24398947-strategic-management-final-notes.ppt
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STRATEGIC PLANNING&
MANAGEMENT
2
MEANING & DEFINITIONStrategic 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”.
3
IMPORTANCE OF 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
Scenario’s
Visions, Missions,Values
External Analysis Internal Analysis
Functional Level Strategies
Business Level Strategies
Structure Match Structure & Controls Controls
Manage Strategic Change
Strategy Implementation
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INTERPRETATION
6
STAGES OF SM• The strategic management process
consists of three stages:• Strategy Formulation (strategy planning)• Strategy Implementations• Strategy Evaluation
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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
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Global Corporate Strategies
Need for National Responsiveness High
LowLow
High Transnational Strategy• Seeks to balance global
efficiencies and local responsiveness
• Combines standardization and customization for product/advertising strategies
Globalization Strategy
• Treats world as a single global market
• Standardizes global products/advertising strategies
Multi-domestic Strategy• Handles markets
independently for each country
• Adapts product/advertising to local tastes and needs
Nee
d f
or
Glo
bal
In
teg
rati
on
ExportStrategy
•Domestically focused
•Exports a few domestically produced products to selected countries
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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
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• 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.
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Tools for Putting Strategy into Action
EnvironmentOrganization
Str
ateg
y
Performance
Leadership Persuasion Motivation Culture/values
Structural Design Organization Chart Teams CentralizationDecentralization, Facilities, task design
Human Resources Recruitment/selection Transfers/promotions Training Layoffs/recallsInformation and Control Systems
Pay, reward system Budget allocations Information systems Rules/procedures
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Portfolio Strategy• Mix of business
units and product lines that fit together in a logical way to provide synergy and competitive advantage
BCG Matrix Exhibit 8.5
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Strategic Management Process
Implement Strategy via Changes in: Leadership culture, Structure, HR, Information & control systems
SWOT
Formulate Strategy – Corporate, Business, Functional
Define new Mission Goals, Grand Strategy
Identify Strategic Factors – Strengths, Weaknesses
Identify Strategic Factors – Opportunities, Threats
Scan Internal Environment – Core Competence, Synergy, Value Creation
Evaluate Current Mission, Goals, Strategies
Scan External Environment – National, Global
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.
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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 corporation’s 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.
Strategic Planning is concerned with the
a) Future or long-term dynamics of the firm; not day-to-day tasks.b) Growth – direction, extent, pace and timing of growth.c) Environment, the fit between the enterprise and its environment.d) Business portfolio - Basket of businesses the firm should have –
changes/additions/deletions to the firm’s product-market posture.e) Its concern is strategy – not routine operational activities – growth
priorities, choice of corporate strategy and choice of business level/competitive strategy are its concern.
f) Creation of core competencies and competitive advantages, is its concern. This equips the organization with capabilities needed to face uncertainties.
g) Integration of all management functions – not a particular function. It views the organization/business in its totality.
h) Corporate strategy – creating long-term, sustainable organizational capability.
Objectives of Strategic Planning:
Components of Strategic Planning:
1. Clarifying the mission of the corporation
2. Defining the business
3. Surveying the environment
4. Internal appraisal of the firm
5. Setting the corporate objectives
6. 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 corporation’s 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 firm’s 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 one’s 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 one’s 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 firm’s 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 organization’s 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 product-market 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
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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”.
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
MASTERSTRATEGIES
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 ordersShipments of foreign locationsServicing 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 org’s 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 you’re 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 you’re 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? That’s really a question of value.
Corporate Goals & Objectives
• Role of Objectives:
1. Legitimacy
2. Direction
3. Coordination
4. Benchmarks for success
5. 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 Environment-1) Supplier 2) Customers-industrial, retailers, wholesalers, Govt.,
foreigners3) Market intermediates- middlemen, physical distribution
firms, marketing service agencies, and financial intermediaries
• Competitors- Desire 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 System—of 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 Analysis-Scanning – 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. trends2. Identification of trends3. 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
Industry Analysis
Techniques
Competitor Analysis
PEST QUEST
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 macro-
environment that affects all firms.
• P.E.S.T. is an acronym for the Political, Economic,
Social, and Technological factors of the external macro-
environment.
• 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.
