Lesson Six : Strategic Formulation using Various Strategic Tools & Options

Transcription

1 Lesson Six : Strategic Formulation using Various Strategic Tools & Options sl/bmbe/2016 1

2 A review of the strategy process V i s i o n E n v i r o n m e n t a l a n a l y s i s O b j e c t i v e s E v e n t s S t r a t e g i c h i s t o r y O r g a n i s a t i o n a l a n a l y s i s S t r a t e g i c a n a l y s i s C u r r e n t s t r a t e g y B a s i s D i r e c t i o n M e t h o d s S t r a t e g i c o p t i o n s F e e d b a c k R e v i s e o b j e c t i v e s F e e d b a c k C o m p a r e m e a s u r e m e n t t o s t a n d a r d s S u i t a b i l i t y F e a s i b i l i t y A c c e p t a b i l i t y E v a l u a t i o n 2 L e v e l o f c h a n g e C o m p e t e n c i e s S t r u c t u r e S y s t e m s R e s o u r c e s S t y l e sl/bmbe/2016 I m p l e m e n t a t i o n M e a s u r e p e r f o r m a n c e

3 Strategic formulation using tools and options As organisations are operating in a competitive world, strategies are developed to cope with the need to survive in the marketplace. Strategic management is supposed to help organisations steer through changes and shifts in the environment to secure future growth and sustainable success through the process of analysis, selection of options and then making decisions to move forward sl/bmbe/2016 3

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5 STRATEGIC TOOLS AND OPTIONS Formulations of strategies are generally based on the different schools of thoughts in which management based their process of formulation on. We need to revisit the strategies, approaches & tools, particularly the 4 perspectives as mentioned by Richard Whittington, the type of formulation and process of working towards the outcomes differ.. sl/bmbe/2016 5

6 Richard Whittington s typology His 4 perspectives which is also called the 2 X 2 framework sl/bmbe/2016 6

7 2x2 matrix or 2 x 2 framework X and Y axis used as two broad dimensions to scope out generic perspectives on strategy The outcomes of strategy (profit maximisation /plural) Processes (deliberate/emergent) This is used to provide 4 perspectives Classical Evolutionary Systemic Processual Deliberate Profit Emergent Plural sl/bmbe/2016 7

8 Profit Classical Deliberate X Emergent Analyse, plan and command Plural Profitability/ Rational planning Dominant view (linked to classical school of thought ) Informed by economics -Rational economic man Self interest & preservation of organisation solely concerned with maximising return on investment Top down approach (militaristic) Separates formulation from implementation Implementation is based on the military style order ; strategy will be carried out via discipline and obedience sl/bmbe/2016 8

9 Profit Systemic Deliberate X Emergent Plural Play by the local rules The social system within which strategies are developed are crucial Contextual sensitivity to : Markets; Countries & Cultures Social systems (and their associated societies) are not solely profit maximising and social systems are based on: Class ; Professionalism & Gender Strategy & planning is also bounded by particular social systems/rules/norms. sl/bmbe/2016 9

10 Processual Deliberate Profit X Emergent Plural Stay close to the ground and go with the flow! Processual managers do not believe in planning Strategy emerges from sticky and messy context based on Pragmatic; Learning & Compromise Optimal strategy is not main concern as managers usually concedes to bounded rationality using the prisoners dilemma Organisations are socially complex bargaining and barter system between interest groups Change disrupts power dynamics and thus strategic change is viewed with suspicion Strategy is discovered in action (through implementation?) sl/bmbe/

11 Profit Evolutionary Deliberate X Emergent Costs low and options open Plural The environment moves too quickly and unpredictably to wait for rationalised action so planning based on best fit; Only the best performers survive law of the jungle Strategy can be a delusion Strategising method is day by day muddling through as managers believe that tomorrow is just too difficult and impossible to predict. Best planning method is drawing upon on diversification so as to survive sl/bmbe/

12 D39BU Business Management in the Built Environment Another look at strategic positioning in reality As organisations are operating in a competitive world, strategies are developed to cope with the need to survive in the marketplace. Strategic management is supposed to help organisations steer through changes and shifts in the environment to secure future growth and sustainable success. sl/bmbe/

