Organisational Strategy

Professor Ming Sun

School of Energy, Geoscience, Infrastructure & Society

Heriot-Watt University

Meaning of Corporate Strategy

• Corporate strategy is the pattern of major

objectives, purposes or goals and essential

policies or plans for achieving those goals.

• Corporate strategy needs to answer the

following questions: – What is the organisation best at?

– Where does the organisation stand now in relation to the

external environment

– Where should the organisation be in a few years time?

Characteristics of Strategy • Strategy is about long term;

• Strategy aims at gaining advantage;

• Strategy concerns the scope of an organisation’s activities;

• Strategy aims at matching organisation’s activities to the

environment;

• Strategy is about maximise the available resources;

• Strategy may require major resource changes;

• Strategy reflects the attitudes and beliefs of senior

managers. It is influenced by environmental forces.

Examples of Strategic Decisions in

Construction • Diversification of building types

• Expanding or shrinking the market, by type of client or/and location

• Differentiation of building product (uniqueness)

• Producing better value-for-money buildings

• Ownership

• Merger or company takeover

• Partnership

• Contracts bidding.

Reactor (Reactive) vs Planned

(Proactive) Approaches

• Reactor (Reactive) Approach is informal and unsystematic. It is often adopted by small firms, who ‘wait and see’ and respond to environmental changes.

• Planned (Proactive) Approach is formal and systematic. It is often adopted by large and sophisticated firms, who look ahead for opportunities and threats.

Advantages of Reactor (Reactive)

Approach

• Save executive time, cost and talent by

not engaging in formal planned strategy;

• Opportunities will not be restricted to

those included in the strategic plan;

• May gain by delaying decisions when

fuller information becomes available.

Advantages of Planned (Proactive)

Approach • Pay attention to important issues

• Examine own strengths and

weaknesses

• Identify opportunities early

• Consider risks as well as

opportunities

• Study competitors

• Anticipate changes in

marketplace and environment

• Avoid the need for crisis

management

• Plan changes and minimise

disruption to existing operation

• Focus effort of everyone and

enhance internal harmony

• Reassure and motivate staff

• Promote strategic thinking

amongst the senior decision

makers

Seven Stages of Developing a

Business Strategy

1. Strategic analysis

2. Strategy formulation

3. Evaluation of alternative strategies

4. Strategic choice

5. Action plan

6. Strategy implementation

7. Strategic control and feedback

1. Strategic Analysis • Analysis of environmental forces

– Use the PEST framework to examine political, economical, social and technological forces to identify opportunities and threats

• Organisational goal and objectives – Goal is a statement of general intention; objectives

(economic and non-economic) are more specific targets to achieve in order to realise the overall goal.

• Organisational appraisal – Analyse the market and own strengths and weaknesses,

using the SWOT technique

1. Strategic Analysis - External

Forces

• Political

• Economical

• Social

• Technological

1. Strategic Analysis – SMART

Objectives

• When setting organisational objectives,

follow the SMART principle:

– Specific

– Measurable

– Achievable

– Realistic

– Timebound

1. Strategic Analysis – SWOT

Technique

Positive Negative

Internal Strengths: positive aspects or distinctive competencies, which provide market advantage

Weaknesses: negative aspects or deficiencies in current competencies or resources

External Opportunities: favourable conditions with changes in external environment

Threats: unfavourable external conditions that endanger operation and effectiveness

2. Strategy Formulation • On the basis of Stage 1 – Strategic Analysis,

clear objectives are decided. Then different alternative plans may be proposed to achieve these objectives.

• These plans should answer a number of questions: – What should the organisation do?

– Where?

– How? and

– When?

3. Evaluation of Alternative

Strategies • The alternative plans, defined in Stage 2, are evaluated

using cost/benefit analysis: – Costs

• Financing

• Human resources

• Administrative resources

– Benefits • Profit

• Growth

• Risk

• A range of tools and techniques are available for this task, such as decision trees, sensitivity analysis, and simulation modelling.

4. Strategic Choice • In deciding between strategic options, executive

management needs to ask a series of questions: – Which option is the optimum choice according to

SWOT?

– Can it be put into practice?

– Can the required finance be raised?

– Can required staff be recruited or trained?

– Is it acceptable to the stakeholders?

• The choice between different options may not be clear-cut.

5. Action Plan • An action plan provides a blueprint for

implementing the chosen strategy;

• An action plan should include: – The activities involved

– Allocation of financing

– Allocation of human resources

– Allocation of administrative resources

– The sequence and timing of each activity

• Action plan may include both long time plan and short term plan

6. Strategy Implementation - Tasks

• Make the right things happen at the right

time, as planned:

– Assembling resources, as planned

– Structuring work relationships

– Integrating and controlling people and

activities

6. Strategy Implementation -

Checklist • Successful implementation requires answers to

the following questions: – Who is responsible for carrying out the strategy?

– What are the key activities that need to be carried out?

– Who should do what and when?

– Is there a need for new recruitment?

– What type of management information system is needed to monitor process?

– How will the implementation process work?

7. Strategic Control and Feedback • This is the phase to monitor progress; take corrective

action to ensure successful implementation of strategic plan. It includes the following six steps: 1. establishment of standards of performance

2. measurement of performance against performance standards

3. diagnosis of deviations from standards

4. initiation of corrective action

5. feedback from internal and external environments

6. continuation of performance monitoring.

Learning Outcomes • Students should understand the importance of organisational

strategy;

• Students should know the main external factors that have an

influence on an organisational strategy;

• Students should be able to compare reactor approach and planned

approach to organisational strategy;

• Students should know the main stages of the strategy development

process and the main tasks at each stage;

• Students should be familiar with the SWOT analysis technique.