Strategy analysis andchoice


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Strategy analysis andchoice

  1. 1. RAMIL P. POLINTAN Head, Mathematics Department, TNHS
  2. 2. Strategy Analysis & Choice  Strategic analysis and choice largely involve making subjective decisions based on objective information.This report introduces important concepts that can help strategists generate feasible alternatives, evaluate those alternatives, and choose a specific course of action. Behavioral aspects of strategy formulation are described, including politics, culture, ethics, and social responsibility considerations.
  3. 3. Nature of Strategy Analysis & Choice -- Establishing long-term objectives-- Generating alternative strategies-- Selecting strategies to pursue-- Best alternative - achieve mission & objectives
  4. 4. Strategy Analysis & ChoiceAlternative Strategies Derive From --VisionMissionObjectivesExternal auditInternal auditPast successful strategies
  5. 5. Comprehensive Strategy-Formulation Framework Stage 1: The Input Stage Stage 2: Stage 3:The Matching Stage The Decision Stage
  6. 6. Strategy-Formulation AnalyticalFramework Internal Factor Evaluation Matrix (IFE) Stage 1: Competitive Profile Matrix The Input Stage (CPM) External Factor Evaluation Matrix (EFE)
  7. 7. Stage 1: The Input StageBasic input information for the matching &decision stage matricesRequires strategists to quantify subjectivity earlyin the processGood intuitive judgment always needed
  8. 8. Strategy-Formulation AnalyticalFramework SWOT Matrix Stage 2: BCG Matrix The Matching Stage Grand Strategy Matrix
  9. 9. Stage 2: The Matching StageMatch between organization’s internal resources &skills and the opportunities & risks created by itsexternal factors E.g. internal: strong R and D function External changing demographics (population getting older) Strategy: Develop new products for older adults (related to long term objectives financial or strategic)
  10. 10. Stage 2: The Matching Stage: SWOT MatrixFour Types of StrategiesStrengths-Opportunities (SO): Use a firm’s internal strengths to take advantage of external opportunitiesWeaknesses-Opportunities (WO): Improving internal weaknesses by taking advantage of external opportunitiesStrengths-Threats (ST): Use a firm’s strengths to avoid or reduce the impact of external threats.Weaknesses-Threats (WT): Defensive tactics aimed at reducing internal weaknesses and avoiding external threats
  11. 11. SWOT Matrix Strengths – S Weaknesses – W List Strengths List WeaknessesOpportunities – O SO Strategies WO Strategies Use strengths to take Overcoming List Opportunities advantage of weaknesses by taking opportunities advantage of opportunities Threats – T ST Strategies WT Strategies Use strengths to avoid Minimize weaknesses List Threats threats and avoid threats
  12. 12. Matching Key Factors to Formulate Alternative StrategiesKey Internal Factor Key External Factor Resultant Strategy 20% annual growth Excess working + in the cell phone = Acquire capacity (strength) industry Cellfone, Inc. (opportunity) Exit of two major Pursue horizontal Insufficient capacity foreign competitors + = integration by buying (weakness) from the industry (opportunity) competitors facilities Decreasing numbers Develop new productsStrong R&D (strength) + of young adults = (threat) for older adults Develop a newPoor employee morale Strong union + activity (threat) = employee benefits(weakness) packageWhich types of strategies, e.g. intensive diversification…, are referred to above 13
