Nowadays most business enterprises are engaged in strategic planning with using new ideas, objects, practices and reaching the goals. Generally strategy is a simple way to analyze the current situation of organization, expected future situation, right direction confidently and achieving the objects. Actually it is more than that which provides the systematic way for identifying and evaluating factors external to the firm and fixing them with the organization's abilities. In addition strategy is a long process over long time period with individual of resources with a competitive environment to meet up customer needs. In other words, strategy is a method of process of direction and scope of an organization to achieve opportunities with its pattern of resources and meet the demand of markets and stakeholder expectations. A company's strategy can decide the fate of an organization, help them to create innovative products and sustain their competitive advantage. Honda was able to successful launch their motor cycles and sell them in USA in 1960 through the "success against all odds" strategy used by Mr. Honda.
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In order to restore or maintain competitive edge many managers are now abandoning old strategy recipes and looking for a new set of more effective strategies in turbulent environments. Yet, are the recipes really new or are they just the emperor's new clothes
Though there is no single universal definition for strategy, it can be defined as 'the pattern or plan that integrates an organizations major goals, policies, and action sequences into a cohesive whole. A well formulated strategy helps to marshal and allocate an organization's resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment, and contingent moves by intelligent opponents
Mainly Strategies are shaped and designed for the whole organization by senior managers, therefore administrating strategy should start from the top to bottom. Effective strategies involve discussion and communication. Strategic management focuses on integrating managerial abilities and techniques such as; marketing, financial/accounting, human resource management, production management, research development to achieve organizational success (David 1995). Organizations should be able to sustain competitive advantage in a discrete and identifiable market, It is the way a company creates value through the configuration and co ordination of its multimarket activities. When all these are carefully managed then the organization is able to achieve its competitive or corporate advantage. Corporate strategy involves the following; vision which is the ambitious aspiration of a company, Goals and Objectives; short and medium-term quantitative targets, resource; these are skills assets and capabilities of the firm, business; this is the industry by which the firm operates, Structure; the way the corporation is divided into discrete units Systems; set of formal policies and routine and Processes; informal elements of the organizational activities. (Bower, 1970). Corporate Advantage results from a harmonious combination of the above elements which work together to create value of the company.
Strategy Formulation process
Strategy formulation is the process of identifying or deciding what to do by a combination of the following main processes:
- Performing a situation analysis, self evaluation and competitor analysis, both internal and external both micro environmental and macro environmental. This also includes identifying opportunities and threats in the company environment and attaching some estimate or risk to the discernible alternatives. Management tools and concepts like SWOT Analysis and PEST Analysis are used to evaluate internal and external environment respectively.
- Concurrent with this assessment, objectives are set. These objectives should be parallel to a timeline; some are in the short term and others on the long term. This involves crafting vision statements, mission statements overall corporate objectives, strategic business unit objectives and tactical objectives The statements provide a vision or target goal for the organization to achieve and define what the organization does and why.
- These objectives should in the light of the situation analysis suggest a strategic plan. The plan provides the details of how to achieve these objectives. describes the parties responsible for completing the tasks related to the strategic objectives and provide a timetable for completion.
- Effective implementation can make a sound strategic decision ineffective or a debatable choice successful. The implementation of strategy is comprised of a series of sub activities primarily administrative. Its purpose is determined, and then the resources of a company can be mobilized to accomplish it. An organization structure necessary for the efficient performance of the required tasks must be made effective by information systems and relationships permitting coordination of subdivided activities
- Post implementation, the results of the strategy need to be measured and need to be evaluated, with changes made as required to keep the strategy on track. Control systems are made and implemented to facilitate the monitoring and evaluation. Standards of performance are then set, the actual performance is measured, and appropriate action is taken to ensure success. The implementation process and failure/success can be monitored with the help of various management tools like Dashboards, steering committees, performance appraisals, reviews etc
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Following diagram explains the process of strategy planning:
Strategy as School of Thoughts
AXA PPP HealthCare
AXAPPPhealthcare is one of the UK's largest, most experienced providers of private medical insurance. They have been providing private medical care since 1940. They offer a range of private medical insurance plans to enable individuals and employers to meet their healthcare needs. AXAPPPhealthcare is a member of the AXA Group - a world leader in financial protection with over 170,000 employees across UK, Europe, America, Asia- Pacific & Africa, 400,000 shareholders and revenues of €93.6 billion in 2007.
