Part III:Organizational Strategy Formulation: Dealing with the Bureaucracy’s Environment

Topics Last Week

I enjoyed the case last week, watch out for the quality of your presentation. Do you stand in a corner? Are you standing in front of the audience for questions? The simple stuff is important.

Topics Housekeeping:

The library should be okay now Have a look at the book

team management Exam Did you “listen” to a problematic person? Statistics Themes of case Antonio

Strategy

StrategyWhat did you think of the differences between

the two chapters?

When did we mention goals before? budget as strategy performance program/project management goals define boundaries of an organization conflicting goals in public administration

Where does the term strategy come from?

What do you think of the difference between mission, goals, and objectives?

Strategy Definition:

Strategy as the basic pattern of current and planned resource deployments and environmental interactions that indicate how an organization will achieve its goals.

“If its grand strategy is correct, any number of tactical errors can be made and yet the enterprise proves to be successful”

“Predicting is easy except for the future”, in other words all strategies have to be updated

It’s not just a document, it is a way of connecting objectives to activities and resource allocations

Goals and Objectives Provide Direction

to know what your final goal is. Unite forces/galvanize

priorities. Are the basis for planning & decision-making

will this plan/decision takes us closer to our goal? Help to measure progress & identify problems

essential for control (cost, quality, time, etc.).

GOALS must be SMART

Specific (e.g., place, who is responsible, etc.)

Measurable Acceptable/commitment Realistic Time bound

& support the Mission Statement

Plans

Strategic: broad long term relation with the

environment top-management

Operational: limited short term internal line-

management

Tactical

Analyzing the Environment (O & T)Analyzing the Environment (O & T)

Assessing Capacities (S & W) Assessing Capacities (S & W)

Identifying Activities (Profit, Growth, Power)Identifying Activities (Profit, Growth, Power)

What Is Strategic Management?What Is Strategic Management?What Is Strategic Management?What Is Strategic Management?

Why Is StrategicWhy Is StrategicManagement ImportantManagement Important?

GlobalGlobalCompetitionCompetition

TechnologicalTechnologicalChanges Changes

EnergyEnergyCrisesCrises

DeregulationDeregulationof Industryof Industry

Levels of StrategyLevels of Strategy

Corporate/Corporate/OrganizationOrganization

Functional Functional or Program/or Program/

ProjectProject

Business/Business/DepartmentDepartment

Top ManagementTop ManagementSets OrganizationalSets Organizational

StrategyStrategy

Manufacturing or Manufacturing or Service DeliveryService Delivery

& Marketing& Marketing

HumanHumanResourcesResources

StrategicStrategicBusiness Unit orBusiness Unit or

Department 1Department 1

StrategicStrategicBusiness Unit orBusiness Unit or

Department 2Department 2

StrategicStrategicBusiness Unit orBusiness Unit or

Department 3Department 3

ResearchResearch& Development& Development

FinanceFinance& Accounting& Accounting

Strategic Business Unit/Department

A single business (or collection of businesses) or large chunk of the bureaucracy that is independent and formulates its own strategy

MultibusinessCorporation

StrategicBusiness Unit

StrategicBusiness Unit

StrategicBusiness Unit

HRR&D FinanceProductionMarketing

Functionallevel

Businesslevel

Corporatelevel

LEVELS OF STRATEGY

Four levels of strategy Mission Organization-level strategy

Seeks to determine what businesses an organization should be in: Product, Market, Identity

Business-level strategy Seeks to determine how an organization should

compete/act in each of its businesses: (Portfolio analyses, Lifecycle analyses)

Functional-level strategy Seeks how to support the business level strategy.

Mission statement components

Product/Service: in families Customer market: segmented Geographical domain Technology Policy: concern for survival Concept: capabilities, structure Public image: environment.

Mission Statement

Central reason for existence. Recognizable identity. ‘core business’, core activity. Your market/target groups. Relatively permanent. Broad goals. Place in the world.

GrandGrand

StrategiesStrategiesGrandGrand

StrategiesStrategies

StabilityStabilityStabilityStability

GrowthGrowthGrowthGrowth

CombinationCombinationCombinationCombination

Identify CurrentIdentify CurrentMission, (GrandMission, (Grand

Strategy)Strategy)

Identify CurrentIdentify CurrentMission, (GrandMission, (Grand

Strategy)Strategy)

Formulate & select Formulate & select (alternative)(alternative)StrategiesStrategies

Formulate & select Formulate & select (alternative)(alternative)StrategiesStrategies

Implement & Implement & adjustadjust

StrategiesStrategies

Implement & Implement & adjustadjust

StrategiesStrategies

EvaluateEvaluateResultsResults

EvaluateEvaluateResultsResults

1

AnalyzeAnalyzeResources/Resources/CapacitiesCapacities

AnalyzeAnalyzeResources/Resources/CapacitiesCapacities

NoteNote WeaknessesWeaknessesand Strengthsand Strengths

NoteNote WeaknessesWeaknessesand Strengthsand Strengths

AnalyzeAnalyzeEnvironmentEnvironment

AnalyzeAnalyzeEnvironmentEnvironment

NoteNoteThreats andThreats and

OpportunitiesOpportunities

NoteNoteThreats andThreats and

OpportunitiesOpportunities

2

3

4

5

6

7

8 StrategyStrategy

SWOTSWOTAnalysisAnalysis

ThreatsThreatsOpportunitiesOpportunities

StrengthsStrengths WeaknessesWeaknesses

J.S . van Dam 00.PPT 10

J.S . van Dam 00.PPT 11

“SWOT” -analysis Strengths. Weaknesses. Opportunities. Threats.

