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By T.M.JayasekeraAbout strategy and the process Q1. What is meant by strategy and indicate its importance in changing environments Indicate the process of strategic Management and explain a model you know of Describe and compare Business and corporate strategiesIntended and emergent strategies Realized and unrealized Strategies About external and Internal environmental AnalysisQ2. Carry out External environmental analysis and Internal Environmental Analysis and a SWOT analysis Explain clearly why you do an environmental analysis Identify key strategic issues at macro ,Industry and micro levels Identify unique resources and core competencies available to the co in the Case Critically analyze and discuss the external environment of the co in the caseAbout strategic options and strategic Choice Q3. What are strategic options available and what id strategic Choice? Identify methods and models you know of developing strategic options for a companyIdentify corporate strategic options available to the co in the caseIdentify the Business strategic options available to the co in the caseIdentify the most suitable option that McDonalds should consider using SAF criteria.

Typology of questions Business Strategy ExaminationExam is based on a Case study from your text Case is available for collection from office Open Book examcan bring in ANY written/printed materialTextbooks, Workbook, Preparation Notescan NOT bring in PC, PDA, mobile phone3What will be in the exam?THREE questions in 2 hours (each question worth 20,30 and 50 marks)Questions may relate to anything covered in the module but you will need to draw definite conclusions / recommendations and provide citations from the case and examples that you know of Key to success iscareful preparation => concise set of notes containing your analysis, findings, conclusions and recommendation etc4The best answers show mature judgementFocus on a few key RELEVANT points and develop them IN DEPTHUse theory as basis of precise analysisBut dont regurgitate it without applying itConsider trade-offs, risks, limitations etcJUSTIFY your views / decisions byreferring to the findings of your analysis including calculation derived from data provided in casetheoryreferring to examples in case and examples discussed in the class or any othersClear CONCLUSIONS Questions may require you to combine the results of several analytical tools to form conclusions5You shouldSpend time fully analysing the case before the examSee the Guide for Case Study Analysis which is in your workbooksBring a concise set of notes containing your analysis, findings, conclusions and recommendations into the exam with you6Q1. What is meant by strategy and indicate its importance in changing environments A. Indicate the process of strategic Management and explain a model you know of B. Describe and compare Business and corporate strategiesC. Intended and emergent strategies D.Realized and unrealized Strategies

About strategy and the process

Strategies are needed in order to 'attract and please customers, conduct operations, grow the business and achieve performance objectives'(Gamble,2009). As they are essential to any business they differ in their application due external and internal factors. Nowadays it is even more important to operate profitable strategies due to increasing changes (e.g. the demand for a product). McGreevy (2008) states: 'change often occurs in an apparently spontaneous and unplanned or emergent way.

What is strategyStrategyStrategy is:A match an organization makes with environmentsan integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantagea game plan to restore the firms ability to earn above-average returnsan outline of how a business intends to achieve its goals.9What is strategyStrategy is the match an organization makes with the environment Hofer and Schendel The definition of strategyStrategy is the direction and scope of an organization over the long term which achieves advantage for the organization through its configuration of resources within a changing environment and to fulfil stakeholder expectations Johnson and Scholes The nature of strategy and Strategic Decisions What types of issues are strategic and what distinguishes these from other types of issues in organizations such as those regarded as operational can be identified from following characteristics of strategic decisions Characteristics of Strategic Decisions 1. Strategy is likely to be concerned with the long term direction of an organization 2.Strategic Decisions are normally about trying to achieve some advantage for the organization over competition 3. Strategic decisions are likely to be concerned with the scope of an organizations activities 4. strategy can be seen as matching(or Fit) of the resources and activities of an organization to the environment in which it operates 5.Strategy can also be seen as building on or stretching an organizations resources and competencies to create opportunities or to capitalize on them

Characteristics of Strategic Decisions 6. Strategy is about major resource change 7. strategic decisions affect operational decisions 8 Strategy is about values and expectations of key stakeholdersStrategic management process 1.Establishing organizational directionMission, Goals and Objectives 2.a. Company Analysis 2.b.Environmental Analysis 3.Strategy Formulation 4.Strategy Implementation5.Strategic Control and review Adapted from Certo and Peter- 1990 Strategic management Model- Wheelan and Hunger External EnvironmentTask EnvSocietal Env Internal Environment Structure Culture Resources Strategy FormulationMissionGoals Object-ives strategyPolicies

Strategy Implementation

Programmes Budgets Procedures St.Evaluation and Control

Performance Feed Back The strategic management process

17A model of the elements of strategic management

Strategic ManagementStrategic management is the study of why some firms outperform others:how to compete in order to create competitive advantages in the marketplacehow to create competitive advantages in the marketplace.19The challenge of strategic managementStrategic management process:the full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above-average returnsconventional sources of competitive advantages no longer guarantee successthe fundamental nature of competition is changing constantlythe pace of change is relentless and is becoming increasingly complex.

