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Factors Influencing Strategic Choice

Factors Influencing Strategic Choice. Environmental Constraints Internal Environment Value system in Decision making Influence of Past Strategy Reaction of Competitors Availability of Information. Focusing on Strategic Alternatives.

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Factors Influencing Strategic Choice

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  1. Factors Influencing Strategic Choice • Environmental Constraints • Internal Environment • Value system in Decision making • Influence of Past Strategy • Reaction of Competitors • Availability of Information

  2. Focusing on Strategic Alternatives The first thing to be done in making a final strategic choice is to identify all the alternatives available. One should consider only those alternatives which are relevant and feasible. While focussing on alternatives, Gap Analysis is helpful.

  3. Gap Analysis Gap Analysis examines the current position of a firm in terms of operational performance and the targets set to be achieved. The emphasis is to find out whether an end that has been established is likely to be achieved by the existing strategy. If the answers is one then one should continue with the present strategy, if the answer is no then some other alternative may have to be decided. There may be a gap between what the organisation’s mission suggests and what it achieves. The analysis of this gap will bring out various alternatives through which the gap can be fulfilled.

  4. GAP Strategic Parameter Time Horizon

  5. Evaluation of Strategic Alternatives After Identifying various strategic alternatives, the next step will be to evaluate the alternatives. The pros and cons of every alternative are discussed before coming to final conclusion. For evaluating the alternatives, portfolio analysis is adopted.

  6. Portfolio Analysis This analysis is adaptable to multi product market firms in which each product/market is managed as a separate business or profit centre and the firm is not dominated by single product/market. Portfolio Techniques are as follows-: • BCG Growth-Share Matrix • GE Nine-Cell Planning Grid • Profit Impact Market Strategy Model • Product/Market Evolution Matrix • Directional Policy Matrix • Strategic Position and action evaluation.

  7. BCG-Growth Matrix It was developed by Boston Consulting Group of USA, taking two dimensions market growth rate and relative market share of organisation. Market Share Market Growth Rate

  8. Stars- These businesses in BCG Matrix, in rapidly markets with large market shares. Stars represent the best long-run growth and profitability in the firm’s portfolio. • Cash Cows- High Market share businesses in maturing, low-growth market industries. Since theses businesses have strong positions and require minimal reinvestments for growth, they after generate cash in excess of their needs. • Question Mark Business-: They have high growth rate and low market share. They require large investments and the cash generated by theses businesses are low because of low market share. • Dogs-They have weak position with no growth rate and low market share. Theses businesses are managed for short-term cash flow to fulfil resource needs.

  9. GE NINE-CELL PLANNING GRID This technique revolves around two basic points-: • It has considered a number of factors in assessing the industry attractiveness and business strength. • GE grid considers three degrees of a dimensions- high, medium and low.

  10. Business Strength Industry Attractiveness Orange-Insert/ Expound Purple-Select/ Earn Green-Harvest/ Divest

  11. Invest/ Expand-: In the extreme left both high and this is an ideal situation in growth. Out of the other two cells, high attractiveness and average strength, an organisation may grow while at medium attractiveness and high strength business can generate competitive advantage. • Select/Earn-: Cell with high attractiveness and weak business strength shows scope to earn in future, Cell with medium strength and average attractiveness shows earn profits with present level capacity. While strong strength and low attractiveness leaves no or very scope of earnings. • Harvest/Divest-: Cells with average strength and low attractiveness & weak strength and low attractiveness are fit for harvesting while cell with medium attractiveness and weak strength suggests slow divesting.

  12. Implementation of Strategy Implementation involves following major aspects-: 1. Structural Considerations 2. Organisational Leadership 3. Resource Allocation 4. Planning and Control System for Implementing Strategy.

  13. 1.Structural Considerations • Entrepreneurial Structure-: Owner • Simple Structure-: Small Organisation • Functional structure-: Different Departments • Divisional Structure-: Diversified Products • Strategic Business Unit-: Separate Unit to concentrate on Single product. • Matrix Organisation-: Dual Channels of Command. • Team Based Structure-: Team is responsible for quality of products or services. • Virtual Organisation-: A temporary alliance where two or more organisation join hands to undertake specific venture.

  14. 2. Organisational Leadership Role of Leadership in Strategy Implementation • Introducing Change • Integrating Conflicting Interest • Developing Motivation System • Setting Organisation Climate • Leadership Development

  15. 3. Resource Allocation-: The needs are matched with the availability of resources. • 4. Planning and Control System for implementing strategy

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