A. Industry Life Cycle Analysis
B. Study of the structure and characteristics of an Industry
C. Profit Potential of Industry (Porter Model)
Industry Analysis: Three sectionsIndustry Analysis: Three sections
A. Industry Life Cycle AnalysisA. Industry Life Cycle Analysis
Four Stages:
• Pioneering Stage
• Rapid Growth Stage
• Maturity and Stabilization Stage
• Decline Stage
B. Study of the structure and characteristics of an Industry
B. Study of the structure and characteristics of an Industry
1. Structure of the Industry and nature of Competition
2. Nature and Prospectus of the demand3. Cost, Efficiency and Profitability4. Technology and Research
Michael Porter has argued that the profit potential of an industry depends on the combined strength of the:
1. Threat of new entrant2. Rivalry among existing firms3. Pressure from substitute products4. Bargaining power of buyers5. Bargaining power of sellers
3. Profit Potential of Industry (Porter Model)
3. Profit Potential of Industry (Porter Model)
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 value-creating strategies superior to their competitors.
Four criteria must be met for a sustained competitive advantage.Valuable
Costly to imitate
Rare
Non-substitutable
Internal Analysis
ResourcesResources• TangibleTangible• IntangibleIntangible• Brand EquityBrand Equity
CapabilitiesCapabilities
CoreCoreCompetenciesCompetencies
CompetitiveCompetitiveAdvantageAdvantage
Above-AverageAbove-AverageReturnsReturns
Components of the Resource-Based View
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
Inbound Logistics
>
Operations
>
Outbound Logistics
>
Marketing & Sales
>
Service
>
A R G 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 in-house. 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 firm’s past, present and future financial conditions
• Done to find firm’s 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/Shareholder’s funds
• Interest coverage ratio: EBIT/shareholder’s funds
• Proprietary ratio: Shareholder’s 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
Assets Total
EBIT
Assets Total
Sales
Sales
EBIT
Assets Total
Tax BeforeNet
Assets Total
ExpenseInterest
Assets Total
EBIT
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 firm’s 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 organization’s
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
Vision &
Strategy
Learning & growth
Internal Business process
Financial perspective
Customer’s
Perspective
BALANCED SCORECARD FRAMEWORK
Translate Strategy to Operational terms
The Strategy
Financial Perspective
“If we succeed, how will we look to our shareholders
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?’’
A Strategy Is A Set of of HypothesesAbout Cause & Effect
60% of organization
s don’t link strategy & budgets
85% of management
teams spend less than
one hour per month on strategy
issues
STRATEGY
Strategic Learning Loop
BALANCED SCORECAR
D
Strategy
Balanced
Scorecard
A good Balanced scorecard describes the Organizational Strategy
• 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
Measures are Balanced between
•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
•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
What does BSC do?
Indicate whether company’s strategy implementation and execution are contributing to bottom-line improvement
•Profitability
•Operating income,
•Return-on-capital employed (ROCE)
•EVA
•Growth
•Cash flow
Financial perspective
Financia
l Persp
ective
“If w
e succ
eed, how w
ill we
look to our s
hareholders
Financial perspective
Financia
l Persp
ective
“If w
e succ
eed, how w
ill we
look to our s
hareholders
Increase EVA to +2%
Productivity StrategyRevenue Growth Strategy
New Products High end products Cost Productivity
Customer Perspective
Customer & Market segment in which the unit is competing
•Performance in the targeted markets
•Customer satisfaction
•Customer retention
•New customer acquisition
•Customer profitability
•Specific measures of value propositions- short lead time or on-time delivery
•New approaches to satisfy emerging needs
Customer P
erspecti
ve
“To ach
ieve m
y visi
on, how
must we lo
ok to our
custo
mers?
Customer Perspective
Relationship
On time delivery
Technical support
Survey Assistance
Differentiators
•Basic RequirementBasic Requirement
•Clean
•Quality
•Variability within specified limits
Win-win Relations with Channel partners
Internal –Business-process perspective
Critical internal process in which organization must excel
Inte
rnal
Persp
ectiv
e
“To
satis
fy m
y cus
tom
er, a
t
which
proc
esse
s mus
t I
exce
l?”
Deliver value proposition
Satisfy shareholders expectations
Internal – Process
Identify entirely new process at which organization must excel to meet customer & financial objectives
Internal –Business-process perspective
Inte
rnal
Persp
ectiv
e
“To
satis
fy m
y cus
tom
er, a
t
which
proc
esse
s mus
t I
exce
l?”
Achieve Operational excellence
Customer Value Proposition
lowest cost producer
Learning and growth perspective
Infrastructure that organization must build to create long-term growth and improvement
•People based measures
•ESI
•Competencies
•Skill Mix
•Systems (Technology)
Org
aniza
tion
Lear
ning
“To
achi
eve
my
visio
n, h
ow m
ust m
y
orga
niza
tion
lear
n an
d im
prov
e?’’
