Univ. of Makati DEM 329 ; 1st SEMDr. Amelia P. Paje, ProfessorAriel S. San Jose, reporter

STRATEGY FORMULATION AND EVALUATION

Ref: Strategic Planning and Management By Eduardo A. Morato, Jr. ©2006

Strategy Formulation and Evaluation

ADAPTIVE STRATEGIZING

naturally grow from existing enterprise activities.

these are natural ways by which enterprise strategies evolve

Adaptive Strategizing:

• Product Line Expansion

Strategy Formulation and Evaluation

• Geographic Expansion

• Organizational Expansion

• Horizontal and Vertical Business Integration

Strategy Formulation and Evaluation

GEOGRAPHIC EXPANSION

An enterprise can naturally expand locally to key cities and major provinces, then to secondary ones.

International expansion to nearby countries or global markets can come next.

Example: The Philippine Banana

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PRODUCT EXPANSION

To cater to the other segments of the same industry

Enterprises can likewise expand product line to other industry markets if the manufacturing competencies needed to produce the new productsare the same or similar

Strategy Formulation and Evaluation PRODUCT EXPANSION

Service extensions can be added toenhance the value propositions to customers

the services can be enhanced by product additives.

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Adaptive Strategizing:

ORGANIZATIONAL EXPANSION

FRANCHISING

BRANCHING DISTRIBUTING

OUTSOURCING

SUBCONTRACTING

NETWORKING

This range of alternatives can also be calledBusiness Dispersion and Disaggregation.

AdaptiveStrategizing

• The fourth adaptive way is to enter industries that are related to, supportive of and complementarywith the enterprise’s main products or services.

• It can be labeled as Horizontal and Vertical Business Integration.

AdaptiveStrategizing The wheel’s hub and spoke analogy.

• Enterprises like banks, airline companies and hotels take on businesses that naturally spring from main business.

Ex. A hotel may begin to set up its own tour company, transport service, etc.

Hub or main

1,2, 3,4, arethe satellitecompanies

Diagram 1

AdaptiveStrategizing Diagram 2:

The Four Adaptive Strategizing Ranges of Alternatives

Geographic Ranges of Alternatives

Horizontal and Vertical Business IntegrationRange of Alternatives

The Product Or Service andMarket Range of Alternatives

Business Dispersion

or Disaggregation Range

of Alternatives

Creative Strategizing CREATIVE STRATEGIZING:

When the growth and developmentof the enterprise gets stuck and have exhausted all their bright ideas, they need to craft creative strategies.

1. Benchmarking against other Industries• to look at other industries which aresimilar enough to make meaningful comparisons but different enough

to generate creative strategies.

Ex. “McDonalize” its manner of delivering products

CreativeStrategizing

2. Reconfiguring the Product or Service

• Entrepreneur lists down all the attributes of the product or service currently being delivered; size, shape, accessories, amenities, etc. then mix, combine and permutate them into possible reconfiguration until the most exciting ideas come out.

Creative Strategizing

3. Altering Customer Attitudes and Behavior

“ If Mohammed cannot come to the mountain,let the mountain come to Mohammed.”

• If one’s products and services are not attracting customers anymore, change the

customers’ attitudes and behavior or rediscover and fall in love with the product

once again.Ex. Listerine

CreativeStrategizing

4. Metaphoring and Bonsai Method

• The entrepreneur can liken the business to a similar situation or phenomenon that comes from a different world but shares similar characteristics with the enterprise.

• The bonsai is an extended metaphor. In a Japanese garden, the bonsai represents Mother Nature, albeitin a stylized and miniature form.

Ex. Apartments, subdivisions

The 5. Brainstorming and Prototyping

• Originally developed by Alex Osborne, 1938.It has been a term for any form of highly interactive discussion by a group of people in order to offer creative solutions.

• The many ideas generated must be pared down later through an evaluation session, which needs not bedone by the same group

CreativeStrategizing

IdeologicalStrategizing IDEOLOGICAL STRATEGIZING:

• Very few enterprises base their strategieson their philosophies, ideologies or core values.

Ex. Kao corporation: “Human beings can live only by the Universal Truth, in their dignity of living, all are absolutely Equal.” (Kao President Yoshio Maruta)Ex. Ben and Jerry’s ice cream in America:

- stress their tenet on environmental concerns, such that they have the cause to provide livelihood for the homeless people by taking in their farm products.

RationalStrategizing

RATIONAL STRATEGIZING:

The rational strategist should ask these2 basic questions:

(1)In how many feasible ways can the customer, market and financial outcomes be maintained?

(2) What specific product or service outputs will perfectly match to these outcome expectations?

RationalStrategizing

In how many ways can this performance indicator be

achieved?

PerformanceIndicator

Alternative Strategies

Quintuple Sales

1. Branching Nationwide2. Franchising3. Exporting4. Mergers and

Acquisitions5. Product and Service

Expansion or Extension

Table 1: Generation of Alternative StrategiesFrom Performance Indicators

RationalStrategizing Questions for External Assessment:

(1)What are the opportunities presented by the trends, patterns and future directions of the Macro Environment?

(2) What are the Threats or hindrances,obstacles, and challenges found in thefour Levels of the External Environment that would prevent the organizationfrom growing, competing and surviving?

RationalStrategizing

Table 2: Examples of Trends, Patterns and Future Directions of the External Environment and their Relevant Opportunities

Macro Environment Opportunities1. SOCIAL: Increasing population with greater purchasing power

Increased demand for products andServices offered. Greater sales Potentials.

2. POLITICAL: LawsPassed to reduce import tariffs.

Cost of imported raw materials andParts would go down, thus, reducingOverall cost of product.

3. ECONOMIC: Interest rates are decreasing.

Financing cost would go down. Can opt for greater financial leverage for expansion.

4. ECOLOGICAL:Stricter anti-pollution controls and implementation

Fewer incidences of respiratory diseases. (Opportunity for a health insurance company).

5. TECHNOOGICAL:New technology that will increase productivity, reduce manpower requirements.

Easier to meet customer qualityExpectations can increase outputs while reducing cost o productionat the same time.

RationalStrategizing

Macro Environment Threats

1. SOCIAL : Aging population

Less demand for unhealthy products (high cholesterol), sweets,fast cars and amusement parks.

2. POLITICAL:Terrorism on the rise. Political turmoil.

Consumers more fearful and will reduce certain expenditures(e.g. amusement, eating out.)

3. ECONOMICAL:Severe recession

Demand for products and serviceswill go down, affecting sales.

4. ECOLOGICAL:Log ban to preserveForest resources

Wood as construction material will be scarcer. Prices will go up. (not good for furniture industry)

5. TECHNOLGICAL:Technological obsolence

Uncompetitiveness may result In closing down of enterprises if new technologies are not availed of.

Table 3: Examples of Trends, Patterns and FutureDirections of External Environment and Their Relevant Threats.

Analysis of Ten Levels For the Internal Environment, the strategist should

go through the ten levels of Internal Assessmentand ask the following questions:

Q: From the analysis of this level, what are the relative strengths, advantages and

competitiveness of the enterprise in relation to its goals and

in comparison with competitors?

Q: What are the weaknesses , disadvantages and competitiveness of the organization in relation to Its goals and in comparison with its competitors?

Strategy Formulation and Evaluation

THANK YOU!