Buiding competitive strategy in the rice farming industry the case of an dinh company xây dựng chiến lược cạnh tranh trong ngàn

-vi-TABLEOFCONTENTS ACKNOWLEDGEMENT……… i AB STRA CT……… …….... -vii-1.2.2Strategyformulationandselection……….12 1.2.3Strategyimplementation……….271.2.4 Strategyevaluation……….28 CHAPTER2:RIC

-vi-TABLEOFCONTENTS

ACKNOWLEDGEMENT………

i AB STRA CT………

…… iiT Ó M TẮT………

…….ivTABLEOFCONTENTS………

…… viLISTOFTABLESANDFIGURES

….ix LISTOFABRREVEATIONS………

… xiINT RODUCTIO N………

………1

1.T h e thesistitle.……….1

2.T h e thesisnecessity…… ……… 1

3.O b j e c t i v e s … … … …

… … 1

4.M e t h o d … … … …

… … … 2

5.Datasources………2

6.Significance……….2

7.Limitations……… 3

8.Expectedresults……… 3

9.T h e thesisstructure……… 3

10.Suggestionforfutureresearch……….3

CHAPTER1:LITERATUREREVIEW……….4

1.1Competitivestrategy………4

-vi-1.1.1Strategyandbusinessstrategy……… 4 1.1.2Competitivestrategy……….5 1.2Strategicmanagement……… 101.2.1Visionandmission………11

-vii-1.2.2Strategyformulationandselection……….12

1.2.3Strategyimplementation……….271.2.4 Strategyevaluation……….28

CHAPTER2:RICEFARMINGINDUSTRYINVIETNAM……….30

2.1 Anoverviewofricefarming………30

2.2 ThedevelopingofricefarmingindustryinVietNam……….32

2.3 Factorseffectingricefarming……… 35

CHAPTER3:BUILDINGCOMPETITIVESTRATEGY………39

3.1Companyprofile………39

3.2Strategyformulation……….41

3.2.1 Externalenvironmentanalysis………41

3.2.2 Industryenvironmentanalysis………51

3.2.3 Internalenvironmentanalysis……… 563.2.4 SWOTanalysis……… 63

3.2.5Strategyformulationandselection… … … 64

3.2.5.1Productionexpanding……….65

3.2.5.2JapanesericefarmingandVietnamese highqualityriceprocessing…….653 2 5 3 Riceseedproducing………

………65

3.2.5.4Marketingenhancing……… 65

3.3 Implementingthecompetitivestrategy……….663.3 1Objectives……… 663.3.2 Solutions………67

-8-3.3.3Actionplan……… 68

3.3.4 RecommendationstoAnDinhCompany……… 70

3.3.5 Recommendationtothegovernment……… 71

CONCLUSION………

72 REFERENCES………

73 APENDDICES……… 75

BargainingpowersofsuppliersandbuyersT a b l e 1.4

ThecompletedSWOTprofileTable1.5

Appropriatestrategiesselection(GREATmodel)T a b l e 2.1

TheworldriceproductionTable2.2

TheworldriceconsumptionandstocksT a b l e 3.1

VietnamquarterlyGDPgrowthTable3.2 AnDinhexternalenvironmentEFEmatrixTable3.3

ExternalenvironmentanalysisconclusionT ab l e 3.4

IndustryanalysisconclusionTable3.5

AnDinhinternalenvironmentIFEmatrixT a b l e 3.6

InternalenvironmentanalysisconclusionTable3.7

-10-Figure1.5

StrategicanalysisprocessesFigure1.6

SWOTMatrixesFigure2.1

VietnamricefarmingareasFigure2.2

VietnamriceproductionsFigure2.3

-11-ADCompany’sorganizationalstructureFigure3.9

ADCompany’sSWOTmatrix

Figure3.10ADCompany’sstrategiesimplementationprocess

GREAT:Gain,Risk,Expense,Achievable,TimeUSDA:UnitedStateDepartmentofAgricultureG S O :

FAO:

FoodandAgricultureOrganizationU S $:

UnitedStateDollar

n e o f world’srichesta g r i c u l t u r a l regionsa n d isthes e c o n d

Thisthesis,inaboveactualfact,istobuildanappropriatecompetitivestrategyforAnDinh

C o m p a n y ’ s development.Ith a s alsoa d d e d thevaluetothes t r a t e g y formulationbygivingrecommendationsandproposinganactionplan,whichcanb e appliedinimplementingstrategies

3 Objectives

Theobjectivesofthisthesisareto(a)reviewthetheoryofbuildingcompetitivestrategies,(b)provideanoverviewofricefarmingindustryinVietnam,

(c)presentAnDinhCompanyandanalyzeitsbusinessenvironment,and(d)buildanappropriatecompetitivestrategyf o r c o m p a n y ’ s furtherdevelopment.T h e studyalsogivesanumberofinsightsintocompany’scurrentstrengthandweakness,andi d e n t i f y i n ganactionplanforproductionexpansion

4 Methodology

Thisthesisappliesthecasestudytobuildcompetitivestrategyf o r AnDinhCompany.Theresearchhasbeenpreparedmainlythroughondeskstudyreviewso f availableliteratureanddatathroughthreebasicsteps:

Thefirststepistor e v i e w theorieso f c o m p e t i t i v e strategya n d s t r a t e g i c management.Thestudyfocusesontheliteratureviewofexistingapproachestocompetitivestrategyformulation,andidentifiesacommonprocesstobuildcompetitivestrategies

Thesecondstepbasedo n theresearcho f ricefarmingindustryinV i e t n a m intermsoffactorsandinfluenceonthebusinesssuccess

Lastb u t n o t l es s, thecasestudyo f AnDinhCompanyisa n a l y z e d i n c l us i v e o f interviewwiththemanagersofcompanywhoareresponsibleforstrategicmanagementplanning.Thisistoc o n t r i b u t e competitives t r a t e g y a n d providerecommendationsonstrategyimplementation

5 Datasources

Thetheoreticalreviewandcollectionofsecondarydatadisplayfromresearchofbooks,reports,newspapersandinternetsources.TheprimarydatawascollectedthroughinterviewswithAnDinhCompany’smanagersandkeyemployees

6 Significance

Byreviewingthetheoryo f competitivestrategya n d strategicmanagementa n d u n d e

r s t a n d i n g theimpactsofbusinessenvironment,thethesisbenefitsAnDinhCompanyinimplementingappropriatecompetitivestrategies.Thistheoreticala p p r o a c hcouldbeappliedincasesofothercompaniesinricefarmingindustry

7 Limitations

Thestudywouldb e limitedd u e toa smallnumbero f competitorsinthelocalmarketareconsidered Moreover,thosecompetitors couldnotbe analyzedwithdetailinformationa n d d a t a , whichmayn o t entirelyreflectthei n d u s t r y ’ s competitiveenvironment

8 Expectedresults

TheresultofthisthesisistobuildappropriatecompetitivestrategiesforfurtherdevelopmentofAnDinhCompany.The me th od ol og y isexpectedtobeappliedeffectivelyinthecasestudyofothercompaniesinricefarmingindustry

9 Thethesisstructure

Beginningwiththeintroductionpart,thethesisconcludesthreechaptersandtheconclusionpart

Chapter1 providesa fundamentalreviewo f competitivestrategya n d s t r a t e g i c managementtheoryfocusingonthecompetitivestrategyformulationprocess

Chapter2 discussesricef a r m i n g status inVietnam,highlightingitslatestachievementandkeyfactors

Chapter3 presentsAnDinhC o m p a n y a n d analyzesitsenvironmenttoidentifyexternalopportunitiesan dthreatsas wellas internalstrengthan dweaknessthatinfluenceonbuilding company’scompetitivestrategy Actionshallberecommendedforstrategicmanagementimplementation

10 Suggestionforfutureresearch

Arapidchangeoffactorsliketechnologicaladvances,climate,andcustomer’slifestylecreatesbothopportunitiesandchallengestothericefarmingindustryandAnDinhCompany.Therefore,adeeperresearchundertakencouldcreatemorebenefittolargersizecompanies

REVIEW

Theimportanceo f competitivestrategya n d strategicmanagementf o r organizationalsuccessisnowrecognizedinboththeliteratureandpractice.Strategyandstrategicmanagementarenecessaryforanorganizationtoachieveitsobjectives,enhancecompetitiveadvantagesandimproveitsvalue

