(KMBN 301) Unit 4: Strategy Choice and Analysis

Strategy Choice and Analysis

Strategy Choice and Analysis is all about figuring out the best path a company should take to reach its goals. Think of it as a process similar to planning a road trip: you decide where you want to go, look at the possible routes, and then choose the one that gets you there quickly, safely, and at the least cost.

Here’s how it breaks down in simple terms:

Setting Goals: First, the company needs to know what it wants. This could be things like increasing sales, entering new markets, or improving customer satisfaction.
Analyzing the Situation: Then, the company studies its current situation, similar to checking the weather, road conditions, and traffic. This involves looking at its strengths, weaknesses, competitors, and market trends.
Generating Options: The company comes up with different strategies, or “routes,” that could help it reach its goal. These could be options like expanding product lines, focusing on a specific customer group, or investing in technology.
Evaluating Options: Next, it evaluates each option by asking questions like, “Will this work? Is it affordable? Is it sustainable?” This step is like checking if each route has any risks, costs, or benefits.
Choosing the Best Strategy: Finally, the company picks the option that seems most likely to succeed with the least risk and highest rewards.

In short, Strategy Choice and Analysis is the company’s way of picking the smartest path to reach its goals, after carefully thinking through the different options available.

Example: Imagine a company that sells organic snacks, and their goal is to increase sales by 30% over the next year.

Step 1: Setting Goals

Goal: Increase sales by 30% over the next year.

Step 2: Analyzing the Situation

They look at their strengths (e.g., high-quality ingredients, loyal customer base).
They consider weaknesses (e.g., limited distribution channels, higher prices).
They check out competitors (e.g., brands selling similar products at lower prices).
They look at market trends (e.g., people are becoming more health-conscious).

Step 3: Generating Options

They brainstorm different strategies to meet their goal, such as:

Expanding distribution by partnering with more stores to reach new customers.
Launching a new product line with lower prices to attract budget-conscious customers.
Increasing online marketing through social media ads and influencers to reach a wider audience.
Offering discounts to encourage existing customers to buy more.

Step 4: Evaluating Options

The company evaluates each option:

Expanding distribution would increase reach, but requires investment and time to build relationships.
Launching a new product line could attract more customers but might dilute their brand if done wrong.
Increasing online marketing could quickly attract new customers but may be costly if not well-targeted.
Offering discounts might boost short-term sales but could affect profits if overused.

Step 5: Choosing the Best Strategy

After considering all factors, they choose increasing online marketing combined with partnering with more stores as their strategy. This approach balances quick customer growth (online marketing) with long-term sales expansion (more store presence).

By using Strategy Choice and Analysis, the company has chosen a practical approach to meet its 30% sales increase target, focusing on options that best fit its situation.

Scenario Analysis Process

Scenario Analysis is a tool that companies use in the Strategy Choice and Analysis process to plan for different possible futures. It’s like preparing for multiple possible “what if” situations to make sure they’re ready for anything.

Imagine you’re the same company that sells organic snacks and wants to increase sales by 30% next year. Here’s how Scenario Analysis would help in Strategy Choice and Analysis:

1. Identify Key Factors

First, the company thinks about what might affect their success, like:

Will people keep buying healthy snacks?
Will ingredient prices go up?
Will a new competitor enter the market?
These are the key factors that could impact their ability to reach their goal.

2. Create Scenarios

The company creates a few different “scenarios” or possible situations based on how these key factors could play out. For example:

Best-case scenario: Demand for healthy snacks goes up, and their sales skyrocket.
Worst-case scenario: A new competitor sells similar products for less, making it harder to attract customers.
Moderate scenario: Demand stays the same, and they need to work a bit harder to reach new customers.

3. Analyze Scenarios

For each scenario, the company considers how it would impact their strategy choices:

Best-case: They may focus on increasing production and expanding into new stores to keep up with demand.
Worst-case: They might focus on strengthening customer loyalty and improving their product’s uniqueness to compete.
Moderate: They may focus on steady online marketing and modest expansion.

