DPM 4106 Lecture 7 2023 Strategy Formulation PDF

Lecture 7 Strategy Formulation, Strategy Analysis and Implementation. DPM 4106 - Lecture 7- O.Greaves 1 Strategy Analysis and Choice Generating alternative strategies Selecting strategies to pursue Best alternative course of action to...

Lecture 7 Strategy Formulation, Strategy Analysis and Implementation. DPM 4106 - Lecture 7- O.Greaves 1 Strategy Analysis and Choice Generating alternative strategies Selecting strategies to pursue Best alternative course of action to achieve mission and objectives DPM 4106 - Lecture 6- O.Greaves 2  Some points about Strategy Generation and Choice All alternatives should be derived from the organisation’s: vision, mission, objectives, external audit, and internal audit; The alternatives are therefore consistent with, or build on, past strategies that have worked well. DPM 4106 - Lecture 6- O.Greaves 3  Some points about Strategy Generation and Choice Strategists never consider all feasible alternatives that could benefit the organisation because there are an infinite number of possible actions and an infinite number of ways to implement those actions. They develop a manageable set of the most attractive alternative strategies. DPM 4106 - Lecture 6- O.Greaves  The Strategy-Formulation Analytical Framework Strategy-formulation techniques can be integrated into a three-stage decision making framework. DPM 4106 - Lecture 6- O.Greaves 5  Comprehensive Strategy-Formulation Framework Stage 1: The Input Stage Stage 2: Stage 3: The Matching Stage The Decision Stage DPM 4106 - Lecture 6- O.Greaves 6 Ch 7 -6 Copyright © 2011 Pearson Education  The Strategy-Formulation Analytical Framework Stage 1 (Input Stage) summarizes the basic input information needed to formulate strategies and assign ratings and weights. Stage 2 (Matching Stage) focuses on generating feasible alternative strategies by aligning key external and internal factors. Stage 3 (Decision Stage) objectively evaluates feasible alternative strategies identified in Stage 2. 7 DPM 4106 - Lecture 6- O.Greaves  Strategy-Formulation Techniques Stage 1 - Input Stage – EFE Matrix – IFE matrix – CPM Stage 2 - Matching Stage – SWOT – BCG matrix – Grand strategy matrix Stage 3 - Decision Stage – QSPM DPM 4106 - Lecture 6- O.Greaves 8 STAGE 1 - INPUT STAGE DPM 4106 - Lecture 6- O.Greaves 9 Strategy-Formulation Framework External Factor Evaluation (Opportunities and Threats) Stage 1: Internal Factor Evaluation The Input Stage (Strengths and Weaknesses) Competitive Profile Matrix (Comparison of the Organisation’s Strengths and Weaknesses) DPM 4106 - Lecture 6- O.Greaves 10  The Input Stage In the Input Stage strategists quantify subjective judgments made in earlier stages of the strategy- formulation process. This requires making decisions regarding the relative importance of external, internal, and competitive factors in order to more effectively generate and evaluate alternative strategies. Put simply, they determine appropriate weights and rankings. DPM 4106 - Lecture 6- O.Greaves STAGE 2 - MATCHING STAGE DPM 4106 - Lecture 6- O.Greaves 12 Stage 2: The Matching Stage ◼Finding a match between the organisation’s internal resources and skills and the opportunities and risks created by its external factors DPM 4106 - Lecture 6- O.Greaves 13  The matching stage of the strategy-formulation framework consists of three techniques that re relevant in the context of the public sector: the SWOT Matrix, the BCG Matrix, the Grand Strategy Matrix. These tools rely upon information derived from the input stage to match external opportunities and threats with internal strengths and weaknesses. DPM 4106 - Lecture 6- O.Greaves 14 Strategy-Formulation Framework SWOT Matrix Stage 2: BCG Matrix The Matching Stage GRAND STRATEGY Matrix DPM 4106 - Lecture 6- O.Greaves 15 Stage 2: The Matching Stage SWOT Matrix ◼Strengths ◼Weaknesses ◼Opportunities ◼Threats DPM 4106 - Lecture 6- O.Greaves 16 SWOT Matrix inspired Strategies ◼Strengths-Opportunities (SO) ◼Weaknesses-Opportunities (WO) ◼Strengths-Threats (ST) ◼Weaknesses-Threats (WT) DPM 4106 - Lecture 6- O.Greaves 17  SO Strategies Strengths Use a organisation’s Weaknesses internal strengths Opportunities to take advantage Threats SO of external Strategies opportunities SWOT DPM 4106 - Lecture 6- O.Greaves 18 Ch 7 -18 Copyright © 2011 Pearson Education  SWOT Matrix (1) SO STRATEGIES use an organisation’s internal strengths to take advantage of external opportunities. i.e using a large cash reserve (internal strength) to buy out a financially troubled competitor/provider (opportunity) (Public and Private) DPM 4106 - Lecture 6- O.Greaves 19  WO Strategies Strengths Improving internal Weaknesses weaknesses by Opportunities taking advantage Threats WO of external Strategies opportunities SWOT DPM 4106 - Lecture 6- O.Greaves 20 Ch 7 -20 Copyright © 2011 Pearson Education  WO STRATEGIES improve internal weaknesses by taking advantage of external opportunities Correcting an internal skill shortages (internal weakness) by hiring skilled employees on short term basis (external opportunity) (Public and Private) DPM 4106 - Lecture 6- O.Greaves 21  ST Strategies Strengths Use a organisation’s Weaknesses strengths Opportunities to avoid or Threats reduce the impact ST of external Strategies SWOT threats DPM 4106 - Lecture 6- O.Greaves 22 Ch 7 -22 Copyright © 2011 Pearson Education  ST strategies use an organisation’s strengths to avoid or reduce the impact of external threats Use of existing retailing partnerships and networks (strength) to impede the growth of a new entrant. (threat) …….