STRATEGY ANALYSIS TOOLS
AND TECHNIQUES
Every
organization has to manage its strategies in 3 main areas:
· The
organizations internal resources
· The
external environment within which organization operate
· The
organizations ability to add value to what it does
Strategic
management can be seen as a linking process between the management of the
organizations internal resources and its external relationship with its
customers, suppliers, competitors and the economic and social environment in
which it exists.
Resource Strategy-
the resources of an organization includes its human resources skills, the
investments and the capital in every part of the organization, organizations
need to develop strategies to optimize the use of these resources.
Environmental strategy-
encompasses every aspect external to the organization itself. Organizations
need to develop strategies that are best suited to their strengths and
weaknesses in relation to the environment in which they operate.
Adding value-
the purpose of strategic management is to add value to the supplies brought
into the organization. This ensure its long term survival, an organization must
take the supplies it brings in, add value to these through its operations and then
deliver its output to the customers.
The
purpose of strategic management is to ensure that the organization adapts to
changing circumstances so that the organization can continue to add value in
the future. Strategic management is both an art and a science. No single
strategy will apply in all cases. Most organizations would like to build on
their skills, they will be influenced by their past experiences and culture,
and constrained by their background, resources and environment.
The
purpose of strategic management is to bring about the conditions under which
the organization is able to create this vital adding value.
KEY ELEMENTS OF STRATEGIC DECISIONS
There
are five key elements of strategic decisions that are related primarily to the
organizations ability to add value and compete in to market place.
Sustainable decisions-
that can be maintained overtime. For the long term survival of the
organization, its strategies must be sustainable
Develop processes to deliver the
strategy- strategy is at least partly how to develop
organizations or allow them to evolve towards their chosen purpose
Offer competitive
advantage- a sustainable strategy is
more likely if the strategy delivers sustainable competitive advantages over
actual or potential competitors.
Exploit linkages between the
organization and its environment- links that cannot
easily be duplicated and will contribute to superior performance. The strategy
has to exploit the many linkages that exist between the organization and its
environment e.g. suppliers, customers, competitors and often the government.
Vision-
the ability to move the organization forward in a significant way beyond the
current environment. This is likely to involve innovative strategies.
Given
the difficulty in practice of developing successful strategy, it is relevant to
explore what makes ‘good’ strategy. Good strategy that delivers the purpose set
out for the strategy in the beginning.
TEST OF A GOOD STRATEGY
1.
Application-
related
a.
The
Value- added test: a good strategy will deliver increased
value added in the market place. This might show increased in profitability, but also be visible in
gains in longer term measures of business performance such as market share,
innovative ability and satisfaction for employees
b.
The
Consistency Tests- A good strategy will be consistent with
the circumstances that surround a business at any point in time. It will take
into account its ability to use its resources efficiently, its environment
which may be changing fast or slowly, and its organizational ability to cope
with the circumstances of that time
c.
The
Competitive advantage Test- a good strategy will increase the
sustainable competitive advantage of the organization. Charity organizations
compete with others for new funds, government departments compete with each
other for a share of the available government funds.
2.
Academic
Rigor
These
tests might also be employed that relate to the above but are more fundamental
to the basic principles of originality, logical thought and scientific method.
a. The Originality Test-
the best strategy often derives from doing something totally different or in a
unique way
b. The Purpose Test-
even if there are some difficulties in defining purpose, it is logical and appropriate to examine whether the strategies that are
being proposed make some attempt to address whatever purpose has been
indentified for the organization
c. The Logical constituency Test-
do the recommendations, flow in a clear and logical way from the evidence used,
and what confidence do we have in the evidence used?
d. The Risk and resources tests-
are the risks, and resources associated with strategies sensible in relation to
the organization?. They might be consisted wit the overall purpose, but involve
such large levels of risk that they are unacceptable.
e. The Flexibility test-
do the proposed strategies lock the organization into future regardless of the
way the environment and the resources might change?
Dimensions of Strategic Decisions
1. Strategic
issues require top management decisions- this is because they represent several
areas of a firms operations
2. Strategic
issues require large amounts of the firm’s resources- they involve substantial
allocations of people, physical assets or money that either must be re directed
from internal sources.
3. Strategic
issues often affect the firms long term prosperity- they usually commit the
firms for a long a long time, typically five years.
4. Strategic
issues are future oriented- are based on what managers forecast rather than on
what they know. The emphasis is placed on the development of projections that
will enable the firm to select the most promising strategic operations
5. Strategic
issues have multifunctional or multibusiness consequences- they have complex
implications for most areas of the firm. Decisions about such matters as
customer mix, competitive emphasis or organizational structure necessarily
involve a number of the firms strategic business units or program units
6. Strategic
issues require considering the firms external environment- all business affect
and are affected by external conditions that are largely beyond their control.
Characteristics
of Good Strategic Plans
Still,
a well conceived and written strategic plan can be a helpful guide for
programs, policies, and processes if it achieves some basic things. To these
ends, good strategic plans share the following characteristics.
- Accountability—responsibility is assigned for successful completion of initiatives.
- Balance—the plans guide not only financial decision-making, but also operational and human resources issues.
- Flexibility—a mechanism for changing and updating the plan is built into the process.
- Manageability—in-process measures are identified to ensure processes are working as intended, critical performance issues are addressed, resources required are projected, and methods of status reporting are in place.
- Prioritization—priorities are established whenever there are multiple interdependent action plans.
- Realism—the question of what the organization can do versus what it would like to do is addressed rationally, though the tone is optimistic.
- Specificity—expected results and milestones are clearly defined, along with the specific actions for implementation and the deliverables for each step.
- Sustainability—a sufficient time period is covered to close performance gaps.
prepared by Ms Florence Mwirigi
