Strategic Choice

Making
Let us understand few terms
Choice and strategic choice refer to the process of
selecting one option for implementation.
An option is a course of action that it appears possible to
take. The simplest form of choice is therefore between taking
an option and not taking itdoing it or not doing it.
A strategic option is a set of related options (typically
combining options for product/markets and resources) that
form a potential strategy. For instance, it might be an option
to enter a new market in a new country.
Chosen Strategy is the strategic option that has been
chosen.
Process of Strategic Choice
The process could be rationally divided into four
steps:
1. Identify options,
2. Evaluate the options against preference criteria,
3. Select the best option, and
4. Then take action
What Options
are available?
Structure for making strategic
choice
Options of
method on
how to progress
Options about
products, markets
and services
Options to improve
resources &
capabilities
Making the Choice
Choice Criteria
-Assessment
-Intent
Theoretical
Frameworks for
making
strategic choice
Who should be
involved in
the Choice?
Linking into available strategic options
Chosen Strategy
Options about products, markets and services
Ansoffs Matrix
Options for building resources,
capabilities, and competence
It is obvious that potential market/product options will require
supporting changes in resources and capabilities
Before making a choice companies have to consider options
about resources, capabilities, and competencies
It involves identifying strengths and weaknesses in existing
resources and capabilities in comparison with competitors.
The time-scales for developing resources and capabilities may
be very long and may be longer than the time-scale for market
entry
For instance, people are a major resource, but changing the overall mix of
people in a company is likely to take years or decades.
Strategic options about building skills and experience may
therefore have to precede choices to enter new markets or to
develop individual products.
Options in methods on how to progress
There are four main methods by which companies
can grow their capabilities
1. Internal development
It involves developing the necessary skills among existing
staff and acquiring the necessary production capacity.
2. Acquisition
3. Contractual arrangements
4. Strategic alliances and partnerships
Linking Available Strategic
Options
Options about product/markets, resources/capabilities,
and the method of implementation have to be combined
into a much smaller number of strategic options.
General tests of strategic options
1. Alignment
- Whether the strategic option conforms to the strategic intent. This
test answers the question Does this option take us towards where
we want to go?
2. Feasible
- Whether the capabilities and resources necessary for success can
be made available. This answers the question: Will it work?
3. Acceptability:
- Acceptable means whether it will win the approval of both those
who will have to approve it and those who will have to implement it.
- Will this option be acceptable?
Who should be involved in the Choice?
Strategic choice is as much a political as a
logical process.
Each context will have its own pattern of
politics which will be important in determining
both how and what strategic decisions are
made.
Ultimately it is likely that a strategic choice will
need approval by the board
Theoretical Frameworks for
making strategic choice
Porter suggested that
the most fundamental
choices facing any
business are the scope
of the markets that it
attempts to serve and
how it attempts to
compete in these
chosen markets.
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Choosing a strategy from among
strategic options
Strategic
Intent
Strategic
Assessment
Available
Options
Choice Criteria/
No options identified
Logically viable options/
Chosen Strategy
Feasible but
Unaligned Options
Aligned but
Infeasible Options
Example of options and a strategic choice
In April 1999, Ford announced the agreed acquisition of
Kwikfit. Ford had therefore made a strategic choice. Ford
has a strategic intent to move into automotive services. A
strategic assessment of Ford should show that its existing
resources of large plants and skills in design, marketing,
finance, and assembly of new cars are inadequate to
support a service business. The decision to acquire Kwikfit
would then be made from options about:
What types of services to offer and in which markets;
What resources and capabilities are needed to support
these services;
How to acquire or build these resources.
Criteria for strategic choice
Does strategy exploit the opportunities present in the
environment?
Is it consistent with the resources of the firm, its
competitive advantage & core competence?
Is the chosen level of risk feasible?
Is it appropriate to the values & aspirations of the
firm?
Factors affecting strategic choice
Nature of environment stable?
Firms internal realities
Ambition of CEO / owners
Company culture
Firms capacity to execute the strategy
Resource allocation.
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Corporate Governance
CORPORATE GOVERNANCE is a system by which
companies are directed and controlled
CG is defined as the general set of customs, regulations,
habits, and laws that determine how a firm should be run
Corporate Governance evolved and introduced as remedial
measures in corporate sector for forbidding the wrongs or
unethical practices.
Ethics & Transparency are ground rules of Corporate
Governance.
It means carrying the business as per the stakeholders
desires.
efficiency as well as globalization are significant factors
urging corporate governance
Objectives of Corporate
Governance
Protecting the long term interest and enhancing
the values of shareholders and other stakeholders (
viz., customers, employees, creditors, bankers,
regulators and society at large)
Reducing the risks normally faced by the
companies
To solve the conflict of interests between
shareholders and management.
Benefits of Corporate Governance
1. Good corporate governance ensures corporate success and economic
growth.
2. Strong corporate governance maintains investors confidence, as a result
of which, company can raise capital efficiently and effectively.
3. It lowers the capital cost.
4. There is a positive impact on the share price.
5. Good corporate governance also minimizes wastages, corruption, risks
and mismanagement.
6. It helps in brand formation and development.
7. It ensures organization in managed in a manner that fits the best
interests of all.
8. Better relationship between the owners and the managers in an
organization
Corporate Ethics
Ethics involves a discipline that examines good or bad
practices within the context of a moral duty
Moral conduct is behavior that is right or wrong
Business ethics (also known as Corporate ethics) is a
form of professional ethics that examines ethical
principles and ethical problems that arise in a business
environment.
Publics interest in business ethics increased during
the last four decades
Publics interest in business ethics spurred by the
media
Business Ethics: Today vs. Earlier Period
Ethical Problem
Ethical
Problem
Societys
Expectations
of Business
Ethics
Actual
Business
Ethics
1950s Early 2000s Time
Two Key Branches of Ethics
Descriptive ethics involves describing, characterizing
and studying morality
What is
Normative ethics involves supplying and justifying
moral systems
What should be
Ethics, Economics, and Law
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Developing Moral Judgment
External Sources of a Managers Values:
Religious values
Philosophical values
Cultural values
Legal values
Professional values


Developing Moral Judgment
Internal Sources of a Managers Values:
Respect for the authority structure
Loyalty
Accepted belief
Performance
Results
Managerial Philosophy
Philosophy is the study of general and fundamental
problems, such as existence, knowledge, values,
reason, mind, and language.