STRATEGIC PLANNING

&
MANAGEMENT

MEANING & DEFINITION

Strategic Management can be defined as the art
and science of formulating, implementing and
evaluating cross-functional decisions that enable
an organization to achieve its objective.
Definition:
The on-going process of formulating,
implementing and controlling broad plans guide
the organization in achieving the strategic goods
given its internal and external environment.

STRATEGIC
MANAGEMENT
Globalization: The survival for business
E-Commerce: A business tool
Earth environment has become a major
strategic issue
Strategic management A route to
success

MODEL FOR STRATEGY FORMULATION

Scenarios
Visions, Missions,Values
External Analysis

Internal Analysis
Functional Level Strategies
Business Level Strategies
Strategy Implementation

Structure

Match Structure & Controls

Manage Strategic Change

Controls

INTERPRETATION

STAGES OF SM
The strategic management process
consists of three stages:
Strategy Formulation (strategy planning)
Strategy Implementations
Strategy Evaluation

THREE ASPECTS OF STRATEGIC

FORMULATION
Corporate Level Strategy: In this aspect of
strategy, we are concerned with broad decisions
about the total organization's scope and direction.
It is useful to think of three components of
corporate level strategy:
(a) growth or directional strategy
(b) portfolio strategy
(c) parenting strategy

Global Corporate Strategies

High

Need for Global Integration

Globalization
Strategy

Low

Treats world as a
single global market
Standardizes global
products/advertising
strategies

Export
Strategy
Domestically focused
Exports a few
domestically
produced products to
selected countries

Transnational
Strategy
Seeks to balance global
efficiencies and local
responsiveness
Combines
standardization and
customization for
product/advertising
strategies
Multi-domestic Strategy
Handles markets
independently for each
country
Adapts
product/advertising to
local tastes and needs

Low Need for National Responsiveness

8

High

Global Strategy

Globalization = product design and

advertising strategies are standardized
around the world
Multi-domestic = adapt product and
promotion for each country
Transnational = combine both
globalization and national
responsiveness

 Competitive Strategy (often called Business

Level Strategy): This involves deciding how
the company will compete within each line of
business (LOB) or strategic business unit (SBU).
Functional Strategy: These more localized
and shorter-horizon strategies deal with how
each functional area and unit will carry out its
functional activities to be effective and maximize
resource productivity.

10

Tools for Putting Strategy

into Action

Strategy

Environment
Organization
Leadership
Persuasion

Motivation

Structural Design
Culture/values
Human Resources
Organization Chart

Teams
Recruitment/selection

Centralization
Transfers/promotions
Decentralization,
Training
Facilities, task design
Systems
Layoffs/recalls
Information and Control
Pay, reward system
Budget allocations

Information systems
Rules/procedures
11

Performance

Portfolio Strategy
Mix of business
units and product
lines that fit
together in a
logical way to
provide synergy
and competitive
advantage

12

BCG Matrix

Exhibit 8.5

Strategic Management
Process
Scan External
Environment
National,
Global
Evaluate
Current
Mission, Goals,
Strategies
Scan Internal
Environment Core
Competence,
Synergy, Value
Creation

13

Identify Strategic
Factors
Opportunities,
Threats

SWOT

Define new
Mission
Goals, Grand
Strategy

Identify Strategic
Factors
Strengths,
Weaknesses

Formulate
Strategy
Corporate,
Business,
Functional

Implement
Strategy via
Changes in:
Leadership
culture,
Structure, HR,
Information &
control
systems

conclusion
In order to formulate Business functions
strategy is to be formulated as well as
implemented with the right approach
Management is basically managing the
strategies and making them function.
Strategic management of an
organization leads to the benefits as well
as growth of the organization.

14

Strategic Planning:
Strategic planning is concerned with the growth and
future of a business enterprise.
It consists of a stream of decisions and actions that lead
to effective strategies and which, in turn, help the firm
achieve its growth objectives.
The process involves a thorough self-appraisal by the
corporation, including an appraisal of the business it is
engaged in and the environment in which it operates.
Marketing environment keeps changing fast. Practically
everything outside the four walls of the firm is changing
fast, resulting in a discontinuity with the past.
Strategic planning provides the road map and ensures
that the enterprise keeps moving in the right direction.

Strategic Planning (contd.)

Starting from the corporations mission and philosophy, down to choice
of businesses and strategies, all vital aspects in the governance of
business are chartered through strategic planning.
It is through strategic planning that the corporation takes decisions
concerning its mission, the business it will pursue and the markets it
will serve; it is through strategic planning that it lays down its growth
objectives and formulates its strategies.
In other words, all decisions of high significance and consequence to a
corporation are taken through the strategic planning process.
Strategic planning ensures that these resources are put to optimum
and best possible use.
Strategic planning helps the firm acquire the best of a lead time for all
its crucial decisions and actions, as it helps the firm anticipate
trends.
Strategic planning has the burden of equipping a corporation with the
relevant competitive advantages in its fight for survival and growth.

Objectives of Strategic Planning:

Strategic Planning is concerned with the
a)
b)
c)
d)
e)
f)
g)
h)

Future or long-term dynamics of the firm; not day-to-day tasks.

Growth direction, extent, pace and timing of growth.
Environment, the fit between the enterprise and its environment.
Business portfolio - Basket of businesses the firm should have
changes/additions/deletions to the firms product-market
posture.
Its concern is strategy not routine operational activities growth
priorities, choice of corporate strategy and choice of business
level/competitive strategy are its concern.
Creation of core competencies and competitive advantages, is its
concern. This equips the organization with capabilities needed to
face uncertainties.
Integration of all management functions not a particular
function. It views the organization/business in its totality.
Corporate strategy creating long-term, sustainable
organizational capability.

Components of Strategic Planning:

1.
2.
3.
4.
5.
6.

Clarifying the mission of the corporation

Defining the business
Surveying the environment
Internal appraisal of the firm
Setting the corporate objectives
Formulating the corporate strategy.

1. Clarifying the mission of the corporation

The mission is the expression of the corporate intent telling insiders and
outsiders what the corporation stands for.
The mission carries the grand design of the firm and communicates what it
wants to be. It subtly indicates the business the firm will pursue and the
customer needs it will seek to satisfy.
The mission is shaped by the capabilities and vision of the corporations
leaders.
The business philosophy of the founder and present leaders of the
corporation gets expressed through the mission statement.
The mission directs the entire planning endeavour of a corporation.
The mission is a reference point and the guiding spirit for the growth plan
of a firm.
It brings the corporate purpose or the long-term objective of the firm into
focus.

2. Defining the business

A business definition is a pithy, clear-cut statement of the business

or businesses the firm is engaged in or is planning to purse. It
prescribes the boundaries of the firms business.

Defining the business correctly is the pre-requisite for selecting the

right opportunities and steering the firm on the correct path. Even to
understand what constitutes its relevant environment and to make
the environmental search effective, the firm must have a proper
definition of the business it is in.

Defining ones business has become an exacting exercise today

because of the fast changes taking place in the areas of technology,
products and customer preference.
When product-market boundaries get extended, when different
product categories of yesteryears blend and merge, and when new
and substitute products keep invading the market altering existing
business boundaries, understanding and defining ones business
becomes very difficult.

3. Surveying the environment

Today strategic planning occupies the central stage in management

purely because a great deal of change is taking place in the
environment.
In environmental survey, basically a firm gathers all relevant
information and analyses it in detail. It analyses the macro
environmental factors as well as the environmental factors that are
specific to the business concerned. Under the macro factors, the
firm studies the demographic, socio-cultural and economic scene. It
also studies the political environment, the legal environment and the
government policies covering various areas.
As for the environmental factors that are more specific to the
business, the firm studies the emerging trends in the industry, the
structure of the industry and the nature of the competition. It also
studies the market and the customer closely. It examines alternative
technologies that are emerging, their relative cost-effectiveness, and
the scope for invasion by substitutes.
The significant point is that under environmental study, the firm does
not confine the study to the existing business but looks beyond it,
because both opportunities and threats can emerge from many
difference sources.

4. Internal appraisal of the firm

While environmental survey helps to identify
areas of opportunities and threats in the areas of
interest, in order to tap these opportunities, it is
necessary to find out whether the firm has the
requisite capabilities. For this an internal
appraisal is undertaken.
Internal appraisal has three distinct parts:
assessment of the strengths and weaknesses of the
firm in different functional areas;
appraisal of the health of individual businesses;
assessment of the firms competitive advantage and
core competence.

5. Setting the corporate objectives

The main task here is to decide the extent of business
growth, the firm wants to achieve. The firm examines the
present level of performance, its achievable level over
the planning period, and its aspirational level. Balancing
the opportunities with the organizations capabilities and
ambitions, the firm figures out its growth objective.
Usually, firms set objectives in all key areas, like, sales,
profits, asset formation, productivity, market share, and
corporate image.
Objectives have to be stated clear-cut in a measurable
time-bound manner. In setting objectives, the firm
integrates its growth ambition with the findings it has
made with its environment survey and internal appraisal.

6. Formulating the corporate strategy

Product-market scope, growth vector, competitive
advantage and synergy are the constituents of corporate
strategy. Findings from the environment
survey/opportunity-threat profile, the competitive
advantages and synergies enjoyed, and the resources
available for growth, are the other major parameters in
deciding the basket of businesses and the productmarket posture. Corporate strategy has to specify
through which businesses and through what kind of
product-market posture is the growth objective going to
be achieved. And it is from this statement that each
business of the corporation existing and new ones
derives its growth targets, direction and priority.

Formulating the corporate strategy (contd.)