20Task of managing is to produce, or allow to emerge, a posture and position that will yield performance in the long term that satisfies the needs of all stakeholdersEmergent strategyIntended and Emergent strategiesMintzberg published a study focussing on deliberate and emergent strategies in 1985. Strategies can be deliberate (realised or intended) or emergent. 'Patterns or consistencies realised despite intentions '(Mintzberg,1985) The two strategies form the poles of a continuumIntended and Emergent strategiesAn emergent strategy evolves around intentions that resulted out of unintended processes. Mintzberg reminds that it does not have to be that management is out of control, but willing to learn.

McGreevy applied the concept of emergent strategies and stated that organisations need to be adaptive in order to change their 'behaviour in response to its environment' (2008).

For example Coach operates in an industry heavily influenced by changing customer tastes and has to adapt to their customers quickly in order to sell handbags. A planned strategy would not work.An imposed strategy (Mintzberg,1985), where the environment directly influences the strategy, can be partly applied. This is due to the fact that Coach has to keep pace with changing trends by observing the whole development of the fashion industry.

The basic concept of strategy is that it is pre-planned in nature and is given a proper shape after a lot of brainstorming. Intended strategy is nothing but a plan or an intended course of action thought to be most suitable for achieving predetermined corporate goals. An intended strategy is planned and deliberate. It is the set of intentional acts that is contemplated and planned to accomplish a goal. An intended strategy is also sometimes called a deliberate strategy.Intended and Emergent strategiesThe planned or deliberate strategy has a precise intention and realised exactly as intended. But eliminating the impact of all uncontrollables is nearly impossible. In a world of constant change there were many example events in the past that were merely unforeseeable. For instance, the terrorism attack on 9/11, the credit crunch (although it was predicted before by some critics) or even the volcanic ashes spreading over Europe from Iceland. Events happen outside the control of an organisation; therefore even a well-planned strategy has the potential to fail.

The basic concept of strategy is that it is pre-planned in nature and is given a proper shape after a lot of brainstorming. Intended strategy is nothing but a plan or an intended course of action thought to be most suitable for achieving predetermined corporate goals.

An intended strategy is planned and deliberate. It is the set of intentional acts that is contemplated and planned to accomplish a goal. An intended strategy is also sometimes called a deliberate strategy.

Intended and Emergent strategiesThe real life scenario is however quite different from what is envisaged by planners as new opportunities and threats continually seem to unfold every day.

Strategy should be as dynamic as the real world scenario and must be adaptable to changing equations.Intended and Emergent strategiesHenry Mintzberg who coined the word emergent while describing the continuous evolution of corporate strategy of an organisation as it not only strived to keep pace with but also attempted to overtake the external environment to reach the pre-determined targets.

Whenever the intended strategy fails to produce the desired results, an automatic introspection and a process of enquiry and learning is triggered within an organisation which evaluates and analyses the intended strategy and its applicability in the current market scenario in great detail.

Intended and Emergent strategiesMintzbergs view on StrategyIntended strategyDeliberate strategyRealised strategyUnrealised strategyEmergent strategyA postureA positionA perspectiveA perfectly deliberate and intended strategy must satisfy 3 conditions: Precise and articulated intentions must exist in a concrete level of detail Seeing organizations as collective action, intention must be common knowledge to virtually all the actors in the organization. These collective intentions must have been realized exactly as intended - (also meaning that no external forces could have interfered with them).

Deliberate strategy: A perfectly emergent strategy is characterised by order, but in the absence of intention about it.

It is although difficult to imagine action in the total absence of intention. Emergent strategy does not mean chaos, but in essence unintended order The planned or deliberate strategy has a precise intention and realised exactly as intended. But eliminating the impact of all uncontrollable is nearly impossible.

In a world of constant change there were many example events in the past that were merely unforeseeable.

For instance, the terrorism attack on 9/11, the credit crunch (although it was predicted before by some critics) or even the volcanic ashes spreading over Europe from Iceland. Events happen outside the control of an organisation; therefore even a well-planned strategy has the potential to fail.

