STRATEGIES, POLICIES AND PLANNING PREMISES PDF

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Class notes on the nature and purpose of strategies and policies, inputs to the organization, the profile of the company, the orientation, values and vision of executives, the present and future external environment, the development of alternative strategies, the evaluation and choice of strategies,...

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STRATEGIES, POLICIES AND PLANNING PREMISES

The nature and purpose of strategies and policies Strategies and policies are closely related. Both give direction, are the framework for plans, are the basis of operational plans and affect all areas of management. The term strategy (which is derived from the Greek word strategists, meaning "general") has been used in different ways. The authors differ in at least one important respect. Some focus on the two endpoints (mission/purpose and goals/goals) and the means to achieve them (policies and plans). Others highlight the means for purpose in the strategic process rather than the ends themselves. Strategyrefers to the determination of the mission (or fundamental purpose) and the basic long-term objectives of an enterprise, followed by the adoption of courses of action and the allocation of the resources needed to achieve those goals. Therefore, the objectives are part of the formulation of the strategy. Policies are statements that guide managers' thinking in decision-making, which ensures that these decisions are made within certain limits. Usually, they do not require action, but are intended to guide managers in their commitment to ultimately make a good decision. The essence of politics is discretion. The strategy, on the other hand, refers to the direction in which human and material resources will be applied to increase the opportunity to achieve the selected objectives. To be effective, strategies and policies must be implemented through plans, with increasing details until you reach the center of the operation. The action plans through which strategies are carried out are known as tactics, and strategies must be supported by effective tactics. Supplies to the organization Industry analysis Porter suggests that formulating a strategy needs to assess the attractiveness of an industry when analyzing the external environment. The focus should be on the type of competition within an industry, the possibility for new companies to enter the market, the availability of substitute products or services and the bargaining positions of suppliers, as well as buyers or customers. Company profile The company profile is almost always the starting point for determining where the company is positioned and where it should go. In such a way that senior management determines the company's mission and clarifies its geographical orientation, as well as whether it should operate in select regions, throughout the

country of origin, or even in different countries. In addition, managers evaluate your company's competitive position. Executive guidance, values and vision The company's profile is composed of people, especially executives; and their orientation and values are important for formulating the strategy. They establish the organizational climate and determine the direction of the company through their vision by answering the following question: "What do we want to become?" Consequently, their values, preferences and risk attitudes should be carefully examined because they have an effect on the strategy. For example, even if the alternative of distributing spirits may seem costsome, executives might decide against that strategy because of the senior management value system that condemns alcoholic beverages. Mission (purpose), main objectives and strategic intent The mission, sometimes also called purpose, is the answer to the question: "What is our business?" The main objectives are the endpoints where the company's activities are directed. Strategic intent is a commitment to winning in the competitive environment. Professors Gary Hamel and C.K. Prahalad analyzed companies that achieved global leadership. They found that these companies had an obsession to win, not only at the highest level, but throughout the organization, this obsession is called strategic intent and is illustrated by the example of Komatsu's intention to "circle Caterpillar", its main Canon's idea of "defeating Xerox," or Honda's intention to become an automotive pioneer, "a second Ford." The authors note that strategic intent requires effort and personal commitment. The declaration of intent is stable over time and focuses on the essence of winning. Present and future external environment The present and future external environment must be evaluated in terms of threats and opportunities. The evaluation focuses on the competitive situation, as well as economic, social, political, legal, demographic and geographical factors. In addition, the environment is examined for technological developments, products and services in the market and other relevant factors in determining the competitive situation of the company. Internal environment Likewise, the internal environment of the company must be audited and evaluated with respect to its resources and strengths, weaknesses in research and development, production, operation, purchases, marketing, products and services. Other important internal factors should be evaluated to formulate a strategy, including human and financial resources, as well as the company's image,

structure and climate of the organization, planning and control system and relationships with Customers. Developing alternative strategies Alternative strategies are developed on the basis of an external and internal environment analysis. An organization can look for very different types of strategies, specialize or concentrate, as the Korean Hyundai did by producing lower-priced cars (in contrast to General Motors, for example, that has a complete product line that goes from cars cheap, to luxury). Under the leadership of Chung Mong Koo, its CEO, the company introduced the competitively priced Santa Fe utility vehicle that was well received in the market. Alternately, a company can diversify by extending its operations to new and profitable markets. Kmart Corporation formed a Specialized Retail Group that included stores such as the Walden Book Company, Builders Square, Designer Depot and PayLess Drug Stores. Another strategy is international expansion to other countries. Other examples of possible strategies are joint investments and appropriate strategic alliances for some companies. In the big business where companies have to gather their resources, as illustrated by the joint investment of General Motors and Toyota to produce small cars in California. In some circumstances, a company may adopt a settlement strategy by terminating an unprofitable product line, or even dissolving the company, as illustrated by the Savings and Loan Associations, or file for bankruptcy, as exemplified by the energy company Enron. But in some cases, settlement may not be necessary, only an entrenchment strategy may be sufficient. In such a situation, the company temporarily cuts its operation. These are just a few examples of possible strategies. In practice, companies, especially large ones, are looking for a combination of strategies. Evaluation and choice of strategies The various strategies need to be carefully evaluated before making the choice. Strategic choices are considered in light of the risks involved in a particular decision. Some redeemable opportunities may not be exploited because failure in a risky project results in the company's failure. Another difficult element when choosing a strategy is the moment. Even the best product can fail if it enters the market at an inappropriate time. Moreover, the reaction of competitors must be taken into consideration. When IBM cut the price of its personal computer in reaction to the success of Apple's Macintosh computer, companies that produced IBM-compatible computers had no choice but to reduce their prices as well. This illustrates the interconnection of business strategies in the same industry. Congruence and contingency planning tests

