CHAPTER 6

STRATEGY ANALYSIS AND

CHOICE

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Learning objectives:

After studying this chapter you should be able to ;

Explain the nature of strategic choice
Understand the nature of generating and selecting
choices
Discuss testing of strategic options and choice
 

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 Strategic choice definition
What is strategy choice?
Strategic choice is the decision to select strategies from the
grand strategies, the strategy which will best meet the firm’s
objectives.
Identifying and evaluating alternative strategies should
involve managers and employees.
 All representatives or participants should have the firm’s
external and internal audit information.
 This information coupled with the firm’s mission
statement will help participants to generate ideas in the
meetings.

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 The process of strategic choice is as follows:

1.Emphasizing on strategic alternatives

The decision maker should emphasize on the reasonable
alternatives and should neglect the other alternatives.
 The alternatives can be emphasized by imagining the
future condition and by working backwards .
It is very essential for the firms to understand,
 the industry conditions
 and evaluate the risks
 and benefits associated with its competitive positioning
before a final selection

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2.Assessing the strategic alternatives.
criteria for strategic choice are:
1. Objective factor
The objective factor is also referred to as rational,
normative, or prescriptive factors.
These factors depends on the analytical techniques
and are hard facts or data which helps in making a
strategic choice.
2. Subjective factors
A subjective factor relies on the individual’s personal
judgment and also are called collective or descriptive
factor.

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3.Evaluating the strategic alternatives
The feasible alternatives are evaluated so that its
capability can assist the organization to attain its
objective.
 The evaluation process primarily deals with
bringing the complete analysis together based on
the subjective factors and objective factors.

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 4. Testing for suitability, feasibility and
acceptability
The suitability of proposed strategy can be assessed by the
extent to which it matches the needs identified from a
strategic analysis

The test for feasibility of a proposed strategy will consider

how well it would work in practice and how difficult it might
be to achieve. The question to be asked would include:
How will the completion react and how will the organization
cope with that reaction?
Test for acceptability address the issue of how shareholders
might feel about the expected outcome of the strategy in
terms of risk, profitability, reward, ethics and the effect on
relationships.
The three test of suitability, feasibility, and
acceptability provide an initial set of screening
tools for strategic
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 5. Risk and uncertainty in strategic choice

Strategy is about charting a course for the future.

 Risk is concerned with assessing the probability of
foreseen outcomes.
 Uncertainty , is to do with outcomes that may be
unforeseen ,or those which are foreseen but against which
a degree of estimated risk cannot be set.
In making choices about strategy acceptance of different
degrees of risk is often a matter of personal preferences .
Some individuals are very risk-averse ,other take risks
almost a matter of routine.

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 6.Selecting from among the strategic
alternatives

The evaluation of strategic choice helps in choosing the

highly relevant alternative in the prevalent conditions.
 Hence, the final step involves making the strategic choice
and chooses one or more strategies for the implementation
Finally, blue print which elucidates the strategies and
conditions under which they ( strategies) operate is
developed along with some contingency
strategies

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 Chapter 7
STRATEGY IMPLEMENTATION

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Learning objectives
Explain the characteristic feature of strategy
implementation
Discuss process of strategy implementation
Identify barriers in strategy implementation
Discuss the importance of annual objective and policies in
achieving organization commitment for strategies to be
implemented
Compare & contrast restructuring & reengineering
Explain why organization structure is so important in
strategy implementation
Understand the importance of strategy control for successful
importance of
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 what is strategy implementation?

 After strategy formulation the strategy needs to be

implemented which is useful in the attainment of goals with
the use of organization structure implementing the strategy
formulated .

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Strategic Implementation
 comprised of ,
-setting policies,
-designing the organization structure,
-and developing a corporate culture, which helps to
meet the organizational objectives
Activity
Think of your organization’s structure, culture,&
system for 1 minute. Tell us how they helped you
for successful implementation.

