Design and Development of Strategy Processes at RACC 1. What have been the goals of the strategic planning exercise at RACC over the years? What are the advantages and disadvantages of the RACC approach? Previously all the strategic planning exercises involved a wide management participation coupled with bottom-up approach. The aim was the development of a multi-product and multi-channel strategy.
In 2000-02 the emphasis of the strategic plan was focused on geographical expansion.
Which were formed by participative process by including 21 senior managers from level 1 and 2 who carried out and external analysis, followed by an internal feasibility analysis. As a result, five corporate strategic priorities were identified, with expansion to the rest of Spain as the highest priority. In 2003-06 the focus of the strategic exercise was to tackle the issue of how to capitalize on the successful expansion. The middle level was given more importance in terms of participation.
Significant changes in the market had occurred in 2005 and 2006 along with diversification of RACC’s core business had initiated a change in the approach to strategic planning process to bring the business back to its shape. From a broader participative approach, RACC started practicing a top-down approach. The goal went to being the development of a multi-product and multi-channel strategy while ensuring compatibility with the ongoing and revised strategy that had already begun to be implemented.
The objective of the change was to increase the profitability and secure the survival of RACC in the insurance business keeping the multi-product and multi-channel strategy as the key strategy in order to increase cross-selling opportunities and to increase the sales revenue and market share. In 2005, unexpected stagnation of the insurance businesses proved difficult for RACC to function as a result the top management had to abandon the bottom-up approach in order to quickly react to the disturbance in the core business of RACC. 007-08, the senior management deemed it necessary to trigger an update of strategic planning exercise of RACC to incorporate the impact and needs of these ongoing projects and to identify additional initiatives. This was taken into consideration to establish overall strategic coherence and help revamp projects that would ensure future financial stability. The 2008-13 exercise was to be carried out by external consultants since they would have a more objective approach along with a team of 10 top managers. The exercise reinforced the concept of service to the car driver and established ambitious growth targets for RACC in the car insurance.
With more emphasis on multi-product and multi-channel strategy to expand the services for car drivers and were designed with ambitious targets. Bottom-up approach/ broader participative approach * Advantages Commitment of the RACC people towards the strategy was formed which resulted in impressive growth in terms of profit, number of members and geographical growth within Spain. * Disadvantages This approach could not foresee the market. The symptoms of stagnation could not be detected which led to an negative impact. Top-down approach * Advantages
The strategy allowed it to operate its different business in different ways whilst producing synergies between them. The strategy also provided better customer service and fostered cross-sales as it encouraged better relationships between the businesses. * Disadvantages The current cross-selling activities needed to be improved which proved as a significant challenge as it required updating the current customer information, analysis of competitors and market trends channel mix, geographical expansion, organizational restructuring, definition of commercial supervision redistribution systems and probably many other issues that could arise. . Should RACC go through a more conventional top down approach given that a participative approach did not seem to foresee the changes in the market? Given that the previous participative and bottom-up approach could not foresee the changes in the market, the top-down approach proved more beneficial since it was more sensible to work with external consultants because of their objective approach.
The symptoms of stagnation were unpredicted and to react to such unforeseen circumstances it was required lay emphasis on the top level managers because of their exclusivity towards the strategy and the lack of time to resolve the occurrence. However, the broad participation approach had proved beneficial for a significant time as well, since it involved the organization participation as a whole, which encouraged implementation due to the involvement. But due to the urgency to take remedial action it would not be feasible to initiate bottom-up approach. . Having faced market changes and having updated the corporate level strategy, should RACC go back to broader participation for the multi-channel strategy? In terms of reacting proactively and effectively to a sudden crisis, it is best for the strategic planning decisions to be carried on by the top level along for a more professional, objective and realistic approach. Regarding the implementation of the strategy, the top level can set directions and supervise the lower levels.
However, to maintain a balance and motivate the lower levels a bottom-up approach can be considered once RACC obtains a more stable position. To facilitate multi-channel strategy the integration of broader participation can enhance cross-selling with the supervision of the top level managers. Core decisions should be in the authority of the higher levels. 4. Can a participative strategy making process increase the chances of future stable profits for RACC? Yes, as long as the core strategic decisions are under the authority of the CEO and top level.
A broader participative approach can be initiated once again when RACC stabilizes itself in the market since this method had been adopted from prior times and had in fact double profits previously because of the commitment of RACC people towards the strategy. Although this can only be opted for enhancing multi-channel strategy, since RACC has diversified itself from a broker to having its own insurance products and services and it is difficult for the lower level to comprehend the wide array of multi-products being implemented. Concentration on cross-selling can prove more viable to sustain growth.