Strategic Management Notes For BBA LLB IPU

UNIT-1
THE INTRODUCTION TO STRATEGIC MANAGEMENT
TOPIC 1A
THE NATURE AND VALUE OF STRATEGIC MANAGEMENT
Strategic management is a process which determines whether an organization excels,

survives, or dies.
All organizations engage in the strategic management process either formally or

informally. Strategic management is equally applicable to public, private, not-for-profit,
and religious organizations. An attempt is made in this thesis to show the applicability of
strategic management to all types of organizations, but the emphasis is on private-
enterprise organizations.
Organizations usually employ one of the three general decision-making processes:
Managers want to resolve current problems. Firms often face problems resulting from
falling sales, low profit rates, or production inefficiencies. Managers try to identify the
sources of those problems and resolve them as best they can.
Managers want to solve current problems and prevent future problems. For example,
faced with rising production costs, managers may apply statistical techniques to create an
optimal solution.
Managers want to design or create a better relationship between the firm and its operating
and general environments. That involves the firm in strategic decision making.
Three factors distinguish strategic decisions from other business considerations:
 Strategic decisions deal with concerns that are central to the livelihood and
survival of the entire organization and usually involve a large portion of the
organization's resources.
 Strategic decisions represent new activities or areas of concern and typically
address issues that are unusual for the organization rather than issues that lend
themselves to routine decision making.
 Strategic decisions have repercussions for the way other, lower-level decisions in
the organization are made.
YASH JAIN BBA LLB (H) 4th Semester | Strategic Management Reference Only Notes 1
To summarize, there are two essential areas of management tasks: strategic management
and operating management. Operating management deals with the ongoing, day-to day
"operations" of the business. However, my concern here is with the strategic management
alone.
STRATEGIC MANAGEMENT DEFINED
The term strategic management is used to refer to the entire scope of strategic-decision

making activity in an organization. Strategic management as a concept has evolved over
time and will continue to evolve. As result there are a variety of meanings and
interpretations depending on the author and sources. For example, some scholars and
practitioners the term strategic planning connote the total strategic management activities.
Moreover, sometimes managers use the terms strategic management, strategic
planning, and long-range planning interchangeable. Finally, some of the phrases are
used interchangeably with strategic management are strategy and policy formulation,
andbusiness policy.
To purpose of this thesis I use the terminology strategy management, as opposed to the

more narrow term business policy.
The following statements serve as a number of workable definitions of strategic

management:
 Strategic management is the process of managing the pursuit of organizational

mission while managing the relationship of the organization to its
environment (James M. Higgins).
 Strategic management is defined as the set of decisions and actions resulting in
the formulation and implementation of strategies designed to achieve the
objectives of the organization (John A. Pearce II and Richard B. Robinson, Jr.).
 Strategic management is the process of examining both present and future
environments, formulating the organization's objectives, and making,
implementing, and controlling decisions focused on achieving these objectives in
the present and future environments (Garry D. Smith, Danny R. Arnold, Bobby G.
Bizzell).
 Strategic management is a continuous process that involves attempts to match or
fit the organization with its changing environment in the most advantageous way
possible (Lester A. Digman).
 Strategic management involves the formulation and implementation of the
major goals and initiatives taken by a company's top management on behalf of
owners, based on consideration of resources and an assessment of the internal and
external environments in which the organization competes.
 Strategic management provides overall direction to the enterprise and involves
specifying the organization's objectives, developing policies and plans designed to
achieve these objectives, and then allocating resources to implement the plans.
Academics and practicing managers have developed numerous models and
frameworks to assist in strategic decision making in the context of complex
environments and competitive dynamics. Strategic management is not static in
nature; the models often include a feedback loop to monitor execution and inform
the next round of planning.
 Strategic management involves the formulation and implementation of the
major goals and initiatives taken by a company's top management on behalf of
owners, based on consideration of resources and an assessment of the internal and
external environments in which the organization competes. Strategy is defined as
"the determination of the basic long-term goals of an enterprise, and the adoption
of courses of action and the allocation of resources necessary for carrying out
these goals."
 Strategies are established to set direction, focus effort, define or clarify the
organization, and provide consistency or guidance in response to the
environment.
 Strategic management involves the related concepts of strategic
planning and strategic thinking. Strategic planning is analytical in nature and
refers to formalized procedures to produce the data and analyses used as inputs for
strategic thinking, which synthesizes the data resulting in the strategy. Strategic
planning may also refer to control mechanisms used to implement the strategy
once it is determined. In other words, strategic planning happens around the
strategic thinking or strategy making activity.
 Strategic management is often described as involving two major
processes: formulation and implementation of strategy. While described
sequentially below, in practice the two processes are iterative and each provides
input for the other.
ELEMENTS OF STRATEGIC MANAGEMENT
Strategic management, as minimum, includes strategic planning and strategic

control. Strategic planning describes the periodic activities undertaken by organizations
to cope with changes in their external environments (Lester A. Digman) It involves
formulating and evaluating alternative strategies, selecting a strategy, and developing
detailed plans for putting the strategy into practice.Strategic planning consists of
formulating strategies from which overall plans for implementing the strategy are
developed. Strategic control consists of ensuring that the chosen strategy is being
implemented properly and that it is producing the desired results.
Based on Robert Anthony's framework, three types of planning and control are required
by organizations:
* STRATEGIC PLANNING AND CONTROL - the process of deciding on changes in

organizational objectives, in the resources to be used in attaining these objectives, in
policies governing the acquisition and use of these resources, and in the means
(strategies) of attaining the objectives. Strategic planning and control involve actions that
change the character or direction of the organization.
* MANAGEMENT PLANNING AND CONTROL - the process of ensuring that

resources are obtained and used efficiently in the accomplishment of the organization's
objectives. Management planning and control is carried on within the framework
established by strategic planning and is analogous to operating control.
* TECHNICAL PLANNING AND CONTROL - the process of ensuring efficient

acquisition and use of resources, with respect to those activities for which the optimum
relationship between outputs and resources can be accurately estimated (e.g., financial,
accounting, and quality controls).
Another important term in the study of strategic management is long-range

planning. Long-range planning, planning for events beyond the current year, is not
synonymous with strategic management (or strategic planning). Not all long-range
planning is strategic. Certain strategic actions and reactions can be relatively short range
and may include more than just planning aspects. It is perfectly reasonable to have long-
range operating or technical plans that are not strategic. However, it should be noted that
most strategic decisions have long-term ramifications.
TOPIC 1B
KEY TERMS IN STRATEGIC MANAGEMENT
Strategic management, like many other subjects, has developed terminology to identify
important concepts. Each of the following definitions is amplified and supplemented with
additional examples in subsequent chapters.
PURPOSE
The organization's purpose outlines why the organization exists; it includes a description
of its current and future business (Leslie W. Rue, and Loyd L. Byars) The purpose of an
organization is its primary role in society, a broadly defined aim (such as manufacturing
electronic equipment) that it may share with many other organizations of its type.
MISSION
The mission of an organization is the unique reason for its existence that sets it apart from
all others (A. James, F. Stoner, and Charles Wankel) The organization's mission
describeswhy the organization exists and guideswhat it should be doing. Often, the
organization's mission is defined in a formal, written mission statement. Decisions
on mission are the most important strategic decisions, because the mission is meant to
guide the entire organization. Although the terms "purpose" and "mission" are often used
interchangeably, to distinguish between them may help in understanding organizational
goals.
GOALS
A goal is a desired future state that the organization attempts to realize (Amitai Etzioni).
OBJECTIVES
The term objective is often used interchangeably with goal but usually refers to specific
targets for which measurable results can be obtained. Organizational objectives are the
end points of an organization's mission. Objectives refer to the specific kinds of results
the organizations seek to achieve through its existence and operations (William F.
Glueck, and Lawrence R. Jauch) Objective definewhat it is the organization hopes to
accomplish, both over the long and short term.
In this paper the terms "goals" and "objectives" are used interchangeably. Specifically,
where other works are being referred to and those authors have used the term goal as
opposed to objective, their terminology is retained.
STRATEGY
Strategies are the means by which long-term objectives will be achieved. "A strategy is a
unified, comprehensive, and integrated plan that relates the strategic advantages of the
firm to the challenges of the environment. It is designed to ensure that the basic
objectives of the enterprise are achieved through proper execution by the organization"
(William F. Glueck, and Lawrence R. Jauch). The role of strategy is to identify the
general approaches that the organization utilize to achieve its organizational objectives.
Therefore, the choice of strategy is so central to the study and understanding of strategic
management.
TACTICS
In contrast, tactics are specifics actions the organization might undertake in carrying its

strategy.
POLICY
In years past it was common practice to title courses and books in the strategic
management areas as "Business policy," if one wished to take up broader range of
organizations. In one sense, what has happened is that word strategy has replaced policy.
But there is another sense in which the term policy is used that differentiates it from
strategy, and from tactics as well. In this view, policies are the means by which objectives
will be achieved. "Policies are guide to action. They include how resources are to be
allocated and how tasks assigned to the organization might be accomplished ... (William
F. Glueck, and Lawrence R. Jauch "
Policies include guidelines, procedures, rules, programs, and budgets established to

support efforts to achieve stated objectives. Therefore, policies become important
management tools for implementing them.
STRATEGISTS
The final key term to be highlighted here is "strategists". Strategists are the individuals

who are involved in the strategic management process. Several levels of management
may be involved in strategic decision making. However, the people responsible for major
strategic decisions are the board of director, president, the chief executive officer, the
chief operating officer, and the division managers.
TOPIC 1C
STRATEGIC MANAGEMENT MODELS
Strategic management is a broader term that includes not only the stages already
identified but also the earlier steps of determining the mission and objectives of an
organization within the context of its external environment. The basic steps of the
strategic management can be examined through the use of strategic management model.
The strategic management model identifies concepts of strategy and the elements
necessary for development of a strategy enabling the organization to satisfy its mission.
Historically, a number of frameworks and models have been advanced which propose
different normative approaches to strategy determination. However, a review of the major
strategic management models indicates that they all include the following elements:
 Performing an environmental analysis.

 Establishing organizational direction.
 Formulating organizational strategy.
 Implementing organizational strategy.
 Evaluating and controlling strategy.
Strategic management is a continuous and dynamic process. Therefore, it should be

understood that each element interacts with the other elements and that this interaction
often happens simultaneously.
The major models differ primarily in the degree of explicitness, detail, and complexity.
These differences derive from the differences in backgrounds and experiences of the
authors. Some of these models are briefly presented below.
ANDREWS' MODELS
In 1965, Kenneth Andrews developed a simple model. This model includes the choice of

a strategy, but ignores implementation and control. In 1971,Andrews formulated a more
complete model that included implementation, but it still ignores a strategic control and
evaluation.
GLUECK'S MODEL
William F. Glueck developed several models of strategic management based on the

general decision-making process.
The phases of this model are as follows:
1. Strategic managements elements: "...to determine mission, goals, and values of the
firm and the key decision makers."
2. Analysis and diagnosis: " ...to search the environment and diagnose the impact of
the threats and opportunities."
3. Choice: ...to consider various alternatives and assure that the appropriate strategy
is chosen."
4. Implementation: "...to match plans, policies, resources, structure, and
administrative style with the strategy."
5. Evaluation: "...to ensure strategy and implementation will meet objectives."
As major contribution to the strategic management process, Glueck considered two

elements: "enterprise objectives" (the mission and objectives of the enterprise," and
"enterprise strategists" (who are involved in the process).
Moreover, Glueck broke down the planning process into analysis and diagnosis, choice,
implementation, and evaluation functions. This model also treats leadership, policy, and
organizational factors.
However, Glueck omitted the important medium- and short-range planning activities of
strategy implementation.
THE SCHENDEL AND HOFER MODEL
Dan Schendel and Charles Hoferdeveloped a strategic management model, incorporating

both planning and control functions.
Their model consists of several basic steps:
(1) goal formulation,

(2) environmental analysis,
(3) strategy formulation,
(4) strategy evaluation,
(5) strategy implementation, and
(6) strategic control.
According to Schendel and Hofer, the formulation portion of strategic management

consists of at least three sub processes:
(1) environmental analysis,

(2) resources analysis,
(3) and value analysis.
Resource and value analyses are not specifically shown, but are considered to be included
under other items (strategy formulation).
THE THOMPSON AND STRICKLAND MODEL
Thompson and Strickland developed several models of strategic management.
According to Thompson and Strickland strategic management is an ongoing process:

"nothing is final and all prior actions and decisions are subject to future modification."
This process consists of five major five ever-present tasks:
1. Developing a concept of the business and forming a vision of where the

organization needs to be headed.
2. Converting the mission into specific performance objectives.
3. Crafting a strategy to achieve the targeted performance.
4. Implementing and executing the chosen strategy efficiently and effectively.
5. Evaluating performance, reviewing the situation, and initiating corrective
adjustments in mission, objectives, strategy, or implementation in light of
actual experience, changing conditions, new ideas, and new opportunities.
Thompson and Strickland suggest that the firm's mission and objectives combine to
define "What is our business and what will it be?" and "what to do now" to achieve
organization's goals. How the objectives will be achieved refers to the strategy of firm.
In general, this model highlights the relationships between the organization's mission, its
long- and short-range objectives, and its strategy.
KOREY'S MODEL
Modern theorist and writer, Jerzy Korey-Krzeczowski, founder and President Canadian

School of Management, have proposed an integrated model of strategic management.
Korey's model consists of three discrete major phases:
(1) preliminary analysis phase,

(2) strategic planning phase,
(3) strategic management phase.
Further, Korey states that the systematic planning consists of at least four continuous
subprocesses:
(1) planning studies,
(2) review and control,
(3) feasibility studies, and
(4) feasibility studies.
The planning is ongoing process, thus all these subprocesses are integrated and they are
interacted each other; creating the fully dynamic model.
Korey's model incorporates both planning and control functions. Moreover, it describes
not only long-range strategic planning process, but also includes elements of medium and
short range planning.
Korey's model is based on existing models; but it differs in content, emphasis, and
process.
This model adds several facets to the planning process that the reader has not seen in
other models. Some of these are: development of educational philosophy, analysis of the
value systems, review of community orientation and social responsibilities, definition of
planning parameters, planning studies, and feasibility studies.
Using Kory's model for strategic planning provides both new direction and new energy to
the organization.
SCHEMATIC MODEL
As an aid in envisioning the strategic management process in this paper.
This model was developed by Peter Wright, Charles Pringle and Mark Kroll(1994). It
consists of five stages:
1. Analyze the environmental opportunities and threats.

2. Analyze the organization's internal strengths and weaknesses.
3. Establish the organizational direction: mission and goals.
4. Strategy formulation.
5. Strategy Implementation.
6. Strategic Control.
The model begins with an analysis of environmental opportunities and threats. The
organization is affected by environmental forces; but the organization can also have an
impact upon its environment.
The organization's mission and goals are linked to the environment by a dual arrow. This
means that the mission and goals are set in the context of environmental opportunities
and threats.
The next arrow depicts the idea that strategy formulation sets strategy implementation in
motion. Specifically, strategy is implemented through the organization's structure, its
leadership, and its culture.
Then, the final downward arrow indicates that the actual strategic performance of the
organization is evaluated.
The control stage is demonstrated by the feedback line that connects strategic control to
the other parts of the model.
TOPIC 1D
BENEFITS OF STRATEGIC MANAGEMENT
The Importance and Value Of Strategic Management
A number of reasons are given by authors to as why organizations should engage in

strategic management. Many research studies show both financial and nonfinancial
benefits which can be derived from a strategic-management approach to decision making.
FINANCIAL BENEFITS
The question "Why should an organization engage in strategic management?" must be

answered by looking at the relationship between strategic management and performance.
Research performed by Eastlack and McDonald (1970), Thune and House (1970), Ansoff
et. al. (1971), Karger and Malik (1975), and Hofer and Schendel (1978) indicate that
formalized strategic management (strategic planning) does result in superior performance
by organizations. Each of these studies was able to provide conceiving evidence of the
profitability of strategy formulation and implementation. The formalized strategic
management process does make a difference in the recorded measurements of profits,
sales, and return on assets. Organizations that adopt a strategic management approach can
expect that the news system will lead to improved financial performance.
NONFINANCIAL BENEFITS
Regardless of the profitability of strategic management, several behavioral effects can be

expected to improve the welfare of the firm. Yoo and Digman emphasize that strategic
management is needed to cope with and manage uncertainty in decision making. They
present several benefits of strategic management:
 It provides a way to anticipate future problems and opportunities.

