mid-term exam course of BPM subject for college SICSR

1. BPS(mid-term Exam
SICSR)
-DEEP SHAH
deep.shah1592@gmail.com

2. Related to Mission & Vision
1.Who are we?
2.What do we do?
3.Why are we here?
4.What kind of company are we?
5.What kind of company do we want to
become?
6.What kind of company must we
become?
Related to Corporate Strategy 1.What is the current strategy, implicit or
explicit?
2.What assumptions have to hold for the
current strategy to be viable?
3.What is happening in the larger, social
and educational environments?
4.What are our growth, size, and
profitability goals?
5.In which markets will we compete?
6.In which businesses?
7.In which geographic areas?
2
2

3. Related to Competitive
Strategy
1.What assumptions have to hold for the current
strategy to be viable?
2.What is happening in the industry, with our
competitors, and in general?
3.What is the current strategy, implicit or explicit?
4.What are our growth, size, and profitability
goals?
5.What products and services will we offer?
6.To what customers or users?
7.How will the selling/buying decisions be made?
8.How will we distribute our products and
services?
9.What technologies will we employ?
10.What capabilities and capacities will we
require?
11.Which ones are core competencies?
12.What will we make, what will we buy, and
what will we acquire through alliance?
13.What are our options?
14.On what basis will we compete?
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3

4. 1.
2.
3.
4.
5.
Some Concluding Remarks -1
Strategy has been borrowed from the military and adapted for business use.
In truth, very little adaptation is required.
Strategy is about means. It is about the attainment of ends, not their
specification. The specification of ends is a matter of stating those future
conditions and circumstances toward which effort is to be devoted until such
time as those ends are obtained.
Strategy is concerned with how you will achieve your aims, not with what
those aims are or ought to be, or how they are established. If strategy has
any meaning at all, it is only in relation to some aim or end in view.
Strategy is one element in a four- part structure. First are the ends to be
obtained. Second are the strategies for obtaining them, the ways in which
resources will be deployed. Third are tactics, the ways in which resources
that have been deployed are actually used or employed. Fourth and last
are the resources themselves, the means at our disposal. Thus it is that
strategy and tactics bridge the gap between ends and means.
Establishing the aims or ends of an enterprise is a matter of policy and the
root words there are both Greek: politeia and polites—the state and the
people. Determining the ends of an enterprise is mainly a matter of
governance not management and, conversely, achieving them is mostly a
4
matter of management not governance.
4

5. Some Concluding Remarks -2
6. Those who govern are responsible for seeing to it that the ends of the
enterprise are clear to the people who manages that enterprise and that
these ends are legitimate, ethical and that they benefit the enterprise
and its members.
7. Strategy is the joint province of those who govern and those who
manage. Tactics belong to those who manage. Means or resources are
jointly controlled. Those who govern and manage are jointly responsible
for the deployment of resources. Those who manage are responsible
for the employment of those resources—but always in the context of the
ends sought and the strategy for their achievement.
8 Over the time, the employment of resources yields actual results and
these, in light of intended results, shape the future deployment of
resources. Thus it is that "realized" strategy emerges from the pattern of
actions and decisions. And thus it is that strategy is an adaptive,
evolving view of what is required to obtain the ends in view.
5
5

6. Strategy FormulationVision, Mission and Purpose,
• A vision is more dreamt of than it is. Vision Statement is permanent
statement of a company. Vision is future aspirations that lead to an
inspiration. It defines the very purpose of existence of a company.
• The vision of a company is a direction for action for employees. The
essence of a vision is forward looking view of what an organisation wishes
to become.
• Kotter(1990) defines Vision as “ a description of an enterprise. (an
organisation, corporate culture, a business, a technology, an activity) in
future”.
• El-namaki(1992) defines vision as a “mental perception of the kind of
environment an individual, or an organisation, aspires to create within a
broad time horizon and underlying conditions for the actualisation of this
perception”
• Miller and Dess(1996) defines vision as “category of intentions that are
broad, all inclusive, and forward thinking”
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7. Characteristics of a Vision Statement
•
•
•
•
•
•
•
•
•
•
•
Inspiring and exhilarating.
It represents, a discontinuity, a step, a jump ahead to dream what it is
to be.
Creation of common identity and share sense of purpose.
Competitive, original and unique and practical.
Foster risk taking and experimentation.
Foster long term thinking.
A vision is a statement about what your organization wants to become.
It should resonate with all members of the organization and help them
feel proud, excited, and part of something much bigger than
themselves.
A vision should stretch the organization’s capabilities and image of
itself. It gives shape and direction to the organization’s future.
Visions range in length from a couple of words to several pages.
Shorter vision statements is recommended because people will tend to
remember their shorter organizational vision.
7

8. Vision Statement
• Vision Statement Samples:
• "Year after year, Westin and its people will be regarded as the best and
most sought after hotel and resort management group in North America."
(Westin Hotels)
• "To be recognized and respected as one of the premier associations of HR
Professionals." (HR Association of Greater Detroit)
• Vision Statement of “TATA STEEL”
“TATA Steel enters the new millennium with the confidence of
learning, knowledge based and happy organisation. We will establish
ourselves as a supplier of choice by delighting our customers with our
service and products. In the coming decade, we will become the most cost
competitive steel plant and so serve the community and the nation”.
• Vision Statement of Farm Fresh Produce
• “We help the families of Main Town live happier and healthier lives by
providing the freshest, tastiest and most nutritious local produce: From local
farms to your table in under 24 hours.”
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9. Developing a Vision Statement
•
The vision statement includes vivid description of the organization as it
effectively carries out its operations.
•
Developing a vision statement can be quick culture-specific, i.e.,
participants may use methods ranging from highly analytical and
rational to highly creative and divergent, e.g., focused discussions,
divergent experiences around daydreams, sharing stories, etc.
Therefore, visit with the participants how they might like to arrive at
description of their organizational vision.
•
Developing the vision can be the most enjoyable part of planning, but
the part where time easily gets away from you
•
Note that originally, the vision was a compelling description of the state
and function of the organization once it had implemented the strategic
plan, i.e., a very attractive image toward which the organization was
attracted and guided by the strategic plan. Recently, the vision has
become more of a motivational tool, too often including highly idealistic
phrasing and activities which the organization cannot realistically
aspire.
9

