MBA Comprehensive Exam
Handling Steps
MBA Comprehensive Exam Handling Steps
Tips for the MBA comprehensive Exam
The selected strategies should be supported by justification
It’s very important to consider the compatibility between the selected strategies with the
financial position (gathered from financial ratios) “i.e. don’t follow integration strategies
if the financial position is bad”.
The Selected Strategies Business/Grand mustn’t be contradicting “i.e.: you can’t
follow:
o Cost leadership business strategy and in the same time Product development (R&D)
Grand strategy.
o Focus business strategy and in the same time use integration Grand strategy.
o Differentiation business strategy and in the same time use Defensive Grand strategy.
Consider always to use Intensive Strategies (Market penetration & Market development
– less costly) rather than integration Strategies (vertical & horizontal integration – need
excellent financial position)
Porter five forces assessment may be excluded if it wasn’t needed to answer the exam
questions like:
Do you think that this market is attractive? Or what do you think about competition?
Time management is the most important issue – the exam will be a 5 hours exam, use
the first hour for reading the case and the questions then use the remaining four hours in
writing the analysis, matching, decision and conclusion, you can follow the following
steps to handle the exam within this time span:
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MBA Comprehensive Exam Handling Steps
Overview for the Suggested steps & time span to handle the Exam
1. ( 5 Min) Start by reading the Questions for the purpose of reorder the questions hence
concentrate on the related parts from the case and the unrelated parts to be excluded.
2. (10 Min) Read the case “Screening” again to identify the unrelated parts to be excluded
3. (35 Min) Read the case carefully focusing on the parts that are related to the questions, using 4
different colored markers highlight the similar Factors i.e. Opportunities, Threats,
Strengths and Weaknesses.
4. (10 Min) Writing a introduction “Abstract” that may involve the following topics:
About the company (Background & History), Products Range, Geographical domination/market,
SBUs, divisions, Territories, industry, customer branding, competitors, competitive advantage
5. (60 Min) The input phase (Strategy Formulation) – involving internal & External Scanning to
form SWOT:
1. Vision
2. Mission
3. Assessing of the External and Internal environment within the step 3” as
following:
i. Mega or Societal Environmental Scanning: PEST assessment.
ii. Task or Industry Environmental Scanning: Porter five forces assessment.
(Proter five forces when asked only, when you have to choose between two
markets or to whether enter a new market or not.
iii. External Audit outcome: is an ordinal list of gathered external factors;
“Opportunities and Threats” Weighted (Sum =1) according to their
importance & Ranked (1-4) according to the degree of achieving, listed in an
EFE Method (where for each Opportunity or threat the weighted score = weight
* rank).
Internal Environment scanning:
A. Organization Structure encompass:
• Simple
• Functional
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MBA Comprehensive Exam Handling Steps
• Divisional
• Matrix
• Network structure.
B. Organization Culture and values
C. Resource Based view
a. Tangible Assets
b. Intangible Assets
c. Managerial Capabilities
D. Organizational Functions
d. Financial Analysis – including comment and interpretation on each ratio.
e. Marketing analysis and decision using strategic model “i.e.; BCG”
f. R&D
g. Operations
h. Information Systems
i. Manufacturing
j. Human Resources
E. Internal Audit: is an ordinal list of gathered Internal factors; “Strengths and
Weaknesses” Weighted (Sum =1) according to their importance & Ranked (1-4)
according to the degree of achieving, listed in an IFE method.
6. (30 Min) The Matching phase – List all suitable plans through using one of the matching tools:
a. IE Matrix
b. SPACE Matrix
c. SWOT/TWOS
d. Boston consulting group – BCG.
e. Grand Matrix
7. (60 Min) The Output phase (Decision) – involving selecting the suitable plans in the
following levels:
a. Organizational Strategies,
b. Business and functional Strategies (Competitive strategies)
c. Structure Changes. (Marketing Plan and HR Plan)(Implementation if asked)
8. Your Recommendations to solve any problems
9. Conclusion/ Epilogue ‫“ الخاتمة‬involving what’s expected when applying the selected strategies”
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MBA Comprehensive Exam Handling Steps
Detailed steps to handle the Exam
1. Writing an introduction “Abstract” First point four steps and a in the fifth step was clearly
fulfilled in the previous page involving
About the company– following is an example:
• “The Company name & website (www. The Company.com) (Background &
History)
• Type of Business/ Industry
• Products/services Range
• Geographical domination/markets
• Market Size
• Customers, Branding
• SBUs and Divisions
• Culture
• Competitors, Competitive situations, competitive advantage, main challenges
” i.e.; The Company operates in the business of Entertainment concerned with
organizing event, production of plays, music and films as well as promotions product in
the United States, Europe, Australia and much of Middle east. The main competitors
are XXX & XX. The company makes approximately ## varieties of the Entertainment
product. The Company is led by CEO XXX whose base pay was $###K in 20##. The
firm’s major competitor is privately-owned XX and conglomerate giant XX”.
Conglomerate= Philp moris and Kraft to all client
Concertic=Dunlop to specific customer
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1. Vision
Write the Actual Vision for the purpose of evaluation hence develop a new one according to
the following criteria:
Achieving
Unrealistic
No available resources
No time frame
No commitment to achieve it
Perceds Mission statement
Future oriented
Clear and Short
Challenging
If the criteria are achieved and it matches the strategic direction of the company then
keep the vision if not change it
Example: “To become the leading producer of Entertainment Services in the world”
2. Mission
Write the Actual Mission to be evaluated:
Criteria
Consistency
Credibiity
Clarity
Orientation
Length
Life cycle
Components
1.Customers
2.Products or Services
3.Industry
4.Market
5.Employees
6.Technology
7.Philosophy
8.Public Image
9.Self-Concept
Survival/ Growth / Profits
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Consistent with the vision
Saying what we are doing
Self-explained/ No jargon
Product oriented or customer oriented
Not too long= Boring, Not too short= Vague
(Start - Growth – Maturity – Decline)
Who are the firms customers?
What are the firms major products or services
Geographically where does the firm competes
Are employees a valuable asset for the
company
Value and belifes
Protifiability
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MBA Comprehensive Exam Handling Steps
If it matches the strategic direction and fulfill the criteria then keep the mission as it is, and if not
adjust the mission and ad the missing elements
Example: “To be the world’s (4) leading Entertainment Company focused on organizing
Events & Producing movies (2). We work for profits to investors (8) as we provide comfort
work zone to our employees (8), and the community (6) in which we operate. We deploy the
latest technological (9) and superior customer care (7) systems to continually create better
services for our customers (1). And in everything we do, we strive for fairness, and integrity
(4)”.
3. External Audit: This analysis is to end up with writing a list of: Threats and Opportunities
“External refers to outside the organization, some of things beyond our control"
Mega or Societal Environmental
Scanning: P.E.S.T. E.L assessment
External term refers to outside the organization, some of things beyond our control. PEST
Analysis is all about you get to assess each factor and every perspective in the mega or in the
societies environment from which you can extract what is Favorable for your organization i.e.
opportunity and what is unfavorable for the organization i.e. threats
Social, Cultural, Demographic, and
Environmental forces:
• Number of marriages, divorces, births, and deaths.
• Social security programs
• Per capita Income
• Lifestyle
• Traffic congestion
• Trust in government
• Average level of education
• Population changes by race, age, and sex
• Air pollution
• size, structure, and regional distribution of the
population
• Cultural fear or freedom level
• Cultural symbol (status)
• What’s socially acceptable?
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Economic forces
• Availability of credit and saving
• Level of disposable income
• Interest rates
• Inflation rates
• Unemployment
• Stock Market trend
• Foreign countries’ economic
conditions
• Monetary policies
• investment laws and regulations,
• The GDP and income level (which
directly reflects on consumer
spending power)
• The currency depreciation or
appreciation
• Wages level
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MBA Comprehensive Exam Handling Steps
• price elasticity of demand
Political, Governmental, and Legal forces:
Technological forces:
• Political stability,
• Internet availability and usage
• Government regulations & deregulations.
• E-commerce
• Changes in tax laws.
• The rate of development
• Level of government subsidies
• The presence of skilled persons
• Country to other countries relationships
• Presence of technological
capabilities.
• Trading policies& Import-export regulations
• Substitute might replace the
• Political conditions in foreign countries
organization’s product.
• Facilities for the entrance for new foreign
investment,
• Size of government budgets
• The relations with other countries
Competitors :
• The structure, bases and intensity of competition.
• The existing major competitors and any competitive advantage.
• The major strengths and relative position of each competitor.
• The objectives, strategies and the level of profitability of each competitors.
• The market share level.
1. Political: These factors determine the extent to which a government may influence the
economy or a certain industry. [For example] a government may impose a new tax or duty
due to which entire revenue generating structures of organizations might change.
Political factors include
a. Political stability and stability of the government
b. Fiscal policy
c. Special Tariffs &Trade tariffs (tariffs, customs and taxes) etc. that a government
may levy around the fiscal year and it may affect the business environment
(economic environment) to a great extent.
d. Boycott, Embargo &Quota
e. Government regulations & deregulations.
f. Changes in tax laws and policies
g. Pressure groups
h. Level of government subsidies( )‫الدعم‬
i. Global relationships
j. Trading policies& Import-export regulations
k. Political conditions in foreign countries/ stability
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l. Terrorist activity, severity if government protest (‫)االرهاب واالحتجاجات‬
m. Facilities for the entrance for new foreign investment,
n. Size of government budgets
o. The relations with other countries
2. Economic: These factors are determinants of an economy’s performance that directly
impacts a company and have resonating long term effects. [For example] a rise in the
inflation rate of any economy would affect the way companies’ price their products and
services. Adding to that, it would affect the purchasing power of a consumer and change
demand/supply models for that economy. Economic factors include:
a. GDP/GNP
b. Interest Rates
c. Money Supply
d. Inflation rate
e. Unemployment Level
f. Exchange Rate
g. Wages level
h. Price control
i. Devaluation
j. Reevaluation
k. Energy costs and availability
l. Disposal income is the amount of money that households have available for
spending and saving after income taxes have been accounted for. Disposable
personal income is often monitored as one of the many key economic indicators
used to gauge the overall state of the economy.
m. Income level (which directly reflects on consumer spending power)
n. Foreign exchange rates
o. Economic growth patterns etc. It also accounts for the FDI (foreign direct
investment) depending on certain specific industries who’re undergoing this
analysis.
p. Availability of credit and saving
q. Monetary policies
r. Investment laws and regulations Level of disposable income
s. Propensity of people to spend (standard of living)
t. Price elasticity of demand
u. The currency depreciation or appreciation (‫)انخفاض قيمة العملة‬
v. Availability of credit
w. Stock Market trend
x. Foreign countries’ economic conditions
y. Monetary policies
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3. Social: These factors scrutinize the social environment of the market, and gauge
determinants like cultural trends, demographics, population analytics etc. An example for
this can be buying trends for Western countries like the US where there is high demand
during the Holiday season.
a. Social Class (Education, Job, Income)
b. Life Style changes
c. Population growth rate
d. Age distribution
e. Life expectancies
f. Birth rate
g. Mortality rate
h. Religious orientation
i. Language
j. Dress
k. Working hours
l. Customs
m. Etiquette
n. Aesthetics
o. Childbearing rates
p. Immigration & emigration rates
q. Consumer behavior
r. Attitudes toward saving
s. Attitudes toward quality
t. Attitudes toward customer service
u. Buying habits
v. Marriages, divorces
w. Number of women and minority workers
x. Social Security programs.
y. size, structure, and regional distribution of the population
z. Cultural fear or freedom level
aa.Population changes by race, age, sex and religion
bb. Cultural symbol (status) What’s socially acceptable?
cc. The attitudinal changes towards business (product / services) produced
dd. Traffic congestion
ee. Trust in government
4. Technological: These factors pertain to innovations in technology that may affect the
operations of the industry and the market favorably or unfavorably. This refers to
automation, research and development and the amount of technological awareness that a
market possesses. Examples:
a. Government Spending on R&D
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b.
c.
d.
e.
f.
g.
h.
i.
j.
Industry Spending on R&D
Patent protection
Telecom infrastructure
Availability of certain Technology need to improve productivity (Presence of
technological capabilities)
Internet availability and usage
E-commerce
The rate of development
The presence of skilled persons
Substitute might replace the organization’s product.
5. Legal: These factors have both external and internal sides. There are certain laws that affect
the business environment in a certain country while there are certain policies that companies
maintain for themselves. Legal analysis takes into account both of these angles and then
charts out the strategies in light of these legislations.
For example:
a. Consumer laws
b. Safety standards
c. Labor laws
d. Competition law
e. Contract law
f. Environmental protection law
g. Changes in patents(‫ )التراخيص‬laws
h. Trade License
i. Customer Protection Law (Law of Negligence)
6. Environmental: These factors include all those that influence or are determined by the
surrounding environment. This aspect of the PESTLE is crucial for certain industries
particularly for example tourism, farming, agriculture etc. Factors of a business
environmental analysis include but are not limited to climate, weather, geographical
location, global changes in climate, environmental offsets etc.
a.
b.
c.
d.
e.
f.
Air and water pollution
Governmental regulation
Waste management
Ethical concerns
Ozone depletion
Endangered species ‫األنوا ع المهددة باالنقراض‬
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Task or Industry Environmental Scanning: Porter five forces
“Task or industry environment is the type of the environment you may control its factors
somehow”
The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies
in a business situation. This is useful, because it helps you understand both the strength of your
current competitive position, and the strength of a position you're considering moving into.
It is used to determine whether to enter a certain market or not or to choose between two
markets.
Societal Env.
STEP.C
Task Env.
Porter 5 Forces
Organisation
Internal Env.
“Porter five forces assessment may be excluded if it wasn’t required explicitly to answer
questions in exam like do you think that this market is attractive? Or what do you think about
competition?”
Five Forces Analysis assumes that there are five important forces that determine competitive
power in a business situation. These are:
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New Entry Barriers
• Economies of scale
• Time and cost of entry
• Product differentiation
• Switching costs
• Large Capital requirement
• Technology protection/ The need to gain technology and specialized knowhow
• Access to distribution Channels/ Lack of adequate distribution channels
• Government Policy (taxes and customs)
• The need to gain economic of scale quickly
• The lack of experience
• Strong customer loyalty
• Strong brand preference
• The potential saturation of market.
• Economies of product differences
• Brand equity
• Absolute cost advantages
• Learning curve advantages
• Expected retaliation
Overall result for threats of new entry: Attractive/not attractive ** Quality, pricing, and marketing
can overcome barriers.
Power is affected by the ability of people to enter your market. If it costs little in time or money to
enter your market and compete effectively, if there are few economies of scale in place, or if you
have little protection for your key technologies, then new competitors can quickly enter your
market and weaken your position. If you have strong and durable barriers to entry, then you can
preserve a favorable position and take fair advantage of it.
Rivalry among Competition (existing firms):
Intense rivalry related to:
Conditions That Cause High Rivalry Among Competing Firms
•
•
•
•
•
•
•
•
High number of competing firms
Similar size of firms competing
Similar capability of firms competing
Falling demand for the industry’s products
Falling product/service prices in the industry
When consumers can switch brands easily
When barriers to leaving the market are high
When barriers to entering the market are low
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•
•
•
•
•
•
•
When fixed costs are high among firms competing
When the product is perishable
When rivals have excess capacity
When consumer demand is falling
When rivals have excess inventory
When rivals sell similar products/services
When mergers are common in the industry
•
•
•
•
•
•
•
•
•
•
•
Number of competitors (Monopoly, Monopolistic Competition, Fragmented)
Rate of industry growth
Product or service characteristics (quality)
Amount of fixed costs
Capacity
Regulation of competition
Customer loyalty
Informational complexity and asymmetry
Brand equity
Fixed cost allocation per value added
Level of advertising expense
Overall result for intensity of competitive rivalry: Attractive/not attractive
** Focus on competitive advantage of strategies What is important here is the number and
capability of your competitors. If you have many competitors, and they offer equally attractive
products and services, then you'll most likely have little power in the situation, because suppliers
and buyers will go elsewhere if they don't get a good deal from you. On the other hand, if no-one
else can do what you do, then you can often have tremendous strength.
