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STRATEGIC MANAGEMENT
COURSE MANUAL
STRATEGIC MANAGEMENT
COURSE MANUAL
MANUAL CONTENTS
Page
Session 1
Session 2
21
Session 3
40
Session 4
57
Session 5
80
Session 6
97
Session 7
120
Session 8
133
Page
Page
Session 9
150
Session 10
171
Session 11
190
Session 12
213
Session 13
232
Session 14
253
Page
ANNEX
Annex 1
Seminars
Annex 2
Recommended Reading
Annex 3
Page
SESSION 1
STRATEGY DEFINITIONS
STRATEGIC PLANNING
DISCUSSION QUESTIONS
S 1 / 01 . 17
Page
WHAT IS STRATEGY ?
Strategy is a term used in common day managerial communication. It is often assumed that
managers have a common understanding of what strategy is all about, but when we consider
the definitions below, there are in fact differences in interpretation !
STRATEGY DEFINITIONS
Strategy is the great work of the organisation. In situations of life and death, it is the
Tao of survival or extinction. Its study cannot be neglected.
Sun Tzu The Art of War
S 1 / 02 . 17
Page
Quinn : Strategic decisions are those that determine the overall direction of an enterprise
and its ultimate viability in light of the predictable changes that may occur in its most
important surroundings environments.
A Strategy is the pattern or plan that integrates an organisations major goals, policies and
action sequences into a cohesive whole. A well formulated strategy helps to marshall and
allocate an organisations resources into a unique and viable posture based on its relative
internal competencies and shortcomings, anticipated changes in the environment and
contingent moves by intelligent opponents.
Johnson & Scholes : Strategy is the direction and scope of an organisation over the
long term ideally which matches its resources to its changing environment, and in
particular its markets, customers or clients so as to meet stakeholder expectations.
S 1 / 03 . 17
Page
Bowman & Asch : Strategic management is the process of making and implementing
strategic decisions . . . (it) is about the process of strategic change.
S 1 / 04 . 17
Page
Sun Tzu : All men can see the tactics whereby I conquer, but what none can see is the
strategy out of which victory is evolved.
The rules of strategy are few and simple. They may be learned in a week. But such
knowledge will no more teach a man to lead an army than a knowledge of grammar will teach
him to write.
Kenichi Ohmae : Strategy is a state of mind
Now, consider these inputs and attempt to define the term STRATEGY !!
One thing is clear, if strategy is designed to deploy resources to achieve a favourable outcome
in the longer term, it is NOT EASILY REVERSED.
S 1 / 05 . 17
Page
Sun Tzu
(Art of War)
Igor Ansoff
Marvin Bower
(of McKinsey)
Andrin Campbell
Alfred Chandler
Edwards Deming
Michael Goold
S 1 / 06 . 17
Page
(Corporate Culture)
Bruce Henderson
Theodore Levitt
(Marketing Myopia)
Kenichi Ohmae
Henry Mintzberg
Tom Peters
S 1 / 07 . 17
Page
10
Edgar Schein
Alfred Sloan
S 1 / 08 . 17
Page
11
BUSINESS UNIT
LEVEL
OPERATIONAL
LEVEL
INDIVIDUAL
LEVEL
S 1 / 09 . 17
12
Henry Mintzberg used an approach defining strategy from a perspective of 5 Ps : STRATEGY AS A PLAN
STRATEGY AS A PLOY
STRATEGY AS A PATTERN
STRATEGY AS A POSITION
ie .a place to be achieved.
STRATEGY AS A PESPECTIVE
These ideas can be used at different organisational levels as outlined one Page 12.
S 1 / 10 . 17
Page
13
STRATEGIC PLANNING
The terms Strategy and Strategic Management are complementary to Strategic
Planning , the details of which will be explained throughout this manual. There is however a
simple but effective approach for producing a strategic plan which can be applied to anything
from business situations to personal life.
Answers to a few powerful questions can offer a sense of purpose, clarity, focus and the
intention to achieve an intended outcome from results-oriented thinking.
These questions in Figure 1.1 are very effective in any management situation where strategy
has to be crafted and decided. This simple sequence works well.
If a more scientific approach is needed, so that one can map the way through the strategic
planning process, the following roadmap of 14 steps will provide a robust framework from
which to proceed (page 15 and 16).
Strategic Planning, (see Figure 1.1) in simple terms, should answer the following 6
questions : S 1 / 11 . 17
Page
14
FIGURE 1.1
6
S 1 / 12 . 17
15
Assessing facts about the current environment, both internal and external
2.
Setting assumptions about existing and future internal and external environmental
conditions
3.
4.
5.
6.
S 1 / 13 . 17
Page
16
7.
8.
Setting criteria to evaluate alternative strategies, including the critical factors for success
9.
Page
17
STRATEGIC MANAGEMENT
In order to understand strategic management in simple but effective terms, the following model
has been designed for this manual.
From this Strategic Management Process Model (Figure 1.2), the following processes should be
appreciated : 1.
2.
3.
4.
5.
6.
7.
Managing the needed changes, which may be both prescriptive and emergent
S 1 / 15 . 17
Page
18
STRATEGIC DIRECTION
EXTERNAL
ENVIRONMENTAL
ANALYSIS
INTERNAL
ENVIRONMENTAL
ANALYSIS
STRATEGY DETERMINATION
STRATEGY OPTIONS
CRITERIA FOR EVALUATION
STRATEGY CHOICE
MANAGING CHANGE
FIGURE 1.2
L C MASSINGHAM 2003
S 1 / 16 . 17
OUTCOMES FROM
CHANGE
Page
19
DISCUSSION QUESTIONS
1.
FROM
THE
INPUTS
IN
THE
MANUAL
AND
YOUR
OWN
PERCEPTIONS,EXTRACT THE KEY INGREDIENTS OF THE DEFINITIONS
FOR STRATEGY AND THEN CRAFT YOUR OWN DEFINITION.
2.
3.
S 1 / 17 . 17
Page
20
SESSION 2
INTERNAL DRIVERS
EXTERNAL DRIVERS
PRESCRIPTIVE APPROACH
EMERGENT APPROACH
DISCUSSION QUESTIONS
S 2 / 01 . 19
Page
21
S 2 / 02 . 19
Page
22
KANTNER et al (1992) argues that these strategy drivers are derived from 3 levels : THE MICRO INTERNAL ENVIRONMENT
THE MACRO EXTERNAL ENVIRONMENT
POLITICAL FORCES AT THE INDIVIDUAL LEVEL IN THE ORGANISATION
This provides a clear, simple and effective summary.
S 2 / 03 . 19
Page
23
All of which, collectively will drive a need for change from the external environment.
S 2 / 04 . 19
Page
24
A PRESCRIPTIVE APPROACH
AN EMERGENT APPROACH
A COMBINATION OF BOTH
S 2 / 05 . 19
Page
25
S 2 / 06 . 19
Page
26
Page
27
Either approach will depend upon the current managerial style, size of organisation, stability
of the organisation together with the policies and protocols for strategic decision taking.
It will be necessary to reflect upon whether strategies determined are : Imposed
Consensus based
Process Driven
Performance based
Ideological
Entrepreneurial or
Long term based and hence have evolved with the environmental conditions being
monitored, tracked and well-considered.
S 2 / 08 . 19
Page
28
In practice, discussions may often be held by those who are affected by strategy
decisions, more so than those taking strategy decisions, simply because the rationale
for strategy decisions has not been adequately communicated.
Moreover, some approaches to strategy decisions may have been taken as a result of an
impending crisis, where the risk attached to strategy decisions may be significant.
Strategy decisions will also be driven by the current market position ie. leader, challenger
or follower.
From the above explanation, it can be seen that the rationale for strategy decisions may be
complex !
S 2 / 09 . 19
Page
29
Prescriptive and emergent approaches both have a time and place utility. It is
important to realise the impact of these approaches upon
The organisation as a whole
Market place performance
The current working culture & ethics
The core values of the enterprise
The overall strategic intent.
Strategy decisions work within a dynamic environment, therefore the impact and outcome
of strategic level decisions must be considered with this clearly in mind. Furthermore all
strategy decisions must be both lead and be supported, because strategy formulation must
be followed through with strategy implementation.
S 2 / 10 . 19
Page
30
S 2 / 11 . 19
Page
31
The key questions to be raised therefore in taking either a prescriptive or an emergent approach
are : -
Does this strategy decision challenge our existing perceived managerial consistency
(if any) ?
Does it fit with stakeholder expectations ?
What advantage can be gained ?
Is it desirable, feasible and doable ?
S 2 / 12 . 19
Page
32
The Drivers for Change can be sourced from the internal and external operating
environments of the organisation. The analysis of these environments should be based upon
fact. The analysis of these facts can be achieved using a SWOT ANALYSIS.
This
comprises
internal
STRENGTHS
AND
WEAKNESSES
and
external
The process of completing a SWOT analysis from a conventional perspective uses a simple
4-box model as shown in Figure 2.1.
S 2 / 13 . 19
Page
33
WEAKNESSES
THREATS
S 2 / 14 . 19
Page
34
Often the company using SWOT Analysis may end up with overstating strengths or
weaknesses arising from the current operating climate and organisational culture.
This may render the SWOT Analysis ineffective.
An important question to raise is :
How can SWOT Analysis help the organisation achieve its vision, mission
and objectives ?
It is only by taking relevant action from the analysis undertaken that will render SWOT
Analysis useful.
One useful approach to SWOT Analysis is : THE 5 CRITICAL ACTIONABLE SWOT FACTORS
S 2 / 15 . 19
Page
35
This approach will take the following posture : Given our future ambitions, how do we assess our ability to achieve these future
ambitions ?
Therefore :
What are the 5 Critical Strengths which can be used to drive future Strategy ?
What are the 5 Most Penetrating Weaknesses which hold the business back and
therefore need to be attended to ? If they cannot be corrected, then these weaknesses are
really operating constraints.
What are the 5 Most Attractive Opportunities the organisation can take advantage of
in the future ?
What are the 5 Most Significant Threats of which the organisation must be mindful ?
Page
36
Once this is achieved, to make the SWOT Analysis valuable, the SWOT interactions should
be considered. It is from these interactions that drivers for change may emerge, priorities can
be established and new strategies formed.
