S.M Assignment

STRATEGIC MANAGEMENT (SIM336)
A business enterprise guided by a clear sense of purpose rationally arrived at and

emotionally ratified by commitment is more likely to have a successful outcome, in terms of
profit and social good, than a company whose future is left to guesswork and chance.
Andrews K., (1987) The concept of corporate strategy; cited in De Wit & Meyer,(2010) Strategy Process, Content, Context, an
international perspective 4
th
Edition

MODULE GUIDE
2012/2013

MODULE LEADER - Derek Harwood
Module Team - Kristina Brown; John Davison;

2

3

Table of Contents

Important Notes .................................................................................................................4
Introduction .......................................................................................................................6
Lecture and Seminar Programme ...................................................................................6
Sunspace Module information .....................................................................................7
University Documentation .............................................................................................7
Module Feedback ...........................................................................................................7
Assessment ........................................................................................................................8
MODULE DESCRIPTION ................................................................................................9
Introductory Lecture ............................................................................................. 12
Introductory Seminar : Review module guide and assessment! ............................. 13
Lecture One: The Strategy Labyrinth. ................................................................ 14
The Essential Reading For Lecture One ............................................................ 14
Seminar One ............................................................................................................ 15
Part 1. The Sale of Burmah Castrol to BP Amoco ................................................. 15
Part 2. Strategy Past; Strategy Futures .................................................................. 15
Lecture Two: Models, Concepts, Theories ............................................................ 16
The Essential Reading For Lecture Two ........................................................... 16
Seminar Two: The Brewery Group Denmark : Faxe, Ceres and Thor.................... 17
Lecture Three : Organizational Purpose ................................................................ 18
The Essential Reading For Lecture Three ......................................................... 18
Seminar Three : Blackberry & The Mobile Phone Industry ................................... 19
Lecture Four: Chaos and Strategy ......................................................................... 20
The Essential Reading For Lecture Four ........................................................... 20
Seminar Four: Blackberry & The Mobile Phone Industry ..................................... 20
Lecture Five: Influences On Action ...................................................................... 21
The Essential Reading For Lecture Five ........................................................... 21
Seminar Five: Ryanair .......................................................................................... 22
Lecture Six: Public Sector Strategy ...................................................................... 23
The Essential Reading For Lecture Six ............................................................. 23
Seminar Six: Strategy development at Castle Press & New Town Council ........... 24
Lecture Six A: Assignment Preparation Part 1 ...................................................... 25
Seminar 6A: Part 1 Final Preparation .................................................................... 25
This week - Hand In Part I of your Assignment. ............................................... 25
Lecture Seven: Risk Management ........................................................................ 26
The Essential Reading For Lecture Seven ......................................................... 26
Seminar Seven: Case Study: Ericssons Supply Chain .......................................... 27
Lecture Eight: Strategy - Does it Matter? .............................................................. 28
The Essential Reading For Lecture Eight .......................................................... 28
Seminar Eight : International Joint Ventures (IJVs) The Rover/Honda Alliance .. 29
Lecture Nine: Assignment Preparation Part 2 ....................................................... 30
Seminar 9: Assignment Preparation & Module feedback ...................................... 30
ASSIGNMENT 1 - TITLE: Strategic Analysis .................................................. 31
APPENDIX ONE......................................................................................................... 35
Useful URLs and important University Documents ...................................................... 35

4

Important Notes

The lecture and seminar programme will be delivered during Term 1.

Lectures and seminars for this module will be delivered every week.
Lecture 1 relates to seminar 1, and so on

Table I Lecture & Seminar delivery

Wk Date W/C Lecture Topic Seminar Academic paper / case
study
Page
27 28 Jan 13 Module
Outline
Introductory Lecture
Outline of the Module
& Assessment
Seminar Review module guide and
assessment.
Using Case studies The
rationale.

-
28 4 Feb 13 Lecture 1 The Strategy
Labyrinth.
Seminar 1 1.Case Study BP Amoco
2.Academic paper Strategy
Past; Strategy Futures
37

47
29 11 Feb 13 Lecture 2 Models, concepts and
theories
Seminar 2 Case Study - The Brewery
Group Denmark

57
30 18 Feb 13 Lecture 3 Organisational
Purpose

Seminar 3 Case Study Blackberry & The
Mobile Phone Industry
-
31 25 Feb 13 Lecture 4 Strategy and Chaos Seminar 4 Case Study Blackberry & The
Mobile Phone Industry
-
32 4 Mar 13 Lecture 5 Influences on action. Seminar 5 Case Study Ryanair

69
33 11 Mar 13 Lecture 6 Public Sector Strategy Seminar 6 Case Studies - Strategy
development at Castle Press &
New Town Council
73

79
34 18 Mar 13 Lecture
6A
Part 1 Assignment
Preparation
Seminar 6A Part 1 Assignment preparation
Electronic Databases; Keynote

-
22 Mar 13 Hand in Part 1 of your
assignment

-
38 15 Apr 13 Lecture 7

Risk Management Seminar 7 Case Study - Ericssons risk
management approach after a
serious sub-supplier accident
87
39 22 Apr 13 Lecture 8

Finally Does it
matter?

Seminar 8 Case Study - International Joint
Ventures Rover / Honda
111
40 29 Apr 13 Lecture 9 Part 2 Assignment
Preparation

Seminar 9 Assignment Preparation &
module feedback
-
41 10 May 2013 Submit Part 2 of your
assignment on Friday
10
th
May 2013

-

5

Please note that the workshops are designed to follow the lectures. It is important that you
arrive at the seminar having considered the lecture and read any case study material or
academic papers given.
The lectures will be available on Sunspace prior to being delivered so please ensure you
print the lecture content prior to attendance at the lecture theatre then you can add notes
during the lecture delivery.
Failure to arrive at lectures or seminars prepared may detract from your learning and the
learning of your seminar group - as well as wasting valuable time.
Take advantage of the seminar process, complain (constructively) if you dont agree or
give complements. Whatever you do please try to avoid being passive in the seminar
process.

Derek Harwood
Email: derek.harwood@sunderland.ac.uk
Tel: 0191 515 2331

Kristina Brown:
Email: kristina.brown@sunderland.ac.uk

John Davison
Email: john.davison@sunderland.ac.uk

6

SIM336 STRATEGIC MANAGEMENT

Personally I'm always ready to learn, although I do not always like being taught.
Sir Winston Churchill, British politician (1874 - 1965)
Introduction
Traditionally, Strategic Management is presented as a final year core module in most
Business Studies Degrees. The module aims are usually integrative and cumulative, in that
it draws together the purposes and methodologies of the functional areas which are usually
studied separately to show how they contribute to the overall purposes and aims of the
organization as a whole. This synthesis and integration of the functional business areas into
a real business entity is usually considered in relation to the environment in which the
organization exists and with reference to a time scale from the past and more importantly
projected into the future. Theoretical models are generally supplemented with case study
material and students on sandwich courses returning from placement are encouraged to
reflect upon their own recent experiences.

The challenge for the student and teacher is to:

analyse a complex organization;
analyse a complex environment;
analyse the complexity of relationships between the two;
synthesise earlier diverse and possibly functional studies of the organization;
assimilate new theoretical models;
evaluate all models and methodologies against observations of the practices of
organizations in the real world.

The degree classification reflects the students ability to do this.

Strategic Management will have elements of all of the above although its primary aim is
the study of the methodologies and models by which one might seek to grasp the
extraordinary complexity of, understanding the organization in its environment as it
moves through time. The application of these ideas to the analysis of real organizations is
something that will be accomplished by you in the module assessment in which you will
have plenty of opportunity to pursue your own ideas and to demonstrate your own abilities.

Lecture and Seminar Programme
There is one lecture session each week followed by the seminar. The lectures will consist
of information, explanation and exploration as detailed in this guide. You will get a lot
more from the lectures if you do some directed reading from the list accompanying each
lecture.
The preparation will consist of reading and thinking about the issues it evokes. You may be
asked to carry out some research or to undertake an exercise. Whilst most of the seminar
work will relate directly to lectures and readings sometimes they will take detours and
include contemporary topics.

Due to the nature of the assignment there will always be an opportunity in the seminars to
discuss any particular issues that might arise during assignment preparation.
7

Sunspace Module information

You will find this module guide, lectures, pod casts and other information on Sunspace at
the following location :-

SIM336_1213_SEM2_A Strategic Management

University Documentation

The relevant links to the under mentioned documentation can be found in Appendix 1

1. University Generic Assessment Criteria
2. University Academic Regulations (including the Student Guide)
3. University Student Handbook
4. University Policy on Plagiarism
5. University Policy on Extenuating Circumstances
6. Guide for Students on the Supervision of Dissertations and Projects
7. University Policies on Complaints, Appeals and Student Discipline

Module Feedback

Module feedback is collated informally during the delivery of the module and formally
during the last lecture.
Feedback from last year and incorporated this year was would the seminar tutors review
the strategic models in the seminar prior to application to the seminar case study.

Reading Information.
Please note the reading is detailed week by week and the texts can generally be found in
the Library (probably in limited quantity with respect to your numbers). Other texts may
well be equally acceptable. Throughout the module guide I have identified at least 3 text
books for reference, including page numbers, to the lectures and seminars. You could
purchase these texts:

1. De Wit, B. and Meyer, R. (2010), Strategy Process, Content, Context, An
International Perspective (Fourth Edition), Cengage Learning EMEA.

2. Johnson, G., Scholes, K., Whittington R., (2008), Exploring Corporate Strategy:
Text and Cases (Eighth Edition), Pearson Education Ltd. - Note. There is an
electronic version of this text available within the SunCat library catalogue.

3. Lynch, R. (2006), Corporate Strategy, (Fourth Edition), Financial Times, Prentice
Hall, Harlow. - Note there is an electronic version of this text available within the
SunCat library catalogue.

Ideally if you purchase a text I suggest you purchase 1 and/or 2 before 3.
This module is a valid reason for getting into the habit of reading a good newspaper on a
daily basis such as the Financial Times (FT). Note the FT is available online via the library
and then the Discover icon. The FT will bring you up to date with many aspects of
business topics.

8

As you start work on your assignment you may find it very rewarding to browse amongst
the journals on the electronic databases. This is of particular importance to your individual
assignment as you choose the topic yourself so you need to choose it from some
background knowledge.

Assessment
The individual assignment takes the form of one 3,000 word assessment divided into two
parts. It is designed to allow you to investigate an arena in which your own chosen
particular aspect of Strategy may be developed, researched, analysed or synthesised in
relation to your own thinking and creativity.

Culture and Structure
Lectures are used to sign post ideas and thinking or develop single issues. Seminars will be
used to reflect on ideas and look at examples of strategy in practice.

The early part of the course might be of concern to you in that some of your favourite
strategic models of business may be questioned.
Is hierarchy a good structure for an organization?
What are the strengths and weaknesses of a SWOT analysis?
Is strategy something you do or something you are?
Is there such a thing as strategy and if there is who does it and where?
There is no one view on strategy and whilst you may align yourself with a guru or a school
of thought or develop your own individual view; it is important that you understand why
you believe what you do and more importantly the strengths and weaknesses of your view.

We may agree, we may agree to differ; we may create something new. Where ever the
course leads us it is important to remember that this is not just a course in Strategy; it is an
opportunity to discover new things, question old things, create new things all of which
require thinking and interaction in lectures in seminars so agree, disagree, ask
questions, read and especially think.

Good luck!

Regards

Derek Harwood
9

MODULE DESCRIPTION

TITLE: STRATEGIC MANAGEMENT
CODE: SIM336
CREDITS: 20
LEVEL: 3
FACULTY: BUSINESS & LAW
MODULE BOARD: UNDERGRADUATE BUSINESS AND MANAGEMENT
AND TOPUP
PRE-REQUISITES: NONE
LEARNING HOURS: 200 hours, the exact nature of which is specified in the
module guide

LEARNING OUTCOMES
Upon successful completion of this module, students will have demonstrated:

Knowledge
K1. Understanding of the origins and various approaches to strategy
K2. Understanding of the complexity of the relationships between the organisation
and its environment
K3. Understanding of international/global strategic thinking
K4. Understanding of the application of strategy ideas in practice

Skill
S1. The ability to analyse the complexity of organisations and their environments
S2. The ability to synthesise earlier, diverse and possible piecemeal studies of the
organisation and assimilate new theoretical models and offer solutions
relative to strategic issues
S3. The ability to evaluate existing models and methodologies against
observations of the practices of real organisations

CONTENT SYNOPSIS
The module aims to be integrative and cumulative in that it draws together the purposes
and methodologies of the functional areas of business policy and strategy which are
usually studied separately and to show how they contribute to the overall purposes and
aims of the organisation.
This synthesis is usually considered in relation to the environment in which the
organisation exists and with reference to a timescale projected into the future. The
challenge for the student is to analyse complex organisations and their environments as
well as the relationships between the two and evaluate models and methodologies
against observations of the practices of real organisations. The module reflects the
process of strategic management and the key schools of strategy in the context of
stable or shifting, national and global environments.

TEACHING AND LEARNING METHODS
This is taught on campus and off campus as a distance learning module delivered at
Tutor supported centres requiring the students to work through a study guide that
introduces the subject material and takes the student through a range of activities and
case studies. Students will be encouraged to reflect on their own work and
organisational experiences. Students will be expected to read the module guide and
supported text reading and complete a range of self study activities to underpin their
knowledge and develop analytical skills in respect to meeting the learning outcomes. All
activities have feedback included. Off campus students will have access to a local
academic Tutor who will offer workshop or online support. Students will be able to work
10

with other students either on line or in workshops depending on the nature of the Centre
approval. The following outline is indicative and will vary on and off campus and
between Centres.

Breakdown of 200 Learning Hours
Breakdown of 200 Learning Hours
Weekly lectures and seminars
12 weeks @ 3 hours 36
Self directed study and individual assignment 164
12 weeks @ 13.67hours per week

Total 200 hrs

ASSESSMENT METHODS
The assessment will be by one individual assignment. All learning outcomes will be
assessed.

The standard University Regulations relating to the Infringement of Assessment
Regulations apply. All work must be referenced using the Harvard Referencing System.

