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Developing Strategic Alternatives: Presented by Tamha Fatima 18366
Developing Strategic Alternatives: Presented by Tamha Fatima 18366
CHAPTER 6
STRATEGIC STRATEGIC
THINKING FORMULATION
STRATEGIC
PLANNING
STRATEGIC THINKING
It involves an awareness of the environment; intellectual
curiosity that is always gathering, organizing, and analyzing
information; and a willingness to be open to creative ideas
and solutions.
STRATEGIC PLANNING
It concerns reaching conclusions about the information,
setting a course of action, and documenting the plan.
Therefore, strategic planning is essentially decision making
– formative which from among the many available
alternatives the organization will pursue.
STRATEGIC FORMULATION
• It incorporates the broadest decisions that set direction and
provide the fundamental strategy for the organization
• It also includes development of strategic alternatives,
evaluation of alternatives, and strategic choice.
Strategic Strategic
Evaluation
Alternatives Choice
• Threat • Strength
• Opportunities • Weaknesses
CHECKLIST PROCEDURE IS AN IMPORTANT PART OF
STRATEGIC THINKING
• Adaptive Strategies
• Competitive Strategies
• Implementation Strategies
The first four of these strategy types make up strategy formulation and set the fundamental
direction for the organization to achieve its mission and vision. Strategic momentum includes
implementation strategies and will set specific objectives for various units to accomplish the
organization’s strategic goal.
Directional Strategies
The organization must first establish its mission, vision, values, and
strategic goals. These decisions set the direction for the
organization and are referred to as directional strategies.
ADAPTIVE STRATERGY
• Diversification
• Vertical Integration These strategies are
• Market Development more specific than
Expansion Of Scope • Product Development
• Penetration
directional strategies
and provide the primary
methods for achieving
• Divestiture the vision of the
• Liquidation organization – adapting
• Harvesting
Contraction Of Scope • Retrenchment
to the environment.
These strategies
determine the scope of
the organization and
• Enhancement specify how the
• Status Quo
organization will expand
Maintenance Of scope, contract scope,
Scope
or maintain scope.
EXPANSION OF SCOPE
Diversification
It is a corporate strategy to enter into a new market or
industry which the business is not currently in, whilst also
creating a new product for that new market.
There are two types of diversification:
Related: An organization chooses to enter a market
that is similar or related to its present operations.
Unrelated: An organization chooses to enter a market
that is unlike its present operations .
Vertical Integration
A vertical integration strategy is a decision to grow
along the channel of distribution of the core
operations. Thus, a health care organization may grow
toward suppliers or toward patients.
Product Development
Product development is the introduction of new
products/services to present markets (geographic and
segments).
Example: The area of women’s health. Many hospitals have
opened clinics designed to serve the special needs of women in
the present market area.
Penetration Strategy.
An attempt to better serve current markets with current
products or services is referred to as a market
penetration strategy.
Example: A market penetration strategy is typically
implemented by marketing strategies such as
promotional, distribution, and pricing strategies, and
often includes increasing advertising, offering sales
promotions, increasing publicity efforts, or increasing the
number of salespersons.
CONTRACTION OF SCOPE STRATERGY
LIQUIDATION:
Involves selling the assets of an organization. Common
reasons for pursuing a liquidation strategy include bankruptcy,
the desire to dispose of nonproductive assets, and the
emergence of a new technology that results in a rapid decline
in the use of the old technology.
HARVESTING:
It is selected when the market has entered long-term
decline. The reason underlying such a strategy is that the
organization has a relatively strong market position but
industry-wide revenues are expected to decline over the
next several years. Therefore the organization will “ride the
decline,” allowing the business to generate as much cash
as possible. However, little in terms of new resources will be
invested. In a harvesting strategy, the organization attempts
to reap maximum short-term benefits before the product or
service is eliminated.
RETRENCHMENT:
A response to declining profitability, usually brought about
by increasing costs.
MAINTAINANCE OF SCOPE STRATERGIES
ENHANCEMENT:
When management believes that the organization is progressing toward its
vision and goals but needs to “do things better,” an enhancement strategy may
be used; neither expansion nor contraction of operations is appropriate but
“something needs to be done.”
STATUS QUO:
It is based on the assumption that the market has mature and periods of
high growth are over. Often, the organization has secured an acceptable
market share and managers believe the position can be defended against
competitors. In a status quo strategy, the goal is to maintain market share.
MARKET ENTRY STRATERGIES
Purchase Strategies:
Acquisitions : entry strategies to expand through the purchase
of an existing organization, a unit of an organization, or a
product/service
Licensing: Acquiring a technology or product through licensing
may be viewed as an alternative to acquiring a complete
company.
Venture capital investments : offer an opportunity to enter or “try
out” a market while keeping risks low. Typically, venture capital
investments are used to become involved in the growth and
development of a small organization that has the potential to
develop a new or innovative technology.
Co-operation Strategies:
Mergers: are similar to acquisitions. In mergers, however, the
two organizations combine through mutual agreement to
form a single new organization, often with a new name.
Combination strategies
Are often used, especially in larger complex organizations,
because no single strategy alone may be sufficient.
For example an organization may concurrently divest itself of
one of its divisions and engage in market development in
another. Perhaps the most frequent combination strategy for
hospital based systems has been vertical integration through
acquisition and alliances combined with market development
through acquisition (horizontal integration).
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