1. Chapter 6 Santiago Ibarreche © S. Ibarreche 2015 1

2. 2 Sub-processElementsToolsOutcome Strategic Planning Revision of Vision, Mission and Purpose Basic Questions for Elements of a Mission Statement Reaffirmation or Change of Mission Statement Environmental Scanning Questionnaires for External and Internal Factor Evaluation IFE and EFE matrices Determination of External Threats and Opportunities and Internal Strengths and Weaknesses Summary SWOT Matrix Environmental Summary Summary of Strategic Options and Possible Strategies Strategy Formation Idea GenerationCreativity Tools Alternatives for Strategies Nurturing of Strategies Idea Harvesting Definition of Options Models for Strategic Options BCG, IE, etc. Strategy Implementation Analysis of Options and Selection of Strategies Scenario Analysis Financial Analysis Market Analysis Main Strategies Competitive Strategies Functional Strategies Changes to the Organization Organization Theory Business Process Re-engineering Plans of Action Policies and Procedures Training and Resource Development Development of Aptitudes and Attitudes Capacity for action Organization Chart and Responsibilities Instrumentation, Implantation and Leadership Plans of action Measuring Systems and Processes Teamwork and Empowerment Quality Actions and Results Outcome Measures Strategy Evaluation Organization for learning Measuring Systems and Information Technology Feedback Information and Control Systems Continuous Improvement Flexibility by Design

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4.  Under the organization’s control:  Strengths  Weaknesses Analysis through the IFE (Internal Factor Evaluation) Matrix  Perceived by but NOT under the organization’s control:  Opportunities  Threats Analysis through the EFE (External Factor Evaluation) Matrix © S. Ibarreche 2015 4

5.  SO (Strength and Opportunities)  Strategies that use the strengths of the organization to take advantage of opportunities  ST (Strengths and Threats)  Strategies that use the strengths of the organization to prevent or minimize the potential effects of threats  WO (Weaknesses and Opportunities)  Strategies in which we strengthen our weak points to take advantage of opportunities or take opportunities in the environment to strengthen our weaknesses  WT (Weakness and Threats)  Strategies in which we prevent the increase of the effects of threats because of our weaknesses © S. Ibarreche 2015 5

6. 6 Table: SWOT Analysis only mentioning issues StrengthsWeaknesses  Strong Engineering Team  Extensive Dealer Network  High Productivity  Poor Financial Performance  Uneven Performance in some Geographic Areas  Poor Cash Flow OpportunitiesThreats  Growth Potential in Asian Countries  Increasing Demand for Hybrid Electric Gasoline Vehicles  Growing demand for trucks worldwide  Ongoing Economic Recession in USA and Europe  Automotive Industry Slow Growth  Intense Competition Specially from Asia Source: Ford Motor Company reports (several) developed by the author

7. © S. Ibarreche 2015 7 Issues Under Control  StrengthsWeaknesses Issues not under control  1.Strong Engineering Team 2.Extensive Dealer Network 3.High Productivity 1.Poor Financial Performance 2.Uneven Performance in some Geographic Areas 3.Poor Cash Flow OpportunitiesSO StrategiesWO Strategies 1.Growth Potential in Asian Countries 2.Increasing Demand for Hybrid Electric Gasoline Vehicles 3.Growing demand for trucks worldwide  Develop Models exclusive for Asian markets (S1, S3, O1)  …  Give special discounts for hybrid cars that are paid in cash (W2, W3, O2)  … ThreatsST StrategiesWT Strategies 1.Ongoing Economic Recession in USA and Europe 2.Automotive Industry Slow Growth 3.Intense Competition Specially from Asia  Take advantage of tax and financial government incentives in USA an Europe (S2, T1, T2)  …  Close dealerships in areas where there is no financial productivity (W1, W2, T1, T2)  … Source: Ford Motor Company reports (several) developed by the author

8.  Our own experiences and the success or failure of strategies in the past  Content and Context analysis  The industry or experiences from competitors  Acceptance of Humility  Experiences with similar situations in different sectors of the economy or other organizations  Adaptation and possibility of Adoption  Theory  Fundamental questions  Creativity and Innovation  Understanding the process © S. Ibarreche 2015 8

9.  “Creativity is the process of discovery, definition, development, and maturation of new ideas and Concepts.”  There is a need for creativity Changes in the environment Opportunities Threats Matching (SWOT)  Some paradoxes:  “Why re-invent the wheel”  “Not Invented Here” © S. Ibarreche 2015 9

10.  Types of Creativity:  Different type on a continuum whose extremes are: radical new ideas generating a constant change of solutions for the same problem Artistic Type new forms of framing the same solution in a better format Resourceful Type © S. Ibarreche 2015 10

