Presentation on theme: "Strategy Analysis and Choice"— Presentation transcript:
1 Strategy Analysis and Choice Chapter 6Strategy Analysis and Choice
2 Strategic Analysis & Choice Re-visit the MissionRevise, create, or maintain missionSet Long-Term ObjectivesGenerate feasible alternativesEvaluate alternativesChoose courses of action
3 The Strategy Formulation Analytical Framework (Figure 6-2) Stage 1: The Input StageExternal Analysis Internal Analysis SWOT AnalysisStage 2: The Matching StageRe-visit Mission and Set Long Term ObjectivesGenerate feasible alternative Corporate StrategiesStage 3: The Decision StageEvaluate and Choose Corporate Strategies
4 Why Are Clear Objectives Needed? To Provide Direction To Provide PurposeTo Allow Synergy To Aid in EvaluationsTo Establish Priorities To Reduce UncertaintyTo Minimize Conflicts To Stimulate ExertionTo Allocate Resources To Design JobsTo Motivate Managers & EmployeesRealisticMeasurableUnderstandableQuantitative
5 Create, revise Mission Statement Statement of the purpose of the organizationDescribes the organization in terms of:CustomersProducts or servicesMarketsBasic beliefs about growth, public image, employeesRemember Hershey’s evolving Mission StatementPurpose of Mission:Communication ToolDecision-Making Tool
6 Long Term Objectives - Areas Quantitative AreasProfitabilityProductivityGrowthShareholder WealthMarket PositionTechnological LeadershipQualitative AreasReputationSocial ResponsibilityEmployees
7 Quantitative Areas Profitability Productivity Growth Net profit margin; ROI; ROEProductivityLower costs (% of sales CGS, S&A)Activity ratiosGrowthIncreases in sales, assets, net incomeCompetitive PositionMarket Share
8 Technological Leadership Shareholder WealthEPS; Dividends; Shareholder Value (stock)Industry specific metrics
9 Qualitative AreasEmployee RelationsSocial ResponsibilityReputationThese areas have long term objectives that can be measured.
10 Corporate Strategies The overall managerial game plan. How management plans to achieve mission and objectives.
15 Tools for Formulating and Choosing Corporate Strategies 1. Portfolio Analysis
16 Relative Market Share Position in the Industry The BCG MatrixRelative Market Share Position in the IndustryHigh Medium LowHighMedium 0LowStars (II)Question Marks (I)Industry Sales Growth Rate (Percent)?Cash Cows (III)Dogs (IV)
17 Industry Attractiveness GEMATRIXCompetitive Position (1. Market Share; 2. TechnologicalKnow-How; 3. Product Quality; 4. Service Network;5. Price Competitiveness; 6. Operating CostsGoodMediumPoorHighWinner???????WinnerIndustry AttractivenessMediumLoserWinnerAverageBusinessProfitProducerLoserLowLoser1. Market growth; 2. market size; 3. Capital requirements;4. Competitive Intensity
19 Advantages of Portfolio Analyses Encourages top management to evaluate each business individually; to set objectives; and consider resources.It stimulates use of external data to supplement management’s judgment.Its graphic representation makes interpretation and communication easier.
20 Limitations of Portfolio Analyses Defining product/market segments isn’t easy.Using standard strategies may miss opportunities or be impractical.Providing an illusion of scientific rigor masks the reality that positions are based on subjective judgments.Determining what makes an industry attractive isn’t always possible.
21 More Tools 2. Past Performance 3. Mission and Long Term Objectives % increase in salesContribution MarginSales or profit (gross, operating, net)Continue to do what doing3. Mission and Long Term Objectives
24 Matching Key External and Internal Factors to Formulate Alternative Strategies (Table 6-2) Resultant StrategyKey Internal Factor Key External Factor20% annual growth in the cablevision industry (an external opportunity)Excess working capacity (an internal strength)Acquire Visioncable+=Exit of two major foreign competitors from the industry (an external opportunityBuy competitors’ facilitiesInsufficient capacity (an internal weakness)+=Decreasing numbers of young adults (an external threat)Develop new products for older adultsStrong R & D expertise (an internal strength)+=Poor employee morale (an internal weakness)Strong union activity (an external threat)Develop a new employee-benefits package+=
25 The TOWS Matrix (Figure 6-3) STRENGTHS - SWEAKNESSES - WList strengthsList weaknessesOPPORTUNITIES - OSO STRATEGIESWO STRATEGIESUse strengths to take advantage of opportunitiesOvercome weaknesses by taking advantage of opportunitiesList opportunitiesTHREATS - TST STRATEGIESWT STRATEGIESUse strengths to avoid threatsMinimize weaknesses and avoid threatsList threats
26 Other Matrices Internal Factor Evaluation (IFE) p.165 External Factor Evaluation (EFE) p. 130Competitive Profile Matrix (CPM) p. 131Strategic Position and Action Evaluation (SPACE) p. 184Internal-External p. 190Grand Strategy p. 192
27 Other Tools Con’t 5. Economic Value Added (EVA) 6. Scenario Analysis 7. Game Theory8. Quantitative Decision TechniquesLinear Programming, etc.9. Computer AssistedDecision Support Systems (DSS)Artificial Intelligence (AI)
28 Behavioral Aspects/Tools Propensity for riskPersonal AgendasPersonalitiesTime PressuresReputation/IntegrityImagination/ConceptualizationsSupport/Coalitions
30 Core Competencies of the Corporation Real sources of advantage - not based on businesses.Core competencies are collective learning in the organization, especially:how to coordinate diverse production skills by integrating multiple streams of technologies.
31 Tests to identify core competencies Provide potential access to a wide variety of markets/products/services.Are difficult to imitate.Are driven by knowledge and learning.
36 Environmental Stability Financial StrengthCompetitive Advantage Industry StrengthEnvironmental Stability
37 Example Strategy Profiles (Figure 6-6) Aggressive ProfilesFSFS( +1, +5)( +4, +4)CAISCAISESESA financially strong firm with major competitive advantages in a growing industryA firm whose financial strength is a dominating factor in the industry
38 Example Strategy Profiles (Figure 6-6) Conservative Profiles FSFS(-2, +4)(-5, +2)CAISCAISESESA firm that suffers from major competitive disadvantages in an industry that has declining salesA firm with financial strength; the firm has no major competitive advantages
40 Example Strategy Profiles (Figure 6-6) Competitive ProfilesBackward, forward and horizontal integrationIntensive strategies; Joint VenturesFSFSCAISCAIS(+5, -1)(+1, -2)ESESA firm with major competitive advantages in a high-growth industryAn organization that is competing fairly well in an unstable industry
41 Example Strategy Profiles (Figure 6-6) Defensive ProfilesFSFSCAISCAIS(-5, -1)(-1, -5)ESESA firm that has a very weak competitive position in a negative growth, stable industryAn financially troubled firm in a very unstable industry