STRATEGIC Development The strategic lenses ‘The idea of looking at strategy through three lenses is an important one. Backward looking skills, knowhow and experience and these have made us successful in the past are part of our corporate memory Strategic as Ideas Strategic as Design Strategic as Experience Is using strategy at a high level, © Careful day-to-day thinking very much often top-down . + ‘Where can we be in five process of turning years?” What will the grand ideas into shape of the industry be? actions «How can we innovate? * Do we need to change * Closely associated radically? with strategy . implementation. What is important about these three lenses? |s that it would be wrong to concentrate overly on one of them. Your future strategy must guided by our past experience. * To concentrate purely on strategy as radical innovative ideas is to abandon too much the strategy gains that we have made in the past through our experience. * Similarly, there is no point in having grand ideas if we can't bring those to fruition using careful design * By the same token relying too much on experience may make us blind to innovations that are possible, and which might be forced on us by changing technology and markets. It's important for managers to keep these three views in balance to use each of the lenses when thinking about strategyStrategic Models Mendelow’s matrix Tool or mode! available for the analysis of stakeholders is Mendelow’s matrix. Two axis are used power and interest; INTEREST the amount of power a stakeholder can exercise 1ow likely a stakeholder is to take action ___High imal effort * These stakeholders have low power and low interest. Management can almost ignore these people. © After all, what are they going to do if they don't like what's happening? Keep informed Stakeholders with low power but high interest have to be kept informed. They can't do much about it themselves but they might be able to influence key players to take action on their behalf. Keep satisfied © With high power but unlikely to take action even if management does something which they dislike * Unwilling to take action because of professional or ethical reasons. For example, medical staff in hospitals are very unlikely to take industrial action * Management doesn't have to be quite as careful with these people as with the key players. * However, they have to be kept satisfied otherwise they could be provoked to take action and tum into key players Key players Stakeholders who have high power and high interest are known as key Players Management really needs to keep those people happy. They have the power and they have the willingness to do something about it f they are upset. These stakeholders can stop any strategy in its tracks.HighStakeholders can be defined as anyone affected by the organization. Its important to know who your stakeholders are and what they want because if the stakeholders are unwilling to cooperate you may find it difficult to put a strategy into action But important point to note is that most stakeholder’s wants are in conflict with one another. Example of stakeholders will include; shareholders, employees the goverment, competitors customers, local community, suppliers managers PESTEL The macro-environmental influences can be remembered by the acronym PESTEL. It stands; Political, Economic, Social, Technological, Ecological, Legal. POLITICAL Elections and change of government, war, regional trade blocks e.g. COMESA, European expansion etc. Trade and tariff barriers may restrict an organizations abilty to sell its products effectively overseas ECONOMIC INFLUENCES These are the factors that may have an influence on the organization as a result of the economic environment. + Interest rates + Exchange rates + Inflation SOCIAL INFLUENCES. The effect of social influences on the organization can be broken down into 2 major categories:- 4. Demographic This refers to the statistics of birth, death and disease and their impact on communities. Ifthe birth rate increases this will offer an opportunity to companies, which sell baby products. 2. Lifestyle trends These are trends, which relate to how people live, their life and what they spend their money ‘on. The impact on a company can be huge. In the telecommunications market we have seen a big increase in people using mobile phones and the Intemetis also increasingly popularTECHNOLOGICAL INFLUENCES This refers to ways of getting things done - new scientific inventions and developments Technological factors can influence the organization in a number of ways: () the type of products that are made or sold (ii) The way in which products are made (ii) The way in which markets are identified: (iv) Information technology provides better quality information about markets and how they are moving. Ifyou have the technology and your competitors don't it provides a major opportunity for the company and visa versa. Legal Health and safety legislation, equality legislation, regulation of industries Industry Convergence Over time industries can converge together to form one, large industry. Example is in airline industiey which now offer car hire, hotels and insurance Two types of convergence 1. Supply-led: Where producers try to see connections btwn separate industries or sectors. E.g, supermarkets offering banking 2. Marketted: Where buyers see or want connections btwn separate industries or sectors. Eg. Customers in a book store also wanting to browse CDs and DVDs. PORTER'S FIVE FORCES MODEL The use of Porter's five forces model will help identify the sources of competition in an industry or sector. The model has similarities with other tools for environmental audit, The model should be used at the level of the strategic business unit (SBU), rather than the organization as a whole, Astrategic business unit (SBU) is a part of an organization for which there is a distinct external market for goods or services. {twill answer the following questions; 1. Why does a nation become the home base for successful international competitors in ana industry? Eg Germany car manufacture, Japan = consumer electronics 2. Why the firm based in particular nation able to create and sustain competitive advantage against the worlds best competitors in particular field? 3. Why is one country often the home of so many of an industrys world leaders?Factors conditions — looks at natural advantages. Eg. France wine industry because of its Climate and soil, Germany - abundance of of iron ore use in car Industry Demand conditions ~ If home indusiry market is demanding good quality products/services its easy to develop into global presence Firms strategy,structure and rivalry - To be a world beating you have to be really good at Home and this home excellence will allow you to compete against the the best of the world. Rivaly will allow intense competition amongst home players making easy to adopt on international level Related and supporting industries- Successful industries often enjoy the benefits arising f from a cluster of related and supporting industries. Value Chain Analysis Value Chain is a model which helps us break down the business cycle into strategic activities that add value to a product or service. The analysis will help in; © Identify where costs are too high, or are reasonable e Understand where and how differentiation from competitors can be achieved. ° Identification of critical success factorsHuman Resource Management Technology Development Procurement & | Inbound — | Operations Outbound Marketing & | Service w logistics Logistics | Sales Primary activities 1 2 3. 