The last key aspect of the strategic planning process is consistency testing and contingency planning. During all phases of the strategic planning process, congruence testing is essential. Since the future cannot be predicted with a high degree of certainty, it is necessary to have contingency plans prepared. For example, a strategy can be prepared under the assumption that gross national product can increase by 3% per year over the next three years. A contingency plan can also be developed where the scenario includes a major recession. Medium- and short-term planning, implementation through organizing, assigning staff, directing and controlling Although not part of the strategic planning process, medium- and short-term planning as well as plan implementation should be considered throughout all phases of the process. The implementation of the strategy requires organizing, perhaps until the organization undergo a reengineering process, integrating staffing, that is, covering and keeping the positions of the organization structure covered (see part 4) and provide leadership through motivation and effective communication (see part 5). Controls should also be installed to monitor performance against plans (see part 6). The importance of feedback is shown by the curls of the model. These aspects of the implementation of the strategy are discussed later in the work. The FODA matrix: a modern tool for situational analysis Today, strategy designers are assisted by several matrices that showcase critical variable relationships, such as the Boston Consulting Group's portfolio of companies to be analyzed later. For many years, FODA analysis has been used to identify a company's strengths, weaknesses, opportunities, and threats. However, this type of analysis is static and rarely leads to the development of clear alternative strategies based on it. Therefore, the FODA matrix was introduced to analyze the competitive situation of the company or even of a nation leading to the development of four sets of different strategic alternatives. The FODA matrix has a broader scope and different importance than the company portfolio matrix. The first does not replace the second. The FODA matrix is a conceptual framework for systematic analysis that facilitates comparison of threats and external opportunities with the organization's internal strengths and weaknesses. It is common to suggest that companies should identify their strengths and weaknesses, as well as the opportunities and threats of the external environment, but what is often ignored is that combining these factors may require different strategic choices. To systematize these elections, the FODA matrix has been proposed, where F represents strengths; Or, opportunities; D, weaknesses and A, threats. The FODA model starts with threat assessment because in many

situations a company undertakes strategic planning as a result of a perceived crisis, problem or threat. Four alternative strategies Strategies are based on the analysis of the external environment (threats and opportunities) and the internal environment (weaknesses and strengths): 1. The DA strategy seeks to minimize weaknesses and threats and is called the mini-mini strategy (by "minimize-minimize"). You can require the company, for example, to set up a joint investment, be intricate, or even settled. 2. The DO strategy attempts to minimize weaknesses and maximize opportunities. Thus, a company with weaknesses in some areas can develop those same areas within the company or acquire the necessary skills (such as technology or people with the necessary skills) from abroad to allow it to take advantage of opportunities in the external environment. 3. The FA strategy uses the organization's strengths to deal with threats in the environment. The goal is to maximize the first ones, minimizing the latter. Thus, a company can use its technological, financial, managerial or marketing strengths to address threats from a new product introduced to the market by its competitor. 4. The FO strategy, which capitalizes on a company's strengths to seize opportunities, is the most desirable. In truth, it is the goal of companies to move from other positions in the matrix to this one. If they have weaknesses, they will seek to overcome them. Turning them into strengths. If they face threats, they will face them so they can focus on opportunities. Time dimension and the FODA matrix So far, the factors shown in the SWOT matrix refer to the analysis at a particular time. However, internal and external environments are dynamic: some factors change over time, while others do very little. Therefore, strategy designers must prepare multiple matrices at different points intime. Thus, we can start with a SWOT analysis of the past, continue with an analysis of the present, and perhaps, most importantly, focus on different periods (T1, T2, etc.) in the future. Application of the SWOT MIF matrix for mergers, acquisitions, joint investments and partnerships Companies around the world use the FODA matrix; the matrix has also been included in several modern textbooks on strategic management. Recently, the concept of the SWOT matrix was introduced to plan mergers, acquisitions, joint investments, and partnerships. When two partners consider joint activities, it is prudent to analyze each partner's strengths and weaknesses, as well as their opportunities and threats. Moreover, their alternative strategies should be considered before their partnership is considered: these two SWOT matrices