Todayhighlycompetitivebusinessworldpressures onmanagersandemployeesacrossfunctionalareasatallorganizationallevelstobetakenonstrategicresponsibilities.Itisessentialthattheyu n d e r s t a n d bothstrategicmanagementc o n c e p t andprocess

Thischapterprovidesthebasicunderstandingofcompetitivestrategyandstrategicmanagement.Itf o c u s e s o n strategyf o r m u l a t i o n a s a p a r t o f thestrategicmanagement.1.1 Competitivestrategy

1.1.1 Strategyandbusinessstrategy

Strategyisaplandesignedtoachieveaparticularlong-termgoal.1

Thereisverylittleagreementa b o u t themeaningo f strategyintheworldo f business.Althoughstrategistsandp r a c t i t i o n e r s understandstrategyind i f f e r e n t w a y s andinvariouscontexts,therearesomemostcommonconcepts:2

 Strategyisperspective,whichisvisionanddirection

 Strategyisposition,itreflectsdecisionstoofferparticularproductsandservicesinparticularmarkets

-6- Competitivestrategyisacombinationoftheends(goals)forwhichthefirmisstrivinga ndthemeans(policies)bywhichitisseekingtogetthere 6

- Hightechnicalproductioncapacity

- Goodandlargedistributionchannel

Toyotaisanexampleofimplementingcostleadershipstrategy

ToyotaisafamousmotorcorporationinJapan,whichappliessuccessfully,costleader shipstrategy.Thep r o d u c t i o n systemisreallyeffectivenesswiththel e a n productiona ndTPS.BothLeanandTPScanbeseenasalooselyconnectedsetofpotentiallycompetingp rincipleswhosegoaliscostreductionbytheeliminationofwaste.Theseprinciplesinclude of:Pullp r o c e s s i n g , perfectfirst-

timequality,wasteminimization,continuousimprovement,flexibility,buildingandmaint aininga long-

termrelationshipwithsuppliers,smartautomation,loadlevelingandproductionflowan dvisualcontrol.Thisproductionsystemcreateahightechnicalproductioncapacityandeff ectivenessthatsupplytocustomeragoodproductwithlowpricecomparetoanotherprodu ctandmaketheToyotaachievethepositionoflargestmotorp r o d u c t i o n intheworldn ow.Moreover,thestrengthfinancialsupportfromJapaneseg o v e r n m e n t andthel a r g

e distributionnetworko v e r theworldalsocontributetotheachievementofToyotatoday.

1.1.2.2 Differentiation:

Differentiationstrategy:Sameproductsorservicesareproducedatahigherqualitythancompetitors’are

Companiesusingthedifferentiationstrategyoftenhavesomecharacters:

- Goodteaminresearchanddevelopment(R&D)

- Goodsalesteam:Abilitytocommunicateinformationofp r o d u c t tocustomer

- Reputationandabilitytoinnovative

AmwayisacorporationbasedinUnitedStateestablishedin1959,nowcompanyoperate sinmorethan8 0 countriesa n d territorieso v e r theworld,getting$ 8 2 billionturnover in2008.Amwayfocusesonproducinghighqualityproductanddifferentiationstrategy Amwayhasstrongresearchanddevelopmentsystemwith6 5 researcha n d d e v e l o p

m e n t laboratoriesworldwidestaffedb y morethan5 0 0 scientists,engineersa n d t e c h

n i c a l professionals.Amwayresearchanddevelopmenthavebeenawardedmorethan 500patentsandhavehadmorethan4 0 0 paperspublishedintopi n d u s t r y j o u r n a l

s Amwayisa leaderintheU S DirectSellingAssociation,theWorldFederationofDir ectSellingAssociations,theNationalAssociationofManufacturers,andtheU.S ChamberofCommerce,Amwaywasranked#43ontheForbesMagazine2007listof“A merica’sLargestPrivateCompanies.”O v e r thepast5 0 years,Amwayhasb e e n r e c

o g n i z e d formanufacturingexcellence,environmentalconcern,andcommitmentto safetyandhealth.

