INTERNATIONAL STRATEGIC MANAGEMENT
UNIT-1
International strategic management is a comprehensive and ongoing management planning
process aimed at formulating and implementing strategies that enable a firm to compete
effectively internationally.
Objectives
• Describe the international strategic management process
• Identify and characterize the levels of international strategies
Strategic Planning
The process of developing a particular international strategy is often referred to as strategic
planning.
Fundamental Questions
• What products and/or services does the firm intend to sell?
• Where and how will it make those products or services?
• Where and how will it sell them?
• Where and how will it acquire the necessary resources?
• How does it expect to outperform its competitors?
Factors Affecting International Strategic Management
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Language
Culture
Politics
Economy
Governmental interference
Labor
Labor relations
Financing
Market research
Advertising
Money
Transportation/ communication
Control
Contracts
Developing International Strategies
 Strategy formulation
 Strategy implementation
Characteristics of International strategic management
They are:
1. Uncertain :Strategic management deals with future-oriented non-routine situation.They
create uncertainly.Managers are unaware about the consequences of their decisions.
2. Complex :Uncertainly brings complexity for strategic management.Managers face
environment which is difficult to comprehend.External and internal environment is
analysed.
3. Organization wide :Strategic management has organization wide implication.It is not
operation specific.It is a systems approach.It involves strategic choice.
4. Fundamental :Strategic management is fundamental for improving the long-term
performance of the organization.
5. Long-term implication :Strategic management is not concerned with day-to-day
operation.It has long-term implications.It deal with vision,mission and objective.
6. Implication :Strategic management ensure that strategic is put into action,implementation
is done through action plans.
Difference Between International & Domestic Business Strategic Planning
A strategic business plan is a step-by-step document that a business writes in order to ensure
operational success. Depending on the type of business these plans will differ dramatically.
Including international or global considerations in a strategic business plan is a major element
that impacts all dimensions of the plan. A basic strategic business plan involves a vision for the
company entailing a mission statement, a well-thought-out financial plan, human resources
strategies and a situational analysis.
Mission Statement
The mission statement is a short two to three sentences that clearly explains the company’s goals,
products and mission. In a domestic market this statement can be more specific, focusing on the
problems and/or concerns of the local populations. When a company is operating internationally
this statement must take into consideration the values, beliefs and concerns of all international
populations that the company operates within or must be regionalized.
Financial Planning
When creating a financial plan in a domestic market one must consider the cost of operations,
cost of new facilities and the profit margin within the area of operations. This is all expanded in
an international market. Cost of operations, facilities and profit margins must still be considered,
however, there is now the added concern of foreign currency. The exchange rates from U.S.
dollars to any other foreign currency changes every day; some countries have such a high
exchange rate that it would be uneconomical to consider doing business there. This introduces a
margin of risk that is not present within a domestic market.
Human Resource Strategies
HR strategies include management strategies, employee recruitment and legal issues.
Domestically one organizational structure can be set up and followed by all future locations in
the same manner. This makes it easier for HR to examine performance and potential risk factors
within the company. In an international setting foreign outsourcing becomes HR’s major
concern, managing many different organizational management structures and diverse employee
recruitment. Legal issues become more complex because laws in each country are different. Not
only must the company follow all laws in their home country, HR must make sure all laws in all
foreign countries of operation are being followed.
Situational Analysis
A situational analysis is a company’s look at the current market, strengths and weaknesses. A
common way that companies do this is with a SWOT analysis, determining strengths,
weaknesses, opportunities and threats. Domestic companies only have to do this for one national
market whereas multinational companies must look at each national market as an individual unit,
as well as the company in its entirety. In international companies, weaknesses, strengths,
opportunities and threats must be considered for each country separately. In an international
business plan each country is analyzed and added into the company’s plan as a whole.
Additional Considerations
In addition to analyzing company traits, marketing and advertising strategies change dramatically
in an each nation's setting. Companies must consider different cultures that hold different values
and concerns about their daily life. Other languages and correct translations must also be
considered. For example, translating the meaning and not just the words is a major concern in
international advertisements. Beyond the primary differences in strategic planning for
multinational companies versus domestic firms, matters such as intellectual property protection,
required legal structures, property ownership risk, political risks and nationalization risks must
be assessed.
UNIT-2
CORPORATE STRATEGY
Definition
The overall scope and direction of a corporation and the way in which its various business
operations work together to achieve particular goals.
Corporate strategy is about enabling an organization to achieve and sustain superior performance
by overcoming business challenges, understanding industry trends and linking tangible actions to
a clear corporation vision. Whether it’s pursuing growth, delivering innovation, driving
efficiencies or improving profitability, companies need strategies they can implement and deliver
to drive successful outcomes.
Our corporate strategy advisors help companies in all industries make the right decisions to allow
them to take advantage of opportunities while minimizing risks. Combining world-class industry
research with decades of hands-on experience, we help you:
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Build targeted customer, growth and channel strategies
Define a corporate vision linked to tangible actions and goals
Improve operational performance
Engage in strategic performance measurement and management
Conduct market, competitive and industry analysis
Design organizational structures and allocate resources
Deloitte has acquired Monitor — one of the world’s leading strategy consulting firms. Monitor
Deloitte will assist their clients as they address their most critical and complex opportunities and
challenges in a dynamic global economy.
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thought leadership and top-notch talent
access to a global network
from strategy development to execution
Creating a Mission Statement, Setting Goals and Developing Strategies
A mission statement is a guiding light for a business and the individuals who run the business. It
is usually made up of three parts:
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Vision - big picture idea of what you want to achieve.
Mission - general statement of how you will achieve your vision.
Core Values - how you will behave during the process.
Each of these three elements is an important aspect of the businesses guiding light.
Once you have developed your mission statement, the next step is to create the following items:
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Goals - general statements of mileposts you need to meet to achieve your vision.
Objectives - specific, time-sensitive statements for achieving your goals
Strategies/Action Plans - specific implementation plans of how you will achieve your
objectives and goals.
Mission Statement Elements
Below are definitions of the three mission statement elements. An example of the statements for
a value-added business is included for clarification. Ag Ventures Alliance (AgVA) is a company
that starts value-added businesses. Because of its unique nature, it is important that AgVA create
a meaningful mission statement to convey its purpose to it leaders, staff and members.
Vision - A vision statement is a mental picture of what you want to accomplish or achieve. For
example, you may want to develop a profitable winery or a successful organic dairy business.
AgVA’s Vision- A vibrant rural economy driven
by value-added agriculture.
The vision statement should be concise and easy to remember. Because it is easy to remember, it
is easy for everyone in the organization to focus on the vision. When people focus on the vision,
their daily activities are automatically directed towards achieving the vision.
Mission - A statement of mission is a general statement of how you will achieve your vision.
There is a very close relationship between the vision and mission. The mission is an action
statement that usually begins with the word “to”. Once again it is a very simple and direct
statement that is easy to understand and remember.
AgVA’s Mission - To create and facilitate the
development of value-added agricultural businesses.
AgVA’s mission defines how it will achieve its vision. It will create a vibrant rural economy by
creating and facilitating the development of value-added agricultural businesses. There is a very
close relationship between the two elements. The vision and mission describe what will be
achieved and how it will be achieved.
Core Values - Core values define the business in terms of the principles and values that the
business leaders will follow. They provide the bounds or limits of how the business leaders will
conduct their activities while carrying out the vision and mission.
AgVA’s Core Values:
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Provide economically sound business opportunities for our members.
Practice high ethical business standards.
Respect and protect the environment.
Produce high quality products that are safe for consumers.
Meet the changing needs and desires of consumers.
The core values tell a lot about the the leaders of AgVA and how they will conduct their business
activities and relationships.
Characteristics of Good Mission Statements
Statements
To create a successful mission statement, you should keep the following concepts in mind.
Simple - Your mission statement should be simple. However, creating the statement is usually
not easy. It may require several drafts. The statement needs to capture the very essence of what
your business or organization will achieve and how you will achieve it.
