strategic options and choice

8/8/2019 Strategic Options and Choice

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STRATEGIC OPTIONS AND

CHOICE



Introduction

Organizations have to embark on strategies which can

help them achieve their goals.

An organizations strategy is ideally a logical responseto factors in the environment,

It is the outcome of strategic analysis, a sequel on

analysis of strengths, weaknesses, opportunities and

threats.



Introduction

An organization's strategy may be appropriate or

inappropriate, may have short or long term gains.

Organizations differ in the quality of their responseas well as the ability to translate strategies into

concrete achievements.

Organizations often have a wide range of strategies

to choose from



Introduction

A strategic choice leads to a strategic direction for the

organization.

organizations have to choose those that are

consistent with their vision, mission, values, desire tosucceed and the capabilities in their organization.

In a nutshell, Strategic Choice involves understanding

the nature of stakeholder expectations, identifying

strategic options, and then evaluating and make

strategic choice(s).



The Process of Identifying Strategic

Options and Making Choices The Strategic choice starts with finding the available

options.

The options can be about market, products and services,

options to improve resources and capabilities or on

improving processes.

Once the individual options are found on various areas, the

next step is to integrate all the available strategic options.

The integrations is based on the relationship of those

options, impact of options on each other and the after

effect of the options on the organization.

Taking all these into consideration, strategic choices are

made.



The Process of Identifying Strategic

Options and Making Choices Johnson and Scholes a leading author on

strategy breaks the options into three

questions namely:

On what basis do we decide to compete?

Which direction should we choose?

How are we going to achieve the chosendirection?



On what basis do we decide to

compete? Prof Michael Porter an authority on strategic options states

that if your company is wishing to obtain competitive

advantage over its rivals, then it faces two options:

± Option 1: Is it seeking to compete by achieving lower costs than its

rivals and charging similar prices for the products and services, which

it offers, thereby achieving advantage via superior profitability?

Or

± Is it wishing to differentiate itself and the customer is prepared to pay

a premium price for the added value which the customer perceives inthe product, and thereby enjoys greater margin than the

undifferentiated product ?



On what basis do we decide to

compete? Options 2: What is the scope of the area in which

your company wishes to obtain competitive

advantage? Is it industry-wide or is it restricted to a

specific niche?

The answers to these two options leave you and your

company faced with three generic strategic options,

which are defined as:

Cost leadership.

Differentiation.

Focus.



Which direction should we choose ?

This involves choosing which strategic options to take

by way of deciding which products/markets to

choose as a way forward for the business.

Six generic options are recommended as follows-

± Do nothing.

± Withdrawal.

± Market penetration.

± Product development.

± Market development.

± Diversification.



How are we going to achieve the

chosen direction? The final problem that an organization must

overcome is to decide how to develop the

chosen strategic options.

The development options available are:

± joint development.

± internal development;

± external development/acquisition;



Some Common Strategic Option

Privatization (Government)

The main policy thrust of government today in Nigeriaand other parts of the world is reduction in the size of

government.

Government has taken the policy option to disengagefrom a large number of social and economic activities inpreference for private sector initiative.

In line with this policy, many government establishmentshave been privatized while others are at advanced stageof privatization.



Some Common Strategies

Privatisation

The main logic in the privatization policy is to enableenterprises operate efficiently and competitively in a

deregulated economy and with minimuminterference.

Privatization has provided the basis of introducingnew philosophy, values, challenges, management,competencies, rewards, processes, etc. inorganizations.

The arguments for and against privatisation areengaging




Contraction of Operation

To contract is to scale down operations.

An organization may be too large and operationallyinefficient.

Before the distress in the banking sector in the 1990s,

many of them had over-expanded and had more branch

networks than was feasible.




Contraction of Operation

Many government organizations engaged in too manyactivities and services and became inefficient and

ineffective.

Scaling down of operations can lead to increased focus,specialization, value creation, quality service delivery,distinctiveness

The notion here is that it is much better to keepoperations at manageable level for better control,efficiency and better service to the clientele.




Expansion and Growth Every organization looks forward to an opportunity to

expand services and to grow.

An organization may take the deliberate strategy toopen new branches, develop projects and services orundertake new lines of businesses with a view toincrease output.

Public hospitals open new clinics at the village level tomove services nearer to the local populace.

More schools may be opened to improve literacy levels




Expansion and Growth

Commercial establishments expand services

presumably to reach customers and to widen market

outreach or in anticipation of future prospects.

Without consideration of feasibility and viability,

expansion may lead to ineffectiveness and business

failure.




