Strategic Analysis and Planning Mohshin Habib
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Strategic Analysis and Planning
Dr. Mohshin Habib
Discipline Leader, Management
Swinburne University of Technology
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What is management?
• It is a process
▫ A series of activities: planning, deciding & evaluating
• Of assembling and using sets of resources
▫ Physical, financial & Human
• In a goal directed manner to accomplish tasks
▫ A purposeful activity
• In an organisational setting
▫ intentionally structured and coordinated to achieve
common purposes
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Imp
ort
an
ce
High
Low
Front line
Managers Mid-level
Managers Top-level
Managers
Interpersonal skills
Technical skills
Conceptual skills
Managerial Skills at Different Organisational Levels
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Instructions:
Rate each questions (1-18) according to the scale
Subtract your score for questions 6,10,14 & 17 from
number 6: Q.6 = (6- 4(q.6 score))= 2
Q.10 = (6- 2)(q.10 score))=4
Q.14 = (6- 3)(q.14 score))=3
Q.17 = (6- 5)(q.17 score))=1
Conceptual Skills = Q1+Q3+Q6+Q9+Q12+Q15= (____)
Human Skills = Q2+Q5+Q8+Q10+Q14+Q17 = (____)
Technical Skills = Q4+Q7+Q11+Q13+Q16+Q18) = (___)
Exercise 1: Management in Practice
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Rate each questions (0-4) according to the scale Very accurate description of me = 4
Moderately accurate = 3
Neither accurate nor inaccurate = 2
Moderately inaccurate = 1
Very inaccurate description of me = 0
Need achievement: _____ + _____ + _____ + _____ + _____ + _____ + _____ =
(Q.2) (Q. 3) (Q.6) (Q.7) (Q.9) (Q.12) (Q14)
Need social approval: _____ + _____ + _____ + _____ + _____ + _____ + _____ +______ =
(Q.1) (Q. 4) (Q.5) (Q.8) (Q.10) (Q.11) (Q13) (Q.15)
Exercise 2: Need strength
Score Interpretation in Achievement Interpretation in social approval
28-32 High level of need High need
20-27 Above average level of need Above average need
12-19 Average level of need Average need
6-11 Below Average level of need Below average need
0-5 Low level of need Low need
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What is Strategy
Plan of action
Resource allocation
Activities for dealing with the environment
Achieving competitive advantage
‘..a pattern in a stream of decisions’
‘..the long-term direction of an organisation’
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Vision
Mission
Objectives
External audit
Internal audit
Past successful strategies
Strategies derive from or influenced by:
What is Strategy Continued..
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Plan should have a Vision
Now
Future
What is Strategy Continued..
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Resources and Capabilities:
fundamental building blocks of strategy
The tangible and intangible inputs that firms use to deliver services
A firm’s skill in using its resources to deliver services.
Strategy
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Component of Strategic capabilities
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Exercise 3: Innkeepers America
Innkeepers of America's position in the economy segment of the lodging industry. Locating properties next to a restaurant rather than having food and beverage in-house. Price of rooms lowered further to meet competition. New advertising campaign with discount coupons for weekend stays Three new customer service positions. Shares of company stock issued for employee bonuses. Providing continental breakfast in the lobby. Room service (for continental breakfast only). Computerized reservation system. Training program for front-desk employees. Web site where reservations can be booked online. New hotel properties built with additional features to appeal to an upscale market. Merger with Economy Lodge, Inc. Rewrite mission statement. Contracting cleaning and landscaping services.
s
s/o
o o o o o o
s/o o o
o s s
s
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Strategic Analysis: Why??
Generating Alternatives –
Participation in generating alternative
strategies should be as broad as
possible
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Establishing long-term objectives
Generating alternative strategies
Selecting strategies to pursue
Develop Best alternatives
Ensures effective use of resources
Provides base to measure progress
Builds strong teams
Purpose of Strategic Analysis
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Strategy’s three branches
CONTEXT – internal and external.
CONTENT – strategic options.
