Week 1 - Operationalization of Strategy: Context and Frameworks

Learning Outcomes
Upon the completion of this week of study you will be able to:

LO.1 Apply critical understanding of operational trends, theories and frameworks associated
with financial management, marketing, and operations management used to translate strategy
into operational practice
LO.2 Gain an understanding of key relationships and engagement challenges and enablers
to create optimum conditions for operationalising strategy

Contents
1.1 Introduction ............................................................................................................................... 2
1.2 Meaning of Strategy .................................................................................................................. 2
1.2.1 Operations Strategy ............................................................................................................ 3
1.2.2 Business Models for the different levels of strategy .......................................................... 5
1.3 Operationalization of the strategy ............................................................................................. 8
1.3.1 Resource Decision ............................................................................................................ 10
References ..................................................................................................................................... 12

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1.1 Introduction
Strategy Operationalization describes the relationship between strategy formulation and
execution. It considers the overall concept and purpose of your strategy and strategic objectives,
as well as financial and regulatory factors. This week introduces the meaning of strategy and
analyses the context along with frameworks that are related with the operationalization process
of the strategy.

1.2 Meaning of Strategy

The action that managers take in order to achieve one or more of the organization's goals is
known as strategy. Additionally, one definition of strategy is a general direction specified for the
firm and its numerous components to achieve a desirable condition in the future (Direction,
2020). The extensive strategic planning process is what ultimately gives rise to strategy.
Developing a strategy involves integrating the operations of an organization, as well as utilizing
and allocating the limited resources available within the context of the organization, in order to
achieve the goals that are currently in place (Direction, 2020). When formulating a plan of
action, it is essential to keep in mind that decisions are not made in a vacuum, and that any action
that is carried out by a company is likely to elicit a response from those who are adversely
affected, be it other businesses in the industry, customers, employees, or suppliers.
Knowledge of the aims, the unpredictability of events, and the requirement to take into account
the likely or actual behavior of others are all components that might be included in a definition of
strategy. A company's strategy can be thought of as a clearly mapped-out road plan. It lays forth
the organization's long-term goals, as well as its overarching mission and direction. The purpose
of a strategy is to maximize the benefits that an organization derives from its strengths while
simultaneously minimizing the advantages enjoyed by its rivals. The strategy process bridging
the gap between "where we are" and "where we want to go" (Direction, 2020).

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1.2.1 Operations Strategy
Strategic decisions are those that: have a broad impact on the organization to which the strategy
pertains; define the organization's position in relation to its environment; and advance the
organization closer to its long-term objectives (Vivares, Avella, & Sarache, 2022).

• Establishing broad objectives that lead a business toward its ultimate objective
• Planning (in general rather than particular terms) the path to achieving these objectives
• Emphasizing long-term objectives above short-term ones
• Focusing on the big picture as opposed to specific tasks
• Being above and apart from the chaos and distractions of daily activity.

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Corporate Level Strategy: Because the corporate level is the highest point in an organization, the
decisions taken here will ultimately affect the primary purpose of the business as well as the
objectives of the lower levels. Corporate strategy comprises the decisions that top managers
make in order to enter and obtain competitive advantage in a number of industries or
markets. The corporate-level strategy ensures that all business units are pursuing the same basic
purpose. Moreover, the corporate level is responsible for coordinating diverse business strategies
across a number of separate business units (Adamides, 2015).
Business Level Strategy: The objective of business-level strategy is to devise means for gaining a
competitive edge in a given market. Business level strategy is how a company delivers value for
a specific market activity. It demonstrates how a company competes, positions itself, and
controls its rival relationships and industrial structure. To do this, the company must structure its
value chain and its resources and competencies to establish a competitive advantage that is
sustainable (Adamides, 2015). Within the context of business-level strategy, three interrelated
questions must be evaluated. The first is customer focus (comprehensive market research to
understand their value proposition, what their customers want, and the highest price they are
willing to pay for a product). Second, organizations must determine what resources and talents
they can provide (whether the company can innovate and reliably produce a high quality good or
service and the scale of this production). Third and last, businesses must assess the competition

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and continue to offer a product or service that consumers prefer to others of a similar nature
(Adamides, 2015).

Functional Level Strategy: To ensure the achievement of a functional level plan, department
managers must ensure that the daily operations of each department fit with the predetermined
corporate outcomes. This will necessitate creating particular metrics to determine whether or not
each region is fulfilling bigger goals. Marketing strategy, finance strategy, production strategy,
and Research and Development strategy are examples of functional strategies. Each of these
distinct strategies will necessitate distinct tactical decisions to achieve the larger corporate goal
(Adamides, 2015).

