy Clock • International • Perceptual Mapping • Benchmarking Statements
• Formulating • Generic • Corporate Valuation • Benchmarking
Mission, Vision Strategies • Org. Structure Analysis
and Values • Blue Ocean

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 The Exploring Strategy Framework
Strategic management includes understanding the strategic position of a organisation,
making strategic choices for the future, and managing strategy in action

Source: Explore Strategy, 11e, Johnson et. al

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 The strategy checklist
Sixteen fundamental questions in strategy
Strategic position Strategic choices Strategy in action
1.What is the basic purpose of the 7. What business strategy and 13. Are strategies suitable,
organisation? model should be used? acceptable and feasible?
2.What are the macro- 8. Which businesses should be 14. What kind of strategy-making
environmental drivers for included in a portfolio? process is needed?
change?
9. Where should the 15. What are the required
3.How can the organisation organization compete organisation structures and
identify a competitive position? internationally? systems?
4.What are the organisation’s
10. Is the organisation innovating 16. How should the organization
distinctive capabilities?
appropriately? manage necessary changes?
5.What are stakeholders’
expectations? 11. Should the organisation buy 17. Who should do what in the
other companies, ally or go it strategy process?
6.How does culture fit the
alone?
strategy?
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 It comprises nine critical tasks:
1. Formulate the company’s vision and mission, including broad statements about its purpose,
philosophy, and goals.
2. Conduct an analysis that reflects the company’s internal conditions and capabilities.
3. Assess the company’s external environment, including both the competitive and the general
contextual factors.
4. Analyse the company’s option by matching its resources with the external environment
5. Identify the most desirable options by evaluating each option in light of the company’s vision
and mission
6. Select a set of long-term objectives and grand strategies that will achieve the most desirable
options
7. Develop annual objectives and short term strategies that are compatible with the selected set
of long-term objectives and grand strategies
8. Implement the strategic choices by means of budgeted resource allocation in which the
matching of task, people, structures, and reward system is emphasised.
9. Evaluate the success of the strategic process Source: Strategic Management, Pearce, 2019, Page 4
Introduction to Strategic Management 21
 Different Approaches to the Strategy Process

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 Strategy Planning & Implementation

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 Strategic Management
STRATEGIC INPUTS STRATEGY DEVELOPMENT STRATEGY IMPLEMENTATION
Situation Analysis Creating Strategies
Putting strategies Strategic
Strategic Thinking Corporate Level Corporate Strategy into action Outcome
Purpose Organic vs
Vision, Mission, Values Inorganic Growth Ansoff’s Matrix
Strategies Diversification
GE-McKinsey
Outcomes Mergers,
Acquisitions and BCG
Strategic vs Operational;
Alliances
External Analysis Internal Analysis International Strategy Competitive
Strategy Implementation Advantage
Macroenvironment Organisations Resources
Analysis and Capabilities
Business Level Business Strategy Strategic Control Value Creation
PESTEL
Generic Strategy Value Capture
Ansoff’s Matrix McKinsey 7S
Industry Analysis Value Chain Analysis
Hybrid Strategy
Strategy Maps Balanced Scorecard
Porter’s Five Forces VRIO Analysis Strategy Groups
Business
Business Platform Model
Critical Success Factors & Benchmarking
Blue Oceans Functional Level
Business Model
Opportunities & Threats Strengths & Weaknesses Marketing Plan Finance, HR, Operations Canvas
Strategy Development Process
TOWS
Introduction to Strategic Management 24
 Strategy
Formulation

Strategy
Implementation

Strategic
Outcomes

Introduction to Strategic Management 25

 Strategic Management Model

Source: Strategic Management – Pearce & Robinson

Introduction to Strategic Management 26
 Strategic vs. Operational Management

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 Strategic vs. Operational Management

