STRATEGIC PLANNING

&
MANAGEMENT
2
MEANING & DEFINITION
Strategic Management can be defined as the art
and science of formulating, implementing and
evaluating cross-functional decisions that
enable an organization to achieve its objective.

Definition:
The on-going process of formulating,
implementing and controlling broad plans guide
the organization in achieving the strategic
goods given its internal and external
environment.

3
IMPORTANCE OF
STRATEGIC
MANAGEMENT
Globalization: The survival for
business

E-Commerce: A business tool

Earth environment has become
a major strategic issue

Strategic management A route
to success

MODEL FOR STRATEGY FORMULATION
Scenarios
Visions, Missions,Values
External Analysis Internal Analysis
Functional Level Strategies
Business Level Strategies
Structure Match Structure & Controls Controls
Manage Strategic Change
Strategy Implementation
5
INTERPRETATION

6
STAGES OF SM
The strategic management process
consists of three stages:
Strategy Formulation (strategy planning)
Strategy Implementations
Strategy Evaluation

7
THREE ASPECTS OF STRATEGIC
FORMULATION
Corporate Level Strategy: In this aspect of
strategy, we are concerned with broad
decisions about the total organization's scope
and direction.
It is useful to think of three components of
corporate level strategy:
(a) growth or directional strategy
(b) portfolio strategy
(c) parenting strategy
8
Global Corporate Strategies
Need for National Responsiveness
High
Low
Low
High
Transnational
Strategy
Seeks to balance global
efficiencies and local
responsiveness
Combines
standardization and
customization for
product/advertising
strategies
Globalization
Strategy
Treats world as a
single global market
Standardizes global
products/advertising
strategies
Multi-domestic Strategy
Handles markets
independently for each
country
Adapts
product/advertising to
local tastes and needs
N
e
e
d

f
o
r

G
l
o
b
a
l

I
n
t
e
g
r
a
t
i
o
n

Export
Strategy
Domestically focused
Exports a few
domestically
produced products to
selected countries
9
Global Strategy
Globalization = product design and
advertising strategies are
standardized around the world
Multi-domestic = adapt product and
promotion for each country
Transnational = combine both
globalization and national
responsiveness
10
Competitive Strategy (often called Business
Level Strategy): This involves deciding how
the company will compete within each line of
business (LOB) or strategic business unit
(SBU).

Functional Strategy: These more localized
and shorter-horizon strategies deal with how
each functional area and unit will carry out its
functional activities to be effective and
maximize resource productivity.

11
Tools for Putting Strategy
into Action
Environment
Organization


S
t
r
a
t
e
g
y

Performance
Leadership
Persuasion
Motivation
Culture/values
Structural Design
Organization Chart
Teams
Centralization
Decentralization,
Facilities, task design
Human Resources
Recruitment/selection
Transfers/promotions
Training
Layoffs/recalls
Information and Control Systems
Pay, reward system
Budget allocations
Information systems
Rules/procedures
12
Portfolio Strategy
Mix of business
units and
product lines
that fit together
in a logical way
to provide
synergy and
competitive
advantage
BCG Matrix
Exhibit 8.5
13






Strategic Management
Process
Implement
Strategy via
Changes in:
Leadership
culture,
Structure, HR,
Information &
control
systems
SWOT
Formulate
Strategy
Corporate,
Business,
Functional
Define new
Mission
Goals, Grand
Strategy
Identify Strategic
Factors
Strengths,
Weaknesses
Identify Strategic
Factors
Opportunities,
Threats
Scan Internal
Environment Core
Competence,
Synergy, Value
Creation
Evaluate
Current Mission,
Goals,
Strategies
Scan External
Environment
National,
Global
conclusion
In order to formulate Business functions
strategy is to be formulated as well as
implemented with the right approach
Management is basically managing the
strategies and making them function.
Strategic management of an
organization leads to the benefits as well
as growth of the organization.
14
Strategic Planning:
Strategic planning is concerned with the growth and
future of a business enterprise.
It consists of a stream of decisions and actions that lead
to effective strategies and which, in turn, help the firm
achieve its growth objectives.
The process involves a thorough self-appraisal by the
corporation, including an appraisal of the business it is
engaged in and the environment in which it operates.
Marketing environment keeps changing fast. Practically
everything outside the four walls of the firm is changing
fast, resulting in a discontinuity with the past.
Strategic planning provides the road map and ensures
that the enterprise keeps moving in the right direction.
Strategic Planning (contd.)

Starting from the corporations mission and philosophy, down to choice
of businesses and strategies, all vital aspects in the governance of
business are chartered through strategic planning.
It is through strategic planning that the corporation takes decisions
concerning its mission, the business it will pursue and the markets it
will serve; it is through strategic planning that it lays down its growth
objectives and formulates its strategies.
In other words, all decisions of high significance and consequence to a
corporation are taken through the strategic planning process.

Strategic planning ensures that these resources are put to optimum
and best possible use.
Strategic planning helps the firm acquire the best of a lead time for all
its crucial decisions and actions, as it helps the firm anticipate
trends.
Strategic planning has the burden of equipping a corporation with the
relevant competitive advantages in its fight for survival and growth.
Strategic Planning is concerned with the

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

Objectives of Strategic Planning:
Components of Strategic Planning:
1. Clarifying the mission of the corporation
2. Defining the business
3. Surveying the environment
4. Internal appraisal of the firm
5. Setting the corporate objectives
6. Formulating the corporate strategy.

1. Clarifying the mission of the corporation
The mission is the expression of the corporate intent telling insiders
and outsiders what the corporation stands for.

The mission carries the grand design of the firm and communicates
what it wants to be. It subtly indicates the business the firm will
pursue and the customer needs it will seek to satisfy.

The mission is shaped by the capabilities and vision of the
corporations leaders.

The business philosophy of the founder and present leaders of the
corporation gets expressed through the mission statement.

The mission directs the entire planning endeavour of a corporation.

The mission is a reference point and the guiding spirit for the growth
plan of a firm.

It brings the corporate purpose or the long-term objective of the firm
into focus.
2. Defining the business

A business definition is a pithy, clear-cut statement of the business
or businesses the firm is engaged in or is planning to purse. It
prescribes the boundaries of the firms business.

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

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

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

While environmental survey helps to identify
areas of opportunities and threats in the areas of
interest, in order to tap these opportunities, it is
necessary to find out whether the firm has the
requisite capabilities. For this an internal
appraisal is undertaken.
Internal appraisal has three distinct parts:
assessment of the strengths and weaknesses of the
firm in different functional areas;
appraisal of the health of individual businesses;
assessment of the firms competitive advantage and
core competence.
5. Setting the corporate objectives
The main task here is to decide the extent of business
growth, the firm wants to achieve. The firm examines the
present level of performance, its achievable level over
the planning period, and its aspirational level. Balancing
the opportunities with the organizations capabilities and
ambitions, the firm figures out its growth objective.
Usually, firms set objectives in all key areas, like, sales,
profits, asset formation, productivity, market share, and
corporate image.
Objectives have to be stated clear-cut in a measurable
time-bound manner. In setting objectives, the firm
integrates its growth ambition with the findings it has
made with its environment survey and internal appraisal.
6. Formulating the corporate strategy
Product-market scope, growth vector, competitive
advantage and synergy are the constituents of corporate
strategy. Findings from the environment
survey/opportunity-threat profile, the competitive
advantages and synergies enjoyed, and the resources
available for growth, are the other major parameters in
deciding the basket of businesses and the product-
market posture. Corporate strategy has to specify
through which businesses and through what kind of
product-market posture is the growth objective going to
be achieved. And it is from this statement that each
business of the corporation existing and new ones
derives its growth targets, direction and priority.
Formulating the corporate strategy (contd.)
Business appraisal and choice of strategy go hand in
hand. The firm decides which businesses are to be
cultivated through fresh investment and care, which ones
are to be given mere maintenance, without committing
much further investment and which businesses it should
phase out. Standard analytical models can be of help to
the strategic planner, in the matter of bringing to the fore
what needs to be done with the different businesses.
Most large companies consist of four organizational
levels the corporate level, the Division level, the
business unit level and the product level.
Formulating the corporate strategy (contd.)
Corporate headquarters is responsible for designing a
corporate strategic plan to guide the whole enterprise; it
makes decisions on the amount of resources to allocate
to each division; as well as which business to start or
eliminate.
Each Division establishes a plan covering the allocation
of funds to each business unit within the division.
Each Business Unit develops a strategic plan to carry
that business unit into a profitable future.
Each product level (product line, brand) within a
business unit develops a marketing plan for achieving its
objectives in its product market.
STRATEGIC
MANAGEMENT
28
MEANING & DEFINITION
Strategic Management can be defined as the
art and science of formulating, implementing
and evaluating cross-functional decisions that
enable an organization to achieve its objective.
Definition:
The on-going process of formulating,
implementing and controlling broad plans guide
the organization in achieving the strategic
goods given its internal and external
environment.