Learning and growth perspective
Climate for action
IT TechnologyCompetencies
•ESI
Motivated and prepared workforce
ROCE
Customer Loyalty
On-line delivery
Process Cycle Time
Process Quality
Employee Competency
Cause and Effect Relationship
Four perspectives: Are they sufficient
•Community perspective - Social responsibility
•Suppliers perspective
Question : Is it vital for success of business unit’s strategy?
The Balanced Scorecard Effectively Communicates How Well the MSO Is Achieving Their Mission
Massachusetts Special Olympics Mission Statement
Positive Image # of new programs / # athletes
Community Volunteer retention / recruitment
Involvement New donors
Athlete Outreach / Donor feedback
Program Expansion # athletes in outreach program
Fin
an
cia
l D
on
or
Training & Competition # athletes not able to find a team
Controlled Cost Cities with no registered athletes
Quality Programs Fee increase
Community For Family feedback
Athletes # of activities outside of competition
Cu
sto
mer
/ A
thle
te
Objectives MeasuresOrganization and Administration % Plans distributed team Public Relations meetings # area management team
$ raisedTraining # training classes offered outreach # first time athletes
Inte
rnal
Op
era
tion
s
Objectives Measures Objectives Measures
Objectives MeasuresKnowledge of MSO Volunteers trained in MSO and sportsManagement Registration forms in one time
Program guide distributionDatabase Management Volunteers in database Recognition Advanced coaches’ training/
coaches’/ meetings
Inte
rnal
Op
era
tion
s
Balanced Scorecard - Example
VisionTo provide patients, families and primary care physicians with the best, most compassionate care possible and to excel at communications
CustomerPatient Primary Care
Physician• % Satisfied • % Satisfied with • % would Recommend Communication • % Parents Could • % Parents Could Articulate Care Plan Identify DCH Physician• Discharge Timeliness
Financial• Operating Margin
• Cost per Case • Revenue from Neonatal Care
Internal ProcessesWait Time Quality Productivity
• Admissions • Infection Rates • Length of Stay• Discharge • Blood Culture • Readmission Rate
Contaminate Rate • Daily Staffing vs. • Use of Clinical Occupancy
Pathways (Top 10)
Learning & Growth• Incentive Plan • Strategic Database
- Awareness - Availability- Implementation - Use
A successful Balanced
Scorecard program starts
with a recognition that it is
not a metrics” project, it’s a
“change” process.
A Good Balanced Scorecard Describes the Organization Strategy.
Strategic Objectives Strategic Measures
Fin
an
cial
F1 Return on Capital Employed
F2 Existing Asset Utilization
F3 Profitablity
F4 Industry Cost Leader
F5 Profitable Growth
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
Financially Strong
Financially Strong
Cust
om
er Delight the Customer
Win-Win Dealer Relationship
C1 Continually Delight the Targeted Consumer
C2 Build Win-Win Relations with Dealer
Share of Segment in Selected Key Markets
Mystery Shopper Rating
Dealer Gross Profit Growth
Dealer Survey
Learn
ing &
gro
wth
Inte
rnal
Build the Franchise
Increase Customer Value
Operational Excellence
Good Neighbor
I1 Innovative products and services
I2 Best-in-class Franchise Teams
I3 Refinery Performance
I4 Inventory Management
I5 Industry Cost Leader
I6 On Spec-On Time
I7 Improve EHS
New Product ROI 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
Motivated and Prepared Workforce
L1 Climate for Action
L2 Core Competencies and Skills
L3 Access to Strategic Information
Employee Survey Personal BSC (%) Strategic Competency
Availability Strategic Information
Availability
A Good Balanced Scorecard Describes the Organization Strategy.
MAKE STRATEGY EVERYONE’S JOB
Top-Down “Bridging Process” To Share the Strategy & Align the
Workforce
Bottom-Up Process to Internalize &
Execute the Strategy
CORP
SBU
• EDUCATION
• PERSONAL GOAL
ALIGNMENT
• BALANCED PAYCHECKS
The Strategy Focused Workforce
Build STRATEGY-FOCUSED ORGANIZATIONS
STRATEGY
Mobilize Change through Executive
Leadership
Make Strategy a Continual
processTranslate the Strategy to
Operational Terms
Align the Organization to
the Strategy
Make Strategy Everyone’s Job
• Mobilization• Governance Processes• Strategic Management
• Link Budgets & Strategy• Strategic Learning• Analysis & Information System
• Strategic Awareness• Personal Scorecard• Balanced Paychecks• Corporate Role
• Business Unit Synergic• Support Unit Synergic
• Strategy Mape• Balanced Scorecards
1
2
3
4
5
Describing Strategy : Strategy Is a Step in a Continuum
MISSION Why we exist
VALUESWhat we believe In
VISIONWhat we want to be
STRATEGYOur game plan
BALANCED SOCRECARD Implementation & FocusSTRATEGIC INITIATIVES
What we need to doPERSONAL OBJECTIVES
What I need to do
STRATEGIC OUTCOMES
Satisfied SHAREHOLDERS
DelightedCUSTOMERS
Satisfied PROCESSES
Motivated & PreparedWORKFORCE
What Is A Good Balanced Scorecard?#1. Executive Involvement
Strategic decision makers must validate the strategy and related measures
#2 Cause-and-Effect RelationshipsEvery objective selected should be part of a chain of cause and effect that represents the strategy
#3 Performance DriversA balance of outcome measures and leading measures facilitates anticipatory management
#4 Linked to Budget/FinancialsEvery measure selected can ultimately be supported/enabled by Budgetary Funds
#5 Change InitiativesAligned 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 enterprise’s 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
• Hofer’s Product-Market Evolution Matrix
• Shell Direction Policy
• Industry’s level policy
• Porter’s 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 corporate’s 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
Source: Perspectives, No. 66, “The Product Portfolio,” Adapted by permission from The Boston Consulting Group, Inc., 1970.
