Strategic Management: Theory and Case Study
By
Tunchalong Rungwitoo
May 2012
ii
Table of Content
Table of Content.................................................................................................................ii
Table of Table................................................................................................................... iii
Table of Figure ..................................................................................................................iv
Table of Example ...............................................................................................................v
Introduction........................................................................................................................1
Part I: Strategy Formulation ............................................................................................3
1. Organization Mission...................................................................................................4
2 Competitive Situations..................................................................................................7
2.1 External Environment Analysis .............................................................................7
2.2 Internal Environment Analysis ............................................................................16
2.3 SWOT Analysis ...................................................................................................19
3. Developing Strategy...................................................................................................20
3.1 Corporate Level Strategy .....................................................................................21
3.2 Business Level Strategy.......................................................................................33
3.3 Functional Level Strategy ....................................................................................35
Part II: Strategy Implementation...................................................................................38
4. Strategy Implementation............................................................................................38
4.1 Organizational Alignment....................................................................................38
4.2 Leadership and Motivation ..................................................................................41
Part III: Controlling and Evaluation .............................................................................44
5. Controlling and Evaluation ........................................................................................44
5.1 The Controlling Process.......................................................................................44
5.2 Key Performance Indicators ................................................................................45
Power Point Hand Out ....................................................................................................48
References.........................................................................................................................83
iii
Table of Table
Table 1 Starbucks Mission and Components.......................................................................6
Table 2 Missha SWOT Analysis........................................................................................20
iv
Table of Figure
Figure 1 Strategic Management Process..............................................................................1
Figure 2 Strategic Formulation Process...............................................................................3
Figure 3 the Components of External Environment ............................................................7
Figure 4 Thailand Competitiveness ...................................................................................11
Figure 5 Thai Automotive Competitiveness ......................................................................12
Figure 6 Porter’s Five Forces.............................................................................................13
Figure 7 Korean Cosmetic Attractiveness .........................................................................14
Figure 8 The Value Chain..................................................................................................17
Figure 9 Air Asia Value Chain ..........................................................................................17
Figure 10 SWOT Analysis Model .....................................................................................19
Figure 11 Hierarchy of Strategy, Goals and Plans.............................................................21
Figure 12 Corporate Level Strategy Chart.........................................................................22
Figure 13 Three Concentration Growth Strategies ............................................................23
Figure 14 Integration Strategy ...........................................................................................24
Figure 15 Adidas Corporate Strategies ..............................................................................26
Figure 16 BCG Growth - Share Matrix .............................................................................29
Figure 17 Product Life Cycle Curve..................................................................................30
Figure 18 a relationship between BCG Growth-Share Matrix and Product Life Cycle ....31
Figure 19 Corporate Strategy suggested by GE 9 Cell ......................................................32
Figure 20 Industry Attractiveness Evaluation....................................................................32
Figure 21 Business Strength Evaluation ............................................................................33
Figure 22 Example of GE 9 Cell Analysis.........................................................................33
Figure 23 Porter's Generic Strategies.................................................................................34
Figure 24 Functional Level Strategy..................................................................................36
Figure 25 Three primary activities for effective strategic implementation .......................38
Figure 26 Organizatinal Alignment ...................................................................................40
Figure 27 Major Source of Leader Power and Likely Subordinate Reactions ..................41
Figure 28 Maslow Hierachy of Needs ...............................................................................42
Figure 29 Hersey and Blanchard's Situational Leadership ................................................43
Figure 30 The Controlling Process ....................................................................................44
Figure 31 Balance Scorecard .............................................................................................45
Figure 32 The Linkage of Four Perspectives.....................................................................47
v
Table of Example
Example 1 Mission Statement .............................................................................................5
Example 2 Macro Environment Analysis ............................................................................8
Example 3 Thailand National Competitiveness.................................................................11
Example 4 Industry Attractiveness Analysis .....................................................................14
Example 5 Value Chain Analysis ......................................................................................17
Example 6 SWOT Analysis ...............................................................................................20
Example 7 Adidas Corporate Strategy...............................................................................25
1
Introduction
General Management which is the process of achieving organizational goals by engaging
in the four major functions of planning, organizing, leading and controlling1 nowadays
may not sufficient and supportive for the organization succeed in the world of complex
environments. It concerns about the process to manage the company internally but does
not concentrate more on creating competitiveness regarding environments affecting the
organization. Even companies adopt general management to sustain profitability by
reducing the defects or costs, and improving operations process in order to increase
productivity, they may not succeed in the competition because they perform only similar
activities better than competitors but do not create the distinctive competitiveness.
Additionally, they perform only operational effectiveness but not strategy2. Operational
effectiveness and strategy are both essential to superior performance but they work in
very different ways. Strategy is about competitive position that the company performs
different activities from rivals’ or performing similar activities in different ways.3
To learn how the companies create strategies and put them into action, the executives or
strategists should examine carefully an aspect of Strategic Management. Strategic
Management is a process regarding 3 primary activities; Strategy Formulation, Strategy
Implementation, and Controlling and Evaluation4.
Figure 1 Strategic Management Process
2
This paper will be divided into 3 parts regarding the strategic management process which
is shown on Figure 1 and given examples related to Asian stories. The first part is strategy
formulation consisting of 3 components; Organization Mission, Competitive Situations,
and Strategy Development. The second part will express how to implement the strategies.
It engages the organization alignment that should be considered for changing the
organization to support the operations based on the formulated strategies. Finally,
Controlling and Evaluation is a key factor to monitor the organization strategic operations
by considering 4 perspectives: financial perspective, customer perspective, internal
process perspective, and learning and growth perspective.
3
Part I: Strategy Formulation
Strategy formulation is the first activity that company should perform to create unique
competitive advantage by setting the organization mission, analysing the competitive
situations both external perspective and internal perspective, and then developing the
strategies that fits in the environments.
Figure 2 Strategic Formulation Process
Firstly, the organization has to establish its reasons to exist and the scope of operations by
setting its mission statement. Then it should consider the competitive situations that effect
firm operations and competitions. There are 2 perspectives for analyzing the situations.
First perspective is external situations. A strategist should understand macro environment,
national competitiveness, and industry attractiveness whether those factors support or
depress the organization. Second perspective is internal factors. An executive should
examine correlations among the organization activities and business functions, and also
explore the core competencies of the organization.
4
As a consequence, a company will create a competitive advantage from crafting a set of
strategies that gain supportive environments and prevent obstructive factors. A strategist
should classify the environments into 4 groups which are strengths, weaknesses,
opportunities and threats; SWOT Analysis. This classification is very helpful for
developing the strategies via bringing its strengths and opportunities up to create
competitive advantage and explore the possible alternatives to improve its weaknesses
and prevent or avoid the threats. Additionally, this competitive situation arrangement
suggests the organization’s competitive position in the industry and supports conducting
the firm’s strategies.
There are 3 levels of the strategies. Grand strategy or corporate strategy is the highest
level. It is very essential for setting the organizational direction whether firm wants to
grow, stable or exit. Business strategy is the second that the company should describe the
company’s characteristics making competitiveness among the competitors whether it
wants to differentiate by offering the superior values for customers, offering the
affordable price by gaining the low cost advantage, or creating distinctive values for its
concentrated customer5. Consequently, the company will contribute its grand strategy and
business strategy to each business functions in order to craft functional strategies.