10. Strategic Vision
• Strategic Vision is a road map showing the route a company intends to
take in developing and strengthening the business. It defines Company’s
destination and provides rational for going there. It culminates in to a
Mission Statement. Strategic Vision points an Organisation in a particular
direction, charts a strategic path to follow for future and moulds the
organisation’s identity.
• Strategic Vision is different from Mission Statement: Strategic Vision deals
with where we are going, where as Mission Statement deals with
Company’s present business scope and purpose.
• A company Mission is guided by the buyer’s needs it seeks to satisfy, the
customer groups and market segments it is endeavouring to serve, and the
resources and technologies that it is deploying in trying to please
customers and achieve a Market and Industry position.
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11. Example of Strategic Vision
• “The San Antonio Express News” developed this Strategic
Vision,
• "EXPAND” our customer base and enhance the franchise by
pursuing multimedia opportunities.
• “DELIVER” an award-winning level of journalistic excellence,
building public interest, trust and pride.
• “PROVIDE” vigorous community leadership and support.
• “INSTILL” an environment of internal and external excellence in
customer service.
• “EMPOWER” and recognize each employee's unique
contribution.
• “ACHIEVE” the highest standards of quality.
• “IMPROVE” financial strength and profitability."
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12. Mission
• Thompson(1997) defines Mission as “the essential purpose of the
organisation, concerning particularly, why it is in existence, the
nature of businesses it is in, and the customers it seeks to serve
and satisfy”
• Hunger and Wheelen(1999) say that “mission is the purpose and
reason for the organisation’s existence”
• Mission statements could be formulated on the basis of vision
that an entrepreneur decides on in the initial stages.
• A business mission helps to evolve an executive action.
• Mission of organisation is what it is and why it exists. It represents
common purpose which the entire organisation shares and
pursues. It is a guiding principle.
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13. Mission Statement
• Mission of a company is expressed it terms of products and
geographical scope. It includes a methodology of attaining the
desired goal in vision. It defines the competitive strength of a
company and it emanates from corporate vision and strategic
posture of a company.
• Thus the mission of a business is a statement, a build-up
philosophy of its current and future expected position with
regards to its products, market leadership.
• Mission is statement which defines the role of organisation plays
in a society.
• The corporate mission is growth ambition of the firm.
13

14. Mission
Characteristics of a Mission Statement
• It should be feasible & It should be precise.
• It should be clear & It should be distinctive.
• It should be motivating.
• It should be indicative of major component of strategy
• It should be indicative of how objectives are to be
accomplished.
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15. Mission Statement Creation
• To create your mission statement, first identify your
organization’s “winning idea”.
This is the idea or approach that will make your organization
stand out from its competitors, and is the reason that
customers will come to you and not your competitors.
• Next identify the key measures of your success. Make sure you
choose the most important measures (and not too many of
them!)
• Combine your winning idea and success measures into a
tangible and measurable goal.
• Refine the words until you have a concise and precise
statement of your mission, which expresses your ideas,
measures and desired result.
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16. Developing a Mission Statement
1. At is most basic; the mission statement describes the overall
purpose of the organization.
2. If the organization elects to develop a vision statement before
developing the mission statement, ask “Why does the image,
the vision exist -- what is it’s purpose?” This purpose is often
the same as the mission.
3. Developing a mission statement can be quick culture-specific,
i.e., participants may use methods ranging from highly
analytical and rational to highly creative and divergent, e.g.,
focused discussions, divergent experiences around
daydreams, sharing stories, etc. Therefore, visit with the
participants how they might like to arrive at description of
their organizational mission.
4. When wording the mission statement, consider the
organization's products, services, markets, values, and
concern for public image, and maybe priorities of activities for
survival.
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17. Mission Statements
5.
6.
7.
8.
Consider any changes that may be needed in wording of the
mission statement because of any new suggested strategies
during a recent strategic planning process.
Ensure that wording of the mission is to the extent that
management and employees can infer some order of
priorities in how products and services are delivered.
When refining the mission, a useful exercise is to add or
delete a word from the mission to realize the change in
scope of the mission statement and assess how concise is its
wording.
Does the mission statement include sufficient description
that the statement clearly separates the mission of the
organization from other organizations?
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18. • Mission Statement of Ranabaxy
•
•
•
•
“To become a $ 1 Billion research based global (International)
company pharmaceutical company”
Mission Statement of Graphite India Limited
“To be within top three companies in the world by achieving
1,00,000 MT Production of Graphite Electrodes before 2012”
The mission statement of Farm Fresh Produce is:
“To become the number one produce store in Main Street by
selling the highest quality, freshest farm produce, from farm to
customer in under 24 hours on 75% of our range and with 98%
customer satisfaction.”
"Our goal is simply stated. We want to be the best service
organization in the world." (IBM)
"To give ordinary folk the chance to buy the same thing as rich
people." (Wal-Mart)
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19. Mission Statements
• "FedEx is committed to our People-Service-Profit Philosophy. We
will produce outstanding financial returns by providing totally
reliable, competitively superior, global, air-ground transportation of
high-priority goods and documents that require rapid, time-certain
delivery." (Federal Express)
• "Our mission is to earn the loyalty of Saturn owners and grow our
family by developing and marketing U.S.-manufactured vehicles that
are world leaders in quality, cost, and customer enthusiasm through
the integration of people, technology, and business systems."
(Saturn)
• "In order to realize our Vision, our Mission must be to exceed the
expectations of our customers, whom we define as
guests, partners, and fellow employees. (mission) We will
accomplish this by committing to our shared values and by
achieving the highest levels of customer satisfaction, with
extraordinary emphasis on the creation of value. (strategy) In this
way we will ensure that our profit, quality and growth goals are
met." (Westin Hotels and Resorts)
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20. Values
• Values are traits or qualities that are considered worthwhile;
they represent an individual’s highest priorities and deeply held
driving forces. (Values are also known as core values and as
governing values; they all refer to the same sentiment.)
• Value statements are grounded in values and define how people
want to behave with each other in the organization. They are
statements about how the organization will value customers,
suppliers, and the internal community. Value statements
describe actions which are the living enactment of the
fundamental values held by most individuals within the
organization.
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21. Values
• The values of each of the individuals in your workplace, along
with their experience, upbringing, and so on, held together to
form your corporate culture. The values of your senior leaders
are especially important in the development of your culture.
These leaders have a lot of power in your organization to set
the course and environment and they have selected the staff
for your workplace.
• If you think about your own life, your values form the
cornerstones for all you do and accomplish. They define where
you spend your time, if you are truly living your values. Each of
you makes choices in life according to your most important
four – ten values. It is necessary to take the time to identify
what is most important to you and to your organization.
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22. Developing a Values Statement
•
Values represent the core priorities in the organization’s
culture, including what drives members’ priorities and how
they truly act in the organization, etc. Values are increasingly
important in strategic planning. They often drive the intent
and direction for “organic” planners.
•
Developing a values statement can be quick culture-specific,
i.e., participants may use methods ranging from highly
analytical and rational to highly creative and divergent, e.g.,
focused discussions, divergent experiences around
daydreams, sharing stories, etc. Therefore, visit with the
participants how they might like to arrive at description of
their organizational values.
•
Establish four to six core values from which the organization
would like to operate. Consider values of customers,
shareholders, employees and the community.
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23. Developing a Values Statement
•
Notice any differences between the organization’s preferred
values and its true values (the values actually reflected by
members’ behaviours in the organization). Record each
preferred value on a flash card, then have each member
“rank” the values with 1, 2, or 3 in terms of the priority
needed by the organization with 3 indicating the value is
very important to the organization and 1 is least important.
Then go through the cards again to rank how people think
the values are actually being enacted in the organization
with 3 indicating the values are fully enacted and 1
indicating the value is hardly reflected at all. Then address
discrepancies where a value is highly preferred (ranked with
a 3), but hardly enacted (ranked with a 1).
•
Incorporate into the strategic plan, actions to align actual
behaviours with preferred behaviours.
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24. Samples of Values and Value Statements
• "To preserve and improve human life." (Merck)
• At Merck, "corporate conduct is inseparable from the conduct of individual
employees in the performance of their work. Every Merck employee is
responsible for adhering to business practices that are in accordance with
the letter and spirit of the applicable laws and with ethical principles that
reflect the highest standards of corporate and individual behaviour...
• "At Merck, we are committed to the highest standards of ethics and
integrity. We are responsible to our customers, to Merck employees and
their families, to the environments we inhabit, and to the societies we
serve worldwide. In discharging our responsibilities, we do not take
professional or ethical shortcuts. Our interactions with all segments of
society must reflect the high standards we profess."
• Patriot Ledger (SouthofBoston.com): "We have a total commitment to
these values, shaping the way we do business for our employees, our
customers and our company.
• Our employees are the most valued assets of our company, essential
participants with a shared responsibility in fulfilling our mission.
• We recognize that the quality, motivation and performance of our
employees are the key factors in achieving our success.
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25. Goals and Action Plans
• After you have developed the key strategies, turn your attention to
developing several goals that will enable you to accomplish each of
your strategies. Goals should be SMART: Specific, Measurable,
Achievable, Realistic and Time-based.
• Once you have enabled strategy accomplishment through setting
SMART goals, you will want to develop action plans to accomplish
each goal. You will need to follow an action plan:
• Establish a cross section of professionals as a committee and meet
to plan the sessions.
• Determine budget.
• Select topics based on member needs assessment.
• Plan advertising strategies, and so forth.
• Make action plans as detailed as you need them to be and
integrate the individual steps into your planning system. An
effective planning system, whether it uses a personal computer, a
paper and pen system, a handheld computer or a Palm, will keep
your goals and action plans on track and on target.
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26. Objectives of Business Policy:
• Understand various concepts, like. Strategy, policies, plans,
programmes.
• Knowledge of internal and external environment and how it
affects the functioning of the organisation.
• Application of generalised approach to deal with wide variety of
situations.
• Development of analytical ability to understand situation.
Identify factors relevant to decision making. Analyse strength,
weakness, opportunities and threats to organisation.
Development of attitude of generalist and asses a situation from
all angles.
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27. Benefits of Business Policy
• Business Policy seeks to integrate the knowledge and experience gained
in various functional areas of Management. Normally functional areas
are aloof of complexities of real life business situations. Business Policy
cuts across the narrow functional boundaries. Business Policy helps us
to create an understanding of how policies are formulated.
• Managers become more receptive to the ideas and suggestions of
senior Management. Managers feel themselves to be a part of a greater
design.
• Understanding Business Policy provides a basic framework for
understanding strategic decision making and Improvement in Job
Performance.
• Study of business policy leads to personal development. Managers
understand the impact of policy shifts on the status of one’s department
and on the positions one occupies.
• Understanding Business Policy enables manger to avail the an
opportunity or avoid a risk to career planning and development
• Understand senior management’s view point.
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28. Porter’s Five Forces Model,
Source: Porter, Michael E, - Competitive Strategies -1985
Potential
Entrants
Threat of new
Entrants
Industry
Competitors
Suppliers
Bargaining Power of
Suppliers
Rivalry among
existing firms
Buyers
Bargaining Power
of Buyers
Threat of substitute
products or suppliers
Substitutes
28

