The Five Stages of the Strategic Management Process

The strategic management process is more than just a set of rules to follow. It is a philosophical
approach to business. Upper management must think strategically first, then apply that thought to a
process. The strategic management process is best implemented when everyone within the business
understands the strategy.

 The five stages of the process are goal-setting, analysis, strategy formation, strategy implementation and
strategy monitoring.

Clarify Your Vision

The purpose of goal-setting is to clarify the vision for your business. This stage consists of identifying
three key facets: First, define both short- and long-term objectives. Second, identify the process of how
to accomplish your objective. Finally, customize the process for your staff, give each person a task with
which he can succeed. Keep in mind during this process your goals to be detailed, realistic and match
the values of your vision. Typically, the final step in this stage is to write a mission statement that
succinctly communicates your goals to both your shareholders and your staff.

Gather and Analyze Information

Analysis is a key stage because the information gained in this stage will shape the next two stages. In this

stage, gather as much information and data relevant to accomplishing your vision. The focus of the
analysis should be on understanding the needs of the business as a sustainable entity, its strategic
direction and identifying initiatives that will help your business grow. Examine any external or internal
issues that can affect your goals and objectives. Make sure to identify both the strengths and weaknesses
of your organization as well as any threats and opportunities that may arise along the path.
Formulate a Strategy

The first step in forming a strategy is to review the information gleaned from completing the analysis.
Determine what resources the business currently has that can help reach the defined goals and
objectives. Identify any areas of which the business must seek external resources. The issues facing the
company should be prioritized by their importance to your success. Once prioritized, begin formulating
the strategy. Because business and economic situations are fluid, it is critical in this stage to develop
alternative approaches that target each step of the plan.

Implement Your Strategy

Successful strategy implementation is critical to the success of the business venture. This is the action
stage of the strategic management process. If the overall strategy does not work with the business'
current structure, a new structure should be installed at the beginning of this stage. Everyone within the
organization must be made clear of their responsibilities and duties, and how that fits in with the
overall goal. Additionally, any resources or funding for the venture must be secured at this point. Once
the funding is in place and the employees are ready, execute the plan.

Evaluate and Control

Strategy evaluation and control actions include performance measurements, consistent review of
internal and external issues and making corrective actions when necessary. Any successful evaluation of
the strategy begins with defining the parameters to be measured. These parameters should mirror the
goals set in Stage 1. Determine your progress by measuring the actual results versus the plan.

Monitoring internal and external issues will also enable you to react to any substantial change in your
business environment. If you determine that the strategy is not moving the company toward its goal,
take corrective actions. If those actions are not successful, then repeat the strategic management
process. Because internal and external issues are constantly evolving, any data gained in this stage
should be retained to help with any future strategies.
Goal Setting
The first part of strategic management is to plan and set your goals. Set the short- and
long-term goals of the organization and make sure that these are shared with all
members of the organization. Explain and share how each member of the team will
have an impact on the organization reaching this goal. This will help give each member
of the team a sense of purpose and will give their job meaning.
Analysis
During this stage of the process, it is important to gather as much information and data
as possible. This information will be integral to creating your strategy to reach your
goals. This step of strategic management entails becoming aware of any issues within
the organization and understand all of the needs of the organization.
Strategy Formation
In this strategic management step, you will use all the intelligence and data you have
gathered to formulate the strategy that you will use to reach whatever goal you set.
Identify useful resources you have, and also seek out other resources you will need to
set up your strategy.
Strategy Implementation
This is arguably the most important part of the entire strategic management process. At
this point, each member of the team should have a clear understanding of the plan and
should know how they play a part within it. This is the stage where your strategy is put
into action.
Strategy Monitoring
During this stage, your strategy will already be in play. At this point, you should be
managing, evaluating, and monitoring each part of your strategy, and ensuring that it
aligns with the end goal. If it does not, this is the time where you would make tweaks
and adjustments to strengthen the overall plan. This is the stage where you will track
progress and have the opportunity to deal with any unexpected shifts in the strategy.
Characteristics of a Mission Statement:
It is extremely difficult to write a meaningful and effective mission
statement. An effective mission statement should usually focus on
markets rather than products and should always be achievable,
motivating and specific.

