Evaluating and Selecting Strategies

download Evaluating and Selecting Strategies

of 28

Transcript of Evaluating and Selecting Strategies

  • 7/29/2019 Evaluating and Selecting Strategies

    1/28

    Evaluating and Selecting

    StrategiesChapter 9

  • 7/29/2019 Evaluating and Selecting Strategies

    2/28

    Learning Outcomes

    Describe the nature of strategic options

    Explain the key areas of strategicdecisions

    Understand and describe the 4 criteria forstrategic options

    Understand financial tools used toevaluate strategic options

  • 7/29/2019 Evaluating and Selecting Strategies

    3/28

    Key Definitions

    Strategic, tactical and operational decisions

    Goods

    Services

    Industrial products, consumer products Convenience, shopping and specialty products

    Product lifecycle

    Suitable Feasible

    Acceptable

  • 7/29/2019 Evaluating and Selecting Strategies

    4/28

    Strategic Analysis

    Evaluation and

    Selection of Strategies

  • 7/29/2019 Evaluating and Selecting Strategies

    5/28

    Strategic Analysis

  • 7/29/2019 Evaluating and Selecting Strategies

    6/28

    Hamel andPrahalad

    Core Competence

    PorterValue Chain

    analysis

    HUMANRESOURCESAudit Analysis

    ORGANISATIONALCULTURE

    Handys typology

    Miles & Snow culture

    types

    INTERNAL ANALYSIS

    FINANCIALANALYSIS

    ANDPERFORMANCE

    INDICATORSSources of finance

    WACC and CAPM

    Ratio Analysis

    Benchmarking

    PRODUCTS ANDMARKETS

    Market

    Segmentation

    Kotlers product

    benefitCopelands product

    typology

    Product life cycle

    BCG Matrix

    GEC Matrix

    Pgs. 33-111

    Chap 2 Chap 3 Chap 4 Chap 5

  • 7/29/2019 Evaluating and Selecting Strategies

    7/28

    EXTERNAL ANALYSIS

    SPENTMacro-

    environment

    Socio-demographicPolitical

    Economic

    Natural

    Technological

    INDUSTRYPorters 5-forces

    Resource-based

    COMPETITIVE ADVANTAGECompetitive Positioning

    Porters generic

    Resource-based/Core

    Competence Prahaladand Hamel

    Knowledge-based

    Stonehouse and Pemberton

    ANSOFFsProduct/Growth Matrix

    Strategicoptions/choice

    Strategicoptions/choice

    Pgs. 115-177

    Chap 6 Chap 7 Chap 8

  • 7/29/2019 Evaluating and Selecting Strategies

    8/28

    Evaluating and Selecting Strategies

  • 7/29/2019 Evaluating and Selecting Strategies

    9/28

    Strategic Decisions

    STRATEGIC

    TACTICAL

    OPERATIONALLevel of decision-making

    Focus

    Scope

    Time horizon

    Complexity

    Degree of uncertainty

    LEVELS

  • 7/29/2019 Evaluating and Selecting Strategies

    10/28

    Evaluation and Selection of

    Strategies: The Process

    Strategic Analysis

    Evaluating and selecting strategy

    Identifying Strategic

    Options

    Applying Evaluation

    Criteria

  • 7/29/2019 Evaluating and Selecting Strategies

    11/28

    Identifying Strategic Options: 3

    Areas of Focus

    Products and markets (Chapter 5)

    Generic strategy and scope (Chapter 8)

    Growth and development options (Chapter11)

  • 7/29/2019 Evaluating and Selecting Strategies

    12/28

    Identifying Strategic Options

    Product and Market

    Decisions

    Generic Strategy

    Decisions

    Growth and

    Development Decisions

  • 7/29/2019 Evaluating and Selecting Strategies

    13/28

    Product and Market Decisions

    Two questions are answered:

    Which products should we produce?

    In which markets should we sell ourproducts?

