CIMA

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• CIMA
• Management Accountancy and Business Strategy
• Lecture 2

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Learning Outcomes
At the end of this session you will

• Understand some of the arguments against the
  rational model
• Have identified other approaches to startegy
  development
• Understand the vocabulary of strategy
• Have identified some of the groups with an
  interest in your organisations actions

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Arguments Against the Rational Model

• Strategic plans often fail
• Information coming in at the hub of operationsis
  not received in the strategic planning dept
• The model ignores the power groups
• Design and implementation carried out by
  different people
• Managers, obsessed with performance indicators,
  losesight of the "big picture" and become less
  able to dealwith uncertainty
• Managers cannot control the behaviour of the
  whole org.

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Fallacies in Strategic Planning - Mintzberg

• Formalisation
• Assumption of detachment
• Predetermination

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Freewheeling Opportunism

• Suggests that organisations should seize
  opportunities as they arise, rather than submit
  strategic decisions to planning procedures which
  might lead to lost opportunities
• Can lead to the undisciplined acquisition of a
  number of business streams with no common thread
• unsuitable for large organisations, and
  organisations whose activities involve many
  different interest groups with the power to
  influence organisational choices

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No Strategic Planning - Incrementalism

• Lindblom argued that the rational model notused
  in the real world
• Managers choose between relatively few
  alternatives
• Small scale extensions of past policy -
  incrementalism
• Policy the outcome of political bargaining
  -partisan mutual adjustment
• Proceeds disjointedly - disjointed incrementalism

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Crafting Emergent Strategies

• Mintzberg - strategies result from a number ofad
  hoc choices, perhaps lower down the hierarchy
• May not be recognised at the time as being
  ofstrategic importance
• Emergent strategies develop out of patterns of
  behaviourin contrast to planned strategies which
  are imposedfrom above

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Deliberate and Emergent Strategies
Deliberatestrategies
Plans
(or intendedstrategies)
Realisedstrategies
Unrealised strategies
Emergentstrategies
Patterns ofbehaviour
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How to Craft Strategy

• Manage stability
• Detect discontinuity
• Know the business
• Manage patterns
• Reconcile change and continuity

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Question for Discussion

• How is strategy developed in your organisation?

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The Vocabulary of Strategy
TERM
DEFINITION
A PERSONAL EXAMPLE
Mission
Be healthy and look good
Overriding premise in line with the values or
expectations of stakeholders
Goal
Lose weight
General Statement of aim or purpose
Objective
Lose 10 pounds by 1 September
Quantification (if possible) or more precise
statement of the goal
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MISSION
..is likely to be concerned with the overall
purpose of the organisation, its scope and its
boundaries.It is sometimes referred to in
terms of the apparently simple, but actually
quite challenging question"What business are
we in?"
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GOAL
..a general statement of direction in line with
the mission.It may well be qualitative in
nature.
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OBJECTIVE
..is more likely to be quantified,or at least
to be a more precise statement in line with the
goal. Action sentence or doing words
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A Useful Mission Statement

• Be visionary and likely to persist for a
  significant period of time
• Clarify the main purposes of the organisation,
  and the reasons why the organisation exists
• Describe the organisation's main activitiesand
  the position it wishes to attain in its industry
• Be a statement of the key values of the
  organisation- particularly regarding attitudes
  towards stakeholder groups
• The organisation should have the intention and
  capability to live up to the mission statement

