Tool of Strategic Management

8/3/2019 Tool of Strategic Management

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Sasmira’s Institute of Management Studies & Research

Tools of Strategic Management

Submitted by:

Ritika Bhutange (05)

Shraddha Goli (15)

Akshay Hazare (19)

Nikita Jalota (23)

Deep Maniar (33)

Chandan Salgaonkar (48)



McKinsey 7 S Framework

McKinsey and Company created this 7S framework in the early 1980s. It is well-known for

analyzing organizations.

Structure

Structure is the skeleton, the form of shape, of organizations. It dictates the way it operates

and performs. Traditionally, businesses are structured with divisions, departments and

layers, in which the lower layers answer to upper layers. Today, the flat structure, where the

work is done in teams of specialists, are more common. The idea is to make the

organisation more flexible and devolve the power by empowering the employees and

eliminate the middle management layers

Strategy

Strategy is a plan or course of action in allocating resources to achieve identified goals over

time. Unlike tactic, strategy is well thought and often rehearsed. It transforms the

organisation from the present position to the new position described in the objectives,

subject to constraints of the capabilities.

Systems

Systems are routine processes and procedures followed within an organisation to implement

the strategy and to run day-to-day affairs. These processes are mainly designed to achieve

maximum effectiveness. Traditionally, the higher management makes the most decisions.

Increasingly, the organisation are using innovation and new technology to make decision-

making process quicker.

Staff

Staff are personnel categories within the organization, such as engineers, sales persons, etc.

Unlike traditional organisations, new leading organisations put more emphasis on hiring the

best staff. They provide their staff with rigorous training and monitoring support, and give

incentive for their staff to achieve professional excellence. This forms the basis of these

organisations’ strategy and competitive advantage over their competitors.



Skills

Skills are the capabilities of the staff within the organisation as a whole.

Style

Style is the way in which key managers behave in achieving organisational goals, that is the

management style. It includes the dominant values, beliefs and norms which develop over

time and become relatively enduring features of the organisational life. Different from the

traditional businesses in which strict adherence to the upper management and procedures

was expected from the lower-rank employees, the recent businesses have been more open,

innovative and friendly with fewer hierarchies and a smaller chain of command.

Shared Values

Shared value refers to the significant meanings or guiding concepts that organisationalmembers share (Peters and Waterman, 1982). These values and common goals keep the

employees working towards a common destination as a coherent team. The organisations

with weak values and common goals often find their employees following their own

personal goals that may be conflicting with others.



The Balanced Scorecard (BSC)

The Balanced Scorecard (BSC) is a strategic performance management tool - a semi-

standard structured report, supported by proven design methods and automation tools, that

can be used by managers to keep track of the execution of activities by the staff within their

control and to monitor the consequences arising from these actions. It is perhaps the bestknown of several such frameworks (it is the most widely adopted performance management

framework reported in the annual survey of management tools undertaken by Bain &

Company, and has been widely adopted in English-speaking western countries and

Scandinavia in the early 1990s). Since 2000, use of the Balanced Scorecard, its derivatives

(e.g., Performance Prism), and other similar tools (e.g., Results Based Management) has

also become common in the Middle East, Asia and Spanish-speaking countries

The 1st Generation design method proposed by Kaplan and Norton was based on the use of

three non-financial topic areas as prompts to aid the identification of non-financial measures

in addition to one looking at Financial. Four "perspectives" were proposed:

Financial: encourages the identification of a few relevant high-level financial

measures. In particular, designers were encouraged to choose measures that helped inform

the answer to the question "How do we look to shareholders?"

Customer: encourages the identification of measures that answer the question "How

do customers see us?"

Internal Business Processes: encourages the identification of measures that answer

the question "What must we excel at?"

Learning and Growth: encourages the identification of measures that answer the

question "Can we continue to improve and create value?".

Implementing the Score card objectives & Initiatives

To achieve our vision, how should we appear to our customers?

To satisfy our shareholders and customers, what business processes must we excel

at?

To achieve our vision, how will we sustain our ability to change & improve?

To succeed financially, how should we appear to our shareholders?

