2. CHAPTER OUTLINE
Strategy alternatives
a choice limited to one of two or more possibilities, as of things, propositions, or
courses of action, the selection of which precludes any other possibility
Strategy variations
the act, process, or accident of varying in condition, character, or degree
a different form of something; variant
Strategic choice
an act or instance of choosing; selection
an alternative
2
3. INTRODUCTION
Purpose of strategy - “build a better, sustainable community” –
healthy & greener city, economic development, entrepreneurial
ecosystem
Types of strategy in public sector - public sector mostly addresses
processes of strategic planning, formulation, implementation,
evaluation, and monitoring
Mechanism used - information system, planning system,
development system, appraisal system, and motivation system
Selection of strategy - should be supported by a sensitive, ongoing
analysis of the external environment
3
4. GENERIC STRATEGY ALTERNATIVES
Strategic alternatives refer to different courses of action which an
organization may pursue at a point in time
Strategic alternatives are influenced by external factors
Mechanism used – brainstorming, meetings, outside consultants,
joints meetings
Identify the right strategy
Fulfill a real market need
Be competitively defended
Suit internal organisational resources and skills
Suit the culture of the organisation
4
5. STRATEGY ALTERNATIVES
Long term objectives – results expected from pursuing
certain strategies
Quantitative, measurable, realistic, understandable,
challenging, hierarchical, obtainable, and congruent
Needed at different organizational level
5
6. FOUR BASIC LEVEL OF STRATEGIES (BRYSON, 2004)
Grand strategy for the organization as a whole – “Grand strategy
refers to the collection of plans and policies that comprise the state's
deliberate effort to harness political, military, diplomatic, and economic
tools together to advance that state's national interest”
Subunit strategies (subunits may be divisions, departments, or units
of a larger organizations)(Montanari and Bracker, 1986)
Program, service or business process strategies (Hammer and
Champy, 1993)
Functional strategies (such as financial, staffing, facilities,
information technology and procurement strategies)
6
7. TYPES OF STRATEGY
Integration - processes that businesses can use to enhance their competitiveness,
efficiency or market share by expanding their influence into new areas. These
areas can include supply, distribution or competition.
Intensive - a growth strategy that focuses on cultivating new products or new
markets, and sometimes both. Businesses use an intensive growth strategy when
they believe they haven't fully. realized their strengths or their markets.
Diversification - Diversification strategy is applied when companies wish to
grow.
Defensive - a marketing tool that management uses to defend their business
from potential competitors (joint venture, retrenchment, divestiture)
7
8. INTEGRATION STRATEGIES
Gain control over distributors, suppliers and competitors
a) Forward integration – increased control over distributors or retailers, web sites
Franchising approach
Example: Pos Malaysia, KR1M
b) Backward integration – increased control of a firm’s suppliers, when a firm
current suppliers are unreliable or too costly
Outsourcing approach
Example: Indah Water (by Local Goverment)
c) Horizontal integration refers to a strategy of seeking ownership of or increased
control over a firms competitors.
Growth approach
Mergers, acquisitions, and takeovers
Example: Proton Holding Bhd by DRB-Hicom
8
9. FORWARD STRATEGY
The existence of ‘Kedai Rakyat 1 Malaysia’
will also act as the medium for the
Government to control prices and lessens
the monopolization of products which has
long been dominated by the multinational
manufacturers. As such, the multinational
companies will be constrained from
imposing price hikes without due
justification.
9
10. BACKWARD STRATEGY
Indah Water Konsortium Sdn Bhd
Indah Water Konsortium Sdn Bhd, a national sewerage company, wholly-owned
by the Minister of Finance Incorporated, responsible for providing sewerage
services, operating and maintaining over 8,000 public sewage treatment plants,
14,000km networks of sewerage pipelines and providing desludging services to
over 350,000 individual septic tanks in Malaysia for the past 10 years since April
1994. Developing and maintaining a modern and efficient sewerage system for
West Malaysia.
10
11. BACKWARD STRATEGY
An ice cream company that buys a dairy farm has
backward vertically integrated.
Starbucks
It backward vertically integrated when it bought a
coffee farm in China, because normally it would
have to buy coffee beans from a coffee bean
supplier.
11
12. HORIZONTAL INTEGRATION
2006 - Launch of CIMB Group as a Regional Universal Bank
The new CIMB Group was launched by the then Prime Minister of Malaysia, Dato’ Seri Abdullah
Ahmad Badawi, in September 2006, signifying the culmination of the 3-way merger of
Commerce International Merchant Bankers, Bumiputra-Commerce Bank and Southern Bank to
form a universal banking group.
As a universal bank, CIMB Group has the full range of banking and financial services –
conventional and Islamic – to serve everyone from the smallest retail client to the largest
companies and institutions.