All three layers of strategy are equally crucial for achieving overall business objectives.

1.2.2 Business Models for the different levels of strategy:

For the Business level strategy the tools that can be used for internal analysis are the Value
Chain Analysis and the VRIO Model and for external analysis frameworks like Porter’s Five
Forces and PESTEL Analysis.

Tool of Value Chain Analysis

This is a powerful tool for disaggregating a company into its strategically relevant activities in
order to focus on the sources of competitive advantage, that is, the specific activities that result in
higher prices or lower costs (Ensign, 2001). A value chain analysis includes:
• Activities - The value chain is the activities involved in delivering value to customers.
• Competitive Advantage – the activities are the basic units of competitive advantage.
• Set of Choices – Strategy is reflected in the set of choices about how the activities in the
value chain are configured and linked together.

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Tool of VRIO Model:
The Resource-Based View (RBV) is a point of view that investigates the connection between the
internal characteristics of a business and its overall performance. The VRIO Framework, also
known as the VRIO Model, is a component of the RBV. The Industrial Organization (I/O)
perspectives, which look more at external factors such as competitiveness in order to determine
performance and profit potential, are therefore complemented by RBV, which takes an internal
rather than an external focus. Instead of looking outside the company for potential sources of a
competitive advantage, RBV proponents contend that organizations should first investigate their
own operations in order to identify potential opportunities. According to this point of view, the
most important ideas to consider are those of Firm Resources and Sustainable Competitive
Advantage. The phrase "all assets, capabilities, organizational processes, firm attributes,
information and knowledge controlled by a firm that enables it to improve its efficiency and
effectiveness" is one definition of the term "firm resources." It is common practice to divide
resources into categories such as tangible (for example, equipment, machinery, land, buildings
and cash) and intangible (for example, trademarks, brand reputation, patents and licenses)
resources, as well as physical, human, and organizational resources. To be able to convert these
resources into a sustainable competitive advantage for their businesses, the resources in question
need to possess four characteristics that can be summed up using the VRIO framework (Knott,
2015).

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Tool of Porter Framework:
Porter's Generic Strategies is an answer to one of the two fundamental questions underlying the
competitive strategy options available to businesses. The first question concerns the
attractiveness of industries for long-term profitability and how a company should choose which
industry to enter. All of us are familiar with Porter's framework for determining this, the Five
Forces Model. The second question concerns the factors that determine a company's relative
competitive position in a given industry after a specific industry has been selected for entry.
Because being active in an attractive industry alone is insufficient for a company's success, you
must acquire a dominant competitive position through one of three generic strategies:
differentiation, cost leadership, or focus (Porter, 1990; 2008).

Porter’s 5 forces focus on the below elements:

Porter demonstrates that competitiveness depends on both domestic and foreign diamonds, and
that the management of domestic firms should understand and exploit both diamonds if they
wish to become or remain globally competitive (Smit, 2010).

Porter's Five Forces Framework is a method for analyzing the operating environment of a
business's competition. It uses industrial organization economics to derive five forces that

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determine the competitive intensity and, consequently, the profitability attractiveness of an
industry (Porter, 1990; 2008).

Tool of PESTEL Analysis:

PESTEL framework

PESTLE framework is used to explore any political, economic, social, technological,

environmental and legal elements that may influence/impact organizational operations. In this
regard, the PESTEL analysis is used to allow organizations to understand the big picture of
adopting their business’ provisions in the business environment where they established
operations as well as realize the advantages, opportunities and to minimize the threats that exist
in the greater business environment and market share (Issa, Chang, & Issa, 2010). The use of
PESTLE tool includes the examination of Political, Economic, Social, Technological, Legal,
Environmental forces (Ho, 2014).

1.3 Operationalization of the strategy

The Operationalization of the strategy describes the relationship between the formulation and
implementation of the strategy. It is based on the overarching concept, strategic goals, the
essential purpose question, and the financial and regulatory structure. The primary emphasis is
on strategy-driven action plans (milestones, etc.). With the aid of these plans, the efficacy and

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productivity of the execution are ensured in a clear and easy manner. The operationalization
represents concentration, clarity, innovation, and transformation (Anwar, Shah, & Hasnu, 2016).
The Role of Resources and Capabilities on Business Strategy
As per Hiroyuki & Lucino, (2007), strategy is the process of aligning a company's resources and
capabilities with the opportunities presented by its external environment. The focus of an
organization has shifted from the identification of profit opportunities in the firm's external
environment and the relationship between strategy and the external environment to the interface
between strategy and the firm's internal environment, specifically its resources and capabilities.
Two factors have contributed to the increasing emphasis on the role of resources and capabilities
as the foundation of strategy. First, as firms' industry environments have become more unstable,
internal resources and capabilities rather than external market focus have been viewed as a more
stable foundation for strategy formulation. Second, it is becoming increasingly evident that
competitive advantage, rather industry attractiveness, is the primary source of superior
profitability (see Figure 5.1).

