Organisational Strategy

Taha Elhag – Turker Bayrak – Satesh Namasivayam

School of Energy, Geoscience, Infrastructure & Society
Heriot-Watt University
Meaning of Corporate Strategy
• Corporate strategy is the pattern of major
objectives, purposes or goals and essential
policies or plans for achieving those goals.
• Corporate strategy needs to answer the
following questions:
– What is the organisation best at?
– Where does the organisation stand now in relation to the
external environment
– Where should the organisation be in a few years time?
Characteristics of Strategy
• Strategy is about long term;
• Strategy aims at gaining advantage;
• Strategy concerns the scope of an organisation’s activities;
• Strategy aims at matching organisation’s activities to the
environment;
• Strategy is about maximise the available resources;
• Strategy may require major resource changes;
• Strategy reflects the attitudes and beliefs of senior
managers. It is influenced by environmental forces.
Examples of Strategic Decisions in
Construction
• Diversification of building types
• Expanding or shrinking the market, by type of
client or/and location
• Differentiation of building product (uniqueness)
• Producing better value-for-money buildings
• Ownership
• Merger or company takeover
• Partnership
• Contracts bidding.
Reactor (Reactive) vs Planned
(Proactive) Approaches
• Reactor (Reactive) Approach is informal
and unsystematic. It is often adopted by
small firms, who ‘wait and see’ and
respond to environmental changes.
• Planned (Proactive) Approach is formal
and systematic. It is often adopted by
large and sophisticated firms, who look
ahead for opportunities and threats.
Advantages of Reactor (Reactive)
Approach
• Save executive time, cost and talent by
not engaging in formal planned strategy;
• Opportunities will not be restricted to
those included in the strategic plan;
• May gain by delaying decisions when
fuller information becomes available.
Advantages of Planned (Proactive)
Approach
• Pay attention to important issues
• Examine own strengths and
weaknesses
• Identify opportunities early
• Consider risks as well as
opportunities
• Study competitors
• Anticipate changes in
marketplace and environment
• Avoid the need for crisis
management
• Plan changes and minimise
disruption to existing operation
• Focus effort of everyone and
enhance internal harmony
• Reassure and motivate staff
• Promote strategic thinking
amongst the senior decision
makers
Seven Stages of Developing a
Business Strategy
1. Strategic analysis
2. Strategy formulation
3. Evaluation of alternative strategies
4. Strategic choice
5. Action plan
6. Strategy implementation
7. Strategic control and feedback
1. Strategic Analysis
• Analysis of environmental forces
– Use the PEST framework to examine political,
economical, social and technological forces to identify
opportunities and threats
• Organisational goal and objectives
– Goal is a statement of general intention; objectives
(economic and non-economic) are more specific targets
to achieve in order to realise the overall goal.
• Organisational appraisal
– Analyse the market and own strengths and weaknesses,
using the SWOT technique
1. Strategic Analysis - External
Forces
• Political
• Economical
• Social
• Technological
1. Strategic Analysis – SMART
Objectives
• When setting organisational objectives,
follow the SMART principle:
– Specific
– Measurable
– Achievable
– Realistic
– Timebound
 1. Strategic Analysis – SWOT
Technique
Positive
Internal Strengths: positive aspects or
distinctive competencies, which
provide market advantage
External Opportunities: favourable
conditions with changes in
external environment
Negative
Weaknesses: negative aspects or
deficiencies in current
competencies or resources
Threats: unfavourable external
conditions that endanger operation
and effectiveness
2. Strategy Formulation
• On the basis of Stage 1 – Strategic Analysis,
clear objectives are decided. Then different
alternative plans may be proposed to achieve
these objectives.
• These plans should answer a number of
questions:
– What should the organisation do?
– Where?
– How? and
– When?
3. Evaluation of Alternative
Strategies
• The alternative plans, defined in Stage 2, are evaluated
using cost/benefit analysis:
– Costs
• Financing
• Human resources
• Administrative resources
– Benefits
• Profit
• Growth
• Risk
• A range of tools and techniques are available for this task,
such as decision trees, sensitivity analysis, and simulation
modelling.
4. Strategic Choice
• In deciding between strategic options, executive
management needs to ask a series of questions:
– Which option is the optimum choice according to
SWOT?
– Can it be put into practice?
– Can the required finance be raised?
– Can required staff be recruited or trained?
– Is it acceptable to the stakeholders?
• The choice between different options may not be
clear-cut.
5. Action Plan
• An action plan provides a blueprint for
implementing the chosen strategy;
• An action plan should include:
– The activities involved
– Allocation of financing
– Allocation of human resources
– Allocation of administrative resources
– The sequence and timing of each activity
• Action plan may include both long time plan and
short term plan
6. Strategy Implementation - Tasks
• Make the right things happen at the right
time, as planned:
– Assembling resources, as planned
– Structuring work relationships
– Integrating and controlling people and
activities
6. Strategy Implementation -
Checklist
• Successful implementation requires answers to
the following questions:
– Who is responsible for carrying out the strategy?
– What are the key activities that need to be carried
out?
– Who should do what and when?
– Is there a need for new recruitment?
– What type of management information system is
needed to monitor process?
– How will the implementation process work?
7. Strategic Control and Feedback
• This is the phase to monitor progress; take corrective
action to ensure successful implementation of
strategic plan. It includes the following six steps:
1. establishment of standards of performance
2. measurement of performance against performance
standards
3. diagnosis of deviations from standards
4. initiation of corrective action
5. feedback from internal and external environments
6. continuation of performance monitoring.
Learning Outcomes
• Students should understand the importance of organisational
strategy;
• Students should know the main external factors that have an
influence on an organisational strategy;
• Students should be able to compare reactor approach and planned
approach to organisational strategy;
• Students should know the main stages of the strategy development
process and the main tasks at each stage;
• Students should be familiar with the SWOT analysis technique.