COMPARISON
STRATEGIC TACTICAL OPERATIONAL
Long range Intermediate Short range
3 or more yrs 2-3 yrs One yr
Top mgt Middle Lower
Broad objectives Integration of departments Day to day working
Focus on planning &
forecasting
On co-ordination On control
Benefits of Strategic Planning
Roadmap to firms
Utilization of resources
Respond to environmental changes
Minimizes chances of mistakes
Creates framework of internal
communication.
Levels of Strategic Planning
- Corporate Level

- Business-Level

- Functional -Level
Elements of a Strategy
+Goals

+Scope

+Competitive Advantage

+Logic

Various types of strategies
MASTER
STRATEGIES
PROGRAMME STRATEGIES
SUB-STRATEGIES
TACTICS
BUSINESS POLICY
Business policy provides a basic framework
defining fundamental issues of a company, its
purpose, mission and broad business objectives
and a set of guideline governing the company's
conduct of business within its total perspective.

O Overall Guide

O Focus on strategic allocation of scarce resources


Types of Policies
MAJOR POLICIES:
+ Lines of business
+ Code of ethics

SECONDARY POLICIES:
+ Selection of geographic area
+ Identification of major customers
+ Major products
Types of Policies
FUNCTIONAL POLICIES:
+ Production
+ Marketing
+ Finance
+ Personnel
+ Research
RULES:
+ Salary & wage Adm.
+ Discipline& discharge
+ Welfare Adm
+ Safety & health
Types of Policies
PROCEDURES & STANDARD OP. PLANS:

+Handling & processing of orders
+Shipments of foreign locations
+Servicing customer complaints
Strategy Vs Policy
STRATEGY POLICY
Strategic decisions Guidelines
Putting a policy into
effect
General course of action
Deals with crucial
decisions, requires top
mgt involvement.
Once formulated can be
delegated to lower levels

STRATEGIC MANAGEMENT
PROCESS
STRATEGIC MANAGEMENT PROCESS
(SMP)
1. Vision formulation which leads to the
statement of the Mission.
2. The mission is then converted into
performance Objectives
3. To achieve objectives you develop
Strategies
4. Strategy Implementation
5. Evaluation of performance
Diagram
(Strategic mgt by VSP Rao and V Hari
Krishna)
Purpose of SMP
CORE COMPETENCE
SYNERGY
VALUE Creation
CORE COMPETENCE:
An orgs core competence is something it
does exceptionally well in comparison to
its competitors. It reflects a distinct
competitive advantage like superior
research, development etc..
SYNERGY:

Two or more sub systems working together
to produce more than the total of what
might they produce working alone.
1+1=3
VALUE CREATION:
Exploiting core competencies and
achieving synergy help organizations
create value for customers. Value is the
sum total of benefits received and cost
paid by the customer.
Steps in SMP
Vision,Mission,Objectives

External Analysis

Internal analysis
DETAILED IN (Strategic mgt by VSP
Rao and V Hari Krishna)

STRATEGY FORMULATION
CORPORATE LEVEL STRATEGIES:
Growth/Expansion Strategy

Stability Strategy

Retrenchment Strategy

Combination Strategy
FUNCTIONAL LEVEL STRATEGY:
R & D Strategy
Operations Strategy
Financial Strategy
Marketing Strategy
Human Resource Strategy




STRATEGY FORMULATION &
IMPLEMENTATION
Detail & Diagram :
(Strategic mgt by VSP Rao and V Hari
Krishna)
Motivational Techniques To
Implement Strategy
MBO
Incentives
Performance appraisal
Salary Administration
Recruiting & termination
Security
Power & Influence


STRATEGIC INTENT:
Vision,Mission,Objectives
Strategic intent is
about clarity, focus
and inspiration.


VISION
MISSION
OBJECTIVES
GOALS
PLANS
VISION
Corporate vision is a short and inspiring
statement of what the organization intends to
become and to achieve at some point in the
future, often stated in competitive terms. Vision
refers to the category of intentions that are
broad, all-inclusive and forward-thinking. It is
the image that a business must have of its goals
before it sets out to reach them. It describes
aspirations for the future, without specifying the
means that will be used to achieve those desired
ends .
Mission
Mission Statement describes what business youre in
and who your customer is. As such, it captures the very
essence of your enterprise - its relationship with its
customer.
Developing mission statement is the step which moves
your strategic planning process from the present to the
future. It depicts the mission statement connects today
with the future. Your mission statement must work not
only today but for the intended life of your strategic plan
of which your mission statement is a part. If youre
developing a five year strategic plan, for example, you
develop a mission statement which you believe will
work for the next five years.
Values
For any statement, whether mission or vision, to
be embraced and acted upon, it must reflect the
values of your organization.
Values describe what your management team
really cares about. What it holds dear. What
makes em tick. How would your managers
respond to a trade-off between product quality
and profit? Thats really a question of value.

Corporate Goals & Objectives
Role of Objectives:
1. Legitimacy
2. Direction
3. Coordination
4. Benchmarks for success
5. motivation
Characteristics of obj;
Obj. form a HIRERACY
Network
Multiplicity of Obj
Long and short-range obj








ENVIRONMENTAL ANALYSIS
Env. may be defined as the set of external factors such
as economic, socio cultural, Govt. & legal, demographic,
which are uncontrollable in nature & affect the business
decisions of a firm or company.
1) Micro Environment 2) Macro Environment
Micro Environment-
1) Supplier
2) Customers-industrial, retailers, wholesalers, Govt.,
foreigners
3) Market intermediates- middlemen, physical distribution
firms, marketing service agencies, and financial
intermediaries
Competitors-
- Desire competitions limited disposable income many
unsatisfied desires T.V./washing machine/ investment
- Generic competition-among alternatives which satisfied
particular category of desire- Investment in U.T.I./P.O./Bank/Any
other.
- Product form competition- Washing machine, semi/ automotive
- Brand competition- videocon/godrej
Public
- media
- citizen action public
- local public
Macro Environment-uncontrollable