Sequence Assessment Type Marking
Scheme
Weighting
%
Qualifying Mark Pass Mark
001 Assignment UCMS 100 35 40

INDICATIVE READING LIST
Primary
Johnson,G., Scholes, K., and Whittington, R. (2011), Exploring Corporate Strategy, 9
th

Edition, Pearson Education Limited or earlier editions.
Additional
De Wit, B. and Meyer, R. (2010) Strategy Process, Content, Context. An International
Perspective, 4th Edition, CENGAGE
Learning.Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009) Strategy Safari, your complete
guide through the wilds of Strategic Management, 2
nd
Edition, Pearson Education
Limited.Stacey, R. D. (2000) Strategic Management & Organisational Dynamics The
Challenge of Complexity, 3
rd
Edition, Financial Times Prentice Hall.
Whittington, R. (2001) What is Strategy and does it matter? Routledge.

A number of journals are all available on the /Emerald/ system.

Students will be encouraged to use the internet as a source of contemporary material for
their studies. To facilitate this, students will be given a list of journals and websites
where relevant information is not only freely available, but is always up to date.

PROGRAMMES USING THIS MODULE AS A CORE OR OPTION
B.A. (Hons) Leadership and Business Management
BA (Hons) Business and Marketing Top-Up (Core)
BA (Hons) Business Management Top-Up (Core)
BA (Hons) Sports Management (Core)
Combined Subjects (Business Major: (Core): Dual with dissertation: (Option):(Business Dual
without dissertation/ Minor) (Core)

11

Is the programme delivered On Campus or Off campus: On and Off campus
Colleges: Various Approved Study
Centres
Work based learning: No
Professional Accreditation: No

MODULE LEADER:
Derek Harwood

LEAD DELIVERER
As above

JACS Code: N100

12

Introductory Lecture

This first session will be largely concerned with generally getting organised to commence
the module. The educational aims of the module will be examined and how the assignment
supports this. The preferred module culture will be described and an outline and
overview of the course will be given. Included in this session will be some preliminary
statements about the subject matter, the views of the teaching team, our assumptions and
alternative views.. Some thought will be given to the way in which we seek to explain the
world and especially the way in which we think about Strategy.

Read the Module Guide carefully, particularly the assignment and start thinking about the
module and what you would like from it. Note down any queries you have, or points on
which you would like further clarification.
This is the normal format of suggested reading. You have generally have a choice of three
texts to underpin the general discussion of the lecture topic and then a compulsory
element of reading:

De Wit B. and Meyer R. (2010) p3-24
De Wit B. and Meyer R. (2004) p25-26 Reading 1.1, The First Strategists by Stephen
Cummings

or

Johnson, G., Scholes, K. and Whittington. R., (2008) p1-28, p29-48.
(8
th
Edition 658.403/J53)
or

Lynch, R., (2006), p1-70.
(658.403/L95)

And

McKiernan P., (1997), Strategy Past; Strategy Futures, Long Range Planning, Vol 30, No.
5, p790-798

Further Reading
Victoria Griffiths, (October 1 1999) Theorists who re-invent old themes, Financial Times
De Wit B. and Meyer R. (2004) p131-138 Reading 3.2 Logical Incrementalism By James
B Quinn
Ansoff I., (1987) Corporate Strategy, Penguin Books.

Notes: You may also find it useful to read Mintzberg et als text - Strategy Safari by
Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009,) Strategy Safari, your complete guide
through the wilds of Strategic Management, , 2
nd
Edition, Pearson Education Limited;
The authors argue that there are ten schools of strategy.

These 2 are
available as an e
book from the
library: you will
need your user id
and password

13

Introductory Seminar : Review module guide and assessment!

This session will be an introduction to the module and the assignment. Tutors will explain
the logic of the module and discuss their/your expectations. Agreement will hopefully be
reached on the approach(es) to be taken in seminars as well as ground rules of
participation.

Go through the module guide with special reference to assessment. Note specifically the
following:

Lectures tend to be about theory and practice, the seminars tend to be about
practice and theory;
Crudely the assignment requires a lot of thinking;
Start the reading now! Dont leave this module till three weeks after the start
thats too late.
Every week bring questions about the lecture or directed reading what you
did/didnt understand or agree/disagree with. Seminars belong to everyone involved
and can be adapted (within reason) to the needs of the class at any point. Active
involvement is better than passive.

The use of Case Studies.

During the module seminars we will be using a lot of case studies to underpin Strategic
Theory.
This seminar will give an explanation as to the rationale for the use of case studies, the
mini lecture is available on Sunspace on the home page of Strategic Management SIM336
entitled Why we use Case Studies.

Prior to ending this seminar, the seminar tutor will allocate individual groups to one
of next weeks two case studies.

14

Lecture One: The Strategy Labyrinth.

In summary, strategy is an elusive and somewhat abstract concept. Its formulation
typically produces no immediate concrete productive action in the firm. Above all, it is an
expensive process both in terms of actual dollars and managerial time. Since management
is a pragmatic result-orientated activity, a question needs to be asked: whether an abstract
concept, such as strategy, can usefully contribute to the firms performance.

Ansoff I., (1987:104) Corporate Strategy, Penguin Books.

This section introduces the some of the most popular models, concepts and theories of
strategic management. It draws on the work of several authors of strategy including
classical and contemporary thinkers. It also reviews De Wit & Meyers strategy
dimensions in terms of process, content and context. A review of the history of strategy is
considered applying Mintzberg et als ten schools of thought There is also an outline of the
terms and relevance of voluntarism and determinism

The Essential Reading For Lecture One

De Wit & Meyer,(2010) Strategy Process, Content, Context, an international perspective
4
th
Edition, pp3-23.
De Wit & Meyer,(2010) Strategy Process, Content, Context, an international perspective
4
th
Edition, pp25-26, Reading 1.1, The First Strategists by Stephen Cummings
or
nd
Edition, Pearson Education Limited; pp1-
19.
or
Johnson, Scholes and Whittington, (2008) Exploring Corporate Strategy, 8
th
Edition,
Pearson Education Limited; pp1-28. pp29-48.
or
Lynch, R. (2006), Corporate Strategy, (Fourth Edition), Financial Times, Prentice Hall,
Harlow. pp1-70.
and
Part 1 Case Study - The Sale of Burmah Castrol to BP Amoco
Part 2 McKiernan P., Strategy past; strategy futures, Long Range Planning, Volume 30,
issue 5, Oct 1997, pp790-798
These case studies are in the module guide

Further Reading
Vickers G., (1970), Freedom in a Rocking Boat, London, Allen Lane.
Lindblom C. E. (1959), The Science of "Muddling Through". Charles E. Lindblom. Public
Administration Review, Vol. 19, No. 2. (Spring, 1959), pp. 79-88

Tutor Contact: Derek Harwood

15

Seminar One

Part 1. The Sale of Burmah Castrol to BP Amoco
Part 2. Strategy Past; Strategy Futures

This session will review some of the origins and definitions of early strategy models and
then look at issues developed from the first lecture and the case study of BP Amoco and
then the paper - Strategy Past; Strategy Futures by Peter McKiernan.
Review Porters (1985) models - 5 Forces for Industry Analysis, Generic Strategies and
the Generic Value Chain towards Competitive Advantage. Check the following link for
Industry Analysis :-
Last week you should have been allocated into groups and one of the case studies.

http://money.cnn.com/magazines/fortune/fortune500/2009/performers/industries/bestinv/1
0yr.html Date accessed: 6 Jan 2013

With regard to part 1: read the BP Amoco case study in the module guide and then answer
the following questions:

1. Analyse the situation facing Burmah Castrol in the late 1990s, for example in terms
of the strengths, weaknesses, opportunities and threats that it faced.
2. Explain the corporate strategy of Burmah Castrol
a. prior to 1997
b. as it changed in 1997 until the sale to BP Amoco.
c. being considered at the time of the sale as an alternative to that sale.
3. If the BP offer had not been forthcoming, what would you have recommended Tim
Stevenson should have done?
4. Would you have recommended the sale of the company or pursued one of the
above options?

With regard to part 2 read the academic paper Strategy Past; Strategy Futures by Peter
McKiernan within the module guide and then answer the following questions:

1. Summarise the Planning and Practice School
2. Outline the Learning School.
3. Summarise the Positioning School.
4. Outline the differences between the Planning and Resource based Schools
5. Outline the differences between the Learning and Positioning Schools

Note that the above questions move from extracting information to picking up on the flow
of an argument, to reflecting on the argument, to searching for mechanisms in operation, to
thinking it through for yourself. All of these skills will be useful in your individual
assignment as well as the course in general.

16

Lecture Two: Models, Concepts, Theories

Initially the lecture highlights the limitations of models and their representation of reality.
A review of Mintzberg et als Design School that predates 1965 which is then compared to
Johnson et als more recent strategy model. Ohmaes (1982) boundaries of strategy are
then considered. A broad range of strategy analytical tools are then outlined and discussed.
Emphasis is then placed upon the following models - Porters (1985) models, including the
5 Forces for Industry Analysis, Generic Strategies and the Generic Value Chain,
Bowmans Strategy clock, Kaplan and Nortons (1992) Balanced Scorecard, the BCG
matrix and the GE McKinsey matrix, Ansoffs Product-Market Matrix and SWOT.

The Essential Reading For Lecture Two
De Wit B. and Meyer R. (2010) p77-78 Reading 2.1 The Concepts Of Corporate Strategy
by Kenneth Andrews

or

Johnson, G., Scholes, K. and Whittington. R. (2008) p49-92.

or

Lynch, R. (2006) pp190-268, pp446-486, pp460-506.

and

Case study: The Brewery Group Denmark in the module guide.

Further Reading
Hill, T. and Westbrook, R. SWOT Its Time For A Product Recall Long Range Planning
Vol 30, No 1, Feb 1997 p46-52

Notes:


17

Seminar Two: The Brewery Group Denmark : Faxe, Ceres and Thor

The case study is The Brewery Group Denmark : Faxe, Ceres and Thor by Flemming
Agersnap, cited in Johnson & Scholes (1997), Exploring Corporate Strategy, Text and
Cases, Prentice Hall, 4
th
Edition, pp.574-584. This case study will give you an opportunity
to apply some of the modules identified in the lecture.
Notes
Figures in the case study are in DKK; A quick conversion in currency - 10 Danish Kronnen
= 1;

Review the case study Brewery Group Denmark (BGD) in groups.

The case study is available on Sunspace and within the module guide.
1. Apply the following models to assist you to identify the strategic position of the
company BGD :-
a. Complete a Political, Economic, Social, Technological, Environmental and
Legal (PESTEL) analysis focussing on its International business.
b. Complete an internal assessment of its strengths and weaknesses
i. Consider its finance, operations, marketing, production and
leadership etc..
c. Porters (1985) Five Forces
2. Within the International market?
a. How does the company choose its partners?
b. How does it choose its channels of distribution?
c. Why does it invest in advertising?
3. What is the companys international strategy?
a. How does it choose particular countries?
b. Refer to the online Keynote report titled The Drinks Market 2009 Market
Review available via Athens login & the electronic databases and consider
if it would be attractive for BDG to consider further expansion into the
United Kingdom beer market at this present time (2009).
c. Apply Porters (1985) Generic Strategies
Having applied the above strategy models, how do these strategies link together :-
What did you discover with the application of the models? Synthesise the
information you have discovered from the application of the models in
questions 1,2, and 3.
4. As a result of your synthesis
a. What changes in strategy would you recommend and why?
18

Lecture Three : Organizational Purpose

What is the purpose of organizations? Is it for the benefit of shareholders or stakeholders?
The purpose is normally defined in the mission statement. The mission statement can be
the anchor for the organization against which strategic direction and policy can be
referenced. In a modern business what role does Corporate Governance have and how does
it impact upon the performance of the business? The paradox of profitability and
responsibility, and the perspectives of conflicting shareholder and stakeholder
expectations will be explored.

The Essential Reading For Lecture Three

De Wit & Meyer, (2010) Strategy Process, Content, Context, an international perspective
4
th
Edition; pp596-612, pp617-622.
or
Johnson, Scholes and Whittington, (2008), Exploring Corporate Strategy, 8
th
Edition,
Pearson Education Limited; pp131-169.

or

Lynch, R. (2006), pp340-371

And

Research Blackberry (RIM) and the Mobile Phone Industry

19

Seminar Three : Blackberry & The Mobile Phone Industry

Some of the seminar will be devoted to having an individual discussion of the topic of
choice for your assignment with the module tutor.

This seminar and next weeks seminar will be specifically devoted to an analysis of the
Smartphone mobile phone industry and then the Blackberry Phone business within the
company - Research In Motion (RIM).

The launch of the first Blackberry was in 2003. Ensure your analysis is across the
Smartphone industry but consider that eventually you will put forward strategic
recommendations to the Blackberry board (Research In Motion).

Essential Reading
Read chapter 2 of Johnson, Scholes and Whittington, (2008), Exploring Corporate
Strategy, 8
th
Edition, Pearson Education Limited available online via the library.

1. Using appropriate tools for macro-environmental analysis, evaluate how macro-
environmental factors have directly influenced the Smartphone industry.
a. What are the key PESTEL factors?
b. Identify the Strategic Groups within the Smartphone industry?
2. What observations can be made about the influence of the macro-environmental
factors on innovation among leading players in this industry? Consider the VIRO
framework.
3. Apply Porters (1985) Five Forces to the Smartphone industry and discuss.
4. Review RIMs (Blackberrys) financial performance for 2010 and 2011 and
identify critical elements.
For further RIM information go to :-
30 March 2012 http://www.bbc.co.uk/news/business-17557177 :Date accessed 6
Jan 13
The Research In Motion website: http://www.rim.com/investors/documents/ :
Date accessed 6 Jan 13
For additional analytical tools that could be utilized refer to lecture 2:
For information on Strategic Groups refer to Johnson, Scholes,Whittington (2008:76),
Exploring Corporate Strategy: Text and Cases (Eighth Edition), Pearson Education Ltd. -
Note. There is an electronic version of this text available within the SunCat library
catalogue.

20

Lecture Four: Chaos and Strategy

The Essential Reading For Lecture Four
De Wit B. and Meyer R. (2004) p500-505 Reading 9.2 Strategy As Order Emerging From
Chaos by Ralph D. Stacey

or

Johnson G., Scholes K. and Whittington R. (2008), p557-576, p594,595.

and

Blackberry & The Mobile Phone Industry.