 It provides employees with clear objectives and directions for the future of the
organization.
 It results in more effective and better performance compared to non-strategic
management organizations.
 It increases employee satisfaction and motivation.
 It results in faster and better decision making and
 It results on cost savings.
 Moreover, Greenley stresses that strategic management offers the following
process and personal benefits:
 It allows for identification, prioritization, and exploitation of opportunities.
 It provides an objective view of management problems.
 It represents a framework for improved coordination and control of activities.
 It minimizes the effects of adverse conditions and changes.
 It allows major decisions to better support established objectives.
 It allows more effective allocation of time and resources to identified
opportunities.
 It allows fewer resources and less time to be devoted to correcting erroneous or ad
hoc decisions.
 It creates a framework for internal communication among personnel.
 It helps to integrate the behavior of individuals into a total effort.
 It provides a basic for the clarification of individual responsibilities.
 It gives encouragement to forward thinking.
 It provides a cooperative, integrated, and enthusiastic approach to tackling
problems and opportunities.
 It encourages a favorable attitude towards change.
 It gives a degree of discipline and formality to the management of a business.
These and other research studies have concluded that strategic management is an integral
and important function of organization life. However, successful organizations are
successful for many reasons: adequate resources, good products and services, and so on.
While not a panaceas, the strategic management process is only a powerful tool. It value
lies with executive and the ability to use this strategic management tool in effectively
managing the enterprise.
TOPIC 1E
PITFALLS IN STRATEGIC MANAGEMENT
It needs to be remembered that strategic management and strategic planning are intricate
and complex processes that take the organization into unchartered territories. Hence, they
do not provide a readymade prescription for success nor do they promise instant solutions
to all problems that the organization is facing. Instead, strategic management and
strategic planning are processes that take the organization through a journey that involves
providing a framework for solving problems and addressing questions.
 The first and foremost pitfall relates to using strategic management and strategic
planning only to satisfy accreditation and regulatory requirements instead of
adding value to the firm’s processes.
 Getting into solution mode without thinking through the complex problems that
21st century organizations face. It needs to be remembered that many problems
that businesses face need “slow fixes” rather than quick and easy solutions that are
attractive at first glance but fail over the longer term.
 When the top managers do not support the strategic management process because
of intraorganizational politics, any strategy however good would fail because of
the lack of buy-in from key interests in the organization.
 When the planning is delegated to a “planner” instead of all the managers getting
involved, there are issues to do with lack of information and lack of execution,
which results in the strategy going haywire.
 When firms are bogged down by too many internal problems that sap the energies
of the managers, strategic planning and strategic management become futile, as the
managers are engrossed in firefighting and solving the internal problems rather
than focusing on the external aspects.
 One of the pitfalls of strategic planning happens when organizations become so
formal and structured in their approach that they neglect the creative and flexible
aspects. The point to be noted here is that out of the box thinking and non-linearity
are important for firms to succeed in today’s business landscape.
 On the other hand, too much reliance on intuition can cost firms dear as after all
strategy is a series of steps that need to be actualized and hence, there is a need for
a well thought out and detailed plan.
 While these are the some of the pitfalls of strategic planning, there are other
aspects like not working to a plan and being too much bureaucratic. Since the
organizations of the future need to be agile and flexible with the ability to be
malleable according to the changing market conditions and yet at the same time,
have a core structure that is consistent with core competencies, a mix of formal
and informal planning is needed for effective strategic management.
 Wondering why your strategic plan never got implemented? Every year,
organizations labor at planning, yet many never seem to turn this planning into
action. Before you sit down with your team to develop or review your strategic
plan, make sure you’re aware of these potential implementation traps:
 Lack of ownership: The most common reason a plan fails is lack of ownership. If
people don’t have a stake and responsibility in the plan, it’ll be business as usual
for all but a frustrated few.
 Lack of communication: The plan doesn’t get communicated to employees, and
they don’t understand how they contribute.
 Getting mired in the day-to-day: Owners and managers, consumed by daily
operating problems, lose sight of long-term goals.
 Out of the ordinary: The plan is treated as something separate and removed from
the management process.
 An overwhelming plan: The goals and actions generated in the strategic planning
session are too numerous because the team failed to make tough choices to
eliminate non-critical actions. Employees don’t know where to begin.
 A meaningless plan: The vision, mission, and value statements are viewed as fluff
and not supported by actions or don’t have employee buy-in.
 Annual strategy: Strategy is only discussed at yearly weekend retreats.
 Not considering implementation: Implementation isn’t discussed in the strategic
planning process. The planning document is seen as an end in itself.
 No progress report: There’s no method to track progress, and the plan only
measures what’s easy, not what’s important. No one feels any forward momentum.
 No accountability: Accountability and high visibility help drive change. This
means that each measure, objective, data source, and initiative must have an
owner.
 Lack of empowerment: Although accountability may provide strong motivation
for improving performance, employees must also have the authority,
responsibility, and tools necessary to impact relevant measures. Otherwise, they
may resist involvement and ownership. It’s easier to avoid pitfalls when they’re
clearly identified. Now that you know what they are, you’re more likely to jump
right over them!
UNIT-2 – STRATEGY FORMULATION, EXTERNAL-INTERNAL ASSESMENT
STAGES OF STRATEGIC MANAGEMENT
The strategic management process represents a logical, systematic, and objective

approach for determining an enterprise's future direction. However, a clear separation is
needed between the managerial process by which an organization formulates, evaluates,
implements, and controls the relationships between its objectives, its strategies, and its
environment.
Researchers usually distinguish three stages in the process of strategic

management: strategy formulation,strategy implementation, and evaluation and control.
STRATEGY FORMULATION
Strategy formulation is the process of establishing the organization's mission, objectives,

and choosing among alternative strategies. Sometimes strategy formulation is called
"strategic planning."
STRATEGY IMPLEMENTATION
Strategy implementation is the action stage of strategic management. It refers to decisions

that are made to install new strategy or reinforce existing strategy. The basic strategy -
implementation activities are establishing annual objectives, devising policies, and
allocated resources. Strategy implementation also includes the making of decisions with
regard to matching strategy and organizational structure; developing budgets, and
motivational systems.
STRATEGY EVALUATION AND CONTROL
The final stage in strategic management is strategy evaluation and control. All strategies
are subject to future modification because internal and external factors are constantly
changing. In the strategy evaluation and control process managers determine whether the
chosen strategy is achieving the organization's objectives. The fundamental strategy
evaluation and control activities are: reviewing internal and external factors that are the
bases for current strategies, measuring performance, and taking corrective actions.
TOPIC 2A
THE BUSINESS VISION AND MISSION STATEMENT
One of the first things that any observer of management thought and practice asks is
whether a particular organization has a vision and mission statement. In addition, one of
the first things that one learns in a business school is the importance of vision and
mission statements.
It has been found in studies that organizations that have lucid, coherent, and meaningful
vision and mission statements return more than double the numbers in shareholder
benefits when compared to the organizations that do not have vision and mission
statements. Indeed, the importance of vision and mission statements is such that it is the
first thing that is discussed in management textbooks on strategy.
Some of the benefits of having a vision and mission statement are discussed below:
Above everything else, vision and mission statements provide unanimity of purpose to
organizations and imbue the employees with a sense of belonging and identity. Indeed,
vision and mission statements are embodiments of organizational identity and carry the
organizations creed and motto. For this purpose, they are also called as statements of
creed.
1. Vision and mission statements spell out the context in which the organization
operates and provides the employees with a tone that is to be followed in the
organizational climate. Since they define the reason for existence of the
organization, they are indicators of the direction in which the organization must
move to actualize the goals in the vision and mission statements.
2. The vision and mission statements serve as focal points for individuals to
identify themselves with the organizational processes and to give them a sense of
direction while at the same time deterring those who do not wish to follow them
from participating in the organization’s activities.
3. The vision and mission statements help to translate the objectives of the
organization into work structures and to assign tasks to the elements in the
organization that are responsible for actualizing them in practice.
4. To specify the core structure on which the organizational edifice stands and to help
in the translation of objectives into actionable cost, performance, and time
related measures.
5. Finally, vision and mission statements provide a philosophy of existence to the
employees, which is very crucial because as humans, we need meaning from the
work to do and the vision and mission statements provide the necessary
meaning for working in a particular organization.
As can be seen from the above, articulate, coherent, and meaningful vision and mission
statements go a long way in setting the base performance and actionable parameters and
embody the spirit of the organization. In other words, vision and mission statements are
as important as the various identities that individuals have in their everyday lives.
It is for this reason that organizations spend a lot of time in defining their vision and
mission statements and ensure that they come up with the statements that provide
meaning instead of being mere sentences that are devoid of any meaning.
VISION STATEMENT
It is a statement that expresses organization’s ultimate objectives.
UNDERSTANDING THE TOOL
It is very important for any organization to have clear and attainable long-term vision;
the statement that guides every chief executive, manager or employee in achieving the
same organizational objective. A vision statement asks ‘What does our business want
to become?’ and usually is a one sentence, inspirational, clear and memorable statement
that expresses company’s desired long-term position. It motivates employees to make
extra effort and usually results in higher performance. Because money rewards only
partly motivates employees, it is important to use other tools such as vision statement to
increase their motivation.
The statement also indicates what resources, competencies and skills will be needed to
achieve the future objective. This way it guides decision-making and resource
allocation more effectively.
Vision is closely related with a term ‘strategic intent’ – a desired leadership position
that is currently unachievable due to the lack of resources and capabilities.
DIFFERENCE BETWEEN VISION AND MISSION STATEMENTS
Vision and mission statements are often developed and used together for the same
purpose. This confuses many people into thinking that vision and mission could be
used interchangeably, when actually they can’t.
DIFFERENCES BETWEEN VISION AND MISSION
Vision Mission
Purpose
Tells what an organization aims to achieve. States what a

company is
currently doing.
Answers the question
What do we want to become? What do we do?
Includes
Objectives Customers
Values Products/Services
Markets
Technology
Concern for
survival
Philosophy
Self-Concept
Concern for
public image
Concern for
employees
Vision Mission
Future or present time?
Talks about the future Talks about the

present
To whom it is developed?
Employees of the company Employees,

customers,
suppliers,
distributors,
partners and
communities
Which one is created first?
Developed first Developed only

when vision is
available
How often does it change?
Rarely changes because it takes years to achieve most Product-oriented

of the objectives missions change
every time when
a company
decides to
venture into a
Vision Mission
new product
market.
There are clear differences between the two statements that should not be neglected.
BENEFITS
Not all the visions are equally good. Some of them are very generic or focus on financial
objectives and as a result, poorly motivates employees. But if a company puts enough
efforts in creating vision statement, it results into following benefits:
 Motivates and inspires employees

 Provides one purpose to work for
 Sets the stretch goals (goals that are impossible to achieve with current resources
and capabilities)
 Guides managers in effectively allocating resources
 Writing the statement
CREATING A VISION STATEMENT
Creating a vision is an important first step in strategic management process. We

identified these steps and guidelines to help you write an effective statement.
STEP 1. Gather a team of managers, employees and shareholders. Vision is the statement

that must be understood by employees of all levels. As many people as possible should be
involved in the process because involvement leads to stronger commitment to company’s
vision. After choosing the people that will be involved you should also distribute several
articles to them about what is organization’s vision and ask everyone to read them as a
background.
STEP 2. Ask everyone to write their own version of vision. The next step is to ask
everyone to write his or her own version of the statement and submit it to the responsible
team. After receiving the statements, the team should try to combine draft vision out of
all the submissions. This is also a great opportunity to resolve any conflicting views
about firm’s ultimate objective.
STEP 3. Revise the statement and present the final version. The draft statement should be
distributed to the members again for their last revision. Upon receiving the feedback, the
final version of the vision should be created and presented to every employee.
Don’t forget that a vision should be a one sentence clear, inspirational and memorable
statement.Vision statement’s examples is the best way to learn creating a vision is to look
at the currently available good and bad examples.
MISSION STATEMENT
Mission statement is a description of what an organization actually does – what its

business is – and why it does it.
Understanding the tool
Often called the “credo”, “philosophy”, “core values” or “our aspirations”, organization’s
mission is the statement that defines its core purpose or reason for being [2]. It tells who a
company is and what it does. According to P. Drucker, often called the father of modern
management, a mission is the primary guidance in creating plans, strategies or making
daily decisions. It is an important communication tool that conveys information about
organization’s products, services, targeted customers, geographic markets, philosophies,
values and plans for future growth to all of its stakeholders.
In other words, every major reason why company exists must be reflected in its mission,
so any employee, supplier, customer or community would understand the driving force
behind organization’s operations.
There are two types of statements:
CUSTOMER-ORIENTED MISSIONS. Customer-oriented missions define
organization’s purpose in terms of meeting customer needs or providing solutions for
them. They provide more flexibility than product-oriented missions and can be easily
adapted to changing environment. For example, Nokia’s statement “connecting people” is
customer-oriented. It does not focus on mobile phones or smartphones only. It provides a
solution to customer needs and could easily have worked 50 years ago, and will continue
to work in the future. It also gives more strategic flexibility for the company. In Nokia’s
case, it may start providing VoIP software to allow calls to be made over the internet and
its mission would still be valid.
PRODUCT-ORIENTED MISSIONS. Product-oriented missions focus on what

products or services to serve rather than what solutions to provide for customers. These
statements provide less flexibility for the company because most products have short life
cycle and offer limited market expansion. The company that defines its business as
“providing best health insurance products” may struggle to grow to other insurance
product categories.
For a mission to be effective it must include the following 9 components:
(1) Customers. Who are your customers? How do you benefit them?

(2) Products or services. What are the main products or services that you offer? Their
uniqueness?
(3) Markets. In which geographical markets do you operate?
(4) Technology. What is the firm’s basic technology?
(5) Concern for survival. Is the firm committed to growth and financial soundness?
(6) Philosophy. What are the basic beliefs, values and philosophies that guide an
organization?
(7) Self-concept. What are the firm’s strengths, competencies or competitive
advantages?
(8) Concern for public image. Is the firm socially responsible and environmentally
friendly?
(9) Concern for employees. How does a company treat its employees?
WHY CREATING A MISSION IS IMPORTANT?
Many studies have been conducted to find out if having and communicating mission
statement helps an organization to achieve higher performance. The results were mixed.
Some studies found positive relationship between written statements and higher
organizational performance, while other studies found none or even negative relationship.
One of the reasons might be that most of the companies create mission statement only
because it’s fashionable to do so and little effort is made to actually communicate that
mission to its stakeholders. David argues that if an organization constantly revises its
mission and treats it as a living document, it achieves higher performance than its
competitors. Nonetheless, all of the authors agree that mission brings the following
benefits:
(1) Informs organization’s stakeholders about its plans and goals;

(2) Unifies employees’ efforts in pursuing company goals;
(3) Serves as an effective public relations tool;
(4) Provides basis for allocating resources;
(5) Guides strategic or daily decision making;
(6) Shows that a company is proactive.
TOPIC 2B
WRITING A MISSION
Creating a mission statement is an important first step in clearly identifying your

business’ reason for being. It’s hard to do it right. Therefore, we identified these steps and
guidelines to help you write an effective statement.
STEP 1: Gather a team of managers, employees and shareholders. Mission is the

statement that must be understood by employees of all levels. Involving more people will
let you find out how each of them sees an organization and its core purpose. In addition,
employees will support organization’s mission more if they will be involved in the
process of creating it.
STEP 2: Answer all 9 questions for effective mission. Many practitioners and academics
agree that a comprehensive statement must include all 9 components. Only then creating
a mission can benefit a company. At this stage, try to honestly answer all the questions
and identify your customers, markets, values etc. It may take a lot of time but it’s worth
it.
STEP 3: Find the best combination. Collect the answers from everyone and try to
combine one mission statement out of them. During this step, you can make sure that
everyone understands company’s reason for being and there are no conflicting views left.
Following guidelines (all taken from various studies) should also be helpful in writing an
effective mission statement:
 ‘Public image’, ‘concern for employees’, ‘philosophy’ and ‘customers’ are the
most important components of a mission;
 ‘Citizenship’, ‘teamwork’, ‘excellence’ and ‘integrity’ are the values used most
often by the companies with effective missions;
 Influential statements include words such as: ‘communities’, ‘customers’,
‘employees’, ‘ethics’, ‘global’ and ‘quality/value’
 Statement should be customer-oriented;
 Use less than 250 words;
 Be inspiring and enduring.
NOTE! Every mission must be communicated to organization’s stakeholders to have any

positive impact.It must be constantly revised and adjusted to meet any changing situation.
MISSION STATEMENT EXAMPLES
The best way to learn creating an influential mission is to look at the existing examples.
In the following table, we provide 3 mission statement examples and examine them using
the previous guidelines.
FEDEX MISSION
"FedEx Corporation will produce superior financial returns for its shareowners by
providing high value-added logistics, transportation and related information services
through focused operating companies. Customer requirements will be met in the highest
quality manner appropriate to each market segment served FedEx Corporation will strive
to develop mutually rewarding relationships with its employees, partners and suppliers.
Safety will be the first consideration in all operations. Corporate activities will be
conducted to the highest ethical and professional standards."
FedEx mission lacks the answers about technologies and social responsibilities , which is
one of the key characteristics that have to be in successful statement. It also lacks all the
values pointed out in the guidelines that are used by successful companies in their
statements. It is also product-oriented.
INTEL MISSION
"Delight our customers(1), employees(9), and shareholders(5) by relentlessly delivering

the platform and technology(2,4) advancements that become essential to the way we
work and live."
Intel’s mission is poor because it lacks 4 components: markets(3), philosophy(6), self-

concept(7) and public image(8). It is customer-oriented but does not use any of the top 4
values and is too short.
TOYOTA MISSION
Toyota will lead the way to the future of mobility, enriching lives around the world(3)
with the safest and most responsible(6) ways of moving people(1). Through our
commitment to quality, constant innovation(4,7) and respect for the planet(8), we aim to
exceed expectations and be rewarded with a smile. We will meet challenging goals (5) by
engaging the talent and passion of people(9), who believe there is always a better way.
(6)Toyota has only missed to mention its products. Their mission is customer-oriented,
inspiring and enduring but it doesn’t clearly mention its customers or social
responsibilities.
TOPIC 2C, 2E
ENVIRONMENTAL SCANNING
INTERNAL & EXTERNAL ANALYSIS OF ENVIRONMENT
Organizational environment consists of both external and internal factors. Environment

must be scanned so as to determine development and forecasts of factors that will
influence organizational success. Environmental scanning refers to possession and
utilization of information about occasions, patterns, trends, and relationships within
an organization’s internal and external environment. It helps the managers to decide
the future path of the organization. Scanning must identify the threats and opportunities
existing in the environment. While strategy formulation, an organization must take
advantage of the opportunities and minimize the threats. A threat for one
organization may be an opportunity for another.
Internal analysis of the environment is the first step of environment scanning.