The statement should be short and concise. The fewer words the better. Use just enough words to
capture the essence. Most mission statements are too long. People tend to want to add additional
information and qualifications to the statement. Usually these statements just confuse the reader
and cloud the real meaning of your statement. Each successive draft of your statements should be
to simplify and clarify by using as few words as possible.
Your statements of vision and mission should be a single thought that can easily be carried in the
mind. To test the effectiveness of a mission statement in a business, ask its leaders, managers and
employees to tell you the vision and mission of their business. If they cannot instantaneously tell
you both, their mission statement is of little use. The vision and mission guide the everyday
activities of every person involved in the business. To be effective, your statements need to short
and simple, capturing the essence of what you want to accomplish.
Fluid Process - People agonize over writing mission statements. Granted, it is usually not a
simple or easy process. However, the statements are not “cast in stone”. They can be updated and
modified later. It is often best to do the best job of writing it as you can, use the statement for a
period of time, and then revisit it a few months or a year later. It is often easy to sharpen the
statement at that time. Remember, the reason you are writing the statement is to clarify what you
are doing.
Unique Businesses - It is usually more important to write mission statements for unique or nontraditional businesses where the purpose of the business is not generally known. Mission
statements are important for these businesses so that everyone involved in the business
understands what the business will accomplish and how it will be accomplished. In essence this
means “keeping everyone on the same page” so they are all “pulling in the same direction”.
The Role of Goals and Objectives
Once you have developed your vision, mission and core values, you can then develop the goals
and objectives needed to achieve your vision.
Goals - Goals are general statements of what you want to achieve. So they need to be integrated
with your vision. They also need to be integrated with your mission of how you are going to
achieve your vision. Examples of company goals are:
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To improve profitability
To increase efficiency
To capture a bigger market share
To provide better customer service
To improve employee training
To reduce carbon emissions
A goal should meet the following criteria:
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Suitable: Does it fit with the vision and mission?
Acceptable: Does it fit with the values of the company and the employees? •
Understandable: Is it stated simply and easy to understand?
Flexible: Can it be adapted and changed as needed?
Make sure the goals are focused on the important properties of the business. Be careful not to set
too many goals. You run the risk of losing focus. Also, design your goals so that they don’t
contradict and interfere with each other.
Objectives - Objectives are specific, quantifiable, time-sensitive statements of what is going to
be achieved and when it will be achieved. They are milestones along the path of achieving your
goals. Examples of company objectives are:
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To earn at least a 20 percent after-tax rate of return on our net investment during the next
fiscal year
To increase market share by 10 percent over the next three years.
To lower operating costs by 15 percent over the next two years by improving the
efficiency of the manufacturing process.
To reduce the call-back time of customers inquiries and questions to no more than four
hours.
Objectives should meet the following criteria:
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Measurable: What will happen and when?
Suitable: Does it fit as a measurement for achieving the goal?
Feasible: Is it possible to achieve?
Commitment: Are people committed to achieving the objective?
Ownership: Are the people responsible for achieving the objective included in the
objective-setting process?
Types of Goals and Objectives
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Most business goals fall into one of four categories. A variety of objectives can be
constructed to meet the goal in each category. Examples are given below. Each of the
objectives should be described with a quantifiable outcome to be achieved by a
predetermined deadline.
The Role of Strategies and Action Plans
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Strategies are statements of how you are going to achieve something. In a sense, a
strategy is how you will use your mission to achieve your vision. A strategy is a series of
actions or activities designed to achieve the goal. Goals and objectives provide
milestones for measuring the success of the strategy in achieving the vision.
Action plans (tactics) are statements of specific actions or activities used to achieve an
objective. You need to identify specific individuals who have the responsibility for
implementing the action plans.
Porter's Five Forces Model: analysing industry structure
Porter identified five factors that act together to determine the nature of competition within an
industry. These are the:
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Threat of new entrants to a market
Bargaining power of suppliers
Bargaining power of customers (“buyers”)
Threat of substitute products
Degree of competitive rivalry
He identified that high or low industry profits (e.g. soft drinks v airlines) are associated with the
following characteristics:
Let’s look at each one of the five forces in a little more detail to explain how they work.
Threat of new entrants to an industry
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If new entrants move into an industry they will gain market share & rivalry will intensify
The position of existing firms is stronger if there are barriers to entering the market
If barriers to entry are low then the threat of new entrants will be high, and vice versa
Barriers to entry are, therefore, very important in determining the threat of new entrants. An
industry can have one or more barriers. The following are common examples of successful
barriers:
Barrier
Notes
Investment cost
High cost will deter entry High capital requirements might mean
that only large businesses can compete
Economies of scale
available to existing firms
Lower unit costs make it difficult for smaller newcomers to break
into the market and compete effectively
Regulatory and legal
restrictions
Each restriction can act as a barrier to entry E.g. patents provide
the patent holder with protection, at least in the short run
Product differentiation
(including branding)
Existing products with strong USPs and/or brand increase
customer loyalty and make it difficult for newcomers to gain
market share
Access to suppliers and
distribution channels
A lack of access will make it difficult for newcomers to enter the
market
Retaliation by established
products
E.g. the threat of price war will act to discourage new entrants
But note that competition law outlaws actions like predatory
pricing
What makes an industry easy or difficult to enter? The following table helps summarise the
issues you should consider:
Easy to Enter
Difficult to Enter
Common technology Access to distribution
channels Low capital requirements No need to
have high capacity and output Absence of
strong brands and customer loyalty
Patented or proprietary know-how Wellestablished brands Restricted distribution
channels High capital requirements Need to
achieve economies of scale for acceptable unit
costs
Bargaining power of suppliers
If a firm’s suppliers have bargaining power they will:
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Exercise that power
Sell their products at a higher price
Squeeze industry profits
If the supplier forces up the price paid for inputs, profits will be reduced. It follows that the more
powerful the customer (buyer), the lower the price that can be achieved by buying from them.
Suppliers find themselves in a powerful position when:
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There are only a few large suppliers
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The resource they supply is scarce
The cost of switching to an alternative supplier is high
The product is easy to distinguish and loyal customers are reluctant to switch
The supplier can threaten to integrate vertically
The customer is small and unimportant
There are no or few substitute resources available
Just how much power the supplier has is determined by factors such as:
Factor
Note
Uniqueness of the input
supplied
If the resource is essential to the buying firm and no close
substitutes are available, suppliers are in a powerful position
Number and size of firms
supplying the resources
A few large suppliers can exert more power over market prices
that many smaller suppliers each with a small market share
Competition for the input
from other industries
If there is great competition, the supplier will be in a stronger
position
Cost of switching to
alternative sources
A business may be “locked in” to using inputs from particular
suppliers – e.g. if certain components or raw materials are
designed into their production processes. To change the
supplier may mean changing a significant part of production
Bargaining power of customers
Powerful customers are able to exert pressure to drive down prices, or increase the required
quality for the same price, and therefore reduce profits in an industry.
A great example in the UK currently is the dominant grocery supermarkets which are able exert
great power over supply firms. Several factors determine the bargaining power of customers,
including:
Factor
Note
Number of customers
The smaller the number of customers, the greater their power
Their size of their orders
The larger the volume, the greater the bargaining power of
customers
Number of firms supplying
the product
The smaller the number of alternative suppliers, the less
opportunity customers have for shopping around
The threat of integrating
backwards
If customers pose a threat of integrating backwards they will
enjoy increased power
The cost of switching
Customers that are tied into using a supplier’s products (e.g.
key components) are less likely to switch because there would
be costs involved
Customers tend to enjoy strong bargaining power when:
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There are only a few of them
The customer purchases a significant proportion of output of an industry
They possess a credible backward integration threat – that is they threaten to buy the
producing firm or its rivals
They can choose from a wide range of supply firms
They find it easy and inexpensive to switch to alternative suppliers
INTERNAL APPRAISAL OF THE FIRM
Three parts of internal appraisal
1. Assessment of strength & weakness
2. Appraisal of the status/health
3. Identify & asses competitive advantages & core competence
Purpose, role and importance
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Stands in capabilities and strength & weakness
Opportunity to be tapped in line with its capability
Match the Objective in line with its capability
Asses the capability gap
Select the specific lines in which it can grow
1.Assessing strength & weakness
 S-W appraisal : (Tata IBM limited)
 Strengths
-excellent workstations
-high brand equity
-IBM itself largest buyers of software
 Weaknesses
-late entry into the market
-limit marketing reach
-omission of IBM name in the company name
 S-W appraisal :AT&T
 Strength
-manufacturing facility
-strong financial muscle
-top-class research facilities
 Weaknesses
-slow in decision-making
-minor player in home market
-slow in recognizing Asian boom
-top management only have North Americans
Competitive Advantage
Competitive advantage occurs when an organization acquires or develops an attribute or
combination of attributes that allows it to outperform its competitors. These attributes can
include access to natural resources, such as high grade ores or inexpensive power, or access to
highly trained and skilled personnel human resources. New technologies such as robotics and
information technology can provide competitive advantage, whether as a part of the product
itself, as an advantage to the making of the product, or as a competitive aid in the business
process (for example, better identification and understanding of customers).
