STRATEGY FORMULATION
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STRATEGY FORMULATION
• Is the development of long-range plans
for the effective management of
environmental opportunities and threats
in light of the corporate strengths and
weaknesses
• Referred as Strategic Planning,
concerned with:
– Defining the corporate vision & mission
– Specifying achievable objectives,
– Developing strategies and
– Setting policy guidelines
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Situational Analysis
SWOT Approach
• the process of finding a strategic fit between
external opportunities and internal strengths while
working around external threats and internal
weaknesses
• Strategy= opportunity/capacity
• Opportunity has no real value unless a company
has the capacity to take advantage of that
opportunity
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Criticisms of SWOT Analysis
• It is simply the opinions of those filling out the boxes.
• Virtually everything that is a strength is also a
weakness.
• Virtually everything that is an opportunity is also a
threat.
• Adding layers of effort does not improve the validity
of the list.
• It uses a single point in time approach.
• There is no tie to the view from the customer.
• There is no validated evaluation approach.
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Strategic Factors Analysis Summary
(SFAS) Matrix
• SFAS summarizes an organization‘s strategic
factors by combining the external factors from
the External Factor Analysis (EFAS) Table with
the internal factors from the Internal Factor
Analysis (IFAS) Table
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Strategic Factor Analysis Summary (SFAS)
1 2 3 4 Duration 5 6
Strategic Factors
INTERMEDIATE
(Select the most important
opportunities/threats from EFAS, Table 3.4
Weighted
SHORT
and the most important strengths and
LONG
weaknesses from IFAS, Table 4.2) Weight Rating Score Comments
Total Score
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Strategic Factor Analysis Summary (SFAS): Maytag as
Example
Duration
Strategic Factors
INTERMEDIATE
(Select the most important
opportunities/threats from EFAS, Table 3.4
Weighted
SHORT
and the most important strengths and
LONG
weaknesses from IFAS, Table 4.2) Weight Rating Score Comments
S1 Quality Maytag culture (S) .10 5 .50 X Quality key to success
S3 Hoover’s international orientation (S) .10 3 .30 X Name recognition
W3 Financial position (W) .10 2 .20 X High debt
W4 Global positioning (W) .15 2 .30 Only in N.A., U.K., and Australia
O1 Economic integration of
European Community (O) .10 4 .40 X Acquisition of Hoover
O2 Demographics favor quality (O) .10 5 .50 X X Maytag quality
O5 Trend to super stores (O + T) .10 2 .20 X Weak in this channel
T3 Whirlpool and Electrolux (T) .15 3 .45 X Dominate industry
T5 Japanese appliance companies (T) .10 2 .20 X Asian presence
1.00 3.05
Total Score
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Finding a Propitious Niche
• Niche:
– A need in the marketplace that is currently unsatisfied
• Propitious niche-
– where an organization can use its core competencies
to take advantage of a particular market opportunity
and the niche is just large enough for one firm to
satisfy its demand
• Strategic sweet spot-
– a company is able to satisfy customers’ needs in a way
that rivals cannot
• Strategic window-
– a unique market opportunity that is available for a
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Developing a Strategic Vision
• Involves thinking strategically about
– Firm’s future business plans
– Where to “go”
• Tasks include
– Creating a roadmap of the future
– Deciding future business position to
stake out
– Providing long-term direction
– Giving firm a strong identity
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VISION
• Is a mental perception of the kind of environment
an organisation aspires to create within a broad
time horizon and underlying conditions for the
actualization of the perception.
• Should describe a set of ideals, priorities, picture of
the future, sense of what makes organization
unique & special, core set of principles that the
organisation stands for, and a broad set of criteria
that will help to define the performance success.
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FEATURES OF a good VISION
• It should be Realistic:
• Based on reality to meaningful for organisation,
- should not be merely day-dreaming, but a dream to
be converted into reality
- Idealistic enough so that it cannot be achieved
without stretching
- Well articulated and easily understood by those
who are responsible to convert into practice
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……VISION
• Credible - must be believable and relevant to the
members of the organisation concerned.
• The purpose being to aspire them achieve a level of
excellence and provide direction for their actions.
• -Reflects the uniqueness of the organisation, its
distinctive competences, and what it is able to
achieve
• Future oriented: not for present but future.
- A vision is not where an organisation is now but
where it will be in future.
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CORPORATE MISSION
• The corporate mission is the purpose or reason for
the corporation’s existence.
• A mission may be narrow or broad in scope.
• A narrow mission clearly limits the scope of the
corporation’s activities in terms of product or
service offered, the technology used, and the
market served.
• A broad mission widens the scope of the
corporation’s activities to include many types of
products or services, markets and technologies.