Organizations should observe the internal organizational environment. This includes
employee interaction with other employees, employee interaction with management,
manager interaction with other managers, and management interaction with
shareholders, access to natural resources, brand awareness, organizational
structure, main staff, operational potential, etc. Also, discussions, interviews, and
surveys can be used to assess the internal environment. Analysis of internal environment
helps in identifying strengths and weaknesses of an organization.
As business becomes more competitive, and there are rapid changes in the external
environment, information from external environment adds crucial elements to the
effectiveness of long-term plans. As environment is dynamic, it becomes essential to
identify competitors’ moves and actions. Organizations have also to update the core
competencies and internal environment as per external environment. Environmental
factors are infinite, hence, organization should be agile and vigile to accept and adjust to
the environmental changes. For instance - Monitoring might indicate that an original
forecast of the prices of the raw materials that are involved in the product are no more
credible, which could imply the requirement for more focused scanning, forecasting and
analysis to create a more trustworthy prediction about the input costs. In a similar
manner, there can be changes in factors such as competitor’s activities, technology,
market tastes and preferences.
While in external analysis, three correlated environment should be studied and analyzed
 immediate / industry environment

 national environment
 broader socio-economic environment / macro-environment
Examining the industry environment needs an appraisal of the competitive structure of

the organization’s industry, including the competitive position of a particular
organization and it’s main rivals.
Also, an assessment of the nature, stage, dynamics and history of the industry is essential.
It also implies evaluating the effect of globalization on competition within the industry.
Analyzing the national environment needs an appraisal of whether the national
framework helps in achieving competitive advantage in the globalized environment.
Analysis of macro-environment includes exploring macro-economic, social, government,

legal, technological and international factors that may influence the environment. The
analysis of organization’s external environment reveals opportunities and threats for an
organization.
Strategic managers must not only recognize the present state of the environment and their
industry but also be able to predict its future positions.
TOPIC 3B
THE INPUT STAGE
There are a various number of tools that are used by the managers in an organization in
order to analyze the various internal as well as the external environmental factors,
namely:
 EFE & IFE MATRICES

 TOOL: BENCHMARKING
 TOOL: COMPETITIVE PROFILE MATRIX (CPM)
 TOOL: BCG GROWTH-SHARE MATRIX
 GE-MCKINSEY (9 BOX STRATEGY)
 VALUE CHAIN ANALYSIS (VCA)
TOOL: EFE & IFE Matrices
Internal Factor Evaluation (IFE) Matrix is a strategy tool used to evaluate firm’s internal
environment and to reveal its strengths as well as weaknesses.
External Factor Evaluation (EFE) Matrix is a strategy tool used to examine company’s
external environment and to identify the available opportunities and threats.
Understanding the tool
The internal and external factor evaluation matrices have been introduced by Fred R.
David in his book ‘Strategic Management’[1] (at least I found them there and couldn’t
trace their origins anywhere else). According to the author, both tools are used to
summarize the information gained from company’s external and internal environment
analyses. The summarized information is evaluated and used for further purposes, such
as, to build SWOT analysis or IE matrix. Even though, the tools are quite simplistic, they
do the best job possible in identifying and evaluating the key affecting factors. Both tools
are nearly identical so we’ll only show an example of an EFE matrix right now.
External Factor Evaluation Matrix
Key External Factors Weigh Ratin Weighte

t g d Score
Opportunities
1. New trade agreement that lifts the ban of imported 0.11 3 0.33
food is signed with a neighboring country.
2. Signing a contract with a new supplier. 0.09 1 0.09
3. Processed food market growing by 15% next year 0.24 2 0.48

in our largest market.
4. Incorporating a new company in neighboring 0.10 1 0.10

country, where the tax rate is decreasing by 3% next
External Factor Evaluation Matrix
Key External Factors Weigh Ratin Weighte

t g d Score
year.
Threats
5. The contract with the main customer expires in 2 0.17 4 0.68

months.
6. Extreme cases of natural disasters occurring next 0.03 2 0.06

year.
7. New law, requiring decreasing the amount of sugar 0.14 3 0.42

in the food by 20%, could be passed next year.
8. Competitors opening 3 new stores in the town. 0.12 2 0.24
Total 1.00 - 2.40
KEY EXTERNAL FACTORS
EFE Matrix. When using the EFE matrix we identify the key external opportunities and
threats that are affecting or might affect a company. Where do we get these factors from?
Simply by analysing the external environment with the tools like PEST analysis, Porter’s
Five Forces or Competitive Profile Matrix.
IFE MATRIX. Strengths and weaknesses are used as the key internal factors in the
evaluation. When looking for the strengths, ask what do you do better or have more
valuable than your competitors have? In case of the weaknesses, ask which areas of your
company you could improve and at least catch up with your competitors?
The general rule is to identify 10-20 key external factors and additional 10-20 key
internal factors, but you should identify as many factors as possible.
WEIGHTS
Each key factor should be assigned a weight ranging from 0.0 (low importance) to 1.0
(high importance). The number indicates how important the factor is if a company wants
to succeed in an industry. If there were no weights assigned, all the factors would be
equally important, which is an impossible scenario in the real world. The sum of all the
weights must equal 1.0. Separate factors should not be given too much emphasis
(assigning a weight of 0.30 or more) because the success in an industry is rarely
determined by one or few factors.
Weights have the same meaning in both matrices.
In our first example, the most significant factors are ‘Processed food market growing by
15% next year in our largest market.’ (0.24 points), ‘The contract with the main customer
expires in 2 months.’ (0.17 points) and ‘New law, requiring decreasing the amount of
sugar in the food by 20%, could be passed next year.’ (0.14 points).
RATINGS
The meaning of ratings is different in each matrix, so we’ll explain them separately.
EFE Matrix. The ratings in external matrix refer to how effectively company’s current
strategy responds to the opportunities and threats. The numbers range from 4 to 1, where
4 means a superior response, 3 – above average response, 2 – average response and 1 –
poor response. Ratings, as well as weights, are assigned subjectively to each factor. In our
example, we can see that the company’s response to the opportunities is rather poor,
because only one opportunity has received a rating of 3, while the rest have received the
rating of 1. The company is better prepared to meet the threats, especially the first threat.
IFE Matrix. The ratings in internal matrix refer to how strong or weak each factor is in a
firm. The numbers range from 4 to 1, where 4 means a major strength, 3 – minor
strength, 2 – minor weakness and 1 – major weakness. Strengths can only receive ratings
3 & 4, weaknesses – 2 & 1. The process of assigning ratings in IFE matrix can be done
easier using benchmarking tool.
WEIGHTED SCORES & TOTAL WEIGHTED SCORE

The score is the result of weight multiplied by rating. Each key factor must receive a
score. Total weighted score is simply the sum of all individual weighted scores. The firm
can receive the same total score from 1 to 4 in both matrices. The total score of 2.5 is an
average score. In external evaluation a low total score indicates that company’s strategies
aren’t well designed to meet the opportunities and defend against threats. In internal
evaluation a low score indicates that the company is weak against its competitors.
In our example, the company has received total score 2.40, which indicates that
company’s strategies are neither effective nor ineffective in exploiting opportunities or
defending against threats. The company should improve its strategy and focus more on
how take advantage of the opportunities.
BENEFITS
Both matrices have the following benefits:
 Easy to understand. The input factors have a clear meaning to everyone inside or

outside the company. There’s no confusion over the terms used or the implications
of the matrices.
 Easy to use. The matrices do not require extensive expertise, many personnel or
lots of time to build.
 Focuses on the key internal and external factors. Unlike some other analyses (e.g.
value chain analysis, which identifies all the activities in the company’s value
chain, despite their importance), the IFE and EFE only highlight the key factors
that are affecting a company or its strategy.
 Multi-purpose. The tools can be used to build SWOT analysis, IE matrix, GE-
McKinsey matrix or for benchmarking.
Limitations
 Easily replaced. IFE and EFE matrices can be replaced almost completely by
PEST analysis, SWOT analysis, competitive profile matrix and partly some other
analysis.
 Doesn’t directly help in strategy formation. Both analyses only identify and
evaluate the factors but do not help the company directly in determining the next
strategic move or the best strategy. Other strategy tools have to be used for that.
 Too broad factors. SWOT matrix has the same limitation and it means that some
factors that are not specific enough can be confused with each other. Some
strengths can be weaknesses as well, e.g. brand reputation, which can be a strong
and valuable brand reputation or a poor brand reputation. The same situation is
with opportunities and threats. Therefore, each factor has to be as specific as
possible to avoid confusion over where the factor should be assigned.
USING THE TOOL
STEP 1. IDENTIFY THE KEY EXTERNAL/INTERNAL FACTORS
EFE matrix. Do the PEST analysis first. The information from the PEST analysis reveals
which factors currently affect or may affect the company in the future. At this point, the
factors can be either opportunities or threats and your next task is to sort them into one or
the other category. Try to look at which factors could benefit the company and which
ones would harm it.
You should also analyze your competitors’ actions and their strategies. This way you
would know what competitors are doing right and what their strategies lack.
IFE MATRIX. In case you have done a SWOT analysis already, you can gather some of
the factors from there. The SWOT analysis will usually have no more than 10 strengths
and weaknesses, so you’ll have to do additional analysis to identify more key internal
factors for the matrix.
Look again into the company’s resources, capabilities, organizational structure, culture,
functional areas and value chain analysis and recognize the strong and weak points of the
organization.
STEP 2. Assign the weights and ratings
Weights and ratings are assigned subjectively. Therefore, it is a more difficult process
than identifying the key factors. We assign weights based on industry analysts’ opinions.
Find out what the analysts say about the industry’s success factors and then use their
opinion or analysis to assign the appropriate weights. The same process is with ratings.
Although, this time you or the members of your group will have to decide what ratings
should be assigned. Ratings from 1-4 can be assigned to each opportunity and threat, but
only the ratings from 1-2 can be assigned to each weakness and 3-4 to each strength.
STEP 3. USE THE RESULTS
IFE or EFE matrices have little value on their own. You should do both analyses and
combine their results to discuss new strategies or for further analysis. They are especially
useful when building advanced SWOT analysis, SWOT matrix for strategies or IE
matrix.
TOOL: BENCHMARKING
Benchmarking is a strategy tool used to compare the performance of the business

processes and products with the best performances of other companies inside and outside
the industry.
Benchmarking is the search for industry best practices that lead to superior performance.
Comparing your own business to a rival is essential when competing. Without it, you
would never know how successful your performance is in a market or whether you
perform one or another task better than your competitor does. For example, 85%
customer satisfaction might look great for you or even compared to your industry’s
average, but what if some other companies (not necessarily rivals) easily achieve 97%
rate? In this situation, your 85% satisfaction rate doesn’t look that brilliant. To better
understand your situation and improve company’s performance, the managers use
benchmarking.
Some form of comparison in the companies was used, since 1800s, and mainly included
product’s quality and feature comparison. This type of comparison was scarcely used and
didn’t become a valuable management tool until late 1980s and 1990s, when Xerox
introduced the process benchmarking technique.[2] This type of comparison proved very
beneficial and Xerox, AT&T and other companies began comparing the performance of
their processes to the best standards in the industry. The following table shows how
benchmarking evolved into a modern strategy tool:
Benchmarking history
1950-1975 Reverse engineering
1976-1986 Competitive benchmarking
1982-1986 Process benchmarking
1988+ Strategic benchmarking
1993+ Global benchmarking
According to Camp,[1] benchmarking is simply “Finding and implementing the best

business practices”. Managers use the tool to identify the best practices in other
companies and apply those practices to their own processes in order to improve the
company’s performance. Improving company’s performance is, without a doubt, the most
important goal of benchmarking.
It’s a very important tool in strategic management, because it often reveals how well your
organization performs compared to rivals.
Other uses of the tool:
To reveal successful business processes. It is often unclear how successful companies

achieve superior performance. By observing and scrutinizing such companies you can
identify the processes, skills or competences that contribute to organization’s success and
then apply the same practices to your own company.
To facilitate knowledge sharing. The knowledge acquired about other businesses can be

easily transferred to your own organization.
To gain competitive advantage. The company can gain a competitive advantage if it

applies the best practices from other industries to its own industry. For example, a small
family owned farm selling its own agricultural products online could apply the same
social media strategies as internet blogs to attract attention and gain new customers. This
would be a new way to gain customers and may result in at least temporary competitive
advantage.
Popularity
The tool is one of the most recognized and widely used tools of all the business strategy
tools. The survey done by The Global Benchmarking Network[4] reveals that adaptation
of the tool in organizations vary from 68% for informal benchmarking to 49% and 39%
for performance and best practice benchmarking, respectively. In addition, annual
surveys from Bain & Company’s[5] indicate similar results.
Source: Bain &
Company[5]
The graph shows that, although, the satisfaction of the tool is high, the usage of it has
declined since the heights in 1999. Still, benchmarking remained the 4th top used tool by
businesses in the world in 2013.[6]
Types
There are different types of benchmarking the managers can use. Tuominen[7] and
Bogan & English[8]identified these 3 major types:
Strategic benchmarking. Managers use this type of benchmarking to identify the best way
to compete in the market. During the process, the companies identify the winning
strategies (usually outside their own industry) that successful companies use and apply
them to their own strategic process. It is also common to compare the strategic goals in
order to spot new strategic choices.
Performance benchmarking. It is concerned with comparing your company’s products

and services. According to Bogan & English[8] the tool mainly focuses on product and
service quality, features, price, speed, reliability, design and customer satisfaction, but it
can measure anything that has the measurable metrics, including processes. Performance
benchmarking determines how strong our products and services are compared to our
competition.
Process benchmarking. It requires to look at other companies that engage in similar

activities and to identify the best practices that can be applied to your own processes in
order to improve them. Process benchmarking is a separate type of benchmarking, but it
usually derives from performance benchmarking. This is because companies first identify
the weak competing points of their products or services and then focus on the key
processes to eliminate those weaknesses. For example, an organization using
performance comparison identifies that their product ‘X’ is superior in features,
manufacturing quality and design, but pricier than competitor’s product ‘Y’. Then the
company determines, which processes add the most to the cost of the product and seek
how to improve them by looking at similar, but less cost heavy processes in other
companies.
Approaches
In addition to the types, there are four ways you can do benchmarking. It is important to
choose the optimal way because it reduces the costs of the activity and improves the
chances to find the ‘best standards’ you can rely on.
INTERNAL BENCHMARKING. In large organizations, which operate in different

geographic locations or manage many products and services, same functions and
processes are usually performed by different teams, business units or divisions. This often
results in processes performed very well in one division but poorly in another. Internal
benchmarking is used to compare the work of separate teams, units or divisions to
identify the ones that are working better and share the knowledge throughout the
company to other teams to achieve higher performance. It is usually employed by the
companies that have recently expanded geographically, but haven’t yet created proper
knowledge sharing systems between divisions. If such systems are in place, there’s no
need to use internal benchmarking to look for best practices.
EXTERNAL OR COMPETITIVE BENCHMARKING. Some authors use these terms

interchangeably but there are a few differences between them. First, competitive
benchmarking refers to a process when a company compares itself with the competitors
inside its industry. Whereas external benchmarking looks both inside and outside the
industry to find the best practices, thus, including competitive benchmarking.[9] Second,
competitive benchmarking, in my opinion, will only be used with performance
benchmarking to compare your products and services. Strategic or process benchmarking
won’t be viable options, because it’ll be very hard to find a competitor, who wants to
share sensitive information with you and you’ll never outcompete your rival if you’ll be
using his strategy or processes. Besides, external benchmarking is a more beneficial
approach to use due to higher possibilities of finding the best practices.
Functional benchmarking. Managers of functional departments find it useful to analyze

how well their functional area performs compared to functional areas of other companies.
It is quite easy to identify the best marketing, finance, human resource or operations
departments, in other companies, that excel in what they do and to apply their practices to
your own functional area. This way the companies can look at a wide range of
organizations, even unrelated ones, and instead of improving separate processes, they can
improve the whole functional areas.
Generic benchmarking. According to Kulmala,[9] it refers to comparisons, which “focus

on excellent work processes rather than on the business practices of a particular
organization”. For example, your company tries to improve its marketing capabilities and
benchmarks itself against company ‘A’. While observing company’s ‘A’ marketing
processes you also notice how well their human resources are managed using ‘big data’
analytics. This gives you an idea to implement the data collecting and analysis team in
your own company to significantly improve its overall performance.
The other example of generic benchmarking would be to compare your processes against
generally accepted best standards. For example, every organization strives to become a
learning organization, because such an organization is better equipped to overcome
challenges and adapt to the market changes. By comparing your company to some
general standards, which would indicate that your company is a learning organization,
you would be using generic benchmarking.
The following diagram summarizes the types and approaches to benchmarking:
Advantages
 Easy to understand and use.

 If done properly, it’s a low cost activity that offers huge gains.
 Brings innovative ideas to the company.
 Provides you with insight of how other companies organize their operations and
processes.
 Increases the awareness of your costs and level of performance compared to your
rivals.
 Facilitates cooperation between teams, units and divisions.
Disadvantages
 You need to find a benchmarking partner.