1. Market rather than products:

Traditionally, most organisations define their business in terms of
what they make (‘our business is glass’). But over a period, when
products and technologies become obsolete, their mission is no longer
relevant. So mission should be stated in terms of serving a particular
group of clients or customers and/or meeting a particular class of need
rather than products or services the organisation is offering at present.

2. Achievable:
The mission statement should be realistic and achievable. It should
open a vision of new opportunities but should not lead the
organisation into unrealistic ventures far beyond its competencies.

For example, the mission statement “we are in the business of

problem solving. Our business is to help solve
administrative, scientific, and human problems” of an
organisation manufacturing ‘office equipment’ sounds well and is
appropriate.
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3. Motivational:
A well-defined mission provides a shared sense of purpose ‘outside’ of
the various activities taking place within the organisation.

4. Specific:
A mission must be specific and provide direction and guidelines to
management. In other words, ‘to produce the highest quality products
at the lowest possible cost’ sounds very good, but it does not provide
direction for management.
Mission statements are not one-size-fits-all, although there are some guidelines that can help you
craft one that effectively captures the purpose and goal of your business. The general rule for these
statements is that you can’t confuse your audience, because that defeats the purpose of trying to
communicate the reasons your business exists. However, there are nine characteristics common in
effective mission statements that provide the parameters under which you can craft a statement that
not only sells the “what” of your company but also the “why.”

They Are Short

The U.S. Navy adopted an adage in the early 1960s that said, “Keep it simple, stupid,” also known

by the acronym KISS. The idea behind that adage is that systems work better when designers keep
things simple, and the same applies to your mission statement. Shorter is better because you want
to convey the purpose and goal of your business in a way that is simple, clear, and easy to
understand. The more words you use, the more likely it is that you’ll send out a garbled message to
your audience.

They Are Unique to Your Business

Mission statements should never be generalized in such a way that any other company could steal
what you wrote and use it as their own. When crafting these statements it’s vital to remember what
makes your company different, unique, and special.

They Create Expectations

A good mission statement embraces the expectations of a target audience for something they truly

crave. For example, Zappos’ mission statement is “To provide the best customer service possible.”
That creates the expectation in Zappos’ customers that they will deliver superior customer service
each and every time.

They Are Realistic

Some companies fall into the trap of crafting mission statements that are so grandiose and
philosophical that they lose all touch with reality. Mission statements must be grounded in what your
company provides customers in the present. Save the inspirational and future-based language for
your vision statement.

They Are Memorable

What are the key phrases and terminology you can use in your mission statement to make it
memorable? That doesn’t mean that readers must be able to recite your mission statement in whole
as if it’s a catchphrase, but it does mean that people should be able to associate key aspects of that
statement with your company.

They Are Active

The word “active” in this context refers to active verbs that make readers feel as if something is

happening now rather than in the past. For example, instead of writing, “These products are made
by our company to improve your life,” you should write, “Our company makes these products to
enhance your quality of life.” Notice how the transition from passive to active verbs, and substituting
“enhance your quality of life” for “improve your life” conveys a stronger message?

They Are Positive

It’s important that you avoid negative messages because mission statements are all about how your
business solves a problem, fulfills a want or need, or makes life easier for your target audience.

They Are Adaptable

A strong mission statement is something that your marketing and product development teams can

also use for motivation and direction. For example, eyeglass brand Warby Parker’s mission
statement is, "Warby Parker was founded with a rebellious spirit and a lofty objective: to offer
designer eyewear at a revolutionary price, while leading the way for socially conscious businesses."
The concepts of “rebellious spirit,” “revolutionary price,” and “socially conscious businesses” are all a
marketing department’s dream because they are sellable concepts.

They Are Targeted

It’s important to remember that mission statements are expressed to your target audience, so the
message must match the wants and needs of that audience. Going back to the Zappos example, the
company knew that customer service was a huge deal among women who shopped for shoes, so it
tailored its statement to match the desires of that audience.
Mission Statement Formulation

1. Define your purpose.

Ask yourself why your company exists. Say it exists to offer cleaning services,
then identifying your service is a great starting point, along with defining for
whom this service is for, how you plan to deliver it and why it's valuable.
Together, these elements communicate your purpose to consumers and team
members.