The interactions to review are : STRENGTHS
OPPORTUNITIES
WEAKNESSES STRENGTHS
THREATS
THREATS
WEAKNESSES
OPPORTUNITIES
OPPORTUNITIES
STRENGTHS
THREATS
OPPORTUNITIES
The consequences of this analysis can then be summarised, reviewed and where appropriate
an agenda of drivers for action can be achieved.
S 2 / 17 . 19
Page
37
The outcome will be new drivers for change, potential strategy proposals and if successful,
future developments.
Session 3 will delve further into conducting external environmental analysis that is
normally used to discover opportunities and threats.
S 2 / 18 . 19
Page
38
DISCUSSION QUESTIONS
1.
ORGANIC FOOD
MOBILE TELECOMMUNICATIONS
LADIES FASHION APPAREL
2.
3.
S 2 / 19 . 19
Page
39
SESSION 3
INDUSTRY DEFINITION
DISCUSSION QUESTIONS
S 3 / 01 . 17
Page
40
INDUSTRY DEFINITION
Industries can be classified broadly into Manufacturing, Process, Service and Information
Industries. It is more common however to define an industry in Product terms :
AEROSPACE INDUSTRY
INFORMATION TECHNOLOGY INDUSTRY
CAR MANUFACTURING INDUSTRY
HOSPITALITY INDUSTRY
The industry definition may simply help to answer what business are you in ?
The context of an Industry definition would also include the buyers, the suppliers and the
competition, to provide a broader explanation.
S 3 / 02 . 17
Page
41
Page
42
Habitual Buying
Restaurant Location
Effective Staffing
Each player would meet these CSFs, some maybe better than others, but the points of
competitive differentiation would probably be based on menu and food taste and service,
for example.
The concept of CSFs enables industry monitoring to be undertaken to test if the industry
is still relevant to its customers and if so, to what extent in accordance with the determined
CSFs.
S 3 / 04 . 17
Page
43
Industry Level
Corporate Level
Management Level
Business Function Level
Operational Level
whereby the essential conditions for success can be pre-determined and then monitored.
At industry level, the following examples maybe useful to support explanation.
S 3 / 05 . 17
Page
44
INDUSTRY
International Airlines
SUGGESTED CSFs
Reservation Systems
Ticket Pricing and Flexibility
Passenger Load factors
Routes
Airport Relations
Mineral Water
Bottling Capacity
Extensive Distribution Network
Low Cost Production
High Sales Volumes
Brand Identity for Market Segments
S 3 / 06 . 17
Page
45
S 3 / 07 . 17
Page
46
Political
Economic
Socio-cultural
S 3 / 08 . 17
Page
47
Technology
Legislation
Ecological
This form of analysis has become well known and accepted. It has also been outlined in
detail in the Marketing Management manual.
For the sake of completeness, it has been included in this Strategic Management manual.
However the essence of PESTLE Analysis is to assess how and where potential
opportunities and threats may arise.
S 3 / 09 . 17
Page
48
S 3 / 10 . 17
Page
49
Page
50
STAGE 1
STAGE 2
S 3 / 12 . 17
1. ______________________
____
2. ______________________
____
3. ______________________
____
4. ______________________
____
N. ______________________
____
Page
51
STAGE 3
STAGE 4
S 3 / 13 . 17
1. ______________________
____
2. ______________________
____
3. ______________________
____
4. ______________________
____
N. ______________________
____
Page
52
STAGE 5
3. _______________
5. _______________
2. _______________
4. _______________
6. _______________
STAGE 6
STAGE 7
S 3 / 14 . 17
Page
53
This is a basic process which can be modified with an increasing level of sophistication.
Scenario analysis is useful to challenge the basic assumptions about the industry and the
enterprise. It will prevent complacency setting in, especially in mature stable industry
environments.
The process of scenario analysis alerts the managerial mindset to the need for change in order
to remain a relevant player within the industry.
S 3 / 15 . 17
Page
54
COMMERCIAL TELEVISION
PRIVATE HOSPITALS
INSURANCE
RESIDENTIAL PROPERTY
PRIVATE JETS
Page
55
S 3 / 17 . 17
Page
56
SESSION 4
COMPETITOR ANALYSIS
COMPETITOR BENCHMARKING
PORTERS 5 FORCES
CUSTOMER ANALYSIS
DISCUSSION QUESTIONS
S 4 / 01 . 23
Page
57
COMPETITOR ANALYSIS
As part of the external environmental review at Industry or Industry Sector level, specific
attention will be needed to assess competition across the broad market domain and then at
segment level.
The main factors to be used to conduct Industry Competitor Analysis are :
S 4 / 02 . 23
Page
58
COMPETITOR BENCHMARKING
It has become common practice within many industries to be able to learn from ones
competitors. Hence, the term benchmarking has been coined whereby a main competitor is
used as a basis for comparison and evaluation.
For example, a local bank in Colombo, Sri Lanka may benchmark itself against HSBC as an
International Bank in the ambition for improvement and improved market penetration.
The reality is that the selected competitor for benchmarking should be within the same market
domain, ie. is it realistic for a local bank to benchmark against an International Bank ?
The ultimate purpose is to identify the best practices valued by customers and suppliers and to
compare the position of your company in order to identify weaknesses for improvement.
[ Learning from benchmarking can also be applied to other industries and by making
relevant transfers of best practices, for example relating hospital customer care to the
service deliverables of a major airline. ]
S 4 / 03 . 23
Page
59
The ability to benefit from benchmarking will depend upon the Strategic Position of your
company, ie. Leader, Follower or Challenger and also the Industry Life Cycle Stage ;
Growth, Maturity or Decline as well as managerial mindsets and operating culture.
Benchmarking can be extended to examine key financial performance indicators such as
Profitability, Liquidity, Return in Assets, Gearing, P/E Ratios and so on --- a subject to be
covered in detail on the Financial Module.
The fundamental benefit from benchmarking is to make improvements, not to imitate
otherwise all companies will begin to look the same !!!
Remember, differentiation is essential to establish and secure a sustainable long term
position within an Industry.
S 4 / 04 . 23
Page
60
PORTERS 5 FORCES
One of the most useful frameworks for analysing competitive structure is that developed by
Michael E. Porter. Porter suggests that competition in an industry is rooted in its underlying
economic structure and therefore goes way beyond the behaviour of current competitors.
Porter claims the state of competition depends upon five basic competitive forces. Together,
these factors determine the ultimate profit potential in an industry where profit potential is
measure in terms of long run return on invested capital.
The goal of competitive strategy is to find a position in the industry where the company can
best defend itself against these forces, or can influence them in its favour. Knowledge of
these underlying pressures highlights the critical strengths and weaknesses of the company,
shows the position in the industry, clarifies areas where strategy changes yield the greatest
pay-off, and highlights areas where industry trends hold greatest significance as opportunities
or threats.
Consider Figure 4.1 below and the notes that are connected to it.
S 4 / 05 . 23
Page
61
PORTERS 5 FORCES
MODEL OF INDUSTRY COMPETITIVENESS
New entrants
Threats
3
Suppliers
Bargaining
Power
Industry
Competitors
Intensity of
rivalry
Bargaining
Buyers
Power
Threats
Substitutes
Figure 4.1
S 4 / 06 . 23
Page
62
NOTE
1
WHO IS COMPETING?
size
market shares
RIVALRY DETERMINANTS
brand loyalty
switching costs
product differentiation
investment requirements
S 4 / 07 . 23
Page
63
These factors will help to understand industry structure and the intensity of rivalry, but
this is further pressured by threats from new entrants and substitutes. In addition, the
bargaining strength and power of suppliers and buyers will add further pressure.
NOTE
2
S 4 / 08 . 23
Page
64
NOTE
3
This is mainly exerted by the price demanded which has a direct impact on the
profitability of the industry, as profitability is reduced, competition intensifies.
Suppliers can also forward integrate. The bargaining power is also a function of
the number of suppliers and the supplier concentration, this is balanced against
the availability of substitutes, essentially it is the classical supply / demand curve.
S 4 / 09 . 23
Page
65
NOTE
4
If the threat of substitutes is great, this could eventually result in the redefining of the
industry.
Switching costs are both functional and emotional and should be taken into account
carefully, so as to assess the nature of future competitive threats.
S 4 / 10 . 23
Page
66
NOTE
5
S 4 / 11 . 23
Page
67
The analysis of Porters 5 Forces can be tabled from a number of perspectives as can be seen.
At a pragmatic level, two aspects should be assessed.
1. Is the force favourable or unfavourable in generating long term industry
profitability ?
2. What is the relative importance of each of these forces upon long term industry
profitability ?
These questions may be approached at industry level and then at the level of one competitor
(for example your own company) because different interpretations will be made.
The analysis will also be conditioned by the industry lifecycle and the economic
environment at the time of the analysis.
It is important also to note that the 5 forces are somewhat detached from the Industry
Mindset.
S 4 / 12 . 23
Page
68
It is not just Industry Rivalry which is to be assessed but also to understand the contextual
depth of the Industry Mindset.
Therefore the Five Force Model would benefit from a contextual understanding about the
perceptions, expectations and assumptions about the industry from among key industry
players. This could be supplemented with the expected financial performance of the industry
in terms of expected margins as well as the critical factors for industry success. This would
add depth to the analysis of Porters 5 Forces.
Page
69
Substitutes
(Price Competition)
ENTRANTS
Supplier Power
Buyer Power
(More Choice)
Figure 4.2
S 4 / 14 . 23
Page
70
POTENTIAL IMPACT
Competitor
Rivalry
Substitutes
(Price Competition)
SUBSTITUTES
Supplier Power
(Business Sustainability)
Buyer Power
(Purchasing Behaviour)
Figure 4.3
S 4 / 15 . 23
Page
71
POTENTIAL IMPACT
Competitor
Rivalry
Entrants
BUYER
POWER
Supplier Power
Substitutes
(Adoption or Avoidance)
Figure 4.4
S 4 / 16 . 23
Page
72
POTENTIAL IMPACT
Entrants
Buyer Power
COMPETITOR
RIVALRY
Supplier Power
Substitutes
(Collaborative Alliances)
S 4 / 17 . 23
Page
73
POTENTIAL IMPACT
Competitor
Rivalry
Entrants
(Collaborative Alliances)
(Downstream Development)
SUPPLIER
POWER
Buyer Power
Substitutes
(Business Sustainability)
Figure 4.6
S 4 / 18 . 23
Page
74
Modify the conclusions drawn by considering the impact of bargaining power and also of
the threats upon the intensity of competitive rivalry and how this may adjust the industry
KSFs (on CSFs).
