lesson six : strategic formulation using various strategic ... · lesson six : strategic...

Business Management in the Built Environment

Lesson Six :Strategic Formulation usingVarious Strategic Tools &

Options

Lesson Six :Strategic Formulation usingVarious Strategic Tools &

Options

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S t r a t e g i ch i s t o r y

C u r r e n ts t r a t e g y

O b j e c t i v e s

S t r a t e g i ca n a l y s i s

V i s i o n

O r g a n i s a t i o n a la n a l y s i s

E n v i r o n m e n t a la n a l y s i s E v e n t s

S t r a t e g i co p t i o n s

• B a s i s• D i r e c t i o n• M e t h o d s

E v a l u a t i o n• S u i t a b i l i t y• F e a s i b i l i t y• A c c e p t a b i l i t y

I m p l e m e n t a t i o n• L e v e l o f c h a n g e• C o m p e t e n c i e s• S t r u c t u r e• S y s t e m s• R e s o u r c e s• S t y l e

M e a s u r ep e r f o r m a n c e

R e v i s e o b j e c t i v e sC o m p a r em e a s u r e m e n tt o s t a n d a r d s

F e e d b a c k

F e e d b a c k

A review of the strategy processBusiness Management in the Built Environment

S t r a t e g i ch i s t o r y

C u r r e n ts t r a t e g y

O b j e c t i v e s

S t r a t e g i ca n a l y s i s

V i s i o n

O r g a n i s a t i o n a la n a l y s i s

E n v i r o n m e n t a la n a l y s i s E v e n t s

S t r a t e g i co p t i o n s

• B a s i s• D i r e c t i o n• M e t h o d s

E v a l u a t i o n• S u i t a b i l i t y• F e a s i b i l i t y• A c c e p t a b i l i t y

I m p l e m e n t a t i o n• L e v e l o f c h a n g e• C o m p e t e n c i e s• S t r u c t u r e• S y s t e m s• R e s o u r c e s• S t y l e

M e a s u r ep e r f o r m a n c e

R e v i s e o b j e c t i v e sC o m p a r em e a s u r e m e n tt o s t a n d a r d s

F e e d b a c k

F e e d b a c k

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As organisations are operating in a competitiveworld, strategies are developed to cope with theneed to survive in the marketplace.

Strategic management is supposed to helporganisations steer through changes and shifts inthe environment to secure future growth andsustainable success through the process ofanalysis, selection of options and then makingdecisions to move forward

Strategic formulation using tools and optionsBusiness Management in the Built Environment

As organisations are operating in a competitiveworld, strategies are developed to cope with theneed to survive in the marketplace.

Strategic management is supposed to helporganisations steer through changes and shifts inthe environment to secure future growth andsustainable success through the process ofanalysis, selection of options and then makingdecisions to move forward

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Formulations of strategies are generallybased on the different schools of thoughts inwhich management based their process offormulation on.We need to revisit the strategies, approaches& tools , particularly the 4 perspectives asmentioned by Richard Whittington, the type offormulation and process of working towardsthe outcomes differ..


STRATEGIC TOOLS AND OPTIONS

Formulations of strategies are generallybased on the different schools of thoughts inwhich management based their process offormulation on.We need to revisit the strategies, approaches& tools , particularly the 4 perspectives asmentioned by Richard Whittington, the type offormulation and process of working towardsthe outcomes differ..

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Richard Whittington’s typology

His 4 perspectives which is alsocalled

the 2 X 2 framework


His 4 perspectives which is alsocalled

the 2 X 2 framework

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2x2 matrix or 2 x 2 framework

•X and Y axis used as two broad dimensions to scope outgeneric perspectives on strategy

– The outcomes of strategy (profit maximisation /plural)– Processes (deliberate/emergent)

•This is used to provide 4 perspectives– Classical– Evolutionary– Systemic– Processual


•X and Y axis used as two broad dimensions to scope outgeneric perspectives on strategy

– The outcomes of strategy (profit maximisation /plural)– Processes (deliberate/emergent)

•This is used to provide 4 perspectives– Classical– Evolutionary– Systemic– Processual