13 D39BU Business Management in the Built Environment Strategic positioning in reality Just like you and I, without a long term goal, we will be aimless, so organisations need goals, vision, mission to enable them to sail through the storms of competition, changes in the market etc.. In fact, strategic planning is similar to the art of war (Sun Tze) you need to understand strategic positioning and also the process of analysis, formulation and then implementation of your tactics and operations in order to succeed in business sl/bmbe/

14 D39BU Business Management in the Built Environment Strategies are based on certain schools of thoughts on which differs in the way strategic planning is done 3 basic thoughts via 1. Classical/rational planning school 2. The design school 3. The positioning school sl/bmbe/

15 D39BU Business Management in the Built Environment IF THE ORGANISATION USES THE CLASSICAL SCHOOL OR APPROACH, THEN THE STRATEGY WILL BE: A)Top down, bureaucratic approach of top management decision which is cascaded down to the bottom of the hierarchy in the organisation B) The leadership style will be telling and informing and not participative or consultative C) Profit and shareholders interest are paramount to reach goals and objectives for the organisation sl/bmbe/

16 D39BU Business Management in the Built Environment 2. IF THE ORGANISATION USES THE DESIGN SCHOOL OR APPROACH a)it will practise the systems view and everything will be according to a certain system or design. b)the management may adopt a selling or collaborating style of leadership so that everyone buys into the organisation goals and achieve together. c)going with the systems especially social and technological systems to be in place - systematic 7 step approach is often used.. sl/bmbe/

17 D39BU Business Management in the Built Environment Diagram showing the process of strategic planning a 7-step model Vision & mission Swot analyss STEEP & Scenarios Planning Strategic analysis & options decision making implementation Evaluation & monitoring sl/bmbe/

18 D39BU Business Management in the Built Environment 3. THE POSITIONING SCHOOL : MICHAEL PORTER S MODEL ALSO PART OF THE EVOLUTIONARY/COMPETITIVE PERSPECTIVE This is the strategic approach based on competition survival of the fittest so the strategic focus will be on maximising competitive strategies to stay ahead of competition Porter argues that profitability of an organisation lies in the power of the organisation to position itself against the others in the industry and how it uses its capabilities to handle its bargaining position to sustain growth and success. sl/bmbe/

19 D39BU Business Management in the Built Environment Porter s diamond diagram Govt Strategy, structure & rivalry Factor conditions Demand conditions Related & supporting industries chance sl/bmbe/

20 D39BU Business Management in the Built Environment According to Porter. a) Factor conditions highly specialised resources developed in different countries where there is a large pool of skilled manpower or labour b) Related and supporting industries which help to expedite the process for production of goods and services c) Demand conditions where consumers force companies to innovate and shape their market orientation in such a way that caters to their needs and wants d) Strategy, structure and rivalry which will be highlighted in the study of 5-forces theory sl/bmbe/

21 D39BU Business Management in the Built Environment STRUCTURAL ANALYSIS OF INDUSTRIES or COMPETITIVE ANALYSIS OF THE INDUSTRY 5 FORCES AFFECTING ANY ORGANISATION ARE : THREAT OF NEW ENTRANTS THREAT OF SUBSTITUTES SUPPLIERS BARGAINING POWER BUYERS BARGAINING POWER INDUSTRY COMPETITIVE RIVALRY sl/bmbe/

22 D39BU Business Management in the Built Environment MICHAEL PORTER S 5 FORCES MODEL /THEORY sl/bmbe/

23 OTHER STRATEGIC TOOLS & TECHNIQUES Using Historical Analysis: Analyse historical accounts of strategy Analyse past, present and potential future events Analyse and seek to understand the lifecycle of the market(s) the organisation operates within Doing a strategic group analysis to determine the strategy of others (prisoners dilemma) Analyse the segmentation of the market Doing a full SWOT analysis Conducting a resource audit and a resource utilisation analysis to determine how resources are actually deployed and on the organisation & environmental analysis or audit sl/bmbe/

