Strategies, Policies, and Planning Premises
Definition of Strategy and Policies
Strategy is the determination of the mission (or the fundamental purpose) and the basic long-term objectives of an enterprise, and the adoption of courses of action and allocation of resources necessary to achieve these aims. Policies are general statements or understandings that guide managers' thinking in decision making.
The Strategic Planning Process
The Strategic Planning Process
Inputs to the organization Industry analysis Enterprise profile Orientation, values, and vision Mission (purpose), major objectives, and strategic intent Present and future external environment Internal environment
The Strategic Planning Process cont.
Development of alternative strategies Evaluation and choice of strategies Medium- and short-range planning Implementation through reengineering, staffing, leadership, and control Consistency testing and contingency planning
Mission, Objectives, and Strategic Intent
Mission relates to the kind of business. Objectives are the end points for activities. Strategic intent is the commitment to win in the competitive environment.
Definition of the TOWS Matrix
The TOWS Matrix is a conceptual framework for a systematic analysis that facilitates matching the external threats and opportunities with the internal weaknesses and strengths of the organization.
TOWS Matrix for Strategy Formulation
TOWS Matrix: 4 Alternative Strategies
SO strategy: WO strategy: ST strategy: WT strategy: MaxiMaxi MiniMaxi MaxiMini MiniMini
Dynamics of the TOWS Matrix
Application of the TOWS Matrix for Mergers, Acquisitions, Joint Ventures, and Alliances
Develop a TOWS Matrix for both companies before the merger, etc. Develop a TOWS Matrix of the joint company after the merger, etc. See Illustration of DaimlerChrysler merger in the closing section of Part 2
Blue Ocean Strategy by Kim & Mauborgne and TOWS Matrix by Weihrich
Explore opportunities in uncontested markets (Opportunities in the TOWS Matrix) Example: Southwest Airline Be aware of competition in red ocean markets (bloody competition). Example, todays personal computers Value innovation: total company commitment to create value for the customer Blue ocean strategy and the TOWS Matrix (SO or WO strategies in uncontested markets)
Business Portfolio Matrix
Business Portfolio Matrix
Two dimensions
Relative competitive position (market share) Business growth rate
Four positions
Question marks Stars Cash cows Dogs
Major Kinds of Strategies and Policies
Products or Services
What is our business? Who are our customers? What do our customers want? How much will our customers buy and at what price? Do we wish to be a product leader? What is our competitive advantage? Do we wish to develop our new products? What advantages do we have in serving customer needs? How should we respond to existing & potential competition? How far can we go in serving customer needs? What profits can we expect? What basic form should our strategy take?
Major Kinds of Strategies and Policies (contd..)
Marketing
Where are our customers & why do they buy? How do our customers buy? How is it best for us to sell? Do we have something to offer that competitors do not? Do we wish to take legal steps to discourage competition? Do we need, and can we supply, supporting services? What are the best pricing strategy & policy for our operation? How can we best serve our customers?
Hierarchy of Company Strategies
The corporate-level strategy. Executives craft the overall strategy for a diversified company. Business strategies are developed usually by the general manager of a business unit. Functional strategies. The aim is to support the business and corporate strategies.
Five Forces in Industry Analysis (Michael Porter)
Potential entrants
Suppliers
Competitive rivalry
Buyers
Substitutes
Five Forces in Industry Analysis (Michael Porter) contd..
The competition among companies The threat of new companies entering the market The possibility of using substitute products or services The bargaining power of suppliers The bargaining power of the buyers or customers
Porters Generic Strategies
Overall Cost Leadership Strategy Differentiation Strategy Focused Strategy (low cost or differentiation)
Premising and Forecasting
Planning premises are the anticipated environments in which plans are expected to operate. Environmental Forecasting
Values and areas of forecasting Forecasting with the Delphi technique
Forecasting with Delphi Technique
A panel of experts on a particular area are selected from both within & outside the organization. The experts are asked to make a forecast (anonymously). Answers are compiled & composite results fed back to the panel members. Further estimates of future are made with this result. Process may be repeated several times. When convergence of opinion begins to evolve, the results are then used as an acceptable forecast.