Business appraisal and choice of strategy go hand in
hand. The firm decides which businesses are to be
cultivated through fresh investment and care, which ones
are to be given mere maintenance, without committing
much further investment and which businesses it should
phase out. Standard analytical models can be of help to
the strategic planner, in the matter of bringing to the fore
what needs to be done with the different businesses.
Most large companies consist of four organizational
levels the corporate level, the Division level, the
business unit level and the product level.

Formulating the corporate strategy (contd.)

Corporate headquarters is responsible for designing a
corporate strategic plan to guide the whole enterprise; it
makes decisions on the amount of resources to allocate
to each division; as well as which business to start or
eliminate.
Each Division establishes a plan covering the allocation
of funds to each business unit within the division.
Each Business Unit develops a strategic plan to carry
that business unit into a profitable future.
Each product level (product line, brand) within a
business unit develops a marketing plan for achieving its
objectives in its product market.

STRATEGIC
MANAGEMENT

MEANING & DEFINITION

Strategic Management can be defined as the
art and science of formulating, implementing
and evaluating cross-functional decisions that
enable an organization to achieve its objective.
Definition:
The on-going process of formulating,
implementing and controlling broad plans guide
the organization in achieving the strategic
goods given its internal and external
environment.

28

COMPARISON
STRATEGIC

TACTICAL

OPERATIONAL

Long range

Intermediate

Short range

3 or more yrs

2-3 yrs

One yr

Top mgt

Middle

Lower

Broad objectives

Integration of departments

Day to day working

Focus on planning &

forecasting

On co-ordination

On control

Benefits of Strategic Planning

Roadmap to firms
Utilization of resources
Respond to environmental changes
Minimizes chances of mistakes
Creates framework of internal
communication.

Levels of Strategic Planning

Corporate Level
Business-Level
Functional -Level

Elements of a Strategy
Goals
Scope
Competitive Advantage
Logic

Various types of strategies

MASTER
STRATEGIES

PROGRAMME STRATEGIES

SUB-STRATEGIES

TACTICS

BUSINESS POLICY
Business policy provides a basic framework
defining fundamental issues of a company, its
purpose, mission and broad business objectives
and a set of guideline governing the company's
conduct of business within its total perspective.
Overall Guide
Focus on strategic allocation of scarce resources

Types of Policies
MAJOR POLICIES:

Lines of business

Code of ethics
SECONDARY POLICIES:

Selection of geographic area

Identification of major customers

Major products

Types of Policies
FUNCTIONAL POLICIES:
Production
Marketing
Finance
Personnel
Research
RULES:
Salary & wage Adm.
Discipline& discharge
Welfare Adm
Safety & health

Types of Policies
PROCEDURES & STANDARD OP. PLANS:
Handling & processing of orders
Shipments of foreign locations
Servicing customer complaints

Strategy Vs Policy
STRATEGY

POLICY

Strategic decisions

Guidelines

Putting a policy into

effect

General course of action

Deals with crucial

decisions, requires top
mgt involvement.

Once formulated can be

delegated to lower levels

STRATEGIC
MANAGEMENT PROCESS

STRATEGIC MANAGEMENT PROCESS

(SMP)
1. Vision formulation which leads to the
statement of the Mission.
2. The mission is then converted into
performance Objectives
3. To achieve objectives you develop
Strategies
4. Strategy Implementation
5. Evaluation of performance

Diagram
(Strategic mgt by VSP Rao and V Hari
Krishna)

Purpose of SMP
CORE COMPETENCE
SYNERGY
VALUE Creation

 CORE COMPETENCE:
An orgs core competence is something it
does exceptionally well in comparison to
its competitors. It reflects a distinct
competitive advantage like superior
research, development etc..

SYNERGY:
Two or more sub systems working together
to produce more than the total of what
might they produce working alone.
1+1=3

 VALUE CREATION:
Exploiting core competencies and
achieving synergy help organizations
create value for customers. Value is the
sum total of benefits received and cost
paid by the customer.

Steps in SMP
Vision,Mission,Objectives
External Analysis
Internal analysis
DETAILED IN (Strategic mgt by VSP
Rao and V Hari Krishna)

STRATEGY FORMULATION
CORPORATE LEVEL STRATEGIES:
Growth/Expansion Strategy
Stability Strategy
Retrenchment Strategy
Combination Strategy

FUNCTIONAL LEVEL STRATEGY:

R & D Strategy
Operations Strategy
Financial Strategy
Marketing Strategy
Human Resource Strategy

STRATEGY FORMULATION &

IMPLEMENTATION
Detail & Diagram :
(Strategic mgt by VSP Rao and V Hari
Krishna)

Motivational Techniques To
Implement Strategy

MBO
Incentives
Performance appraisal
Salary Administration
Recruiting & termination
Security
Power & Influence

STRATEGIC INTENT:
Vision,Mission,Objectives

 Strategic intent is
about clarity, focus
and inspiration.

VISION

MISSION

OBJECTIVES

GOALS

PLANS

VISION
Corporate vision is a short and inspiring
statement of what the organization intends to
become and to achieve at some point in the
future, often stated in competitive terms. Vision
refers to the category of intentions that are
broad, all-inclusive and forward-thinking. It is
the image that a business must have of its goals
before it sets out to reach them. It describes
aspirations for the future, without specifying the
means that will be used to achieve those desired
ends .

Mission
Mission Statement describes what business youre in
and who your customer is. As such, it captures the very
essence of your enterprise - its relationship with its
customer.
Developing mission statement is the step which moves
your strategic planning process from the present to the
future. It depicts the mission statement connects today
with the future. Your mission statement must work not
only today but for the intended life of your strategic plan
of which your mission statement is a part. If youre
developing a five year strategic plan, for example, you
develop a mission statement which you believe will
work for the next five years.

Values
For any statement, whether mission or vision, to
be embraced and acted upon, it must reflect the
values of your organization.
Values describe what your management team
really cares about. What it holds dear. What
makes em tick. How would your managers
respond to a trade-off between product quality
and profit? Thats really a question of value.

Corporate Goals & Objectives

1.
2.
3.
4.
5.

Role of Objectives:
Legitimacy
Direction
Coordination
Benchmarks for success
motivation

Characteristics of obj;

Obj. form a HIRERACY

Network
Multiplicity of Obj
Long and short-range obj

ENVIRONMENTAL ANALYSIS

 Env. may be defined as the set of external factors such

as economic, socio cultural, Govt. & legal, demographic,
which are uncontrollable in nature & affect the business
decisions of a firm or company.
1) Micro Environment 2) Macro Environment
Micro Environment1) Supplier
2) Customers-industrial, retailers, wholesalers, Govt.,
foreigners
3) Market intermediates- middlemen, physical distribution
firms, marketing service agencies, and financial
intermediaries

CompetitorsDesire competitions limited disposable income many

unsatisfied desires T.V./washing machine/ investment
Generic competition-among alternatives which satisfied
particular category of desire- Investment in U.T.I./P.O./Bank/Any
other.
Product form competition- Washing machine, semi/ automotive
Brand competition- videocon/godrej
Public
media
citizen action public
local public

Macro Environment-uncontrollable

1.

Economic Environment
Eco. Conditions- business cycle, growth of economy, size of
domestic Market & its dynamic effect
Eco. Policies- budgets, industrial regulations, eco planning,
import & export regulations, business laws, , industrial policy,
control on price & wages, trade & transport policy, size of
national income, demand & supply of various goods
Economic Systemof a country
free enterprise i.e. capitalist
socialist
communist
mixed

2. Political & Govt. Environment.

Legislature- decide particularly course
of action

Executive -implementation

Judiciary -to see above both working

public interest.

3. Socio Cultural Environment- people

attitude to work & health, role of family,
marriage, religion & education, ethical
issues, social responsibilities of business
4. Natural Environment- geographical &
ecological factors- natural resources
endowments, weather & climatic
conditions, topographical factors,
locational aspects, port facilities

5. Demographic Environment. - Size

growth age composition of population,
family size, economic stratification of
population, educational level, caste
religion etc.
6. Technological Environment- marketing,
innovation, R & D
7. International Environment-liberation
force of view global perspectives

 Environmental Scanning: helps every mgt in

attaining maximum profits and growth and the
same time helps in minimization of future threats.
Environment analysis has 3 basic objectives
Under taking of current & potential changes
Should provide inputs for strategic decision
making
Rich source of idea & understanding of the
context, bring fresh views

Environmental AnalysisScanning general supervision of all env. Factors & their interaction in order
1.
to identify early signals of change,
2.
Detect env. Changes underway
Monitoring -- tracking the env. Trends sequences of events or stream of
activities. Study of Indicators, assemble data to discern emerging
patterns. Three outcomes emerges in monitoring
1.
A specific description of env. trends
2.
Identification of trends
3.
Identification of areas of further scans
Forecasting -scanning & monitoring provide a picture of what is
happening strategic decision Making requires future orientation.
Forecasting is developing future projections of changes
Assessment - outputs of above 3 steps are assessed to determine
implementation. Assessment involves identifying & evaluate how & why
current & projected env. Changes affect strategic Mgt. Of the
organization

Techniques of Environment
Analysis

SWOT Analysis, strengths, weakness, opportunities, & threats.

Forecasting methods
Time services analysis & projection-moving averages, exponential
smoothing book Jenkins, trend projection.
Casual Methods- regression model, econometric model, anticipation
surveys, input output model, diffusion index, leading indicators, life cycle
analysis.
Qualitative Method-Delphi method, market research, panel consensus,
visionary forecast, historical analogy.
Scenario technique- preparation of background, selection of critical
indicators, establishing past behavior of indicators, verification of potential
future events, forecasting the indicators, writing of scenario.
Preparation of ETOP-environmental threat & opportunity profile is a
summary of environmental factors. It is a structured way. Assessing
Importance of environmental factors, assessing impact factor combining
importance & impact factor.

