1. Strategic Choices 10: Strategy Methods and Evaluation

2. Learning Outcomes
Identify the methods by which strategies can be pursued: organic development, mergers and acquisitions, and strategic alliances
Employee three success criteria for evaluating strategic options: suitability, acceptability, and feasibility
Use a range of different techniques for evaluating strategic options
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3. Exhibit 10.1 Strategy Methods and Evaluation
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4. What is a Strategic Method?
A strategic method is the means by which a strategy can be pursued.
Organic
development
Mergers and
acquisitions
Strategic
alliances
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5. What is Organic Development?
Organic development is where strategies are developed by building on and developing an organisation’s own capabilities.
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6. Reasons for Using Organic Development
Highly technical products
Knowledge and capability development
Spreading investment over time
Minimising disruption
Nature of markets
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7. What are Mergers and Acquisitions?
A merger is a mutually agreed decision for joint ownership beween organisations
An acquisition is where an organisation takes ownership of another organisation
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8. Environmental Motives for Acquisitions and Mergers
Speed of entry
Competitive
situation
Consolidation
opportunities
Financial
markets
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9. Capability Motives for Acquisitions and Mergers
Exploitation of
strategic capabilities
Cost efficiency
Obtaining new
capabilities
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10. Stakeholder Expectations for Acquisitions and Mergers
Institutional
shareholder
expectations
Managerial
ambition
Speculative
motives
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11. Issues Affecting Success of Acquisitions and Mergers
Can value be added to acquisition?
Can the commitment of middle managers be gained?
Will expected synergies be realised?
Are there problems of cultural fit?
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12. What is a Strategic Alliance?
A strategic alliance is where two or more organisations share resources and activities to pursue a strategy.
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13. Motives for Strategic Alliances
Need for critical mass
Co-specialisation
Learning
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14. Types of Alliances Joint ventures Franchising Consortia Licensing
Networks
Subcontracting
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15. Exhibit 10.3 Types of Strategic Alliance
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16. Success Criteria of Strategic Options
Feasibility
Suitability
Acceptability
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17. Exhibit 10.4 Strategic Options
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18. Evaluation Tools for Assessing Suitability
TOWS Matrix
Relative suitability of options
Ranking strategic options
Decision trees
Scenarios
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19. Assessing Acceptability
Return
Profitability
Cost-benefit
Real options
Shareholder value analysis
Risk
Financial ratios
Sensitivity analysis
Stakeholder reactions
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20. Exhibit 10.8 Assessing Profitability: Return on Capital Employed
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21. Exhibit 10.8 Assessing Profitability: Payback Period
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22. Exhibit 10.8 Assessing Profitability: Discounted Cash Flow
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23. Exhibit 10.10 Measures of Shareholder Value
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24. Stakeholder Reactions
Financial restructuring
Acquisitions/Mergers
New business model
Use Eurotunnel, begin at 2:50 and go to 3:33 (section on banks and financial needs)
Outsourcing
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25. Case Example: Tesco
Using Exhibit 7.2, identify the development directions that Tesco had followed from its origins as a UK-based grocer retailer
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