Marketing department will conduct marketing plan related to corporate and business
strategies, as well as production and operation plan, human resources plan, and financial
plan.
1. Organization Mission
The organization should set its mission as the organization’s purpose or fundamental
reason for existence. Its organization mission is called as mission statement. It is a broad
declaration of the basic, unique purpose and scope of operations that distinguish the
organization from other of it type 6 . There are 9 components to formulate mission
statement as following:
1) Customers. Who are the organization’s customers?
2) Products or services. What are the organization’s major products or services?
3) Location. Where does the organization compete?
4) Technology. What is the firm’s basic technology?
5
5) Concern for survival. What is the organization’s commitment to economic
objectives?
6) Philosophy. What are the basic belief, values, aspirations, and philosophical
priorities of the organization?
7) Self-concept. What are the organization’s major strengths and competitive
advantages?
8) Concern for public image. What are the organization’s public responsibilities,
and what image is desired?
9) Concern for employees. What is the organization’s attitude toward its
employees?
Example 1 Mission Statement
Starbucks set its mission as the premier purveyor of the finest coffee in the world while
maintaining our uncompromising principles as we grow 7 . The following six guiding
principles will help Starbucks measure the appropriateness decisions;
•
Provide a great work environment and treat each other with respect and dignity.
•
Embrace diversity as an essential component in the way we do business.
•
Apply the highest standards of excellence to the purchasing, roasting and fresh
delivery of our coffee.
•
Develop enthusiastically satisfied customers all of the time.
•
Contribute positively to our communities and our environment.
•
Recognize that profitability is essential to our future success.
From the above mission statement, Starbucks’ missions contain all of nine components
which are shown in table 1
6
Table 1 Starbucks Mission and Components
X
Concern for employees.
public
X
for
Self-concept.
X
Concern
image.
Philosophy.
X
Technology.
X
Concern for survival.
The premier purveyor of the
Location.
Customers.
Starbucks Mission
Products or services.
Components
finest coffee in the world while
maintaining our
uncompromising principles as
we grow.
Provide
a
great
X
work
X
environment and treat each
other with respect and dignity.
Embrace
diversity
as
X
an
essential component in the way
we do business.
X
Apply the highest standards of
X
excellence to the purchasing,
roasting and fresh delivery of
our coffee.
Develop
enthusiastically
X
satisfied customers all of the
time.
X
Contribute positively to our
communities
and
our
environment.
Recognize that profitability is
essential to our future success.
X
7
2 Competitive Situations
The firm can set a suitable strategic vision and strategy by analysing the competitive
situation considering external environment and internal environment.
The external
analysis builds on an economics perspective of industry structure, and how a firm can
make the most of competing in that structure. The internal analysis based on operation
activities and its competencies with in the organization.
2.1 External Environment Analysis
External environment is the uncontrollable factors that effect the organization. Firms
should consider 3 models to amylase its external environment. These are Macro
Environment, National Competitiveness, and Industry Attractiveness.
Legislation and Regulations
Macro Environment
Firm Strategy
and Rivalry
Related and
Supporting Industries
National Competitiveness
Industry Attractiveness
Suppliers
Societal Values
And Lifestyles
Organization
Buyers
General Economic
Conditions
New Entrants
Substitutes
Factor
Conditions
Technology
Demand
Conditions
Population Demographics
Figure 3 the Components of External Environment
8
1) Macro Environment
The first perspective is Macro Environment that affects overall of the business situation.
The company should consider 5 factors which are Legislation and Regulations, General
Economic Conditions, Societal Values and Lifestyles, Population Demographics, and
Technology8. The corporate who expand the business to a global market should consider
all of these factors to be as the information for developing the strategy according to the
host country.
Example 2 Macro Environment Analysis
CP All, a convenience store company in Thailand which granted a license to use the
trademark “7-Eleven”, are expanding the business in Vietnam9 have to consider all of 5
factors affecting the market penetration.
(1) Legislation and Regulations
Vietnam Government’s policy implies to the intention of developing economic growth by
using foreign direct investment such as the reduction the conditional fields of foreign
investment by opening the door to such “sensitive” service fields as banking, finance,
transportation, telecommunications, wholesale and retail, and culture.
10
In addition,
Vietnam is considered to be the country which has a stable socio-political environment
than the other regional countries.11 This is also the one support factor to encourage the
investment. However, Vietnamese strategy declaration focuses on 6 target other countries
for foreign investment.12 This will be the threat for Thai investor that will less prioritize
and faces with the increasing of competitors.
For retail services, C.P.All is influenced from the law to entry in the retail and franchise
service by joint venture and should invest its own stores before it is able to expand its
branch after 3 years.13
9
(2) General Economic Conditions
The economic indicators show the strong GDP growth rate and increases GDP per capita,
investment rate and total retail sector value that expresses the rising of consumer
consumption. However, the inflation rate effect the buying power that may be reduced
from the higher price of goods and services and also the increasing of interest rate may
change the expense to saving and also decrease the investment from bank funding. For
one thing, Vietnam has efficiency employment. There are a few employment rates around
5 % which are male 2% and female 3%. In addition the part-time job increased focusing
on service and retail sectors.
(3) Societal Values and Lifestyles
The economic reform changes Vietnamese values and lifestyles. They require more
standards of living such as hygiene and convenience. People in urban areas normally go
to shopping fresh food and other consuming goods in Supermarkets which is the most
convenient. In addition, Convenience foods are becoming more popular with families to
save their time in preparing and cooking. Moreover, people prefer relaxing in their own
houses with families at night or on days off. As a result, they can spend more money on
home entertainment products such as CD VCD and DVD. 14
Vietnamese are not familiar with buses, and usually have no habit of using a bus in daily
life but the main means of transportation in Vietnamese daily life is motorbikes and
bicycles. Therefore, 7-Eleven ought to locate in gas station.
(4) Population Demographics
Vietnamese population was 83 million in 2005. This total population is predicted to
increase to more than 94 million in 2015. If the Vietnamese population was represented
by a pyramid, it would have a narrow top and wide base. Vietnamese population density
is high in comparison to other countries. As Vietnam is an agricultural country, the
population is mainly concentrated in rural areas which around 80% of the total population
of the country, while only 20% of population lives in urban areas.15
10
Furthermore, the population density is very high and the household preferences that
people live in the rented house. This may imply that there should be a large number of
houses locating nearly with high density. In consequence, 7-eleven should locate in the
house community to offer them the convenience.
(5) Technology
Vietnam is putting considerable effort into modernization and expansion of its
telecommunication system and Information Technology, but the performance has to be
improved and require more investment. Vietnam technology good in the economic main
cities; Hanoi, Da Nang, and Ho Chi Minh City, there are fibre-optic cable or microwave
radio relay network to exchange the information; main lines have been substantially
increased, and the use of mobile telephones is growing rapid16
2) National Competitiveness
For International Business environment, the national competitiveness is an important
factor that a company should see the potential of industry regarding competitive
advantage in the state level. In a world of increasingly international competition, nations
have become more important. Competitive advantage is created and sustained through a
highly localized process. Differences in national values, culture, economic structures,
institutions, and histories all contribute to competitive success. Therefore, the company
should analyze the competiveness in the state level in order to find the opportunities and
threat influenced on the industry that firm challenges. To investigate national
competitiveness, firm should examine The Diamond of National Advantage which
compound of 4 attributes; Factor Conditions, Demand Conditions, Related and
Supporting Industries, and Firm strategy, Structure, and Rivalry.17
(1) Factor Conditions. The nation’s position in factors of production, such as
skilled labour or infrastructure, necessary to compete in a given industry.
