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Strategic Choices 10: Strategy Methods and Evaluation

Strategic Choices 10: Strategy Methods and Evaluation. Learning Outcomes. Identify the methods by which strategies can be pursued: organic development, mergers and acquisitions, and strategic alliances

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Strategic Choices 10: Strategy Methods and Evaluation

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  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 10-2

  3. Exhibit 10.1 Strategy Methods and Evaluation 10-3

  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 10-4

  5. What is Organic Development? Organic developmentis where strategies are developed by building on and developing an organisation’s own capabilities. 10-5

  6. Reasons for Using Organic Development • Highly technical products • Knowledge and capability development • Spreading investment over time • Minimising disruption • Nature of markets 10-6

  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 10-7

  8. Environmental Motives for Acquisitions and Mergers Speed of entry Competitive situation Consolidation opportunities Financial markets 10-8

  9. Capability Motives for Acquisitions and Mergers Exploitation of strategic capabilities Cost efficiency Obtaining new capabilities 10-9

  10. Stakeholder Expectations for Acquisitions and Mergers Institutional shareholder expectations Managerial ambition Speculative motives 10-10

  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? 10-11

  12. What is a Strategic Alliance? Astrategic allianceis where two or more organisations share resources and activities to pursue a strategy. 10-12

  13. Motives for Strategic Alliances Need for critical mass Co-specialisation Learning 10-13

  14. Types of Alliances Joint ventures Franchising Consortia Licensing Networks Subcontracting 10-14

  15. Exhibit 10.3 Types of Strategic Alliance 10-15

  16. Success Criteria of Strategic Options Feasibility Suitability Acceptability 10-16

  17. Exhibit 10.4 Strategic Options 10-17

  18. Evaluation Tools for Assessing Suitability • TOWS Matrix • Relative suitability of options • Ranking strategic options • Decision trees • Scenarios 10-18

  19. Return Profitability Cost-benefit Real options Shareholder value analysis Risk Financial ratios Sensitivity analysis Stakeholder reactions Assessing Acceptability 10-19

  20. Exhibit 10.8 Assessing Profitability: Return on Capital Employed 10-20

  21. Exhibit 10.8 Assessing Profitability: Payback Period 10-21

  22. Exhibit 10.8 Assessing Profitability: Discounted Cash Flow 10-22

  23. Exhibit 10.10 Measures of Shareholder Value 10-23

  24. Stakeholder Reactions Financial restructuring Acquisitions/Mergers New business model Outsourcing 10-24

  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 10-25

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