ACCA

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• ACCA
• Strategic Business Planning and Development
• Lecture 1
• Strategic Management The Traditional Approach

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Learning Outcomes
At the end of this lecture you will

• Appreciate the meaning of the term strategy
• Understand the nature of the rational model
  of strategic planning
• Appreciate some of the arguments for and against
  the rational model

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Strategy!What does the word really mean?
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Defining the term Strategy
ACCA
'a course of action, including the specification
of resources required, to achieve a specific
objective'
Hofer and Schendel
'the mediating force or 'match' between the
organisation and the environment'
K. Andrews (The Concept of Corporate Strategy)
'corporate strategy is the pattern of decisions
in a company that determines and reveals its
objectives, purpose or goals, and produces the
principal policies and plans for achieving these
goals'
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Strategy
..is the direction and scope of an organisation,
over the long term, which matches its resources
to its changing environment, and in particular
its markets, customers or clients so as to meet
stakeholder expectations.
(Johnson Scholes)
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How Does Strategy Fit In?
Mission
Goals/Objectives
Strategy
Tactics
Operations
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Gaining Competitive Advantage- Ohmae

• The strategic triangle
• Gain ground on competitors at acceptable cost
• Organisation should shape the environment,whilst
  directing the strategy towards the competition

company
customers
competition
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Gaining Competitive Advantage- Ohmae (2)

• Key success factors
• Exploit competitor's actual or potentialweaknesse
  s or the organisation's own strengths
• Challenge assumptions about markets
• Alter the markets or find new ways of
  exploitingthem

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The Need for Strategy

• Managers need strategies to guide HOW the
  organisation's business will be conducted and HOW
  performance targets will be achieved
• Without a strategy, managers have
• No clearly established course to follow
• No roadmap to manage by
• No cohesive action plan to produce successful
  performance

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The Three Big Strategic Questions
Where are we now?Where do we want to
go?How will we get there?
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Different Levels of Strategy

• Corporate - what business(es) should we be in?
• Business - how should each business compete?
• Functional - how should the functional areas
  support the corporate and business strategies?

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The Various Functions

• Marketing
• Production
• Finance
• Human Resource Management
• Information Systems
• Research and Development

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Strategic Planning and Strategic Management

• Strategy
• A course of action including the specification
  of resources required, to achieve a specific
  objective
• Strategic Plan
• A statement of long-term goals along with a
  definition of the strategies and policies which
  will ensure achievement of these goals
• Strategic Management
• An integrated management approach drawing
  together the elements involved in planning,
  integrating and controlling a business strategy

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The Rational Model

• The careful and deliberate formulation,
  evaluation and selection of strategies for the
  purpose of achieving objectives
• A complex process including a thorough analysis
  of internal and external factors
• Strategic analysis
• Strategic choice
• Strategic implementation
• Strategic control

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The Rational Model - Stages

• Strategic analysis
• Mission/Vision
• Goals
• Objectives
• Environmental analysis
• Position audit/situation analysis
• Corporate appraisal
• Gap analysis

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• Strategic choice
• Generation of strategic options
• Evaluation of strategic options
• Strategic implementation
• Resource planning
• Operations plans
• Organisation structure and culture
• Change
• Functional strategies
• Strategic control

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Arguments for the Rational Model

• Assumptions
• Top down
• Corporate first
• Breakdown
• Objective evaluation
• Ansoff
• Pursue objectives
• Partial ignorance
• Consistency

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• Drucker
• Systematically taking risky decisions with
  greater knowledge of their future effect
• Organising systematically the efforts needed to
  carry out decisions made
• Processes
• Behaviour
• Organisation structure
• Resource allocation
• Measuring the results of the decisions through
  organised, systematic feedback

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Advantages of a Formal System of Strategic
Planning

• Identifies risk
• Forces managers to think
• Forces decision-making
• Better control
• Enforces consistency at all levels
• Public knowledge
• Time horizon
• Co-ordinates
• Clarifies objectives
• Allocates responsibility

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Arguments against the RationalModel

• Practical failure
• Routine not regular
• Reduces initiative
• Internal politics
• Exaggerates power

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• Mintzbergs arguments against
• Formalisation
• Detachment divorcing planning from operations
• Formulation proceeds implementation
• Predetermination
• Kays military analogy
• Businesses have more ill-defined objectives
• Cannot control resources like military
  organisations