Competitive Strategies/advantages
Cost Leadership Strategy
The goal of Cost Leadership Strategy is to offer products or services at the lowest cost in the
industry. The challenge of this strategy is to earn a suitable profit for the company, rather than
operating at a loss and draining profitability from all market players. Companies such as
Walmart succeed with this strategy by featuring low prices on key items on which customers are
price-aware, while selling other merchandise at less aggressive discounts. Products are to be
created at the lowest cost in the industry. An example is to use space in stores for sales and not
for storing excess product.
Differentiation Strategy
The goal of Differentiation Strategy is to provide a variety of products, services, or features to
consumers that competitors are not yet offering or are unable to offer. This gives a direct
advantage to the company which is able to provide a unique product or service that none of its
competitors is able to offer. An example is Dell which launched mass-customizations on
computers to fit consumers' needs. This allows the company to make its first product to be the
star of its sales.
Innovation Strategy
The goal of Innovation Strategy is to leapfrog other market players by the introduction of
completely new or notably better products or services. This strategy is typical of technology
start-up companies which often intend to "disrupt" the existing marketplace, obsoleting the
current market entries with a breakthrough product offering. It is harder for more established
companies to pursue this strategy because their product offering has achieved market acceptance.
Apple has been a notable example of using this strategy with its introduction of iPod personal
music players, and iPad tablets. Many companies invest heavily in their research and
development department to achieve such statuses with their innovations.
Operational Effectiveness Strategy
The goal of Operational Effectiveness as a strategy is to perform internal business activities
better than competitors, making the company easier or more pleasurable to do business with than
other market choices. It improves the characteristics of the company while lowering the time it
takes to get the products on the market with a great start.
Core competency
A core competency is a concept in management theory introduced by, C. K. Prahalad, Julian
Kriviak and Gary Hamel. It can be defined as "a harmonized combination of multiple resources
and skills that distinguish a firm in the marketplace".
Core competencies fulfill three criteria.
1. Provides potential access to a wide variety of markets.
2. Should make a significant contribution to the perceived customer benefits of the end
product.
3. Difficult to imitate by competitors.
Canon's core competencies from the original paper are precision mechanics, fine optics, and
micro-electronics. All products in Canon's product portfolio are based on at least one of these
core competencies.
Core Competence
A core competency results from a specific set of skills or production techniques that deliver
additional value to the customer. These enable an organization to access a wide variety of
markets.
In an article from 1990 titled "The Core Competence of the Corporation", Prahalad and Hamel
illustrate that core competencies lead to the development of core products which further can be
used to build many products for end users. Core competencies are developed through the process
of continuous improvements over the period of time rather than a single large change. To
succeed in an emerging global market, it is more important and required to build core
competencies rather than vertical integration. NEC utilized its portfolio of core competencies to
dominate the semiconductor, telecommunications and consumer electronics market. It is
important to identify core competencies because it is difficult to retain those competencies in a
price war and cost-cutting environment. The author used the example of how to integrate core
competences using strategic architecture in view of changing market requirements and evolving
technologies. Management must realize that stakeholders to core competences are an asset which
can be utilized to integrate and build the competencies.Competence building is an outcome of
strategic architecture which must be enforced by top management in order to exploit its full
capacity.
Core competencies and product development
Core competencies are related to a firm's product portfolio via core products. Core products
contribute "to the competitiveness of a wide range of end products. They are the physical
embodiment of core competencies." Approaches for identifying product portfolios with respect
to core competencies and vice versa have been developed in recent years. One approach for
identifying core compencies with respect to a product portfolio has been proposed by Danilovic
& Leisner (2007). They use design structure matrices for mapping competencies to specific
products in the product portfolio. Using their approach, clusters of competencies can be
aggregated to core competencies. Bonjour & Micaelli (2010) introduced a similar method for
assessing how far a company has achieved its development of core competencies. More recently
Hein et al. link core competencies to Christensen's concept of capabilities, which is defined as
resources, processes, and priorities. Furthermore, they present a method to evaluate different
product architectures with respect to their contribution to the development of core competencies.
Internal Analysis
 Strategic analysis of any Business enterprise involves two stages: Internal and External
analysis.
 Internal analysis is the systematic evaluation of the key internal features of an
organization.
 External analysis will be discussed later.
Four broad areas need to be considered for internal analysis
 The organization’s resources, capabilities
 The way in which the organization configures and co-ordinates its key value-adding
activities
 The structure of the organization and the characteristics of its culture
 The performance of the organization as measured by the strength of its products.
Turnaround management
Turnaround management is a process dedicated to corporate renewal. It uses analysis and planning to
save troubled companies and returns them to solvency. Turnaround management involves management
review, activity based costing, root failure causes analysis, and SWOT analysis to determine why the
company is failing. Once analysis is completed, a long term strategic plan and restructuring plan are
created. These plans may or may not involve a bankruptcy filing. Once approved, turnaround
professionals begin to implement the plan, continually reviewing its progress and make changes to the
plan as needed to ensure the company returns to solvency.
Turnaround Managers
Turnaround Managers are also called Turnaround Practitioners in the UK, and often are interim
managers who only stay as long as it takes to achieve the turnaround. Assignments can take anything
from 3 to 24 months depending on the size of the organization and the complexity of the job.
Turnaround management does not only apply to distressed companies, it in fact can help in any
situation where direction, strategy or a general change of the ways of working needs to be
implemented. Therefore turnaround management is closely related to change management,
transformation management and post-merger-integration management. High growth situation for
example are one typical scenario where turnaround experts also help. More and more turnaround
managers are becoming a one-stop-shop and provide help with corporate funding (working closely with
banks and the Private Equity community) and with professional services firms (such as lawyers and
insolvency practitioners) to have access to a full range of services that are typically needed in a
turnaround process. Most turnaround managers are freelancers and work on day rates, but there are a
few very high profile individuals who work for very large corporations on an employed basis and usually
get 5 year contracts.
Stages
Stages in repositioning of an organization
1. The evaluation and assessment stage
2. The acute needs stage
3. The restructuring stage
4. The stabilization stage
5. The revitalization stage
The first stage is delineated as onset of decline (1). Factors that cause this circumstance are new
innovations by competitors or a downturn in demand, which leads to a loss of market share and
revenue. But also stable companies may find themselves in this stage, because of
maladministration or the production of goods that are not interesting for customers. In public
organisations are external shocks, like political or economical, reasons that could cause a
destabilization of a performance.
Sometimes an onset of decline can be temporary and through a corrective action and recovery
(2) been fixed.
The reposition situation (3) is the point in the process, where the minimally accepted
performance is long-lasting below its limits. In empirical studies a performance of turnaround is
measured through financial success indicators. These measures ignore other performance
indicators such as impact on environment, welfare of staff, and corporate social responsibility.
