This action might not be possible to undo. Are you sure you want to continue?
Describe the nature of strategic options Explain the key areas of strategic decisions Understand and describe the 4 criteria for strategic options Understand financial tools used to evaluate strategic options
Key Definitions Strategic. consumer products Convenience. tactical and operational decisions Goods Services Industrial products. shopping and specialty products Product lifecycle Suitable Feasible Acceptable .
Strategic Analysis Evaluation and Selection of Strategies .
Strategic Analysis .
33-111 .INTERNAL ANALYSIS PRODUCTS AND MARKETS •Market Segmentation •Kotler’s product benefit •Copeland’s product typology •Product life cycle •BCG Matrix •GEC Matrix Chap 5 FINANCIAL ANALYSIS Hamel and AND Prahalad PERFORMANCE •Core Competence INDICATORS ORGANISATIONAL •Sources of finance Porter CULTURE •WACC and CAPM •Value Chain •Handy’s typology •Ratio Analysis •analysis •Miles & Snow culture •Benchmarking types HUMAN RESOURCES •Audit Analysis Chap 2 Chap 3 Chap 4 Pgs.
115-177 .EXTERNAL ANALYSIS SPENT Macroenvironment •Socio-demographic •Political •Economic •Natural •Technological INDUSTRY •Porter’s 5-forces •Resource-based COMPETITIVE ADVANTAGE •Competitive Positioning – Porter’s generic •Resource-based/Core Competence – Prahalad and Hamel •Knowledge-based – Stonehouse and Pemberton Chap 6 Chap 7 ANSOFF’s Product/Growth Matrix Chap 8 Strategic options/choice Strategic options/choice Pgs.
Evaluating and Selecting Strategies .
Strategic Decisions LEVELS STRATEGIC TACTICAL OPERATIONAL •Level of decision-making •Focus •Scope •Time horizon •Complexity •Degree of uncertainty .
Evaluation and Selection of Strategies: The Process Strategic Analysis Evaluating and selecting strategy Identifying Strategic Options Applying Evaluation Criteria .
Identifying Strategic Options: 3 Areas of Focus Products and markets (Chapter 5) Generic strategy and scope (Chapter 8) Growth and development options (Chapter 11) .
Identifying Strategic Options Product and Market Decisions Generic Strategy Decisions Growth and Development Decisions .
Product and Market Decisions Two questions are answered: Which products should we produce? In which markets should we sell our products? .
Product and Market Decisions (cont.) Decisions to be made include: Product and market categories Product features Product and market portfolios Life cycle considerations .
Product and Market Categories Decisions to be made include: Products Goods/services Consumer/industrial products Convenience. shopping or specialty products (Copeland’s classification) Geographic area International decisions Benefits and risks Markets .
Product Features Focuses on the benefits of the product Decisions may be based on Kotler’s 5 levels of product benefit Core benefit Basic product Expected product Augmented product Potential product .
Product and Market Portfolios Should the portfolio be broad or narrow? .
Generic Strategy Decisions Cost Leadership or differentiation strategy? Cost Focus or Focused Differentiation? .
Growth and Development Decisions Generic growth direction (Ansoff’s Growth Matrix) Market penetration Market development Product development Diversification Mechanisms for generic growth strategies Internal external .
Applying Evaluation Criteria Four criteria can be used to assess each option: 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? .
Is the strategy suitable? Suitable – fitting. appropriate Is the strategic option appropriate for achieving the strategic goal? Example: a cost leadership strategy may not be suitable if the strategic goal is to create a premium brand .
human and intellectual resources Example: a strategy that involves diversification (new products for new markets) may require a large capital investment cost. the strategy is not feasible. .Is the strategy feasible? Feasible – capable of being done or carried out Feasibility will often depend on the organization’s physical. If the organization has difficulty getting the capital. financial.
the proper question is: Is the strategy acceptable to the stakeholders? Remember.Is the strategy acceptable? Acceptable – capable of being received For strategy. stakeholder influence differs based on power and interest .
Will the strategy lead to competitive advantage? The strategy is not worth pursuing unless it either results in superior performance or above average profits .
In Support of Evaluation Criteria: Financial Tools Cash-flow forecasting Investment appraisal .
Cash-flow forecasting The organization forecasts (predicts) the expected income from the strategic option Example .
Investment Appraisal Payback period .
with the benefits (financial and intangible benefits) Impact analysis Sensitivity analysis .In Support of Evaluation Criteria: Other Tools Cost/benefit analysis – comparing the costs of the strategic option (including financial and opportunity costs).