Further Reading
Beer, S. Brain Of The Firm 2ed. Wiley 1981 p1-50
Beer, S. Beyond Dispute Wiley 1994
Lessem, R. Global Management Principles Prentice Hall 1989 p373-395
De Chardin, P. T. The Phenomenon of Man Collins London 1959
Ansoff I., (1987) Corporate Strategy, Penguin Books.

Seminar Four: Blackberry & The Mobile Phone Industry

1. Identify, in a SWOT analysis, the critical aspects you have discovered from the
application of your chosen models (from last week) to the industry and then
Blackberry.
2. What important factors have you discovered about the industry and Blackberry that
are directly relevant to Blackberrys Strategic development?
3. Make recommendations to the Blackberry board on how it should develop its
Strategy over the next 5 years note your recommendations need to be supported
by evidence you have identified in seminars three and four.
4. Finally critically examine Research in Motion's decision (2012) to withdraw from
the consumer market. Specifically, to what extent is the decision driven
by competition or internal capabilities?


21

Lecture Five: Influences On Action

Men like the opinions to which they have become accustomed from youth; this prevents
them from finding the truth, for they cling to the opinions of habit.
Moses Maimonides (1135-1204); Egyptian physician and philosopher

In this session we shall look at some of the ways in which organizations carry inherent
tendencies towards particular action. It is quite accepted that strategic decisions and actions
will be influenced by outside forces in the environment - by competitors; by customers; by
government; by global economic forces. What is less often explored is the degree to which
organizations and people are locked into a limited range of choices by their own
perceptions, character and history. Some positive characteristics of leaders are identified
and a consideration of the dark side of leadership is also given.

Additionally a view is considered of how the growth of an organization can and does
impact severely upon the leadership.

The Essential Reading For Lecture Five
De Wit B. and Meyer R. (2010) p130-133, Reading 3.1, Managing The Strategy Process
by Balaji Chakravarthy and Peter Lorange

or

Johnson G., Scholes K. and Whittington R. (2008) p399 - 423.
or

Lynch, R. (2006) pp340 - 371.

and

Whittington, R. (2001) p42-61

Further Reading
Wilson, D. C. A Strategy of Change Routledge 1994
Lessem, R. Global Management Principles Prentice Hall 1989 p597-660
Morgan, G. Images of Organization. Sage Publications 1986

Notes: Lessem is an excellent reference for all management thinking covering the classical
to postmodern management gurus and thinkers.

22

Seminar Five: Ryanair

This session will be based on topics developed in all of the lectures to date and the case
study of Ryanair which consists of two articles. The first article is an extract taken from the
Ryanair 2010 Annual Report, and is available in the attached case studies section. The
second article is an interview conducted with Michael O Leary, Ryanairs Chief Executive
Officer - Entitled Lunch with the FT: Michael OLeary, by Pilita Clark, Published:
December 18, 2009.
Please follow the link to the article in the Financial Times and print it out and bring it to
the seminar session.
The link to the Financial Times article is :-

http://www.ft.com/cms/s/2/073c8d40-e9ca-11de-ae43-00144feab49a.html

Date Accessed 25 July 11: You may need to access this via mysunderland; library services;
journal search; business and management; - then the Financial Times Online.

Read both articles and then answer the following questions:

Questions
1. From the Company annual report, the Financial Times article and your previous
knowledge, determine Michael O Learys leadership style as Chief Executive and
its impact upon organizational strategy?
a) Is he Machiavellian?
b) How difficult would it be to replace him?

2. Consider the companys strategy and then :-
b) Determine and justify the companys strategic position in terms of competitive
advantage?
c) Is the identified competitive advantage sustainable over the long term?

3. Is O Learys leadership style appropriate to take the business forward over the
next 5 to 10 years?
a) Consider Greiners (1975) model.
b) Would Vickers (Lecture 4, slide 4) identify O Leary / Ryanair as a
Lobster?

23

Lecture Six: Public Sector Strategy

However beautiful the strategy, you should occasionally look at the results.
Sir Winston Churchill, British politician (1874 - 1965)

Politics is a universal activity, the consequences of which impact on the business world in
a number of ways. This session examines the nature of the complex patterns or
organizational control in the public domain. The lecture will define the nature of
organization and environment within public sector management thinking and will develop
the meaning of strategy within this context and the issue of managing complexity.

The Essential Reading For Lecture Six
The case study - Strategy development at Castle Press & New Town Council by Andy
Bailey and Julie Verity.

And

Johnson G. and Scholes K.(ed), (2001), Exploring Public Sector Strategy, Financial Times
Prentice Hall; p1-160.
or
Lynch, R. (2006), pp643-673.

Further Reading
Isaac-Henry, K., Painter, C. & Barnes, C. (1993) Management in the Public Sector,
chapter 3.
Goldsmith A. A. (1997) Private-sector Experience With Strategic Management:
Cautionary Tales for Public Administration International Review Of Administrative
Sciences, Vol 63 p25-40.


24

Seminar Six: Strategy development at Castle Press & New Town Council

This session will look at issues developed from the sixth lecture and the two case studies,
Castle Press and New Town Council by Andy Bailey and Julie Verity. Please read the case
studies before the seminar as both are fairly lengthy and require reflection and then answer
the questions.

1. How do strategies come about in organizations?
a. What is the strategy process at New Town Council?
b. What is the strategy process at Castle Press?
2. What influences the process of strategy development?
a. Why is the strategy development process at New Town as it is?
b. Why is the strategy development process at Castle Press as it is?

3. What are the main differences/similarities in the strategy development process
between the two cases?

4. Why do these differences exist?
For example, the Chief Executive at New Town is not entirely happy with the
process of strategy development in his organization, he would like to change it.
a. What options are attractive to him and his team?
b. Why? Is a different process feasible and if so, how could he manage such a
change?

25

Lecture Six A: Assignment Preparation Part 1

This lecture will outline the requirements of the assessment particularly with respect to the
formative assessment for the part1 task.
Examples of previous part 1 submissions will be discussed.

Remember that this module assessment is divided into two parts, the first part is designed
to assist and guide you in the development of your assignment.
Please note that no marks are awarded for Part 1, it is an opportunity for you to take some
observations / guidance from your tutor.
The tutor must approve your idea.
Approval of your chosen topic is not automatic and is conditional upon your tutor being
satisfied that the analysis will offer a level of rigour commensurate with the final level of
an Honours Degree:
The tutor will not review your part 1 formative assessment after the submission date unless
it has Not Yet Passed.
Part 2 will be assessed and will contribute to 100% of the marks.

Remember there are no marks for the part 1 task, it is a formative assessment.
Because part 1 attracts no marks, in the past some students have elected not to submit part
1 of this assessment, this is risky. Remember 80% of the best 100 credits at level 3
contribute to your overall degree classification.

Assignments have failed because they were inappropriate topics.

An extract from the assessment :-
Task: Part 1 (Summary)
For this task you must work on an individual basis. You must submit a paper based
summary of no more than 300 words outlining the focus of your analysis.
You will receive feedback on your Part 1 submission from your workshop tutor to assist
you with the focus of your analysis for Part 2 of your assessment.

Seminar 6A: Part 1 Final Preparation

This will be a discussion and review of your part 1 that you intend to submit.
The part 1 should be submitted this Friday to Assignment Services located in the library.
Seminar tutors will review and discuss your part 1s that you intend to submit.

This week - Hand In Part I of your Assignment.

Dont forget to put your seminar tutors name on the Business School assessment record
sheet!!

26

Lecture Seven: Risk Management

If you cant manage risk, you cant control it. And if you cant control it you cant manage
it. This means youre just gambling and hoping to get lucky.

J. Hooten, Managing Partner, Arthur Andersen & Co., 2000

The concept of risk management is appearing higher on the business agenda as the
possibility of litigation becomes more aggressive. This session will consider the rationale
and application of corporate risk management in business. Risk is categorised in terms of
business risk into financial/quantitative and non-financial/qualitative This session will
only consider one aspect which is the non-financial/qualitative element. It will outline the
risk management process and organizational techniques for identifying risk including
potential sources of business risk and some of the risk assessment models.

The Essential Reading For Lecture Seven

Heldman K. (2005); Project managers spotlight on RISK MANAGEMENT; Harbor Light
Press. Chapters 1,2, 5 and 6. (658.155H24)
or
Project Risk Analysis and Management Guide, (2004), APM Publishing Limited. Chapters
2, 3, 5 and 7. (658.155A77)
or
Chapman C., and Ward S., (2004), Project Risk Management Processes, Techniques and
Insights, 2
nd
Edition, John Wiley & Sons, Ltd. Part 1 and II. (658.404C30)
or
The Institute of Risk Management at www.theirm.org
or
Merna, M. & Al-Thani, F. F., (2008), Corporate Risk Management, 2
nd
Edition, John
Wiley & Sons Ltd. Chapters 1,2,3, 4 and 10.

And - The Ericsson case study in the module guide.

Further Reading

Notes:

27

Seminar Seven: Case Study: Ericssons Supply Chain

Norrman A., and Jansson U., (2004), Ericssons proactive supply chain risk management
approach after a serious sub-supplier accident, International Journal of Physical
Distribution & Logistics Management, Vol. 34 No. 5, pp. 434-456.

This session will investigate the application and rationale of risk management in Ericssons
supply chain.

1. Define Risk Management.

2. Outline the Risk Management Process.

3. How would Ericssons probability / impact grid vary from the example given below
which was outlined in the lecture.

Risk - Probability / Impact Grid
1
Medium High Extremely High
Low Medium High
Very Low Low Medium
High
P
r
o
b
a
b
i
l
i
t
y

o
f

O
c
c
u
r
r
e
n
c
e
Business Impact
Low
Low
High
Medium
Medium

4. This is the last year of your degree; from a risk management perspective construct a
Probability Impact Grid (PIG) of the risks that may halt your progression to
successfully obtaining a BSc (Hons) Degree in your specialist programme and then
attempt to mitigate the most important risks if in fact you can.

28

Lecture Eight: Strategy - Does it Matter?

This lecture will synthesise the range of topics that has been covered within the Strategic
Management module and then attempt to answer the above question.

The Essential Reading For Lecture Eight

Johnson, Scholes and Whittington, (2008), Exploring Corporate Strategy, 8
th
Edition,
Pearson Education Limited, pp354-383.pp255-286, p189-203, pp293-316.
and
nd
Edition, Pearson Education Limited,pp3-
21.
or
Lynch, R. (2006), pp679-719.

And

Strategic Alliance And Dependency In Design And Manufacture: The Rover-Honda Case
by Pilkington:

Notes:


29

Seminar Eight : International Joint Ventures (IJVs) The Rover/Honda Alliance

This session will look at issues developed from the ninth lecture and the paper
Strategic Alliance And Dependency In Design And Manufacture: The Rover-Honda Case
by Pilkington:
Read the case study and answer the questions:

i. What were the driving forces behind Rovers decision to enter into a joint venture?
ii. Outline and discuss Dunnings OLI model.
iii. Using Dunnings OLI model and/or your own thinking interpret the success of the
Rover/Honda alliance from the Rover perspective.
iv. Using Dunnings OLI model and/or your own thinking interpret the success of the
Rover/Honda alliance from the Honda perspective.

30

Lecture Nine: Assignment Preparation Part 2

This lecture will outline and suggest some basic structures to your assessment report.
It will review some past assignments and identify their strengths and weaknesses.
The 5 samples of previous work that are available on Sunspace will be outlined.

Finally, a module feedback form will be issued for you to complete and informal feedback
will also be taken by the module tutor.

Seminar 9: Assignment Preparation & Module feedback

This seminar will be set aside for tutors to answer questions regarding concerns you may
have with your assignment that you intend to submit.
This will be a drop in session for those students wishing to take further advice upon their
assignment.

Finally good luck with your assignment!


31

SIM336 STRATEGIC MANAGEMENT

ASSIGNMENT 1 - TITLE: Strategic Analysis

Issue Date: Week 27 of Semester 2

Due Date: Part 1 - 1.00 p.m. on 22 March 2013
Part 2 - 1.00 p.m. on 10 May 2013

Learning outcomes: Strategic analysis of an organization(s).
Synthesis of ideas or solutions relating to strategy issues

Skills outcomes: Research skills
Critical evaluation
Creativity
Communication

Moderated by: John Dixon-Dawson

All students are required to submit their Part 1 to Assignment Services in the Prospect
building.

All students are required to submit their Part 2 assignment via Turnitin.
The penalty for students that do not submit their Part 2 assignments through Turnitin is that
they will fail the assignment.
Students may submit assignment drafts through Turnitin prior to the hand in date to
generate originality reports. The last submission of the assignment prior to the hand in date
will be deemed to be the final submission for assessment purposes.

All work submitted must adhere to the University Policy on Cheating, Collusion and
Plagiarism
You must not submit an assignment that analyses the mobile phone industry or a mobile
phone company.

Outline
This assessment is divided into two parts, the first part is designed to assist and guide you
in the development of your assignment. Please note that no marks are awarded for Part 1, it
is an opportunity for you to take some observations / guidance from your tutor. The tutor
must approve your idea. Approval of your chosen topic is not automatic and is conditional
upon your tutor being satisfied that the analysis will offer an appropriate level of rigour.
Part 2 will be assessed and will contribute to 100% of the marks.

Assignments may fail because they are inappropriate topics.

32

Task: Part 1 (Summary)
For this task you must work on an individual basis. You must submit a paper based
summary of no more than 300 words outlining the focus of your analysis.
You will receive feedback on your Part 1 submission from your workshop tutor to assist
you with the focus of your analysis for Part 2 of your assessment.

Task: Part 2

You are required to submit an individual report of 3,000 10% words, which can be based
on an organization or idea of your own choice.
The strategic analysis must be related to a recognised aspect of business policy, strategic
management or the philosophical underpinning of a particular methodology within the
public or private sector strategic management domain.
The assignment (Part 2) you submit, as part of the final submission may be a slightly
modified version of the initial idea because as you progress, your research may cause you
to re-think your ideas. Minor changes are allowed to give you some freedom. Major
changes of the idea (e.g. changing the whole topic) should not be necessary, as your initial
research should have got you beyond any major stumbling blocks with your topic.

