MANAGEMENT STRATEGY Page 195243

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MANAGEMENT STRATEGYPage 195-243
4.0
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ELEMENTS OF STRATEGY
4.1

• Consideration of environmental changes offering
  new opportunities and posing new threats
• Assessment of internal strengths and weaknesses
  and the ability of the organization to respond to
  environmental changes
• Product of decision-making process influenced by
  values, preferences and power of interested
  parties
• Strategy formulation is therefore highly complex

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APPROACHES TO STRATEGY
4.2

• Rational (forecasting, portfolio analyses,
  SWOT-analyses following the decision-model)
• Flexible Maximizing chances of survival
  (scenario planning, the SONO-example)
• Creative (rely on a creative manager)
• Behavioural (political decisions as a result of
  negotiations between senior management and other
  dominant coalitions)
• Incremental (Lindbloms The science of muddling
  through, mainly in the public sector)
• Absence of strategy?
• Combination of approaches

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Making strategy
SWOT Portfolio etc.
Rational decision making
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SWOT-analysis (1)

• Simple list of

Opportunities
Threats
Strengths
Weaknesses
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SWOT-analysis (2)
4.2.1

• SWOT Strengths, Weaknesses, Opportunities,
  Threats
• A rational approach
• Analysis of external environment in terms of
  opportunities and threats
• Analysis of internal organization in terms of
  strengths and weaknesses
• Assumes information is available and that a
  helpful analysis can be made
• Collects useful data, gives direction, has face
  validity, can be a team-building exercise

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THE IMMEDIATE COMPETITIVE ENVIRONMENT (5 forces)
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STRATEGIC CONTEXTS
4.3

• The need for strategy exists in all types of
  organization, e.g. schools, police, football
  clubs and production industries.
• Strategic levels 1
• Industry level
• Individual firm level
• Product market level
• Strategic levels 2
• Overall strategy
• Functional area strategies
• Individual targets and budgets

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THE USES AND VALUE OF STRATEGY
4.4

• Assists in formulation and modification of goals
• Management control device
• Assists in resource allocation
• Assists management focus on key issues and
  actions
• Guides and co-ordinates the activities of
  constituent parts of the organization
• Assists in organizational and cultural change
• Strategy formulation is part of management
  development
• However
• Mixed evidence on links between strategy and
  performance
• Cause and effect complicated by many variables

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TYPES OF GENERAL ENVIRONMENT
4.5.1

• Simple and static (bread, meat, fireworks,
  railway)
• Dynamic (home computers, television,
  construction)
• Complex (many products, may geographical areas,
  many different types of skilled workers, many
  languages within the organization. E.g.
  multinationals, hospitals, EU Parliament.

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ENVIRONMENTAL ANALYSIS - COMPLICATIONS
4.5.3

• Threat to one part of the organization may be an
  opportunity to another
• Ability to respond depends on factors such as
  size, market position and financial status
• Managers may differ in their perception of
  opportunities and threats and have different
  attitudes to risk

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BENEFITS OF ORGANIZATIONAL ANALYSIS
4.6.1

• Knowledge of resources a vital prerequisite to
  determine what can be done
• Identifies gaps which may or may not be possible
  to rectify
• Combining resources in certain ways can be a
  source of competitive advance
• To rate the attractiveness of products and
  markets
• Assessment of the organizations ability to change

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CORE COMPETENCIES
4.6.2

• Key activities that give organizations a
  competitive edge
• Integration of knowledge, skills and technology
  to give customers added value (Hamel and
  Prahalad, 1990)
• Kay (1993) Identifies 3 aspects of core
  competence
• Architecture
• Reputation
• Innovative ability

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THE VALUE CHAIN
4.6.3

• A cumulative build-up of added value for the
  customer through the interaction of key
  activities
• Porter (1985) sees the value chain in terms of

FIGURE 4.4
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PORTFOLIO ANALYSIS
4.6.4

• Techniques to enable management to assess the
  attractiveness of business and products in
  specific markets and aid future investment.
• The Boston Consulting Group developed a matrix
  to assess products in terms of market share and
  market growth. Products can be classes as
• Stars - High growth, high share
• Cash Cows - Low growth, high share
• Question marks - High growth, low share
• Dogs - Low growth, low share

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PORTFOLIO ANALYSIS, Boston
4.6.4
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Porters marketing strategies
Competitive advantage
Assortment
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STRATEGIC CHOICE
4.9

• As a product of
• Analysis of opportunities and threats
• Analysis of organization resources
• Stated aims of the organization and its
  management team
• Values and preferences of key decision-makers
• Organizational politics
• Issue of sustainability

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CLASSIFICATION OF FIRMS BY STRATEGIC OPTION
4.7.2

• Competing firms in a single industry have been
  classified by Miles and Snow (1978) as
• Defenders
• Prospectors (innovators, 3M and HP)
• Analysers (Digital Equipment, IBM)
• Reactors

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TYPES OF STRATEGIC OPTION
4.7.1

• Diversification
• Changing the competitive position of an existing
  business via product improvement, increased
  market penetration, cost reduction
• Deleting operations
• Consolidation

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DIVERSIFICATION STRATEGIES
4.7.3

• Related diversification
• Backward integration (or upstream)
• Forward integration (or downstream)
• vertical integration (up- and downstream)
• Horizontal integration (buy competing firms)
• Economies of scope (related activities)
• Unrelated diversification
• (Beer and bikes)

Suppliers
Retail
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JOINT VENTURES, MERGERS AND ACQUISITIONS -
CLASSIFICATION BY OWNERSHIP PATTERNS
4.8.1
FIGURE 4.7
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JOINT VENTURES, MERGERS AND ACQUISITIONS -
RATIONALE AND CLAIMED ADVANTAGES
4.8.2

• Pool resources, capital and know-how
• Cost reductions
• Economies of scale
• Synergies to create competitive advantage
• Access to new markets via local knowledge
• Access to new technologies
• Joint ventures as a political necessity

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JOINT VENTURES, MERGERS AND ACQUISITIONS -
SOURCES OF DIFFICULTIES AND FAILURE
4.8.3

• Capability
• Compatibility
• Commitment
• Control