Topics:

 The Decision Stage  Cultural Aspects of Strategy Choice  The Politics of Strategy Choice  Governance Issues

Ronel N. Dadula
Reporter

The Decision Stage

The Decision Stage

Analysis and intuition provide a basis for making strategy-formulation decisions. The matching techniques just discussed reveal feasible alternative strategies. Many of these strategies will likely have been proposed by managers and employees participating in the strategy analysis and choice activity.

Stage 3: Decision Stage

Quantitative Strategic Planning Matrix (QSPM)

The Quantitative Strategic Planning Matrix (QSPM)

QSPM is the only one analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions other than ranking strategies to achieve the prioritized list. The QSPM is a tool that allows the strategist to evaluate alternative strategies objectively, based on previously identified external and internal critical success factors Like other strategy-formulation analytical tools, the QSPM requires good intuitive judgment.

The Quantitative Strategic Planning Matrix (QSPM) The QSPM comes under the third stage of strategy formulation which is called The Decision Stage and also the final stage of this process.

The best thing about QSPM is that it never insist the strategist to enter the information on assumptions, it extract the information from Stage 1 The Input Stage and Stage 2 The Matching Stage.

Format of Quantitative Strategic Planning Matrix

Format of Quantitative Strategic Planning Matrix

Internal and External key factors (EFE & IFE matrix)

Format of Quantitative Strategic Planning Matrix

Weight (relative importance of the factor)

Format of Quantitative Strategic Planning Matrix

Attractive Score (AS)

Format of Quantitative Strategic Planning Matrix

Total Attractive Score (TAS)

Steps to develop QSPM

1. List the firms key external opportunities & threats; list the firms key internal strengths and weaknesses (EFE Matrix and IFE Matrix). A minimum of 10 external & internal critical success factors should be taken. 2. Assign weights to each external and internal critical success factor . 3. Examine the Stage 2 (matching) matrices and identify alternative strategies that the organization should consider implementing.

Steps to develop QSPM

4. Determine the Attractiveness Scores (AS), defined as numerical values that indicate the relative attractiveness of each strategy in a given set of alternatives. The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. 5. Compute the Total Attractiveness Scores. Total Attractiveness Scores are defined as the product of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each row.

Steps to develop QSPM

6. Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in each strategy column of the QSPM. The Sum Total Attractiveness Scores reveal which strategy is most attractive in each set of alternatives. Higher scores indicate more attractive strategies, considering all the relevant external and internal factors that could affect the strategic decisions.

Limitations of QSPM
A limitation of the QSPM is that it can be only as good as the prerequisite information and matching analyses upon which it is based. Another limitation is that it requires good judgment in assigning attractiveness scores. Also, the sum total attractiveness scores can be really close such that a final decision is not clear. Like all analytical tools however, the QSPM should not dictate decisions but rather should be developed as input into the owners final decision.

Advantages of QSPM
A QSPM provides a framework to prioritize the strategies, it can be used for comparing strategies at any level such as corporate, business and functional. The other positive feature of QSPM that it integrate external and internal factors into decision making process. A QSPM can be developed for small and large scale profit and non-profit organizations.

Cultural Aspects of Strategy Choice

Cultural Aspects of Strategy Choice

All organizations have a culture. Culture includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes, and heroines that describe a firm. Culture is the unique way an organization does business. It is the human dimension that creates solidarity and meaning, and it inspires commitment and productivity in an organization when strategy changes are made.

Cultural Aspects of Strategy Choice

It is beneficial to view strategic management from a cultural perspective because success often rest upon the degree of support that strategies receive from a firms culture. If firms strategies are supported by cultural products such as values, beliefs, rites etc., then managers often can implement changes swiftly and easily. However, if a supportive culture does not exist and is not cultivated, then strategy changes may be ineffective or even counterproductive.

Cultural Aspects of Strategy Choice

A firms culture can become antagonistic to new strategies, and the result of that antagonism may be confusion and disarray. Strategies that require fewer cultural changes may be more attractive because extensive changes can take considerable time and effort. Whenever two firms merge, it becomes especially important to evaluate and consider culture-strategy linkages.

Cultural Aspects of Strategy Choice

Culture provides an explanation for the difficulties a firm encounters when it attempts to shift its strategic direction, as the following statement explains: Not only has the right corporate culture become the essence and foundation of corporate excellence, but success or failure of needed corporate reforms hinges on man-agements sagacity and ability to change the firm driving culture in time and in tune with required changes in strategies.