Profit

Plural

Deliberate Emergent

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Classical

•Analyse, plan and command– Profitability/ Rational planning– Dominant view (linked to classical school of thought )– Informed by economics -Rational economic man

• Self interest & preservation of organisation• solely concerned with maximising return on investment

– Top down approach (militaristic)– Separates formulation from implementation– Implementation is based on the military –style order ;– strategy will be carried out via discipline and obedience

Profit

Plural

Deliberate EmergentX


•Analyse, plan and command– Profitability/ Rational planning– Dominant view (linked to classical school of thought )– Informed by economics -Rational economic man

• Self interest & preservation of organisation• solely concerned with maximising return on investment

– Top down approach (militaristic)– Separates formulation from implementation– Implementation is based on the military –style order ;– strategy will be carried out via discipline and obedience

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Systemic

•Play by the local rules•The social system within which strategies are developed arecrucial•Contextual sensitivity to : Markets; Countries & Cultures•Social systems (and their associated societies) are not solelyprofit maximising and social systems are based on: Class ;Professionalism & Gender•Strategy & planning is also bounded by particular socialsystems/rules/norms.

Profit

Plural



•Play by the local rules•The social system within which strategies are developed arecrucial•Contextual sensitivity to : Markets; Countries & Cultures•Social systems (and their associated societies) are not solelyprofit maximising and social systems are based on: Class ;Professionalism & Gender•Strategy & planning is also bounded by particular socialsystems/rules/norms.

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Processual

•Stay close to the ground and go with the flow!•Processual managers do not believe in planning•Strategy emerges from sticky and messy context based onPragmatic; Learning & Compromise•Optimal strategy is not main concern as managers usuallyconcedes to bounded rationality – using the ‘prisonersdilemma’•Organisations are socially complex – bargaining and bartersystem between interest groups•Change disrupts power dynamics and thus strategic change isviewed with suspicion•Strategy is discovered in action (through implementation?)

Profit

Plural



•Stay close to the ground and go with the flow!•Processual managers do not believe in planning•Strategy emerges from sticky and messy context based onPragmatic; Learning & Compromise•Optimal strategy is not main concern as managers usuallyconcedes to bounded rationality – using the ‘prisonersdilemma’•Organisations are socially complex – bargaining and bartersystem between interest groups•Change disrupts power dynamics and thus strategic change isviewed with suspicion•Strategy is discovered in action (through implementation?)

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Evolutionary

•Costs low and options open•The environment moves too quickly and unpredictablyto wait for rationalised action so planning based on best fit;•Only the best performers survive – law of the jungle•Strategy can be a delusion•Strategising method is day by day muddling through•as managers believe that tomorrow is just too difficult andimpossible to predict.•Best planning method is drawing upon on diversification so as tosurvive

Profit

Plural



•Costs low and options open•The environment moves too quickly and unpredictablyto wait for rationalised action so planning based on best fit;•Only the best performers survive – law of the jungle•Strategy can be a delusion•Strategising method is day by day muddling through•as managers believe that tomorrow is just too difficult andimpossible to predict.•Best planning method is drawing upon on diversification so as tosurvive

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As organisations are operating in acompetitive world, strategies are developedto cope with the need to survive in themarketplace.

Strategic management is supposed to helporganisations steer through changes andshifts in the environment to secure futuregrowth and sustainable success .

Another look at strategic positioning in reality …D39BU – Business Management in the Built Environment

As organisations are operating in acompetitive world, strategies are developedto cope with the need to survive in themarketplace.

Strategic management is supposed to helporganisations steer through changes andshifts in the environment to secure futuregrowth and sustainable success .

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• Just like you and I, without a long termgoal, we will be aimless, so organisationsneed goals, vision, mission to enable themto sail through the storms of competition,changes in the market etc..

In fact, strategic planning is similar to theart of war (Sun Tze) – you need tounderstand strategic positioning and alsothe process of analysis, formulation andthen implementation of your tactics andoperations in order to succeed in business

Strategic positioning in reality …D39BU – Business Management in the Built Environment

• Just like you and I, without a long termgoal, we will be aimless, so organisationsneed goals, vision, mission to enable themto sail through the storms of competition,changes in the market etc..

