Strategic Management

Strategic

management is the set of decisions

and actions used to formulate and implement
strategies that will provide a competitively
superior fit between the organization and its
environment so as to achieve organizational
goals.

GE Nine Cell Matrix

Different factors can be used to define Industry Attractiveness. Like:Market Size, Market Growth Rate, Demand variability, Industry
Profitability, Competitive Rivalry, Global Opportunities, Entry and exit
barriers, Capital requirement, Macro environmental Factors (PEST)

Different factors can also be used to define SBU Strength. Like:Market Share, Distribution Channel Access, Financial Resources, R&D
Capability, Brand equity, Production Capacity, Knowledge of customer
and market, Caliber of management. Relative cost position

The factors and their relative weightings are selected. The rating values
for each factor are entered for each SBU and Industry.

GE Nine Cell Matrix

Industry
Attractiveness

Business Unit Strength

Strong

Average

Weak

High

Grow

Grow

Hold

Medium

Grow

Hold

Harvest

Low

Hold

Harvest

Harvest

GE Nine Cell Matrix

Grow - Business units that fall under grow attract high investment.
Firms may go for product differentiation or Cost leadership. Huge
cash is generated in this phase. Market leaders exist in this phase.

Hold - Business units that fall under hold phase attract moderate
investment. Market segmentation, Market penetration, imitation
strategies are adopted in this phase. Followers exist in this phase.

Harvest - Business units that fall under this phase are unattractive.
Low priority is given in these business units. Strategies like
divestment, Diversification, mergers are adopted in this phase.

Market Attractiveness

Annual market growth rate

Overall market size
Historical profit margin
Current size of market
Market structure
Market rivalry
Demand variability
Global opportunities

Business Strength

Current market share

Brand image
Production capacity
Corporate image
Profit margins relative to
competitors
R & D performance
Promotional effectiveness

GE Nine Cell Matrix

Strength
a) It allows

intermediate ratings between high and low and between

strong and week.

b) It helps in channeling the corporate resources to business and

achieving competitive advantage and superior performance.
c) It helps in better strategic decision making and better understanding
of business scope.
Weakness
a)It tends to obscure business that are become to winners because their
industries are entering at exit stage.
b)Assessment of business in terms of two factors is not fair.

EXAMPLE OF GE NINE CELL

MATRIX

The Grand Strategy

Plan

of major action to achieve long term

goals.

The Grand Strategy

Growth
Stability
Retrenchment

Growth
New

products
Developed products
Strategic alliance
Starbucks
HP Disney
Avon
ebay

stability
Maintain

current business and product

portfolios
maintains the existing level of effort
satisfied with incremental growth.

 It

decides to serve the same markets with

the same products
It continues to pursue the same objectives
with a strategic thrust on incremental
improvement of functional performances
Dell, Videocon

Retrenchment
Retrenchment

is a short-run renewal strategy

designed to overcome organizational weaknesses
that are contributing to deteriorating performance.
TATA group continued concentrating on its various
business including steel, automobile
manufacturing, etc while Tomco, which did not
share a synergistic relationship with its current
portfolio of businesses.

 Globalization

- Mc D, Ford 2000
Multidomestic - Caterpillar, P&G
Transnational - local yet unique

Hierarchy of Strategy
Corporate
Headquarters

Strategic
Business
Unit

Manufacturing

Finance

Strategic
Business
Unit

Marketing

Corporate
Strategy

Business
(Division
Level)
Strategy

Strategic
Business
Unit

Research
and
Development

Human
Resources

Functional
Strategy

Strategic Management Defined

The set of managerial decisions and actions that determines the
long-run performance of a corporation. It includes:
environmental scanning (internal & external)
strategy formulation
strategy implementation
evaluation and control
It focuses on integrating management, marketing,
finance/accounting, production/operations, research and
development, and computer information systems to achieve
organizational success.

Benefits of Strategic Management

Clearer

sense of strategic vision

Sharper focus on what is strategically
important
Improved understanding of rapidly
changing environment

Three Key Strategic Questions

Where

is the organization now?