The Politics of Strategy Choice

The Politics of Strategy Choice

All organizations are political. Unless managed, political maneuvering consumes valuable time, subverts organizational objectives, diverts human energy, and results in the loss of some valuable employees. Sometimes political biases and personal preferences get unduly embedded in strategy choice decisions. Internal politics affect the choice of strategies in all organizations.

The Politics of Strategy Choice

The hierarchy of command in an organization, combined with the career aspirations of different people and the need to allocate scarce resources, guaranties the formation of coalitions of individuals who strive to take care of themselves first and the organization second, third or fourth. Coalitions of individuals often form around key strategy issues that face an enterprise.

The Politics of Strategy Choice

Major Responsibilities of strategists.

 to guide the development of coalitions  to nurture an overall team concept  to gain the support of key individuals and groups of individuals

The Politics of Strategy Choice

In the absence of objectives analyses, strategy decisions too often are based on the politics of the moment. With development of improved strategy-formation tools, political factors become less important in making strategic decisions.

In the absence of objectivity, political factors sometimes dictate strategies, and this is unfortunate. Managing political relationships is an integral part of building enthusiasm and esprit de corps in an organization.

The Politics of Strategy Choice

Tactics used by politicians for centuries that can aid strategists: Equifinality Satisfying Generalization Focus on Higher-Order Issues Provide Political Access on Important Issues

Governance Issues

Governance Issues
Director one of a group of persons entrusted with the overall direction of corporate enterprise.

Board of Directors a group of individuals who are elected by the ownership of a corporation to have oversight and guidance over management and who look out for shareholders interest. The act of oversight and direction is referred to as Governance.

Governance Issues
Governance the characteristics of ensuring that longterm strategic objectives and plans are established and that the proper management structure is in place to achieve those objectives, while at the same time making sure that the structure functions to maintain the corporations integrity, reputation, and responsibility to its various constituencies.

source: The National Association of Corporate Directors

Governance Issues
Board of Directors Duties and Responsibilities
 Control and oversight over management  Adherence to legal prescriptions  Consideration of stakeholders interest  Advancement of stockholders rights

Governance Issues
Board of Directors Duties and Responsibilities - Control and oversight over management.
       Select the Chief Executive Officer (CEO). Provide the CEO with a forum. Ensure managerial competency. Evaluate managements performance. Set managements salary levels, including fringe benefits. Guarantee managerial integrity through continues auditing. Devise and revise policies to be implemented by mgmt.

Governance Issues
Board of Directors Duties and Responsibilities - Adherence to legal prescriptions.
      Keep abreast of new laws. Ensure the entire organization fulfills legal prescriptions. Pass bylaws and related resolutions. Select new directors. Approve capital budgets. Authorize borrowing, new stock issues, bonds, and so on.

Governance Issues
Board of Directors Duties and Responsibilities - Consideration of stakeholders interest.
 Monitor product quality.  Facilitate upward progression in employee quality of work life.  Review labor policies and practices.  Improve the customer climate.  Keep community relations at the highest level.  maintain good public image.

Governance Issues
Board of Directors Duties and Responsibilities - Advancement of stockholders rights.
     Preserve stockholders equity. Guard against equity dilution. Inform stockholders through letters, reports and meetings. Declare proper dividends. Guarantee corporate survival.

Governance Issues
Good governance is acknowledged to be essential for the success of any organization and is now more important than ever. Members of boards play a vital role in serving their causes and communities and bring passion and commitment as well as skills and experience to the organizations they lead. They provide long term vision and protect the reputation and values of their organizations.

Governance Issues

Today, boards of directors are composed mostly of outsiders who are becoming more involved in organizations strategic management. The trend in the U.S. for example, is toward much greater board member accountability with smaller boards, now averaging 12 members rather than 18 as they did few years ago

Governance Issues
Principles of Good Governance
An effective board will provide good governance and leadership by:

 Understanding their role  Ensuring delivery of organizational purpose  Being effective as individuals and a team  Exercising control  Behaving with integrity and  Being open and accountable.

Governance Issues
Being a member of a board of directors today requires much more time , is much more difficult, and requires much more technical knowledge and financial commitment than in the past. Just as directors are beginning to place more emphasis on staying informed about an organizations health and operations, they are also taking a more active role in ensuring that publicly issued documents are accurate representations of a firms status.

Thank You for listening.

End