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Business Management in the Built Environment
Lesson Six :Strategic Formulation usingVarious Strategic Tools &
Options
Lesson Six :Strategic Formulation usingVarious Strategic Tools &
Options
sl/BMBE/2016 1
S t r a t e g i ch i s t o r y
C u r r e n ts t r a t e g y
O b j e c t i v e s
S t r a t e g i ca n a l y s i s
V i s i o n
O r g a n i s a t i o n a la n a l y s i s
E n v i r o n m e n t a la n a l y s i s E v e n t s
S t r a t e g i co p t i o n s
• B a s i s• D i r e c t i o n• M e t h o d s
E v a l u a t i o n• S u i t a b i l i t y• F e a s i b i l i t y• A c c e p t a b i l i t y
I m p l e m e n t a t i o n• L e v e l o f c h a n g e• C o m p e t e n c i e s• S t r u c t u r e• S y s t e m s• R e s o u r c e s• S t y l e
M e a s u r ep e r f o r m a n c e
R e v i s e o b j e c t i v e sC o m p a r em e a s u r e m e n tt o s t a n d a r d s
F e e d b a c k
F e e d b a c k
A review of the strategy processBusiness Management in the Built Environment
S t r a t e g i ch i s t o r y
C u r r e n ts t r a t e g y
O b j e c t i v e s
S t r a t e g i ca n a l y s i s
V i s i o n
O r g a n i s a t i o n a la n a l y s i s
E n v i r o n m e n t a la n a l y s i s E v e n t s
S t r a t e g i co p t i o n s
• B a s i s• D i r e c t i o n• M e t h o d s
E v a l u a t i o n• S u i t a b i l i t y• F e a s i b i l i t y• A c c e p t a b i l i t y
I m p l e m e n t a t i o n• L e v e l o f c h a n g e• C o m p e t e n c i e s• S t r u c t u r e• S y s t e m s• R e s o u r c e s• S t y l e
M e a s u r ep e r f o r m a n c e
R e v i s e o b j e c t i v e sC o m p a r em e a s u r e m e n tt o s t a n d a r d s
F e e d b a c k
F e e d b a c k
sl/BMBE/20162
As organisations are operating in a competitiveworld, strategies are developed to cope with theneed to survive in the marketplace.
Strategic management is supposed to helporganisations steer through changes and shifts inthe environment to secure future growth andsustainable success through the process ofanalysis, selection of options and then makingdecisions to move forward
Strategic formulation using tools and optionsBusiness Management in the Built Environment
As organisations are operating in a competitiveworld, strategies are developed to cope with theneed to survive in the marketplace.
Strategic management is supposed to helporganisations steer through changes and shifts inthe environment to secure future growth andsustainable success through the process ofanalysis, selection of options and then makingdecisions to move forward
sl/BMBE/2016 3
Formulations of strategies are generallybased on the different schools of thoughts inwhich management based their process offormulation on.We need to revisit the strategies, approaches& tools , particularly the 4 perspectives asmentioned by Richard Whittington, the type offormulation and process of working towardsthe outcomes differ..
Business Management in the Built Environment
STRATEGIC TOOLS AND OPTIONS
Formulations of strategies are generallybased on the different schools of thoughts inwhich management based their process offormulation on.We need to revisit the strategies, approaches& tools , particularly the 4 perspectives asmentioned by Richard Whittington, the type offormulation and process of working towardsthe outcomes differ..
sl/BMBE/2016 5
Richard Whittington’s typology
His 4 perspectives which is alsocalled
the 2 X 2 framework
Business Management in the Built Environment
His 4 perspectives which is alsocalled
the 2 X 2 framework
sl/BMBE/2016 6
2x2 matrix or 2 x 2 framework
•X and Y axis used as two broad dimensions to scope outgeneric perspectives on strategy
– The outcomes of strategy (profit maximisation /plural)– Processes (deliberate/emergent)
•This is used to provide 4 perspectives– Classical– Evolutionary– Systemic– Processual
Business Management in the Built Environment
•X and Y axis used as two broad dimensions to scope outgeneric perspectives on strategy
– The outcomes of strategy (profit maximisation /plural)– Processes (deliberate/emergent)
•This is used to provide 4 perspectives– Classical– Evolutionary– Systemic– Processual
Profit
Plural
Deliberate Emergent
sl/BMBE/2016 7
Classical
•Analyse, plan and command– Profitability/ Rational planning– Dominant view (linked to classical school of thought )– Informed by economics -Rational economic man
• Self interest & preservation of organisation• solely concerned with maximising return on investment
– Top down approach (militaristic)– Separates formulation from implementation– Implementation is based on the military –style order ;– strategy will be carried out via discipline and obedience
Profit
Plural
Deliberate EmergentX
Business Management in the Built Environment
•Analyse, plan and command– Profitability/ Rational planning– Dominant view (linked to classical school of thought )– Informed by economics -Rational economic man
• Self interest & preservation of organisation• solely concerned with maximising return on investment
– Top down approach (militaristic)– Separates formulation from implementation– Implementation is based on the military –style order ;– strategy will be carried out via discipline and obedience
sl/BMBE/2016 8
Systemic
•Play by the local rules•The social system within which strategies are developed arecrucial•Contextual sensitivity to : Markets; Countries & Cultures•Social systems (and their associated societies) are not solelyprofit maximising and social systems are based on: Class ;Professionalism & Gender•Strategy & planning is also bounded by particular socialsystems/rules/norms.