Now have a look at the broader environment influences which Porters model ignores, ie.
PEST / SLEPT / PESTLE and conclude how these uncontrollable factors will impact
upon industry performance and the need for change. Then review how competitive
conditions may emerge overtime. This presents a good case for scenario planning !!!
S 4 / 19 . 23
Page
75
CUSTOMER ANALYSIS
Within the external environment are customers who are the source of survival, growth and
sustainability for any industry.
Therefore, it is essential to know who are the existing and potential buyers, their location
and purchasing power, plus the motives that will induce and sustain purchase so that their
needs are being met now and in the future.
At external level, broad classifications into market segments are needed. At internal level,
customer profiling and tracking is vital for planning, resourcing customer strategy and
business success.
Cross-reference to the modules on Marketing Management will provide an important input to
this element of external environmental analysis.
S 4 / 20 . 23
Page
76
SUMMARY
The outcome of external environment analysis is to determine drivers for change that may
arise from the extraction and assessment of current and future OPPORTUNITIES AND
THREATS.
S 4 / 21 . 23
Page
77
DISCUSSION QUESTIONS
2. ASSUME YOU ARE ONE OF THE LEADING 3 CAR HIRE COMPANIES WITH
GLOBAL MARKET PENETRATION, WHAT CAN YOU LEARN FROM APPLYING
PORTERS 5 FORCE MODEL ?
S 4 / 22 . 23
Page
78
S 4 / 23 . 23
Page
79
SESSION 5
DIFFERENTIATION ADVANTAGE
DISCUSSION QUESTIONS
S 5 / 01 . 17
Page
80
S 5 / 02 . 17
Page
81
OPERATIONS
Operational restrictions : Legal, regulatory framework
Operational processes
Operational profitability, flexibility, efficiency, capacity
Facilities and plant : Age, location, ownership, condition, usage
R&D record, expenditure and capability
Control and quality
Relationships and coordination with support functions
Suppliers : Contracts, relationships
S 5 / 03 . 17
Page
82
PRODUCTS/SERVICES
Product /service range : Main, niche, specialised, gaps, potential, dropped products
Brand names, patent, copyright
Comparative ratings : Market share, profitability, rating by trade, rating by customer, price level,
value for money, fitness for purpose, packaging
MARKETING
Pricing : Stability, margin vs cost, elasticity and constraints
Sales Performance : By Product, geographic spread, customer type, distribution channels
Customer data : Loyalty, turnover, attitude
Promotion : Effectiveness, expenditure/sales
Reputation : Complaints procedures, response times
FINANCE
Track record : Profit, dividends, interest, cash flow, balance sheet, reserves
Asset management record
Major changes in accounting policies
Profit and cash flow forecasts
Control of debtors and creditors
ADDITIONAL ITEMS CONTEXTUALLY RELEVANT
S 5 / 04 . 17
Page
83
The resource audit is used as a route to strategy determination as shown in Figure 5.1 below :
THE ROUTE TO STRATEGY THROUGH RESOURCE & CORE COMPETENCE
1.
2.
3.
4.
S 5 / 05 . 17
RESOURCES
CAPABILITY
POTENTIAL FOR
SUSTAINABLE
COMPETITIVE
ADVANTAGE
STRATEGY
DETERMINATION
Figure 5.1
Page
84
The output of this analysis is to determine existing and future weaknesses and strengths.
However it will also highlight resource constraints within which the business has to operate
to achieve objectives.
One important resource of any organisation is its core competence.
Leveraging a companys position from its core competence is one route to sustainable
competitive advantage, provided that this competency remains relevant to the market
and can be differentiated from the competition.
Resources should be assessed not only in terms of a functional resource audit, but also in
terms of knowledge, experience, systems, relationships, partnerships, brand equity, time,
space and so on. The resource audit needs to consider any platform that can create value
for the enterprise. This all helps in part to answer an important question Where are we
now ? .
S 5 / 06 . 17
Page
85
S 5 / 07 . 17
Page
86
margin
Technology development
Procurement
5 primary
activities
In bound
logistics
Operations
Outbound
logistics
Marketing
and sales
Service
margin
S 5 / 08 . 17
Page
87
While the conventions of Porters value chain are probably already understood, one useful
application is to use the value chain to locate and analyse the sources of competitive
advantage. Figure 5.3 shows how this can be achieved.
The diagram follows the conventions of the combination of Primary and Support activities
specific to the business, which when combined produce an operating margin. Then within
these areas of activity, which will actually be the Key Result Areas (KRAs) for the
business, points of competitive differentiation can be located.
These of course will be attached to responsibilities for their delivery. To ensure that this is
achieved, KPIs can be established for performance management and review.
In this way the value chain can support business and organisational productivity. Moreover,
this is simple to understand and easy to communicate.
S 5 / 09 . 17
Page
88
SUPPORT
ACTIVITIES
INFRASTRUCTURE ACTIVITIES :
RESEARCH, DEVELOPMENT, DESIGN
v
.
MATERIAL
HANDLING
S 5 / 10 . 17
v
.
v
.
SALES &
MARKETING
HOLDING,
WAREHOUSING
& DISTRIBUTION
INVENTORY
PRODUCTION
PURCHASING,
PRIMARY
ACTIVITIES
Figure 5.3
Fast manufacturing,
Defect-free manufacturing.
Ability to produce to
customer specification
Partnership with key
customers.
DEALER
SUPPORT &
CUSTOMER
SERVICE
Training that
supports the channel.
Total commitment to
customer service
89
Page
90
STAGE 3. Select Key Result Areas (KRAs) and the strengths within them
Identify the internal strengths of the firm. For example, if the canning company has
strong technical capabilities, it may therefore differentiate by meeting demanding design
specifications and offering a high level of technical support to canning customers.
S 5 / 12 . 17
Page
91
CAN MAKER
3
4
PRIMARY
ACTIVITIES
CANNER
PRIMARY
ACTIVITIES
Figure 5.4
S 5 / 13 . 17
Page
92
The design engineering of distinctive cans for customers end-use may in turn assist the
customers own marketing activities.
2.
3.
By maintaining high stocks and offering speedy delivery, customers can economize on
their stockholding (they may even be able to move to a just-in-time system of can
supply).
4.
5.
Capable and fast technical support can reduce the costs of breakdowns on canning lines.
S 5 / 14 . 17
Page
93
S 5 / 15 . 17
Page
94
DISCUSSION QUESTIONS
1.
S 5 / 16 . 17
Page
95
2.
3.
S 5 / 17 . 17
Page
96
SESSION 6
COMB ANALYSIS
CLASSICAL MODELS
SERVO ANALYSIS
DISCUSSION QUESTIONS
S 6 / 01 . 23
Page
97
RULE 2 :
S 6 / 02 . 23
Page
98
RRULE 3 :
RRULE 4 :
S 6 / 03 . 23
Page
99
SITE
LOCATIONS
SUPPLIER LINKS
MARKET SHARE
CUSTOMER
VALUE FOR
PRODUCT
FOCUS
INVENTORY
THE BRAND
MANAGEMENT
MONEY
SERVICE
CULTURE
IN STORE MERCHANDISING
SITE
LOCATIONS
S 6 / 04 . 23
INNOVATION
MKiS
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100
CONSERVATIVE
CORPORATE
CULTURE
MANAGERIAL INFLEXIBILITY
EMPLOYEE ENGAGEMENT
S 6 / 05 . 23
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101
COMB ANALYSIS
Comb Analysis can be used as a basis for comparative analysis, for example in Figure 6.3 it can be
used to achieve a comparison of customers purchase criteria with comparative ratings of alternative
suppliers.
This simple visual analysis enables the analyst to understand differential competitive advantage
from a market place perspective.
The steps to take are as follows : STEP 1
mean
STEP 2
Then determine from the same sample how each competitor is rated on the
same criteria and calculate mean scores for the sample, (or industry) as a whole.
STEP 3
Overlay the results to produce a Comb chart and interpret the data.
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COMB CHART
Figure 6.3
1
Brand Name
Terms of
Trade
Industry Scores
S 6 / 07 . 23
After Sales
Service
On time
Price
Delivery
PURCHASE CRITERIA
Competitor A
Product
Promotional
Quality
Support
Competitor B
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103
Figure 6.4
RANKING CRITERIA
X
X
X
X
X
X
1
LOW
0
Price
X
X
X
X
Quality
Service
Packing
Delivery on Time
Complaints Handling
Credit
From the chart, the gaps between customer needs and perceived customer deliverables from suppliers in
general is significant.
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104
The chart is a useful device to help to visualise the gaps and this analysis will highlight
weaknesses which in turn became drivers for change.
The Comb Chart helps to clarify comparisons over a pre-determined set of criteria in order to
locate areas for future action.
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105
Life cycle analysis can therefore assist the Strategic Management Mindset and in so doing, drive
continuous change.
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106
Figure 6.5
LIFE CYCLES
THE PRODUCT LIFE CYCLE
SALES
SALES
AND
PROFIT
PROFIT
Introduction
S 6 / 11 . 23
Growth
Maturity
Decline
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107
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108
STARS
Product
D
GROWTH
LOW
PROBLEM CHILDREN
Product
B
MARKET
RATE
LOW
MARKET SHARE
CASH COWS
Product
A
Product
C
DOGS
* The breakpoint depends on the industry eg : Steel 3%, Food Retailing 8% and based on Country Market Segments.
** Market Share is your share relative to the four largest Players in the market.
S 6 / 13 . 23
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Figure 6.7
Where are we in
relation to our
competitors in
providing for
market needs
SALES
Innovation
Early Adoption
Laggards
(2.5%)
(13.5%)
(34%)
(16%)
S 6 / 14 . 23
(34%)
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110
CLASSICAL MODELS
The classical models which the reader should be aware of include :
These models are familiar to the student as they have been covered in earlier modules. It is simply
worthy of note to mention that they area collective set of tools that can be used with benefit to
produce insight and analysis into an organisations internal operating environment.
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111
SERVO ANALYSIS
Another management tool to assess the companys strategic decisiveness is to use the SERVO
model. This acronym stands for :
Strategy
Environment
Resources
Values
Organisation
The approach taken is to assess each element and then the interactions between the elements to
determine the levels of consistency overtime and to use this as a yardstick for the future. The aim of
the model is to determine the balance between all the internal elements with the environment and
thereby assess the strategic fit between the elements of the SERVO model.