In fact, strategic planning is similar to theart of war (Sun Tze) – you need tounderstand strategic positioning and alsothe process of analysis, formulation andthen implementation of your tactics andoperations in order to succeed in business

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Strategies are based on certain schoolsof thoughts on which differs in the waystrategic planning is done

3 basic thoughts via …1. Classical/rational planning school2. The design school3. The positioning school

D39BU – Business Management in the Built Environment

3 basic thoughts via …1. Classical/rational planning school2. The design school3. The positioning school

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IF THE ORGANISATION USES THE CLASSICAL SCHOOL ORAPPROACH , THEN THE STRATEGY WILL BE:A)Top down, bureaucratic approach of topmanagement decision which is cascaded down tothe bottom of the hierarchy in the organisationB) The leadership style will be telling and informingand not participative or consultativeC) Profit and shareholders’ interest are paramount toreach goals and objectives for the organisation


IF THE ORGANISATION USES THE CLASSICAL SCHOOL ORAPPROACH , THEN THE STRATEGY WILL BE:A)Top down, bureaucratic approach of topmanagement decision which is cascaded down tothe bottom of the hierarchy in the organisationB) The leadership style will be telling and informingand not participative or consultativeC) Profit and shareholders’ interest are paramount toreach goals and objectives for the organisation

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2. IF THE ORGANISATION USES THE DESIGNSCHOOL OR APPROACH

a)It will practise the systems view and everythingwill be according to a certain system or design.b)The management may adopt a selling orcollaborating style of leadership so thateveryone buys into the organisation goals andachieve together.c)Going with the systems especially social andtechnological systems to be in place -systematic 7 step approach is often used ..


a)It will practise the systems view and everythingwill be according to a certain system or design.b)The management may adopt a selling orcollaborating style of leadership so thateveryone buys into the organisation goals andachieve together.c)Going with the systems especially social andtechnological systems to be in place -systematic 7 step approach is often used ..

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Diagram showing the process of strategic planning –a 7-step model

Vision &mission Swot analyss

STEEP & Scenarios Planning


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Strategic analysis & optionsdecision making

implementation

Evaluation & monitoring

3. THE POSITIONING SCHOOL :MICHAEL PORTER’S MODEL – ALSO PART OF THEEVOLUTIONARY/COMPETITIVE PERSPECTIVE

This is the strategic approach based oncompetition –survival of the fittest – so the strategicfocus will be on maximising competitive strategies tostay ahead of competitionPorter argues that profitability of an organisation liesin the power of the organisation to position itselfagainst the others in the industry and how it uses itscapabilities to handle its bargaining position tosustain growth and success.


This is the strategic approach based oncompetition –survival of the fittest – so the strategicfocus will be on maximising competitive strategies tostay ahead of competitionPorter argues that profitability of an organisation liesin the power of the organisation to position itselfagainst the others in the industry and how it uses itscapabilities to handle its bargaining position tosustain growth and success.

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Porter’s diamond diagram


Strategy,structure &rivalry

Factorconditions

Govt

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Demandconditions

Factorconditions

Related &supportingindustries chance

According to Porter….a) Factor conditions – highly specialised

resources developed in different countrieswhere there is a large pool of skilled manpoweror labour

b) Related and supporting industries which helpto expedite the process for production of goodsand services

c) Demand conditions where consumers forcecompanies to innovate and shape their marketorientation in such a way that caters to theirneeds and wants

d) Strategy, structure and rivalry which will behighlighted in the study of 5-forces theory


a) Factor conditions – highly specialisedresources developed in different countrieswhere there is a large pool of skilled manpoweror labour

b) Related and supporting industries which helpto expedite the process for production of goodsand services

c) Demand conditions where consumers forcecompanies to innovate and shape their marketorientation in such a way that caters to theirneeds and wants

d) Strategy, structure and rivalry which will behighlighted in the study of 5-forces theory

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STRUCTURAL ANALYSIS OF INDUSTRIES orCOMPETITIVE ANALYSIS OF THE INDUSTRY