The report must be written in a recognised style, i.e. table of contents, introduction, main
analysis, conclusions, recommendations, references and bibliography. You must apply the
Harvard system of referencing in your report.

Objectives
To analyse a business policy or strategic management topic, to carry out individual
research or evaluation of an organization.

Requirements
Meet the learning outcomes listed above, identify and critically analyse fundamental issues
related to strategic management. Undertake a study that shows clear evidence of synthesis
and evaluation.

There are a number of ways you might carry out this assignment: here are a few ideas:
Use a theoretical model to reflect upon the reality (practice) of a situation. Use
theory to predict the outcomes of practice. Use practice to reflect upon / modify
theory;

Compare theory and practice: Does M.E. Porters (1985) model of competition
support the experience of practitioners? i.e. use a practical example /case / issue to
reflect on Porters model(s) and examine success and / or failure.
A case study approach: Is Steve Ballmer, C.E.O. managing Microsoft as
effectively as he might? i.e. do an analysis of Microsofts performance in relation
to declared (or undeclared) strategy and the efficacy of his strategy.
A recovery plan: My advice to the Chief Executive Officer of the News
Corporation is i.e. suggest a way forward for the organization in light of their
33

debacle over the telephone Hacking scandal and their pursuit of organizational
growth.
A risk management strategy: My advice to British Petroleums Chief Executive
Officer in light of their environmental disaster in the Gulf of Mexico.

These are merely examples of approaches you might take; thinking up your own ideas
might be more productive and fun.

Assessment Criteria
Your seminar tutor on the basis of the following general criteria will assess the paper:

Content - the quality of research and analysis undertaken and the use of initiative in
finding sources of information;

Process - the quality and clarity of the assignment and your ability to demonstrate
command over the subject area and the development of a case or argument;

Discretion - additional credit may be awarded to a student who tackles a difficult
subject well.

The assignment will be graded for individuals on the basis of the specific criteria outlined
on the following page.

The Presentation element of the Generic Assessment Criteria will be used to assess the
report structure.
34

Generic Assessment Criteria Undergraduate
These should be interpreted according to the level at which you are working and related to the assessment criteria for the module
Categories
Grade Relevance Knowledge Analysis Argument and Structure Critical Evaluation Presentation Reference to Literature
P
a
s
s

86 100% The work examined is exemplary and provides clear evidence of a complete grasp of the knowledge, understanding and skills appropriate to the Level of the qualification. There is also ample excellent evidence
showing that all the learning outcomes and responsibilities appropriate to that Level are fully satisfied. At this level it is expected that the work will be exemplary in all the categories cited above. It will
demonstrate a particularly compelling evaluation, originality, and elegance of argument, interpretation or discourse.
76-85% The work examined is outstanding and demonstrates comprehensive knowledge, understanding and skills appropriate to the Level of the qualification. There is also
excellent evidence showing that all the learning outcomes and responsibilities appropriate to that level are fully satisfied. At this level it is expected that the work will be
outstanding in the majority of the categories cited above or by demonstrating particularly compelling evaluation and elegance of argument, interpretation or discourse.

70 75%
The work examined is excellent and is evidence of comprehensive knowledge, understanding and skills appropriate to the Level of the qualification. There is also
excellent evidence showing that all the learning outcomes and responsibilities appropriate to that level are satisfied At this level it is expected that the work will be
excellent in the majority of the categories cited above or by demonstrating particularly compelling evaluation and elegance of argument, interpretation or discourse.

60 69%
Directly relevant to
the requirements
of the assessment
A substantial knowledge
of strategy material,
showing a clear grasp of
themes, questions and
issues therein
A good strategic
analysis,
clear and orderly
Generally coherent and logically
structured, using an appropriate
mode of argument and/or
theoretical mode(s)
May contain some
distinctive or independent
thinking; may begin to
formulate an independent
position in relation to
strategic theory
and/or practice.
Well written, with
standard spelling and
grammar, in a readable
style with acceptable
format
Critical appraisal of up-todate
and/or appropriate literature.
Recognition of different
perspectives.
Very good use of source material.
Uses a range of sources

50 59%
Some attempt to address
the requirements of
the assessment:
may drift away
from this in less
focused passages
Adequate knowledge of a
fair range of relevant
strategy material, with
intermittent evidence of
an appreciation of its
significance
Some analytical
treatment, but may be
prone to description, or
to narrative, which
lacks clear analytical
purpose
Some attempt to construct a
coherent argument, but may suffer
loss of focus and consistency,
with issues at stake stated only
vaguely, or theoretical mode(s)
couched in simplistic terms
Sound work which expresses
a coherent position only in
broad terms and in uncritical
conformity to one or more
standard views of strategy.
Competently written, with
only minor lapses from
standard grammar, with
acceptable format
Uses a variety of literature which
includes some recent strategic
texts and/or appropriate literature,
though not necessarily including a
substantive amount beyond library
texts. Competent use of source
material.
40 49% Some correlation with
the requirements of the
assessment but there are
instances of irrelevance
Basic understanding of
the strategy but
addressing a limited
range of material
Largely descriptive or
narrative, with little
evidence of analysis
A basic argument is evident, but
mainly supported by assertion
and there may be a lack of clarity
and coherence
Some evidence of a view
starting to be formed but
mainly derivative.
A simple basic style but
with significant
deficiencies in expression
or format that may pose
obstacles for the reader
Some up-to-date and/or
appropriate literature used. Goes
beyond the material tutor has
provided. Limited use of sources
to support a point.
F
a
i
l

35 39% Relevance to the
requirements of the
assessment may be very
intermittent, and may be
reduced to its vaguest
and least challenging
terms
A limited understanding
of a narrow range of
strategic material.
Heavy dependence on
description, and/or on
paraphrase, is common
Little evidence of coherent
argument: lacks development and
may be repetitive or thin
Almost wholly derivative:
the writers contribution
rarely goes beyond
simplifying paraphrase
Numerous deficiencies in
expression and
presentation; the writer
may achieve clarity (if at
all) only by using a
simplistic or repetitious
style
Barely adequate use of literature.
Over reliance on material
provided by the tutor.
The evidence provided shows that the majority of the learning outcomes and responsibilities appropriate to that Level are satisfied for compensation consideration.
30 34%

The work examined provides insufficient evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence provided shows that some of the learning outcomes and
responsibilities appropriate to that Level are satisfied. The work will be weak in some of the indicators.
15-29% The work examined is unacceptable and provides little evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence shows that few of the learning outcomes
and responsibilities appropriate to that Level are satisfied. The work will be weak in several of the indicators.
0-14% The work examined is unacceptable and provides almost no evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence fails to show that any of the learning
outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in the majority or all of the indicators.
35

APPENDIX ONE

Useful URLs and important University Documents

Note: as URLs for some individual documents may change from year to year, some of the
links are to folders within the Academic Quality Handbook which contain the relevant
documents and which will not change.

University Generic Assessment Criteria (updated link 20 June 12)
https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-7861/AQH-F6-
15%20Generic%20Assessment%20Criteria.pdf

University Academic Regulations (including the Student Guide)
https://docushare.sunderland.ac.uk/docushare/dsweb/View/Collection-2780

University Student Handbook
https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-
6248/Student+Handbook+-+Regulations%2C+Policies+and+Procedures+2012.pdf

University Policy on Academic Misconduct
https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-8019/AQH-
F7b%20Academic%20Misconduct%20Regulations.pdf

University statement on the use of Turnitin
Fe%20University%20Statement%20on%20the%20Use%20of%20Turnitin.pdf

University Policy on Extenuating Circumstances for extension of module deadlines
(Mitigation)
https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-2995/AQH-F6-
13%20Procedures%20for%20Extenuating%20Circumstances.pdf

Guide for Students on the Supervision of Dissertations and Projects
F8+Supervision+of+Dissertations+and+Projects+-+a+Guide+for+Students.pdf

University Policies on Complaints, Appeals and Student Discipline
https://docushare.sunderland.ac.uk/docushare/dsweb/View/Collection-2784

36

Case Studies

37

Exploring Corporate Strategy

CLASSIC CASE STUDIES

The Sale of Burmah Castrol
to BP Amoco
Gerry Johnson

In 1999, the management team of Burmah Castrol, the lubricants and chemicals business, led by its
CEO Tim Stevenson, decided to recommend to the corporate board the sale of the company to BP
Amoco. In what follows, Stevenson explains how the company arrived at the point of considering this
option, and why the board decided to take it.

l l l

The Burmah Oil Company was founded in 1886 by Scottish entrepreneurs interested in exploiting newly
found oil deposits in Burma. Success there was followed by a milestone investment in an exploration
concession across a substantial area of Iran acquired from the Shah. That company, then called the
Anglo-Persian Oil Company, later became British Petroleum (BP). Burmah held a major shareholding
in BP right through until the early 1970s. Indeed, after a long period operating effectively as an inter-
mediate holding company for BP shares, the management of Burmah in the 1960s used the value of
the shares as collateral to embark on an ambitious plan to turn Burmah into both a fully integrated oil
company and a substantial conglomerate group. Businesses bought included Castrol and Signal Oil
and Gas; other interests included major exploration licences in the North Sea, a substantial fleet of oil
tankers and a raft of other activities, including high-street retailer Halfords, various chemicals com-
panies and Quinton Hazell, an automotive component supplier. This period of expansion was brought
to an abrupt halt by the recession consequent on the Yom Kippur war in 1974. Much of the companys
subsequent history is the story of how this expansionist drive was gradually unwound, and a new cor-
porate approach and concept developed.

THE STRATEGIC DEVELOPMENT OF BURMAH CASTROL

Tim Stevenson explained how the portfolio of the Burmah Castrol businesses developed and changed
from the 1960s:

First there was a process of divestment: selling Signal Oil and Gas, selling the tanker fleet,
re-negotiating the Bahamas terminal and selling other peripheral companies like the automotive
parts retailer, Halfords and Quinton Hazell.

This case was prepared by Professor Gerry Johnson, University of Strathclyde Graduate School of Business, based on
discussions with Tim Stevenson, the past CEO of Burmah Castrol, and on published sources. The author is published with
the permission of BP Amoco. It is intended as a basis for class discussion and not as an illustration of either good or bad
management practice. Not to be reproduced or quoted without permission.
The Sale of Burmah Castrol to BP Amoco
38

Over time, and as the process of slimming down progressed, there emerged the concept a two-
pronged Burmah Castrol, consisting of related businesses. One prong was the Castrol business
which, throughout all this turmoil, was continuing to develop as a very successful global
business with an increasingly powerful brand. The other prong was Chemicals, which it was
planned could provide a substantial counter weight for Castrol. From the later 1970s/early 1980s
onwards, a portfolio of speciality chemicals businesses was put together, taking some of the
businesses inherited from the past as the foundation and adding to them by buying in high-
quality speciality businesses as additions to the portfolio. The emerging rationale for Burmah
Castrol that resulted was that the Groups business was the sale and marketing of speciality
oil and chemical products. The argument was that we were good at managing Castrol and
that we would be able to demonstrate to shareholders and the market that we could also very
successfully manage chemical businesses whose style and approach to the market would be
in certain key respects similar to that followed by Castrol. We also argued that management
had skill in spotting both good managers and sound investment opportunities: the combination
would enable all the Groups businesses to prosper and grow. There was sufficient similarity in
terms of key factors for success between Castrol and the Chemicals businesses to enable senior
management to add value across the portfolio. The idea that Burmah Castrol, as slimmed down,
was a conglomerate per se was resisted.
Whilst the process of simultaneous slimming down and building up the chemical portfolio
proceeded, the markets response, as measured by improvement in the share price, was
satisfactory. Castrol continued to perform strongly.
There was, however, internal questioning, particularly towards the end of the 80s, about
where the Group was headed over the medium to long run. There was an argument that Burmah
as a two-legged stool needed a third to give it, overall, an appropriate, stable shape. This led to a
search for moves that might provide such balance. Included within this search were possibilities
for rendering the Chemicals portfolio as a whole more substantial and therefore more able to sit
comfortably alongside Castrol. This process culminated in the successful hostile acquisition of
Foseco in the early 90s. The opportunity arose because Foseco had lost its way; its share price
was very depressed. In fact, as it turned out, the price wasnt quite as cheap as it might later
have become, because economic conditions continued to deteriorate after the purchase. This
inevitably affected Fosecos short-run performance to a greater extent than Burmah Castrol had
anticipated. In turn, this meant that it took somewhat longer to achieve an appropriate return on
the investment than originally planned. However, vigorous restructuring work on the business
and an improved economic environment in due course demonstrated the acquisition to have
been sound. But in a qualitative sense the acquisition of Foseco was important because it led to
some serious questioning in the market for the first time concerning Burmah Castrols overall
raison dtre. Was it appropriate for Burmah to be expanding its Chemicals businesses to such
a substantial extent? How usefully related was the Castrol business to the Chemicals businesses,
and what was the real value in having them in the same portfolio?
There were also other issues to sort out in the Chemicals businesses where some were
underperforming: work needed to be done to improve their overall operating efficiency. That
was a task that was successfully set about and delivered: significantly improved ratios were
achieved through cost cutting and effective focus. But that was not enough. The market response
was, Youve improved the performance but what are you going to do now? When I took over
as chief executive in 1997 a clear message from some substantial investing institutions was that
management should not contemplate further substantial expansion through acquisition of the
Chemicals portfolio. We dont understand why you bought Foseco. We dont understand how
you think you can add value to acquisitions of that sort.
The Sale of Burmah Castrol to BP Amoco
39

RECONSIDERING STRATEGY AND STRUCTURE

By the mid-1990s Burmah Castrol consisted of Castrol, blending and marketing lubricants; and
Chemicals with a residual Fuels retailing business effectively the final relic of the past which was
in the process of being sold off. Until 1997 Castrol and Chemicals were run as two distinct groups
of businesses. From 1997 onwards, for reasons explained below, the corporation was restructured into
discrete business units. Exhibit 1 summarises the activities and performance of these business units.
In 1994 Mike Dearden, then CEO of the Chemicals businesses, had undertaken a review of the strat-
egy and structure of those businesses. He had inherited a situation in which the acquired businesses still
provided the foundation for the structure of his group. Foseco operated as Foseco; Fosroc as Fosroc,
Sericol as Sericol and so on; each with its head office and often with subsidiary geographical offices.
There had been no attempt within this to sort out a rationale for the Chemicals Group. The strategic
review identified an underlying theme of industrial marketing and quality service as the core com-
petences of the successful chemicals businesses. It was clear that the success of these businesses was
much more to do with understanding customer needs than the production of chemicals. This conclusion
resulted in a move to much greater focus on devolution of responsibility to the market-facing business
units.
In 1996 Tim Stevenson, then CEO of the Castrol business, also instigated a strategic review of that
side of the portfolio. The passenger car engine oil business, which represented 75 per cent of total
profits, faced the prospect of more efficient engines requiring longer and longer gaps between oil
changes; and therefore of potential long-term volume decline. However, the strategic review was
triggered by a short-term challenge: Tim Stevenson explained:

