Strategies -Unit I C

8/13/2019 Strategies -Unit I C

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Modern tool for analysis of the

situation

Internal factors

External factors

INTERNAL

STRENGTHS (S)

INTERNAL

WEAKNESSES (W)

EXTERNAL

OPPORTUNITIES (O)

SO STRATEGY

MAXIMAXI

(successful strategy)

WO STRATEGY

MINI - MAXI

(Overcome weakness)

EXTERNAL

THREATS (T)

ST STRATEGY

MAXIMINI(Avoid threats)

WT STRATEGY

MINIMINI(Retrenchment

strategy)

TOWS MATRIX FOR STRATEGY FORMULATION


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FOUR ALTERNATIVE

STRATEGIES

WT strategy aims to minimise both

weaknesses and threats

WO strategy attempts to minimise the

weaknesses and maximises opportunities


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ST strategy based on organisations strengths

to deal with threats in the environment

SO strategydesirable situationuse

strengths to take advantage of opportunities


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Time dimensions and the TOWS

matrix

Internal and external environments are

dynamic

Strategic designer must prepare several

TOWS matrices at different points in time


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THE PORTFOLIO MATRIX

A tool for allocating resources

Developed by Boston Consulting Group (BCG)

Linkage between GROWTH RATE OF THE

BUSINESS AND COMPETITIVE POSITION

OF THE FIRM


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Question Marks

Weak market share, High growth rate

Require cash investment


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Stars

High growth, strongly competitive position

Have opportunities for growth, profit


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Cashcows

Strong competitive position, low growth rate

Makes product at low cost

Provide needed cash for operation


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Dogs

Low growth rate and weak market shareNot

profitable, generally disposed of

Developed for large corporations with several

divisions


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Major kinds of strategies and

policies

Growth

How much growth should occur?

How fast?

How should it occur?


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Finance

Clear strategy non business enterprise


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Organisation

How centralised or decentralised?

What kinds of departmental patterns?

How should staff positions be designed?


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Personnel

Human resources and relationships

Union relations, compensation, selection,

training, appraisal


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Public relations

Strategy designed closeness to the public

Fit all organisations and situations

Ex: Two major strategic areas


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Products or Services: Key questions

What is our business?

Who are our customers?

Customers wants?

Product leader?

Develop new products?

Potential competition


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Profits expected?

Basic form of strategy?

Advantages of serving customers


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Marketing

How do customers buy?

How is it best for us to sell?

Offer something that competitors do not?

Supply supporting services?

Best pricing strategy?

Best in serving customers?


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Industry Analysis and competitive

strategies by PORTER

Prof. Michael Porter at Harvard suggested

strategy formulation

Requires analysis of the industry


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Industry analysis

The competition among companies

The threat of new companies entering market

Possibility of using substitute products

Bargaining power of suppliers

Bargaining power of buyers


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Overall cost leadership strategy

Aims at reduction in cost

Based on experience

Close watch on costs in R & D

Objective is to have low cost structure

Ex: Lincoln Electric company produces arc

welding equipment and supplies

Low cost ivory soap sold in a broad market


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Differentiation strategy

Something unique in the industry

Ex: Caterpillar companyavailability of spare

parts


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Focused strategies

Concentrates on special groups of customers

Ex: Specific geographic region

Specific segment of market

Focused low cost strategy

Focused differentiation strategy


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Effective implementation of

strategies

Allocation of resources

Appropriate organisation structure

Effective management information system

(MIS)

Budgeting system

Reward systemsupports the strategy


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Strategic planning failures

Managers inadequately prepare

Information is insufficient

Goalstoo vague

Business units not identified clearly

Reviewnot done effectively

Link insufficient


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Successful implementation of

strategies

Communicating strategies to all key decision

making managers

Developing and communicating planning

premises Ensuring that action plans contribute to and

reflect major objectives and strategies


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Continuing to emphasize planning and

implementation strategy

Creating a company climate that forces

planning


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Premising and forecasting

Planning Premises

Defines as the anticipated environment in

which plans are expected to operate

Include assumptions of forecasts of the future

Forecast is a prerequisite of planning


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Environmental Forecasting

Managers compute the optimum method of

reaching their objective


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Environmental areas

Economic

Social

Political/legal

Technological

Frequently chosen for making forecasts

F ti ith th D l hi


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Forecasting with the Delphi

technique

Developed by Olaf Helmer and his colleagues

at the RAND corporation

Process:

A panel of experts selectedinside andoutside the organisation

Experts are asked to make forecast

Answers are compiled, results fedback topanel members


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Further estimates made

Process repeated

Convergence of opinion begins to evolve

acceptable forecast


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Effective premising

Selection of the premises that bear materially

on the programs

Development of alternative premises for

contingency planning Verification of the consistency of premises

Communication of the premises

Documents

Strategies -Unit I C