1

Strategies, Policies Strategies, Policies and Planning and Planning

PremisesPremises

2

Strategy A company’s strategy consists of the competitive

moves, internal operating approaches, and action plans devised by management to produce successful performance.

Strategy is management’s “game plan” for running the business.

Managers need strategies to guide HOW the organization’s business will be conducted and HOW performance targets will be achieved.

3

Levels of Strategy

4

Levels of Strategy1. Corporate-level Strategy

The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets.

2. Business-level StrategyHow the organization conducts business in a particular industry.

3. Functional-level StrategyStrategy developed for specific functional areassuch as marketing, finance, and so forth.

5

Corporate Strategy

Business Strategies

Functional Strategies

Levels of Strategy-Making

6

BCG Matrix*

Cash Cash CowsCows

?Question Question MarksMarks

DogsDogs

Relative Market ShareRelative Market Share

Mar

ket

Gro

wth

Rat

eM

arke

t G

row

th R

ate

LowLow

HighHigh

HighHigh LowLow

StarsStars

7

BCG Market Share/Market Growth Matrix

8

What is Strategic Planning?

Strategic planning is a systematic process through which an organization agrees on and builds commitment among key stakeholders to priorities that are essential to its mission and are responsive to the environment.

Strategic Planning guides the acquisition and allocation of resources to achieve these priorities.

9

Strategic Planningvs. Operational Planning

Strategic Planning– formulation– What, where– ends– vision– effectiveness– risk

Operational Planning– implementation– how– means– plans– efficiency– control

10

Three Big Strategic Questions

Where Are We Now?

Where Do we Want to Go?

How Will We Get There?

11

Strategic Planning ProcessStrategic Planning Process

Developing a Vision and a Mission Assessment Setting Objectives Crafting a Strategy Implementing and Executing Strategy Evaluating Performance, Reviewing the

Situation and Initiating Corrective Action

12

Strategic Planning First Stage of Strategic

Planning may involve:

Futures Thinking– Thinking about what the

business might need to do 10–20 years ahead

Strategic Intents– Thinking about key strategic

themes that will inform decision making

13

Strategic Planning The Vision

– Communicating to all staff where the organisation is going and whereit intends to be in the future

Aims and Objectives:– Aims – long term target– Objectives – the way in which you are

going to achieve the aim

14

Strategic Analysis Constantly evaluate their position

Strategic analysis includes different methods of assessing the current position of the business in the market place

Two basic methods:– Internal – External

15

Internal Audits Productivity Efficiency Costs Other Internal Data

– Labour turnover, absenteeism– Customer satisfaction surveys– Quality procedures – Cash flow statements– Sales trends– Skills audit

Strengths and weaknesses analysis

Core competencies

16

External Audits General business environment – Inflation, competitiveness,

unemployment/employment, growth, consumer spending Competitors

PEST factors– Political – e.g. change of government

– Economic – Trends in economic growth, inflation, etc.

– Social-changed outlook, age structure of population, etc.

– Technological

17

SWOT Analysis

Strengths Weaknesses Opportunities Threats

Vision & MissionAn organization’s fundamental purpose

Good Strategies

SWOT Analysis

To formulate strategies that support the mission

Those that support the mission and:

• exploit opportunities and strengths• neutralize threats• avoid weaknesses

Internal AnalysisStrengths(distinctivecompetencies)

Weaknesses Threats

External AnalysisOpportunities

18

Strength’s

Strength’s – Those things that you do well, theStrength’s – Those things that you do well, the high value or performance pointshigh value or performance points

Strengths can be tangible: Loyal customers,Strengths can be tangible: Loyal customers, efficient distribution channels, very high qualityefficient distribution channels, very high quality products, excellent financial conditionproducts, excellent financial condition

Strengths can be intangible: Good leadership,Strengths can be intangible: Good leadership, strategic insights, customer intelligence, solidstrategic insights, customer intelligence, solid reputation, high skilled workforcereputation, high skilled workforce

19

Weaknesses

Weaknesses – Those things that prevent you from Weaknesses – Those things that prevent you from doing what you really need to dodoing what you really need to do Since weaknesses are internal, they are withinSince weaknesses are internal, they are within your controlyour control

Weaknesses include: Bad leadership, unskilledWeaknesses include: Bad leadership, unskilled workforce, insufficient resources, poor productworkforce, insufficient resources, poor product quality, slow distribution and delivery channels,quality, slow distribution and delivery channels, outdated technologies, lack of planning, . . .outdated technologies, lack of planning, . . .

20

Opportunities

Opportunities – Potential areas for growth andOpportunities – Potential areas for growth and higher performancehigher performance External in nature – marketplace, unhappy External in nature – marketplace, unhappy customers with competitor’s, better economiccustomers with competitor’s, better economic conditions, more open trading policies, . . conditions, more open trading policies, . .

Timing may be important for capitalizing onTiming may be important for capitalizing on opportunitiesopportunities

21

Threats

Threats – Challenges confronting the Threats – Challenges confronting the organization, external in natureorganization, external in nature

Threats can take a wide range – bad pressThreats can take a wide range – bad press coverage, shifts in consumer behavior, substitutecoverage, shifts in consumer behavior, substitute products, new regulations, . . . products, new regulations, . . .