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112
STRATEGY
To assess strategy using SERVO analysis the approach taken is to review the firms vision, mission
and objectives, the product/market spaces in which they compete as well as the competitive strategy
and positioning. Attention should then be given to assess how the firm will build capabilities and
resources to achieve sustainable competitive advantage.
In addition the business model is used to discover how the firm can deliver value to its customers at
a satisfactory level of profitability and whether this remains viable for the future. The focus
therefore is to review the core strategy of the business.
This in itself is a comprehensive review, the challenge therefore is to assess the strategy consistency
with other elements in the SERVO model, namely the environment, resources, values and
organisation.
From this review apparent strengths and weaknesses will also be revealed.
S 6 / 17 . 23
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113
ENVIRONMENT
The expected division between internal and external environmental factors will be completed but at
different levels : The Task Environment
The Industry Environment
The Macro Environment
RESOURCES
Resources are fundamental assets and capabilities used to generate measureable outputs in the
marketplace. An assessment will therefore be completed for the : Financial resources
Human resources
Physical resources
Intangible resources
S 6 / 18 . 23
114
VALUES
Values can be both stated, or even mandated, but the real assessment is to determine if they are
embedded within the managerial and operating cultures of the organisation. Shared values are often
observable, moreover in some organisations the corporate belief system is visible on a consistent
basis. The values, as manifest are experienced by the customer as well as the employee. A
qualitatitive assessment, albeit subjective, is a useful indicator of how the company culture is
working.
ORGANISATION
The most important elements in the SERVO acronym for organisation are : Culture
--
Leadership
--
Staffing
Structure
Systems
----
S 6 / 19 . 23
how the company does things day to day and the overall organisational
climate and work ethics
how the actions and behaviour of top management is visible to deliver
the mission of the enterprise
numbers, quality, retention, training in relation to business needs
the organisation chart and reporting relationships for decision-making
the flow of activities for the firm to function including core processes
and support activities
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115
The visual interpretation of the SERVO model is shown in Figure 6.8 below : RESOURCES
ENVIRONMENT
STRATEGY
ORGANISATION
VALUES
Figure 6.8
Figure 6.8 shows that the individual elements are interactive and therefore should be
assessed
independently
and then
interactively
S 6 / 20 . 23
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116
To assess interactivity, a cross-impact matrix can be used as shown in the matrix below : -
S
E
R
V
O
This interactivity will assess the strengths of the strategic fit between the respective elements
currently and then for a future planning horizon. Cells within the matrix can then be isolated for
attention, as appropriate.
The conclusion derived from SERVO analysis will be : A set of apparent strengths & weaknesses
An assessment of strategic fit
A review of strategic balance
S 6 / 21 . 23
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117
This will enable a SWOT Analysis by Market Segment to be achieved which in turn will
feed the DRIVERS FOR CHANGE.
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118
DISCUSSION QUESTIONS
1.
2.
3.
S 6 / 23 . 23
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119
SESSION 7
STRATEGIC DIRECTION
STRATEGIC INTENT
* VISION
* MISSION
S 7 / 01 . 13
DISCUSSION QUESTIONS
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120
STRATEGIC DIRECTION
The intention of Strategic Direction is to give focus, direction and purpose for an
organisation in order to achieve its corporate and operational objectives.
Without strategic direction, the company does not have an anchor from which to assemble,
align and deploy resources. It is like a ship adrift !
Strategic Direction has to be lead, motivated, tracked and guided through managerial
leadership and hence is one of the most important tenets of Strategic Management.
Strategic Direction is formed by vision and mission, the message from which cascades
from corporate, to SBU, to operational levels.
Vision and Mission is then achieved overtime through the implementation of predetermined strategies at each of these levels.
S 7 / 02 . 13
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121
S 7 / 03 . 13
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122
Mission is the statement of what the organisation has to be , it is more imperative than
the vision statement. It is the mission to be achieved by being in business.
The mission statement answers the question What is the business for and what business
are we in ? . It gives purpose to the organisation and a belief system for employees ; it also
indicates values and culture.
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123
Mission gives direction and states what has to eventually be accomplished to achieve the
vision. The mission is the journey to the vision.
The mission provides a basis for corporate level strategy. Large organisations may have a
hierarchy of missions to make these statements meaningful and actionable, but all aligned to
one vision for the future.
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124
Many organisations today have Mission Statements, but a distinction needs to be made
between those who have mission statements and those who have a real mission to
accomplish .
The former may be part of corporate Public Relations to dress the business whereas the
latter demands a real sense of mission.
A sense of mission is essential to galvanise employees together to have a real committed
belief in the company and what it stands for.
There are many types of mission statements, and as yet there is no confirmed formula for
writing an effective statement. However the Ashridge Mission Model offers one approach
which requires a mission to have 4 parameters :
PURPOSE
VALUES
STRATEGY
BEHAVIOURAL STANDARDS
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125
PURPOSE
Why the company exists
STRATEGY
The competitive position
and distinctive competence
VALUES
What the company
believes
BEHAVIOURAL STANDARDS
The behaviour patterns that
underpin the value system
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126
The challenge is then to write a Mission Statement which embodies all these parameters. The
result may be something which is cumbersome and unmanageable, so therefore skill is
required to enable any organisation to craft a Mission Statement.
Alternative approaches would suggest that an effective Mission Statement should demonstrate
the following criteria.
1.
2.
3.
4.
5.
6.
7.
8.
9.
S 7 / 08 . 13
127
Consider and then review the following : Worldwide Mission Statement (1)
ABC will become the acknowledged global leader in the express delivery of documents and
packages. Leadership will be achieved by establishing the industry standards of excellence for
quality of service and by maintaining the lowest cost position relative to our service commitment
in all markets of the world.
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128
Consider the following mission from an Asian based Fast Moving Consumer Goods (FMCG)
company : -
By just reviewing these 3 examples, it provides evidence of the state of the art of writing
mission statements . . . and yet these are so vital to convey a sense of purpose to
stakeholders.
S 7 / 10 . 13
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129
TYPICAL PITFALLS
By researching a wide range of mission statements, it is clear that there are typical pitfalls :
Differences in Interpretation
Ambiguity
Lack of focus
S 7 / 11 . 13
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130
S 7 / 12 . 13
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131
DISCUSSION QUESTIONS
3. SELECT A MISSION STATEMENT OF YOUR CHOICE AND THEN ASSESS ITS VALUE
USING SELECTED CRITERIA FOR EVALUATION.
S 7 / 13 . 13
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132
SESSION 8
S 8 / 01 . 17
CORE VALUES
CAPABILITIES
CULTURE
COMPETITIVE POSITIONING
COMPETITIVE EDGE
STAKEHOLDERS
DISCUSSION QUESTIONS
Page
133
CORE VALUES
Core Values are the basis for a belief system for employees and therefore should influence
behaviour standards.
Attachment to Core Values is an important element of the operating culture of any
organisation. Core Values account for the way in which business will be conducted to achieve
the business mission eg. being customer centric, quality certified, cost conscious, time
responsive, service driven, these values should influence corporate priorities, management
styles and decision making and serve to bind the organisation together.
Core Values can be mandated, they can become institutionalised and again they can also look
nice at the entrance to a company headquarters or on their website. The real question to ask is
Are these core values really felt ? and are they acted upon, do they really influence
and guide behaviour .
The embedding of core values will also contribute significantly to corporate Brand
Positioning, through the interaction of employees with customers.
S 8 / 02 . 17
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134
CAPABILITIES
Capabilities (or competencies) are a core component for business sustainability, providing that
they remain relevant for organisational effectiveness and market place needs.
Competitive differentiation and competitive advantage are secured from core capabilities. Such
capabilities need to be leveraged to drive business values and support shareholder value.
Core Capabilities (or core competencies) enable the organisations core business to flourish.
It is useful to track the core capabilities of the organisation to ensure that what they are good at
and what they are known for is still valued.
With the rapid progress of technology and the progressive development of business, the actual
competencies required may be changing. It is for this reason that more enlightened
organisations conduct competency audits to determine competency gaps so that Human Capital
Development plans can be re-designed and implemented.
S 8 / 03 . 17
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135
CULTURE
Culture can be defined as the glue that holds an organisation together, or in more simple terms
the way we do things here !!
To examine this more closely, the work of Johnson (1992) attempts to explain the complex
cultural web of the organisation, through which, vision, mission and different levels of strategy
to be achieved.
The model accounts for the existing paradigm or mindset of assumptions commonly held
about the business.
To show how these values and beliefs are reinforced, then the following dimensions are
helpful :
--
Stories
--
S 8 / 04 . 17
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136
Symbols
--
Power structure
--
Organisational
--
Control systems
--
S 8 / 05 . 17
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137
Stories
Rituals and
Routines
Control
System
Symbols
The
Paradigm
or Mindset
Power
Structures
Organisational
Structures
Figure 8.1
S 8 / 06 . 17
Page
138
4. Decide how culture can be changed, albeit by also recognising that this is the
most difficult thing to achieve in business.
S 8 / 07 . 17
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139
COMPETITIVE POSITIONING
To set strategic direction requires that the company is clear about both the intended and the
secured position it has achieved in the competitive market place.
One challenge to be accepted is to discover how the customer positions the company and not
just how the company wants to position itself.
S 8 / 08 . 17
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140
Know the enemy and yourself and you will win 100 victories in 100 battles. Know
yourself and not the enemy and you may win or lose a battle. Do not know either the enemy
or yourself and you will surely lose the battle.
-- Sun Tze --
Whether the company (and its brands) are in a leadership, follower, or challenger position,
in the market place, competitive positioning is derived from perceived value. These
values, both tangible and intangible, are associated with an identity. This identity is the
anchor for competitive positioning. This identity is defined by the customer, not the
company because positioning is really decided in the mind of the buyer !
S 8 / 09 . 17
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141
Sun Tze, would therefore suggest research and tracking to know the enemy.
The essence of competitive positioning can be addressed in the diagram below.
POTENTIAL FOR
LOST BUSINESS
COMPETITOR
OFFERING
SUSTAINABLE
DIFFERENTIATION
FROM THE
COMPETITION
POSITIONING
COMPANY
CAPABILITY
CUSTOMER
NEEDS
RELEVANT, SUPERIOR
PERCEIVED VALUE
Figure 8.2
Competitive positioning when successful, will achieve the strategic intent of the enterprise and in turn
progressively deliver mission and vision. In this way the strategic direction can become secured.