Achieving long term objectives through short term actions

Often the linkage between short term financial measures and long term strategic

objectives is weak

Because of this weak linkage, strategy implementation often is ineffective

http://en.wikipedia.org/wiki/Performance_management

http://www.bain.com/management_tools/home.asp

http://en.wikipedia.org/wiki/Bain_%26_Company


http://en.wikipedia.org/w/index.php?title=Performance_Prism&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Results_Based_Management&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Results_Based_Management&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Performance_Prism&action=edit&redlink=1



http://www.bain.com/management_tools/home.asp

http://en.wikipedia.org/wiki/Performance_management



Using the balanced score card, companies can strengthen the linkage between long

term strategy and short term tactics

Implementing the Score card objectives & Initiatives

To achieve our vision, how should we appear to our customers?

To satisfy our shareholders and customers, what business processes must we excel

at?

To achieve our vision, how will we sustain our ability to change & improve?

To succeed financially, how should we appear to our shareholders?

Balanced score card can be used to

• Clarify and update strategy

• Communicate strategy throughout the company

• Align unit and individual goals with the strategy

• Link strategic objectives to long term targets

• Identify and align strategic initiatives

• Conduct periodic performance reviews to learn about and improve strategy



PORTERS 5 FORCE ANALYSIS

Porters 5 force analysis is a technique used for analysing a company's business environment

and industrial context based on the 5 main aspects shaping a sector: competitors, new

entrants, substitute products, customers and suppliers. It facilitates the identification and

implementation of development strategies after market opportunities and threats have been

analysed and taken into account.

Porter’s 5 forces analysis represents the competitive environment of the firm. It is a

strategic foresight to avoid putting the competitive edge at risk and ensure the profitability

of products on a long term. For the company this vision is quite important because the firm

is able to direct its innovations in terms of choice of strategies and investments. The

profitability of businesses within the industrial structure depends on the following forces:

Competitive rivalry within the industry;

Threats of new entrants;

Threats of substitutes products;

Bargaining power of customers;

Bargaining power of suppliers.

The competitive rivalry within the industry

The competition between firms determines the attractiveness of a sector. Companies are

struggling to maintain their power. The competition changes based on sector development,diversity and the existence of barriers to enter. In addition it is an analysis of the number of

competitors, products, brands, strengths and weaknesses, strategies, market shares,



The threat of new entrants

It is in a company’s interest to create barriers to prevent its competitors to enter to market.

They are either new companies, or companies which intend to diversify. This barriers can

be legal (patent regulations, …), or industrial (products or single brands, …) The arrival of

new entrants also depends on the size of the market (economy of scale), the reputation of a

company already installed, the cost of entry, access to raw materials, technical standards,

cultural barriers.

The threat of substitute products

The substitute products can be considered as an alternative compared to supply on the

market. These products are due to changes in the state of technology or to the innovation.

The companies see their products be replaced by different products. These products often

have a better price/quality report and come from sectors with higher profits. These

substitute products can be dangerous and the company should anticipate to cope with thisthreat.

The bargaining power of suppliers

The bargaining power of suppliers is very important in a market. Powerful suppliers can

impose their conditions in terms of price, quality and quantity. On the other hand if there

are a lot of suppliers their influence is weaker. One has to analyze the number of realized

orders, the cost of changing the supplier, the presence of raw materials.

The bargaining power of customers

If the bargaining power of customers is high, they influence the profitability of the market

by imposing their requirements in terms of price, service, quality.Choosing clients is crucial

because a firm should avoid to be in a situation of dependence. The level of concentration

of customers gives them more or less power. Generally their bargaining power tends to be

inversely proportional to that of the suppliers.



SWOT ANALYSIS

The SWOT matrix (Strengths, Weaknesses, Opportunities, Threats) enables the analysis of

the internal and external environment of a project and company. The SWOT analysis is

a tool to identify the strengths, weaknesses, opportunities and threats of a particular

enterprise. The strengths and weaknesses are internal factors that create or destroy value.

The opportunities and threats are external factors that companies can not control. It is a

representation of the status of a product or service on the market.

The key factors for success or failure of a product/project must be listed in the various

boxes of the matrix.

Strength:

A resource or a characteristic of the product or the organization which is used to highlight

it.

Weakness:

A limit, a defect or a « non competence » of a product or the organization that will prevent

it from having success.

Opportunity:

Any situation, in favor of a company, that allows to achieve a competitive advantage in the

product/project.

Threat:

Any undesired situation in the external environment that is a threat to the progress of the

project.

http://www.innovation.public.lu/en/ir-entreprise/techniques-gestion-innovation/outils-gestion-strategique/080820-La-matrice-SWOT-vers-eng.pdf






BCG Matrix

The BCG was developed by Bruce Henderson.