In 1996, we had a difficult year in North America after a run of consistently good volume and
profit growth; and simultaneously we started to develop worries about long-run developments
in the passenger car engine oil business in Europe. Thus we believed we had the makings of a
problem in the developed world concerning the sustainability of the sorts of growth achieved in
the past in selling growing volumes of high-margin sophisticated lubricants into passenger car
engine oil markets. And whilst we had a very successful developing world position, particularly
in Asia Pacific, that was unlikely to offer sufficient to offset the difficulties we might be going
to encounter over a five-year run absent of action in the bigger developed markets in Europe
and North America.
All this provoked us into having a re-look at what was happening to our passenger engine oil
business, what the medium-term market development might look like and what was going to
happen to the competitor structure. The conclusion was that our old approach, unaltered, was
not going to enable us to continue to grow the business at the rate previous strategic plans had
assumed. We also looked at the other businesses; the industrial lubricants business, the marine
lubricants business and the commercial lubricants business. The key overall conclusion that
emerged was that our internal structure for managing the global Castrol lubricants business was
no longer appropriate if we were to optimise our position in each of the four markets. Our old
structure had been a geographically based model, with four regional directors, the line managers
responsible for over 50 country managers who ran their country businesses, very successfully
hitherto, like individual fiefdoms. Within the country they were responsible for all aspects of
Castrols business, covering all the four market areas, and for sourcing of raw materials,
blending, distribution, customer relationships; everything. They had to comply with central
instructions in terms of the use of the brand and other broad policy areas but, subject to a
relatively small number of rules of engagement, they were left to themselves.
A problem was that some of the areas of business were suffering because of the dominant
culture of the passenger car engine oil business. So, for example, an opportunity for significant
business development was being missed because there was no co-ordinated policy for focusing

40

Exhibit 1 The Burmah Castrol business in the late 1990s

Castrol Consumer

Castrol Consumer is world leader
in the supply of car and motorcycle
lubricants and services, marketing
to workshops and retail chains,
auto accessory stores and petrol
stations. Principal products are
engine oils, e.g. GTX, transmission
fluids and brake fluids.

Market share 11%
Market position 1
World market size 11bn litres
Main competitors:
Mobil
Shell
Texaco

Castrol Commercial
Castrol Commercial provides
products and services principally
to on and off-road vehicle fleets.
Off-road business includes vehicles
used in construction, quarrying,
agriculture and forestry. On-road
fleets cover trucks, buses and
coaches. Castrol Commercial
assists its customers in optimising
service intervals, achieving fuel
economy and improving engine
efficiencies.

Market share 2%
Market position 5
Main competitors:
Exxon
Mobil
Shell

Sericol Printing
Sericol Printing is the world leader
in screen printing inks and ancillary
products. It supplies inks to the
graphic, textile and speciality
markets which include CDs, credit
cards and snowboards. Sericol
provides its customers with a high
level of support, including training,
computerised colour matching
and environmental services.

Market share 11%
Market position 1
World market size 1.1bn
Main competitors:
Coates Screen
Nazdar

Source: Burmah Castrol annual report.
Castrol Industrial

Castrol Industrial is the world
leader in supplying metalworking
fluid and services to industries
such as transport and metal
component manufacturers. The
business also supplies process
industries such as food and
beverage, mining, power
generation and offshore oil
and gas production.

Market share 6% (metalworking)
Market position 1 (metalworking)
Main competitors:
Fuchs
Houghton
Milacron

Foseco Foundry
Foseco Foundry is the worlds
leading supplier of consumable
chemicals and services to the
foundry industry. Fosecos products
are used in the conversion of
molten metal into finished castings.
This enables foundries to produce
castings of high quality, strength
and weight whilst improving
efficiency and reducing energy
consumption.

Market share 19%
Market position 1
World market size 1.2bn
Main competitors:
Ashland
Borden
Huttenes-Albertus

Chem-Trend Releasants
Chem-Trend Releasants is the
worlds largest manufacturer of
specialised mould and die cast
release agents. Customers range
from manufacturers of tyres and
car steering wheels to shoe soles
for the footwear industry. Each
relies on Chem-Trends tailor-made
formulations and application skills
to improve quality, cost and
productivity.

Market share 182%
Market position 15
World market size 270m
Main competitors:
Acheson
Acmos
Wacker
Castrol Marine

Castrol Marine markets specialist
lubricants and fluids to the
international marine market.
Customers range from the largest
international shipowning groups,
leisure and cruise operators to
small fishing boat owners. Castrol
Marine provides unique lubricant
solutions and essential business
information, increasingly through
the Internet.

Market share 12%
Market position 5
Main competitors:
BP
Mobil
Shell

Fosroc Construction
Fosroc Construction provides
formulated products for the civil
engineering and construction
industries worldwide. Products
include concrete admixtures to
provide enhanced characteristics
and greater cost effectiveness;
a wide range of cement-based
mortars and products and systems
to extend the life of concrete
structures.

Market share 2%
Market position 5
World market size 6bn
Main competitors:
SKW-MBT
Sika
W R Grace

Foseco Steel
Foseco Steels strong market
position has been built on an ability
to provide major steel producers
with a total package of products
and services which are vital to the
safe, efficient and cost-effective
production of high-quality steel.

Market share 5%
Market position 2
World market size 1bn
Main competitors:
Thor-Didier
Stollberg
Vesuvius

41

on the industrial lubricants business. The conclusion was reached that to optimise performance
over the whole business, and to achieve economies of scale, we needed to move away from a
geographic structure to one focusing on each of the four areas of Castrol as global businesses in
their own right. We made the decision halfway through 1997 and then implemented it in 1997
and 1998. It was a very significant cultural change for the organisation. The old structure had
been immensely successful. It had enabled a very strong ethic of customer focus and a strong
esprit de corps. If you had the right man in Australia or Vietnam or Brazil, and you gave him
his head, he produced strong results. So turning our backs on all of that and sweeping away the
country structure was a major move. We originally planned to implement over two years,
phasing it in; but in practice the job was completed in just over 12 months. It was done quickly
and with minimal disruption. The results didnt suffer and on balance little of our market-facing
customer focus was lost. Furthermore, the early signs were that the substantial benefits that we
hoped to achieve from the change would materialise.
The logic behind these changes had two main elements. First, it gave the opportunity of
unleashing potential in the industrial business and the commercial business and giving marine
the proper focus that it needed. But the biggest benefit, second, was that the restructuring
enabled a global focus on the passenger car engine oil business. Market trends couldnt be
reversed, of course; but by having a single team to think about how we were going to manage
the business globally, to take advantage of economies of scale on a regional and global basis
and maximise the potential of our global branding strategy, opportunities were opened up for
managing that business much more effectively in what looked as though it would become a
tougher environment.

Exhibit 2 summarises the financial performance of Burmah Castrol in the late 1990s.

THE GOLDEN THREAD

In 1997 Tim Stevenson took over as CEO of the Burmah Castrol Group. He was aware that some finan-
cial institutions were looking for action at the Group level. They had witnessed and approved the
restructuring of the organisation; but there remained bigger questions.

I was seen by some as an opportunity to force management to look at the business with new
eyes; if you like, through their eyes in terms of how value could be released to them. Our Board
had earlier discussed, in general philosophical terms, what managements objectives ought to be
and whether shareholder value should be the driving force of what we were doing. There was
complete agreement that that had to be the guiding force. Our share price reached 10 in the
early 1990s and hadnt really moved from that level. It moved to 13 at one point and down to
7 at another, but these were the extremes of a dull range. [See Exhibit 3.] When you have a
share price that is doggedly stuck, but you have high-quality assets, there is an imperative to do
something about it because, if you dont, sooner or later the market will find a way of doing it
for you of delivering value to the shareholders.
At this time we argued with our shareholders that the rationale for Burmah Castrol lay in our
having a golden thread. Although Castrol and Chemicals were separate entities and we didnt
manage them as one, there were sufficient similarities in terms of the sorts of businesses they
were and the way they went to market, to enable Burmah Castrol to add value at the top level.

The golden thread argument had received qualified support from a study of 21 of the most successful
businesses in Burmah Castrol, spanning consumer, industrial and commercial lubricants and various
chemicals businesses from different parts of the world. It concluded that the success of most of the busi-
nesses was based on competences to do with high levels of service rooted in localised knowledge

42

Exhibit 2 Five-year summary of Burmah Castrol financial performance

1999 1998 1997
M M M
1996
M
1995
M
Turnover net of duties:

Continuing operations (including acquisitions) 2,907.8 2,761.9 2,778.6 2,853.5 2,751.3
Discontinued operations (note (i)) 35.9 75.2 157.4 206.0 297.2

2,943.7 2,837.1 2,936.0 3,059.5 3,048.5
Operating profit before exceptional items:

Continuing operations (including acquisitions)

Castrol subsidiaries 211.4 185.8 209.6 201.4 194.7
Share of operating profit in associates 1.6 1.6 1.6 3.0 4.5
Castrol 213.0 187.4 211.2 204.4 199.2
Chemicals 78.6 71.7 72.8 64.1 60.3
Fuels 1.9 1.7 (0.8) (0.7) 3.4
Energy investments 4.0 4.0 5.9 5.1 0.7
Central management (13.6) (13.3) (13.6) (12.5) (12.6)

283.9 251.5 275.5 260.4 251.0
Discontinued operations 0.7 7.3 18.4 21.9 29.7

284.6 258.8 293.9 282.3 280.7
Interest (25.0) (9.5) (14.2) (20.9) (27.7)
Profit before exceptional items and taxation 259.6 249.3 279.7 261.4 253.0
Exceptional items:

Continuing operations (76.7) (49.0) (24.1) (7.5)

Discontinued operations (7.3) 34.7 (17.9) 18.5

Profit before taxation 175.6 235.0 237.7 272.4 253.0
Taxation (79.9) (86.8) (92.2) (97.6) (97.8)
Profit after taxation 95.7 148.2 145.5 174.8 155.2
Minority interests (22.7) (19.6) (22.2) (19.7) (20.2)
Profit for the financial year attributable to shareholders 73.0 128.6 123.3 155.1 135.0
Balance sheet

Fixed assets 883.1 864.6 839.1 914.0 974.5
Net current assets 309.4 381.8 376.9 424.7 445.7
Total assets less current liabilities 1,192.5 1,246.4 1,216.0 1,338.7 1,420.2
Long-term creditors and provisions (603.1) (395.6) (391.9) (491.6) (631.4)
Minority interests (68.7) (62.6) (61.1) (80.5) (80.7)
Shareholders funds 520.7 788.2 763.0 766.6 708.1

pence pence pence pence pence
Statistics per ordinary share:

Ordinary dividends (note (ii)) 47.3 43.0 40.5 36.8 33.45
Earnings per ordinary share before exceptional items 77.0 66.1 75.5 71.1 66.9
Earnings per ordinary share after exceptional items 39.0 60.7 58.0 74.2 66.9
Shareholders funds 291.5 369.4 329.6 332.6 320.8

(i) Discontinued operations relate to the results of subsidiary and associated undertakings discontinued at any time during the five year period
under review.
(ii) Excluding any Foreign Income Dividend enhancement.

of how their product applications could meet customer need. Similar to the earlier exercise on the
Chemicals businesses, the conclusion was that success was not so much based on the technical aspect
of product as on industrial marketing and service on a local basis. An important exception to this pat-
tern was that part of the passenger car lubricants business which involved sale of product through retail
channels. This relied a great deal more on brand and marketing push. The results of the exercise did,
however, support the decision to reorganise the Group into market-facing business units. Further, it
helped identify appropriate, and inappropriate, roles for the centre. The Group centre of Burmah Castrol
should concentrate on developing people with the skills to work internationally but with local sensitiv-
ity; but it should avoid heavy-handed central co-ordination. The Corporate Centre was reorganised as a
result of this exercise, splitting the corporate-level activity off from the servicing activity which was

43

Exhibit 3 Relative performance of FTSE All-Share vs. Burmah Castrol, from
January 1995 to July 2000

set up to be market responsive. So if operating companies did not want to buy the services the centre
was offering they could go elsewhere.
There were, then, arguments that management could use in support of the proposition that Burmah
Castrol businesses were linked by a golden thread:

We believed we had a strong story to explain to the institutions what it was we were trying to
do, and how we were going to release value.
However, as we got into the streaming of Castrol into four separate business streams, this
increasingly had an influence on our own thinking about the shape of the portfolio as a whole.
Having split out the industrial business from the passenger car engine oil business, it further
highlighted, for example, that there might be more similarities between the industrial lubricants
business and the foundry chemicals business than there were between, say, the industrial
lubricant business and the passenger car engine oil business. So by breaking up Castrol into
business units, we had an effect on our own internal thinking.
At the same time as this change within the company, a process of major consolidation in
the oil industry was under way. We believed this to be a once-off process. It seemed to us that
Castrol its brand and marketing culture would represent a great prize to a number of the
major oil companies because of economies of scale and the broader coverage of the lubricants
market that it would provide. This led us to believe that there could be latent potential for
releasing substantial value to our shareholders by in some way putting our lubricants business
together with another major lubricants business.
Thus at this point there were various distinct strands of thinking. At one level we were
explaining to the City that management had a clear vision for developing our Castrol and
Chemicals portfolio as restructured. At another, we believed we had to explore what routes
might be open to us to release the value that we believed was inherent in our businesses but
which was not reflected in our share price.