(2) Demand Conditions. The nature of home-market demand for the industry’s
product or service.
(3) Related and Supporting Industries. The presence or absence in the nation of
supplier industries and other related industries that are internationally
competitive.
11
(4) Firm Strategy, Structure and Rivalry. The conditions in the nation
governing how companies are created, organized, and managed, as well as the
nature of domestic rivalry.
Example 3 Thailand National Competitiveness
Figure 4 Thailand Competitiveness
Figure 4 shows the competitiveness of Thailand regarding Diamond Model18 suggesting
opportunities for a company to create its own competitiveness. Automotive and tourism
sector have high potential for Thailand competitive advantage. Automotive sector gain
the opportunity from demand condition especially in pick-up truck which is one of the
most developed markets in the world. While the beautiful location and natural resources
are an opportunity for tourism sector.
12
Figure 5 Thai Automotive Competitiveness
Figure 5 is the business environment assessment of Thai automotive cluster.19 There are
many factors supporting automotive corporation in Thailand. This cluster has strong and
growing position in the world export market for pick-up trucks. There is a large
investment from international automakers and cost competitiveness based on low factor
input costs. In addition, automotive makers can access to the skills of foreign assemblers
and gain a strong physical infrastructure as well as a strong presence of locally –based
suppliers. However, there are 2 weak points that automotive firm should consider to solve
them. They are the mismatch between workforce skills and company needs, and lacking
of innovative capacity.
3) Industry Attractiveness
Industry Attractiveness is a competition environment affecting the industry or the market
that the company competes. 5 forces model20 is an important tool to analyze competition
environment and to help the company examine the industry attractiveness. This model is
useful for the company to making a decision for investing or entering to the interesting
industry.
13
Figure 6 Porter’s Five Forces
The 5 forces model is divided in to 2 perspectives. The first perspective, vertical line, is
about the competition in the certain industry regarding 3 factors; Industry Competitors,
New Entrants, and Substitutes. This perspective considers the market challenger in the
current competition by examining the strength of the competitors and the competition
intensive. If the competitors have much more power and the market is high competitive
environment, the industry may not attractive for the new comers. In addition, it considers
the increasing of the new competitors. If there is no barrier for the new entrants, the
competition will be higher and may not attractive in the future. Furthermore, substitute
products are one of the indirect competitors that can gain the customer share from the
market. For another perspective, horizontal line is about the industry operation showing
the correlation among suppliers, producers, merchandises, and buyers. It regard as the
bargaining power of supplier and buyers. If the related units have more power to persist
the product quality, price or other subject that the company are not able to negotiate, the
industry may not attractive to enter.
14
Example 4 Industry Attractiveness Analysis
A Korean cosmetic industry nowadays is not much attractive for the home corporation.
Rivalry among competitors and bargaining power of buyers forces the Korean cosmetic
firms to find new market by expanding business to other country.
Figure 7 Korean Cosmetic Attractiveness
(1) Rivalry among competitors: High
- Large number of brands in the market: There are currently a lot of major
brands already existing in the market with strong foothold, therefore, each brand try to
compete against one another to gain market share especially those major brands.
- Industry growth: With 3.4% increase over 2006, Cosmetic industry has seen as
much consolidated in recent years. Therefore, all brands want to grab this growth to have
its sales volume grow.
- Low product differences: Every brand will follow the market trends to be more
competitive to other brands. Therefore every brand will have nearly the same SKU in
their product category.
(2) Barriers to entry: High
- Brand Identity: Korean people tends to favour European cosmetics over US or
Korean product as European products have traditionally had a more Luxurious brand
images, therefore, the new comer will have the difficulty to enter the market.
15
- Government restriction: There are many documents needed to be submitted to
The Korea Pharmaceutical Traders Association (KPTA) in order to importing product
into Korea.
- Large number of brands in the market: There are currently a lot of majors
brands imported into Korea, also many of Korea local brands increasing their reputation
to Korean market. Therefore there is high barrier of the new comer to enter to the market.
(3) Threat of substitutes: Low
- Substituted product: There are no evident threats as to the possibility of new
products that could replace the cosmetic industry.
(4) Bargaining power of supplier: Moderate
- Differentiation of input: There is low differentiation of input in cosmetic
industry as every supplier need to follow market trend in order to keep the customer
loyalty to the brand.
- Impact of inputs on cost: As the world economy is now very fluctuating
especially the oil price, the price of raw materials are increasing which make the
difficulty of the supplier to maintain the price.
- Threat of forward integration: To integrate with the supplier would need high
cost of investment.
(5) Bargaining power of buyer: high
- Buyer’s needs: Korean people tend to be more health-conscious. They prefer
more natural and green cosmetic products. Therefore they have high bargaining power
which makes every brand to follow the customer’s needs in order to keep the customer
loyalty.
- Market sizes: The entire cosmetics market in Korea is estimated to be worth
about USD 6.1 billion. So customer has many cosmetic brands to choose for themselves.
If product doesn’t meet their preference, they will switch to another brand instead.
- Brand Identity: In the cosmetic market, there are some brands especially
European brands which are in the consumer’s awareness like Chanel, Lancôme, Sisley,
16
LVMH Group, and etc. which can be considered as a brand identity for cosmetic market.
As a result, consumer always considers purchasing those brands as first priority.
- Product differentiation: There is low product differentiation of cosmetic business
as all brands will have nearly the same features and benefits provided to customer. So
customer can change the brands easily.
2.2 Internal Environment Analysis
Besides watching External Environment, The companies should examine the
competitiveness and performance of the firm operations. Corporation can analyze internal
operations by using Value Chain Analysis, Business Function Analysis, and Core
Competencies Analysis.
1) Value Chain Analysis21 is a systematic tool to analyze the interaction among all the
activities a firm performs. This concept divides a company’s activities, value activities,
into the technology and economically distinct activities it performs to do business. A
company’s value activities fall into nine generic categories. They are regarded as the
process to create value considering 2 main activities which are 5 primary activities and 4
support activities. Primary activities compound of the operational factors initiating from
the input of raw materials to operations and output as the finished products delivered to
target customers. For the support activities, there are 4 main factors that firm should
encourage the increasing of competitiveness regarding primary activities. These are Firm
Infrastructure, Human Resource Management, Technological Development, and
Procurement.
A firm gains competitive advantage by performing these strategically important activities
more cheaply or better than its competitors. One of the reasons the value chain framework
is helpful is because it emphasizes that competitive advantage can come not just from
great products or services, but from anywhere along the value chain. It's also important to
understand how a firm fits into the overall value system, which includes the value chains
of its suppliers, channels, and buyers.
17
Support
Firm
Activities
Infrastructure
Human Resource
Management
Technology
Development
Procurement
Inbound
Logistics
Operations
Outbound
Marketing
Logistics
and Sales
Primary Activities
Services
Margin
Figure 8 The Value Chain
Example 5 Value Chain Analysis
Air Asia which is the low cost Malaysian national airline gain the competitive advantage
from performing its operation regarding value chain activities showed on Figure 9
Figure 9 Air Asia Value Chain
18
2) Business Functions Analysis is the basis tools to investigate the organization
performance divided by functions which are marketing, productions, operations, human
resource, and finance etc. For example, executive should explore firm’s market share and
customer satisfaction for marketing analysis. Production analysis is to determine
productivity of the production process and also product quality. Human resource
management is to explore the organizational structure and also the staff competencies.
