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Strategic Planning

Clare Devlin

Patterns of Strategy
development
How strategies develop over time:
Punctuated equilibrium
Long periods of continuity
Periods of no clear direction

Transformational change
Clare Devlin

Strategy:three elements
Competitive strategy
Financial strategy
Investment and resource strategy

Clare Devlin

Competitive strategy
The firm has to decide how it will compete for
business and where it will make its money
This involves looking at:

how it attracts customers


what it decides to produce or sell
what markets or countries it operates in
how will beat its rivals
Clare Devlin

Financial strategy
This deals with with the firms relations with
its investors and other providers of credit
Company has to:
provide an adequate return to shareholders
protect the value of investment by avoiding
excessive risk
obtain funds at an appropriate cost in order to
meet the need of the business
Clare Devlin

Investment and resource


strategy
This strategy looks at how management uses
its funds in order to have the resources to
carry out its competitive strategy
Need to look at
purchase of land, buildings and other fixed
capital equipment
investment in R&D
Clare Devlin

Investment and resource


strategy
This strategy looks at how management uses
its funds in order to have the resources to
carry out its competitive strategy
Need to look at
investment in advertising and marketing
investment in HRM
funds to makes acquisitions
adapted from CIMA Management Accounting Business strategy

Clare Devlin

Levels of Strategy
Corporate level
Business Strategy
Functional strategy

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Environmental conditions
Simple/static
Dynamic
Complex

Clare Devlin

Formal strategy Process 1


In some organisations the development of business
strategies is a formal process. The organisation will
have
a designated team responsible for strategy development
formal collection of information
collective decision making by senior managers
A process for communication and implementing the
strategy
regular review of the strategy

Clare Devlin

Designated team responsible for


strategy development 2
With a designated team responsible for strategy
there is a strategic planning unit which
collects business intelligence and advises on
formulating strategy
there are groups of managers who look at and
assess strategies
there are business consultants who act as
facilitators and advisors
Clare Devlin

Formal collection of
information 3
The management team will need
environmental scanning reports looking
at market trends, competitive behaviour
special reports on markets of particular
interest
research reports on market opportunities
and threats
accounting information on operating costs
Clare Devlin

Collective decision making by


senior managers 4
This involves senior management working
together to develop and agree business
strategies. Brainstorming and business
models will be used. A lot of negotiation
and conflict involved

Clare Devlin

A process for communicating and


implementing the strategy 5
This can be done using a variety of methods
formal reports
briefing meetings
detailed policies and programmes and
budgets
development of performance targets
Clare Devlin

Regular review of the strategy 6


Management will monitor the success of the
strategy by receive regular reports on
performance and environmental changes .
In these days of increasing change there has
been an increased emphasis on the
environment

adapted from CIMA Management Accounting Business strategy

Clare Devlin

THE BENEFITS OF FORMAL


PLANNING SYSTEMS
A structured means of analysis and thinking
about strategic problems.
Encouraging questioning and challenging of
the taken for granted.
The involvement of people in strategy
development.
A means of control against agreed objectives.
Clare Devlin

THE BENEFITS OF FORMAL


PLANNING SYSTEMS
Contributing to ownership and coordination of strategy.
A means of communication of intended
strategy.
A means of control against agreed
objectives.

Clare Devlin

DANGERS AND PROBLEMS OF


FORMAL PLANNING SYSTEMS
The neglect of cultural and political
dimensions of organisations.
Delegating responsibility to specialists
Failure to achieve ownership of plans
Individuals understanding parts rather than
the whole of plans
.
Clare Devlin

DANGERS AND PROBLEMS OF


FORMAL PLANNING SYSTEMS

Detail rather than vision


Information overload
Strategy as the plan
The search for the mythical right strategy

Clare Devlin

Intended and realised Strategies


Intended strategy:
desired direction of top management

Realised strategy:
is only 10-30% of intended strategy

Emergent strategy:
pattern of decisions that are followed
Clare Devlin

Strategic Development
Different explanations of processes

Rational planning
Incremental view
Cultural political view
Command View
Enforced Choice
Clare Devlin