Hiroyuki, I. & Lucino, N. (2007). Analyzing Resources and Capabilities. Blackwell Publishing. 123-168.

To comprehend why the resource-based perspective has had such a significant impact on strategy
thinking, we must return to the origin of strategy formulation: Typically, a statement of the
identity and purpose of the company (often expressed in a mission statement). A closer
examination of Porter's five forces framework suggests that industry attractiveness ultimately
stems from resource ownership. For example, incumbent firms' patents, brands, distribution
channels, knowledge, or some other resource constitute entry barriers. Similarly, the lack of

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competition resulting from the dominance of a single firm (monopoly) or a small number of
firms (oligopoly) is typically due to the concentration of ownership of key resources such as
technology, manufacturing facilities, or distribution networks (Bruijl & Gerard, 2018). The
resource-based approach has significant implications for the formulation of business strategies.
When industry selection and positioning was the primary concern of strategy, businesses tended
to adopt similar strategies. The resource-based perspective, on the other hand, emphasizes the
uniqueness of each business and suggests that the key to profitability lies not in doing the same
as other companies, but in capitalizing on differences. Establishing a competitive advantage
requires the formulation and implementation of a strategy that capitalizes on the singularity of a
company's portfolio of resources and capabilities (Hiroyuki & Lucino, 2007).

1.3.1 Resource Decision

According to Salonen and Jaakkola (2015), resource decisions include:

o People resources
o Financial resources
o Physical resources
o Intellectual resources
To manage resources within an organisation you need to be able to:
1. Record when and how much they are used.
2. Measure, compare and monitor their use.
3. Interpret and analyse any results.
4. Use information to make decisions.

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The critical components of the financial decision-making process include (1) financial decisions
– selection of equity or debt funds and associated costs; (2) investment decisions – selection of
long-term assets; and (3) operating decisions to either reinvest profits back into a business or
distribute profits to the owners (Greenberg & Hershfield, 2019).

Management accounting aims :

▪ Communicate plans through the organisation for operational control
▪ Employ feedback to evaluate and correct
▪ Use behavioural theory for setting targets, recognising achievements & rewarding
performance
▪ Increase motivation by managerial involvement in the planning process
▪ Allow managers to achieve personal goals in addition to corporate goals
▪ Provide a performance measurement system to encourage goal congruence ( the reward
system should reinforce this)

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References
Adamides, E. D. (2015). Linking operations strategy to the corporate strategy process: a practice
perspective. Business Process Management Journal.
Anwar, J., Shah, S., & Hasnu, S. (2016). Business strategy and organizational
performance. Pakistan Economic and Social Review, 54(1), 97-122.
Bruijl, D., & Gerard, H. T. (2018). The relevance of Porter's five forces in today's innovative and
changing business environment. Available at SSRN 3192207.
Direction, S. (2020). Understanding strategy: How the definition of strategy matters for competitive
advantage. Strategic Direction, 36(12), 35-37.
Ensign, P. C. (2001). Value chain analysis and competitive advantage. Journal of General
Management, 27(1), 18-42.
Greenberg, A. E., & Hershfield, H. E. (2019). Financial decision making. Consumer Psychology
Review, 2(1), 17-29.
Hiroyuki, I. & Lucino, N. (2007). Analyzing Resources and Capabilities. Blackwell Publishing.
123-168.
Ho, J. K. K. (2014). Formulation of a systemic PEST analysis for strategic analysis. European
academic research, 2(5), 6478-6492.
Issa, T., Chang, V., & Issa, T. (2010). Sustainable business strategies and PESTEL framework.
GSTF International Journal on Computing, 1(1), 73-80.
Knott, P. J. (2015). Does VRIO help managers evaluate a firm’s resources?. Management Decision.
Porter, M. E. (1990). New global strategies for competitive advantage. Planning Review, 18(3), 4-
14.
Porter, M. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86(1),
78-137.
Salonen, A., & Jaakkola, E. (2015). Firm boundary decisions in solution business: Examining
internal vs. external resource integration. Industrial Marketing Management, 51, 171-183.
Smit, A. J. (2010). The competitive advantage of nations: is Porter’s Diamond Framework a new
theory that explains the international competitiveness of countries?. Southern African Business
Review, 14(1), 105-130.
Vivares, J. A., Avella, L., & Sarache, W. (2022). Trends and challenges in operations strategy
research: Findings from a systematic literature review.

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