In line with the vision, “To be Southeast Asia’s Most Valued Universal Bank”, the Group
embarked on a rebranding exercise and unveiled a new logo and a new tagline, “Forward
Banking”, reflecting its promise to create value for customers through forward thinking.
12
13. INTENSIVE STRATEGIES
Require intensive efforts to improve competitive position
a) Market penetration – increase market share for present services
through greater marketing effort
Includes increasing the number of salespersons, advertising expenditures, and
publicity efforts or offering extensive sales promotion items
b) Market development - introducing present services/product into new
geographic area
Going international / abroad
c) Product development – increased sales by improving or modifying
present services/products
Research and development expenditures
Example: Oil, gas and energy / introducing Green Technology
13
14. DIVERSIFICATION STRATEGY
Related diversification – when the value chain posses competitively
valuable across business strategic fits
Example: Palm oil and related product (soap, detergents and cosmetics)
Unrelated Diversification – when their value chains are so dissimilar
that no competitively valuable cross-business relationships exist
Example: ATM collaborate with KKLW
14
16. SIME DARBY
Sime Darby is a key player in the Malaysian economy as well as a
diversified multinational involved in key growth sectors, namely,
plantations, industrial equipment, motors, property and energy &
utilities with operations in more than 20 countries.
16
17. DEFENSIVE STRATEGY
1) Retrenchment
Sometimes called a turnaround or reorganizational strategy, retrenchment is
designed to fortify an organizations basic distinctive competence
Occurs when an organization regroups through cost and asset reduction to reverse
declining sales and profits
Mostly in private sector, bankruptcy can be an effective retrenchment strategy
Closure departments, change of portfolio, cuts in the level of inputs and reductions in
the supply of services
Example: Kementerrian Penerangan, Komunikasi dan Kebudayaan (formerly known as
Kementerian Penerangan)
17
18. DEFENSIVE STRATEGY
2) Divestiture
Selling a division or part of an organization
Used to raise capital for further strategic acquisitions or investments
The firms try to focus on their core strengths, lessening their level of diversification
3) Liquidation
Selling all of a company's assets for their tangible worth
Liquidation is recognition of defeat and consequently can be an emotionally difficult
strategy
Example: MAS
18
19. MICHAEL PORTER’S FIVE GENERIC STRATEGIES
The strategies allow organizations to gain competitive advantage from three
different bases:
Cost leadership: emphasizes on a very low per-unit cost
Low cost – lower price available on the market
Best value – best price-value on the market
Differentiation: offer different degrees of differentiation (PDRM in reducing crime)
Focus: fulfill the needs of small groups of consumers
a) Cost leadership-low cost
b) Cost leadership-best value
c) Differentiation
d) Focus-low cost
e) Focus-best value
KR1M, BR1M, Skim Rumah Pertama
19
20. STRATEGIC MANAGEMENT IN GOVERNMENTAL
ORGANIZATIONS
In Malaysia, federal, state and local government are responsible for
formulating, implementing, and evaluating strategies that use the
government revenues in the most cost-effective way to provide services
and programs
Strategic-management concepts are increasingly being used to enable
governmental organizations to be more effective and efficient by
introducing laws, programs, planning and projects to achieve objectives
and missions
Based on the strategies before, which strategy/s may be suitable to be
implement in our government?
20
21. OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC
SECTOR STRATEGIES
The strategy can be divided into 2 major functions:
Steering – concentrate on core strategy (as a guide)
Rowing – concentrate on the 4 remaining strategy (as an act)
All 5 strategies touch on the issue of accountability.
The core strategy defines what an organization is accountable for;
the consequences strategy determines how it will be held accountable;
customer strategy specifically to whom are the organizations accountable;
the control strategy affects who will be accountable; and
the culture strategy helps employees internalize their accountability.
21
22. OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC SECTOR
STRATEGIES
• Clarifying Purpose
• Use strategic management to create clarity of purpose
• If an organization is unclear about its purpose—or has been
given multiple and conflicting purposes—it cannot
achieve high performance
• Eliminate functions that no longer serve core purposes
• Clarity roles by separating policy making and regulatory
roles from service delivery and compliance roles; also separate
service delivery from compliance (separation of power)
• To get clarity the organization must first define the system or
organization's core purposes.
• Then it has to eliminate activities that no longer contribute
to those purposes.
• And finally, organize the system so that each unit is free to
pursue its own piece of the core mission or missions.