Amwayhasmorethan3millionAmwayBusinessOwnersand13,000peopleworkinAmw ayanditssubsidiaries.A m w a y isacompanythatbelieveseverypersonc a n make adifference.Theylivethisphilosophyeveryday.Theyempowertheiremployeestoreach goals,fulfillambitions,a n d contributetothecommunitieswheretheyoperate.Peoplewh oworkwithAmwaystayatAmway.MostofemployeeshavebeeninAmwayformorethan1 0years,withmanyworkingherefordecades.

Amwayissuccessfulcompanyapplyingdifferentiationstrategy.

1.1.2.3 Focus:

Focusstrategy: Strategyfocusingexclusivelyonanarrowsegmentofthemarket

Afocus(orniche)strategyismostsuitableforsmallfirmsbutcanbeusedbyanycompany,especiallythosecanaffordneithera widescopecostleadershipnorawidescopedifferentiationstrategy.Companiescoulduseacostfocusoradifferentiationfocus.Withacostfocus,a firmaimsa t b e i n g thelowestcostp r o d u c e r inthatsegment.Withadifferentiationfocus,afirmcreatescompetitiveadvantagethroughdifferentiationwithinthesegment.

Theappropriategenericstrategywillhelpthefirmtoleverageitsstrengthsan d d e f e n dagainstthefiveforces’effects.O t h e r w i s e , MichaelPorterspecificallyemphasizedthatonlyoneofthegenericstrategyalternativesshouldbepursuedfora givenproduct,ratherthanimplementingacombinationofthesestrategies.T h e r e f o r e , organizationsshouldtaketheircompetenciesa n d strengthsintoconsiderationtochoosethemostsuitablegenericstrategy

AsMichaelPorteropinion,enterprisescanbesuccessfulinusingcombinationofthesestrategieswhentheyestablishseparatedcompanyfollowingonestrategy

a s onlyproducedM D F panelswiththicknessfrom2 c m to5 c m Rayoniersegmented itsproductlineeventheycanproduceotherkindsofthickness.Thereasonisthatt h e y f oundthed e m a n d o f houseconstructiona n d largefurnituremakinginthiscountryand byfocusingthosekindofproductstheyc a n getmoreprofits.

Thestrategyisfocusingonaparticularbuyergroup,segmentoftheproductline,o r geog raphicmarket.Asdifferentiation,focusmaytakemanyforms.Althoughthelowcosta n d d ifferentiationstrategiesareaimeda t achievingtheirobjectivesindustrywide,theentiref ocusstrategyisbuiltaroundservingaparticulartarget

n thef o u n d a t i o n t h a t thef i r m isthusabletoserveitsnarrows t r a t e g i c targetmor eeffectivelyo r efficientlythancompetitorswhoarecompetingmorebroadly.Asaresult,t hefirmachieveseitherdifferentiationfrombettermeetingthene e d o f thep a r t i c u l a

r target,o r l o we r c o s t s inse rv i n g thistarget,o r both.E v e n thoughthefocusstrateg ydoesnotachievelowcostordifferentiationfromtheperspectiveo f themarketa s a w hole,itd o e s achieveo n e o r botho f thesepositionswithitsnarrowmarkettarget.

1.2 Strategicmanagement

Strategicmanagementistheprocessb y termdirectionandperformanceoftheorganizationbyensuringthatcarefulformulation,effectiveimplementationa n d c o n t i n u o u s evaluationofthes t r a t e g y takeplac

whichtop-managementdeterminesthelong-e.7T h estrategicmanagement,he nce, isanobjective,logicalandsystematicapproachfordecisionmakinginanorganization

7 Lloyd

L.Byars,LeslieW.Rue,ShakerA.Zahra(1996),“Strategic management”

Value chain

SWOT Analysis

-12-8 Alex

Miller,GregoryG.Dess(1996),“Strategic management”

thebest,themosto r thegreatest.A visionbecomesmorevisiblewhenitisexpressedintheformofamissionstatement.

