(c) Macmillan & Tampoe 20011

The Strategy Formulation Process

Chapter 8

Strategic Assessment:

General Principles

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Purpose of Strategic Assessment

Anchors future strategies in reality Relates strategic intent to the present Address both external and internal

aspects of context Combine analysis with judgement

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Analysis Vs. Assessment

Assessment is more than analysis Assessment focuses on testing decisions for

validity in practice Analysis gives undue weight to what can be

measured Assessment takes almost equal notice of

quantitative and qualitative data Good assessment should give a balanced

understanding of the context

(c) Macmillan & Tampoe 20014

Key Elements of Assessment Process

External analysisInternal analysisStrategic intentOperational resultsStrategic choice

(c) Macmillan & Tampoe 20015

Figure 8.1 Factors likely to influence Strategic Assessment

StrategicAssessment

External Analysis Business Environment, Industry,

Competitors & Threats and Opportunities

Operational ResultsInternal Analysis

Resources, Capabilities& Competencies

Strengths and Weaknesses

Trigger

Strategic Intent

StrategicChoice

Results

6 (c) Macmillan & Tampoe 2001

Figure 8.2 Reconsidering Strategies

ReconsiderStrategy

ActionReviewResults

Trigger

Operational Cycle

Strategic Cycle

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Questions for Strategic Assessment to address

What are our chances of survival if we continue as we are?

What are the best opportunities for growth given our existing capabilities?

What are our competitive advantages and disadvantages?

Where can we invest to improve our capabilities most efficiently?

What changes can we realistically implement?

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Selecting analytical tools

Vast range of tools available Usually use several tools but choice is

important Choice depends on:

Data available Nature of issues to be resolved Time and skills available

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Figure 8.3 Techniques in use in strategic planning processes

Technique % Using

Core competencies analysis 72Scenario Planning 69Benchmarking 56Total Quality Management 44Shareholder Value Analysis 44Value Chain Analysis 44Business Process Redesign 33Time-based Competition 25

Adapted from: Wilson, I. “Strategic Planning Isn’t Dead - it changed” Long Range Planning 1994

(c) Macmillan & Tampoe 200110

Assessing competitive advantage

Cost-based advantage Differentiation advantage First mover advantage Time-based advantage Technology-based advantage Corporate advantage

(c) Macmillan & Tampoe 200111Adapted from: Collis, D.J. & Montgomery, C.A. “Creating Corporate Advantage” HBR 98303

Figure 8.4 The Triangle of Corporate Strategy

CompetitiveAdvantage

Coordination ControlOrganization. Systems, Processes

BusinessesResources Vision

Goals & Objectives

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Figure 8.5 Successful enterprises tend to make coherent choices

Adapted from: Collis, D.J. & Montgomery, C.A. “Creating Corporate Advantage” HBR 98303

Nature of Resources

Scope of Business

Co-ordination Mechanisms

Control Systems

Corporate office size

general specialised

wide narrow

transferring

sharing

financial operating

small large

Enterprise A Enterprise B Enterprise C

(c) Macmillan & Tampoe 200113

Figure 8.6 The SWOT diagram may summarise the results of analyses

Strengths Weaknesses

OpportunitiesThreats

InternalAnalyses

InternalAnalyses

ExternalAnalyses

ExternalAnalyses

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Strategic Assessment of a business as a whole

Questions What business are we really in? What real customer needs do we

satisfy? What problem do we solve for our

customers?