24 OTHER STRATEGIC TOOLS & TECHNIQUES SUCH AS USING A VALUE CHAIN ANALYSIS WITH THE CHECKLIST OF RESOURCES AND ACTIVITIES Support activities Corporate structure Human resources Technological development purchasing services Mktg & sales Outbound logistics mfg Inbound logistics Primary activities sl/bmbe/

25 OTHER STRATEGIC TOOLS & TECHNIQUES USING A PORTFOLIO ANALYSIS : to see if the company is in a good position to capitalise on market growth in markets where they hold a large share sl/bmbe/

26 Portfolio Analysis or Market Analysis: the growth / share matrix or the BCG Matrix Theoretically offer the best profit & growth Low growth in a poor market / weakness Profits best utilised elsewhere Requires large investment for development sl/bmbe/

27 Portfolio Analysis or Market Analysis: BCG proposed the matrix is presented in Fig 14 of Pg 19 Unit 5 Market Share High Low Market Growth High Low sl/bmbe/

28 Portfolio analysis or matrix is to assess the balance and contribution to the strategic capability of the organisation. Implications of using this matrix: a) This analysis is applied to SBUs and not the whole market b) Management must develop the capability to review the SBU c) Different targets are set for different segments d) Too much focussing on one part may be bad for the whole organisation for example stars and cash cows must be managed well to prevent conflict e) Dogs may be retained in order to become loss leaders sl/bmbe/

29 OTHER STRATEGIC TOOLS & TECHNIQUES DIVERSIFICATION ANALYSIS OR MATRIX Model Existing Portfolio Services / Products: New / Related Services/ Products: New / Unrelated Services / Products: Existing Clients: Existing Expansion Expansion Same Geographical Area Strategy Strategy Strategy Existing Clients: Expansion Expansion Diversification New Geographical Area Strategy Strategy Strategy New Clients: Expansion Diversification Conglomerate Same Geographical Area Strategy Strategy Diversification New Clients: New Geographical Area Expansion Diversification Conglomerate Strategy Strategy Diversification sl/bmbe/

30 All the tools used are for understanding and determining which options to choose; how resources have been deployed in the past and how effective these strategies were; how effective is the performance of the organisation against the industry norms and to see if the firm able to benchmark across other industries to determine the scope for change and strategy as well as to check the balance of resources an organisation owns or controls Is the organisation balanced enough to be flexible? sl/bmbe/

31 SELECTION OF OPTIONS : PORTER S GENERIC STRATEGIES UNIT 6 PG 1-3 Competitive Advantage Lower cost Differentiation Broad target Narrow target Competitive scope Cost Leadership Cost Focus Broad Differentiation Differentiation Focus sl/bmbe/

32 SELECTION OF OPTIONS : PORTER S GENERIC STRATEGIES PG 2-UNIT 6 3. Hybrid 4.Differentiation 5. Focused Differentiation Strategic 2. Low Price Choice/options 6. Increased Price / What is of value to Standard Value the user of the product / service? 1. Low Price / Added Value 8. Low Value / Standard Price 7. Increased Price / Low Value sl/bmbe/

33 DISCUSSION AND ASSIGNMENT 1. Critically appraise the purpose and process of strategic analysis and, fully describe three tools or techniques that those responsible for strategy development in a built environment organisation may choose to adopt. 2. Explain what you understand by Richard Whittington s 2x2 Framework of generic perspective on strategy. Draw the diagrams depicting the 4 perspectives relating to his theory. sl/bmbe/

34 D39BU Strategic Management in the Built Environment Core reading for module Useful reading material Carter, C., Clegg, S., Kornberger, M (2008) A very short, fairly interesting and reasonably cheap book about studying organisations, Sage, London Clegg, S., Kornberger, M., Pitsis, T. (2005) Managing and Organisations: An introduction to theory and practice, Sage, London Whittington, R. (2001) (2 nd Ed.) What is Strategy and does it matter?, Thomson, London Mintzberg, H., Ahlstrand, B., Lampel, J. (1998) Strategy Safari: the complete guide through the wilds of strategic management, Prentice Hall, London Langford, S., Male, S. (2001) Strategic Management in Construction, sl/bm Blackwell, Oxford Journal papers BE/20 16