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Strategies, Policies and Planning Premises
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THE NATURE AND PURPOSE OF STRATEGIES AND POLICIES
1. STRATEGY:
y
The determination of the mission or purpose and the basic long-term objectives of anenterprise, followed by the adoption of courses of action and allocation of resources necessary
to achieve these aims.
2. POLICIES:
y General statements or understandings that guide managers· thinking in decision making
y They ensure that the decisions fall within certain boundaries
SIMILARITIES:
y They give direction
y They are frame work for plans
y They are the basis of operational plans
y They affect all areas of managing
MAJOR DIFFERENCE:
y The essence of policy is discretion
y Strategy concerns the discretion, in which human and material resources will be applied in
order to increase the chance of achieving selected objectives
y Tactics: the action plans through which strategies are executed.
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THE STRATEGIC PLANNING PROCESS
Inputs:
People, Capital,
Managerial skills,
Technical Skills,
Others
Goals of Stake
holders:
Employees
Consumers
Suppliers
Stock holders
Govt
Community
Others
Inputs:
People, Capital,
Managerial skills,
Technical Skills,
Others
Goals of Stake
holders:
Employees
Consumers
Suppliers
Stock holders
Govt
Community
Others
IndustryAnalysis
IndustryAnalysis EnterpriseProfile
EnterpriseProfile
Executive
orientatio
n values
vision
Executive
orientatio
n values
vision
�Mission
�Major
Objectives�Strategic
Intent
�Mission
�Major
Objectives�Strategic
Intent
Development of alternative
strategies
Development of alternative
strategies
Present &
Future
External
Threats &
Opportunities
Present &
Future
External
Threats &
Opportunities
�Internal
weaknesses &
Strengths
�Internal
weaknesses &
Strengths
Evaluation &
strategic choice
Evaluation &
strategic choice Implementation
Implementation
Medium &
Short Range
planning
Medium &
Short Range
planning
�Reengineering
Organizationstructure Staffing
�Reengineering
Organizationstructure Staffing
Leadership
Control
Leadership
Control
Consistency
Testing
ContingencyPlanning
Consistency
Testing
ContingencyPlanning
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THE STRATEGIC PLANNING PROCESS
1. Inputs to the organization2. INDUSTRY ANALYSIS
y The competition and its kinds available
y Possibility of new firms entering
y Availability of substitute products or servicesy Bargaining position of the suppliers and buyers
3. ENTERPRISE PROFILE
y Mission
y Geographic orientation (would it operate in homecountry or in different countries
y Competitive position of the company itself
4. Orientation, vision and values of executives
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THE STRATEGIC PLANNING PROCESS
4. Mission (purpose), major objectives, and strategic intenty MISSION: ´what is our businessµy OBJECTIVE: ´the end points towards which the activities
of the enterprise are directedµy STRATEGIC INTENT: ́ the commitment to win in the
competitive marketµ
6. Present and future external environment:7. Internal environment:8. Development of alternative strategies:
y To concentratey To diversify y
International expansiony Joint venturesy Strategic alliancesy Liquidationy Retrenchment
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THE STRATEGIC PLANNING PROCESS
9. Evaluation and choice of strategies:10. Consistency testing and contingency planning
11. Medium and short range planning,
implementation through organizing, staffing,
leading and controlling
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Strengths in internal
departments like
management,R&D, Finance,
marketing, OD etc
Eg weaknesses in internal
departments
Current and Future conditions in
respect of economy, politics,
financial regulations, new products,
services and technology
The most successful strategy,
utilizing the org·s strengths to
take adv of opportunities
Developmental strategy: to
overcome internal weaknesses
to take adv of opportunities
Energy shortages, competition
and other areas like conditions
mentioned above
Use of strengths to cope up
with threats or to avoid
threats
Retrenchment, liquidation,
joint ventures etc to minimize
weaknesses & threats
FOUR ALTERNATIVE STRATEGIES
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APPLICATION OF THE TOWS MERGER MATRIX FOR
MERGERS, ACQUISITIONS, JOINT VENTURES AND
ALLIANCES
TIME DIMENSION AND THE TOWS
MATRIX
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BLUE OCEAN STRATEGY
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BLUE OCEAN STRATEGY
THE FOUR ACTIONS FRAMEWORKy Identify and eliminate those factors that may be
unimportant to the buyer
y If elimination is not an option, consider
reducing those factorsy Raise or strengthen those factors that are
unique
y Create new and unique factors that are wanted
by the buyers but are ignored by thecompetition
Companies may adopt both the SO and SW
alternative strategies
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THE PORTFOLIO MATRIX: A TOOL FOR
ALLOCATING RESOURCES
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This tool was developed by Boston consulting group in 1970s.
This is a relationship between Market Growth and Market share of a company/ its business unit or a product
This was developed for large corporations with several divisions,called as Strategic Business Units (SBUs) for the allocation of resources in the right place
y By dividing the matrix into four areas, four types of SBU can bedistinguished:
y Stars - Stars are high growth businesses or products competingin markets where they are relatively strong compared with thecompetition. Often they need heavy investment to sustain theirgrowth. Eventually their growth will slow down and, assuming
they maintain their relative market share, will become cashcows.
y Cash Cows - Cash cows are low-growth businesses or productswith a relatively high market share. These are mature,successful businesses with relatively little need for investment.
They need to be managed for continued profit - so that they
continue to generate the strong cash flows that the company needs for its Stars.
THE PORTFOLIO MATRIX: A TOOL FOR
ALLOCATING RESOURCES
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y Question marks - Question marks are businesses orproducts with low market share but which operate inhigher growth markets. This suggests that they havepotential, but may require substantial investment in orderto grow market share at the expense of more powerfulcompetitors.
y Management have to think hard about "question marks" -which ones should they invest in? Which ones should they allow to fail or shrink?
y Dogs - the term "dogs" refers to businesses or productsthat have low relative share in unattractive, low-growth
markets. Dogs may generate enough cash to break-even,but they are rarely, if ever, worth investing in.
y Criticism:y Its too simplisticy The growth rate criterion is insufficient for the evaluation of
an industry·s attractiveness
y The market share is also insufficient for estimating thecompetitiveness
THE PORTFOLIO MATRIX: A TOOL FOR
ALLOCATING RESOURCES
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y GROWTH
y FINANCE
y ORNANIZATION
y PERSONNEL y PUBLIC RELATIONS
y PRODUCTS OR SERVICES
y MARKETING
MAJOR KINDS OF STRATEGIES AND
POLICIES
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y Planning premising:y The anticipated environment in which plans are
expected to operate
y Environmental Forecastingy Human and material resources and their opportunities
and threatsy Values and areas of Forecasting
y The making of forecasts and their review by managerscompel thinking ahead, looking to the future, andproviding for it
y
Preparation of forecast may disclose areas wherenecessary control is lackingy Forecasting, especially when there is participation
throughout the organization, helps unify and coordinateplans. By focusing attention to the future, it assists inbringing a singleness of purpose to planning
y
The areas of forecasting; usually are economic, social,political/ legal, and technological environments
PREMISING AND FORECASTING
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y Forecasting with Delphi Technique:
y This technique was developed by Olaf Helmer ad his
colleagues at the RAND corporation for
technological forecasting
y The process is as follows:y A panel of experts on a particualr problem area is selected,
usually from both inside and outside the organization
y The experts are asked to make a forecast (anonymously) in
terms of discoveries and developments
y The answers are compiled and fed back to the audience
y Further estimates of future are made collectively
y Repetitions take place if required for further additions
y When a convergence of opinion begins to evolve, the results
are then used as an acceptable forecast
PREMISING AND FORECASTING