The organizational leaders need to decide, if a strategy change should happen or the current
strategy be kept, which could lead on the other hand to a company takeover or an insolvency. In
the public sector performances are characterized by multiple aims that are political contested and
constructed. Nevertheless, are different criteria of performances used by different stakeholders
and even if its use results in the same criteria, it is likely that different weights apply to them. So
if a public organization is situated in a turnaround situation, it is subject to the dimensions of a
performance (e.g. equity, efficiency, effectiveness) as well as its approach of their relative
importance. This political point of view suggests that a miscarriage in a public service may
happen when key stakeholders are ongoing dissatisfied by a performance and therefore the
existence of an organisation might be unclear. In the public sector success and failure is judged
by the higher bodies that bestow financial, legal, or other different resources on service
providers.
If decision maker choose to take a new course, because of the realization that actions are
required to prevent an ongoing decline, they need at first to search for new strategies (4).
Question that need to be asked here are, if the search for a reposition strategy should be
participative and decentralized or secretive and centralized or intuitive and incremental or
analytic and rational. Here, the selection must be made quickly, since a second turnaround may
not be possible after a new or existing poor performance. This means, that a compressed strategy
process is necessary and therefore an extensive participation and analysis may be precluded. The
same applies to the public sector, because the public authorities are highly visible and politically
under pressure to rapidly implement a recovery plan.
Is the fifth stage reached, the selection of a new strategy (5a) has been made by the company.
Especially researcher typically concentrates on this one of the reposition process. Most of them
focus on the structure and its impact on the performance of the strategy that was implemented. It
is even stated by the scientist, that a commercial success is again possible after a failing of the
company. But different risk-averse groups, like suppliers, customers or staff may be against a
change or are sceptical about the implementation of the strategy. These circumstances could
result in a blockade of the realization. Also the conclusion is conceivable, that no escape
strategy is found (5b), as a result that some targets can’t be achieved. In the public sector it is
difficult to find a recoverable strategy, which therefore could lead to a permanent failure. The
case may also be, that though a recovery plan is technically feasible, it might not be political
executable.
The implication of the new strategy (6) ensues in the following sixth stage. It is a necessary
determinant of organizational success and has to be a fundamental element of a valid turnaround
model. Nevertheless, it is important to note, that no empirical study sets a certain turnaround
strategy.
The outcomes of the turnaround strategies can result in three different ways. First of all a
terminal decline (7a) may occur. This is possible for situations, where a bad strategy was
chosen or a good strategy might have been implemented poorly. Another conceivable outcome is
a continued failure (7b). Here is the restructuring plan failed, but dominant members within the
company and the environment still believe that a repositioning is possible. If that’s the case, they
need to restart at stage four and look for a new strategy. Does an outcome of the new strategy
turns out to be good, a turnaround (7c) is called successful.
Unit 3
PORTFOLIO ANALYSIS
In financial terms, ‘portfolio analysis’ is a study of the performance of specific portfolios under
different circumstances. It includes the efforts made to achieve the best trade-off between risk
tolerance and returns. The analysis of a portfolio can be conducted either by a professional or an
individual investor who may utilizes specialized software.
Portfolio Analysis: Advanced topics in performance measurement, risk and attribution
(Risk Books, 2006. ISBN 1-904339-82-4) is an industry text written by a comprehensive
selection of industry experts and edited by Timothy P. Ryan. It includes chapters from
practitioners and industry authors who investigate topics under the wide umbrella of performance
measurement, attribution and risk management, drawing on their own experience of the fields.
The book also boasts a first in its area in that it brings together previously separated topics and
practitioners or ex-post performance measurement and ex-ante performance risk measurement. It
is also the first book to explain the role of the Transition Manager.
The book includes coverage and discussion of performance measurement, performance
evaluation, portfolio risk, performance attribution, Value-at-Risk (VaR), managing tracking error
and GIPS verification.
It is also said to cover the following developing areas of the marketplace:
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Alternative assets
Hedge funds
Commodity futures
Life-cycle funds
Book income-orientated investments
Transition management
Portfolio Analysis Tools
Several specialized portfolio analysis softwares are available in the market to ease the task for an
investor. These application tools can analyze and predict future trends for almost every
investment asset. They provide essential data for decision making on the allocation of assets,
calculation of risks and attainment of investment objectives.
Process of strategic choice:
Focusing on strategic alternatives: It involves identification of all alternatives. The strategist
examines what the organization wants to achieve (desired performance) and what it has really
achieved (actual performance). The gap between the two positions constitutes the background for
various alternatives and diagnosis. This is gap analysis. The gap between what is desired and
what is achieved widens as the time passes if no strategy is adopted.
Evaluating strategic alternatives: The next step is to assess the pros and cons of various
alternatives and their suitability. The tools which may be used are portfolio analysis, GE business
screen and corporate Parenting. [Describe each of these]
Considering decision factors:
(i) Objective factors:¨
Environmental factors
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Volatility of environment
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Input supply from environment
-
Powerful stakeholders
¨
Organizational factors
-
Organization’s mission
-
Strategic intent
-
Business definition
-
Strengths and weaknesses
(ii) Subjective factors:- Strategies adopted in the previous period;
- Personal preferences of decision- makers;
- Management’s attitude toward risk;
- Pressure from stakeholders;
- Pressure from corporate culture; and
- Needs and desires of key managers.
Constructing Corporate scenario: Corporate scenario consists of proforma balance sheets and
income statement which forecasts the strategic alternative’s impact on various divisions.
First: 3 sets of estimated figures for optimistic, pessimistic and most likely conditions are
manipulated for all economic factors and key external strategic factors.
Second: Common size financial statements with projections are drawn.
Third: Based on historical data from previous years balance sheet projection for next 5 years for
Optimistic (O), Pessimistic (P), and Most likely (M) are developed.
Corporate scenario is constructed for every strategic alternative considering both environmental
factors and market conditions. It provides sufficient information for a strategist to make final
decision.
Process of Strategic Choice:
Two techniques are used in the process of selection of a strategy, namely:
(i)
Devil’s Advocate – in strategic decision- making is responsible for identifying potential
pitfalls and problems in a proposed strategic alternative by making a formal presentation.
(ii)
Dialectical inquiry – involves making two proposals with contrasting assumptions for
each strategic alternative. The merits and demerits of the proposal will be argued by advocates
before the key decision-makers. Finally one alternative will emerge viable for implementation.
FOCUSING IN STRATEGIC ALTERNATIVES
There is no one way to market your products -- each business is unique and should have its own
unique strategy. There are, however, four generic strategies that a business can use to create a
general outline of its marketing strategy. When marketing a product you can target the broad
market or a niche, and you can compete on the basis of price or differentiation.
Cost Leadership
The cost leadership strategy is a high volume, low margin strategy. Cost leaders offer lower
prices than their competitors in order to gain a large share of the market. Although profit margins
may be small for companies using this strategy, a large volume can allow for significant profits.
Because this strategy requires a large volume, it is better suited to large, multinational companies
than to small businesses.
Differentiation
The differentiation strategy involves creating unique products that are different from any other
offerings. When a company develops a unique product that consumers want, it is able to charge a
premium price for it. This means that companies who use the differentiation strategy generally
sell products at a higher price. In order to develop differentiated offerings a company needs to
invest heavily in research and development. The associated costs of research can make the
strategy difficult for a small business.
Cost Focus
Like the cost leadership strategy, the cost focus strategy aims to offer products to consumers at
low prices. But unlike the cost leadership strategy, which aims at the entire market, the cost
focus strategy focuses on a limited niche. For instance, a business might manufacture scissors
designed for left-handed people. The company might not have the lowest prices for scissors, but
it could still be a cost leader in the left-handed niche. Because the cost focus strategy caters to a
smaller niche, it is ideally suited to small businesses with limited resources.
Differentiation Focus
The differentiation focus strategy is like the differentiation strategy, but like the cost focus
strategy it focuses on a specific niche rather than the market as a whole. Instead of creating
unique new products that appeal to everyone, the company designs its offerings for a narrow
group. By focusing on a narrow group, the company faces less competition than if it was
developing products for the general public.
Gap analyisis
In the management literature, gap analysis is the comparison of actual performance with
potential performance. If a company or organization does not make the best use of current
resources, or forgoes investment in capital or technology, it may produce or perform below its
potential. This concept is similar to an economy's being below the production possibilities
frontier.