4. Choose the Most Flexible Strategy

Now, they compare their scenarios and choose a strategy that works well in multiple situations, not just one.
For example, they may decide to increase online marketing and partner with more stores because this strategy works if demand is high, low, or stable.

5. Prepare Contingency Plans

The company also prepares “backup plans” for each scenario. If things go really well, they’re ready to expand faster. If things go poorly, they have a plan to cut costs or target a smaller but loyal customer group.

In short: Scenario Analysis helps a company consider different futures so they can make smarter strategy choices that prepare them for any outcome. This way, they're not caught off guard if things change unexpectedly!

Tools & Techniques of Strategic Analysis

Strategic analysis tools and techniques help businesses evaluate their strengths, weaknesses, opportunities, and threats, enabling smarter decision-making and planning.

BCG Matrix

The BCG Matrix, or Boston Consulting Group Matrix, is a tool that helps companies decide which of their products to focus on and invest in. It divides products into four categories based on market growth (how fast the industry is growing) and market share (how much of the market the company owns for that product). This matrix is often visualized as a 2x2 grid with four categories:

The BCG Matrix is a simple tool that helps companies decide which products or services to focus on, keep, or let go. It categorizes products into four types based on two main factors:

Market Growth - How fast the market for the product is growing.
Market Share - How much of the market the company owns for that product.

By using the BCG Matrix, companies can see which products are worth investing in (Stars and some Question Marks), which products they can rely on for steady income (Cash Cows), and which ones they may need to phase out (Dogs).

Example: Imagine a tech company that sells four types of products:

Star: Their best-selling smartphone in a fast-growing market.
Cash Cow: An old but popular laptop that brings in steady income.
Question Mark: A new tablet with low market share but high growth potential.
Dog: An outdated smartwatch with poor sales in a shrinking market.

Using the BCG Matrix, the company can decide to keep investing in the smartphone (Star), use profits from the laptop (Cash Cow) to support the tablet (Question Mark), and possibly discontinue the smartwatch (Dog).

The BCG Matrix helps companies prioritize where to spend their money, focus on high-potential products, and reduce losses on less successful ones.

Ansoff Grid

The Ansoff Grid (or Ansoff Matrix) is a simple tool that helps businesses think about how to grow by looking at their products and markets. It shows four main ways a company can expand, depending on whether it’s focused on existing or new products and markets.

The Ansoff Grid is helpful because it shows companies different ways to grow and helps them think about the risks of each approach.

GE Nine Cell Planning Grid

The GE Nine Cell Planning Grid is a strategic tool that helps businesses decide which products or business units to invest in, grow, or cut back on. It’s essentially a large grid (3x3) that combines two main factors:

Market Attractiveness – How appealing or profitable a market is.
Business Strength – How well a specific product or business unit performs in that market.

The grid has nine cells (three levels for each factor: High, Medium, and Low), and products or business units are placed into one of these cells. Let’s break it down simply:

The rows represent the market attractiveness (High, Medium, Low).
The columns represent the business’s strength in the market (Strong, Average, Weak).

Each cell in the grid suggests a different strategy for the business.

How It Works:

The cells can be grouped into three main strategic actions based on where a product or business unit lands on the grid:

1. Invest / Grow: High market attractiveness + strong business strength

Example: A company sells a unique smartphone in a high-demand market where it performs well. The company would invest more in this product, increasing production, marketing, or improving features to capture more customers.

2. Selectively Invest / Maintain / Hold: Medium market attractiveness or average business strength

Example: A clothing brand operates in a moderately competitive fashion market. The company might maintain its investment here but keep a close watch on trends and adjust as needed, possibly introducing new styles if trends shift.

3. Divest / Exit / Harvest: Low market attractiveness or weak business strength

Example: A company sells an older model of a home appliance that faces strong competition and low demand. Here, the company might decide to cut back or even discontinue the product since it’s not likely to bring significant profit.

Example: Imagine a company has three products: A, B, and C.