1. Economic Environment
- Eco. Conditions- business cycle, growth of economy, size of
domestic Market & its dynamic effect
- Eco. Policies- budgets, industrial regulations, eco planning,
import & export regulations, business laws, , industrial policy,
control on price & wages, trade & transport policy, size of
national income, demand & supply of various goods
- Economic Systemof a country
- free enterprise i.e. capitalist
- socialist
- communist
- mixed
2. Political & Govt. Environment. -
Legislature- decide particularly course
of action
Executive -implementation
Judiciary -to see above both working
public interest.
3. Socio Cultural Environment- people
attitude to work & health, role of family,
marriage, religion & education, ethical
issues, social responsibilities of business
4. Natural Environment- geographical &
ecological factors- natural resources
endowments, weather & climatic
conditions, topographical factors,
locational aspects, port facilities
5. Demographic Environment. - Size
growth age composition of population,
family size, economic stratification of
population, educational level, caste
religion etc.
6. Technological Environment- marketing,
innovation, R & D
7. International Environment-liberation
force of view global perspectives
Environmental Scanning: helps every mgt in
attaining maximum profits and growth and the
same time helps in minimization of future
threats.
Environment analysis has 3 basic objectives
Under taking of current & potential changes
Should provide inputs for strategic decision
making
Rich source of idea & understanding of the
context, bring fresh views
Environmental Analysis-
Scanning general supervision of all env. Factors & their interaction in order

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

SWOT Analysis, strengths, weakness, opportunities, & threats.
Forecasting methods
Time services analysis & projection-moving averages, exponential
smoothing book Jenkins, trend projection.
Casual Methods- regression model, econometric model, anticipation
surveys, input output model, diffusion index, leading indicators, life cycle
analysis.
Qualitative Method-Delphi method, market research, panel consensus,
visionary forecast, historical analogy.
Scenario technique- preparation of background, selection of critical
indicators, establishing past behavior of indicators, verification of potential
future events, forecasting the indicators, writing of scenario.
Preparation of ETOP-environmental threat & opportunity profile is a
summary of environmental factors. It is a structured way. Assessing
Importance of environmental factors, assessing impact factor combining
importance & impact factor.
Environmental Scanning &
Monitoring
Environmental scanning is a concept from
business management by which businesses gather
information from the environment, to better achieve
a sustainable competitive advantage.
To sustain competitive advantage the company
must also respond to the information gathered from
environmental scanning by altering its strategies
and plans when the need arises.
Environmental Scanning &
Monitoring- Techniques

SWOT

Industry Analysis
Techniques

Competitor
Analysis


PEST

QUEST
SWOT
(Strength-Weakness-Opportunity-Threat)
Identification of threats and
Opportunities in the environment
(External) and strengths and
Weaknesses of the firm (Internal) is
the cornerstone of business policy
formulation; it is these factors which
determine the course of action to
ensure the survival and growth of the
firm.
What is PEST?
PEST Analysis The Meaning
A PEST analysis is an analysis of the external macro-
environment that affects all firms.
P.E.S.T. is an acronym for the Political, Economic,
Social, and Technological factors of the external
macro-environment.
Such external factors usually are beyond the firm's
control and sometimes present themselves as threats.
However, changes in the external environment also
create new opportunities.
A. Industry Life Cycle Analysis
B. Study of the structure and characteristics
of an Industry
C. Profit Potential of Industry (Porter Model)
Industry Analysis: Three sections
A. Industry Life Cycle Analysis
Four Stages:
Pioneering Stage
Rapid Growth Stage
Maturity and Stabilization Stage
Decline Stage
B. Study of the structure and
characteristics of an Industry
1. Structure of the Industry and nature of
Competition
2. Nature and Prospectus of the demand
3. Cost, Efficiency and Profitability
4. Technology and Research

Michael Porter has argued that the profit
potential of an industry depends on the
combined strength of the:
1. Threat of new entrant
2. Rivalry among existing firms
3. Pressure from substitute products
4. Bargaining power of buyers
5. Bargaining power of sellers
3. Profit Potential of Industry (Porter
Model)


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

Internal Analysis
Resource-Based View

Firms have heterogeneous resources and capabilities.

By exploiting core competencies, firms can develop value-creating
strategies superior to their competitors.

Four criteria must be met for a sustained competitive advantage.
Valuable
Costly to imitate
Rare
Non-substitutable
Internal Analysis
Resources
Tangible
Intangible
Brand Equity
Capabilities
Core
Competencies
Competitive
Advantage
Above-Average
Returns
Components of the Resource-
Based View
Internal Analysis
Resources and Capabilities:

Resources

Represent what the firm has to work with.

Resources must be combined to establish a capability.

Types:

Tangible
Intangible
Brand Equity
Internal Analysis
Tangible Resources Assets that can be seen, touched or quantified.

- Financial resources (borrowing capacity)
- Physical Resources (facilities, locations)
- Organizational structure (reporting structures)
- Technological (patents)

Intangible Resources

- Human resources (experience, training)
- Resources for innovation (technical employees, facilities)
- Reputation
Brand Equity

- Brand name
- maintaining brand equity (Mercedes example value/performance
and Japanese automakers)
VALUE CHAIN ANALYSIS
A value chain identifies and isolates the
various economic value adding activities
that occur in every firm. It portrays
activities required to crate value for
customer for a given product.
The Value Chain System

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

Porter's Generic Value Chain
M

Inbound
Logist
ics
>
Operations
>
Outbound
Logistics
>
Marketing &
Sales
>
Service
>
A

R

G

I

N

Firm Infrastructure
HR Management
Technology Development
Procurement
The primary value chain activities
are:

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


The primary value chain
activities are:

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


These primary activities are
supported by:

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

These primary activities are
supported by:

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

Cost Advantage and the Value
Chain

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

10 cost drivers related to value
chain activities:

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


Differentiation and the Value
Chain

Policies and decisions
Linkages among activities
Timing
Location
Interrelationships
Differentiation and the Value
Chain

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


Technology and the Value
Chain

Inbound Logistics Technologies
Transportation
Material handling
Material storage
Communications
Testing
Information systems

Operations Technologies

Process
Materials
Machine tools
Material handling
Packaging

Operations Technologies

Maintenance
Testing
Building design & operation
Information systems

Outbound Logistics
Technologies

Transportation
Material handling
Packaging
Communications
Information systems

Marketing & Sales
Technologies

Media
Audio/video
Communications
Information systems

Service Technologies

Testing
Communications
Information systems

Linkages Between Value Chain
Activities

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

Linkages Between Value Chain
Activities

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

Outsourcing Value Chain
Activities

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

Outsourcing Value Chain
Activities

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

Outsourcing Value Chain
Activities

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


Financial Analysis
Assessment of the firms past, present and
future financial conditions
Done to find firms financial strengths and
weaknesses
Primary Tools:
Financial Statements
Comparison of financial ratios to past,
industry, sector and all firms
Types of Ratios
Financial Ratios:
Liquidity Ratios
Assess ability to cover current obligations
Leverage Ratios
Assess ability to cover long term debt obligations
Operational Ratios:
Activity (Turnover) Ratios
Assess amount of activity relative to amount of
resources used
Profitability Ratios
Assess profits relative to amount of resources
used
Valuation Ratios:
Assess market price relative to assets or earnings
LIQUIDITY RATIO:


Current Ratio= Current Assets/Current
Liabilities.


Quick Ratio= CA-Inventory/CL
LEVERAGE RATIO
Debt-Equity Ratio: Total long term debt/Shareholders
funds

Interest coverage ratio: EBIT/shareholders funds

Proprietary ratio: Shareholders funds/total assets

Debt to assets ratio: Total Debts/total assets


Activity Ratio
Asset Turnover = Sales turnover / assets employed

Stock turnover = Cost of goods sold / stock expressed as
times per year

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

Fixed Assets TO ratio = Sales (Net)/Net fixed Assets
Profitability ratio
G.P.ratio=GP/Net Sales

N.P.ratio=NP/Net sales

Operating ratio = Op. Cost/Net sales
Operating Profitability Ratios
Assets Total
EBIT
Assets Total
Sales
Sales
EBIT

Assets Total
Tax Before Net
Assets Total
Expense Interest
Assets Total
EBIT

KEY FACTOR RATING
The key factors that affect org functioning.
Info regarding key factors is collected.
Answers are being closely examined with
respect to key factors. The impact of each
key factor is examined.
FUNCTIONAL AREA PROFILE & RESOURCE
DEVELOPMENT MATRIX
To make a comparative analysis of a firms
own resource deployment position and
focus of efforts with those of competitors.
First, technique requires preparation of
matrix of functional area with common
features.
Secondly matrix is prepared showing
deployment and focus of efforts over a
period of time.
STRATEGIC ADVANTAGE PROFILE
SAP tries to find out the org strengths and
weaknesses with relation to some CSF.