 It is sometimes impossible to assign a metric to measure a process.
 You might need to hire a consultant.
 If your organization is not experienced at it, the initial costs could be huge.
 Managers often resist the changes that are required to improve the performance.
 Some of best practices won’t be applicable to your whole organization.
USING THE TOOL
Benchmarking is used extensively by organizations, but no universal process of how to

conduct it is established. Each organization designs its own way of using the tool. Before
revealing some of the examples, we provide you with the guidelines[3] to make the
process easier.
GUIDELINES:
Only choose the products, services or processes, which performance is poor. Comparing

the processes you are good at will be a waste of time and money, and won’t bring the
desired results.
Define the specific metrics or processes to measure. Be careful not to choose too broad
processes that can’t be measured as you won’t be able to compare it properly.
Prepare your company for change. Your organization must overcome the resistance to
change to implement new best practices.
Choose the team that is qualified. Although benchmarking is easy to use, you shouldn’t
pick up just anybody to do it. Include the people that will be responsible for
implementing the changes and the people that are skilled at it.
Participate in benchmarking networks and use the appropriate software to facilitate the
process. There are various benchmarking networks, where participating companies can
find benchmarking partners or gather the data for the metrics they need. Such
participation facilitates the process significantly by reducing the costs and time spent
looking for the right data.
Look for the best standards and ideas even in unrelated areas. Many significant
discoveries will be made by observing the companies that are completely unrelated to
your organization.
BENCHMARKING WHEEL
The benchmarking wheel model introduced in article “Benchmarking for Quality”[10] is

a 5 stage process that was created by observing more than 20 other models.
It’s fairly simple and comprises of following stages:
Plan. Assemble a team. Clearly define what you want to compare and assign metrics to it.
Find. Identify benchmarking partners or sources of information, where you’ll be able to

collect the information from.
Collect. Choose the methods to collect the information and gather the data for the metrics
you defined.
Analyze. Compare the metrics and identify the gap in performance between your
company and the organization observed. Provide the results and recommendations on
how to improve the performance.
Improve. Implement the changes to your products, services, processes or strategy.
XEROX PROCESS
Xerox has popularized benchmarking and was one of the first companies to introduce the
process of doing it. This 5-phase and 12-step process was created by Camp, R. the
manager of Xerox responsible for benchmarking.[3]
Most of the processes are similar to the examples above and can be applied to any
company or non-profit organization that strives to achieve superior performance using
benchmarking.
Example
Company ‘A’ has used performance benchmarking to compare its product ‘X’ with the
competitor’s product ‘Y’ and found out that the product ‘X’ is priced slightly lower, but it
also has fewer features than product ‘Y’. The company recognized that in order to win a
larger market share and establish itself in the market, it has to increase the number of
features in its product while keeping the price at the same level or even decreasing it.
To achieve this, the company ’A’ has set up a team that investigated product ‘X’ value
chain analysis. The team identified that the activities adding the most to the cost are
marketing and purchasing parts in an open market. The team also identified that by
buying standards parts in the market, the company has little room to introduce new
features as this would require customized parts for its product ‘X’. The next step was to
assign the proper metrics to marketing and purchasing activities and gather the required
data. The company joined the benchmarking network and in a few weeks gathered
enough data to compare the performance of its processes.
The results indicated that the marketing activities could be improved significantly. The
team recognized that many businesses in the industry were able to attract new customers
profitably through heavy advertising online. Yet, further observations of the companies
outside the industry showed that the average returns on advertising weren’t so huge
compared to the returns when attracting customers through social media. Therefore, the
team decided to rely on social media rather than advertising to attract more customers,
while reducing its costs by 20%.
The next activity analyzed was the purchase of parts in the open market. While this was a
convenient way to conduct the business it was costing more and didn’t allow customizing
the product. The team identified that this activity could be improved by manufacturing
the parts inside the company or by establishing long term relationships with suppliers.
The collected data and the experience of other similar businesses showed that the best
option would be to establish long term relationships with suppliers. It would cost less
than manufacturing the parts inside the company or buying them in an open market. It
would also allow ordering customized parts that were needed for the new features.
By engaging in benchmarking activities, the team has identified the gaps in company’s
performance and introduced new ways to improve the current processes to achieve the
higher performance.
TOOL: COMPETITIVE PROFILE MATRIX (CPM)
The Competitive Profile Matrix (CPM) is a tool that compares the firm and its rivals and
reveals their relative strengths and weaknesses.
In order to better understand the external environment and the competition in a particular
industry, firms often use CPM. The matrix identifies a firm’s key competitors and
compares them using industry’s critical success factors. The analysis also reveals
company’s relative strengths and weaknesses against its competitors, so a company
would know, which areas it should improve and, which areas to protect. An example of a
matrix is demonstrated below.
CPM Table
Company A Company B Company C
Critical Success Weigh Ratin Scor Ratin Scor Ratin Score

Factor t g e g e g
Brand reputation 0.13 2 0.26 3 0.39 1 0.13
Level of product 0.08 4 0.32 3 0.24 1 0.08

integration
Range of products 0.05 3 0.15 1 0.05 2 0.10
Successful new 0.04 3 0.12 3 0.12 3 0.12

introductions
Market Share 0.14 2 0.28 4 0.56 4 0.56
Sales per employee 0.08 1 0.08 2 0.16 3 0.24
Low cost structure 0.05 1 0.05 3 0.15 4 0.20
Variety of 0.07 4 0.28 2 0.14 2 0.14

distribution
channels
Customer retention 0.02 2 0.04 4 0.08 1 0.02
Superior IT 0.11 3 0.33 4 0.44 4 0.44

capabilities
Strong online 0.15 3 0.45 3 0.45 4 0.60

presence
Successful 0.08 1 0.08 2 0.16 1 0.08

promotions
Total 1.00 - 2.44 - 2.94 - 2.71
CRITICAL SUCCESS FACTORS
Critical success factors (CSF) are the key areas, which must be performed at the highest
possible level of excellence if organizations want succeed in the particular industry. They
vary between different industries or even strategic groups and include both internal and
external factors. In our example, we have included 11 CSF, which is usually not enough.
The more critical success factors are included the more robust and accurate the analysis
is.
The following list provides some of the general CSF, but the list is not definite and you
should include industry specific factors in your matrix:
Market Share Union relations Power over suppliers
Product Quality Skilled workforce Access to key suppliers
Clear strategic
Location of facilities Efficient supply chain
direction
Customer service Production capacity Supply chain integration
Customer loyalty Added product features On time delivery
Brand reputation Price competitiveness Strong online presence
Customer Effective social media

Low cost structure
satisfaction management
Experience and skills

Financial position Variety of products
in e-commerce
Management qualification
Cash reserves Complementary products
and experience
Innovation in products
Profit margin Level of product integration and
services
Inventory turnover Successful product promotions Innovative culture
Employee retention Superior marketing capabilities Efficient production
Income per
Superior advertising capabilities Lean production system
employee
Innovations per
Superior IT capabilities Strong supplier network
employee
Strong distribution
Cost per employee Size of advertising budget
network
Effectiveness of sales
R&D spending Product design
distribution
Strong patent Level of vertical

Employee satisfaction
portfolio integration
Effective planning and Effective corporate social

New patents per year
budgeting responsibility programs
Revenue per new

Variety of distribution channels Sales per outlet
product
Successful new
Power over distributors Parent company support
introductions
WEIGHT
Each critical success factor should be assigned a weight ranging from 0.0 (low
importance) to 1.0 (high importance). The number indicates how important the factor is
in succeeding in the industry. If there were no weights assigned, all factors would be
equally important, which is an impossible scenario in the real world. The sum of all the
weights must equal 1.0. Separate factors should not be given too much emphasis
(assigning a weight of 0.3 or more) because the success in an industry is rarely
determined by one or few factors. In our first example, the most significant factors are
‘strong online presence’ (0.15), ‘market share’ (0.14), ‘brand reputation’ (0.13).
RATING
The ratings in CPM refer to how well companies are doing in each area. They range from
4 to 1, where 4 means a major strength, 3 – minor strength, 2 – minor weakness and 1 –
major weakness. Ratings, as well as weights, are assigned subjectively to each company,
but the process can be done easier through benchmarking. Benchmarking reveals how
well companies are doing compared to each other or industry’s average. Just remember
that firms can be assigned equal ratings for the same factor. For example, if Company A,
Company B and Company C, have the market share of 25%, 27% & 28% accordingly,
they would all receive the rating of 4 rather than receiving ratings 2, 3 & 4.
Score & Total Score
The score is the result of weight multiplied by rating. Each company receives a score on
each factor. Total score is simply the sum of all individual score for the company. The
firm that receives the highest total score is relatively stronger than its competitors. In our
example, the strongest performer in the market should be Company B (2.94 points).
BENEFITS OF THE CPM:
 The same factors are used to compare the firms. This makes the comparison more
accurate.
 The analysis displays the information on a matrix, which makes it easy to compare
the companies visually.
 The results of the matrix facilitate decision-making. Companies can easily decide
which areas they should strengthen, protect or what strategies they should pursue.
USING THE TOOL
STEP 1. IDENTIFY THE CRITICAL SUCCESS FACTORS
To make it easier, use our list of CSF and include as many factors as possible. In
addition, following questions should be helpful identifying industry’s CSF:
 Why consumers prefer Company A over Company B or vice versa?

 What resources, capabilities and competences firms possess?
 What sustainable competitive advantages companies have in the industry?
 Why some companies succeed and others fail in the industry?
STEP 2. ASSIGN THE WEIGHTS AND RATINGS
The best way to identify what weights should be assigned to each factor is to compare the
best and worst performing companies in the industry. Well performing companies will
usually undertake activities that are significant for success in the industry. They will put
most of their resources and energy into those activities as compared to low performing
organizations. Weights can also be determined in discussion with other top-level
managers.
Ratings should be assigned using benchmarking or during team discussions.
STEP 3. COMPARE THE SCORES AND TAKE ACTION
You should compare the scores on each factor to identify where company’s relative
strengths and weaknesses are. In our first example, Company A had relative strength in
‘level of product integration’, ‘product range’ and ‘variety of distribution channels’.
Therefore, Company A should protect these areas while trying to improve its weaknesses
in ‘sales per employee’ and ‘market share’. The company should also improve its strategy
to become more successful in the industry.
TOOL: BCG GROWTH-SHARE MATRIX
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.
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. BCG matrix quadrants are simplified versions of the reality and
cannot be applied blindly. They can help as general investment guidelines but should not
change strategic thinking. Business should rely on management judgement, business
unit strengths and weaknesses and external environment factors to make more reasonable
investment decisions.
Advantages and disadvantages
 Easy to perform;
 Helps to understand the strategic positions of business portfolio;
 It’s a good starting point for further more thorough analysis.
 Growth-share analysis has been heavily criticized for its oversimplification and
lack of useful application. Following are the main limitations of the analysis:
 Business can only be classified to four quadrants. It can be confusing to classify an
SBU that falls right in the middle.
 It does not define what ‘market’ is. Businesses can be classified as cash cows,
while they are actually dogs, or vice versa.
 Does not include other external factors that may change the situation completely.
 Market share and industry growth are not the only factors of profitability. Besides,
high market share does not necessarily mean high profits.
 It denies that synergies between different units exist. Dogs can be as important as
cash cows to businesses if it helps to achieve competitive advantage for the rest of
the company.
USING THE TOOL
Although BCG analysis has lost its importance due to many limitations, it can still be a
useful tool if performed by following these steps:
1. Step 1. Choose the unit
2. Step 2. Define the market
3. Step 3. Calculate relative market share
4. Step 4. Find out market growth rate
5. Step 5. Draw the circles on a matrix
STEP 1. CHOOSE THE UNIT. BCG matrix can be used to analyze SBUs, separate
brands, products or a firm as a unit itself. Which unit will be chosen will have an impact
on the whole analysis. Therefore, it is essential to define the unit for which you’ll do the
analysis.
STEP 2. DEFINE THE MARKET. Defining the market is one of the most important
things to do in this analysis. This is because incorrectly defined market may lead to poor
classification. For example, if we would do the analysis for the Daimler’s Mercedes-Benz
car brand in the passenger vehicle market it would end up as a dog (it holds less than 20%
relative market share), but it would be a cash cow in the luxury car market. It is important
to clearly define the market to better understand firm’s portfolio position.
STEP 3. CALCULATE RELATIVE MARKET SHARE. Relative market share can

be calculated in terms of revenues or market share. It is calculated by dividing your own
brand’s market share (revenues) by the market share (or revenues) of your largest
competitor in that industry. For example, if your competitor’s market share in
refrigerator’s industry was 25% and your firm’s brand market share was 10% in the same
year, your relative market share would be only 0.4. Relative market share is given on x-
axis. It’s top left corner is set at 1, midpoint at 0.5 and top right corner at 0 (see the
example below for this).
STEP 4. FIND OUT MARKET GROWTH RATE. The industry growth rate can be
found in industry reports, which are usually available online for free. It can also be
calculated by looking at average revenue growth of the leading industry firms. Market
growth rate is measured in percentage terms. The midpoint of the y-axis is usually set at
10% growth rate, but this can vary. Some industries grow for years but at average rate of
1 or 2% per year. Therefore, when doing the analysis you should find out what growth
rate is seen as significant (midpoint) to separate cash cows from stars and question marks
from dogs.
STEP 5. DRAW THE CIRCLES ON A MATRIX. After calculating all the measures,
you should be able to plot your brands on the matrix. You should do this by drawing a
circle for each brand. The size of the circle should correspond to the proportion of
business revenue generated by that brand.
GE-MCKINSEY (9 BOX STRATEGY)
GE-McKinsey nine-box matrix is a strategy tool that offers a systematic approach for the
multi business corporation to prioritize its investments among its business units.
GE-McKinsey is a framework that evaluates business portfolio, provides further strategic

implications and helps to prioritize the investment needed for each business unit (BU).
In the business world, much like anywhere else, the problem of resource scarcity is
affecting the decisions the companies make. With limited resources, but many
opportunities of using them, the businesses need to choose how to use their cash best.
The fight for investments takes place in every level of the company: between teams,
functional departments, divisions or business units. The question of where and how much
to invest is an ever going headache for those who allocate the resources.
How does this affect the diversified businesses? Multi business companies manage
complex business portfolios, often, with as much as 50, 60 or 100 products and services.
The products or business units differ in what they do, how well they perform or in their
future prospects. This makes it very hard to make a decision in which products the
company should invest. At least, it was hard until the BCG matrix and its improved
version GE-McKinsey matrix came to help. These tools solved the problem by
comparing the business units and assigning them to the groups that are worth investing in
or the groups that should be harvested or divested.
In 1970s, General Electric was managing a huge and complex portfolio of unrelated
products and was unsatisfied about the returns from its investments in the products. At
the time, companies usually relied on projections of future cash flows, future market
growth or some other future projections to make investment decisions, which was an
unreliable method to allocate the resources. Therefore, GE consulted the McKinsey &
Company and as a result the nine-box framework was designed. The nine-box matrix
plots the BUs on its 9 cells that indicate whether the company should invest in a product,
harvest/divest it or do a further research on the product and invest in it if there’re still
some resources left. The BUs are evaluated on two axes: industry attractiveness and a
competitive strength of a unit.
INDUSTRY ATTRACTIVENESS
Industry attractiveness indicates how hard or easy it will be for a company to compete in
the market and earn profits. The more profitable the industry is the more attractive it
becomes. When evaluating the industry attractiveness, analysts should look how an
industry will change in the long run rather than in the near future, because the
investments needed for the product usually require long lasting commitment.
Industry attractiveness consists of many factors that collectively determine the

competition level in it. There’s no definite list of which factors should be included to
determine industry attractiveness, but the following are the most common: [1]
Long run growth rate
1. Industry size
2. Industry profitability: entry barriers, exit barriers, supplier power, buyer power,
threat of substitutes and available complements (use Porter’s Five Forces analysis
to determine this)
3. Industry structure (use Structure-Conduct-Performance framework to determine
this)
4. Product life cycle changes
5. Changes in demand
6. Trend of prices
7. Macro environment factors (use PEST or PESTEL for this)
8. Seasonality
9. Availability of labor
10. Market segmentation
11. Competitive strength of a business unit or a product
Along the X axis, the matrix measures how strong, in terms of competition, a particular
business unit is against its rivals. In other words, managers try to determine whether a
business unit has a sustainable competitive advantage (or at least temporary competitive
advantage) or not. If the company has a sustainable competitive advantage, the next
question is: “For how long it will be sustained?”
The following factors determine the competitive strength of a business unit:
1. Total market share

2. Market share growth compared to rivals
3. Brand strength (use brand value for this)
4. Profitability of the company
5. Customer loyalty
6. VRIO resources or capabilities (use VRIO framework to determine this)
7. Your business unit strength in meeting industry’s critical success factors
(use Competitive Profile Matrix to determine this)
8. Strength of a value chain (use Value Chain Analysis and Benchmarking to
determine this)
9. Level of product differentiation
10. Production flexibility
ADVANTAGES
1. Helps to prioritize the limited resources in order to achieve the best returns.
2. Managers become more aware of how their products or business units perform.
3. It’s more sophisticated business portfolio framework than the BCG matrix.
4. Identifies the strategic steps the company needs to make to improve the
performance of its business portfolio.
DISADVANTAGES
1. Requires a consultant or a highly experienced person to determine industry’s

attractiveness and business unit strength as accurately as possible.
2. It is costly to conduct.
3. It doesn’t take into account the synergies that could exist between two or more
business units.
DIFFERENCE BETWEEN GE MCKINSEY AND BCG MATRICES
GE McKinsey matrix is a very similar portfolio evaluation framework to BCG matrix.

Both matrices are used to analyze company’s product or business unit portfolio and
facilitate the investment decisions.
The main differences:
Visual difference. BCG is only a four cell matrix, while GE McKinsey is a nine cell
matrix. Nine cells provide better visual portrait of where business units stand in the
matrix. It also separates the invest/grow cells from harvest/divest cells that are much
closer to each other in the BCG matrix and may confuse others of what investment
decisions to make.
COMPREHENSIVENESS. The reason why the GE McKinsey framework was
developed is that BCG portfolio tool wasn’t sophisticated enough for the guys from
General Electric. In BCG matrix, competitive strength of a business unit is equal to
relative market share, which assumes that the larger the market share a business has the
better it is positioned to compete in the market. This is true, but it’s too simplistic to
assume that it’s the only factor affecting the competition in the market. The same is with
industry attractiveness that is measured only as the market growth rate in BCG. It comes
to no surprise that GE with its complex business portfolio needed something more
comprehensive than that.
USING THE TOOL
There are no established processes or models that managers could use when performing
the analysis. Therefore, we designed the following steps to facilitate the process:
1. STEP 1. DETERMINE INDUSTRY ATTRACTIVENESS OF EACH

BUSINESS UNIT
2. MAKE A LIST OF FACTORS. The first thing you’ll need to do is to identify,
which factors to include when measuring industry attractiveness. We’ve provided
the list of the most common factors, but you should include the factors that are the
most appropriate to your industries.
3. ASSIGN WEIGHTS. Weights indicate how important a factor is to industry’s
attractiveness. A number from 0.01 (not important) to 1.0 (very important) should
be assigned to each factor. The sum of all weights should equal to 1.0.
4. RATE THE FACTORS. The next thing you need to do is to rate each factor for
each of your product or business unit. Choose the values between ‘1-5’ or ‘1-10’,
where ‘1’ indicates the low industry attractiveness and ‘5’ or ‘10’ high industry
attractiveness.
5. CALCULATE THE TOTAL SCORES. Total score is the sum of all weighted
scores for each business unit. Weighted scores are calculated by multiplying
weights and ratings. Total scores allow comparing industry attractiveness for each
business unit.
TOOL: VALUE CHAIN ANALYSIS (VCA)
It is a process where a firm identifies its primary and support activities that add value to
its final product and then analyze these activities to reduce costs or increase
differentiation.
Value chain represents the internal activities a firm engages in when transforming inputs
into outputs.
VCA is a strategy tool used to analyze internal firm activities. Its goal is to recognize,
which activities are the most valuable (i.e. are the source of cost or differentiation
advantage) to the firm and which ones could be improved to provide competitive
advantage. In other words, by looking into internal activities, the analysis reveals where a
firm’s competitive advantages or disadvantages are. The firm that competes through
differentiation advantage will try to perform its activities better than competitors would
do. If it competes through cost advantage, it will try to perform internal activities at lower
costs than competitors would do. When a company is capable of producing goods at
lower costs than the market price or to provide superior products, it earns profits.
M. Porter introduced the generic value chain model in 1985. Value chain represents all
the internal activities a firm engages in to produce goods and services. VC is formed
of primary activities that add value to the final product directly and support activities that
add value indirectly.
PORTER'S VALUE CHAIN MODEL
PRIMARY ACTIVITIES
SUPPORT ACTIVITIES
Although, primary activities add value directly to the production process, they are not
necessarily more important than support activities. Nowadays, competitive advantage
mainly derives from technological improvements or innovations in business models or
processes. Therefore, such support activities as ‘information systems’, ‘R&D’ or ‘general
management’ are usually the most important source of differentiation advantage. On the
other hand, primary activities are usually the source of cost advantage, where costs can be
easily identified for each activity and properly managed.
Firm’s VC is a part of a larger industry VC. The more activities a company undertakes
compared to industry VC, the more vertically integrated it is.
Below you can find an industry value chain and its relation to a firm level VC.
USING THE TOOL
There are two different approaches on how to perform the analysis, which depend on
what type of competitive advantage a company wants to create (cost or differentiation
advantage). The table below lists all the steps needed to achieve cost or differentiation
advantage using VCA.
Competitive advantage types
Cost advantage Differentiatio

n advantage
This approach is used when organizations try to compete on costs The firms that
and want to understand the sources of their cost advantage or strive to
disadvantage and what factors drive those costs. create
superior
products or
services use
differentiation
advantage
approach.
Step 1. Identify the firm’s primary and support activities. Step

