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A company’s strategy consists of the competitive
moves, internal operating approaches, and action
plans devised by management to produce successful
Strategy is management’s “game plan” for running
Managers need strategies to guide HOW the
organization’s business will be conducted and HOW
performance targets will be achieved.
Levels of Strategy
The set of strategic alternatives that an organization
chooses from as it manages its operations
simultaneously across several industries and several
2. Business-level Strategy
How the organization conducts business in a particular
Strategy developed for specific functional areas
such as marketing, finance, and so forth.
Levels of Strategy-Making
Market Growth Rate
Relative Market Share
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
Strategic Planning guides the acquisition and
allocation of resources to achieve these
vs. Operational Planning
Three Big Strategic Questions
Where Are We
Where Do we Want
How Will We Get
Strategic Planning Process
Developing a Vision and a Mission
Crafting a Strategy
Implementing and Executing Strategy
Evaluating Performance, Reviewing the
Situation and Initiating Corrective Action
First Stage of Strategic
Planning may involve:
– Thinking about what the
business might need to do
10–20 years ahead
– Thinking about key strategic
that will inform
– 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
Constantly evaluate their position
Strategic analysis includes different methods
of assessing the current position of the
business in the market place
Two basic methods:
Other Internal Data
– Labour turnover, absenteeism
– Customer satisfaction surveys
– Quality procedures
– Cash flow statements
– Sales trends
– Skills audit
Strengths and weaknesses analysis
General business environment – Inflation, competitiveness,
unemployment/employment, growth, consumer spending
– Political – e.g. change of government
– Economic – Trends in economic growth, inflation, etc.
– Social-changed outlook, age structure of population, etc.
Vision & Mission
An organization’s fundamental purpose
To formulate strategies that support the mission
Those that support the mission and:
• exploit opportunities and strengths
• neutralize threats
• avoid weaknesses
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
Weaknesses – Those things that prevent you from
doing what you really need to do
Since weaknesses are internal, they are within
Weaknesses include: Bad leadership, unskilled
workforce, insufficient resources, poor product
quality, slow distribution and delivery channels,
outdated technologies, lack of planning, . . .
Opportunities – Potential areas for growth and
External in nature – marketplace, unhappy
customers with competitor’s, better economic
conditions, more open trading policies, . .
Timing may be important for capitalizing on
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
Five Forces Model of Competition
(of firms in
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
Gap = Basis for LongGap = Basis for LongTerm Strategic Plan
Term Strategic Plan
The purpose is to
convert the mission into
Yardsticks for tracking
company progress and
Should be set at levels
that require stretch and
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
3. Focus strategy
» An organization concentrates on a specific regional
market, product line, or group of buyers.
Types of Strategy
– Internal growth
– Acquisitions – mergers and takeovers
New product development: to keep ahead of rivals and set
Contraction/Expansion – focus on what you are good at
(core competencies) or seek to expand into a range of
Global – seeking to expand Global operations
Characteristic of the Good
An ongoing exercise
Emphasis on Organisation Culture
Importance of Planning
What is Decision-Making?
– The process of choosing a course of
action for dealing with a problem or
Types of Decisions
– Programmed decisions.
» Involve routine problems that arise regularly
and can be addressed through standard
– Nonprogrammed decisions.
» Involve nonroutine problems that require
solutions specifically tailored to the situation at
– 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.
– 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
– 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
– Also characterized by rapidly changing:
» External conditions.
» Information technology requirements.
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.
Classical decision theory
– The classical decision maker:
» Faces a clearly defined problem.
» Knows all possible action alternatives and
» Chooses the optimum alternative.
– Is often used as a model of how
managers should make decisions.
Problem is clear and unambiguous.
All alternatives are known.
Clear and constant preferences.
The decision is in the best interest of
the organization—not the manager.
Behavioral decision theory
– Recognizes that human beings operate
» 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.
Behavior that is rational within the
parameters of a simplified model that
captures the essential features of the
Making a decision that is
“good enough.” (Satisficing Model)
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.
Intuitive Decision Making
An unconscious process of making decisions
on the basis of experience and accumulated
– Making decisions on the basis of gut feeling
– It does play an important role in managerial
Range of decision making
• “Ready, fire, aim”
• Impulsive, compulsive
• “Analysis paralysis”
Cultural and Social Influences