The Concept of Strategy and Strategy Development

The Concept of Strategy and Strategy Development Management Level – Paper E2 Project and Relationship Management Lecture - 001 VidyaRajawasam ACMA CGMA MBA

CIMA – Managerial Level - The Concept of Strategy What is Strategy? Understanding Strategy can be a quite difficult idea grasp. • Strategy defines higher direction of an organization, • Focuses on desired outcome of an organization’s activities, • Basically strategy tells you how to move from current state to desired objectives.

CIMA – Managerial Level - The Concept of Strategy The CIMA Definition CIMA defines Strategy as • a course of action, • Including the specification of resources required, • to achieve a specific objective. • Strategic Plan; statement of long term goals • with a definition of Strategies & Policies, • which will ensure achievement of these goals.

CIMA – Managerial Level - The Concept of Strategy Common themes in Strategy • Purpose and direction is long term, • Scope is based on organizations’ activities, • Meeting the challenges of the external environment, • Effective use of internal resources and competencies • Creating value for stakeholders.

CIMA – Managerial Level - The Concept of Strategy Henri Mintzberg’s 5 Ps of Strategy • Plan; Strategy as a plan, a direction or a path to get from here to there. • Pattern; consistent behavior over time, a logical activity pattern. • Ploy; a maneuver in a competitive business activity. • Position; strategy as a position, placing the organization in particular market. • Perspective; how an organization views and solves business issues.

CIMA – Managerial Level - The Concept of Strategy Peter Drukers’ fundamental questions related to strategy • What is the company’s mission? • What are the company’s plans? • Who are the company’s customers? • What is valued by our customers? • What are our results?

CIMA – Managerial Level - The Concept of Strategy Three levels strategy Strategy occurs at various levels in the organization. • Corporate Strategy • Business Strategy • Functional / Operational Strategy

CIMA – Managerial Level - The Concept of Strategy Corporate Strategy Focuses on determining the overall business purpose and the scope of the organization. The common issues are; • Mergers/acquisitions of businesses • Setting up/Sale/Closure of Strategic Business Units • Relationships with external stakeholders • Decisions to enter new markets • Decisions to embrace new technologies. • Development of corporate policies.

CIMA – Managerial Level - The Concept of Strategy Business Strategy Focuses on how Strategic Business Unit approaches a specific market. The Competitive strategies are formulated at this level. The common issues are; • Product development, pricing, promotion & distribution. • Segmentation of Markets • Decisions regarding specialization in profitable market segments.

CIMA – Managerial Level - The Concept of Strategy Functional/Operational Strategies Focuses on how to strategize main business functions. The common issues are; • Formulation of Long term management policies for functional areas. • Intended to ensure each functional area supports the SBU to achieve Business/Corporate Strategies.

CIMA – Managerial Level - The Concept of Strategy Rational Approach to Strategy Development. Strategy Development/Formulation process is based on strategic planning. What is a strategic plan? • Statement of long term goals • With definition of Strategies & Policies, • which will ensure achievement of desired goals/objectives.

CIMA – Managerial Level - Strategy Development Rational Approach to Strategy Development. The Rational approach is also known as traditional, formal or top-down approach. The rational approach is based on rational behavior. Where by the planners, management and the organization are expected to behave in a logical step by step manner.

CIMA – Managerial Level - Strategy Development The logical step by step approach; • Determinationof Mission of the organization. • Settingup Corporate objectives • Carrying out Corporate appraisal (SWOT), analysis of internal and external environments. • Generating strategic options

CIMA – Managerial Level - Strategy Development The logical step by step approach; • Evaluatingstrategic options, selection of strategies to achieve competitive advantage, exploiting opportunities/ strengths and minimizing threats/weaknesses. • Implementingchosen strategies. • Review and control, reviewing performance to determine achievement of goals/objectives and taking corrective action.