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





Characteristics of CSF Analysis
Internal
External
Monitor
Develop
Process of CSF Analysis Identify
CSF
Critical information internal & external
Critical assumption set
Critical decisions


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

Long term Mission & Goals

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




Characteristics of mission statement
Feasible,
Precise
Clear
Motivating
Should give the means to achieve objectives

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

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


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



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





BALANCED SCORECARD
FRAMEWORK
Vision &
Strategy
Learning &
growth
Internal
Business
process
Financial
perspective
Customers
Perspective
BALANCED SCORECARD
FRAMEWORK

Translate Strategy to Operational terms
The Strategy
Financial Perspective
If we succeed, how will we look
to our shareholders
Customer Perspective
To achieve my vision, how must
we look to our customers?
Internal Perspective
To satisfy my customer, at
which processes must I excel?
Organization Learning
To achieve my vision, how must my
organization learn and improve?
60% of
organizations
dont link
strategy &
budgets
85% of management
teams spend less
than
one hour per month
on strategy issues
STRATEGY
Strategic
Learning Loop
BALANCED
SCORECARD

Strategy

Balanced
Scorecard
A good Balanced scorecard describes the
Organizational Strategy
Outcome measures ( results from past efforts)and
the measures that drive performance
Objective, easily quantified outcome measures and
subjective, somewhat judgmental performance
drivers
Lagging and leading indicators
Short-term and long-term objectives
Stakeholders
Measures are Balanced between
BSC s are more than just a somewhat adhoc
collection of financial & non-financial
performance measures
BSC is a Top down process driven by the
mission and strategy
Clarify and translate vision and strategy
Communicate and link strategic objectives and
measures
Plan ,set targets, and align strategic initiatives
Enhance strategic feedback and learning
What does BSC do?
Clarify and gain consensus about strategy
Communicate strategy throughout the organization
Align departmental and personal goals to strategy
Link strategic objectives to long term targets and
annual budgets
Perform periodic and systematic strategic reviews
Obtain feedback to learn about and improve strategy
What does BSC do?
Indicate whether companys strategy implementation and
execution are contributing to bottom-line improvement
Profitability
Operating income,
Return-on-capital employed (ROCE)
EVA
Growth
Cash flow
Financial perspective
Financial perspective
Increase EVA to +2%
Productivity Strategy Revenue Growth Strategy
New Products High end products Cost Productivity
Customer Perspective
Customer & Market segment in which the unit is
competing
Performance in the targeted markets
Customer satisfaction
Customer retention
New customer acquisition
Customer profitability
Specific measures of value propositions- short lead
time or on-time delivery
New approaches to satisfy emerging needs
Customer Perspective
Relation
ship
On time
delivery
Technical
support
Survey

Assistance

Differentiators
Basic Requirement
Clean
Quality
Variability within
specified limits
Win-win Relations with
Channel partners
Internal Business-process perspective
Critical internal process in which organization must
excel
Deliver value
proposition
Satisfy shareholders
expectations
Internal Process
Identify entirely new process at which organization must
excel to meet customer & financial objectives
Internal Business-process perspective
Achieve Operational
excellence
Customer Value
Proposition
lowest cost producer
Learning and growth perspective
Infrastructure that organization must build to create
long-term growth and improvement
People based measures
ESI
Competencies
Skill Mix
Systems (Technology)

Learning and growth perspective
Climate for
action
IT Technology

Competencies

ESI
Motivated and prepared
workforce
ROCE
Customer
Loyalty
On-line
delivery
Process
Cycle Time
Process
Quality
Employee
Competency
Cause and Effect Relationship
Four perspectives: Are they sufficient
Community perspective - Social responsibility
Suppliers perspective
Question : Is it vital for success of business units
strategy?
The Balanced Scorecard Effectively Communicates
How Well the MSO Is Achieving Their Mission
Massachusetts Special Olympics Mission Statement
Positive Image # of new programs / #
athletes
Community Volunteer retention /
recruitment
Involvement New donors
Athlete Outreach / Donor feedback
Program Expansion # athletes in outreach program
F
i
n
a
n
c
i
a
l

D
o
n
o
r

Training & Competition # athletes not able to find a
team
Controlled Cost Cities with no registered
athletes
Quality Programs Fee increase
Community For Family feedback
Athletes # of activities outside of
competition
C
u
s
t
o
m
e
r

/

A
t
h
l
e
t
e

Objectives Measures
Organization and Administration % Plans distributed team
Public Relations meetings # area management team
$ raised
Training # training classes offered
outreach # first time athletes
I
n
t
e
r
n
a
l

O
p
e
r
a
t
i
o
n
s

Objectives Measures Objectives Measures
Objectives Measures
Knowledge of MSO Volunteers trained in MSO and
sports
Management Registration forms in one time
Program guide distribution
Database Management Volunteers in database
Recognition Advanced coaches training/
coaches/ meetings
I
n
t
e
r
n
a
l

O
p
e
r
a
t
i
o
n
s

Balanced Scorecard - Example
Vision
To provide patients, families and primary care physicians with the best,
most compassionate care possible and to excel at communications
Customer
Patient Primary Care
Physician
% Satisfied % Satisfied with
% would Recommend Communication
% Parents Could % Parents Could
Articulate Care Plan Identify DCH Physician
Discharge Timeliness
Financial
Operating Margin
Cost per Case Revenue from
Neonatal Care
Internal Processes
Wait Time Quality Productivity

Admissions Infection Rates Length of Stay
Discharge Blood Culture Readmission Rate
Contaminate Rate Daily Staffing vs.
Use of Clinical Occupancy
Pathways (Top 10)
Learning & Growth
Incentive Plan Strategic Database
- Awareness - Availability
- Implementation - Use
A successful Balanced Scorecard
program starts with a recognition
that it is not a metrics project,
its a change process.
A Good Balanced Scorecard Describes
the Organization Strategy.
Strategic Objectives Strategic Measures
F
i
n
a
n
c
i
a
l

F1 Return on Capital
Employed
F2 Existing Asset
Utilization
F3 Profitablity
F4 Industry Cost Leader
F5 Profitable Growth


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






C
u
s
t
o
m
e
r
Delight the Customer

Win-Win Dealer
Relationship
C1 Continually Delight
the Targeted
Consumer
C2 Build Win-Win
Relations with Dealer
E Share of Segment in
Selected Key Markets
E Mystery Shopper Rating
E Dealer Gross Profit
Growth
E Dealer Survey
L
e
a
r
n
i
n
g

&

g
r
o
w
t
h

I
n
t
e
r
n
a
l

Build the Franchise

Increase Customer Value

Operational Excellence

Good Neighbor


I1 Innovative products
and services
I2 Best-in-class Franchise
Teams
I3 Refinery Performance
I4 Inventory
Management
I5 Industry Cost Leader
I6 On Spec-On Time
I7 Improve EHS