PROCESS – formation and implementation.
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Strategic planning systems
Strategic planning systems take the form
of systematised & step-by-step procedures to
develop an organisation’s strategy.
Managerial equivalent of scientific analysis
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The role of strategic planning
Strategic planning play several roles within an organisation:
Formulating strategy - managers can understand strategic issues and involve in developing alternative
Learning – questioning and challenging the taken-for-granted.
Co-ordinating - business-level strategies within an overall corporate strategy.
Communicating - providing agreed objectives or strategic milestones.
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Strategic Planning Process
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Benefits of strategic planning
There are psychological benefits of planning:
can provide opportunities for involvement,
leading to a sense of ownership,
provides security to managers and
re-assures managers that the strategy is
‘logical’.
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Perceptions of strategy development
Strategy will be seen differently by different people:
Senior executives: see strategy in terms of intended, rational, analytic planned processes
Middle managers: see strategy as the result of cultural and political processes.
Managers in public-sector organisations: see strategy as externally imposed.
People who work in family businesses see strategy as the influence of powerful individuals (owners of the
businesses).
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Develop
vision and
mission
statements
Perform Internal Analysis
Perform external analysis
Establish long term objectives
Generate evaluate &
select Strategy
Implement Strategy –
Management issues
Implement Strategy –
Marketing, finance, Accounting, MIS
issues
Measure and evaluate performance
Strategy
formulation
Strategy
Implementation
Strategy
Evaluation
Comprehensive Strategic Management Model
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STAGE 1: THE INPUT STAGE
External Factor Evaluation (EFE)
Matrix
Competitive Profile Matrix (CPM)
Internal Factor Evaluation (IFE)
Matrix
STAGE 2: THE FORMULATION STAGE
GAP Analysis
SWOT Matrix
SPACE Matrix
BCG Matrix
STAGE 3: THE DECISION STAGE
Quantitative Strategic Planning Matrix (QSPM)
Strategy formulation Analytical Framework
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Comprehensive Strategy-Formulation Framework
Stage 1:
The Input Stage
Stage 2:
The Formulation Stage
Stage 3:
The Decision Stage
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Strategy-Formulation Analytical Framework
Internal Factor Evaluation
Matrix (IFE)
External Factor Evaluation
Matrix (EFE)
Competitive Profile Matrix
(CPM)
Stage 1:
The Input Stage
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Stage 1: The Input Stage
Basic input information for the formulation & decision
stage matrices
Requires strategists to quantify subjectivity early in
the process
Good intuitive judgment always needed
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Strategy-Formulation Analytical Framework
GAP Analysis
SWOT Matrix
SPACE Matrix
BCG Matrix
Stage 2:
The Formulation Stage
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Stage 2: The Formulation Stage
Match between organisation's internal
resources & skills and the opportunities &
risks created by its external factors
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Stage 2: Gap analysis
Assesses the ‘fit’ between an organisation’s strategy and:
its environment (external)
its capabilities (internal)
Assesses fit between strategy, performance and stakeholder expectations
Aims to ensure that all elements of strategic analysis are considered
Both positive and negative ‘gaps’ can be revealed
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Stage 2: Gap analysis
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Environment–business strategy gaps
Macro-environment Identify the growth trends
Estimate when these trends take effect
Establish whether business strategy will fit new environment (match / mismatch)
Industry environment Compares consistency between business strategy and
industry environment e.g. business strategy & expected profitability
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Key competitor gaps The organisation’s performance relative to
competitors’
financial performance
market position and performance
technological performance
service performance
Analyse inconsistencies for possible danger signals
e.g. good financial performance but lagging in service or technology
Environment–business strategy gaps
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Assess how well existing capabilities match business strategy (comparative analysis)
What may affect competitive strengths?
e.g. legal or economic barriers, complacency, regulator’s role, changes in competitor strategy, changes in technology,
Key goals or objectives are compared with actual results (under / over performance)
Compare performance with stakeholder expectations
Gaps identified should influence future strategy choices
Large gaps = New business strategy
Small gaps = Focus on implementation (functional strategies)
Business strategy: current to future options
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Gap analysis summary
How does strategy match the macro-environment?