5 FORCES AFFECTING ANY ORGANISATION ARE:THREAT OF NEW ENTRANTSTHREAT OF SUBSTITUTESSUPPLIERS’ BARGAINING POWERBUYERS’ BARGAINING POWERINDUSTRY COMPETITIVE RIVALRY


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5 FORCES AFFECTING ANY ORGANISATION ARE:THREAT OF NEW ENTRANTSTHREAT OF SUBSTITUTESSUPPLIERS’ BARGAINING POWERBUYERS’ BARGAINING POWERINDUSTRY COMPETITIVE RIVALRY

MICHAEL PORTER’S 5 FORCES MODEL /THEORY


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OTHER STRATEGIC TOOLS & TECHNIQUESUsing Historical Analysis:• Analyse historical accounts of strategy• Analyse past, present and potential future events• Analyse and seek to understand the lifecycle of the market(s)

the organisation operates within

Doing a strategic group analysis to determine the strategy ofothers (prisoners dilemma)• Analyse the segmentation of the market

• Doing a full SWOT analysis•Conducting a resource audit and a resource utilisationanalysis to determine how resources are actually deployedand on the organisation & environmental analysis or audit


Using Historical Analysis:• Analyse historical accounts of strategy• Analyse past, present and potential future events• Analyse and seek to understand the lifecycle of the market(s)

the organisation operates within

Doing a strategic group analysis to determine the strategy ofothers (prisoners dilemma)• Analyse the segmentation of the market

• Doing a full SWOT analysis•Conducting a resource audit and a resource utilisationanalysis to determine how resources are actually deployedand on the organisation & environmental analysis or auditsl/BMBE/2016 23

OTHER STRATEGIC TOOLS & TECHNIQUES SUCH AS USINGA VALUE CHAIN ANALYSIS WITH THE CHECKLIST OFRESOURCES AND ACTIVITIES


Support activitiesCorporate structureHuman resourcesTechnological developmentTechnological development

purchasing

Inboundlogistics

mfg

Outbound

logistics

Mktg

& sales

services

Primary activitiessl/BMBE/2016 24

OTHER STRATEGIC TOOLS & TECHNIQUES

• USING A PORTFOLIO ANALYSIS :to see if the company is in a good position tocapitalise on market growth in markets where theyhold a large share


• USING A PORTFOLIO ANALYSIS :to see if the company is in a good position tocapitalise on market growth in markets where theyhold a large share

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Theoretically offer the best profit & growth


Portfolio Analysis or Market Analysis:the growth / share matrix or the BCG Matrix

Low growth in a poor market / weakness

Profits best utilised elsewhere

Requires large investment for development

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•Portfolio Analysis or Market Analysis:•BCG proposed the matrix is presented in Fig 14 of Pg 19Unit 5

Market ShareLowHigh


MarketGrowth

Low

Low

High

High

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Portfolio analysis or matrix is to assess the balanceand contribution to the strategic capability ofthe organisation.Implications of using this matrix:a) This analysis is applied to SBUs and not the whole marketb) Management must develop the capability to review the SBUc) Different targets are set for different segmentsd) Too much focussing on one part may be bad for the

whole organisation for example stars and cash cowsmust be managed well to prevent conflict

e) Dogs may be retained in order to become loss leaders


Portfolio analysis or matrix is to assess the balanceand contribution to the strategic capability ofthe organisation.Implications of using this matrix:a) This analysis is applied to SBUs and not the whole marketb) Management must develop the capability to review the SBUc) Different targets are set for different segmentsd) Too much focussing on one part may be bad for the

whole organisation for example stars and cash cowsmust be managed well to prevent conflict

e) Dogs may be retained in order to become loss leaders

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OTHER STRATEGIC TOOLS & TECHNIQUES

DIVERSIFICATION ANALYSIS OR MATRIX

Existing PortfolioServices /Products:

New / RelatedServices/Products:

New / UnrelatedServices /Products:


Model

Existing Clients:

Same Geographical Area

Existing Clients:

New Geographical Area

New Clients:

Same Geographical Area

New Clients:

New Geographical Area

Existing

Strategy

Expansion

Strategy

Expansion

Strategy

Expansion

Strategy

Expansion

Strategy

Expansion

Strategy

Diversification

Strategy

Diversification

Strategy

Expansion

Strategy

Diversification

Strategy

Conglomerate

Diversification

Conglomerate

Diversificationsl/BMBE/2016 29

All the tools used are for understanding anddetermining which options to choose; howresources have been deployed in the past andhow effective these strategies were;how effective is the performance of theorganisation against the industry norms and tosee if the firm able to benchmark across otherindustries to determine the scope for changeand strategy as well as to check the balance ofresources an organisation owns or controls –Is the organisation balanced enough to beflexible?


All the tools used are for understanding anddetermining which options to choose; howresources have been deployed in the past andhow effective these strategies were;how effective is the performance of theorganisation against the industry norms and tosee if the firm able to benchmark across otherindustries to determine the scope for changeand strategy as well as to check the balance ofresources an organisation owns or controls –Is the organisation balanced enough to beflexible?

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SELECTION OF OPTIONS : PORTER’S GENERIC STRATEGIESUNIT 6 PG 1-3

Com

pet

itiv

esc

ope

Competitive Advantage

DifferentiationLower cost


Com

pet

itiv

esc

ope

Narrow target

Broad targetCost

Leadership

Cost Focus

BroadDifferentiation

DifferentiationFocus

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3. Hybrid 4.Differentiation 5. FocusedDifferentiation

StrategicChoice/options

Business Management in the Built EnvironmentSELECTION OF OPTIONS : PORTER’S GENERIC STRATEGIESPG 2-UNIT 6

2. Low Price 6. IncreasedPrice /

Standard Value

1. Low Price /Added Value

8. Low Value /Standard Price

7. IncreasedPrice / Low

Value

StrategicChoice/options

What is of value tothe user of the

product / service?

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DISCUSSION AND ASSIGNMENT

1. Critically appraise the purpose and process ofstrategic analysis and, fully describe three tools ortechniques that those responsible for strategydevelopment in a built environment organisation maychoose to adopt.

2. Explain what you understand by RichardWhittington’s 2x2 Framework of generic perspective onstrategy. Draw the diagrams depicting the 4perspectives relating to his theory.


1. Critically appraise the purpose and process ofstrategic analysis and, fully describe three tools ortechniques that those responsible for strategydevelopment in a built environment organisation maychoose to adopt.

2. Explain what you understand by RichardWhittington’s 2x2 Framework of generic perspective onstrategy. Draw the diagrams depicting the 4perspectives relating to his theory.

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Core reading for module

Useful reading material◦ Carter, C., Clegg, S., Kornberger, M (2008) A very short, fairly

interesting and reasonably cheap book about studying organisations,Sage, London

◦ Clegg, S., Kornberger, M., Pitsis, T. (2005) Managing andOrganisations: An introduction to theory and practice, Sage, London

◦ Whittington, R. (2001) (2nd Ed.) What is Strategy – and does itmatter?, Thomson, London

◦ Mintzberg, H., Ahlstrand, B., Lampel, J. (1998) Strategy Safari: thecomplete guide through the wilds of strategic management, PrenticeHall, London

◦ Langford, S., Male, S. (2001) Strategic Management in Construction,Blackwell, Oxford

◦ Journal papers.....................

34D39BU – Strategic Management in the Built Environment

Useful reading material◦ Carter, C., Clegg, S., Kornberger, M (2008) A very short, fairly

interesting and reasonably cheap book about studying organisations,Sage, London

◦ Clegg, S., Kornberger, M., Pitsis, T. (2005) Managing andOrganisations: An introduction to theory and practice, Sage, London

◦ Whittington, R. (2001) (2nd Ed.) What is Strategy – and does itmatter?, Thomson, London

◦ Mintzberg, H., Ahlstrand, B., Lampel, J. (1998) Strategy Safari: thecomplete guide through the wilds of strategic management, PrenticeHall, London

◦ Langford, S., Male, S. (2001) Strategic Management in Construction,Blackwell, Oxford

◦ Journal papers.....................

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