S 8 / 10 . 17
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142
Competitive positioning can be secured in the mind of actual and potential buyers, but to
achieve a competitive edge may need to be thought through in a more scientific manner as
shown in Figure 8.3.
This shows that the route to achieving a competitive edge is based upon the organisations
core capabilities, values and competencies to source and sustain competitive advantage from
within the organisations value chain. This foundation then must align with the customer
value chain of expectations.
This alignment then needs to be adequately resourced and periodically monitored for
continued relevance.
S 8 / 11 . 17
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143
8.
MONITORING THE CONTINUED
RELEVANCE
(FEEDBACK & REVIEW)
2.
CORE VALUES
(THE BELIEF SYSTEM TO
GUIDE BEHAVIOUR)
7.
3.
CORE COMPETENCE
(TRAINING & ORGANISATIONAL
DEVELOPMENT)
6.
4.
5.
SUSTAINING THE COMPETITIVE
ADVANTAGE
(TRACKING STUDIES + SUSTAINED
RESOURCING)
S 8 / 12 . 17
SOURCES OF COMPETITIVE
ADVANTAGE
(APPLY PORTERS VALUE CHAIN)
Figure 8.3
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144
STAKEHOLDERS
Strategic direction will be reviewed by a wider audience then is often acknowledged, and
hence the term given to these groups of people as STAKEHOLDERS.
They are the people and organisations who have an interest in your companys
performance !!!
Stakeholders may have power and influence, both directly and indirectly, therefore the
strategic management mindset must always consider stakeholder groups, these include : Customers
Creditors
Competitors
Equity shareholders
Local community
Industry Associations
Employees
Unions
Suppliers
Government
Charities
S 8 / 13 . 17
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145
One significant challenge for strategic management to face is to balance the organisations
deliverables in order to meet different stakeholder expectations.
S 8 / 14 . 17
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146
BOLDNESS
HONESTY
RESPONSIVENESS
S 8 / 15 . 17
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147
S 8 / 16 . 17
Page
148
S 8 / 17 . 17
Page
149
SESSION 9
CORPORATE OBJECTIVES
ORGANIC GROWTH
STRATEGIC ALLIANCES
DISCUSSION QUESTIONS
S 9 / 01 . 21
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150
CORPORATE OBJECTIVES
The Statements of Strategic Intent, supported with core values and competitive positioning
provide a sound foundation for strategy development.
The bridge between the two must be a set of corporate objectives which specify WHAT is
to be accomplished and BY WHEN.
These objectives will normally be : QUANTITATIVE and QUALITATIVE.
whereby the former will relate to financial performance, the hard aspects of business and
the Qualitative objectives, the latter, relating to the soft part of the business.
Both types of objectives must be delivered within time and other resource constraints.
S 9 / 02 . 21
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151
Specific
Measurable
Attainable
Realistic
Time Bounded
so that they can be managed and of course provide a platform for crafting strategy and
making strategy adjustments.
There are various classical ways in which strategy can be determined as shown in the
following course content.
S 9 / 03 . 21
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152
STRATEGY OPTIONS
Any approach to business strategy designed to produce sustainable business futures, needs
to be assessed with care. This is fundamental to Strategic Management.
There are a number of classical approaches to assess strategy options. This manual will
consider 3 important but distinctly different approaches namely : -
S 9 / 04 . 21
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153
The ANSOFF Approach (Figure 9.1) is a four box model which outlines four potential strategies :
MARKET PENETRATION
MARKET DEVELOPMENT
PRODUCT DEVELOPMENT
DIVERSIFICATION
Figure 9.1
PRODUCTS / SERVICES
MARKET PENETRATION
MARKETS
Existing
New
S 9 / 05 . 21
Withdraw
Consolidate
Produce / Build
MARKET DEVELOPMENT
New Territories
New Segments
New Users
New
DIVERSIFICATION
Related Markets
Horizontal or Vertical Integration
Unrelated Markets
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154
MARKET PENETRATION
MARKET DEVELOPMENT uses the existing product portfolio, but now aimed at new
markets. In fact this strategy is designed to create new market segments.
DIVERSIFICATION is achieved both within and also beyond the existing experience
and technology base to provide the 4th, but highest risk strategy.
S 9 / 06 . 21
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155
The Ansoff approach is classical, well-known and useful particularly to those in search of
market extension and growth strategies.
(SF)
Differentiation
(D)
S 9 / 07 . 21
?
CL
D
Page
156
His approach argued that competitive advantage can either come from a cost advantage or from
being distinctly different, thereafter with either one or both of these strategies, strategic focus to
well-defined segments is needed, so that the scope of the strategy in terms of market reach can
be known and be planned for.
This approach has been used widely. Of course if any business can achieve all these strategies
combined, then this is the best case strategy scenario.
Consider McDonalds Fast Food Chain where cost leadership has been achieved and then in turn
allowing for a significant price advantage in the market. The business is well focused into defined
segments and the product as well as the brand are well differentiated. In fact McDonalds have
accomplished all 3 points on Porters triangle.
According to Porter, for companies not able to make a choice between his 3 generic strategies,
they will be stuck in the middle and going nowhere. Of course this will really depend upon the
nature of the competitive rivalry within the defined industry.
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157
Aggressive
Competitive
Conservative
Exit
S 9 / 09 . 21
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158
Locating Core Business will depend upon the exposure, history and heritage related to the
lifecycle stage that the company is in the defined industry. Core business maybe located
upstream, mainstream or downstream as the company ie. where the main business volume is
based.
S 9 / 10 . 21
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159
Distinguishing the Core Business will include ensuring that the business can achieve competitive
advantage. This is where the value chain can be applied, using sources of competitive advantage that
are associated with business functions.
It is also appropriate to look for other ways of distinguishing the core business by using strategies
for differentiation. This can be achieved in at least six basic ways.
1.
Price Differentiation
2.
Image Differentiation
3.
Support Differentiation
4.
Quality Differentiation
5.
Design Differentiation
6.
No Differentiation
S 9 / 11 . 21
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160
Other ways of achieving distinction is to have strategies for scope often known as market
reach. The alternative approaches to scope would be :
UNIVERSAL ,
where one size fits all. This is difficult to achieve but Henry Fords
Model T did achieve it !
SEGMENTATION,
CUSTOMISATION ,
Most companies will have a selected strategy for scope but large organisations may have a
combination of approaches working in different business locations.
S 9 / 12 . 21
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161
Penetration Strategies
Each of these strategies or a combination of them, known as a hybrid strategy, can be used in
Mintzbergs terms to elaborate the core business and thereby achieve growth.
Please note that a diversification strategy, normally contained within the Ansoff framework is
not included as core business.
S 9 / 13 . 21
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162
Extending the core business is intended to take organisations beyond their core business in
order to achieve development and growth. This can be achieved in a number of ways.
VERTICAL INTEGRATION
HORIZONTAL INTEGRATION
S 9 / 14 . 21
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163
DIVERSIFICATION
business,
it
is
termed
CONCENTRIC
DIVERSIFICATION.
Unrelated diversification also extends the core
business
beyond
existing
experiences
and
Page
164
INTERNAL DEVELOPMENT
ACQUISITION & STRATEGIC
ALLIANCES
ORGANIC GROWTH
S 9 / 16 . 21
165
S 9 / 17 . 21
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166
Re-concieving the core business will arise when the combination of the above strategies has
produced a lack of focus for the business as a whole. Then, there may be a need to reconfigure
the business, redefine it and essential by re-concieve it. There are 3 basic approaches : BUSINESS REDEFINITION
STRATEGY
S 9 / 18 . 21
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167
CORE RELOCATION
STRATEGY
S 9 / 19 . 21
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168
DISCUSSION QUESTIONS
1. TAKE ONE OF THE FOLLOWING COMPANIES AND APPLY THE ANSOFF MATRIX
TO DETERMINE THE STRATEGY OPTIONS EMPLOYED AND ALSO THAT COULD
BE AREAS FOR POTENTIAL DEVELOPMENT ?
* MCDONALDS
* BOBBI BROWN COSMETICS
* KODAK
* APPLE MACINTOSH
* NIKE
WHAT ARE YOUR OBSERVATIONS FROM THE ASSESSMENTS YOU HAVE MADE.
S 9 / 20 . 21
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169
2.
3. DEFINE THE CORE BUSINESS FOR ONE OF THE FOLLOWING AND THEN EXPLAIN
HOW THEIR CORE BUSINESS CAN BE LEVERAGED, IF AT ALL.
S 9 / 21 . 21
BARCLAYS BANK
PORSCHE OR MERCEDES
FORMULA ONE
BRITISH AIRWAYS
HILTON HOTELS
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170
SESSION 10
GROWTH AMBITION
THE IDEAL CONDITIONS FOR BUSINESS GROWTH
SOME TRUISMS ABOUT GROWTH
GROWTH AND ENTREPRENEURSHIP
GROWTH MARKETS
GROWTH VALUES
GROWTH MISSION
S 10 / 01 . 18
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171
SESSION 10
S 10 / 02 . 18
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172
GROWTH AMBITION
Growth ambitions are part of most business organisations, simply because shareholder value
is expected to grow.
Growth therefore should be planned and it should be rewarded, it rarely happens naturally !!
Strategic planning is focused upon controlled growth, whereby growth is forecasted into a
future time horizon. This is the convention, but a more creative way to approach growth is to
accept that it has already happened and then ask the question
What must we have done to get here ?
Then by logical deduction, a growth plan will emerge, in fact more easily than following the
conventional approach.
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173
Once the route to growth has been formulated, the founding principle of growth is
Concentration, Concentration and Commitment to Concentration
so that there is a clear focus for growth, to achieve growth.
It is argued that growth has a lifecycle effect, this in fact is well understood, but lifecycles
are getting shorter and the time boundaries for growth and profits are reducing all as a
result of competition and incremental globalisation.
Within the shape of the lifecycle, a rate of growth can be envisaged, it is a fact of life that
growth comes eventual decay.
Therefore every growth curve has a genetic code for decline, its just a matter of time. In
planning for growth, one therefore must factor into the growth equation a rate of decline.
S 10 / 04 . 18
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174
The simple example is to check the rate of earnings under the product lifecycle in relation to
sales. In fact sales can continue to climb, but profits decline earlier as the market becomes
more sensitive to price and to competition invades the market territory.