Acompany’smissionisitsreasonforbeing.Themissionstatementdescribesthecompany’sbusinessvision,i n c l u d i n g theunchanging valuesand purposeo f thefirma n d f

o r w a r d - l o o k i n g visionarygoalsthatguidethepursuito f f u t u r e opportunities

1.2.2 Strategyformulationandselection

Strategyformulationincludesidentifyinganorganization’sexternalopportunitiesand threats,analyzingi n t e r n a l strengthsa n d weakness,generatinga l t e r n a t i v e

s strategies,andchoosingthemostappropriatestrategiestopursue

1.2.2.1 Externalenvironmentanalysis

Theexternalenvironmenthastwoaspects:themacro-environmentthataffectsallfirmsandthemicroenvironmentthataffectsonlyfirmsinaparticularindustry.APESTanalysisisatechniqueforunderstandingthemacro-

environmentinwhichafirmoperates.PESTa n a l y s i s includesPolitical,Economic,Sociala n d Technologicalfactors

Theindustry,inwhichthef i r m operates(orisc o n s i d e r i n g operating),isa n importantaspectofthemicro-

environmentalanalysis.Inthebook“CompetitiveStrategy:TechniquesforAnalyzingIndustriesandCompetitors”(1980),MichaelPorterpresentsthemodeloftheFiveCompetitiveForces.Themodelhasbecomea usefultoolf o r i n d u s t r y a n a l y s i s T h

e fivef o r c e s i n c l u d e Barrierstoe n t r y , Customers,Suppliers,Substituteproducts,andRivalry

a PESTAnalysis

Manymacro-environmentalfactorsarecountry-specificandaPESTanalysisn e e d s tob e performedf o r allrelatedc o u n t r i e s T h

e numbero f macro-environmentalfactorsisunlimited

SkilllevelofworkforceLaborcosts

BusinesscyclestageIncomeUnemploymentrateInflationrateMonetarypolicy

Impact of changes in

InformationTechnology

b Industryanalysis:Porter’sFiveForcesmodel

Porter’sfiveforcesframeworkevaluatesentrybarriers,suppliers,customers,substituteproducts,andrivalryintheindustry

Figure1.3FiveForces Model

Source:MichaelPorter,1980

Thosefivecompetitivef o r c e s a p p e a r ine v e r y industrya n d everymarket.T h e y determinetheintensityo f c o m p e t i t i o n andthereforetheprofitabilitya n d attractivenesso f a n i n d u s t r y Basedo n theinformationderivedfromtheF i v e Forcesanalysis,managersc a n decideh o w toinfluenceo r toexploitparticularcharacteristicsoftheirindustrytoimprovethefirm’sposition

-15-ratioindicatesthatmanyrivals,n o n e o f w h i c h h a s a significantmarketshare,characterizetheindustry.Themarketiscompetitive

Theintensityofrivalryiscommonlybasedonthefirms’aggressivenessinordertogainanadvantage.Itisinfluencedbytheindustrycharacteristicssuchas:

 Thenumberofcompetitors

Alargenumbersofcompetitorsincreaserivalrybecausemorefirms

mustcompetef o r thesamecustomersa n d resources.T h e rivalryismoreintenseifthere

a r e manysm al l o r equallysizedco m p e t i t o r s ; r iv al ry islessw h e n a n industryh a s

a marketleader

 Marketgrowth

Inaslowgrowthmarket,

firmshavetocompeteformarketshare.Onthecontrary,firmsareeasytoimproverevenuesinanexpandingmarket

 Highfixedcosts

Iftotalcostsaremostlyfixedcosts,thefirmmustproducenearcapacitytoattainthelowestunitcosts.Thefirmmustsellalargequantityofproduct,thatleadtoafightformarketshareandanincreaseinrivalry

 Levelofproductdifferentiation

Lowlevelo f p r o d u c t differentiationisa s s o c i a t e d withhigherlevelo f rivalry.Industrieswhereproductsarecommoditieshavegreaterrivalry,industrieswherecompetitorscandifferentiatetheirproductshavelessrivalry

 Switchingcosts

Rivalryisreducedifthereisasignificantcostassociatedwiththedecisiontobuya productfromanalternativesupplier

 ThreatofNewEntrants

Itisn o t onlye x i s t i n g rivalsthatmakea threattocompaniesinanindustry, thepossibilitythatnewcompaniesmayentertheindustryalsoa f f e c t s c o m p e t i t i o n