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 Contrast b/n strategy formulation &
implementation
Strategy formulation Strategy implementation

is positioning forces before is managing forces during the

the action action

focuses on effectiveness focuses on efficiency

requires coordination among requires coordination among

few individuals many individuals

Requires good intuitive & Requires special motivation &

analytical skills leadership, technical skills

Is primarily an intellectual Is primarily an operational

process process

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 Features of strategy implementation

Action orientation
The indispensable nature of strategy implementation is, it involves action.

Comprehensive in scope
Strategy implementation is composed of several aspects and extensive range
of activities& functions.
Demanding varied skills
Strategy implementation process deals with an extensive range of activities,

Wide ranging involvement

The strategy implementation needs the involvement of middle level managers
Integrated process
 strategy implementation must act in holistic manner.

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 Mc Kinsey’s 7-s framework
Strategy implementation requires the 7-S factors
1. Strategy: A set of decision & action which aims to
gain competitive advantage
2.structure: The organizational chart presenting ,who
reports to whom, and how task to be divide.
3. Systems: Sequential activities engaged in the daily
operations
4.Style (leadership)
5. Staff (management):It related to employees training
6. Shared values (culture):is subjected to commonly
used beliefs ,mindsets &assumptions
7.Skills (management):concerned with organization’s
dominant capabilities & competencies

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Major barriers to the process of strategy
implementation
Inability to effectively deal with change
Poor or indefinite strategy
Lack of guidelines or a role model to guide the
implementation
Vague responsibility and accountability
Working against the organizational power, structure.
Coherence problem
Resource problem

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 Ways to improve the implementation
problems
Effective strategy, then adopting a clear model of strategy
implementation
Implementing based on the skills and abilities of the
managers involved in those activities.
Unambiguous guidelines, policies.
Properly Motivating, communicating, and directing
the workers
Create common interest and group sprit
Providing adequate resources
What are the other success factors?

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 Implementing strategies:
Management issues
1. Matching structure with strategy
 changes in strategy leads to changes in organizational
structure.
 Structure should be designed to facilitate strategic
pursuit of the firm and therefore, follows strategy.
 However, most of the researchers are of the opinion that
there exist reciprocal relationship between the
strategy and the structure.
The following figure indicates the two way relationships
existing between the structure and strategy

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.
Strategy determine the structure .The
structure also has impact on strategy

.
Strategy

Affects
 Determines

structure
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 2. Annual Objectives and policies.
Annual objective serves as a guideline for action,
directing and channeling efforts and activities of
organizational members.
Policies refer to specific guidelines, methods,
procedures, rules, forms and administrative practices
established to support and encourage work towards
stated goals.
Policies set boundaries, constraints, and limits on the
kind administrative actions that can be taken toward
and sanction behavior;
They clarify what can and can not be done in pursuit of
an organization’s objectives.

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Some issues that may require a
management policy are as follows .
To centralize or decentralize employee-training
activities.
To promote on the basis of merit or seniority
To promote from within or to hire from the
outside.
To use one or more suppliers.
To discourage sexual harassment
To discourage smoking at work.

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 3. Resource allocation

Resource allocation is a central management activity that

allows for strategy execution.
Strategic management enables resources to be allocated
according to priorities established by annual objectives.
 All organizations that at least four types of resources that
can be used to achieved desired objectives and implement
strategies:
 Financial resources, physical resources ,human resources,
and technological resources.
.

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 Resources
Tangible Intangible
Technology Human Resource
Financial Reputation
Specialized skills, knowledge
Communication
motivation
Physical Culture

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Factors prohibit effective resource
allocation
Over protection of resources
To great emphasis on short-run financial criteria.
Organizational politics
Vague strategy target
Reluctance to take risk.
Lack of sufficient knowledge

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 4. Restructuring and reengineering
Restructuring also called downsizing, rightsizing,
or delayring
Involves reducing the size of the firm in terms of:
number of employees,
number of division or units,
or number of hierarchical levels in
the organizational structure.
The reduction in size is intended to improve both
efficiency and effectiveness.
 Restructuring is concerned primarily with
shareholders well-being rather than employee well
being.
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Reengineering
 Reengineering also called process
management, process innovation or process
redesign
 It involves redesigning work, jobs, and
processes for the purpose of improving cost,
quality, service, and speed.
 It does not imply employee layoffs.
 It is concerned more with employee and
customer well-being than shareholder well-
being.
 The focus of reengineering is changing the way
work is actually carried out.