Profit
Plural
Deliberate EmergentX
Business Management in the Built Environment
•Play by the local rules•The social system within which strategies are developed arecrucial•Contextual sensitivity to : Markets; Countries & Cultures•Social systems (and their associated societies) are not solelyprofit maximising and social systems are based on: Class ;Professionalism & Gender•Strategy & planning is also bounded by particular socialsystems/rules/norms.
sl/BMBE/2016 9
Processual
•Stay close to the ground and go with the flow!•Processual managers do not believe in planning•Strategy emerges from sticky and messy context based onPragmatic; Learning & Compromise•Optimal strategy is not main concern as managers usuallyconcedes to bounded rationality – using the ‘prisonersdilemma’•Organisations are socially complex – bargaining and bartersystem between interest groups•Change disrupts power dynamics and thus strategic change isviewed with suspicion•Strategy is discovered in action (through implementation?)
Profit
Plural
Deliberate EmergentX
Business Management in the Built Environment
•Stay close to the ground and go with the flow!•Processual managers do not believe in planning•Strategy emerges from sticky and messy context based onPragmatic; Learning & Compromise•Optimal strategy is not main concern as managers usuallyconcedes to bounded rationality – using the ‘prisonersdilemma’•Organisations are socially complex – bargaining and bartersystem between interest groups•Change disrupts power dynamics and thus strategic change isviewed with suspicion•Strategy is discovered in action (through implementation?)
sl/BMBE/2016 10
Evolutionary
•Costs low and options open•The environment moves too quickly and unpredictablyto wait for rationalised action so planning based on best fit;•Only the best performers survive – law of the jungle•Strategy can be a delusion•Strategising method is day by day muddling through•as managers believe that tomorrow is just too difficult andimpossible to predict.•Best planning method is drawing upon on diversification so as tosurvive
Profit
Plural
Deliberate EmergentX
Business Management in the Built Environment
•Costs low and options open•The environment moves too quickly and unpredictablyto wait for rationalised action so planning based on best fit;•Only the best performers survive – law of the jungle•Strategy can be a delusion•Strategising method is day by day muddling through•as managers believe that tomorrow is just too difficult andimpossible to predict.•Best planning method is drawing upon on diversification so as tosurvive
sl/BMBE/2016 11
As organisations are operating in acompetitive world, strategies are developedto cope with the need to survive in themarketplace.
Strategic management is supposed to helporganisations steer through changes andshifts in the environment to secure futuregrowth and sustainable success .
Another look at strategic positioning in reality …D39BU – Business Management in the Built Environment
As organisations are operating in acompetitive world, strategies are developedto cope with the need to survive in themarketplace.
Strategic management is supposed to helporganisations steer through changes andshifts in the environment to secure futuregrowth and sustainable success .
sl/BMBE/2016 12
• Just like you and I, without a long termgoal, we will be aimless, so organisationsneed goals, vision, mission to enable themto sail through the storms of competition,changes in the market etc..
In fact, strategic planning is similar to theart of war (Sun Tze) – you need tounderstand strategic positioning and alsothe process of analysis, formulation andthen implementation of your tactics andoperations in order to succeed in business
Strategic positioning in reality …D39BU – Business Management in the Built Environment
• Just like you and I, without a long termgoal, we will be aimless, so organisationsneed goals, vision, mission to enable themto sail through the storms of competition,changes in the market etc..