E New Product ROI
E New Product Acceptance
Rate
E Dealer Quality Score
E Yield Gap
E Unplanned Downtime
E Inventory Levels
E Run-out Rate
E Activity Cost. vs.
Competition
E Perfect Orders
E Number of Environmental
Incidents
E Days Away from Work
Rate
Motivated and Prepared
Workforce


L1 Climate for Action
L2 Core Competencies
and Skills
L3 Access to Strategic
Information
E Employee Survey
E Personal BSC (%)
E Strategic Competency
Availability
E Strategic Information
Availability
A Good Balanced Scorecard Describes
the Organization Strategy.
MAKE STRATEGY EVERYONES JOB
Top-Down Bridging
Process To Share the
Strategy & Align the
Workforce
Bottom-Up Process
to Internalize &
Execute the Strategy
CORP
SBU
EDUCATION
PERSONAL GOAL
ALIGNMENT
BALANCED PAYCHECKS
The Strategy Focused Workforce
Build STRATEGY-FOCUSED ORGANIZATIONS
STRATEGY
Mobilize Change
through Executive
Leadership
Make Strategy
a Continual
process
Translate the
Strategy to
Operational Terms
Align the
Organization to
the Strategy
Make Strategy
Everyones Job
Mobilization
Governance Processes
Strategic Management
Link Budgets & Strategy
Strategic Learning
Analysis & Information System
Strategic Awareness
Personal Scorecard
Balanced Paychecks
Corporate Role
Business Unit Synergic
Support Unit Synergic
Strategy Mape
Balanced Scorecards
1
2
3
4
5
Describing Strategy : Strategy Is a Step in a
Continuum
MISSION
Why we exist
VALUES
What we believe In
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SOCRECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do
PERSONAL OBJECTIVES
What I need to do
STRATEGIC OUTCOMES
Satisfied
SHAREHOLDERS
Delighted
CUSTOMERS
Satisfied
PROCESSES
Motivated & Prepared
WORKFORCE
What Is A Good Balanced Scorecard?
#1. Executive Involvement
Strategic decision makers must validate the
strategy and related measures

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

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

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

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


CORPORATE LEVEL
STRATEGIES
Types of CLS
Growth/expansion
Stability
Retrenchment
combination
Growth/Expansion

A) INTENSIFICATION
Market penetration
Market development
Product development
Innovation
B) DIVERSIFICATION
Concentric
Conglomerate
Forward
Backward

Concentric Diversification(RELATED)
When an org diversifies into a related but
distinct business. With concentric
diversification, new businesses can be
related to existing businesses through
products, markets or technology. Example:
Philips into Cellular phones,etc
CONGLOMERATE(UNRELATED)
An org diversifies into an area that are
unrelated to its business. The decision is
taken due to technological change.

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



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

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





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


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


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

Differentiation Strategy

Focus Strategy

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

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



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



COMPETITIVE ADVANTAGE
Competitive advantage occurs when a organization
acquires or develops an attribute or combination of
attributes that allows it to outperform its competitors.
These attributes can include access to natural
resources, such as high grade ores or inexpensive
power, or access to highly trained and skilled personnel
human resources. New technologies such as robotics
and information technology either to be included as a
part of the product, or to assist making it. The term
competitive advantage is the ability gained through
attributes and resources to perform at a higher level than
others in the same industry or market
How to build/acquire CA?
Innovation
Integration
Alliances/mergers/acquisitions
R&D
Entry Barriers
Benchmarking
Value chain approach

How to build/acquire CORE
COMPETENCE?
Focus on two or more skills
Low cost strategies
Benefits of cost leadership



STRATEGIC ANALYSIS AND CHOICE
STRATEGY CHOICE
How effective has the existing strategy
been?
How effective will that strategy be in the
future?
What will be the effectiveness of selected
strategies?
STRATEGY CHOICE
Strategists collect and evaluate information to assess strengths and
weaknesses of the internal environment and opportunities and
threats of the external environment. Such an assessment presents a
list of possible strategic alternatives.From among those alternatives,
choices are made.
It determines the characteristics and forms of an organization's
strategic direction.

the decision to select among the grand strategies
considered, the strategy which will best meet the
enterprises objectives.
GAP Analysis
Gap analysis is a tool that helps a company to compare
its actual performance with its potential performance.

It simply answer two questions - where are we now?
and where do we want to be? .

The difference between the two is the GAP - this is how
you are going to get there.
Tools of Determining Strategic Choice
BCG Portfolio
GE Multifactor Portfolio Matrix
Hofers Product-Market Evolution Matrix
Shell Direction Policy
Industrys level policy
Porters five forces model
Portfolio Analysis
And
BCG Matrix

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


It analyses the impact of investing resources in
different SBUs on the corporates future earnings
and cash flow.





SBUs are evaluated from two ways
1. Industry attractiveness
(market growth)

And

2. Competitive strength
(relative market share)



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



The Growth Share Matrix
The market growth rate on the vertical axis is
the proxy measure for the industry
Attractiveness.

The relative market share is proxy for its
competitive strength in the industry.

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


The BCG Matrix
Source: Perspectives, No. 66, The Product Portfolio, Adapted by permission from The Boston Consulting Group, Inc., 1970.
Relative market share
Cash cows Dogs
High
Low
Question
marks
Stars
M
a
r
k
e
t

g
r
o
w
t
h

r
a
t
e

Cash cows Dogs
High
High
Low
Question
marks
Stars
High
Low
Low
$
?
Stars
Cash Cows Dogs
Problem Child
Relative market share
M
a
r
k
e
t

g
r
o
w
t
h

r
a
t
e


M
a
r
k
e
t

g
r
o
w
t
h

r
a
t
e


Relative market share
M
a
r
k
e
t

g
r
o
w
t
h

r
a
t
e


BCG Matrix
Stars
Cash Cows Dogs
Problem Child
Relative market share
M
a
r
k
e
t

g
r
o
w
t
h

r
a
t
e


M
a
r
k
e
t

g
r
o
w
t
h

r
a
t
e


Relative market share
M
a
r
k
e
t

g
r
o
w
t
h

r
a
t
e


BCG Matrix
Revenue ++++
Expenses _ _ _
Net +
Revenue +
Expenses _ _ _ _
Net _ _ _
Revenue + + + + +
Expenses _
Net + + + +
Revenue + +
Expenses _ _ _ _
Net _ _ _
BCG Market Share/Market Growth Matrix
BCG Matrix
Dogs are businesses that have a very small
share of a market that is not expected to grow.
Cash cows are businesses that have a large
share of a market that is not expected to grow
substantially.
Question marks are businesses that have only a
small share of a quickly growing market.
Stars are businesses that have the largest share
of a rapidly growing market.
Stars

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



Cash cows

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


Question marks

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

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


Portfolio Strategies
Four
Portfolio
Strategies
BUILD
Does the SBU have the potential to be a star?
HOLD
Can you maintain and preserve market share?
DIVEST
Is it appropriate to dump SBUs
with low-growth potential?
.

HARVEST
Increase the short-term return without
impacting long-run prospects.
Limitations of the BCG Matrix
1. Market Growth rate is an inadequate descriptor of
overall industry attractiveness.

2. Relative market share is inadequate as a descriptor of
overall competitive strength.

3. The analysis is highly sensitive to how growth and
share are measured.

4. It provide little guidance on how best to implement the
investment strategies.

5. The model implicitly assumes that business units are
independent or one another except for the flow of cash.
How to Identify SBUs?
It is the basic competitive unit of a company.
It has a specific and identifiable group of
customers.
It has specific and identifiable competitors.
It can be measured as an independent entity in
terms of profit and loss.
Therefore, it may require a separate marketing
strategy.

