8-SAEStrategicOptions_StrategicEvaluation

SAEStrategicOptionsandStrategyEvaluationTheKeyQuestionWhatarethestrategicissuesweareseekingtoaddress/resolve?(Identifiedfromthestrategicanalysis)EveryCaseisDifferentallbusinessesaredifferent,industriesaredifferent&environmentsaredifferent.Butwhenitcomestotheoptionsforgrowingthevalueofasimplebusinessoracomplexcorporation,eitherasuccessfuloneorafailingone,optionsarealwaysfairlylimited.Wecandescribetheoptionsintermsofdirectionsofdevelopmentandmethodsofdevelopmentandtherequirementsforsuccessfuldevelopment.GeneratingStrategicOptionsThesearchforopportunities,andtheresponsetothreats,using:•Driversofchange•Scenarios•Competencyanalysis•Marketsegmentation•Strategicgroupanalysis•5Forcesanalysis•Others….Issue/OptionMatchingMatrixIssueOptionDiscussionIssue1Issue2Issue3Issue4Issue”n”GeneratingOptionsTOWSMatrixInternalfactorsExternalfactorsStrengths(S)Weaknesses(W)Opportunities(O)SOStrategicOptionsGenerateoptionsherethatusestrengthstotakeadvantageofopportunitiesWOStrategicOptionsGenerateoptionsherethattakeadvantageofopportunitiesbyovercomingweaknessesThreats(T)STStrategicoptionsGenerateoptionsherethatusestrengthstoavoidthreatsWTStrategicOptionsGenerateoptionsherethatminimiseweaknessesandavoidthreatsTheBusinessPortfolio/GrowthShareMatrix?MarketGrowthRateHighLowHighLowRelativeCompetitivePosition(marketshare)CASHOUTFLOWCASHINFLOWHarvestdivestIndustryAttractiveness/BusinessStrengthMatrixHighMediumLowHighMediumLowIndustryattractivenessBusinessstrengthInvestmentandgrowthSelectivegrowthSelectivitySelectivegrowthSelectivitySelectivityHarvestdivestHarvestDivestGrandStrategyMatrixInternal/ExternalPerspectiveOvercomeweaknessesMaximisestrengthsInternalExternalTurnaroundorretrenchmentDivestitureLiquidationVerticalintegrationConglomeratediversificationConcentratedgrowthMarketdevelopmentProductdevelopmentInnovationHorizontalintegrationConcentricdiversificationJointventuresChoosingCorporateStrategyAcompanycanchooseacorporatestrategyby:identifyingtheinterrelationshipsamongexistingbusinessunitsselectingthecorebusinessasthefoundationofcorporatestrategycreatinghorizontalorganisationalmechanismstofacilitateinterrelationshipsamongthecorebusinesses&laygroundworkforfuturerelateddiversificationpursuingdiversificationopportunitiesthatallowsharedactivitiespursuingdiversificationthroughthetransferofskillsifopportunitiesforsharingactivitiesarelimitedorexhaustedpursuingastrategyrestructuringifthisfitstheskillsofmanagementornogoodopportunitiesexistforforgingcorporateinterrelationshipspayingdividendssothattheshareholderscanbetheportfoliomanagersOptionGenerationAssurethatseveralviableoptionsreachthetop–Searchdeepintheorganisation–Reviewexisting“rulesofthegame”Createadditionaloptionsdirectly–Examineplanningaxioms–Searchforpossiblesynergies–Combineoptionsandconsidertiming–UsecreativitytechniquesCreateoptionsindirectly–Buyintoselectedtechnologies–Examinecompetitorbehaviour–InvestinscenarioanalysisFlexibleStrategiesSimplegrowthoptions–Creatingaportfolioofgrowthoptions–BreakingdevelopmentprogrammesintostagesSwitchingoptions–Buildinginon/offcapabilities–ReducingswitchingcostChangingthegame–Creatinguncertaintyforcompetitors–BuildinggeneralpurposecapabilitiesIssue/OptionMatchingMatrixIssueOptionDiscussionIssue1Developcapability….Respondingto….Issue2Issue3Issue4Issue”n”EvaluatingOptionsTheScenario/OptionsMatrixRisk&RobustnessOption1Option3Option‘n’Option2EvaluatingStrategicOptionsSUITABILITY:Doesoptionaddresscircumstancesinwhichorganisationoperates?Todowithstrategiclogic.ACCEPTABILITY:Isoptionacceptabletokeystakeholdersandintermsofriskandreturn(financialattractiveness)?FEASIBILITY:Doestheorganisationhavethecapabilitytodelivertheoption?Todowithimplementationpracticalities.CriteriaofEvaluationSuitability•Fitwithcompetencies•Fitwithmarket/environmentalneed•Fitwithscenarios•Fitwith‘businessidea’•FitwithlikelycompetitiveresponseAcceptability•Fitwithstakeholderexpectations•Degreeofrisk•LikelyfinancialreturnsEvaluatingSuitability-+OptionsCriteriaMarketPenetration•Theimportanceofmarketshare•Withinsegments•Theimportanceofquality•DifficultyinbuyingshareStrategicOptions:EvidenceConsolidation•Qualitymatters•Whatbasesofcostreduction?•Inimprovingproductivitybewareinflexibility•RememberharvestingProductDevelopment•Focusisimportant:proliferationisproblematic•InvestmentinR&DOKinhighsharebusinesses•BewarerapidratesofproductintroductionsMarketDevelopment•Donewmarketsrequirenew/differentcompetences•BewareproliferationofproductsxmarketsStrategicOptions:EvidenceCommonPitfallsinStrategicChoiceLonglistsofoptionswithoutaframeworkorlogicNoconnectiontoanorganisation’sstrategicpositionNocoherencebetweenbasis/directionofstrategyLostinanalyticaltechniqueswithnounderstandingofthestrategicissues(Theopposite)–goodstrategic‘feel’butnodetailedjustificationSTRATEGICPOSITIONCONCEPTSIMPLICATIONSTOSTRATEGICCHOICES(forAOL/TimeWarnerIllustration1.1)CONCEPTHELPSWITH:-BASIS(CLOCK)DIRECTIONMETHODPESTELOpportunitiesforgrowth/declineIndustrystructureVolumeornichesVerticalintegrationforco