Environmental Scanning &

Monitoring
Environmental scanning is a concept from
business management by which businesses gather
information from the environment, to better achieve
a sustainable competitive advantage.
To sustain competitive advantage the company must
also respond to the information gathered from
environmental scanning by altering its strategies
and plans when the need arises.

Environmental Scanning &

Monitoring- Techniques
SWOT
PEST

Techniques

Industry Analysis

QUEST

Competitor
Analysis

SWOT
(Strength-Weakness-Opportunity-Threat)

Identification of threats and

Opportunities in the environment
(External) and strengths and
Weaknesses of the firm (Internal) is
the cornerstone of business policy
formulation; it is these factors which
determine the course of action to
ensure the survival and growth of the
firm.

What is PEST?

PEST Analysis The

Meaning
A PEST analysis is an analysis of the external macroenvironment that affects all firms.
P.E.S.T. is an acronym for the Political, Economic, Social,
and Technological factors of the external macroenvironment.
Such external factors usually are beyond the firm's control
and sometimes present themselves as threats.
However, changes in the external environment also create
new opportunities.

Industry
Industry Analysis:
Analysis: Three
Three sections
sections
A. Industry Life Cycle Analysis
B. Study of the structure and
characteristics of an Industry
C. Profit Potential of Industry (Porter
Model)

A.
A. Industry
Industry Life
Life Cycle
Cycle Analysis
Analysis
Four Stages:
Pioneering Stage
Rapid Growth Stage
Maturity and Stabilization Stage
Decline Stage

B.
B. Study
Study of
of the
the structure
structure and
and
characteristics
characteristics of
of an
an Industry
Industry
1. Structure of the Industry and nature of
Competition
2. Nature and Prospectus of the demand
3. Cost, Efficiency and Profitability
4. Technology and Research

3.
3. Profit
Profit Potential
Potential of
of Industry
Industry (Porter
(Porter
Model)
Model)

1.
2.
3.
4.
5.

Michael Porter has argued that the profit

potential of an industry depends on the
combined strength of the:
Threat of new entrant
Rivalry among existing firms
Pressure from substitute products
Bargaining power of buyers
Bargaining power of sellers

INTERNAL ANALYSIS

SWOT analysis
Value chain Analysis
Financial Analysis
Key factor rating
Functional area profile
Strategic advantage profile

Internal Analysis
Resource-Based View

Firms have heterogeneous resources and capabilities.

By exploiting core competencies, firms can develop valuecreating

strategies superior to their competitors.

Four criteria must be met for a sustained competitive

Valuable
advantage.
Costly to imitate
Rare
Non-substitutable

Internal Analysis
Resources
Tangible
Intangible
Brand Equity

Components of the ResourceBased View

Capabilities

Core
Competencies
Competitive
Advantage

Above-Average
Returns

Internal Analysis
Resources and Capabilities:

Resources

Represent what the firm has to work with.

Resources must be combined to establish a capability.

Types:

Tangible
Intangible
Brand Equity

Internal Analysis
Tangible Resources Assets that can be seen, touched or
quantified.
- Financial resources (borrowing capacity)
- Physical Resources (facilities, locations)
- Organizational structure (reporting structures)
- Technological (patents)
Intangible Resources
- Human resources (experience, training)
- Resources for innovation (technical employees, facilities)
- Reputation
Brand Equity
- Brand name
- maintaining brand equity (Mercedes example
value/performance
and Japanese automakers)

VALUE CHAIN ANALYSIS

A value chain identifies and isolates the
various economic value adding activities
that occur in every firm. It portrays
activities required to crate value for
customer for a given product.

The Value Chain System

A firm's value chain is part of a larger
system that includes the value chains of
upstream suppliers and downstream
channels and customers. Porter calls this
series of value chains the value system,

Porter's Generic Value Chain

Porter's Generic Value Chain
M
A
Inbound
Logist
ics

Outbound
Logistics

Operations

>

>

Marketing &
Sales

>

Service

>

>

I
N

Firm Infrastructure
HR Management
Technology Development
Procurement

The primary value chain activities

are:
Inbound Logistics: the receiving and
warehousing of raw materials, and their
distribution to manufacturing as they are
required.
Operations: the processes of transforming
inputs into finished products and services.
Outbound Logistics: the warehousing and
distribution of finished goods.

The primary value chain

activities are:
Marketing & Sales: the identification of
customer needs and the generation of
sales.
Service: the support of customers after
the products and services are sold to
them.

These primary activities are

supported by:
The infrastructure of the firm:
organizational structure, control systems,
company culture, etc.
Human resource management: employee
recruiting, hiring, training, development,
and compensation.

These primary activities are

supported by:
Technology development: technologies to
support value-creating activities.
Procurement: purchasing inputs such as
materials, supplies, and equipment.

Cost Advantage and the Value

Chain
Porter identified 10 cost drivers related
to value chain activities:
Economies of scale
Learning
Capacity utilization
Linkages among activities
Interrelationships among business units

10 cost drivers related to value

chain activities:

Degree of vertical integration

Timing of market entry
Firm's policy of cost or differentiation
Geographic location
Institutional factors (regulation, union
activity, taxes, etc.)

Differentiation and the Value

Chain

Policies and decisions

Linkages among activities
Timing
Location
Interrelationships

Differentiation and the Value

Chain
Learning
Integration
Scale (e.g. better service as a result of
large scale)
Institutional factors

Technology and the Value

Chain

Inbound Logistics Technologies

Transportation
Material handling
Material storage
Communications
Testing
Information systems

Operations Technologies

Process
Materials
Machine tools
Material handling
Packaging

Operations Technologies

Maintenance
Testing
Building design & operation
Information systems

Outbound Logistics
Technologies

Transportation
Material handling
Packaging
Communications
Information systems

Marketing & Sales

Technologies

Media
Audio/video
Communications
Information systems

Service Technologies
Testing
Communications
Information systems

Linkages Between Value Chain

Activities
Value chain activities are not isolated
from one another. Rather, one value chain
activity often affects the cost or
performance of other ones. Linkages may
exist between primary activities and also
between primary and support activities.

Linkages Between Value Chain

Activities
Consider the case in which the design of a
product is changed in order to reduce
manufacturing costs. Suppose that
inadvertently the new product design
results increased service costs; the cost
reduction could be less than anticipated
and even worse, there could be a net
cost increase.

Outsourcing Value Chain

Activities
Whether the activity can be performed
cheaper or better by suppliers.
Whether the activity is one of the firm's
core competencies from which stems a
cost advantage or product
differentiation.

Outsourcing Value Chain

Activities
The risk of performing the activity inhouse. If the activity relies on fast
changing technology or the product is
sold in a rapidly-changing market, it may
be advantageous to outsource the activity
in order to maintain flexibility and avoid
the risk of investing in specialized assets.

Outsourcing Value Chain

Activities
Whether the outsourcing of an activity
can result in business process
improvements such as reduced lead time,
higher flexibility, reduced inventory, etc.

Financial Analysis
Assessment of the firms past, present and
future financial conditions
Done to find firms financial strengths and
weaknesses
Primary Tools:
Financial Statements
Comparison of financial ratios to past,
industry, sector and all firms

Types of Ratios
Financial Ratios:
Liquidity Ratios
Assess ability to cover current obligations

Leverage Ratios
Assess ability to cover long term debt obligations

Operational Ratios:
Activity (Turnover) Ratios
Assess amount of activity relative to amount of
resources used

Profitability Ratios
Assess profits relative to amount of resources used

Valuation Ratios:

Assess market price relative to assets or earnings

LIQUIDITY RATIO:

Current Ratio= Current Assets/Current

Liabilities.

Quick Ratio= CA-Inventory/CL

LEVERAGE RATIO
Debt-Equity Ratio: Total long term debt/Shareholders
funds

Interest coverage ratio: EBIT/shareholders funds

Proprietary ratio: Shareholders funds/total assets

Debt to assets ratio: Total Debts/total assets

Activity Ratio

Asset Turnover = Sales turnover / assets employed

Stock turnover = Cost of goods sold / stock expressed as

times per year

Working Capital ratio = Sales (net)/W.C.

Fixed Assets TO ratio = Sales (Net)/Net fixed Assets

Profitability ratio
G.P.ratio=GP/Net Sales
N.P.ratio=NP/Net sales
Operating ratio = Op. Cost/Net sales

Operating Profitability Ratios

EBIT
Sales
EBIT

Sales Total Assets Total Assets

EBIT
Interest Expense Net Before Tax

Total Assets
Total Assets
Total Assets

KEY FACTOR RATING

The key factors that affect org functioning.
Info regarding key factors is collected.
Answers are being closely examined with
respect to key factors. The impact of each
key factor is examined.

FUNCTIONAL AREA PROFILE & RESOURCE

DEVELOPMENT MATRIX

To make a comparative analysis of a firms

own resource deployment position and
focus of efforts with those of competitors.
First, technique requires preparation of
matrix of functional area with common
features.
Secondly matrix is prepared showing
deployment and focus of efforts over a
period of time.

STRATEGIC ADVANTAGE PROFILE

SAP tries to find out the org strengths and
weaknesses with relation to some CSF.