If no changes are made, where will the
organization be in one, two, five or ten years?
Are the answers acceptable?
If the answers are not acceptable, what
specific actions should management
undertake? What are the risks and payoffs
involved?

Strategic Management Model

Environmental
Scanning
External
Societal
Environment
General Forces
Task
Environment
Industry Analysis

Internal
Structure
Chain of Command
Culture
Beliefs, Expectations,
Values

Strategy
Formulation

Strategy
Implementation

Evaluation
and Control

Mission
Reason for
existence

Objectives
What results
to
accomplish
by when

Strategies
Plan to
achieve the
mission &
objectives

Policies
Broad
guidelines for
decision
making

Programs
Activities
needed to
accomplish
a plan

Resources
Assets, Skills
Competencies,
Knowledge

Budgets
Cost of the
programs

Procedures
Sequence
of steps
needed to
do the job

Feedback/Learning

Process
to monitor
performance
and take
corrective
action

Performance

Environmental Scanning
Monitoring, evaluating and disseminating information
from the environment to key people within the
corporation.
Scan via SWOT analysis:
Look for opportunities/threats in the external
environment
Look for strengths/weaknesses in the internal
environment

Strategy Formulation
The process of developing long-range plans to deal effectively with
environmental opportunities and threats in light of corporate strengths
and weaknesses.
Composed of:
Mission
Objectives
Strategies
Policies

Mission

The purpose or reason for the corporations

existence. It tells who the company is, what they
do as well as what theyd like to become.

Objectives

The end results of planned activity. They state

WHAT is to be accomplished by WHEN. They
should be quantified, if possible.
Should be specific, measurable and obtainable.

Strategies
A strategy is a comprehensive master plan stating HOW the corporation
will achieve its mission and objectives. There are three types:
Corporate - a corporations overall direction and the management of its
businesses.
Business - emphasizes improving the competitive position of a
corporations products or services in a specific industry or market segment.
Functional - concerned with developing a distinctive competence to
provide a company or business unit with a competitive advantage.

Hierarchy of Strategy
Corporate
Headquarters

Strategic
Business
Unit

Manufacturing

Finance

Strategic
Business
Unit

Marketing

Corporate
Strategy

Business
(Division
Level)
Strategy

Strategic
Business
Unit

Research
and
Development

Human
Resources

Functional
Strategy

Policies

Broad guidelines for making decisions.

E.g. - 3Ms policy requiring researchers to spend
15% of their time working on something other
than their primary project.

Strategy Implementation
The process of putting strategies and policies into action through
the development of:

Programs - statements of activities or steps needed to

accomplish a single-use plan.

Budgets - statements of a corporations

dollar terms.

Procedures - systems of sequential steps or techniques that

describe in detail how to perform particular tasks or jobs.

programs in

Evaluation and Control

The process of monitoring corporate

activities and performance results so that
actual performance can be compared with
desired performance.

Strategic Decision-Making Process

3(a)

Scan and
Assess
External
Environment:
Societal
Task

1(a)

Evaluate
Current
Performance
Results

1(b)
Examine and
Evaluate the
Current:
Mission
Objectives
Strategies
Policies

3(b)

Analyze
External
Factors:
Opportunities
Threats

5(a)
Select
Strategic
Factors
(SWOT)
in Light of
Current
Situation

Review
Corporate
Governance:
Board of
Directors
Top Management

4(a)
Scan and
Assess
Internal
Environment:
Structure
Culture
Resources

5(b)

Review and
Revise as
Necessary:
Mission
Objectives

6(a)
Generate
and
Evaluate
Strategic
Alternatives

6(b)

Select
and
Recommend
Best
Alternative

Implement
Strategies:
Programs
Budgets
Procedures

4(b)
Analyze
Internal
Factors:
Strengths
Weaknesses

Strategy
Formulation:
Steps 1 6

Strategy
Implementation
Step 7