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The Strategy Formulation Process

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Presentation on theme: "The Strategy Formulation Process"— Presentation transcript:

1 The Strategy Formulation Process
Analytical Tools to Support the Strategy Formulation Process (c) Macmillan & Tampoe 2001

2 ‘Thinking’ Tools for Strategists
Intellectual frameworks e.g., Porter’s five forces model Value and supply chain models Structured Approaches e.g., SWOT analysis Scenario Planning Encoded Logic as Software Statistical techniques to test hypotheses and strength of feeling & relationships (c) Macmillan & Tampoe 2001

3 Models as Analytical Tools
Intellectual Frameworks Situational Analysis Simulations (c) Macmillan & Tampoe 2001

4 Intellectual Frameworks - Models
Models represent reality as understood by the model builder Models identify the main and secondary influencers associated with an issue Models represent the inter-relationships and interactions of these influences Once built and validated the model helps assess the results of different actions and events (c) Macmillan & Tampoe 2001

5 Situational Analysis Models that derive the relationships based on the data presented e.g., neural networks, data envelopment analysis Benefits are that findings are based on data rather than on preconceptions Risks are that conclusions must be drawn from the results by experienced analysts who have a good understanding of the issues (c) Macmillan & Tampoe 2001

6 Simulations Models that imitate real life
Simulations have deterministic and random elements Real value derived from testing for the bizarre ideas Helps in the learning process where practical experience is limited E.g., expert systems, heuristic models (c) Macmillan & Tampoe 2001

7 Strategy Software - Benefits
Makes using the intellectual frameworks easier The encoded logic is a ‘true’ representation of accepted theory Useful for those who understand but are not experts in the area Facilitates far greater analysis and what if testing (c) Macmillan & Tampoe 2001

8 Strategy Software - Risks
Accepting answers without validating the encoded logic Invalid inputs and assumptions Over-modeling because it can be done more easily ‘working the figures’ to get the desired answer (c) Macmillan & Tampoe 2001

9 Categories of Software
Strategic Modeling Strategic Thinking Database Analysis Knowledge Transfer Expert Systems Decision Support Systems (c) Macmillan & Tampoe 2001

10 Application of Strategy Support Tools
New business, new venture, merger and acquisition analysis Assessment of risks and rewards Assessment of trends in industry, economy Assessing effects of alternative strategies Evaluating competitors Assessing strengths of opinion and relationships Modeling cost structures of organisations 1. The straightforward view of competitive strategy is that it is about beating the competition to the customer. 2. Kenichi Ohmae offers the above diagram of the Strategic Triangle - the three C’s. 3. Note how the company competes on cost and in offering value to the customer. 4. Note how the pool of potential customers may itself be segmented and so different competitors may compete for different segments. 5. Bear Hunting Story (c) Macmillan & Tampoe 2001

11 Choosing Strategy Software
Look for: Quality of documentation, training and help Reliability of encoded logic and repeatability Longevity of software and vendor Functionality - too much is as bad as too little Interfaces with other applications, compatibility with the Web, and data exchange Commercial terms and conditions Intellectual property of results (c) Macmillan & Tampoe 2001

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