The more accurate you are in identifying threats, The more accurate you are in identifying threats, the better position you are for dealing with thethe better position you are for dealing with the “ “sudden ripples” of change sudden ripples” of change

22

Five Forces Model of Competition

Substitute Products(of firms in

other industries)

Suppliers of Key Inputs

Buyers

PotentialNew

Entrants

RivalryAmong

CompetingSellers

23

Porter’s Five Competitive Forces

1. Threat of new entrants

2. Competitive rivalry

3. Threat of substitute products

4. Power of buyers

5. Power of suppliers

24

Gap Analysis

Vision Assessment

Gap = Basis for Long-Term Strategic Plan

Gap = Basis for Long-Term Strategic Plan

25

Setting ObjectivesSetting Objectives

The purpose is to convert the mission into Specific Performance Targets

Yardsticks for tracking company progress and performance.

Should be set at levels that require stretch and disciplined effort.

26

Crafting a StrategyCrafting a Strategy

27

Generic Strategies Porter’s Generic Strategies

1. Differentiation strategy» An organization seeks to distinguish itself from

competitors through the quality of its products or services. Developing an image perceived as unique

2. Overall cost leadership strategy» An organization attempts to gain competitive

advantage by reducing its costs below the costs of competing firms.

3. Focus strategy» An organization concentrates on a specific regional

market, product line, or group of buyers.

28

Types of Strategy Market Dominance

Achieved through:– Internal growth– Acquisitions – mergers and takeovers

New product development: to keep ahead of rivals and set the pace

Contraction/Expansion – focus on what you are good at (core competencies) or seek to expand into a range of markets?

Global – seeking to expand Global operations

29

Strategy ImplementationStrategy Implementation

Technology Human Resource Reward System

Decision Process

30

Characteristic of the Good Characteristic of the Good Strategy ImplementationStrategy Implementation

An ongoing exercise Proper Communication Contingency Plan Emphasis on Organisation Culture Regular Review Importance of Planning

31

DECISION-MAKING

32

What is Decision-Making?

Decision making

– The process of choosing a course of

action for dealing with a problem or

opportunity.

33

Types of Decisions

– Programmed decisions.

» Involve routine problems that arise regularly

and can be addressed through standard

responses.

– Nonprogrammed decisions.

» Involve nonroutine problems that require

solutions specifically tailored to the situation at

hand

34

Decision environments

– Certain environments.

– Risk environments.

– Uncertain environments.

35

Certain environments.

– Exist when information is sufficient to

predict the results of each alternative in

advance of implementation.

– Certainty is the ideal problem solving and

decision making environment.

36

Risk environments– Exist when decision makers lack complete

certainty regarding the outcomes of various courses of action, but they can assign probabilities of occurrence.

– Probabilities can be assigned through objective statistical procedures or personal intuition.

37

Uncertain environments.– Exist when managers have so little information

that they cannot even assign probabilities

.– Uncertainty forces decision makers to rely on

individual and group creativity to succeed in problem solving.

– Also characterized by rapidly changing:» External conditions.» Information technology requirements.

38

Classical Vs. Behavioral Decision Theory

Classical decision theory.– Views the decision maker as acting in a

world of complete certainty.

Behavioral decision theory.– Accepts a world with bounded rationality

and views the decision maker as acting only in terms of what he/she perceives about a given situation.

39

Classical decision theory

– The classical decision maker:» Faces a clearly defined problem.» Knows all possible action alternatives and

their consequences.» Chooses the optimum alternative.

– Is often used as a model of how managers should make decisions.

40

Rationality

Problem is clear and unambiguous. Single goal. All alternatives are known. Clear and constant preferences. Maximum payoff. The decision is in the best interest of

the organization—not the manager.

41

Behavioral decision theory

– Recognizes that human beings operate with:

» Cognitive limitations.» Bounded rationality.

– The behavioral decision maker:» Faces a problem that is not clearly defined.» Has limited knowledge of possible action

alternatives and their consequences.» Chooses a satisfactory alternative.

42

Bounded Rationality

Behavior that is rational within the parameters of a simplified model that captures the essential features of the problem.

Making a decision that is “good enough.” (Satisficing Model)

43

Bounded Rationality

LimitedSearch

InadequateInformationand Control

DecisionsSatisficing

44

Other decision making models

The garbage can model– A model of decision making that views

problems, solutions, participants, and choice situations as mixed together in the “garbage can” of the organization.

Incremental Model

45

Intuitive Decision Making

An unconscious process of making decisions on the basis of experience and accumulated judgment.

– Making decisions on the basis of gut feeling

– It does play an important role in managerial decision making.

46

Too Slow Too Quick

• Procrastination

• Indecision

• “Analysis paralysis”

• “Ready, fire, aim”

• Impulsive, compulsive

• Arbitrary

Range of decision makingRange of decision making

47

Cultural and Social Influences

Decision-Making Process

MOTI VATION

Perception

Learning and Memory

Attitudes

AFFECT

Problem Recognition Search Evaluation Choice Outcomes

Ethnicity, Race, and Religion

Household and ref. groups

Socio-Econ: income,educ.

Demographic:Gender, Age

Psychographics: Lifestyle, Person.

Basic Psychological Processes

48

Group Decision-Making

49

Forms of Group Decision Making

Interacting groups

Delphi Methods

Nominal groups

50

Decision-Making Techniques Marginal Analysis

Financial Analysis Break-Even Analysis Ratio Analysis OR Technique

» Linear Programming» Queuing Method» Game Theory» Simulation» Decision Tree