STRATEGY ANALYIS AND CHIOCE

ByGroup No. 4 (S4 MBA)

Under the Leadership ofMiss. Sunaina T Suku

MSN Institute of Management and Technology 2013-2015

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“When a crisis forces choosing among alternatives, most people will choose the worst possible one”

Rudin’s Law

“Life is full of lousy options”General P. X. Kelley

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Doing Great in a Weak Economy…How ?A case of Apple Inc

Geoff Colvin, “The World’s Most Admired Companies,” Fortune (March 16, 2009): 76–86.

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Introduction

• Organizations continually face the challenge of exercising choice among alternatives.

• Strategic choice is an inalienable part of the decision making process.

• The process of strategic choice is essentially a decision making process.

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• Some strategy option is more appropriate than other

• Strategist should evaluate the existing alternatives before choosing the best strategy

• Strategy analysis and choice enable the firm to achieve its mission and objectives.

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Definition

The decision to select from among the grand strategies considered, the strategy which will best meet the enterprise’s objective. The decision involves focusing on a few alternatives considering the selection factors, evaluating the alternatives against these criteria and making the actual choice.”

- Prof. Azhar Kazmi

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Approaches for strategic choice

• Planned approach :This approach involves formal appraisal of the relevant strategic options for suitability, acceptability and feasibility

• Enforced choice approach :An organization has various stakeholder. The dominate stakeholders play an important role in strategic choice. Their expectations considered.

• Experience based approach :Managers possess an experience curve. Past experience of managers a guideline for strategic choice.

• Command approach :The strategic choice is based on the command of top management. It is top down approach.

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Process of selecting Strategies

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Focusing on Strategic Alternatives

Evaluating the Strategic Alternatives

Considering Decision Factors

Choosing the best Choice

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Focusing on Strategic Alternatives

• It involves identification of all alternatives.

• The strategist examines what the organization wants to achieve (desired performance) and what it has really achieved (actual performance).

• This done through gap analysis.

• GAP ANALYSIS = Actual Performance – Desired Performance

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Result of GAP analysis Strategy

Large gap due to expected environmental opportunities

Expansion Strategy

Narrow Stability Strategy

Large due to bad performance Retrenchment Strategy

Multiple reasons Combination Strategy

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Evaluating the Strategic Alternatives

 • The next step is to assess the pros and cons of

various alternatives and their suitability.

• The tools which may be used are portfolio analysis, GE business screen and corporate Parenting.  

• Analysis done on the basis of the objective and subjective factors.

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• The Objective Factors- Based on analytical techniques and hard facts or data.

• The Subjective Factors- Based on one’s personal judgment, collective or descriptive factors.

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The Objective Factors-

Environmental factors• Volatility of

environment• Input supply from

environment• Powerful stakeholders

Organizational factors• Organization’s

mission• Strategic intent• Business definition• Strengths and

weaknesses

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The Subjective Factors-

 • Strategies adopted in the previous period;• Personal preferences of decision- makers;• Management’s attitude toward risk;• Pressure from stakeholders;• Pressure from corporate culture; and• Needs and desires of key managers.

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Constructing Corporate scenario

• Corporate scenario consists of Performa balance sheets and income statement which forecasts the strategic alternative’s impact on various divisions.

• First: 3 sets of estimated figures for optimistic, pessimistic and most likely conditions are manipulated for all economic factors and key external strategic factors.

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• Second: Common size financial statements with projections are drawn.

• Third: Based on historical data from previous years balance sheet projection for next 5 years for Optimistic (O), Pessimistic (P), and Most likely (M) are developed

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Evaluating and Selecting Criteria

Johnson et al (2008)

• Suitability

• Feasibility

• Acceptability (SFA)

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Suitability

• It analyzes an organization’s position first and then changes in the environment and assesses the fit between these keeping in view the organizational goal (expectation of stakeholders)

• It evaluates the rationale of the strategic option

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• Then needs to define suitability criteria for assessing the strategy e.g. it could be environmental suitability, capability suitability and expectation suitability.

• The next thing is to have a selection criterion. This could be based on

ranking (score cards) decision trees

scenario matching

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Acceptability

• Here an outcome based view of strategy is taken and strategy performance expectation is judged.

• The performance of strategy in this case is measured in terms of return, risk and stakeholder reactions

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•  Returns are calculated based on the benefits stakeholders are expected to get by pursuing the particular strategy

• The risk of a strategy in this area concerns the probability of its failure and possible consequences thereafter

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Feasibility

• It considers whether an organization has the required resources, capabilities and competences to implement the strategy in practice

•  Financial feasibility is established by forecasting and analyzing cash-flows and/or break-even analysis, among others.

• Assessment of the availability of other resources, as deemed necessary to carry out activities involved in the strategy implementation is also done

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Some other Factors

• Cultural Factors

• Political Factors

• Organizational Factors

• Competitive Advantages

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