Strategies, Policies and Planning Premises

Strategies, Policies and Planning Premises

Learning ObjectivesThe nature and purpose of strategies and policiesThe strategic planning process which identifies the

aspect of formulating a strategyTool for systematically integrating internal and

external factors (“TOWS Matrix”)Tool for allocating resources (“Portfolio Matrix”)Major kinds of strategies and policiesIdentify Porter’s generic strengthsMake recommendation for effective implementation

of strategiesThe nature and types of premises and forecastsMake premising effective

IntroductionToday most business enterprises engage in strategic

planning, although the degree of sophistication and formality vary considerably. Conceptual strategic planning is deceptively simple: Analyze the current and future situation, determine the direction of the firm and develop the means of achieving the mission. In reality, this is an extremely complex process which demands a systematic approach for identifying and analyzing the factors extensively for the organization and matching them with the firm’s capabilities.

StrategyStrategy, a word of military origin, refers to a plan of action designed to achieve a particular goal.First attested in English 1810, the term strategy”, derived from the Greek word strategos, means to achieve the end points.

Policy

A policy is typically described as a principle or rule to guide decisions and achieve rational outcome(s).

It guides us in decision making.

Differences between Policies and Strategies

Policies Strategies 1. A policy is typically described as a principle or rule to guide decisions and achieve rational outcome(s).

A plan, or method of approach developed by an individual, group, or organization, in an effort to successfully achieve an overall goal or objective

2. The essence of policy is discretion

It concerns the direction in which human and material resources will be applied in order to increase the chance of achieving the selected objectives

3. It will guide our thinking in decision making – if a decision is to be made.

It implies that the that the enterprise has made to commit resources in a given direction.

Few Similarities

Strategies and policies are closely related. The key function is to unify and form the framework for the

plans Both are the basis of the operational plans Both affects the areas of managing

But standing alone, can they ensure that an organization will reach its goal?

The more carefully developed and clearly understood strategies and policies are, the more consistent and effective the ensuing plans will be .

Strategic Planning Process

TOWS MatrixThis is a conceptual framework for a

systematic analysis that facilitates matching external threats(T) and opportunities(O) with the internal weakness (W)and strengths(S) of organization.

It is a tool which helps in analyzing the situation.

TOWS MATRIX: CONTDThere are four alternative strategies based on the analysis of external environment( T & O) and internal environment( W & S):

WT(W and T decreased)WO(W is decreased and O is increased)ST(S is maximized and T is minimized)SO(aim of enterprise is move to this part of matrix)

The Tows Matrix For Strategy Formulation

Internal Factors

ExternalFactors

Internal Strengths (S) e.g. strengths in mgmt, operations, finance, marketing, engineering

Internal weaknesses e.g. Weaknesses in areas showing areas shown in the box of strengths

External Opportunities(O):e.g.. current and economic future conditions, political and social changes, new products, services and technology

SO Strategy: Maxi – MaxiPotentially the most successful strategy, utilizing the organization’s strengths to take advantage of opportunities

WO Strategy: Maxi – Maxie.g. development strategies to overcome weaknesses in order to take advantage of opportunities.

External Threats(T): e.g. lack of energy, competition and areas similar to those shown in the opportunities box above

ST Strategy: Maxi – Minie.g. use of strengths to cope with threats or to avoid threats

WT Strategy: Maxi – Minie.g.. retrenchment, liquidation or joint ventures.

Time Dimension and the TOWS Matrix

So far, the TOWS Matrix is pertained to analysis of particular point of time. External and internal factors are dynamic. Hence, these factors change over while others change very little.

Because of the dynamics in the environment, TOWS Matrix is designed at different points of time

Thus, one may start with past, continue with present and focus on different time periods of future.

The Portfolio MatrixDeveloped by Boston consultancy groupShows the link between growth rate of

business and relative competitive position

Stars Question marks

Cash Cows Dogs

Strong

High

Low

Weak

Relative Comptetion Position

Major Kinds of Strategies and Policies

GrowthFinanceOrganization PersonnelPublic relationsProducts or servicesMarketing

Generic CompetitiveStrategies by Porter

It suits all levels and different kind of organizations

Overall cost leadership strategyDifferentiation strategyFocused strategy

Effective Implementation of Strategies

Strategic planning may fail becauseManagers are inadequately preparedInformation is insufficient for planningGoals are too vagueBusiness units are not clearly identifiedReviews are not done effectively

Successful Implementation of Strategies

Communication of strategies to all key decision making managers

Developing and communicating planning premisesAction plans contributing to and reflecting major

objectives and strategiesRegular review of strategyDevelopment of contingency strategies and programsMaking organization structure fit planning needsContinuing emphasis on planning and implementing

strategyCreating a company climate that forces planning

Premising and forecastingPlanning premises are defined as anticipate the

environment which plans are expected to operate

They also includes assumptions or forecasts of future known conditions that will effect the operation plans

Forecasting with accuracy is more complicated one

Values and areas of forecastAreas include economic, social, political, legal

and technological

Forecasting with the Delphi Technique

Developed by Olaf Helmer and his colleagues at RAND cooperation

Convergence of opinion begins to evolve then the results are acceptable forecast

The sales forecast:

Why it is important?

Methods of sales forecastJury of executive opinionSales force compositeUser’s expectationStatistical methodsDeductive methodsCombination of methods

Effective Premising:Selection of the best premiseDevelopment of alternating premises for

contingency planningAssurance that premises are consistentCommunication of the premises

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