Emergent strategy:Business-level strategyStrategyan integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.Business-level strategyan integrated and coordinated set of commitments and actions designed to gain a competitive advantage by exploiting core competencies in specific, individual product markets.Copyright 2011 Cengage Learning Pty Limited31Business-levelstrategyWhich good or service to offer customers?How tomanufacture or create it?How todistribute it?Business-level strategy (cont.)Indicates choices the firms make to compete in individual product/service marketKey issuesCopyright 2011 Cengage Learning Pty LimitedBusiness-level strategy (cont.)Customers: business-level strategic issuesin selecting a business-level strategy, the firm determines:who will be servedwhat needs those target customers have that it will satisfyhow those needs will be satisfied.an exampleDells strategy to satisfy customer needs and manage its relationships with customers.Copyright 2011 Cengage Learning Pty Limited33Two levels of strategyBusiness-level strategy (competitive)each business unit chooses a business-level strategy to achieve strategic competitiveness and earn above-average returns.

Corporate-level strategy (company-wide)strategy options taken by a corporate entity to gain competitive advantage through the management of a mix of businesses competing in several industries or product markets and geographic locations.Copyright 2011 Cengage Learning Pty Limited34Corporate-level strategyA corporate-level strategy is concerned with two key questions:What business should the firm be in?How should the corporate office manage its group of businesses?

Corporate level strategies are aimed to enhance a firms strategic competitiveness and contribute to earn above average returns.

35END of Q1 Q2. Carry out External environmental analysis and Internal Environmental Analysis and a SWOT analysis Explain clearly why you do an environmental analysis Identify key strategic issues at macro ,Industry and micro levels Identify unique resources and core competencies available to Mc Donalds Critically analyze and discuss the external environment of McDonalds

About external and Internal environmental Analysis

The external environment for a company covers many aspects. The environment covers two main areas:the macro-environmentthe micro-environment.The macro-environment consists of forces such social, cultural, legal, economic, political and technological. Within this are included factors such as demographics, green issues and larger societal and environmental forces. The micro-environment includes otherenvironmental constraints, such as the structure of the market, the suppliers, and customers, trends of the market, the public and competitionExternal analysisA firms environment represents all of the internal and external forces, factors, or conditions that exert some degree of impact on the strategies, decisions, and actions taken by the firm (Pitts and Lei, 1996). The purpose of an external environment analysis is to identify or develop a finite list of opportunities that could benefit a firm and threats that could be avoided. The term finite suggests that the external audit or analysis is not aimed at developing an exhaustive list of every possible factor that could influence the business; rather it is aimed at identifying key variables that offer actionable responses. Firms should be able to respond either offensively or defensively to the factors by formulating strategies that take advantage of external opportunities or that minimise the impact of potential threats (David, 1999). External analysis can be divided into macro-environment and industry analyses. Why Ext.environmental analysisPolitical:The international operations of McDonalds are highly influenced by the individual state policies enforced by each government.EconomicMcDonalds has the tendency to experience hardship in instances where the economy of the respective states is hit by inflation and changes in the exchange rates.Market leader.Very high target market.Low cost and more incomes.The rate at which the economy of that particular state grows determines the purchasing power of the consumers in that country.SocialWorking within many social groups.Increase employmentsTechnologicalAdvanced technology development.EnvironmentalEnvironmental Standards Quality packing.Local manufacture using foreign supplies.LegalLegislation for product Sustained Logo

PESTEL AnalysisAt the micro level structure and life cycle of the market, attractiveness of the industry, competitor analysis should be carried out in addition to the Five Forces Analysis (Industry Analysis)FIVE FORCES ANALYSISAccording to Porter there are five competitive forces that will govern the rules ofcompetition and these rules will prevail in any industry both in domestic and international markets. The five forces are:the entry of new competition to the marketthe threat of substitutes or replacement productsthe bargaining power of buyersthe bargaining power of suppliersthe rivalry between firms of the same sector.The concentration of firms within the fast food industry is low due to the establishedpresence of McDonalds, Burger King and KFC. However, in certain markets, McDonalds will face competition from established domestic fast-food outlets.