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Elements of Mission
Purpose(why the company exists)
Strategy(competitive position,distinctive
competences)
Employee'spersonalvalues
Values(company's)
Standardsand behaviour
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Influence of Mission
Mission
Denotesvalues
Guides commercialdecisions
Culture
Strategy
Should reinforceeach other
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Mission Statements Selling Corporate Values to
Employees
LRP, Vol. 24, No.3, pp73-78, 1991
The general conclusion ... is that companies see
the mission statement primarily as a vehicle to
communicate to staff and to assert their
leadership throughout the company
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Does Your Organisation Need a Mission?
Leadership and Organisation Development, 3
(1989)
Andrew Campbell's research in the U.K. indicates
that in efficient and effective companies a good
mission statement can overcome the rivalry of
stakeholder groups.Campbell also asserts that
"leadership is more than strategy...successful
leaders also instill values in their
organisation..."The mission... has an
essential part to play in developing an
organisational culture.
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A Tool for Effective Leadership?
LRP, Vol. 24, no. 3, pp. 73-78, 1991
Provides individual managers...with a common
direction that should transcend individual,
departmental and transitory needsEnables a
manager, particularly a new chief executive to
assert his or her authority over the
organisation to lead it in a new
directionProcess of formulating the statement
can be used to generate new ideas and challenge
old ones
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A Tool for Effective Leadership?
LRP, Vol. 24, no. 3, pp. 73-78, 1991
Promotes a sense of shared expectations among all
levels of employees, thus it is an essential
part of building a company cultureAssists the
process of managing in the interests of the
stakeholdersTo a lesser extent it
communicates a public image to important groups
outside the company
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Subverting Mission
Mintzberg argues that system goals have a habit
of subverting mission, by making mission
subordinate to these goals. System goals are
those which the organisation's existence as an
organisation encourages it to pursue. They
include

• Survival
• Efficiency
• Control
• Growth

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BA
British Airways New Mission Statement
To be the undisputed leader in world travel
The Goals Customers first choice in key
markets Financially secure, strong
profitability Global in network
outlook, Superior value in world travel Building
on success - inspirational
The Values Safe and Secure Honest and
Reliable Innovative, Team-spirited Global and
caring A Good Neighbour
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Wal - Mart
Key Market
To offer all our fine customers in our
territories
Contribution
all of their household needs
Distinction
in a manner in which they continue to think of
us fondly.
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Otis Elevator
Key Market
To provide any customer
Contribution
with a means of moving people and things up,
down and sideways over short distances
Distinction
with higher reliability than any similar
enterprise.
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Courtyard by Marriot
Key Market
To provide economy and quality minded frequent
business travellers
Contribution
with a premier, moderate priced lodging facility
Distinction
which is consistently perceived as clean,
comfortable, staffed by friendly, attentive and
efficient people.
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Goals

• The relevance of the mission to different
  stakeholders

Common shareholdersPreferred shareholdersTrade
creditorsHolders of DebtCustomersSuppliersEmpl
oyeesPast employeesCompetitors
Immediate communityNational societyWorld
societyCorp. managementOrganisational
strategistsChief executiveBoard of
directorsGovernmentSpecial interest groups
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Stakeholders' Expectations

• Shareholders profit, ROI, increase in share
  price
• Managers salary, security, job satisfaction
• Suppliers future orders, profitable sales,
  payment
• Customers goods services, VFM, quality
• Bankers profitable relationship, security of
  assets
• Govt taxation, employment, lawful
  operations,competition policy
• Public environmental impact, employment
• Pressure groups anything relevant

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Question for Discussion

• Identify some of the groups with an interest in
  your organisations actions (i.e. the
  stakeholders)

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Company Objectives

• Whose interests are paramount -plural
  stakeholders?common shareholders?
• Stakeholder view - management must balance
  theobjectives of the shareholders with those of
  thestakeholders
• Consensus view - objectives emerge as a
  consensusof the differing views, and are not all
  selectedor controlled by management

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Commercial Goals and Objectives - Characteristics

• Specific
• Measurable
• Attainable
• Results-orientated
• Time-bounded
• Goal congruence
• Consistent vertically
• Consistent with each other
• Identify beneficiaries, nature and size of benefit

SMART
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Non-Financial Goals and Objectives

• Social and ethical obligations
• Technological
• Flexibility
• Others

- products and markets- organisation structure-
productivity- expansion/consolidation