29. Forces Shaping Competition in an industry - 1
•
According to Porter, a firm develops its business strategies in
order to obtain competitive advantage (i.e., increase profits)
over its competitors. It does this by responding to five primary
forces:
1.
Rivalry amongst existing firms and jockeying for position - i.e.
competition
2.
Threat of new entrants
3.
Bargaining power of buyers / customers
4.
Threat form substitute products and
5.
Bargaining power of suppliers
29

30. Forces Shaping Competition in an industry - 2
• These five factors shape competition and determine
Attractiveness / Profitability in an industry.
• Sizing up competition within factory is not enough; all forces
shaping competition and survival of industry must be sized up.
We should know which of these forces are strong and how they
work in its industry, how will they affect the firm in particular
and how to adjust one’s position to defend or overcome or take
advantage of these forces.
• The company positions itself so as to be least vulnerable to
competitive forces while exploiting its unique advantage (cost
leadership). A company can also achieve competitive advantage
by altering the competitive forces.
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31. Forces Shaping Competition in an industry - 3
• These five forces of competition influence the firm’s strategy.
The five competitive forces model provides a solid base for
developing business strategies that generate strategic
opportunities In fact the strategy should be formed in such a
way to influence all these forces in favour of the firm. Strategy
should be formed to build defence against these forces and
finding a position in industry where the influence of these forces
is weakest.
• In his recent study, Porter (2001) reemphasized the importance
of analyzing the five competitive forces in developing strategies
for competitive advantage:
• Analyzing the forces illuminates an industry’s fundamental
attractiveness, exposes the underlying drivers of average
industry profitability, and provides insight into how profitability
will evolve in the future.
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32. Rivalry amongst existing firms and jockeying
for position - i.e. competition
• Industry members undertake more aggressive and more
frequent actions to boost their market standing &
performance. This makes rivalry stronger.
• Rivalry is stronger in slow growing markets.
• More nos. of competitors and competitors who are equal in
size and capability makes rivalry stronger.
• Rivalry increases as products of rival competitor becomes
more standardised giving good reliability.
• Rivalry increases as it becomes less costly for buyers to
switch the brand.
• Rivalry increases as competitors play a price war and other
competitive weapons to boost their market share.
• Rivalry is strong when nos. of competitors are less than five.
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33. • Rivalry increases when strong companies outside the
industry acquire weak firm in the industry and launch wellfunded, aggressive moves to transform the acquired
company in to a major contender.
• Rivalry is weak in fast growing markets.
• Rivalry is weak when, there are so many rivals, that impact
of one’s action is thin on spread over span.
Typical weapons to combat rivalry are:
• 1. Lower Prices.
• 2. More or different features.
• 3. Better product performance with higher Quality.
• 4. Stronger Brand image & appeal.
• 5. Wider selection to customers to choose from
Models & styles.
• 6. Better & bigger dealer network.
• 7. Better Customer service capabilities.
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34. 2. Threat of new entrants
Entry threats are stronger when:
• Candidates have resources that make them a formidable contender.
• Entry barriers are low.
• Newcomers can expect good returns.
• Buyer demand is growing rapidly.
• Industry is unwilling / unable to stop new entrants.
Entry Threats are weaker when:
• Entry candidates are small in nos.
• Entry barriers are high.
• Existing industry is itself struggling for profits.
• Industry outlook is uncertain and risky.
• Buyer demand is stagnant or slow.
• Existing industry members strong contest and does not allow new
comer to settle.
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35. 3. Bargaining power of buyers / customers
1. When nos. of buyers is small and when a buyer is particularly
important to seller.
2. When cost of switching brand is low to buyer.
3. When buyer demand is low and sellers are many
4. When buyers are well informed about product, prices & costs.
5. When buyer is capable of backward integrating and making
product by themselves.
6. When buyers have discretion in whether & when to purchase
the product.& When buyer is large and can demand
concessions.
Bargaining power of buyer is low when:
•
Infrequent and small purchases.
•
Buyers cost of switching to other brands is high.
•
It is a seller’s market & Brand reputation is important to buyer.
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36. 4.
Threat form substitute products
• When substitutes are readily available & attractively priced.
• When buyer view substitute products at par in terms of quality, performance &
other attributes.
• When costs are low to end users to switch to substitutes.
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37. 5. Bargaining power of suppliers
• Major suppliers can have sufficient bargaining power to
influence the terms & conditions in their favour.
• Item supplied is a commodity that is not readily available from
other suppliers in market.
• When few large suppliers are primary suppliers of a particular
item. (Suppliers can have a cartel)
• When it is costly or difficult for buyer to switch to new brand
or alternate items.
• When need items are in short supply.
• When supplied item has a differentiation, which enhances
performance of final product.
• When certain supplier supplies item has possibilities of cost
savings to industry members on account of its added quality
feature or service.
• Bargaining Power of Supplier is weak when: backward
integration is possible, when buyer is a major customer, when
there are many suppliers available.
37