How does strategy match the industry environment?
How does strategy match performance?
How does strategy match capabilities and those of competitors? (Now and in the future)
To be able to answer these, must identify current business strategy.
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Strategy-Formulation Analytical Framework
SWOT Matrix
GAP Analysis
SPACE Matrix
BCG Matrix
Stage 2:
The Formulation Stage
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Strengths
Weaknesses
Opportunities
Threats
SWOT Matrix
Stage 2: The Formulation Stage
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SWOT Matrix
Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO)
Strengths-Threats (ST)
Weaknesses-Threats (WT)
Four Types of Strategies
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SO Strategies
Use a firm’s
internal strengths
to take advantage
of external
opportunities SO
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
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WO Strategies
Improving internal
weaknesses by
taking advantage
of external
opportunities WO
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
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ST Strategies
Use a firm’s
strengths
to avoid or
reduce the impact
of external
threats
ST
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
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WT Strategies
Defensive tactics
aimed at reducing
internal
weaknesses &
avoiding
threats
WT
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
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SWOT Matrix
Strengths – S
List Strengths
Weaknesses – W
List Weaknesses
Opportunities – O
List Opportunities
SO Strategies
Use strengths to take
advantage of
opportunities
WO Strategies
Overcoming weaknesses
by taking advantage of
opportunities
Threats – T
List Threats
ST Strategies
Use strengths to avoid
threats
WT Strategies
Minimize weaknesses and
avoid threats
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Exercise 4: Robin Hood
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Limitations with SWOT Matrix
Does not show how to achieve a competitive
advantage
Provides a static assessment in time
May lead the firm to overemphasise a single
internal or external factor in formulating
strategies
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Strategy-Formulation Analytical Framework
SPACE Matrix
SWOT Matrix
GAP Analysis
BCG Matrix
Stage 2:
The Formulation Stage
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SPACE Matrix
Strategic Position & Action Evaluation Matrix
Aggressive
Conservative
Defensive
Competitive
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SPACE Matrix
Two Internal Dimensions
Financial Strength (FS)
Competitive Advantage (CA)
Two External Dimensions
Environmental Stability (ES)
Industry Strength (IS)
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SPACE Factors
Environmental Stability (ES)
Technological changes
Rate of inflation
Demand variability
Price range of competing products
Barriers to entry
Competitive pressure
Price elasticity of demand
Ease of exit from market
Risk involved in business
Financial Strength (FS)
Return on investment
Leverage
Liquidity
Working capital
Cash flow
Earnings per share
Price earnings ratio
External Strategic Position Internal Strategic Position
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SPACE Factors
Industry Strength (IS)
Growth potential
Profit potential
Financial stability
Technological know-how
Resource utilization
Ease of entry into market
Productivity, capacity utilisation
Competitive Advantage (CA)
Market share
Product quality
Product life cycle
Customer loyalty
Competition’s capacity utilization
Technological know-how
Control over suppliers &
distributors
External Strategic Position Internal Strategic Position
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Exercise 5: Winter Survival
Item Expert ranking
Ball of steel wool 2
Newspaper 8
Compass 12
Hand Axe 6
Cigarette lighter 1
45 calibre pistol 9
Section air map 11
Canvas 5
Shirt and Pants 3
Can of shortening 4
Whisky 10
Chocolate bar 7
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Strategy-Formulation Analytical Framework
BCG Matrix
SWOT Matrix
SPACE Matrix
GAP Analysis
Stage 2:
The Formulation Stage
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BCG Matrix
Boston Consulting Group Matrix
Enhances multidivisional firm in formulating
strategies
Autonomous divisions = business portfolio
Divisions may compete in different industries
Focus on market-share position & industry growth
rate
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BCG Matrix
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BCG Matrix
Question Marks
Low relative market share, competes in
high-growth industry
Cash needs are high
Case generation is low
Decision to strengthen (intensive strategies)