MICRO Level analysisSocio-cultural Environment Immigration ratesAttitudes towards governmentEthical concernsRacial equalityAttitudes towards customer serviceAttitudes towards authorityLife stylesDemographics

Managers aware of values & ideas of different cultural groupsTechnological Environment Product innovationAutomationInformation technologyNanotechnologyQuality consciousnessApplication of knowledgeEconomic Environment Availability of creditlevels of disposable incomeInterest ratesUnemployment trendsAttitudes towards customer serviceTax rates

Look beyond your immediate horizons-no one is isolatedPolitico-legal Environment level of defense expenditureLobbying activitiesSize of government budgetlocation & severity of terrorist activityEnvironmental protection lawslegislation on equalemploymentPolitical conditions in foreign country

Managers be aware of values & ideas of different cultural groupsPESTEL is an analysis of the external macro and micro environment in which a business operates. PESTEL stands for political, economical, social, technological, environmental and legal factors. Some factors that could be identified are as follows. Political:The international operations of McDonalds are highly influenced by the individual state policies enforced by each government.EconomicMcDonalds has the tendency to experience hardship in instances where the economy of the respective states is hit by inflation and changes in the exchange rates.Market leader.Very high target market.Low cost and more incomes.The rate at which the economy of that particular state grows determines the purchasing power of the consumers in that country.SocialWorking within many social groups.Increase employmentsTechnologicalAdvanced technology development.EnvironmentalEnvironmental Standards Quality packing.Local manufacture using foreign supplies.LegalLegislation for product Sustained LogoAt the micro level structure and life cycle of the market, attractiveness of the industry, competitor analysis should be carried out in addition to the Five Forces Analysis

PESTEL ANALYSIS- McDonalds

Industry Analysis Bargaining power of buyersBargaining power of suppliersThreat of new entrantsThreat of substitutesRivalry amongst competitorsPorters Five Forces ModelWhat industry forces determine profitability?How are they changing?What is the effect of the change?Competitor Analysis What will they do in future?What is our advantage?How does this change relationships with competitor?What are they up to?What drives competitor?What is competitor doing & can do?What competitor believes about itself & industryWhat are competitors capabilities?External Factor Analysis (EFAS) Organise external factors into opportunities & threats categories 1. list factors2. Assign wt (1.0 most, 0 least important)3. Assign rating (5, outstanding, 1 poor)4. Multiply wt by rate 5. Note why factor selected & how wt & rate selected6. Add weighted score & compare (An average company is 3.0)External factor Weight Rating Wt score CommentOpportunitiesTrend to superstore 0.1 2 0.2 maytag weakWheelan & Hunger, 2000What risks are available?Competitive risks Political risksEconomic risks What trade offs are necessary?Risks and Trade-offs All organisations have strengths and weaknesses in the functional areas of business. No enterprise is equally strong or weak in all areas (David, 1999).

The process of internal environment analysis parallels that of the external analysis or audit. Representative managers from throughout the organisation need to be involved in determining the strengths and weaknesses of the firm.

Internal environment Analysis The internal analysis or audit requires gathering and assimilating information about the firms management, marketing, finance/accounting, production/operations, research and development (R&D) and computer information systems operations. Key factors should be prioritised so that firms most important strengths and weaknesses can be determined collectively. Critical success factors can be identified and prioritised. Internal audit looks at three major components: resources, structure and culture. Managers perform these tasks so they can formulate strategies for competitive advantage. Why Int.environmental analysisResources & Capabilities Tangible - property, raw materialsIntangible - reputation, brand names, patentsOrganisational capability- resource combinations eg faster deliveryCompetitive Advantage Resource-based viewTangibleCapabilityIntangibleCompetitive AdvantageCompetencySustainable Competitive Advantage Is a resource. Difficult to Without CompetitiveValuable Rare to imitate Substitutes Implications No - - - Competitive disadvantage Yes No - - Competitive parity Yes Yes No - Temp. comp. advantage Yes Yes Yes No Competitive parity YES YES YES YES SCA Roots of SCA ResourceDistinctive competencyBetter quality Innovation Customer serviceResourceDifferentiateLower costCreate better valueValue & Value Chain Difference between cost & benefits from using it Infrastructure HRM Technology Procurement