Critical Success Factor Analysis

Developed John Rockart
Satisfactory performance required for
organization achieve goals
Identify tasks & requirements for
success
CSFs means to achieve goals
Sources of CSF - industry, environment &
temporal factors

 Characteristics of CSF Analysis

Internal
External
Monitor
Develop

Process of CSF Analysis Identify

CSF
Critical information internal & external
Critical assumption set
Critical decisions

 Benefits of CSF Analysis

Results needs enterprise clearly
Measure success prioritize goals
Needs of end users & enterprise are met

Long term Mission & Goals

Mission short /long term activity to
achieve vision
Mission statement statement that
communicates total essence organization
Gives what an organization is today and
what it should be
Focus and guide - internal decision making

 Characteristics of mission statement

Feasible,
Precise
Clear
Motivating
Should give the means to achieve objectives

 Characteristics of successful strategic

planning
Will lead to action
Builds a shared vision which is value based
Will be a participative process
Accepts accountability
Externally focused to organizations
environment
Will be relying on quality data
Will require openness to questioning

Contingency Planning
Contingency planning approach
identify what if something wrong
happens
Planning strategies cope up
contingency events
Objective make to think possible
contingencies and its responses

 Process of contingency planning

Identifying - Identify events when plan is to be
invoked and who will be responsible for
implementing it
Assessing - Assess the value of the resources and
correlate them with their functions to identify the
critical elements
Prevention - Preventative measures for critical
resources
Developing build the plan simple & straight
forward step by step workflows an checklists
Communicate and rehearse

 Benefits of contingency planning

Strengthens the organization cope up with
unexpected developments
Reduces stress reduce delay & indecisiveness
Respond sensibly & wisely
Focus on issues and identify constraints
Clarifies roles and responsibilities
Barriers
Maintaining commitment & participation
Keeping the process on going
Updating and reviewing the process

BALANCED SCORECARD
FRAMEWORK

BALANCED SCORECARD
FRAMEWORK
Financial
perspective

Customers

Vision &

Perspective

Strategy

Learning &
growth

Internal
Business
process

Translate Strategy to Operational terms

The Strategy
Financial Perspective
If we succeed, how will we look
to our shareholders

A Strat
Set of o
f

egy Is A

Hypoth
eses
About C
ause &
Effect

Customer Perspective
To achieve my vision, how
must we look to our customers?
Internal Perspective
To satisfy my customer, at
which processes must I excel?

Organization Learning
To achieve my vision, how must my
organization learn and improve?

60% of
organization
s
dont link
strategy &
budgets

STRATEGY

85% of
management
Strategic
teams spend less
Learning Loop
than
one hour per
month on strategy
BALANCED
issues
SCORECAR
D

A good Balanced scorecard describes the

Organizational Strategy

Strategy

Balanced
Scorecard

Measures are Balanced between

Outcome measures ( results from past efforts)and
the measures that drive performance
Objective, easily quantified outcome measures and
subjective, somewhat judgmental performance
drivers
Lagging and leading indicators
Short-term and long-term objectives
Stakeholders

BSC s are more than just a somewhat adhoc

collection of financial &
non-financial
performance measures
BSC is a Top down process driven by the
mission and strategy

What does BSC do?

Clarify and translate vision and strategy
Communicate and link strategic objectives and
measures
Plan ,set targets, and align strategic initiatives
Enhance strategic feedback and learning

What does BSC do?

Clarify and gain consensus about strategy
Communicate strategy throughout the organization
Align departmental and personal goals to strategy
Link strategic objectives to long term targets and
annual budgets
Perform periodic and systematic strategic reviews
Obtain feedback to learn about and improve strategy

Financial perspective
Indicate whether companys strategy implementation and
execution are contributing to bottom-line improvement
Profitability
Operating income,
Return-on-capital employed
EVA
Growth
Cash flow

ve e
i
t
c ll w
e
wi ers
sp
r
Pe how old
l
ia ed, reh
c
(ROCE) an cce sha
Fin su our
e to
w
If look

ve e
i
t
ec ill w s
p
rs w w er
e
P ho old
l
ia ed, reh
c
n ce sha
a
c
Fin su our
we to
f
I look

Financial perspective
Increase EVA to +2%

Revenue Growth Strategy

New Products

High end products

Productivity Strategy

Cost

Productivity

Customer Perspective
Customer & Market segment in which the unit is
competing
ive
Performance in the targeted
Customer satisfaction
Customer retention

t how
c
pe on, r
s
r si u
markets
e
P vi o o
r
e my k t
m
o ve loo rs?
t
s ie e
e
u
m
h
C c t w to
a
o mus cus
T

New customer acquisition

Customer profitability
Specific measures of value propositions- short lead
time or on-time delivery
New approaches to satisfy emerging needs

Customer Perspective
Win-win Relations with
Channel partners

Differentiators
On time
delivery

Relation
ship

Basic Requirement
Clean
Quality
Variability within
specified limits

Technical
support

Survey

Assistance

Internal Business-process perspective

Critical internal process in which organization must
excel
Deliver value
proposition

Satisfy shareholders
expectations

t
it ve r, a
ec me st I
p
rs sto mu
e
P cu s
l
y e
na m ss
r
te isfy oce el?
n
I at pr xc
s h
e
o
c
i
T wh

Internal Process
Identify entirely new process at which organization must
excel to meet customer & financial objectives

Internal Business-process perspective

Customer Value
Proposition

Achieve Operational
excellence

lowest cost producer

t
it ve r, a
ec me st I
p
rs sto mu
e
P cu s
l
y e
na m ss
r
te isfy oce el?
n
I at pr xc
s h
e
o
c
i
T wh

Learning and growth perspective

People based measures

ESI
Competencies
Skill Mix
Systems (Technology)

T
o
or ac Org
ga hie a
ni ve niz
za
a
tio my tio
n
n
le visi Le
ar on ar
n
n
an , ho ing
d w
im m
pr us
ov t m
e? y

Infrastructure that organization must build to create

long-term growth and improvement

Learning and growth perspective

Motivated and prepared

workforce

Climate for
action
ESI

Competencies

IT Technology

Cause and Effect Relationship

ROCE
Customer
Loyalty
On-line
delivery
Process
Cycle Time

Process
Quality
Employee
Competency

Four perspectives: Are they sufficient

Community perspective - Social responsibility
Suppliers perspective

Question : Is it vital for success of business units

strategy?

Involvement
Athlete Outreach /
Program Expansion

Customer /
Athlete

Community

Measures
# of new programs / #
athletes
Volunteer retention /
recruitment
New donors
Donor feedback
# athletes in outreach
program
Internal
Operations

Objectives
Positive Image

Internal
Operations

Financial
Donor

The Balanced Scorecard Effectively

Communicates
How Well the MSO Is Achieving Their
Massachusetts Special Olympics Mission Statement
Mission

Objectives
Measures
Training & Competition
# athlete
able to find a team
Controlled Cost

Cities wit
registered athletes
Quality Programs

Fee incre
Community For

Family
feedback
Athletes

# of acti
outside of competit

Objectives
Organization and Administration
team
Public Relations meetings

team

Training

offered outreach

Measures
% Plans distributed

Objectives
Knowledge of MSO
and
Management
time

Measures
Volunteers trained in MSO
sports
Registration forms in one

Database Management
Recognition

# area management
$ raised
# training classes
# first time athletes

Program guide distribution

Volunteers in database
Advanced coaches training/
coaches/ meetings

Balanced Scorecard Example

Vision
To provide patients, families and primary care physicians with
the best, most compassionate care possible and to excel at
communications
Customer
Patient
% Satisfied
% would Recommend
% Parents Could
Articulate Care Plan
Discharge Timeliness

Financial

Primary Care
Physician
% Satisfied with
Communication
% Parents Could
Identify DCH Physician

Operating Margin
Cost per Case

Revenue from
Neonatal Care

Internal Processes
Wait Time

Quality

Productivity

Admissions
Discharge

Infection Rates
Blood Culture
Contaminate Rate
Use of Clinical
Pathways (Top 10)

Length of Stay
Readmission Rate
Daily Staffing vs.
Occupancy

Learning & Growth

Incentive Plan
- Awareness
- Implementation

Strategic Database
- Availability
- Use

A successful Balanced
Scorecard program starts
with a recognition that it is
not a metrics project, its a
change process.

A Good Balanced Scorecard

Describes the Organization
Strategy. Strategic Objectives
Strategic Measures

Financially Strong

Customer

Financial

Financially Strong

F1 Return on Capital
Employed
F2 Existing Asset
Utilization

F3 Profitablity

Delight the Customer

Win-Win Dealer
Relationship

F4 Industry Cost
Leader

F5 Profitable Growth

C1 Continually Delight
the Targeted
Consumer

C2 Build Win-Win
Relations with
Dealer

ROCE
Cash Flow
Net Margin Rank (vs.
Competition)
Full Cost per Gallon
Delivered (Vs.
Competition)
Volume Growth Rate
vs. Industry
Premium Ratio
Non-Gasoline Revenue
and Margin

Share of Segment in
Selected Key Markets
Mystery Shopper
Rating
Dealer Gross Profit
Growth
Dealer Survey

A Good Balanced Scorecard

Describes the Organization
Strategy. I1 Innovative products

New Product ROI

Build the Franchise
and services

Internal

Increase Customer
Value

I2 Best-in-class
Franchise Teams
I3 Refinery
Performance

Operational Excellence

I4 Inventory
Management

Good Neighbor

I5 Industry Cost
Leader

Learning &
growth

I6 On Spec-On Time

Motivated and
Prepared Workforce

I7 Improve EHS

L1 Climate for Action

L2 Core Competencies
and Skills
L3 Access to Strategic
Information

New Product
Acceptance Rate
Dealer Quality Score
Yield Gap
Unplanned Downtime
Inventory Levels
Run-out Rate
Activity Cost. vs.
Competition
Perfect Orders
Number of
Environmental
Incidents
Days Away from Work
Rate
Employee Survey
Personal BSC (%)
Strategic Competency
Availability
Strategic Information
Availability

MAKE STRATEGY EVERYONES JOB

CORP
Top-Down Bridging
Process To Share the
Strategy & Align the
Workforce

SBU
EDUCATION
PERSONAL GOAL
ALIGNMENT
BALANCED PAYCHECKS

The Strategy Focused Workforce

Bottom-Up Process
to Internalize &
Execute the Strategy

Build STRATEGY-FOCUSED ORGANIZATIONS

1 Mobilize Change
through Executive
Leadership

2 Translate the
Strategy to
Operational Terms
Strategy Mape
Balanced Scorecards

Mobilization
Governance Processes
Strategic Management

Link Budgets & Strategy

Strategic Learning
Analysis & Information System

STRATEGY

4
3

Align the
Organization to
the Strategy
Corporate Role
Business Unit Synergic
Support Unit Synergic

Make Strategy
a Continual
process

Make Strategy
Everyones Job

Strategic Awareness
Personal Scorecard
Balanced Paychecks

Describing Strategy : Strategy Is a Step in a

Continuum
MISSION
Why we exist
VALUES
What we believe In
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SOCRECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do
PERSONAL OBJECTIVES
What I need to do

STRATEGIC OUTCOMES

Satisfied
SHAREHOLDERS

Delighted
CUSTOMERS

Satisfied
PROCESSES

Motivated & Prepared

WORKFORCE

What Is A Good Balanced Scorecard?