1. Identify the
Step 2. Establish the relative importance of each activity in the total
customers’
cost of the product.
value-creating
Step 3. Identify cost drivers for each activity. activities.
Step 4. Identify links between activities. Step

2. Evaluate
Step 5. Identify opportunities for reducing costs. the
differentiation
strategies for
improving
customer
value.
Competitive advantage types
Cost advantage Differentiatio

n advantage
Step
3. Identify the
best
sustainable
differentiation
.
COST ADVANTAGE
To gain cost advantage a firm has to go through 5 analysis steps:
STEP 1. Identify the firm’s primary and support activities. All the activities (from
receiving and storing materials to marketing, selling and after sales support) that are
undertaken to produce goods or services have to be clearly identified and separated from
each other. This requires an adequate knowledge of company’s operations because value
chain activities are not organized in the same way as the company itself. The managers
who identify value chain activities have to look into how work is done to deliver
customer value.
STEP 2. Establish the relative importance of each activity in the total cost of the
product. The total costs of producing a product or service must be broken down and
assigned to each activity. Activity based costing is used to calculate costs for each
process. Activities that are the major sources of cost or done inefficiently (when
benchmarked against competitors) must be addressed first.
STEP 3. Identify cost drivers for each activity. Only by understanding what factors drive
the costs, managers can focus on improving them. Costs for labor-intensive activities will
be driven by work hours, work speed, wage rate, etc. Different activities will have
different cost drivers.
STEP 4. Identify links between activities. Reduction of costs in one activity may lead to
further cost reductions in subsequent activities. For example, fewer components in the
product design may lead to less faulty parts and lower service costs. Therefore identifying
the links between activities will lead to better understanding how cost improvements
would affect he whole value chain. Sometimes, cost reductions in one activity lead to
higher costs for other activities.
STEP 5. Identify opportunities for reducing costs. When the company knows its
inefficient activities and cost drivers, it can plan on how to improve them. Too high wage
rates can be dealt with by increasing production speed, outsourcing jobs to low wage
countries or installing more automated processes.
DIFFERENTIATION ADVANTAGE
VCA is done differently when a firm competes on differentiation rather than costs. This
is because the source of differentiation advantage comes from creating superior products,
adding more features and satisfying varying customer needs, which results in higher cost
structure.
STEP 1. IDENTIFY THE CUSTOMERS’ VALUE-CREATING

ACTIVITIES. After identifying all value chain activities, managers have to focus on
those activities that contribute the most to creating customer value. For example, Apple
products’ success mainly comes not from great product features (other companies have
high-quality offerings too) but from successful marketing activities.
STEP 2. EVALUATE THE DIFFERENTIATION STRATEGIES FOR

IMPROVING CUSTOMER VALUE. Managers can use the following strategies to
increase product differentiation and customer value:
 Add more product features;

 Focus on customer service and responsiveness;
 Increase customization;
 Offer complementary products.
STEP 3. IDENTIFY THE BEST SUSTAINABLE DIFFERENTIATION. Usually,

superior differentiation and customer value will be the result of many interrelated
activities and strategies used. The best combination of them should be used to pursue
sustainable differentiation advantage.
TOPIC 2D
PORTER’S FIVE FORCES MODEL
Porter’s five forces model is an analysis tool that uses five industry forces to determine
the intensity of competition in an industry and its profitability level.
Five forces model was created by M. Porter in 1979 to understand how five key
competitive forces are affecting an industry. The five forces identified are:
These forces determine an industry structure and the level of competition in that industry.
The stronger competitive forces in the industry are the less profitable it is. An industry
with low barriers to enter, having few buyers and suppliers but many substitute products
and competitors will be seen as very competitive and thus, not so attractive due to its low
profitability.
It is every strategist’s job to evaluate company’s competitive position in the industry and

to identify what strengths or weakness can be exploited to strengthen that position. The
tool is very useful in formulating firm’s strategy as it reveals how powerful each of the
five key forces is in a particular industry.
THREAT OF NEW ENTRANTS. This force determines how easy (or not) it is to enter
a particular industry. If an industry is profitable and there are few barriers to enter, rivalry
soon intensifies. When more organizations compete for the same market share, profits
start to fall. It is essential for existing organizations to create high barriers to enter to
deter new entrants. Threat of new entrants is high when:
 Low amount of capital is required to enter a market;

 Existing companies can do little to retaliate;
 Existing firms do not possess patents, trademarks or do not have established brand
reputation;
 There is no government regulation;
 Customer switching costs are low (it doesn’t cost a lot of money for a firm to
switch to other industries);
 There is low customer loyalty;
 Products are nearly identical;
 Economies of scale can be easily achieved.
BARGAINING POWER OF SUPPLIERS. Strong bargaining power allows suppliers

to sell higher priced or low quality raw materials to their buyers. This directly affects the
buying firms’ profits because it has to pay more for materials. Suppliers have strong
bargaining power when:
 There are few suppliers but many buyers;
 Suppliers are large and threaten to forward integrate;
 Few substitute raw materials exist;
 Suppliers hold scarce resources;
 Cost of switching raw materials is especially high.
BARGAINING POWER OF BUYERS. Buyers have the power to demand lower price

or higher product quality from industry producers when their bargaining power is strong.
Lower price means lower revenues for the producer, while higher quality products
usually raise production costs. Both scenarios result in lower profits for producers.
Buyers exert strong bargaining power when:
 Buying in large quantities or control many access points to the final customer;
 Only few buyers exist;
 Switching costs to other supplier are low;
 They threaten to backward integrate;
 There are many substitutes;
 Buyers are price sensitive.
THREAT OF SUBSTITUTES. This force is especially threatening when buyers can

easily find substitute products with attractive prices or better quality and when buyers can
switch from one product or service to another with little cost. For example, to switch
from coffee to tea doesn’t cost anything, unlike switching from car to bicycle.
Rivalry among existing competitors. This force is the major determinant on how

competitive and profitable an industry is. In competitive industry, firms have to compete
aggressively for a market share, which results in low profits. Rivalry among competitors
is intense when:
 There are many competitors;

 Exit barriers are high;
 Industry of growth is slow or negative;
 Products are not differentiated and can be easily substituted;
 Competitors are of equal size;
 Low customer loyalty.
Although, Porter originally introduced five forces affecting an industry, scholars have
suggested including the sixth force: complements. Complements increase the demand of
the primary product with which they are used, thus, increasing firm’s and industry’s
profit potential. For example, iTunes was created to complement iPod and added value
for both products. As a result, both iTunes and iPod sales increased, increasing Apple’s
profits.
SUMMARY
Porter's Five Forces Factors
Threat of new entry
 Amount of capital required

 Retaliation by existing companies
 Legal barriers (patents, copyrights, etc.)
 Brand reputation
 Product differentiation
 Access to suppliers and distributors
 Economies of scale
 Sunk costs
 Government regulation
Supplier power
 Number of suppliers
 Suppliers’ size
 Ability to find substitute materials
 Materials scarcity
 Cost of switching to alternative materials
 Threat of integrating forward
Buyer power
 Number of buyers
 Size of buyers
 Size of each order
 Buyers’ cost of switching suppliers
 There are many substitutes
 Price sensitivity
 Threat of integrating backward
Threat of substitutes
 Number of substitutes
 Performance of substitutes
 Cost of changing
Rivalry among existing competitors
 Number of competitors
 Cost of leaving an industry
 Industry growth rate and size
 Product differentiation
 Competitors’ size
 Customer loyalty
 Threat of horizontal integration
 Level of advertising expense
USING THE TOOL
We now understand that Porter’s five forces framework is used to analyze industry’s
competitive forces and to shape organization’s strategy according to the results of the
analysis. But how to use this tool? We have identified the following steps:
1. Step 1. Gather the information on each of the five forces

2. Step 2. Analyze the results and display them on a diagram
3. Step 3. Formulate strategies based on the conclusions
STEP 1. GATHER THE INFORMATION ON EACH OF THE FIVE
FORCES. What managers should do during this step is to gather information about their
industry and to check it against each of the factors (such as “number of competitors in the
industry”) influencing the force. We have already identified the most important factors in
the table below.
STEP 2. ANALYZE THE RESULTS AND DISPLAY THEM ON A

DIAGRAM. After gathering all the information, you should analyze it and determine
how each force is affecting an industry. For example, if there are many companies of
equal size operating in the slow growth industry, it means that rivalry between existing
companies is strong. Remember that five forces affect different industries differently so
don’t use the same results of analysis for even similar industries!
STEP 3. FORMULATE STRATEGIES BASED ON THE CONCLUSIONS. At this

stage, managers should formulate firm’s strategies using the results of the analysis For
example, if it is hard to achieve economies of scale in the market, the company should
pursue cost leadership strategy. Product development strategy should be used if the
current market growth is slow and the market is saturated.
Although, Porter’s five forces is a great tool to analyze industry’s structure and use the
results to formulate firm’s strategy, it has its limitations and requires further analysis to
be done, such as SWOT, PEST orValue Chain analysis.
TOPIC 2F
VALUE CHAIN ANALYSIS
“Achieving Excellence in the Things That Really Matter”
Value Chain Analysis is a useful tool for working out how you can create the greatest
possible value for your customers.
In business, we're paid to take raw inputs, and to "add value" to them by turning them
into something of worth to other people. This is easy to see in manufacturing, where the
manufacturer "adds value" by taking a raw material of little use to the end user (for
example, wood pulp) and converting it into something that people are prepared to pay
money for (e.g. paper). But this idea is just as important in service industries, where
people use inputs of time, knowledge, equipment, and systems to create services of real
value to the person being served – the customer.
And remember that your customers aren't necessarily outside your organization: they can
be your bosses, your co-workers, or the people who depend on you for what you do.
Now, this is really important: in most cases, the more value you create, the more people
will be prepared to pay a good price for your product or service, and the more they
will keep on buying from you. On a personal level, if you add a lot of value to your team,
you will excel in what you do. You should then expect to be rewarded in line with your
contribution.
So how do you find out where you, your team or your company can create value?
This is where the "Value Chain Analysis" tool is useful. Value Chain Analysis helps
youidentify the ways in which you create value for your customers, and then helps you
think through how you can maximize this value: whether through superb products, great
services, or jobs well done.
HOW TO USE THE TOOL
Value Chain Analysis is a three-step process:
1. Activity Analysis: First, you identify the activities you undertake to deliver your
product or service.
2. Value Analysis: Second, for each activity, you think through what you would do
to add the greatest value for your customer.
3. Evaluation and Planning: Thirdly, you evaluate whether it is worth making
changes, and then plan for action.
We follow these through one by one:
STEP 1 – ACTIVITY ANALYSIS
The first step is to brainstorm the activities that you, your team or your company
undertakes that in some way contribute towards your customer's experience.
At an organizational level, this will include the step-by-step business processes that you
use to serve the customer. These will include marketing of your products or services;
sales and order-taking; operational processes; delivery; support; and so on (this may also
involve many other steps or processes specific to your industry).
At a personal or team level, it will involve the step-by-step flow of work that you carry
out.
But this will also involve other things as well. For example:
 How you recruit people with the skills to give the best service.
 How you motivate yourself or your team to perform well.
 How you keep up to date with the most efficient and effective techniques.
 How you select and develop the technologies that give you the edge.
 How you get feedback from your customer on how you're doing, and how you can
improve further.
Tip:
If you carry out the brainstorming behind the Activity Analysis and Value Analysis with
your team, you'll almost certainly get a richer answer than if you do it on your own. You
may also find that your team is more likely to "buy into" any conclusions you draw from
the exercise. After all, the conclusions will be as much theirs as yours.
Once you've brainstormed the activities which add value for your company, list them. A
useful way of doing this is to lay them out as a simplified flow chart running down the
page – this gives a good visual representation of your "value chain." You can see an
example of this in Figure 1 below.
STEP 2 – VALUE ANALYSIS
Now, for each activity you've identified, list the "Value Factors" – the things that your
customers value in the way that each activity is conducted.
For example, if you're thinking about a telephone order-taking process, your customer
will value a quick answer to his or her call; a polite manner; efficient taking of order
details; fast and knowledgeable answering of questions; and an efficient and quick
resolution to any problems that arise.
If you're thinking about delivery of a professional service, your customer will most likely
value an accurate and correct solution; a solution based on completely up-to-date
information; a solution that is clearly expressed and easily actionable; and so on.
Next to each activity you've identified, write down these Value Factors.
And next to these, write down what needs to be done or changed to provide great value
for each Value Factor.
STEP 3 – EVALUATE CHANGES AND PLAN FOR ACTION
By the time you've completed your Value Analysis, you'll probably be fired up for action:
you'll have generated plenty of ideas for increasing the value you deliver to customers.
And if you could deliver all of these, your service could be fabulous!
Now be a bit careful at this stage: you could easily fritter your energy away on a hundred
different jobs, and never really complete any of them.
So firstly, pick out the quick, easy, cheap wins – go for some of these, as this will
improve your team's spirits no end. Then screen the more difficult changes. Some may be
impractical. Others will deliver only marginal improvements, but at great cost. Drop
these.
And then prioritize the remaining tasks and plan to tackle them in an achievable, step-by-
step way that delivers steady improvement at the same time that it keeps your
team enthusiastic.
Tip:
If you have a strong enough relationship with one or more of your customers, it may be
worth presenting your conclusions to them and getting their feedback – this is a good way
of either confirming that you're right or of getting a better understanding of what they
really want.
Example
Lakshmi is a software development manager for a software house. She and her team
handle short software enhancements for many clients. As part of a team development
day, she and her team use Value Chain Analysis to think about how they can deliver
excellent service to their clients.
During the Activity Analysis part of the session, they identify the following activities that
create value for clients:
 Order taking
 Enhancement specification
 Scheduling
 Software development
 Programmer testing
 Secondary testing
 Delivery
 Support
Lakshmi also identifies the following non-client-facing activities as being important:
Recruitment: Choosing people who will work well with the team.
Training: Helping new team members become effective as quickly as possible, and
helping team members learn about new software, techniques and technologies as they are
developed.
Lakshmi marks these out in a vertical value chain on her whiteboard (you can see the first
three client-facing activities shown in the . Next, she and her team focus on the Order
Taking process, and identify the factors that will give the greatest value to customers as
part of this process.
They identify the following Value Factors:
 Giving a quick answer to incoming phone calls.

 Having a good knowledge of the customer's business, situation and system, so that
they do not waste the customer's time with unnecessary explanation.
 Asking all the right questions, and getting a full and accurate understanding of the
customer's needs.
 Explaining the development process to the customer and managing his or her
expectations as to the likely timetable for delivery.
You can see these in the "Value Factors" column of figure 1.
They then look at what they need to do to deliver the maximum value to the customer.
These things are shown in the Figure 1's "Changes Needed" column.
They then do the same for all other processes.
Once all brainstorming is complete, Lakshmi and her team may be able to identify quick
wins, reject low yield or high cost options, and agree their priorities for implementation.
KEY POINTS
 Value Chain Analysis is a useful way of thinking through the ways in which you
deliver value to your customers, and reviewing all of the things you can do to
maximize that value.
 It takes place as a three stage process:
 Activity Analysis, where you identify the activities that contribute to the delivery
of your product or service.
 Value Analysis, where you identify the things that your customers value in the
way you conduct each activity, and then work out the changes that are needed.
 Evaluation and Planning, where you decide what changes to make and plan how
you will make them.
 By using Value Chain Analysis and by following it through to action, you can
achieve excellence in the things that really matter to your customers.

UNIT –III
THE STRATEGY ANALYSIS AND CHOICE
Strategic analysis and choice are two important components of the implementation stage
of the strategic management plan. These two components are crucial links in the strategic
management implementation procedure. Strategic analysis involves a number of steps.
Strategic implementation is the penultimate stage of strategic management and strategic
analysis and choice are two significant constituents of that process.The strategy of a
company refers to its all-inclusive plan or program for the purpose of accomplishing its
aims and targets in the long run.
Different types of strategies include business unit strategy, corporate strategy, operational

strategy and others. Strategic analysis implies the examination of the present condition of
a business and consequently developing an appropriate business strategy.
Strategic analysis carries higher importance with regards to conglomerates that offer a
wide range of diversified products. Strategic choice refers to the selection of the
appropriate business strategy.
At the time of performing strategic analysis and arriving at strategic choices, long term
goals are fixed and different types of strategies are chosen that are most appropriate for
the mission of the company and the variable conditions.
Strategic analysis and choice of strategies are done with the help of a number of
techniques. If the appropriate strategy is chosen, a company would become more efficient
to establish sustainability in competitive advantage and maximize firm valuation.
Factors Taken into Consideration for Strategic Analysis and Choice
KEY INTERNAL FACTORS
 Marketing
 Management
 Operations/Production
 Accounting/Finance
 Computer Information Systems
 Research and Development
KEY EXTERNAL FACTORS
 Political/Governmental/Legal
 Economy
 Technological
 Social/Demographic/Cultural/Environmental
 Competitive
TECHNIQUES USED IN STRATEGIC ANALYSIS
The following devices or techniques are used in the procedure of strategic analysis:
1. Five Forces Analysis

2. PEST Analysis (Political, Economic, Social and Technological Analysis)
3. Market segmentation
4. Scenario planning
5. Competitor analysis
6. Directional policy matrix
7. SWOT Analysis (Strength, Weaknesses, Opportunities, and Threats Analysis)
8. Critical Success Factor Analysis
Characteristics of Strategic Analysis and Choice
 Following are the features of strategic analysis and choice:

Establishment of long term goals
 Producing strategy options
 Choosing strategies to act on
 Selecting the best option and accomplishing mission and goals
The first step in evaluating and choosing a strategy is to review the results of the strategic
situation assessment consisting of an analysis of the general, industry, and internal
environments, in terms of factors critical to the success of the business.
George Steiner stated that three types of data are required to perform a situation audit:
identifying threats, strengths, and weaknesses.
 Past performance of the firm.