44

THE PRESSURE FOR RELEASING SHAREHOLDER VALUE

The pressure on management to demonstrate how Burmah Castrol could release more value for
shareholders remained; and there was growing concern internally about a need for greater clarity of
corporate strategy:

The activism from some shareholders continued. When our share price went down to 7.50 there
was particularly strong pressure from some shareholders along the lines of We dont want to
strong-arm you but you must do something about this. You are sitting on a strong global asset in
Castrol, the value of which is being dragged down by the fact that as management you continue
to manage speciality chemicals businesses which are not so highly rated. And by 1999,
internally there was some feedback about the lack of vision in the corporation. We had a series
of senior executive briefings in Europe, Asia Pacific and in North America; open and frank
debate suggested that senior teams sought a clear banner for the future of the corporation
that they could rally round. With half of the profit coming from the passenger car engine oil
business, however, it was difficult to provide a really strong argument that would provide an
overall cohesive umbrella that people could buy into. It was not possible for senior management
to argue that there was something over and above the golden thread which some were
questioning. So at this point we had a combination of some lack of belief internally, lack of
belief externally and a possibly time-limited opportunity as a result of oil industry consolidation.
In addition, one of our non-executives argued consistently at board meetings that there was
indeed a time-limited opportunity to release value to shareholders. If you leave it you will
discover that its passed you by and the opportunity for releasing value will disappear, and,
worse, in some scenarios you will find, as an independent player who has not played a part
in consolidation, you are increasingly squeezed by the big players. As an executive team we
came to a view that we had to explore what opportunities there were for us to play a part in
the process of consolidation.

Joint venture discussions
The earliest conversations we had with a major player in the oil industry were in late 97 and
the summer of 98. The argument was that at a time of consolidation you need to be aware
how the big players may operate in the lubricants market. They have substantial economies of
scale. If they should choose to use the advantages of those economies of scale to buy market
share through cutting margins in the developed markets, that could seriously affect our business.
They can make such cuts and still make good returns because they enjoy economies of scale that
we dont have. If we could establish a joint venture, we would have the possibility of releasing
value by locking our brand alongside another major brand, and reaping the benefits of scale.
At the same time it could head off the perceived threat to our business from the process of oil
industry consolidation.
We went into these discussions on the basis that what we had to offer was the premier
independent premium lubricants brand in the consumer market and a strongly embedded
marketing culture. Our working assumption was that we could achieve value and long-term
growth security, by allying ourselves in some way with a major oil company.
Discussion about possible structures, however, raised issues about how Burmah Castrol
could structure a joint venture for its Castrol business with another major international oil
company in a way that would unequivocally put value into our shareholders hands. In a joint
venture with a major oil company where they would own 50 per cent of Castrol and our
shareholders would own 50 per cent of Castrol, what would that then make of Burmah
Castrol as a whole? An independent investor in Burmah Castrol would have a 100 per cent
investment in a 800m turnover series of speciality chemicals businesses and a 50 per cent
share in a major global lubricants business, the other half of which would be owned by a

45

major oil company. Our advisers counselled that this would not be acceptable to the market.
Any bid premium in our share price would go, and we would be tied in terms of flexibility
for what we could do with Castrol. This led to the inevitable conclusion that release of
value to shareholders through allying Castrol with another lubricants business effectively
meant selling.

Other strategic options
What was the alternative to such a sale, bearing in mind the value which it could potentially
release? The alternative which management developed, in considerable detail, involved breaking
the Group up. This acknowledged market scepticism about the coherence of the portfolio.
Although the need for radical restructuring was accepted, an issue which management did not
fully resolve at this point in the process concerned how the slicing should be carried out. There
were two views.
One option would be to sell Chemicals, significantly run down the Burmah Castrol head
office to those functions needed to support the Castrol business, and be even more radical than
we were being in terms of the way the Castrol business was run by taking out substantial cost.
This would have involved major rationalisation of the whole supply chain; of the back office
infrastructure throughout the world; of the way the portfolio of brands was run. In other words,
turning the business into one focused on sales and marketing organisation with most other
activity being outsourced.
The alternative was a variant on the theme. It was to sell parts of the Chemicals businesses
but to keep those that were automotive based. Under this model we might have retained our
foundry chemicals business, the Chem-Trend releasants business, the investment casting
business and sold construction chemicals, mining, printing inks, cables, wax all of the things
that didnt obviously fit into an automotive products and services model. That would have left
us with a business of two parts: a passenger car engine oil business and an industrial-facing
business and with the residual possibility of in due course breaking it into two. Some work
was done on the viability of this option.

THE DECISION TO SELL

On 11 August 1998, BP announced its merger with Amoco and in so doing initiated a wave of con-
solidation amongst the major oils. This was followed on 1 December 1998 by Exxons announcement
of a merger with Mobil, which put into play the lubricants business within the BP-Mobil joint venture
in Europe.
During its early conversations with Amoco, BP had come to the realisation that there remained a
strategic gap in its downstream portfolio. The small lubricants business that it would potentially inherit
from Amoco in combination with BPs existing lubricants business simply would not have the critical
mass to compete effectively on the world stage. After the Amoco merger, BP either had to consider
maintaining a niche tactical presence or perhaps even a total withdrawal from the lubricants business,
or seek other opportunities to grow the business into a material globally branded business. The think-
ing within BP had identified Burmah Castrol amongst others as possible opportunities to help achieve
this objective.
As this thinking crystallised in mid-1999, the decision was taken within BP to take a significant
strategic step in the lubricants sector first by extracting at a minimum its share of the lubricants busi-
ness from the Mobil joint venture in Europe, and secondly by pursuing exploratory discussions with
Burmah Castrol. BP management saw Burmah Castrol as a vehicle for growth, delivering a global
brand, world-class marketing talent and significant synergy savings as well as, importantly, growth
through brand extension, cross-selling, and access to additional emerging markets. It saw no advantage
46
46

in retaining the ancillary Chemicals portfolio within Burmah and resolved, if an arrangement were reached to
acquire Burmah, to divest them as soon as practically possible.
In Burmah Castrol too the implications of the likely consolidation in the industry were being
considered. Tim Stevenson explained:

It was clear that a knock-on effect would be a major change in the status of the European-wide pre-existing
joint venture between BP and Mobil. It seemed to us, as part of our approach to examining options for
combining our lubricants business with that of one of the majors, that this opened an opportunity. We
approached BP with this proposition, and they responded favourably. A team was put together to examine
the possibilities.
Within Burmah Castrol there was, quite rightly, considerable executive debate about the appropriateness
of selling the business. The argument that something had to be done to release value to our shareholders
locked up in our business but not reflected in our share price was clearly powerful. Yet there were also
considerations of corporate tradition: the fact that Burmah had existed for over 100 years; the fact that we
were beginning to develop an aggressive alternative to outright sale to a third party.
All acknowledged that there was a point at which we would have to sell. It came down to a
discussion concerning the net present value of what managements alternative go it alone option would
deliver against the price BP would be prepared to pay. In the event BPs offer of 16.75 per share had to
be set against that value that managements plan B could deliver over time.
At the board meeting that decided to recommend the BP bid the board accepted that the company was
at a crossroads; something significant had to happen. If the BP bid were not to be recommended then
there would need to be a radical change to the shape of the corporation,
involving the abandonment of the golden thread argument The alternative option on the table
at the meeting involved the plan outlined earlier: radical reshaping of the portfolio, together with substantial
cost-saving measures and some aggressive new business initiatives. We had modelled this in terms of its
impact on the share price over the medium term, assuming successful implementation. The boards debate
concerned managements ability to carry through a radical new agenda; how quickly success would be
reflected in the share price; and how this would
stack up against BPs 16.75 offer.
The response from the financial institutions and the press to the boards decision to accept
16.75 was that it was the right thing to do. Internally, response was inevitably mixed. The initial response
in Castrol was broadly enthusiastic. Its the right thing to do; taking a five-year view as an independent
company were going to come under increasing pressure. Putting the Castrol business together with the BP
business gives us a much greater footprint globally around the world, particularly in Europe but also in the
Far East. BP are tougher, harder managers than Burmah Castrol; very rigorous in terms of costs. Castrol
needs that. Theyll
bring their rigour to sorting out the expense base. In the Chemicals businesses there was inevitably
some sense of betrayal; certainly disappointment and anxiety about who the new owners were going to
be. But the Chemicals executives continued to manage the businesses very professionally. Results for the
first six months of 2000 were excellent. Perhaps hardest hit were those people in Burmah Castrol head
office: the ending of the PLC meant the end of requirement for many head office functions. They were
perhaps the people who most felt we should have stayed independent and go our own way; although of
course the reality was that
had we not sold to BP, our own restructuring plan would likely have put many jobs in jeopardy in any
event.

In July 2000 Burmah Castrol formally became part of BP Amoco. Most of the corporate board of Burmah Castrol
left, including Tim Stevenson, and BP started the process of finding buyers for the Chemicals businesses.

47
47

STRATEGY AT THE LEADING EDGE
NEW RESEARCH & CONFERENCE REPORTS

Strategy Past; Strategy Futures

Peter McKiernan

As STRATEGY SCRAMBLES FROM adolescence to adult-
hood it is beginning to ask questions about its new
identity. Like many young adults, it is concerned
about its roots and about where it is heading. The
choice of a future direction is influenced by those
origins and the viewpoint they have formed. This can
be coloured by history, discipline, culture or, simply,
the prevailing 'dominant paradigm'. The latter, when
transferred into an organizational 'recipe',* can
induce strong cases of cognitive calcification, so lim-
iting interpretation and creativity. This is as true for
academics as it is for practitioners. In a recent
survey,t strategy scholars were asked for their per-
ception of seminal contributions to the development
of thought in the area. A number of patterns were
discernible in their answers. First, consensus on a

Edited by
Martin Whitehill

*After the work of Grinyer, P.H. and Spender, J.C., see references.
tConducted by the author in preparation for the 'Historical Evol-
ution of Strategic Management; Volumes I and II', Dartmouth, 1996.

Strategy is a youthful discipline with much of
its research material derived from studies in
the last 30 years. Its roots,however, go back
much further. Modern studies can be partitioned
into four schools--Planning and Practice,
Learning, Positioning and Resource Based
,each with long scholastic and practical
traditions.
The schools are not mutually exclusive nor do
they cover all the contributions to the field. But
they are a useful way of identifying the pathways
to the present so that a clearer view can be
formed of potential strategy futures. This article
paints four such futures; some based upon an
extension of the past and other, alternative,
trajectories. The aim of the paper i s to stimulate
thinking to the progress of the youth from
adolescence to adulthood. 1997 Elsevier
Science Ltd

common pathway was limited due to the many disci-
plinary avenues down which the development of
strategy has had to travel. So their selections were
many and varied. Second, there was a distinct dif-
ference in the choices by scholars from the strategy

Strategy at the Leading Edge features short
reports on.conferences, new research and
experiments by academics, organizations and
consultancies for all those involved in strategy
and strategic management. Contributions (two
hard copies and a disk. Should be sent to Martin
Whitehill, City University Business School,
Frobisher Crescent, Barbican Centre, London
EC2Y 8HB [E mail: m;whitehill@city.ac.uk].

Pergamon

PII: S0024-6301(97)00080-0
Long Range Planning, Vol. 30, No. 5, pp. 790 to 798, 1997
1997 Published by Elsevier Science Ltd. All rights reserved
Printed in Great Britain
0024-6301/97 $17 .00+0.00
48
48

h
h

content, and by those from the strategy process,
schools. The danger herein is the development of an
the writings of the great French and German military
strategists, Foch and van Clausewitz, in the 19
1

intellectual schism that could impede the integrative
evolution of the field. Third, all quoted contributions
came from the last 30 years, with over 80% of them
in the last decade. This probably reflects the reality
of an emergent subject; with few specialist journals,
and schools dominated by a handful of authors each
decade since the 1960s.
If we are to search for a strategy future, it is always
helpful to have explored the past. Cummings
1
sug-
gests that most recent converts to corporate strategy
have little knowledge of where the pathways to the
present began. Two generic sources have momentum.
One is the biological route that recognizes the per-
ennial presence of natural competition, acknowl-
edges the partial role of Darwinian selection, builds
to encapsulate Gause's principle of competitive
exclusion and adds the central gifts of imagination
and logic to differentiate the strategist from the rest.
Henderson
2
argues that Darwin is probably a better
guide to business competition than economists are.
The other source is a more traditional heritage by
way of military analogy. In the East, China's oldest
military classic, 'The Art of War' (c 500 BC), with
its claim that the highest form of leadership is to
overcome the enemy by strategy, provided a succinct
exposition of planning, organization, tactics and the
seizure of opportunities. In the West, the parallel is
with the ancient Athenian position of 'strategos',
coined during the democratic reforms of Kleisthenes
(508 BC) in reference to the military and political
sub-units that formed the Athenian war council.
Certainly, contemporary terminology in strategic
management has a military flavour. Further, it can be
argued that in certain areas of the subject e.g. pro-
curement, empowerment, intelligence, control and
communications, the military are decades ahead of
the academics. Hence, this pathway cannot be denied
easily.
Fourth, the picture painted had a distinct North
American hue, even among a sample with a pre-
dominance of European authors. Clearly, important
inputs to the subject's development have enjoyed that
heritage. But it would be erroneous to accept, unques-
tioningly, that any single geographic source has mon-
opolized the development of the subject. For instance,
the two major historic strands outlined above have
different cultural origins. Moreover, much of the
Greek inspired military pathway can be traced
through mediaeval Europe where it is pivotal in
Machiavelli's 'Prince'. Drawing on case material from
the 'strategoi', he warned that;
'for intellectual training, the Prince must read history, studying
the actions of eminent men to see how they conducted them-
selves during war and to discover the reasons for their victories
or their defeats, so he can avoid the latter and imitate the former'.
From here, similar principles can be identified in
century.
We witness that the history of strategy is global
and not entirely American; ancient and not modern.
However, we can divide the modern contributions
into four schools of thought; Planning and Practice,
Learning, Positioning and Resource-Based. These are
not mutually exclusive. There has been active inter-
play between them. A good way to visualize them
is as strands woven together to form a strong rope.
Authors e.g. Andrews, Rumelt, who appear in one
have also been influential in others. Nor are they com-
plete; other research streams e.g. game theory, have
nudged the field along. Yet each captures a part of a
broad and rich strategy heritage. From a knowledge
of each, we can attempt to identify patterns of evol-
ution that may guide us to some strategy futures.