#1.

Executive Involvement
Strategic decision makers must validate
the strategy and related measures

#2

Cause-and-Effect Relationships
Every objective selected should be part
of a chain of cause and effect that
represents the strategy

#3

Performance Drivers
A balance of outcome measures and
leading measures facilitates anticipatory
management

#4

Linked to Budget/Financials
Every measure selected can ultimately
be supported/enabled by Budgetary
Funds

#5

Change Initiatives
Aligned Strategic Initiatives that change
the behavior of the organization

CORPORATE LEVEL
STRATEGIES

Types of CLS

Growth/expansion
Stability
Retrenchment
combination

Growth/Expansion
A) INTENSIFICATION

Market penetration
Market development
Product development
Innovation

B) DIVERSIFICATION

Concentric
Conglomerate
Forward
Backward

Concentric Diversification(RELATED)
When an org diversifies into a related but
distinct business. With concentric
diversification, new businesses can be
related to existing businesses through
products, markets or technology. Example:
Philips into Cellular phones,etc

CONGLOMERATE(UNRELATED)
An org diversifies into an area that are
unrelated to its business. The decision is
taken due to technological change.

STABILITY STRATEGY
When firms are satisfied with their current rate of growth
and profits, they may decide to use a stability strategy.
This strategy is essentially a continuation of existing
strategies. Such strategies are typically found in
industries having relatively stable environments. The firm
is often making a comfortable income operating a
business that they know, and see no need to make the
psychological and financial investment that would be
required to undertake a growth strategy.

RETRENCHMENT STRATEGIES
Retrenchment strategies involve a
reduction in the scope of a corporation's
activities, which also generally
necessitates a reduction in number of
employees, sale of assets associated with
discontinued product or service lines,
possible restructuring of debt through
bankruptcy proceedings, and in the most
extreme cases, liquidation of the firm.

DIVESTMENT STRATEGY
A divestment decision occurs when a firm
elects to sell one or more of the businesses
in its corporate portfolio. Typically, a poorly
performing unit is sold to another company
and the money is reinvested in another
business within the portfolio that has
greater potential.

BUSINESS-LEVEL STRATEGIES

 Business-level strategies are similar to

corporate-strategies in that they focus on
overall performance. In contrast to
corporate-level strategy, however, they
focus on only one rather than a portfolio of
businesses. Business units represent
individual entities oriented toward a
particular industry, product, or market

 A common focus of business-level

strategies are sometimes on a particular
product or service line and business-level
strategies commonly involve decisions
regarding individual products within this
product or service line. There are also
strategies regarding relationships between
products.

ANALYSIS OF BUSINESS-LEVEL
STRATEGIES
PORTER'S GENERIC STRATEGIES.:
Cost leadership Strategy
Differentiation Strategy
Focus Strategy

COST LEADERSHIP
Cost-leadership strategies require firms to
develop policies aimed at becoming and
remaining the lowest cost producer and/or
distributor in the industry. Note here that the
focus is on cost leadership, not price leadership.
This may at first appear to be only a semantic
difference, but consider how this fine-grained
definition places emphases on controlling costs
while giving firms alternatives when it comes to
pricing (thus ultimately influencing total
revenues).

DIFFERENTIATION STRATEGY
Differentiation strategies require a firm to create something
about its product that is perceived as unique within its market.
Whether the features are real, or just in the mind of the
customer, customers must perceive the product as having
desirable features not commonly found in competing products.
The customers also must be relatively price-insensitive.
Adding product features means that the production or
distribution costs of a differentiated product will be somewhat
higher than the price of a generic, non-differentiated product.
Customers must be willing to pay more than the marginal cost
of adding the differentiating feature if a differentiation strategy
is to succeed.

FOCUS STRATEGY
Focus, the third generic strategy, involves concentrating on a
particular customer, product line, geographical area, channel
of distribution, stage in the production process, or market
niche. The underlying premise of the focus strategy is that the
firm is better able to serve its limited segment than
competitors serving a broader range of customers. Firms using
a focus strategy simply apply a cost-leader or differentiation
strategy to a segment of the larger market. Firms may thus be
able to differentiate themselves based on meeting customer
needs through differentiation or through low costs and
competitive pricing for specialty goods.

COMPETITIVE ADVANTAGE
Competitive advantage occurs when a organization
acquires or develops an attribute or combination of
attributes that allows it to outperform its competitors.
These attributes can include access to natural
resources, such as high grade ores or inexpensive
power, or access to highly trained and skilled personnel
human resources. New technologies such as robotics
and information technology either to be included as a
part of the product, or to assist making it. The term
competitive advantage is the ability gained through
attributes and resources to perform at a higher level than
others in the same industry or market

How to build/acquire CA?

Innovation
Integration
Alliances/mergers/acquisitions
R&D
Entry Barriers
Benchmarking
Value chain approach

How to build/acquire CORE

COMPETENCE?
Focus on two or more skills
Low cost strategies
Benefits of cost leadership

STRATEGIC ANALYSIS AND CHOICE

STRATEGY CHOICE
How effective has the existing strategy
been?
How effective will that strategy be in the
future?
What will be the effectiveness of selected
strategies?

STRATEGY CHOICE

Strategists collect and evaluate information to assess strengths and

weaknesses of the internal environment and opportunities and
threats of the external environment. Such an assessment presents a
list of possible strategic alternatives.From among those alternatives,
choices are made.
It determines the characteristics and forms of an organization's
strategic direction.
the decision to select among the grand strategies
considered, the strategy which will best meet the
enterprises objectives.

GAP Analysis
Gap analysis is a tool that helps a company to compare
its actual performance with its potential performance.
It simply answer two questions - where are we now?
and where do we want to be? .
The difference between the two is the GAP - this is how
you are going to get there.

Tools of Determining Strategic Choice

BCG Portfolio
GE Multifactor Portfolio Matrix
Hofers Product-Market Evolution Matrix
Shell Direction Policy
Industrys level policy
Porters five forces model

Portfolio Analysis
And
BCG Matrix

The Growth Share Matrix

It evaluates the strength of a firm from the portfolio of
businesses or products the firm has in different stages
of PLC, which are required for future growth.

It analyses the impact of investing resources in different

SBUs on the corporates future earnings and cash flow.

SBUs are evaluated from two ways

1. Industry attractiveness
(market growth)
And
2. Competitive strength
(relative market share)

The Growth Share Matrix

A Matrix is created considering the market
growth and relative market share of all the
businesses in their respective industries
and businesses are placed in that matrix for
analysis and evaluation.

The Growth Share Matrix

The market growth rate on the vertical axis is
the proxy measure for the industry
Attractiveness.
The relative market share is proxy for its
competitive strength in the industry.

BCG Growth-Share Matrix

In BCG approach, the company classifies all
its SBUs into 4 types as
star,
cash cow,
question mark
and
dog
according to their market growth and relative
market share.

The BCG Matrix

Market growth rate

High

Stars

Question
marks

Cash cows

Dogs

Low
High

Relative market share

Low

Source: Perspectives, No. 66, The Product Portfolio, Adapted by permission from The Boston Consulting Group, Inc., 1970.

BCG Matrix
Problem Child

Market growth rate

Stars

?
$
Cash Cows

Dogs

Relative market share

BCG Matrix
Problem Child

Market growth rate

Stars
Revenue
+++
+
Expenses _ _ _
Net
+

Revenue + + +
++
Expenses _
Net
+++
+ Cows
Cash

Revenue
Expenses
_
Net

+
___
___

Revenue + +
Expenses _ _ _ _
Net
___

Relative market share

Dogs

BCG Market Share/Market Growth Matrix

BCG Matrix
Dogs are businesses that have a very small
share of a market that is not expected to grow.
Cash cows are businesses that have a large
share of a market that is not expected to grow
substantially.
Question marks are businesses that have only a
small share of a quickly growing market.
Stars are businesses that have the largest share
of a rapidly growing market.

Stars
are high-growth, high-share businesses or
products. They often need heavy
investment to finance their rapid growth.
Therefore, they may not be producing a
positive cash flow. The business strategy
will generally be for growth fueled by
externally acquired capital. Eventually, their
growth will slow, and they will turn into cash
cows.

Cash cows
are low-growth, high-share businesses or
products. These established and successful
SBUs need less investment to keep their
market share. They produce a lot of cash to
be used for other business units of the
company. They are either milked for
investment in stars or question marks or
harvested if there is little optimism for a
stable future.

Question marks
sometimes called problem children, are lowshare business units in high-growth markets.
They need a lot of cash to keep and increase
their share; they can not generate enough
cash themselves. Management must decide
which question mark it should build into stars
and which should phase out.