What therefore are the ideal conditions for business growth ?
These conditions are a business utopia and may never be achieved, but nevertheless it may be
useful to simply explore the ideal conditions for growth.
1.
2.
3.
4.
5.
6.
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175
This of course is an unachievable ideal, but it does help to create a future vision !
There must be a belief that growth can be achieved and therefore the culture of the business
must value growth, live, breathe and digest growth.
Growth has to be driven, engineered and have growth strategies aligned to maximising
asset utilisation, achieving new market opportunities consistently and committing to
emergent growth technologies.
SOME TRUISMS ABOUT GROWTH
The following statements are worthy of reflection, as there may be inherent wisdom from
which new perspectives can be appreciated.
1.
2.
S 10 / 06 . 18
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176
3.
4.
5.
6.
Time spent on discussing these statements may provide new insights to the growth agenda.
S 10 / 07 . 18
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177
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178
GROWTH MARKETS
Markets are made up of customers with money to spend and as inclination to buy. Therefore
to achieve business growth we must be attached to growth markets.
It is the market that will grow the business, the business cannot grow itself.
Therefore to grow, we must attract and hold customers who will grow with us. We have to
grow the customer base to grow the business.
In Business to Business Markets, if we help our customers to reduce cost, improve margin
and generate increased revenue, they achieve growth and so we grow with them. Thus a
partnership model with customers can be one route to sustainable growth, using a simple
win-win approach.
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179
To succeed in this approach our customers must therefore see us as : solution provides
business growers
profit suppliers
growth experts
-----
This means we MUST KNOW OUR CUSTOMERS WELL, in fact better than they know
us !
To make this work, we need : Customers who really want to grow
Customers who want us to grow with them
Customers who will allows us to grow through them
Market Segmentation becomes vital in this process, so that we can participate in customer
sales growth and dominate selected segments.
S 10 / 10 . 18
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180
GROWTH VALUES
Our values, for our customers, as a business growth strategist must be to : -Enhance market profitability
-Support customer growth
-Bring incremental profits to customers
-Quantify results
-Drive partnerships
-Know the business growth of our customers
-Add tangible value to customer operations
Our own values for growth need 3 clear specifications : -How Much !
-How Soon !
-How Sure !
These are interpreted internally and from a customer perspective. Furthermore, these values
are deeply embedded.
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GROWTH MISSION
The dedication and purpose of business is a commitment to growth.
A growth mission combines the growth values into a growth culture to align with a growth
market with the power to deliver growth. The mission therefore is a mission for growth,
therefore it has to be :
Customer oriented
Customer centric
Customer driven
Customer derived
Simply because shareholder value is delivered from customer value.
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Page
183
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1.
2.
3.
4.
5.
6.
7.
8.
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The 80 / 20 Rule
The work of Poreto is classical. His 80/20 rule has been proven time and time again. 80% of
customers deliver 20% of profit, but 20% of customers produce 80% of profit.
So where does growth opportunity reside ?
It may be worth segmenting the 80% customer base to search for business growth through
the customers customer !
However profit will come from high unit margins and premium prices, whereas business
volume is the multiplier for growth, so entrepreneurial business will need both.
Almost certainly the search will be for the 20% of customers who will deliver 80% of future
profits.
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DISCUSSION QUESTIONS
1.
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188
SESSION 11
Page
189
SESSION 11
S 11 / 01 . 23
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190
S 11 / 02 . 23
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191
In blue oceans, the rules of the game have not been determined, even an approach to finding
these oceans has not been unravelled because the traditional approach to strategy in most of
the literature has been devoted to Red Ocean environments.
Blue oceans have always been with us, they just havent been defined as such. Industries and
markets created in the last 15 years, of which there are many were in fact blue oceans at one
point in time.
The first mover advantage in an blue ocean gives higher (short-term) profits than pursuing
strategic moves in red oceans, where price and cost constraints erode profit potential.
S 11 / 03 . 23
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192
Page
193
FOR EXAMPLE
TRADITIONAL
CIRCUS
PERFORMANCE
INTERNATIONAL
LONG HAUL
FLIGHTS
DEPARTMENT STORE
CLOTHING,
FOOT WEAR SALES
PRE-SCHOOL
KINDERGARTEN
CONVENTIONAL
DIETING
S 11 / 05 . 23
TO
TO
TO
Montessori Pre-Schools
TO
TO
Philip Wain
Slimming & Wellness Centres
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194
As can be seen, the market boundaries have been moved. The marketplace is in the mind of the
customer, so blue ocean strategy is designed to create and stimulate new demand among
receptive customers.
The value innovation so created actually defines the new blue ocean, because real
differentiation has been achieved, which in effect makes the competition irrelevant. The
competitors are no longer the focus of business strategy. The focus is upon delivering value to
customers in the newly created market space.
Some Key Questions to help define a blue ocean
According to Kim and Manborgne, there are some simple but penetrating questions to be
asked of a managerial team to help the mindset orientate towards blue ocean thinking.
Question 1
: What are the factors that our industry takes for granted which could
be illiminated ?
Question 2
As you can see, these two questions are really challenging and somewhat anarchic.
S 11 / 06 . 23
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195
Question 3
Question 4
: Which factors could be created that the industry has never offered ?
The purpose here is to use customer focus to determine where value can be innovated, and
new value propositions be determined. Reference to Figure 11.1 and Figure 11.2 will serve
to give clarification.
S 11 / 07 . 23
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196
REDUCE COSTS
1.
ELIMINATE
ADD VALUE
3.
RAISE
Figure 11.1
2.
REDUCE
4. CREATE
ADD VALUE
REDUCE COSTS
Figure 11.2
VALUE INNOVATION
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S 11 / 09 . 23
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198
Referring back to the Cirque De Soleil example, which is cited in the work of Kim and Manborgne
and applying the four action framework created from their text, we can see how the blue ocean was
created by using this methodology for analysis.
Figure 11.3
REDUCE COSTS
1.
ELIMINATE
STAR PERFORMERS
ANIMAL SHOWS
MULTIPLE SHOW ARENAS
2.
REDUCE
FUN &HUMOUR
THRILL & DANGER
ADD VALUE
3.
RAISE
UNIQUE VENUES
4. CREATE
A THEME
REFINED ENVIRONMENT
MULTIPE PRODUCTIONS
ARTISTIC MUSIC & DANCE
TO CIRCUE DU SOLEIL
The Value Innovation reduced costs, added value and discovered a new market which has been
preserved as a blue ocean.
S 11 / 10 . 23
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199
At the heart of blue ocean strategy are 6 core principles that should be used as a guideline
to tackle common risks that are associated with new product innovation and development.
These principles can be used to progress the determination of blue oceans for
implementation.
PRINCIPLE ONE
PRINCIPLE TWO
PRINCIPLE THREE
PRINCIPLE FOUR
S 11 / 11 . 23
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200
PRINCIPLE FIVE
PRINCIPLE SIX
Once a zone of value innovation has been determined and then a new blue ocean has been
visualised, the above 6 principles can be applied to smooth the path of implementation by
assessing and reducing the exposure to product development risks.
S 11 / 12 . 23
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201
The blue ocean strategy has provided an insight for management internationally, but the model
actually is descriptive , it doesnt demonstrate clearly in a well structured plan how to apply it.
In this sense, it is not prescriptive, but with experiment and usage there is merit to its adoption.
Their text looks at blue ocean innovations through interpretation rather than direct application
but the corporate evidence is building.
What is now transpiring as a result of this best selling text is that the blue ocean has become a
term used in management discussions which in turn influences mindset and maybe decision
taking.
The main message is how can we discover, enter and defend uncontested market space ?
S 11 / 13 . 23
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202
STARBUCKS
Starbucks created a lifestyle experience out of coffee drinking by creating cool
environments where customers could relax in comfort to chill out with their friends.
S 11 / 14 . 23
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203
NINTENDO WII
Previously in a market leadership position but much ground was lost to Sony and
Microsoft. They found their blue ocean by targeting non-customers (or non-gamers) by
developing easy to use interactive consoles that moved as you moved. The reinvented the
gaming scene and created uncontested space in the market.
The Blue Ocean Strategy is a path of discovery, but to bring this strategy to fulfilment it
will require a business model as with all new product development and new business
ventures. The next sub-section therefore will focus upon building a business model.
S 11 / 15 . 23
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204
It describes the rationale and core logic of how an organisation creates, delivers and
captures value.
S 11 / 16 . 23
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205
2. Superior Value
Propositions
3. Channels
4. Relationships
5. Revenue
S 11 / 17 . 23
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206
7.
8.
Key Partnerships
9.
S 11 / 18 . 23
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207
CHANNELS
RELATIONSHIPS
COSTS
REVENUE
CUSTOMERS
VALUE CHAIN
BASED RESOURCES
SUPERIOR VALUE
PROPOSITIONS
PARTNERSHIPS
But to use this as a planning tool to build, the business model a A Business Model Canvas
can be used as shown in Figure 11.4.
S 11 / 19 . 23
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208
PRIORITY
CUSTOMERS
SUPERIOR VALUE
PROPOSITIONS
CHANNELS
KEY ACTIVITIES
COMPETITION /
COMPETITIVE
STRATEGY
RELATIONSHIPS
KEY PARTNERSHIPS
VALUE CHAIN
BASED
RESOURCES
Figure 11.5
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209
The Business Model Canvas allows the whole design for the model to be seen on one page
with all the ingredient captured. It can be the focal point to visualise the business model
and thereby to obtain contributions from those who will take ownership for it.
The canvas as proposed, can be adjusted according to need, but it captures the essence of
the design from which plans can be developed for the required strategy implementation.
To illustrate the use of the business model canvas, the reader should refer to Figure 11.5.
S 11 / 21 . 23
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210
SUPERIOR VALUE
PROPOSITIONS
Cost Conscious
First Time
International
Budget
Travellers
Lowest Price
No Frills
Frequent Service
COMPETITION /
COMPETITIVE
STRATEGY
Only from International
Long Haul Carriers, no
budget, long haul airline
as yet
CHANNELS
KEY ACTIVITIES
On-line Booking
Telephone Ticket Sales
Long Haul
Europe - Asia
RELATIONSHIPS
Customer Loyalty
* Programmes
* IATA
* Intl Airport Authorities
VALUE CHAIN
BASED
RESOURCES
All provided
from parent
company, a full
cost International
Premium Airline
KEY PARTNERSHIPS
As a sub-brand of the parent
company, who have
diversified the business into
a budget provider
Figure 11.6
N.B. : THE BLUE OCEAN OF VALUE INNOVATION IS LONGHAUL BUDGET AIRTRAVEL
S 11 / 22 . 23
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211
DISCUSSION QUESTIONS
1.