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

The GE / McKinsey matrix is similar to the
BCG growth-share matrix in that it maps
strategic business units on a grid of the
industry and the SBU's position in the
industry. The GE matrix however, attempts to
improve upon the BCG matrix in the following
two ways:
The GE matrix generalizes the axes as
"Industry Attractiveness" and "Business Unit
Strength" whereas the BCG matrix uses the
market growth rate as a proxy for industry
attractiveness and relative market share as a
proxy for the strength of the business unit.

The vertical axis of the GE / McKinsey matrix is
industry attractiveness, which is determined by
factors such as the following:
GMarket growth rate
GMarket size
GDemand variability
GIndustry profitability
GIndustry rivalry
GGlobal opportunities
GMacroenvironmental factors (PEST)

Industry Attractiveness

Each factor is assigned a weighting
that is appropriate for the industry.
The industry attractiveness then is
calculated as follows:



The horizontal axis of the GE / McKinsey matrix is the strength of
the business unit. Some factors that can be used to determine
business unit strength include:
GMarket share
GGrowth in market share
GBrand equity
GDistribution channel access
GProduction capacity
GProfit margins relative to competitors
The business unit strength index can be calculated by multiplying the estimated
value of each factor by the factor's weighting, as done for industry attractiveness.

Business Unit Strength

Industry attractiveness and business unit
strength are calculated by first identifying
criteria for each, determining the value of
each parameter in the criteria, and
multiplying that value by a weighting factor.
The result is a quantitative measure of
industry attractiveness and the business
unit's relative performance in that industry
Industry attractiveness =
factor value
1
x factor weighting
1

+ factor value
2
x factor weighting
2
+
GE MATRIX contd..
Each business unit can be portrayed as a circle
plotted on the matrix, with the information
conveyed as follows:
GMarket size is represented by the size of the
circle.
GMarket share is shown by using the circle as a pie
chart.
GThe expected future position of the circle is
portrayed by means of an arrow.
Plotting the Information

The shading of the above circle indicates a 38%
market share for the strategic business unit. The
arrow in the upward left direction indicates that
the business unit is projected to gain strength
relative to competitors, and that the business unit
is in an industry that is projected to become more
attractive. The tip of the arrow indicates the future
position of the center point of the circle.
The following is an example of such a representation:


Resource allocation recommendations can be made to
grow, hold, or harvest a strategic business unit based on
its position on the matrix as follows:
Grow strong business units in attractive
industries, average business units in attractive
industries, and strong business units in average
industries.
Hold average businesses in average industries,
strong businesses in weak industries, and weak
business in attractive industries.

Strategic Implications
Harvest weak business units in unattractive
industries, average business units in unattractive
industries, and weak business units in average
industries.
There are strategy variations within these three
groups. For example, within the harvest group
the firm would be inclined to quickly divest itself
of a weak business in an unattractive industry,
whereas it might perform a phased harvest of an
average business unit in the same industry.
LIMITATION GE
While the GE business screen represents an
improvement over the more simple BCG growth-
share matrix, it still presents a somewhat limited
view by not considering interactions among the
business units and by neglecting to address the
core competencies leading to value creation.
Rather than serving as the primary tool for
resource allocation, portfolio matrices are better
suited to displaying a quick synopsis of the
strategic business units.

GE Mckinsey Matrix
HOLD Low
AVERAGE
High
WEAK AVERA
GE

STR
- ONG
Bus Str
Ind at
GROW
HOLD
HARVEST
Hofers product Market evolution
According to Hofer and Schendel, "The
Principal difficulty with GE Business
Screen is that it does not depict as
affectively at it might the positions of
new businesses that are just starting to
grow in new industries.

Major changes in basic competitive
position occur in the stages of
development, shakeout and decline
because in these stages the basic nature
of competition changes. It is more difficult
to make changes to competitive position in
the other stages of growth, maturation and
saturation as the bases for competition are
usually well established.
Market shifts during these stages of the market evolution
do happen however and can be caused by:
+ a major blunder by the industry leader
+ a major investment program by a well positioned follower
+ through the acquisition and effective integration of another firm
within the industry
+ through a sustained effort to produce small, consistent incremental
advantages over a long period of time.
Stages of Product-market evolution

Direction Policy Matrix
It uses two dimensions-business sector prospects and companys
competitive capabilities-in order to choose appropriate strategies.

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

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

Try harder Average capabilities but operating in attractive prospects. New
additional resources top strengthen their position.

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

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

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

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

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

Divest Business Capabilities are weak here.SBU;s running in losses with
uncertain cash flows. Not likely o improve in future..

Business-Level Strategic Analysis
Industry analysis
Strategic Group analysis
Competitor analysis
Life cycle analysis
SWOT Analysis

Subjective Factors influencing
Strategic Choice
Commitment of past strategies
Attitudes towards risk
Degree of firms external dependence
Internal political considerations
Time constraints
Competitive reactions
Corporate culture.


STRATEGIC
IMPLEMENTATION
Implementation of strategies is concerned
with the design and management of
systems to achieve the best integration of
people,structures,processes and
resources in reaching organizational
purpose.

RESOURCE ALLOCATION
While implementing strategies, the scarce
resources (financial,physical,human,etc)
resources need to be allocated carefully. In this
regard, one can follow, top-down and bottom-up
approach.
In top -down approach resources are
allocated through a process of segregation
down to operating levels.
In the bottom-up approach resources are
distributed after a process of aggregation
from the operating level
.
Means of resource allocation
Strategic Budget
Capital budget
Performance budget
ZBB
Decision package
Ranking
Resource allocation
Structural Issues
FUNCTIONAL STRUCTURE:A company
organized with a functional structure
groups people together into functional
departments such as purchasing,
accounts, production, sales, marketing.
These departments would normally have
functional heads who may be called
managers or directors depending on
whether the function is represented at
board level.

Advantages
Clarity
Economies of scale
Specialization
Coordination
In-depth skill development
Suitability
Limitations
Effort Focus

Poor decision-making

Sub-unit conflicts

Managerial vacuum
PRODUCT DEPARTMENTATION
The purpose of product departmentation is that every product is
handled by separate management team and the problems faced in
the development of a product are carried out by single group of
employees working in that unit.

The disadvantage is that the product managers need to coordinate
each other for the resource sharing which becomes a difficult
process because of lesser communication between the product
divisions.

Sometimes, products of the same company start competing with
each other which results in snatching one's division profit from other
division leaving behind net profit for the company zero. However this
kind of structure works best in the big organizations which have lots
of products in their product portfolio.
PRODUCT DEPARTMENTATION
Advantage: The manager can aware about their
particular activity in the firm about the activities
which are related to the manufacturing a
product.
Disadvantage: Sometimes the managers and
employees do not meet the requirement of other
department which is somewhere related to their
particular department because they are working
in their department and there is no more
communication between the other departments
GEOGRAPHIC DEPARTMENTATION
MATRIX ORGNAISATION
STRUCTURE
A Matrix structure organisation contains
teams of people created from various
sections of the business. These teams will
be created for the purposes of variety of
projects rather than a specific project and
will be led by a project manager. Often the
team will only exist for the duration of the
projects and matrix structures are usually
deployed to develop new products and
services .
The advantages of a matrix include
Individuals can be chosen according to the
needs of the project.
The use of a project team which is
dynamic and able to view problems in a
different way as specialists have been
brought together in a new environment.
Project managers are directly responsible
for completing the project within a specific
deadline and budget.

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

Technology

Environment

People

PROJECT MANAGEMENT

Project management is a carefully planned and
organized effort to accomplish a specific (and usually)
one-time objective.
for example, construct a building or implement a major
new computer system.

