8-SAEStrategicOptions_Strategicuation.ppt

SAE Strategic Options and Strategy Evaluation,The Key Question,What are the strategic issues we are seeking to address/resolve? (Identified from the strategic analysis),Every Case is Different,all businesses are different, industries are different & environments are different. But when it comes to the options for growing the value of a simple business or a complex corporation, either a successful one or a failing one, options are always fairly limited. We can describe the options in terms of directions of development and methods of development and the requirements for successful development.,Generating Strategic Options,The search for opportunities, and the response to threats, using: Drivers of change Scenarios Competency analysis Market segmentation Strategic group analysis 5 Forces analysis Others .,Issue / Option Matching Matrix,Generating Options,TOWS Matrix,The Business Portfolio/Growth Share Matrix,?,Market Growth Rate,High,Low,High,Low,Relative Competitive Position (market share),CASH OUTFLOW,CASH INFLOW,Harvest divest,Industry Attractiveness/ Business Strength Matrix,High,Medium,Low,High,Medium,Low,Industry attractiveness,Business strength,Investment and growth,Selective growth,Selectivity,Selective growth,Selectivity,Selectivity,Harvest divest,Harvest Divest,Grand Strategy Matrix Internal/External Perspective,Overcome weaknesses,Maximise strengths,Internal,External,Turnaround or retrenchment Divestiture Liquidation,Vertical integration Conglomerate diversification,Concentrated growth Market development Product development Innovation,Horizontal integration Concentric diversification Joint ventures,Choosing Corporate Strategy,A company can choose a corporate strategy by: identifying the interrelationships among existing business units selecting the core business as the foundation of corporate strategy creating horizontal organisational mechanisms to facilitate interrelationships among the core businesses & lay groundwork for future related diversification pursuing diversification opportunities that allow shared activities pursuing diversification through the transfer of skills if opportunities for sharing activities are limited or exhausted pursuing a strategy restructuring if this fits the skills of management or no good opportunities exist for forging corporate interrelationships paying dividends so that the shareholders can be the portfolio managers,Option Generation,Assure that several viable options reach the top Search deep in the organisation Review existing “rules of the game” Create additional options directly Examine planning axioms Search for possible synergies Combine options and consider timing Use creativity techniques Create options indirectly Buy into selected technologies Examine competitor behaviour Invest in scenario analysis,Flexible Strategies,Simple growth options Creating a portfolio of growth options Breaking development programmes into stages Switching options Building in on/off capabilities Reducing switching cost Changing the game Creating uncertainty for competitors Building general purpose capabilities,Issue / Option Matching Matrix,Evaluating Options,The Scenario/Options Matrix Risk & Robustness,Evaluating Strategic Options,SUITABILITY: Does option address circumstances in which organisation operates? To do with strategic logic. ACCEPTABILITY: Is option acceptable to key stakeholders and in terms of risk and return (financial attractiveness)? FEASIBILITY: Does the organisation have the capability to deliver the option? To do with implementation practicalities.,Criteria of Evaluation,Suitability Fit with competencies Fit with market/environmental need Fit with scenarios Fit with business idea Fit with likely competitive response,Acceptability Fit with stakeholder expectations Degree of risk Likely financial returns,Evaluating Suitability,Criteria,Market Penetration The importance of market share Within segments The importance of quality Difficulty in buying share,Strategic Options: Evidence,Consolidation Quality matters What bases of cost reduction? In improving productivity beware inflexibility Remember harvesting,Product Development Focus is important: proliferation is problematic Investment in R&D OK in high share businesses Beware rapid rates of product introductions Market Development Do new markets require new/different competences Beware proliferation of products x markets,Strategic Options: Evidence,Common Pitfalls in Strategic Choice,Long lists of options without a framework or logic No connection to an organisations strategic position No coherence between basis/direction of strategy Lost in analytical techniques with no understanding of the strategic issues (The opposite) good strategic feel but no detailed justification,The Cycle of Organizational Change,(strategic inflection point),Janis & Mann,Janis & Mann, conflict theory of strategic decision making (1977),Organisational Commitment,An important question will concern the level of commitments being made to a particular strategy What is the size of the likely commitments? What are the risks involved? To what degree are the costs involved sunk (un-recoverable) costs? Need we make this commitment now or can we wait for a clearer picture to emerge? Can we take out an option on the option which involves less commitment now but gives us the right to go for it later? Does this commitment bet the future of the company?,Implementability,As observed