CIMA – Managerial Level - Strategy Development The logical step by step approach;

CIMA – Managerial Level - Strategy Concept Review MCQ In strategic thinking, how long is the long term, approximately? • A week to a month • 1 to 12 months • 1 to 5 years • More than 5 years • None of these Any of these

CIMA – Managerial Level - Strategy Concept Review MCQ The goal of the organization's ____ is to capture the hearts and minds of employees, challenge them, and evoke their emotions and dreams. a. vision b. mission c. culture d. strategy

CIMA – Managerial Level - Strategy Development Vision, Mission, Goals and objectives; Vision Statement, • Describes the preferred future status. • Should describe organizations’ values. • Should be concerned with the whole organization. • Should resonate with both employees and those outside the organization.

CIMA – Managerial Level - Strategy Development Vision, Mission, Goals and objectives Mission Statement, • Should describe the purpose of organizations’ existence, • Provides basis for consistent planning decisions. • Should translate the purpose and direction into objectives which can be assessed and controlled. • Should inspire support and ongoing commitment.

CIMA – Managerial Level - Strategy Development Vision, Mission, Goals and objectives Goals, • Goals are the intentions behind the organizations decisions and actions. • Goals are more specific than Vision and Mission and have shorter timelines. • Goalsare not frequently achieved and there are difficulties in measuring them. • Goalsdoes not have precise measures to measure performance.

CIMA – Managerial Level - Strategy Development Vision, Mission, Goals and objectives Objectives, • Objectives can be defined as the goals that can be measured. • Objectives correspond with target/s to be achieved. • Objectives sets the timelines for achieving desired intentions. • Setting up objectives can follow ‘SMART’ criteria.

CIMA – Managerial Level - Strategy Development Corporate Appraisal (SWOT) The Corporate appraisal provides the framework for internal and external analysis • Internal analysis focuses on strengths and weaknesses of the organization. • External analysis focuses on opportunities and Threats faced by the organization. • Analytical tools used in internal analysis are; Resources Audit and Porters Value Chain. • Analytical tools used in external analysis are; PESTEL and Porters Five Forces

CIMA – Managerial Level - Strategy Development Strategic options Evaluation & Choice The strategic analysis provides the basis for strategic options generation. Strategic evaluation process focuses on identification and evaluation strategic options generated and finding alternative courses of action. The strategic evaluation process leads to Strategic choice and Strategic direction.

CIMA – Managerial Level - Strategy Development Strategic Direction – Ansoff Matrix

CIMA – Managerial Level - Strategy Development Strategy Implementation Focuses on drawing up detail plans, policies and programs necessary to make the strategy work. They are commonly known as tactical and operational plans and decisions. • Tactical programs and decisions have medium term timelines. Related to developing new products, recruitment and investment in new capacity. • Operational programs and decisions cover day to day activities. Meeting production targets, cost & revenue targets etc..

CIMA – Managerial Level - Strategy Development Review and Control This is the last step in the rational approach to strategy development process. This is a continuous process that needs to be reviewed continuously. • Does the performance of the strategy helped the business to achieve the strategic objectives? • Are the forecasts related to the environment is still accurate or are there any unforeseen opportunities and threats have arisen subsequently?

CIMA – Managerial Level - Strategy Concept Review MCQ A firm's missiona. is a statement of a firm's business in which it intends to compete and the customers which it intends to serve.b. is an internally-focused affirmation of the organization's financial, social, and ethical goals. c. is mainly intended to emotionally inspire employees and other stakeholders. d. is developed by a firm before the firm develops its vision.

CIMA – Managerial Level - Strategy Concept Review MCQ Competitive rivalry has the most effect on the firm's ____ strategies than the firm's other strategies. a. business-level b. corporate-level c. acquisition d. international

The Concept of Strategy and Strategy Development Management Level – Paper E2 Project and Relationship Management Lecture - 001 VidyaRajawasam ACMA CGMA MBA

The Concept of Strategy and Strategy Development