38. SWOT Analysis:
Identify Company Resource Strengths and Competitive
capabilities.
Identify Company Resource Weaknesses and Competitive
deficiencies.
Identify Company’s Market Opportunities.
Identify External Threats to the Company’s future well
being.
•
•
•
Next step will be to draw conclusions concerning the
Company’s overall business situation.
Rank all factors from exceptionally weak to exceptional strong
scale and find out business attractiveness.
Identify attractive and non-attractive aspects of the Company’s
situation.
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39. SWOT Analysis:
• Third step will be to plan actions to improve Company Strategy.
• Use Company’s Strengths & Capabilities to overcome
weaknesses.
• Pursue those opportunities that are suitable to Company’s
Strengths and Competitiveness.
• Correct weaknesses that affect our abilities to take advantage
of market Opportunities.
• Use Company’s Strengths & Capabilities to lessen the impacts
of important external threats.
39

40. Factors to look for in SWOT analysis:
• Potential Resource Strengths & Capabilities
$ A powerful Strategy. $ Core competencies.
$ Distinctive Competence. $ A strongly differentiated Product.
$ Competencies & Capabilities matching with Key Success
Factors of Industry.
$ A strong financial condition providing ample resources.
$ Strong brand image $ An attractive Customer base.
$ Superior Technological skills / Product Quality/ Patents /
intellectual Capital / Innovation capabilities.
$ Cost advantage. $ Strong advertising & Promotion.
$ Supply Chain Management Capabilities.
$ Customer service capabilities.
$ Wide geographical coverage / strong Global distribution
capabilities.
$ Alliances / joint ventures / collaborations.
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41. Potential Resource Weaknesses & Competitive
Deficiencies.
•
•
•
•
•
•
•
•
•
•
•
•
•
No clear Strategic Direction.
Resources not matching KSFs
Lack of Core & Distinctive competencies.
Weak balance Sheet / heavy debt / low resources.
Too narrow product line compared to rivals.
Weak Brand image.
Weaker dealer network.
Low product Quality, lack of R&D and Technological know-how.
Lack of Management depth.
Loosing market share because………
Behind rivals in e-commerce capabilities.
Internal operation problems / obsolete facilities.
Underutilised Plant capacity.
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42. Potential Market Opportunities
•
•
•
•
•
•
•
•
•
•
Sharply rising buyer demand.
Serving new market segments / new set of customers.
Expanding to new geographic markets.
Expanding product line & range of products to meet market
demand.
Online sales, e-business.
Forward or backward integration.
Overcoming Trade barriers and capturing new foreign markets.
Acquire rival firms.
Enter into alliances.
Exploit new technologies.
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43. Potential External Threats
• Increasing intensity of competition among rivals.
• Slowdown of market.
• Entry of new potent rivals.
• Loss of sales to substitute products.
• Growing bargaining power of Customers / Suppliers.
• A shift in buyer needs and tastes.
• Adverse demographic change curtailing demand.
• Restrictive trade policies on the part of foreign Governments.
• Costly new regulatory requirements.
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44. Internal
Factors
External
Factors
Strengths
Technological Skills
Leading Brands
Distribution Channels
Consumer Loyalty
Production Quality
Scale
Management
Weaknesses
Absence of important skills
Weak Brands
Peer access to distribution
Low Customer retention
Unreliable Product / Service
Sub-scale
Management
Opportunities
Changing customer tastes
Geographical Liberalisation
Technological advances
Government Policies changes
Lower personal Taxes
Population age structure
New Distribution Channels
Threats
Changing customer tastes
Geographical Closures
Technological advances
Government Policies changes
Lower personal Taxes
Population age structure
New Distribution Channels
Positive
Negative
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45. Syllabus
• 5. Corporate Portfolio Analysis:
• Business Portfolio Analysis – Synergy and Dysergy –
• BCG Matrix –
• GE 9 Cell Model –
• Concept of Stretch, Leverage and fit
(3)
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46. Business Portfolio Analysis
• Definition : Analyzing “Elements” of a firm's “Product Mix”
to determine the “ Optimum Allocation” of its “Resources”.
Two most “Common Measures” used in a “Portfolio Analysis”
are “Market Growth” and “Relative Market Share”.
• “The strategic units that make up the company and the
attempts to evaluate current effectiveness and vulnerabilities”
(McDonald et al, 1992)
• “Business Portfolio Management” enable strategic planners to
select the optimal strategies for the individual products whilst
achieving overall corporate objectives” (McNamee, 1985)
46

47. • When a Business Portfolio comprises of Multi-business Units and
/ or operating at multi-location, then the Strategist often ask two
questions to take a decision on Business Strategy.
• How much of our time and money should we spend on our
best products to ensure that they continue to be successful?
• How much of our time and money should we spend
developing new costly products, most of which will never be
successful
• Examples of Portfolios:
• Unilever: ice cream, tea, spreads,
• Proctor & Gamble: Detergents, nappies,
• Gillette: batteries, Shaving products
• Virgin : trains, planes, cola, music stores
• Wipro : Computers, Vanaspati, Veg.Oils, Soaps,
• ITC : Tobacco, Soaps, Biscuits
47

48. •
•
•
•
1.
2.
3.
Business Portfolio Analysis
Portfolio Analysis is an analysis of the Corporation as a portfolio
of different businesses with the objective of managing it for
return on its resources.
Portfolio analysis looks at the corporate investments in different
products or industries under common corporate jurisdiction. It
involves, analysing future implications of presents resource
allocation and continuously deciding, adding, curtailing or
disposing, operations or products, so that overall portfolio
balance is maintained or improved.
Portfolio analysis takes into considerations aspects such as “
Companies Competitive Strength”, “Resource Allocation Pattern”
& “Industry Characteristics”.
All businesses have to balance, three basic aspects of running
the business :
Net Cash Flow.
State of Development.
Risk.
48

49. Boston Consulting Group – BCG’s Growth – Share Matrix
49

50. BCG’s Growth – Share Matrix
•
1.
2.
•
•
•
Different businesses which forms the Business Portfolio can be
characterised by two parameters:
Company’s Market share for the business, representing the
firm’s competitive position and
The overall growth rate of the business.
For each activity in the portfolio, a separate strategy must be
developed depending upon its position in 2 X 2 matrix.
Higher Market share will mean, higher profits and higher cash
flows. Relative market share is defined as the market share of
the relevant business divided by the market share of its largest
competitor. i.e. A = 10%, B = 20% & C = 60%, then, ‘A’s relative
market share is 1/6 & ‘C’s share is 3.
Higher Growth rate will mean profitable investment / expansion
opportunities and easier to increase market share. Earned Cash
can be ploughed back to enhance ROI.
50

51. BCG’s Growth – Share Matrix - Methodology
•
Step-by-step procedure to develop the business portfolio matrix
and identify appropriate strategies for different businesses:
1. Classify various activities of the Company into different business
segments or SBUs. (Strategic Business Units)
2. For each business segment, determine the growth rate of the
market. Plot it on linear scale.
3. Compile assets employed for each business segment and
determine the relative size of the business within the company.
4.
5.
Estimate the relative market shares for the different business
segments. This is done on logarithmic scale.
Plot the position of each business on a matrix of business growth
rate and relative market share.
51

