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Strategies, Policies andPlanning Premises

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Strategy A companys strategy consists of the competitivemoves, internal operating approaches, and action

plans devised by management to produce successful

performance.

Strategy is managements game plan for running

the business.

Managers need strategies to guideHOW the

organizations business will be conducted and HOW

performance targets will be achieved.

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Levels of Strategy

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Levels of Strategy1. Corporate-level Strategy

The set of strategic alternatives that an organizationchooses from as it manages its operationssimultaneously across several industries and severalmarkets.

2. Business-level Strategy

Howthe organization conducts business in a particularindustry.

3. Functional-level StrategyStrategy developed for specific functional areas

such as marketing, finance, and so forth.

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Corporate

Strategy

Business

Strategies

Functional

Strategies

Levels of Strategy-Making

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BCG Market Share/Market Growth Matrix

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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

environment.

Strategic Planning guides the acquisition and

allocation of resources to achieve these

priorities.

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Strategic Planning

vs. Operational Planning Strategic Planning

formulation

What, where

ends

vision

effectiveness risk

Operational Planning

implementation

how

means

plans

efficiency control

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Three Big Strategic Questions Where Are We

Now?

Where Do we Want

to Go?

How Will We Get

There?

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Strategic Planning Process Developing a Vision and a Mission

Assessment Setting Objectives

Crafting a Strategy

Implementing and Executing Strategy Evaluating Performance, Reviewing the

Situation and Initiating Corrective Action

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Strategic Planning First Stage of Strategic

Planning may involve:

Futures Thinking

Thinking about what thebusiness might need to do1020 years ahead

Strategic Intents

Thinking about key strategicthemesthat will informdecision making

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Strategic Analysis Constantly evaluate their position

Strategic analysis includes different methodsof assessing the current position of thebusiness in the market place

Two basic methods: Internal

External

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Internal Audits Productivity

Efficiency

Costs

Other Internal Data

Labour turnover, absenteeism

Customer satisfaction surveys Quality procedures

Cash flow statements

Sales trends

Skills audit Strengths and weaknesses analysis

Core competencies

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External Audits General business environmentInflation, competitiveness,

unemployment/employment, growth, consumer spending

Competitors

PESTfactors

Politicale.g. change of government

EconomicTrends in economic growth, inflation, etc.

Social-changed outlook, age structure of population, etc.

Technological

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SWOTAnalysis

Strengths

Weaknesses

OpportunitiesThreats

Vision & Mission

An organizations fundamental purpose

Good Strategies

SWOT AnalysisTo formulate strategies that support the mission

Those that support the mission and:

exploit opportunities and strengths

neutralize threats

avoid weaknesses

Internal AnalysisStrengths(distinctivecompetencies)

Weaknesses Threats

External AnalysisOpportunities

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Strengths

Strengths Those things that you do well, thehigh 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

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Weaknesses

WeaknessesThose things that prevent you fromdoing what you really need to do

Since weaknesses are internal, they are withinyour control

Weaknesses include: Bad leadership, unskilled

workforce, insufficient resources, poor product

quality, slow distribution and delivery channels,

outdated technologies, lack of planning, . . .

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Opportunities

OpportunitiesPotential areas for growth andhigher performance

External in naturemarketplace, unhappycustomers with competitors, better economic

conditions, more open trading policies, . .

Timing may be important for capitalizing on

opportunities

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Threats

ThreatsChallenges confronting theorganization, external in nature

Threats can take a wide rangebad presscoverage, 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

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Five Forces Model of Competition

Substitute Products(of firms inother industries)

Suppliers

of Key

Inputs

Buyers

Potential

New

Entrants

Rivalry

Among

Competing

Sellers

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Porters Five Competitive Forces

1. Threat of new entrants

2. Competitive rivalry

3. Threat of substitute products

4. Power of buyers

5. Power of suppliers

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Setting Objectives The purpose is to

convert the mission into

Specific Performance

Targets

Yardsticks for tracking

company progress and

performance.

Should be set at levels

that require stretch and

disciplined effort.

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Crafting a Strategy

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Generic Strategies Porters Generic Strategies

1. Differentiation strategy An organization seeks to distinguish itself from

competitors through the quality of its products orservices. 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

competing firms.

3. Focus strategy An organization concentrates on a specific regional

market, product line, or group of buyers.

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Types of Strategy Market Dominance

Achieved through:

Internal growth

Acquisitionsmergers and takeovers

New product development:to keep ahead of rivals and set

the pace

Contraction/Expansionfocus on what you are good at(core competencies) or seek to expand into a range of

markets?

Globalseeking to expand Global operations

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Strategy Implementation

Technology

Human Resource

Reward System

Decision Process

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Characteristic of the Good

Strategy ImplementationAn ongoing exercise

Proper Communication

Contingency Plan

Emphasis on Organisation Culture

Regular Review Importance of Planning

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DECISION-MAKING

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What is Decision-Making?

Decision making

The process of choosing a course of

action for dealing with a problem or

opportunity.

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Types of Decisions

Programmed decisions.

Involve routine problems that arise regularly

and can be addressed through standardresponses.

Nonprogrammed decisions.

Involve nonroutine problems that requiresolutions specifically tailored to the situation at

hand

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Decision environments

Certain environments.

Risk environments.

Uncertain environments.

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Certain environments.

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.

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Risk environments

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 orpersonal intuition.

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Uncertain environments. 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

problem solving.

Also characterized by rapidly changing: External conditions.

Information technology requirements.

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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 actingonly in terms of what he/she perceives

about a given situation.

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Classical decision theory

The classical decision maker:

Faces a clearly defined problem.

Knows all possible action alternatives andtheir consequences.

Chooses the optimum alternative.

Is often used as a model of howmanagers should make decisions.

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Rationality

Problem is clear and unambiguous.

Single goal.All alternatives are known.

Clear and constant preferences.

Maximum payoff. The decision is in the best interest of

the organizationnot the manager.

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Behavioral decision theory

Recognizes that human beings operatewith:

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.

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Bounded Rationality

Behavior that is rational within the

parameters of a simplified model thatcaptures the essential features of the

problem.

Making a decision that is

good enough. (Satisficing Model)

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Bounded Rationality

Limited

Search

Inadequate

Information

and ControlDecisionsSatisficing

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Other decision making models

The garbage can model

A model of decision making that views

problems, solutions, participants, andchoice situations as mixed together in the

garbage can of the organization.

Incremental Model

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Intuitive Decision Making

An unconscious process of making decisions

on the basis of experience and accumulated

judgment.

Making decisions on the basis of gut feeling

It does play an important role in managerialdecision making.

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Too Slow Too Quick

Procrastination

Indecision

Analysis paralysis

Ready, fire, aim

Impulsive, compulsive

Arbitrary

Range of decision making

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Cultural and Social Influences

Decision-Making Process

M

O

T

IV

A

T

I

O

N

Perception

Learning and

Memory

Attitudes

A

FF

E

C

T

Problem

RecognitionSearch Evaluation Choice Outcomes

Ethnicity, Race,

and Religion

Household and

ref. groups

Socio-Econ:

income,educ.

Demographic:

Gender, Age

Psychographics:

Lifestyle, Person.

Basic Psychological

Processes

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Group Decision-Making

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Forms of Group Decision Making

Interacting groups

Delphi Methods

Nominal groups

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Decision-Making Techniques Marginal Analysis

Financial Analysis

Break-Even Analysis

Ratio Analysis

OR Technique Linear Programming

Queuing Method Game Theory

Simulation

Decision Tree