  13. 13. Strengths: Weaknesses: 1. Over dependent on borrowings -1. R and D almost complete Insufficient cash resources2. Basis for strong management team 2. Board of Directors is too narrow3. Key first major customer acquired 3. Lack of awareness amongst prospective4. Initial product can evolve into range of customers offerings 4. Need to relocate to larger premises5. Located near a major centre of 5. Absence of strong sales/marketing excellence expertise6. Very focused management/staff 6. Overdependence on few key staff7. Well-rounded and managed business 7. Emerging new technologies may move market in new directions Threats: Opportunities:1. Major player may enter targeted market segment 1. Market segment is poised for rapid2. New technology may make products growth obsolescent 2. Export markets offer great potential3. Economic slowdown could reduce 3. Distribution channels seeking new demand products4. Euro/Yen may move against $ 4. Scope to diversify into related market5. Market may become price sensitive segments6. Market segments growth could attract major competition
  14. 14. Key Strategies1.  by strengthening R and D Accelerate product launches team2. Extend links with key technology centres3. Raise additional venture capital4. Expand senior management team in sales/marketing5. Recruit non-executive directors6. Strengthen human resources function and introduce share options for staff7. Appoint advisers for intellectual property and finance8. Seek new market segments/applications for products
  15. 15. SWOT Matrix Strengths – S Weaknesses – W List Strengths List WeaknessesOpportunities – O SO Strategies WO Strategies Match and determine Match and determine List Opportunities strategy strategy Threats – T ST Strategies WT Strategies Match and determine Match and determine List Threats strategy strategy Inset key strategies into correct box element of the Matrix
  16. 16. Limitations with SWOT Matrix Does not show how to achieve a competitive advantageProvides a static assessment in timeMay lead the firm to overemphasize a single internal or external factor in formulating strategies
  17. 17. BCG MatrixBoston Consulting Group Matrix Enhances multi-divisional firm in formulating strategies Autonomous divisions = business portfolio Divisions may compete in different industries Focus on market-share position & industry growth rate
  18. 18. BCG MatrixRelative Market Share PositionRatio of a division’s own market sharein an industry to the market share heldby the largest rival firm in that industry
  19. 19. BCG Matrix Relative Market Share Position High Medium Low 1.0 .50 0.0 High +20  Stars Question MarksIndustry Sales Growth Rate II I Medium 0 Cash Cows Dogs III IV Low -20 20
  20. 20. BCG MatrixQuestion Marks Low relative market share – compete in high- growth industry Cash needs are high Case generation is low Decision to strengthen (intensive strategies) or divest
  21. 21. BCG MatrixStars High relative market share and high growth rate Best long-run opportunities for growth & profitability Substantial investment to maintain or strengthen dominant position Integration strategies, intensive strategies, joint ventures
  22. 22. BCG MatrixCash Cows High relative market share, competes in low- growth industry Generate cash in excess of their needs Milked for other purposes Maintain strong position as long as possible Product development, concentric diversification If weakens—retrenchment or divestiture
  23. 23. BCG MatrixDogs Low relative market share & compete in slow or no market growth Weak internal & external position Liquidation, divestiture, retrenchment
  24. 24. Grand Strategy Matrix Tool for formulating alternative strategies Based on two dimensions Competitive position Market growth
  25. 25. RAPID MARKET GROWTH Quadrant II Quadrant I 1. Market development 1. Market development 2. 3. Market penetration Product development  2. 3. Market penetration Product development 4. Horizontal integration 4. Forward integration 5. Divestiture 5. Backward integration 6. Liquidation 6. Horizontal integration WEAK 7. Concentric diversification STRONGCOMPETITIVE COMPETITIVE POSITION Quadrant III Quadrant IV POSITION 1. Retrenchment 1. Concentric diversification 2. Concentric diversification 2. Horizontal diversification 3. Horizontal diversification 3. Conglomerate 4. Conglomerate diversification diversification 4. Joint ventures 5. Liquidation 26 SLOW MARKET GROWTH
  26. 26. Grand Strategy Matrix Quadrant IExcellent strategic positionConcentration on current markets/productsTake risks aggressively when necessaryWhich type of strategy would you suggest?