11.  Main Obstacles to Creativity:  Individual’s obstacles: 1. The Right Answer 2. That’s Not Logical 3. Follow the Rules 4. Be Practical 5. Play Is Frivolous 6. That’s Not My Area 7. Avoid Ambiguity 8. Don’t Be Foolish 9. To Err Is Wrong 10. I’m Not Creative (Source: von Oech (1990)) © S. Ibarreche 2015 11

12.  Main Obstacles to Creativity:  Organizational obstacles:  Highly structured procedures Emphasis in the process instead of the purpose  Lack of time available to creative projects Emphasis in what is not in what it can be “just do what they ask you to do”  Not knowing the talent in the organization Only explicit knowledge matters © S. Ibarreche 2015 12

13.  Steps to create creative environments:  Remove or reduce obstacles  Match jobs to individual’s creative abilities  Tolerate failure and establish direction  Improve motivation to increase productivity and solve problems creatively  Enhance the self-esteem and build the confidence of organization members  Improve communications so that ideas can better be shared  Place highly creative people in special jobs and provide training to take advantage of their creativity  Source: Evans (2012) © S. Ibarreche 2015 13

14.  Types of Ideas to Harvest:  Specific Ideas directly related to the main question(s)  General concepts related directly to the question(s)  Specific ideas tangentially related to the main question(s)  “For example” ideas.  Exceptions.  Seedling ideas  Rejected ideas. © S. Ibarreche 2015 14

15.  Fifth Rule:  “Ideas without actions are worthless”  Process:  Flesh out the idea Examples, Scenarios, related ideas Structure, process and purpose  Implementing the idea Instrumentation Implantation Follow up © S. Ibarreche 2015 15

16.  General Caveats to Matching Schemes (IFE, EFE, BCG, SPACE, etc.)  They are Instruments to help in the definition of potential goals and strategies  Each situation is different and each individual will have a different appreciation of reality. Consider the Assumptions  Scores and other results are subject to Interpretation  Formulating these matrices is often more important than the final result © S. Ibarreche 2015 16

17. © S. Ibarreche 2015 17 Concept Relative Weight RankingTotal Score Opportunities Growth Potential in Asian Countries 10%30.30 Increasing Demand for Hybrid Electric Gasoline Vehicles 15%40.45 Growing Demand for Trucks Worldwide 13%40.42 U. S. Government Attitude Toward Industry 10% 3 0.30 Threats Ongoing Economic Recession in USA and Europe 25%10.25 Automotive Industry Slow Growth 10%20.20 Intense Competition Specially from Asia 17%10.17 TOTAL 100% 2.09 Source: Ford Motor Company reports (several) developed by the author [1] [1] The information is available at http://www.ford.com/about-ford/investor-relations/company-reports. Also there are public reports for all public companies at the Securities and Exchange Commission (SEC) site under the EDGAR information system. This system is accessible through the network at http://www.sec.gov/edgar.shtml.http://www.ford.com/about-ford/investor-relations/company-reportshttp://www.sec.gov/edgar.shtml

18. © S. Ibarreche 2015 18 ConceptRelative WeightRankingTotal Score Strengths Strong Engineering Team 20%30.60 Extensive Dealer Network 15%30.45 High Productivity 15%30.45 Weaknesses Poor Financial Performance 10%10.10 Uneven Performance in some Geographic Areas 20%20.40 Poor Cash Flow 17%20.34 Bad Image of Brand 3%20.06 TOTAL 100% 2.40 Source: Created by the Author with Publicly Available Data [1] [1] The information is available at http://www.ford.com/about-ford/investor-relations/company-reports. Also there are public reports for all public companies at the Securities and Exchange Commission (SEC) site under the EDGAR information system.http://www.ford.com/about-ford/investor-relations/company-reports This system is accessible through the network at http://www.sec.gov/edgar.shtml.http://www.sec.gov/edgar.shtml

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22.  How we define the market  High market share not always leads to high profit  The market includes only two dimensions in its definition of market, growth rate and market share  Neglect of the interaction effect (normally synergistic) of relations between business units  There are other measures different than market growth that may better measure the level of attractiveness of a market © S. Ibarreche 2015 22

23.  SPACE (Strategic Position and Action Evaluation) Matrix  Some possible interaction included: Competitive Advantage (CA) is balanced or countered by Industry Strength (IS); the net result is plotted in the x axis Financial Strength (FS) is countered by Environmental Stability (ES); the net result is plotted in the y axis  Other Analytic tools from Econometric, Statistical Analysis, and Financial Analysis © S. Ibarreche 2015 23