STRATEGY ANALYSIS TOOLS AND TECHNIQUES

 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