The Planning and Practice School
The Industrial Revolution produced several British
pioneers in the development of modern management
thought (e.g. Steuart, Smith, Watt, Owen, Arkwright).
The principles of authority, specialization, control,
standard operating procedures, personnel policies,
cost accounting, scientific management and planning
were laid down largely as mechanistic procedures
(though such concepts were well known to the Sumer-
ians, Egyptians, Hebrews and Chinese in a previous
era). Later American contributions (e.g. Towne, Met-
calfe, Halsey, Taylor, the Gilbreths) consolidated this
science of management in explaining internal organ-
izational activities. By the early part of the 20
1
century, this mechanistic approach had embraced the
integration of these activities. But, as Spender
3
points
out:

'prior to the 1930s, there seemed to be little difference between
theories of organizations, their management and their strategies'.

As with the military analogy, strategy was essen-
tially about large and long term decisions; a view that
still pervades the literature. Barnard
4
provided the
necessary insights. First, he separated organization
theory from both management and strategy, leaving
the latter as a 'function of executive leadership'.
Second, he shifted the debate away from its focus on
efficiency to a focus on effectiveness. This necessi-
tated a coupling of the organization to its environ-
ment. Such environmental 'fit' formed the bedrock of
modern analytical approaches to strategy formulation
and, in conjunction with the efficiency approaches,
opened the way for the introduction of the SWOT
technique to the strategists' armoury.
In the modern era, Barnard's contribution is
reflected in the seminal Harvard casebook of Learned,
Christensen, Andrews and Guth
5
Andrews, who

Long Range Planning Vol. 30 October 1997
49
49

-

wrote the text, split strategy into formulation and
implementation and, after the influence of Chandler,
highlighted four components:
1. what the firm might do (market opportunity);
2. what the firm could do (corporate competence);
3. what the firm wants to do (ambition);
4. what the firm should do (social responsibility).
So strategy decisions dealt with the 'fit' between the
external (1 & 4) and the internal (2 & 3) environments.
This contribution also borrowed the notion of 'dis-
tinctive competence' from Selznick
6
, so emphasizing
competitive advantage from the fertilization of the
resource base (see later). Porter
7
recognises this cre-
ation of competitive advantage, from a clever uti-
lization of a heterogeneous resource set, to be a salient
step in the evolution ofthe subject. Spender
8
traces it
to the evolutionary systems models utilized by Hend-
erson and Follett. Whatever its origin, the resource-
based view developed, subsequently, into a separate
field of endeavour in the subject's evolution (see
later).
The sequential nature of activities and the inherent
logic of the Harvard schema suggested that strategy
formation could be 'designed'
9
from first principles
in a simple, yet informal, way. In a parallel devel-
opment, Ansoff
0
provided a more systematic model
of the strategic decisions, characterized by detail and
definition in its 'planning' process. The planner was
more significant than the chief executive; strategy out-
put was generic rather than uniquely defined and the
terminology of corporate, rather than business, strat-
egy was germane.
Both approaches stressed environmental appraisal,
market positioning and resource capability in ana-
lysing the whole organization. These ingredients for-
med the basis of many of the 'planning' texts of the
1960s and 1970s.
11 13
Such models suggested that
well-developed planning systems were indispensable
to executive management as well as a necessary, but
not sufficient, condition for performance enhance-
ment. They were mechanical, prescriptive and about
corporate, rather than strategic, planning. However,
the chief strategy architects (Chandler, Andrews and
Ansoff) had established the modern concept of strat-
egy and, as SchendeP
4
acknowledges:
'There is little written today that cannot be traced back to their
work'.
This was quickly spread and developed by the con-
sultancy professionals and organizational planning
teams who provided new techniques with which to
facilitate its practical implementation (e.g. BCG,
PIMS, Shell's scenarios).

The Learning School

The theoretical ease with which objectives could be
set, markets appraised and resources deployed in a
logical engineering manner had a strong attraction to
executives and academics. Hence, the planning
approach became deeply embedded in the strategic
psyche. By the 1990s, it was still the dominant model
in many strategic management texts and course
designs in the Anglo-American world. However,
observations of both the process and effectiveness of
strategy in practice clashed with this rational-analytic
view. In reality, some 'planned' strategies failed to
realize their intended outputs and other, successful,
strategies emerged informally. Organizational studies
scholars began to challenge the planners' notions of
intentional choice and outcome. They spoke of boun-
ded rationality and the role of power, internal politics
and chance in strategy decision making. They
emphasized organizational adaptability, since the
rational planning process was constrained by both
external and internal variables whose behaviour was
unpredictable or simply unknown.
The 'learning' school was eclectic in membership. It
sympathized with the natural selection model, which
assumed that the environment was so unpredictable
and complex that synoptic models did not present any
protection from the constant buffeting organizations
had to face. Each was forced to adapt to survive. Lind-
blom15 had already noted that companies should
adapt to, or 'muddle through', this complexity. So
Wildavsky
16
suggested that, in attempting to include
the totality of organizational activity, planning had
dissipated into nothing. The unfortunate planner
could no longer discern its shape; it was beyond
control, 'located everywhere in general and nowhere
in particular'.
Empirical investigations
17
showed that companies
progress using a form of 'logical incrementalism',
navigating the future by evolutionary adjustments to
the core business and controlled venturing elsewhere.
Rather than 'muddling', such incrementalism is pur-
poseful and proactive, integrating the analytical and
behavioural aspects of strategy formation. Planning is
not rejected but seen as one of many enablers of stra-
tegic change. Johnson
18
takes issue with the notion of
'logical' within the incrementalist approach, arguing
that it suggests a degree of rationality which is con-
strained in organizations by politics and paradigms.
The resultant strategy is frequently the result of a
symbolic, programmatic and cognitive cocktail which
can often appear illogical.
As an executive process, strategy formation is
cloaked in organizational politics; of individuals and
groups with conflicting demands, of legitimacy, sym-
bolism, rituals, beliefs, myths and heritage that can
expand into a network beyond the bounds of a single
company, through interlocking directorships. Cre-
ditably, strategy scholars
19
-
21
have tried to make sense
of this complexity by searching for explanations and
patterns. So strategy can be an identifiable pattern in
a series of decisions; a combination of the deliberate

50
50

(planning) and the emergene
2
depending on the
organizations' culture and context. In a parallel, but
unrelated, development, a detailed analysis of the
latter was being undertaken by industrial economists.
The research propelled market structure to the fore-
front of conceptual activity and paved the way for the
positioning school.

The Positioning School

Arguably, the greatest impact on the modern strategic
management field from the area of industrial organ-
ization economics (10) came from Porter.
23
'
24
The ori-
gins of his work follow a rich vein of US empiricism
as researchers struggled with the applicability of mic-
roeconomic theory in its pure form. Initially, Cham-
berlin25, a Harvard doctoral student, articulated the
theory of monopolistic competition. He rejected the
restrictive assumptions of prevailing economic the-
ory as 'remote and unreal'. He suggested that the
determination of most prices was the result of both
monopolistic and competitive forces rather than to
be explained by one or the other, as was previously
assumed. The linking mechanism was to be a firms'
ability to attract customers through product dif-
ferentiation, thus earning quasi monopoly rents in
a quasi competitive arena. Mason
26
developed this
theme by analysing firm policies and concluded that
this required a consideration of how firms react to
market situations and of the constituent elements of
market structure, of which product differentiation
was only one. It was differences in market structure
that governed any differences in their policy
decisions, e.g. on price. There followed a systematic
investigation of key US industries (aluminum,
tobacco, lead, petroleum) by Harvard economists in
which Bain
27
challenged traditional price theory by
introducing the threat of potential entrants to a sector.
He defined and classified entry barriers and intro-
duced much of the language now familiar to modern
strategists. By establishing a strong positive cor-
relation between industry concentration and pro-
fitability, the notion that market Structure determined
firm Conduct and so Performance (the S-C-P model)

the challenges to conventional 10 thinking came from
one of Caves's doctoral students, Michael Porter.
Porter
23
saw the root of competitive strategy as link-
ing the firm to its environment. Industry structure, to
be analysed by the famous five forces, determined the
extent of competition and so the profit potential. A
firm positioned itself within the sector where it could
best defend against or influence these forces, e.g.
behind strong entry barriers. This was an 'outside in'
approach; though Porter paid homage to a capabilities
analysis within the firm. His approach strongly
reflected its American SCP heritage yet it still rep-
resented a dramatic shift in thinking. The SCP school
had made environment the key determinant of per-
formance. As Schendel emphasized:

'by making managerial choice in an explicitly environmental
context the focal point of analysis, Porter succeeded in turning
10 Economics on its head'.

The Resource Based View of the
Firm

The positioning approach provided prescriptions to
executives in terms of the five force analysis and the
generic strategies of low cost, differentiation and
focus. It took a strong hold in board rooms and busi-
ness schools. Still, it invoked steady criticism from
the academic fraternity, not least for the lack of any
stable definition of industry or market from which to
perform the analysis or the restrictive mutual exclu-
sivity of its generic strategies. Moreover, strategy
researchers throughout the 1980s confirmed firm
specific factors as the major determinants of per-
formance differences between firms in the same
sector.
28
For an explanation, attention switched to the
analysis of the firms' resource base in the hope of
identifying the unique blend and balance which
would deliver a competitive advantage. Commonly
referred to as the 'inside-out' view, this school
emphasized the accumulation of scarce resources
through skill acquisition and learning, thus placing
the firm at centre stage.
The resource based view has a long history. The
rich vein can be traced from Marshali,Z
9 31

was indelibly written into the 10 folklore.
This Mason-Bain paradigm was refined and tested

Coase
32
and Andrews
33
to Penrose
34
:
- through

over the next two decades. Harvard economists (e.g.
Caves, Hunt) began to focus on the changing environ-
mental contexts as firms shifted from unsuccessful
diversifications in the 1960s and 1970s to leveraged
buy-outs and divestments in the later 1970s and early
1980s. They incorporated firm behaviours and
mobility into their analyses, breaking with con-
ventional oligopolistic thinking by dropping the
assumption of firm homogeneity. This led to the intro-
duction of strategic groups within sectors and to the
analysis of strategic decision making patterns. One of
'It is the heterogeneity, not the homogeneity, of productive
resources available.... that gives the firm its unique character'.

Conventional economics focused on a traditional
resource base of land, labour and capital, which all
behaved well according to the assumption of dim-
inishing returns to scale and so could be modelled
easily. Penroses's bundle of resources included man-
agement's increasing experience and knowledge of
the external world which could not. It was the inter-
action of resources with each other and with this
human experience that provided firms with unique

51
51

advantages. Transferring and monitoring resources
between firms was thus made difficult, denying rivals
the chance of replication and so securing superior
returns. Such complexity needed a new articulation
40

that our studies broaden their notion of rationality to
include the procedural and intuitive forms. More-
over, care is required in our normative prescriptions
which rest on our traditional techniques and models.
and modern scholars were quick to oblige.
35
- This In essence, we need to know where they work, where
academic discourse was disseminated to the waiting
executive audience by Prahalad and Hamel
41
who saw
real sources of competitive advantage as lying in:

'Management's ability to consolidate corporate-wide tech-
nologies and production skills into competencies that empower
individual businesses to adapt quickly to changing oppor-
tunities'.

This development of core competencies had been
witnessed in some of the world's leading organ-
izations (e.g. Honda, Canon, Sony, Yamaha,
Komatsu). Hence, there was some urgency attached
to its widespread adoption among Western firms.

Futures 1: Planning and Learning Schools
As environments become more complex, the limi-
tations of the linear, stage-based model of strategic
management and its associated rational-analytic tech-
niques, developed within the Planning and Practice
school, become pronounced. There is a shift from
traditional forecasting of the future by extrapolation
of the past to the painting of alternative futures
through scenario creation. The aim is to improve the
'fit' between the organization and its environment.
This process relies on a variety of internal corporate
perceptions of the future and, through conversation
rather than quantification, explores the role of lan-
guage in organizational learning. Language and cul-
ture are inextricably bound and, as more attention is
now being given by language scholars to the place of
language in the nation state and the individual, we
expect to witness increased activity at the organ-
izational level in the hope of understanding the
'emotional intelligence' deployed. For instance,
government inward investment programmes have
brought foreign nationals together with indigenous
labour forces. Flexible language can confront inflex-
ible language, interpretations can become fuzzy and
disputes so arise.
Further, the current conversations in, and popu-
larity of, organizational learning should enhance two
other futures. First, modern strategic management
assumes a notion of 'rationality' at the individual or
collective level. It is not always clear exactly what
notion of rationality is employed; though there is a
sense in which this is dominated by Western philo-
sophical bases and has an emphasis on the instru-
mental. There are some parts of our global arena (e.g.
Africa, Asia) where 'reason may be the slave of the
passions'* rather than of 'morallaw'.t This requires

*David Hume.
tlmmanuel Kant.
they do not, what adjustments are required, and what
new models are needed.
Perhaps a further consequence of the ubiquitous
presence of western management literature is the
danger of accepting a restrictive set of 'values' in the
strategy process and, especially, in corporate govern-
ance. There is little mention of ethics in recent strat-
egy writing
42
and so this field is ripe for exploration
and expansion beyond the guidance of Aristotle,
Bentham and Kant. Strategy decisions have global
and local characteristics. They depend on both an
ultimate value, which may be determined by organ-
izational executive ownership, and on what is 'right'
in the context, which is probably determined by fea-
tures of the indigenous local culture. Global exposure,
interlocking directorships, strategic alliances and
environmentalism provide a strong incentive for a
change of emphasis and for new research
programmes.
Second, in building scenarios, organizations filter
environmental signals and, in a shared way, cog-
nitively de-code information.
43
Cognitive mapping
has a solid research base in academe yet, because few
scholars have been fully conversant with the tech-
nical aspects of its methodology, it has not been as
widespread as its content deserves. Hence, its results
have not been fully articulated to executive audiences
in a readily useable format. We should see greater
developments in this area with the continued adop-
tion of psychoanalytic techniques in the research pro-
cess. The exploration of decision-making and its
'bounded rationality', of executive politics, of man-
agement styles, of managerial elites, of ambitions and
aspirations should all be much improved. In particu-
lar, this future could be considerably enhanced by
closer liaison with the knowledge base and meth-
odologies within social anthropology (see Ref. 44),
especially where group behaviours, pathways to dif-
ferent decisions, self reflexivity and cognitive pat-
terns are concerned.