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Characteristics of a Mission
Statement
• Defines current business activities
• Highlights boundaries of current business
• Conveys
– Who we are,
– What we do, and
– Where we are now
• Company specific, not generic —so as to give a
company its own identity
• A company’s mission is not to make a profit !
The real mission is always—“What will we do to make a
profit?”
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Missions vs. Strategic Visions
• A mission statement • A strategic vision
focuses on current concerns a firm’s future
business activities -- business path -- “where
“who we are and what we are going”
we do” – Markets to be pursued
– Current product and – Future technology-
service offerings product-customer focus
– Customer needs being – Kind of company that
served management is
– Technological and trying to create
business capabilities
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Examples………
• MU VISION:
– Mzumbe University to be recognized as a leading
institution in Africa for demand driven knowledge
generation, application, preservation and dissemination
for socio-economic development by 2025
• MU Mission: The mission of the University is to
provide opportunities for acquisition, development,
preservation and dissemination of knowledge and
skills through training, research, technical and/or
professional services.
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UDSM
• Vision: to become a reputable world-class
university that is responsive to national, regional
and global development needs through
engagement in dynamic knowledge creation and
application.
• Mission: the unrelenting pursuit of scholarly and
strategic research, education, training and public
service directed at attainment of equitable and
sustainable socio-economic development of
Tanzania and the rest of Africa
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Tanga City Council
• Vision: Tanga City is determined that by the year 2010
it should become a city with its people, men and
women, living above poverty line and their livelihood
improved through sustainable utilisation of available
resources (land, the ocean and harbour) in an
improved environment with the necessary
infrastructure empowered and involvement in
planning, implementing and evaluating their own
priorities through their democratically elected
leadership operating within values of transparency,
gender equity and accountability and safeguarding
their cultural heritage”
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TCC Mission
• Tanga City Council is committed to the delivery of
high quality social and economic services by
empowering and involving stakeholders (men and
women) in planning, implementing and evaluating
their own priorities through their democratically
elected leadership operating within values of good
governance”. The objective of TCC is to attain
“improved livelihood of the Tanga population, living
above poverty line, in a city safeguarding their
cultural heritage
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Coca cola Company Vision
• People: Be a great place to work where people are
inspired to be the best they can be.
• Portfolio: Bring to the world a portfolio of quality beverage
brands that anticipate and satisfy people's desires and
needs.
• Partners: Nurture a winning network of customers and
suppliers, together we create mutual, enduring value.
Planet: Be a responsible citizen that makes a difference by
helping build and support sustainable communities.
• Profit: Maximize long-term return to shareowners while
being mindful of our overall responsibilities.
• Productivity: Be a highly effective, lean and fast-moving
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organization.
Coca cola mission
• To refresh the world...
• To inspire moments of optimism and
happiness...
• To create value and make a difference.
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VISION and MISSION
• A vision without a mission is just a dream …
• “A mission without a vision just passes the
time …
• “A vision with action can change the world.”
– By Joel Barker
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Organizational Objectives
• The corporate mission determines the parameters
of the specific objectives to be defined by top
management.
• The objectives state what is to be accomplished
and when.
• The term goal is often confused with objective.
• Goal is an open-ended statement of what one
wishes to accomplish without being very specific
and with no time criteria for completion.
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Objectives
• Objectives are the goals of the business
– what the business wants to achieve
• It is of great importance for a business to have
well-defined objectives.
• These objectives will help the business to be clear
about what it wants to achieve or where it wants
to go.
• With objectives, the performance of a business
can be assessed according to a standard, that is to
say, how effectively the business has achieved its
objectives.
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Characteristics of Objectives
• Objectives have to be SMART
• Specific – stating exactly what it is trying to achieve.
• Measurable – able to be measured to decide if they
have been achieved.
• Agreed – have the approval and understanding of
everyone involved.
• Realistic – able to be achieved by the business
taking into account its resources, competition,
market, etc.
• Time Specific – state a time by which they should
be achieved.
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Factors determine Objectives
• The size and status of the business.
• The power of stakeholders.
• Ownership.
• Long and short-term objectives.
• External and internal pressures.
• Risks
• Corporate and business culture.
• Number of years the business has been
operating
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Importance of Objectives
• Determine strategy
• Provide a guide to action
• Provide a sense of direction and units
• Provide a framework for decision making
• Coordinate activities
• Facilitate prioritization and resolve conflicts between
departments.
• Measure and control performance
• Encourage a concentration of long – term factors
• Motivate employees
• Provide a basis for decision making.
• Provide shareholders with a clear idea of the business in
which they have invested. MBA
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THE HIERARCHY OF OBJECTIVES
The business over all purpose. The long-term
goals which a business hopes to achieve. No
two companies will have the same corporate
Management By Objectives (MBO)
aims.