  27. 27. Grand Strategy Matrix Quadrant II Evaluate present approach How to improve competitiveness Rapid market growth requires intensive strategy
  28. 28. Grand Strategy Matrix Quadrant III Compete in slow-growth industries Weak competitive position Drastic changes quickly Cost & asset reduction (retrenchment)
  29. 29. Grand Strategy Matrix Quadrant IV Strong competitive position Slow-growth industry Diversification to more promising growth areas
  30. 30. Strategy-Formulation AnalyticalFramework Quantitative Strategic Stage 3: Planning Matrix The Decision Stage (QSPM) Technique designed to determine the relative attractiveness of feasible alternative actions
  31. 31. Steps to Develop a QSPM1. Make a list of the firm’s key external  opportunities/threats and internal strengths/weaknesses in the left column2. Assign weights to each key external and internal factor3. Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing4. Determine the Attractiveness Scores (A.S)5. Compute the Total Attractiveness Scores6. Compute the Sum Total Attractiveness Score
  32. 32. QSPM : information from IFE and EFE Strategic AlternativesKey External Factors Weight Strategy 1 Strategy 2 Strategy 3EconomyPolitical/Legal/GovernmentalSocial/Cultural/Demographi c/EnvironmentalTechnologicalCompetitiveKey Internal FactorsManagementMarketingFinance/AccountingProduction/OperationsResearch and DevelopmentComputer InformationSystemsSum total A.S. 33 AS 1 to 4 and blank if factor does not effect strategy: TAS = Weight x AS
  33. 33. QSPMLimitationsRequires intuitive judgments & educatedassumptionsOnly as good as the prerequisite inputsAdvantagesSets of strategies considered simultaneously orsequentiallyIntegration of pertinent external & internal factors inthe decision making process
  34. 34. CULTURAL ASPECTS OF STRATEGIC CHOICEA. Culture includes the set of shared values, beliefs, attitudes, customs, norms, personalities, h eroes, and heroines that describe a firm. B. All Organizations Have a Culture 1.It is beneficial to view strategic management from acultural perspective because success often rests on the degreeof support that strategies receive from a firm’s culture. 2.If a firm’s strategies are supported by cultural productssuch asvalues, beliefs, rites, rituals, ceremonies, stories, symbols, language, heroes, and heroines then managers often canimplement changes swiftly and easily. 3.Strategies that require fewer cultural changes may bemore attractive because extensive changes can take
  35. 35. THE POLITICS OF STRATEGY CHOICEA. In the absence of objective analyses, strategy decisions  too often are based on the politics of the moment. With development of improved strategy-formulation tools, political factors become less important in making strategic decisions.B. Tactics to aid in strategy: 1. Equifinality 2. Satisfying 3. Generalization 4. Focus on Higher-Order Issues 5. Provide Political Access on Important Issues
  36. 36. THE ROLE OF A BOARD OF DIRECTORS A director is one of a group of persons entrusted with the overall direction of a corporate enterprise. A board of directors is a group of persons elected by the ownership of a corporation to have oversight and guidance over management and to look out for the shareholders’ interests.
  37. 37. SWOT Analysis SWOT Analysis is an effective way ofidentifying the strengths and weaknesses of theimpact of legislation, policy, protocols, parent-partnership arrangements, and so on, and ofexamining the opportunities and threats yourorganisation/school may face as a result ofimplementing such policies, protocols, andarrangements.
  38. 38.   Attributes of the school that are likely to Strength have a positive effect on achieving the school’s objectives.  Attributes of the school that are likely toWeaknesses have a positive effect on achieving the school’s objectives.  : Conditions external to the school thatOpportunities are likely to have a positive effect on achieving the school’s objectives.  Conditions external to the school that are Threats likely to have a negative effect on achieving the school’s objectives.
  39. 39. Purpose In sum, the purpose of a SWOT analysis is to develop strategies that capitalise on the school’s strengths, minimise the effects of any weaknesses, exploit available opportunities and defend against threats. Implementing these strategies should lead to achieving the school’s objectives.
  40. 40. How to use the tool ? To carry out a SWOT Analysis, write down answers to the following questions. Where appropriate, use similar questions and, whenever possible, consider your answers from your own point of view and from the point of view of the people you deal with.
