MA in ManagementStrategic Analysis Module - D

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1、MA in Management Strategic Analysis ModuleEvaluating StrategiesBlank PageA.INTRODUCTION TO SESSIONWithin all organisations there will come times where a proposed course of action, or more likely a number of courses, need to be evaluated. In Session 1, discussion about the nature of strategic managem

2、ent suggested that a strictly sequential model of analysis-choice-implementation stood at one end of a spectrum of descriptions of the strategy process, with most organisations following a more incremental model of strategy development. Never the less, the evaluation of strategic options is an impor

3、tant part of the strategy process, whether largely incremental and implicit or an explicit stage within a formal planning system. However conducted the focus of attention is on the future of the organisation rather than assessing past performance.In Session 1 it was also argued the strategic analysi

4、s “tool kit” could be applied to assist all aspects of strategic management. The primary purpose of this Session is to examine how many of the tools, models and frameworks explored throughout this Module can be used in the assessment and selection of strategic options. This process can also be assis

5、ted by applying some of the tools explored in other modules of the course, so where appropriate these are mentioned below.Your ObjectivesBy the end of this session you should be able to:Outline the range of criteria that can be applied in the evaluation of strategic options.Apply relevant tools, mod

6、els and frameworks to assist in the assessment and selection of appropriate strategic options for organisations.ReadingG Johnson & K Scholes, Exploring Corporate Strategy Ch. 8T Jacobs, J Shepherd & G Johnson,“Strengths, weaknesses, opportunities and threats (SWOT) analysis” in V Ambrosini et al., E

7、xploring Techniques of Analysis and Evaluation in Strategic ManagementR Rumelt, “The Evaluation of Business Strategy” in B De Wit & R Meyer, Strategy Process, Content, Context, 2nd ed. International Thompson Publishing 1998B.EVALUATING STRATEGIES A FRAMEWORKIn his article The Evaluation of Business

8、Strategy, Richard Rumelt identified the key criteria against which strategic options need to be evaluated as being consistency, consonance, advantage and feasibility. Similarly, in Exploring Corporate Strategy, Gerry Johnson and Kevan Scholes identified suitability, feasibility and acceptability as

9、the broad tests to be used. Whilst not identical, there are many similarities between the approaches in terms of the questions that they pose about particular strategic options, as indicated in Figure 9:1.Johnson & Scholes CriteriaRumelts CriteriaSuitability Does the strategy address the circumstanc

10、es in which the organisation is operating? Is the strategy viable? Does the strategy exploit core competences?Consonance Does the strategy address the external environment?Advantage Does the strategy create/maintain competitive advantage in the selected area of activity?Acceptability What are the ex

11、pected performance outcomes and are they consistent with stakeholder expectations?Consistency Are goals and policies mutually consistent?Feasibility Has the organisation got the resources and capabilities to deliver the strategy?Feasibility Can the strategy be attempted within the physical, human an

12、d financial resources available?Figure 9:1 Comparing Tests for Evaluating Strategic OptionsTo the criteria identified above can also be added the following questions: Attractiveness does the strategy look attractive in terms of financial returns and the timescale required for delivery? Vulnerability

13、 what are the risks involved in following the strategy and how significant are they? Validity are the assumptions made about the strategy reasonable and justifiable given the context? Achievability what is the likelihood of success for the strategy given conditions within the external environment?Al

14、l these questions can be combined under the three broad criteria of suitability, acceptability and feasibility, but to find answers to the questions involved in assessing and selecting particular options requires the application of relevant tools, models and frameworks. In Figure 9:2, a revised list

15、 of the questions implied by each of the broad sets of criteria are linked to relevant tools explored in previous Sessions, as well as drawing on some techniques explored in the other Modules of this course.Criteria & QuestionsTools, Models & TechniquesSuitability Does the strategy address the exter

16、nal environment? Is the strategy viable and achievable given conditions within the environment? Does the strategy build upon or exploit the strategic capabilities of the organisation? Does the strategy create/exploit synergy across the organisation? Does the strategy fit with the current corporate c