The BCG Matrix graphically portrays differences among divisions in terms of relative

market share position and industry growth rate. The BCG Matrix allows a multidivisional

organization to manage its portfolio of businesses by examining the relative market share

position and the industry growth rate of each division relative to all other divisions in theorganization. Relative market share position is defined as the ratio of a division's own

market share in a particular industry to the market share held by the largest rival firm in that

industry

According to this technique, businesses or products are classified as low or high performers

depending upon their market growth rate and relative market share. Useful way of

screening the opportunities open to the company and helps one think about where one can

best allocate resources to maximize profit in the future.

STARS

High growth, High market share

• Stars are leaders in business.

• They also require heavy investment, to maintain its large market share.

• It leads to large amount of cash consumption and cash generation.

• Attempts should be made to hold the market share otherwise the star will become a

CASH COW.

CASH COWS

Low growth , High market share

• They are foundation of the company and often the stars of yesterday.

• They generate more cash than required.

• They extract the profits by investing as little cash as possible



• They are located in an industry that is mature, not growing or declining.

QUESTION MARKS

High growth , Low market share

• Most businesses start of as question marks.

• They will absorb great amounts of cash if the market share remains unchanged,

(low).

• Question marks have potential to become star and eventually cash cow but can also

become a dog.

• Investments should be high for question marks.

DOGS

Low growth, Low market share

• Dogs are the cash traps.

• Dogs do not have potential to bring in much cash.

• Number of dogs in the company should be minimized.

• Business is situated at a declining stage.

S.M.A.R.T. Goals

The use of S.M.A.R.T. goals as a strategic management tool helps ensure the goals set by

management are Specific, Measurable, Attainable, Relevant and Timely. The purpose of

setting such goals is to avoid the frustration that results from setting unrealistic goals. It is

important that the goals of the strategic management team are specific, as it can sometimes

be impossible to determine whether vague goals have actually been met. They must be

measurable in that there must be a set system for determining how close the team is to its

goals as well as how much work is left to do to get there. Unattainable goals will lead to a

breakdown of the strategic management process when workers realize it's pointless to even

attempt to reach their goals. The strategic management plan must also include goals which

are relevant to the organization's mission statement and can be reached within a given

period of time

You'll receive these benefits:

SMART is tailored to your business and designed to identify ways you can achieve

success



SMART is driven by your business strategies and action plans, your customer focus

and other factors critical to your business success.

SMART provides a framework for performance excellence.

SMART will help you measure performance of a wide range of key business

indicators — customers, products and services, operations and finances.

SMART examines all processes associated with your company's key stakeholders —

customers, employees, owners and the public — and evaluates the results. SMART will allow you to identify your company's strengths and to target key

opportunities for improvement.

SMART will help you align resources with your business goals, thereby increasing

company performance and enhancing communications.

SMART provides you with a detailed feedback report compiled by a team of business

counselors that outlines your company's strengths and opportunities for improvement.

Follow-up assistance will be provided to help you develop short- and long-term

action plans.

Specific

The first term stresses the need for a specific goal over and against a more general one. This

means the goal is clear and unambiguous; without vagaries and platitudes. To make goals

specific, they must tell a team exactly what is expected, why is it important, who’s

involved, where is it going to happen and which attributes are important.A specific goal will usually answer the five "W" questions:

What: What do I want to accomplish?

Why: Specific reasons, purpose or benefits of accomplishing the goal.

Who: Who is involved?

Where: Identify a location.

Which: Identify requirements and constraints.

Measurable

The second term stresses the need for concrete criteria for measuring progress toward the

attainment of the goal. The thought behind this is that if a goal is not measurable, it is not

possible to know whether a team is making progress toward successful completion.

Measuring progress is supposed to help a team stay on track, reach its target dates, and

experience the exhilaration of achievement that spurs it on to continued effort required to

reach the ultimate goal.

A measurable goal will usually answer questions such as:

How much?

How many?



How will I know when it is accomplished?

Attainable

The third term stresses the importance of goals that are realistic and attainable. While an

attainable goal may stretch a team in order to achieve it, the goal is not extreme. That is, the

goals are neither out of reach nor below standard performance, as these may be considered

meaningless. When you identify goals that are most important to you, you begin to figure

out ways you can make them come true. You develop the attitudes, abilities, skills, and

financial capacity to reach them. The theory states that an attainable goal may cause goal-

setters to identify previously overlooked opportunities to bring themselves closer to the

achievement of their goals.