Gap analysis identifies gaps between the optimized allocation and integration of the inputs
(resources), and the current allocation level. This reveals areas that can be improved. Gap
analysis involves determining, documenting, and approving the difference between business
requirements and current capabilities. Gap analysis naturally flows from benchmarking and other
assessments. Once the general expectation of performance in the industry is understood, it is
possible to compare that expectation with the company's current level of performance. This
comparison becomes the gap analysis. Such analysis can be performed at the strategic or
operational level of an organization.
Gap analysis is a formal study of what a business is doing currently and where it wants to go in
the future. It can be conducted, in different perspectives, as follows:
1.
2.
3.
4.
Organization (e.g., Human Resources)
Business direction
Business processes
Information technology
Gap analysis provides a foundation for measuring investment of time, money and human
resources required to achieve a particular outcome (e.g. to turn the salary payment process from
paper-based to paperless with the use of a system). Note that 'GAP analysis' has also been used
as a means of classifying how well a product or solution meets a targeted need or set of
requirements. In this case, 'GAP' can be used as a ranking of 'Good', 'Average' or 'Poor'. This
terminology does appear in the PRINCE2 project management publication from the OGC (Office
of Government Commerce).
The need for new products or additions to existing lines may emerge from portfolio analysis, in
particular from the use of the Boston Consulting Group Growth-share matrix—or the need may
emerge from the regular process of following trends in the requirements of consumers. At some
point, a gap emerges between what existing products offer and what the consumer demands. The
organization must fill that gap to survive and grow.
Gap analysis can identify gaps in the market. Thus, comparing forecast profits to desired profits
reveals the planning gap. This represents a goal for new activities in general, and new products
in particular. The planning gap can be divided into three main elements
The gap analysis also can be used to analyze gaps in processes and the gap between the existing
outcome and the desired outcome. This step process can be summarized as below:
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Identify the existing process for example fishing by using fishing rod
Identify the existing outcome for example we can manage to get 20 fish per day
Identify the desired outcome for example we want to get 100 fish per day
Identify the process to achieve the desired outcome,we therefore use an alternative
method for example by using an appropriate fishing net
Identify Gap, Document the gap,which is a quantity of 80 fish
Develop the means to fill the gap,which is by using a fishing net
Develop and prioritize Requirements to bridge the gap
Gap analysis can also be used to compare existing processes to processes performed elsewhere,
such as those obtained by benchmarking. In this usage, you compare each process side-by-side
and step-by-step and note the differences. Then analyze each difference carefully to determine if
there is any benefit obtained by incorporating the other process or portions of the other process.
This analysis must be done carefully and objectively to realize any potential gains. Sometimes
the gap analysis will reveal that the two processes can be combined to create a new one that is
superior to either original.
Selection factors
Admission to Harvard Medical School is very selective. We seek students of integrity and
maturity who have concern for others, leadership potential and an aptitude for working with
people.
The Committee on Admissions evaluates applications based on several factors, including:
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Academic Records
Applicant's essay
Medical College Admission Test scores
Extracurricular activities
Summer Occupations
Life experiences
Experience in the health field, including research or community work
Letters of evaluation
Accepted applicants must successfully complete all courses and programs in progress as
indicated at the time of application, including course requirements for admission, at a standard
comparable in quality with past academic performance.
HMS complies with Federal and State Law prohibiting discrimination against any applicant or
enrolled student on the basis of race, color, religion, sex, sexual preference, age, or handicap.
Applicants with disabilities will be evaluated on a case by case basis in accordance with
technical standard guidelines as suggested by the Association of American Medical Colleges. All
students must possess the physical and emotional capabilities required to independently
undertake the full curriculum and to achieve the levels of competence required by the faculty.
You may wish to review our technical standards in detail.
Corporate portfolio strategy
The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of
the Boston Consulting Group in the early 1970's. It is based on the observation that a
company's business units can be classified into four categories based on combinations of market
growth and market share relative to the largest competitor, hence the name "growth-share".
Market growth serves as a proxy for industry attractiveness, and relative market share serves as a
proxy for competitive advantage. The growth-share matrix thus maps the business unit positions
within these two important determinants of profitability.
BCG Growth-Share Matrix
This framework assumes that an increase in relative market share will result in an increase in the
generation of cash. This assumption often is true because of the experience curve; increased
relative market share implies that the firm is moving forward on the experience curve relative to
its competitors, thus developing a cost advantage. A second assumption is that a growing market
requires investment in assets to increase capacity and therefore results in the consumption of
cash. Thus the position of a business on the growth-share matrix provides an indication of its
cash generation and its cash consumption.
Henderson reasoned that the cash required by rapidly growing business units could be obtained
from the firm's other business units that were at a more mature stage and generating significant
cash. By investing to become the market share leader in a rapidly growing market, the business
unit could move along the experience curve and develop a cost advantage. From this reasoning,
the BCG Growth-Share Matrix was born.
The four categories are:
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Dogs - Dogs have low market share and a low growth rate and thus neither generate nor
consume a large amount of cash. However, dogs are cash traps because of the money tied
up in a business that has little potential. Such businesses are candidates for divestiture.
Question marks - Question marks are growing rapidly and thus consume large amounts
of cash, but because they have low market shares they do not generate much cash. The
result is a large net cash comsumption. A question mark (also known as a "problem
child") has the potential to gain market share and become a star, and eventually a cash
cow when the market growth slows. If the question mark does not succeed in becoming
the market leader, then after perhaps years of cash consumption it will degenerate into a
dog when the market growth declines. Question marks must be analyzed carefully in
order to determine whether they are worth the investment required to grow market share.
Stars - Stars generate large amounts of cash because of their strong relative market share,
but also consume large amounts of cash because of their high growth rate; therefore the
cash in each direction approximately nets out. If a star can maintain its large market
share, it will become a cash cow when the market growth rate declines. The portfolio of a
diversified company always should have stars that will become the next cash cows and
ensure future cash generation.
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Cash cows - As leaders in a mature market, cash cows exhibit a return on assets that is
greater than the market growth rate, and thus generate more cash than they consume.
Such business units should be "milked", extracting the profits and investing as little cash
as possible. Cash cows provide the cash required to turn question marks into market
leaders, to cover the administrative costs of the company, to fund research and
development, to service the corporate debt, and to pay dividends to shareholders. Because
the cash cow generates a relatively stable cash flow, its value can be determined with
reasonable accuracy by calculating the present value of its cash stream using a discounted
cash flow analysis.
Under the growth-share matrix model, as an industry matures and its growth rate declines, a
business unit will become either a cash cow or a dog, determined soley by whether it had become
the market leader during the period of high growth.
While originally developed as a model for resource allocation among the various business units
in a corporation, the growth-share matrix also can be used for resource allocation among
products within a single business unit. Its simplicity is its strength - the relative positions of the
firm's entire business portfolio can be displayed in a single diagram.
Limitations
The growth-share matrix once was used widely, but has since faded from popularity as more
comprehensive models have been developed. Some of its weaknesses are:
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Market growth rate is only one factor in industry attractiveness, and relative market share
is only one factor in competitive advantage. The growth-share matrix overlooks many
other factors in these two important determinants of profitability.
The framework assumes that each business unit is independent of the others. In some
cases, a business unit that is a "dog" may be helping other business units gain a
competitive advantage.
The matrix depends heavily upon the breadth of the definition of the market. A business
unit may dominate its small niche, but have very low market share in the overall industry.
In such a case, the definition of the market can make the difference between a dog and a
cash cow.
While its importance has diminished, the BCG matrix still can serve as a simple tool for viewing
a corporation's business portfolio at a glance, and may serve as a starting point for discussing
resource allocation among strategic business units.
Benefits and Limitations of bcg matrix
Benefits of the BCG-Matrix:
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The BCG-Matrix is helpful for managers to evaluate balance in the companies’s current
portfolio of Stars, Cash Cows, Question Marks and Dogs.
BCG-Matrix is applicable to large companies that seek volume and experience effects.
The model is simple and easy to understand.
It provides a base for management to decide and prepare for future actions.

