Business Management in the Built Environment Lesson Six
Business Management in the Built Environment Lesson Six : Strategic Formulation using Various Strategic Tools & Options sl/BMBE/2017 1
Business Management in the Built Environment A review of the strategy process 2 sl/BMBE/2017
Business Management in the Built Environment Strategic formulation using tools and options As organisations are operating in a competitive world, strategies are developed to cope with the need to survive in the marketplace. Strategic management is supposed to help organisations steer through changes and shifts in the environment to secure future growth and sustainable success through the process of analysis, selection of options and then making decisions to move forward sl/BMBE/2017 3
Business Management in the Built Environment sl/BMBE/2017 4
Business Management in the Built Environment STRATEGIC TOOLS AND OPTIONS Formulations of strategies are generally based on the different schools of thoughts in which management based their process of formulation on. We need to revisit the strategies, approaches & tools , particularly the 4 perspectives as mentioned by Richard Whittington, the type of formulation and process of working towards the outcomes differ. . sl/BMBE/2017 5
Business Management in the Built Environment Richard Whittington’s typology His 4 perspectives which is also called the 2 X 2 framework sl/BMBE/2017 6
Business Management in the Built Environment 2 x 2 matrix or 2 x 2 framework • X and Y axis used as two broad dimensions to scope out generic perspectives on strategy – The outcomes of strategy (profit maximisation /plural) – Processes (deliberate/emergent) • This is used to provide 4 perspectives – Classical Profit – Evolutionary – Systemic Deliberate Emergent – Processual Plural sl/BMBE/2017 7
Business Management in the Built Environment Classical Deliberate Profit X Emergent • Analyse, plan and command Plural – Profitability/ Rational planning – Dominant view (linked to classical school of thought ) – Informed by economics -Rational economic man • Self interest & preservation of organisation • solely concerned with maximising return on investment – Top down approach (militaristic) – Separates formulation from implementation – Implementation is based on the military –style order ; – strategy will be carried out via discipline and obedience sl/BMBE/2017 8
Business Management in the Built Environment Systemic Deliberate Profit X Emergent Plural • Play by the local rules • The social system within which strategies are developed are crucial • Contextual sensitivity to : Markets; Countries & Cultures • Social systems (and their associated societies) are not solely profit maximising and social systems are based on: Class ; Professionalism & Gender • Strategy & planning is also bounded by particular social systems/rules/norms. sl/BMBE/2017 9
Business Management in the Built Environment Processual Deliberate Profit Emergent X Plural • Stay close to the ground and go with the flow! • Processual managers do not believe in planning • Strategy emerges from sticky and messy context based on Pragmatic; Learning & Compromise • Optimal strategy is not main concern as managers usually concedes to bounded rationality – using the ‘prisoners dilemma’ • Organisations are socially complex – bargaining and barter system between interest groups • Change disrupts power dynamics and thus strategic change is viewed with suspicion • Strategy is discovered in action (through implementation? ) sl/BMBE/2017 10
Business Management in the Built Environment Evolutionary Deliberate Profit X Emergent Plural • Costs low and options open • The environment moves too quickly and unpredictably to wait for rationalised action so planning based on best fit; • Only the best performers survive – law of the jungle • Strategy can be a delusion • Strategising method is day by day muddling through • as managers believe that tomorrow is just too difficult and impossible to predict. • Best planning method is drawing upon on diversification so as to survive sl/BMBE/2017 11
D 39 BU – Business Management in the Built Environment Another look at strategic positioning in reality … As organisations are operating in a competitive world, strategies are developed to cope with the need to survive in the marketplace. Strategic management is supposed to help organisations steer through changes and shifts in the environment to secure future growth and sustainable success. sl/BMBE/2017 12