-16-Newentrantstoanindustrycanraisethelevelofcompetition,therebyreducingitsattractiveness.However,therearebarrierstoentry

marketistopreservecompetitionthroughanti- Patentsandproprietaryknowledge

Ideasandknowledgethatprovidecompetitiveadvantagesareconsideredprivateproperty,sothat,preventingothersfromusingtheknowledgeandthuscreatingabarriertoentry

 Assetspecificity

Assetspecificityistheextenttowhichthefirm’sassetscanbeutilizedtoproducea differentproduct.Potentialentrantsarereluctanttoinvestinhighlyspecializedassetsthatcannotbesoldorconvertedintootheruses

 EconomiesofScale

Theexistenceofaneconomyofscale(minimumsizerequirementsforprofitableoperations)createsabarriertoentry

 Exitbarriers

Barrierstoexitaresimilartobarrierstoentry.Exitbarrierslimittheabilityofafirmtoleavethemarket.Highbarrierstoleaveanindustryincreaserivalry.Highexitbarrierscauseafirmtoremaininanindustry,evenwhenthebusinessisnot

stsInterrelatedbusinesses

 BargainingPowerofSuppliers

Supplierscanhaveasignificantimpactonacompany’sprofitability.Ifsuppliershavehighbargainingpoweroveracompany,thenthecompany’sindustryislessattractive

Ap r o d u c i n g i n d u s t r y requiresr a w m a t e r i a l s , labor,components,etc.Thisrequirementleadstobuyer-

supplierr e l a t i o n s h i p s betweentheindustrya n d thefirmsthatprovidethematerialsusedtocreateproducts.Suppliers,ifpowerful,canp u t influenceonproducingindustrysuchassellingatahighpricetocapturesomeo f theindustry’sprofits

Theindustryo f t e n f a c e s a highp r e s s u r e fromtheirs u p p l i e r s o r b u y e r s Thisrelationshipcanpotentiallyaffectitsprofitability

Producercanta ke overo w n distributionorretailing

SignificantswitchingcostsProducersthreatenforwardintegration

PurchasecommodityproductTheindustryisakeycustomer

Buyersthreatenbackwardintegration

 ThreatofSubstitutes

IntheFiveForcesmodel,substituteproductsrefertoalternativeproductsinotherindustries.Athreatofsubstitutesexistswhenaproduct’sdemandisaffectedbythepricechangeo f

a substitutep r o d u c t ( p r o d u c t ’ s priceelasticity).T h e moresubstitutesa r e a v a i

l a b l e , themoree l a s t i c thedemandb e c o m e s N o t onlyconstrainsthecompanies’abilitytoraiseprices,thesubstituteproductsalsolowerindustryattractivenessandprofitability

external factors

Assign factors’ weight

Rate factors from 1 - 4

Multiply weight by rating

Total all weighted score

-21-organizationtoorganization.F a c t o r s thatarecommonlye v a l u a t e d a c r o s s theorganization’sareasinvaluechain:

Service:thesupportofcustomersaftertheproductsandservicesaresoldtothem.Thesepri

maryactivitiesaresupportedby:

Infrastructureo f thec o m p a n y :o r g a n i z a t i o n a l structure,controlsystems,co

b IFEmatrix(Internalfactorsevaluation)

Internal

FactorEvaluation(IFE)matrixisastrategicmanagementtoolforauditingo r evaluatingmajorstrengthsandweaknessesinfunctionalareasofabusiness

internal factors

Assign factors’ weight

Rate factors from 1 - 4

Multiply weight by rating

Total all weighted score

Step5.Summing upweighedscore:Toc o n s t r u c t theIFEmatrixistosumtheweight

edscoresf o r e a c h factor.Thisprovidesthetotalweightedscoref o r y o u r business

frameworkforgeneratingstrategicalternativesfromasituationanalysis.Theinternalandexternalenvironmentanalysiscanprovidealargeamounto f information,mucho f whichmayn o t b e highlyrelevant.T h e r e b y , SWOTconcentratesonlyontheissuesthatpotentiallyhavethemostimpact

Figure1.7Strategicanalysisprocess

Whentheanalysishasbeencompleted,aSWOTprofilecanbegeneratedanduseda s thebasisofgoalsetting,strategyformulation,andimplementation

S-a n y ’ s strengths.

