Process of Strategic Choice

ContentContentContentContent Introduction Strategic Choice- A Definition Process of Strategic Choice Subjective Factors in Strategic Choice Contingency Strategies Strategic Plan

IntroductionIntroductionIntroductionIntroduction

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.

STRATEGIC CHOICESTRATEGIC CHOICESTRATEGIC CHOICESTRATEGIC CHOICE

“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

Process of strategic choiceProcess of strategic choiceProcess of strategic choiceProcess of strategic choice

Focusing on strategic alternativesFocusing on strategic alternativesFocusing on strategic alternativesFocusing on strategic alternatives

Focusing on alternative could be done by visualizing the future state and working backwards. This done through gap analysis.

GAP AnalysisGAP AnalysisGAP AnalysisGAP Analysis

GAP ANALYSIS = Projected Performance – Desired Performance

Gap Analysis For Focusing on Strategic Alternatives

Gap Analysis For Focusing on Strategic Alternatives

Per

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P

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Present Present performanceperformance

Desired Desired performanceperformance

Performance Performance gapgap

TIME TIME

T1 T2T1 T2

Strategic AlternativeStrategic AlternativeStrategic AlternativeStrategic Alternative

At the corporate level:1.Expansion Strategy2.Stability Strategy3.Retrenchment Strategy4.Combination Strategy

Expansion StrategyExpansion StrategyExpansion StrategyExpansion Strategy

If the performance GAP is large due to expected environmental opportunity, Expansion Strategy would be seem to be a feasible alternative.

Stability StrategyStability StrategyStability StrategyStability Strategy

If the “Performance Gap” is narrow then Stability Strategy would be seem to be a feasible alternative.

Retrenchment StrategyRetrenchment StrategyRetrenchment StrategyRetrenchment Strategy

If the performance GAP is large due to Past and expected bad performance then Retrenchment Strategy would be seem to be a feasible alternative.

Combination StrategyCombination StrategyCombination StrategyCombination Strategy

In the complex scenario, where the multiple reason for the performance GAP then Combination Strategy would be seem to be a feasible alternative.

Strategic AlternativesStrategic AlternativesStrategic AlternativesStrategic Alternatives

At the business level:

Organization need to think alternative ways of competing.

Choice is essentially between positioning the business as being low-cost, differentiated or focused.

Strategic AlternativesStrategic AlternativesStrategic AlternativesStrategic Alternatives

At the business level:

It needs to understand the conditions of the industry’s risk and benefit of each competitive positioning before making a choice.

By reverting business definition (Page 40-44),(3 dimensions)

–Customer group–Customer functions and –Alternative technologies.

Analyzing the strategies Analyzing the strategies AlternativesAlternatives

Analyzing the strategies Analyzing the strategies AlternativesAlternatives

An analysis has to rely on certain factors. These factors are termed as selection factors.

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.

Evaluating the strategic Evaluating the strategic AlternativesAlternatives

Evaluating the strategic Evaluating the strategic AlternativesAlternatives

Evaluation of strategic alternatives basically involves bringing together the analysis done on the basis of the objective and subjective factors.

To observe what is important, both the factors have to be consider together.

Choosing From Among the Strategic AlternativeChoosing From Among the Strategic AlternativeChoosing From Among the Strategic AlternativeChoosing From Among the Strategic Alternative

This is the final step of making the strategic choice. One or more strategies have to be chosen for implementation. Also a blue print has to be made that will describe the strategy and the condition under which they operates.

Subjective Factors in Strategic ChoiceSubjective Factors in Strategic ChoiceSubjective Factors in Strategic ChoiceSubjective Factors in Strategic Choice

Subjective factors are essentially intuitive and descriptive in nature. Here no “cut and dried” analytical models can be used. It consider many of the issues that can not probably should not be dealt within the application of analytical models.

Subjective Factors in Strategic ChoiceSubjective Factors in Strategic ChoiceSubjective Factors in Strategic ChoiceSubjective Factors in Strategic Choice

Consideration for Government Policies. Perception of critical success factors (CSFs) and distinctive competencies.

Commitment to past strategic actions. Strategist’s decision styles and attitude to risk.

Internal Political Considerations. Timing and Competitor Considerations.

Consideration for Government PoliciesConsideration for Government PoliciesConsideration for Government PoliciesConsideration for Government Policies

Strategies within organizations are aware of the crucial role the Government plays in setting down politics and priorities. In fact Government policies are the deciding factor which impact on the future prospects of companies.

Perception of critical success factors and Perception of critical success factors and distinctive competenciesdistinctive competencies

Perception of critical success factors and Perception of critical success factors and distinctive competenciesdistinctive competencies

For consider several strategic alternatives, strategist could be guided by the distinctive competencies that the organization possesses and the CSFs that ensure success in any industry.

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Commitment to past strategic actionsCommitment to past strategic actionsCommitment to past strategic actionsCommitment to past strategic actions

Past strategic action shows that they move in an incremental fashion. By this strategist are more likely to start from where the organization is, and work up in the way that had been adopted by it to reach where it was.

Strategist’s decision styles and attitude to Strategist’s decision styles and attitude to riskrisk

Strategist’s decision styles and attitude to Strategist’s decision styles and attitude to riskrisk

The decision style adopted by strategist, particularly by CEO and their attitude to risk is a determining subjective factors in strategic choice.

Internal Political Considerations.Internal Political Considerations.Internal Political Considerations.Internal Political Considerations.

When strategy formulation is viewed as a political process, strategist are viewed as a coalition of interest. A dominant CEO is able to affect strategic choice a decisively.

