CIMA Strategic Case Study Theory and the Strategic Case Study Section A – CIMA E3 Chapter 2 Formulating a business strategy © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 11 CIMA Strategic Case Study Theory and the Strategic Case Study 1. Business strategy Strategy A strategy is a plan of action designed to achieve a goal or objective. The aim of a strategy is to gain some kind of competitive advantage or to help to exploit future opportunities. A strategic plan tends to be an overall guide to the way forward rather than a detailed step by step approach due to the tendency of the real world to be uncertain. In the example of a chess game, a ‘strategy’ provides the over-riding approach that the player will take to win the game, but the exact set of moves they undertake will vary depending on the opponent’s moves. Strategy in business Applying this to a business scenario, according to the CIMA official terminology a business strategy can be defined as: "A course of action, including the specification of resources required, to achieve a specific objective" Or, more complete definition is given by Johnson, Scholes and Whittington as: “The direction and scope of an organisation over the long term, which achieves advantage for the organisation through its configuration of resources within a changing environment, to meet the needs of the markets and to fulfil stakeholder expectations” Business strategy therefore is concerned with the overall management of an organisation and includes the management of and taking decisions about: a) Products b) Markets c) Locations (production and sales) d) Structure e) Personnel f) Buildings and machinery g) How to compete It is vital that you have fully analysed the strategy for your preseen company and decided on how you would take this company forward if you were advising a director of this business. © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 12 CIMA Strategic Case Study Theory and the Strategic Case Study 2. Approaches of Strategy Formulation There are a number of different approaches to the development of strategies within organisations. Planned strategies Emergent strategies Incrementalism Opportunism These will be examined one by one in the following sections. Planned Strategies Strategies can be consciously and formally planned in advance, either by the directors or by a specialist department. This provides a clear, justifiable strategy based on the information available about the company’s current position, environment and competencies. As such the strategy developed should be well thought through and effective. Planned strategies are often used in large organisations, and are particularly suitable where the industry is subject to relatively little change. Emergent Strategies (Mintzberg) Emergent strategies are strategies which emerge out of the course of the business rather than having been formally planned. They could perhaps be due to opportunities which present themselves (e.g. a competitor comes up for sale) or threats which need to be addressed (e.g. a competitor develops a new product and the company must follow suit to remain competitive). Emergent strategies can be combined with the successful elements of the planned strategy to define the way forward for the business. The process of bringing these together is called crafting a strategy. Incrementalism In fast changing environments it may be unrealistic to effectively undertake the full strategic planning process. Instead it is more practical to develop a short term strategy based on the consensus of opinion of major stakeholders. An incrementalist approach was adopted by many businesses during the economic downturn of the late 2000s as uncertainty made it hard to make © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 13 CIMA Strategic Case Study Theory and the Strategic Case Study accurate long term predictions. The strategy is then developed regularly using a series of small scale changes as dictated by the changing environment. A shorter term ‘middle ground’ view is taken that ‘satisfies’ all groups. Freewheeling Opportunism In this model there is no formal approach to strategy development. Directors dictate the business direction through taking whatever opportunities are available at a particular point in time. This allows the business to be very flexible and take opportunities that companies using a more formal approach to strategy development would be slow to take. Freewheeling opportunism is most common in small companies with an entrepreneurial leader who can direct and focus their organisation down each new track based on the opportunities they identify and wish to pursue. The lack of formal processes makes change quick and easy. Application to the preseen: Strategic approaches For your case study consider the following, either completing your answers in the gaps below the questions or on a separate piece of paper: Which strategic approach as been used by the company in the past? What strategic approach is currently being used? What strategic approach do you believe it would be best for this company to use in the future? © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 14 CIMA Strategic Case Study Theory and the Strategic Case Study 3. Mission What is the organisation all about? Why does it exist? Who does it exist for? What is it trying to achieve? An organisation’s mission answers these questions. A mission helps to provide: Common purpose – so everyone is clear what the purpose and values of the company are to help guide the company’s culture Focus for the strategy – strategic decisions can be based upon and reviewed against their consistency with the mission to ensure the organisation does not get off track or lose focus on its true values and purpose. Direction for objectives – to ensure alignment of activities towards achieving objectives which are consistent with the company’s purpose. Mission Statements A mission statement is a written statement of the company’s purpose, strategy, values and policies. Campbell set out the following key elements of good mission statements: Purpose Why does the organisation exist? For whom does it exist? What does the organisation hope to achieve long term? Strategy How will the organisation compete? The range of businesses it is operating within. Values What the organisation stands for (quality, value for money, innovation etc.) Policies Policies people are expected to follow which will ensure people