RightRight--Sizing (Government)Sizing (Government)

RightRight--sizing may take the form of increase or decreasesizing may take the form of increase or decreasein the workforce but more of the latter.in the workforce but more of the latter.

Many public and private sector organizations buckleMany public and private sector organizations buckleunder the weight of bloated workforce.under the weight of bloated workforce.

Recruitment in many organizations was driven byRecruitment in many organizations was driven byextraneous factors, more than by the need to increaseextraneous factors, more than by the need to increase

production or meet market demands.production or meet market demands.




Right-Sizing (Government)

Public sector reforms, scaling down of operations,cost containment and other pressures in the

business environment have compelled organizationsto take another look at staffing decisions.

An organization which pursue right-sizing as astrategy may utilize part-time staff and consultants to

handle some of their schedules (beware of moraleand union factors).




Project DevelopmentProject Development

Public and private sector organizations undertake newPublic and private sector organizations undertake newprojects for the purpose of enhancing service delivery.projects for the purpose of enhancing service delivery.

Public projects may take the form of developing newPublic projects may take the form of developing newinfrastructure, including schools, hospitals, markets,infrastructure, including schools, hospitals, markets,potable water, road networkpotable water, road network

Projects may be concerned with education, training,Projects may be concerned with education, training,

health care, employment generation, gender or otherhealth care, employment generation, gender or otherforms of empowerment.forms of empowerment.




Project Development

Private sector organizations embark on new projectsto replace obsolete plants, expand existing capacity

or facilities and to improve service delivery. In each case, project cost, technical and market

factors, capabilities, outcomes and other factors thatwill affect feasibility have to be considered.

The bane of our development process is white

elephant projects, inflated project cost, poorimplementation of projects, etc.




Product and Service Development and Management

Organizations success or failure is intricately linkedto the performance of products and services.

Some products are stars, they are well received inthe market and yield high returns. Others areproducts of the future.

Products and services have high failure rate. Popularand well accepted products today may be rejectedtomorrow. Products have a life cycle and peopleswitch brands.




Product and Service

Managers have to take appropriate decisions tointroduce products, re-cycle them, innovate products,

They have to stimulate demand and gain sustainedmarket acceptance and patronage.

They introduce new products or services to respond tomarket demands, meet existing or potential needs,expand operations and enhance profits.

Product development is an important decision and isdriven by need and appropriate strategies.




Market Segmentation

An organization may provide services to a broad range

of market or to a specific market segment.

Managers have to identify different market segments

with homogenous characteristics

This is required to be able to respond to needs,

expectation and characteristics of each marketsegment.




Diversification, integration

An organization may have a few lines of activities,products or services.

This gives focus and enables it to develop competenciesin the areas.

Some others engage on varied, often related orunrelated growth strategies.

In the breweries, diversification has taken the form of expanding into bottled water, soft drinks, integratingbackward to produce grains, integrating forward toproduce distribution outlets, etc.




Diversification, integration

The universities offer their regular courses and in

addition provide primary and secondary education,run mature people and diploma programmes, go into

publication and consultancy.



Strategic Alliances, Partnership and Mergers

Two or more organizations may decide to work out amemorandum of understanding to work together toachieve a common goal.

They may have a lose arrangement in which theyprovide services to a predetermined clientele undergiven conditions and terms

They may come together by way of mergers to provide

their services.

Some Common StrategiesSome Common Strategies




Strategic Alliances ...

Public and private sector partnerships is beingcanvassed as a means of providing better social

services. The bank consolidation policy has set in motion

strategic alliances, mergers and acquisitions.

Partnership and mergers have to be carefully

managed to blend disparate values and cultures.




Technology Every organization requires technology to provide

quality service.

In all industries some have appropriate technology or

lead in technology. Several others cannot afford the technology needed by

them to perform effectively.

Technology has a huge cost implication and decisionson technology should be informed by market forces,cost consideration, funding capabilities and need forquality service delivery.



Factors Considered InSelecting Strategies

Organization's mandate

Vision and values of organizational leaders

Opportunities in the environment

Threats and challenges facing theorganization

Competition

Internal resource capabilities

Technology



Conclusion

Organizations need strategies to direct actionappropriately and to achieve objectives.

Some strategies are effective, many others are not

Yesterdays strategies may be inappropriate to meettodays challenges.

Strategies are as important as the processes involved inselecting them.



Conclusion

Organizations must devote time and resourcesto formulate, implement and review strategiesfor goal achievement and improved service

delivery.

strategic options and choice

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