52. BCG’s Growth – Share Matrix - illustration
Relative market Share
20
STARS
CASH COWS
18
QUESTION MARKS
DOGS
16
Business
Growth
rate %
14
12
10
8
6
4
2
2
10 X
4X
1.5 X
1X
0.5 X
0.1 X
52

53. Product Life Cycle
53

54. Strategies as per Product Life Cycle-1
• Expansion Strategy : Stars – are the businesses which have
high growth rate & high market share. At times they are not self
sufficient in cash flow, but need to be supported in view of their
potential. This is ‘Growth’ phase of “Product Life Cycle” (PLC).
Such businesses generate as well as use large amount of cash. The
Star generate high profits and represent the best investment
opportunities for growth. We need to reaffirm the Company’s
Competitive Edge at this phase by sufficient doses of resources for
expansion. The best strategy regarding stars is to make necessary
investments and consolidate the company’s high relative
competitive position.
e.g. Tiles, Electronics & Communications, Pharmaceuticals, are
“Star” industries.
54

55. Strategies as per Product Life Cycle-2
• Hold Strategy - Cash Cows are the businesses with low growth rate
and high market share. High market share leads to high generation
of cash and profits. Cash Cow is a business that generates cash
flows over & above its internal needs. Cows can be milked to
provide a corporate parent with funds for investing in star / cash
dog businesses, financing new acquisitions or paying dividends.
Cash cows provide the financial base for the company.
A strong cash flow resulting out of relatively high market share / low
market growth rate ‘Cash Cow’ opportunities should be able to
maintain market share at or around existing levels.
In this state of business, Corporate can adopt mainly Stability
Strategies. Expansions & investments can be thought only if the
long term prospects are exceptionally bright.
These are generally mature businesses reaping benefits of
experience and expertise. Funds generated are to be used for
“Question Mark” or “Star” businesses as “Cash Cow's are destined
to slow down. A phased retirement need to be planned.
55

56. Strategies as per Product Life Cycle- 3
•
Build Strategy – Question Mark : The Businesses with high
industry growth but low market share are “Question Marks”. In
the business. These ‘Question Mark’ opportunities need
investment in order to grow and gain market share.
Because of their high growth, the cash requirement is high, but
due to their low market share cash generation is low.
These are sometimes known as “Problem Child” as someone
with huge potential, but not clicking. Here, a large amount of
Cash inflow is required to stabilise and enter into “Star” phase.
Companies must obtain early lead to strengthen the business
and capture growth opportunities.
A question Mark business can either become a Star or can go to
Dogs depending upon funds & competitive edge.
56

57. •
•
•
•
•
Strategies as per Product Life Cycle - 4
The business is called Dogs, if business growth rate is low and the
company’s relative market share is also low.
The lower market share means poor profits and as market growth
is low, any investment is prohibitive as cash demanded will exceed
the cash generation, causing negative cash flow.
Under such circumstances, the Strategic solution is to either
liquidate, or if possible harvest or divest the DOG business.
Harvest Strategy : To develop short term cash flow irrespective of
the long term damaging effect to the product or business. This
strategy is appropriate for any weak products where disposal in the
form of a sale is unavailable or not preferred due to high exit
barriers
Divest Strategy : To change the capital of the business and allow
resources to be used elsewhere of industries that have a very slow
or negative market growth rate and where a company has low
market share. These are products in late maturity or declining stage
as mostly substitute’s start taking over these products. They stop
generating large amount of Cash and face a cost disadvantage
owing to low market share. Sometimes to reduce the high costs
involved, a Retrenchment Strategy is also adopted.
57

58. Cash Positions of Various Businesses
Business
Type
Cash
Cash
Source Use
Net Cash Balance
COW
More
Less
Funds available, so milk and
deploy
STAR
More
More
Build competitive position
and grow
DOG
Less
More
Divest and re-deploy
proceeds.
QUESTION Less
More
Funds needed to invest
selectively to improve
competitive position.
58

59. Limitation of BCG Matrix
• Predicting Profitability from Growth and Market Share:- BCG assumes
that profit depends on growth & market share. This may not be 100% true.
Industry attractiveness may be different from simple growth rate and the
firm’s competitive position may not be reflected in its market share.
• Difficulty in determining Market Share:- BCG has heavy dependence on
market Share as indicator of its competitive strength. The calculation of
market share depends upon how we decide, what is total market.
Sometimes, we may have to consider “niche’ market for analysis.
• No consideration for experience curve synergy :- In BCG each quadrant is
viewed independently. Low costs due to expertise of employees can
prolong Dog, star or cash cow stages.
• Disregard for Human aspect:- BCG does not recognise human aspect of
business. Cash generated in one business in one business get associated
with the power of concerned manager. Cash Cow unit may be reluctant to
part away with its cash to other businesses in the house. Strategic options
given by BCG may not be easy to implement.
59

60. Synergy v/s Dysergy -1
•
•
•
•
The whole is greater or lesser than sum of its parts.
1 + 1 could be 2 or 11 or 111.
This effect is known as Synergy.
In any
organisation, Resources, Strengths, Weaknesses, behaviours do
not exist independently but they act together. If these
strengths, and resources and behaviour in the Organisation are
directed properly, then a Synergistic Effect could be seen. The
Organisation should cultivate “Win-Win” and open
communication with philosophy of “Seek to understand first
and then to be understood”.
• In such an atmosphere, two or more strong points add up to
something more than its arithmetic sum. This is Synergy.
Similarly, two or more weaknesses acting in tandem can
damage more than its arithmetic sum. This is Dysergy.
60

61. Synergy v/s Dysergy -2
• In practice if functions like Product, Pricing, Distribution and
Promotion, work in harmony and support each other, then,
synergistic effect could be seen in Marketing. Similarly, if
Marketing and Production areas support each other, then
synergistic effect could be seen in Operating Efficiency.
Marketing inefficiencies could result in reduction of operating
efficiency as dysergistic effect.
• Synergistic Effects are results of quality and type of internal
environment existing within organisation. These effects will
only lead the organisations to develop competencies and ward
off external threats.
61

62. General Electric’s ( or McKinsey) 9 point
Multifactor Portfolio Planning Matrix
• Different businesses in the organisation as SBUs can be rated
for purpose of strategic planning.
• Two parameters are considered based on internal appraisal of
all the SBUs done individually.
• 1. Industry Attractiveness: How attractive is the industry? The
attractiveness index depends upon business strengths. It is a
product of several factors like Industry potential, the current
size of industry, the rate of growth of industry, structure and
profitability of the industry. This is generally highly profitable,
productive arena, where firm would like to deploy best of
everything. Similarly least attractive business is kept with little
attention or is for grabs i.e. for divestment.
• 2. Company business strength: Company business strengths is
a product of several factors like company’s current market
share, growth rate, differentiation strength, brand image,
corporate image.
62

63. GE’s 9 Point Model.
• The weighted factors for both these areas are plotted in
Company business Strength/Industry attractiveness
Company Business Strength
I
n
d
u
s
t
r
y
A
t
t
r
a
c
t
i
v
e
n
e
s
s
Strong
Medium
Weak
Invest /
Grow
Selectivity Harvest /
/Earnings Divest
High
Medium
Low
63