Project management includes developing a project plan,
which includes defining and confirming the project goals
and objectives, identifying tasks and how goals will be
achieved, quantifying the resources needed, and
determining budgets and timelines for completion..
It also includes managing the implementation of
the project plan, along with operating regular
'controls' to ensure that there is accurate and
objective information on 'performance' relative to
the plan, and the mechanisms to implement
recovery actions where necessary. Projects
usually follow major phases or stages (with
various titles for these), including feasibility,
definition, project planning, implementation,
evaluation and support/maintenance.
Benefits of Project Mgt.
Better efficiency in delivering services
Improved/increased/enhanced customer satisfaction
Enhanced effectiveness in delivering services
Improved growth and development within your team
Greater standing and competitive edge
Opportunities to expand your services:.
Better Flexibility:
Increased risk assessment:.
Increase in Quality:



BUSINESS ETHICS
AND
SOCIAL RESPONSILBILTY
VALUES
Values are those things that really matter to
each of us ... the ideas and beliefs we hold
as special. Caring for others, for example,
is a value; so is the freedom to express
our opinions.
CULTURE
The totality of socially transmitted behavior
patterns, arts, beliefs, institutions, and all other
products of human work and thought.
These patterns, traits, and products considered
as the expression of a particular period, class,
community, or population:
These patterns, traits, and products considered
with respect to a particular category, such as a
field, subject, or mode of expression:
ETHICS
a system of moral principles
the rules of conduct recognized in respect to a
particular class of human actions or a particular
group, culture, etc.:
.(usually used with a singular verb ) that
branch of philosophy dealing with values relating
to human conduct, with respect to the rightness
and wrongness of certain actions and to the
goodness and badness of the motives and ends
of such actions.
BUSINESS ETHICS
Business ethics (also known as Corporate
ethics) is a form of applied ethics that examines
ethical principles and moral or ethical problems
that arise in a business environment. It applies
to all aspects of business conduct and is
relevant to the conduct of individuals and
business organizations as a whole. Applied
ethics is a field of ethics that deals with ethical
questions in many fields such as medical,
technical, legal and business ethics.
Factors influencing business ethics
Legislation

Government rules & regulations

Social pressures

Conflicts between personal values and
needs of the firms.
SOCIAL RESPONSIBILITY
Social responsibility is an ethical or
ideological theory that an entity whether it
is a government, corporation, organization
or individual has a responsibility to society
at large. This responsibility can be
"negative", meaning there is exemption
from blame or liability, or it can be
"positive," meaning there is a responsibility
to act beneficently.
corporate responsibility is a form of corporate
self-regulation integrated into a business model.
Ideally, CSR policy would function as a built-in,
self-regulating mechanism whereby business
would monitor and ensure their adherence to
law, ethical standards, and international norms.
Business would embrace responsibility for the
impact of their activities on the environment,
consumers, employees, communities,
stockholders and all other members of the public
sphere.
Corporate social responsibility (CSR) isn't just
about doing the right thing. It means behaving
responsibly, and also dealing with suppliers who
do the same. It also offers direct business
benefits.

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

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


LEADERSHIP
&
Its STYLE
Leadership

The ability to influence a group toward the
achievement of goals
Principles of Leadership
Know yourself and seek self-improvement - In order to know
yourself, you have to understand your be, know, and do, attributes.
Seeking self-improvement means continually strengthening your
attributes. This can be accomplished through self-study, formal
classes, reflection, and interacting with others.

Be technically proficient - As a leader, you must know your job
and have a solid familiarity with your employees' tasks
.
Seek responsibility and take responsibility for your actions -
Search for ways to guide your organization to new heights. And
when things go wrong, they always do sooner or later -- do not
blame others. Analyze the situation, take corrective action, and
move on to the next challenge
Principles of Leadership
Make sound and timely decisions - Use good problem
solving, decision making, and planning tools.
Set the example - Be a good role model for your
employees. They must not only hear what they are
expected to do, but also see. We must become the
change we want to see - Mahatma Gandhi
Know your people and look out for their well-being -
Know human nature and the importance of sincerely
caring for your workers.
Keep your workers informed - Know how to
communicate with not only them, but also seniors and
other key people.
Principles of Leadership
Develop a sense of responsibility in your workers -.
Ensure that tasks are understood, supervised, and
accomplished - Communication is the key to this
responsibility.
Train as a team - Although many so called leaders call
their organization, department, section, etc. a team; they
are not really teams...they are just a group of people
doing their jobs.
Use the full capabilities of your organization - By
developing a team spirit, you will be able to employ your
organization, department, section, etc. to its fullest
capabilities
Factors of leadership

Factors of leadership
Follower

Leader

Situation

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

This type of person leads by positive example and
endeavors to foster a team environment in which
all team members can reach their highest
potential, both as team members and as people.
They encourage the team to reach team goals
as effectively as possible, while also working
tirelessly to strengthen the bonds among the
various members. They normally form and lead
some of the most productive teams.
Country Club Leader (low task, high
relationship)
This person uses predominantly reward power
to maintain discipline and to encourage the team
to accomplish its goals. Conversely, they are
almost incapable of employing the more punitive
coercive and legitimate powers. This inability
results from fear that using such powers could
jeopardize relationships with the other team
members.
Impoverished Leader (low task, low
relationship)
A leader who uses a "delegate and disappear"
management style. Since they are not
committed to either task accomplishment or
maintenance; they essentially allow their team to
do whatever it wishes and prefer to detach
themselves from the team process by allowing
the team to suffer from a series of power
struggles
The Process of Great Leadership

Challenge the process - First, find a process that you
believe needs to be improved the most.
Inspire a shared vision - Next, share your vision in
words that can be understood by your followers.
Enable others to act - Give them the tools and methods
to solve the problem.
Model the way - When the process gets tough, get your
hands dirty. A boss tells others what to do, a leader
shows that it can be done.
Encourage the heart - Share the glory with your
followers' hearts, while keeping the pains within your
own.
Managers Vs Leaders
Manager Characteristics
Administers
A copy
Maintains
Focuses on systems and structures
Relies on control
Short range view
Asks how and when
Eye on bottom line
Imitates
Accepts the status quo
Classic good soldiers
Does things right


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


Charismatic Leadership
Key Characteristics of Charismatic leaders
1. Self Confidence- They have complete confidence in their judgment and ability.

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

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

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

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

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

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


Transactional vs Transformational leaders
Characteristics of Transactional and transformational leaders

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

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

The Activities of Successful & Effective leaders
Type of Activity
Description categories
Derived from free Observation
Interacting with outsiders
Traditional Management
Networking
Human Resource Management
Exchange Information
Handling paperwork
Planning
Decision Making
Controlling
Routine Communication
Socializing /Politicking
Motivating/Reinforcing
Disciplining/Punishing
Managing conflict
staffing
Training/Developing
What skills do leaders need?
Personal Skills
1.Developing
Self-awareness
3. Solving
Problems
creatively
2.Managing
stress
Determining values
and priorities
Identifying cognitive style
Assessing attitude toward change
Coping with stressors
Managing time
Delegating
Using the rational approach
Using the creative approach
Fostering innovation in others
Interpersonal Skills
4. Communication
supportively
5. Gaining power
and influences
7. Management
conflict
6. Motivating others
Gaining power
Exercise influence
Empowering others

Coaching
Counseling
Listening

Identifying causes
Selecting appropriate strategies
Resolving confrontations
Diagnosing poor performance
Creating a motivating environment
Rewarding accomplishment
STRATEGIC LEADERSHIP
Strategic leaders are generally responsible for
large organizations and may influence several
thousand to hundreds of thousands of people.
They establish organizational structure, allocate
resources, and communicate strategic vision.
Strategic leaders work in an uncertain
environment on highly complex problems that
affect and are affected by events and
organizations outside their own.
Strategic leaders apply many of the same leadership
skills and actions they mastered as direct and
organizational leaders; however, strategic leadership
requires others that are more complex and indirectly
applied.
Strategic leaders, like direct and organizational leaders,
process information quickly, assess alternatives based
on incomplete data, make decisions, and generate
support. However, strategic leaders decisions affect
more people, commit more resources, and have wider-
ranging consequences in both space and time than do
decisions of organizational and direct leaders..
Features of Strategic Leaders
Strategic vision
Managing change
Governance and management
Culture
Structure and policies
Communications & network

