Professional Documents
Culture Documents
02 Strategy Formulation
02 Strategy Formulation
Levels of strategies
Corporate Strategy Business Strategy Functional Strategy
Strategic Choices
Corporate Strategy
The corporate parent Corporate parenting rationales Portfolio decisions Extent of diversity Management and control of subsidiaries
Corporate Strategy
Corporate strategy determines the means for utilizing resources in the functional areas of marketing, production, finance, research and development, and human resources to reach the organizations goals. Corporate strategy determines not only the scope of the business, but also its resource deployment, competitive advantages, and overall coordination of functional areas. Corporate strategy is used by all organizations, not just corporations.
Corporate Strategy
Corporate strategy planners are concerned with broad issues such as corporate culture, competition, differentiation, diversification, interrelationships between business units, and environmental and social issues. They attempt to match the resources of the organization with the opportunities and threats in the environment. They are also concerned with defining the scope and role of the firms business units so that they are coordinated to reach the ends desired.
Vision
A vision statement outlines what a company wants to be. It focuses on tomorrow; it is inspirational; it provides clear decision-making decision criteria. Corporate vision is a short, succinct, and inspiring statement of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms. Vision refers to the category of intentions that are broad, all-inclusive inclusive and forward-thinking. forward It is the image that a business must have of its goals before it sets out to reach them. It describes aspirations for the future, without specifying the means that will be used to achieve those desired ends.
http://www.ic.gc.ca/epic/site/stco-levc.nsf/en/qw00046e.html
Vision
Warren Bennis, , a noted writer on leadership, says: "To choose a direction, an executive must have developed a mental image of the possible and desirable future state of the organization. This image, which we call a vision, may be as vague as a dream or as precise as a goal or a mission statement. Vision without action is a daydream. Action without vision is a nightmare. - Japanese Proverb
Mission Statement
A mission statement is an organization's vision translated into written form. It makes concrete the leader's view of the direction and purpose of the organization. For many corporate leaders it is a vital element in any attempt to motivate employees and to give them a sense of priorities.
Mission Statement
A mission statement should be a short and concise statement of goals and priorities. In turn, goals are specific objectives that relate to specific time periods and are stated in terms of facts. The primary goal of any business is to increase stakeholder value. The most important stakeholders are shareholders who own the business, employees who work for the business, and clients or customers who purchase products and/or services from the business.
http://www.1000ventures.com/business_guide/crosscuttings/vision_mission_strategy.html
http://www.1000ventures.com/business_guide/crosscuttings/strategic_intent.html
Strategic Objectives
Broadly defined targets that an organization must achieve to make its strategy succeed. Strategic objectives are, in general, externally focused and (according to Peter Drucker) fall into eight major classifications: Market standing: desired share of the present and new markets; Innovation: development of new goods and services, and of skills and methods required to supply them; Human resources: selection and development of employees; Financial resources: identification of the sources of capital and their use;
Strategic Objectives
Physical resources: equipment and facilities and their use; Productivity: efficient use of the resources relative to the output; Social responsibility: awareness and responsiveness to the effects on the wider community of the stakeholders; Profit requirements: achievement of measurable financial well being and growth.
http://www.businessdictionary.com/definition/strategic-objective.html
Financial objectives
Faster revenue growth Faster earning growth Higher dividends Wider profit margins Higher returns on invested capital Stronger bond and credit ratings Bigger cash flows A rising stock price Recognition as a blue chip company A more diversified revenue base Stable earnings during recessionary periods
Strategic Direction
Course of action that leads to the achievement of the objectives of an organization's strategy
http://www.businessdictionary.com/definition/strategic-direction.html
Ansofs model
Product
Present
Market
New
Present
Market Penetration
Product Development
New
Market Development
Diversification
Diversification
Diversification
Defined as a strategy which takes the organization away from its current markets or products or competences
Related Diversification
Strategy development beyond current products and markets, but within the value system or industry in which the company operates
Vertical Integration
Describes either backward or forward integration into adjacent activities in the value system
Horizontal Integration
Development into activities which are competitive with, or complementary to, a companys present activities
Horizontal integration Expansion via acquisition of a competitor or by adding outlets to a chain. For example, a book publisher might acquire another publishing house to increase its stable of editors and authors or to otherwise enhance its competitiveness.
Manufacturer
By-products
Transport
Marketing information
Examples/Comments
Tea processors own plantations to secure continuity of supply Components for motor cars may need to be manufactured by the company Printing facilities can be cheaper if in-house in Manufacturers own retail outlets to gain guaranteed distribution Car manufacturer own credit services, car hire firms and servicing firms to access information on customer preferences Fully integrated steel plants save costs of reheating and transport Firm of accountants moving into tax advice or corporate recovery Precision engineering equipment manufacturer in one market entering another with similar technical requirement Avoids over-reliance reliance on one product or market, but builds on related experience Manufacturer acquiring company for compatible products to fill capacity So the corporate parent can understand business units
Even out cyclical effects in a given sector Need to use excess cash or safeguard profits Personal values or objectives of powerful figures
BCG Model
The market-growth/market-share share matrix, the Boston Consulting Group (BCG) approach, is based on the philosophy that a products market growth rate and its market share are important considerations in determining its marketing strategy. a) All the firms SBUs and products should be integrated into a single, overall matrix and evaluated to determine appropriate strategies for individual products and overall portfolio strategies. b) Managers can use this model to determine and classify each products expected future cash contributions and future cash requirements.
BCG Model
Relative Market Share Position High
Industry Sales Growth Rate (%)
Low
High
STARS
Questions Mark
Low
Cash Cows
Dogs
BCG Model
Dogs have a low share of the market and low prospects for growth; these products are often found in established markets. Example: General Motors (now outdated) Oldsmobile brand Question marks, sometimes called problem children, have a small share of a growing market and generally require a large amount of cash to build market share. Example: Mercedes mountain bikes The long-term term health of an organization depends on having some products that generate cash (and provide acceptable profits) and others that use cash to support growth.
http://www.boekestijn.org/1602789.htm
Conservative
+6 +5 +4 +3 +2 +1 CA -6 -5 -4 -3 -2 -1 -1 -2 -3 -4 -5 0 0
FS
Aggressive
IS +1 +2 +3 +4 +5 +6
Defensive
-6 ES
Competitive
Quadrant II
1. 2. 3. 4. 5. 6.
WEAK COMPETITIVE POSITION
Market development Market penetration Product development Horizontal integration Divestiture liquidation
1. 2. 3. 4. 5. 6. 7.
Market development Market penetration Product development Forward integration Backward integration Horizontal integration Related diversification
Quadrant III
1. 2. 3. 4. 5.
Quadrant IV
Divest
Disposition or sale of an asset by a company. A company will often divest an asset which is not performing well, which is not vital to the company's core business, or which is worth more to a potential buyer or as a separate entity than as part of the company.
Typologies of Strategies
Mintzbergs Deliberate Vs. Emergent Strategies Miles and Snows Typologies of Strategy Porters Generic Strategies Mintzbergs Generic Competitive Strategies Johnson and Scholes, The Strategic Lenses
Defenders
Reactors
Competitive Scope
Paradigm
A paradigm is the set of assumptions held relatively in common and taken for granted in an organization.
If unsatisfactory
Step 1 Tighter Control Step 2 Reconstruct or Develop New Strategy Step 3 Abandon paradigm and adopt a new one
Source: Adapted from P. Grinyer and J-C. Spender, Turnaround: Managerial recipes for strategic success, Associated Business Press, 1979, p. 203.