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© 2008 Weihrich and Cannice Chapter 5. Strategies, Policies, and Planning Premises 1
MANAGEMENT: A GLOBAL AND ENTREPRENEURIAL PERSPECTIVE by Weihrich, Cannice, and Koontz
Strategies, Policies, and Planning Premises
Chapter
5
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KEY IDEAS AND CONCEPTS FOR REVIEW
• Strategy• Policy• Tactics• Key elements in the
strategic planning process
• TOWS Matrix by Weihrich
• TOWS Merger Matrix• Blue ocean strategy
• Portfolio matrix by the Boston Consulting Group
• Major kinds of strategies
• Hierarchy of strategies• Porter’s generic
strategies• Planning premises• Environmental
forecasting• Delphi technique
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After studying this chapter, you should understand:
1. The mission, strategies, and policies.2. The strategic planning process.3. The TOWS Matrix and the business portfolio
matrix.4. Some major kinds of strategies/policies and the
hierarchy of strategies.5. Porter's generic strategies.6. The nature of premises and forecasts.
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Definition of Strategy and Policies
• Strategy is the determination of the mission (or the fundamental purpose) and the basic long-term objectives of an enterprise, and the adoption of courses of action and allocation of resources necessary to achieve these aims.
• Policies are general statements or understandings that guide managers' thinking in decision making.
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Fig. 5-1 The Strategic Planning Process
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The Strategic Planning Process (Figure 5-1)
• Inputs to the organization• Industry analysis• Enterprise profile• Orientation, values, and vision• Mission (purpose), major objectives, and
strategic intent• Present and future external environment• Internal environment
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The Strategic Planning Process – cont.
• Development of alternative strategies• Evaluation and choice of strategies• Medium- and short-range planning• Implementation through reengineering,
staffing, leadership, and control• Consistency testing and contingency
planning
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Mission, Objectives, and Strategic Intent
• Mission relates to the kind of business.• Objectives are the end points for
activities. • Strategic intent is the commitment to
win in the competitive environment.
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Definition of the TOWS Matrix
• The TOWS Matrix is a conceptual framework for a systematic analysis that facilitates matching the external threats and opportunities with the internal weaknesses and strengths of the organization.
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Fig. 5-2 TOWS Matrix for Strategy Formulation
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TOWS Matrix: 4 Alternative Strategies
• SO strategy: Maxi–Maxi• WO strategy: Mini–Maxi• ST strategy: Maxi–Mini• WT strategy: Mini–Mini
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Fig. 5-3 Dynamics of the TOWS Matrix
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Application of the TOWS Matrix for Mergers, Acquisitions, Joint Ventures, and Alliances
• Develop a TOWS Matrix for both companies before the merger, etc.
• Develop a TOWS Matrix of the joint company after the merger, etc.
• See Illustration of DaimlerChrysler merger in the closing section of Part 2
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Blue Ocean Strategy by Kim & Mauborgne and TOWS Matrix by Weihrich
• Explore opportunities in uncontested markets (Opportunities in the TOWS Matrix) Example: Southwest Airline
• Be aware of competition in red ocean markets (bloody competition). Example, today’s personal computers
• Value innovation: total company commitment to create value for the customer
• Blue ocean strategy and the TOWS Matrix (SO or WO strategies in uncontested markets)
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Fig. 5-4 Business Portfolio Matrix
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Business Portfolio Matrix
• Two dimensions– Relative competitive position (market share)– Business growth rate
• Four positions– Question marks– Stars– Cash cows– Dogs
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Major Kinds of Strategies and Policies
• Products or Services– What are some of the key questions to
ask?• Marketing
– What are some of the key questions to ask?
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Hierarchy of Company Strategies
• The corporate-level strategy. Executives craft the overall strategy for a diversified company.
• Business strategies are developed usually by the general manager of a business unit.
• Functional strategies. The aim is to support the business and corporate strategies.
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Five Forces in Industry Analysis (Porter)
• The competition among companies• The threat of new companies entering
the market • The possibility of using substitute
products or services • The bargaining power of suppliers • The bargaining power of the buyers or
customers
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Porter’s Generic Strategies
• Overall Cost Leadership Strategy • Differentiation Strategy • Focused Strategy (low cost or
differentiation)
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Premising and Forecasting
• Planning premises are the anticipated environments in which plans are expected to operate.
• Environmental Forecasting– Values and areas of forecasting– Forecasting with the Delphi technique
• What are the typical steps of the technique?