 Data about the current situation, including:
 Analysis of customers and markets.
 Resources of the company.
 Competition.
 Environmental setting.
Other performance measures or areas of interest:
 Forecasts of the future.

 Critical success factors (CSFs) for any business are the limited number of areas in
which satisfactory results ensure successful competitive performance. Studies have
shown that three to six factors are usually critical to success in most industries.
 In general, at least five criteria tend to determine which factors are critical to the
business and their relative importance:
 Impact on performance measures, such as market share, profits, cash flow, and the
like.Relationship to strategic thrusts, such as differentiation, costs, segmentation,
preemptive, turnaround, renewal, and the like.
 Relationship to life-cycle stage, that is, introduction, growth, maturity, and aging
and decline.
 Relates to a major activity of the business, such as marketing at IBM.
 Involves large amounts of money relative to other activities of the firm.
 There are several techniques for identifying CSFs for a business, its industry, and
its general environment. It is important to evaluate the firm, but it is equally
important evaluate the capabilities of competitors.
 The development and evaluation of alternatives should be two separate and
distinct steps. Three basic questions must be asked during strategy evaluation:
 How effective has the existing strategy been?
 How effective will that strategy be in the future?
 What will be the effectiveness of selected alternative strategies (or changes in the
existing strategy) in the future?
 The form of strategic analysis and choice varies considerably according to the
stage of development of the firm, and the focus differs at the different firm levels.
 The evaluation should take place at the corporate, business, and functional levels,
with close scrutiny of policies and plans at each of these levels.
 For multi-industry and multiproduct/product firm, strategic analysis begins at the
corporate level.
 Corporate strategy provides guidance for resource allocations among businesses
and also indicates standards for adding new businesses or deleting existing ones.
 Alternative business-level strategies must be examined within the context of each
business unit in multi-industry firms.
 Functional strategies must be identified to initiate and control daily business
activities in a manner consistent with business strategy.
FORMULATION OF STRATEGY
Formulation of strategy involves analyzing the environment in which the organization

operates, then making a series of strategic decisions about how the organization will
compete. Formulation ends with a series of goals or objectives and measures for the
organization to pursue. Environmental analysis includes the:
Remote external environment, including the political, economic, social, technological,

legal and environmental landscape (PESTLE);
Industry environment, such as the competitive behavior of rival organizations, the

bargaining power of buyers/customers and suppliers, threats from new entrants to the
industry, and the ability of buyers to substitute products (Porter's 5 forces); and
Internal environment, regarding the strengths and weaknesses of the organization's

resources (i.e., its people, processes and IT systems).
Strategic decisions are based on insight from the environmental assessment and are
responses to strategic questions about how the organization will compete, such as:
 What is the organization's business?

 Who is the target customer for the organization's products and services?
 Where are the customers and how do they buy? What is considered "value" to the
customer?
 Which businesses, products and services should be included or excluded from the
portfolio of offerings?
 What is the geographic scope of the business?
 What differentiates the company from its competitors in the eyes of customers and
other stakeholders?
 Which skills and capabilities should be developed within the firm?
 What are the important opportunities and risks for the organization?
 How can the firm grow, through both its base business and new business?
 How can the firm generate more value for investors?
The answers to these and many other strategic questions result in the organization's
strategy and a series of specific short-term and long-term goals or objectives and related
measures.
IMPLEMENTATION
The second major process of strategic management is implementation, which involves

decisions regarding how the organization's resources (i.e., people, process and IT
systems) will be aligned and mobilized towards the objectives. Implementation results in
how the organization's resources are structured (such as by product or service or
geography), leadership arrangements, communication, incentives, and monitoring
mechanisms to track progress towards objectives, among others.
Running the day-to-day operations of the business is often referred to as "operations

management" or specific terms for key departments or functions, such as "logistics
management" or "marketing management," which take over once strategic management
decisions are implemented.
MANY DEFINITIONS OF STRATEGY
Strategy has been practiced whenever an advantage was gained by planning the sequence
and timing of the deployment of resources while simultaneously taking into account the
probable capabilities and behavior of competition.
In 1988, Henry Mintzberg described the many different definitions and perspectives on

strategy reflected in both academic research and in practice. He examined the strategic
process and concluded it was much more fluid and unpredictable than people had
thought. Because of this, he could not point to one process that could be called strategic
planning. Instead Mintzberg concludes that there are five types of strategies:
 Strategy as plan – a directed course of action to achieve an intended set of goals;

similar to the strategic planning concept;
 Strategy as pattern – a consistent pattern of past behavior, with a
strategy realized over time rather than planned or intended. Where the realized
pattern was different from the intent, he referred to the strategy as emergent;
 Strategy as position – locating brands, products, or companies within the market,
based on the conceptual framework of consumers or other stakeholders; a strategy
determined primarily by factors outside the firm;
 Strategy as ploy – a specific maneuver intended to outwit a competitor; and
 Strategy as perspective – executing strategy based on a "theory of the business" or
natural extension of the mindset or ideological perspective of the organization.
In 1998, Mintzberg developed these five types of management strategy into 10 “schools
of thought” and grouped them into three categories. The first group is normative. It
consists of the schools of informal design and conception, the formal planning, and
analytical positioning. The second group, consisting of six schools, is more concerned
with how strategic management is actually done, rather than prescribing optimal plans or
positions. The six schools are entrepreneurial, visionary, cognitive,
learning/adaptive/emergent, negotiation, corporate culture and business environment. The
third and final group consists of one school, the configuration or transformation school, a
hybrid of the other schools organized into stages, organizational life cycles, or
“episodes”.
Michael Porter defined strategy in 1980 as the "...broad formula for how a business is
going to compete, what its goals should be, and what policies will be needed to carry out
those goals" and the "...combination of the ends (goals) for which the firm is striving and
the means (policies) by which it is seeking to get there." He continued that: "The essence
of formulating competitive strategy is relating a company to its environment."
In 1985, Professor Ellen Earle-Chaffee summarized what she thought were the main
elements of strategic management theory where consensus generally existed as of the
1970s, writing that strategic management:
 Involves adapting the organization to its business environment;

 Is fluid and complex. Change creates novel combinations of circumstances
requiring unstructured non-repetitive responses;
 Affects the entire organization by providing direction;
 Involves both strategy formulation processes and also implementation of the
content of the strategy;
 May be planned (intended) and unplanned (emergent);
 Is done at several levels: overall corporate strategy, and individual business
strategies; and
 Involves both conceptual and analytical thought processes.
Chaffee further wrote that research up to that point covered three models of strategy,
which were not mutually exclusive:
1. LINEAR STRATEGY: A planned determination of goals, initiatives, and

allocation of resources, along the lines of the Chandler definition above. This is
most consistent with strategic planning approaches and may have a long planning
horizon. The strategist "deals with" the environment but it is not the central
concern.
2. ADAPTIVE STRATEGY: In this model, the organization's goals and activities are
primarily concerned with adaptation to the environment, analogous to a biological
organism. The need for continuous adaption reduces or eliminates the planning
window. There is more focus on means (resource mobilization to address the
environment) rather than ends (goals). Strategy is less centralized than in the linear
model.
3. INTERPRETIVE STRATEGY: A more recent and less developed model than the
linear and adaptive models, interpretive strategy is concerned with "orienting
metaphors constructed for the purpose of conceptualizing and guiding individual
attitudes or organizational participants." The aim of interpretive strategy is
legitimacy or credibility in the mind of stakeholders. It places emphasis on
symbols and language to influence the minds of customers, rather than the
physical product of the organization.
TOPIC 3C
THE MATCHING STAGE
 SWOT
 BCG
SWOT ANALYSIS
SWOT analysis involves the collection and portrayal of information about internal and
external factors which have, or may have, an impact on business.
SWOT is a framework that allows managers to synthesize insights obtained from an

internal analysis of the company’s strengths and weaknesses with those from an analysis
of external opportunities and threats.
What is SWOT analysis? The answer to the question is simple: it’s a tool used for
situation (business or personal) analysis! SWOT is an acronym which stands for:
Strengths: factors that give an edge for the company over its competitors.
Weaknesses: factors that can be harmful if used against the firm by its competitors.
Opportunities: favorable situations which can bring a competitive advantage.
Threats: unfavorable situations which can negatively affect the business.
Strengths and weaknesses are internal to the company and can be directly managed by it,
while the opportunities and threats are external and the company can only anticipate and
react to them. Often, SWOT is presented in a form of a matrix as in the illustration
below:
SWOT is widely accepted tool due to its simplicity and value of focusing on the key
issues which affect the firm. The aim of swot is to identify the strengths and weaknesses
that are relevant in meeting opportunities and threats in particular situation.
BENEFITS
Swot tool has 5 key benefits:
 Simple to do and practical to use;

 Clear to understand;
 Focuses on the key internal and external factors affecting the company;
 Helps to identify future goals;
 Initiates further analysis.
LIMITATIONS
Although there are clear benefits of doing the analysis, many managers and academics
heavily criticize or don’t even recognize it as a serious tool.[2] According to many, it is a
‘low-grade’ analysis. Here are the main flaws identified by a research:[2][5]
 Excessive lists of strengths, weaknesses, opportunities and threats;

 No prioritization of factors;
 Factors are described too broadly;
 Factors are often opinions not facts;
 No recognized method to distinguish between strengths and weaknesses,
opportunities and threats.
HOW TO PERFORM THE ANALYSIS?
Swot can be done by one person or a group of members that are directly responsible for
the situation assessment in the company. Basic swot analysis is done fairly easily and
comprises of only few steps:
Step 1. Listing the firm’s key strengths and weaknesses

Step 2. Identifying opportunities and threats
STRENGTHS AND WEAKNESSES
Strengths and weaknesses are the factors of the firm’s internal environment. When
looking for strengths, ask what do you do better or have more valuable than your
competitors have? In case of the weaknesses, ask what could you improve and at least
catch up with your competitors?
WHERE TO LOOK FOR THEM?
Some strengths or weaknesses can be recognized instantly without deeper studying of the
organization. But usually the process is harder and managers have to look into the firm’s:
 Resources: land, equipment, knowledge, brand equity, intellectual property, etc.

 Core competencies
 Capabilities
 Functional areas: management, operations, marketing, finances, human resources
and R&D
 Organizational culture
 Value chain activities
STRENGTH OR A WEAKNESS?
Often, company’s internal factors are seen as both, strengths and weaknesses, at the same
time. It is also hard to tell if a characteristic is a strength (weakness) or not. For example,
firm’s organizational structure can be a strength, a weakness or neither! In such cases,
you should rely on:
CLEAR DEFINITION. Very often factors which are described too broadly may fit both
strengths and weaknesses. For example, “brand image” might be a weakness if the
company has poor brand image. However, it can also be a strength if the company has the
most valuable brand in the market, valued at $100 billion. Therefore, it is easier to
identify if a factor is a strength or a weakness when it’s defined precisely.
BENCHMARKING. The key emphasize in doing swot is to identify the factors that are
the strengths or weaknesses in comparison to the competitors. For example, 17% profit
margin would be an excellent margin for many firms in most industries and it would be
considered as a strength. But what if the average profit margin of your competitors is
20%? Then company’s 17% profit margin would be considered as a weakness.
VRIO FRAMEWORK. A resource can be seen as a strength if it exhibits VRIO

(valuable, rare and cannot be imitated) framework characteristics. Otherwise, it doesn’t
provide any strategic advantage for the company.
Opportunities and threats
Opportunities and threats are the external uncontrollable factors that usually appear or
arise due to the changes in the macro environment, industry or competitors’ actions.
Opportunities represent the external situations that bring a competitive advantage if
seized upon. Threats may damage your company so you would better avoid or defend
against them.
WHERE TO LOOK FOR THEM?
PESTEL: PEST or PESTEL analysis represents all the major external forces (political,

economic, social, technological, environmental and legal) affecting the company so it’s
the best place to look for the existing or new opportunities and threats.
COMPETITION. COMPETITOR’S REACT TO YOUR MOVES AND

EXTERNAL CHANGES: They also change their existing strategies or introduce new
ones. Therefore, the company must always follow the actions of its competitors as new
opportunities and threats may open at any time.
MARKET CHANGES: The most visible opportunities and threats appear during the
market changes. Markets converge, starting to satisfy other market segment needs with
the same product. New geographical markets open up allowing the firm to increase its
export volumes or start operations in a new country. Often niche markets become
profitable due to technological changes. As a result, changes in the market create new
opportunities and threats that must be seized upon or dealt with if the company wants to
gain and sustain competitive advantage.
OPPORTUNITY OR THREAT?
Most external changes can represent both opportunities and threats. For example,
exchange rates may increase or reduce the profits gained from exports. This depends on
the exchange rate, which may rise (opportunity) or fall (threat) against the home country
currency. The organization can only guess the outcome of the change and count on
analysts’ forecasts. In such cases, when organization cannot identify if the external factor
will affect it positively or negatively, it should gather unbiased and reliable information
from the external sources and make the best possible judgement.
GUIDELINES FOR SUCCESSFUL SWOT
The following guidelines are very important in writing a successful swot analysis. They
eliminate most of swot limitations and improve it's results significantly:
1. Factors have to be identified relative to the competitors. It allows specifying

whether the factor is a strength or a weakness.
2. List between 3 – 5 items for each category. Prevents creating too short or endless
lists.
3. Items must be clearly defined and as specific as possible. For example, firm’s
strength is: brand image (vague); strong brand image (more precise); brand image
valued at $10 billion, which is the most valued brand in the market (very good).
4. Rely on facts not opinions. Find some external information or involve someone
who could provide an unbiased opinion.
5. Factors should be action orientated. For example, “slow introduction of new
products” is action orientated weakness.
TOPIC 3C (B)
BCG MATRIX
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.
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
BCG matrix quadrants are simplified versions of the reality and cannot be applied
blindly. They can help as general investment guidelines but should not change strategic
thinking. Business should rely on management judgement, business unit strengths and
weaknesses and external environment factors to make more reasonable investment
decisions.
ADVANTAGES AND DISADVANTAGES
Benefits of the matrix:
 Easy to perform;
 Helps to understand the strategic positions of business portfolio;
 It’s a good starting point for further more thorough analysis.
 Growth-share analysis has been heavily criticized for its oversimplification and
lack of useful application. Following are the main limitations of the analysis:
 Business can only be classified to four quadrants. It can be confusing to classify an
SBU that falls right in the middle.
 It does not define what ‘market’ is. Businesses can be classified as cash cows,
while they are actually dogs, or vice versa.
 Does not include other external factors that may change the situation completely.
 Market share and industry growth are not the only factors of profitability. Besides,
high market share does not necessarily mean high profits.
 It denies that synergies between different units exist. Dogs can be as important as
cash cows to businesses if it helps to achieve competitive advantage for the rest of
the company.
USING THE TOOL
Although BCG analysis has lost its importance due to many limitations, it can still be a
useful tool if performed by following these steps:
 Step 1. Choose the unit

 Step 2. Define the market
 Step 3. Calculate relative market share
 Step 4. Find out market growth rate
 Step 5. Draw the circles on a matrix
STEP 1. CHOOSE THE UNIT. BCG MATRIX CAN BE USED TO ANALYZE

SBUs, separate brands, products or a firm as a unit itself. Which unit will be chosen will
have an impact on the whole analysis. Therefore, it is essential to define the unit for
which you’ll do the analysis.
STEP 2. DEFINE THE MARKET. Defining the market is one of the most important
things to do in this analysis. This is because incorrectly defined market may lead to poor
classification. For example, if we would do the analysis for the Daimler’s Mercedes-Benz
car brand in the passenger vehicle market it would end up as a dog (it holds less than 20%
relative market share), but it would be a cash cow in the luxury car market. It is important
to clearly define the market to better understand firm’s portfolio position.
STEP 3. CALCULATE RELATIVE MARKET SHARE. Relative market share can

be calculated in terms of revenues or market share. It is calculated by dividing your own
brand’s market share (revenues) by the market share (or revenues) of your largest
competitor in that industry. For example, if your competitor’s market share in
refrigerator’s industry was 25% and your firm’s brand market share was 10% in the same
year, your relative market share would be only 0.4. Relative market share is given on x-
axis. It’s top left corner is set at 1, midpoint at 0.5 and top right corner at 0 (see the
example below for this).
STEP 4. FIND OUT MARKET GROWTH RATE. The industry growth rate can be
found in industry reports, which are usually available online for free. It can also be
calculated by looking at average revenue growth of the leading industry firms. Market
growth rate is measured in percentage terms. The midpoint of the y-axis is usually set at
10% growth rate, but this can vary. Some industries grow for years but at average rate of
1 or 2% per year. Therefore, when doing the analysis you should find out what growth
rate is seen as significant (midpoint) to separate cash cows from stars and question marks
from dogs.
STEP 5. DRAW THE CIRCLES ON A MATRIX. After calculating all the measures,

you should be able to plot your brands on the matrix. You should do this by drawing a
circle for each brand. The size of the circle should correspond to the proportion of
business revenue generated by that brand.
TOPIC 3D
THE DECISION STAGE
Quantitative Strategic Planning Matrix (QSPM)

