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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT

Course No 301 Paper No. XVIII

Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an organization to examine different businesses in its portfolio on the basis of their related market share and industry growth rates. It is a two dimensional analysis on management of SBUs (Strategic Business Units). In other words, it is a comparative analysis of business potential and the evaluation of environment. According to this matrix, business could be classified as high or low according to their industry growth rate and relative market share. Relative Market Share = SBU Sales this year leading competitors sales this year. Market Growth Rate = Industry sales this year Industry Sales last year.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

The analysis requires that both measures be calculated for each SBU. The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance. The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership. BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis denoting market growth rate. The mid-point of relative market share is set at 1.0. if all the SBUs are in same industry, the average growth rate of the industry is used. While, if all the SBUs are located in different industries, then the mid-point is set at the growth rate for the economy. Resources are allocated to the business units according to their situation on the grid. The four cells of this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a particular type of business.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix, Boston Consulting Group analysis). Created by Bruce Henderson for the Boston Consulting Group in 1970 to help corporations toAnalyzing their business units or product lines. help the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis. To use the chart, analysts plot a scatter graph to rank the business units (or products) on the basis of their relative market shares and growth rates.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

As a particular industry matures and its growth slows, all business units become either cash cows or dogs. The natural cycle for most business units is that they start as question marks, then turn into stars. Eventually the market stops growing thus the business unit becomes a cash cow. At the end of the cycle the cash cow turns into a dog.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

The overall goal of this ranking was to help corporate analysts decide which of their business units to fund, and how much; and which units to sell. Managers were supposed to gain perspective from this analysis that allowed them to plan with confidence to use money generated by the cash cows to fund the stars and, possibly, the question marks. As the BCG stated in 1970: Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth opportunities. The balanced portfolio has: stars whose high share and high growth assure the future; cash cows that supply funds for that future growth; and question marks to be converted into stars with the added funds.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

For each product or service, the 'area' of the circle represents the value of its sales, thus offers a very useful 'map' of the organization's product (or service) strengths and weaknesses, at least in terms of current profitability, as well as the likely cashflows. The need which prompted this idea was, indeed, that of managing cashflow. It was reasoned that one of the main indicators of cash generation was relative market share, and one which pointed to cash usage was that of market growth rate.

Derivatives can also be used to create a 'product portfolio' analysis of services. So Information System services can be treated accordingly.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com

MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

StarsStars represent business units having large market share in a fast growing industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead. Net cash flow is usually modest. SBUs located in this cell are attractive as they are located in a robust industry and these business units are highly competitive in the industry. If successful, a star will become a cash cow when the industry matures.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be utilized for investment in other business units. These SBUs are the corporations key source of cash, and are specifically the core business. They are the base of an organization. These businesses usually follow stability strategies. When cash cows loose their appeal and move towards deterioration, then a retrenchment policy may be pursued.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Question MarksBusiness units having low relative market share and located in a high growth industry. They requirehuge amount of cash to maintain or gain market share. attention to determine if the venture can be viable. Question marks are generally new goods and services which have a good commercial prospective. There is no specific strategy which can be adopted If--the firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be adopted. Most businesses start as question marks as the company tries to enter a high growth market in which there is already a marketshare. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Dogs-