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 5. Managing resistance to change
 No organization or individuals can escape change.
 Resistance in the form of sabotaging production machine,
absenteeism, unfounded grievance, and unwillingness to
cooperate regularly occurs in organizations.
People often resist strategy change and implementation
because they do not understand what is happening or why
changes are taking place.
 Change must view as an opportunity rather than as threat
by managers and employees.

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 Approaches for implement change
Change Advantage
Description Disadvantages
strategies

Force change Giving order Implemented High

&enforcing fast resistance, low
commitment
Educative Convince High Implementatio
change people for commitment, n slow, and
change less difficult
resistance
Rational change Convince individual Implementation
easy

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Some Strategies to minimize resistance to change

Participate employees in feasibility study, share/offer

research result
Offer training and development workshop
Communication and inspiration
Sharing the benefit
Individuals who affected by change should participate in
decision making of change

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 CHAPTER 8:
STRATEGY EVALUATION AND
CONTROL

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Chapter outlines
The process of Evaluating Strategies
Reviewing the underlying bases of strategy
Measuring organizational performance
Taking corrective Actions.

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Learning objectives

After studying this chapter, you should able to do the

following.
1. Describe a practical framework for evaluating strategies
2. Explain why strategy evaluation is essential for
organizational success
3. Discuss the importance of contingency planning in
strategy evaluation

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I. Approaches of strategic
control
Organizational controls helps to compare the actual results
VS expected outcomes
Effectively designed organizational controls
 gives clear information
 and makes clear about the behaviors, which improves
the firm’s overall performance.
 While designing the organizational controls, the firm
usually, makes use of
 strategic control
 and financial controls.

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Difference between strategic control and
financial control.
Strategic control Financial control
evaluating the extent to evaluate the firm’s
which the firm is using performance
adequate strategies
focus on the requirements for measures the firm’s present
implementing its strategies. performance with the past
outcomes as well as with the
competitor’s performance and
industry averages
focus on evaluating the fit focus on evaluating the firm’s
between what the firm might performance with the help of
do and what it can do unrelated diversification strategy
which is concerned with financial
outcomes.
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 strategic control systems
A firm makes use of two major forms of control
systems for assuring information control for
strategies:
 1. Conventional approaches to strategic control
  Formulate strategies
 
  Implement strategies
 
  Strategic control

The control depends on a feedback loop,

which is from performance measurement to strategy formulation.
This type of control system is called single loop learning
(Informational control). This method is suitable when the
environment
01/02/2023 is stable & simple
SM Ch-6-7-8 36
 2.Modern approach to strategic control

Formulat Implemen
e t strategies
strategies

way/Behavioral control
Informational control Strategic
control

Strategy formulation, strategy implementation and control influence

each other.
Two types of control, informational and behavioral control.
Informational control deals with whether the organization is performing
the right things (effectiveness)
Behavioral control focuses whether the organization performing the
things right (efficiency)

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 Steps in Designing an Effective Control System

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II. The nature of strategy evaluation
Strategic evaluation includes three basic activities.
1. Examining the underlying bases of a firm’s
strategy
2. Performance appraisal and Comparing
expected results with actual results
3. Taking corrective actions to ensure that
performance confirms to plans.
Strategy evaluation is essential to ensure that
stated objectives are being achieved

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What do you think- problem?
 Too much emphasis on evaluating strategies ?
 Too little evaluation ?
 No evaluation ?