If a company is able to use the experience curve to its advantage, it should be able to
manufacture and sell new products at a price that is low enough to get early market share
leadership. Once it becomes a star, it is destined to be profitable.
Genine cell matrix
E / McKinsey Matrix
GE Matrix or McKinsey Matrix is a strategic tool for portfolio analysis. This strategic portfolio
analysis tool has been initially developed by GE and McKinsey.
This tool compares different businesses on "Business Strength" and "Market Attractiveness"
variables, plus the size of the bubbles represents the market size and allows the business user to
compare business strength, market attractiveness, market size, and market share for different
strategic business units (SBUs) or different product offerings.
The GE matrix has nine cells. Based on its position, a strategic business unit can make any of
the three resource allocation recommendations:
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Grow
Hold
Harvest
GE Matrix Positions and Strategy
The GE / McKinsey Matrix is actually divided into nine cells. These 9 cells represent the nine
alternatives for positioning of any SBU or product / service offering. Based on the strength of the
business and its market attractiveness each SBU will have a different position in the matrix.
Further, the market size and the current sales will distinguish each SBU. Based on clear
understanding of all of these factors decision makers are able to develop effective strategies.
The nine cells in the matrix can be grouped into three major segments:
Segment 1: This is mostly the best segment. The business in this position is
strong and the market is attractive.
In this case the company should allocate resources in this business and focus on
growing the business and increase its current market share.
Segment 2: The business is either strong but the market is not attractive or the
market is strong and the business is not strong enough to pursue potential
opportunities.
Decision makers should make judgment on how to further deal with these SBUs
or products. Some of them may consume to much resources and are not really promising any
strong potential while others may need additional resources and better strategy for growth.
Segment 3: This is the worst positioning segment. Businesses or products and
services in this segment are very weak and their market is not attractive.
Decision makers should consider either repositioning these SBUs into a different
market segment, develop better cost-effective offering, or get rid of these SBUs
and invest the resources into more promising and attractive SBUs.
SWOT ANALYSIS
A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to
evaluate the strengths, weaknesses, opportunities, and threats involved in a project or in a
business venture. A SWOT analysis can be carried out for a product, place, industry or person. It
involves specifying the objective of the business venture or project and identifying the internal
and external factors that are favorable and unfavorable to achieve that objective. Some authors
credit SWOT to Albert Humphrey, who led a convention at the Stanford Research Institute (now
SRI International) in the 1960s and 1970s using data from Fortune 500 companies.[1][2] However,
Humphrey himself does not claim the creation of SWOT, and the origins remain obscure. The
degree to which the internal environment of the firm matches with the external environment is
expressed by the concept of strategic fit.
Setting the objective should be done after the SWOT analysis has been performed. This would
allow achievable goals or objectives to be set for the organization.
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Strengths: characteristics of the business or project that give it an advantage over
others.
Weaknesses: characteristics that place the business or project at a disadvantage
relative to others
Opportunities: elements that the project could exploit to its advantage

Threats: elements in the environment that could cause trouble for the business or
project
Identification of SWOTs is important because they can inform later steps in planning to achieve
the objective.
First, the decision makers should consider whether the objective is attainable, given the SWOTs.
If the objective is not attainable a different objective must be selected and the process repeated.
Users of SWOT analysis need to ask and answer questions that generate meaningful information
for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful
and find their competitive advantage.
Strengths
A firm's strengths are its resources and capabilities that can be used as a basis for developing a
competitive advantage. Examples of such strengths include:
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patents
strong brand names
good reputation among customers
cost advantages from proprietary know-how
exclusive access to high grade natural resources
favorable access to distribution networks
Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the
following may be considered weaknesses:
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lack of patent protection
a weak brand name
poor reputation among customers
high cost structure
lack of access to the best natural resources
lack of access to key distribution channels
In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a
large amount of manufacturing capacity. While this capacity may be considered a strength that
competitors do not share, it also may be a considered a weakness if the large investment in
manufacturing capacity prevents the firm from reacting quickly to changes in the strategic
environment.
Opportunities
The external environmental analysis may reveal certain new opportunities for profit and growth.
Some examples of such opportunities include:
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an unfulfilled customer need
arrival of new technologies
loosening of regulations
removal of international trade barriers
Threats
Changes in the external environmental also may present threats to the firm. Some examples of
such threats include:
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shifts in consumer tastes away from the firm's products
emergence of substitute products
new regulations
increased trade barriers
The SWOT Matrix
A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a
better chance at developing a competitive advantage by identifying a fit between the firm's
strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order
to prepare itself to pursue a compelling opportunity.
To develop strategies that take into account the SWOT profile, a matrix of these factors can be
constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:
SWOT / TOWS Matrix
Strengths
Weaknesses
Opportunities S-O strategies W-O strategies
Threats
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S-T strategies W-T strategies
S-O strategies pursue opportunities that are a good fit to the company's strengths.
W-O strategies overcome weaknesses to pursue opportunities.
S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability
to external threats.
W-T strategies establish a defensive plan to prevent the firm's weaknesses from making
it highly susceptible to external threats.
Unit-4
STRATEGIC IMPLEMENTATION
“The best game plan is the world never blocked or tackled anybody.” V. Lombardi
“We would be in some form of denial if we didn’t see that execution is the true
measure of success.” C. Michael Armstrong.
“People think of execution as the tactical side of business, something leaders
delegate while they focus on the perceived ‘bigger issues’. This idea is completely
wrong. Execution has to be built into a company’s strategy, its goals, and its
culture. And the leader of the organization must be deeply engaged in it.” Larry
Bossidy,
“When you manage these processes in depth, you get robust results. You get
answers to critical questions:
Are our products positioned optimally in the marketplace?
Can we identify how we are going to turn the plan into specific results for growth
and productivity?
Are we staffed with the right kinds of people to execute the plan?
How do we make sure the operating plan has sufficient specific programs to
deliver the outcome?”
Implementation is Different
 Operation-driven rather than market-driven.
 Action-oriented, make-things-happen tasks.
 Strategy requires few; execution requires everyone.
A Framework for Strategy Implementation.
 Implementation should be addressed initially when the pros and cons of strategic
alternatives are analyzed.
 Some strategies cannot be executed by some companies!
 Form follows function – can vary even by department.
Concept Of Strategy Implementation
Strategy implementation is "the process of allocating resources to support the chosen
strategies". This process includes the various management activities that are necessary to put
strategy in motion, institute strategic controls that monitor progress, and ultimately achieve
organizational goals.
For example, according to Steiner, "the implementation process covers the entire managerial
activities including such matters as motivation, compensation, management appraisal, and
control processes".
As Higgins has pointed out, "almost all the management functions -planning, controlling,
organizing, motivating, leading, directing, integrating, communicating, and innovation -are
in some degree applied in the implementation process".
Pierce and Robinson say that "to effectively direct and control the use of the firm's resources,
mechanisms such as organizational structure, information systems, leadership styles,
assignment of key managers, budgeting, rewards, and control systems are essential strategy
implementation ingredients".
The implementation activities are in fact related closely to one another, and decisions about each
are usually made simultaneously. I have split these activities in the next chapters.
Essential Steps to Successful Strategy Implementation
Why Strategies Fail
There are three reasons strategy fails to execute. They are:
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Company initiatives don’t aligned with strategy
Company processes don’t align with strategy
Employees and stakeholder fail to engage
(for more information see my prior post ‘Why strategy Fails’)
So how do we ensure that our strategies implement successfully? The answer is to build the
execution into and across the strategy and the strategy planning process.
Below are the 5 steps to successful strategy implementation.
1. Align your initiatives
A key road to failed implementation is when we create a new strategy but then continue to do the
same things of old. A new strategy means new priorities and new activities across the
organisation. Every activity (other than the most functional) must be reviewed against its
relevance to the new strategy.
A good way of doing this is to create a strategic value measurement tool for existing and new
initiatives. Initiatives should be analysed against their strategic value and the impact to the
organisation.
Kaplan & Norton developed a scorecard based on the following criteria: Strategic
Relevance/Benefit (weighted 50%), Resource Demands (30%) and Risks (20%).