D 39 BU – Business Management in the Built Environment Strategic positioning in reality … • Just like you and I, without a long term goal, we will be aimless, so organisations need goals, vision, mission to enable them to sail through the storms of competition, changes in the market etc. . In fact, strategic planning is similar to the art of war (Sun Tze) – you need to understand strategic positioning and also the process of analysis, formulation and then implementation of your tactics and operations in order to succeed in business sl/BMBE/2017 13
D 39 BU – Business Management in the Built Environment Strategies are based on certain schools of thoughts on which differs in the way strategic planning is done 3 basic thoughts via … 1. Classical/rational planning school 2. The design school 3. The positioning school sl/BMBE/2017 14
D 39 BU – Business Management in the Built Environment IF THE ORGANISATION USES THE CLASSICAL SCHOOL OR APPROACH , THEN THE STRATEGY WILL BE: A)Top down, bureaucratic approach of top management decision which is cascaded down to the bottom of the hierarchy in the organisation B) The leadership style will be telling and informing and not participative or consultative C) Profit and shareholders’ interest are paramount to reach goals and objectives for the organisation sl/BMBE/2017 15
D 39 BU – Business Management in the Built Environment 2. IF THE ORGANISATION USES THE DESIGN SCHOOL OR APPROACH a)It will practise the systems view and everything will be according to a certain system or design. b)The management may adopt a selling or collaborating style of leadership so that everyone buys into the organisation goals and achieve together. c)Going with the systems especially social and technological systems to be in place systematic 7 step approach is often used. . sl/BMBE/2017 16
D 39 BU – Business Management in the Built Environment Diagram showing the process of strategic planning – a 7 -step model Vision & mission Swot analyss STEEP & Scenarios Planning Strategic analysis & options decision making implementation Evaluation & monitoring sl/BMBE/2017 17
D 39 BU – Business Management in the Built Environment 3. THE POSITIONING SCHOOL : MICHAEL PORTER’S MODEL – ALSO PART OF THE EVOLUTIONARY/COMPETITIVE PERSPECTIVE This is the strategic approach based on competition –survival of the fittest – so the strategic focus will be on maximising competitive strategies to stay ahead of competition Porter argues that profitability of an organisation lies in the power of the organisation to position itself against the others in the industry and how it uses its capabilities to handle its bargaining position to sustain growth and success. sl/BMBE/2017 18
D 39 BU – Business Management in the Built Environment Porter’s diamond diagram Govt Strategy, structure & rivalry Factor conditions Demand conditions Related & supporting industries sl/BMBE/2017 chance 19
D 39 BU – Business Management in the Built Environment According to Porter…. a) Factor conditions – highly specialised resources developed in different countries where there is a large pool of skilled manpower or labour b) Related and supporting industries which help to expedite the process for production of goods and services c) Demand conditions where consumers force companies to innovate and shape their market orientation in such a way that caters to their needs and wants d) Strategy, structure and rivalry which will be highlighted in the study of 5 -forces theory sl/BMBE/2017 20
D 39 BU – Business Management in the Built Environment STRUCTURAL ANALYSIS OF INDUSTRIES or COMPETITIVE ANALYSIS OF THE INDUSTRY 5 FORCES AFFECTING ANY ORGANISATION ARE : ØTHREAT OF NEW ENTRANTS ØTHREAT OF SUBSTITUTES ØSUPPLIERS’ BARGAINING POWER ØBUYERS’ BARGAINING POWER ØINDUSTRY COMPETITIVE RIVALRY sl/BMBE/2017 21
D 39 BU – Business Management in the Built Environment MICHAEL PORTER’S 5 FORCES MODEL /THEORY sl/BMBE/2017 22
Business Management in the Built Environment OTHER STRATEGIC TOOLS & TECHNIQUES Using Historical Analysis: • Analyse historical accounts of strategy • Analyse past, present and potential future events • Analyse and seek to understand the lifecycle of the market(s) the organisation operates within Doing a strategic group analysis to determine the strategy of others (prisoners dilemma) • Analyse the segmentation of the market • Doing a full SWOT analysis • Conducting a resource audit and a resource utilisation analysis to determine how resources are actually deployed and on the organisation & environmental analysis or audit sl/BMBE/2017 23
Business Management in the Built Environment OTHER STRATEGIC TOOLS & TECHNIQUES SUCH AS USING A VALUE CHAIN ANALYSIS WITH THE CHECKLIST OF RESOURCES AND ACTIVITIES Support activities Corporate structure gin ar m Human resources Technological development purchasing m a r g in services Mktg & sales Outbound logistics mfg Inbound logistics sl/BMBE/2017 Primary activities 24