Lastly, strategist should analyze financial statement considering profitability and liquidity.
3) Core Competencies Analysis 22 is to examine the resources, capabilities and
competencies which considered as the essential factors in the organization. It will lead to
the company core competencies and also the organizational competitive advantage. A
successful company which is flexible for adapting its operation related to the complex
environment has a set of core competencies or capabilities that are difficult for
competitors to imitate and distinguish the company from competition.
An organization’s resources and capabilities23encompass the financial, physical, human,
and organizational assets used in its operations. Financial resources include debt, equity,
retained earnings, and other money related matters. Physical resources include buildings,
machinery, vehicles, and other material items used to operate. Human resources are the
skills, abilities, experience, and other work-related characteristics of the individuals
associated with the organization.
Core competencies 24 is the collective learning in the organization, especially how to
coordinate diverse production skills and integrate multiple streams of technology.
Company should identify the organization regarding 3 factors; a potential access to wide
variety of markets, a significant contribution to end user value, and difficulty for
competitors to imitate. There are many competitive brands gain competitive advantage
from their core competencies such as Sony in miniaturization, allowing it to make
everything from Walkmans to video cameras to notebook computers.
Canon's core
competence in optics, imaging, and microprocessor controls have enabled it to enter
markets as seemingly diverse as copiers, laser printers, cameras, and image scanners.
19
2.3 SWOT Analysis
SWOT analysis is a tool to classify the environment effecting the organization. It
identifies internal and external factors whether they are favourable and unfavourable to
the organization and classifies them into 4 groups which are Strength, Weakness,
Opportunities, and Threats.
Strengths determine internal environments which are the organization’s strong points.
They arise from the resources and competencies available in the firm. Additionally, the
resources advantage relative to competitors and the needs of the markets a firm serves or
expects to serve. Weaknesses are organization’s weak points which are limitation or
deficiency relative to competitors that impedes a firm’s effective performance.
Opportunities determine uncontrollable factors from the external environment that
support the organization activities. Threats are unfavourable situation in the firm’s
external environment and the key impediments to the firm’s current or desired position.
SWOT Analysis involves 2 important parts which are drawing conclusions about the
competitive situations and translating these conclusions into strategic actions to better
match the strategy on its resource strengths and market opportunities, to correct the
important weaknesses, and to defend against external threats.
Advantage
Disadvantage
Internal Environments
Strengths
Weaknesses
External Environments
Opportunities
Threats
Competitiveness
Improvement, Protection
Strategic Actions
Figure 10 SWOT Analysis Model
20
Example 6 SWOT Analysis
Missha, a Korean cosmetic brand, analyze the environment affecting the business
expansion in Thailand on the table 2.
Table 2 Missha SWOT Analysis
Strengths
•
Product quality and variety
•
Reasonable Price
•
Low cost of distribution expense
•
Consumer’s active participation
Weaknesses
•
Ability to understand the different
culture and language
•
Experience in doing business in
Thailand
solution
Opportunities
Threats
•
Korean Trend spread worldwide
•
Strong brand in local market
•
Increasing in health and nature
•
Different consumer behaviour from the
conscious
home market.
•
Increasing of Female world population
•
Decreasing of global economy
•
Global Rising in men’s grooming
•
Increasing of production cost
market
Table 2 shows Missha SWOT Analysis for establishing business in Thailand. This grid
helps Missha to set its marketing strategies regarding strengths and opportunities and find
the solutions to solve its weaknesses and threats. Missha uses its strength in marketing
proposition to communicate to Thai target customer who adopts Korean Trend and is
aware of wellbeing. However, to solves its depress it use joint ventures which are the
mode of entry giving local company who understand Thai culture prepare marketing plan
that suits to Thai behaviour.
3. Developing Strategy
Many organizations develop strategies at 3 different levels: Corporate, Business and
functional. 25 Corporate Level Strategy addresses overall of the organization strategic
direction. For the organization which has a various strategic business unit, it may set the
21
direction to each business unit differently. A Strategic Business Unit (SBU) is a distinct
business that can be managed relatively independently of other businesses within the
organization. Business Level Strategy focuses on the way to compete within particular
business while also supporting the corporate level strategy. Strategies at this level are
aimed at deciding the type of competitive advantage to build, determining responses to
changing environmental and competitive conditions, allocating resources within the
business unit, and coordinating functional level strategy. Functional Level Strategy
concentrates on the action plan for particular functional area such as marketing strategy,
productions and operations strategy, human resource strategy, and financial strategy.
Strategic
Goals//Plans
Top Management
Corporate Strategy
Tactical
Goals/Plans
Middle Management
Business Strategy
Operational
Goals /Plans
First-Line
Management
Functional Strategy
Figure 11 Hierarchy of Strategy, Goals and Plans
In addition, the three levels of strategies have parallel levels of goals, plans, and
management levels26 as shown in Figure 11. Strategic goals are broadly defined targets
result and contribute to strategic plans setting by top management. Tactical goals are
future end result for specific department or business units setting by middle management.
Finally, Operational Goals are target result that address specific measurable outcome
related to functional strategy.
3.1 Corporate Level Strategy
Corporate Level Strategy, grand strategy or master strategy, provides the basic strategic
direction at the corporate level. There are 3 main direction that top management has to
decide for its business unit; growth, stability and retrenchment.
22
1) Growth Strategy involves organizational expansion in sales, earnings, and other
criteria such as business units, product variety, customers, geographic locations, and
economy of scales, etc. There are 3 major growth strategies; Concentration,
Diversification, and Integration.
Market Penetration
Concentration
Market Development
Product Development
Concentric
Diversification
Growth
Diversification
Conglomerate
Diversification
Horizontal Integration
Integration
Corporate
Level
Strategy
Vertical Integration
Stability
Harvest
Turnaround
Retrenchment
Divestiture
Bankruptcy
Liquidation
Figure 12 Corporate Level Strategy Chart
23
(1) Concentration Strategy, or intensive strategy, focuses on effecting the
growth of a single product or service or a small number of closely related products or
services. It considers 2 dimensions which are product and market.
Current Products
Current Markets Market Penetration Strategy
New Markets Market Development Strategy
New Products
Product Development Strategy
(Diversification Strategy)
Figure 13 Three Concentration Growth Strategies27
The company first considers whether it could gain more market share with its current
products in their current markets (market penetration strategy). Next it considers whether
it can find or develop new markets for its current products (market development strategy).
Then it considers whether it can develop new products of potential interest to its current
markets (product development strategy). Later it will also review opportunities to develop
new products for new markets (diversification strategy).28
(2) Diversification Strategy entails effecting growth through the development of
new areas that are clearly distinct from current business. In addition to diversifying for
growth reasons, organizations often diversify to reduce the risk that can be associated
with single-product or single-industry operations.29 There are two types of diversification:
concentric and conglomerate. First, the company develops concentric strategy to seek
new products that have technological or market synergies with existing product line, even
though the new products themselves may appeal to a different group of customers. It
occurs when an organization diversifies into a related, but distinct, business. Second, the
company can set conglomerate strategy to seek new businesses that have no relationship
to its current technology, products, or markets. 30
24
(3) Integration Strategy 31 involves expanding its operations line to related
activities or the similar activities but to acquire more markets or products. A company can
expand its activities from producing its finish products to produce raw materials or other
input. When a company grows by becoming its own suppliers, the process is backward
vertical integration. Additionally, it may develop forward vertical integration which
replaces distributors by establishing its own stores to meet end customers itself.