Strategic Evaluation and
Control
Nature of Strategic Evaluation
Evaluate effectiveness of organisational
strategy in achieving organisational
objectives

Perform the task of keeping organisation
on track
Importance of Strategic Evaluation
The need for feedback
Appraisal and reward
Check on the validity of strategic choice
Congruence between decisions and intended
strategy
Successful culmination of the strategic
management process
Creating inputs for new strategic planning
Ability to coordinate the tasks performed
Barriers in Evaluation

Limits of Controls
Difficulties in measurement
Resistance to evaluation
Short-termism
Relying on efficiency versus effectiveness
Requirements of Effective Evaluation
Control should involve only the minimum amount
of information
Control should monitor only managerial activities
and results
Control should be timely
Long term and short term control should be used
Control should aim at pinpointing exceptions
Rewards for meeting or exceeding standards
should be emphasized
Evaluation Criteria for a Strategy

Qualitative Factors

Quantative Factors
Quantitative Factors
Companys performance over a period of time,

Companys performance with the competitors

Companys performance to industry averages.

Ratios play an important role in evaluating the strategy in
quantitative terms:
- ROI
ROE
- Employee turnover
- Employee satisfaction index
- Return on capital employed
- Profit margin
- Debt to equity
- EPS
- Asset growth
Qualitative Factors
+Consistency

+Feasibility

+Advantage

Strategic Control
Four Types of Strategic Controls
Premise Control

Implementation Control

Strategic Surveillance

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


Implementation control is aimed at evaluating
whether the plans, programmes, and projects
are actually guiding the organization towards
its predetermined objectives or not.
Strategic Surveillance


Strategic surveillance aimed at a more
generalized and overarching control
designed to monitor a broad range of events
inside and outside the company that are likely
to threaten the course of a firms strategy.
Special Alert Control


Special alert control, which is based on a
trigger mechanism for rapid response and
immediate reassessment of strategy in the
light of sudden and unexpected events
Operational Control

Aimed at the allocation and use of
organisational resources

Concerned with action or performance
How do Strategic Control and
Operational Control Differ
Attribute Strategic Control Operational Control
1. Basic question
Are we moving in the
right direction?
How are we performing?
2. Aim
Proactive, continuous
questioning of the basic
direction of strategy
Allocation and use of
organisational resources
3. Main Concern
Steering the
organizations future
direction
Action control
4. Focus
External environment
Internal organization
5. Time Horizon
Long- term
Short- term
6. Main Techniques
Environmental scanning,
information gathering,
questioning and review
Budgets, schedules, and
MBO
Process of Evaluation
Setting standards of performance

Measurement of performance

Analyzing variances

Taking corrective action
Setting of Standards
Quantitative Criteria
+ It has performed as compared to its past
achievements
+ Its performance with the industry average or that
of major competitors
Qualitative Criteria

There has to be a special set of qualitative criteria for a
subjective assessment of the factors like capabilities,
core competencies, risk- bearing capacity, strategic
clarity, flexibility, and workability
Measurement of Performance
The evaluation process operates at the
performance level as action takes place.
Standards of performance act as the
benchmark against which the actual
performance is to be compared. It is
important, however, to understand how the
measurement of performance can take
place.
Analyzing Variances
The measurement of actual performance and its
comparison with standard or budgeted
performance leads to an analysis of variances.
Broadly, the following three situations may arise:
The actual performance matches the budgeted
performance
The actual performance deviates positively over
the budget performance
The actual performance deviates negatively
from the budgeted
Taking Corrective Actions


There are three courses for corrective
action: checking of performance, checking
of standards, and reformulating strategies,
plans, and objectives.
Techniques of Strategic
Evaluation and Control

Evaluation Techniques for Strategic Control

Evaluation Techniques for Operational Control
Evaluation Techniques for Strategic
Control

Techniques for strategic control could be
classified into two groups on the basis of the
type of environment faced by the organisation.
The organisation that operate in a relative stable
environment may use strategic momentum
control, while those which face a relatively
turbulent environment may find strategic leap
control more appropriate.
Evaluation Techniques for
Operational Control
Operational control is aimed at the
allocation and use of organisational
resources
The evaluation techniques are classified
into three parts:
Internal analysis
Comparative analysis
Comprehensive analysis.
What is Strategic control?
it is the process by which managers
monitor the ongoing activities of an
organization and its members to evaluate
whether activities are being performed
efficiently and effectively and to take
corrective action to improve performance if
they are not
The importance of Strategic Control
The success of a chosen strategy
The implementation compass
Organizational performance
Ensuring competitive advantage
Strategic Control:
Requires more than re-acting on past
performance
Keeps the organization on track
Anticipating events that might occur in
future
Allows the organization to respond to new
opportunities that may present itself

The importance of Strategic Control
& quality:

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

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

The importance of Strategic Control
& Innovation:

:
Managers must create an environment in
which people feel free to experiment and
take risks
Managers are challenged to build control
systems that encourage risk taking
Measures cost reduction, process
improvement and improved quality
measures.
Control and Innovation
Problem: Time wasted due to unavailable parts
from central store. Electrical workshop not close
to central store (Witbank Municipality)
Electricians designed a innovative solution
through simple measures (trips to stores per
electrician per day
Applied 80/20 principle Established
decentralized store
Major savings

STRATEGIC CONTROL
Strategic Control Systems
are the formal target setting ,
measurement and feedback systems that
allow strategic managers to evaluate
whether the company is achieving on the
four building blocks of a competitive
advantage..
Types of Control systems
Financial controls
Output controls
Behavior controls
Organization culture
STRATEGIC CONTROL
Financial controls
Growth
Profitability
ROCE
Share prices( Private sector)
Is a favorite control because it is objective
STRATEGIC CONTROL
Types of Control systems
Output controls: It is a system of control in which
managers estimate or forecast appropriate performance
goals for each division, department and employee and
measure achievement against these goals
Divisional Goals
Functional Goals
Individual Goals


STRATEGIC CONTROL
Types of Control systems
Divisional Goal
Goal: To be the number 1 or 2 in the
industry in terms of market share
STRATEGIC CONTROL
Types of Control systems
Behavior controls: happens through the
establishment of a comprehensive systems of
rules and procedures to direct the actions of
divisions, functions and individuals
Operating budgets
HR rules & regulations
Standardization
STRATEGIC CONTROL
Strategic Control Systems
Characteristics
Be flexible to allow managers to respond as
necessary to unexpected events;
Should provide accurate information, giving a
true picture of organizational performance;
Should provide information in a timely manner

STRATEGIC CONTROL PROCESS

Four steps to design an effective control system:
1. Establish the standards & targets against which
performance is to be evaluated;
2. Create the measuring & monitoring systems that
indicate whether the standards & targets are being
reached;
3. Compare actual performance against established
targets
4. Initiate corrective action when it is decided that the
standards & targets are not being achieved
STRATEGIC CONTROL
Kinds of measures
Efficiency: Level of production costs, number of hours needed to
produce an item, cost of raw materials
Quality: Number of rejects, number of customer returns, level of product
reliability
Innovation: number of new products introduced, time taken to market;
cost of product development
Responsiveness to customers: number of repeat
customers; level of on-time delivery to customers, level of customer service