AIMS
A statement of the business’s core aims, phrased in a
way to motivate employees and to stimulate interest
by outside groups. Its an attempt to condense the
MISSION purpose of the business’s existence into one
statement.
These are the goals of the business. They
are the outcomes or targets the business
want to gain in order to achieve its aims. The
CORPORATE OBJECTIVES objective of a business can be derived from
its aims
Specific targets for separate
divisions.
DIVISIONAL OBJECTIVES
Targets for each
DEPARTMENTAL OBJECTIVES department
Individual
goals/targets
INDIVIDUAL TARGETS
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THE HIERARCHY OF OBJECTIVES
TO MAXIMISE SHAREHOLDERS VALUE
AIMS
Management By Objectives (MBO)
TO INCREASE PROFITS OFF ALL DIVISIONS BY
10% PER YEAR
CORPORATE OBJECTIVES
WITHIN ONE REGION, TO INCREASE
MARKET SHARE BY 10% AND CUT
DIVISIONAL OBJECTIVES OVERHEADS BY 5%
MARKETING: Increase Profits by
10%; FINANCE : Reduce Long-
DEPARTMENTAL OBJECTIVES term borrowing by 5%; R&D:
Develop one innovative product
each year.
E.G IN THE MARKETING
DEPARTMENT
•Increase Sales by an average of
INDIVIDUAL TARGETS 5% per client.
•Introduce five more clients to
the business each year.
How Corporate Aim is divided at every level of the organisation
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Types of Objectives
1. Survival,
2. Profit Maximization,
3. Growth,
4. Sales Revenue Maximization,
5. Image and Social responsibility
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Objective of survival
Survival objective is essential for any
business in that no survival means no today
and no future
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When to consider survival to be an important objective
When Brief explanation
During such stages, businesses may face many
1) In the early stages of problems because they may lack experience and
trading resources, or they may meet with strong
competition from existing companies.
During such periods, a business may face falling
2) When trading becomes demand for their products, bad debts, or low
difficult confidence for its future.
In case of the threat of being taken over by
3) when there is danger of another firm, survival may be the main
take-over objective. Otherwise, the business may be a
business owned by some one else,
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Profit Maximization
• Profit maximization means increasing profit as
much as possible or producing a level of output
which brings the most profit for the business.
• Usually, the main objective of a private sector
business may be to maximize its profits.
• However, things may be different for a public
sector business.
• The main objective of a public sector business
may be to supply the best service in the past,
although nowadays, they are offering services in
a more and more ‘business like’ way
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Balance between short term and long
term profit maximization:
• A business may sometimes sacrifice short-
term profit maximization for long-term
profit maximization.
• Possible reasons why a business might
sacrifice short-term profit maximization for
long-term ones are,
– lowering the price to build a market share and
increase it when possible or operating a short
term at loss to wait for the pick-up of sales in the
future.
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Objective of Growth
• Growth objective may refer to the goal of a
business to become larger, stronger or more
competitive.
• Many businesses regard growth as their main
objectives. There are some reasons why
businesses must choose growth as an
important objective
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Possible reasons for a business to
regard growth as an objective
1. To survive, no growth may mean ‘final death’.
2. To introduce new products in order to meet
customer changing needs.
3. To reduce risks of business: In fierce competition, if
a business can not become strong enough, it is more
likely to be eaten up by other stronger competitors.
4. To have low costs and more profits on a larger scale
(economy of scale).
5. To make employees, managers, and owners all feel
happy and secure…
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Sales Maximization
1. When managers and employees are paid
according to their sales revenues rather than
the created profit, sales revenue
maximization may become the main
objective of the business.
2. The business wants to enlarge the market
share first and then benefits in the long run.
Shortcomings:
This may be a shortcoming for a business.
Profit maximization for a business should be
more important than sales revenue
maximization in whatever situations.
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Image and Social Responsibility
Social Responsibility definition: management
philosophy that highlights the social and
economic effects of managerial decisions. Or the
management’s acceptance of the obligation to
consider profit, consumer satisfaction, and
societal well-being of equal value in evaluating
the firm’s performance.
Image and social responsibility have become
more and more important objectives of
businesses.
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Possible reasons for a businesses to pursue image
and social responsibility as its objectives
Possible Reasons Brief Explanations
Many laws have been passed to protect workers’
1) Government legislation health and safety, reduce discrimination against
disabled workers and protect the environment.
Increasing competition has become a challenge for
modern businesses. If customers think badly of a
2) Competitive pressure business, then the business is finished. The
business’s market share will be taken over by other
companies.
Good image may mean more sales and more profit.
A company can benefit a lot if it has a good relation
3) Benefits for the business
with its suppliers. Reliable supply of raw materials
is key to production.
Paying attention to image and social responsibility
4) Sustainable development
is key to long term development.
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