01.

Approaches to Strategy
Presented By: M.Dimuthu Suranjana (BSc. Business. Administration (Sp)
hons-USJ, FCA, MBA (PIM-USJ), Post.gra.dip. in Business & Finance
Administration-CA Sri Lanka, Post.gra.dip.in Corporate & Strategic Finance-
CA Sri Lanka, FMAAT, ACMA, ACPM

CA Sri Lanka-M.D.Suranjana (FCA-1880)

 Content
1. Levels of Strategy
2. Strategic planning for SBUs
3. Strategy Lenses
4. Vision, Mission and values
5. Goals, Objectives and targets

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 1.Levels of Strategy
1. Corporate strategy -This is the most general level of strategy,
identifying the strategy for the organization as a whole. Role of the
corporate parent is to manage the scope of the business activities
of the organisation in terms of products, markets & International
operations.
2. Business Strategy -This is concerned with strategy formulation at
the divisional or SBU level within the group.
3. Operational/functional strategies -Within each business (SBU),
strategic plans or long-term plans are prepared for each operation
or function (department).

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 What is a strategy
• Strategy-The direction & scope of an organization over the long term which
achieves advantage for the organization through its configuration of
resources within a changing environment to meet the needs of markets & to
fulfill stakeholder expectations.
• A successful strategy is one which achieves the objectives that are set. To do
this, the organisation should seek to achieve competitive advantage in its
markets through its use of resources and exploiting its competences
• Strategic decisions are made under conditions of complexity and uncertainty

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 Six general areas for decision making
• Long-term direction-Strategic decision making is for the long-term
future, although this includes the short term too. e.g.: next 05 years
• Scope of activities- It is concerned with the areas of business and
the scope of products and markets for the organization as a whole.
• Competitive advantage- gain some kind of advantage in
competition over rival organizations
• Adapting to changes in the business environment- this will involve
adapting products and services to changing customer needs
• Exploiting unique resources and core competences- organization
seeks to change the business environment through its own positive
actions by using unique resources & core competences
• Recognizing the values and expectations of major stakeholders-
Strategic decisions are affected by the values and expectations of
all of the organization’s stakeholders.
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 Triggers for the initiation of strategies
• "trigger" or "triggering event“ is something that brings about the
realization of the need for action and can either be an internal or
perhaps more commonly, an external event.
• putting a new strategy in place is not an easy thing to do – there will
be resistance.
• A new strategy is usually put in place because something somewhere
has changed, and we need to change in response to avoid losing our
competitive advantage.

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 External (Environmental) Triggers
• External triggers can be split up into direct and indirect triggers.
Direct refers to the 'micro' environment, and indirect refers to the
'macro' environment.
• Indirect external triggers can be identified using the PESTLE
framework (Political, Economic, Social, Technological, Legal,
Environmental/ecological) and direct external triggers can be
assessed using Porter's five forces model (Competitive rivalry, Power
of Customers, Power of suppliers, Threat of new entrants, Threat of
substitutes)

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 Internal Triggers
• The internal triggers for change within the organisation could span any functional area of
operation or level of control from strategic to operational.
• Examples:
 Change of philosophy; new ownership, new CEO
 New initiative or a change in management style
 Re-organisation
 Divisional restructuring
 A decision to start a process of cost reduction, perhaps because of a
realization of a decline in profitability
 Personnel changes; perhaps a key member of staff has retired or left for personal
reasons unconnected to the organisation.
 New opportunities being identified by staff or management
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 Characteristics of strategic decisions
• Complexity- They involve a number of inter-related factors that must be
considered, and there will often be a variety of different possible outcomes
from any strategic decision.
• Uncertainty- uncertainty involving both about the precise nature of current
circumstances and about the likely consequences of any course of action.
• Effect on business operations- Strategic decisions have extensive impact on
operational decision making (decisions at lower levels in the organization).
• They affect the entire organization or business- Strategic decisions affect
the organization as a whole and require processes that cross operational
and functional boundaries within. An integrated approach is therefore
required.
• Change- Strategic decisions are likely to lead to change within the
organization as resource capacity is adjusted to permit new courses of
action. Changes with implications for organizational culture are particularly
complex and difficult to manage

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 2. Strategic planning for SBUs
• In simple terms, strategy formulation at the SBU level can be illustrated as follows.
Strategy position strategic choices Strategic action
• The process of preparing a long-term (five-year or ten-year) business plan should
take into consideration the following issues:
 The organisation's vision and mission
 Its values
 Its goals
 Objectives for achievement
 Position analysis Strategic choices
 Specifying key performance indicators and targets
 Putting chosen strategies into action

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.