2.
IDENTIFY A BLUE OCEAN STRATEGY AND ASK WHY AND HOW IT HAS BECOME
SO.
3.
S 11 / 23 . 23
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212
SESSION 12
S 12 / 01 . 19
SWOT
GAP ANALYSIS
CONSISTENCY CRITERIA
PRAGMATIC CRITERIA
FINANCIAL CRITERIA
RISK ANALYSIS
STAKEHOLDER ANALYSIS
Page
213
DECISION MATRICES
DISCUSSION QUESTIONS
S 12 / 02 . 19
Page
214
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215
SWOT ANALYSIS
From the earlier work in this subject, SWOT Analysis has been outlined as the conclusion to
environmental analysis, from which drivers for change may be achieved.
By referring back to the SWOT Analysis, it is useful to recognise that future strategy must be
based on existing, confirmed, business strengths. In the absence of such strengths, the strategy
may fail unless these strengths can otherwise be acquired.
The leveraging of business strengths should therefore become a meaningful criteria for
strategy option evaluation. Assessment of the risk potential arising from external market
threats is also important as these are uncontrollable and maybe potentially damaging in the
future. Consideration of capacity weakness may be essential where resource limitations
impose a potential constraint.
Therefore, at a simplistic level, the SWOT Analysis will be useful again to help to achieve
future strategy. However this is only one tool which ideally should be supplemented by
others.
S 12 / 04 . 19
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216
GAP ANALYSIS
The difference between a future desired ambition and the probability of achieving it creates a
strategic gap. Future strategy options should be evaluated in terms of their potential to close
the strategic gap.
This gap may be a growth gap, a shareholder value gap, a mission gap and so on. The
rationale for strategy option choice is the ability to reduce the gap between current and
projected performance ambitions.
S 12 / 05 . 19
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217
PERFORMANCE
Shows the current performance position, most often explained in qualitative or functional terms.
Shows the desired future position defined in the same terms as the current position. This is the projected (or
forecasted future position).
The Gap is between positions
and
1
2 .
S 12 / 06 . 19
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218
S 12 / 07 . 19
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219
It is common practice today to set stretched targets and hence position 3 shows the
desired stretched position for which strategies and tactics are needed as well as incentives
for achieving this position.
It is probably the case that most organisations have a negative gap. This means that the
desired future position has not been reached.
In rare cases, the planning gap becomes positive, whereby targets and even stretched
targets have been exceeded.
This situation with also require strategy adjustments probably in relation to resourcing and
capacity.
S 12 / 08 . 19
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220
CONSISTENCY CRITERIA
Evaluation criteria should also consider if the strategic options are consistent with the
strategic intent of the business and other critical performance factors namely :
Vision
Mission
Core business
Core values
Core competencies
Value chain based competitive advantage
Product portfolio positions with market segments
Existing company success factors
This provides both a solid and realistic platform against which to select future strategy .
The selected option will then have a sense of strategic logic.
S 12 / 09 . 19
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221
Investment level
Payback period
Return on capital
Employed
Internal cost of capital
Return on investment
Target internal rate of return
Discounted cash flows implications
Shareholder value
Cost benefit analysis
Page
222
PRAGMATIC CRITERIA
These criteria should not be applied at the execution of others, but rather as a simple way of
concluding the process of strategy option evaluation. This simple criteria, which all levels of
management will be able to understand are :
Suitability
Desirability
Feasibility
Acceptability
Do we want it
Do we need it
Can we do it
Can we accept it
Often top management will prefer a pragmatic approach providing that other screening tests
have been applied.
The normal tests will be : - financial feasibility
- organisational HR resource feasibility
- market feasibility (if relevant)
- gap analysis justification
S 12 / 11 . 19
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223
- stakeholder analysis
- risk analysis
whereby stakeholder analysis will consider the positive and negative response to be anticipated
by key stakeholder groups, arising from each strategy option. The objective here will be to
minimise risk and optimise stakeholder value added.
Risk Analysis has become part of strategy determination in many organisations in recent
years. There are now well established risk management protocols which can be followed or
adapted to assess future strategy options. The conclusion will be based upon the risk appetite
of the organisation.
Fundamental Analysis will be required to answer, among others, the following questions : 1.
What is the nature of the risk(s) that the company could be exposed to for each strategy
option if it were to be adopted. These risks will be pre-determined and pre-classified and
will range from financial risk to relationship risk, reputational risk and so on.
S 12 / 12 . 19
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224
2.
3.
What is the consequence for the organisation should the risk arise ?
4.
5.
6.
Risk is closely related to returns ; high risk = high return, low risk = low return.
So therefore the Vision, Mission and Corporate Objectives will align the risk appetite
against which the risk assessment process for strategy options will be conducted.
S 12 / 13 . 19
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225
STRATEGY CHOICE
A simple process is needed, by which future strategy can be selected. One simple but effective
measure is to use Decision Matrices (see below) whereby different strategy options can be
assessed using factor analysis.
CRITERIA FOR EVALUATION
WEIGHT
(For example)
(1 - 10)
1.
Leveragable Strengths
________
2.
Internal Weaknesses
________
3.
External Threats
________
4.
Gap Analysis
________
5.
Risk Analysis
________
6.
Feasibility Analysis
________
7.
Pragmatic Criteria
________
8.
Others (1 N)
________
Total Score
N.B. : For each option, multiply the weight by the score and then summarise to determine the factor totals.
S 12 / 14 . 19
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226
This simple rational approach will at least be able to assess strategy options to determine
viability between options. In so doing, it may become clear that certain options must be
discarded.
S 12 / 15 . 19
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227
Relevance
Reliability
Rule
Rule
Rule
Rule
Understandability :
Significance
:
Sufficiency
:
Practicality
:
3
4
5
6
:
:
These practical rules can apply to any important communication to help to get the buy-in
from the decision takers.
S 12 / 16 . 19
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228
2.
3.
Acceptability
3.1 expected costs and financial returns
3.2 risks involved and how to reduce them
3.3 acceptability to stakeholders
S 12 / 17 . 19
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229
4.
Feasibility
4.1 resources and competencies needed
4.2 ability to implement at company and industry levels
4.3 implementation team who is involved
4.4 who is affected by the outcomes and how
5.
Timing
5.1 start date
5.2 GANTT Chart of phased implementation, with time scales and milestones for
achievement
5.3 completion date
NOTE :
This may need to be filtered informally before making the final proposal.
The simplest checklist should involve what, why, who, where, when, how and the
outcomes !!
S 12 / 18 . 19
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230
DISCUSSION QUESTIONS
S 12 / 19 . 19
Page
231
SESSION 13
PEOPLE ALIGNMENT
MOMENTUM
STRUCTURE
BUDGETARY CONTROL
SUMMARY
DISCUSSION QUESTIONS
S 13 / 01 . 21
Page
232
STRATEGY PLANNING
STRATEGY IMPLEMENTATION
IMPLEMENTATION MONITORING
PERFORMANCE EVALUATION
REVIEW
S 13 / 02 . 21
Page
233
TIME DISCIPLINE
TIME DEADLINES
TOTAL RESOURCING
RESPONSIBILITIES AND ACCOUNTABILITY ALLOCATED
COMMUNICATIONS PLANNING TO ALL STAKEHOLDERS
A CONTROL SYSTEM FOR TRACKING PERFORMANCE OUTCOMES
PERIODIC MONITORING AND MANAGEMENT REVIEWS
These two checklists provide the content of what needs to be done, but achieving this
involves processes.
The Implementation Process deals with the softer issues, whereas the above checklists deal
with the functionality.
S 13 / 03 . 21
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234
Managing change
Celebrating success
The most challenging task is to get people aligned, supportive and productive.
S 13 / 04 . 21
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235
People Alignment
Non-Compliant people with non-supportive attitudes and non-committed behaviour will
produce resistance and frustrate successful implementation.
Such phenomena are a direct function of Power . . . over information, people, knowledge,
expertise etc. Power implications of change for the individuals affected, needs to be
considered with care.
To achieve effective change, position power must be used to galvanise the required action. It
is also to be taken into account that motivation through recognition and reward may help to
smoothen the path of new strategy implementation.
At the Individual level, the response to any form of significant change will be affected by :
Personality Type
Life position
The period of uncertainty
The support for change leadership
Trust
Transparency
Past experiences
S 13 / 05 . 21
Page
236
Equally the level of individual involvement and the need for consultative process to assist the
strategy change have to be taken into account.
In short, you will need the RIGHT PEOPLE to implement strategic change.
It is to be recognised that there will be beneficiaries who will support the change directly or
indirectly as well as those who impartial.
In aligning people behind the strategy change, it is wise to cross-reference their powerbase by
their perceived individual benefits to determine real supporters, change agents and those who
will merely be spectators.
S 13 / 06 . 21
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237
IMPLEMENTATION MOMENTUM
To achieve effective implementation of strategic change, one important critical factor for
achieving success is managing momentum which means : -
Inform clearly and with authority about the pressures for change and remind this to
embed the purpose for the change
Give feedback on performance gaps to provide tangible evidence
Set and celebrate success / milestones
Act upon fear / concern / resentment before it escalates
S 13 / 07 . 21
Page
238
2. Maintaining momentum
3. Decision making
S 13 / 08 . 21
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239
4. Build coalitions
Much of the above is about managerial soft skills, without which if is really difficult to harness
the energy required to secure the commitment needed.
Implementation Momentum is about moving people to get the job done, at a pace realistic and
relevant to stakeholder expectations.
S 13 / 09 . 21
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240
STRUCTURE
Strategy should be based upon leveregable strengths and then the achievement of that
strategy will be in turn be based upon structure. Why ? . . . because access to skills and
competencies is required through a decision making machinery for productive outcomes,
working within a framework of policies, procedures and processes.
The key question therefore is Does the existing structure provide relevance to the
strategy changes envisaged ?
If this cannot be answered with clarity, then work must be undertaken until this question
can be addressed with conviction.