Furthermore, a company can reduce competitions or gain more market share by merging
or acquiring companies in the certain industry. The process to add more similar business
is called as horizontal integration.
Backward
Integration
Suppliers
Organizations
Competitors
Forward
Integration
Competitors
Horizontal Integration
Buyers
Figure 14 Integration Strategy
2) Stability Strategy 32 engages maintaining the statue in a competition because of
several reasons. If a company is doing reasonably well, managers may not want to take
risk from aggressive growth. In addition, a company may gain high market share and has
enjoyed the market already. Another reason for choosing stability is to recover the
resource. An organization that stretched its resources during a period of accelerated
growth may need to attain stability before it attempt further accelerated growth. On the
other hand, if the market growth is low, a company may choose stability strategy to hold
on the current market share.
25
3) Retrenchment Strategy33 or defensive strategy focus on the desire or need to reduce
organizational operations, usually through cost reduction or asset reductions.
Retrenchment strategy includes many types of retrenchment such as harvest, turnaround,
divestiture, bankruptcy, and liquidation.
(1) Harvest entails minimizing investments while attempting to maximize shortrun profits and cash flow, with the long-run intention of exit the market.34 It is often used
when future growth in the market is doubtful or will require investment that does not
appear to be cost effective.
(2) Turnaround is designed to reverse a negative trend and restore the
organization to appropriate levels of profitability. It is used for shifting from a negative
direction or a positive one. A company will push an effort to reserve it resources in order
to make a big turnaround.
(3) Divestiture involves an organization’s selling or divesting of a business or
part of a business. There are 2 different effects on this strategy. A company may have a
positive effect on the price of the firm’s stock but conversely it may have a negative
effect if divestitures are conducted in the absence of clear strategic goals.
(4) Bankruptcy is a means whereby an organization that is unable to pay its debts
can seek court to protection from creditors and from certain contract obligations while it
attempts to regain financial stability.
(5) Liquidation entails dissolving an organization by disposing of all its assets
and settling its remaining debts. It usually occurs when serious difficulties, such as
bankruptcy can not be resolved.
Example 7 Adidas Corporate Strategy35
Adidas, a German company that manufactures footwear and sport apparel found in 1920s,
set its vision to achieve “the best portfolio of sports brands in the world.” Adidas
corporate strategy can be divided into 4 revolutions. There are 3 top executives
formulated strategies which are shown on Figure 15.
26
Revolution I
The First revolution was conducted by the founder, Adolph Dassler, to create innovative
athletic footwear focusing on track-and-field shoes. Rudolph Dassler, his brother, joined
Adidas as strategic partner but their conflict make Rudolph split him to found Puma
which was Adidas competitor.
This first revolution was successful from the reputation that many sport activities sign
contract to Adidas and athletes use Adidas as their sport shoes. However, when founder
passed away and his son was not able to operate it with a clear direction, the first
revolution has come to the end and turned to the next revolution.
Figure 15 Adidas Corporate Strategies
Revolution II
After the founder and his son passed away, Robert Louise – Dreyfus, a French advertising
executive who is a head of group investor acquired Adidas, came to be a chief executive
director and launched a dramatic turnaround of the company by following action cutting
27
costs, improving styling, and launching new model. Turnaround strategy makes Adidas
become the 3rd largest athletic footwear seller in the U.S.
In addition, when Nike, Adidas competitor, had begun to diversify outside of athletic
footwear and apparel, Adidas promoted new strategy to diversification to ski equipment,
golf clubs, bicycle component, and winter sports apparel by acquiring Salomon which is a
French sports equipment manufacture. The objective of concentric diversification strategy
from the French CEO may be just to do the same as the key competitor, but his decision
led Adidas to the failure of this revolution. Therefore, he step down and rejoined his
family business. This is because his decision may not think prudentially of Adidas
capability both competencies and financial status.
Revolution III
Herbert Hainer, the company’s head of marketing in Europe and Asia, came to be the
third top executive and launched the turnaround strategy by these following actions;
•
Cutting costs
•
Introduced new apparel and footwear products
•
Increases advertising
•
Signed additional athletes to endorsement contracts
•
Supplied apparel, equipment, and footwear to Olympic Games
For the problem from the acquisition of Salomon, Hainer restructured the strategic
business and changed the direction of Adidas from to operate the sport equipment
business in Salomon that Adidas has no competencies and capabilities to offer the apparel
and footwear as the supplement product to Salomon customers.
Furthermore, Adidas in the third revolution also used 2 groups of growth strategy;
intensive strategy and integration strategy. The company expanded sales by establishing
its own retail store to the international market. This can be defined as the using of
backward vertical integration and market development.
28
Revolution IV
Adidas sustains its growth by using divestiture strategy by selling Salomon which require
much more competencies that waste Adidas resources and planning for horizontal
integration strategy to acquire Reebok which are in the same footwear and apparel
business. This decision is to reduce cost from less strategic fit unit and by the mean time
to increase the unit that have more strategic fit which creates more value and lead to
synergy as well.
Tools for crafting corporate strategy
While strategists consider environments effecting the strategy formulations, many
companies are not able to find a relationship between environment and strategy. In
addition, they create strategy base on opinion based rather than information based.
Therefore, a company can’t succeed to creating competitive advantage. To help strategists
create corporate strategy according to the environments, they should select 2 tools for
crafting strategy; BCG Growth-Share Matrix or GE 9 Cell.
Even though a strategist can use SWOT Analysis as a basic tool to see the supporting
factors from internal and external environments, it can’t suggest a process or
methodology to develop strategy especially a strategic direction. BCG Growth – Share
Matrix and GE 9 Cell are tools helping strategist to formulate strategy according to
internal and external factors
1) BCG Growth – Share Matrix
BCG Growth – Share Matrix is developed by Boston Consulting Group, a prominent
management consulting firm. It is used for suggest a resources contribution to the
organization business unit by considering marketing perspective internally and externally.
For internal market factors, Market shared is considered as the company ability to
compete in the market. While market growth is represented as the external factor whether
it is interesting for invest. A Company will rate these 2 factors in to 2 levels; High and
Low. As a result, BCG Growth-Share Matrix conducts the four-cell matrix which divides
business unit in to 4 categories36 as shown on Figure 16
29
Figure 16 BCG Growth - Share Matrix
(1) Question Mark is a category which a business unit gains low market shares in
a high growth rate business. This category always involves a start-up organization
investing in a potential market. Its products generate less cash than is invested in them.
They are risky and require considerable funding, making them minimally profitable in the
initial stages. The business which falls in this category can set it corporate strategy to be
growth or retrenchment. The Question Mark products/business units could become Stars
by increasing market share or divest to exit the uncompetitive industry.
(2) Star is a category for business unit which has high market share in a high
business growth. The organization performance in this category yields more cash than
the cash investment in them. However, Stars need investment to maintain their position
because the rivalry may be tense from market challengers who compete to gain more
market share or new competitors who enter to a high growth market.
(3) Cash Cow involves business units with high market growth, generating more
cash than the cash investments required for sustaining them. Cash Cows are mature
products/business units in well-established markets, generating funds to support other
parts of the business. They typically form the core of a business.