Business Management in the Built Environment OTHER STRATEGIC TOOLS & TECHNIQUES • USING A PORTFOLIO ANALYSIS : to see if the company is in a good position to capitalise on market growth in markets where they hold a large share sl/BMBE/2017 25
Business Management in the Built Environment Portfolio Analysis or Market Analysis: the growth / share matrix or the BCG Matrix Theoretically offer the best profit & growth Low growth in a poor market / weakness Profits best utilised elsewhere Requires large investment for development sl/BMBE/2017 26
Business Management in the Built Environment • Portfolio Analysis or Market Analysis: • BCG proposed the matrix is presented in Fig 14 of Pg 19 Unit 5 Market Share High Low High Market Growth Low sl/BMBE/2017 27
Business Management in the Built Environment Portfolio analysis or matrix is to assess the balance and contribution to the strategic capability of the organisation. Implications of using this matrix: a) This analysis is applied to SBUs and not the whole market b) Management must develop the capability to review the SBU c) Different targets are set for different segments d) Too much focussing on one part may be bad for the whole organisation for example stars and cash cows must be managed well to prevent conflict e) Dogs may be retained in order to become loss leaders sl/BMBE/2017 28
Business Management in the Built Environment OTHER STRATEGIC TOOLS & TECHNIQUES DIVERSIFICATION ANALYSIS OR MATRIX Model New / Related Existing Portfolio Services / Products: Services/ Products: New / Unrelated Services / Products: Existing Clients: Existing Expansion Same Geographical Area Strategy Existing Clients: Expansion Diversification New Geographical Area Strategy New Clients: Expansion Diversification Conglomerate Same Geographical Area Strategy Diversification New Clients: Expansion Diversification Conglomerate New Geographical Area Strategy 29 Diversification sl/BMBE/2017
Business Management in the Built Environment All the tools used are for understanding and determining which options to choose; how resources have been deployed in the past and how effective these strategies were; how effective is the performance of the organisation against the industry norms and to see if the firm able to benchmark across other industries to determine the scope for change and strategy as well as to check the balance of resources an organisation owns or controls – Is the organisation balanced enough to be flexible? sl/BMBE/2017 30
Business Management in the Built Environment SELECTION OF OPTIONS : PORTER’S GENERIC STRATEGIES UNIT 6 PG 1 -3 Broad target Competitive scope Competitive Advantage Narrow target Lower cost Differentiation Cost Leadership Broad Differentiation Cost Differentiation Focus sl/BMBE/2017 31
Business Management in the Built Environment SELECTION OF OPTIONS : PORTER’S GENERIC STRATEGIES 5. Focused 3. Hybrid 4. Differentiation PG 2 -UNIT 6 Differentiation 2. Low Price Strategic Choice/options What is of value to the user of the product / service? 1. Low Price / Added Value 8. Low Value / Standard Price sl/BMBE/2017 6. Increased Price / Standard Value 7. Increased Price / Low Value 32
Business Management in the Built Environment DISCUSSION AND ASSIGNMENT 1. Critically appraise the purpose and process of strategic analysis and, fully describe three tools or techniques that those responsible for strategy development in a built environment organisation may choose to adopt. 2. Explain what you understand by Richard Whittington’s 2 x 2 Framework of generic perspective on strategy. Draw the diagrams depicting the 4 perspectives relating to his theory. sl/BMBE/2017 33
D 39 BU – Strategic Management in the Built Environment Core reading for module Useful reading material 34 ◦ Carter, C. , Clegg, S. , Kornberger, M (2008) A very short, fairly interesting and reasonably cheap book about studying organisations, Sage, London ◦ Clegg, S. , Kornberger, M. , Pitsis, T. (2005) Managing and Organisations: An introduction to theory and practice, Sage, London ◦ Whittington, R. (2001) (2 nd Ed. ) What is Strategy – and does it matter? , Thomson, London ◦ Mintzberg, H. , Ahlstrand, B. , Lampel, J. (1998) Strategy Safari: the complete guide through the wilds of strategic management, Prentice Hall, London sl/BM ◦ Langford, S. , Male, S. (2001) Strategic Management in Construction, BE/20 Blackwell, Oxford 17 ◦ Journal papers. . . . .
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