Strategies, Policies and
Planning Premises
Strategy
A company’s strategy consists of the competitive
moves, internal operating approaches, and action
plans devised b...
Levels of Strategy
Levels of Strategy
1.

Corporate-level Strategy
The set of strategic alternatives that an organization
chooses from as it ...
Levels of Strategy-Making
Corporate
Strategy

Business
Strategies

Functional
Strategies
BCG Matrix*
Market Growth Rate

High
Stars

Cash
Cows

?

Question
Marks

Dogs

Low
High

Relative Market Share

Low
BCG Market Share/Market Growth Matrix
What is Strategic Planning?
Strategic planning is a systematic process
through which an organization agrees on
and builds ...
Strategic Planning
vs. Operational Planning
Strategic Planning
–
–
–
–
–
–

formulation
What, where
ends
vision
effectiven...
Three Big Strategic Questions
Where Are We
Now?
Where Do we Want
to Go?
How Will We Get
There?

1
Strategic Planning Process
Developing a Vision and a Mission
Assessment
Setting Objectives
Crafting a Strategy
Implementin...
Strategic Planning
First Stage of Strategic
Planning may involve:
Futures Thinking
– Thinking about what the
business migh...
Strategic Planning
The Vision
– Communicating to all staff where the
organisation is going and where
it intends to be in t...
Strategic Analysis
Constantly evaluate their position
Strategic analysis includes different methods
of assessing the curre...
Internal Audits
Productivity
Efficiency
Costs
Other Internal Data
– Labour turnover, absenteeism
– Customer satisfaction s...
External Audits
General business environment – Inflation, competitiveness,
unemployment/employment, growth, consumer spend...
SWOT
Analysis

Vision & Mission
An organization’s fundamental purpose

SWOT Analysis
To formulate strategies that support ...
Strength’s
Strength’s – Those things that you do well, the
high value or performance points
Strengths can be tangible: Loy...
Weaknesses
Weaknesses – Those things that prevent you from
doing what you really need to do
Since weaknesses are internal,...
Opportunities
Opportunities – Potential areas for growth and
higher performance
External in nature – marketplace, unhappy
...
Threats
Threats – Challenges confronting the
organization, external in nature
Threats can take a wide range – bad press
co...
Five Forces Model of Competition
Substitute Products
(of firms in
other industries)

Suppliers
of Key
Inputs

Rivalry
Amon...
Porter’s Five Competitive Forces
1. Threat of new entrants
2. Competitive rivalry

3. Threat of substitute products
4. Pow...
Gap Analysis
Vision

Assessment

Gap = Basis for LongGap = Basis for LongTerm Strategic Plan
Term Strategic Plan

2
Setting Objectives
The purpose is to
convert the mission into
Specific Performance
Targets
Yardsticks for tracking
company...
Crafting a Strategy

2
Generic Strategies
Porter’s Generic Strategies
1. Differentiation strategy
» An organization seeks to distinguish itself f...
Types of Strategy
Market Dominance
Achieved through:
– Internal growth
– Acquisitions – mergers and takeovers
New product ...
Strategy Implementation
Technology
Human Resource
Reward System
Decision Process

2
Characteristic of the Good
Strategy Implementation
An ongoing exercise
Proper Communication
Contingency Plan
Emphasis on O...
DECISION-MAKING

3
What is Decision-Making?
 Decision making
– The process of choosing a course of

action for dealing with a problem or
opp...
Types of Decisions
– Programmed decisions.
» Involve routine problems that arise regularly

and can be addressed through s...
Decision environments
– Certain environments.
– Risk environments.
– Uncertain environments.

3
Certain environments.
– Exist when information is sufficient to

predict the results of each alternative in
advance of imp...
Risk environments
– Exist when decision makers lack complete

certainty regarding the outcomes of
various courses of actio...
Uncertain environments.

– Exist when managers have so little information

that they cannot even assign probabilities
.
– ...
Classical Vs. Behavioral Decision Theory
 Classical decision theory.
– Views the decision maker as acting in a
world of c...
Classical decision theory
– The classical decision maker:
» Faces a clearly defined problem.
» Knows all possible action a...
Rationality
Problem is clear and unambiguous.
Single goal.
All alternatives are known.
Clear and constant preferences.
Max...
Behavioral decision theory
– Recognizes that human beings operate

with:

» Cognitive limitations.
» Bounded rationality.
...
Bounded Rationality
Behavior that is rational within the
parameters of a simplified model that
captures the essential feat...
Bounded Rationality

Satisficing

Limited
Search

Inadequate
Information
and Control

Decisions

4
Other decision making models
 The garbage can model
– A model of decision making that views
problems, solutions, particip...
Intuitive Decision Making
An unconscious process of making decisions
on the basis of experience and accumulated
judgment.
...
Range of decision making
Too Slow

Too Quick

• Procrastination

• “Ready, fire, aim”

• Indecision

• Impulsive, compulsi...
Cultural and Social Influences
Ethnicity, Race,
and Religion

