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Strategic Choices 10: Strategy Methods and Evaluation. Learning Outcomes. Identify the methods by which strategies can be pursued: organic development, mergers and acquisitions, and strategic alliances - PowerPoint PPT Presentation
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Strategic Choices10: Strategy Methods and Evaluation
10-2Exploring Corporate Strategy 8e, © Pearson Education 2008
Learning Outcomes
Identify the methods by which strategies can be pursued: organic development, mergers and acquisitions, and strategic alliances
Employee three success criteria for evaluating strategic options: suitability, acceptability, and feasibility
Use a range of different techniques for evaluating strategic options
10-3Exploring Corporate Strategy 8e, © Pearson Education 2008
Exhibit 10.1 Strategy Methods and Evaluation
10-4Exploring Corporate Strategy 8e, © Pearson Education 2008
What is a Strategic Method?
A strategic method is the means by which a strategy can be pursued.
Organic development
Mergers and acquisitions
Strategicalliances
10-5Exploring Corporate Strategy 8e, © Pearson Education 2008
What is Organic Development?
Organic development is where strategies are developed by building on and developing an organisation’s
own capabilities.
10-6Exploring Corporate Strategy 8e, © Pearson Education 2008
Reasons for Using Organic Development
Highly technical products
Knowledge and capability development
Spreading investment over time
Minimising disruption
Nature of markets
10-7Exploring Corporate Strategy 8e, © Pearson Education 2008
What are Mergers and Acquisitions?
A merger is a mutually agreed decision for joint ownership
beween organisations
An acquisition is where an organisation takes ownership of
another organisation
10-8Exploring Corporate Strategy 8e, © Pearson Education 2008
Environmental Motives for Acquisitions and Mergers
Speed of entryCompetitive
situation
Consolidationopportunities
Financial markets
10-9Exploring Corporate Strategy 8e, © Pearson Education 2008
Capability Motives for Acquisitions and Mergers
Exploitation of strategic capabilities
Cost efficiency
Obtaining new capabilities
10-10Exploring Corporate Strategy 8e, © Pearson Education 2008
Stakeholder Expectations for Acquisitions and Mergers
Institutional shareholder expectations
Managerialambition
Speculativemotives
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Issues Affecting Success of Acquisitions and Mergers
Can value be added to acquisition?
Can the commitment of middle managers be gained?
Will expected synergies be realised?
Are there problems of cultural fit?
10-12Exploring Corporate Strategy 8e, © Pearson Education 2008
What is a Strategic Alliance?
A strategic alliance is where two or more organisations share
resources and activities to pursue a strategy.
10-13Exploring Corporate Strategy 8e, © Pearson Education 2008
Motives for Strategic Alliances
Need for critical mass
Co-specialisation
Learning
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Types of Alliances
Joint ventures
Consortia
Networks
Franchising
Licensing
Subcontracting
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Exhibit 10.3 Types of Strategic Alliance
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Success Criteria of Strategic Options
Suitability Acceptability Feasibility
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Exhibit 10.4 Strategic Options
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Evaluation Tools for Assessing Suitability
TOWS Matrix
Relative suitability of options
Ranking strategic options
Decision trees
Scenarios
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Assessing Acceptability
Return
Profitability
Cost-benefit
Real options
Shareholder value analysis
Risk
Financial ratios
Sensitivity analysis
Stakeholder reactions
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Exhibit 10.8 Assessing Profitability: Return on Capital Employed
10-21Exploring Corporate Strategy 8e, © Pearson Education 2008
Exhibit 10.8 Assessing Profitability: Payback Period
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Exhibit 10.8 Assessing Profitability: Discounted Cash Flow
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Exhibit 10.10 Measures of Shareholder Value
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Stakeholder Reactions
Financial restructuring
Acquisitions/Mergers
New business model
Outsourcing
10-25Exploring Corporate Strategy 8e, © Pearson Education 2008
Case Example: Tesco
Using Exhibit 7.2, identify the development directions that Tesco had followed from its origins as a UK-based grocer retailer
