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Developing and Choosing Strategies Vula

BUS4050W Strategic Thinking UCT Course notes

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13 views

Developing and Choosing Strategies Vula

BUS4050W Strategic Thinking UCT Course notes

Uploaded by

rockzongoepe856
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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BUS4050W CHOOSING AND DEVELOPING STRATEGIES

P R E PA R E D A N D P R E S E N T E D B Y D R M A R L I N H O F F M A N
STRATEGIC GOALS AND
STRATEGIC CHOICES
• Strategic planning as the responsibility of strategists to determine and communicate the strategic
direction of the organisation.
• Every organisation is part of a larger system and that interactions within the system are determined by
various role-players, referred to as stakeholders, present in the organisation’s business environment as
well as the composition of the business environment.
• The first part of any strategy formulation process is thus to assess the current situation.
• The findings of such an assessment will inform the goals of the organisation with the overall goal of
creating a strategic fit between the organisational resources and capabilities and the opportunities
present in the external environment.
• Strategic goals are statements that express specific outcomes to be achieved.
• We also acknowledge that goals from the basis of a common language for understanding the wider
context as it contains realistic measures of progress and achievements.
• These measures of progress are set to support and achieve the strategic direction of the organisation.
• However, the primary objective of business strategy is to achieve a sustainable competitive advantage
that leads to above-average performance and returns.
• The primary objective of a responsible business is to achieve responsible competitiveness.
CORPORATE STRATEGIC OPTIONS: CREATING
CORPORATE VALUE AND SYNERGY

 To create value for the organisation, executives need to make decisions about
growth path of an organisation.
 On a corporate level, executives on the highest level need to make decisions about
the overall purpose, scope, range, and diversity of the organisation.
 in short, the corporate-level strategies deal with the number of products and
services that the organisation will offer and the markets that will be pursued.
 Whether an organisation operates as a multi-business or not, organisations have the
option to pursue any, or a combination of, corporate strategies.
 We can broadly classify these strategies into the following categories:
o internal growth strategies.
o External growth strategies.
o Cooperative or corporate combination strategies.
o Turnaround and exit strategies.
 Each of these broad categories can be achieved by employing different strategic options.
 The choice of the most appropriate strategy is dependent on the strategic fit between the
organisation’s internal strengths, capabilities and resources, and the opportunities
available and threats facing the organisation in the external environment.

 Corporate-level strategic options

• Market • Diversifica • Strategic • Retrenchm

Cooperative or corporate
External growth strategies

combination strategies

Turnaround and exit strategies


Internal growth strategies

penetratio tion alliance ent


n (related or • Joint • Recovery
• Market unrelated) venture • Revenue
developme • Integration • Merger growth
nt (horizontal • Acquisition • Divestiture
• Product or vertical) • Liquidation
developme
nt
• Innovation
BUSINESS-LEVEL STRATEGIES OPTIONS:
CREATING AND SUSTAINING COMPETITIVE
ADVANTAGE
 Corporate-level strategies essentially deal with a number of products and services that the
organisation will offer and the markets that they will pursue.
 Business-level, or competitive, strategies consider how to compete successfully in these markets.
 In other words, these strategies focus on how to position an organisation within an industry in such a
way that it has competitive advantage.
 Business-level strategies can be described as an integrated set of commitments and actions that a
business uses to gain a competitive advantage by exploiting core competencies in specific product
markets.
 There are many variations in business-level strategies, but if we strip away the details to get to real
substance, the biggest and most significant difference among competitive strategies are reduced to
the following:
o Whether an organisation’s target market is broad or narrow.
o Whether the organisation is pursuing a competitive advantage linked to low cost or product
differentiation
o A combination of the above.
FOUR
GENERIC
COMPETITIVE
APPROACHES
EVALUATING STRATEGIES
 Strategies can be evaluated against three key evaluation criteria, namely, suitability, acceptability and
feasibility.
 Suitability considers whether the proposed strategies address the key issues related to the strengths,
weaknesses, opportunities and threats the organisation faces.
 Suitable strategies need to take advantage of external opportunities and internal weaknesses.
 In order to identify whether a strategy is suitable, the strategist should have a good understanding of the
internal environment of the organisation, as well as of the external environment in which the organisation
operates.
 In practice, it often happens that more than one strategy may be suitable, but that limited resources
necessitate the screening of options so that the most appropriate strategy can be selected.
 Strategies are acceptable of their expected performance outcomes meet the expectations of all stakeholders.
 Since the acceptability of a strategy option is determined by expected performance outcomes, this criterion
requires strategists to consider risk, return and stakeholder reaction.
 We find that organisations, regardless of the industry in which they operate, mostly engage in formal risk
assessment if strategic options require sustainable investment.
 Tools such as sensitivity analysis, financial ratios, and break-even analysis are useful for evaluating risk.
 The second consideration I return, which refers to the financial benefits which stakeholders are expected to
receive form a strategy.
 To assess return, strategists can use different measurements such as financial
analysis, shareholder value analysis, cost-benefit evaluations and the real option
approach.
 To assess the final consideration, which is the reaction of stakeholders, strategists
can make use of stakeholder mapping.
 Finally, a strategy is feasible when the organisation has, or can obtain, the
capabilities required to deliver a strategy.
 To assess feasibility, strategists need to address two ket questions:
o Do the resources and competencies currently exist to implement a strategy
effectively?
o If not, can they be obtained?
 The answer should be informed by considering financial and human resource
requirements, as well as resource integration.

• Although the criteria seem to be quite straightforward, the reality is that each
criterion can only be assessed if key strategic issues dealing with it are identified by
means of a comprehensive internal and external environment.

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