Financials Liquidity ratio: Ability to meet short term obligationsLeverage ratio: How much debtActivity ratio: How resources are usedProfitability ratio : returns on sales & investmentGrowth ratios: Ability to meet economic positionUsed to develop Internal Factor AnalysisInvestor paradiseInternal Factor Analysis (IFAS) Organise internal factors into strengths & weakness categories StrengthsVertical integration 0.1 4 0.4 Dedicated factory1. list factors2. Assign wt (1.0 most, 0 least important)3. Assign rating (5, outstanding, 1 poor)4. Multiply wt by rate5. Note why factor selected & how wt & rate selected6. Add weighted score & compare (An average company is 3.0)Internal factor Weight Rating Wt score CommentWheelan & Hunger, 2000Some of the strategic issues that could be identified through the analysis may be as follows.Supporting 1. Growing health trends among consumers2.Globalization, expansion in othercountries (especially in China &India).3.Diversification and acquisition ofother quick-service restaurants.4.Growth of the fast-food industry.5.Worldwide deregulation.6.Low cost menu that will attract the customers.7.Free buys and discounts

Strategic IssuesSome of the strategic issues that could be identified through the analysis.Negating ones

Strategic IssuesQ3. What are strategic options available and what id strategic Choice? Identify methods and models you know of developing strategic options for a companyIdentify corporate strategic options available to McDonalds Identify the Business strategic options available to McDonalds Identify the most suitable option that McDonalds should consider using SAF criteria.

About strategic options and strategic Choice

Johnson, Scholes and Whittington present a model in which strategic options are evaluated against three key success criteria:Suitability; does the strategy effectively address the mission?Feasibility; can it be made to work?Acceptability; will stakeholders accept the strategy?

Evaluating strategy

One of the prime purposes of strategic analysis is to gain a clear understanding of the organisation and the environment in which it is operating. A simple summary of this situation might include a listing of the major opportunities and threats which face the organisation, its particular strengths and weaknesses, and any expectations which are an important influence on strategic choice.Suitability is a criterion for assessing the extent to which a proposed strategy fits the situation identified in the strategic analysis, and how it would sustain or improve the competitive position of the organisation. Some authors have referred to this as consistency. Suitability can also be thought of as a first round look at strategies, since many of the questions below are revisited in more detail when assessing the acceptability or feasibility of a strategy. Suitability is therefore a useful criterion for screening strategies.

Suitability

The following questions need to be asked about strategic options:Does the strategy exploit the company strengths How far does the strategy overcome the difficulties identified in the strategic analysis (resource weaknesses and environmental threats)? For example, is the strategy likely to improve the organisations competitive standing, resolve the companys liquidity problems, or decrease dependence on a particular supplier? Does it fit in with the organisations purposes? For example, would the strategy achieve profit targets or growth expectations?Suitability deals with the overall rationale of the strategy.Does the strategy address the mission?Does it reflect the organization's capabilities?Does it make economic sense?

Suitability

An assessment of the feasibility of any strategy is concerned with whether it can be implemented successfully. The scale of the proposed changes needs to be achievable in resource terms. As suggested earlier, this assessment will already have started during the identification of options and will continue through into the process of planning the details of implementation. However, at the evaluation stage there are a number of fundamental questions which need to be asked when assessing feasibility. For example:Can the strategy be funded? Is the organisation capable of performing to the required level (e.g., quality level, service level)? Can the necessary market position be achieved, and will the necessary skills be available? Can competitive reactions be coped with? How will the organisation ensure that the required skills at all levels are available? Will the technology (both product and process) be available to compete effectively? Can the necessary materials and services be obtained?

Feasibility

It is also important to consider all of these questions with respect to the timing of the required changes.Feasibility is concerned with whether the organization has the resources required to implement the strategy. Resources include capital, people, time, market access and expertise.Evaluation tools include:cash flow analysis and forecastingbreak-even analysisresource deployment analysis

Feasibility

Alongside suitability and feasibility is the third criterion, acceptability. This can be a difficult area, since acceptability is strongly related to people's expectations, and therefore the issue of acceptable to whom? requires the analysis to be thought through carefully. Some of the questions that will help identify the likely consequences of any strategy are as follows:What will be the financial performance of the company in profitability terms? The parallel in the public sector would be cost/benefit assessment. How will the financial risk (e.g., liquidity) change? What will be the effect on capital structure (e.g., gearing or share ownership)? Will any proposed changes be appropriate to the general expectations within the organisation (e.g., attitudes to greater levels of risks)? Will the function of any department, group or individual change significantly? Will the organisations relationship with outside stakeholders (e.g., suppliers, government, unions, and customers) need to change? Will the strategy be acceptable in the organisations environment (e.g., will the local community accept higher levels of noise)?

