STRATEGIC CHOICE

6TH LECTURE
 CHAPTER OUTLINE

Strategy alternatives
 a choice limited to one of two or more possibilities, as of
things, propositions, or courses of action, the selection of
which precludes any other possibility
Strategy variations
 the act, process, or accident of varying in condition, character,
or degree
 a different form of something; variant
Strategic choice
 an act or instance of choosing; selection
 an alternative
 INTRODUCTION

Purpose of strategy,
types of strategy in public sector,
mechanism used
selection of strategy
 GENERIC STRATEGY ALTERNATIVES

Identify the right strategy

 Fulfill a real market need
 Be competitively defended
 Suit internal organisational resources and skills
 Suit the culture of the organisation
Long term objectives – results expected from
pursuing certain strategies
Quantitative, measurable, realistic, understandable,
challenging, hierarchical, obtainable, and congruent
Needed at different organizational level
 FOUR BASIC LEVEL OF STRATEGIES
(BRYSON, 2004)

Grand strategy for the organization as a whole

Subunit strategies (subunits may be divisions,
departments, or units of a larger organizations)
(Montanari and Bracker, 1986)
Program, service or business process strategies
(Hammer and Champy, 1993)
Functional strategies (such as financial, staffing,
facilities, information technology and procurement
strategies)
 Types of Strategy

Integration
Intensive
Diversification
Defensive
 INTEGRATION STRATEGIES

 Gain control over distributors, suppliers and competitors

a) Forward integration – increased control over distributors or
retailers, web sites
 Franchising approach
 Example: Pos Malaysia, KR1M
b) Backward integration – increased control of a firm’s suppliers,
when a firm current suppliers are unreliable or too costly
 Outsourcing approach
 Example: Indah Water (by Local Goverment)
c) Horizontal integration refers to a strategy of seeking
ownership of or increased control over a firms competitors.
 Growth approach
 Mergers, acquisitions, and takeovers
 Example: Proton Holding Bhd by DRB-Hicom
Forward strategy

The existence of ‘Kedai Rakyat 1 Malaysia’

will also act as the medium for the
Government to control prices and lessens
the monopolization of products which has
long been dominated by the multinational
manufacturers. As such, the multinational
companies will be constrained from
imposing price hikes without due
justification.
 Backward strategy

Indah Water Konsortium Sdn Bhd

Indah Water Konsortium Sdn Bhd, a national sewerage
company, wholly-owned by the Minister of Finance
Incorporated, responsible for providing sewerage services,
operating and maintaining over 8,000 public sewage
treatment plants, 14,000km networks of sewerage pipelines
and providing desludging services to over 350,000 individual
septic tanks in Malaysia for the past 10 years since April 1994.
 Backward strategy

Starbucks
It backward vertically integrated
when it bought a coffee farm in
China, because normally it would
have to buy coffee beans from a
coffee bean supplier.

An ice cream company that

buys a dairy farm has backward
vertically integrated.
 Horizontal integration

 2006 - Launch of CIMB Group as a Regional Universal Bank

 The new CIMB Group was launched by the then Prime Minister of
Malaysia, Dato’ Seri Abdullah Ahmad Badawi, in September 2006,
signifying the culmination of the 3-way merger of Commerce
International Merchant Bankers, Bumiputra-Commerce Bank and
Southern Bank to form a universal banking group.
 As a universal bank, CIMB Group has the full range of banking and
financial services – conventional and Islamic – to serve everyone from
the smallest retail client to the largest companies and institutions.
 In line with the vision, “To be Southeast Asia’s Most Valued Universal
Bank”, the Group embarked on a rebranding exercise and unveiled a
new logo and a new tagline, “Forward Banking”, reflecting its promise
to create value for customers through forward thinking.
 INTENSIVE STRATEGIES

Require intensive efforts to improve competitive position

a) Market penetration – increase market share for present
services through greater marketing effort
 Includes increasing the number of salespersons, advertising
expenditures, and publicity efforts or offering extensive sales
promotion items
b) Market development - introducing present
services/product into new geographic area
 Going international / abroad
c) Product development – increased sales by improving or
modifying present services/products
 Research and development expenditures
Example: Oil, gas and energy / introducing Green Technology
 DIVERSIFICATION STRATEGY

Related diversification – when the value chain

posses competitively valuable across business
strategic fits
 Example: Palm oil and related product (soap, detergents and
cosmetics)
Unrelated Diversification – when their value chains
are so dissimilar that no competitively valuable
cross-business relationships exist
 Example: ATM collaborate with KKLW
 Sime Darby

Sime Darby is a key player in the Malaysian economy

as well as a diversified multinational involved in key
growth sectors, namely, plantations, industrial
equipment, motors, property and energy &
utilities with operations in more than 20 countries.
 DEFENSIVE STRATEGY