Measuring your initiatives against a scorecard will help highlight the priorities and ensure the
right initiatives are adopted for delivery.
2. Align budgets & performance
Ideally your capital budgets are decentralised, so each division can both allocate and manage the
budgets to deliver the division’s strategic initiatives. Norton and Kaplan in their recent book
‘The Execution Premium’ recommend cross functional strategic initiatives be allocated specific
budget (STRATEX) alongside capital (CAPEX) and operating (OPEX) budgets. This protects
strategic expenditure from being re-allocated to short-term requirements of OPEX whilst
subjecting strategic initiatives to a rigorous review (eg. forecasted revenue growth and
productivity) much like is done for CAPEX.
Organisational performance should be closely aligned to strategy. Performance measures should
be placed against strategic goals across the organisation and each division and staff member. All
staff will have job functions that will impact on strategy. Most staff will have impact across a
series of strategic goals (eg. financial, customer service, product). Ensure employees are aware
of their role and influence on strategy delivery and performance. This is also important to
employee engagement (see below).
Likewise performance incentives should be directly linked to performance against strategy. They
should include a combination of individual, team and corporate performance measures that
ensure staff recognise their direct and indirect impact on strategy performance.
3. Structure follows strategy
A transformational strategy may require a transformation to structure. Does the structure of your
organisation allow strategy to cascade across and down the organisation in a way that
meaningfully and efficiently delivers the strategy?
Organisations that try and force a new strategy into an out-dated structure will find their strategy
implementation eventually reaches a deadlock.
4. Engaging Staff
The key reason strategy execution fails is because the organisation doesn’t get behind it. If
you’re staff and critical stakeholders don’t understand the strategy and fail to engage, then the
strategy has failed.
The importance of this step cannot be understated. If you’re staff are not delivering the strategy,
then the strategy has failed.
So how do we engage staff?
Prepare: Strategy involves change. Change is difficult and human tendency is to resist it. So not
matter how enlightened and inspiring your new strategic vision, it will come up against hurdles.
Tipping Point Leadership theory (a key principle of the Blue Ocean Strategy methodology)
outlines four key hurdles that executives must overcome to achieve execution. Those hurdles are
cognitive, resource, motivation and political hurdles. It is important we understand each of these
hurdles and develop strategies to overcome them.
Include: Bring influential employees, not just executive team members into the planning
process. Not only will they contribute meaningfully to strategy, they will also be critical in
ensuring the organisation engages with the strategy. Furthermore, listen across the organisation
during strategy formulation. Some of your best ideas will come from within your organisation,
not the executive team (think 3M’s Post-It Notes)
Communicate: Ensure every staff member understands the strategic vision, the strategic themes
and what their role will be in delivering the strategic vision.
And enrich the communication experience. Communicate the strategy through a combination of
presentations, workshops, meetings, newsletters, intranets and updates. Continue strategy and
performance updates throughout the year.
And engage them emotionally in the vision. The vision needs to give people goose bumps – a
vision they believe in, that they want to invest and engage with.
Clarify: It is important that all employees are aware of expectations. How are they expected to
change? What and how are they expected to deliver? Each individual must understand their
functions within the strategy, the expected outcomes and how they will be measured. As
mentioned above performance measures and incentives should be aligned with performance
against strategic KPIs.
5. Monitor and Adapt
A strategy must be a living, breathing document. As we all know: if there’s one constant in
business these days it’s change. So our strategies must be adaptable and flexible so they can
respond to changes in both our internal and external environments.
Strategy meetings should be held regularly throughout the year, where initiatives and direction
are assessed for performance and strategic relevance. At least once a year we should put our
strategy under full review to check it against changes in our external and competitive
environments as well as our internal environments.
Strategy is not just a document written by executive teams and filed in the CEO’s desk. It is a
vision for the organisation, owned by the organisation. And to succeed the whole organisation
must engage with it and live and breathe it. Strategy should inform our operations, our structure,
and how we go about doing what we do. It should be the pillar against which we assess our
priorities, our actions and performance.
When execution is brought into strategic planning we find that our strategy is weaved through
our organisation, and it’s from here that great leaps in growth and productivity can be achieved.
Factors causing unsuccessful implementation of strategy
Organisational Structure For Strategy Implementation
Organisational structure refers to the hierarchy within a business, how employees are grouped in
relation to job tasks and activities, the authority lines within the business as well as how these
groups interact and communicate with one another.
Each organisation has a different structure, and no one particular structure can be deemed the
most beneficial or successful. Organisational structures vary depending on the strategies
implemented, the size of the business, the growth of the business, as well as managerial styles.
The structure of the business is an important factor to consider when implementing new
strategies, as the structure plays a role in regards to how strategies are converted into actions,
who is responsible for monitoring and evaluating such actions, as well as how effectively the
strategies and actions are communicated to the rest of the organisation.
When developing an organisational structure, the first consideration by managers is how tasks
and activities will be grouped into functions and divisions. This grouping process requires much
consideration in relation to the processes to be implemented, the interactions required within
teams, as well as considering a logical structure that will best achieve strategies and
organisational goals. Costs, resources and capabilities are just some factors that are considered
when establishing functions and divisions.
The next consideration when developing an organisational structure is the hierarchy, that is, the
authority and decision-making lines within the business. The hierarchy should be clear and
known to everyone within the organisation. Responsibilities and authority of various managers
should be clearly established so that employees know who to report to and so that there is no
confusion with each manager's roles. The number of levels within a hierarchy can influence the
performance of the business, as well as the effectiveness of strategies. Organisational structures
with many levels can cause problems such as miscommunication when information is transferred
throughout the hierarchy. The more individuals involved in relaying a message, the more
chances there are of it being distorted or misinterpreted. Other issues include the time delays
when having to pass information through such an extensive hierarchy, as well as the added costs
of many levels with many managers. Such issues can cause inefficiencies, expenses, as well as a
less than optimum output, and therefore, mediocre performance. Opting for a structure with the
least possible levels required to successfully achieve strategies is a better option, in order to
avoid the potential issues mentioned above from arising.
Forms of Organizational Structure
An organization’s goals and the plan selected to reach these goals depends on its form of
organizational structure. BusinessDictionary.com defines organizational structure as “the
framework, typically hierarchical, within which an organization arranges its lines of authority
and communications, and allocates rights and duties.” Whether an organization is a small
business or an international corporation, its form of organizational structure must match its needs
to achieve success.
Simple Structure
Simple structure is the most commonly used structure in small businesses. This includes
organizations with fewer than 100 employees. This structure places the majority of the power
and decision-making with the business owner or manager. The strengths of an organization using
simple structure include quick decisions, owner awareness of the organization's day-to-day
operations and judgments made on what is best suited for organization. A big weakness of
simple structure is lost opportunities when the owner is not available to make decisions. This
structure does not work well for bigger organizations.
Functional Structure
Functional structure divides the workers into groups based on their job function, such as
personnel, marketing, production and finance. Groups might be based on product or service, by
process or equipment or by types of customers. These groups work together and exchange
information. Strengths of a functional structure include specialists prepared to make decisions
within their groups and that the CEO can run the entire organization with no concern about
routine problems. Weaknesses include area managers often concentrating on local, as opposed to
overall company strategic, matters, and interdepartmental conflicts from lack of communication
among groups.
Divisional Structure
Divisional structures are also referred to as multidivisional, M-form or geographic area
structures. This organizational structure splits into self-reliant units or divisions based on
location. Each works separately from the main or parent company. The strengths of divisional
structure include allowing corporate officers to more precisely examine each division’s
performance and encouraging division managers with poor showings to work on methods to
improve performance. Weaknesses include divisions competing for company resources and lack
of coordination between divisions.
Matrix Structure
The matrix structure combines functional and divisional structures. This form brings numerous
skilled workers from various parts of the organization together as a team. They focus on a
specific project that is to be completed within a set time frame and often have more than one
manager. This organizational structure form is often used in multinational companies. Strengths
an weaknesses of this structure are similar to those encountered with functional and divisional
structures.