Rivalry Among Competing Firms
Most powerful of the five forces
Focus on competitive advantage of strategies
Threat of substitute
• Availability of substitutes
• Substitute performance
• Switching costs
• Relative price of substitute products declines
• Buyer propensity ‫ ميل‬to substitute
• Perceived level of product differentiation
Overall result for threat of substitute products: Attractive/not attractive
** Firm’s plans for increased capacity & market penetration
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This is affected by the ability of your customers to find a different way of doing what you do – for
example, if you supply a unique software product that automates an important process, people may
substitute by doing the process manually or by outsourcing it. If substitution is easy and
substitution is viable, then this weakens your power.
Potential Development of Substitute Products
Pressures increase when consumer’s switching costs decrease
Firm’s plans for increased capacity & market penetration
Bargaining power of Buyers
• Buyer buys large portion of seller’s product
• Buyer can integrate backward
• Undifferentiated product
• Availability of sellers (Competitors and substitutes)
• Buyer orientation (price oriented vs quality oriented)
• Switching costs
• Low quality or high price
Consumers gain increasing bargaining power under the following circumstances:
•
•
•
•
•
•
If they can inexpensively switch to competing brands or substitutes
If they are particularly important to the seller
If sellers are struggling in the face of falling consumer demand
If they are informed about sellers’ products, prices, and costs
If they have discretion (‫ )تقدير‬in whether and when they purchase the product.
Alternative suppliers are plentiful ( ‫ )وافر‬because the product is standard or
undifferentiated.
• Changing supplier’s costs very little.
• The purchase product represents a high percentage of a buyer’s costs, thus providing
incentive to shop around for a lower price.
• A buyer earns low profits and is thus very sensitive to costs and service differentiation.
• The purchased product is unimportant to the final quality or price of a buyer’s products
or service.
• Buyer information availability
• Ability to backward integrate
• Availability of existing substitute products
• Buyer price sensitivity
• Price of total purchase
Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the
number of buyers, the importance of each individual buyer to your business, the cost to them of
switching from your products and services to those of someone else, and so on. If you deal with
few, powerful buyers, then they are often able to dictate terms to you. When customers are:
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• concentrated
• large
• buy in volume
Bargaining Power of Buyers
Customers concentrated or buy in volume affects intensity of competition
Consumer power is higher where products are standard or undifferentiated
Bargaining power od suppliers
• Number of suppliers and buyers (Petroleum) (few suppliers higher power)
• Suppliers product characteristics (unique or commodity – quality) unique (higher
power)
• Switching costs/ High switching cost (higher power)
• Availability of substitutes/ Substitutes are not easily available (higher power)
• Suppliers forward integration/ Real threat of forward integration from supplier (high
power)
• Amount purchased from supplier (large quantities)
• Product is critical for the business (higher power)
• The target industry is NOT important to the supplier (higher power)
• supplier switching costs relative to firm switching costs
• degree of differentiation of inputs
• presence of substitute inputs
• supplier concentration to firm concentration ratio
• Threat of forward integration by suppliers relative to the threat of backward
integration by firms.
• cost of inputs relative to selling price of the product
•
Overall result for bargaining power of suppliers: Attractive/not attractive
** Backward integration can gain control or ownership of suppliers (This strategy is especially
effective when suppliers are unreliable, too costly, or not capable of meeting a firm’s needs on a
consistent basis)
** However, in many industries it is more economical to use outside suppliers of component parts
than to self-manufacture the items, who specialize in such components and have huge economies
of scale.
Here you assess how easy it is for suppliers to drive up prices. This is driven by the number
of suppliers of each key input, the uniqueness of their product or service, their strength and
control over you, the cost of switching from one to another, and so on. The fewer the
supplier choices you have, and the more you need suppliers' help, the more powerful your
suppliers are.
When suppliers are:
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• Few suppliers who supply the required products
• The products have few substitutes
• The switching cost is relatively high
Bargaining Power of Suppliers
Large number of suppliers & few substitutes affects intensity of competition
Backward integration can gain control or ownership of suppliers
A supplier is powerful if some of the following factors apply
Low number of suppliers and many buyers
High power of suppliers
High differentiation or switching cost
High power of suppliers
Low availability of substitutes
High power of suppliers
High ability of supplier to integrate forward
High power of suppliers
Example:
Self Assessment—Bargaining Power of Suppliers
1 Are there a large number of potential input suppliers?
NO
2 Are the products that we need to purchase for our business ordinary?
NO
3 Do our purchases from suppliers represent a large portion of their business?
4 Would it be difficult for our suppliers to enter our business?
YES
5 Can we easily switch to substitute products from other suppliers? NO
6 Are we well informed about our supplier’s product and market? NO
YES
Final Assessment: Bargaining Power of Suppliers STRONG
Self Assessment—Bargaining Power of Buyers
1 Do we have enough customers such that losing one isn’t critical to your success?
YES
2 Does our product represent a small expense for our customers?
YES
3 Are customers uninformed about our product and market? NO
4 Is our product unique?
NO
5 Would it be difficult for buyers to integrate backward in the supply chain?
YES
6 Is it difficult for customers to switch from ours to our competitors’ products? NO
Final Assessment: Bargaining Power of Buyers
MEDIUM
Self Assessment—Threat of New Entrants
1 Do we have a unique process that has been protected? YES
2 Are customers loyal to our brand? NO
3 Are there high start-up costs for our business? YES
4 Are the assets needed to run our business unique?
NO
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5
6
7
8
Is there a process or procedure critical to our business?
YES
Will a new competitor have difficulty acquiring/obtaining needed inputs?
YES
Will a new competitor have any difficulty acquiring/obtaining customers?
NO
Would it be difficult for a new entrant to have enough resources to compete ? NO
Final Assessment: Threat of New Entrants MEDIUM
Self Assessment—Threat of Substitutes
1 Does our product compare favorably to possible substitutes? YES
2 Is it costly for our customers to switch to another product? NO
3 Are customers loyal to existing products?
NO
Final Assessment: Threat of Substitutes
STRONG
Self Assessment—Rivalry Among Competitors
1 Is there a small number of competitors? YES
2 Is there a clear leader in our market?
NO
3 Is your market growing? YES
4 Do we have low fixed costs?
NO
5 Can you store your product to sell at the best times? YES
6 Does our competitors pursuing a low growth strategy?
YES
7 Is your product unique?
NO
8 Is it easy for competitors to abandon their product? YES
9 Is it difficult for customers to switch between our product and our competitors’?
YES
Final Assessment: Rivalry Among Competitors LOW
Porter Five Forces
Attractiveness of the market
Rivalry
Attractive / Not Attractive
New Entry
Attractive / Not Attractive
Substitutes
Attractive / Not Attractive
Buyer Power
Attractive / Not Attractive
Supplier Power
Attractive / Not Attractive
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External Factor Evaluation Matrix
External Factor Evaluation (EFE) Matrix:
EFE Allows strategists to summarize and evaluate economic, social, cultural, demographic,
environmental, political, governmental, legal, technological, and competitive information
1. After the previous External factors scanning “highlighted with the marker throughout the
case” start to List key external factors as identified in the external-audit process.
2. Include a total of 15 to 20 factors, including both opportunities and threats, that affect the
firm and its industry.
3. List the opportunities first and then the threats. Be as specific as possible, using percentages,
ratios, and comparative numbers whenever possible.
4. Assign to each factor a weight that ranges from 0.0 (not important) to 1.0 (very
important). The weight indicates the relative importance of that factor to being
successful in the firm’s industry.
5. Opportunities often receive higher weights than threats, but threats can receive high weights
if they are especially severe or threatening. Appropriate weights can be determined by
comparing successful with unsuccessful competitors or by discussing the factor and reaching
a group consensus.
6. The sum of all weights assigned to the factors must equal 1.0
7. Assign a rating between 1 and 4 to each key external factor to indicate how effectively
the firm’s current strategies respond to the factor, where:
4 = the response is superior
3 = the response is above average
2 = the response is average
1 = the response is poor.
Ratings are based on effectiveness of the firm’s strategies.
Ratings are thus company-based, whereas the weights are industry-based.
It is important to note that both threats and opportunities can receive a 1, 2, 3, or 4.
8. All the factors that act with low priority will be excluded I will only deal with the factors
with high and medium priority.
9. Multiply each factor’s weight by its rating to determine a weighted score.
10.Sum the weighted scores for each variable to determine the total weighted score for the
organization.
11.Regardless of the number of key opportunities and threats included in an EFE Matrix, the
highest possible total weighted score for an organization is 4.0 and the lowest possible is 1.
Example:
Key External Factors
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Weight
Rating
Weighted
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(assumption)
Opportunities
1. The European market is promising, with the advantage of
tariff-free transportation across EU nations
2. Middle Eastern and North African nations such as Syria, Saudi
Arabia, and Algeria are turning out to be profitable markets
3. Excess capacity from Egypt can be channeled to the newly
emerging European market
4. The financial crisis has proved to be an opportunity for
expansion into Europe
5. Egypt’s varied natural resources and industrial products could
be attractive for backward integration
6. The acquisition of Iskraemeco has expanded opportunities for
electrical services
7. Wind Energy is a promising division which promotes
generation of alternative power
Threats
1. Expansion into the European market connotes the risk of
(assumption)
Score
0.12
4
0.48
0.08
3
0.24
0.08
3
0.24
0.10
4
0.40
0.07
3
0.21
0.10
4
0.40
0.08
3
0.24
0.07
2
0.14
0.12
4
0.48
0.08
2
0.16
0.10
2
0.20
tackling new cultures
2. The company faces competition from five local and six
international firms
3. Co-operation with competitors as Elsewedy’s favored
customers may backfire if the latter switch loyalties
4. Italy and Spain could be risky markets in terms of relationships
with Egypt
Total
1.00
Summation must =1
No
Summation
3.19
Total
weighted
score
(TWS) =
Σ Weight
x Rate
Comment
The average total weighted score is 2.5. A total weighted score of 4.0 indicates that an organization
is responding in an outstanding way to existing opportunities and threats in its industry. In other
words, the firm’s strategies effectively take advantage of existing opportunities and minimize the
potential adverse effects of external threats. A total score of 1.0 indicates that the firm’s strategies
are not capitalizing on opportunities or avoiding external threats.
If TWS= 2.5-onwards means that your organization is in a good external position, i.e.
your organization is able to capitalize all its external opportunities and avoid all its
external threats.
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Less than 2.5 to 1 it means that your organization is in a weak external position, that
many opportunities your organization is not able to capitalize on or take advantage of
and many threats you cannot avoid.
Example: The total weighted score of 2.72 suggests that Moderna is aware of the opportunities
and threats it faces, and has embarked on a serious review of its potential for growth, its
capabilities, and its limitations. However, the response is still tentative, and firm Internal Scanning
4. Internal
Audit
1. Organization Structure
• Refers to how job tasks are formally divided, grouped and coordinated. [A system of tasks
reporting, relationships and communication channels linking individuals and groups in the
organization]
• Structure changes as environnemental conditions change
• Usually we choose between two types of structure Functional or Divisional structure.
Changes in strategy often require changes in the way an organization is structured for two
major reasons.
a. First, structure largely dictates how objectives and policies will be established.
For example, objectives and policies established under a geographic organizational structure are
couched in geographic terms. Objectives and policies are stated largely in terms of products in
an
organization
whose
structure
is
based
on
product
groups.
The structural formula for developing objectives and policies can significantly impact all other
strategy-implementation issues.
b. The second is that structure dictates how resources will be allocated.
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Selecting an organizational structure
1. The Functional Structure:
→
Groups together people with similar skills, expertise, sharing similar responsibilities in similar
areas of interests (each one in his own areas of expertise)
groups tasks and activities by business function such as product/operations, marketing,
finance/accounting, R&D, and computer information systems.
→
Typically work well for small organization producing few products or services in a
relatively predictable environment with low demand of innovation or change
President
Vice President
Vice President
Vice President
Vice President
Marketing
Production
HR
Finance
ADVANTAGES
• is the simplest and least expensive
• Centralized control of operations. (Minimizes the need for an elaborate control system).
• Promotes in-depth functional expertise(specialization of labor)
•
Enhances operating efficiency where tasks are routine.
• Allows rapid decision-making.
• High quality in solving technical problems.
• In depth training and skill development within each function.
• Clear career paths.
DISADVANTAGES
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• It forces accountability to the top. (Problems are moved forward to the upper level for
solving).
• Minimizes career development opportunities.
• Sometimes characterized by low employee morale.
• Functional coordination problems. (Lack of coordination.)
• Inter-functional rivalry (may lead to internal conflict)
• Overspecialization and narrow viewpoints
• Hinders development of cross-functional experience
• Slower to respond in turbulent environments (communication and problem solving across
functions this can result in slowing the decision making process and problem solving.
• Unclear responsibilities in areas such as innovation, product quality.
2. Divisional Structure: [Product, geographical, customer, process]
→
Groups together people that work together on the same product or process serve the same
customer or located within the same geographic areas
→
Typically work well for
The organization is managing diverse product line.
organization is expanding to cover wider geographical areas.
Complex organization producing multiple and differentiated products with diversified
strategies and who are working in different competitive environments.
The divisional structure can be organized in one of four ways:
1. Geographic area: (or area structure)
(common in international operations allowing to focus more on cultural and
regional differences or when the product need to be differentiated on the
basis of areas)
President
Middle East
Division
European
Division
✓ is appropriate for organizations whose strategies need to be tailored to fit the particular needs
and characteristics of customers in different geographic regions.
2. Product or service:
(Allows high degree of accountability as costs, profits, failures, successes
are clearly identified)
✓ Is most effective for implementing strategies when specific products
or services need special emphasis.
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General
Manager
Food
Personal
care product
Exam Handling Template
MBA Comprehensive Exam Handling Steps
3. Process:
Catalog Sales
Manager
(Group of related tasks creating something of a value to the customer)
✓ Is similar to a functional structure, because activities are organized
Product
Purchasing
Order
fulfillment
according to the way work is actually performed.
4. Customer.
(requirements of each customer is different)
Industrial
Division
Consumers
Division
With a divisional structure, functional activities are performed both centrally and in each separate
division.
ADVANTAGES:
•
•
•
•
•
•
•
Decentralized decision making.
Each business is organized around products.
Puts profit/loss accountability on manager.
Facilitates rapid response to environmental changes.
Allows efficient management of a large number of units.
Creates career development opportunities for managers.
Allows new businesses and products to be added easily (flexibility in changing size by
adding or deleting divisions).
• Improved cross functional coordination.
• Clear point of responsibility for product delivery and quality.
• Focused expertise on customers/ products/ regions.
DISADVANTAGES
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• May lead to costly duplication of functions.( increase costs; increase deficiencies as
resources and efforts are duplicated).
• Inter-divisional rivalry. (may lead to internal conflict)
• Corporate managers may lose in-depth understanding.
3. The Strategic Business Unit (SBU) Structure (a recent form of the divisional structure)
Divisions or group of divisions composed of independent product-market segments that are
primary responsibility and authority for the management of their own functional areas.