Timing and Competitor ConsiderationsTiming and Competitor ConsiderationsTiming and Competitor ConsiderationsTiming and Competitor Considerations

When to exercise a strategic choice? When a particular strategic choice is to be made?

For what time period is a strategic choice to be made?

What are the competitor action?

Webster Dictionary Webster Dictionary Webster Dictionary Webster Dictionary

Inalienable: you are emphasizing that they have a right to it which can not be changed or taken away.

Internal Political ConsiderationInternal Political ConsiderationInternal Political ConsiderationInternal Political Consideration

Here it means, Inter-relationship and power structure and balance.

The political behavioral in organisation is perfectly naturally legitimate… politics and power are neither good nor bad. They are natural.

Critical success factor (CSF)Critical success factor (CSF)Critical success factor (CSF)Critical success factor (CSF) This is the term for an element that is necessary

for an organization or project to achieve its mission. CSF are those few things that must go well to ensure success for a manager or an organization, and, therefore, they represent those managerial or enterprise area, that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization's current operating activities and to its future success.“

Source- Wikipedia

Distinctive competenceDistinctive competenceDistinctive competenceDistinctive competence

Distinctive competence of a firm refers to a set of activities or capabilities that a company is able to perform better than its competitors and which gives it an advantage over them. Distinctive competence can lie in different area such as technology, marketing activities, or management capability.

Source- Wikipedia

Decision making processDecision making processDecision making processDecision making process

Because it consists of:–Setting objectives–Generating alternatives.–Choosing one or more alternatives.–Finally implementing the chosen alternatives.

IntuitiveIntuitiveIntuitiveIntuitive

Webster: It feels that it is true although it have no evidence or proof of it.

Oxford: having or, perceived by intuition.

Contingency strategiesContingency strategiesContingency strategiesContingency strategies

This strategy is formulate in advance to deal with uncertainties that are a natural part of business. There are few approach to help companies to develop and implement this strategy i.e. model of contingency planning process:

Identifying contingency events; Establishing the trigger points and; Developing strategies and tactics.

Strategic PlanStrategic PlanStrategic PlanStrategic Plan

Strategic plan (also called a corporate, group or perspective plan), is a document which provides information regarding the differences elements of strategic management and the manner in which an organization and its strategist propose to put the strategies into action. Basic steps in a strategic planning process are as follows:

Step One - Getting ReadyStep One - Getting ReadyStep One - Getting ReadyStep One - Getting Ready

An organization that determines it is indeed ready to begin strategic planning must perform five tasks to pave the way for an organized process:

– Identify specific issues or choices that the planning process should address.

– Clarify roles (who does what in the process).

– Create a Planning Committee.

– Develop an organizational profile.

– Identify the information that must be collected to help make sound decisions.

Step Two - Articulating Mission and VisionStep Two - Articulating Mission and VisionStep Two - Articulating Mission and VisionStep Two - Articulating Mission and Vision

It is like an introductory paragraph. a mission statement must communicate the essence of an organization to the reader. It describes an organization in terms of its:

Purpose - why the organization exists, and what it seeks to accomplish.

Business - the main method or activity through which the organization tries it fulfil this purpose.

Values - the principles or beliefs that guide an organization's members as they pursue the organization's purpose.

Step Three - Assessing the SituationStep Three - Assessing the SituationStep Three - Assessing the SituationStep Three - Assessing the Situation

Once an organization has committed to why it exists and what it does, it must take a clear-eyed look at:- Its current situation.- Part of strategic planning, thinking, and management is an awareness of resources and - An eye to the future environment, so that an organization can successfully respond to changes in the environment.

Step Three - Assessing the SituationStep Three - Assessing the SituationStep Three - Assessing the SituationStep Three - Assessing the Situation

- Situation assessment (means obtaining current information about the organization's strengths, weaknesses, and performance information) that will highlight the critical issues that the organization faces and that its strategic plan must address.

Step Four - Developing Strategies, Goals, Step Four - Developing Strategies, Goals, and Objectivesand Objectives

Step Four - Developing Strategies, Goals, Step Four - Developing Strategies, Goals, and Objectivesand Objectives

Once an organization's mission has been affirmed and its critical issues identified, it is time to figure out what to do about them. The broad approaches to be taken and the general and specific results to be sought (the goals and objectives). This strategies may come from individual inspiration, group discussion, formal decision-making techniques, and so on.

Step Five - Completing the Written PlanStep Five - Completing the Written PlanStep Five - Completing the Written PlanStep Five - Completing the Written Plan

The mission has been articulated, the critical issues identified, and the goals and strategies agreed upon. This step essentially involves putting all that down on paper!

Format for a Strategic PlanFormat for a Strategic PlanFormat for a Strategic PlanFormat for a Strategic Plan

1. INTRODUCTION

1.1 Background and organizational profile

2. MISSION STATEMENT

2.1 Vision

2.2 Mission

2.3 Values

3. ASSESSING THE SITUATION

3.1 Introduction

3.2 Review of Past Performance

3.3 Strengths, Weaknesses, Opportunities and Threats

Analysis

3.4 Critical Issues 

Format for a Strategic PlanFormat for a Strategic PlanFormat for a Strategic PlanFormat for a Strategic Plan

4. STRATEGIES, GOALS AND OBJECTIVES

4.1 Approaches to be taken (Strategies)

4.2 General and specific results (Goals and Objectives)

5. IMPLEMENTATION STRATEGY

5.1 Implementation of the strategies

5.2 Action Planning (activities, budget & financing etc.)

*Source- IGNOU Book

ReferencesReferencesReferencesReferences

Strategic Management and Business Policy-

-Prof. Azhar Kazmi

Strategic management (IGNOU Books) www.wikipedia.com www.google.com

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