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Reasons why strategy evaluation is
more difficult today
A dramatic increase in the environment’s complexity
The increasing difficulty of predicting the future with
accuracy
The rapid rate of obsolescence of even the best plans.
The increase in the number of both domestic & world
events affecting organizations

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 What should be the solution?
Modern organization demands for greater
flexibility, creativity, and initiative from
employees
 A fundamental problem facing managers today is
how to effectively control employees in light of these.

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 The process of evaluating strategies
Strategy evaluation is necessary for all sizes and kinds of
organization.
A certain amount of management by wandering around at
all levels is essential to effective strategy evaluation.
 Strategy evaluation should be performed on a continuing
basis, rather than at the end of specified periods.
 If expectations deviate significantly from forecasts, then
the firm should renew strategy formulation activities,
perhaps sooner than planned.
 Through involvement in the process of evaluating
strategies, managers& employees become committed to
keep the firm moving steadily toward achieving objectives.

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 ASTRATEGY EVALUATION FRAMEWORK

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1. Reviewing underlining bases of strategy
a) Prepare revised Internal factor Evaluation (IFE)
matrix
Focus on changes in mgt, marketing, finance,
operations, R&D, MIS : strengths & weaknesses
 Compare revised to Existing internal Factor Evaluation
b)Prepare revised External factor Evaluation (EFE)
matrix
Compare revised to Existing External Factor Evaluation
(EFE)
If différence occurs --- take corrective actions
If no… measure organisationnel performance

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2.Measuring organizational performance
 comparing expected results to actual results,
 investigating deviations from plans, evaluating individual
performance, and examining progress being made toward
meeting stated objectives
strategy evaluation is based on both quantitative & qualitative
criteria
Quantitative criteria used to evaluate finance are:
 Comparing the firm’s performance over different time period
 Comparing the firm’s performance to industry average
 Comparing the firm’s performance to competitors
Qualitative criteria
 Human factors such as high absenteeism& turnover rates; poor
production quality and quantity rates,
 low employee satisfaction can be underlying cause of declining
performance
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 3. Taking corrective actions
Taking corrective actions, requires making changes to
reposition a firm competitively for the future,
Examples of changes that may be need are
 altering on organization’s structure,
replacing one or more key individuals
revising a business mission,
 revising objectives,
devising new policies,
developing new performance incentives, etc.

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Characteristics of an effective Evaluation
system
Strategy evaluation must meet several basic requirements to be
effective
It must be economical ,too many controls can do more harm than
good
It should be meaningful, they should specifically relate to a firm’s
objectives,
It should provide timely information
It should be designed to provide a true picture of what is
happening
It should foster mutual understanding, trust, and common sense.
 Control need to be action oriented rather than information
oriented
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 Contingency plan
 Contingency plans can be defined as alternative plans that can be put into
effect if certain key events do not occur as expected.
 Firms plan ways to deal with unfavorable and favorable events before they
occur.
Some contingency plans commonly established by firms include
 If a major competitor withdraws from particular markets as intelligence
reports indicate, what action should our firm take?
 If our sales objectives are not reached , what action should our firm
take to avoid profit losses?
 If demand for our new product exceeds plans, what actions should our
 firm take to meet the higher demand?
When strategy- evaluation activities reveal the need for a major
change quickly,
 Contingency plan can promote a strategists ability to respond quickly to
key changes in the internal & external bases of an organizations current
strategy.
 In some cases, external or internal conditions present unexpected
opportunities.
 When such opportunities occur, contingency plans could allow an
organization to capitalize on them quickly.
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 Effective contingence plan processes.
Identify both beneficial & unfavorable events that could possibly
derail the strategy
Specify trigger points. Calculate about when contingent events are
likely to occur
Assess the impact of each contingent event
 Estimate the potential benefit or harm of each contingent event
Assess the counter impact of each contingency plan .i.e., estimate
how much each contingency plan will capitalize on or cancel out
its associated contingent event
Determine early warning signals for key contingent events.
Monitor the early warning signals
For contingent events with reliable early warning signals, develop
advance action plans to take advantage of the variable lead time
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 N D
E - E
TH

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