The SBU structure groups similar divisions into strategic business units and delegates authority and
responsibility for each unit to a senior executive who reports directly to the CEO.
Typically used when:
Any size
A unique mission
Identifiable competitors
External market focus
Control over its business functions
(E.G. instead of organizing food on the basis of the packaging technology: canned, packed they are
divided according to the customer segments they serve)
ADVANTAGES:
This change in structure can facilitate strategy implementation by improving coordination between
similar divisions and channeling accountability to distinct business units.
DISADVANTAGES:
• It requires an additional layer of management, which increases salary expenses.
• The role of the group vice president is often ambiguous.
4. The Matrix Structure
The matrix structure (sometimes called the matrix organization) it combines the functional and
divisional structure.
It is designed to gain the advantage and minimize the disadvantages of the functional and
divisional structures.
The matrix is formed by using permanent cross functional teams to integrate functional expertise
in support of a clear divisional focus on project, product or program.
Typically used in:
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Multinational organizations to offer a flexibility to deal with the regional differences as
well as the multi products, programs or regional needs.
Common solution for the organizations that pursues the growth strategies in a dynamic
and complex environment
Scarce resources
Ideas need to be cross fertilized across projects
External environment is very complex and changeable
• Functional & product form are combined simultaneously at the same level.
• Workers belong to 2 formal groups: a functional and a project (or program or product)
team.
• Employee have 2 superior, functional superior & horizontal product manager (reporting to 2
bosses one within the functions and the other within the team).
General Manager
Manager of Projects
Manufacturing
Manager
Engineering
Manager
Sales Manager
Project A
Project B
Functional personnel assigned to both projects and coordinating with their
functional departments
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ADVANTAGES:
•
•
•
•
•
•
Project objectives are clear.
There are many channels of communication.
Workers can see visible results of work.
Projects can be shut down easily.
Better inter-functional cooperation in operations and problem solving.
Increased flexibility in adding, removing and changing operations to meet changing
demands.
• Better customer service since there is always a program, product, project manager who is
fully informed and available to answer all and every enquiries.
• Better performance accountability through the program, product, project managers.
• Improved decision making as problem solving takes place at team level, where the best
information is available.
• Improved strategic management since top management levels are freed from unnecessary
problem solving to focus time into strategic issues.
DISADVANTAGES:
• It is the most complex of all designs because it depends upon both vertical and horizontal flows
of authority and communication.
• It can result in higher overhead cost because it creates more managerial positions.
• It also creates dual lines of budget authority, dual sources of reward and punishment, shared
authority, and dual reporting channels.
• boss system could create a conflict between the two in exercising power and authority
• Strong teams loyalties could cause losing the focus on the larger organizational goals,
adding team leaders cause increase in costs.
** Distinct phase exist in the DEVELOPMENT OF matrix structure
1. Temporary cross functional task forces:
Project manager is in charge as the key horizontal link
2. Product or brand management:
The functional is still the primary organizational structure, product manager act as integrator of
semi permanent product or brand.
3. Mature matrix:
A true dual authority structure, functional & product structure are permanent.
5. Network structure
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Warehouse
Supplier
Off-shore
manufacturing
and packaging
firm
Business
Core
Furniture
• Many activities are outsource
• Series of independent firms or business units that are linked together by computers in an
IS
Nike, Reebok,
Benetton
use the network structure on their operation
by subcontracting
Furniture
design
Accountingfunctions
and
financial
firm
manufacturingstudio
to other companies in low cost location around the
world.
Used when the environment is unstable
The organization operates with a central core business linked to outside suppliers and
contractors by a networks of relationships that utilize the latest tech. to engage in strategic
alliances and business contracts sustaining operations without the costs of owning all the
functions.
Emerged as a result of information
and
technology (sort of boundary less
Alliance
withcommunication
other
furniture manufacturer
organizations or virtual corporations)
Very suitable for entrepreneurial and small firms, the same concept can be used in large
organizations such as in the case of outsourcing.
ADVANTAGES:
• Rapid response time
• Firm’s emphasize their own core competencies
• Very flexible
• Reduces capital intensity
• Allowing the firm to operate with less employees.
• A more simplified internal systems.
• Reducing costs overheads.
• Increased operations efficiency and therefore increasing competitiveness.
• no geographical boundaries.
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DISADVANTAGES:
• With large size it is often difficult to maintain control over the network of relationships and
contracts.
• If one part of the network fail to deliver, the whole system will fall.(single point of flair)
6. Team Structures:
Uses extensively permanent and temporary cross-functional teams to improve lateral
relations. Members are coming from different functional working closely together to
improve performance or solve a problem
→ Pros: solve the problem of lack of coordination and communication across function, boost the
morale as people from different part of the organization are working together, improve the quality
and the speed of the decisions making process, synergies are expected as people having different
technical expertise work together.
→ Cons: difficulty for team members to balance between the team and the function assignment,
passing too much time in meeting – time – that is not always productive.
2. Organizational Culture
It is the collection of beliefs, expectations, and values learned and shared by a corporations’ members and
transmitted from one generation of employees to another.
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Corporate Culture has two distinct attributes:
➢ Intensity:
The degree to which members of a unit accept the norms, values or other culture content associated with the unit.
(depth)
➢ Integration:
The extent to which units throughout an organization share a common culture. (breadth)
Importance:
✓ Conveys a sense of identity for employees.
✓ Generates employee commitment to something greater than themselves.
✓ Adds to the stability of the organization as a social system
✓ Guide for appropriate behavior.
Creation of Organizational Culture
⚫ Beliefs and values of the organization’s founder
⚫ Societal norms of firm’s native/host country
⚫ Problems of external adaptation and survival
⚫ Problems of internal integration
Cultural Differences
Research on pace of life in various countries suggest that Westerners have fairly precise measures of time and a
stronger concern for punctuality than most other people
– Mono-chronic style individuals focus on one thing at a time; characteristic of USA
– Poly-chronic style individuals focus on several things at one time; characteristics of Latin American
countries
Dimensions of Cultural Differences
Research has shown that countries differ significantly in
– Interpersonal trust
– Power-distance
– Avoidance of uncertainty
– Individualism v. Collectivism
Artifacts/Symbols
Visible objects, actions, stories that represent the culture
Most easily changed
Rites, rituals, ceremonies
Stories, myths, legends
Symbols
Language/jargon/gestures
Behavior Patterns
Shared ways of interacting, approaching a task
- Shared ways of responding to something new
Norms
- Socially constructed preferences
Group expectations about how things should be done
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Values
- Preferred states
- Feelings & beliefs about what’s good or right
Shared Assumptions
- Taken for granted
- Not conscious
- Hard to change
Culture and Technology
In order to create a more innovative corporation, top management must develop an entrepreneurial culture that is
open to the transfer of the new technology into company activities and products and services. The company must be
flexible and accepting of change. It should include a willingness to withstand a certain percentage of product
failures on the way to success.
Innovative organizations should have the following characteristics:
1- Private attitude towards change
2- Decentralized decision making
3- Informal structure
4- Interconnectedness
5- System Openness
According to Geert Hofstede's Model, culture has five dimensions
1. Power distance
Power distance measures how subordinates respond to power and authority. In high-power distance countries
subordinates tend to be afraid of their bosses, and bosses tend to be paternalistic and autocratic. In low-power
distance countries, subordinates are more likely to challenge bosses and bosses tend to use a consultative
management style.
2. Collectivism versus Individualism
In individualistic countries, people are expected to look out for themselves. Solidarity is organic (all contribute to a
common goal, but with little mutual pressure) rather than mechanical. Typical values are personal time, freedom,
and challenge.
In collectivist cultures individuals are bounded through strong personal and protective ties based on loyalty to the
group during one’s lifetime and often beyond (mirrored on family ties). Values include training, physical condition,
the use of skills. See Appendix 2 for comments on differences between American and Chinese society on this
dimension.
3. Femininity versus Masculinity
Hofstede’s study suggested that men’s goals were significantly different from women’s goals and could therefore
be expressed on a masculine and a feminine pole.
Where feminine values are more important (Sweden; France, Israel, Denmark, Indonesia), people tend to value a
good working relationship with their supervisors; working with people who cooperate well with one another, living
in an area desirable to themselves and to their families, and having the security that they will be able to work for
their company as long as they want.
Where the masculine index is high (US, Japan, Mexico, Hong Kong, Italy, Great Britain), people tend to value
having a high opportunity for earnings, getting the recognition they deserve when doing a good job, having an
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opportunity for advancement to a higher-level job, and having challenging work to do to derive a sense of
accomplishment.
4. Uncertainty avoidance
When uncertainty avoidance is strong, a culture tends to perceive unknown situations as threatening so that people
tend to avoid them. Examples include South Korea, Japan, and Latin America.
In countries where uncertainty avoidance is weak (the US; the Netherlands; Singapore; Hong Kong, Britain) people
feel less threatened by unknown situations. Therefore, they tend to be more open to innovations, risk, etc.
5. Long-term versus Short-term orientation
A long term orientation is characterized by persistence and perseverance, a respect for a hierarchy of the status of
relationships, thrift, and a sense of shame. Countries include China; Hong Kong; Taiwan, Japan and India
A short-term orientation is marked by a sense of security and stability, a protection of one’s reputation, a respect for
tradition, and a reciprocation of greetings; favors and gifts. Countries include: Britain, Canada, the Philippines;
Germany, Australia
3. Resource Based View RBV
A. Tangible Assets
Assets
Equipment/ Machinery
Raw Materials/ Supplies
Plant/ Factory
Location/ Buildings
Capital
B. Intangible Assets
Training
Experience
Knowledge
Brand Name/ Equity/Value
Skills/ Creative ability
Reputation
Intellectual Property (Copy Rights, Trademarks, Trade Secrets, Patents)
C. Managerial Capabilities
Board of Directors:
• Who are they, are they internal or external, do they own shares, do they have different
voting rights and for how long they are serving on the board?
• Do they contribute knowledge, skills and connections to the firm? And if the firm has
international operations do they have international experience?
• What is there level of involvement in strategic management?(refer to board continuum
Example:
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•
•
•
•
•
The number of directors.
Main names mentioned in the case:
…………., Chairman.
…………., President.
One-insider member members, ……………….
Top Management
• Who are the top managers and what are their characteristics in terms of knowledge, skills,
background and style? And if the firm has international operations do they have
international experience?
• Are they responsible for the performance of the firm and how well they interact with the
lower level and the BOD?
• What is there level of involvement in the strategic management process?
Example:
• As outlined in the case, company has been appointed Mr. ……. as CEO from within the
company or outside
• He is Very experienced in the industry – long history.
• Responsible for the current situation to on improvements; he was the driving engine and
the reason of having the creativity atmosphere in the company
• Mr. ……. (Style = Active participation).
Leadership Style
1. Laissez-faire (Delegative)
Shows low concern for both people and task. Turn most decisions over the work group
and show less interest in the work process or its results.
2. Directive or Autocratic(Dictatorial)
High concern for task and low concern for people. Make most of the decisions, gives
directions and expect his orders to be followed.
The autocratic leadership style allows managers to make decisions alone without the
input of others. Managers possess total authority and impose their will on employees. No
one challenges the decisions of autocratic leaders. Countries such as Cuba and North
Korea operate under the autocratic leadership style. This leadership style benefits
employees who require close supervision. Creative employees who thrive in group
functions detest this leadership style.
3. Supportive leader
Shows high concern for people and low concern for tasks. Warm in interpersonal
relationships, avoid conflict, and seek harmony in decision-making.
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4. Participative or Democratic
shows high concern for both people and task. Share decisions with the work group,
encourage participation and support the work efforts of others.
Often called the democratic leadership style, participative leadership values the input of
team members and peers, but the responsibility of making the final decision rests with the
participative leader. Participative leadership boosts employee morale because employees
make contributions to the decision-making process. It causes them to feel as if their opinions
matter. When a company needs to make changes within the organization, the participative
leadership style helps employees accept changes easily because they play a role in the
process. This style meets challenges when companies need to make a decision in a short
period
Managerial skills
• Technical skills is the ability to use a special proficiency or expertise in one’s work
(Lower level)
• Human skills: is the ability work well in cooperation with others people (all levels)
• Conceptual skills: is the ability to think analytically and solve complex problems (Top
management)
Organizational Functions
Finance
Ratios
Current Ratio=
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑡𝑖𝑒𝑠
A. Liquidity
(Xtimes)
Current ratio: How much current assets covers the current liabilities.
(capability of the company to fulfill the short-term liabilities)
Current assets: All assets that can be liquidated for the next 3 months (converted into cash)
a. Cash
b. Receivables
c. Inventory
Current liabilities: All Liabilities for the same period
a. Payables
b. Account Expenditure
Scenarios:
A. Current Ratio = 1: Bad situation (Risky Situation to fulfill short term liabilities)
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B. Current Ratio = 2 (1.5 to 1.8): Very Strong position
C. Current Ratio = 3, 4, 5
1. Investors: Very bad situation due to surplus of cash that is not invested as cash should
be invested for the sake of return and dividends
2. Creditor: Very good situation as the company will be able to fulfill its liabilities
Current assets calculations: Calculate for each year
2006
0.5
2.3
2007
1.3
2.8
2008
1.9
3.3
Trend
Increasing up t0 2
Increasing above 2
4
2.2
2.8
1.3
2.1
0.95
Decreasing towards 2
Decreasing below2
Comment
Good situation
Bad situation due to
surplus of cash and
resources that the
management team should
have invested in
Good situation
Bad situation due to low
performance
B. Profitability Ratio
1. Gross Profit Margin=
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
𝑆𝑎𝑙𝑒𝑠
Sales (Revenue): Marketing and sales department responsibility
COGS: Supply chain department responsibility
Gross profit margin evaluates the performance pf supply chain team of the company
Increased trend: Efficient performance of the supply chain department
Decreased Trend: Inefficient performance of the supply chain departement
Example: Product (10$) Cost (8$), year 3 cost (7$), Recession decreased no of units sold
Year
Units sold Revenue
One 100
Two 200
Three 100
1000$
2000$
1000$
COGS
800$
1600$
700$
Gross Profit Gross Profit
Margin
200
200/1000=0.2
400
400/2000=0.2
300
300/100=0.3
In case of decreased trend:
As a CEO my recommendation is to apply cost leadership strategy to correct the situation.
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2. Operating Income Margin=
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒
𝑆𝑎𝑙𝑒𝑠
Increased trend (low operating expenses): Efficient performance of the management team as
they are incurring the operating expenses efficiently.
Decreased trend (high operating expenses): Low performance of the management team
It evaluates the performance of the management team due to incurring (spending) operating
expenses only
The best strategy to apply in this situation is retrenchment to decrease operating expenses.
3. Net Operating Income margin =
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑆𝑎𝑙𝑒𝑠
It is a combination of efforts of management team and supply chain team
Increasing trend: The aim of any business.
Decreasing trend: Adopt unrelated diversification strategy.
4. Return on Assets=
𝑅𝑒𝑡𝑢𝑟𝑛 (𝐸𝑎𝑟𝑛𝑖𝑛𝑔)(𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 (𝑓𝑟𝑜𝑚 𝑏𝑎𝑙𝑎𝑛𝑐𝑒 𝑠ℎ𝑒𝑒𝑡)
How much investment in asset to earn one dollar in return.
ROA=ROI in calculation
Company
A
Capital
100 MD
Return
20%
The two companies work in the same industry.
B
100 MD
15%
The management team of company A is better than that of company B regarding managing all
assets (taking decisions regarding assets whether fixed or current/ long term or short term).
ROA: how much impact of operations on assets
Increasing trend: good performance of the management team
Decreasing trend: bad performance of the management team in managing assets.