64. General Electric’s Business Screen
I
n
d
u
s
t
r
y
A
t
t
r
a
c
ti
v
e
n
e
s
s
Winners
High
Winners
A
B
C
Question
Marks
D
Winners
E
Average
Businesses
F
Medium
Losers
Losers
H
G
Low
Profit
Producers
Strong
Losers
Average
Weak
Business Strength / Competitive position
Circle denotes the size of Industry , while blue colour portion corresponds to Market Share.
64

65. General Electric’s Business Screen
•
The vertical axis represents Industry Attractiveness. This is weighted
composite rating based on eight different factors. These factors are:
1. Size of Market
10%
2. Rate of Growth of Sales & Cyclicality
10%
3. Industry Profit Margin.
40%
4. Competitive intensity including vulnerability to foreign competition.
15%
5. Seasonality.
5%
6. Economics of Scale.
5%
7. Susceptibility to Technological obsolesce
5%
8. Entry conditions, Social, legal, environmental & human impacts.
10%
Against each of these factors, the concerned business is
rated on a scale of 1 to 10 and then the weighted score is
determined from maximum of 10. This gives the Industry
Attractiveness Index.
65

66. General Electric’s Business Screen
• The horizontal axis represents business strength competitive
position. This is a weighted composite rating based on seven
factors. These factors are:
1. Relative market Share.
2. Profit margins.
3. Ability to compete on Price & Quality.
4. Knowledge of Customer & Market.
5. Competitive Strengths & Weaknesses.
6. Technological Capability
7. Calibre of Management.
•
The two composite values for ‘Industry Attractiveness’ and
‘Business Strength’ are plotted for each business in a
Company’s Portfolio. The pie charts denote the proportional
size of the industry – white colour & blue segment represent
company share.
66

67. General Electric’s Business Screen
• The horizontal axis represents business strength competitive position. This is
a weighted composite rating based on seven factors. A typical scoring of
Company’s Competitive position
Factor
Weightage Rating
Score
(1 to 10)
Market Share and Capacity
20%
7
1.4
Growth Rate
10%
7
0.7
Location and Distribution
10%
5
0.5
Management Skill
15%
6
0.9
Work force Harmony
20%
7
1.4
Technical Excellence including Product
and Process Engineering
20%
8
1.6
Company Image
5%
8
0.4
67

68. Gap Analysis
Desired
Performance
Gap
Performance
Achieved
Performance
Time -1
Time -2
68

69. Gap analysis -2
• Gap analysis is done for focussing on strategic alternatives.
• On dimension of time various alternatives are evaluated in
different phases to get a clear picture for selection of
strategies.
• What is the result of the present strategy?
• What should be new strategy?
• What should be methodology of implementation?
• If the gap is narrow, policy is to stabilise the strategies.
• If the gap is due to consistent past bad performance; which is
also expected in future, then retrenchment / withdrawal
strategies may be more suitable.
69

70. Gap Analysis - 3
• First step is to identify alternatives. Companies find it difficult
to change their strategies because strategic thinking is not the
core competency of managers. Hence lot of brain storming,
situational analysis need to be done.
• A correct definition of the problem is the Second step. A
hypothesis is developed after brain storming and situation
analysis. This hypothesis must be tested to developing clear
understanding of the forces that actually work.
• Next step is to formulate the strategy and address the driving
forces in a “cause and effect” relationship. Find the 80:20
Pareto Principle and attack the most important one.
• Prioritise the strategies and a plan for the projects to
implement strategies on time scale is created for future
guidance and analysis.
70

71. • --------------------------------------------------------• Syllabus
6. Generic Competitive Strategies:
• Low cost,
• Differentiation,
• Focus
(3)
• ---------------------------------------------------------
71

72. Competitive Strategy
• Competitive Strategy is about being different. It means
deliberately choosing to perform activities differently or to
perform different activities than rivals to deliver unique mix of
value – Michael F Porter.
• Competitive Strategy is about analysing and then
experimenting, trying, learning, and experimenting some more.
– Ian C. McMillan & Rita Gunther Mcgrath.
• The essence of Competitive Strategy lies in creating tomorrow’s
competitive advantages faster than the competitors mimic the
one you posses today. – Gary Hammel & C K Prahalad.
• A Competitive Strategy concerns the specifics of management
game plan for competing successfully and achieving a
competitive edge over rivals.
72

73. Generic Competitive Strategies
1.
2.
3.
4.
5.
A low-cost provider Strategy : Appealing to a broad spectrum of
customers by being the overall Low Cost Provider of a Product or
Service.
A broad-differentiation strategy : Seeking to differentiate the
company’s Product/service by offering different from Rivals to broad
spectrum of Customers.
A best-cost provider strategy : Giving customers more value for
money by incorporating good to excellent product attributes at
lower cost than rivals.
A focussed or market niche strategy based on Lower Cost :
Concentrating on Narrow buyer segment and out competing rivals
by offering at lowest cost than rivals
A focussed or market niche strategy based on differentiation :
Concentrating on Narrow buyer segment and out competing rivals
by offering customised attributes to niche member at lowest cost
than rivals
•
The basis of competitive strategy lies in Low-cost or
Differentiation and finding out our own focus on market niche.
73

74. Revamp Value Chain
•
•
1.
2.
3.
4.
5.
6.
7.
A Low-cost advantage can be achieved by re-vamping the
“Value Chain” activities and controlling all factors that drive
the costs. Re–vamping of “Value Chain” is aimed at
increasing efficiencies to out-manage rivals on costs. Revamping of value Chain is also done by examining the
elements of value chain eliminating or bypassing the
activities which are adding costs but not value to the
product. (Waste elimination)
Re-vamping the value Chain:
Use of internet Technology applications.
Approaching direct to end user in Sales & Marketing.
Purchasing directly from manufacturer.
Simplifying product design.
Using simpler, less capital intensive, flexible technologies.
Using CADs.
Substituting high cost/imported raw materials with
indigenous ones (Value Engineering)
Relocation of facilities. 8. Dropping the dead weight.
74

75. The value chain
• The value chain is a systematic approach to examining the
development of competitive advantage. It was created by M. E.
Porter in his book, Competitive Advantage (1980). The chain
consists of a series of activities that create and build value.
They culminate in the total value delivered by an organisation.
The 'margin' depicted in the diagram is the same as added
value. The organisation is split into 'primary activities' and
'support activities.'
75

76. 76

77. •
•
•
•
•
Primary Activities.
Inbound Logistics: Here goods are received from a company's
suppliers. They are stored until they are needed on the
production/assembly line. Goods are moved around the organisation.
Operations: This is where goods are manufactured or assembled.
Individual operations could include room service in a hotel, packing of
books/videos/games by an online retailer, or the final tune for a new
car's engine.
Outbound Logistics: The goods are now finished, and they need to be
sent along the supply chain to wholesalers, retailers or the final
consumer.
Marketing and Sales: In true customer orientated fashion, at this
stage the organisation prepares the offering to meet the needs of
targeted customers. This area focuses strongly upon marketing
communications and the promotions mix.
Service: This includes all areas of service such as installation, aftersales service, complaints handling, training and so on.
77