(Private) Use of existing local government structure (strength) to distribute medications to prevent an impending epidemic (threat) …….(Public) DPM 4106 - Lecture 6- O.Greaves 23  WT Strategies Defensive tactics Strengths aimed at reducing Weaknesses internal Opportunities weaknesses and Threats avoiding WT environmental Strategies SWOT threats DPM 4106 - Lecture 6- O.Greaves 24 Ch 7 -24 Copyright © 2011 Pearson Education  WT STRATEGIES defensive tactics aimed at reducing internal weakness and avoiding external threats Addressing limited capacity (internal weakness) and economic downturn (external threat) by divesting some operations…..(Private) Addressing limited capacity (internal weakness) and macro economic stringency (external threat) by suspending some operations…..(Public) DPM 4106 - Lecture 6- O.Greaves 25 Boston Consulting Group Matrix BCG Matrix DPM 4106 - Lecture 6- O.Greaves 26  BCG Matrix ◼ Assists multidivisional organisations in formulating strategies ◼ Divisions may compete in different industries ◼ Focus on relative market-share position and industry growth rate DPM 4106 - Lecture 6- O.Greaves 27 The BCG Matrix DPM 4106 - Lecture 6- O.Greaves 28  BCG Matrix divides products/activities into: Question Marks – low relative market share in a high-growth industry. Requiring a lot of cash to hold their share. Stars – high relative market share in a high- growth industry. They will eventually turn into cash cows. DPM 4106 - Lecture 6- O.Greaves 29  BCG Matrix (2) Cash Cows – high relative market share in a low-growth industry. Require less investment to maintain market share in a stable market. Dogs – Low relative market share in a slow or no growth industry. Not worth much investment. Marketing efforts, or investments, will vary, depending on the product’s classification DPM 4106 - Lecture 6- O.Greaves  BCG Recommended Strategies STARS QUESTION MARKS ❖Invest to Maintain ❖Convert to a STAR or Share. Divest ❖Cut Price only to Hold Share. CASH COWS DOGS ❖Ration New Investment ❖Manage for Cash and ❖Maintain Prices Withdraw ❖Keep Out New Entrants DPM 4106 - Lecture 6- O.Greaves 31 Grand Strategy Matrix DPM 4106 - Lecture 6- O.Greaves 32  Grand Strategy Matrix ◼ Tool for formulating alternative strategies ◼ Based on two dimensions ❑ Competitive position ❑ Market growth DPM 4106 - Lecture 6- O.Greaves 33  RAPID MARKET GROWTH Quadrant II Quadrant I 1. Market development 1. Market development 2. Market penetration 2. Market penetration 3. Product development 3. Product development 4. Horizontal integration 4. Forward integration 5. Divestiture 5. Backward integration 6. Liquidation 6. Horizontal integration WEAK 7. Related diversification STRONG COMPETITIVE COMPETITIVE POSITION Quadrant III Quadrant IV POSITION 1. Retrenchment 1. Related diversification 2. Related diversification 2. Unrelated diversification 3. Unrelated diversification 3. Joint ventures 4. Divestiture 5. Liquidation SLOW MARKET GROWTH DPM 4106 - Lecture 6- O.Greaves 34  Stage 3: The Decision Stage DPM 4106 - Lecture 6- O.Greaves 35  Determing the Strategy Stage 3: – objectively indicates which alternative strategies are best – uses input from Stage 1 analyses and matching results from Stage 2 analyses to decide objectively among alternative strategies DPM 4106 - Lecture 6- O.Greaves 36  Actions in Step 3: 1. Make a list of the organisation’s key external opportunities/threats and internal strengths/weaknesses. 2. Assign levels of importance to each key external and internal factor. DPM 4106 - Lecture 6- O.Greaves 37 3. Examine the Stage 2 results and identify alternative strategies that the organisation should consider implementing. 4. Determine the strategy based on the relative attractiveness of feasible alternative actions. DPM 4106 - Lecture 6- O.Greaves Other Important Factors in Strategy Choice DPM 4106 - Lecture 6- O.Greaves 39  Cultural Aspects of Strategy Choice Successful strategies depend on support of the organisation’s culture. Strategies that require fewer cultural changes may be more attractive because extensive changes can take considerable time and effort. DPM 4106 - Lecture 6- O.Greaves 40  Political Aspects of Strategy Choice Sometimes political biases and personal preferences get unduly embedded in strategy choice decisions. Internal politics affect the choice of strategies in all organisations. At times decision makers are more interested in taking care of themselves first and the organisation second, third, or fourth. DPM 4106 - Lecture 6- O.Greaves 41 Tactics to aid Strategy Acceptance Equifinality—It is often possible to achieve similar results using different means or paths. Strategists should recognize that achieving a successful outcome is more important than imposing the method of achieving it. DPM 4106 - Lecture 6- O.Greaves 42  Satisfying—Achieving satisfactory results with an acceptable strategy is far better than failing to achieve optimal results with an unpopular strategy. Generalization—Shifting focus from specific issues to more general ones may increase strategists’ options for gaining organisational commitment. DPM 4106 - Lecture 6- O.Greaves 43  Focus on Higher-Order Issues —By raising an issue to a higher level, many short-term interests can be postponed in favor of long-term interests. Provide Political Access on Important Issues — Strategy and policy decisions with negative consequences for middle managers will motivate intervention behavior from them. Provide political access for them to voice their concerns. DPM 4106 - Lecture 6- O.Greaves 44  END DPM 4106 - Lecture 6- O.Greaves 45