STRATERGIC MANAGEMENTPrepared and edited by

1.INTRO

1950s – budgetary planning and control... Financial control... Budgeting & project management and appraisal... Emphasised financial management

1960s – Corporate planning, planning for growth, forecasting & investment planning, rise of corporate planning departments & formal planning.

Early to Mid 1970s – Corporate strategy – diversification – portfolio strategy planning – synergy market share – diversification – quest for global market share .Late 1970s to early 1980s – Analysis of industry & competition, positioning, analysis of industry & competition, industry/market selectivity. Active asset management .Late 1980s – early 1990s – Quest for competitive advantage, competitive advantage, resource analysis, core competences - restructuring, BPR, refocusing and outsourcing. .Late 1990s – early 2000s – Strategic innovation, The “New Economy” - Innovation & knowledge – dynamic sources of advantage – Knowledge Management, cooperation – Virtual organisation, alliances – quest for critical mass .Late 2000s - Strategic Management – strategy is a design tool – you need to design a strategy to

build a design tool. Strategy by design.

Strategy. ‘A course of action, including the specification of resources required, to achieve aspecific objective.’ CIMA: Management Accounting.

It is widely held that growth is the fundamental strategic challenge for business leaders. Today’s business environment is making creative strategy even more critical. Virtually every business We can argues that the world is getting more complex, whether it’s the new rules of the Internet economy; the “flattening” of global markets; the emergence of new world-scale competitors; or the fluidity of people, ideas,and capital. In this environment, constant strategic recreation may offer the only hope of long-term success. books tell stories of great strategic triumphs (and failures), examining heroic leaders and critical decisions, analyzing businesses individually and en masse to glean lessons and codify rules. But whatvalue does this serve in preparing leaders for the creative process of developing the next strategy? Many of the heroes of our best strategic tales, including some told in the books reviewed here, were not great students of strategy.Indeed, many of our modern business icons — BillGates, Sam Walton, Richard Branson, Fred Smith, and the like — didn’t proceed from theory to action. And perhaps their genius can’t be codified. As the

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philosopher Immanuel Kant argued, “Genius is a talent for producing that for which no definite rule can be given, and not an aptitude in the way of cleverness for what can belearned according to some rule.” It is therefore no wonder that most business books discuss how to evaluate a strategy, but few offer much help in creating one.Michael Porter’s classic CompetitiveStrategy: Techniques for Analyzing Industries andCompetitors (Free Press, 1980) “tells you how to analyze your own strategy in light of your industry and your competitors. But it does not tell you how to come up with a strategic idea: that’s a ‘creative step’ Porter leaves out.”

Stretegic planning is the process of formulating, implementing and evaluating strategies to support the cross functional decision of the company. In today’s world, everything is changing with unexpected speed.Competition,Innovation,polices,environment,technology and human resource are some major concerns of the company.Companies follow the traditional ad-hoc,forecasting methods to compete in the market will not work for long term. Strategic planning is now become mandatory process to clearly define company objectives,goals,internal resources,external factors and to evaluate overall cycle for eliminating bottlenecks

Stretegic planning process compromise of following following phases:

1- Compny vision & mission

2-Internal audit

3-External audit

4-Formulation of strategy

5-Implementation of strategy

6-Evaluation of strategy

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SPACE matrix 

The Strategic Position & ACtion Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization. What is the SPACE matrix strategic management method?

To explain how the SPACE matrix works, it is best to reverse-engineer it. First, let's take a look at what the outcome of a SPACE matrix analysis can be, take a look at the picture below. The SPACE matrix is broken down to four quadrants where each quadrant suggests a different type or a nature of a strategy:

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Aggressive Conservative Defensive Competitive

This is what a completed SPACE matrix looks like:

This particular SPACE matrix tells us that our company should pursue an aggressive strategy. Our company has a strong competitive position it the market with rapid growth. It needs to use its internal strengths to develop a market penetration and market development strategy. This can include product development, integration with other companies, acquisition of competitors, and so on.