For example, Zappos’ mission is “to provide the best customer service possible.”
Company staff works toward this goal every day, and customers experience it via
free and easy returns on their shoe orders. The company’s growth trajectory and
eventual acquisition by Amazon speaks to its success in living up to its mission.

2. Be specific.

Buzzwords and jargon are generally ineffective in a mission statement. If you tell
people that you “deliver business efficiencies using optimized software solutions,”
they’re unlikely to commit this phrase to memory.

When your mission is hard to remember, it’s difficult for team members to align
their daily activities with the goals outlined. Choose your words wisely and use
terms that are easily understood and relevant to your business.

Consider U.K.-based fast-food chain Pret a Manger, which is dedicated to

providing economical, natural food. It clearly communicates this by printing short
blurbs on its products’ packaging that explain how these items specifically relate to
its mission statement. A Pret a Manger sparkling water can indicates that the
company has added “No Nasties” and no "any weird chemicals or additives.”

3. Inspire.

While it’s important to make your mission plausible and attainable, it can also be
powerful to include an inspirational element. This element can encourage your
team members to work toward your vision. You might also find it useful to tie your
mission statement to specific activities or behaviors, which can move it from the
conceptual realm to the practical world.
Patagonia, for instance, aspires to “build the best product, cause no unnecessary
harm, use business to inspire and implement solutions to the environmental crisis.”
While its mission might start off not directly referencing the products made, it
quickly becomes aspirational. The company links (making apparel) with its
fundamental values (saving the planet).

Consumers have come to realize that the company does more than manufacture
clothing for outdoor enthusiasts, and Patagonia’s staff members recognize that
their work supports environmental causes.

4. Keep it succinct.

Some of the biggest companies in the world devote full pages to their mission
statements, but that may not be the ideal way to convey your enterprise's particular
message. When writing your mission statement, try to be as concise as possible. If
it’s lengthy, pare it to sharpen your vision and delivery.

For example, Chipotle’s phrase “food with integrity” captures the company’s
commitment to sourcing, cooking and serving good food in just three words.

Once you’ve written a mission statement worthy of your business, your job is only
half-finished. A mission statement is most effective when you impart its message
to your team -- and when they align their actions with the mission’s vision.

The process of carrying out the actions implied with the words often begins with
your actions. Everything you do can ultimately reflect the values, purpose and
enthusiasm behind your company's mission statement. An impactful statement can
serve as a reminder of why you founded your business, and a mission statement
worthy of memorization can guide you for years to come.
Stability Strategy:

When an enterprise is satisfied by its present position, it will not like to change from

here and it will be a stability strategy. Stability strategy will be successful when the

environment is stable. This strategy is exercised most often and is less risky as a course

of action. A stability strategy of a concern for example will be followed when the

organization is satisfied with the same product, serving the same consumer groups and
maintaining the same market share.

The organization may not be adventurous to try new strategies to change the status quo.

This strategy may be possible in a mature industry with static technology.

Stability strategy may create complacency among managers. The managers of such an
organization may find it difficult to cope with the changes when they come.

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Stability strategies can be of the following types:

(i) No-Change Strategy:

Stability strategy is a conscious decision to do nothing new, that is to continue with the

present work. It does not mean an absence of strategy, rather taking no decision in itself

is a strategy. When external environment is predictable and organizational environment

is stable then a businessman may like to continue with the present situation. There may
be major opportunities or threats operating in the environment.

There may be no new threat from competitors or no new competing product may be

coming into the market, under these circumstances it will be prudent to continue the

present strategies. The small and medium firms generally operate in a limited market

and supply products and services with the use of time tested technology, such firms will

prefer to continue with their present work. Unless otherwise there is a major threat in
the environment or occurrence of some major upset in the market, the present strategy
will serve the firms well.

(ii) Profit Strategy:

Sometimes things change in such a way that the firm has to adopt changes in its

working. There may be unfavorable external factors such as increase in competition,

recession in the industry, government attitude, industry down turn etc. Under these
situations it becomes difficult to sustain profitability.

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A supposition is that the changed situation will be a temporary phase and old situation

will again return. The firm will try to sustain profitability by controlling expenses,

reducing investments, raise prices, cut costs, increase productivity etc. These measures
will help the firm in sustaining current profitability in the short run.

