The Strategy Formulation Process Chapter 8 Strategic Assessment: General Principles (c) Macmillan & Tampoe 2001

Purpose of Strategic Assessment Anchors future strategies in reality Relates strategic intent to the present Address both external and internal aspects of context Combine analysis with judgement (c) Macmillan & Tampoe 2001

Analysis Vs. Assessment Assessment is more than analysis Assessment focuses on testing decisions for validity in practice Analysis gives undue weight to what can be measured Assessment takes almost equal notice of quantitative and qualitative data Good assessment should give a balanced understanding of the context (c) Macmillan & Tampoe 2001

Key Elements of Assessment Process External analysis Internal analysis Strategic intent Operational results Strategic choice (c) Macmillan & Tampoe 2001

Figure 8.1 Factors likely to influence Strategic Assessment External Analysis Business Environment, Industry, Competitors & Threats and Opportunities Strategic Intent Strategic Assessment Strategic Choice Trigger Results Internal Analysis Resources, Capabilities & Competencies Strengths and Weaknesses Operational Results (c) Macmillan & Tampoe 2001

Figure 8.2 Reconsidering Strategies Strategy Trigger Strategic Cycle Review Results Action Operational Cycle (c) Macmillan & Tampoe 2001

Questions for Strategic Assessment to address What are our chances of survival if we continue as we are? What are the best opportunities for growth given our existing capabilities? What are our competitive advantages and disadvantages? Where can we invest to improve our capabilities most efficiently? What changes can we realistically implement? (c) Macmillan & Tampoe 2001

Selecting analytical tools Vast range of tools available Usually use several tools but choice is important Choice depends on: Data available Nature of issues to be resolved Time and skills available (c) Macmillan & Tampoe 2001

Figure 8.3 Techniques in use in strategic planning processes Technique % Using Core competencies analysis 72 Scenario Planning 69 Benchmarking 56 Total Quality Management 44 Shareholder Value Analysis 44 Value Chain Analysis 44 Business Process Redesign 33 Time-based Competition 25 Adapted from: Wilson, I. “Strategic Planning Isn’t Dead - it changed” Long Range Planning 1994 (c) Macmillan & Tampoe 2001

Assessing competitive advantage Cost-based advantage Differentiation advantage First mover advantage Time-based advantage Technology-based advantage Corporate advantage (c) Macmillan & Tampoe 2001

Figure 8.4 The Triangle of Corporate Strategy Competitive Advantage Businesses Resources Vision Goals & Objectives 1. Competitve Advantage: Do the resources convey or substantiate competitive advantage in the businesses? Does participation in the businesses help upgrade the resources? 2. Coordination Is the infrastructure in place to enable a firm’s resources to be effectively deployed in its businesses? 3. Control Can the individual businesses be effectively monitored and controlled under the corporate infrastructure? Organization. Systems, Processes Coordination Control Adapted from: Collis, D.J. & Montgomery, C.A. “Creating Corporate Advantage” HBR 98303 (c) Macmillan & Tampoe 2001

Figure 8.5 Successful enterprises tend to make coherent choices Enterprise A Enterprise B Enterprise C Nature of Resources Scope of Business Co-ordination Mechanisms Control Systems Corporate office size general specialised wide narrow transferring sharing financial operating small large Note: There is no one right answer. Adapted from: Collis, D.J. & Montgomery, C.A. “Creating Corporate Advantage” HBR 98303 (c) Macmillan & Tampoe 2001

Figure 8.6 The SWOT diagram may summarise the results of analyses Internal Analyses Strengths Weaknesses Opportunities Threats External Analyses (c) Macmillan & Tampoe 2001

Strategic Assessment of a business as a whole Questions What business are we really in? What real customer needs do we satisfy? What problem do we solve for our customers? (c) Macmillan & Tampoe 2001