Core
Strategy
22
23. OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC SECTOR
STRATEGIES
• Making use of incentives
• Use market to create consequences
• Use competitive contracts benchmarks
• Use performance oriented rewards as incentives
• This consequences concentrate on performance
• Create competition between public and private
organizations (or public and public organizations)
• To shatter the status quo by measuring performance,
rewarding improvement and excellence and refusing to
tolerate persistent failure
Consequences
strategy
23
24. OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC SECTOR
STRATEGIES
• Determines where decision making power lies
• For as it shifts the locus of control, it also shifts the form
of control
• Instead of using commands, rules, and inspections for
compliance, reinventors develop new ways to guide the
behavior of employees
• Shifting power away from the top and center
• Give managers the power to manage
• Give frontline employees the power to improve results
• Give communities the power to solve their own
problems
Control
strategy
24
25. OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC SECTOR
STRATEGIES
• Determines the culture of public organizations: the
values, norms, attitudes, and expectations of
employees
• Focus on how we change the culture
• Developing an entrepreneurial and service-oriented
culture
• Change habits by introducing new experiences
• Create emotional bounds among employees
• Change employees mental models
Culture
strategy
25
26. OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC SECTOR
STRATEGIES
• By making organizations accountable to their
customers, the customer strategy deals most
powerfully with the issue of accountability
• Making public organizations accountable to
their key stakeholders
• Induce competition
• Offer customers choice
• Emphasize service quality
Customer
strategy
26
28. GOVERNMENT REFORM STRATEGY
Structural Change
A key agents of change in
promoting development and
institution building
Public Service Department (PSD)
Malaysian Administration
Modernization and Management
Planning Unit (MAMPU)
Improved productivity
and delivery of services
Organizational efficiency and
effectiveness
Privatization of public
enterprisesClient/counter services
System and procedure
The Client’s charter
Process simplification and
composite licences
Office automation and
information system
technology for the
public sector
Expediting work processes, quality
of output, the comfort and safety
of personnel
Government computer system
Electronic data interchange
Upgrading the use of new
technology
28
29. GOVERNMENT REFORM STRATEGY
Measuring efficiency
and effectiveness
Annual budget
New performance
appraisal system
Improving
performance reporting
in the public sector
Audit Act 1982
Public Complaint
Bureau
Total quality
management
"Guidelines on
Quality Control
Circles", issued in
1991,
The "Guidelines on total quality
management (TQM) in the public
service", a circular issued in 1992
29
30. STRATEGIC CHOICE
The Process of Generating and Selecting Strategies:
Strategic choice as the decision of selecting from among the grand strategies (Stability
strategies, Expansion/Growth strategies, Retrenchment strategies, and Combination
strategies) considered the strategy which will best meet the organisation’s objectives. The
decision involves focusing on a few alternatives, considering the selection factors, evaluating
the alternatives against these criteria and making the actual choice.
Strategists never consider all feasible alternatives that could benefit the firm, because there
are an infinite number of possible actions and an infinite number of ways to implement those
actions. Therefore, a manageable set of the most attractive alternative strategies must be
developed.
Identifying and evaluating alternative strategies should involve many of the managers and
employees who earlier assembled the organizational mission statement, performed the
external audit, and conducted the internal audit.
Alternative strategies proposed by participants should be considered and discussed in a
meeting or series of meetings.
30
31. STRATEGIC CHOICE
Develop SWOC (Strength, weakness, opportunities and challenges)
Analysis
1. Brainstorm lists of strengths, weaknesses, opportunities and challenges.
2. Categorize list of ideas and reduce it to top five to ten ideas per category.
3. Separately review and discuss each category and possible implications to the
organization.
4. Determine how the organization's internal strengths and weaknesses align with
opportunities and threats.
5. Analyze results and determine whether a strength and/or opportunity exist--
promote potential growth or, if both weaknesses and/or threats are prevalent,
represent areas for improvement.
31
32. STRATEGIC CHOICE
Develop SWOC Analysis (cont) focus on FOUR basic types of critical
success factors:
Industry – These factors result from specific industry characteristics and are the
things that the organization must do to remain competitive.
Environmental – These factors result from macro-environmental influences on an
organization and include things like the business climate, the economy, competitors
and technological advancements.
Strategic – These factors result from the specific competitive strategy chosen by the
organization and can include the way in which the company chooses to position
themselves, market themselves, and whether they are high volume low cost or low
volume high cost producers, etc.
Temporal - These factors result from the organization’s internal forces and include
specific barriers, challenges, direction and influences.
32
33. STRATEGIC CHOICE
Develop SWOC Analysis (cont) and approach of SWOT analysis
SO Strategies: Resources (Assets) an important firm’s strength to get opportunity for
external resources. Example: Integration.
WO Strategies: Useful if the firm take advantage to external resources in order to
overcome the weakness. Example: Diversification.
ST Strategies: Adopted by opening new branches in order to overcome competitive
threat. Example: Intensive.
WT strategies: Defensive tactics directed at reducing internal weaknesses and
avoiding external threats. Example: Defensive.
33