78. Support Activities -1.
• Procurement: This function is responsible for all purchasing of
goods, services and materials. The aim is to secure the lowest
possible price for purchases of the highest possible quality.
They will be responsible for outsourcing (components or
operations that would normally be done in-house are done by
other organisations), and e-Purchasing (using IT and webbased technologies to achieve procurement aims).
• Technology Development: Technology is an important source
of competitive advantage. Companies need to innovate to
reduce costs and to protect and sustain competitive
advantage. This could include production technology, Internet
marketing activities, lean manufacturing, Customer
Relationship Management (CRM), and many other
technological developments.
78

79. Support Activities -2.
Human Resource Management (HRM).
• Employees are an expensive and vital resource. An
organisation would manage recruitment and
selection, training and development, and rewards and
remuneration. The mission and objectives of the
organisation would be driving force behind the HRM
strategy.
Firm Infrastructure.
• This activity includes and is driven by corporate or
strategic planning. It includes the Management
Information System (MIS), and other mechanisms for
planning and control such as the accounting
department.
79

80. Five Generic Competitive Strategies
Type of Competitive Advantage Desired
Lower Cost
Differentiation
M
a
r
k
e
t
S
h
a
r
e
A Broad
Cross
Section of
Buyers
Overall Low Cost
Provider
Strategy
Broad
Differentiation
Strategy
Best Cost
Provider
Strategy
A narrow
Buyer
segment
for
Market
Niche
Focussed Low
Cost Strategy
Focussed
Differentiation
Strategy
80

81. Drivers for Low-Cost Strategy -1
Low-Cost Strategy makers generally attend to following cost
drivers:
a) Economies or diseconomies of scale: - Larger volumes can
reduce the costs as fixed costs get spread over large
volume. At the same time larger volume means larger
inventories and higher inventory carrying costs.
Manufacturing economies can be achieved by simplifying
product line, longer production runs, reducing varieties of
models, standardising designs and using common parts, use
of modular designs etc.
b) Learning Curve effects: A new product, new plant is full of
innumerable problems. Faster we de-bug, master the
technology, improve plant layout & work flow, improve
design, will bring economies of learning curve. Aggressively
managed companies who capture benefits of learning are
the one who can offer low costs.
81

82. Drivers for Low-Cost Strategy -2
c)
d)
e)
f)
Cost of key resource inputs: use of innovative incentive
schemes for unionised labour, use of non –unionised
labours, out sourcing, large scale purchasing with effective
use of bargaining power, variables due to locations,
Effective “Supply chain Management”
Use of industry value Chain by linking other activities for
other products in the company. Also warranty claims can be
linked with suppliers, there by diverting the warranty costs,
sharing opportunities with other businesses in the
organisations.
Using vertical integration v/s outsourcing: backward or
forward integration can reduce the reliance on outsourcing
and can reduce the costs.
Capacity utilisation has direct relation on spread of fixed
costs in the product cost. Low cost leader has to find ways
to operate at close to full capacity year round.
82

83. Drivers for Low-Cost Strategy -3
g)
Strategic Choices & Operating decisions such as:
•
Adding / Cutting services offered to Buyers.
•
Incorporating more / fewer performance & quality features
into product.
•
Increasing / decreasing distribution channels.
•
Lengthening / Shortening delivery times to customers.
•
Putting more emphasis on wages, incentives & fringe
benefits to motivate employees.
•
Rising / Lowering the specifications for purchased materials.
•
Example : Wall Mart.- The Low Cost Leader :
83

84. Factors for Low Cost Strategy
• Price competition is very high.
• Products are identical and are easily available.
• Product differentiation is low & cannot be achieved.
• Most buyers use the product in the same way.
• Cost of switching brand is low for customer.
• Buyers are large and have power to bargain.
• Newcomers can come with low price and attract buyers.
However, a Low Cost provider must always contain
enough attributes to be attractive to prospective buyers.
Low price by itself, is not appealing to buyers.
84

85. Aspects of industry for Differentiation Strategy-1
•
The essence of broad differentiation strategy is to be unique in
ways that are valuable to a wide range of customers. and at the
same it should be noted that
•
Easy to copy differentiators cannot provide sustainable
competitive advantages. As a rule,
•
Differentiation yields a longer lasting effect and more profitable
competitive edge, when it is based on:
1. Product innovation by R&D,
2. Technical superiority,
3. Product quality with superior manufacturing abilities.
4. Reliability.
5. Comprehensive customer service,
6. Unique competitive capability
7. Superior supply-chain activities.
8. Maintaining the cost of differentiation in line.
85

86. Aspects of industry for Differentiation Strategy-2
Such differentiation should result into:
•
Perceived & actual delivered value for customers
•
Command a premium price for its products
•
Increase unit sales & Gain buyer Brand loyalty
Approaches for achieving Cost Differentiation
1. Incorporate product attributes & user Features that lowers
the buyers overall costs of using the company’s product.
2. Incorporate features that raise product performance like
quality, reliability, durability etc.
3. Incorporate features that enhance buyer satisfaction in noneconomic or intangible ways.
4. To deliver value to customers via competitive capabilities
that rivals do not have or cannot afford to match.
86

87. •
•
•
•
•
•
•
•
•
Factors of Differentiation Strategy
The Product can be differentiated in many ways and buyers perceive
these differences as having value.
Buyers needs and uses are diverse.
There is less head to head competition. Few rival firms are following
differentiation approach.
Technological change is fast paced and competition revolves around
evolving product features.
Any differentiation that works well gets imitated and there is need
for constant up gradation.
Differentiating something that does not lower buyer’s cost or
improves perceived value is a mistake.
Over differentiating increasing service needs or usage constraints is
a mistake.
Trying to charge a too high a premium price.
Being timid & not striving to open up about competitors defect and
differentiating that is not visible to buyers is a pitfall.
87

88. Best Cost Provider Strategies
• Best Cost Provider Strategies are for giving customer ‘more
value for money'.
• It is middle path between pursuing a low cost advantage and
differentiation strategy.
• Best Cost Provider Strategies are ‘hybrid’ Strategies balancing
emphasis on Low Cost & Differentiation.
• Target market is Price & Value conscious buyer, with diversity
of products, where differentiation is a norm.
• To be successful, Best Cost Strategy must offer, buyers
significantly better product attributes, so that they can justify
higher price above Low – Cost leaders and with sufficient
differentiation can win over high-end Differentiation Leaders.
88

89. Focussed or Market Niche Strategies
Focussed Strategies have concentrated attention on a narrow
piece of the total Market. Target market segment is called as
‘niche’. e.g. Rolls Royce- a status symbol, Porsche for sports cars,
e-Bay for e-auctions.
Focussed Low Cost Strategy:
• Serving buyers in the target market niche at lower cost & lower
price than rivals.
• Producing ‘Private-Label’ imitating Brand name merchandise &
selling directly to retail chains.
Focussed Differentiation Strategy:
• Serving a buyer segment that is looking for special product
attributes or seller capabilities.
• By offering niche members a product perceive as well suited for
their own unique tastes & preferences and be at top of Market
pyramid due to their strength of differentiation.
• e.g. Gucci, Rolls Royce, Armani, Rolex, Reliance Fresh, Kesari
Tours
89

90. Low Cost Provider
Strategic Target
A broad cross section of the market
Basis of competitive
advantage
Lower overall costs than
competitors.
Product Line
A good basic product with
acceptable quality & few frills.
Production emphasis Continuous cost reduction without
sacrificing attributes
Marketing emphasis
Make virtue of product features with
low cost
Keys to sustain
strategy
Economical prices, good value, low
cost year after year.
90