Dogs
are low-growth, low-share businesses and
products. They often have poor
profitability. Therefore, the business
strategy for a dog is most often to divest,
but occasionally to hold for possible
strategic repositioning as a question mark
or cash cow.

Portfolio Strategies
BUILD
Does the SBU have the potential to be a star?
HOLD
Can you maintain and preserve market share?

Four
Portfolio
Strategies

HARVEST
.
Increase the short-term return without
impacting long-run prospects.
DIVEST
Is it appropriate to dump SBUs
with low-growth potential?

Limitations of the BCG Matrix

1.

Market Growth rate is an inadequate descriptor of

overall industry attractiveness.

2.

Relative market share is inadequate as a descriptor of

overall competitive strength.

3.

The analysis is highly sensitive to how growth and

share are measured.

4.

It provide little guidance on how best to implement the

investment strategies.

5.

The model implicitly assumes that business units are

independent or one another except for the flow of cash.

How to Identify SBUs?

It is the basic competitive unit of a company.
It has a specific and identifiable group of
customers.
It has specific and identifiable competitors.
It can be measured as an independent entity in
terms of profit and loss.
Therefore, it may require a separate marketing
strategy.

GE / McKinsey Matrix
In consulting engagements with General Electric
in the 1970's, McKinsey & Company developed
a nine-cell portfolio matrix as a tool for screening
GE's large portfolio of strategic business units
(SBU). This business screen became known as
the GE/McKinsey Matrix and is shown below:
The GE matrix has nine cells vs. four cells in
the BCG matrix.

 The GE / McKinsey matrix is similar to the

BCG growth-share matrix in that it maps strategic
business units on a grid of the industry and the SBU's
position in the industry. The GE matrix however,
attempts to improve upon the BCG matrix in the
following two ways:

The GE matrix generalizes the axes as "Industry

Attractiveness" and "Business Unit Strength" whereas
the BCG matrix uses the market growth rate as a
proxy for industry attractiveness and relative
market share as a proxy for the strength of the
business unit.

Industry Attractiveness
The vertical axis of the GE / McKinsey matrix is
industry attractiveness, which is determined by
factors such as the following:
Market growth rate
Market size
Demand variability
Industry profitability
Industry rivalry
Global opportunities
Macroenvironmental factors (PEST)

Each factor is assigned a weighting

that is appropriate for the industry.
The industry attractiveness then is
calculated as follows:

Business

Unit Strength

The

horizontal axis of the GE / McKinsey matrix is the strength of

the business unit. Some factors that can be used to determine
business unit strength include:
Market

share

Growth

in market share

Brand

equity

Distribution
Production
Profit
The

channel access

capacity

margins relative to competitors

business unit strength index can be calculated by multiplying the estimated

value of each factor by the factor's weighting, as done for industry attractiveness.

GE MATRIX contd..
Industry

attractiveness and business unit

strength are calculated by first identifying
criteria for each, determining the value of
each parameter in the criteria, and
multiplying that value by a weighting factor.
The result is a quantitative measure of
industry attractiveness and the business
unit's relative performance in that industry
Industry

attractiveness

factor value1 x factor weighting1

Plotting the Information

Each

business unit can be portrayed as a circle

plotted on the matrix, with the information
conveyed as follows:
Market

circle.

size is represented by the size of the

Market

share is shown by using the circle as

a pie chart.
The

expected future position of the circle is

portrayed by means of an arrow.

The following is an example of such a representation:

The

shading of the above circle indicates a 38%

market share for the strategic business unit. The
arrow in the upward left direction indicates that
the business unit is projected to gain strength
relative to competitors, and that the business unit
is in an industry that is projected to become more
attractive. The tip of the arrow indicates the future
position of the center point of the circle.

Strategic Implications

Resource allocation recommendations can be made to

grow, hold, or harvest a strategic business unit based on
its position on the matrix as follows:

Grow strong business units in attractive

industries, average business units in attractive
industries, and strong business units in average
industries.

Hold average businesses in average industries,

strong businesses in weak industries, and weak
business in attractive industries.

Harvest weak business units in unattractive

industries, average business units in unattractive
industries, and weak business units in average
industries.

There

are strategy variations within these three

groups. For example, within the harvest group
the firm would be inclined to quickly divest itself
of a weak business in an unattractive industry,
whereas it might perform a phased harvest of an
average business unit in the same industry.

LIMITATION GE
While the GE business screen represents an
improvement over the more simple BCG growthshare matrix, it still presents a somewhat limited
view by not considering interactions among the
business units and by neglecting to address the
core competencies leading to value creation.
Rather than serving as the primary tool for
resource allocation, portfolio matrices are better
suited to displaying a quick synopsis of the
strategic business units.

GE Mckinsey Matrix
Bus
Str Ind at
High

STR
AVERA WEAK
- ONG GE
GROW

AVERAGE
Low

HOLD

HOLD

HARVEST

Hofers product Market evolution

According to Hofer and Schendel, "The
Principal difficulty with GE Business
Screen is that it does not depict as
affectively at it might the positions of
new businesses that are just starting to
grow in new industries.

 Major changes in basic competitive

position occur in the stages of
development, shakeout and decline
because in these stages the basic nature
of competition changes. It is more difficult
to make changes to competitive position in
the other stages of growth, maturation and
saturation as the bases for competition are
usually well established.

 Market shifts during these stages of the market evolution

do happen however and can be caused by:

a major blunder by the industry leader

a major investment program by a well positioned follower
through the acquisition and effective integration of another firm
within the industry
through a sustained effort to produce small, consistent incremental
advantages over a long period of time

Stages of Product-market evolution

Direction Policy Matrix

It uses two dimensions-business sector prospects and companys

competitive capabilities-in order to choose appropriate strategies.

Each dimension is further divided into three degress:business

sector prospects into attratctive,unattractive and average
and company's competitive capabilities into strong, average
and weak. The combination of two dimensions further sliced into
three compartments gives a nine cell matrix.

Leader Top position; major resources are focused upon the SBU.

Try harder Average capabilities but operating in attractive prospects. New

additional resources top strengthen their position.

Double or quit Business prospects are attractive but companys own resources
are weak. Two possibilities either INVEST MORE or QUIT

Growth - grow the market by focusing on R&D,innovations.

Custodial Average position in both the cases bear with the situation with little
help from other product divisions.

Cash Generator strong capabilities but unattractive prospects .May continue for
satisfactory profits.

Phased withdrawal Average to weak position, little chance of generating cash..

Divest Business Capabilities are weak here.SBU;s running in losses with

uncertain cash flows. Not likely o improve in future..

Business-Level Strategic Analysis

Industry analysis
Strategic Group analysis
Competitor analysis
Life cycle analysis
SWOT Analysis

Subjective Factors influencing

Strategic Choice

Commitment of past strategies

Attitudes towards risk
Degree of firms external dependence
Internal political considerations
Time constraints
Competitive reactions
Corporate culture.

STRATEGIC
IMPLEMENTATION

 Implementation of strategies is concerned

with the design and management of
systems to achieve the best integration of
people,structures,processes and
resources in reaching organizational
purpose.

RESOURCE ALLOCATION
While implementing strategies, the scarce
resources (financial,physical,human,etc)
resources need to be allocated carefully. In this
regard, one can follow, top-down and bottom-up
approach.
In top -down approach resources are
allocated through a process of segregation
down to operating levels.
In the bottom-up approach resources are
distributed after a process of aggregation
from the operating level
.

Means of resource allocation

Strategic Budget
Capital budget
Performance budget
ZBB
Decision package
Ranking
Resource allocation

Structural Issues
FUNCTIONAL STRUCTURE:A company
organized with a functional structure
groups people together into functional
departments such as purchasing,
accounts, production, sales, marketing.
These departments would normally have
functional heads who may be called
managers or directors depending on
whether the function is represented at
board level.

Advantages

Clarity
Economies of scale
Specialization
Coordination
In-depth skill development
Suitability

Limitations
Effort Focus
Poor decision-making
Sub-unit conflicts
Managerial vacuum

PRODUCT DEPARTMENTATION

The purpose of product departmentation is that every product is

handled by separate management team and the problems faced in
the development of a product are carried out by single group of
employees working in that unit.

The disadvantage is that the product managers need to coordinate

each other for the resource sharing which becomes a difficult
process because of lesser communication between the product
divisions.

Sometimes, products of the same company start competing with

each other which results in snatching one's division profit from other
division leaving behind net profit for the company zero. However this
kind of structure works best in the big organizations which have lots
of products in their product portfolio.

PRODUCT DEPARTMENTATION

 Advantage: The manager can aware about their

particular activity in the firm about the activities
which are related to the manufacturing a
product.
Disadvantage: Sometimes the managers and
employees do not meet the requirement of other
department which is somewhere related to their
particular department because they are working
in their department and there is no more
communication between the other departments

GEOGRAPHIC DEPARTMENTATION

MATRIX ORGNAISATION
STRUCTURE
A Matrix structure organisation contains
teams of people created from various
sections of the business. These teams will
be created for the purposes of variety of
projects rather than a specific project and
will be led by a project manager. Often the
team will only exist for the duration of the
projects and matrix structures are usually
deployed to develop new products and
services .