To rectify we have to:
1. Increase return or total assets.
2. Decrease inventory turnover (offering discounts).
Decreasing current assets will decrease total assets thus will increase ROA.
At 31/12 take cash buy new inventory so lead time ends in the next year.
C. Leverage
Debt Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
(from balance sheet)
Example: Debt ratio is 30%
Then 30% of the company assets is financed by debt
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Normal debt ratio is 30% to 70%
Increasing trend more than 30%: Risky situation as more assests is fainanced by debt
Decreasing trend to 30%: Better situation
Increasing trend to 30%: Extra loans to expand business
Decreasing trend less than 30%:
For investors: Bad due to losing opportunities to acquire loans to increase the business
especially in case of market growth.
Creditors: Good especially in case of recession
Scenario
Comment
High ROA/ High Debt Ratio
Good
Low ROA/ High Debt Ratio
Bad financial position
High ROA/ Low Debt Ratio
Good
Low ROA/ Low Debt Ratio
Bad
We measure the trend by comparing the 1st year to the 3rd year.
• Liquidity Ratios: They measure the short term debt paying ability. i.e: firm’s liquidity
position.
1.
Current Ratio = Current assets ÷ Current liabilities = # times; each 1$ of current liabilities
is covered by # $ of current assets.
2.
Quick Ratio(Acid test ratio) = Cash + Marketable securities +Receivables ÷ Current
liabilities
OR = Current Assets – Inventories ÷ Current Liabilities = (# times It’s a measure of immediate
paying ability. It should be > 1 to be a good sign.
• Assets Management Ratios:
1.
Inventory Turnover Ratio Indicates how many times the inventory turned over during the
accounting period. = Sales ÷ Average inventory = (#times)
2.
Fixed Assets Turnover Ratio it measures how efficiently the firm uses its plant &
equipments. = Sales ÷ net fixed assets = (#time) each 1$ of fixed assets results in (…$) of
sales
3.
Total Assets Turnover Ratio = Sales ÷ Total Assets = (#time).
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• Financial leverage or Debt Management Ratios: Determine the level of debt in the
firm’s capital structure & measure how much debt the firm can take to finance its
activities.
1.
Total Debt To Total Assets Ratio = total debt (liabilities) ÷ total assets = (%) the creditors
have supplied (%) of the firms total financing.
• Profitability Ratios: The effect of liquidity, asset management & debt management on
operating results
1.
Profit Margin on Sales Ratio = Net Income ÷ Net Sales (cash & credit) = (%); Each 1$ of
net sales results on average in () cents of net income. more realistic it’s better to use
operating income instead of net income. If it’s lower than industry average it indicates;
Costs are too high, inefficient operations & Heavy use of debt.
2.
Return On Total Assets (ROA) ratio = net income /average total assets = (%) Each 1$ of
total assets results in (…) cents of net income.
3.
Return on Common Stockholder’s Equity (ROE) = net income ÷ average common
stockholder’s equity = #%
• Market Value Ratios: (the outsider’s view): Give management an indication of what
investors think of the company’s past performance and future prospects.
1.
Price/earnings ratio = market price per share ÷ earnings per share (EPS) = (..Time). If the
market price per share is > 12-15 time EPS, this is overvalued stock If t’s < 12-15 time EPS,
this is undervalued stock.
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Finance Strategies (references)
To provide the organization with funds and a capital structure to suit the strategic requirements
2. Sources of funds(capital mix decisions)
Internal vs external and
2. Usage of funds linking allocation to strategies prioritizing projects and activities Capital
expenditure vs. working capital
3. Management of funds Dividend mgt., accounts and audit, capital structure management,
compensation
Finance Strategies & Grand Strategies
Stability: daily operations, cash mgt., working capital needs, current assets
Expansion: capital budgeting, fixed assets, long term investments, decentralized expenditure
Retrenchment: rescue operations, centralized expenditure, reallocation of funds, pruning and cuts
Marketing
1. Customer,
2. Effective segmentation
3. Competitive Standpoint,
4. Unique Selling Propositions,
5. Product Quality,
6. Relative Market Share
7. Loyalty
8. Distribution Costs
9. Pricing
10.Promotion
11. Geographical Coverage
12.Market research
13.After Sales Services
14.Customer knowledge
15.New product skills
16.Sales force
17.Reputation
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R&D
•
•
•
•
•
•
•
Are R&D facilities available and adequate?
Cost effectiveness of outsourced R&D
R&D personnel well qualified
Effective allocation of R&D resources
Adequate management information and computer systems
Effective communication between R&D and other units
Are present products technologically competitive
Operations/ Production
•
•
•
•
•
•
•
Are supplier’s raw materials reliable and reasonable
Are facilities machinery and offices in good condition
Are inventory control policies and procedures effective
Effectiveness of quality control policy and procedures
Are facilities resources and markets strategically located
Does the firm have technological competencies?
Process, Capacity, Inventory, Workforce and quality are the functions
Information Systems
•
•
•
•
•
•
•
•
•
•
Is it used by all managers to make decisions?
Is CIO or director if IS position n the firm
Data on IS updated regularly
All functional areas contribute input to IS
Effective passwords for entry to IS
Familiarity of strategists with rival firms IS
Is user friendly
Do all users of IS understand the competitive advantages that information can provide firms
Computer training workshops for IS users
Continually improvements of IS content and user friendliness
Human Resource
The human resource objective reflects the intention of the senior management (strategy) with a
balance to the related topics such as HR functions, society, governing rules, etc.
A. Objectives:
There are four major objectives for the Human resource management;
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a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
a. Organizational objectives: to achieve the required organization effectiveness and objectives
and ensure that the organization always has people with the right abilities available to do the
right work
b. Functional Objectives: maintain the department’s contribution at a level appropriate to the
org. needs
c. Societal Objective : respond ethically and socially to the challenges of the environment
while minimizing the negative impact of such demands on the organizations
d. Personal objectives: to assist retain and motivate the employees for achieving their personal
goals and guide them to better achievement (most important )
B. Human Resource Policies and Programs
Preparation and selection: Review of the employees' job description, job specification and job
performance standard to match the change of the organization.
Succession Planning: the preparation of the company succession plan will enable the
organization to stand any future challenges.
Career Path and development: the preparation of the career path for the employees will help the
stability and minimize the turnover of the employees.
Recruitment: designing a good recruitment process (Selection, interviews) with a high level of
orientation to ensure the compatibility of the new recruited employees with the existing culture
to achieve organizational objectives.
Training and development: on-the- job” training, Off-the-Job training and Provide career
planning assistance for employees.
Incentive system will ensure the motivation of the employees to better performance (linking
incentive to production)
Compensation Policies and protection: What employees get in exchange for their contribution
to the organization → maintains, retain productive workforce, achieve the org. objectives.
Managing workforce diversity ( if the organization is going internationally)
Enhance employee participation: in implementing our strategy, all employees from different
organizational levels must make a meaningful contribution in decision-making .this will
increase employee's involvement and enhance their working life balance.
Enhance employee organizational commitment: by increasing job involvement, which results in
lower levels of absenteeism and turnover.
Implementing employee recognition programs: starting with personal attention and ending with
appreciation for a job well done.
Develop effective staffing plans supporting the organizational strategies by allowing to fill job
openings proactively (in terms of number and the quality of the workforce for the short and long
term) VIP in case of international operations.( if the company is multinational)
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Internal Factor Evaluation (IFE) Matrix
A summary step in conducting an internal strategic-management analysis is to construct an Internal
Factor Evaluation (IFE) Matrix. This strategy-formulation tool summarizes and evaluates the major
strengths and weaknesses in the functional areas of a business, and it also provides a basis for
identifying and evaluating relationships among them.
1. List key internal factors as identified in the internal-audit process.
2. Use a total of from 10 to 20 internal factors, including both strengths and weaknesses.
3. List strengths first and then weaknesses. Be as specific as possible, using percentages, ratios,
and comparative numbers.
4. When a key internal factor is both a strength and a weakness, the factor should be included
twice in the IFE Matrix, and a weight and rating should be assigned to each statement
5. Assign a weight that ranges from 0.0 (not important) to 1.0 (all-important) to each
factor. The weight assigned to a given factor indicates the relative importance of the
factor to being successful in the firm’s industry.
6. Regardless of whether a key factor is an internal strength or weakness, factors considered to
have the greatest effect on organizational performance should be assigned the highest
weights. The sum of all weights must equal 1.0.
7. Assign a 1-to-4 rating to each factor to indicate whether that factor represents a
major weakness (rating = 1)
minor weakness (rating = 2)
minor strength (rating = 3)
major strength (rating = 4).
Note that strengths must receive a 3 or 4 rating and weaknesses must receive a 1 or 2
rating.
Ratings are thus company-based, whereas the weights in step 2 are industry-based.
8. Multiply each factor’s weight by its rating to determine a weighted score for each variable.
9. Sum the weighted scores for each variable to determine the total weighted score for the
organization.
The example hereafter include Itemized below are the strengths and weaknesses of Elsewedy –
from the information provided, far more strengths than weaknesses could be identified.
Key Internal Factors
Strengths
1. Elsewedy is a highly reputed firm in the MENA with four
diversified segments
2. The company has an extensive and wide variety of electrical
products and services
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Weight
(assumption)
Rating
(assumption)
Weighted
Score
0.10
4
0.40
0.09
4
0.36
Exam Handling Template
MBA Comprehensive Exam Handling Steps
3. Elsewedy has the largest production in Egypt with over 50
percent of the market share
4. The Elsewedy family owns 75 percent of the company,
allowing speedy decision-making
5. The company has successfully entered the U.K. and France
in the EU
6. It is a price leader producing quality electrical goods and
services competitively
7. In 2007 Elsewedy acquired Iskraemeco, the Slovakian
energy solutions company
8. Elsewedy is currently well-established internationally in
MENA and Western Europe
9. The company targets all three sectors: public, private, and
professional end-users
10. Elsewedy has strong business links with some competitors
as its favoured customers
Weaknesses
1. “Elsewedy targets almost everyone” – this suggests a lack of
focus
2. The wire and cables sales in Egypt are predicted to decline
when New Cairo is completed
3. Turnkey projects with potential contribution from the other
segments are executed mostly in Egypt and Africa only
Total
5.
0.10
4
0.40
0.06
2
0.12
0.07
3
0.21
0.06
3
0.18
0.09
3
0.27
0.09
4
0.36
0.06
3
0.18
0.05
2
0.10
0.09
3
0.27
0.07
2
0.14
0.07
1.00
Summation
must =1
3
0.21
3.20
Total
weighted
score (TWS)
=
Σ Weight x
Rate
No
Summation
Matching Phase
The Matching phase – AFTER doing internal and external analysis, we will List all
suitable plans through using one or more of the matching tools
Matching tools are: TOWS, IE Matix, SPACE Matrix, BCG and Grand Matrix
Start with IE Matrix Then SPACE
If you have time or it was mentioned do TOWS if not, don’t do it.
You can develop BCG Matrix or Grand Matrix if the data of the model is available
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Internal External Matrix
IE (internal external)
matrix based on the total
internal weighted scores
and the total external
weighted scores from IFE
and EFE analysis. I will not
deal with the cells in the
matrix as nine cells but I
will deal with them as three
bundles, as follows:
Cell#1 and cell#2 and cell#4 are the first bundle: "after finishing analysis according to
the TWS of IFE and EFE" we may interpret
Cell#1 in terms of external and internal position, it means that a certain business unit that is located
in this cell is strong internally and strong externally.
Cell#2: means that a certain business unit that is located in this cell is average internally and strong
externally, which is a strong and positive position.
Cell#4: means that a certain business unit that is located in this cell is strong internally and average
externally, which is a strong and a positive position.
This first bundle that covers cells#1, 2, 4 is called: "Grow and Build", because the weakest
position in this bundle is average and the opposite position is strong. The strategy of this bundle
is to sustain that positive and strong position, and sustain means to go for the integration
strategies and the intensive strategies.
Cell#3 and cell#5 and cell#7 are the second bundle: is called: Hold and Upgrade
"hold& maintain"
Cell#3 in terms of external and internal position: means that a certain business unit that is located
in this cell is weak internally and strong externally, it is an average position.
Cell#5: means that a certain business unit that is located in this cell is average internally and
average externally.
Cell#7: means that a certain business unit that is located in this cell is strong internally and weak
externally, which is average position. because the weakest position in this bundle is average and
not weak, then I have to sustain this average position and try to upgrade the situation, i.e. I need to
stabilize myself in this bundle and avoid going down to the third bundle and this stabilization is
through the intensive strategies.
Cell#6 and cell#8 and cell#9 are the third bundle:
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Cell#6 regarding external/internal position: Business located in this cell is weak internally and
average externally.
Cell#8: means that a certain business located in this cell is average internally and weak externally.
Cell#9: means that a certain business located in this cell is weak internally and weak externally,
which is average position. The situation in this bundle is from weak to average. This third bundle
that covers cells#6, 8, 9 is called: "Harvest or Divest". If I have a sort of competitive edge in the
business unit located in this bundle I will invest in it, in order to be able to push this business
unit/product line from this third bundle to the second bundle, that's what we call to harvest in this
business unit, if I don’t have any. Competitive edge, I will just go for the divestiture strategy, i.e.
relying basically on the defensive strategy.
Comment
Regardless of how many factors are included in an IFE Matrix, the total weighted score can range
from a low of 1.0 to a high of 4.0, with the average score being 2.5.
Total weighted scores well below 2.5 characterize organizations that are weak internally, whereas
scores significantly above 2.5 indicate a strong internal position.
Like the EFE Matrix, an IFE Matrix should include from 10 to 20 key factors. The number of
factors has no effect upon the range of total weighted scores because the weights always sum to
1.0.
SPACE Matrix
The Strategic Position & Action Evaluation matrix or short a SPACE matrix is a strategic
management tool that focuses on strategy formulation especially as related to the competitive
position of an organization.
The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG
matrix model, industry analysis, or assessing strategic alternatives (IE matrix).
The SPACE matrix is a management tool used to analyze a company. It is used to determine
what type of a strategy a company should undertake.
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The SPACE matrix is broken down to four quadrants where each quadrant suggests a different type
or a nature of a strategy:
• Aggressive
• Conservative
• Defensive
• Competitive
The SPACE Matrix analysis functions upon two internal and two external strategic dimensions in
order to determine the organization's strategic posture in the industry. The SPACE matrix is based
on four areas of analysis.
Internal strategic dimensions:
I. Financial strength (FS) +VE / Y-axis
• Return on investment
• Leverage
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• Liquidity
• Working capital
• Cash flow
• Inventory turnover
• Earnings per share
• Price earnings ratio
• Ability to raise capital
II. Competitive advantage (CA) -VE/ X-axis
• Market share
• Product quality
• Product life cycle
• Customer loyalty
• Competition’s capacity utilization
• Technological know-how
• Control over suppliers & distributors
• Speed of innovation
• Market niche position
External strategic dimensions
I. Environmental stability (ES) -VE/ Y-axis
• Technological changes
• Rate of inflation
• Demand variability
• Price range of competing products
• Barriers to entry
• Competitive pressure
• Price elasticity of demand
Ease of exit from market
Risk involved in business
II. Industry strength (IS) +VE/ X-axis
• Growth potential (GDP Growth)
• Profit potential
• Financial stability
• Technological know-how
• Resource utilization
• Ease of entry into market
• Productivity, capacity utilization
The SPACE matrix calculates the importance of each of these dimensions and places them on a
Cartesian graph with X and Y coordinates.
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The following are a few model technical assumptions:
- By definition, the CA and IS values in the SPACE matrix are plotted on the X axis.
- CA values can range from -1 to -6.
- IS values can take +1 to +6.