With the opening of markets, Indian industry is facing lot of problems with the presence

of multinationals and reduction in tariff on imports. The firms will have to adjust their

policies to the changing environment otherwise they will find it difficult to stay in the
market.

Profit strategy will be successful for a short period only. In case things do not improve to

the advantage of the firms then this strategy will only deteriorate their position. This
strategy can work only if problems are temporary.

(ii) Proceed-With Caution Strategy:

Proceed with caution strategy is employed by firms that wish to test the ground before

moving ahead with full-fledged grand strategy or by those firms which had a rapid pace
of expansion and now wish to rest for a while before moving ahead. The pause is
sometimes essential because intervening period will allow consolidation before

embracing on further expansion strategies. The main object is to let the strategic

changes seep down the organizational levels, allow structural changes to take place and
let the system adopt to new strategies.

Concentration strategy:
https://opentextbc.ca/strategicmanagement/chapter/concentration-strategies/
Porter’s Five Forces to Industry Analysis

Before entering a new market or industry, the entrepreneur must be very well versed with the
business environment and functioning of this industry.

So the study of this environment and analysis of the industry are essential for his successful entry
into the market. And one important and effective tool for this is Porters Approach to Industry
Analysis, also known as Porter’s Five Forces.

This model helps in identifies and then helps in analyzing the main five competitive forces
prevailing in every industry. It also helps in discovering the strengths and weaknesses of an
industry.

So the entrepreneur can use this to his advantage while establishing himself in this new market.
These factors can be used to his advantage to ensure that they do not affect his profitability. Let us
look at the five forces as per the Porters Approach to Industry Analysis.

1] Supplier Power

This refers to the power the suppliers have to jack up their prices. This will depend on a litany of
factors like – how many suppliers are present in the market, are the goods/services they supply
unique and special, is the quality comparable to other suppliers etc.

The fewer the number of suppliers the more the concentration of power in their hands. Another
factor will be how difficult it would be for the entrepreneur to shift to alternative suppliers and how
much would it cost him? The sum total of all these factors will give us an idea of the supplier power
in the industry.
2] Buyer Power

This is an examination of how easily the buyers can bring down the prices of the product and
services available in the market.

Again, this will depend on a lot of factors – the number of buyers, the general order size, demand
for new products, the uniqueness of your product, prices of other alternatives etc. If the buyers are in
limited numbers they can dictate their terms and prices more efficiently.

3] Competitive Rivalry

This is an important factor in Porter’s approach. The number of competitors and their capability are
both significant factors in an industry.

So if a new product on the market already has many competitors it is a disadvantage. Because both
suppliers and customers have alternatives. But if your product or service has no, or very little
competition then that is a significant advantage to the entrepreneur.

4] Threat of Substitution

This refers to the customer finding an alternative way to fulfil their requirements. So they are able to
eliminate the need for your product or service because they found another way to satisfy their needs.

Say for example your offer IT services of setting up a LAN connection. But now the customers
connect their entire computing system over a wireless network, and so your services are no longer
necessary.

5] Threat of New Entry

This refers to how easy it is for new players to enter the market. If it is fairly easy to enter the
market with minimum finances and efforts, then new players will keep entering and increasing the
competition.

This will weaken your position in the market and dilute your market share. However, if there are
some strong barriers to entry it will be favourable to the entrepreneurs.
How Can a Corporation Keep From Sliding Into the Decline Part of
the Organizational Life Cycle?
The organizational life cycle is a model of the way a business changes through its life.
Its four stages are startup, growth, maturity and decline. When organizations are
about to slide into the decline stage, they experience warning signs, such as a
potentially damaging fall in revenue, resources, market share and profitability. A
sustained period of decline can take the organization to a point where it is impossible
to recover, so it is essential to recognize the warning signs and take action to reverse
the trends.

Analyze

If your business is in the maturity phase, you are concentrating on consolidating your
position and improving costs and efficiency. To identify trends that could lead to
decline, start by auditing your business. Review your sales records and market share
to identify areas where revenue is falling. Analyze your product portfolio to compare
the proportion of old products to new models. Assess the capability of your workforce
by measuring the number of recent highly qualified recruits and the number of
employees taking training programs.