1) Retrenchment
 Sometimes called a turnaround or reorganizational strategy,
retrenchment is designed to fortify an organizations basic
distinctive competence
 Occurs when an organization regroups through cost and asset
reduction to reverse declining sales and profits
 Mostly in private sector, bankruptcy can be an effective
retrenchment strategy
 Closure departments, change of portfolio, cuts in the level of
inputs and reductions in the supply of services
 Example: Kementerrian Penerangan, Komunikasi dan
Kebudayaan (formerly known as Kementerian Penerangan)
 DEFENSIVE STRATEGY

2) Divestiture
 Selling a division or part of an organization

 Used to raise capital for further strategic acquisitions or

investments
 The firms try to focus on their core strengths, lessening their
level of diversification
3) Liquidation
 Selling all of a company's assets for their tangible worth

 Liquidation is recognition of defeat and consequently can be an

emotionally difficult strategy
Example: MAS
MICHAEL PORTER’S FIVE GENERIC STRATEGIES

The strategies allow organizations to gain competitive

advantage from three different bases:
 Cost leadership: emphasizes on a very low per-unit cost
 Low cost – lower price available on the market
 Best value – best price-value on the market
 Differentiation: offer different degrees of differentiation (PDRM in
reducing crime)
 Focus: fulfill the needs of small groups of consumers (,)
a) Cost leadership-low cost
b) Cost leadership-best value
c) Differentiation
d) Focus-low cost
e) Focus-best value
KR1M, BR1M, Skim Rumah Pertama
 STRATEGIC MANAGEMENT IN GOVERNMENTAL
ORGANIZATIONS

In Malaysia, federal, state and local government are

responsible for formulating, implementing, and
evaluating strategies that use the government revenues in
the most cost-effective way to provide services and
programs
Strategic-management concepts are increasingly being
used to enable governmental organizations to be more
effective and efficient by introducing laws, programs,
planning and projects to achieve objectives and missions
Based on the strategies before, which strategy/s may be
suitable to be implement in our government?
OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC
SECTOR STRATEGIES

The strategy can be divided into 2 major functions:

 Steering – concentrate on core strategy (as a guide)
 Rowing – concentrate on the 4 remaining strategy (as an act)
All 5 strategies touch on the issue of accountability.
 The core strategy defines what an organization is accountable for;
 the consequences strategy determines how it will be held
accountable;
 customer strategy specifically to whom are the organizations
accountable;
 the control strategy affects who will be accountable; and
 the culture strategy helps employees internalize their
accountability.
OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC
SECTOR STRATEGIES
OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC
SECTOR STRATEGIES
OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC
SECTOR STRATEGIES
OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC
SECTOR STRATEGIES
OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC
SECTOR STRATEGIES
OSBORNE AND PLASTRIK’S TYPOLOGY OF PUBLIC
SECTOR STRATEGIES
GOVERNMENT REFORM STRATEGY
GOVERNMENT REFORM STRATEGY
 STRATEGIC CHOICE

The Process of Generating and Selecting Strategies:

 Strategists never consider all feasible alternatives that could
benefit the firm, because there are an infinite number of
possible actions and an infinite number of ways to implement
those actions. Therefore, a manageable set of the most
attractive alternative strategies must be developed.
 Identifying and evaluating alternative strategies should involve
many of the managers and employees who earlier assembled
the organizational mission statement, performed the external
audit, and conducted the internal audit.
 Alternative strategies proposed by participants should be
considered and discussed in a meeting or series of meetings.
 STRATEGIC CHOICE

Develop SWOC (Strength, weakness, opportunities and

challenges) Analysis
1. Brainstorm lists of strengths, weaknesses, opportunities and
challenges.
2. Categorize list of ideas and reduce it to top five to ten ideas per
category.
3. Separately review and discuss each category and possible
implications to the organization.
4. Determine how the organization's internal strengths and
weaknesses align with opportunities and threats.
5. Analyze results and determine whether a strength and/or
opportunity exist--promote potential growth or, if both weaknesses
and/or threats are prevalent, represent areas for improvement.
 STRATEGIC CHOICE
Develop SWOC Analysis (cont) focus on FOUR basic
types of critical success factors:
 Industry – These factors result from specific industry characteristics
and are the things that the organization must do to remain
competitive.
 Environmental – These factors result from macro-environmental
influences on an organization and include things like the business
climate, the economy, competitors and technological advancements.
 Strategic – These factors result from the specific competitive strategy
chosen by the organization and can include the way in which the
company chooses to position themselves, market themselves, and
whether they are high volume low cost or low volume high cost
producers, etc.
 Temporal - These factors result from the organization’s internal
forces and include specific barriers, challenges, direction and
influences.
 STRATEGIC CHOICE

Develop SWOC Analysis (cont) and approach of

SWOT analysis
 SO Strategies: Resources (Assets) an important firm’s strength
to get opportunity for external resources. Example:
Integration.
 WO Strategies: Useful if the firm take advantage to external
resources in order to overcome the weakness. Example:
Diversification.
 ST Strategies: Adopted by opening new branches in order to
overcome competitive threat. Example: Intensive.
 WT strategies: Defensive tactics directed at reducing internal
weaknesses and avoiding external threats. Example: Defensive.