17、ulture of the organisation? Does the strategy create/maintain competitive advantage?SWOT analysisPEST analysisFive forces frameworkStrategic group analysisMarket segmentation analysisResource analysisValue chain analysisCore competences analysisActivity mappingCultural web mappingGeneric strategy id

18、entificationSynergy analysis portfolio; linkages; core competences; management stylesSources of competitive advantage appraisalAcceptability What are the expected outcomes of the strategy and are they consistent with stakeholder expectations? Does the strategy look attractive in terms of financial r

19、eturns and the timescale required for delivery? What are the risks involved in following the strategy and how significant are they?Stakeholder mappingProfitability analyses return on capital employed; payback period & net present value of discounted cash flowsRisk analyses financial ratio projection

20、s; sensitivity analysis & simulations Feasibility Has the organisation got the resources and capabilities to deliver the strategy? What gaps in resources and capabilities need addressing in order to ensure success?Resource analysisValue chain analysisCore competences analysisActivity mappingResource

21、 and capability gap identificationCultural web re-mappingStakeholder re-mappingFigure 9:2 A Framework for Evaluating Strategies Questions and ToolsSome of the tools and techniques identified in Figure 9:2 can be used to provide input into addressing the questions under more that one set of criteria.

22、 This does imply that the analyses need to be undertaken repeatedly, just that their results have application in more than one area. The following sections explore each of the criteria in more detail, reviewing the questions and how the tools, models and techniques can be applied.C.SUITABILITYThe as

23、sessment of the suitability of a particular strategy is concerned with the logic or rationale on which it is based - how the proposed strategy creates and/or maintains competitive advantage. This can be broken down further to assess the extent to which the strategy addresses the challenges of the ex

24、ternal environment, is based upon or enhances the resources and capabilities of the organisation, builds or exploits synergies and is consistent with its corporate culture.It is not unusual for discussions about suitability to stress the importance of fit between the elements outlined above. However

25、, the more important point is that the assessment needs to ask if the strategy makes sense and to identify were there are gaps that need to be confronted which links into the assessment of feasibility. Using these elements a range of criteria can be articulated as implied by the questions outlined i

26、n Figure 9:3. In some cases a simple “yes/no” test will be sufficient, but if a range of options are under consideration then an assessment of the extent to which each criterion is met or surpassed might be required. The assessment of the suitability of a strategy depends upon answers to these quest

27、ions: Does the strategy address the external environment? Is the strategy viable and achievable given conditions within the environment? Does the strategy build upon or exploit the strategic capabilities of the organisation? Does the strategy create/exploit synergy across the organisation? Does the

28、strategy fit with the current corporate culture of the organisation? Does the strategy create/maintain competitive advantage?Figure 9:3 Assessing the Suitability of a StrategyAn environmental analysis is the starting point for assessing whether suggested strategies meet the criteria related to the e

29、xternal environment. The tools and frameworks outlined in Session 3, like PEST analysis, the five forces framework, strategic group analysis and market segmentation analysis may be employed, as appropriate, to identify the main external pressures. Then each strategic option can be assessed by addres

30、sing the first two questions in outlined in Figure 9:3.Resource and capabilities analysis underpins the evaluation of the criterion related to capabilities. The tools and frameworks covered in Session 4, including resource audit, value chain analysis, core competences analysis and activity mapping m

31、ay all provide useful insights into the extent to which any strategic option meets the test indicated.In many organisations, any new strategic option needs to be evaluated within a multi-business context. As was described in Sessions 6 and 7, the creation and management of synergy can provide a majo

32、r contribution to the organisation as a whole and underpins the fourth question in Figure 9:3. The range of frameworks and models that may prove useful in this assessment include portfolio matrices, linkages and core competences analysis, the identification of management styles and the parenting mat

33、rix. The use of some or all of these tools can help assess the extent to which any new strategy (an acquisition for example) is consistent with, relies upon or can enhance existing synergies within the organisation. Any test of suitability of a particular strategic option needs to consider the exten