Understand

Before you develop an action plan, investigate the reasons for decline. Falling market
share could reflect strong competitive activity or decreasing demand because of
changing customer requirements or the availability of newer products. A product
portfolio with a high proportion of old products reflects a lack of investment in new
product development or overreliance on existing products. A static or shrinking
workforce could reflect lack of investment in training and recruitment or natural
wastage through employees retiring and leaving.

VIDEO OF THE DAY

Communicate

Your strategy for change must focus on the key factors in your decline. You also need
to make your employees aware of the need for change. In communicating and sharing
your strategy, emphasize the importance of innovation and demonstrate your
commitment to growth by allocating funds for investment in new products. Set sales
force and marketing targets for expanding your customer base and increasing market
share.

Innovate
Innovation plays an important role in your change program, so it’s essential to create
an environment for innovation. Break down rigid departmental barriers by encouraging
teamwork and collaboration, and set up a forum where employees can contribute
ideas for new product development and other improvements. Identify training
requirements and set up programs to improve workforce performance. Analyze your
workforce to identify gaps in essential skills, and fill those gaps by training or recruiting
to key positions.

Develop

A new product development program is key to regaining market share. Research

customers’ requirements and develop new products aligned to those requirements.
Collaborate with customers to strengthen relationships and ensure that you continue
to meet their changing needs. Communicate your change program to customers and
suppliers to build understanding and recognition of your long-term viability as a
business partner.

Others:

https://smallbusiness.chron.com/maintain-strategy-decline-stage-26080.html
Balanced Scorecard Basics

The balanced scorecard (BSC) is a strategic planning and management system that organizations use
to:
 Communicate what they are trying to accomplish
 Align the day-to-day work that everyone is doing with strategy
 Prioritize projects, products, and services
 Measure and monitor progress towards strategic targets

The system connects the dots between big picture strategy elements such as mission (our purpose),
vision (what we aspire for), core values (what we believe in), strategic focus areas (themes, results
and/or goals) and the more operational elements such as objectives (continuous improvement
activities), measures (or key performance indicators, or KPIs, which track strategic performance),
targets (our desired level of performance), and initiatives (projects that help you reach your targets).
Who Uses the Balanced Scorecard (BSC)?
BSCs are used extensively in business and industry, government, and nonprofit organizations
worldwide. Gartner Group suggests that over 50% of large US firms have adopted the BSC. More than
half of major companies in the US, Europe, and Asia are using the BSC, with use growing in those
areas as well as in the Middle East and Africa. A recent global study by Bain & Co listed balanced
scorecard fifth on its top ten most widely used management tools around the world, a list that includes
closely-related strategic planning at number one. BSC has also been selected by the editors of Harvard
Business Review as one of the most influential business ideas of the past 75 years.

BSC Terminology: Perspectives

The BSC suggests that we view the organization from four perspectives, and to develop objectives,
measures (KPIs), targets, and initiatives (actions) relative to each of these points of view:

 Financial: often renamed Stewardship or other more appropriate name in the public sector, this perspective views
organizational financial performance and the use of financial resources
 Customer/Stakeholder: this perspective views organizational performance from the point of view the customer or
other key stakeholders that the organization is designed to serve
 Internal Process: views organizational performance through the lenses of the quality and efficiency related to our
product or services or other key business processes
 Organizational Capacity (originally called Learning and Growth): views organizational performance through the
lenses of human capital, infrastructure, technology, culture and other capacities that are key to breakthrough
performance

BSC Terminology: Strategic Objectives

Strategic Objectives are the continuous improvement activities that we must do to implement
strategy. The break down the more abstract concepts like mission and vision into actionable steps.
Actions that your organization take should be helping you achieve your strategic objectives. Examples
might include: Increase Revenue, Improve the Customer or Stakeholder Experience, or Improve the
Cost-Effectiveness of Our Programs.

BSC Terminology: Strategy Mapping

One of the most powerful elements in the BSC methodology is the use of strategy mapping to
visualize and communicate how value is created by the organization. A strategy map is a simple
graphic that shows a logical, cause-and-effect connection between strategic objectives (shown as
ovals on the map). Generally speaking, improving performance in the objectives found in the
Organizational Capacity perspective (the bottom row) enables the organization to improve its Internal
Process perspective (the next row up), which, in turn, enables the organization to create desirable
results in the Customer and Financial perspectives (the top two rows).