- The FS and ES dimensions of the model are plotted on the Y axis.
- ES values can be between -1 and -6.
- FS values range from +1 to +6.
The SPACE matrix is constructed by plotting calculated values for the competitive advantage (CA)
and industry strength (IS) dimensions on the X axis. The Y axis is based on the environmental
stability (ES) and financial strength (FS) dimensions. The SPACE matrix can be created using the
following seven steps:
Step 1: Choose a set of variables to be used to gauge the competitive advantage (CA), industry
strength (IS), environmental stability (ES), and financial strength (FS).
Step 2: Rate individual factors using rating system specific to each dimension. Rate competitive
advantage (CA) and environmental stability (ES) using rating scale from -6 (worst) to -1 (best).
Rate industry strength (IS) and financial strength (FS) using rating scale from +1 (worst) to +6
(best).
Step 3: Find the average scores for competitive advantage (CA), industry strength (IS),
environmental stability (ES), and financial strength (FS).
Step 4: Plot values from step 3 for each dimension on the SPACE matrix on the appropriate axis.
Step 5: Add the average score for the competitive advantage (CA) and industry strength (IS)
dimensions. This will be your final point on axis X on the SPACE matrix.
Step 6: Add the average score for the SPACE matrix environmental stability (ES) and financial
strength (FS) dimensions to find your final point on the axis Y.
Step 7: Find intersection of your X and Y points. Draw a line from the center of the SPACE matrix
to your point. This line reveals the type of strategy the company should pursue.
Example:
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This particular SPACE matrix tells us that our company should pursue an aggressive strategy.
Comment
Aggressive: Our company has a strong competitive position it the market with rapid growth. It
needs to use its internal strengths to develop a market penetration and market development
strategy. This can include product development, integration with other companies, acquisition
of competitors, and so on.
Conservative: Implies staying close to the firm’s basic competencies and not taking excessive
risks. Conservative strategies most often include market penetration, market development,
product development, and related diversification.
Defensive: Suggests that the firm should focus on rectifying internal weaknesses and avoiding
external threats. Defensive strategies include retrenchment, divestiture, liquidation, and
related diversification.
Competitive: Indicating competitive strategies. Competitive strategies include backward,
forward, and horizontal integration; market penetration; market development and product
development.
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TOWS Matching Model
TOWS Matrix, helps you think about the options that you could pursue. To do this you match
external opportunities and threats with your internal strengths and weaknesses. The TOWS matrix,
which while making use of the same inputs (Threats, Opportunities, Weaknesses and Strengths),
reorganizes them and integrates them more fully into the strategic planning process, as illustrated in
the matrix below:
When an organization matches internal strengths to external opportunities, it creates core
competencies in meeting the needs of its customers. In addition, an organization should act to convert
internal weaknesses into strengths and external threats into opportunities.
Focus on your strengths. Shore up your weaknesses. Capitalize on your opportunities. Recognize
your threats.
WT Strategy (Min-Min) – Defevinse – Liquadtion or joint venture
•
In general, the aim of the WT strategy is to minimize both weaknesses and threats.
•
An organization faced with external threats and internal weaknesses may indeed be in a
precarious position.
•
In fact, such a firm may have to fight for its survival or may even have to choose liquidation.
•
But there are other choices.
•
For example, such a firm may prefer a merger, or may cut back its operations, with the intent
of either overcoming the weaknesses or hoping that the threat will diminish over time (too often
wishful thinking).
•
Whatever strategy is selected, the WT position is one that any firm will try to avoid.
The WO Strategy (Mini-Max) – Reternishement or reorgansation
•
The second strategy attempts to minimize the weaknesses and to maximize tile opportunities.
•
A company may identify opportunities ill the external environment but have organizational
weaknesses which prevent the firm from taking
•
advantage of an opportunity. For example, lack of Skills/technology in certain areas.
•
One possible strategy would be to acquire this Skills/technology through cooperation with a
firm having competency in this field.
•
An alternative tactic would be to hire and train people with the required technical capabilities.
•
Of course, the firm also has the choice of doing nothing, thus leaving the opportunity to
competitors.
Examples:
1. Sell off low revenue generating segments / products to raise cash and pay off debt
2. Sell off low profit segments and pay down the long-term debt
3. Sell off business units to improve cash infusion to the company Form joint ventures with
companies who are not in direct competition with drug companies but are within health-related
businesses for developing/introducing non-competing products
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4. Increase franchising and licensing to improve cash flow and income
5. Improve security implemented on products to reduce / limit intellectual property and licensing
violations
6. Develop new products for small kids based on cartoon characters
7. Sponsor more athletics programs, mostly for young generation
8. Try buying new equipment and rides by long term financing or by establishing loyalty agreement
for reserving more cash for working capital
9. Acquire innovative technology/Internet- related businesses using a combination of cash and debt
10. Increase marketing efforts through social networks and the Internet on consumer YYY(products)
specific to young generation
11. Develop new health related products such as vitamins and dietary pills / drinks for healthconscious consumers
12. Improve operations by being more lean and cutting back excessive executive spending
13. Increase quality control to improve reducing product recalls
14. Promote “healthy” snacks and drinks
15. Improve the quality by educating the workers on how to test and sample products before they are
shipped
16. Offer a better discount for retailers to sell / promote Harley merchandise such as clothes, mugs,
etc.
17. Offer better financing rate to new / first time buyers
The ST Strategy (Maxi-Mini) – Dvierfistion
•
This strategy is based on the strengths of the organization that can deal with threats in the
environment. The aim is to maximize the former while minimizing the latter.
•
This, however, does not mean that a strong organization can meet threats in the external
environment head-on
Examples:
1. Negotiate with employees and union representative for pay cut to eliminate laying off staff and
improve cash flow. Use the savings and offer better discounts to customers
2. Improve security measure in theme parks and hospitality locations by using surveillance cameras
3. Develop a new moderately priced product line
4. Expand distribution by selling to stores other than their own retailers
5. Struck a deal with the county or local government for getting additional funding for renovation of
historic building and re-building the local area. This would attract more businesses to the area and
will be a revenue enhancing venture for the city / county
6. Form partnership with other related businesses (restaurant or hotel chain, car rental, etc.) for
opening stores close by and share some of the mass advertising cost
7. Offer new marketing data collection for advertisers
8. Create additional bundling partnership for sound or video streaming
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9. Form a partnership/ joint venture (minority interest) with generic drug manufacturers on
promoting and educating the health benefits of specific products
10. Outsource some of R&D procedures and processes in order to reduce R&D cost but ensure the
intellectual property remains secure and confidential
11. Improve promotion on selected lower priced models with zero or very low rate financing to
younger generation through Internet using Facebook, Twitter, and other networking channels
12. Offer “Free” extended warranty for additional 2 years to gain customer loyalty and brand image
13. Use the excess cash by acquiring biotechnology or other health related businesses
14. Work with the government and the U.S. Congress in developing a medical program, discounting
product pricing
15. Sponsor programs to teens and younger generation to through virtual Facebook, Twitter, and such
16. Improve distribution in European market with new and innovative organic products 17. Increase
current promotional campaign (product placement, advertising, Online newsgroup / press releases,
media ads, etc.) both in the U.S. and abroad
The SO Strategy (Maxi-Maxi) attached all startegy
•
Any company would like to be in a position where it can maximize both, strengths and
opportunities.
•
Such an enterprise can lead from strengths, utilizing resources to take advantage
•
Successful enterprises, even if they temporarily use one of the three previously mentioned
strategies, will attempt to get into a situation where they can work from strengths to take advantage
of opportunities.
•
If they have weaknesses, they will strive to overcome them, making them strengths. If they
face threats, they will cope with them so that they can focus on opportunities.
Examples:
1.Expand XXX(company) segment to popular countries where they have strong economy and have
positive image for US products and services
2. Increase advertising and promotion to young generation (coupons and rebate cards) through social
networks such as Twitter and Facebook
3. Expand into international market more where the economy is stronger
4. Aggressively promote the XXX(company) by offering deep discounts to local and surrounding
counties / cities
5. Penetrate the market (non-locals) by offering discount / membership cards if purchased in
advance (% off after so many visits), student or state or employee discounts, corporate / school event
discounts, etc.
6. Implement a vertical or horizontal integration (forward or backward) of a company that has global
presence
7. Increase advertising spending by additional 10 percent on fee based segments 8. Cutback prices
on advertising and fee-based segment by 2 percent
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9. Increase R&D on products related to YYY(products)
10. Invest additional funding in R&D, improving new product introduction
11. Acquire additional companies that are innovative and have pending patents on popular health
related products
12. Expand into S. American and European countries by offering better incentives and financing 13.
Produce more fuel efficient and smaller models and promote them with lower financing options (in
case of cars)
14. Continue purchasing new companies in segments that the company is losing product sales or
market share
15. Continue international expansion
16.Develop a new product line, focusing on organic ingredients
17. Acquire a small competitor that sells to restaurants and / or intermediary channels
18. Develop a lower price / light weight bike, efficient in fuel consumption for individuals who are
interested in riding a bike but can’t afford or ride the current models
19. Create a new line for female riders to be promoted in US and foreign markets
Common results of TOWS
•
New Business opportunities
•
Businesses to abandon
•
Allocation of resources
•
Expansion or diversification
•
International markets
•
Mergers or joint ventures
•
Avoidance of hostile takeover
At the end choose 2-3 actions from the options (SO, WT) and justify the choice and make sure these
strategies match vision and mission of company. (safest strategy to use is intensive strategy)
Example of how Daimler-Benz used the TOWS matrix in Mercedes cars division:
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STRATEGIES
TACTICS
ACTIONS
INTERNAL STRENGTHS
1. Cash position
2. Luxury car image
3. New car models
4. Location dose to suppliers
5. Engineering and
technology
EXTERNAL OPPORTUNITIES
1. Demand for luxury cars
2. Eastern Europe,
especially East Germany
3. Prosperity through EC
1992
4. Electronics technology
S-0 STRATEGY
1. Develop new models (using
high-tech) and charge
premium prices
2. Use financial resources to
acquire other companies or
increased production capacity
EXTERNAL THREATS
5. Decrease in defense
needs because of easing
of East—West tensions
6. BMW, Volvo, Jaguar,
Lexus, Infinity in Europe
7. BMW in Japan
8. Diesel emissions
9. Renault/Volvo
cooperation
10. Political instability in S.
Africa
S-T STRATEGY
1. Transform
defense sector
to consumer
sector
2. Develop new
models to
compete
especially in
Europe
INTERNAL WEAKNESSES
1. High costs
2. Venturing into unrelated
businesses
3. Organizational diversity
4. Reliance on past successes and
bureaucracy
5. Long cycle for new model
development
6. Relatively weak position in Japan
W-0 STRATEGY
1. Reduce costs through automation
and flexible manufacturing W1,
O4
2. Manufacture parts in Eastern
Europe O2, W1
3. Reorganizations
4. Daimler-Benz management
holding companies
W-T STRATEGY
1. Retrench in South Africa
2. Form strategic alliance
with Mitsubishi to
penetrate the Japanese
market
Grand Strategy Matrix.
In addition to the SWOT Matrix, SPACE Matrix, BCG Matrix, and IE Matrix, the Grand Strategy
Matrix has become a popular tool for formulating alternative strategies.
All organizations can be positioned in one of the Grand Strategy Matrix’s four strategy quadrants. A
firm’s divisions likewise could be positioned.
The Grand Strategy Matrix is based on two evaluative dimensions: competitive position and
market (industry) growth. Any industry whose annual growth in sales exceeds 5 percent could
be considered to have rapid growth.
Appropriate strategies for an organization to consider are listed in sequential order of attractiveness
in each quadrant of the matrix.
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Grand Strategy Matrix has emerged into a powerful tool in devising alternative strategies. This
matrix is basically based on four important elements:
• Rapid Market Growth
• Slow Market Growth
• Strong Competitive Position
• Weak Competitive Position
These elements form a four quadrant matrix in which all organizations can be positioned in
such a way that identification and selection of appropriate strategy becomes an easy task.
Moreover, this matrix helps in adopting the best strategy based on the current growth and
competitive state of the firm.
A large scale firm segregated into many divisions can also plot its divisions in this four
quadrant Grand Strategy Matrix for formulating the best strategy for each division.
The key area of management is to suitably select the strategy cohesive with the firms’ market
and competitive position.
The Grand Strategy Matrix makes it an easygoing job. It helps in scientific analysis of firms
‘current position and selection of best strategy in accordance with the revealed competitive
position and market place.
Broadly speaking four elements of the Grand Strategy Matrix can be described as two
evaluative dimensions namely market growth and competitive position.
In each quadrant of the matrix the apt strategies are enlisted in sequential order for each
organization or division keeping in view the attractiveness in each quadrant of the matrix.
Quadrant I
The quadrant one of the Grand Strategy Matrix is meant for those firms which are in a strong
competitive position and flourishing with rapid market growth. Firms located in this quadrant
are in excellent strategic position and they need to concentrate on current markets and products.
Concentration on current markets reveals the adoption of strategies such as market penetration
and market development and likewise concentration on current products calls for adoption of
product development strategy. These firms or divisions should continue to ponder upon current
competitive advantage and must avoid from loosing the focus from the competitive advantage
gained over the time.
In case quadrant one firms have excessive resources, than, it would be wise to adopt the
expansion program and indulge in backward, forward, or horizontal integration. But and a
careful thought process needs to be done before assuming such integrations so that any
meditation from the current competitive advantage can be avoided. The quadrant one firm also
requires identifying the risk associated mainly if it is committed to a single product line. The
best strategy to espouse in this case is related diversification because it can be helpful in
reducing the risk associated with the slender product line.
One of the main advantages to the quadrant one firms is that they can afford to exploit the
external opportunities and magnify the wealth in numerous areas of dealings.
Quadrant II
Firms and divisions falling in quadrant two of the Grand Strategy Matrix are characterized with
a weak competitive position in fast growing market. The present market position of these firms
must click in the minds of the management and they need to weigh up the firms’ present market
place critically. The opportunity lagging here is that such firms are operating in a growing
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industry but the problem area is that they are competing ineffectively. An in-depth analysis is
necessary to identify the gray areas of incompetence and the reasons behind such
ineffectiveness. Moreover, adoption of counteractive measures is also indispensable so that
ability to compete effectively is strengthen and firm can find its space in the more competitive
environment.
Since quadrant two firms are in a rapid market growth industry, therefore, an intensive strategy,
more appropriately, can be classified as the first option to adopt. The dilemma in espousing the
intensive strategy arises when the firms is lacking distinctive competence or competitive
advantage. In this scenario the most enviable substitute is horizontal integration.
In case the quadrant II firm does not find any suitable strategy to adopt than divestiture of some
divisions can be considered as another option. Such an arrangement may avail the desired
funding to buy back the shares or to invest in the current venture in other divisions to strengthen
the competitive position. Moreover, as last resort, liquidation should be considered so that
another business can be acquired.
Quadrant III
The quadrant three firms are operating in a slow growth industry with a weak competitive
position. These firms are prone to further decline which may result possibly in liquidation. To
avoid such situations quadrant three firms needs introduce drastic changes in almost all the
areas of managing the company. The management has to change its philosophy and should
necessarily adopt new approaches of governing the firm. The management should be willing to
incur some extensive costs in the overall revamp of the organization.
Strategically retrenchment (assets reduction) would be the best option to be considered first.
Secondly diversifying the overall business through shifting the resources should be evaluated as
another choice (related or unrelated diversification). The final option is again divesture or
liquidation.
