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business strategy 51110

2. Module 9 Strategy evaluation

Audrey
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business strategy 51110

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    1. 1 BUSINESS STRATEGY 51110 / MKT3002 LECTURE Nine: Topic 9: Strategy evaluation and selection

    2. 2 Module 9Strategy evaluation & selection Learning outcomes Define suitability, acceptability & feasibility Understand how suitability can be tested Explain the strengths & limitations of various methods of screening options Explain the different approaches to assessibility Undertake an assessment of of feasibility of strategy; and understand the different processes of strategy selection

    3. 3 Key words and concepts Suitability Establishing the rationale Life cycle analysis Positioning Value chain analysis Portfolio analysis Business profile analysis Screening options Acceptability Feasibility Formal evaluation Enforced choice Learning from experience Command

    4. 4 Introduction

    5. 5 Assessing suitability

    6. 6 1. Establishing the rationale Does it exploit external opportunities and avoid threats? Does it capitalise on internal strengths and core competencies and overcome weaknesses? Does it address the cultural and political context? 5 rationale based techniques to assess suitability

    7. 7 Testing suitability

    8. 8 A. Life cycle analysis Life cycle analysis: ‘assesses whether a strategy is likely to be appropriate given the stage of the product life cycle’. (Johnson & Scholes 1999, p. 356)

    9. 9 Life cycle analysis (Cont) Eight determinants of the product life cycle stage: Market growth rate; Growth potential; Breadth of product lines; Number of competitors; Spread of market share between competitors; Customer loyalty; Entry barriers; and Technology. Suitability of strategies is therefore assessed by the stage in the lifecycle and the firm’s position in the industry

    10. 10

    11. 11 B. Positioning – viable AND sustainable? How viable is the current and future positioning strategy: Demand, is it likely to grow or decline? Need to assess the uniqueness of the competences which underpin the value-added features Determine which of these will contribute to either cost reduction OR value adding Then establish how easy these are to copy Is the resource or competence VALUED? Is it RARE Is it COMPLEX (and difficult to copy) Is it TACIT (embedded in organisation)

    12. 12 C. Value chain analysis Value chain analysis: ‘describes the activities within and around an organisation and relates them to an analysis of the competitive strength of the organisation’. (Johnson & Scholes 1999, p. 360)

    13. 13 Value chain analysis (Cont) The strategy will reconfigure the value chain in a way which improves value for money and the competitive position of the organisation. Synergy must be the result of re-configuration an assessment of the benefit which can be gained by linking activities in new ways What is core business (product, market or competences)? Must fit parenting style and add value to the firm

    14. 14 D. Portfolio analysis Portfolio analysis: ‘analyses the balance of an organisation’s strategic business units’. (Johnson & Scholes 1999, p. 362)

    15. 15 E. Business profile analysis Business profile analysis: ‘shows the extent to which a strategy matches the favourable performance parameters from PIMS analyses’. (Johnson & Scholes 1999, p. 362) Look at illustration 8.2 for more info The degree of ‘correctness’ in determining your strategic options and methods will be validated or confounded through this technique (and the others of course) Drivers of profitability are interconnected with drivers of competitive advantage Reputation for quality may necessitate lower profit margins AND the strengthening of this image may necessitate further capital expense, thus lowering profits. If other parameters are also low then should you do it?

    16. 16 2. Screening options Screening: ‘the process of comparing the relative merits of different strategies’. (Johnson & Scholes 1999, p. 364) This process includes: Ranking; The use of a decision tree; and Scenario development. QPSM

    17. 17 Gap analysis

    18. 18 A. Ranking Ranking: ‘a systematic way of analysing specific options for their suitability or fit with the factors arising from strategic analysis’. (Johnson & Scholes 1999, p. 367)

    19. 19 B. Decision trees Decision tree: ‘ranks options by progressively eliminating others’. (Johnson & Scholes 1999, p. 367)

    20. 20 C. Scenario planning Assessing an organisation’s environment in conditions of high uncertainty. Matching strategic options to the possible future scenarios. Outcomes: Preferred option for each possible future scenario. A series of contingency plans. Continually monitor the changing business environment – adopt appropriate options as required.

    21. 21 D. QPSM Similar to ranking but adds all the weightings and ratings of the tows together (csf) as a way of determining which alternative will; Best utilise strengths Overcome effect of weaknesses Take advantage of opportunities Minimise the threats

    22. 22 Analysing acceptability

    23. 23 Analysing return Three different assessments: Profitability analyses Forecasting the return on capital employed; Payback period; and Discounted cash flow. Cost-benefit analysis Shareholder value analysis.

    24. 24 Analysing risk Financial ratio projections. Ability to assess the level of risk involved (eg. An extension of long-term loans will increase financial risk). Sensitivity analysis. Assist in making particular strategic decision and increases the degree of confidences. Simulation modelling.

    25. 25 Analysing feasibility Feasibility: ‘concerned with whether an organisation has the resources and competences to deliver a strategy’. (Johnson & Scholes 1999, p. 383) Analytical approaches to assess feasibility. Resource Funds flow analysis. Break-even analysis. Resource deployment analysis.

    26. 26 Selection of strategies Four approaches to the selection of strategies. The planned approach: formal evaluation; Enforced choice; Learning from experience; and Command.

    27. 27 Processes for selecting strategies

    28. 28 Lecture 9 review Suitability. Accessibility. Feasibility. Selection of strategies.

    29. 29 Next week Module 10: Organisational structure and design (Study book: Module 10 - Text Chapter 9)

    30. 30 Next week’s tutorial Assignment preparation.

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