Change Strategies

Inputs from environmental analysis

• Strategy formulation: the process of designing and
selection strategic that lead to the attainment of
organizational objectives.
• Managers rely on environmental analysis to provide
the information they need to begin the strategy
formulation process.
• There are two approaches that focus environmental
analysis on strategic formulation:
1. critical question analysis.
2. SWOT analysis.
 importance OF STRATEGY
The formulation of a sound strategy facilitates
a number of actions and desired results that
would be difficult otherwise. A strategic plan,
when communicated to all members of an
organization, provides employees with a clear
vision of what the purposes and objectives of
the firm
 Critical questions analysis
1. what is the purpose (s) and objective(s) of the organization?
The answer of this question tells managers where the want to go.
2. Where the organization present going ? The answer to this
question reveals whether an organization is achieving its goals or
at least making satisfactory progress.
3. What critical environment factors does the organization
currently face? This question addresses both internal and
external environments factors both inside and outside the
organization
4. What can be done to achieve organizational objectives more
effectively in the future? The answer to this question actually
result in the formulation of a strategy for the organization. Thus
it goes beyond environmental analysis and includes the stages of
planning and selection
 SWOT ANALYSIS

SWOT analysis: is a useful tool for analyzing an

organization’s overall situation
(SWOT stands for strengths, weakness, opportunities ,
and threats ) this approach attempts to balance the
internal strengths and weaknesses of an organization
with the opportunities and threats that the external
environment present.
 This approach suggests that the major issues facing
an organization can be isolated through careful
analysis of each of these four elements.
 FORMULATING ORGANIZATIONAL STRATEGIES

• Organizational strategies are formulated by

top management and are designed to achieve
the firm’s overall objectives.
• This process includes two related tasks:
• First, general strategic must be selected and
developed.
• Second, specific decisions must be made about
what role various lines of business in the
organization will play and how resources will be
assigned among them.
 GENERAL STRATEGY
ALTERNATIVES
• An organization can choose from a wide
variety of general strategy. We will discuss a
number of them and the conditions under
which they are likely to be used.
CONCENTRANTION STRATEGY
A concentration strategy: is one in which an
organization focuses on a single line of
business.
 STABILITY STRATEGY
The organization that adopts a stability strategy focuses
on its existing line or lines of business and attempts to
maintain them.
This is a useful strategy in several situations.
• An organization that is large and dominates its market
(s) may choose a stability strategy in an effort to avoid
government controls or penalties for monopolizing the
industry.
• Another organization may find that further growth is
too costly and could have Detrimental effects on
profitability.
• Finally, an organization in a low-growth or no- growth
industry that has no other viable options may be forced
to select a stability strategy.
 GROWTH STRATEGICC
• Organizations usually seek growth in sale profit,
collection, market share, frequency or some
other measure as a primary objectives. Growth
strategies may be followed by means of
1. vertical integrations,
2. horizontal integration,
3. diversification, and
4. mergers and joint venture.
 VERTICAL INTEGRATION
• Vertical integration: involves growth through
acquisition of other organizations in a channel of
distribution.
• when an organization purchases other companies
that supply it, it engages in backward integration.
1. The organization that purchases other firms that
are closer to the end users of the product (such as
wholesalers and retailers) participates in forward
integration.
• Vertical integration is used to obtain greater control
over a line of business and to increase profits
through greater efficiency or better selling effort.
 HORIZONTAL
INTEGRATION
• Horizontal integration: involves growth through
the acquisitions of competing firms in the same
line of business.
• It is accepted in an effort to increase the size, sale,
profit, and likely market share of an organization.
• This strategy is some times used by smaller firms in
an industry subject by one or a few large
competitors, such as the soft drink and computer
industries.
 Diversification
Diversification: involves growth through the acquisition
of firms in other industries or lines of business.
• When the acquired firm has production technology,
products, channels of distribution, and/or markets
similar to those of the firm purchasing it , the strategy
is called related or concentric diversification.
• This strategy is useful when the organization can
acquire greater efficiency or market impact through
the use of shared resources.
• When the acquired firm is in a completely
different line of business, the strategy is
called separate or multinational. This strategy
is used for one or more of the following
reasons:
1. Organization in slow-growth industries may
purchase firms in faster-growing industries
to increase their overall growth rate.
2. Organization with excess cash often find
investment in another industries (particular
a fast-growing one) a profitable strategy.
 Continuous
• 3.organization may diversify in order to
spread their risks across several industries
• 4. the acquiring organization may have
management talent, financial and
technical resources, or marketing skills
that it can apply to a weak firm in another
industry in the hope of making it highly
profitable.
 MERGERS AND JOINT
•
VENTURES
In the above discussion we spoke of diversification in
terms of acquisition – that is, one firm purchasing
another with cash or normal.
• An organization can also grow through mergers and
joint ventures.
• In a merger, company joins with another company to
form a new organization.
• In a joint venture, an organization works with another
company on a project too large to handle by itself, such
as some elements of the space program.
• Similarly, organizations in different countries may work
together to overcome trade barriers in the international
market or share resources more efficiency.
 LEVERAGED BUYOUTS
• Leveraged buyouts: Another strategy
designed to increase the value of
organizations involves leveraged buyout.
• In a leverage buyout, the stockholders of a
public firm are offered a premium for their
shares over the going market price.
• Often, the buyers of the firm use little cash in
the transaction. Rather, they may finance the
purchase by selling junk bonds (bonds with
low quality ratings) that capacity the firm up
with obligation.
 RETRENCHMENT (cut)
STRATEGY
• When an organization’s survival is
threatened and it is not competing
effectively, retrenchment strategies are
often needed. The three basic types of
retrenchment are
1. Turnaround
2. Divestment and
3. Liquidation
 TURNAROUND STRATEGY
• Turnaround strategy: this strategy is used
when an organization is performing poorly but
has not yet reached a critical stage.
• It usually involves getting rid of un profitable
products, pruning the work force, edge
distribution outlets, and seeking other methods
of making the organization more efficient.
• If the turnaround is successful the organization
may then focus on growth strategies.
 DIVESTMENT STRATEGY
• Divestment strategy: this strategy involves
selling the business or setting it up as separate
corporation.
• Divestment is used when a particular business
doesn’t fit well in the organization or regularly
fails to reach the objectives set for it .
• Divestment can also be used to improve the
financial position of the divesting
organization.
 LIQUIDATION
STRATEGY
• Liquidation strategy: In this strategy, a business is
terminated (ending)and its assets sold off.
• Liquidation is the least desirable retrenchments
strategy, because it usually involves losses for both
stockholders and employees.
• However, in a multibusiness organization, the loss
of one business typically has less negative impact
than it has in a single-business organization.
 COMBINATIONS
• STRATEGY
Combinations strategy: Large, diversified
organizations commonly use a number of
these strategies in combinations.
• Clearly formulating a consistence
organizational strategy in large, diversified
companies is very complicated, because a
number of different business-level strategies
need to be coordinated to achieve overall
organizational objectives.
• Business portfolio models are designed to help
managers deal with this problem.