We will speak today of the options available to the organisation. This is an expansion of what you did before half term when covering strategic choice. Strategic Choice posed the question ‘Where do we go, what direction is best suited to our analysis. This presentation will run along the same lines however, I intend to add some meat on the bones and look at further aspects. Whatever decisions we make her will impact on the long term direction of the organisation & although they may not be set in stone at this stage they will be quite firm within the future business plan. Time spent on analysis at this stage will firm up the future and give us more idea where we are and where we want to be.
Page 18 Strategic Management & Business Analysis> David Williamson et al These analysis will draw up questions that need to be answered honestly and not glossed over. Senior management need to know the true facts and not what they want to hear. It is no good hiding and hoping. Remembering off course we are looking to secure the future , hopefully securing profit and growth within our objectives however, in today's economic environment, survival may be the key. I would suggest that the key to success is having a balanced portfolio (Virgin for example) where monies from cash cow companies funding cash hungry enterprises. Is this too idealistic?
Page 18 Strategic Management & Business Analysis. Whichever option is taken it must improve on the existing level of performance. The key to success is to have a balanced portfolio of diverse activities (Virgin for example) where monies from cash rich enterprises fund other growing, cash hungry enterprises. This will mean corporate management “fit together & manage both the financial and strategic coherence of all companies concerned”. Shareholders and stakeholder must be happy that effective use is made of company funds which is were effective use of the BCG matrix and GE matrix are so important in the decision making process. Your SWOT & PEST would be very useful here. DO not underestimate the influence or impact of your stakeholders! Look at the Cadbury / Kraft merger where would both fit? For example Cadbury their option are Do nothing, disposal, closure For Kraft – Acquisition – why?
Page 20: Strategic Analysis & Business Analysis. The models we have used to analyse the current position of the business will be useful when looking at making our directional selection. These will generate a number of selection opportunities for consideration. Analysis is key to the future of the organisation decision making. Analysis is ongoing. We will speak of each in turn. Hold or increase market share. Product Life Cycle Adjustment or turnaround of product or market. Product Life Cycle Product / market development. Ansoff / BCG Related / unrelated diversification. Ansoff / BCG
Page 21 /22 Strategic Management & Business Analysis. Re-launch, re-model, add extras, create brand loyalty Don’t forget we are talking of individual strategies here for individual product within our product portfolio. Functional product & project managers must be empowered to make decisions & the elimination of any blame culture crucial.. A product in this position would be within a very competitive market environment and will require constant improvement of not only the product but also the service offered. Perception of quality & branding (from the customers perspective play a huge part in the success. As technology and competitors offerings of our competitors change then we must adapt in order to maintain and enhance our advantage. Our strategies need to include a drive to improve quality (of product and service). If we cannot improve then we will need to consider withdrawing from the market Example: Motor industry; customers have very little loyalty and will be swayed into buying your product by WIIFM or excitement features (air con as standard ect) The concept of CI within a culture of CI is vital to the success
Page 22: Strategic Management & Business Analysis Slatter (1994) indicate there are 5 reason for this decline (see above). Some, if they recognise the issues early enough, will turn the situation around others will not (Sega games!) This is the scenario – poor customer service An organisation (or product) has lost it credibility (brand image and or reputation). We are being overrun by our competitors. What is happening is that market share is being lost and customer expectations of the product increase. (Related to the product life cycle) Think of the playstation and the launch of playstation 2. As manager we need to recognise when this is happening by keeping a close eye on our competitors and sales and be proactive. Look at Portsmouth FC – where do these fit?
Page 23: Strategic Business & Business Analysis Effectively this is repositioning the product for growth in other areas by switching to a different market 9(aguar with the X200) or adding a geographical area. Good example of re-positioning is Skoda when Volkswagen bought into them. Suddenly, the brand power of VW plus modifications to the design and excitement features allowed Skoda to become repositioned as a desirable product. Add the Mini which has been re-positioned by it’s owners BMW
Page 24 Strategic Management & Business Analysis From a market based perspective a related diversification will involve moving into new products & markets that have similar factors of production to the ones currently being served. For example a perfume retailer whose established market revolves around satisfying the female need may diversify into the manufacture and sale of men's cosmetics. In this case the selling, the brand and distribution would have similar features to that of the woman's perfume market, remembering many men buy perfume for their wives, girlfriends and mistresses! From a recourse based perspective we are looking to channel our core competencies and skills into new markets. An example would be Ford, who have a reputation for making cars, moving into the production of vans and lorries. We are using the skills of our people within the functional areas to diversify into a new market.
Page 29 Strategic Management & Business Analysis Clearly, the sooner an organisation can ‘sense’ the need for change the sooner it can avoid situation know as ‘strategic drift’ and the need to take violent remedial actions which can harm the structure and culture of the organisation for good and are painful to all concerned if it is to remain competitive. (remember the strategic position of M & S in the 90’s?). Slatter (1984) discussed turnaround and recovery strategies. He says that change can be influenced through selective recruitment and training programmes over time and that radical, knee-jerk reactions should be avoided. Many managers in this position will go for cost cutting as an immediate weapon to steady the ship however, Slatter warns that indiscriminate cost cutting can effect the long term balance of the organisation and effect the core competence. An example: If this college became debt bound & focussed on cost reductions through staff reductions then, short term, this would help. The long term effect however is that less tutors means less students and less courses which would reduce revenue even further. Remember, redundancies can effect the core competence of the organisation.
3. Strategy Evaluation & Selection
Strategy Evaluation & Selection <ul><li>What options are open to the organisation? </li></ul><ul><li>What is the best way forward for the organisation? </li></ul>
Strategy Evaluation & Selection <ul><li>What options are open to the organisation? (Part 1) </li></ul><ul><li>Business closure. </li></ul><ul><li>Business disposal. </li></ul><ul><li>Business acquisition. </li></ul><ul><li>Business re-organisation. </li></ul><ul><li>The impact of doing nothing different. </li></ul>
Strategy Evaluation & Selection <ul><li>What options are open to the organisation? (Part 2 ) </li></ul><ul><li>Hold or increase market share. </li></ul><ul><li>Adjustment or turnaround of product or market. </li></ul><ul><li>Product / market development. </li></ul><ul><li>Related / unrelated diversification. </li></ul>
Strategy Evaluation & Selection <ul><li>Hold or increase market share. </li></ul><ul><li>Strive to increase quality of product, production processes & customer service to ensure customer loyalty. </li></ul>
Strategy Evaluation & Selection <ul><li>Adjustment or turnaround of product or market. </li></ul><ul><li>Due to: </li></ul><ul><li>Poor management </li></ul><ul><li>Poor financial control </li></ul><ul><li>High cost structure </li></ul><ul><li>Poor marketing </li></ul><ul><li>Competitive weakness </li></ul>
Strategy Evaluation & Selection <ul><li>Product / market development. </li></ul><ul><li>Repositioning the product for growth in other areas by switching to a different market. </li></ul>
Strategy Evaluation & Selection <ul><li>Related / unrelated diversification </li></ul><ul><li>Diversification can be considered from 2 different perspectives: </li></ul><ul><li>Market based </li></ul><ul><li>Resource based </li></ul>
Strategy Evaluation & Selection <ul><li>What is the best way forward for the organisation? </li></ul><ul><li>Doing things differently? </li></ul><ul><li>Doing things better? </li></ul><ul><li>Rate of change (fast or slow?) </li></ul>
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