Businesses having weak market shares in low-growth markets. They neither generate cash nor require huge amount of cash. Due to low market share, these business units face cost disadvantages. Generally retrenchment strategies are adopted because these firms can gain market share only at the expense of competitors/rival firms. These business firms have weak market share because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share. Number of dogs should be avoided and minimized in an organization.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Stars (high growth, high market share) Stars are using large amounts of cash. Stars are leaders in the business. Therefore they should also generate large amounts of cash. Stars are frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold your market share in Stars, because the rewards will be Cash Cows if market share is kept. Cash Cows (low growth, high market share) Profits and cash generation should be high. Because of the low growth, investments which are needed should be low. Cash Cows are often the stars of yesterday and they are the foundation of a company.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Dogs (low growth, low market share) Avoid and minimize the number of Dogs in a company. Watch out for expensive rescue plans. Dogs must deliver cash, otherwise they must be liquidated. Question Marks (high growth, low market share) Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share. If the market share remains unchanged, Question Marks will simply absorb great amounts of cash. Either invest heavily, or sell off, or invest nothing and generate any cash that you can. Increase market share or deliver cash.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Other uses and benefits of the BCG Matrix If a company is able to use the experience curve to its advantage, it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. Once it becomes a star, it is destined to be profitable. BCG model is helpful for managers to evaluate balance in the firms current portfolio of Stars, Cash Cows, Question Marks and Dogs. BCG method is applicable to large companies that seek volume and experience effects. The model is simple and easy to understand. It provides a base for management to decide and prepare for future actions.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Limitations of BCG Matrix The BCG Matrix produces a framework for allocating resources among different business units and makes it possible to compare many business units at a glance. But BCG Matrix is not free from limitations, such asBCG matrix classifies businesses as low and high, but generally businesses can be medium also. Thus, the true nature of business may not be reflected. Market is not clearly defined in this model. High market share does not always leads to high profits. There are high costs also involved with high market share. Growth rate and relative market share are not the only indicators of profitability. This model ignores and overlooks other indicators of profitability. At times, dogs may help other businesses in gaining competitive advantage. They can earn even more than cash cows sometimes. This four-celled approach is considered as to be too simplistic .
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Other uses and benefits of the BCG Matrix If a company is able to use the experience curve to its advantage, it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. Once it becomes a star, it is destined to be profitable. BCG model is helpful for managers to evaluate balance in the firms current portfolio of Stars, Cash Cows, Question Marks and Dogs. BCG method is applicable to large companies that seek volume and experience effects. The model is simple and easy to understand. It provides a base for management to decide and prepare for future actions.
Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com 16

MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Phases of Strategic Management: Define the Mission, Purpose, objectives. Formulate the strategy Implement the strategy Evaluate the strategy after implementation for the expected outcome.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Elements of strategic management process: Define the Business Set the Mission determine the purpose Establish the objectives Perform the Environment Scanning Obtain Corporate Appraisal Evolve the alternatives Exercise the choices Formulate the strategy Prepare the strategic plan Evaluate the strategy.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Determinants of Strategy ( Considerations that affects the strategy) Demand for goods and services Supply of goods and services Competition Key success factors(KSF) Growth potential and profit prospects Market strength Financial capacity of the organization
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Attributes of the professional management Knowledge Attitude Skills Technical Human Conceptual Analytical Administrative Managerial Etc.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Levels of strategic management: Corporate level: Board of Directors, Chief Executive Officers- looking after the running the company as a whole, deciding about the type of the business the organization is in. Business level: SBU Strategic Business Unit: e.g. Divisional G.M. generally depends on the number of product mix, profit centers. Operating level: use to take technical decisions, e.g. marketing, finance, operations, manufacturing, etc.

Level

Concep Human tual Skills Skills High Medium High Medium

Technic al Skills

Top

Low Medium High

Middle Mediu m Low Low

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Areas of Alternatives: Production strategies Finance strategies Marketing strategies Personnel strategies etc.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Strategic Options: Strategies of Survival Stable growth strategy Growth strategy End game strategy Retrenchment strategy Combination of strategy Business unit strategies
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

1. Strategies for Survival:


Hold or Maintain: ( Suitable whenever there is a Risk of Loss) Pull Back and Redeploy: Narrow down the supply & Redesign resources Milk or Harvest: suits for short term gain, Best if the product is on the verge of Obsolescence, product life cycle ends, Customer confidence declining in the product. Liquidation and Divestment: Withdraw from the business on failure at every stage to save the business.

2. Stable Growth Strategy: Low risk, Steady growth, Change in resource allocation. 3. Growth Strategies: a. Product life cycle: b. Expansion: c. Concentrating on one product: d. Vertical Integration: in two possible directions e. Concentric diversification: Add new product similar to product line f. Horizontal diversification: Buy the Competitor, Take over. g. Conglomerate diversification: Add new product different than product line
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

4. End Game Strategy: In situation where product demand declines, modify leadership, diversification in niche etc helps rescue the problem Retrenchment Strategies: In situation like recession, poor financial performance of the organization. Turn around Strategy: Cut back on personnel, expenses, cost, promotions, overheads etc to increase the efficiency, productivity and performance. Divestment Strategy: Sell the product line to another business i.e. hand over the entire business or brand to other units. e.g. Dalda, soap, tractor etc. Liquidation Strategy: In the extreme case sell out the entire business Combination of the Strategies: Simultaneous: Two or more strategies at a time Sequential: Time bound implementation of plan one by one Business Unit Strategies: a. Overall cost leadership i.e. keep the costs lower than competitors. b. Differentiation Strategy: Maintain the Uniqueness in the business line. c. Focus Strategies: Concentrate on particular group of customers.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Mintzberg's 5 Ps for Strategy The word "strategy" has been used implicitly in different ways even if it has traditionally been defined in only one. Explicit recognition of multiple definitions can help people to manoeuvre through this difficult field. Mintzberg provides five definitions of strategy: Plan Ploy Pattern Position Perspective.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