1. Product A: High attractiveness (demand is high and the market is growing) + Strong strength (product sells well).

Action: Invest / Grow — the company will increase its budget for marketing and production for Product A.

2. Product B: Medium attractiveness (demand is stable) + Average strength (product has moderate sales).

Action: Maintain / Hold — the company will keep Product B as it is, but won’t spend too much on it.

3. Product C: Low attractiveness (demand is low) + Weak strength (product doesn’t sell well).

Action: Divest / Harvest — the company might stop producing Product C or reduce its focus on it.

The GE Nine Cell Planning Grid gives a clear visual representation of which products to prioritize, maintain, or potentially remove from the business lineup based on both market potential and performance.

McKinsey’s 7’S framework

The McKinsey 7S Framework is a tool to help organizations understand and align seven important areas so they can work together effectively. The framework consists of 7 S’s—Shared Values, Strategy, Structure, Systems, Style, Staff, and Skills. These are grouped into "hard" and "soft" elements.

Here’s a simple look at each one:

Strategy: This is the company’s big plan for success. It’s the “what” and “how” they aim to achieve their goals, like expanding to new markets or launching a new product.
Structure: This is about how the company is organized. Think of it as the “shape” of the business: who reports to whom, how teams are set up, and how decisions are made.
Systems: These are the everyday processes and tools that keep things running smoothly, like the payroll system, customer service procedures, or supply chain methods.
Shared Values: These are the core beliefs and culture of the company, like putting customers first or working as a team. Shared values help guide everyone’s actions and keep them united.
Skills: These are the abilities that employees need to have for the company to succeed, such as technical skills, communication, or leadership.
Style: This is the management approach or “personality” of the company’s leaders. Some companies may have a more relaxed, open style, while others might be more formal or structured.
Staff: This simply refers to the people who work there. It’s about hiring the right people and putting them in roles where they can do their best.

Example: Imagine a restaurant aiming to become the top dining spot in town:

Shared Values: The restaurant values excellent service and quality food, so every decision reflects these priorities.
Strategy: The restaurant focuses on locally sourced ingredients and a unique menu to stand out.
Structure: The chef leads the kitchen, the manager oversees customer service, and there are clear roles for waitstaff, making service efficient.
Systems: The restaurant uses a reservation system for seating and a feedback process for improving food quality.
Style: The owner promotes a warm and friendly atmosphere; managers lead by example, ensuring the staff is customer-focused.
Staff: Employees are hired for their friendliness and trained in food service and customer interaction.
Skills: The head chef’s culinary skills and the staff’s customer service abilities set the restaurant apart from competitors.

By aligning these seven elements, the restaurant ensures that all aspects of its business work together toward the goal of becoming the top choice for diners.

Strategy implementation

Strategy implementation is simply putting a company’s plan into action. It’s like moving from planning to doing. Once a company decides on a strategy—like entering a new market, launching a new product, or improving customer service—it needs to follow a series of steps to make that strategy a reality.

Set Clear Goals: The company first breaks down its big goals into smaller, specific targets. For example, if the strategy is to improve customer service, a clear goal might be "reduce customer wait times to under 5 minutes."
Assign Responsibilities: Different tasks are assigned to the right people or teams. For example, the customer service team would focus on training for faster responses, while the tech team might work on improving customer service software.
Allocate Resources: The company ensures it has the necessary resources (like money, people, technology) to make the strategy work. This could mean hiring new staff, buying software, or setting a budget for advertising.
Develop a Timeline: To stay on track, a timeline with deadlines is created. If the goal is to launch a product, they may set a timeline with stages for design, testing, production, and marketing.
Monitor Progress: The company regularly checks how things are going to make sure the strategy is working. If they find any issues (like a delay in product launch), they make adjustments as needed.
Motivate and Support Employees: Employees are encouraged and given the support they need. This might include training, team meetings, or incentives to stay motivated and focused.
Evaluate and Adjust: Finally, after some time, the company reviews the results. If the strategy is working, they continue with it. If not, they make changes to improve the results.