The advantages of a matrix include

Individuals can be chosen according to the
needs of the project.
The use of a project team which is
dynamic and able to view problems in a
different way as specialists have been
brought together in a new environment.
Project managers are directly responsible
for completing the project within a specific
deadline and budget.

the disadvantages include

A conflict of loyalty between line managers
and project managers over the allocation
of resources.
If teams have a lot of independence can
be difficult to monitor.
Costs can be increased if more managers
(ie project managers) are created through
the use of project teams

Factors affecting Organizational

structure
Size
Technology
Environment
People

PROJECT MANAGEMENT
Project management is a carefully planned and
organized effort to accomplish a specific (and usually)
one-time objective.
for example, construct a building or implement a major
new computer system.
Project management includes developing a project plan,
which includes defining and confirming the project goals
and objectives, identifying tasks and how goals will be
achieved, quantifying the resources needed, and
determining budgets and timelines for completion..

 It also includes managing the implementation of

the project plan, along with operating regular
'controls' to ensure that there is accurate and
objective information on 'performance' relative to
the plan, and the mechanisms to implement
recovery actions where necessary. Projects
usually follow major phases or stages (with
various titles for these), including feasibility,
definition, project planning, implementation,
evaluation and support/maintenance.

Benefits of Project Mgt.

Better efficiency in delivering services

Improved/increased/enhanced customer satisfaction
Enhanced effectiveness in delivering services
Improved growth and development within your team
Greater standing and competitive edge
Opportunities to expand your services:.
Better Flexibility:
Increased risk assessment:.
Increase in Quality:

BUSINESS ETHICS
AND
SOCIAL RESPONSILBILTY

VALUES
Values are those things that really matter to
each of us ... the ideas and beliefs we hold
as special. Caring for others, for example,
is a value; so is the freedom to express
our opinions.

CULTURE
The totality of socially transmitted behavior
patterns, arts, beliefs, institutions, and all other
products of human work and thought.
These patterns, traits, and products considered
as the expression of a particular period, class,
community, or population:
These patterns, traits, and products considered
with respect to a particular category, such as a
field, subject, or mode of expression:

ETHICS
a system of moral principles
the rules of conduct recognized in respect to a
particular class of human actions or a particular
group, culture, etc.:
.(usually used with a singular verb ) that
branch of philosophy dealing with values relating
to human conduct, with respect to the rightness
and wrongness of certain actions and to the
goodness and badness of the motives and ends
of such actions.

BUSINESS ETHICS
Business ethics (also known as Corporate
ethics) is a form of applied ethics that examines
ethical principles and moral or ethical problems
that arise in a business environment. It applies
to all aspects of business conduct and is
relevant to the conduct of individuals and
business organizations as a whole. Applied
ethics is a field of ethics that deals with ethical
questions in many fields such as medical,
technical, legal and business ethics.

Factors influencing business ethics

Legislation
Government rules & regulations
Social pressures
Conflicts between personal values and
needs of the firms.

SOCIAL RESPONSIBILITY
Social responsibility is an ethical or
ideological theory that an entity whether it
is a government, corporation, organization
or individual has a responsibility to society
at large. This responsibility can be
"negative", meaning there is exemption
from blame or liability, or it can be
"positive," meaning there is a
responsibility to act beneficently.

 corporate responsibility is a form of corporate

self-regulation integrated into a business model.
Ideally, CSR policy would function as a built-in,
self-regulating mechanism whereby business
would monitor and ensure their adherence to
law, ethical standards, and international norms.
Business would embrace responsibility for the
impact of their activities on the environment,
consumers, employees, communities,
stockholders and all other members of the public
sphere.

 Corporate social responsibility (CSR) isn't just

about doing the right thing. It means behaving
responsibly, and also dealing with suppliers who
do the same. It also offers direct business
benefits.

BENEFITS OF CSR
A good reputation makes it easier to recruit
employees.
Employees may stay longer, reducing the costs and
disruption of recruitment and retraining.
Employees are better motivated and more
productive.
CSR helps ensure you comply with regulatory
requirements.
Activities such as involvement with the local
community are ideal opportunities to generate
positive press coverage.

 Good relationships with local authorities

make doing business easier. See the page in
this guide on how to
work with the local community.
Understanding the wider impact of your
business can help you develop new products
and services.
CSR can make you more competitive and
reduces the risk of sudden damage to your
reputation (and sales). Investors recognize
this and are more willing

LEADERSHIP
&
Its STYLE

Leadership

The ability to influence a group toward the

achievement of goals

Principles of Leadership

Know yourself and seek self-improvement - In order to know

yourself, you have to understand your be, know, and do, attributes.
Seeking self-improvement means continually strengthening your
attributes. This can be accomplished through self-study, formal
classes, reflection, and interacting with others.

Be technically proficient - As a leader, you must know your job

and have a solid familiarity with your employees' tasks

Seek responsibility and take responsibility for your actions Search for ways to guide your organization to new heights. And
when things go wrong, they always do sooner or later -- do not
blame others. Analyze the situation, take corrective action, and
move on to the next challenge

Principles of Leadership
Make sound and timely decisions - Use good problem
solving, decision making, and planning tools.
Set the example - Be a good role model for your
employees. They must not only hear what they are
expected to do, but also see. We must become the
change we want to see - Mahatma Gandhi
Know your people and look out for their well-being Know human nature and the importance of sincerely
caring for your workers.
Keep your workers informed - Know how to
communicate with not only them, but also seniors and
other key people.

Principles of Leadership
Develop a sense of responsibility in your workers -.
Ensure that tasks are understood, supervised, and
accomplished - Communication is the key to this
responsibility.
Train as a team - Although many so called leaders call
their organization, department, section, etc. a team; they
are not really teams...they are just a group of people
doing their jobs.
Use the full capabilities of your organization - By
developing a team spirit, you will be able to employ your
organization, department, section, etc. to its fullest
capabilities

Factors of leadership

Factors of leadership
Follower
Leader
Situation
communication

types of leaders

Authoritarian
Team Leader
Country Club
Impoverished

 Authoritarian Leader (high task, low relationship)

:
People who get this rating are very much task oriented
and are hard on their workers (autocratic). There is little
or no allowance for cooperation or collaboration. Heavily
task oriented people display these characteristics: they
are very strong on schedules; they expect people to do
what they are told without question or debate; when
something goes wrong they tend to focus on who is to
blame rather than concentrate on exactly what is wrong
and how to prevent it; they are intolerant of what they
see as dissent (it may just be someone's creativity),

 Team Leader (high task, high relationship)

This type of person leads by positive example and
endeavors to foster a team environment in which
all team members can reach their highest
potential, both as team members and as people.
They encourage the team to reach team goals
as effectively as possible, while also working
tirelessly to strengthen the bonds among the
various members. They normally form and lead
some of the most productive teams.

 Country Club Leader (low task, high

relationship)
This person uses predominantly reward power to
maintain discipline and to encourage the team to
accomplish its goals. Conversely, they are
almost incapable of employing the more punitive
coercive and legitimate powers. This inability
results from fear that using such powers could
jeopardize relationships with the other team
members.

 Impoverished Leader (low task, low

relationship)
A leader who uses a "delegate and disappear"
management style. Since they are not
committed to either task accomplishment or
maintenance; they essentially allow their team to
do whatever it wishes and prefer to detach
themselves from the team process by allowing
the team to suffer from a series of power
struggles

The Process of Great Leadership

Challenge the process - First, find a process that you
believe needs to be improved the most.
Inspire a shared vision - Next, share your vision in
words that can be understood by your followers.
Enable others to act - Give them the tools and methods
to solve the problem.
Model the way - When the process gets tough, get your
hands dirty. A boss tells others what to do, a leader
shows that it can be done.
Encourage the heart - Share the glory with your
followers' hearts, while keeping the pains within your
own.

Managers Vs Leaders
Manager Characteristics
Administers
A copy
Maintains
Focuses on systems and structures
Relies on control
Short range view
Asks how and when
Eye on bottom line
Imitates
Accepts the status quo
Classic good soldiers
Does things right

Leader Characteristics
Innovates
An original
Develops
Focuses on people
Inspires trust
Long range perspective
Asks what and why
Eye on horizon
Originates
Challenges the status quo
Own person
Does the right thing

Charismatic Leadership
Key Characteristics of Charismatic leaders
1.

Self Confidence- They have complete confidence in their judgment and ability.

2.

A vision- This is an idealized goal that proposes a future better than the status quo. The greater the disparity
between idealized goal and the status quo, the more likely that followers will attribute extraordinary vision to the
leader.

3.

Ability to articulate the vision- They are able to clarify and state the vision in terms that are understandable
to others. This articulation demonstrates an understanding of the followers needs and, hence acts as a
motivating force.

4.

Strong convictions about vision- Charismatic leaders are perceived as being strongly committed, and willing
to take on high personal risk, incur high costs, and engage in self-sacrifice to achieve their vision.

5.

Behavior that is out of the ordinary- Those with charisma engage in behavior that is perceived as being
novel, unconventional, and counter to norms. When successful , these behaviors evoke surprise and
admiration in followers.

6.

Perceived as being a change agent- Charismatic leaders are perceived as agents of radical change rather
than as caretakers of the status quo.

7.

Environmental sensitivity- These leaders are able to make realistic assessments of the environmental
constraints and resources needed to bring about change.

Transactional vs Transformational leaders

Characteristics of Transactional and transformational leaders
Transactional Leaders

Contingent Reward: Contracts exchange of rewards for effort, promises rewards for good
performance, recognizes accomplishment
Management by exception (active): Watches and searches for deviations from rules and
standards, takes corrective action.
Management by exception (passive): Intervenes only if standards are not met
Laissez faire: Abdicates responsibilities, avoids making decisions

Transformational Leaders

Charisma : Provides vision and sense of mission, instills pride, gains respect trust.
Inspiration: Communicates high expectations, uses symbols to focus efforts, expresses
important purposes in simple ways.
Intellectual Stimulations: Promotes intelligence, rationality, and careful problem solving.
Individualized consideration: Gives personal attention, treats each employee individually,
coaches, advises.