  • 7/29/2019 Evaluating and Selecting Strategies

    14/28

    Product and Market Decisions

    (cont.)

    Decisions to be made include:

    Product and market categories

    Product features

    Product and market portfolios

    Life cycle considerations

  • 7/29/2019 Evaluating and Selecting Strategies

    15/28

    Product and Market Categories

    Decisions to be made include:

    Products Goods/services

    Consumer/industrial products Convenience, shopping or specialty products

    (Copelands classification)

    Markets

    Geographic area International decisions

    Benefits and risks

  • 7/29/2019 Evaluating and Selecting Strategies

    16/28

    Product Features

    Focuses on the benefits of the product

    Decisions may be based on Kotlers 5levels of product benefit

    Core benefit

    Basic product

    Expected product

    Augmented product

    Potential product

  • 7/29/2019 Evaluating and Selecting Strategies

    17/28

    Product and Market Portfolios

    Should the portfolio be broad or narrow?

  • 7/29/2019 Evaluating and Selecting Strategies

    18/28

    Generic Strategy Decisions

    Cost Leadership or differentiationstrategy?

    Cost Focus or Focused Differentiation?

  • 7/29/2019 Evaluating and Selecting Strategies

    19/28

    Growth and Development

    Decisions

    Generic growth direction (Ansoffs GrowthMatrix) Market penetration

    Market development Product development

    Diversification

    Mechanisms for generic growth strategies Internal

    external

  • 7/29/2019 Evaluating and Selecting Strategies

    20/28

    Applying Evaluation Criteria

    Four criteria can be used to assess eachoption:

    Is the strategic option suitable?

    Is the strategic option feasible?

    Is the strategic option acceptable?

    Will the strategic option give the organization

    a competitive advantage?

  • 7/29/2019 Evaluating and Selecting Strategies

    21/28

    Is the strategy suitable?

    Suitable fitting, appropriate

    Is the strategic option appropriate forachieving the strategic goal?

    Example: a cost leadership strategy maynot be suitable if the strategic goal is tocreate a premium brand

  • 7/29/2019 Evaluating and Selecting Strategies

    22/28

    Is the strategy feasible?

    Feasible capable of being done or carried out

    Feasibility will often depend on theorganizations physical, financial, human and

    intellectual resources Example: a strategy that involves diversification

    (new products for new markets) may require alarge capital investment cost. If theorganization has difficulty getting the capital, thestrategy is not feasible.

  • 7/29/2019 Evaluating and Selecting Strategies

    23/28

    Is the strategy acceptable?

    Acceptable capable of being received

    For strategy, the proper question is: Is thestrategy acceptable to the stakeholders?

    Remember, stakeholder influence differsbased on power and interest

  • 7/29/2019 Evaluating and Selecting Strategies

    24/28

    Will the strategy lead to competitive

    advantage?

    The strategy is not worth pursuing unlessit either results in superior performance orabove average profits

  • 7/29/2019 Evaluating and Selecting Strategies

    25/28

    In Support of Evaluation Criteria:

    Financial Tools

    Cash-flow forecasting

    Investment appraisal

  • 7/29/2019 Evaluating and Selecting Strategies

    26/28

    Cash-flow forecasting

    The organization forecasts (predicts) theexpected income from the strategicoption

    Example

    http://localhost/var/www/apps/conversion/tmp/scratch_8/cash%20flow%20forecast%20example.xlshttp://localhost/var/www/apps/conversion/tmp/scratch_8/cash%20flow%20forecast%20example.xls
  • 7/29/2019 Evaluating and Selecting Strategies

    27/28

    Investment Appraisal

    Payback period

  • 7/29/2019 Evaluating and Selecting Strategies

    28/28

    In Support of Evaluation Criteria:

    Other Tools

    Cost/benefit analysis comparing thecosts of the strategic option (includingfinancial and opportunity costs), with

    the benefits (financial and intangiblebenefits)

    Impact analysis

    Sensitivity analysis