(4) Dog is a category in the declining stage which business units gain small
market share and operate in slow growing market. As a rule, these products do not
30
generate much cash, but they do absorb cash. Their profitability is declining and they
must be divested if possible, or otherwise rapidly harvested.
In addition, this method is based on the product life cycle theory that can be used to
determine what priorities should be given in the product portfolio of a business unit. To
ensure long-term value creation, a company should have a portfolio of products that
contains both high-growth products in need of cash inputs and low-growth products that
generate a lot of cash.
Product Life cycle theory, there are 5 stages categorised by the revenue generates.
Generally product life cycle can be drawn as S-curve which is shown in Figure 17.
Figure 17 Product Life Cycle Curve
In Introduction stage, the market growth is low but can develop for growth stage. This
stage fall in question mark that companies try to find its competitiveness to gain market
share. Next, the market shoots up in the growth stage, a company who gains high market
share will be in a star category but low market share is a dog group. The third stage is
maturity which market growth decreased. Market leader gains profitability and earn more
money as a cash cow group while a small market share turn to be question mark. For this
stage a company should find more opportunities to exit in the next stage, decline stage.
The cash cow company can use its money generated to invest in other potential product or
31
industry in order to be a question mark unit for other industry which is shown in Figure
18.
Figure 18 a relationship between BCG Growth-Share Matrix and Product Life Cycle
2) GE 9 Cell
Even though BCG Growth-Share Matrix help strategist to develop it organization
direction considering performance and environment, it considers market perspective
which market growth may not the only indicator for industry attractiveness as well as
market share is not imply to the organization strengths. In addition, 2 rating level, High
and Low, may not sufficient for creating strategy. As a result, GE 9 Cell is developed to
resolve the above limitations.
GE 9 Cell, or General Electric/ McKinsey Matrix, is a nine cell matrix from 2
dimensions; industry attractiveness and business strength. Strategist can break down these
dimensions in to several factors and rate then as 1 – 9 scores or 3 level as high medium or
low. Then strategist weight the factors impact with the score rated in each dimensions. As
a result a company can see the status of the business unit and suggest the strategy the
business fell in the categories.
32
Growth
Strategy
Stability
Strategy
Retrenchment
Strategy
Figure 19 Corporate Strategy suggested by GE 9 Cell
Industry attractiveness can separate to various factors; 5 forces model and other
external environments can be considered for this perspective. In addition, Business
strength can be divided to other internal factors related to value chain and functional
activities. Calculations for these perspectives is shown in Figure 19 and Figure 20
Figure 20 Industry Attractiveness Evaluation
33
Figure 21 Business Strength Evaluation
From the above rating, the business unit has 4.40 strength score with 7.75 industry attractive score.
As a consequence, it falls in Medium business strength – High market attractiveness. This matrix
suggests a growth strategy by increasing its strengths.
Figure 22 Example of GE 9 Cell Analysis
3.2 Business Level Strategy
Business Level Strategy involves a distinctive positioning that firm established to
competes successfully in a particular market. A company can develop it position by
leveraging its strengths whether it will be differentiation or cost advantage. In addition, it
wants to focus in a particular segment or offers its values to mass market. Therefore,
generic strategies result differentiation, cost leadership, and focus.37
34
Figure 23 Porter's Generic Strategies
(1) Differentiation Strategy38
A differentiation strategy calls for the development of a product or service that offers
unique attributes that are valued by customers and that customers perceive to be better
than or different from the products of the competition. The value added by the uniqueness
of the product may allow the firm to charge a premium price for it. The firm hopes that
the higher price will more than cover the extra costs incurred in offering the unique
product. Because of the product's unique attributes, if suppliers increase their prices the
firm may be able to pass along the costs to its customers who cannot find substitute
products easily. Firms that succeed in a differentiation strategy often have the following
internal strengths:
•
Access to leading scientific research to create innovative products.
•
Highly skilled and creative product development team.
•
Strong sales team with the ability to successfully communicate the perceived
•
Corporate reputation for quality and innovation.
(2) Cost Leadership Strategy39
The firm offers its products at average industry prices to earn a profit higher than the
rivals, or below the average industry prices to gain market share. In the price war, cost
leadership is advantage to gain higher profitability than competitors. Even without price
war, a company will remain profitable in the mature industry which price decline.
35
Some of the ways that firms acquire cost advantages are by improving process
efficiencies, gaining unique access to a large source of lower cost materials, making
optimal outsourcing and vertical integration decisions, or avoiding some costs altogether.
If competing firms are unable to lower their costs by a similar amount, the firm may be
able to sustain a competitive advantage based on cost leadership. Firms that succeed in
cost leadership often have the following internal strengths:
•
Access to the capital required making a significant investment in production
assets; this investment represents a barrier to entry that many firms may not
overcome.
•
Skill in designing products for efficient manufacturing, for example, having a
small component count to shorten the assembly process.
•
High level of expertise in manufacturing process engineering.
•
Efficient distribution channels.
(3) Focus Strategy40
The focus strategy concentrates on a narrow segment and within that segment attempts to
achieve either a cost advantage or differentiation. The premise is that the needs of the
group can be better serviced by focusing entirely on it. A firm using a focus strategy often
enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other
firms from competing directly. In addition, it is able to tailor a broad range of product
development strengths to a relatively narrow market segment that they know very well.
Because of their narrow market focus, firms pursuing a focus strategy have lower
volumes and therefore less bargaining power with their suppliers. However, firms
pursuing a differentiation-focused strategy may be able to pass higher costs on to
customers since close substitute products do not exist.
3.3 Functional Level Strategy
Functional Level Strategy involves business function operations to support corporate and
business strategy. Functional level strategy is about marketing strategy, productions and
operations strategy, human resource management strategy, and financial strategy.
36
Corporation can develop business plan regarding as functional level strategy which each
business functions are synergise and support each others which are shown in Figure 24
Figure 24 Functional Level Strategy
A process to conduct functional strategy should be focus firstly on marketing strategy. A
company should select potential target customer according to its business level strategy.
If a company develop differentiation, it can target on superior customers who have high
ability to pay but cost leadership should be benefit for mass market which customers are
price conscious.
Marketer should consider its target market by using STP Strategy. STP strategy comes
from 3 major activities which are Segmentation, Targeting and Positioning. A company
can separate the market in to different groups divided by demographic and psychographic.
Then it can target a group that need, want and demand for company product or service
values. Finally a company should position itself to make its target customers perceive the
product different among market challengers.
The second activity with regard to marketing function is conducting Marketing Mix
Strategy. Marketer should formulate its product preference which responses target
customer’s behaviour with a reasonable price. Additionally, distribution channel strategy
and communication strategy should be developed to reach them coveragely and
frequently.
37
The next related strategy is Productions and Operations Strategy. Production is a process
to transform input, raw material, to finish product as its outputs while operation consists
of various activities that support organization to do business effectively and efficiently. In
addition, research and development is regarded as operations activity which necessary for
creating innovations. Furthermore, Productivity and Quality is concerned to create
superior productions. A manager should decide the organization activities related to value
chain activities in order to produce the products supporting product characteristic
developed by marketing strategy. Furthermore, a company should prepare a process to
use its supply efficiently in order to minimize waste and expense but maximize the
number of quality finished products.
After develop marketing strategy and productions and operations strategy, a company
should decide about an important resource who responsible for strategic implementation.