I prefer OTWS (organization needs to be outward looking

(customer centered, if you will)). Do analysis in light of your mission (product(s)/service(s),

marktets/clients, the identity of the organization). You can start with brainstorming. Watch out for disruptive

events. There are also more quantitative methods. Be participatory

MANAGEMENT OF

ORGANIZATIONS

Demographics

Political system

Economic system

COMPETITIVE

Competitors New Entrants

Substitute Products

CustomersSuppliers

TECHNOLOGICAL

Knowledge Equipment

ToolsTechnical

POLITICAL-LEGAL

Governments

Unions

Laws

Interest

Share holders

CULTURAL

Values

Language

Religion

ENVIRONMENTAL FORCES

Natural Resources

groups

External

Strategy Staff

Structure

Systems(SOP,e.g.,

budget, program)

Superordinategoals

(mission)

Style(Leadership)

Skills(capacities, competence)

Internal

Task 4: Generate ALTERNATIVE STRATEGIES

Task 5: Develop STRATEGIC PLAN

Task 6: Develop TACTICAL PLANS

Task 7: Control and asses RESULTS

Task 8: Repeat PLANNING PROCESS

Task 3

Assess

STRENGTH &

WEAKNESSES

Strategic Planning Process

Task 1

Develop

MISSION &

OBJECTIVES

Task 2

Diagnose

THREADS &

OPPORTUNITIES

EXTERNFORMULATION

OPPORTUNITIESTHREATS

INTERNALANALYSIS

STRENGTHSWEAKNESSES

STRATEGYFORMULATION

MANAGEMENTVALUES

STAKEHOLDERS

CAPACITIESSUCCESFACTOS

STRATEGYSELECTION

STRATEGYIMPLEMENTATION

Prentice Hall, 1998 12Chapter 8

AbundantEnvironmentalOpportunities

CriticalEnvironmental

Threats

CriticalWeaknesses

Environmental Status

FirmStatus

ValuableStrengths Organi-Organi-

zationalzationalGrowthGrowth

Org.Org.StabilityStability

Org.Org.RetrenchmentRetrenchment

SWOT Analysis and Grand Strategies

MISSION STATEMENTFounder, Board of Directors, Parliament

Decades

STRATEGIC PLANSTop Management and Middle Management

1 - 3 Years, wide scope

OPERATIONAL PLANSMiddle and First Line Managers

Budget Year, Day to Day, narrow scope

Hierarchy of plans

phase 1Organizational

Mission

phase 2Strategic

Objectives

phase 3Departmental

Objectives

phase 4Team + Individual

Participation

phase 5Action

Planning

phase 6Implementation

phase 7Performance Reviews

Control

Strategicplanning

Tacticalplanning

Operationalplanning

Strategy Process

MakeROI of

20% after taxes

Increase salesup to $ 6000

Increasegross profitup to $ 800

Reduceproduction cost

by 8%

Increase work-forceproductivity

by 5%

- Refocus advertising efforts- Penetrate new markets- Develop new products

- Consolidate functions- Clean out stock- Sell obsolete equipment

- Improve equipment + tools- Improve material handling- Improve planning

- Management training prgms- Work fore training prgms- Hire skilled labor

For 2000:

For 2000:

ROI = Return On Investment

Strategic Tactical Operational

Strategy

Many other forms of analysis stakeholder historical cost/benefit institutional core competencies / new markets

Implementation Remember: routine drives out

planning. Many plans don’t get implemented. Many decisions don’t get follow-up.

Selection of strategy(ies) also implies pre-implementation feasibility

Good strategy helps implementation: sense of purpose higher expectations

Implementation

Some do’s and don’t’s especially in public administration

don’t stop ongoing activities you can loose support, get delays yet, high workload

use pilots be incremental (muddling through)

are tasks simple & manageable great ideas fail, because they can be

too much to swallow at once

Implementation Check your capacities regularly, e.g.,

if pilot project fails, establish why this is the case

When restaffing is possible, this can greatly help, but it is not always possible. Same holds often true for changing structure (structure follows strategy)

Sequester resources for strategy formulation and entrepreneurial projects.

Implementation Do you need to simplify

organizational processes (procurement, delegation of authority)?

Leadership is important: to infuse the organization with value; to develop the organization’s

distinctive competence to distribute incentives to structure & mediate conflicts

Why goals are unimportant Do people always follow their

goals? Meaning is retrospective Attack on rationality Sometimes people start working on

something, and then justify it. Discussion on rational approaches.