provide a better understanding of potential partners before formalizing ties. For example, complementary strengths and weaknesses could result in a competitive advantage for both companies. On the other hand, repetition and overlap can result in duplication of effort. After evaluating the two matrices, a third must be developed for society. This is of particular importance for acquisitions and mergers due to the relative permanence of the resulting entity. Preparing the three FoDA matrices can lead to potential problems being identified in looser partnerships as a strategic alliance. Blue Ocean Strategy: Looking for Opportunities in an Unpursued Market The analysis of the FODA matrix showed that companies could use their strengths and overcome their weaknesses by seizing opportunities and dealing with threats. It was suggested that the most successful potential strategy was to use the company's strength and seize the opportunities. In the recently published book Blue Ocean Strategy-How to Create Uncontested Market Space and Make the Competition Irrelevant, authors W. Chan Kim and Renee Mauborgne specifically suggest focusing on opportunities that explore unconspored waters ( "Blue Ocean", rather than trying to defeat competition in the existing industry, or the "red ocean," as the authors suggest. The red ocean can be illustrated with the current "bloody" competition in the automotive industry where companies try to be a little better than their competitor by having, for example, a lower cost structure. In contrast, the Blue Ocean strategy can be illustrated by eBay's online auction by entering a market without competitors. Let's take a closer look at the differences between red and blue ocean strategies. Traditional competitive strategies operating in the red ocean, aimed at defeating competition in an existing market. Companies were trying to be better than their competitors. Michael Porter of Harvard suggested that companies have to make a strategic choice between differentiation by offering customers something special, so they are willing to pay an additional price, or have a lower low-cost structure. In contrast, the Blue Ocean strategy focuses on the uncontended market by offering a product or service that is unique in a market space where there is no competitor, making competition irrelevant, as the subtitle of the blue ocean strategy suggests. Rather than competing in an existing demand situation, the Blue Ocean strategy seeks to create and develop a new demand for its products or services. Moreover, the successful company will look for strategies that focus on differentiation and low cost as illustrated with the introduction of the Lexus car that had luxury car differentiation features, but at a lower price. Toyota, the manufacturer of Lexus, thus created value for the buyer. Value innovation is more than just innovation, it is a strategy that requires the whole company to be committed to creating value for the customer by offering something special at a relatively low cost and price.

To capture the blue ocean and make the competition irrelevant, Kim and Mauborgne introduce a diagnostic and action-frame tool called The Strategic Canvas. This tool identifies the relevant factors of an industry in which companies compete. These factors vary from industry to industry. For example, in the airline industry, factors may include the price of air transportation, food, service friendliness, etc. Southwest Airlines, the successful U.S. airline, rates low prices, food, and hub connections. But it rates higher in-service friendliness and flight frequency than other airlines. Since Southwest had little competition in these latter criteria where it earned high ratings, it was looking for a blue ocean strategy. For companies seeking a blue ocean strategy, four actions should be searched. First, identify and eliminate those factors that may not matter to the buyer. Second, if deletion is not an option, consider reducing those factors. Third, elevate or strengthen those factors that are unique. And fourth, create new or new and unique factors that are desired by buyers, but ignored by competitors. This is what Southwest Airlines and other companies did by adopting a blue ocean strategy. The traditional red ocean strategy can be exemplified by the FA strategy (strengths and threats) in which a company uses its strengths to deal with threats created by the competition. Head-to-head competition often results in a bloodbath through a red ocean strategy. In contrast, the FO (strengths-opportunity) strategy in which a company uses its strategies to seize opportunities would be an example of a blue ocean strategy. It is true that in the SWOT matrix the analysis of opportunities was considered in general, while Kim and Mauborgne focus on unique opportunities ignored by competitors. There is another alternative blue ocean strategy, namely the DO strategy, where a company understands its weaknesses and recognizes that one way to overcome weakness is to look for unique opportunities. Often, a company with weaknesses can be in trouble and then feel motivated to look for opportunities that have not been exploited by its competitors with intensity, that is, adopt a blue ocean strategy. While it is not possible to avoid becoming inthe FA strategy, it is prudent for companies to first try to adopt a blue ocean strategy to avoid the bloody confrontation resulting from the FA alternative. The Portfolio Matrix: A Resource Allocation Tool The Boston Consulting Group developed the company portfolio matrix. Companies located in the "question" quadrant, with weak market share and a high growth rate, typically require cash investment to become "stars", companies in the high-growth position and very Competitive. These types of companies have growth opportunities and profits. "Cash cows", with a strong competitive position and low growth rate, are well established in the market and such companies are in a position to produce their products at low costs. Therefore, your products provide the cash necessary for your operation. "Dogs" are low-growth companies with

weak market share. They are usually not redeemable companies and generally have to be rid of. The portfolio matrix was developed for large corporations with several divisions that are often organized around strategic company units. While portfolio analysis was popular in the 1970s, it still had critics who argue that it is too simplistic. In addition, the growth rate criterion has been considered insufficient for the assessment of the importance of an industry. Similarly, market share as a rule for measuring competitive position may be inadequate. Key types of strategies and policies For a business company (and with some modification, also for other types of organizations), the main strategies and policies that give a general direction to the operation, are likely to be in the areas of growth, finance, organization, public relati...