To attain the leadership ambition, AXA Group has built their strategy around a business model and a set of well defined operational priorities. AXA Group's business model entails fortifying, consolidating and developing organic growth-keeping existing clients and acquiring new ones-to ensure that the Group is able to grab genuine opportunities for external growth. AXA Groups developmental efforts are focused on the most profitable segments and they seek to enhance its positioning in developed or high growth market.
AXA Group has set 5 operational priorities or catalysts for strategic change which are known as the five cylinders of its growth:
- Product innovation - is a source of differentiation that reflects AXA's desire to offer value every time it introduces a new product in the market. The focus is on product development which satisfies customers' needs.
- Core business expertise - AXA Groups goal is to offer the best possible service at the best possible price. This can be achieved by ensuring all their strategies focus on maintaining their core competencies.
- Distribution management- a second source of differentiation that reflects the groups aspiration of enhancing sales performance by reducing the administrative load on its distributors. This is strategically different.
- Quality of service - Provide good quality service delivery to end customers. Ensure excellence in service delivery and quality
- Productivity- AXA seeks to decrease operating costs and improve quality of service every year. Cost reduction is an ongoing challenge, but not a one-off reaction to a difficult operating environment.
To achieve operational excellence in each of these key areas, AXA has adopted a continuous process improvement program based on listening to the voice of the customer. AXA performs these programs and runs innovative projects through its Change Management team. Change management team is their core strategic team and consist of a driving committee which includes Head of each department within AXA.
Strategic Change/Implementation done by AXA
AXA PPP Healthcare conducted a "voice of the customer" survey in 2007 which called for a need for strategic change to ensure AXA keeps its competitive advantage in the fast growing and dynamic Health care industry. The key area of improvement identified was the turnaround time for the claims processed by the Claims processing team which operates from UK & India. This could be achieved by improving productivity, reducing reworks, improving service delivery and achieving operational excellence. The Change management team was given the responsibility to drive and implement the strategic change. The first step taken by the change management team was to review the existing process i.e. identify the opportunities and threats. Based on the current capacity and scope of improvement, objectives were set.
Objective - Objectives were set for the organization to improve productivity by 20% (increase number of claims processed per day per assessor) and improve turnaround time of claims (to 93% of claims to be completed in 6 days) by end of 2008.
Resources - Resources within the operation teams were identified to drive the strategy, they were called change agents. A team of green belts and black belts was made to support the data analysis, to identify the areas of improvement and support implementation process.
Projected Benefits - Enhance customer satisfaction by improving turnaround time of claims and reduce cost by improving productivity.
Methodology - The lean methodology was adopted by the Change management team to identify improvement potential. Lean took kit was utilized to identify key areas for enhancing productivity and turnaround time.
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Phase 1 - Data collation for the existing process, review of current Key Performance Indicators & use the Lean Tool kit to analyze the "as is" process. Conduct time motion study to identify the true potential or capacity.
Phase 2 - Post analysis and time motion study, following improvement areas and implementation levers were identified.
Phase 3 - To monitor the performance of the process on the new implementations, new measurement metrics and KPIs were introduced. These KPIs were drilled down to each team in the claims processing department and monitored regularly by using visual dashboards
Benefits achieved from Strategic Change
- Productivity benefit of 24% achieved which resulted to a reduction of 28 FTEs and cost savings of 17920 GBP per month. Claims processed per person per day increases to 82 from 65.
- Target for Turnaround time exceeded, 94.3% claims were completed in 6 days for Q4 of 2008.
- Voice of Customer - Score for "Voice of customer" survey for 2008 was 87% which improved by 8 % compared to the score for 2007 which was at 79% .