Strategic decisions are long term, complex and future oriented whereas
operational are more today and execution in general
Strategic Operational
Strategic management is concerned with complexity An operational manager is most often required to deal with
arising out of ambiguous and non-routine situations problems of operational control such as
with organisation-wide rather than operation-specific • Efficient production of good
implication • Management of a salesforce
• Monitoring of financial performance
• Focuses on activities necessary to ensure
competitive positioning • Concerned with the day-to-day activities required to
• Planning of Purpose, Vision, Mission and Objectives produce goods and services,
• Senior Management • Planning the routine activities of the Company
• Longer Time Frame – Future orientation • Middle Management
• Wide in Scope • Shorter Time Frames – current orientation
• Concerned with overall purpose and the scope of an • Narrow in Scope
organisation and how value will be added to the • Concerned with how the component parts of an
different parts of the organization organisation delivers effectively the corporate – and
business – level strategies in terms of resources, processes
and people
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 Levels of Strategy
(Corporate, Business, Functional)

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 Levels of Strategy
Holding Company
Corporate Multi Business Unit Tata Sons
• Top of the hierarchy
• Composed principally of a board of directors and the chief executive and administrative officers
• They are responsible for the firm’s financial performance and for the achievement of nonfinancial goals
• Corporate-level Strategy is concerned with the overall purpose and the scope of an organisation and how value will be added to the different
parts of the organisation
Business Business Business Business Business
(Divisional) 1 2 3 4

A strategic business unit is a

part of an organisation for • Composed principally of business and corporate managers
which there is a distinct • These managers must translate the statements of direction and intent generated at the corporate level into concrete
external market for goods or objectives and strategies for individual business divisions or SBUs
services that is different from • In essence, business-level strategic managers determine how the firm will compete in the selected product-market arena
another SBU. • They strive to identify and secure the most promising market segment within that arena

Functional Marketing Financial R&D HR

Strategies Strategies Strategies Strategies
• Bottom of the decision making hierarchy
• Composed principally of managers of product, geographic, and functional areas
• They develop annual objectives and short term strategies in such areas as production, operations, research and development, finance and accounting, marketing and human relations
• Principal responsibility is to implement or execute the firms strategic plan
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 Strategic Business Unit (SBU)

A strategic business unit is a part of an organisation for which there is a distinct external market
for goods or services that is different from another SBU.
• A strategic business unit, popularly known as SBU, is a fully-functional unit of a business that
has its own vision and direction.
• Typically, a strategic business unit operates as a separate unit, but it is also an important part
of the company. It reports to the headquarters about its operational status.
• A strategic business unit or SBU operates as an independent entity, but it has to report
directly to the headquarters of the organisation about the status of its operation.
• It operates independently and is focused on a target market. It is big enough to have its own
support functions such as HR, training departments etc. There are several benefits of having
an SBU.
• This principle works best for organisations which have multiple product structure.

https://economictimes.indiatimes.com/definition/strategic-business-unit

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 Evolution of Strategic Thinking – Views of
Eminent Thinkers

Introduction to Strategic Management 32

 Origin

The art of planning and A plan of action designed to

directing overall military achieve a long-term or overall aim
operations and movements in
a war or battle

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 Introduction

• While the foundation of the concept of strategy can be traced to military ancestry, the
business application has gained in popularity and following.

• Business strategy drives companies of all shapes and sizes, ideally capturing the
differences that can carry a company to success.

Introduction to Strategic Management 34

 The evolution of business strategy has moved through the
following phases:
1. Budgetary Planning
2. Corporate Planning
3. Corporate Strategy
4. Industry and Competitive Analysis
5. Internal Sourcing of Competitive Advantage
6. Strategic Innovation and Implementation
7. Strategic Thinking & Simplification

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 Phase I: Budgetary Planning (1950-1960)
Alfred Sloan, General Motors
• One of the first individuals credited with developing and implementing strategy in the
business landscape is Alfred Sloan, head of General Motors from 1923 to 1955.
• In 19XX, Sloan reorganized GM as documented in his book entitled, My Years with
General Motors, published in 1963.