Quadrant IV
The firms falling in quadrant IV are characterized as having a strong competitive position but
are operating in a slow growth industry. These firms have to quest for the promising growth
areas and to exploit the opportunities in the growing markets as they possess the strengths to
instigate diversified programs in growing industries.
Ideally quadrant four firms have limited requirements of funds for internal growth whereas they
enjoy the high cash flows due to the competitive position they are characterized for. Therefore,
these firms can often hunt for related or unrelated diversification fruitfully. Due to
availability of excessive funds quadrant IV firms can also pursue joint ventures.
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BCG Matrix (Portfolio Analysis)
According to this technique, businesses or products are classified as low or high performers
depending upon their market growth rate and relative market share.
It is used to assess:
• Profile of products
• The cash demands of products
• The development cycles of products
• Resource allocation and divestment decisions
To understand Boston Matrix you need to understand how market share and market growth
interrelate
• Market Share
Market share is the percentage of the total market that is being serviced by your company,
measured by revenue terms or unit volume terms.
RMS = Business unit sales this year
Leading Rival sales this year sales this year
The higher your market share, the higher the proportion of the market you control
• Market Growth rate
Market growth is a measure of the market’s attractiveness
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Market growth rate= Individual sales this year – Individual sales last year
Individual sales last year
Markets experiencing high growth are ones where the total market share available expanding,
and there is plenty of opportunities for everyone to make money
The BCG growth share matrix is a portfolio planning model which is based on the observation
that a company’s business units are classified into four categories:
1. Stars
•
•
•
•
•
High growth and high market share
Stars are leaders in business
They also require heavy investment to maintain its large market share
It leads to a large amount of cash consumption and cash generation
Attempts should be made to hold the market share otherwise the star will become a
Cash Cow
2. Cash cows
Low growth and high market share
They are the foundation of the company and often the stars of yesterday
They generate more cash than required
They extract the profits by investing as little cash as possible
They are located in industries that are mature, not growing or declining
3. Question marks
High growth and low market share
Most businesses start of as a question mark
They will absorb great cash if the market share remains unchanged (low)
They have potential to become a star and eventually cash cow but can also become a dog
Investments should be high for question marks
4. Dogs
low growth, low market share
they are the cash traps
they do not have the potential to bring in cash
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Number of dogs in the company should be minimized
Business is situated at declining stage
Main steps of BCG matrix
• Identifying and defining a company into SBUs (Strategic business unit)
• Assessing and comparing the prospects of each SBU according to two criteria:
1.SBU’s relative market share
2.Growth rate of SBU’s industry
• Classifying the SBUs according to the BCG matrix
• Developing strategic objective for each SBU’s industry
it is based on the combination of market growth and market share relative to the next best
competitor
Benefits
• BCG matrix is simple and easy to understand
• It helps you to quickly and simply screen the opportunities open to you, and helps you
think about how to make the most of them
• It is used to identify how corporate cash resources can best be used to maximize the
company’s future growth and profitability
Limitations
• BCG matrix used only two dimensions’; market growth rate and relative market share
• Problems of getting data on market growth and relative market share
• High market share does not mean profits all time
• Business with low market share can be profitable too
The BCG matrix has its limitations and it is one of the most famous and simple portfolio planning
matrix used by large companies having multiple products
Relative market share position is given on the x-axis of the BCG Matrix. The midpoint on
the x-axis usually is set at .50, corresponding to a division that has half the market share
of the leading firm in the industry.
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The y-axis represents the industry growth rate in sales, measured in percentage terms.
The growth rate percentages on the y-axis could range from -20 to +20 percent, with 0.0
being the midpoint.
Quantitative Strategic Planning Matrix (QSPM)
Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management approach for
evaluating possible strategies. Quantitative Strategic Planning Matrix or a QSPM provides an
analytical method for comparing feasible alternative actions. The QSPM method falls within socalled stage 3 of the strategy formulation analytical framework.
When company executives think about what to do, and which way to go, they usually have a
prioritized list of strategies. If they like one strategy over another one, they move it up on the list.
This process is very much intuitive and subjective. The QSPM method introduces some numbers
into this approach making it a little more "expert" technique.
What is a Quantitative Strategic Planning Matrix or a QSPM?
The Quantitative Strategic Planning Matrix or a QSPM approach attempts to objectively select the
best strategy using input from other management techniques and some easy computations. In other
words, the QSPM method uses inputs from stage 1 analyses, matches them with results from stage
2 analyses, and then decides objectively among alternative strategies.
Stage 1 strategic management tools...
The first step in the overall strategic management analysis is used to identify key strategic factors.
This can be done using, for example, the EFE matrix and IFE matrix.
Stage 2 strategic management tools...
After we identify and analyze key strategic factors as inputs for QSPM, we can formulate the type
of the strategy we would like to pursue. This can be done using the stage 2 strategic management
tools, for example the SWOT analysis (or TOWS), SPACE matrix analysis, BCG matrix model, or
the IE matrix model.
Stage 3 strategic management tools...
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Conceptually, the QSPM in stage 3 determines the relative attractiveness of various strategies
based on the extent to which key external and internal critical success factors are capitalized upon
or improved. The relative attractiveness of each strategy is computed by determining the
cumulative impact of each external and internal critical success factor.
What does a QSPM look like and what does it tell me?
First, let us take a look at a sample Quantitative Strategic Planning Matrix QSPM, see the picture
below. This QSPM compares two alternatives. Based on strategies in the stage 1 (IFE, EFE) and
stage 2 (BCG, SPACE, IE), company executives determined that this company XYZ needs to
pursue an aggressive strategy aimed at development of new products and further penetration of the
market.
They also identified that this strategy can be executed in two ways. One strategy is acquiring a
competing company. The other strategy is to expand internally. They are now asking which option
is the better one.
QSPM Quantitative Strategic Planning Matrix example
(Attractiveness Score: 1 = not acceptable; 2 = possibly acceptable; 3 = probably acceptable; 4 =
most acceptable; 0 = not relevant)
Doing some easy calculations in the Quantitative Strategic Planning Matrix QSPM, we came to a
conclusion that acquiring a competing company is a better option. This is given by the Sum Total
Attractiveness Score figure. The acquisition strategy yields higher score than the internal expansion
strategy. The acquisition strategy has a score of 4.04 in the QSPM shown above whereas the
internal expansion strategy has a smaller score of 2.70.
How do I construct a QSPM?.
Step 1...
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Provide a list of internal factors -- strengths and weaknesses. Then generate a list of the firm's key
external factors -- opportunities and threats. These will be included in the left column of the
QSPM. You can take these factors from the EFE matrix and the IFE matrix.
Step 2...
Having the factors ready, identify strategy alternatives that will be further evaluated. These
strategies are displayed at the top of the table. Strategies evaluated in the QSPM should be
mutually exclusive if possible.
Step 3...
Each key external and internal factor should have some weight in the overall scheme. You can take
these weights from the IFE and EFE matrices again. You can find these numbers in our example in
the column following the column with factors.
Step 4…
Attractiveness Scores (AS) in the QSPM indicate how each factor is important or attractive
to each alternative strategy. Attractiveness Scores are determined by examining each key
external and internal factor separately, one at a time, and asking the following question:
Does this factor make a difference in our decision about which strategy to pursue?
If the answer to this question is yes, then the strategies should be compared relative to that key
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, then the respective key factor has no effect on our
decision. If the key factor does not affect the choice being made at all, then the Attractiveness
Score would be 0.
Step 5...
Calculate the Total Attractiveness Scores (TAS) in the QSPM. Total Attractiveness Scores are
defined as the product of multiplying the weights (step 3) by the Attractiveness Scores (step 4) in
each row.
The Total Attractiveness Scores indicate the relative attractiveness of each key factor and related
individual strategy. The higher the Total Attractiveness Score, the more attractive the strategic
alternative or critical factor.
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Step 6...
Calculate the Sum Total Attractiveness Score by adding all Total Attractiveness Scores in each
strategy column of the QSPM.
The QSPM Sum Total Attractiveness Scores reveal which strategy is most attractive. Higher
scores point at a more attractive strategy, considering all the relevant external and internal
critical factors that could affect the strategic decision
6.Decision/Recommendations
Organizational level strategies
1. Vertical Integration Strategies (Gain Control Over: Distributors, Suppliers, and
Competitors)
1.1. Forward Integration(Gain Control Over ---Distributors, Retailers)
Guidelines
▪ Current distributors – expensive or unreliable
▪ Availability of quality distributors – limited
▪ Firm competes in industry expected to grow markedly
▪ Firm has both capital & HR to manage new business of distribution
▪ Current distributors have high profit margins
1.2. Backward Integration (Ownership or Control -- Firm’s suppliers)
Guidelines
▪ Current suppliers – expensive or unreliable
▪ # of suppliers is small; # competitors is large
▪ High growth in industry sector
▪ Firm has both capital & HR to manage new business
▪ Stable prices are important
▪ Current suppliers have high profit margins
1.3. Horizontal Integration (Ownership or Control --Firm’s competitors)
Guidelines
▪ Gain monopolistic characteristics w/o federal government challenge
▪ Competes in growing industry
▪ Increased economies of scale – major competitive advantages
▪ Faltering due to lack of managerial expertise or need for particular resource
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▪
2. Diversification Strategies (Less Popular -- More difficult to manage diverse
business activities)
2.1. Concentric Diversification (New & related products/services)
Guidelines
▪ Compete in no/slow growth industry
▪ New & related products increases sales of current products
▪ New & related products offered at competitive prices
▪ Current products—decline stage of product life cycle
▪ Strong management team
2.2. Conglomerate Diversification(New & unrelated products/services)
Guidelines
▪ Declining annual sales & profits
▪ Capital & managerial ability to compete in new industry
▪ Financial synergy between acquired and acquiring firms
▪ Current markets for present products – saturated
2.3. Horizontal Diversification(New & unrelated products/services for current customers)
Guidelines
▪ Adding new products/services would significantly increase revenues
▪ Highly competitive and/or no-growth industry; low margins & returns
▪ Current distribution channels can be used
▪ New products have counter cyclical sales patterns
3. Intensive Strategies: Improve competitive position with existing products
3.1. Market Penetration (Increased Market Share)
• Present products/services & Present markets
• Greater marketing efforts
Guidelines
▪ Current markets not saturated
▪ Usage rate of present customers can be increased significantly
▪ Shares of competitors declining; industry sales increasing
▪ Increased economies of scale provide major competitive advantage
3.2. Market Development (New Markets -- Present products/services to new geographic areas)
Guidelines
▪ New channels of distribution – reliable, inexpensive, good quality
▪ Firm is successful at what it does
▪ Untapped/unsaturated markets
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▪ Excess production capacity
3.3. Product Development(Increased Sales -- Improving present products/services, Developing
new products/services)
Guidelines
▪ Products in maturity stage of life cycle
▪ Industry characterized by rapid technological development
▪ Competitors offer better-quality products @ comparable prices
▪ Compete in high-growth industry
▪ Strong R&D capabilities
4. Defensive Strategies
4.1. Retrenchment: (Regrouping , Cost & asset reduction to reverse declining sales & profit)
Guidelines
▪ Failed to meet objectives & goals consistency; has distinctive competencies
▪ Firm is one of weaker competitors
▪ Inefficiency, low profitability, poor employee morale, pressure for stockholders
▪ Strategic managers have failed
▪ Rapid growth in size; major internal reorganization necessary
4.2. Divestiture(Selling a division or part of an organization)
Guidelines
▪ Retrenchment failed to attain improvements
▪ Division needs more resources than are available
▪ Division responsible for firm’s overall poor performance
▪ Division is fit with organization
▪ Large amount of cash is needed and cannot be raised through other sources
4.3. Liquidation: Selling , Company’s assets, in parts, for their tangible worth
Guidelines
▪ Retrenchment & divestiture failed
▪ Only alternative is bankruptcy
▪ Minimize stockholder loss by selling firm’s assets
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Means for Achieving Strategies
Joint Venture/Partnering
“Two or more companies form a temporary partnership or consortium for purpose of capitalizing
on some opportunity”. Why Joint Ventures Fail ▪ Managers who must collaborate daily; not involved in developing the venture
▪ Benefits the company not the customers
▪ Not supported equally by both partners
▪ May begin to compete with one of the partners
Guidelines
▪ Synergies between private and publicly held
▪ Domestic with foreign firm, local management can reduce risk
▪ Complementary distinctive competencies
▪ Resources & risks where project is highly profitable (e.g. Alaska Pipeline)
▪ Two or more smaller firms competing w/larger firm
▪ Need to introduce new technology quickly
Mergers & Acquisitions
▪ Provide improved capacity utilization
▪ Better use of existing sales force
▪ Reduce managerial staff
▪ Gain economies of scale
▪ Smooth out seasonal trends in sales
▪ Gain new technology
▪ Access to new suppliers, distributors, customers, products, creditors
First Mover Advantages
▪ Benefits a firm may achieve by entering a new market or developing a new product or
service prior to rival firms.
Potential Advantages
▪ Securing access to rare resources
▪ Gaining new knowledge of key factors & issues
▪ Carving out market share
▪ Easy to defend position & costly for rival firms to overtake
Outsourcing
▪ Companies taking over the functional operations of other firms
Benefits
▪ Less expensive
▪ Allows firm to focus on core business
▪ Enables firm to provide better services
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Business level Strategies
Select one of the following Structures to follow and use the Benefits & problems to justify
your selection:
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7.Implemetation (Functional Level strategies)
Components of a Marketing Plan
•
•
•
•
•
•
•
•
Executive Summary
Situational Analysis
SWOT (mentioned above)
PESTEL (mentioned above)
Competitive Analysis
List competitors, products, revenues (Market Share Pie Chart)
Determine the brand images of each of the competitors.
Identify how each of the products are positioned in the market and with respect to other
competitors.
• Find out who their suppliers are.
• Make a list of the kinds of activities they engaged in over the past year or two. For example,
did they introduce new products, adjust their prices, embark on advertising campaigns, etc.
• Marketing Objectives:
Objectives has to be SMART:
• Specific
• Measurable
• Achievable
• Realistic/ Relevant
• Time bounded
Examples:
• Sales/ Revenue/ Turnover
• Market share/ Relative market share
• Awareness
• Customer Satisfaction
• Innovation
• New customers
Marketing Strategies
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Ansoff'
Markets
Products
Existing
Sell more of our
existing products to our
existing types of
customers. (Market
penetration)
Modified
Modify our current
products and sell
more of them to
our existing
customers.
(Product
modification)
Enter and sell our
Offer and sell
products in other
modified products
geographical areas.
to new
(Geographical
geographical
expansion)
markets.
Sell our existing
Offer and sell
products to new types of modified products
customers. (Segment
to new types of
invasion)
customers.
Existing
Modified
New
Type of
strategies
Ways to achieve the strategy
Cost
Leadership:
Being the lowcost competitor in
an industry while
maintaining
satisfactory
profit margins.
•
Focus(Niche):
Advantage
achieved when a
firm target and
effectively serve
a small segment
of the market
•
Differentiation:
Advantage
•
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•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Benefits
Size and economies of scale
Globalization
Relocating to low-cost parts of the
world
Modification/simplification of
designs
Greater labour effectiveness
Greater operating effectiveness
Strategic alliances
New source of supply
Government Subsidies------New Delivery Methods-----Production Innovations-----Obtain inexpensive raw materials
Create efficient operations-Control overhead costs-----Avoid marginal customers-
The ability to:
• outperform
rivals
• erect barriers to
entry
• resist the five
forces
Concentration upon on or a small
number of a strong and specialist
reputation
Used by small companies with
limited resources
used in a limited geographic market
focused on a specific product line
A more detailed
understanding of
particular segments
The creation of barriers
to entry
A reputation for
specialization
The ability to
concentrate efforts
A distancing from others
in the market
The creation of strong brand
identities and Image
New
Design new products that
will appeal to our
existing customers. (New
product development)
Design new products for
prospects in new
geographic areas.
