QUESTION ONE

Read the following text and answer the questions that follow: As Peter Drucker observed, understanding and seriously considering alternatives is the first step in making decisions. Careful evaluation of alternatives is even more critical for organisations making strategic choices because of the long-term consequences of such decisions. Organisations typically have many strategic alternatives from which to choose so many that selecting a strategy can become confusing at best and completely overwhelming at worst. Systematic classification of the strategic alternatives available, as well as a description of the intent and required conditions for selecting each alternative within each classification, can aid strategic managers in working though the clash and conflict of divergent opinions of the serious consideration of competing alternatives. Despite one course of action appearing obvious, examining alternatives will provide new information; test long held assumptions, biases, and opinions; and prevent tunnel vision. Strategic decisions have a rational hierarchy. Decisions concerning the organisations mission, vision, values, and strategic goals are made first and provide guidance for subsequent decisions. An understanding of the hierarchy of strategic decisions a map that shows the classes of decisions and a logical order to follow is important for strategic decision makers. In addition, strategic managers need clear delineations of the available strategic alternatives and an understanding of the implication of each. A logical map of strategic decision alternatives (the analytical approach) lays the groundwork for the strategic planning process. As the strategy unfolds, learning (the emergent approach) will guide alternative decision making. A map of strategic alternatives for organisations helps begin the process of alternative analysis. Being able to envision the complete big picture of how strategic decisions must progress provides perspective on the scope and hierarchy of strategic decision making and illustrates the linkage of strategic alternatives in organisations. Considering strategic alternatives opens ones mind to what can be. 43 Strategic thinking involves an awareness of the environment; intellectual curiosity that is always gathering, organising, and analysing information; and a willingness to be open to creative ideas and solutions. Strategic planning concerns reaching conclusions based on information, setting a course of action, and documenting the plan. Therefore, strategic planning is essentially decision making determining which strategy to pursue from among the many available options. In addition, an organisation may pursue several different types of strategies simultaneously or sequentially. There is a logical order in making strategic decisions because as organisations make strategic choices, these choices will have downstream consequences that both limit and create opportunities. For instance, a merger or affiliation decision is part of a series of decisions rather than a single decision or an end in itself; there is a broader strategy that precipitated the merger or affiliation and there will be subsequent strategic decisions that will have to be made to ensure success. Strategy formulation is the process of developing strategic alternatives, evaluating alternatives, and making strategic choices. Decisions concerning five categories of strategies directional, adaptive, market entry/exit, competitive, and implementation should generally be addressed sequentially with each decision more specifically defining the activities of the organisation. If expansion is selected as the best way to perform the mission and realise the vision of the organisation, several alternatives are available. The expansion of scope strategies grow an organisation and include Diversification, Vertical integration, Market development, Product development and Penetration.

Questions:

1.1 Explain the relationship among directional strategies, adaptive strategies, market entry/exit strategies, and competitive strategies. (10)

1.2 Identify the strategic alternatives available to organizations in terms of the generic strategies.