34、t to which it is consistent with the existing corporate culture of the organisation. Mapping the cultural web allows for a more explicit assessment of how the proposed option may be interpreted and possibly resisted by those within the organisation. However, this need not be a passive assessment the

35、 new strategy may well aim to change key aspects of the cultural web, as was discussed in Session 8.The evaluation of suitability of a new strategy also needs to identify and appraise the sources of advantage on which it is based, in terms of cost efficiency and added value. This can be done by cons

36、idering its classification within the generic strategies framework and/or assessing the sustainability of the sources of advantage and appropriability of returns, as discussed in Session 5. SWOT AnalysisSWOT analysis was introduced in Session 1 as a means of summarising how an organisations capabili

37、ties (strengths & weaknesses) matched with the challenges of the external environment (opportunities & threats). As applied to the Churchill Tableware illustration this was a simple framework for listing the key points of a largely intuitive analysis. However, the technique can be extended to provid

38、e a more rigorous analysis of the current strategy of an organisation and to evaluate the suitability of a range of strategic options.In their article Strengths, weaknesses, opportunities and threats (SWOT) analysis Tony Jacobs, Jill Shepherd and Gerry Johnson show how a simple scoring scheme can be

39、 used to assess the impact of each environmental change upon the existing strengths and weaknesses of an organisation. This can provide an evaluation of the current strategy and highlight areas for action in terms of building on strengths or rectifying weaknesses.They then go further to extend their

40、 scoring technique to the screening of strategic options. Within the context of the assessment of the suitability of a range of strategic options, this adaptation of the technique can provides a useful way of bringing together and summarising the outcomes from the many analyses outlined above.This a

41、pproach works by systematically evaluating the impact of each environmental change as identified from the environmental analysis on the range of possible alternative strategic options. The other analyses can be used to identify the strengths and weaknesses and assess the effects of each option upon

42、them. Using a simple scoring system (such as +3 to 3) to indicate the intensity of the impact, scores can be attributed to each element for each strategic option. Finally, the results from the assessment of each strategic option can be summarised on a combined matrix. By aggregating the scores the o

43、rganisation will be able to see: Which strategies capitalise on environmental changes, build on strengths and overcome weaknesses, and which do not. Which strategy or strategies, in relation to others, are likely to offer the best way forward.An example of this more approach as it could apply to a p

44、harmaceutical company is illustrated in Figure 9:4. Strategy A Impact analysis of forming alliances with biotech companiesEnvironmental Changes (Opportunities & threats)Increasing industry globalisationEntrance of new technologiesHealth care rationingNew diseases & resistance to antibioticsTotal -St

45、rength or Weakness(+/-)StrengthsLarge sales force0+1+10+2Leading research facilities0+2-2+2+2Global recognition of main product0-1+1+1+1WeaknessesNo competences in biotech or genetics+3+1-1+2+5No new products in line+1+1-1-10Over-reliance on main product0+1+10+2Environmental Impact Scores+4+5-1+4Sui

46、tability of all strategic options identified in impact analysesStrategyExternal ChangesStrengthsWeaknessesSumIncreased global-isationEntry of new tech-nologyHealth care rationingNew diseases& antibiotic resistanceLarge sales forceLeading research facilitiesGlobal recog-nitionof main productNo comps.

47、 in biotechor geneticsNo new products in lineOver-reliance on main productOption AAlliances+4+5-1+4+2+2+1+50+2+24Option BGlobalResearch+3+2+1+10+2+3-1+2-3+10Option COwnBiotech.Capability0+3+2+2-1+20-1+3-1+9Option DImprove on paststrengths0-1+3-30+1+1000+1Figure 9:4 SWOT Analysis: Analysing Suitabili

48、ty of Strategic OptionsSource: adapted from A Jacobs, J Shepherd & G Johnson, “SWOT Analysis” in V Ambrosini et al. Evaluating Techniques of Analysis and Evaluation in Strategic Management, Prentice Hall, 1998A point of caution: whilst the approach uses scores, they are arrived at by a process quali