S 13 / 10 . 21
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241
TASK
KEY *
RESULT ALLOCATED
AREA
RESPONSIBILITY
MILESTONE TIMELINE
T1
T2
T3
T4
T5
T6
1. _______
_______
__________________
2. _______
_______
__________________
A
F
A
F
3. _______
_______
__________________
F
4. _______
_______
__________________
A
F
N. _______ _______
F - FORECAST
A - ACTUAL
S 13 / 11 . 21
__________________
Figure 13.1
* KRA is located within the value chain of the strategy chain.
Page
242
One further key to successful implementation is to ensure that the processes to be followed to
achieve the strategy and the assigned tasks are set up and tested.
Within each KRA (Key Result Areas within the value chain of the strategy change),
processes may already exist, but may also be created for the implementation of action plans.
Processes essential for movement and so for control . Processes when appropriately explained
also stimulate transparency across the organisation.
S 13 / 12 . 21
Page
243
Page
244
Page
245
Organisational health using the Balanced Scorecard can be measured from 4 perspectives : 1.
Financial Perspective
2.
3.
4.
Whereby the aim of the scoring process is to assess the organisation as a whole, so that
weaknesses can be identified and be connected. In the same way, new strategic change
can be introduced into this framework.
Figure 13.2 explains the concept of the Balanced Scorecard in outline.
S 13 / 15 . 21
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246
VISION &
STRATEGY
Financial Perspective
if we succeed,
how will we
look to
our shareholder?
Customer Perspective
To achieve my
vision, how must
I look to my
customer?
Figure 13.2
Internal Perspective
To satisfy my
Customer, at
Which processes
must I excel?
S 13 / 16 . 21
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247
S 13 / 17 . 21
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248
Outcomes of performance can then be tracked, monitored and assessed. In turn this
performance can then be rewarded by way of bonus, increments and other financial
incentives, apart from the more qualitative approach which may be used to motivate
sustained performance improvement.
Therefore when making selected strategy option changes, further key question s will be :
What are the actions to be taken and initiatives to be introduced to achieve the
SMART objectives dedicated to this change ?
S 13 / 18 . 21
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249
BUDGETARY CONTROL
Almost all strategic change will have cost implications, therefore a dedicated budgetary
allocation for the desired change will be required.
Within the budget headings for expenditure, allowances should be made for contingencies,
as unforeseen events occur and costs may arise during the life of the implementation.
Working within the budget is an essential skill for implementation.
The nature of the budget will be zero based for new strategy changes. Reference to the
subject of Financial Management will provide detail and clarity on this important area of
management.
S 13 / 19 . 21
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250
SUMMARY
Strategy Implementation is one of the more difficult management tasks. It is for this reason
that many planned strategies actually fail.
To guard against potential failure, the following points should be taken into account : 1. Ensure that there is a well-defined business case for the Strategy
2. Ensure that this is well communicated , well lead and understood by all involved
3. Set up a system to measure progress and results achieved
4. Drive a winning performance culture with the right people to drive the momentum
5. Ensure that all the required enabling structures and processes are in place
6. Reinforce the message of the purpose to be achieved, the outcomes & the benefits
7. Have periodic reviews.
S 13 / 20 . 21
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251
DISCUSSION QUESTIONS
1.
STRATEGY
DESIGN
IS
A
CREATIVE
PROCESS,
BUT
STRATEGY
IMPLEMENTATION IS A SIGNIFICANT MANAGERIAL CHALLENGE . . . WHY ?
2.
3.
IN YOUR OPINION, WHAT ARE THE TOP 10 FACTORS WHICH MUST BE TAKEN
INTO ACCOUNT TO ACHIEVE SUCCESSFUL IMPLEMENTATION OF A NEW
STRATEGY.
S 13 / 21 . 21
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252
SESSION 14
LEWIN
McKINSEY 7S
KANTNER
GEMIMI 4 RS
CHANGE PROCESSES
PLANNED CHANGE
RESPONSE TO CHANGE
FORCE FIELD ANALYSIS
DISCUSSION QUESTIONS
S 14 / 01 . 17
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253
INTRODUCTION
The subject of Change Management has been introduced in an earlier session as part of
Strategy Implementation and Control.
This session is devoted to well known models and approaches to change as well as to the
change process.
S 14 / 02 . 17
LEWIN
McKINSEY 7 S
KANTNER
GEMIMI 4 RS
Page
254
The work of Lewin suggests there are 3 distinct phases in the change process which are named as
unfreezing, change and refreezing. He claims that before any change can be introduced that the
current conditions which prevail must be unfrozen before any new ideas can be introduced, once
this is achieved and the changes achieved, the environment has to be refrozen to capture and
sustain the change.
Stage 1.
Unfreezing
S 14 / 03 . 17
255
Stage 2. Change
Stage 3. Refreeze
Such processes often incur a painful, confusing period of time with lowered effectiveness in
the short term. Lewins approach attempts to achieve the felt need for change by creating
insecurities. This approach needs effective leadership and support.
S 14 / 04 . 17
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256
McKINSEY 7 S FRAMEWORK
The McKinsey 7 S framework is outlined in Figure 14.1. Through this approach to change, it
is suggested that there are key elements.
1.
2.
Strategy
Shared Values
3.
4.
Structure
Style
5.
Systems
6.
7.
Skills
Staffing
S 14 / 05 . 17
257
MC KINSEY 7 S
Shared
Values
Strategy
Figure 14.1
Style
Systems
Structure
Skills /
Staffing
These 7 elements are of course inter-related, and the challenge is to untangle the inherent
complexities to produce a roadmap for accountability the changes needed. It is also to be
recognise that some changes will be located within the 7 Ss identified.
S 14 / 06 . 17
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258
KANTNER
The approach taken by KANTNER argues that change may be more multi-directional
than Lewin suggests.
He argues change can be accomplished in
Bold strokes
Long marches
This may be fine for transformational change, but incremental change may have to take
smaller steps and also step-by-step. However, according to KANTNER both Bold Strokes
and Long Marches use his same 10 steps, these being : S 14 / 07 . 17
Page
259
Page
260
GEMINIS 4 RS
By contrast to the work of Lewin, McKinsey and Kantner, the approach from Gemini,
posture that strategic transformation requires :
REFRAMING
RESTRUCTURE
REVITALISE
RENEW
Page
261
The literature is rich with variation upon the theme of achieving change, some of which
have common ingredients and others offer new insights. As yet there isnt one formula
which has been adopted.
The student should appreciate the real complexities involved in achieving change from a
strategic management perspective.
Selling Strategy and Specifying the changes need is the subject of corporate ambition..
Achieving the changes required is a matter of corporate ability.
The matching of ambition to ability will require the effective implementation of change.
The essence of achieving change is to understand the processes required, the next section
attempts to highlight this subject.
S 14 / 10 . 17
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262
CHANGE PROCESSES
To manage Planned change, the following route is a starting point from which to appreciate
some of the essentials required to affect change.
1.
2.
Develop momentum
2.1 Communicate, communicate, communicate
2.2 Align people behind the change
2.3 Involve people
2.4 Provide leadership and teams
2.5 Create urgency
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263
4.
5.
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264
RESPONSE TO CHANGE
Change is hard to accept at times, nobody really likes change owing to the turbulence it creates.
Change can cause stress and anxiety, even though it may be beneficial, especially when change is
imposed. The KUBLER-ROSS curve below in Figure 14.2 attempts to explain the psychological
response to impactful change. If this is understood, then approaches to significant change
programmes may need to be counseled.
Typical response to imposed change
INTEGRATION
PLANNING
DISCARDING
LOSS
MOOD
DENIAL
INITIAL
ADAPTATION
Figure 14.2
PRECHANGE
POST
CHANGE
PERIOD
OF
ADJUSTMENT
TIME
The time taken for readjustments will depend upon the nature of the change and the impact it
created.
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265
Denial
Initial
Adaptation
Discarding
Planning
Implementation
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266
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267
POWER
BASE
[ LOCATION ]
HI
1. __________
2. __________
3. __________
4. __________
WEIGHT
OF
RESISTANCE
WEIGHT
OF
RESISTANCE
LOW
1 10
1 - 10
HI
LOW
___
___
___
___
___
___
____
____
____
____
____
____
___
___
___
____
____
____
________
________
________
___
___
____
____
___
____
________
Total
====
====
DISEQUILIBRIUM ?
POWER
BASE
SOURCE OF
SUPPORT
[ LOCATION ]
Figure 14.3
This simple model attempts to quantify the assessment of political support and opposition.
It can also be used as a mindset when planning transformational change.
S 14 / 16 . 17
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DISCUSSION QUESTIONS
1.
S 14 / 17 . 17
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ANNEX 1
SEMINARS
Page
270
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271
ASSIGNMENT PREPARATION
2.
3.
4.
5.
6.
EXAMINATION BRIEFING
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272
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273
1. Students Are Required To Present The Plan For Their Strategic Management
Assignment
2. Students Will Be Selected For Presentation Depending Upon Class Size
3. Group Feedback From Peers Will Be Obtained
4. Critique Given By Tutor
5. Tutor Explains How The Assignment Is Marked And The Criteria Used For
Assignment Evaluation
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274
TOPICS 1 TO 7
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275
TOPICS 8 TO 14
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276
Protocols
Examination Techniques
Tutor Expectations
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277
ANNEX 2
RECOMMENDED READING
Page
278
Johnson, G. and Scholes, K. (2008), Exploring Corporate Strategy text and cases,
Prentice Hall
Kim, W. C., Mauborgne, R. (2005), Blue Ocean Strategy, Harvard Business Press
Mintzberg, H. and Quinn, J. (2003), The Strategy Process, (4th edition), Prentice Hall
Mintzberg, H. (2009), Strategy Safari : The Complete Guide Through The Wilds of
Strategic Management, Free Press
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280
ANNEX 3
ASSESSMENT
THE STRATEGIC MANAGEMENT ASSIGNMENT
AND PRESENTATION
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281
Your task in groups is to adopt the theme Success Through Strategic Management .
You are to select an organisation of your choice and to draft a report with the following
sections : Using the context, models and frameworks contained within the Strategic
Management module.
1. Background to the organisation, its history and business domain.
2. The Strategic Direction to be achieved through Vision, Mission and Core Values.
3. The nature of Competition and Competitive Positioning of your selected company.
4. The drivers for change from the internal and external environments.
5. Strategic options for Growth.
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