Relative market share
Cash cows Dogs
High
Low
Questionmarks
Stars
Mar
ket
gro
wth
rat
e
Cash cows Dogs
High
High Low
Questionmarks
Stars
High
Low
Low
$$
?Stars
Cash Cows Dogs
Problem Child
Relative market share
Mark
et
gro
wth
rate
M
ark
et
gro
wth
rate
Relative market share
Mark
et
gro
wth
rate
BCG Matrix
Stars
Cash Cows Dogs
Problem Child
Relative market share
Mark
et
gro
wth
rate
M
ark
et
gro
wth
rate
Relative market share
Mark
et
gro
wth
rate
BCG Matrix
Revenue ++++Expenses _ _ _Net +
Revenue +Expenses _ _ _ _ Net _ _ _
Revenue + + + + + Expenses _Net + + + +
Revenue + + Expenses _ _ _ _Net _ _ _
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 low-share 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
FourFourPortfolioPortfolio
StrategiesStrategies
BUILDBUILDDoes the SBU have the potential to be a star?
HOLDHOLDCan you maintain and preserve market share?
DIVESTDIVEST Is it appropriate to dump SBU’s
with low-growth potential?
.HARVESTHARVESTIncrease the short-term return without
impacting long-run prospects.
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.
• 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)
Industry Attractiveness
Each factor is assigned a weighting that is appropriate for the industry. The industry attractiveness then is
calculated as follows:
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 channel access
Production capacity
Profit margins relative to competitors The 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.
Business Unit Strength
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
+ factor value2 x factor weighting2+…
GE MATRIX contd..
Each business unit can be portrayed as a circle plotted on the matrix, with the information conveyed as follows:
Market size is represented by the size of the circle.
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.
Plotting the Information
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.
The following is an example of such a representation:
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.
Strategic Implications
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 growth-share 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
HOLDLow
AVERAGE
High
WEAKAVERAGE
STR - ONG
Bus Str Ind at
GROW
HOLD
HARVEST
Hofer’s 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 company’s 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 company’s 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&
It’s 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 leaders1. 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
Interacting with outsiders
Traditional Management
Networking
Human Resource Management
Exchange Information
Handling paperwork
Planning
Decision MakingControlling
Routine Communication
Socializing /Politicking
Motivating/Reinforcing
Disciplining/Punishing
Managing conflict
staffing
Training/Developing
What skills do leaders need?
• Personal Skills
1.Developing Self-awareness
3. Solving Problems
creatively
2.Managing stress
•Determining values and priorities•Identifying cognitive style•Assessing attitude toward change
•Coping with stressors•Managing time•Delegating
•Using the rational approach •Using the creative approach•Fostering innovation in others
•Interpersonal Skills
4. Communicationsupportively
5. Gaining power and influences
7. Management conflict
6. Motivating others
•Gaining power •Exercise influence•Empowering others
•Coaching•Counseling•Listening
•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 wider-ranging 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
• Company’s performance over a period of time,
• Company’s performance with the competitor’s
• Company’s performance to industry averages.
• Ratio’s play an important role in evaluating the strategy in quantitative terms:
ROIROE
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 firm’s 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 organization’s future
direction
Action control
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 performanceThe actual performance deviates positively over the budget performanceThe 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 it’s 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. Establish the standards & targets against which
performance is to be evaluated;2. Create the measuring & monitoring systems that
indicate whether the standards & targets are being reached;
3. Compare actual performance against established targets
4. Initiate corrective action when it is decided that the standards & targets are not being achieved
STRATEGIC CONTROL
Kinds of measuresEfficiency: 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
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