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Strategies, Policies and Planning Premises

THE NATURE AND PURPOSE OF STRATEGIES AND POLICIES


1.

STRATEGY: y The determination of the mission or purpose and the basic long-term objectives of an enterprise, followed by the adoption of courses of action and allocation of resources necessary to achieve these aims.

POLICIES: y General statements or understandings that guide managers thinking in decision making y They ensure that the decisions fall within certain boundaries SIMILARITIES: y They give direction y They are frame work for plans y They are the basis of operational plans y They affect all areas of managing
2.

MAJOR DIFFERENCE: y The essence of policy is discretion y Strategy concerns the discretion, in which human and material resources will be applied in order to increase the chance of achieving selected objectives y Tactics: the action plans through which strategies are executed.

THE STRATEGIC PLANNING PROCESS


Executive orientatio n values vision
Present & Future External Threats & Opportunities

Inputs: People, Capital, Managerial skills, Technical Skills, Others Industry Analysis

Medium & Short Range planning

Goals of Stake holders: Employees Consumers Suppliers Stock holders Govt Community Others

Enterprise Profile

Development of alternative strategies

Evaluation & strategic choice

Implementation

Leadership Control

Mission Major Objectives Strategic Intent

Internal weaknesses & Strengths

Reengineering Organization structure Staffing

Consistency Testing Contingency Planning

THE STRATEGIC PLANNING PROCESS


1. Inputs to the organization 2. INDUSTRY ANALYSIS
y y y y

The competition and its kinds available Possibility of new firms entering Availability of substitute products or services Bargaining position of the suppliers and buyers Mission Geographic orientation (would it operate in home country or in different countries Competitive position of the company itself

3. ENTERPRISE PROFILE
y y y

4. Orientation, vision and values of executives

THE STRATEGIC PLANNING PROCESS


4.
y y y

Mission (purpose), major objectives, and strategic intent


MISSION: what is our business OBJECTIVE: the end points towards which the activities of the enterprise are directed STRATEGIC INTENT: the commitment to win in the competitive market

6. 7.
8. y y y y y y y

Present and future external environment: Internal environment:


Development of alternative strategies: To concentrate To diversify International expansion Joint ventures Strategic alliances Liquidation Retrenchment

THE STRATEGIC PLANNING PROCESS


9. Evaluation and choice of strategies: 10. Consistency testing and contingency planning 11. Medium and short range planning,

implementation through organizing, staffing, leading and controlling

FOUR ALTERNATIVE STRATEGIES


Strengths in internal departments like management, R&D, Finance, marketing, OD etc Eg weaknesses in internal departments

Current and Future conditions in respect of economy, politics, financial regulations, new products, services and technology

The most successful strategy, utilizing the orgs strengths to take adv of opportunities

Developmental strategy: to overcome internal weaknesses to take adv of opportunities

Energy shortages, competition and other areas like conditions mentioned above

Use of strengths to cope up with threats or to avoid threats

Retrenchment, liquidation, joint ventures etc to minimize weaknesses & threats

TIME DIMENSION AND THE TOWS MATRIX

APPLICATION OF THE TOWS MERGER MATRIX FOR MERGERS, ACQUISITIONS, JOINT VENTURES AND ALLIANCES

BLUE OCEAN STRATEGY

BLUE OCEAN STRATEGY


THE FOUR ACTIONS FRAMEWORK y Identify and eliminate those factors that may be unimportant to the buyer y If elimination is not an option, consider reducing those factors y Raise or strengthen those factors that are unique y Create new and unique factors that are wanted by the buyers but are ignored by the competition Companies may adopt both the SO and SW alternative strategies

THE PORTFOLIO MATRIX: A TOOL FOR ALLOCATING RESOURCES

THE PORTFOLIO MATRIX: A TOOL FOR ALLOCATING RESOURCES


This tool was developed by Boston consulting group in 1970s. This is a relationship between Market Growth and Market share of a company/ its business unit or a product This was developed for large corporations with several divisions, called as Strategic Business Units (SBUs) for the allocation of resources in the right place y By dividing the matrix into four areas, four types of SBU can be distinguished: y Stars - Stars are high growth businesses or products competing in markets where they are relatively strong compared with the competition. Often they need heavy investment to sustain their growth. Eventually their growth will slow down and, assuming they maintain their relative market share, will become cash cows. y Cash Cows - Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars.

THE PORTFOLIO MATRIX: A TOOL FOR ALLOCATING RESOURCES


y Question marks - Question marks are businesses or

products with low market share but which operate in higher growth markets. This suggests that they have potential, but may require substantial investment in order to grow market share at the expense of more powerful competitors. y Management have to think hard about "question marks" which ones should they invest in? Which ones should they allow to fail or shrink? y Dogs - the term "dogs" refers to businesses or products that have low relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. y Criticism:
y Its too simplistic y The growth rate criterion is insufficient for the evaluation of

an industrys attractiveness y The market share is also insufficient for estimating the competitiveness

MAJOR KINDS OF STRATEGIES AND POLICIES


y GROWTH y FINANCE y ORNANIZATION y PERSONNEL y PUBLIC RELATIONS y PRODUCTS OR SERVICES y MARKETING

PREMISING AND FORECASTING


y Planning premising:
y The anticipated environment in which plans are

expected to operate and threats

y Environmental Forecasting
y Human and material resources and their opportunities

y Values and areas of Forecasting


y The making of forecasts and their review by managers

compel thinking ahead, looking to the future, and providing for it y Preparation of forecast may disclose areas where necessary control is lacking y Forecasting, especially when there is participation throughout the organization, helps unify and coordinate plans. By focusing attention to the future, it assists in bringing a singleness of purpose to planning y The areas of forecasting; usually are economic, social, political/ legal, and technological environments

PREMISING AND FORECASTING


y Forecasting with Delphi Technique:
y This technique was developed by Olaf Helmer ad his

colleagues at the RAND corporation for technological forecasting y The process is as follows:
y A panel of experts on a particualr problem area is selected, y y y y y

usually from both inside and outside the organization The experts are asked to make a forecast (anonymously) in terms of discoveries and developments The answers are compiled and fed back to the audience Further estimates of future are made collectively Repetitions take place if required for further additions When a convergence of opinion begins to evolve, the results are then used as an acceptable forecast