91. Broad Differentiation
Strategic Target
A broad cross section of the market
Basis of competitive
advantage
Ability to offer something attractively
different.
Product Line
Many Product, wide selection, with
differentiating features.
Production emphasis Production superiority with
differentiating features buyers are
willing to pay
Marketing emphasis Advertise features, charge a
premium for differentiation
Keys to sustain
strategy
Constant innovation to stay ahead,
Few key differentiators.
91

92. Best Cost Provider
Strategic Target
Value oriented buyers
Basis of competitive
advantage
More value for money
Product Line
Items with appealing & assorted
upscale attributes.
Production emphasis Items with appealing & assorted
upscale attributes with lower costs
Marketing emphasis
Advertise best value, comparable
features with lower value.
Keys to sustain
strategy
Unique expertise in managing costs
while offering upscale features &
attributes.
92

93. Focussed Low Cost Provider
Strategic Target
Basis of competitive
advantage
Narrow market niche satisfying
distinctively different buyers needs &
preferences.
Lower overall costs than competitors
in niche market.
Product Line
A product tailored to tastes &
requirements of niche market.
Production emphasis
Continuous cost reduction without
sacrificing attributes
Marketing emphasis
Communicate budget priced product
features that fits niche market
requirements.
Keys to sustain
strategy
Stay committed to serving niche at
lowest over all cost . Do not loose
focus by entering other markets..
93

94. Focussed Differentiation Provider
Narrow market niche satisfying
Strategic Target
distinctively different buyers needs &
preferences.
Basis of competitive
advantage
Product Line
Attributes that appeal specifically to
niche members.
A product tailored to tastes &
requirements of niche market.
Production emphasis
Custom made products that match the
tastes & requirements of niche market.
Marketing emphasis
Communicate how product features
does the best of meeting niche
market requirements.
Keys to sustain
strategy
Stay committed to serving niche market at
better differentiation. Do not loose focus by
entering other markets Economical prices,
good value, low cost year after year.
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95. Description of the 7-S Frame work of MC Kinsey
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96. Description of the 7-S Frame work of MC Kinsey
• The 7-S framework of McKinsey is a Value Based Management (VBM)
model. Together these factors determine the way in which a corporation
operates.
• Shared Value: The interconnecting centre of McKinsey's model is: Shared
Values. What does the organization stands for and what it believes in.
These are Central beliefs and attitudes.
• Strategy: Strategy is a Plan for the allocation of a firm’s scarce resources,
over a time to reach identified goals. Strategy considers Environment,
Competition and Customers.
• Structure: The way the organization's units relate to each other:
centralized, functional divisions (top-down); decentralized (the trend in
larger organizations); matrix, network, holding, etc.
• System: The procedures, processes and routines that characterize how
important work are to be done: financial systems; hiring, promotion and
performance appraisal systems; information systems.
• Staff: Numbers and types of personnel within the organization.
• Style: Cultural style of the organization and how key managers behave in
achieving the organization’s goals.
• Skill: Distinctive capabilities of personnel or of the organization as a
whole. (Core Competencies).
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97. The McKinsey 7S Framework
• Ensuring that all parts of your organization work in harmony
• McKinsey 7S framework Developed in the early 1980s by Tom
Peters and Robert Waterman, two consultants working at the
McKinsey & Company consulting firm.
• The McKinsey 7S model can be applied to elements of a team or a
project as well. The alignment issues apply, regardless of how you
decide to define the scope of the areas you study
The 7S model can be used in a wide variety of situations where an
alignment perspective is useful, for example:
• Improve the performance of a company;
• Examine the likely effects of future changes within a company;
• Align departments and processes during a merger or acquisition;
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98. The Seven Elements
Hard Elements
Soft Elements
Strategy
Structure
Systems
Shared Values
Skills
Style
Staff
•"Hard" elements are easier to define or identify and
management can directly influence them: These are strategy
statements; organization charts and reporting lines; and formal
processes and IT systems.
•"Soft" elements, on the other hand, can be more difficult to
describe, and are less tangible and more influenced by culture.
However, these soft elements are as important as the hard
elements if the organization is going to be successful.
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99. • The way the model is presented in Figure depicts the interdependency of the
elements and indicates how a change in one affects all the others.
• Placing Shared Values in the middle of the model emphasizes that these values
are central to the development of all the other critical elements. The company's
structure, strategy, systems, style, staff and skills all stem from why the
organization was originally created, and what it stands for. The original vision of
the company was formed from the values of the creators. As the values change,
so do all the other elements
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100. How to Use the Model
• The model is based on the theory that, for an organization to
perform well, these seven elements need to be aligned and
mutually reinforcing. So, the model can be used to help
identify what needs to be realigned to improve performance,
or to maintain alignment (and performance) during other types
of change.
• Whatever the type of change - restructuring, new processes,
organizational merger, new systems, change of leadership, and
so on - the model can be used to understand how the
organizational elements are interrelated, and so ensure that
the wider impact of changes made in one area is taken into
consideration.
• You can use the 7S model to help analyze the current situation
(Point A), a proposed future situation (Point B) and to identify
gaps and inconsistencies between them. It's then a question of
adjusting and tuning the elements of the 7S model to ensure
that your organization works effectively and well once you
reach the desired endpoint.
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101. • However, it is not simple. Changing your organization probably
will not be simple at all! Whole books and methodologies are
dedicated to analyzing organizational strategy, improving
performance and managing change. The 7S model is a good
framework to help you ask the right questions - but it won't
give you all the answers. For that you'll need to bring together
the right knowledge, skills and experience.
• When it comes to asking the right questions, we've developed
a Mind Tools checklist and a matrix to keep track of how the
seven elements align with each other. Supplement these with
your own questions, based on your organization's specific
circumstances and accumulated wisdom.
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102. 7S Checklist Questions
• Here are some of the questions that you'll need to explore to help you
understand your situation in terms of the 7S framework. Use them to
analyze your current (Point A) situation first, and then repeat the
exercise for your proposed situation (Point B).
• Strategy:
• What is our strategy?
• How to we intend to achieve our objectives?
• How do we deal with competitive pressure?
• How are changes in customer demands dealt with?
• How is strategy adjusted for environmental issues?
• Structure:
• How is the company/team divided?
• What is the hierarchy?
• How do the various departments coordinate activities?
• How do the team members organize and align themselves?
• Is decision making and controlling centralized or decentralized? Is this
as it should be, given what we're doing?
• Where are the lines of communication? Explicit and implicit?
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103. • Systems:
• What are the main systems that run the organization? Consider financial
and HR systems as well as communications and document storage.
• Where are the controls and how are they monitored and evaluated?
• What internal rules and processes does the team use to keep on track?
• Shared Values:
• What are the core values?
• What is the corporate/team culture?
• How strong are the values?
• What are the fundamental values that the company/team was built on?
• Style:
• How participative is the management/leadership style?
• How effective is that leadership?
• Do employees/team members tend to be competitive or cooperative?
• Are there real teams functioning within the organization or are they just
nominal groups?
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104. • Staff:
• What positions or specializations are represented within the
team?
• What positions need to be filled?
• Are there gaps in required competencies?
• Skills:
• What are the strongest skills represented within the
company/team?
• Are there any skills gaps?
• What is the company/team known for doing well?
• Do the current employees/team members have the ability to
do the job?
• How are skills monitored and assessed?
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