Now, how do we get to the possible outcomes shown in the SPACE matrix? The SPACE Matrix analysis functions upon two internal and two external strategic dimensions in order to determine the organization's strategic posture in the industry. The SPACE matrix is based on four areas of analysis.

Internal strategic dimensions:

          Financial strength (FS)          Competitive advantage (CA)

External strategic dimensions:

          Environmental stability (ES)          Industry strength (IS)

There are many SPACE matrix factors under the internal strategic dimension. These factors analyze a business internal strategic position. The financial strength factors often come from company accounting. These SPACE matrix factors can include for example return on investment, leverage, turnover, liquidity, working capital, cash flow, and others. Competitive

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advantage factors include for example the speed of innovation by the company, market niche position, customer loyalty, product quality, market share, product life cycle, and others.

Every business is also affected by the environment in which it operates. SPACE matrix factors related to business external strategic dimension are for example overall economic condition, GDP growth, inflation, price elasticity, technology, barriers to entry, competitive pressures, industry growth potential, and others. These factors can be well analyzed using the Michael Porter's Five Forces model.

The SPACE matrix calculates the importance of each of these dimensions and places them on a Cartesian graph with X and Y coordinates.

The following are a few model technical assumptions:

- By definition, the CA and IS values in the SPACE matrix are plotted on the X axis.- CA values can range from -1 to -6.- IS values can take +1 to +6.

- The FS and ES dimensions of the model are plotted on the Y axis.- ES values can be between -1 and -6.- FS values range from +1 to +6.

How do I construct a SPACE matrix?

The SPACE matrix is constructed by plotting calculated values for the competitive advantage (CA) and industry strength (IS) dimensions on the X axis. The Y axis is based on the environmental stability (ES) and financial strength (FS) dimensions. The SPACE matrix can be created using the following seven steps: The SPACE matrix is constructed by plotting calculated values for the competitive advantage (CA) and industry strength (IS) dimensions on the X axis. The Y axis is based on the environmental stability (ES) and financial strength (FS) dimensions. The SPACE matrix can be created using the following seven steps:

Step 1: Choose a set of variables to be used to gauge the competitive advantage (CA), industry strength (IS), environmental stability (ES), and financial strength (FS).

Step 2: Rate individual factors using rating system specific to each dimension. Rate competitive advantage (CA) and environmental stability (ES) using rating scale from -6 (worst) to -1 (best). Rate industry strength (IS) and financial strength (FS) using rating scale from +1 (worst) to +6 (best).

Step 3: Find the average scores for competitive advantage (CA), industry strength (IS), environmental stability (ES), and financial strength (FS).

Step 4: Plot values from step 3 for each dimension on the SPACE matrix on the appropriate axis.

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Step 5: Add the average score for the competitive advantage (CA) and industry strength (IS) dimensions. This will be your final point on axis X on the SPACE matrix.

Step 6: Add the average score for the SPACE matrix environmental stability (ES) and financial strength (FS) dimensions to find your final point on the axis Y.

Step 7: Find intersection of your X and Y points. Draw a line from the center of the SPACE matrix to your point. This line reveals the type of strategy the company should pursue

SMART criteria. (Specific, Measurable, Action Oriented, Realistic, Time bound). Each goal should have action plan(s) to assure they are achieved. Frequently some of the goals from one level become objectives for the next level down in the organization. When this happens it assures that goal oriented action plans anywhere in the organization can be traced up the organization to demonstrate they are in support of the top level objectives and strategy. When there are gaps in that linkage it is common to have misunderstandings and efforts that are not aligned and hence not as efficient nor as effective as they could. Effective team building starts at the executive level, includes management training at all levels including front line supervisors and has a leadership skills development  training plan for every employee.

Six Sigma Six Sigma can be an integral part of  strategic planning or a business plan. For many Six Sigma is part of that vision. Achieving a performance level that has less than 3.4 ppm defect or error rate may seen like the Impossible Dream for some, yet for other's it has been achieved.. For a strategy involving cost leadership, Six Sigma can be focused to improve internal processes, yields, productivity, eliminate complexity, reduce cycle time and in general help gain or maintain low cost supplier position for your particular product or service. If your strategy includes being the lowest price in the market your costs had better be the lowest.

