Approaches to formulating strategy

Rational Planning Model (RPM)

This approach indicates that strategy has to be developed through a rational process based on a predetermined decision making criteria.

The foundation for RPM was developed through the thinking of Newton which was pioneered advised by F. W. Taylor through Scientific Management.

This process was considered into management by Igor Ansoff through the publication corporate strategy in 1965. This was support by Alfred Chandler through his publication strategy and structure.

This theory was justified in the present context by Michael Porter.

The RPM is a concept which indicates that strategy is carried out through a specific purpose defined based on a predetermined objective and a standard.

Mission & Objectives

This provides the basis for the entire plan.

Position Appraisal

This involves identifying the resources of the organization based on capability and capacity. This includes SWOT analysis.

Environmental Analysis

This involves a critical appraisal of the business environment based on the influence of factors such as competitor, customers etc… This also includes PEST analysis.

Corporate Appraisal

This will critically evaluate the quality of the organization resources against the environmental condition in order to develop a practical strategic plan.

Strategic Option generation

This involves generating possible alternatives options in order to achieve the stated objectives.
Eg: New product development
Invest in another country
Acquisition

Strategic Evaluation & Choice

This involves identifying the most appropriate option for the organization based on the objectives.
Eg: Acquisition

Strategy Implementation

This involves developing a schedule for practically implementing the strategic plan through people based on the future.

Monitoring & Review (Control)

This involves critical evaluation of the actual results against the predetermined objectives based on selected intervals.
Eg: Monthly Report

Advantages through characteristics of RPM

1. This provides a clear direction based on an objective to ensure consistent decision making.
2. This clearly identifies the capacity of the organization in the strategy development.
3. This clearly evaluates the nature of the environment and influence in generating strategy. This enables the organization to concentrate on long-term. This is a top down approach where top managers developing strategy for the entire organization.
4. This is a formal approach develop through a legitimate process involving every employee.
5. This clearly identifies every stakeholder in the process through the standards developed.
6. This includes specific level of control developed within the system.

Limitation of RPM

1. This ignores the environmental uncertainty and the impact of such variables.
2. This expect the plan which is on paper to be exactly implemented in real life which not practical.
3. This strategy is developed by the top management who will not interact with the customer, this lacks market information.
4. This ignores the involvement of people within the organization especially at lower level.
5. This is too rigid, therefore ignores actual trend in the market which should be basis.
6. This ignores the creativity and innovation of employees in generating new concept.
7. This ignores the market development after the plan which can directly influence any objectives.
8. This cannot be practice with small business or business start-up.

Practice of RPM Resource Based Theory – RBT

This theory indicates that strategy should be developed on the organizational resources; therefore strategy should be developed internally based on the capacity and the ability of the organization.

This identifies the resources and their competence on the basis for strategy development (ability).

The RBT can only be practice if the competence can be converted into core competence through which the organization can generate a competitive advantage over others. This is achieved through generating better performance than others through possessing specific resources.
Eg: Valvo for Safety
Rolex for quality