49、tative judgements so spurious accuracy should not be attributed to the outcomes, the main purpose is to present an assessment about the suitability of each option.IllustrationEASYJET ORDERS UP TO 30 BOEINGSLow-cost airline plans to increase fleet fivefold in attempt to pre-empt competitorsEasyJet, t

50、he UK-based low-cost carrier, is to increase the size of its Boeing fleet fivefold in an attempt to pre-empt competition from rivals such as Ryanair and Go, the British Airways offshoot. EasyJet will announce today that it has placed firm orders for 15 new generation Boeing 737-700s and has taken ou

51、t options on a further 15. The orders are in addition to 12 older generation Boeing 737-300s that EasyJet ordered last year. The airline also plans to start using a further Boeing leased by a Swiss company in which it has taken a stake. This will increase its fleet from seven aircraft to 35 over the

52、 next five years. EasyJets latest order for up to 30 aircraft has a list price of about $1.2bn (720m) although the airline will have a discount on that. The privately-owned company is understood to have financed the deposits on the aircraft from cashflow. Full payment on the first orders will be fin

53、anced by bank loans. In the longer term, EasyJet may issue enhanced equipment trust certificates - bonds secured by the aircraft. EasyJet has no immediate plans for a flotation. Stelios Haji-Ioannou, the heir to a Greek shipping fortune, founded EasyJet in 1995 to take advantage of the liberalisatio

54、n of the European Union aviation market, completed last year. Based at Londons Luton airport, EasyJet began flying to Scotland before extending its network to continental Europe including Amsterdam, Barcelona, Nice and Athens. It has since established a second hub at Liverpool airport, with flights

55、to Amsterdam and Nice. EasyJet is expected to use the new aircraft to start services to Spain, France, the Netherlands, Switzerland or Greece. Mr Haji-Ioannou is understood to be keen to pre-empt Ryanair and Go by flying to routes they do not serve. The three airlines have largely avoided direct com

56、petition with one another. EasyJet has made proposals to Geneva airport to establish a third hub. It has acquired a 40 per cent stake in TEA Switzerland, a charter carrier, which it wants to use to set up a Geneva-based low-cost affiliate. EasyJet can acquire the remainder of TEA if Switzerland conc

57、ludes an open skies agreement with the EU. TEA has five leased Boeing 737s. EasyJet is using one and plans to take on a second. It will return the other three to International Lease Finance Corporation of Los Angeles. Mr Haji-Ioannou is involved in two legal battles. In the UK, he won the right this

58、 year to challenge BAs support for Go, although he failed to win an injunction to prevent Go from operating. In Greece, Mr Haji-Ioannou is being sued by travel agents objecting to his refusal to use their services.Source: M Skapinker, Financial Times, 28 July 1998SAA 1Read the illustration EasyJet O

59、rders up to 30 Boeings and use relevant tools and techniques to comment upon the suitability of the strategy outlined for the company.What additional information would you require to improve upon this assessment?(Note: not all the tools and techniques outlined above can be applied in this case, sele

60、ct those that seem appropriate.)C.ACCEPTABILITYThe assessment of the acceptability of a strategy involves consideration of the anticipated rewards relative to the goals of the organisation. The goals of the organisation are likely to be a reflection of the expectations of its key stakeholder groups.

61、 Anticipated rewards reflect the possible returns of the strategy relative to the risks incurred. In defining the criteria for acceptability consideration should be given to the questions outlined in Figure 9:5.The assessment of the acceptability of a strategy depends upon answers to these questions

62、: What are the expected outcomes of the strategy and are they consistent with stakeholder expectations? Does the strategy look attractive in terms of financial returns and the timescale required for delivery? What are the risks involved in following the strategy and how significant are they?Figure 9:5 Assessing the Acceptability of a StrategyIn assessing stakeholder expectations and their likely reaction to any particular strategy, stakeholder mapping can be of considerable assistance. This technique, outlined in Session 8, allows for an assessment