The Rational Planning


Dimension 1
Strategies are the outcome of rational,
sequential, planned and methodical
procedures
Definite and precise strategic objectives are
set
The organisation and environment are
analysed
Clare Devlin

The Rational Planning


Dimension 2
potential strategic options are generated and the
optimum solution chosen
defined procedures for implementation and the
achievement of the strategic objectives are
developed
the strategy is made explicit in the form of detailed
plans

Clare Devlin

Review
and
control

Position
audit

Mission
and

Corporate
appraisal

objectives

Strategic
option
generation

Strategy

evaluation
and choice

Environmental

analysis

Rational Strategy Process

Clare Devlin

Strategy
implementation

The Incremental Dimension 1


evolutionary but purposeful strategy
development
strategy is developed as issues arise
strategy is continually adjusted to match
changes in the operating environment
early commitment to a strategy is tentative
and subject to review
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The Incremental Dimension 2


strategic options are continually assessed
for fit
successful options gain additional resources
strategic options are developed from
existing strategies by experimentation and
through gradual implementation

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The Cultural Dimension 1


a way of doing things in the organisation
guides strategic direction
strategies evolve in terms of a core set of
shared assumptions based on past
experience, values and beliefs held by the
organisations members

Clare Devlin

The Cultural Dimension 2


the shared assumptions guide
the selection of goals and objectives
the identification of strategic issues
the selection of information
the selection of strategies

Clare Devlin

The Political Dimension 1


Strategies are developed by negotiation and
bargaining between interest groups
The interest groups seek to realise their own
desired objectives
Their influence on strategy development
increases with power
Clare Devlin

The Political Dimension 2


Power comes from the ability to create or
control the flow of scarce resources and the
control and provision of information
An acceptable strategy is achieved by a
process of accommodation and mutual
adjustment
Clare Devlin

The Command Dimension 1


An individual is the driving force behind
the organisation's strategy
Strategy is primarily associated with the
institutionalised power of an individual or
small group
The strategy represents the aspirations of
this individual for the organisation's future
Clare Devlin

The Command Dimension 2


The strategic direction may be related to a
vision based on
rational understanding and intuition
experience and intuition

The individual becomes the representation


of the strategy of the organisation
Clare Devlin

Enforced Choice Dimension 1


Strategic choice is prescribed or limited by
external forces which the organisation is
unable to control or influence
Organisations respond to environmental
imperatives

Clare Devlin

Enforced Choice Dimension 2


Strategic change is instigated from outside
the organisation
Barriers in the environment severely restrict
strategic mobility

Clare Devlin

Freewheeling Opportunism 1
Many initially small businesses follow a
different path of strategic development e.g
Jeffrey Bezos
Amazon
Richard Branson
Virgin
Anita Roddick
Body Shop
Alan Sugar
Amstrad
Clare Devlin

Freewheeling Opportunism 2
These companies follow strategies that have been
described as freewheeling opportunism or radical
entrepreneurship.They have the following in
common
Grew up in an industry dominated by large
corporation/s
The founders had a vision of how they wanted the
business to develop
Businesses often in areas of new technology
Clare Devlin

Freewheeling Opportunism 3
They did not depend on conventional financing
sources to develop
They did not appear to use rational strategy
formulation techniques but relied on vision, the
skills of the owner and a willingness to take
risks
The owner had a day to day involvement in the
business

adapted from CIMA Management Accounting Business strategy

Clare Devlin

Strategic Management
Processes implications
Beware equating strategic management with
strategic planning
Need to understand how strategies develop
in an organisation to:
account for strategic direction
manage formulation process
manage change
Clare Devlin

Strategic Management
Processes implications 2
Managing change means managing changes
to the realised strategy- not just the intended
strategy

From Johnson and Scholes Exploring Corporate strategy

Clare Devlin