In fact, strategic planning is similar to theart of war (Sun Tze) – you need tounderstand strategic positioning and alsothe process of analysis, formulation andthen implementation of your tactics andoperations in order to succeed in business
sl/BMBE/2016 13
Strategies are based on certain schoolsof thoughts on which differs in the waystrategic planning is done
3 basic thoughts via …1. Classical/rational planning school2. The design school3. The positioning school
D39BU – Business Management in the Built Environment
3 basic thoughts via …1. Classical/rational planning school2. The design school3. The positioning school
sl/BMBE/2016 14
IF THE ORGANISATION USES THE CLASSICAL SCHOOL ORAPPROACH , THEN THE STRATEGY WILL BE:A)Top down, bureaucratic approach of topmanagement decision which is cascaded down tothe bottom of the hierarchy in the organisationB) The leadership style will be telling and informingand not participative or consultativeC) Profit and shareholders’ interest are paramount toreach goals and objectives for the organisation
D39BU – Business Management in the Built Environment
IF THE ORGANISATION USES THE CLASSICAL SCHOOL ORAPPROACH , THEN THE STRATEGY WILL BE:A)Top down, bureaucratic approach of topmanagement decision which is cascaded down tothe bottom of the hierarchy in the organisationB) The leadership style will be telling and informingand not participative or consultativeC) Profit and shareholders’ interest are paramount toreach goals and objectives for the organisation
sl/BMBE/2016 15
2. IF THE ORGANISATION USES THE DESIGNSCHOOL OR APPROACH
a)It will practise the systems view and everythingwill be according to a certain system or design.b)The management may adopt a selling orcollaborating style of leadership so thateveryone buys into the organisation goals andachieve together.c)Going with the systems especially social andtechnological systems to be in place -systematic 7 step approach is often used ..
D39BU – Business Management in the Built Environment
a)It will practise the systems view and everythingwill be according to a certain system or design.b)The management may adopt a selling orcollaborating style of leadership so thateveryone buys into the organisation goals andachieve together.c)Going with the systems especially social andtechnological systems to be in place -systematic 7 step approach is often used ..
sl/BMBE/2016 16
Diagram showing the process of strategic planning –a 7-step model
Vision &mission Swot analyss
STEEP & Scenarios Planning
D39BU – Business Management in the Built Environment
sl/BMBE/2016 17
Strategic analysis & optionsdecision making
implementation
Evaluation & monitoring
3. THE POSITIONING SCHOOL :MICHAEL PORTER’S MODEL – ALSO PART OF THEEVOLUTIONARY/COMPETITIVE PERSPECTIVE
This is the strategic approach based oncompetition –survival of the fittest – so the strategicfocus will be on maximising competitive strategies tostay ahead of competitionPorter argues that profitability of an organisation liesin the power of the organisation to position itselfagainst the others in the industry and how it uses itscapabilities to handle its bargaining position tosustain growth and success.
D39BU – Business Management in the Built Environment
This is the strategic approach based oncompetition –survival of the fittest – so the strategicfocus will be on maximising competitive strategies tostay ahead of competitionPorter argues that profitability of an organisation liesin the power of the organisation to position itselfagainst the others in the industry and how it uses itscapabilities to handle its bargaining position tosustain growth and success.