The Quantitative Strategic Planning Matrix is a strategic tool which is used to evaluate
alternative set of strategies. The QSPM incorporate earlier stage details in an organize
way to calculate the score of multiple strategies in order to find the best match strategy
for the organization.
The QSPM comes under the third stage of strategy formulation which is called “The
Decision Stage” and also the final stage of this process. The best thing about QSPM is
that it never insist the strategist to enter the information on assumptions, it extract the
information from stage 1 The Input Stage and stage 2 the the matching stage.
1. Stage 1 or the input stage is based on EFE Matrix, IFE Matrix and CPM
2. Stage 2 made up of TOWS matrix, SPACE Matrix, BCG Matrix, IE Matrix, Grand
Strategy Matrix.
3. Stage 3 or Decision stage: The QSPM combine the intuitive thinking of managers
with the analytical process to decide the best strategy for the organization success.
Format of Quantitative Strategic Planning Matrix
 There are four main columns in QSPM, the left column list down the key internal
and external key factors which are same as in EFE and IFE matrix.
 Adjacent column to key factors is Weight (relative importance of the factor) which
hold the numeric value obtained from EFE and IFE matrix weight column.
 The next to weight is AS stands for attractive score assign priority to key factors
using the numeric value 4 for most importance and 1 for least importance and the
last column TAS (Total attractive score) is the value calculated by multiplying
weight by AS.
 One thing important to note for each strategy separate AS and TAS value added in
the table, weight remain same for all set of strategies mentioned in QSPM.
 The topmost shows the strategies are compared in the QSPM matrix, below
mentioned table illustrate the structure of QSPM matrix.
STEPS TO DEVELOP QUANTITATIVE STRATEGIC PLANNING MATRIX

(QSPM)
STEP 1
Make a list of the firm’s key external opportunities/threats and internal

strengths/weaknesses in the left column of the QSPM. This information should be taken
directly from the EFE Matrix and IFE Matrix. A minimum of 10 external critical success
factors and 10 internal critical success factors should be included in the QSPM.
STEP 2
Assign weights to each key external and internal factor. These weights are identical to
those in the EFE Matrix and the IFE Matrix. The weights are presented in a straight
column just to the right of the external and internal critical success factors.
Step 3
Examine the Stage 2 (matching) matrices and identify alternative strategies that the
organization should consider implementing. Record these strategies in the top row of the
QSPM. Group the strategies into mutually exclusive sets if possible.
Step 4
Determine the Attractiveness Scores (AS), defined as numerical values that indicate the
relative attractiveness of each strategy in a given set of alternatives.
Attractiveness Scores are determined by examining each key external or internal factor,
one at a time, and asking the question, “Does this factor affect the choice of strategies
being made?” If the answer to this question is yes, then the strategies should be compared
relative to that key factor. Specifically, Attractiveness Scores should be assigned to each
strategy to indicate the relative attractiveness of one strategy over others, considering the
particular factor.
The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 =

reasonably attractive, and 4 = highly attractive. If the answer to the above question is no,
indicating that the respective key factor has no effect upon the specific choice being
made, then do not assign
Attractiveness Scores to the strategies in that set. Use a dash to indicate that the key
factor does not affect the choice being made. Note: If you assign an AS score to one
strategy, then assign AS score(s) to the other. In other words, if one strategy receives a
dash, then all others must receive a dash in a given row.
Step 5
Compute the Total Attractiveness Scores. Total Attractiveness Scores are defined as the
product of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each
row. The Total Attractiveness Scores indicate the relative attractiveness of each
alternative strategy, considering only the impact of the adjacent external or internal
critical success factor. The higher the Total Attractiveness Score, the more attractive the
strategic alternative (considering only the adjacent critical success factor).
Step 6
Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in each
strategy column of the QSPM. The Sum Total Attractiveness Scores reveal which
strategy is most attractive in each set of alternatives. Higher scores indicate more
attractive strategies, considering all the relevant external and internal factors that could
affect the strategic decisions. The magnitude of the difference between the Sum Total
Attractiveness Scores in a given set of strategic alternatives indicates the relative
desirability of one strategy over another.
Limitations of QSPM
A limitation of the QSPM is that it can be only as good as the prerequisite information
and matching analyses upon which it is based. Another limitation is that it requires good
judgment in assigning attractiveness scores. Also, the sum total attractiveness scores can
be really close such that a final decision is not clear. Like all analytical tools however, the
QSPM should not dictate decisions but rather should be developed as input into the
owner’s final decision.
Advantages of QSPM
A QSPM provides a framework to prioritize the strategies, it can be used for comparing
strategies at any level such as corporate, business and functional.The other positive
feature of QSPM that it integrate external and internal factors into decision making
process.A QSPM can be developed for small and large scale profit and non-profit
organizations.
UNIT-4
MEANING
Strategy implementation is a term used to describe the activities within an organisation
to manage the execution of a strategic plan.
There is no universally accepted meaning of ‘strategy implementation’. Many definitions
can be found:
 The sum total of the activities and choices required for the execution of a
strategic plan (Wheelen and Hunger, 2004: 192)
 Operationalisation of a clearly articulated strategic plan (Noble 1999: 119)
 All the processes and outcomes which accrue to a strategic decision once
authorisation has been to go ahead and put the decision into practice (Miller et
al., 2004: 203).
 A process by which large, complex, and potentially unmanageable strategic
problems are factored into progressively smaller, less complex, and hence
more manageable proportions (Hrebiniak and Joyce, 1984: 90).
 A series of interventions concerning organisational structures, key personnel
actions, and control systems designed to control performance with respect to
desired ends (Hrebiniak and Joyce, 1984).
 The managerial interventions that align organisational action with strategic
intention (Floyd and Wooldridge, 1992).
TOPIC 4A
THE NATURE OF STRATEGY IMPLEMENTATION
The implementation of organization strategy involves the application of the management

process to obtain the desired results. Particularly, strategy implementation includes
designing the organization's structure, allocating resources, developing information and
decision process, and managing human resources, including such areas as the reward
system, approacches to leadership, and staffing.
Each of these management functions has been the subject of extensive writing and
research by scholars and practitioners and has covered in management books.
Since full coverage of each management function is beyond the scope of this thesis, I
shall focus only on the factors that are most critical to effective implementation strategy.
CONCEPT OF STRATEGY IMPLEMENTATION
Strategy implementation is "the process of allocating resources to support the chosen

strategies". This process includes the various management activities that are necessary to
put strategy in motion, institute strategic controls that monitor progress, and ultimately
achieve organizational goals.
For example, according to Steiner, "the implementation process covers the entire
managerial activities including such matters as motivation, compensation, management
appraisal, and control processes".
As Higgins has pointed out, "almost all the management functions -planning, controlling,
organizing, motivating, leading, directing, integrating, communicating, and innovation
-are in some degree applied in the implementation process".
Pierce and Robinson say that "to effectively direct and control the use of the firm's
resources, mechanisms such as organizational structure, information systems, leadership
styles, assignment of key managers, budgeting, rewards, and control systems are essential
strategy implementation ingredients".
The implementation activities are in fact related closely to one another, and decisions
about each are usually made simultaneously. I have split these activities in the next
chapters.
CONCEPT OF STRATEGY IMPLEMENTATION
Strategy implementation is "the process of allocating resources to support the chosen

strategies". This process includes the various management activities that are necessary to
put strategy in motion, institute strategic controls that monitor progress, and ultimately
achieve organizational goals.
For example, according to Steiner, "the implementation process covers the entire
managerial activities including such matters as motivation, compensation, management
appraisal, and control processes".
As Higgins has pointed out, "almost all the management functions -planning, controlling,
organizing, motivating, leading, directing, integrating, communicating, and innovation
-are in some degree applied in the implementation process".
Pierce and Robinson say that "to effectively direct and control the use of the firm's
resources, mechanisms such as organizational structure, information systems, leadership
styles, assignment of key managers, budgeting, rewards, and control systems are essential
strategy implementation ingredients".
The implementation activities are in fact related closely to one another, and decisions
about each are usually made simultaneously. I have split these activities in the next
chapters.
TOPIC 4B
RESOURCE ALLOCATION IN STRATEGY IMPLEMENTATION
Resource allocation is a central management activity that allows for strategy execution.
The real value of any resource-allocation program lies in the resulting accomplishment of
an organization's objectives.
A number of factors prohibit effective resource allocation, including an over-protection

of resources, too great an emphasis on short-run financial criteria, organizational politics,
vague strategy targets, a reluctance to take risks, and a lack of sufficient knowledge.
Yavitz and Newman explain why below the corporate level, there often exists an absence
of systematic thinking about resources allocated and strategies of the firm:
Managers normally have many more tasks than they can do. Managers must allocate time
and resources among these tasks. Pressure builds up. Expenses at too high. The CEO
wants a good financial report for the third quarter.
Strategy formulation and implementation activities often get deferred. Today's problems
soak up available energies and resources. Scrambled accounts and budgets fail to reveal
the shift in allocation way from strategic needs to currently squeaking wheels.
The relationship between resources and strategy is two-way. Strategy affects resources
and resources affect strategy.
 Resources can be evaluated from several different perspectives:

 The most prevalent way of evaluating them is by functional areas: finance,
research and development, human resources, operations, marketing.
 A second way of evaluating resources is by type: financial, physical, human, and
organizational.
 A third way of evaluating resources is in terms of their tangibility.
TANGIBLE RESOURCES (e.g., a plant or the number of employees) can be observed

and measured. Less tangible resources (e.g., corporate name) are also important though
their characteristics and importance are harder to evaluate.
TOPIC 4 F
HUMAN RESOURCE CONCERNS WITH STRATEGY IMPLEMENTATION
After a decade or so of haphazard evolution, it can probably at last be said that Human
Resources, that ambiguous child of marketing and capitalism, has finally gotten his
ungainly legs beneath him. The HR department has always been a point of some
confusion, as companies struggle to discover the best ways in which to utilize such a
vague, if obviously valuable, tool. Trial and error have gradually allowed HR to carve its
niche in the business world; in recent years, HR has proven itself especially useful in the
innovative development of organizational strategy. The time has come, however, for
Human Resource professionals to push past the strategy-development phase and put their
plans into action. The implementation of strategy is a key element of business success,
and HR authorities are uniquely positioned to pioneer the realization of such strategies.
And why, exactly, HR? To begin with, unlike any other constituent of an organization,
Human Resources is extensive, inter-departmental, and involved throughout the
company; the nature of HR is to interact with and understand the processes of the
business as a whole. Furthermore, the implementation of a business strategy intrinsically
demands cooperation with the human work force, and whose domain is that? – Human
Resources, of course. Lastly, the specific arsenal of skills necessary to strategy
implementation is native to those people working in HR: similar tools for similar tasks, in
a manner of speaking.
The notion of “strategic HR” is common enough – certainly a plethora of books, articles,
Internet publications, and the like exists to spur HR professionals towards strategizing
their business management. A great deal of progress has been made along this trend, but
the fact of the matter is that much of this strategy development remains strictly
conceptual; very little ground is being gained in terms of actual organizational change.
Strategy, in order to be effective, must naturally be implemented. If a business is to
change, people must drive the wheels of that change, and that is where HR’s true role
comes into play.
Honing in on a successful method of strategy implementation, of course, can be a

difficult and often overwhelming task. Even HR professionals at the forefront of their
field can find themselves well out of their depth when it comes to actually putting the
vehicle of strategy into gear. It is the goal of this article, therefore, to act as both friend
and guide to anyone aiming to become more actively involved in the evolution of his
company. HR can and should be a leading factor in the implementation of strategy. This
article serves to outline but one method of strategy implementation, designed for the
simple purpose of aiding HR professionals in transitioning to this new and very important
realm of contribution and influence. Regardless of an organization’s size, function, or
ambition, there are certain steps to be taken which are all but essential to the
implementation process. It is hoped that this article can assist in streamlining HR
activities and employee objectives in order to successfully deliver on company strategy.
LEAPING THE HURDLES OF CHANGE
Before HR professionals can work to implement strategy, they must first ascertain what
obstacles presently exist to prevent the desired changes from occurring in their
organization. Strategy implementation is, in many ways, a systematized process of
removing the company’s many internal roadblocks to change. Every strategy will
encounter some measure of resistance, even when it’s been unanimously agreed that
change is imperative; and the more dramatic the change in strategy, of course, the more
struggle there will be.
HR can preempt many of their potential battles by anticipating and addressing some of
the problems that will likely arise. As a general rule of thumb, there are five basic causes
for strategy implementation failure, and from these causes stem ten or so foreseeable
hurdles that HR management must endeavor to overcome.
The core causes and their related issues are as follows:
CAUSE #1: POOR COORDINATION WITHIN MANAGEMENT
1. Incongruous goals, opinions, and policies among upper-level executives can obstruct
the cross-system cooperation required by the strategy.
CAUSE #2: EMPLOYEES AREN’T BUYING IN
2. Employees within the company do not understand the strategy.

3. Employees feel no personal responsibility to fulfill the strategy. It’s possible they may
feel that their efforts will be inconsequential in actually bringing about a change, or
perhaps they are contemptuous of management.
4. Employees are impassive towards the execution of the strategy, and exert no
enthusiasm in taking part.
5. Employees are uninspired by the overarching goals of the strategy.
CAUSE #3: INADEQUATE CHANGE WITHIN THE WORK UNIT
6. Managers fail to direct the efforts of their work units toward conforming with the new
strategy.
7. Managers’ styles and tactics undermine employee enthusiasm about the strategy.
8. Work proceeds as usual even within those units which the strategy requires to exhibit
swift and considerable change.
CAUSE #4: WEAK INTER-DEPARTMENTAL COLLABORATION

9. There are insufficient processes employed to advance the collaboration between
different operating and functional areas.
CAUSE #5: THERE EXISTS NO MEASUREMENT OF PROGRESS

10. A method of measuring progress toward the desired goals is either deficient or else
entirely absent. It is difficult, if not impossible, to tell what exactly is changing.
In order to establish which of these barriers to change will pose the most difficulty within
a given organization, consider the following questions:
 Which of these problems will most directly affect the achievement of our goals?
 If these problems persist, what kinds of challenges could result?”
 If these problems are removed or reduced, what quantifiable business benefits will
be yielded
 Which of these problems comprises the most immediate, pressing issue?
How can HR work to address these problems?
The most crucial element to solving these kinds of internal company issues is to identify
them from the start. Like any disease left undiagnosed, small discrepancies in
communication and leadership can rankle deeply and result in long-term and potentially
devastating problems. In order to effectively implement strategy, HR leaders must take a
proactive role in seeking out and carefully eradicating these various obstacles to change.
STRATEGY IMPLEMENTATION AS A SOCIAL ISSUE
The most significant aspect of the “obstacle course” listed above is the fact that it consists
predominantly of not technical or financial system flaws, but rather, stumbling blocks
within the human system. This, of course, is HR’s happy realm of specialty – for, where
there is discord in the human resource, there is work for the Human Resource
professionals.
The art of strategy implementation is a symphony in three parts: the technical system, the
business system, and the social system. The majority of management teams do a swell job
of dovetailing their business processes with the newly-established strategy, and the
benefits of cutting-edge technology typically fall into place – but the marriage of social
system and strategy is far too often a rocky one. The human resource is fickle and
complex, difficult to understand and, as a consequence, difficult to successfully manage.
By working to improve human interactions, HR will, by extension, be working to
improve the actual execution and use of the more straightforward technology and
business processes.
Social issues, when left to fester, can grow to the unfortunate point of overshadowing
otherwise superior efforts by the remaining two fields. Put simply: the best technology
money can buy and that paragon of a business plan are meaningless without the right
people to operate them. HR professionals, therefore, become indispensable in their roles
of mediating social issues and building up a support force to help drive the strategy
implementation.
SO WHERE TO START?
That formidable string of issues listed up yonderways can be pared down to yield a tidy
little “To-Do” list – but recognizing problems and tackling problems are two very
different things. The chore of thoroughly managing barriers to strategy is an intimidating
one, and given that, the rarity of effective strategy execution is really none too surprising.
Fortunately, every one of those issues is within the power of HR to conquer.
From a big-picture perspective, there are four vital tasks that all businesses must
accomplish. These four jobs, when properly fulfilled, add up to the bare-bones work of
strategy implementation, and they are:
1. HELPING EMPLOYEES TO UNDERSTAND THE STRATEGY. Not only must

employees understand the strategic direction itself, they must also comprehend the reason
for the strategy, as well as the driving forces behind it. Employees are the cogs around
which the gears of business turn. If the employees don’t understand where the strategy is
headed, they will be incapable of realizing their full potential in aiding the strategy
implementation.
2. AUGMENTING EMPLOYEE COMMITMENT TO THE STRATEGY.