Human resource is a key factor that makes all strategy in to action. Therefore, a company
should design organizing process regarding job design, organizational structure, authority
allocation, and coordination and then planning for staffing, training and development,
compensation, and performance appraisal.
Finally, a company should conclude the budget that required for all strategy and also
prepare for funding the investment which can be derived from stockholder or liability.
Strategist should compare the benefit from each source and select an optimal solution. In
addition, manager should consider profitability and liquidity as key criteria for financial
decision which is supported by projected financial statements and feasibility study.
38
Part II: Strategy Implementation
4. Strategy Implementation
Since the organization develops new strategies, it should compare from its current
strategies to its desire strategies and explore differences among them. As a result, it can
implement the strategy by changing the factors that should be transformed.
Transformation requires 3 major activities which are organization alignment, leadership
and motivation, and controlling and evaluation.41
Figure 25 Three primary activities for effective strategic implementation
4.1 Organizational Alignment
In order to implement organisational strategy, organization should align 7 supportive
factors related to the McKinsey 7-S Model. It is a widely discussed framework for
viewing the interrelationship of strategy formulation and implementation. These 7 Factors
are Strategy, Structure, Systems, Style, Staffing, Skills, and Shared Values.
(1) Strategy is the plan of action an organisation designs to transform the firm from
the present position to the new position described by objectives, subject to
constraints of the capabilities or the potential.42
39
(2) Structure should be organised in a specific form to support organisations strategy.
This effect the organization flexibility and decision. If a company has flat
organization, a company can make the organisation more flexible and devolve the
power by empowering the employees and eliminate the middle management
layers.43
(3) Systems or internal process sets a correlation among departments in the
organization structure to support and implement the strategy and run day-to-day
affairs. A process is normally as procedure designed to achieve maximum
effectiveness. Traditionally the organisations have been following a bureaucraticstyle process model where most decisions are taken at the higher management
level. However, modern organisations are simplifying and modernising their
process by innovation and use of new technology to make the decision-making
process faster.44
(4) Style or Cultural style involves the organization’s own distinct culture and
management style. It includes the dominant values, beliefs and norms which
develop over time and become relatively enduring features of the organisational
life. It also entails the way managers interact with the employees and the way they
spend their time. Additionally, Culture remains an important consideration in the
implementation of any strategy in the organisation. Therefore, there have been
extensive efforts in the past couple of decades to change to culture to a more open,
innovative and friendly environment with fewer hierarchies and smaller chain of
command.45
(5) Staffing entails the people who bridge the strategy gap to from the old one to
desire one. Human resource management is emphasis on hiring the best staff,
providing them with rigorous training and mentoring support, and pushing their
staff to limits in achieving professional excellence, and this forms the basis of
these organisations' strategy and competitive advantage over their competitors. It
is also important for the organisation to instil confidence among the employees
about their future in the organisation and future career growth as an incentive for
hard work.46
(6) Skills are considered as distinctive capabilities and competencies of employees
and organization. Firms should find the organization skills that required to achieve
implementing its strategy. 47
40
(7) Shared Values encourage all members of the organisation to share some common
fundamental ideas or guiding concepts around which the business is built. These
values and common goals keep the employees working towards a common
destination as a coherent team and are important to keep the team spirit alive. The
organisations with weak values and common goals often find their employees
following their own personal goals that may be different or even in conflict with
those of the organisation or their fellow colleagues.48
Figure 26 Organizatinal Alignment
Additionally, These 7 factors can be categorised into 2 groups. The first group called as
hard factors which are factual and easy to identify. Strategy, Structure and Systems are in
this group because they can be develop from strategy statements, corporate plans,
organization charts, and other documentation that the executives can change from their
power and authority. While the others 4 factors are the second group which called as soft
factors. They are highly determined by the people at work in the organization and
difficult to describe since they are continuously developing and changing. Organizations
are not able to change these factors radically because they are softly sensitive to people
behaviors and characteristics.
41
4.2 Leadership and Motivation
Leadership and motivation is another factor for executive to transform the organisation to
its desire strategy49. Even though executives can create change form their power, they
should lead subordinate to get along with the organization transformation by using
leadership and motivation.
Leadership is an ability to influence other people to reach organization objectives.50 It
always derived from the executives powers such as Legitimate Power, Reward Power
Coercive Power, Referent Power, Expert Power, and Information Power, etc. 51 they
should adopt their power according to the situation because each power effect subordinate
in different way. For example, Coercive power or power to punish may create resistance
in the organization while referent power and expert power build the organization
commitment. As a result, to implement the organization strategies leadership should be
used according to the acceptable to change of firm people.
Figure 27 Major Source of Leader Power and Likely Subordinate Reactions52
Motivation is ability for executives that should use to support their leadership. It is a
process to encourage people accepts or agrees to reach organization objectives.53 There are
54
2 theories for motivate people; Need Theories and Process Theories .
42
Figure 28 Maslow Hierachy of Needs
Fist approach suggest leader to explore people need and try to satisfy them. If subordinates
satisfy their need, they are easily motivated to achieve the organizational goals. For
example, people concerns fundamental status as physical need in food, warmth, water,
and other bodily needs. Once they meet fundamental needs, they’ll seek more security in
live and their belonging. After that, they’ll find more factors as a step on social needs,
esteem needs, and Self actualization needs.55
Second approach is about a process that executives should explore each person and
motivate according to behaviour. For instance, executives should examine subordinate
readiness with 2 factors; competency and acceptable. If followers are able and will to
achieve the organization strategy, leader can use delegating motivation which requires
low level of both relationship behaviour and task behaviour. On the contrary, executives
should provide specific instructions and closely supervise performance for unready
followers.56
43
Figure 29 Hersey and Blanchard's Situational Leadership
44
Part III: Controlling and Evaluation
5. Controlling and Evaluation
Controlling and Evaluation is the last activity in the strategic management process. It has
correlations with strategic formulation and strategic implementation. In a recent year
controlling and evaluation is an important factor to translate strategy in to action and also
a milestone for strategic implementation as one of the key factors to encourage change as
shown in Figure 25
5.1 The Controlling Process
Figure 30 The Controlling Process57
Since organization has established strategies, it should set performance standards to
measure performance from its implementation. Controller pays attention to compare
differences of the actual performances and their standards. To evaluate, strategist should
explore the reasons of it difference. If the actual result greater or lower than its standards,
firm should consider that the standards are challengeable and attainable. If their target
standards are too high or too low, organization should improve their goals. However, if
their actual performances show operations difficulties, executive should take corrective
action.
45
5.2 Key Performance Indicators
Key Performance Indicators are quantifiable measurements that reflect the critical success
factors of an organization. In order to set the performance standards according to the
controlling process which is shown in Figure 29, a strategist should established KPI to
measure the organization implementation. For one thing, KPI is very helpful at prior stage
of strategic management process; strategy formulation. It firstly is a goal for the
organization to translate it s strategies to measurable factors and then the organization can
use this KPI to evaluate the organization operations and to benchmark with competitors.
Measurement in the traditional orientation usually bases on financial indicators however,
they are out of step with the skills and competencies companies are trying to create in
order to gains competitiveness.58 Beside financial evaluations, nonfinancial measurements
nowadays are valuable because thy support long term performance and also predict future
financial performance. There are 4 systematic perspectives that translate vision and
strategy into key performance indicators; Financial Perspective, Customers perspective,
Internal process perspective, and Learning and growth perspective.59 In addition, these
perspectives enables companies to track financial results while simultaneously monitoring
progress in building the capabilities and acquiring the intangible assets they would need
for future growth which are shown in Figure 30.