sl/BMBE/2016 18
Porter’s diamond diagram
D39BU – Business Management in the Built Environment
Strategy,structure &rivalry
Factorconditions
Govt
sl/BMBE/2016 19
Demandconditions
Factorconditions
Related &supportingindustries chance
According to Porter….a) Factor conditions – highly specialised
resources developed in different countrieswhere there is a large pool of skilled manpoweror labour
b) Related and supporting industries which helpto expedite the process for production of goodsand services
c) Demand conditions where consumers forcecompanies to innovate and shape their marketorientation in such a way that caters to theirneeds and wants
d) Strategy, structure and rivalry which will behighlighted in the study of 5-forces theory
D39BU – Business Management in the Built Environment
a) Factor conditions – highly specialisedresources developed in different countrieswhere there is a large pool of skilled manpoweror labour
b) Related and supporting industries which helpto expedite the process for production of goodsand services
c) Demand conditions where consumers forcecompanies to innovate and shape their marketorientation in such a way that caters to theirneeds and wants
d) Strategy, structure and rivalry which will behighlighted in the study of 5-forces theory
sl/BMBE/2016 20
STRUCTURAL ANALYSIS OF INDUSTRIES orCOMPETITIVE ANALYSIS OF THE INDUSTRY
5 FORCES AFFECTING ANY ORGANISATION ARE:THREAT OF NEW ENTRANTSTHREAT OF SUBSTITUTESSUPPLIERS’ BARGAINING POWERBUYERS’ BARGAINING POWERINDUSTRY COMPETITIVE RIVALRY
D39BU – Business Management in the Built Environment
sl/BMBE/2016 21
5 FORCES AFFECTING ANY ORGANISATION ARE:THREAT OF NEW ENTRANTSTHREAT OF SUBSTITUTESSUPPLIERS’ BARGAINING POWERBUYERS’ BARGAINING POWERINDUSTRY COMPETITIVE RIVALRY
MICHAEL PORTER’S 5 FORCES MODEL /THEORY
D39BU – Business Management in the Built Environment
sl/BMBE/2016 22
OTHER STRATEGIC TOOLS & TECHNIQUESUsing Historical Analysis:• Analyse historical accounts of strategy• Analyse past, present and potential future events• Analyse and seek to understand the lifecycle of the market(s)
the organisation operates within
Doing a strategic group analysis to determine the strategy ofothers (prisoners dilemma)• Analyse the segmentation of the market
• Doing a full SWOT analysis•Conducting a resource audit and a resource utilisationanalysis to determine how resources are actually deployedand on the organisation & environmental analysis or audit
Business Management in the Built Environment
Using Historical Analysis:• Analyse historical accounts of strategy• Analyse past, present and potential future events• Analyse and seek to understand the lifecycle of the market(s)
the organisation operates within
Doing a strategic group analysis to determine the strategy ofothers (prisoners dilemma)• Analyse the segmentation of the market
• Doing a full SWOT analysis•Conducting a resource audit and a resource utilisationanalysis to determine how resources are actually deployedand on the organisation & environmental analysis or auditsl/BMBE/2016 23
OTHER STRATEGIC TOOLS & TECHNIQUES SUCH AS USINGA VALUE CHAIN ANALYSIS WITH THE CHECKLIST OFRESOURCES AND ACTIVITIES
Business Management in the Built Environment
Support activitiesCorporate structureHuman resourcesTechnological developmentTechnological development
purchasing
Inboundlogistics
mfg
Outbound
logistics
Mktg
& sales
services
Primary activitiessl/BMBE/2016 24
OTHER STRATEGIC TOOLS & TECHNIQUES
• USING A PORTFOLIO ANALYSIS :to see if the company is in a good position tocapitalise on market growth in markets where theyhold a large share
Business Management in the Built Environment
• USING A PORTFOLIO ANALYSIS :to see if the company is in a good position tocapitalise on market growth in markets where theyhold a large share
sl/BMBE/2016 25
Theoretically offer the best profit & growth
Business Management in the Built Environment
Portfolio Analysis or Market Analysis:the growth / share matrix or the BCG Matrix
Low growth in a poor market / weakness
Profits best utilised elsewhere
Requires large investment for development
sl/BMBE/2016 26
•Portfolio Analysis or Market Analysis:•BCG proposed the matrix is presented in Fig 14 of Pg 19Unit 5
Market ShareLowHigh
Business Management in the Built Environment
MarketGrowth
Low
Low
High
High
sl/BMBE/2016 27
Portfolio analysis or matrix is to assess the balanceand contribution to the strategic capability ofthe organisation.Implications of using this matrix:a) This analysis is applied to SBUs and not the whole marketb) Management must develop the capability to review the SBUc) Different targets are set for different segmentsd) Too much focussing on one part may be bad for the
whole organisation for example stars and cash cowsmust be managed well to prevent conflict
e) Dogs may be retained in order to become loss leaders
Business Management in the Built Environment
Portfolio analysis or matrix is to assess the balanceand contribution to the strategic capability ofthe organisation.Implications of using this matrix:a) This analysis is applied to SBUs and not the whole marketb) Management must develop the capability to review the SBUc) Different targets are set for different segmentsd) Too much focussing on one part may be bad for the
whole organisation for example stars and cash cowsmust be managed well to prevent conflict
e) Dogs may be retained in order to become loss leaders
sl/BMBE/2016 28
OTHER STRATEGIC TOOLS & TECHNIQUES
DIVERSIFICATION ANALYSIS OR MATRIX
Existing PortfolioServices /Products:
New / RelatedServices/Products:
New / UnrelatedServices /Products:
Business Management in the Built Environment
Model
Existing Clients:
Same Geographical Area
Existing Clients:
New Geographical Area
New Clients:
Same Geographical Area
New Clients:
New Geographical Area
Existing
Strategy
Expansion
Strategy
Expansion
Strategy
Expansion
Strategy
Expansion
Strategy
Expansion
Strategy
Diversification
Strategy
Diversification
Strategy
Expansion
Strategy
Diversification
Strategy
Conglomerate
Diversification
Conglomerate
Diversificationsl/BMBE/2016 29
All the tools used are for understanding anddetermining which options to choose; howresources have been deployed in the past andhow effective these strategies were;how effective is the performance of theorganisation against the industry norms and tosee if the firm able to benchmark across otherindustries to determine the scope for changeand strategy as well as to check the balance ofresources an organisation owns or controls –Is the organisation balanced enough to beflexible?