  41. 41. Strength 1. What advantages does this policy/protocol/arrangement/other present?2. What do we currently do well?3. What relevant resources do we access to?4. What do other people see as your strengths?
  42. 42. Weaknesses  1. What can we improve? 2. What do we not do well? Consider what you are criticised for or what you receive complaints about. 3. Where are we vulnerable? Remember to consider this from an internal and external perspective. Do other people perceive weaknesses that you do not see? Are other schools doing any better than you in this area? It is best to be realistic now, and face any unpleasant truths as soon as possible.
  43. 43. Opportunities 1. What opportunities do we know about but have not addressed?2. Are there emerging trends on which we can capitalise? Useful opportunities can come from such things as:1. changes in technology and educational markets on both a broad and narrow scale2. changes in government policy related to your field3. changes in social patterns, population profiles, lifestyle changes, and so on4. local events
  44. 44. Opportunities A useful approach to consideringopportunities is to look at your strengthsand ask yourself whether these open upany opportunities. Alternatively, examineyour weaknesses and ask yourself whetheryou could open up opportunities byeliminating them.
  45. 45. Threats1.  What obstacles do we face?2. Are economic conditions affecting our financial viability? Ask yourself, what would be the financial, social, educational impact of not implementing changes?3. Are the required specifications for our services changing?4. Is changing technology threatening our position?5. Could any of our weaknesses seriously threaten our business, children’s educational attainment, and so on? In other words, are weaknesses likely to make us critically vulnerable?
  46. 46. Carrying out this analysis will often be illuminating –both in terms of pointing out what needs to be done,and in putting what we might see as a problem into perspective. You can then use a simple matrix suchas the one below to record your analysis. STRENGTH WEAKNESSES OPPORTUNITIES THREATS
  47. 47. We will use an example of a teacher working within a local primary school who is keen to review and improve relationships with parents.TASK 1. Consider what practices you currently have in place to encourage parent-partnerships within your school.2. Use this to conduct a SWOT analysis, identifying your current strengths and realistically appraising your current weaknesses.3. Then suggest up to three opportunities for improving your current systems and, for each, list a possible threat that would need to be managed if you were to pursue each opportunity.
  48. 48. The Special Educational Needs Co-ordinator(SENCO) for a local Primary School identified the following school objective:  To improve parent-partnership by encouraging parents to visit the school and become active members of the learning community, thereby fostering parental confidence.
  49. 49. Currently, the school’s practice is to hold an Open House event once each year, using thisas a means to encourage parents to visit the school and engage with school staff. The SENCO formulated the following SWOT Analysis.
  50. 50. STRENGTHS WEAKNESSES1. Highly-skilled, committed and 1. Teachers not available to meet concerned teachers. parents often enough.2. History of successful Open House 2. Insufficient school staff to plan more  events. frequent Open House events.3. School has a strong ethos of 3. Staff not always clear of their openness, sharing and commitment responsibilities to parent partnership to increasing parental confidence under current legislation. OPPORTUNITIES THREATS1. Active volunteer group willing to 1. Confidentiality is compromised: plan and organise Open House need to ensure proper governance of events. voluntary organisations.2. Pupils active in the school’s Pupil 2. Pupil coercion: need to ensure that Participation Project can be asked for adults are not leading or forcing their opinions and suggestions. pupils’ opinions.3. Head Teacher is willing to use some 3. Incomplete mandatory training: need designated ‘training days’ for Open to ensure that time borrowed from House events so that all teachers can the designated training day does not attend. result in staff failing to complete statutory/mandatory training, leading to local authority censure.
  51. 51. SWOT Matrix Strengths – S Weaknesses – W List Strengths List WeaknessesOpportunities – O SO Strategies WO Strategies Use strengths to take Overcoming List Opportunities advantage of weaknesses by taking opportunities advantage of opportunities Threats – T ST Strategies WT Strategies Use strengths to avoid Minimize weaknesses List Threats threats and avoid threats
  52. 52. Thank You….