Peter Drucker
• Drucker published Concepts of the Corporation in 1946 in which he examined Sloan’s
General Motors, General Electric, IBM and Sears, Roebuck.
• The findings of his studies concluded that the most successful companies were
centralized and good at goal setting.
• The first to see that the purpose of business is external in creating and satisfying
customer needs.
Financial control was created through operating budgets, which also took into account
investment planning and project appraisal.
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 Phase II: Corporate Planning (1960–1968)

The 1960’s represent the acknowledged entrance of strategy into the business
community and the popularization of corporate planning.

Alfred Chandler Jr. was the first academic researcher of business strategy and he
published a landmark work entitled, Strategy and Structure, in 1962.
• Chandler offers one of the first definitions of strategy in the business context:
• The determination of long-term goals and objectives of an enterprise and the adoption
of courses of action and the allocation of resources necessary for carrying out those
goals.

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 1960s
Strategy was to do with the task of the general manager and, perhaps most obviously,
took form in the business policy courses run at universities such as Harvard

Ansoff, in his 1957 paper, provided

a definition for product-market
strategy as “a joint statement of a
product line and the
corresponding set of missions
which the products are designed
to fulfil”.[3] He describes four
growth alternatives for growing an
organization in existing or new
markets, with existing or new
products. Each alternative poses
differing levels of risk for an
organization

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 Phase III: Corporate Strategy (1968–1975)
Bruce Henderson founded the Boston Consulting Group, (BCG), a management consulting
firm, in 1963.

• One of the contributions of BCG is the Growth/Share Matrix, which assesses the
market growth rate in relation to a firm’s relative market share.
• This accelerated adoption in the 1970’s of portfolio planning, in which firm’ s literally
plotted their products/business units in these matrices to evaluate their respective
contributions.
• Corporate strategy’s adoption in the 1970’s was largely influenced by portfolio planning
and large companies need to establish synergy between the business units and
corporate parent.
• The 1970’s also witnessed the beginning of the mammoth PIMS (Profit Impact of
Market Strategy) study in an attempt to understand the correlation between
performance and strategy.
Introduction to Strategic Management 39
 1960s and 1970s
• In parallel there developed the influence of books on corporate planning.
• Analyse the various influences on an organisation’s well-being in such a way as to
identify opportunities or threats to future development.
• It took the form of highly systematised approaches to planning – incorporating the
mathematical techniques of operational research and economics.

March 1962
Introduction to Strategic Management 40
 Phase IV: Industry and Competitive Analysis (1975–1985)

• Putting a depth charge into this field of thought was Harvard Business School Professor
Michael Porter, writing perhaps the most influential book on business strategy entitled,
Competitive Strategy, in 1980.

• Porter’s work propelled the analysis of industry and competition through models such
as the “ Five Forces,” which assesses a company based on their position relative to five
factors.

Introduction to Strategic Management 41

 1970s
• Henry Mintzberg and Andrew Pettigrew, drew on sociology and psychology to argue
that people were too imperfect and the world too complex for heavy reliance on
analysis and planning

defined strategy as a pattern in a stream of decisions to contrast with

a view of strategy as planning

Introduction to Strategic Management 42

 1980s
• Michael Porter on industry structure
• Position based theory
• Porter’s strategic development process starts by looking at the relative position of a
firm in a specific industry.
• This is, we start by considering the firm’s environment and then try to assess what
strategy is the one that may maximize the firm’s performance.

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 Phase V: Internal Sourcing of Competitive Advantage (1985–1995)
• However, the path for seeking competitive advantage changed, to one seeking sources
of competitive advantage within the firm.
• Embodying this shift in thinking was the work by Gary Hamel and C.K. Prahalad
entitled, Competing for the Future, published in 1994. Hamel and Prahalad introduced
the term core competencies to represent the sources of competitive advantage
inherent in the firm.
• Hamel and Prahalad define core competencies as a bundle of skills and technologies
that enables a company to provide a particular benefit to customers, representing the
sum of learning across individual skill sets and individual organizational units.
• The sourcing of competitive advantage from within the firm follows the Resource-Based
Theory, which focuses on the firm’s assets and capabilities and how these internal
strengths provide advantage over rivals.