act according to the defined values, strategy and purpose. © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 15 CIMA Strategic Case Study Theory and the Strategic Case Study Application to the preseen: The Mission Statement Is a mission statement provided for your case study company? If so note it below: If no mission statement is given, consider what information is given under Campbell's key headings: Purpose Strategy Values Policies 4. Objectives The purpose of objectives A mission is non-quantifiable i.e. it provides an overall direction and purpose rather than being directly measurable. This means it is very hard to measure its success and it is not a good tool for motivating staff since targets are unclear. For a mission to be effective, it needs to be supported by clear, measurable objectives which provide targets for directors and staff, and hence motivates and provides focus for them. © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 16 CIMA Strategic Case Study Theory and the Strategic Case Study They also perform an important role in performance measurement as organisational and individual performance can be assessed by how effectively they have achieved their objectives. Qualities of effective objectives To be effective objectives should have the following qualities: Specific – about a clear focused topic e.g. profit, sales, customer satisfaction, new product development. Measurable – able to be measured to ensure people can be held accountable for them, and to give people focus. e.g. Turnover from new products launched. Achievable – To ensure they are motivational to those people tasked with working towards them and to make rewards attached to them meaningful. Relevant - to the person/division who has been set the objective, and consistent with the organisation’s mission. E.g. New product launch objectives might be given to the research and development or marketing departments. Timebound – to provide a deadline to focus and motivate people towards, and ensure accountability at that date Application to the preseen: The Objective The objectives provide a focused target to move towards to direct planning, motivate staff and enable accurate performance measurement. Are clear objectives set for the case study company? Is there are clear process for setting and monitoring objectives, all all levels in the business from strategically down to individuals? Identify and analyse the objectives of the company given in the preseen analysis below: Objective: Comments: Objective: © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 17 CIMA Strategic Case Study Theory and the Strategic Case Study Comments: Objective: Comments: 5. Stakeholders What are stakeholders? Stakeholders of an organisation are people who are affected in some way by what the organisation does. Organisational objectives should always be considered in relation to the objectives of different stakeholders. This ensures that a wide range of needs are considered in the objective setting process and balanced objectives are produced. Who are the key stakeholders Stakeholders and their needs include: Category Stakeholder Needs of the stakeholder Internal - Directors - Pay, bonus, overall performance, job security - Employees - Pay, bonus, personal performance, job security Connected - Shareholders - Share price growth, dividend payments (usually have - Customers - Prices, quality, delivery times, assured supply a contract) - Suppliers - Assured custom, high prices - Financiers - Interest payments, ability to pay back loans - Government - Tax, law, wealth of nation External © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 18 CIMA Strategic Case Study (Other) Theory and the Strategic Case Study - Pressure groups - E.g. environment - Local community - Employment, nice place to live - Wider community - Environment Stakeholder power The degree to which stakeholder needs are considered as part of the objective setting process depends on the level of power they have to impact the organisation and its results. The needs of powerful groups will tend to be prioritised For example large customers have significant power and products, prices, location of production facilities and so on may be impacted by their needs. Small customers have far less power and less consideration will be paid to their individual needs. Stakeholder Mapping (Mendelow’s Matrix) Mendelow's matrix helps to identify the relationships that should be built with different stakeholders. A stakeholder's position in the matrix depends on two factors: Power- The power to influence the organisation, and affect its decisionmaking. Interest - The interest which the stakeholder has in the organisation. The greater the interest in the organisation the greater the level of communication that will be required with them. Many employees have little power, but good communication of plans is important to retain their loyalty and motivation. © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 19 CIMA Strategic Case Study Theory and the Strategic Case Study Each stakeholder is placed in one box depending on each factor and then treated differently depending on where they are: Minimal effort – e.g. Temporary employee. Give them basic information to meet their needs, but pay little attention to them in decision making and strategy. Keep informed – e.g. Full time employee. Regularly communicate with them, particularly things they are interested in. This helps retain good relationships and avoids them seeking to increase power (e.g. through staff grouping together in a union). Keep satisfied e.g. Government. They have high power so to avoid them exercising the power they should be kept satisfied e.g. by paying them on time or meeting whatever needs they have. As they have little interest only information is given to them as is necessary (e.g. profit information to government to help assess tax payable). Key players (Keep Close) e.g. Major shareholder – Regular communication is maintained and their goals and objectives included as part of the strategy setting process and business approach. Application to the preseen : Stakeholder Mapping Using the information from the preseen, fill in the Mendelow's matrix below: © Strategic Business Coaching Ltd 2015 Personal use only - not licensed for use on courses Any unauthorised copying or sharing of this material is punishable by CIMA under the CIMA code of ethics 20
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