The Activities of Successful & Effective leaders

Type of Activity

Description categories
Derived from free Observation
Exchange Information

Routine Communication

Handling paperwork
Planning

Traditional Management

Networking

Decision Making
Controlling
Interacting with outsiders
Socializing /Politicking
Motivating/Reinforcing

Human Resource Management

Disciplining/Punishing
Managing conflict
staffing
Training/Developing

What skills do leaders need?

Personal Skills

Coping with stressors

Managing time
Delegating

2.Managing
stress

1.Developing
Self-awareness

Determining values
and priorities
Identifying cognitive style
Assessing attitude toward change

3. Solving
Problems
creatively
Using the rational approach
Using the creative approach
Fostering innovation in others

Interpersonal Skills

Coaching
Counseling
Listening

5. Gaining power
and influences

4. Communication
supportively

Gaining power
Exercise influence
Empowering others

6. Motivating others
7. Management
conflict

Identifying causes
Selecting appropriate strategies
Resolving confrontations

Diagnosing poor performance

Creating a motivating environment
Rewarding accomplishment

STRATEGIC LEADERSHIP
Strategic leaders are generally responsible for
large organizations and may influence several
thousand to hundreds of thousands of people.
They establish organizational structure, allocate
resources, and communicate strategic vision.
Strategic leaders work in an uncertain
environment on highly complex problems that
affect and are affected by events and
organizations outside their own.

 Strategic leaders apply many of the same leadership

skills and actions they mastered as direct and
organizational leaders; however, strategic leadership
requires others that are more complex and indirectly
applied.
Strategic leaders, like direct and organizational leaders,
process information quickly, assess alternatives based
on incomplete data, make decisions, and generate
support. However, strategic leaders decisions affect
more people, commit more resources, and have widerranging consequences in both space and time than do
decisions of organizational and direct leaders..

Features of Strategic Leaders

Strategic vision
Managing change
Governance and management
Culture
Structure and policies
Communications & network

Strategic Evaluation and

Control

Nature of Strategic Evaluation

Evaluate effectiveness of organisational
strategy in achieving organisational
objectives
Perform the task of keeping organisation
on track

Importance of Strategic Evaluation

The need for feedback
Appraisal and reward
Check on the validity of strategic choice
Congruence between decisions and intended
strategy
Successful culmination of the strategic
management process
Creating inputs for new strategic planning

Ability to coordinate the tasks performed

Barriers in Evaluation
Limits of Controls
Difficulties in measurement
Resistance to evaluation
Short-termism
Relying on efficiency versus effectiveness

Requirements of Effective Evaluation

Control should involve only the minimum amount
of information
Control should monitor only managerial activities
and results
Control should be timely
Long term and short term control should be used
Control should aim at pinpointing exceptions
Rewards for meeting or exceeding standards
should be emphasized

Evaluation Criteria for a Strategy

Qualitative Factors
Quantative Factors

Quantitative Factors
Companys performance over a period of time,
Companys performance with the competitors
Companys performance to industry averages.

Ratios play an important role in evaluating the strategy in

quantitative terms:
ROI
ROE
Employee turnover
Employee satisfaction index
Return on capital employed
Profit margin
Debt to equity
EPS
Asset growth

Qualitative Factors
Consistency
Feasibility
Advantage

Strategic Control

Four Types of Strategic Controls

Premise Control
Implementation Control
Strategic Surveillance
Special alert control

Premise Control
Premises control is necessary to identify the
key assumptions and its implementation.
Premises control serves the purpose of
continually testing the assumptions to find out
whether they are still valid or not. This
enables the strategists to take corrective
action at the right time rather than continuing
with a strategy which is based on erroneous
assumptions.

Implementation Control

Implementation control is aimed at evaluating

whether the plans, programmes, and projects
are actually guiding the organization towards
its predetermined objectives or not.

Strategic Surveillance

Strategic surveillance aimed at a more

generalized and overarching control
designed to monitor a broad range of events
inside and outside the company that are likely
to threaten the course of a firms strategy.

Special Alert Control

Special alert control, which is based on a

trigger mechanism for rapid response and
immediate reassessment of strategy in the
light of sudden and unexpected events

Operational Control
Aimed at the allocation and use of
organisational resources
Concerned with action or performance

How do Strategic Control and

Operational Control Differ
Attribute

Strategic Control

Operational Control

1. Basic question

Are we moving in the

right direction?

How are we performing?

2. Aim

Proactive, continuous
questioning of the basic
direction of strategy

Allocation and use of

organisational resources

3. Main Concern

Steering the
organizations future

Action control

direction

4. Focus

External environment

Internal organization

5. Time Horizon

Long- term

Short- term

6. Main Techniques

Environmental scanning,
information gathering,
questioning and review

Budgets, schedules, and

MBO

Process of Evaluation
Setting standards of performance
Measurement of performance
Analyzing variances
Taking corrective action

Setting of Standards
Quantitative Criteria
It has performed as compared to its past
achievements

Its performance with the industry average or

that of major competitors

Qualitative Criteria
There has to be a special set of qualitative criteria for a
subjective assessment of the factors like capabilities,
core competencies, risk- bearing capacity, strategic
clarity, flexibility, and workability

Measurement of Performance
The evaluation process operates at the
performance level as action takes place.
Standards of performance act as the
benchmark against which the actual
performance is to be compared. It is
important, however, to understand how the
measurement of performance can take
place.

Analyzing Variances
The measurement of actual performance and its
comparison with standard or budgeted
performance leads to an analysis of variances.
Broadly, the following three situations may arise:
The actual performance matches the budgeted
performance
The actual performance deviates positively over
the budget performance
The actual performance deviates negatively from
the budgeted

Taking Corrective Actions

There are three courses for corrective

action: checking of performance, checking
of standards, and reformulating strategies,
plans, and objectives.

Techniques of Strategic
Evaluation and Control
Evaluation Techniques for Strategic Control
Evaluation Techniques for Operational Control

Evaluation Techniques for Strategic

Control
Techniques for strategic control could be
classified into two groups on the basis of the
type of environment faced by the organisation.
The organisation that operate in a relative stable
environment may use strategic momentum
control, while those which face a relatively
turbulent environment may find strategic leap
control more appropriate.

Evaluation Techniques for

Operational Control
Operational control is aimed at the
allocation and use of organisational
resources
The evaluation techniques are classified
into three parts:
Internal analysis
Comparative analysis
Comprehensive analysis.

What is Strategic control?

it is the process by which managers
monitor the ongoing activities of an
organization and its members to evaluate
whether activities are being performed
efficiently and effectively and to take
corrective action to improve performance if
they are not

The importance of Strategic Control

The success of a chosen strategy
The implementation compass
Organizational performance
Ensuring competitive advantage

Strategic Control:
Requires more than re-acting on past
performance
Keeps the organization on track
Anticipating events that might occur in
future
Allows the organization to respond to new
opportunities that may present itself

The importance of Strategic Control

& quality:
:
Efficiency measures how many units of inputs
are being used to produce a single unit of output
Must also measure how many units are
produced
The control system should contain these
measures

The importance of Strategic Control

& quality:
Organizational control is important because it determine
the quality of goods & services
Can make continuous improvements to quality over time
and this gives them a competitive advantage
Customer complaints is the basis for determining the
quality of a product or service
Total Quality Management can be regarded as control
system

The importance of Strategic Control

& Innovation:

:
Managers must create an environment in
which people feel free to experiment and
take risks
Managers are challenged to build control
systems that encourage risk taking
Measures cost reduction, process
improvement and improved quality
measures.

Control and Innovation

Problem: Time wasted due to unavailable parts
from central store. Electrical workshop not close
to central store (Witbank Municipality)
Electricians designed a innovative solution
through simple measures (trips to stores per
electrician per day
Applied 80/20 principle Established
decentralized store
Major savings

STRATEGIC CONTROL
Strategic Control Systems
are the formal target setting ,
measurement and feedback systems that
allow strategic managers to evaluate
whether the company is achieving on the
four building blocks of a competitive
advantage..

Types of Control systems

Financial controls
Output controls
Behavior controls
Organization culture

STRATEGIC CONTROL
Financial controls
Growth
Profitability
ROCE
Share prices( Private sector)
Is a favorite control because it is objective

STRATEGIC CONTROL
Types of Control systems
Output controls: It is a system of control in which
managers estimate or forecast appropriate performance
goals for each division, department and employee and
measure achievement against these goals

Divisional Goals
Functional Goals
Individual Goals

STRATEGIC CONTROL
Types of Control systems
Divisional Goal
Goal: To be the number 1 or 2 in the
industry in terms of market share

STRATEGIC CONTROL
Types of Control systems
Behavior controls: happens through the
establishment of a comprehensive systems of
rules and procedures to direct the actions of
divisions, functions and individuals
Operating budgets
HR rules & regulations
Standardization

STRATEGIC CONTROL
Strategic Control Systems
Characteristics
Be flexible to allow managers to respond as
necessary to unexpected events;
Should provide accurate information, giving a
true picture of organizational performance;
Should provide information in a timely manner

STRATEGIC CONTROL PROCESS

Four steps to design an effective control system:

1.
2.
3.
4.

Establish the standards & targets against which

performance is to be evaluated;
Create the measuring & monitoring systems that
indicate whether the standards & targets are being
reached;
Compare actual performance against established
targets
Initiate corrective action when it is decided that the
standards & targets are not being achieved

STRATEGIC CONTROL
Kinds of measures
Efficiency: Level of production costs, number of hours needed to
produce an item, cost of raw materials

Quality: Number of rejects, number of customer returns, level of product

reliability

Innovation: number of new products introduced, time taken to market;

cost of product development

Responsiveness to customers: number of repeat

customers; level of on-time delivery to customers, level of customer service