Introduction to Strategic Management 44

 1990s
• Resource-based theories – Hamel & Prahalad

• The resource-based view of strategy: the competitive advantage of an organisation is

explained by the distinctiveness of its capabilties

• The Resource-Based (RB) Theory, by contrast, can be seen as an “inside-out” process of

strategy formulation.
– We start by looking at what resources the firm possesses.
– Next, we assess their potential for value generation and end up by defining a
strategy that will allow us to capture the maximum of value in a sustainable way.

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 Phase VI: Strategic Innovation and Implementation (1995–2001)

• Too many companies have realized all too well that even the most wonderfully
conceived strategy is irrelevant if not properly implemented.

• C. Davis Fogg’s work entitled, Implementing Your Strategic Plan (1999) advocates five
broad categories for successful implementation of strategy:

• 1. Setting accountability
• 2. Enabling and aligning action
• 3. Fixing the organization
• 4. Providing an environment in which people can excel
• 5. Judging and rewarding

Introduction to Strategic Management 46

 Phase VI: Strategic Innovation and Implementation (1995–2001)

• A tool called the Balanced Scorecard was introduced in the book, The Strategy-Focused
Organization, written by Robert Kaplan and David Norton. The Balanced Scorecard is
intended to highlight three dimensions of a new management system:

• 1. Strategy: make strategy the central organizational agenda

• 2. Focus: create incredible focus
• 3. Organization: mobilize all employees to act in fundamentally different ways

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 Phase VII: Strategic Thinking & Simplification (2003 and beyond)

• The primary problem is that many companies view strategic thinking and strategic
planning as one in the same, and have failed to allocate sufficient time to the two
distinct activities.

• The shifting emphasis for strategy will now move toward strategic thinking and
simplification: people learning the tangible skills of strategic thinking and using them in
simple frameworks that allow strategy development to be an on-going, daily
occurrence rather then an annual trek to the Mecca of strategy gods resting high above
the corporate hierarchy.

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 Evolution of Strategic Management

NO Period Person
1 1950-1960 Alfred Sloan, Peter Drucker
2 1960–1968 Alfred Chandler Jr. , Igor Ansoff
3 1968–1975 Bruce Henderson, BCG
4 1975–1985 Michael Porter
5 1985–1995 Gary Hamel and C.K. Prahalad
6 1995–2001 C. Davis Fogg , Robert Kaplan and David Norton
7 2003 onwards Strategic thinking and Simplification

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 Twenty-first century
The emergence and growing acceptance of new streams of research that offer still more
promising means of coping with organisational reality

• Complexity theory
• Discourse researchers
• Strategy-as-practice (SAP)

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 Complexity theory

• The framework is provided by the modern science of complexity: the study of

nonlinear and network feedback systems, incorporating theories of chaos, artificial
life, self‐organization and emergent order.
• Here system dynamics are characterized by positive and negative feedback as
systems coevolve far from equilibrium, in a self‐organizing manner, toward
unpredictable long‐term outcomes.
• Ralph Stacey and Kathy Eisenhardt

Introduction to Strategic Management 51

 Discourse analysis

• Discourse analysis (DA), or discourse studies, is the approaches to analyze

written, vocal, or sign language use, or any significant semiotic event.
• David Knights

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 Strategy-as-practice (SAP)

Strategy as practice can be regarded as an alternative to the mainstream strategy

research via its attempt to shift attention away from a ‘mere’ focus on the effects of
strategies on performance alone to a more comprehensive, in-depth analysis of what
actually takes place in strategy formulation, planning and implementation and other
activities that deal with the thinking and doing of strategy.

Introduction to Strategic Management 53

Introduction to Strategic Management 54
 Finish

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