Professional Documents
Culture Documents
Strategic Choice
Strategic Choice
Selection of the Best Strategy
of the proposed strategy to deal with strategic factors developed earlier in SWOT analysis. Ability of each alternative to satisfy agreed-on objectives with the least resources and the fewest negative side affects.
Ability
Resultant Strategy
Develop new products for older adults Develop a new employee benefits package
Corporate Scenarios are pro forma balance sheets and income statements that forecast each alternative strategy and its various programs will likely have on division and corporate ROI
In survey of Fortune 500 firms, 84% reported using computer simulation models in strategic planning.
Industry Scenarios
Examine possible shifts in the societal variables globally. Identify uncertainties in each of the six forces of the task environment. Make a range of plausible assumptions about future trends. Combine assumptions about individual trends into internally consistent scenarios. Analyze the industry situation that would prevail under each scenario. Determine the sources of competitive advantage under each scenario. Predict competitors behavior under each scenario. Select the scenario that are either most likely to occur or most likely to have a strong impact on the future of the company.
2002
4 090 970 2 673 129 65,3%
1999
2 452 939 1 617 253 65,9%
1996
1 350 466 939 067 69,5%
14,5% 17,7%
15,6% 14,2%
18,2% 10,9%
17,3% 8,3%
Z-Value
Altmans Bankruptcy Formula to calculate Z-value: Z= 1.2x1+1.4x2+3.3x3+0.6x4+1.0x5 x1 = Working capital/Total assets(%) x2 = Retained earnings/Total assets(%) x3 = Earnings before interest and taxes/Total assets(%) x4 = Market value of equity/Total liabilities(%) x5 = Sales/Total assets (number of times) A score bellow 1.81 indicates significant credit problems A score above 3.0 healthy firm
The actual decision will probably be influenced by several subjective factors: Managements attitude toward risk Pressures from stakeholders Pressure from the corporate culture Needs and desires of key managers
8-14
Development of Policies
After selection of the best alternative the organization must now engage in developing policies. Policies define the board guidelines for implementation. Policies tend to be rather long lived even outlast the particular strategy that created them. The general policies can become part of corporate culture and make the implementation of specific strategies easier but can restrict managements strategic options in future. A change in strategy should be followed quickly by a change in policies.