Report – Nike in China Assignment briefing ? See the assignment briefing for details Exercise Split into groups of between 3 and 5 Discuss how you will carry out the assignment. Focus on understanding the assignment brief, selection of an organisation, use of the tools, how to draw conclusions. Assignment Brief: ? Conduct a thorough strategic analysis of your organisation’s external environment and critically evaluate how the identified issues might impact on the organisation’s business strategy. ? (If you are not currently working, then you can use an organisation with which you are familiar.) Format ? 2500 words ? Report format recommended but this is an academic report and so arguments MUST be underpinned by evidence and academic sources ? Suggested structure on assignment briefing ? Fully referenced using Harvard referencing style ? Proof read and spell check – if it doesn’t make sense I cannot mark it! ? Conduct a thorough strategic analysis of your organisation’s external environment and critically evaluate how the identified issues might impact on the organisation’s business strategy. ? Conduct a thorough strategic analysis of your organisation’s external environment and critically evaluate how the identified issues might impact on the organisation’s business strategy. Over to you... How will you tackle the assignment? Which organisation will you use? Which models will you use and why? Stages ? Identify organisation ? This may take some time – you might start to investigate the organisation and then decide to change due to lack of information ? Consider models you wish to use ? Support their choice with academic evidence ? Undertake further research on the organisation ? Apply the models to the company ? Write the report Session 3 – Generating and evaluating strategic options Learning objetives After studying this topic you should be able to: 1. Understand the key influences on an organisations available strategy options; 2. Apply the Ansoff matrix to evaluate the strategic options available to an organisation 3. Use a range of concepts to evaluate the relative merits of one strategy option against another to determine the most appropriate choice for an organisation at a given time. Determinants of Strategy ? Industry life cycle stage ? Industry structure ? Competitive position ? Competitor behaviour ? Company innovation ? Organisational resources ? Customer needs Business strateg Johnson et al (2011:197) Johnson et al (2011:199) Source: Adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1985, 1998 by Michael E. Porter. All rights reserved Strategy clock Johnson et al (2011:208) Source: Adapted from D. Faulkner and C. Bowman, The Essence of Competitive Strategy, Prentice Hall, 1995 Other Strategies ? Strategic Lock In ? users become dependent on a supplier and are unable to use another supplier without substantial switching costs. ? Controlling complementary products or services. ? Creating a proprietary industry standard. ? Hypercompetition ? No longer able to plan for sustainable positions for competitive advantage – need to act faster than competitors ? Co-operating with rivals ? Collaboration can provide advantage (but be careful of legal considerations ie collusion) Strategy and Life Cycle Stage1 EMERGENCE GROWTH STRATEGIC ISSUES MARKETING TASKS ? Market definition ? Technology uncertain ? Low entry barriers ? Financing R&D ? First mover advantages ? Research the market ? Raise awareness/interest ? Induce consumers to try/buy ? Develop channel relationships ? Educate targeted segments ? Financing expansion ? Experience effects ? New entrants ? Technology alliances ? Improve product quality ? Extend product line ? Enter new segments ? Access wider channels ? Build the brand ? Cut prices at right time 1. Adapted from Kotler, Marketing Management – chapter on Marketing strategies for Different Stages of the PLC. Strategy and Life Cycle Stage MATURITY DECLINE STRATEGIC ISSUES MARKETING TASKS • Rivalry intensifies • Profitability declines • Innovation declines • Consolidation • Cost reduction • Expand customer base • Increase usage rate • Introduce new brands • Product modification • Adjust marketing mix • Rate of decline • Differential advantages • Attractiveness/position • Exit barriers • Diversification potential • Evaluate portfolio • Invest in cash cows • Withdraw weak products • Promote benefits Impact of Competitive Position on Strategic Choice ? Market Leaders ? key issues: how to expand the market and protect share ? Market Challengers ? key issues: costs, risks and gains from attacking leader and how to attack ? Market Followers ? key issues: co-existence and imitation ? Market Nichers ? key issues: segmentation and specialisation (focus strategy) Johnson et al (2011:232) Source: Adapted from H.I. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6. Ansoff originally had a matrix with four separate boxes, but in practice strategic directions involve more continuous axes. The Ansoff matrix itself was later developed – see Reference 1 TOWS (Weihrich, 1982) ? TOWS Analysis is a variant of the classic business tool, SWOT Analysis. ? By analysing the external environment and your internal environment you can use these techniques to think about the strategy of your whole organization, a department or a team. ?? E.g. Use strengths to develop strategies to exploit opportunities the matrix below: TOWS Strategic Alternatives Matrix TOWS External Opportunities (O) 1. 2. 3. 4. External Threats (T) 1. 2 Internal Strengths (S) 1. 2. 3. 4. SO "Maxi-Maxi" Strategy Strategies that use strengths to maximize opportunities. ST "Maxi-Mini" Strategy Strategies that use strengths to minimize threats. Internal Weaknesses (W) 1. 2. 3. 4. WO "Mini-Maxi" Strategy Strategies that minimize weaknesses by taking advantage of opportunities. WT "Mini-Mini" Strategy Strategies that minimize weaknesses and avoid threats. Translating Strategy into Action The 4 general strategies identified above in the Ansoff matrix can each be pursued in a variety of ways. These include: INTERNAL EXTERNAL ? Organic growth ? Exporting ? Overseas office ? Overseas manufacture ? Multinational operation ? Global organisation ? Merger ? Acquisition ? Joint venture ? Alliance ? Franchising ? Licensing ? Turnkey Strategy Evaluation1 Consistency Will the strategy present mutually inconsistent goals and policies? Is the strategy realistic given available resources? Feasibility Rumelt’s criteria Consonance Is the strategy an adaptive response to critical environmental changes? Does the strategy create or enhance competitive advantage? Advantage Session 3 - Summary ? Organisations are not working with a blank piece of paper when choosing their strategy. The available options are partly determined by existing external factors, company factors and managerial characteristics. ? The Ansoff matrix offers a simple way to examine possible market growth strategies but only focuses on external market opportunities. ? The TOWS matrix seeks to base strategy development in the reality of strategic analysis and integrates both the external and internal perspectives. ? Having generated a range of strategic options, it is vital to screen them rigorously against key selection criteria. Rumelt suggested consonance, consistency, advantage and feasibility. ? Thompson further pointed out that there is no perfect choice and that a compromise is often required to balance environmental, resource and values perspectives.