Household and
ref. groups

Psychographics:
Lifestyle, Person...
Group Decision-Making

4
Forms of Group Decision
Making
Interacting groups
Delphi Methods
Nominal groups

4
Decision-Making Techniques
Marginal Analysis
Financial Analysis
Break-Even Analysis
Ratio Analysis
OR Technique
»
»
»
»
»
...
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Strategies, policies and planning premises

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Strategies, policies and planning premises

  1. 1. Strategies, Policies and Planning Premises
  2. 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. 3. Levels of Strategy
  4. 4. Levels of Strategy 1. 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 Strategy How the organization conducts business in a particular industry. 3. Functional-level Strategy Strategy developed for specific functional areas such as marketing, finance, and so forth.
  5. 5. Levels of Strategy-Making Corporate Strategy Business Strategies Functional Strategies
  6. 6. BCG Matrix* Market Growth Rate High Stars Cash Cows ? Question Marks Dogs Low High Relative Market Share Low
  7. 7. BCG Market Share/Market Growth Matrix
  8. 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. 9. Strategic Planning vs. Operational Planning Strategic Planning – – – – – – formulation What, where ends vision effectiveness risk Operational Planning – – – – – – implementation how means plans efficiency control
  10. 10. Three Big Strategic Questions Where Are We Now? Where Do we Want to Go? How Will We Get There? 1
  11. 11. Strategic 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 1
  12. 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 1
  13. 13. Strategic Planning The Vision – Communicating to all staff where the organisation is going and where it 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 1
  14. 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 1
  15. 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 1
  16. 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 1
  17. 17. SWOT Analysis Vision & Mission An organization’s fundamental purpose SWOT Analysis To formulate strategies that support the mission Strengths Weaknesses Opportunities Threats Internal Analysis Strengths (distinctive competencies) Weaknesses External Analysis Opportunities Threats Good Strategies Those that support the mission and: • exploit opportunities and strengths • neutralize threats • avoid weaknesses 1
  18. 18. Strength’s Strength’s – Those things that you do well, the high value or performance points Strengths can be tangible: Loyal customers, efficient distribution channels, very high quality products, excellent financial condition Strengths can be intangible: Good leadership, strategic insights, customer intelligence, solid reputation, high skilled workforce 1
  19. 19. Weaknesses Weaknesses – Those things that prevent you from doing what you really need to do Since weaknesses are internal, they are within your control Weaknesses include: Bad leadership, unskilled workforce, insufficient resources, poor product quality, slow distribution and delivery channels, outdated technologies, lack of planning, . . . 1
  20. 20. Opportunities Opportunities – Potential areas for growth and higher performance External in nature – marketplace, unhappy customers with competitor’s, better economic conditions, more open trading policies, . . Timing may be important for capitalizing on opportunities 2
  21. 21. Threats Threats – Challenges confronting the organization, external in nature Threats can take a wide range – bad press coverage, shifts in consumer behavior, substitute products, new regulations, . . . The more accurate you are in identifying threats, the better position you are for dealing with the “sudden ripples” of change 2
  22. 22. Five Forces Model of Competition Substitute Products (of firms in other industries) Suppliers of Key Inputs Rivalry Among Competing Sellers Potential New Entrants Buyers 2
  23. 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 2
  24. 24. Gap Analysis Vision Assessment Gap = Basis for LongGap = Basis for LongTerm Strategic Plan Term Strategic Plan 2
  25. 25. Setting 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. 2
  26. 26. Crafting a Strategy 2
  27. 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. 2
  28. 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 2
  29. 29. Strategy Implementation Technology Human Resource Reward System Decision Process 2
  30. 30. Characteristic of the Good Strategy Implementation An ongoing exercise Proper Communication Contingency Plan Emphasis on Organisation Culture Regular Review Importance of Planning 3
  31. 31. DECISION-MAKING 3
  32. 32. What is Decision-Making?  Decision making – The process of choosing a course of action for dealing with a problem or opportunity. 3
  33. 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 3
  34. 34. Decision environments – Certain environments. – Risk environments. – Uncertain environments. 3
  35. 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. 3
  36. 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. 3
  37. 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. 3
  38. 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. 3
  39. 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. 3
  40. 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. 4
  41. 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. 4
  42. 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) 4
  43. 43. Bounded Rationality Satisficing Limited Search Inadequate Information and Control Decisions 4
  44. 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 4
  45. 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. 4
  46. 46. Range of decision making Too Slow Too Quick • Procrastination • “Ready, fire, aim” • Indecision • Impulsive, compulsive • “Analysis paralysis” • Arbitrary 4
  47. 47. Cultural and Social Influences Ethnicity, Race, and Religion Household and ref. groups Psychographics: Lifestyle, Person. Socio-Econ: income,educ. Demographic: Gender, Age Perception Basic Psychological Processes M O T I V A T I O N Learning and Memory A F F E C T Attitudes Decision-Making Process Problem Recognition Search Evaluation Choice Outcomes 4
  48. 48. Group Decision-Making 4
  49. 49. Forms of Group Decision Making Interacting groups Delphi Methods Nominal groups 4
  50. 50. Decision-Making Techniques Marginal Analysis Financial Analysis Break-Even Analysis Ratio Analysis OR Technique » » » » » Linear Programming Queuing Method Game Theory Simulation Decision Tree 5

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