4. 5. Inbound Logistics - involve relationships with suppliers and include all the activities required to receive, store, and disseminate inputs. Operations - are all the activities required to transform inputs into outputs (products and services). Outbound Logistics - include all the activities required to collect, store, and distribute the output. Marketing and Sales - activities inform buyers about products and services, induce buyers to purchase them, and facilitate their purchase. Service - includes all the activites required to keep the product or service working effectively for the buyer afer itis sold and delivered. Secondary activities are: 1 Procurement - is the acquisition of inputs, or resources, for the firm. 2. Human Resource management - consists of all activities involved in recruiting, ss hiring, training, developing, compensating and (if necessary) dismissing or laying off personnel Technological Development - pertains to the equipment, hardware, software, procedures and technical knowledge brought to bear in the firm's transformation of inputs into outputs Infrastructure - serves the company’s needs and tes its various pars togeter, it consists of functions or departments such as accounting, legal, finance, planning, public affairs, government relations, quality assurance and general management. Supply chain can be divided into; 1. Upstream Supply chain- flow of materials into the organization 2. Downstream Supply chain- flow of materials from the organization to customersBoston Consulting Group (BCG Matrix} Evaluate the strategic position of the business brand portfolio and its potential. Uses four categories based on industry attractiveness (growth rate of that industry) and competi 1n (relative market share) ‘The general purpose of the analysis is to help understand, which brands the firm should invest in and which ones should be divested. An organization should have a balanced portfolio Hake Market Growth Low Stars Question Marks © Attractive Mkt © Attractive mkt but too « Reinvest heavly to ‘small to capitalize defend mkt share & « Either invest heavily to growth gain mkt share or get out © Little cash surplus Bouble or quit “4 * a Cash Cows Dogs 1 * Too small to benefit from YZ} © Strong position in low ‘ecomonies of scale = growth(unattractive) ‘© Mkt does not justify further e mkt investment © Little threat from © Divest rivals ‘© Just keep the product | ticking over and | collect the cash | daa Key Assumption: Higher an organization market share = higher profits & lower its costs due to Economies of scale, improved bargaining power and the experience curveFunding strategies using the BCG Matrix Stars e High growth © High business risk Use some retained eamings & new equity for investors seeking growth High reinvestment rate so medium dividends ‘Question Marks © High growth rate © Very high business risk Use equity from venture capital © Low or zero dividends in ‘the short term Cash Cows * Low growth ¢ Medium business risk © Use retained earnings & debis if necessary Large net cash fiows to support dividends low growth low business risk Use debt until divest Zero investment rate so high dividend Problem child (A) Stars (B) Cash Cows (C) Dogs Product movement (product life cycle): A to B then C Cash movement: C to B or ABenefits of the matrix: + Easy to perform; + Helps to understand the strategic positions of business portfolio; + It's a good starting point for further more thorough analysis. Criticism of the BCG matrix: The matrix uses only 2 measures Encourages companies to adopt holding strategies implies that the most profitable markets are those with high growth Implies that only those with large markets share should remain TOWS analysis TOWS analysis is method of the strategic analysis process, involving systematic and comprehensive assessment of external and internal factors that determine current competitive position and growth potential of the company Closely associated with SWOT analysis Strengths (S) Weakness (W) Opportunities (O) Examine strategies that | Examine strategies that use strengths to make use | take advantage of of opportunities (SO) opportunities by overcoming/avoiding weakness (WO) Threats (T) Examine strategies that —_| Examine strategies that use strengths to overcome | minimize the effects of or avoid threats (ST) | weaknesses and avoid/overcome threats (WT) TOWS Analysis Steps © Identification of opportunities and threats © Identification and analysis of strengths and weaknesses © Determination of strategic position and directions of business developmentAnsoff Model The model, also called the Product/Market Expansion Grid. It shows four different growth options for businesses as they match " and services with existing and new markets" xisting and new products This looks at growth strategies as the market matures Existing Products New Products Existing Markets Market Penetration/Growth Introduce a new/improved competitive strategy Best used when mkt is growing Key risks Competitors will react Can lead to stagnation Product development © Create newlimproved products + Orcopy rivals Key risks 1, Unknown demand 2. Can harm existing products New Markets Market development Finding new markets for existing products Examples could be new segments in current mits( eg. New age groups or overseas markets Key risks Need a news external analysis Diversification Vertical, Horizontal,Conglomerate Moving away from existing core activities and offer a new product to a new customer Key risks Combines the risks of product and market development Need good corporate parenting stillscS Puts a strain on existing strategic capabilities Four different strategies . Market Penetration. Using this strategy, businesses penetrate current markets for current customers by more effectively marketing their existing products or services through "promoting the product, repositioning the brand, and soon" , Market Development. Using this strategy, businesses introduce a current product into a brand new market by introducing it to a brand new audience. Product Development. Using this strategy, businesses market new products to their customer base that already exists. One example of product development would be "when existing models are updated or replaced and then marketed to existing customers". Both the technology and automobile industries use product development frequently. . Diversification. Using this strategy, businesses market brand new products to brand new customers. Weakness of Ansoff Matrix One weakness of the Ansoff Matrix concerns the fact it does not take into account forces external to a market that can drive a market regardless.