BSC Terminology: Measures (Key Performance

Indicators)
For each objective on the strategy map, at least one measure or Key Performance Indicator (KPI) will
be identified and tracked over time. KPI’s indicate progress toward a desirable outcome. Strategic
KPIs monitor the implementation and effectiveness of an organization's strategies, determine the gap
between actual and targeted performance and determine organization effectiveness and operational
efficiency.
Good KPIs:

 Provide an objective way to see if strategy is working

 Offer a comparison that gauges the degree of performance change over time
 Focus employees' attention on what matters most to success
 Allow measurement of accomplishments, not just of the work that is performed
 Provide a common language for communication
 Help reduce intangible uncertainty
BSC Terminology: Strategic Initiatives
Strategic Initiatives are projects (new or existing) that are designed to help the organization achieve
Strategic Objectives and have significant organization-wide impact. They are managed formally like
any other project, meaning they are explicitly defined in terms of owner, schedule, resources needed,
action steps, progress, and expected results. Some Strategic Initiatives are short-term (taking only a
few days to implement) while others can take years to fully implement. Strategic Project
Management is the process of managing projects to achieve strategic success.

BSC Terminology: Cascading

Cascading a balanced scorecard means to translate the corporate-wide scorecard (referred to as Tier 1)
down to first business units, support units or departments (Tier 2) and then teams or individuals (Tier
3). The end result should be focus across all levels of the organization that is consistent. The
organization alignment should be clearly visible through strategy, using the strategy map,
performance measures and targets, and initiatives. Scorecards should be used to improve
accountability through objective and performance measure ownership, and desired employee
behaviors should be incentivized with recognition and rewards.

Cascading strategy focuses the entire organization on strategy and creating line-of-sight between the
work people do and high level desired results. As the management system is cascaded down through
the organization, objectives become more operational and tactical, as do the performance measures.
Accountability follows the objectives and measures, as ownership is defined at each level. An
emphasis on results and the strategies needed to produce results is communicated throughout the
organization. This alignment step is critical to becoming a strategy-focused organization.

BSC History
The Balanced Scorecard (BSC) was originally developed by Dr. Robert Kaplan of Harvard University
and Dr. David Norton as a framework for measuring organizational performance using a more
BALANCED set of performance measures. Traditionally companies used only short-term financial
performance as measure of success. The “balanced scorecard” added additional non-financial strategic
measures to the mix in order to better focus on long-term success. The system has evolved over the
years and is now considered a fully integrated strategic management system.
While the phrase balanced scorecard was coined in the early 1990s, the roots of the this type of
approach are deep, and include the pioneering work of General Electric on performance measurement
reporting in the 1950’s and the work of French process engineers (who created the Tableau de Bord –
literally, a "dashboard" of performance measures) in the early part of the 20th century.

This new approach to strategic management was first detailed in a series of articles and books by Drs.
Kaplan and Norton and built on work by Art Schneiderman at Analog Devices. Recognizing some of the
weaknesses and vagueness of previous management approaches, the balanced scorecard approach
provides a clear prescription as to what companies should measure in order to 'balance' the financial
perspective.

Kaplan and Norton describe the innovation of the balanced scorecard as follows:
"The balanced scorecard retains traditional financial measures. But financial measures tell the story of
past events, an adequate story for industrial age companies for which investments in long-term
capabilities and customer relationships were not critical for success. These financial measures are
inadequate, however, for guiding and evaluating the journey that information age companies must
make to create future value through investment in customers, suppliers, employees, processes,
technology, and innovation."

BSC Automation and Performance Analysis

Once a scorecard has been developed and implemented, performance management software can be
used to get the right performance information to the right people at the right time. Automation adds
structure and discipline to implementing the Balanced Scorecard system, helps transform disparate
corporate data into information and knowledge, and helps communicate performance information. The
Balanced Scorecard Institute formally recommends the QuickScore Performance Information
SystemTM developed by Spider Strategies and co-marketed by the Institute.