In short, strategy implementation is the "how" behind making big ideas and plans happen in a company. It’s about making sure everyone knows what to do, has the tools to do it, and follows the plan until the goal is achieved.

Developing Programs

Developing Programs is about taking a big idea or plan (strategy) and breaking it down into specific projects or actions to make it happen. Think of it as the “action phase” where the company turns its strategic goals into real, concrete steps.

In simple terms, developing programs means creating detailed activities or projects to support a company’s goals. For each program, the company defines what needs to be done, who will do it, and what resources are needed. This way, everyone knows their role, and the strategy can move forward in an organized way.

How It Works, Step by Step

Define Clear Goals: The company decides on specific goals or targets it wants to achieve. For example, a goal could be to increase customer satisfaction by 20% in the next year.
Create Specific Programs: For each goal, the company develops a program or set of activities to reach it. For the customer satisfaction goal, one program might be a Customer Feedback Program to gather opinions and identify areas for improvement.
Assign Roles and Responsibilities: For each program, the company assigns roles to employees or teams. For the Customer Feedback Program, the customer service team might be responsible for handling feedback and surveys.
Allocate Resources: Resources like time, money, and tools are allocated. For example, the company might invest in a survey tool or hire a consultant to analyze customer satisfaction data.
Set Timelines and Milestones: Each program needs a timeline to track progress. Milestones, or small goals, help make sure the program is on track. The Customer Feedback Program could have a milestone to launch the first survey in 3 months.
Monitor and Adjust: As the program runs, the company monitors the results. If the program isn’t meeting its goals, adjustments are made. If feedback shows long wait times are an issue, the company might add more customer support agents.

Example: Let’s say a clothing brand wants to expand its online presence and boost sales by 30%.

1: Social Media Campaign

Goal: Increase followers and engagement.
Roles: The marketing team handles posts; the customer service team responds to questions.
Resources: Budget for ads on social media platforms.
Timeline: Run campaigns for 6 months, review results monthly.

2: Improve Website Experience

Goal: Make the website user-friendly and faster.
Roles: IT team works on website updates; marketing team tests new features.
Resources: Budget for a new web design and testing tools.
Timeline: Complete updates within 4 months, track sales monthly.

By setting up these specific programs, the clothing brand takes a clear path from its big goal of boosting online sales to concrete actions that help reach it. Each program is planned, assigned, and tracked to make sure it’s contributing to the overall strategy

Budget and Procedures

1. Budget

A budget is basically a financial plan. It sets limits on how much a company can spend and allocates funds to different areas based on priorities.
The budget helps ensure that there’s enough money available to support projects and day-to-day operations without overspending.
Example: If a company wants to launch a new product, the budget would cover costs like research, product development, marketing, and distribution. It assigns a specific amount to each of these so that the project stays financially manageable.

2. Procedures

Procedures are step-by-step instructions or rules that guide how tasks should be completed. They ensure that everyone in the organization knows what to do and how to do it consistently.
Procedures help maintain quality, reduce mistakes, and save time because everyone follows a clear process.
Example: For the new product launch, there might be procedures for testing the product, how to respond to customer feedback, or the steps in the marketing campaign. These procedures keep things organized and ensure all team members work in sync.

In short, the budget provides the financial resources, while procedures offer the roadmap for how tasks should be carried out to achieve the organization’s goal.

Stages of Corporate Development

The Stages of Corporate Development are the different phases a company goes through as it grows and evolves. Each stage has unique challenges and needs, which change as the company matures. Here’s a simple breakdown of each stage:

1. Start-Up Stage

In this early phase, the company is just getting off the ground. It focuses on creating its first products or services, finding customers, and making a name for itself.
Key Challenge: Surviving and establishing a market presence.
Example: A new tech start-up developing a unique app to attract its first users.

2. Growth Stage

Here, the company has started to gain traction with customers and sees increasing sales. The focus shifts to expanding the business, hiring more employees, and improving production.
Key Challenge: Managing rapid growth without losing quality.
Example: An online retailer that has built a solid customer base and now needs more inventory and a bigger team to keep up with demand.

