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Strategic Analysis and Action (5th edition)

Figures

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

The Job of the General Manager


Setting Direction
vision mission values

today and tomorrow

Assessing Performance

General Manager

Creating Strategy
determining the way forward

making it happen

Implementing Change

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

The Performance Matrix

Quadrant 2 Organizational Health +


complacent organization three years ago

Quadrant 1
desired state tomorrow? today

crisis

troubled organization

Quadrant 4

Quadrant 3 Operating Performance +

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Collins and Porras Vision Framework


Organizational Vision

Guiding Philosophy

Tangible Image

Purpose

Mission

Environment
Core Beliefs & Values

Vivid Description

Source: Copyright 1991, by The Regents of the University of California. Reprinted from the California Management Review, Vol. 34, No. 1. By permission of The Regents.

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Business Strategy Components

Goals

Value Proposition Product Market Focus Core Activities

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Strategic Choice: Product/Market Scope

PRODUCT EXISTING EXISTING MARKET NEW Market development Diversification Market penetration NEW Product development

Source: Ansoff, I., The New Corporate Strategy. Copyright 1987, John Wiley & Sons, Inc. Reprinted by permission of John Wiley & Sons, Inc.

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

The Wal-Mart Business Strategy

Dominate markets Lowest cost system High growth Do it Wal-Mart way

Goals

Everyday low prices Always in stock Courteous, reliable

Value Proposition Product Market Focus Core Activities

Branded general merchandise Value-oriented customers Develop easier markets first: work from regional hubs

Integrated logistics: supplier to checkout Intensely managed Local tailoring

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Apples Strategy
Change the world through technology

Goals

Value Proposition Product Market Focus

Differentiation on product and service through a user-friendly graphic interface and integrated products

Core Activities

Complete desktop solution 50% US; 50% foreign Education (50%MS); home Hardware, software, peripherals High end

R&D

Mnfg

Distn

Fully integrated

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Corporate, Business and Functional Strategy


Corporate Strategy

Industry A

Industry B

Industry C

Business Strategy A

Business Strategy B

Business Strategy C

Functional/ Product Strategy

Functional/ Product Strategy

Functional/ Product Strategy

Functional/ Product Strategy

Functional/ Product Strategy

Functional/ Product Strategy

Functional/ Product Strategy

Functional/ Product Strategy

Functional/ Product Strategy

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

The Diamond-E Framework

Management Preferences

Organization

Strategy

Environment

Resources

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Strategic Risks
TIME HORIZON SHORT-TERM Errors in reading the environment cause strategic failure LONG-TERM Environmental changes make the strategy obsolete

ENVIRONMENTAL RISKS CAPABILITY RISKS

Strategic demands exceed Internal capabilities develop the capacity to execute inconsistently with strategy

Source: Ansoff, I., The New Corporate Strategy. Copyright 1987, John Wiley & Sons, Inc. Reprinted by permission of John Wiley & Sons, Inc.

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

The Strategic Analysis Triangle

Management Preferences

WANT

Individual

Strategic Tension

Resource Capabilities and Organization

CAN

Environment

NEED

Firm

Industry

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

The Process of Strategic Analysis


Activities Step 1: Base Case Analysis Assess the strategic position of the business and the urgency for action. Step 2: Strategy Formulation and Testing Develop and evaluate proposals to address business opportunities and challenges. Step B: Decision and Implementation Commit, implement, and review. 1. Assess past performance. 2. Identify and evaluate current strategy using the Diamond-E drill. 3. Forecast future performance under current strategy. 4. Decide on the need, nature, and urgency of change. 1. Work from the environment and capabilities to generate new proposals. 2. Use the Diamond-E drill to shape and short-list proposals. 3. Prepare performance forecasts for short-listed proposals.

1. Decide on proposal(s) to implement. 2. Move to build commitment and develop required capabilities. 3. Implement.

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Porters Five Forces Model


POTENTIAL ENTRANTS
Threat of new entrants

Bargaining power of suppliers

INDUSTRY COMPETITORS BUYERS Rivalry Among Existing Firms


Bargaining power of buyers

SUPPLIERS

Threat of substitute products or services

SUBSTITUTES

Source: Reprinted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from COMPETITIVE STRATEGY: Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright 1980, 1998 by The Free Press.

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Prisoners Dilemma Matrix

FIRM TWO Strategy A I: $6,000 II: $6,000 I: $0 II: $10,000 Strategy B I: $10,000 II: $0 I: $2,000 II: $2,000

Strategy A FIRM TWO Strategy B

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

PEST Forces
Macro Forces

Political

Economic

Social

Technological

Micro Forces Supply Competition Demand

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Internalization: Global/Local
High

Global Need for Global Integration


Economies of scale Customers accept standardized products

Multidomestic
Locally tailored products Benefits of being local outweigh added costs

Low

Need for Local Responsiveness

High

Source: Reprinted with the permission of The Free Press, a Division of Simon & Schuster,Inc., from THE MULTINATIONAL MISSION by C.K. Prahalad and Yves L. Doz. Copyright 1987 by The Free Press.