BSC Development

The Institute’s award-winning framework, Nine Steps to SuccessTM, is a disciplined, practical approach to
developing a strategic planning and management system based on the balanced scorecard. Training is
an integral part of the framework, as is coaching, change management, and problem solving.
Emphasis is placed on “teaching clients to fish, not handing them a fish”, so the scorecard system can
be sustained.

A key benefit of using a disciplined framework is that it gives organizations a way to ‘connect the dots’
between the various components of strategic planning and management, meaning that there will be a
visible connection between the projects and programs that people are working on, the measurements
being used to track success, the strategic objectives the organization is trying to accomplish and the
mission, vision and strategy of the organization.
 Functional Level Strategy
Definition: Functional Level Strategy can be defined as the day to day strategy which is
formulated to assist in the execution of corporate and business level strategies. These strategies
are framed as per the guidelines given by the top level management.

Functional Level Strategy is concerned with operational level decision making, called tactical
decisions, for various functional areas such as production, marketing, research and development,
finance, personnel and so forth.

As these decisions are taken within the framework of business strategy, strategists provide proper
direction and suggestions to the functional level managers relating to the plans and policies to be
opted by the business, for successful implementation.

Role of Functional Strategy

 It assists in the overall business strategy, by providing information concerning the
management of business activities.
 It explains the way in which functional managers should work, so as to achieve better results.
Functional Strategy states what is to be done, how is to be done and when is to be done are the
functional level, which ultimately acts as a guide to the functional staff. And to do so, strategies
are to be divided into achievable plans and policies which work in tandem with each other.
Hence, the functional managers can implement the strategy.

Functional Areas of Business

There are several functional areas of business which require strategic decision making, discussed
as under:

1. Marketing Strategy: Marketing involves all the activities concerned with the identification of
customer needs and making efforts to satisfy those needs with the product and services they
require, in return for consideration. The most important part of a marketing strategy is the
marketing mix, which covers all the steps a firm can take to increase the demand for its product.
It includes product, price, place, promotion, people, process and physical evidence.

For implementing a marketing strategy, first of all, the company’s situation is analysed
thoroughly by SWOT analysis. It has three main elements, i.e. planning, implementation and
control.

There are a number of strategic marketing techniques, such as social marketing, augmented
marketing, direct marketing, person marketing, place marketing, relationship marketing, Synchro
marketing, concentrated marketing, service marketing, differential marketing and demarketing.
2. Financial Strategy: All the areas of financial management, i.e. planning, acquiring, utilizing and
controlling the financial resources of the company are covered under a financial strategy. This
includes raising capital, creating budgets, sources and application of funds, investments to be
made, assets to be acquired, working capital management, dividend payment, calculating the net
worth of the business and so forth.
3. Human Resource Strategy: Human resource strategy covers how an organization works for the
development of employees and provides them with the opportunities and working conditions so
that they will contribute to the organization as well. This also means to select the best employee
for performing a particular task or job. It strategizes all the HR activities like recruitment,
development, motivation, retention of employees, and industrial relations.
4. Production Strategy: A firm’s production strategy focuses on the overall manufacturing system,
operational planning and control, logistics and supply chain management. The primary objective
of the production strategy is to enhance the quality, increase the quantity and reduce the overall
cost of production.
5. Research and Development Strategy: The research and development strategy focuses on
innovating and developing new products and improving the old one, so as to implement an
effective strategy and lead the market. Product development, concentric diversification and
market penetration are such business strategies which require the introduction of new products
and significant changes in the old one.
For implementing strategies, there are three Research and Development approaches:
1. To be the first company to market a new technological product.
2. To be an innovative follower of a successful product.
3. To be a low-cost producer of products.

Functional level strategies focus on appointing specialists and combining activities within the
functional area.
Ansoff matrix

http://www.quickmba.com/strategy/matrix/ansoff/

What is TOWS Analysis?

TOWS analysis is a tool which is used to generate, compare and select
strategies. Strictly speaking it is not the same as SWOT analysis, and it is
certainly not a SWOT analysis which focuses on threats and opportunities. This
is a popular misconception. TOWS may have similar roots. TOWS is a tool for
strategy generation and selection; SWOT analysis is a tool for audit and
analysis. One would use a SWOT at the beginning of the planning process, and
a TOWS later as you decide upon ways forward.