UNIT-5
Strategy Evaluation and Control
 Strategic evaluation and control constitutes the final phase of strategic management.
 Strategic evaluation operates at two levels:
 Strategic level - wherein we are concerned more with the consistency of strategy
with the environment.
 Operational level – wherein the effort is directed at assessing how well the
organisation is pursuing a given strategy.
Definition
Strategic evaluation and control could be defined as the process of determining the
effectiveness of a given strategy in achieving the organisational objectives and taking
corrective action wherever required.
Nature of Strategic Evaluation
 Nature of the strategic evaluation and control process is to test the effectiveness of
strategy.
 During the two proceedings phases of the strategic management process, the strategists
formulate the strategy to achieve a set of objectives and then implement the strategy.
 There has to be a way of finding out whether the strategy being implemented will guide
the organisation towards its intended objectives.
 Strategic evaluation and control, therefore, performs the crucial task of keeping the
organisation on the right track.
 In the absence of such a mechanism, there would be no means for strategists to find out
whether or not the strategy is producing the desired effect.
Importance of Strategic Evaluation
 Strategic evaluation helps to keep a check on the validity of a strategic choice.
 An ongoing process of evaluation would, in fact, provide feedback on the continued
relevance of the strategic choice made during the formulation phase. This is due to the
efficacy of strategic evaluation to determine the effectiveness of strategy.
Participants in Strategic Evaluation
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Shareholders
Board of Directors
Chief executives
Profit-centre heads
Financial controllers
Company secretaries
External and Internal Auditors
Audit and Executive Committees
Corporate Planning Staff or Department
Middle-level managers
What Are the Four Types of Strategic Control?
Strategic control involves tracking a strategy as it's being implemented. It's also concerned with
detecting problems or changes in the strategy and making necessary adjustments. As a manager,
you tend to ask yourself questions, such as whether the company is moving in the right direction,
or whether your assumptions about major trends and changes in the company's environment are
correct. Such questions necessitate the establishment of strategic controls.
Premise Control
Every strategy is based on certain planning premises or predictions. Premise control is designed
to check methodically and constantly whether the premises on which a strategy is grounded on
are still valid. If you discover that an important premise is no longer valid, the strategy may have
to be changed. The sooner you recognize and reject an invalid premise, the better. This is
because the strategy can be adjusted to reflect the reality.
Special Alert Control
A special alert control is the rigorous and rapid reassessment of an organization's strategy
because of the occurrence of an immediate, unforeseen event. An example of such event is the
acquisition of your competitor by an outsider. Such an event will trigger an immediate and
intense reassessment of the firm's strategy. Form crisis teams to handle your company's initial
response to the unforeseen events.
Related Reading: The Difference Between Operational Data & Strategic Data
Implementation Control
Implementing a strategy takes place as a series of steps, activities, investments and acts that
occur over a lengthy period. As a manager, you'll mobilize resources, carry out special projects
and employ or reassign staff. Implementation control is the type of strategic control that must be
carried out as events unfold. There are two types of implementation controls: strategic thrusts or
projects, and milestone reviews. Strategic thrusts provide you with information that helps you
determine whether the overall strategy is shaping up as planned. With milestone reviews, you
monitor the progress of the strategy at various intervals or milestones.
Strategic Surveillance
Strategic surveillance is designed to observe a wide range of events within and outside your
organization that are likely to affect the track of your organization's strategy. It's based on the
idea that you can uncover important yet unanticipated information by monitoring multiple
information sources. Such sources include trade magazines, journals such as The Wall Street
Journal, trade conferences, conversations and observations.
Process Evaluation
Process Evaluation Strategies
Both qualitative and quantitative research methods (mixed method) are used in process
evaluation. It is often the richness of qualitative methods that provides the more detailed, indepth, language, context and relationship between ideas that best informs programme process.
The following list presents the possible strategies to use to collect process level information:
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Interviews where open ended questions regarding feelings, knowledge, opinions,
experiences, perceptions are used and data recorded
Focus groups
Forums and discussion groups
In-depth interviews using key informant or other community members; semistructured and structured
Delphi method using expert opinion and reiteration
Observations from fieldwork descriptions of activities
Case Studies
Ethnographic studies that are enmeshed and of long duration
Standard Performance Evaluation Corporation
The Standard Performance Evaluation Corporation (SPEC) is an American non-profit
organization that aims to "produce, establish, maintain and endorse a standardized set" of
performance benchmarks for computers.
SPEC was founded in 1988. SPEC benchmarks are widely used to evaluate the performance of
computer systems; the test results are published on the SPEC website. Results are sometimes
informally referred to as "SPECmarks" or just "SPEC".
SPEC evolved into an umbrella organization encompassing four diverse groups; Graphics and
Workstation Performance Group (GWPG), the High Performance Group (HPG), the Open
Systems Group (OSG) and the newest, the Research Group (RG). More details are on their
website;
Strategic Evaluation & Control
 Strategic Evaluation is defined as the process of determining the effectiveness of a given
strategy in achieving the organizational objectives and taking corrective action wherever
required.
 Strategy evaluation is the final step of strategy management process. The key strategy
evaluation activities are: appraising internal and external factors that are the root of
present strategies, measuring performance, and taking remedial / corrective actions.
Evaluation makes sure that the organizational strategy as well as it’s implementation
meets the organizational objectives.
Nature of Strategic Evaluation
 Nature of the strategic evaluation and control process is to test the effectiveness of
strategy.
 During the strategic management process, the strategists formulate the strategy to achieve
a set of objectives and then implement the strategy.
 There has to be a way of finding out whether the strategy being implemented will guide
the organisation towards its intended objectives. Strategic evaluation and control,
therefore, performs the crucial task of keeping the organisation on the right track.
 In the absence of such a mechanism, there would be no means for strategists to find out
whether or not the strategy is producing the desired effect.
 Through the process of strategic evaluation and control, the strategists attempt to answer
set of questions, as below.
 Are the premises made during strategy formulation proving to be correct?
 Is the strategy guiding the organization towards its intended objectives?
 Are the organization and its managers doing things which ought to be done?
 Is there a need to change and reformulate the strategy?
 How is the organization performing?
 Are the time schedules being adhered to?
 Are the resources being utilized properly?
 What needs to be done to ensure that resources are utilized properly and
objectives met?
Importance of Strategic Evaluation
 Strategic evaluation can help to assess whether the decisions match the
intended strategy requirements.
 Strategic evaluation, through its process of control, feedback, rewards, and
review, helps in a successful culmination of the strategic management
process.
 The process of strategic evaluation provides a considerable amount of
information and experience to strategists that can be useful in new strategic
planning.
Participants in Strategic Evaluation
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Shareholders
Board of Directors
Chief executives
Profit-centre heads
Financial controllers
Company secretaries
External and Internal Auditors
Audit and Executive Committees
Corporate Planning Staff or Department
Middle-level managers
Process of Strategic Evaluation
 While fixing the benchmark, strategists encounter questions such as - what
benchmarks to set, how to set them and how to express them.
 In order to determine the benchmark performance to be set, it is essential to
discover the special requirements for performing the main task.
 The organization can use both quantitative and qualitative criteria for
comprehensive assessment of performance.
 Quantitative criteria includes determination of net profit, ROI, earning per
share, cost of production, rate of employee turnover etc. Among the
Qualitative factors are subjective evaluation of factors such as - skills and
competencies, risk taking potential, flexibility etc.
Measurement of performance
 The standard performance is a bench mark with which the actual
performance is to be compared.
 The reporting and communication system help in measuring the
performance.
 For measuring the performance, financial statements like - balance sheet,
profit and loss account must be prepared on an annual basis.
Analyzing Variance
 While measuring the actual performance and comparing it with standard
performance there may be variances which must be analyzed.
 The strategists must mention the degree of tolerance limits between which
the variance between actual and standard performance may be accepted.
Taking Corrective Action
 Once the deviation in performance is identified, it is essential to plan for a
corrective action.
 If the performance is consistently less than the desired performance, the
strategists must carry a detailed analysis of the factors responsible for such
performance.