3. Maturity Stage

At this point, the company has established itself in the market, and growth has started to level off. The focus is on maintaining market share, improving efficiency, and maximizing profits.
Key Challenge: Staying relevant and avoiding stagnation.
Example: A well-known food brand that focuses on improving processes and refining its products to stay competitive.

4. Expansion or Diversification Stage

Companies in this stage look for new growth opportunities by expanding into new markets, launching new products, or even acquiring other companies.
Key Challenge: Taking calculated risks and managing new business areas.
Example: A smartphone brand expanding into wearable tech, like smartwatches, to reach a new customer base.

5. Decline or Renewal Stage

If a company fails to adapt or innovate, it may face a decline in sales and profits. The focus here is on either turning the business around (renewal) or accepting the decline and managing costs carefully.
Key Challenge: Reinventing or restructuring to survive.
Example: A traditional media company that adopts digital content strategies to compete with streaming services and stay relevant.

These stages reflect a company’s growth journey, from starting small to potentially becoming an industry leader—or facing the risk of decline if it doesn’t keep evolving.

Organizational Life cycle

The Organizational Life Cycle is the journey a business goes through as it grows and changes over time. It’s similar to the stages of life for a person: birth, growth, maturity, and eventually, decline or renewal. Here’s a simple way to understand the different stages of an organization’s life:

1. Startup (Birth)

This is when the company is first created. It’s like a newborn starting out in the world. The focus is on getting things up and running, finding customers, and making sure the business can survive.
Challenges: There's a lot of uncertainty, limited resources, and the company needs a lot of effort from a small team.
Example: A person opens a small bakery. They need to figure out recipes, attract customers, and manage day-to-day operations.

2. Growth (Childhood/Adolescence)

In this stage, the company starts to grow. It’s like a child or teenager becoming more active, gaining more customers, and expanding its products or services.
Challenges: The business needs more staff, better systems, and strategies to manage the increase in customers and sales.
Example: The bakery becomes popular, hires more workers, and maybe opens a second location to keep up with demand.

3. Maturity (Adulthood)

At this point, the company is stable and established. It’s like an adult who has figured things out. The business is now a well-known brand, with consistent customers and steady sales.
Challenges: The focus shifts to keeping things running smoothly, maintaining customers, and avoiding the risk of becoming too comfortable or outdated.
Example: The bakery now has a loyal customer base, but it may focus on improving efficiency and introducing new products to stay competitive.

4. Decline or Renewal (Old Age or Transformation)

This stage can go two ways: the company either declines because it fails to adapt, or it renews itself by changing and staying relevant.
Challenges: Businesses in decline may face tougher competition, reduced sales, or outdated practices. Those that renew themselves innovate or adapt to market changes.
Example: The bakery might struggle if new competitors open nearby, but it can try a makeover, such as offering online orders or a trendy new menu, to attract younger customers.

5. Exit or Transformation

In the final stage, the business might either close down, sell to someone else, or transform into something new to continue in a different form.
Challenges: This requires tough decisions about the future—whether to pass the business on, close it, or change its direction completely.
Example: The bakery might sell to a larger chain, or it could close if it can’t keep up with changing tastes.

In short, just like any living thing, businesses go through different life stages: they start small, grow bigger, reach maturity, and either face decline or find ways to reinvent themselves. Understanding this helps business owners plan for the future and make smart choices at each stage.

Organizational Structure

Organizational Structure refers to how a company arranges its teams, departments, and roles to get work done. Different structures help a company run efficiently depending on its goals, size, and industry. Here’s a simple explanation of three types of structures: Matrix, Network, and Modular/Cellular.

1. Matrix Structure

The Matrix Structure is like a double reporting system. Employees report to two managers: one based on their functional role (like finance or marketing) and another based on the project or product they are working on.

This structure is used when a company needs employees to work on multiple projects at the same time, bringing in expertise from different areas.
Example: Imagine a large tech company. An engineer (who works in the technology department) is also part of a team developing a new smartphone. The engineer reports both to the technology manager and the smartphone project manager. This helps the company use resources more flexibly across multiple projects.