Six Sigma also should be an integral part of any customer loyalty strategy. One of the keys to customer loyalty is providing the customer with products and services that meet or exceed their expectation every time. Every transaction and interaction between a customer, or potential customer, is an opportunity to meet or fail to meet that specific customers expectations. Few systems are good enough to offer the desired level of product or service on a consistent basis to keep loyal customers without some constant attention and work. The tremendous benefits from having loyal customers can not be overstated. Jack Welch has been quoted as saying that only when GE's Six Sigma efforts started focusing on the external customers did they begin to really see the benefits.

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2.THE STRATEGIC MANAGEMENT PROCESS

Strategic management primarily concerned with strategy formulation and its implementation

As strategic management concept there should be first come in mind about

STRETEGIC PLANNING

• corporate strategy • business unit strategy• functional or departmental level or operational strategy

Corporate strategy:The corporate center is at the apex of the organization. It is the head office of the firm and willcontain the corporate board. The planning view of strategy assumes that all strategy wasformulated at corporate level and then implemented in a ‘top-down’ manner by instructions to thebusiness divisions. During the 1980s, high profile corporate planners like IBM, General Motorsand Ford ran into difficulties against newer and smaller ‘upstart’ competitors who seemed to bemore flexible and entrepreneurial. One consequence was the devolution of responsibility forcompetitive strategy to strategic business units (S.B.U.).

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Cost Business Strategy:A strategic business unit (SBU) is defined by CIMA as:Management of the SBU will be responsible for winning customers and beating rivals in itsparticular market. Consequently, it is at this level that competitive strategy is usually formulated.The consideration at this level will include:Marketing issues such as product development, pricing, promotion and distribution;Decision on production technology;Staffing decisions.A business strategy should be formulated within the board framework of the overall objectiveslaid down by the corporate centre to ensure that each SBU plays its part. The extent to which themanagement of the SBU is free to make competitive strategy decisions varies from organizationto organization and reflects the degree of centralization versus decentralization in themanagement structure of the firm.

Functional StrategiesThe functional (or sometimes called operational) level of the organization refers to main businessfunctions such as sales, production, purchasing, human resources and finance. Functionalstrategies are the long-term management policies of these functional areas. They are intended toensure that the functional area plays its part its part in helping the SBU achieve the goals of itsbusiness strategy.Functional area strategy such as marketing, financial, production and Human Resource arebased on the functional capabilities of an organization. For each functional area, first the majorsub areas are identified and then for each of these sub functional areas, contents of functionalstrategies, important factors, and their importance in the process of strategy implementation isidentified.

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An additional level of strategy called operational strategy was encouragedby Peter Drucker in his theory of management by objectives (MBO).In terms of the levels of strategy formulation, functional strategies operate below the SBU orbusiness-level strategies. Within functional strategies there might be several sub-functionalareas. Functional strategies, are made within the higher level strategies and guidelines thereinthat are set at higher levels of an organization. Functional managers need guidance from thebusiness strategy in order to make decisions. Operational plans tell the functional managerswhat has to be done while policies state how the plans are to be implemented.The reasons why functional strategies are really important and needed for business can beenumerated as follows:The development of functional strategies is aimed at making the strategies-formulated at thetop management level-practically feasible at the functional level.Functional Strategies facilitate flow of strategic decisions to the different parts of anorganization.They act as basis for controlling activities in the different functional areas of business.The time spent by functional managers in decision-making is reduced as plans lay downclearly what is to be done and policies provide the discretionary framework within whichdecisions need to be taken.Functional strategies help in bringing harmony and coordination as they remain part of majorstrategies.Similar situations occurring in different functional areas are handled in a consistent manner bythe functional managers.

3.ELEMENTS OF STRATEGIC MANAGMENT

mission-vision

The Business Vision andCompany Mission Statement

While a business must continually adapt to its competitive environment, there are certain core ideals that remain relatively steady and provide guidance in the process of strategic decision-making. These unchanging ideals form the business vision and are expressed in the company mission statement.