Futures 2: Positioning, Resource-based and
Learning Schools
Despite the partial demise of the 'positioning' view
and the relative dominance ofthe resource based view
in the early 1990s, each school has dealt with the
same thing, i.e. competitive advantage. The emphasis
in each has merely been different, though each has
recognised the other's territory. For instance, Porter
presents a thorough capabilities analysis in the con-
text of competitor reaction,
23
acknowledges dis-
tinctive competencies as a cornerstone of strategy
45
and relates activities analysis to strategic position-

52
52

ing.
46
Ironically, he also developed one of the most
useful tools for internal resource analysis in the value
chain.
24
A progressive strategy future would see
adherents of the two schools seeking greater inte-
gration to lever their relative strengths. First, they
need a common language.
The traditional emphasis on accounting techniques
to measure internal assets has made it difficult to
carry out a full resource audit. Such techniques are
essentially historic and so are incongruent with the
building of future competencies and capabilities.
Moreover, the latter include content that is tacit e.g.
knowledge, which is not measurable by such con-
ventional means. A different language is required that
can deal with 'soft' rather than 'hard' resources and
a comprehensive set of new measures needs to be
developed. This requires a multidisciplinary effort.
Second, they need a new theory of the firm. At the
heart of the resource based view is the concept of
imitability. Competitive advantage is built on a
unique bundle of assets that is difficult to imitate. Its
sustainability depends on the continuous devel-
opment of key resources. One is culture and one is
knowledge. Culture should be the one resource that
is impossible to copy. Research into culture by organ-
izational theorists (in the Learning school) is reason-
ably well developed. However, there has not yet been
sufficient intellectual traffic between the two schools
for cross-fertility to occur. Perhaps disciplinary 'silos'
have prevented theory development here.
Organizationally embedded knowledge, influenced
by the work of Polanyi
47
on tacit knowledge and Nel-
son and Winter
48
on organizational routines, became
the focus of much resource-based research. But, our
knowledge ofthe anatomy and creation of this knowl-
edge is embryonic and its exploration has been ham-
pered by measurement problems (see above). Though
fresh research in this area has broken new ground
49
towards a knowledge-based theory of the firm, much
work still remains to be done to progress this strategy
future.
Any evolutionary strategy future would foster
closer integration of all the schools. Linking the out-
side-in (Positioning) with the inside-out (Resource
Based) is one obvious route. Academic initiatives
50
51
have already begun and must be sustained as they lag
behind global business practice, which has followed
this path for a generation.

Future 3: Chaos and Complexity
The above futures build on the relevant historic tracks
and are part of a traditional evolution. They involve
the development of the subject as a capstone disci-
pline, borrowing partial analyses from adjacent social
and mainstream sciences. This broadening should be
accompanied by a deepening of already established
knowledge. An alternative future would break with
this linear tradition and embrace a radical route for
strategic management. If we accept that organisations
are families of non-linear feed-back loops linked to
other families (organizations) by similar loops, they
should be able to operate a long way from equilibrium,
at the border between stability and instability. They
will operate in bounded instability, at the edge of
chaos. This state is difficult to manage. The need for
control and integration pulls them towards stability
and eventual ossification. The need for decent-
ralization and innovation pulls them toward insta-
bility and eventual disintegration. The left and the
right need to remain in balance. As Stacey
52
states:

'The dynamics of successful organizations are therefore those of
irregular cycles and discontinuous trends, falling within quali-
tative patterns, fuzzy but recognizable categories taking the form
of archetypes and templates'.

For strategic management, this means that,
although some short term control is possible through
traditional techniques, long term development must
eschew the type of linear, analytic reasoning that
underpins many of these techniques. Waldrop
53
warns of the danger of 'locking in' to sub-optimal
schema; generations of strategists could unques-
tionably operate stage-based, linear models, becom-
ing hooked on these textbook paradigms. Without
continued education, the lock in will be reinforced for
years to come. Pascale
54
talked of the Law of Requisite
Variety, demanding that any organism must develop
an ability to manage conflict and paradox internally
if it wants to stand any chance of coping with external
shocks with similar characteristics. In this future, we
may need to throw off the baggage of a previous econ-
omic-strategy generation and embrace self-organ-
ization, transformation and renewal. This future
would link strongly to the next. It remains on its own
as it requires a change in the mindset of many modern
strategists. Change or not, the next future will have to
be faced.

Futures 4: External Pull and Complexity
Strategists will have to react to the phenomenon of
change in contemporary society. The march towards
liberal democracy, the growth of the nation state and
tribalism, the de-militarization of the international
community, the emergence of trading blocs and mega-
markets (e.g. China and India), the fight against
poverty, the fight for sustainable development, the
drift from national to regional government and the
proliferation of privatization and de-regulation pro-
vide an engaging complexity at the general environ-
mental level. At the operating level, the digital
telecommunications revolution will continue to lib-
erate individuals from their corporate parents
through efficient personal communication systems
bringing with it new work patterns. Consequent de-
centralization could stimulate increased activity in
small cells linked together by networks, so trans-

53
53

forming intra and inter company relationships. Stra-
tegists will have to grapple with virtual organizations,
outsourcing, increased mobility of labour and a need
for continuous education and training as the rapidity
of technology and knowledge flows quickly erodes
contemporary skills and abilities. The structure of
industries as well as companies will change dra-
matically.
The challenge for strategists will be to search for
patterns in this complexity;
53
to start with uncer-
tainty; to embrace conversation and stories; to better
understand intuition and to prevent it from potential
contamination from the 'engineering' toolbox.

Conclusion
Many tools and techniques are concerned with the
provision of operational efficiency. They come and
go. Trainers and consultants assure that the latest
versions are dispersed widely to organizations, who,
in turn, appear to have voracious appetites for them.
Organizations end up doing things in the same way,
especially when financial observers force upon them
similar output measures. Yet, these sorts of efficiency
gains are a means to an end. Strategy is not about this
inward imitation. There is a paradox of progress here.
The world presents a complex agenda where generic
treatments can lead to inappropriate solutions. Stra-
tegists should ensure that organizations do things dif-
ferently to remain competitive and responsible.
These strategy futures are a combination of the evol-
utionary and the revolutionary. The former predict
that we will do more of the same ourselves; inte-
grating schools and disciplines, accepting partial
analyses from further cognate areas and generally
tweaking things at the margin. This may be good
enough if we get the odd breakthrough. The latter is
a call to drop the baggage, to accept that linearity can't
cope with complexity, to adjourn our deepening of
generic strategies, to become analytically 'softer', to
experiment and to end any pretension that our work
in strategy is novel. That would be an acceptance of
the lessons of history ofthe Chinese, of the Egyptians,
of the Greeks. Our strategy rope has a circular and
repetitive pattern. If we continue to do the same
things with it, let us hope it's strong enough.

I am gratefulfor the comments of my colleagues Peter Grinyer,
Joe
Lampeland James Urquart on previous drafts of this paper.

PETER McKIERNAN is Professor of Management at the
University of St. Andrews, Scotland and Visiting Pro-
fessor of Strategic Management at the University of
Warwick, England.

References

1. S. Cummings, Brief Case: The First Strategists, Long Range Planning 26, (3), 133-135
(1993).

2. B. D. Henderson, The Origin of Strategy, Harvard Business Review, November/December,
139-43 (1989).

3. J.-C. Spender, Business Policy and Strategy: A View of the Field, Working Paper, Graduate
School of Management, Rutgers University, New Jersey ( 1993).

4. C. I. Barnard, The Functions of the Executive, Harvard University Press, Cambridge MA,
1938.

5. E. P. Learned, C. R. Christensen, K. R. Andrews and W. D. Guth, Business Policy: Text and
Cases, lrwin, Homewood, IL (1965).

6. P. Selznick, Leadership in Administration: A Sociological Interpretation, Harper & Row,
New York (1957).

7. M. E. Porter, Towards a dynamic theory of strategy, Strategic Management Journal12,
95-117 (1991).

8. See Spender, op cit.

9. Mintzberg (1994).

10. H. I. Ansoff, Corporate Strategy, McGraw Hill, New York (1965).

11. G. A. Steiner, Top Management Planning, Macmillan, New York (1969).

12. R. L. Ackoff, A Concept of Corporate Planning, Wiley, New York (1970).

13. J. Argenti, Systematic Corporate Planning, Thomas Nelson, Sunbury-on-Thames,
Middlesex (1974).

14. D. Schendel, Strategy Futures: What's Left to Worry About?, Working Paper, Krannert
Graduate School of Management, Purdue University, Indiana ( 1992).

15. C. E. Lindblom, The Science of Muddling Through, Public Administration Review 19,79-
88 (1959).

54
54

16. A. Wildavsky, If Planning is Everything, Maybe it's Nothing, Policy Sciences 4,127-153
(1973).

17. J. B. Quinn, Strategic Change: 'Logic lncrementalism', S/oan Management Review, Fall,
7-21 (1978).

18. G. Johnson, Rethinking Incrementalism, Strategic Management Journal9, 75-91 (1988).

19. H. Mintzberg, Strategy Making in Three Modes, California Management Review XVI, 44-
53 (1973).

20. E. E. Chattee, Three Models of Strategy, Academy of Management Review 10,89-98
(1985).

21. A. Pettigrew, On Studying Managerial Elites, Strategic Management Journal10, 87-105
(1992).

22. H. Mintzberg and J. A. Waters, Of Strategies Deliberate and Emergent, Strategic
Management Journal&, 257-272 (1985).

23. M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors,
Free Press, New York (1980).

24. M. E. Porter, Competitive Advantage, Free Press, New York (1985).

25. E. H. Chamber!in, The Differentiation of the Product, In The Theory of Monopolistic
Competition: A Re-orientation of the Theory of Value, Harvard University Press, Cambridge,
MA (1933).

26. E. S. Mason, Price and Production Policies of Large-Scale Enterprise, American Economic
Review, Supplement 29, March, 61-74 (1939).

27. J. S. Bain, Relation of Profit Rate to Industry Concentration: American Manufacturing,
1936-1940, Quarterly Journal of Economics LXV, 293-324 (1951).

28. K. Cool and D. Schendel, Performance Differences among Strategic Group Members,
Strategic Management Journal9, 207-224 ( 1988).

29. A. Marshal!, Principles of Economics, Macmillan, London (1890).

30. A. Marshal!, Elements of Economics of Industry, Macmillan, London (1913).

31. A. MarshalI, Industry and Trade, Macmillan, London (1923).

32. R. H. Coase, The Nature ofthe Firm, Economica, 4, November, 386-405 (1937).

33. P. W. S. Andrews, Costs of Production, Part 11: The Effects of Changing Organisation, In
Manufacturing Business, Macmillan, London (1949).

34. E. Penrose, The Theory of the Growth of the Firm, Oxford: Blackwell (1959).

35. A. A. Alchian and H. Demsetz, Production, Information Costs, and Economic Organisation,
American Economic Review62, 777-795 (1972).

36. R. P. Rumelt, Towards a Strategic Theory of the Firm, In R. Lamb (ed.). Competitive
Strategic Management. pp. 556-70, Prentice-Hall, Englewood Cliffs, NJ (1984).

37. B. Wernerfelt, A Resource-Based View of the Firm, Strategic Management JournalS, 171-
180 (1984).

38. C. K. Prahalad and R. A. Bettis, The Dominant Logic: A New Linkage between Diversity
and Performance, Strategic Management Journal7, 485-501 (1986).

39. D. J. Teece, G. Pisano, and A. Shuen, Firm Capabilities, Resources and the Concept of
Strategy: Four Paradigms of Strategic Management, CCC Working Paper, No 90-8,
Center for Research in Management, University of California in Berkeley (1990).

40. R. M. Grant, The Resource-Based Theory of Competitive Advantage: Implications for
Strategy Formulation, California Management Review, Spring, 114-35 (1991).

41. C. K. Prahalad and G. Hamel, The Core Competence of the Corporation, Harvard Business
Review, May-June, 79-91 (1990).

42. H. Mintzberg, J. B. Quinn and S. Ghoshal, The Strategy Process: Concepts, Contexts and
Cases, European Edition, Prentice-Hall (1995).

43. Van Der Heijden (1986).

44. S. Linstead, The Social Anthropology of Management. British Journal of Management, 8
(No. 1), March (1997).

45. M. E. Porter, Towards a Dynamic Theory of Strategy, Strategic Management Journal12,
95-117 (1991).

46. M. E. Porter, What is Strategy? Harvard Business Review, November-December, 61-78
(1996).

47. M. Polonyi, Personal Knowledge: Towards a Post-critical Philosophy, University of
Chicago Press, Chicago IL (1962).


55 | P a g e

48. R. R. Nelson and S. G. Winter, An Evolutionary Theory of Economic Change, Harvard
University Press, Cambridge, MA (1982).
49. R. Grant and J.-C. Spender (Eds.). Knowledge and the Firm, Strategic Management
Journal, Special Issue, 17, Winter (1996).
50. R. D'Aveni, Hypercompetition, Free Press, New York (1994).
51. Coliis and Montgomery ( 1995).

52. R. Stacey, Strategic Management and Organisational Dynamics, Second
Edition, Pitman, London (1996).
53. M. M. Waldrop, Complexity, Simon and Schuster, New York (1992).
54. R. T. Pascale, Managing on the Edge, Penguin, London (1990).
55. P. H. Grinyer and J. C. Spender, Recipes, Crises and Adaptation in Mature Businesses,
International Studies of Management and Organisation IX, 113-133 ( 1979).
56. N. Machiavelli, The Prince, Penguin, Harmondsworth (1961).
57. H. Mintzberg, The Rise and Fall of Strategic Planning, Prentice-Hall, Hemel Hempstead
(1964).
58. K. Van Der Heijden, Scenarios; the Art of Strategic Conversation, Wiley, Chichester (1996).


56 | P a g e

S.M Assignment

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

S.M Assignment

Uploaded by

Copyright:

Available Formats

STRATEGIC MANAGEMENT (SIM336)

A business enterprise guided by a clear sense of purpose rationally arrived at and

You might also like