Welcome to StudyCIMAOnline online tutorial
series on Strategy Formulation.
In this tutorial we will discuss about the
strategic planning models used in business.
Rational Planning Model
This model is the starting point of studying
about strategy formulation because it is highly
logical, sequential and easy to understand.
The model comprises of a flow of elements
as follows:
1.
Be clear about the mission and vision of the
organization
2.
Analyse the internal and External Environment
3.
Use the information from above two steps to
carry out a position analysis of the organization
4.
Identify the strategic options to reach the
desired objectives of the organization
5.
Evaluate the identified strategic options.
– an easy way to evaluate is using Suitability,
Acceptability & Feasibility framework by Johnson
Scholes & Whittington
6.
Choose the strategies which score overall
best fit using above criteria
7.
Implement the strategies using the resources
within the business and the resources acquired
from outside
8.
Review continuously and make changes to drive
the actions towards realizing the strategy
However, we should remember that there are
inherent weaknesses of this model.
This is because the rational planning model
is linear, sequential, driven by analysis
of past information and lack of responsiveness
to the changes in external environment.
Johnson Scholes & Whittington has grouped
the above process in to 3 major categories:
1.
Strategic Analysis
2.
Strategic Choice
3.
Strategy Implementation
1.
Strategic Analysis
This will include the internal and external
analysis of the organization.
Internal analysis is mostly done using the
frameworks such as Strengths and Weaknesses
analysis, value chain analysis, business unit
performance analysis, customer life cycle
analysis, customer profitability analysis
and a variety of other analytical tools.
External analysis can be carried out using
Porter’s 5 Forces Model (to evaluate the
competitiveness in the industry, to decide
whether entering a new market/business is
viable etc), External Opportunities and Threats
Analysis, and also analysis of the Political,
Economic, Social, Technological, Ecological
and Legal factors.
2.
Strategic Choice
This is where alternative strategic options
are identified, evaluated and decided which
strategies to be used.
For each business unit a competitive strategy
should be developed to beat the competition
in the market.
These strategies are often following the “Critical
Success Factors – CSFs”; the few selected
areas that should perform well to bring overall
success of the organization.
At this stage the business can apply the model
developed by Ansoff;
a) Sell more units in its existing market
– i.e.
“Market Penetration”
b) Sell a new products in the existing market
– i.e.
“Product Development”
c) Sell the same product in to a new market
– i.e.
“Market Development”
d) Sell a new product to a new market – i.e.
“Diversification”
Also the businesses have to decide between
organic growth, expansion by mergers & acquisition
etc.
3.
Strategy Implementation
Success of achievement of each critical success
factor is measured using “Key Performance
Indicators - KIPs”.
During the implementation stage you will be
using the knowledge gathered from many areas
of management such as marketing, human resource
management, motivation & rewards, information
technology and risk management.