Design new products to
sell to new types of
customers.
(Diversification)
Possible problems
•
•
•
Vulnerability to even lower
cost operators
Possible price wars
The difficulty of sustaining
it in the long term
Limited opportunities for sector
growth
The possibility of outgrowing the
market
The decline of the sector
A reputation for specialization which
ultimately inhibits growth and
development into other sectors
The difficulties of sustaining the
bases for differentiation
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achieved when a
firm provides
something that is
unique and
valuable to
buyers beyond
simply offering a
lower price
•
•
•
•
The consistent pursuit of pursuit of The creation of a major Possibly higher costs
competitive advantage The difficulty of achieving true and
those factors which customers
Flexibility
meaningful differentiation
perceive to be important
High performance in one or more of
a spectrum of activities
Strong dealer network
Product reliability and Servic
• STP
Segmentation
Market Segment: a group of consumers who share a similar set of needs and wants.
Marketer’s task is to identify them, rather than to create the segments.
Niche Marketing: A more narrowly defined customer group seeking a distinctive mix of
benefits.
Niches are identified by dividing a segment into sub-segments.
Geographic segmentation
Dividing the market into different geographical units such as nations, states, regions, counties,
cities or neighborhoods.
Hilton Hotels customizes according to location.
Wal-Mart, Sears and K-Mart stock different products according to the local community
E.g. Hyper One
Demographic Segmentation
Dividing the market into groups on the basis of variables such as age, family size, family life
cycle, gender, income, occupation, education, religion, race, generation, nationality and social
class.
Psychographic Segmentation
Using psychology and demographics to better understand consumers.
Consumers are divided into groups based on psychological/personality traits, lifestyle or
values.
Many people within the same demographic group can exhibit very different psychographic
profiles.
Behavioral Segmentation
Buyers are divided into groups based on their attitude toward, use of or response to a product.
Segmentation(Market segments opportunities) Not all segments are useful An ideal Market
segment must be: Measurable(purchasing power can be measured), substantial(Large and
profitable enough to serve), accessible(effectively reached),differentiable (different respond to
product),Actionable(easy attracted)
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Targeting
Targeting (segmentation evaluation):-we look to the segment's overall attractiveness aligned with
company's objectives & resources availability
Targeting Five criteria :-business size, growth, profitability, scales economies and low risk
Targeting approaches:
Mass market (Product oriented marketing program): All Segments are the same so I
will focus on my product rather than the customer and I will apply undifferentiated
marketing program
Full market coverage (diff. products, diff. groups): market is divided into few
segments so I will make a marketing plan for each
Multiple segments specialization: "Product Specialization) OR "Market
specialization" : I will take the best 3 segments of the market
Single segment (customer oriented marketing prog. Individuals as segments): All the
market is only one segment
• Financial position:-Low Targeting approach:-undifferentiated(mass marketing),design
marketing program for superior image product
• Financial position:-High Targeting approach:- Multiple segment specialization" product
specialization" approach
Positioning
Positioning: is the act of designing the company’s offering and image to occupy a distinctive place
in the target market’s mind within a certain competitive frame of reference.
Successful positioning strategy involves the total marketing mix.
Result of positioning: a customer focused value proposition.
What exactly the customer gets? "Competitive advantage". Using points of parity POPs and Points
of Differences PODs to provide reasons to believe or proof points BY Positioning maps (according
to most product beneficial features). Brand Mantra
Points-of-difference
(PODs)
Attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe
they could not find to the same extent with a competitive brand
Consumer desirability criteria od POD
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•
•
•
•
•
•
Relevance
Distinctiveness
Believability
Feasibility
Communicability
Sustainability
Points-of-parity (POPs)
Associations that are not necessarily unique to the brand but may be shared with other brands;
usually indicates a category membership
Perceptual (positioning) Map:
In searching for a specific positioning, the business unit should consider the following possible
sources:
Attribute positioning: The Company positions itself on some attribute or feature. A hotel
describes itself as the city’s tallest hotel. Positioning by feature is normally a weak choice
since no benefit is explicitly claimed.
Benefit positioning: The product promises a benefit. Tide claims that it cleans better.
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Use/application positioning: The product is positioned as the best in a certain application.
Nike might describe one of its shoes as the best to wear for racing and another as the best to
wear for playing basketball.
User positioning: The product is positioned in terms of a target user group, Apple Computer
describes its computers and software as the best for graphic designers.
Competitor positioning: The product suggests its superiority or difference from a
competitor’s product. Avis described itself as a company “that tries harder” (than Hertz, by
implication); 7 UP called itself the Uncola,
Category positioning: The Company may describe itself as the category leader, Xerox means
copy machines.
Quality/price positioning: The product is positioned at a certain quality and price level. Taco
Bell represents its tacos as giving the most value for the money.
Companies must avoid the following errors in positioning their brand:
Under-posirioning: Failing to present a strong central benefit or reason to buy this brand
Over-posirioning: Adopting such a narrow positioning that some potential customers may
overlook the brand
Confused positioning: Claiming two or more benefits that contradict each other.
Irrelevant positioning: Claiming a benefit which few prospects care about
Doubtful positioning: Claiming a benefit that people will doubt the brand or company can
actually deliver
1. Choosing a Value Positioning
We have discussed the selection of one or more specific benefits that the brand will advertise,
without mentioning anything about how the brand will be priced. But buyers think in terms of
value for the money: what they get for what they pay. The seller must value-position the brand. We
can distinguish five value positions.
More for More
Companies can always be found that specialize in making the most upscale version of the product
and charging a high price to cover their higher costs. Called luxury goods, such products claim to
be better in quality, craftsmanship, durability, performance, or style. Examples include Mercedes
automobiles, Mont Blanc writing instruments, and Gucci apparel.
The product is not only fine in itself; it is delivering prestige to the buyer. Often the price far
exceeds the actual increment of quality.
One can find very expensive restaurants, hotels, coffees, brandies, and so on. One is surprised
occasionally at the entry of a new competitor who sets an unusually high price. Haagen-Dazs came
in as a premium ice cream brand at a price never before charged for ice cream; Starbucks came in
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as an expensive coffee where coffee could always be had for much less; some Cuban cigar brands
command an unbelievably high price, in general, a company should be alert to the possibility of
introducing a “much more for much more” brand in any underdeveloped product or service
category.
Yet more-for-more brands are vulnerable: They often invite imitators who claim the same quality
but are priced lower. And luxury goods are at risk during economic downturns when buyers
become more cautious in their spending.
More for the Same
Companies have been able to attack a “more for more” brand by introducing a brand claiming
comparable quality and performance but priced much lower. The Toyota company introduced its
new Lexus automobile with “more for the same” value positioning.
Lexus advertising shows the Mercedes and Lexus side by side and the superior qualities of the
Lexus; and through evidence that Lexus dealerships were providing a better buying experience
than Mercedes dealerships. Mercedes car owners in many American cities ended tip making their
next car purchase a Lexus. Since that time the Lexus repurchase rate has been 60 percent twice that
of the average car brand repurchase rate.
The Same for Less
It seems that everyone is happy when they can buy a typical product or brand at less than the
normal price. Everything—Arrow shirts, Goodyear tires, Panasonic TV sets—seems to be
available at a lower price at some store or discount shop.
Discount stores don’t claim to have superior products, but they can offer ordinary brands at deep
savings, based on superior purchasing power.
Less for Much Less
Some people complain that some manufacturers or service providers provide more than they
require but they still have to pay the higher price. One cannot say to a hotel, “take out the TV set
and charge me less,” or tell an airline, “skip the food and charge me less.”
Therefore sellers have an opportunity to enter a market with a “less for much less” offering. There
is a hotel in Tokyo that rents not a room but a berth for substantially less than the normal hotel
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price. Southwest Airlines, the most profitable U.S. air carrier, charges much less by not serving
food, not assigning seats, not using travel agents, and not transferring luggage to other carriers.
More for Less
Of course, the winning value positioning would be to offer prospects and customers more for less.”
This is the attraction of highly successful category killer stores. Sportmart offers the largest
selection of sports equipment and sports clothing for the lowest prices. Mass merchandisers make a
similar claim: walking into a Wal-Mart store, one meets a friendly greeter, sees a whole array of
attractively laid-out, well-known branded goods, finds everyday low prices, and generous return
policies, and leaves thinking of Wal-Mart as a place where he or she can get more for less.
Marketing Mix:
A. Product & Service Strategy:
1. How do people become aware of their need for your products or service?
2. How do consumers find your offering?
3. How do consumers make their final selections?
4. How do consumers order and purchase your product or service?
5. How is your product or service delivered?
6. What happens when your product or service is delivered?
7. How is your product installed?
8. How is your product or service paid for?
9. How is your product stored?
10.How is your product moved around?
11.What is the customer really using your product for?
12.What do customers need help with when they use your product?
13.What about returns or exchanges?
14.How is your product repaired or serviced?
15.What happens when your product is disposed of or no longer used?
1. Line extension: additional items in the same product under the same brand
Advantage:
• Saving cost
• Minimize risk in introducing new products
Disadvantage:
• Brand dilution
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• consumer confusion
• Cannibalization on original product
2. brand extension: launching new product under the same brand
Advantage:
• Saving high advertising cost and build brand name
• Give new products instant recognition and faster acceptance
Disadvantage:
• consumer confusion about the brand image and may loose its positioning
• may harm consumer attitude toward other product under the same brand
3. multi branding: new brand name in the same product
Advantage:
• establish different features
• appeal to different buying motives
Disadvantage:
• multi branding might gain only small market share
• need resources on building different brands
B. Promotion
Advertising Sales Promotion
Print and
broadcast
ads
Packagingouter
Packaging
inserts
Motion
pictures
Brochures
and
booklets
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Public
Relations
Press kits
Sales Force
Stakes, lotteries
Speeches
Sales meetings
Mailings
Premiums and gifts
Seminars
Telemarketing
Sampling
Annual
reports
Charitable
donations
Incentive
programs
Samples
Contests, games,
sweep
Fairs and trade
shows
Sales
presentations
Fairs and trade
shows
Direct
Marketing
Catalogs
Electronic
shopping
TV shopping
Exam Handling Template
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Posters and
leaflets
Directories
Reprints of
ads
Billboards
Display
signs
Point-ofpurchase
Displays
Exhibits
Sponsorships
Fax mail
Demonstrations
Coupons
Publications
Community
relations
Lobbying
Identity
media
Company
magazine
Events
E-mail
Voice
Audiovisual
material
Symbols
and logos
Videotapes
Continuity programs
Rebates
Low-interest
financing
Entertainment
Trade-in-allowances
Tie-ins
1. Advertising
Used when:
• Build up long term image
• Cost efficient in reaching geographically dispersed buyers
• Trigger quick sales
• Gives image of good value to the brand
2. Sales promotion
Used when:
• Encourage trial or purchase
• Short run effect
• Boosting sagging sales
3. Public relation
Used when:
• Building up good corporate image
• Heading off unfavorable rumors
4. Personal selling
Used when:
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• Making sales
• Building customer relations preference, conviction and solicit action
• Build up buyers
5. Direct and interative marketing
Used when:
• Targeted individual consumers
• Localized and customized used to reach well defined target segments
C. Distribution & Place:
Channel Decisions:
• Channels Coverage
• Assortments
• Locations
• Inventory
• Transport
Channel design decisions:
• Push strategy
• Pull strategy
Types of Distribution Channels (Number of intermediaries)
• Exclusive distribution
• Exclusive dealing
• Selective distribution
• Intensive distribution
1. Identify major alternatives channels
Number of intermediary:
• Exclusive distribution
• selective distribution
• intensive distribution
2. Evaluting alternatives channels
Based on:
• Channels cost
• Sales output
• Product complexity
3. Selecting channels
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Based on:
• Years on business
• Growth record
• Financial strength
• Service reputation
Inventory management
• Manufacture focused
• Time based market focused
Budgeting
A typical marketing budget will include: market research, marketing communications, salaries for
marketing staff, travel costs, etc.
• Task Method: Also known as the "objective and task" method, the objective task
method is a system in which a company allocates a certain amount of money to its
marketing budget based on specific objectives, rather than choosing an arbitrary
amount or basing its marketing budget on sales revenues or projections alone.
• Percentage of last year Sale
• Same as Last time (SALT)
• All You Can Afford
• Profit Maximization
• Competitive Parity
D-Pricing Strategies
Pricing is one of the most important elements of the marketing mix, as it is the only mix, which
generates a turnover for the organisation. The remaining 3p’s are the variable cost for the
organisation.
It costs to produce and design a product, it costs to distribute a product and costs to promote it.
Price must support these elements of the mix. Pricing is difficult and must reflect supply and
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demand relationship. Pricing a product too high or too low could mean a loss of sales for the
organisation.
Pricing should take into account the following factors:
1. Fixed and variable costs.
2. Competition
3. Company objectives
4. Proposed positioning strategies.
5. Target group and willingness to pay.
Pricing Strategies
An organisation can adopt a number of pricing strategies. The pricing strategies are based much on
what objectives the company has set itself to achieve.
▪ Penetration pricing: Where the organisation sets a low price to increase sales and market
share.
▪ Skimming pricing: The organisation sets an initial high price and then slowly lowers the price
to make the product available to a wider market. The objective is to skim profits of the market
layer by layer.
▪ Competition pricing: Setting a price in comparison with competitors.
▪ Product Line Pricing: Pricing different products within the same product range at different
price points. An example would be a video manufacturer offering different video recorders with
different features at different prices. The greater the features and the benefit obtained the greater
the consumer will pay. This form of price discrimination assists the company in maximising
turnover and profits.
▪ Bundle Pricing: The organisation bundles a group of products at a reduced price.
▪ Psychological pricing: The seller here will consider the psychology of price and the positioning
of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead
of $200
▪ Premium pricing: The price set is high to reflect the exclusiveness of the product. An example
of products using this strategy would be Harrods, first class airline services, porsche etc.
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▪ Optional pricing: The organisation sells optional extras along with the product to maximise its
turnover. This strategy is used commonly within the car industry.
1. Market penetraion: set low prices to ensure high level of sales
used when:
• market is highly price sensitive
•
low price simulate market growth
•
production and distribution cost fall with in accumulated production experience
2. Market skimming: initial prices are set high and gradually reduced to capture greet number of market
segments
Used when:
• sufficient number of buyers have a high current demand
•
high price communicates the image of superior product
3. Product quality leadership : relative prices are set at a premium
Used when:
• brands perceived relative high quality
4. Early cash recovery :
Used when:
• Faced with problem of liquidity
• Belief that the product life is likely to be short
Can be delivered by:
• Mass distribution
•
Rigorous credit control policy
•
Special offers
•
Discount to trigger immediate sales and prompt payment
5. Reflecting product differentiation :
Used when:
▪
Target different segments it different products
Evaluation
Marketing mix activities should be accompanied by market driven metrics.
Metrics (KPIs)
•
Customer satisfaction
•
Revenue growth
•
Market share
•
Customer retention rates
.
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Key practices to consider in the marketing mix are the creation of value propositions
and in positioning the product. The Value Proposition is used to define and prove the
economic or strategic benefit of the product or service for a given target market
o Structure Changes involves:
HR Functional Plan “i.e. plan to leverage the employees skills (through Training) or low moral
(Through compensation plan), turnover and so on” and organization
Select one of the following Structures to follow and use the Advantage and disadvantage to
justify your selection:
▪ SIMPLE STRUCTURE:
• OWNER-MANAGER MAKES DECISIONS.