2.1: The rational model of strategy

Action

Position Audit Strategic

Control

Mission & Corporate Strategic Strategic Implementing

Objectives Appraisals Options Choice Strategy

Environmental
analysis

choice
Position

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Elements of Strategic Management
Environment

Culture

Capability

Purpose

strategic

position/

analysis

Business level O r g a n is a tio n s tr u c t u r e

Corporate level S tra te g y Processes

S tr a te g ic
International in to a c tio n Resourcing
c h o ic e
Evaluation (im p le m e n ta tio n ) S tr a te g y d e v e lo p m e n t

Strategic change

(Adapted from: Johnson et al, 2005)

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 2.2: Emergent Strategies
• An emergent strategy is one whose final objective is unclear at the
outset, and whose elements develop during its life as the strategy
proceeds.
• An emergent strategy is one developed out of a pattern of behavior
rather than being consciously imposed in advance by senior
management. There is a high degree of experimentation to find the
most productive route.
The diagram below should help to explain the contrast between prescriptive (planned) and
emergent strategy.
Plans for intended Deliberate
Strategies Strategies

Unrealized
Realized
Strategies
Strategies

Emergent
Patterns of
behavior Strategies
CA Sri Lanka-M.D.Suranjana (FCA-1880)
 3. Strategy Lenses
• The phrase "strategic lens" refers to the different ways in which
strategies are deemed to arise.
• There are four ways in which strategies can come out about:
- Strategy as design
- Strategy as experience
- Strategy as ideas
- Strategy as Discourse

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 3.1: Strategy as design
• This takes the view that strategy development is a formal, logical,
planned process in which the internal strengths and weaknesses of
the organisation are compared with the external opportunities and
threats, and the long-term aspirations of key stakeholders to establish
clear strategy direction
• It is a top-down approach to strategic decision making
• It is suitable in a stable environment
• The advantage of this approach is that nothing will get missed out,
and all possible opportunities are considered, leading to the optimal
performance of the organisation.
• The disadvantage of this approach is that it is so slow and time
consuming
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 3.2: Strategy as experience
• Here the view is that future strategies of organisations are heavily
influenced by the experience of the managers and others in the
organisation based on their previous strategies. There is less emphasis
placed upon analytical techniques, and a greater appreciation given to
the skills and knowledge of the lower level management and staff.
This means that development of the organisation is incremental, and
comes through a series of small steps, rather than through any big
leaps into the future.
• It is bottom-up approach to strategic decision making.
• One advantage of this approach is that there is a lower risk of
resistance from lower level managers since they are involved.
• On the downside, it can result in the organisation playing safe, and
being unwilling to ventureCAoutside of its comfort zone.
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 3.3: Strategy as ideas
• If the environment is constantly changing, it may mean that
innovation could come completely out of the blue: an unexpected
development, that if taken advantage of quickly, can lead to fortune.
If we want to use the strategy as ideas approach, the organisation has
to be genuinely open to new ideas.
• Sometimes the new ideas may arise from relatively low down in the
organisational hierarchy.
• A mechanism will be needed to identify good ideas.
• The downside, of course, is that sometimes ideas may be suggested
that are impractical, or simply unlikely to appeal to our target market.
• suitable in unpredictable macro-environment
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 3.4: Strategy as discourse
• This view consists in making choices between different possibilities
and then inspiring confidence for the choice taken.
• This view is very high on legitimacy and low on rationality and
innovation – a strategy may end up as being accepted simply because
of its proponent.
• Strategy as discourse sees strategy development in terms of language
as a "resource" for managers by which strategy is communicated,
explained and sustained and through which managers gain influence,
power and establish their legitimacy as strategists.

CA Sri Lanka-M.D.Suranjana (FCA-1880)

 4. Vision, mission and values

• Vision is the ultimate goal of an organization. The 'big picture' of how

the company sees the future.
• Mission describes the organization’s basic function in society, in terms
of the products & services it produces for its clients”
• Values are the beliefs and moral principles that underlie the
organization’s culture. e.g.: Team work, Integrity, Passion

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 National Savings Bank (NSB)
• Vision
The most reliable and sought-after choice for savings and investment
solutions.
• Mission
Providing our customers with total financial solutions to optimize their
savings and investment needs, while meeting the expectations of all
our stakeholders.
• Values
In conducting our day-to-day business we will respond promptly and
act creatively with trust, mutual respect and integrity.
CA Sri Lanka-M.D.Suranjana (FCA-1880)
 Importance of mission and values for strategy
formulation and implementation
(a) They can sometimes be a public relations exercise rather than
an accurate portrayal of the firm's actual mission and values.
(b) They may be full of generalizations that are impossible to tie
down to specific strategic implications.
(c) They may be ignored by the people responsible for
formulating or implementing strategy.

CA Sri Lanka-M.D.Suranjana (FCA-1880)

 Role of mission & values in strategic planning process

• Inspires and informs planning- Strategic plans should further

the organization’s goals and be consistent with its mission and
core values.
• Screening - Mission acts as a benchmark by which strategic
plans are judged. Strategic options that are inconsistent with a
company's mission should not be considered

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 5.Goals objectives and targets
• A goal may be described as a long-term
objective or aspiration. Since a goal is long term,
it will probably not be fully achieved within the
period of the business plan.
• an objective could be described as something
that the organization wants to achieve within
the period of the Business plan. Objectives can
be fairly specific. Good objectives are SMART
• A target is the measurement of an objective.
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 Purpose of objectives-PRIME
• Planning- Objectives define what the plan is about and
what it is trying to achieve.
• Responsibility- Objectives, particularly for functional
strategies, define the responsibilities of managers and
departments
• Integration- Consistent objectives that integrate the
efforts of different departments.
• Motivation- In order to motivate people, they need to
know what is expected. Objectives and target provide this
information.
• Evaluation- Performance is assessed by comparison with
the targets for objectives. Performance measurement
provides a basis forCAstrategic control
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