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Internalization: Global/Local
Step 1: Focus the Environment Analysis Work from the strategic proposal to define the boundaries of the relevant environment, highlight the questions that need to be asked about demand, supply, competition, and government. Establish a time horizon for analysis. Step 2: Test the Strategy-Environment Linkage How well does the strategic proposal anticipate the opportunities and challenges in demand, supply, competition, and government? For serious misfits, recycle to develop a more attractive proposal. Step 3: Forecast Performance Decide if the strategic proposal, implemented as planned, will meet its goals. For clearly failing proposals, recycle to develop a more attractive proposal. Step 4: Rank Against Other Proposals Consider the strategic proposal in the light of alternative proposals. If it is competitive, proceed with the Diamond-E drill. If not, consider dropping it and recycle to develop a more attractive proposal. Step 5: Move to Next Step in Diamond-E Drill Assess the strategy-resource linkage. GENERATE NEW STRATEGIC PROPOSAL(S) Recycle

Recycle

Recycle

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Testing the Strategy-Environment Linkage


Business Environment Analysis Model (BEAM)

E.G., Industry support programs Economic and trade policy Regulation of structure and conduct

Government

E.G., Customer needs and performance Market growth Buyer bargaining power

Supply
E.G., Advances in product, process technology Supplier competence and bargaining power Competition for raw materials and people

How well does the strategy anticipate...

Demand

Competition

E.G., Aggregate competitive conditions Individual competitor strategies

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Resource Analysis
Step 1: Identify Resource Requirements Work from the strategic proposal to clarify and project the resources required for implementation and ongoing success. Prepare at a level of detail that will facilitate analysis and management action. Step 2: Test the Strategy-Resource Linkage Compare the resource requirements with the counterpart resources in the business or readily available to it. Identify current and anticipated gaps between the two. For serious misfits, recycle to develop a more attractive proposal. Step 3: Develop Gap-Closing Analysis Assess the feasibility of closing any material gaps. If the costs, chances of success, and consequences of failure are acceptable, carry the proposal forward. If not, recycle to develop a more attractive proposal. Step 4: Move to Next Step in Diamond-E Drill Assess the strategy-management preference linkage. GENERATE NEW STRATEGIC PROPOSAL(S)

Recycle

Recycle

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

The Indirect Role of Management Preferences


Management Preferences Direct Role

Strategic Choices

Environment

Indirect Role
Organization, Resources & Capabilities
A management preferences filter through which the environment and resources are assessed.

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Management Preference Analysis


Step 1: Identify the Required Management Preferences Work from the strategic proposal to develop a list of required management preferences implied by each of the four elements of strategy. Step 2: Test the Strategy-Preferences Linkage Compare the required preferences with the observed preferences of influential managers and management groups. Identify current and anticipated gaps between the two. For serious misfits, recycle to develop a more attractive proposal. Step 3: Develop Gap-Closing Analysis Assess the feasibility of closing any material gaps. If the costs, chances of success, and consequences of failure are acceptable, carry the proposal forward. If not, recycle to develop a more attractive proposal. Step 4: Move to Next Step in Diamond-E Drill Assess the strategy-management preference linkage. GENERATE NEW STRATEGIC PROPOSAL(S)

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Strategy-Organization Analysis
Step 1: Identify Required Organizational Capabilities Identify the key organizational capabilities that will be required to successfully implement the strategic proposal. Step 2: Identify Capability Gap Compare the required organizational capabilities with those currently in the business. Identify the most important capability gaps. If the gaps are clearly too large to close, reject the proposal and recycle to develop a more attractive one. Step 3: Identify Required Organizational Changes Identify the changes in organization structure, management processes, and leadership behaviour that would be needed to develop the missing capabilities identified in Step 2. Step 4: Assess Feasibility Assess the probability that the proposed organizational changes will in fact result in the creation of the required new capabilities, in the time available. Identify the major areas of risk. Step 5: Move to Next Step in Diamond-E Drill Decide which of the strategic proposals you have been examining to adopt, based on an analysis of risk and expected performance. RETURN TO FIRST STEPS OF DIAMOND-E DRILL

Recycle

Recycle

Recycle

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Organizational Capabilities Model


Leverage Point
Leadership Behaviour Culture Behaviour

Leverage Point
Organization Structure

Organizational Capabilities
Behaviour Culture Behaviour Culture

Leverage Point
Management Processes

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Basic Organization Structure (Partial)


Functional Organization General Manager Finance Human Resources Production Marketing Finance Product Organization CEO Human Resources Magazines Newspapers

Editorial Books Magazines Newspapers

Books Editorial

etc.

etc.

Production Marketing

etc.

etc.

Geographic Organization CEO North America

Matrix Organization CEO North America

Europe Books Magazines Newspapers

Asia Books

Europe

Asia

etc.

etc.

Magazines Newspapers
two boss managers etc.

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Intended and Emergent Strategy

Unrealized Strategy

Realized Strategy Intended Strategy Emergent Strategy

Source: Mintzberg, H.; Ahlstrand, B.; Lampel, J.;Strategy Safari, New York: The Free Press, 1998.

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Creating a Change Plan


Change Agenda What change needs have you identified in your Diamond-E analysis?

Analysis of Starting Conditions Urgency Are you dealing with anticipatory, reactive, or crisis change? Organizational Readiness Who will be most affected by the proposed change? How ready are they? Personal Readiness How ready are you to lead the change process?

Establishing Guidelines for Action Priority Objective What do you need to accomplish first? Priority Targets and Actions Who are your priorty targets? What will your first steps be? Leadership Style How are you going to manage the change process? Pace How fast do you need to move?

Creating an Action Plan Period 1, etc. Objectives 1. 2. . . Targets .. .. First Steps . . Style .. .. Timing .. ..

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Urgency for Action: The Crisis Curve

Good

Anticipatory Change

Reactive Change

Strategic Performance

Crisis Change

Poor

Time

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Readiness for Change and Strategic Capability


Readiness for Change
Good Anticipatory Change Reactive Change

Strategic Performance

Crisis Change

Poor

Strategic Capability

Time

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

Assessing Potential Priority Targets

Proactive Resistors

Change Agents

Bystanders
Defensive Resistors Change Agents in Waiting

Actively Opposed

Neutral Commitment to Proposed Change

Strongly Supportive

Strategic Analysis and Action (5th edition) 2002 Pearson Education Canada

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