Acceptability

Acceptability is concerned with the expectations of the identified stakeholders (shareholders, employees and customers, etc.) with the expected financial and non-financial outcomes. Return deals with stakeholder benefits. Risk deals with the probability and consequences of failure. Employees are particularly likely to have concerns about non-financial issues such as working conditions and outsourcing.Evaluation tools include:what-if analysisstakeholder mapping

Acceptability

Success Criteria for Strategic OptionsSuitabilityWhether strategy addresses circumstances in which organisation is operatingLinked to strategic positionRationale of strategyAcceptabilityThe expected performance outcomes (e.g. risk/return)Meeting expectations of stakeholdersFeasibilityWhether strategy can be made to work in practiceLinked to strategic capability

Understanding the suitability of strategic options by using concepts about the strategic postion Exhibit 7.4Suitability Strategic PositionConceptTo understandStrategy must addressPESTELGrowth/declineChanges in industry structureIndustry convergenceScenariosUncertainty/riskContingency plans5-forcesCompetitive forcesBarriers to new entrantsStrategic GroupsAttractiveness of groups, Mobility barriers, strategic spacesRepositioningCore CompetenceIndustry threshold standardsBasis of competitive advantageEliminate weaknessesExploit strengthsValue chainOpportunities for vertical integration/outsourcingHow to integrate (e.g. merger/alliance)StakeholdersAcceptability to stakeholdersPower and interestEffect on stakeholdersManage power/interestCultural webReal acceptability, impact on feasibilityManage culture clash in merger/allianceAmended Exh 7.4

Some examples of suitabilityExhibit 7.5Examples of Suitability - Directions for GrowthStrategicOptionSuitability in terms ofEnvironmentCapabilityExpectationsConsolid-ationWithdraw from declining marketsSell valuable assetsMaintain market shareBuild on strengths invest and innovateBetter returns at low risk by exploiting current strategiesMarket penetrationGain market share for advantageExploit superior resources & competencesProduct developmtExploit knowledge of customer needsExploit R&DBetter returns at medium risk by exploiting current strengths or market knowledgeMarket developmtOpportunities for new geographical market, new segments/usesExploit current productsDiversifi-cationCurrent markets saturated/decliningExploit core competences in new areasBetter returns at higher risk by seeking new businessExamples of Suitability - Methods of GrowthStrategicOptionSuitability in terms ofEnvironmentCapabilityExpectationsInternal developmtFirst in fieldPartners/acquisitions not availableLearning and competence development Spread of costCultural/political easeM&ASpeedSupply/demandP/E ratiosAcquire competencesScale economiesReturns: growth or share valueProblems of culture clashStrategic allianceSpeedIndustry normComplementary competencesLearning from partnersRequired for entryDilutes riskFashionable

Understanding the relative suitability ofStrategic optionsExhibit 7.6Why Strategies may be UnsuitableBiased Not addressing all three factors of environment, capability and expectationsRelative suitabilityOther options may be more suitableElements of strategy not internally consistentCompetitive strategy, development direction and development methodSome criteria for understanding the acceptability of strategic options

Exhibit 7.7Criteria for Acceptability CriteriaTo UnderstandExamplesLimitationsReturnProfitabilityFinancial return on investmentsROCEPayback periodDCFApply to discrete projectsOnly tangible costs/benefitsCost-benefitWider costs/benefits (incl. intangibles)Major infrastructure projectsDifficulties of quantificationReal optionsSequence of decisionsReal options analysisQuantificationShareholder value analysisImpact on shareholder valueMergers and acquisitionsTechnical detail often difficultCriteria for Acceptability CriteriaTo UnderstandExamplesLimitationsRiskFinancial ratio projectionsRobustness of strategyBreak-even analysisImpact on gearing/liquiditySensitivity analysisTest assumptions/robustnessWhat if? analysisTests factors separatelyStakeholder reactionsPolitical dimension Stakeholder mappingGame theoryLargely qualitativeAssessing profitability (1)Exhibit 7.8a

Assessing profitability (2)Exhibit 7.8b

Real options frameworkExhibit 7.9Source: Reprinted with permission of Harvard Business Review. Adapted from T.A. Luehrman, Strategy as a portfolio of real options, September-October, 1998, p. 3. Copyright 1989 by the Harvard Business School Publishing Corporation; all rights reserved.

FeasibilityFinancialFunds flow forecasting timing of new fundingBreak-even analysisResource deploymentResources and competences neededThresholdUnique resources/core competencesScale, quality of resource, timetable for changeResource Deployment

Exhibit 7.10Thank you very much END