2. Network Structure

A Network Structure is when a company relies on outside partners or other businesses to do some of its work, while it focuses on its core activities. It's like a central hub that connects different outsourced or partnered parts.

This structure is useful when companies need flexibility and efficiency but don’t want to manage every single part themselves.
Example: Think of a clothing brand. The company may design clothes and market them, but the manufacturing, shipping, and retail might be done by other companies. The clothing brand manages the network of these different companies to get everything done, without directly handling each task.

3. Modular/Cellular Structure

In a Modular/Cellular Structure, the company is divided into independent units or cells that can operate on their own but work together as part of the whole company. Each unit focuses on a specific task, product, or region, and can be flexible in how they operate.

This is often used by companies that need to quickly adapt and change, as each module can evolve independently.
Example: A car company might have separate units for different car models. Each unit (or cell) handles everything related to their specific car model—from design to production. If one model is not performing well, it can be adjusted without affecting the others.

Each of these structures helps a business organize its work in a way that suits its needs—whether that's managing multiple projects, collaborating with outside companies, or being flexible with different teams.

Reengineering and Strategy implementation

Reengineering and Strategy Implementation are two concepts used to improve how a business operates and reaches its goals. Let’s break them down in simple terms:

1. Reengineering

Reengineering is like starting from scratch to improve how work is done. It’s about taking a fresh look at all the main processes in a company and finding ways to make them better, faster, and cheaper.
In reengineering, a company questions all of its usual methods. If there’s a new, better way to get things done, they’ll redesign the process—even if it means big changes.
Example: Imagine a company that has always handled orders manually. To improve efficiency, they decide to reengineer their process by using a new digital system to handle orders automatically. This saves time, reduces errors, and makes customers happier.

2. Strategy Implementation

Strategy Implementation is simply about putting a plan into action. A strategy is a company’s plan for how it will succeed, and implementation is when they take that plan and make it real through day-to-day actions.
It involves coordinating resources, managing people, and ensuring each department understands its role. It’s the practical part of achieving a company’s goals.
Example: A clothing store decides its strategy is to become the go-to spot for affordable, eco-friendly fashion. To implement this strategy, they might start sourcing sustainable materials, training staff on eco-friendly practices, and promoting these changes in their marketing.

In short, reengineering is about redesigning and improving existing processes, while strategy implementation is about taking a strategic plan and making sure it happens successfully across the business.

Leadership and corporate culture

Leadership and Corporate Culture are two essential elements that shape how a company functions and feels. Here’s a simple explanation of each:

1. Leadership

Leadership is about guiding and inspiring people in a company. Leaders set the direction, make important decisions, and motivate everyone to work toward shared goals. Good leadership helps people feel supported, focused, and ready to give their best.
Leaders come in different styles. Some are more hands-on, while others prefer giving people more freedom. A good leader adapts their style based on what the team needs and what will help them succeed.
Example: Think of a team captain in sports who motivates the players, keeps them organized, and encourages them to perform their best, even when they’re tired or the game is challenging.

2. Corporate Culture

Corporate Culture is like the personality of the company. It’s the set of shared values, beliefs, and practices that shape how people work and interact within the company. It influences everything from how people dress, communicate, handle problems, to how they celebrate success.
Culture is built over time through the behavior of leaders, company policies, and shared experiences. It can be positive (open, collaborative) or negative (stressful, overly competitive) depending on how it’s nurtured.
Example: If a company values teamwork, its culture might encourage employees to work together, share ideas, and support each other. On the other hand, a company focused on competition might reward individuals for outperforming others.

In simple terms, leadership is about guiding people, while corporate culture is the atmosphere or environment created within the company. Great leaders often play a big role in shaping a strong, positive culture where people feel motivated and connected.

Unit 3 Strategy Formulation | Unit 2: Environmental Scanning | Unit 1: Introduction of Strategic Management & Corporate Governance | Unit 5: Strategy Evaluation & Control