An attainable goal will usually answer the question:

How: How can the goal be accomplished?

Relevant

The fourth term stresses the importance of making goals relevant. A relevant goal must

represent an objective that the goal-setter is willing and able to work towards. This does not

mean the goal cannot be high. A goal is probably relevant if the goal-setter believes that it

can be accomplished. If the goal-setter has accomplished anything similar in the past they

may have identified a relevant goal.

A relevant goal will usually answer the question:

Does this seem worthwhile?

Timely

The fifth term stresses the importance of grounding goals within a time frame; giving them

a target date. A commitment to a deadline helps a team focus their efforts on completion of

the goal on or before the due date. Timeliness is intended to prevent goals from being

overtaken by the day-to-day crises that invariably arise in an organization. A timely goal is

intended to establish a sense of urgency.

A timely goal will usually answer the question:

When?

What can I do 6 months from now?

What can I do 6 weeks from now?

What can I do today?



Benchmarking

According to the American Productivity and Quality Center, benchmarking is "the process

of identifying, understanding and adapting outstanding practices and processes from

organizations anywhere in the world to help your organization improve its performance."

Benchmarking is an important strategic management tool which helps managers determine

the best way to meet the organization's individual goals and improve the organization's

positioning within the industry.

Benchmarking (also "best practice benchmarking" or "process benchmarking") is a process

used in management and particularly strategic management, in which organizations

evaluate various aspects of their processes in relation to best practice, usually within theirown sector. This then allows organizations to develop plans on how to adopt such best

practice, usually with the aim of increasing some aspect of performance. Benchmarking

may be a one-off event, but is often treated as a continuous process in which organizations

continually seek to challenge their practices.

A process similar to benchmarking is also used in technical product testing and in land

surveying. See the article benchmark for these applications.

Advantages of benchmarking

Benchmarking is a powerful management tool because it overcomes "paradigm blindness."

Paradigm Blindness can be summed up as the mode of thinking, "The way we do it is the

best because this is the way we've always done it." Benchmarking opens organizations to

new methods, ideas and tools to improve their effectiveness. It helps crack through

resistance to change by demonstrating other methods of solving problems than the one

currently employed, and demonstrating that they work, because they are being used by

others.

ADVANTAGE OF THE BENCHMARKING FOR A COMPANY:

1. A better understanding of the waits(expectations) of the customer because it is: based on

the reality of the market estimated in a objectivist way

2. A better economic planning of the purposes and the objectives to achieve in the company

because they are: centred on what takes place outside controlled and mastered.

3. A better increase of the productivity: resolution of the real problems Understanding of the processes and what they produce "

4. Better current practices Search for the change Many decisions practices of break



5. A better competitiveness thanks to: a solid knowledge of the competition a strong

implication of the staff new ideas on practices and tried techniques

Benchmarking has consequences which are beyond the process itself: it reforms all the

levels of the company.; modifies the process of manufacture of the product leads(drives) ;

also reforms the hierarchical organization of the company, the product itself, and the state

of mind of the employees.

Procedure

1. Identify your problem areas - Because benchmarking can be applied to any

business process or function, a range of research techniques may be required. They include:

informal conversations with customers, employees, or suppliers; exploratory research

techniques such as focus groups; or in-depth marketing research, quantitative research,

surveys, questionnaires, reengineering analysis, process mapping, quality control variancereports, or financial ratio analysis.

2. Identify organizations that are leaders in these areas - Look for the very best in

any industry and in any country. Consult customers, suppliers, financial analysts, trade

associations, and magazines to determine which companies are worthy of study.

3. Survey companies for measures and practices - Companies target specific business

processes using detailed surveys of measures and practices used to identify business process

alternatives and leading companies. Surveys are typically masked to protect confidential

data by neutral associations and consultants.

4. Visit the "best practice" companies to identify leading edge practices -

Companies typically agree to mutually exchange information beneficial to all parties in a

benchmarking group and share the results within the group.

5. Implement new and improved business practices - Take the leading edge practices

and develop implementation plans which include identification of specific opportunities,

funding the project and selling the ideas to the organization for the purpose of gaining

demonstrated value from the process.

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