There is a trade-off between internal and external factors. Strengths and

weaknesses are internal factors and opportunities and threats are external
factors. This is where our four potential strategies derive their importance. The
four TOWS strategies are Strength/Opportunity (SO), Weakness/Opportunity
(WO), Strength/Threat (ST) and Weakness/Threat (WT).

TOWS Analysis
Four TOWS strategies

Strength/Opportunity (SO). Here you would use your strengths to exploit

opportunities.
Weakness/Opportunity (WO). Indicates that you would find options that
overcome weaknesses, and then take advantage of opportunities. So, you
mitigate weaknesses, to exploit opportunities.
Strength/Threat (ST). One would exploit strengths to overcome any potential
threats.
Weakness/Threat (WT). The final option looks least appealing; after all,
would relish using a weakness to overcome a threat? With Weakness/Threat
(WT) strategies one is attempting to minimise any weaknesses to avoid possible
threat.
Definition
BCG matrix

(or growth-share matrix) is a corporate planning tool, which is used to portray firm’s
brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis)
and speed of market growth (vertical axis) axis.
Growth-share matrix

is a business tool, which uses relative market share and industry growth rate factors to
evaluate the potential of business brand portfolio and suggest further investment
strategies.

Understanding the tool

BCG matrix is a framework created by Boston Consulting Group to evaluate the
strategic position of the business brand portfolio and its potential. It classifies business
portfolio into four categories based on industry attractiveness (growth rate of that
industry) and competitive position (relative market share). These two dimensions reveal
likely profitability of the business portfolio in terms of cash needed to support that unit
and cash generated by it. The general purpose of the analysis is to help understand,
which brands the firm should invest in and which ones should be divested.
Relative market share. One of the dimensions used to evaluate business portfolio is
relative market share. Higher corporate’s market share results in higher cash returns.
This is because a firm that produces more, benefits from higher economies of scale and
experience curve, which results in higher profits. Nonetheless, it is worth to note that
some firms may experience the same benefits with lower production outputs and lower
market share.

Market growth rate. High market growth rate means higher earnings and sometimes
profits but it also consumes lots of cash, which is used as investment to stimulate
further growth. Therefore, business units that operate in rapid growth industries are
cash users and are worth investing in only when they are expected to grow or maintain
market share in the future.

There are four quadrants into which firms brands are classified:

Dogs. Dogs hold low market share compared to competitors and operate in a slowly
growing market. In general, they are not worth investing in because they generate low
or negative cash returns. But this is not always the truth. Some dogs may be profitable
for long period of time, they may provide synergies for other brands or SBUs or simple
act as a defense to counter competitors moves. Therefore, it is always important to
perform deeper analysis of each brand or SBU to make sure they are not worth
investing in or have to be divested.
Strategic choices: Retrenchment, divestiture, liquidation

Cash cows. Cash cows are the most profitable brands and should be “milked” to
provide as much cash as possible. The cash gained from “cows” should be invested into
stars to support their further growth. According to growth-share matrix, corporates
should not invest into cash cows to induce growth but only to support them so they can
maintain their current market share. Again, this is not always the truth. Cash cows are
usually large corporations or SBUs that are capable of innovating new products or
processes, which may become new stars. If there would be no support for cash cows,
they would not be capable of such innovations.
Strategic choices: Product development, diversification, divestiture, retrenchment

Stars. Stars operate in high growth industries and maintain high market share. Stars
are both cash generators and cash users. They are the primary units in which the
company should invest its money, because stars are expected to become cash cows
and generate positive cash flows. Yet, not all stars become cash flows. This is
especially true in rapidly changing industries, where new innovative products can soon
be outcompeted by new technological advancements, so a star instead of becoming a
cash cow, becomes a dog.
Strategic choices: Vertical integration, horizontal integration, market penetration, market
development, product development

Question marks. Question marks are the brands that require much closer
consideration. They hold low market share in fast growing markets consuming large
amount of cash and incurring losses. It has potential to gain market share and become
a star, which would later become cash cow. Question marks do not always succeed and
even after large amount of investments they struggle to gain market share and
eventually become dogs. Therefore, they require very close consideration to decide if
they are worth investing in or not.
Strategic choices: Market penetration, market development, product development,
divestiture