• LITTLE SPECIALIZATION OF TASKS.
• FEW RULES, LITTLE FORMALIZATION.
ADVANTAGES:
▪ Provides high flexibility
▪ Rapid product introduction
▪ Few coordination problems
▪ FUNCTIONAL STRUCTURE:
The company rather being lead by an entrepreneur, he is replaced by as team of managers who
have functional specializations. The entrepreneur must learn now to delegate his responsibilities;
otherwise, the new structure will yield no benefit
ADVANTAGES
▪ Centralized control of operations
▪
Promotes in-depth functional expertise
▪
Enhances operating efficiency where tasks are routine
DISADVANTAGES
▪ Functional coordination problems
▪ Inter-functional rivalry
▪ Overspecialization and narrow viewpoints
▪ Hinders development of cross-functional experience
▪ Slower to respond in turbulent environments
▪ DIVISIONAL STRUCTURE:
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It occurs especially when the organization is managing diverse product line or when the
organization is expanding to cover wider geographical areas
ADVANTAGES:
▪ Decentralized decision making
▪ Each business is organized around products
▪ Puts profit/loss accountability on manager
▪ Facilitates rapid response to environmental changes
▪ Allows efficient management of a large number
of units
DISADVANTAGES
▪ May lead to costly duplication of functions
▪ Inter-divisional rivalry
▪ Corporate managers may lose in-depth understanding
▪ MATRIX STRUCTURE
It combines the functional and divisional structure. It is designed to gain the advantage and
minimize the disadvantages of the functional and divisional structures. The matrix is formed by
using permanent cross functional teams to integrate functional expertise in support of a clear
divisional focus on project, product or program.
The matrix structure in the multinational
organizations offers a flexibility to deal with the
regional differences as well as the multi products,
programs or regional needs.
The matrix structure is the common solution for
the organizations that pursues the growth
strategies in a dynamic and complex environment
Functional & product form are combined
simultaneously at the same level.
▪ Employee
have
2
superior,
functional superior & horizontal
product manager
WHEN TO USE?
▪
Scarce resources
▪ Ideas need to be cross fertilized across projects
▪ External environment is very complex and changeable
Distinct phase exist in the DEVELOPMENT OF matrix structure
▪
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• TEMPORARY CROSS FUNCTIONAL TASK FORCES: PROJECT MANAGER IS IN CHARGE AS THE
KEY HORIZONTAL LINK
• PRODUCT OR BRAND MANAGEMENT: THE FUNCTIONAL IS STILL THE PRIMARY
ORGANIZATIONAL STRUCTURE, PRODUCT MANAGER ACT AS INTEGRATOR OF SEMI PERMANENT
PRODUCT OR BRAND.
• MATURE matrix: A true dual authority structure, functional & product structure are
permanent.
▪ NETWORK STRUCTURE
•
•
MANY ACTIVITIES ARE OUTSOURCE
SERIES OF INDEPENDENT FIRMS OR BUSINESS UNITS THAT ARE LINKED TOGETHER BY
COMPUTERS IN AN IS
• USED when the environment is unstable
Nike, Reebok, Benetton use the network structure on their operation functions by
subcontracting manufacturing to other companies in low cost location around the world.
ADVANTAGES:
▪ Rapid response time
▪ Firm’s emphasize their own core competencies
▪ Very flexible
▪ Reduces capital intensity
.
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EXTRAS
Value Chain Model
It is a model that helps to analyze specific activities through which firms can create value
and competitive advantage
1. Primary Activities
a. Inbound Logistics: Raw material handling and warehousing, receiving, storing,
inventory control and transportation scheduling
b. Operations: Machining, Assembling, Testing, packaging, equipment maintenance
and all other value creating activities that transform the input into final product.
c. Outbound Logistics
The activities required to get the finished product to customers: Warehousing,
order fulfillment, transportation, distribution management of finished goods)
d. Marketing and Sales
The activities associated with getting buyers to purchase the product including:
channel selection, advertising, promotion, selling, pricing, retail management, etc.
e. Services
The activities that maintains and enhance product’s value including: customer
support, installation, training, spare part management upgrading, etc.
2. Support Activities
a. Firm Infrastructure
Includes: General management, accounting, finance, strategic planning (planning
management, legal, public affairs, quality management, etc.
b. Human Resource Management
The activities associated with recruiting, training, development retention and
compensation of employees and managers.
c. Technology Development
Includes technology development that supports value chain activities such as R&D,
product and process improvement, process automation, design and redesign
d. Procurement
Purchasing of raw material, machines and supplies, spare parts, buildings, and
servicing.
Mckinsey 7S
McKinsey 7s model is a tool that analyzes firm’s organizational design by looking at 7 key
internal elements: strategy, structure, systems, shared values, style, staff and skills, in order to
identify if they are effectively aligned and allow organization to achieve its objectives.
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The model can be applied to many situations and is a valuable tool when organizational design
is at question. The most common uses of the framework are:
• To facilitate organizational change.
• To help implement new strategy.
• To identify how each area may change in a future.
• To facilitate the merger of organizations
The McKinsey 7-S model involves seven interdependent factors which are categorized as
either "hard" or "soft" elements:
Hard Elements
Soft Elements
Strategy
Shared values
Structure
Skills
System
Style
Staff
"Hard" elements are easier to define or identify and management can directly influence them:
These are strategy statements; organization charts and reporting lines; and formal processes and IT
systems.
"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and
more influenced by culture. However, these soft elements are as important as the hard elements if
the organization is going to be successful.
1. Strategy: the plan devised to maintain and build competitive advantage over the
competition.
Strategy is a plan developed by a firm to achieve sustained competitive advantage and
successfully compete in the market. What does a well-aligned strategy mean in 7s McKinsey
model? In general, a sound strategy is the one that’s clearly articulated, is long-term, helps to
achieve competitive advantage and is reinforced by strong vision, mission and values. But it’s
hard to tell if such strategy is well-aligned with other elements when analyzed alone. So the key
in 7s model is not to look at your company to find the great strategy, structure, systems and etc.
but to look if its aligned with other elements. For example, short-term strategy is usually a poor
choice for a company but if its aligned with other 6 elements, then it may provide strong results.
Questions
• What is our strategy?
• How do we intend to achieve our objectives?
• How do we deal with competitive pressure?
• How are changes in customer demands dealt with?
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• How is strategy adjusted for environmental issues?
2. Structure: the way the organization is structured and who reports to whom.
Structure represents the way business divisions and units are organized and includes the
information of who is accountable to whom. In other words, structure is the organizational chart
of the firm. It is also one of the most visible and easy to change elements of the framework.
• How is the company/team divided?
• What is the hierarchy?
• How do the various departments coordinate activities?
• How do the team members organize and align themselves?
• Is decision making and controlling centralized or decentralized? Is this as it should be, given
what we're doing?
• Where are the lines of communication? Explicit and implicit?
The way that a company’s structure develops often falls into a tall (vertical) structure or a flat
(horizontal) structures. Tall structures are more of what we think of when we visualize an
organizational chart with the CEO at the top and multiple levels of management. Flat
organizational structures differ in that there are fewer levels of management and employees often
have more autonomy.
Tall Organizational Structure
Large, complex organizations often require a taller hierarchy. In its simplest form, a tall structure
results in one long chain of command similar to the military. As an organization grows, the number
of management levels increases and the structure grows taller. In a tall structure, managers form
many ranks and each has a small area of control. Although tall structures have more management
levels than flat structures, there is no definitive number that draws a line between the two.
Flat Organizational Structure
Flat structures have fewer management levels, with each level controlling a broad area or group.
Flat organizations focus on empowering employees rather than adhering to the chain of command.
By encouraging autonomy and self-direction, flat structures attempt to tap into employees’ creative
talents and to solve problems by collaboration.
Tall Structure Pros And Cons
The pros of tall structures lie in clarity and managerial control. The narrow span of control allows
for close supervision of employees. Tall structures provide a clear, distinct layers with obvious
lines of responsibility and control and a clear promotion structure. Challenges begin when a
structure gets too tall. Communication begins to take too long to travel through all the levels. These
communication problems hamper decision-making and hinder progress.
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Flat Structure Pros And Cons
Flat organizations offer more opportunities for employees to excel while promoting the larger
business vision. That is, there are more people at the “top” of each level. For flat structures to
work, leaders must share research and information instead of hoarding it. If they can manage to be
open, tolerant and even vulnerable, leaders excel in this environment. Flatter structures are flexible
and better able to adapt to changes. Faster communication makes for quicker decisions, but
managers may end up with a heavier workload. Instead of the military style of tall structures, flat
organizations lean toward a more democratic style. The heavy managerial workload and large
number of employees reporting to each boss sometimes results in confusion over roles. Bosses
must be team leaders who generate ideas and help others make decisions. When too many people
report to a single manager, his job becomes impossible. Employees often worry that others
manipulate the system behind their backs by reporting to the boss; in a flat organization, that means
more employees distrusting higher levels of authority.
3. Systems: the daily activities and procedures that staff members engage in to get the job
done.
Systems are the processes and procedures of the company, which reveal business’ daily
activities and how decisions are made. Systems are the area of the firm that determines how
business is done and it should be the main focus for managers during organizational change.
• What are the main systems that run the organization? Consider financial and HR systems as
well as communications and document storage.
• Where are the controls and how are they monitored and evaluated?
• What internal rules and processes does the team use to keep on track?
4. Shared Values: called "superordinate goals" when the model was first developed, these are
the core values of the company that are evidenced in the corporate culture and the general
work ethic.
Shared Values are at the core of McKinsey 7s model. They are the norms and standards that
guide employee behavior and company actions and thus, are the foundation of every
organization.
• What are the core values?
• What is the corporate/team culture?
• How strong are the values?
• What are the fundamental values that the company/team was built on?
5. Style: the style of leadership adopted.
Style represents the way the company is managed by top-level managers, how they interact,
what actions do they take and their symbolic value. In other words, it is the management style
of company’s leaders.
• How participative is the management/leadership style?
• How effective is that leadership?
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• Do employees/team members tend to be competitive or cooperative?
• Are there real teams functioning within the organization or are they just nominal groups?
6. Staff: the employees and their general capabilities.
Staff element is concerned with what type and how many employees an organization will need
and how they will be recruited, trained, motivated and rewarded.
• What positions or specializations are represented within the team?
• What positions need to be filled?
• Are there gaps in required competencies?
7. Skills: the actual skills and competencies of the employees working for the company.
Skills are the abilities that firm’s employees perform very well. They also include capabilities
and competences. During organizational change, the question often arises of what skills the
company will really need to reinforce its new strategy or new structure.
• What are the strongest skills represented within the company/team?
• Are there any skills gaps?
• What is the company/team known for doing well?
• Do the current employees/team members have the ability to do the job?
• How are skills monitored and assessed?
Examples:
Strategy
Market penetration
Structure
Simple structure
Systems
Few formal systems. The systems are
mainly concerned with customer
support and order processing. There are
no or few strategic planning, personnel
management and new business
generation systems.
Skills
Few specialized skills and the rest of
jobs are undertaken by the management
(the founders).
Staff
Few employees are needed for an
organization. They are motivated by
successful business growth and
rewarded with business shares, of which
market value is rising.
Style
Democratic but often chaotic
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management style.
Shared Values
The staff is adventurous, values
teamwork and trusts each other.
Strategy
Market penetration
Strategy
Market penetration
Structure
Bureaucratic machine
Systems
Order processing and control, customer
support and personnel management
systems.
Skills
Skills related to service offering and
business support, but few managerial
and analytical skills.
Staff
Many employees and appropriate
motivation and reward systems.
Style
Democratic but often chaotic
management style.
Shared Values
Enthusiasm and excellence
Strategy
Market penetration
Strategy
Market development
Structure
Bureaucratic machine
Systems
Order processing and control, customer
support, personnel management and
strategic planning systems.
Skills
Skills aligned with company’s
operations.
Staff
Employees form many cultures, who
expect different motivation and reward
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systems.
Style
Shared Values
Strategy
Democratic style
Enthusiasm and excellence
Market development
International entry options
Exporting and importing
-Licensing Arrangement: An agreement in which the licensing firm grants right to another firm in
another country or market to produce and/or sell the original company’s products.
-Franchising: franchiser grant rights to another company to open a retail using the name.
-Joint Venture: Cooperative business activity formed of two or more separate organization to form
a new independent business entity and allocates ownership and liabilities.
-Acquisition: Purchasing another company already operating in the market or in the area.
-Mutual Service Consortia: Partnership of similar companies in similar industry who pool their
resources to gain a benefit that is too expensive for each of them separately
-Value Chain Partnership: A strong and close alliance in which a company forms a long term
arrangement with a key supplier or a distributor for mutual advantage.
▪ Recommended Strategy
•
Explain what are the most feasible alternative strategies available to the firm and what are the pros and
cons of each?
1-Market-leader strategies
1- EXPANDING THE TOTAL MARKET
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a-New Users
 market-penetration strategy,
 new market- segment strategy geographical -expansion strategy
b-New Uses
 discovering and promoting new uses for the product.
c-More Usage
 convince people to use more products per use occasion.
2-Market-challenger strategies
CHOOSING A SPECIFIC ATTACK STRATEGY









Price discount:
Lower price goods
Prestige goods
Product proliferation
Product innovation
Improved services:
Distribution innovation
Manufacturing-cost reduction
Intensive advertising promotion
3-Market-follower strategies
present similar offers to buyers by copying the leader.
 Imitator: The imitator copies some things from the leader
 Adapter: The adapter takes the leader’s products and adapts
4-Market-nicher strategies
The Nichers have three tasks to achieves high margin,not like mass- high volume.:
 creating niches,
 expanding niches,
 protecting niches.
A. Implementation
•
•
•
•
•
•
Management commitment
Employee empowerment
Reward System
Integrating training
Process improvement
Quality at source
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The implementation process has already been started by Top management ,as follow.
•Provide financials to implement the recommended strategies as outlined above.
•Board members with more global business experience should be recruited with an eye on the future and market
potential in local and international markets.
Develop more programs that invest in employees’ capability to handle international operations and increased
competition locally and internationally.
•Develop more customer-retail relationship programs
•Create new job rotational programs locally and internationally within for more exposure of employees and
creativity.
•A TQM department should be structured to ensure quality and customer service leadership. As mentioned before
the company has implemented several principles of total quality management philosophy, such as:
1.
Management commitment: creating committed management to the process of continuous improvement, a
dedication to empowering people to change, and to periodically raise the goals for improvement. Adoption
and communication of TQM: using tools like mission statement and slogans.
2.
Employee empowerment: giving workers the responsibility for improvements and the authority to make
changes to accomplish them.
3.
Reward System: is the missing link that motivates managers and employees to "walk the talk" and use TQM
to the fullest and it's divided into two groups, monetary and non-monetary rewards.
4.
Integrating training: includes different aspects of TQM elements, team skills and problem-solving
techniques.
5.
Process improvement: process of reducing waste and cycle times in all areas through cross-departmental
process analysis.
6.
Quality at source: the philosophy of making each worker responsible for the quality of his/her work
B. Evaluation and Control
is a leader in the industry for ,,,,,,,,. All they have to do is continue with periodic management evaluations and rely
on their distinctive competences of customer service and achieve better utilization of the company current & fixed
asset
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5. Conclusion/ Epilogue ‫الخاتمة‬
o Specify how your recommendations can be implemented and what results you can
expect.
▪ Prepare forecasted ratios and projected financial statements.
▪ Present a timetable or agenda for action.
▪ Recommend specific annual objectives and policies
o Identify the business impact on the current situation.
o Recommend procedures for strategy review and evaluation.
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