Figure 31 Balance Scorecard60
46
1) Financial Perspective
For business organization, it should set KPI to measure the success factors that would be
appear to stakeholders. Actually, stakeholders concern about the return on its finance
investment regarding the increasing of the organization income and the reduction of its
expense. Therefore, there are several KPI regarding profitability such as revenues,
revenue growth, unit cost, cost per revenue, and asset utilisation, etc.61
2) Customer Perspective
Beside financial measurements, firms should realise that its revenue comes from their
customers who willing to pay for the firms values. There are 5 key primary indicators to
measure for this perspective; market share, customer retention, customer acquisition,
customer satisfaction, and customer profitability62.
3) Internal Process Perspective
This perspective considers its operations process to meet customer requirement such as a
quality product and service and also support financial perspective in terms of
productivity 63 . This perspectives can be set according to value chain activities both
primary activity and supporting activity64.
4) Learning and Growth Perspective
This dimension is the most important for organization and also long term growth because
it considers organization capabilities and competencies. There are 3 primary factors to
evaluate;
human
resource
management, information
technology
systems,
and
organizational culture and motivations. Therefore, it established KPI to measure
employee skills, attitude and employee satisfaction, and employee turnover, etc.
Additionally, there are correlations among these perspectives as cause and effect systems.
Figure 31 shows that employees’ morale from learning and growth perspective is a cause
increasing customer satisfaction directly and has indirect impacts on internal process and
also financial process perspective.
47
Figure 32 The Linkage of Four Perspectives
48
Power Point Hand Out
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
References
1
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
2
Porter, Michael E. 1996. What is Strategy? Harvard Business Review. NovemberDecember 1996.
3
Ibid.
4
Suksriwong, Sakorn 2007, Management : From the Executive’s Viewpoint, Bangkok.
5
Porter, Michael E. 1980, Competitive Strategy: Techniques for Analyzing Industries and
Competitors, Free Press, New York.
6
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
7
http://www.starbucks.co.th
8
Thomson, Jr., Arthur A., Stickland III, A.J., and Gamble, John E. 2008, Crafting and
Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases,
16th edition, New York: McGraw-Hill/Irwin.
9
Business Monitor International 2008, Company News Alert – C.P. All Seeks
Vietnamese 7-Eleven Franchise, 30 Jan 2008.
10
Ministry of Planning and Investment, Foreign Investment Agency 2008, Attraction
objectives & Orientations, viewed 5 March 2008.
<http://fia.mpi.gov.vn/Default.aspx?ctl=Article2&TabID=4&mID=52&aID=310>
11
Ibid.
12
Ibid.
13
World Trade Organisation 2006, Working Part on the accession of Vietnam, 27
October, 2006.
14
Ibid.
15
Euromonitor International 2005, Consumer Lifestyles-Vietnam, 10 June 2005.
84
16
Central Intelligence Agency 2008, The World Fact Book-Vietnam, view 1 March
2008. <www.cia.gov>
17
Porter, Michael E. 1998, The Competitive Advantage of Nations, London: Macmilland.
18
Porter, Michael E. 2003, Thailand Competitiveness: Creating the Foundations For
Higher Productivity, Harvard Business School, 4 May 2003.
19
Christian H.M. Ketels. 2003, Thailand Competitiveness: Key Issues in Five Clusters,
Harvard Business School, 4 may 2003.
20
Porter, Michael E. 2008, “The Five Competitive Forces That Shape Strategy”, Harvard
Business Review, January 2008.
21
Porter, Michael E. 1985, How Information Gives You Competitive Advantage, Free
Press, New York.
22
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
23
Ibid.
24
Ibid.
25
Ibid.
26
Ibid.
27
Ansoff, I. 1957, “Strategies for Diversification”, Harvard Business Review, September
– October 1957.
28
Ibid.
29
Raphael Amit and Joshua Livnat 1998, “A Concept of Conglomerate Diversificaion,”
Journal of Management, vol.14.
30
Kotler, P. 2006, Marketing Management, Prentice Hall.
31
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
85
32
Ibid.
33
Ibid.
34
Arthur A. Thompson, Jr., and A.J. Strickland III 1992, Strategic Management:
Concepts and Cases, 6th ed., BPI/Irwin, Homewood,III.
35
Gamble John E. 2007, “adidas: Will Restructuring Its Business Lineup Allow It to
Catch Nike?” University of South Alabama.
36
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
37
Porter, Michael E. 1980, Competitive Strategy: Techniques for Analyzing Industries
and Competitors, Free Press, New York.
38
Ibid.
39
Ibid.
40
Ibid.
41
Suksriwong, Sakorn 2007, “Strategy Change and Implementation: a Framework for
Executives”, Chulalongkorn Review, October – December 2007. (Thai Version)
42
Ansoff, I. 1965, Corporate Strategy, McGraw-Hill, London.
43
Boyle, S. (2007) "Impact of Changes in Organisational Structure on Selected Key
Performance Indicators for Cultural Organisations", International Journal of
Cultural Policy, Vol. 13.
44
Lynch, R. 2005, Corporate Strategy, 4th edition, Prentice Hall, UK.
45
Martins, E. and Terblanche, F. 2003, "Building Organisational Culture that Stimulates
Creativity and Innovation", European Journal of Innovation Management, Vol. 6.
46
Pascale, R. and Athos, A. 1981, The Art of Japanese Management, London: Penguin
Books.
86
47
Suksriwong, Sakorn 2007, “Strategy Change and Implementation: a Framework for
Executives”, Chulalongkorn Review, October – December 2007. (Thai Version)
48
Martins, E. and Terblanche, F. 2003, "Building Organisational Culture that Stimulates
Creativity and Innovation", European Journal of Innovation Management, Vol. 6.
49
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
50
Suksriwong, Sakorn 2007, “Strategy Change and Implementation: a Framework for
Executives”, Chulalongkorn Review, October – December 2007. (Thai Version)
51
Raven, V, 1993, “The Bases of Power: Origins and Recent Development”, Journal of
Social Issues, vol.9.
52
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
53
Suksriwong, Sakorn 2007, “Strategy Change and Implementation: a Framework for
Executives”, Chulalongkorn Review, October – December 2007. (Thai Version)
54
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
55
Maslow, A 1954, Motivation and Personality, Harper & Row, New York.
56
Hersey, P & Blanchard, K 1988, Management of Organizational Behaviour: Utilizing
Human Resources, 5th ed., Prentice-Hall, Englewood Cliffs, New Jersey.
57
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
58
Kaplan, R & Norton, D 1992, “The Balanced Scorecard: Measures That Drive
Performance”, Harvard Business Review, January – February 1992.
59
Kaplan, R & Norton, D 1996, “Using the Balanced Scorecard as a Strategic
Management System”, Harvard Business Review, January – February 1996.
60
Ibid.
61
Kaplan, R & Norton, D 1996, Balance Scorecard, Harvard Business Press.
87
62
Ibid.
63
Ibid.
64
Decharin Pasu 2003, From Strategy to Action with Balanced Scorecard and Key
Performance Indicators, Chulanlongkorn University Printing House: Bangkok.
(Thai Version)