1. Strategy in A Complex World
Semester 2 Week 3-4
Making Strategy

2. A number of potential strategic Futures.

3. Risk trade-offs between Strategic Paths

4. Option Development and evaluation process

5. Strategic Alternatives
Mimic Competitors
Balance Strengths/Weaknesses
Seek new businesses/markets
‘Breakthrough’ or ‘Outpacing’ Strategy 16 20

6. Strategic Alternative
Withdraw
Reserve “Right to Play”
Feints and Spoiling actions
Neutralize competition (acquisitions, litigation) 16 20

7. Capabilities & intellectual resources:
Physical resources
Available within firm or on open market
Financial resources:
Cash and cashflow
Ability to borrow funds or issue equity
Assets that can be sold
Improved working capital management
Capabilities & intellectual resources:
Existing resources
Capacity to learn and innovate

8. RESOURCES
Human resources
Existing staff (training needs?)
Recruitment (are skills available?)
Reputational assets
Established brands (where important)
Reputations established in other businesses
Relational assets
Relationships with local administrations, opinion formers, alliance partners
Time
to outpace competitors
to deliver results to stakeholders

9. Will option be acceptable to key stakeholders?
Does it meet requirements of controlling stakeholders:
Growth, financial returns, risk, ethics
Does it upset other powerful stakeholders
Top managers, staff, competitors …
Loss of power, status, money
Changes to existing “relational contracts”
Can change be “managed” without a damaging conflict

10. Is the option coherent... ...within itself? ...with rest of strategy?
Brand values and reputation:
Culture/architecture
Value chain & resources
...with rest of strategy?
retained elements of existing strategy
other new proposals
Note: ‘coherent with’ ≠ ‘same as’

11. Strategic Improvements
Change competitive stance:
Move resources between businesses
Reposition product up/down-market
Change value chain
Enhance cost-effectiveness, reliability
Change architecture, e.g.:
Improve information gathering and communication
Enhance motivation
Usually need to change all three together to keep strategy “consistent”

12. Evaluating strategic options: The RACES criteria
RESOURCES
ACCEPTABLE
COHERENT
EFFECTIVE
SUSTAINABLE
Does firm have?
Will the proposal be to key stakeholders?
Is this option with rest of strategy?
Will proposal be in resolving targeted issues?
Will the proposal deliver a competitive advantage?

13. Operational Excelence Financial Perspective Increase ShareHolder Value
Strategic Maps
Customer Intimacy
Technology Driven
Operational Excelence
Customer Perspective
Trusted Advisor
Deliver Added Value
Flexible Solutions
Frequent Repeat Business
Internal Perspective
Capture and Utilise Knowledge
Build Sustainable Relationships
Integrate Processes
Effective Cost Management
Improve Resource Management
Learning and Growth Perspective
Develop Relationship Skills
Improve Industry Knowledge
Engender Innovation
More Succesful Career Planning
Operational Management Skills
Financial Perspective
Increase ShareHolder Value
Add New Revenue Stream

14. Appraising the strategic importance of resources and capabilities14
©2012 Robert M. Grant & Judith Jordan

15. The links among resources, capabilities and competitive advantage
©2012 Robert M. Grant & Judith Jordan

16. Analysing resources and capabilities: the interface between strategy and the firm
©2012 Robert M. Grant & Judith Jordan

17. FOR REFERENCE

18. Effectiveness and sustainability
Will proposal be effective in resolving targeted issues?
Does the proposal stand up to detailed analysis of the competitive context…
Fit with industry success and survival factors
Does it achieve adequate financial returns?
Will the proposal deliver a sustainable competitive advantage?
Will valuable strategic resources result

19. Why firms Merge or Acquire
Horizontal mergers in mature industries:
Reduce competition, buy time to restructure
Synergies; enhanced legitimacy and bargaining power
Consolidator strategy in fragmented industry
scale, reach, reputational assets, pricing power
Geographic roll-up; product or market extension
Industry convergence
Resource acquisition (often of small firms)
Boost target’s cashflow and profits
Improved asset management
Managers’ power and status – or fear of losing them

20. Balancing the different criteria
Rarely a clear ‘winning option’
Option should normally be rejected if:
resources clearly not available or obtainable
Effectiveness low
Frequently a trade-off between acceptability and effectiveness:
Options that work best in market may involve uncomfortable organizational change
Not all proposals expected to meet sustainability criterion – but those that do merit preference

21. Divestment may be an option
Liquidation
Sale to an external buyer
Float-offs
Management buy-outs and management buy-ins.

22. Advantages of management buy-outs