Changes in strategy mean changes for people on an individual level, and individual
change tends to mean frustration, disappointment, and challenge. If an employee is going
to put in any extra effort toward propelling a conceived strategy to fruition, he must
genuinely believe that, in the long run, the end product will be worth the difficult
sacrifices made in order to implement the strategy.
3. STREAMLINING LOCAL EFFORT WITH THE STRATEGY. Though

invariably all employees must be on board for understanding and committing to the
strategy, this in and of itself is not enough. Implementing a strategy means legitimately
changing work production. In order to achieve the business strategy, all off-strategy work
must terminate and all on-strategy work must proceed with renewed urgency and
dedication.
4.INDUCING CROSS-SYSTEM COOPERATION.The final and most important step

in strategy implementation is that of realigning departmental relationships within the
system. Implementing strategy means carving deeper relationships between inter-
dependent organizational units, such as sales and manufacturing, or customer service and
distribution. This last job is as challenging as it is critical, because it demands that
employees within discrete work units learn to share and interact across the traditional
boundaries of their job descriptions.
This system of change as organized into four jobs is rather unique among most designs
for strategic HR. Where many plans focus in on how HR can appeal to, motivate, and
enrich the contribution of the individual, the Four Jobs system recognizes the work that
must be done on all three tiers of organization, from the individual to the work unit to the
department as a whole. Implementation of strategy is an all-encompassing procedure,
demanding change at all levels of the business’s social system.
Naturally, strategy implementation doesn’t always quite follow the nice linear path laid
out above. The first two jobs, however, do remain distinctly foundational, and without
their proper groundwork of understanding, jobs three and four are mind-boggling to
approach. Jobs one and two, meanwhile, are certainly inter-related. When employees are
lead to fully understand the nature and logic of the business strategy, they will feel
entirely more compelled to work toward achieving it – particularly when they can see
what they stand to gain from the change.
All this talk of strategy, of course, is worthless if it doesn’t at some point translate over
into action. Therein lies the purpose of job three. Regardless of employee understanding
and enthusiasm, if there’s no change in work at the local level, the strategy will never
achieve full implementation. Changing work means not only altering the actual processes
of local work units, but also improving the ways in which they go about completing their
tasks. This is not simply a job for management – the workers themselves must
affirmatively be included in the process of formulating solutions. Working employees
enjoy a firsthand insight which upper-level management simply does not have the ability
to possess.
Fulfilling a company-wide strategy requires that change be made not only within
individual departments, but also in the ways in which those departments interact with one
another. Job four focuses on adjusting the relationships between different business
processes, improving how they work together and accomplish their aims. The
implementation of a new strategy almost always demands such cross-system changes, but
rarely do organizations actually take steps to make these shifts. Granted, it’s pretty hard
work.
And why is job four so much more difficult than job one? Proceeding through the steps of
strategy implementation, there is a distinct trend of increasing difficulty. The reasons for
this are several:
- Technically speaking, HR can accomplish jobs one and two without really partnering
with the line organization (and it certainly often tries to) – but HR could not possibly
hope to achieve jobs three and four on its own. To really hold weight over what work is
done and how it is completed, HR must have an agreeable client who wants the offered
help.
- As jobs one and two suggest, it is one thing to guide people in understanding something,
and another thing entirely to motivate them to take action with what they’ve learned.
This, of course, is one of HR’s specialties – but though HR might be pro at instilling such
changes within its own field of the business, it should be careful not to do so otherwise
without line manager involvement.
- As important as it is that employees understand the strategy, as in job one, it is

exponentially more critical that they apply what they know, as through jobs three and
four. Unfortunately, this is where traditional training begins to grow less effective, and
different, less conventional approaches become necessary.
- Job three does not apply merely to the individual – it is a sweeping movement
throughout entire work units, driving a collective change in focus, work habits, and
processes. To successfully accomplish such a far-flung task, HR must work closely with
line managers, often in situations which are out of HR’s usual comfort zone.
TOPIC 4F
THE REAL ROLE OF HUMAN RESOURCES
Having established that these four jobs form the core work of strategy implementation,
the question now remains: exactly whose work is it? Certainly HR has a necessary role in
helping the business to address each of these jobs, but it is not the place of HR to carry
them all out. HR should follow its own initiative to complete those tasks it can, and a
solid partnership with the executive line will see to the rest. Put simply, HR must
establish itself as the driving force behind the strategy implementation effort.
On the flip side, though it is within the ability of HR to fulfill many of the requirements
of jobs one and two, the executive line should be far from uninvolved. Employees, in all
honesty, would rather be lectured and inspired by line leaders than they would by HR.
HR, meanwhile, has the power to generate opportunities to bring employees together with
managers and executives, leading from behind the scenes.
Management will have the greatest success in implementing strategy given a:

- Thorough understanding of the strategic objectives
- Willingness to make sacrifices in order to achieve the strategy
- Common view regarding what parts of the organization must change
- Commitment to a systematic plan of employee management, support, and inter-
departmental relations that will cultivate efficient execution of the strategy
If any of these elements are deficient, it is the job of HR professionals to urge the
management group to address these issues and suggest means of bringing the group into
greater accord.
CHECKLIST FOR STRATEGY IMPLEMENTATION SUCCESS
Putting together all of the pieces, here is a final set of guidelines to HR professionals
aiming to crack down on transforming strategy ideas into actuality.
1. LOOK AT THE BIG-PICTURE BUSINESS PROBLEMS, NOT JUST HR

BUSTLE. Be down-to-earth and talk to people about what’s really going on. Ask a line
executive what problems are weighing on him – chances are good he’ll launch into a
spiel on customer response time, bottlenecks, production costs, waste, sales slumps, and
the like, not the cost of new hires or lack of corporate values. Don’t worry too much
about what strategic problems HR professionals should “bother with” getting involved in,
whether they’re “HR-type” priority or not. The important thing is that HR is helping the
organization to make changes, and any point that falls in line with the strategy is worth
HR’s time.
2. GAUGE HR IN TERMS OF BUSINESS RESULTS. HR often deals with the

difficult-to-quantify, yes – but it’s worthwhile to encourage HR to be more market-
driven. HR will be more successful in earning respect within the company if it can
contribute what the line executives need, want, and will appreciate.
3. BUDDY UP WITH THE TOP LINE EXECUTIVES. A good partnership includes

two parties which are working to achieve a common goal. HR and the executive line
should both be open to receiving feedback with regard to how they are helping one
another accomplish the strategy objectives. This sort of relationship operates far more
effectively than the unfortunate habit of HR simply dictating coldly to the line functions
what the problems are and what “must be done” to solve them.
4. BE OBSTINATE IN BUILDING ALLIANCES. Job four is pivotal – there must be

inter-departmental collaboration and change in order for strategy implementation to
succeed. The different business processes, so accustomed to their separate and
competitive ways, may very will dig their heels in and resist the building of cross-system
relationships, but HR professionals should stick to their guns and manhandle the
company into cooperation.
5. GET SAVVY ABOUT BUSINESS CHANGE. HR professionals should be exactly

that – professional. They, more than anyone else, should know their stuff when it comes
to what’s going on in and around the business. Nothing is more valuable than a thorough
understanding of how HR must operate. This article itself is a mere sampler of what HR
is responsible for knowing.
6. BRANCH OUT FOR SUPPORT. Don’t shy away from hiring outside partners in
order to help HR compile and carry out a method of tying in organization to strategy.
“Hiring out” is not a sign of weakness or incompetence – on the contrary, it shows
business maturity in seeking diversity and creativity in order to solve problems.
Oftentimes HR is too far buried within its own issues to see clearly, and an outside
perspective can offer a crisp new form of insight. The purpose of this article has been to
illustrate the need for HR to take real action in not only conceiving but in actually
implementing strategy, and to offer a generalized guide which will, hopefully, help HR
professionals to do so. HR professionals can and should be an extraordinarily valuable
asset to every organization, and when working to the full extent of their capabilities, they
are more than qualified to set the wheels of legitimate strategy implementation in motion.
TOPIC 4C, 4E
CREATING A STRATEGY SUPPORTIVE STRUCTURE
Strategy Follows Structure, Structure Supports Strategy. Strategy and structure are
married to each other. If you change one you have to change the other.
For too long, structure has been viewed as something separate from strategy. Revising
structures are often seen as ways to improve efficiency, promote teamwork, create
synergy or reduce cost. Yes, restructuring can do all that and more. What has been less
obvious is that structure and strategy are dependent on each other. You can create the
most efficient, team oriented, synergistic structure possible and still end up in the same
place you are or worse.
THE CONNECTION BETWEEN STRATEGY AND STRUCTURE
Structure is not simply an organization chart. Structure is all the people, positions,
procedures, processes, culture, technology and related elements that comprise the
organization. It defines how all the pieces, parts and processes work together (or don’t in
some cases). This structure must be totally aligned with strategy for the organization to
achieve its mission and goals. Structure supports strategy.
IF AN ORGANIZATION CHANGES ITS STRATEGY, it must change its structure to

support the new strategy. When it doesn’t, the structure acts like a bungee cord and pulls
the organization back to its old strategy. Structure supports strategy. What the
organization does defines the strategy. Changing strategy means changing what everyone
in the organization does.
When an organization changes its structure and not its strategy, the strategy will change
to fit the new structure. Strategy follows structure. Suddenly management realizes the
organization’s strategy has shifted in an undesirable way. It appears to have done it on its
own. In reality, an organization’s structure is a powerful force. You can’t direct it to do
something for any length of time unless the structure is capable of supporting that
strategy.
A SCIENCE FICTION AND REAL WORLD EXAMPLE
Let’s look at an imaginary example using the human body. Suppose science figured out
how to create a living tissue arm to replace one’s existing arm that could perform 300%
better in strength, responsiveness and dexterity. The strategy here is to restructure the
body with this super arm so it can do more. The scientists successfully replace an existing
arm with this new super arm.
What will happen? The rest of the body remains as it was before. So the heart,
circulation system, nervous system and brain are still structured to support a regular arm.
This new arm requires more and faster blood flow, faster neuron responses in the brain
and so on to support its functions. Over time, the super arm will evolve back into a
regular arm because the rest of the body cannot support its enhanced capabilities. For this
science fiction example to work, scientist would need to restructure the entire human
body, not just one part of it.
What happens when you restructure sales channels resulting in large sales increases
but nothing is changed in order processing, customer support, engineering or
manufacturing? You end up with a lot of unhappy customers because the company can’t
deliver on its promise. How many times have we seen something like this happen?
Or what happens when you add a new offering that goes to a new target customer?
Maybe a company has a sales force that sells to small businesses and lower management
in larger organizations. They add a new offering that is targeted at top executives. The
existing sales force / sales channels cannot effectively sell to that new target. This has
happened just a few too many times.
And, of course, what happens when a firm makes a major push to upgrade its quality and
service without improving everything in the organization that supports products and
service? Disaster. Plain and simple.
STRATEGY IS THE STRUCTURE
The sum total of how an organization goes about its work is its strategy. Structure and
strategy are married to each other. When a company makes major changes, it must
carefully think out every aspect of the structure required to support the strategy. That is
the only way to implement lasting improvements. Every part of an organization, every
person working for that organization needs to be focused on supporting the vision and
direction. How everything is done and everything operates needs to be integrated so all
the effort and resources support the strategy.
It takes the right structure for a strategy to succeed. Management that is solely focused on
results can have a tendency to direct everyone on what they need to do without paying
attention to the current way the organization works. While people may carry out these
actions individually, it is only when their daily way of working is integrated to support
strategy that the organization’s direction is sustainable over time.
IMPLEMENTING CHANGE AS IMPORTANT AS STRATEGY ITSELF
During the last 27 years, we’ve worked with organizations in over 30 industries to help
them find more ways to increase sales, growth rates and market share. Improving existing
strategies and creating new strategies that can spur exceptional growth reflect our firms
main mission. But, over the years, we began to notice that some clients were not
successful in implementing new strategies. That is what led us to look deeper into the
cause behind this.
 Top management can’t just send out a proclamation about a new strategy,
direction and vision and expect everyone to follow it. To implement such a
strategic shift requires a complete change within the organization itself. The
organization’s DNA has to be rebuilt or its existing
 DNA structure will cause the new strategy to fail and revert back to the old
strategy. And that will
 happen without top management’s involvement.
 Leadership and people issues turn out to be much more important than we may
have realized. On the surface, everyone talks about the importance of people and
leadership but too often, management puts this on the back burner when the heats
on to deliver quarterly results or meet the guidance. Structure is strategy.
That’s why we realized our focus on increasing our client’s revenue had to be balanced
by an equal focus on implementing change. We didn’t want to leave clients with reports
that weren’t implemented or worse implemented through directives that ultimately failed.
So many years ago we became project managers for our client’s implementation efforts
to insure that their new strategies designed to increase revenue actually rang the cash
register.
You can’t improve strategy, increase revenue, even enhance the performance of a sales
force without addressing the structural, people, cultural, communication, measurement
and leadership aspects of the organization or at least that part of the organization you are
changing.
Strategy and structure are married to each other. A decision to change one requires an all
out effort to change the other. But that structural change must be well thought out and
based on a thorough cause and effect analysis. You don’t just change a structure to
change it.
You have to make sure the changes will support that strategy. At the same time, you
don’t just implement a better leadership and engagement approach in a company or alter
the organizational chart without evaluating how that is going to effect the firms ability to
carry out its current strategies.
 Strategy implementation is the translation of chosen strategy into organizational

action so as to achieve strategic goals and objectives. Strategy implementation is
also defined as the manner in which an organization should develop, utilize, and
amalgamate organizational structure, control systems, and culture to follow
strategies that lead to competitive advantage and a better performance.
Organizational structure allocates special value developing tasks and roles to the
employees and states how these tasks and roles can be correlated so as maximize
efficiency, quality, and customer satisfaction-the pillars of competitive advantage.
But, organizational structure is not sufficient in itself to motivate the employees.
 An organizational control system is also required. This control system equips
managers with motivational incentives for employees as well as feedback on
employees and organizational performance. Organizational culture refers to the
specialized collection of values, attitudes, norms and beliefs shared by
organizational members and groups.
 Following are the main steps in implementing a strategy:
Developing an organization having potential of carrying out strategy successfully.
Disbursement of abundant resources to strategy-essential activities.
Creating strategy-encouraging policies.
Employing best policies and programs for constant improvement.
Linking reward structure to accomplishment of results.
Making use of strategic leadership.

Excellently formulated strategies will fail if they are not properly implemented. Also, it is
essential to note that strategy implementation is not possible unless there is stability
between strategy and each organizational dimension such as organizational structure,
reward structure, resource-allocation process, etc. Strategy implementation poses a threat
to many managers and employees in an organization.
TOPIC 4D
MANAGING RESISTANCE TO CHANGE
New power relationships are predicted and achieved. New groups (formal as well as
informal) are formed whose values, attitudes, beliefs and concerns may not be known.
With the change in power and status roles, the managers and employees may employ
confrontation behavior.
Stakeholder resistance, if it gains a foothold on a large scale, can threaten to derail even
the most positive change effort. There are four primary reasons1 that people resist
change. Once you know what types to look for, you will be better equipped to spot
change resistance in your organization.
After you have identified the types of change resistance present in your organization,
employ a mix of strategies to counter the negative forces. Following are six classic
strategies1 for dealing with change resistance (in order from least to most extreme) – use
them to develop action plans that address the resistance within your organization.
 EDUCATION & COMMUNICATION: One of the best ways to overcome

resistance to change is to educate people about the change effort beforehand. Up-
front communication and education helps employees see the logic in the change
effort. This reduces unfounded and incorrect rumors concerning the effects of
change in the organization.
 PARTICIPATION & INVOLVEMENT: When employees are involved in the
change effort they are more likely to buy into change rather than resist it. This
approach is likely to lower resistance more so than merely hoping people will
acquiesce to change.
 FACILITATION & SUPPORT: Managers can head-off potential resistance by
being supportive of employees during difficult times. Managerial support helps
employees deal with fear and anxiety during a transition period. This approach is
concerned with provision of special training, counseling, time off work.
 NEGOTIATION AND AGREEMENT: Managers can combat resistance by
offering incentives to employees not to resist change. This can be done by
allowing change resistors to veto elements of change that are threatening, or
change resistors can be offered incentives to go elsewhere in the company in order
to avoid having to experience the change effort. This approach will be appropriate
where those resisting change are in a position of power.
 MANIPULATION AND COOPTATION: “Cooptation” (no it’s not misspelled)
involves the patronizing gesture of bringing a person into a change management
planning group for the sake of appearances rather than their substantive
contribution. This often involves selecting leaders of the resisters to participate in
the change effort. These leaders can be given a symbolic role in decision making
without threatening the change effort.
 EXPLICIT AND IMPLICIT COERCION: Managers can explicitly or implicitly
force employees into accepting change by making clear that resisting change can
lead to losing jobs, firing, or not promoting employees.

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What are the three general decision-making processes mentioned?

What are the three general decision-making processes mentioned?

What are the two essential areas of management tasks?

What are the two essential areas of management tasks?

UNIT-1

THE INTRODUCTION TO STRATEGIC MANAGEMENT

THE NATURE AND VALUE OF STRATEGIC MANAGEMENT

Strategic management is a process which determines whether an organization excels,

All organizations engage in the strategic management process either formally or

Organizations usually employ one of the three general decision-making processes:

Three factors distinguish strategic decisions from other business considerations:

STRATEGIC MANAGEMENT DEFINED

The term strategic management is used to refer to the entire scope of strategic-decision

To purpose of this thesis I use the terminology strategy management, as opposed to the

The following statements serve as a number of workable definitions of strategic

 Strategic management is the process of managing the pursuit of organizational

ELEMENTS OF STRATEGIC MANAGEMENT

Strategic management, as minimum, includes strategic planning and strategic

* STRATEGIC PLANNING AND CONTROL - the process of deciding on changes in

* MANAGEMENT PLANNING AND CONTROL - the process of ensuring that

* TECHNICAL PLANNING AND CONTROL - the process of ensuring efficient

Another important term in the study of strategic management is long-range

KEY TERMS IN STRATEGIC MANAGEMENT

In contrast, tactics are specifics actions the organization might undertake in carrying its

Policies include guidelines, procedures, rules, programs, and budgets established to

The final key term to be highlighted here is "strategists". Strategists are the individuals

STRATEGIC MANAGEMENT MODELS

 Performing an environmental analysis.

Strategic management is a continuous and dynamic process. Therefore, it should be

In 1965, Kenneth Andrews developed a simple model. This model includes the choice of

William F. Glueck developed several models of strategic management based on the

As major contribution to the strategic management process, Glueck considered two

THE SCHENDEL AND HOFER MODEL

Dan Schendel and Charles Hoferdeveloped a strategic management model, incorporating

Their model consists of several basic steps:

(1) goal formulation,

According to Schendel and Hofer, the formulation portion of strategic management

(1) environmental analysis,

THE THOMPSON AND STRICKLAND MODEL

Thompson and Strickland developed several models of strategic management.

According to Thompson and Strickland strategic management is an ongoing process:

This process consists of five major five ever-present tasks:

1. Developing a concept of the business and forming a vision of where the

Modern theorist and writer, Jerzy Korey-Krzeczowski, founder and President Canadian

Korey's model consists of three discrete major phases:

(1) preliminary analysis phase,

As an aid in envisioning the strategic management process in this paper.

1. Analyze the environmental opportunities and threats.

BENEFITS OF STRATEGIC MANAGEMENT

The Importance and Value Of Strategic Management

A number of reasons are given by authors to as why organizations should engage in

The question "Why should an organization engage in strategic management?" must be

Regardless of the profitability of strategic management, several behavioral effects can be

 It provides a way to anticipate future problems and opportunities.

PITFALLS IN STRATEGIC MANAGEMENT

STAGES OF STRATEGIC MANAGEMENT

The strategic management process represents a logical, systematic, and objective

Researchers usually distinguish three stages in the process of strategic