PLAN Strategy is a plan - some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation. By this definition strategies have two essential characteristics: they are made in advance of the actions to which they apply, and they are developed consciously and purposefully. PLOY As plan, a strategy can be a ploy too, really just a specific manoeuvre intended to outwit an opponent or competitor.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

PATTERN If strategies can be intended (whether as general plans or specific ploys), they can also be realised. In other words, defining strategy as plan is not sufficient; we also need a definition that encompasses the resulting behaviour: Strategy is a pattern - specifically, a pattern in a stream of actions. Strategy is consistency in behaviour, whether or not intended. The definitions of strategy as plan and pattern can be quite independent of one another: plans may go unrealised, while patterns may appear without preconception. Plans are intended strategy, whereas patterns are realised strategy; from this we can distinguish deliberate strategies, where intentions that existed previously were realised, and emergent strategies where patterns developed in the absence of intentions, or despite them.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

POSITION Strategy is a position - specifically a means of locating an organisation in an "environment". By this definition strategy becomes the mediating force, or "match", between organisation and environment, that is, between the internal and the external context. PERSPECTIVE Strategy is a perspective - its content consisting not just of a chosen position, but of an ingrained way of perceiving the world. Strategy in this respect is to the organisation what personality is to the individual. What is of key importance is that strategy is a perspective shared by members of an organisation, through their intentions and / or by their actions. In effect, when we talk of strategy in this context, we are entering the realm of the collective mind individuals united by common thinking and / or behaviour.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

The 7-S Framework It is a management model which describes 7 factors to organize a company in an holistic and effective way. The model is developed by McKinsey is termed as 7-S Framework. These factors are helpful to determine the way in which a corporation operates. Managers needed to take into account all of the seven factors so as to achieve the successful implementation of a strategy for the organization, large or small. Since all are interdependent, the failure to pay proper attention to one of them may effect all others as well. Origin of the 7-S Framework. History The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981while investigating about the successful performance of the Japanese industry. At around the same time that Tom Peters and Robert Waterman were exploring what made a company excellent. The Seven S model was born at a meeting of these four authors in 1978. It appeared also in "In Search of Excellence" by Peters and Waterman, and was taken up as a basic tool by the global management consultancy company McKinsey. Since then it is known as their 7-S model.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

1.Shared Values The interconnecting center of McKinsey's model is: Shared Values. What does the organization stands for and what it believes in. Central beliefs and attitudes. 2. Strategy Plans for the allocation of a firms scarce resources, over time, to reach identified goals. Environment, competition, customers.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

3. Structure The way in which the organization's units relate to each other: centralized, functional divisions (top-down); decentralized; a matrix, a network, a holding, etc. 4. Systems The procedures, processes and routines that characterize how the work should be done: financial systems; recruiting, promotion and performance appraisal systems; information systems.

5. Staff Numbers and types of personnel within the organization. 6. Style Cultural style of the organization and how key managers behave in achieving the organization's goals. 7. Skills Distinctive capabilities of personnel or of the organization as a whole. Compare: Core Competences.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

The ADL Matrix from Arthur D. Little is a portfolio management method.


The ADL portfolio management approach uses an industry assessment and a business strength assessment as its dimensions. The industry measurement is an identification of the life cycle of the industry. The business strength measure is a categorization of the corporation's SBU's into one of five (six) competitive positions: dominant, strong, favorable, tenable, weak (and non-viable). This yields a matrix of 5 competitive positions by 4 life cycle stages. Positioning in the matrix identifies a general strategy. Defining the line of business in the ADL matrix In the ADL Matrix approach, the strategist must identify discrete businesses by finding commonalities among products and business lines using the following criteria as guidelines:Common rivals Prices, Customers, Quality/Style, Substitutability, Divestment or liquidation.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