or divest
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BCG Matrix
Stars
High relative market share and high growth
rate
Best long-run opportunities for growth & profitability
Substantial investment to maintain or
strengthen dominant position
Integration strategies, intensive strategies, joint
ventures
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BCG Matrix
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Cash Cows
High relative market share, competes in low-
growth industry
Generate cash in excess of their needs
Milked for other purposes
Maintain strong position as long as possible
Product development, concentric diversification
If weakens – retrenchment or divestiture
BCG Matrix
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Dogs
Low relative market share, competes in
slow or no market growth
Weak internal & external position
Liquidation, divestiture, retrenchment
BCG Matrix
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Stage 3:
The Decision Stage
Quantitative Strategic
Planning Matrix
(QSPM)
Strategy-Formulation Analytical Framework
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QSPM
Technique designed to determine
the relative attractiveness of feasible
alternative actions
Quantitative Strategic Planning Matrix
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QSPM
Key Internal Factors
Management
Marketing
Finance/Accounting
Production/Operations
Research and Development
Computer Information
Systems
Strategy 3 Strategy 2 Strategy 1 Weight Key External Factors
Economy
Political/Legal/Governmental
Social/Cultural/Demographic/
Environmental
Technological
Competitive
Strategic Alternatives
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Steps to Develop a QSPM
1. Make a list of the firm’s key external
opportunities/ threats and internal
strengths/weaknesses in the left column.
2. Assign weights to each key external and internal
factor.
3. Examine the Stage 2 (formulation) matrices, and
identify alternative strategies that the
organisation should consider implementing.
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4. Determine the Attractiveness Scores.
5. Compare the Total Attractiveness Scores.
6. Compute the Sum Total Attractiveness
Score.
Steps to Develop a QSPM
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QSPM
Requires intuitive judgments & educated
assumptions
Only as good as the prerequisite inputs
Limitations
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Cultural Aspects of Strategy Choice
Successful strategies depend on the degree
of consistency with the firm’s culture
Organisational Culture ?
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Politics of Strategy Choice
Management hierarchy
Career aspirations
Allocation of scarce resources
Politics in Organisations
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Satisfying
Generalisation
Higher-order issues
Political access on important issues
Political Tactics for Strategists
Politics of Strategy Choice
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Governance & Strategy Choice
Control & oversight over management
Adherence to legal prescriptions
Consideration of stakeholder interests
Advancement of stockholder rights
Board of Directors Roles & Responsibilities
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“Principles of Good Governance”
Governance & Strategy Choice
1. No more than 2 directors are current or former company
executives
2. No directors do business with the company
3. Audit, compensation, and nominating committees made up
of outside directors
4. Each director owns a large equity stake in the company
5. At least one outside director with extensive experience
6. Fully employed directors sit on no more than 4 boards,
retirees on no more than 7
7. Each director attends at least 75% of all meetings
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“Principles of good governance”
8. Board meets regularly without management present
9. Audit committee meets at least four times a year
10.Board is frugal on executive pay, diligent in CEO
succession, and prompt to act when trouble arises
11.CEO is not also the chairperson of the board
12.Shareholders have considerable power and
information to choose & replace directors
13.Stock options are considered a corporate expense
14.No interlocking directorships
Governance & Strategy Choice
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Yielding: _____ + _____ + _____ + _____ = _______
(Q.1) (Q. 6) (Q.11) (Q.16)
Compromising: _____ + _____ + _____ + _____ = ______
(Q.2) (Q. 7) (Q.12) (Q.17)
Forcing: _____ + _____ + _____ + _____ = _______
(Q.3) (Q. 8) (Q.13) (Q.18)
Problem solving: _____ + _____ + _____ + _____ = _______
(Q.4) (Q. 9) (Q.14) (Q.19)
Avoiding: _____ + _____ + _____ + _____ = _______
(Q.5) (Q. 10) (Q.15) (Q.20)
Exercise 6: Conflict handling
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