OStrategieso v e r c o m e weak nessestopursueopportunities

W-External

Threats

TStrategiesidentifywaysthatthe firmcanuseitsstrengthstoreduc eitsvulnerabilitytoexternalthre ats.

S- TStrategiesestablishadefensive plantopreventthefirm’sweakne ssesf r o m makingithighlysusce ptibletoexternalthreats.

W-1.2.2.4 Strategyselection

Choosinga n appropriatestrategy,basically,involvesc a r e f u l c o n s i d e r a t i o n stoensurethattheoptionselectedwillworkinpractice.Strategicoptionsthatmayberelevantindifferentsituationsneedtobeweighedupagainsteachother.Thethreemostimportantcriteriaaresuitability,acceptabilityandfeasibility

 Suitability

Havingaviewofrelationshipsbetweentheinternalandexternalenvironment,anorganizationthenn e e d s toconsiderwhethera strategyissuitableo r not.Forexample,d o e s itbuildu p o r g a n i z a t i o n ’ s strengthsa n d e n v i r o n m e n t a l opportunities?

Doesitmatchtheorganization’sobjectives?

 Acceptability

Acceptabilityc o n c e r n s withw h e t h e r a strategywillb e a c c e p t a b l e toanorganizationanditsstakeholders(mainlyshareholders,employeesandcustomers).Itisrelatedtotheexpectedperformanceoutcomes,returns,risksandstakeholderreactions

Returndealswiththebenefitsexpectedbythestakeholders.Forexample,shareholderswouldexpecttheincreaseoftheirwealth,employeeswouldexpectimprovementintheircareersandcustomerswouldexpectbettervalueformoney

Stakeholders’reactionsdealwithanticipatingreactionso f stakeholders Shareholders

couldopposetheissuingofnewshares,employeesandunionscouldopposeoutsourcingforf ear of losing theirjobs,customerscouldhaveco nce rn s overamergeraboutqualityandsupport

 Feasibility

Feasibilityisconcernedwithwhetherstrategicplanscangoinpracticeandwhethertheorganization has sufficientresources tocarry o u t thoseplans.Resourcesincludefunds,people,timeandinformation

ThemostpopularapproachestoselectstrategiesincludetheGREATModel

a.GREATModel

Thosepotentialstrategiesshouldbeevaluatedandcomparedtochoosethemostp r o p

e r strategy,basedontheGREATmodel,whichstandsforGain,Risk,Expense,AchievableandTime.Criteriaareweighedaccordingtotheirimportancetothecompany.Strategiesaremarkedform1to5foreachcriterion,ofwhich1istheworst,3ismediumand5isthebest.Basically,companiesaresuggestedtopursuestrategiesget good marks

Table1.5Appropriatestrategiesselection(GREATmodel)

Criteria Weight Strategy1 Strategy2 Strategy3 Strategy4 Gain

Afterbeinganalyzeda n d s e l e c t e d , a strategyist r a n s l a t e d intoo r g a n i z a t

i o n a l action.However,theimplementationisn o t easy.Itrequiresa n organizationtoestablishannualobjectives,settingpolicies,motivatingemployeesandallocatingresourcestoe x e c u t e f o r m u l a t e d strategies.T h e implementationc o n s i s t s ofd e v e l

o p i n g a supportiveculture,c r e a t i n g a n effectiveo r g a n i z a t i o n a l structure,p r e p a r i n g budgets,utilizinginformationsystems,anddeterminingwhichstrategytobeimplementedfirst

Instrategicmanagement,almostmanagersfindimplementationmoredifficultthaneitherstrategicanalysisorstrategyformulation.Mostcompanieshavestrategies,b u t afewcanfulfillthem.AFortuneMagazinestudysuggestedthat70%of10CEOswhofaildosonotbecauseofbadstrategy,butbecauseofbadexecution.9Inanotherstudyof200companiesintheTimes1000,80%ofdirectorssaidtheyh a d therightstrategiesbutonly14%thoughttheywereimplementingthemwell.10

Programs,budgetsa n d p r o c e d u r e s helptos e l e c t strategy.T h e implementationinvolvesthecompany’sresourcesanditsstaffs’motivationtoachieveobjectives.T h e strategydeploymentplaysa s i g n i f i c a n t impacto n whetheritwillb e successful