Business Management in the Built Environment
All the tools used are for understanding anddetermining which options to choose; howresources have been deployed in the past andhow effective these strategies were;how effective is the performance of theorganisation against the industry norms and tosee if the firm able to benchmark across otherindustries to determine the scope for changeand strategy as well as to check the balance ofresources an organisation owns or controls –Is the organisation balanced enough to beflexible?
sl/BMBE/2016 30
SELECTION OF OPTIONS : PORTER’S GENERIC STRATEGIESUNIT 6 PG 1-3
Com
pet
itiv
esc
ope
Competitive Advantage
DifferentiationLower cost
Business Management in the Built Environment
Com
pet
itiv
esc
ope
Narrow target
Broad targetCost
Leadership
Cost Focus
BroadDifferentiation
DifferentiationFocus
sl/BMBE/2016 31
3. Hybrid 4.Differentiation 5. FocusedDifferentiation
StrategicChoice/options
Business Management in the Built EnvironmentSELECTION OF OPTIONS : PORTER’S GENERIC STRATEGIESPG 2-UNIT 6
2. Low Price 6. IncreasedPrice /
Standard Value
1. Low Price /Added Value
8. Low Value /Standard Price
7. IncreasedPrice / Low
Value
StrategicChoice/options
What is of value tothe user of the
product / service?
sl/BMBE/2016 32
DISCUSSION AND ASSIGNMENT
1. Critically appraise the purpose and process ofstrategic analysis and, fully describe three tools ortechniques that those responsible for strategydevelopment in a built environment organisation maychoose to adopt.
2. Explain what you understand by RichardWhittington’s 2x2 Framework of generic perspective onstrategy. Draw the diagrams depicting the 4perspectives relating to his theory.
Business Management in the Built Environment
1. Critically appraise the purpose and process ofstrategic analysis and, fully describe three tools ortechniques that those responsible for strategydevelopment in a built environment organisation maychoose to adopt.
2. Explain what you understand by RichardWhittington’s 2x2 Framework of generic perspective onstrategy. Draw the diagrams depicting the 4perspectives relating to his theory.
sl/BMBE/2016 33
Core reading for module
Useful reading material◦ Carter, C., Clegg, S., Kornberger, M (2008) A very short, fairly
interesting and reasonably cheap book about studying organisations,Sage, London
◦ Clegg, S., Kornberger, M., Pitsis, T. (2005) Managing andOrganisations: An introduction to theory and practice, Sage, London
◦ Whittington, R. (2001) (2nd Ed.) What is Strategy – and does itmatter?, Thomson, London
◦ Mintzberg, H., Ahlstrand, B., Lampel, J. (1998) Strategy Safari: thecomplete guide through the wilds of strategic management, PrenticeHall, London
◦ Langford, S., Male, S. (2001) Strategic Management in Construction,Blackwell, Oxford
◦ Journal papers.....................
34D39BU – Strategic Management in the Built Environment
Useful reading material◦ Carter, C., Clegg, S., Kornberger, M (2008) A very short, fairly
interesting and reasonably cheap book about studying organisations,Sage, London
◦ Clegg, S., Kornberger, M., Pitsis, T. (2005) Managing andOrganisations: An introduction to theory and practice, Sage, London
◦ Whittington, R. (2001) (2nd Ed.) What is Strategy – and does itmatter?, Thomson, London
◦ Mintzberg, H., Ahlstrand, B., Lampel, J. (1998) Strategy Safari: thecomplete guide through the wilds of strategic management, PrenticeHall, London
◦ Langford, S., Male, S. (2001) Strategic Management in Construction,Blackwell, Oxford
◦ Journal papers.....................
sl/BMBE/20
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