ASSESSING THE INDUSTRY LIFE CYCLE STAGE IN THE ADL MATRIX The assessment of the Industry Life Cycle stage of each company is made on the basis of: Business market share, Investment, and Profitability and cash flow. ASSESSING THE COMPETITIVE POSITION IN THE ADL MATRIX The competitive position of a firm is based on an assessment of the following criteria: Dominant. Rare, often the result from a almost-monopoly or protected leadership. Strong. A strong company can follow a strategy without too much consideration of moves by rival companies. Favorable. Industry is fragmented. No clear leader among stronger rivals. Tenable. The company has a niche, either geographical or defined by the product. Weak. Business is too small to be profitable or survive over the long term. Critical weaknesses. LIMITATIONS Some known limitations of the ADL Matrix are: There is no standard life cycle length. Determining the current industry life cycle phase is difficult. Competitors may influence the length of the life cycle.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Strategic Review Evaluation and Control Levels of review: 1. Strategic 2. operational Basic Steps in the process of review:1. Develop Criteria for evaluation 2. Measure actual Performance 3. define Tolerance Limits / Acceptance levels 4. Analyze deviation from acceptable limits 5. Get feedback 6. Analyze and modify the process.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Need of Evaluation to1. Check whether decisions are in tune with the Policy 2. Check whether sufficient resources are made available 3. Check whether resources are used wisely 4. Check whether events are as anticipated 5. Check whether Goals are achieved 6. Check whether to continue with the plan
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

What to Evaluate? 1. Objectives 2. environment 3. Internal Conditions 4. Resource Capitalization 5. Risk 6. Time Horizon 7. Feasibility
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Check while developing the criteria for evaluation 1. Performance Target and Standards 2. Quantitative criteria ( ROI, Dividend, Turn Over, Mkt Share etc) 3. Qualitative criteria like Consistency, Appropriateness, Workability Systems Approach for Control Action Objectives Set Standards Measure & Monitor Analyze deviation Feedback Modify Implement. ( Have Flow Chart Method)
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Control is a continuous and Dynamic Process, there fore have

1.Budgets 2. Audits 3. Time based Control like PERT,CPM, GERT ( Graphical Evaluation & Review Tech.) PDM ( Precedence Diagramming Method) 4. Strategy Audit on ( Validity, Consistency, Effectiveness) 5. MIS 6. Motivation & Reward system
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Beneficiaries of Strategic Control: Shareholders, Creditors, Govt, Board of Direcotors, CEO, Finance, Profit Centers, Middle level management. Problems in Evaluation and Control: Difficulty in deciding Limit of Strategic Control Difficulty in measurements of control Resistance to change and Evaluation
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Types of Strategic Control: Premise of Control Implementation of Control Strategic Surveillance Special alert Control Methods / Techniques in Strategic Evaluation & Control: Strategic Control: (i) Strategic momentum (ii) Strategic Leap Control Assumption:- There is no change in the strategy 1. Responsibility Control Centre :- From Core Mgmt Control system ( Revenue, Expenses, Profits, Investments) 2. Underlying Success Factors: ( Key Success Factors like KPI Key Performance Index) 3. Generic Strategies: ( Based on Comparison with other organization strategies)

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Strategic Leap Control: ( Environment is relatively Unstable it


helps to redefine strategy)

1. 2. 3. 4. 5.

Types of Strategic leap Control: Strategic issue management Strategic Field assignment Modeling Scenarios

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Evaluation Method for Operational Controls: 1. Financial Techniques: Budgetary Control , ZERO Based Budgets, Financial Analysis, PARTAVA System 2. Network Technique: PERT CPM 3. MBO Management By Objectives: Performance of Jr. Sr. Executives 4. MOU Memorandum of Understanding 5. Strategic Audit: Validity, Consistency, Effectiveness.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Some Quotes
The price of greatness is responsibility. A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. Continuous effort - not strength or intelligence - is the key to unlocking our potential The farther backward you can look, the farther forward you are likely to see. You have enemies? Good. That means you've stood up for something, sometime in your life.

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

However beautiful the strategy, you should occasionally look at the results Sir Winston Churchill 1874-1965, English statesman

There is always a better strategy than the one you have; you just haven't thought of it yet
Sir Brian Pitman, former CEO of Lloyds TSB, Harvard Business Review, April 2003

Unless a variety of opinions are laid before us, we have no opportunity of selection, but are bound of necessity to adopt the particular view which may have been brought forward
Herodotus, 5th century BC, Greek historian

The processes used to arrive at the total strategy are typically fragmented, evolutionary, and largely intuitive
James Quinn in Strategic Change: Logical Incrementalism, 1978
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

How many senior executives discuss the crucial distinction between competitive strategy at the level of a business and competitive strategy at the level of an entire company?
C.K. Prahalad and Gary Hamel, in their article: The core competence of the corporation, 1990

What's the use of running if you are not on the right road
German proverb

I claim not to have controlled events, but confess plainly that events have controlled me
Abraham Lincoln 1809-1865, sixteenth American president

Perception is strong and sight weak. In strategy it is important to see distant things as if they were close and to take a distanced view of close things
Miyamoto Musashi 1584-1645, legendary Japanese swordsman
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Do not repeat the tactics which have gained you one victory, but let your methods be regulated by the infinite variety of circumstances
Sun Tzu c. 490 BC, Chinese military strategist

There is always a better strategy than the one you have; you just haven't thought of it yet
Sir Brian Pitman, former CEO of Lloyds TSB, Harvard Business Review, April 2003

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Unless a variety of opinions are laid before us, we have no opportunity of selection, but are bound of necessity to adopt the particular view which may have been brought forward
Herodotus, 5th century BC, Greek historian

The processes used to arrive at the total strategy are typically fragmented, evolutionary, and largely intuitive
James Quinn in Strategic Change: Logical Incrementalism, 1978

How many senior executives discuss the crucial distinction between competitive strategy at the level of a business and competitive strategy at the level of an entire company?
C.K. Prahalad and Gary Hamel, in their article: The core competence of the corporation, 1990
Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

What's the use of running if you are not on the right road
German proverb

I claim not to have controlled events, but confess plainly that events have controlled me
Abraham Lincoln 1809-1865, sixteenth American president

Perception is strong and sight weak. In strategy it is important to see distant things as if they were close and to take a distanced view of close things
Miyamoto Musashi 1584-1645, legendary Japanese swordsman

Do not repeat the tactics which have gained you one victory, but let your methods be regulated by the infinite variety of circumstances
Sun Tzu c. 490 BC, Chinese military strategist
Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com 50

MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Explanation of Benchmarking. Benchmarking is a systematic tool that allows a company to determine whether its performance of organizational processes and activities represent the best practices. Benchmarking models are useful to determining how well a business unit, division, organization or corporation is performing compared with other similar organizations. A benchmark is a point of reference for a measurement. The term 'benchmark' presumably originates from the practice of making dimensional height measurements of an object on a workbench using a gradual scale or similar tool, and using the surface of the workbench as the origin for the measurements.

Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

1. 2. 3. 4. 5.

Business benchmarking is related to Kaizen and competitive advantage thinking. BENEFITS OF BENCHMARKING. Improving communication Professionalizing the organization / processes, or for Budgetary reasons In outsourcing projects Traditionally, performance measures are compared with previous measures from the same organization at different times. Although this can be a good indication of the speed of improvement within the organization, it could be that although the organization is improving, the competition is improving faster... FIVE TYPES OF BENCHMARKING Internal benchmarking (benchmark within a corporation, for example between business units) Competitive benchmarking (benchmark performance or processes with competitors) Functional benchmarking (benchmark similar processes within an industry) Generic benchmarking (comparing operations between unrelated industries) Collaborative benchmarking (carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries or an industry organization).
Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

TYPICAL STEPS IN A BENCHMARKING PROCESS Scope definition Choose benchmark partner(s) Determine measurement methods, units, indicators and data collection method Data collection Analysis of the discrepancies Present the results and discuss implications / improvement areas and goals Make improvement plans or new procedures Monitor progress and plan ongoing benchmark. COST OF BENCHMARKING There are costs to benchmarking, although many companies find that it pays for itself. The three main types of costs are: 1. Visit costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labour time. 2. Time costs - Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required. 3. Benchmarking database costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice.
Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com 54

MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

LIMITATIONS OF BENCHMARKING Benchmarking is a tough process that needs a lot of commitment to succeed. Time-consuming and expensive. More than once benchmarking projects end with the 'they are different from us' syndrome or competitive sensitivity prevents the free flow of information that is necessary. Comparing performances and processes with 'best in class' is important and should ideally be done on a continuous basis (the competition is improving its processes also...). Is the success of the target company really attributable to the practice that is benchmarked? Are the companies comparable in strategy, size, model, culture? What are the downsides of adopting a practice?

Book: Christopher E. Bogan, Michael J. English - Benchmarking for Best Practices Book: Peter Bolstorff, Robert Rosenbaum - Supply Chain Excellence Book: Joe Zhu - Quantitative Models for Performance Evaluation and Benchmarking Stanley Stringer - USA How should I put together a Peer Group? "How do I determine the right companies to compose a Peer Group... Does anybody have an approach or criteria?"

Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com

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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT


Course No 301 Paper No. XVIII

Assignment

Use the suitable tools while developing and evaluating a strategy Analyse using the same for your presentation

Thanks.

Dr.N.C.Dhande SRTM University Nanded, nishika.dhan@gmail.com

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