The mission statement communicates the firm's core ideology and visionary goals, generally consisting of the following three components:

1. Core values to which the firm is committed2. Core purpose of the firm3. Visionary goals the firm will pursue to fulfill its mission

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The firm's core values and purpose constitute its core ideology and remain relatively constant. They are independent of industry structure and the product life cycle.

The core ideology is not created in a mission statement; rather, the mission statement is simply an expression of what already exists. The specific phrasing of the ideology may change with the times, but the underlying ideology remains constant.

The three components of the business vision can be portrayed as follows:

Core Values

     Core

Purpose

     

    BusinessVision

   

       

    VisionaryGoals

   

Core Values

The core values are a few values (no more than five or so) that are central to the firm. Core values reflect the deeply held values of the organization and are independent of the current industry environment and management fads.

One way to determine whether a value is a core value to ask whether it would continue to be supported if circumstances changed and caused it to be seen as a liability. If the answer is that it would be kept, then it is core value. Another way to determine which values are core is to imagine the firm moving into a totally different industry. The values that would be carried with it into the new industry are the core values of the firm.

Core values will not change even if the industry in which the company operates changes. If the industry changes such that the core values are not appreciated, then the firm should seek new markets where its core values are viewed as an asset.

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For example, if innovation is a core value but then 10 years down the road innovation is no longer valued by the current customers, rather than change its values the firm should seek new markets where innovation is advantageous.

The following are a few examples of values that some firms has chosen to be in their core:

excellent customer service pioneering technology creativity integrity social responsibility

Core Purpose

The core purpose is the reason that the firm exists. This core purpose is expressed in a carefully formulated mission statement. Like the core values, the core purpose is relatively unchanging and for many firms endures for decades or even centuries. This purpose sets the firm apart from other firms in its industry and sets the direction in which the firm will proceed.

The core purpose is an idealistic reason for being. While firms exist to earn a profit, the profit motive should not be highlighted in the mission statement since it provides little direction to the firm's employees. What is more important is how the firm will earn its profit since the "how" is what defines the firm.

Initial attempts at stating a core purpose often result in too specific of a statement that focuses on a product or service. To isolate the core purpose, it is useful to ask "why" in response to first-pass, product-oriented mission statements. For example, if a market research firm initially states that its purpose is to provide market research data to its customers, asking "why" leads to the fact that the data is to help customers better understand their markets. Continuing to ask "why" may lead to the revelation that the firm's core purpose is to assist its clients in reaching their objectives by helping them to better understand their markets.

The core purpose and values of the firm are not selected - they are discovered. The stated ideology should not be a goal or aspiration but rather, it should portray the firm as it really is. Any attempt to state a value that is not already held by the firm's employees is likely to not be taken seriously.

Visionary Goals

The visionary goals are the lofty objectives that the firm's management decides to pursue. This vision describes some milestone that the firm will reach in the future and may require a decade or more to achieve. In contrast to the core ideology that the firm discovers, visionary goals are selected.

These visionary goals are longer term and more challenging than strategic or tactical goals. There may be only a 50% chance of realizing the vision, but the firm must believe that it can do so. Collins and Porras describe these lofty objectives as "Big, Hairy, Audacious Goals." These goals should be challenging

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enough so that people nearly gasp when they learn of them and realize the effort that will be required to reach them.

Most visionary goals fall into one of the following categories:

Target - quantitative or qualitative goals such as a sales target or Ford's goal to "democratize the automobile."

Common enemy - centered on overtaking a specific firm such as the 1950's goal of Philip-Morris to displace RJR.

Role model - to become like another firm in a different industry or market. For example, a cycling accessories firm might strive to become "the Nike of the cycling industry."

Internal transformation - especially appropriate for very large corporations. For example, GE set the goal of becoming number one or number two in every market it serves.

While visionary goals may require significant stretching to achieve, many visionary companies have succeeded in reaching them. Once such a goal is reached, it needs to be replaced; otherwise, it is unlikely that the organization will continue to be successful. For example, Ford succeeded in placing the automobile within the reach of everyday people, but did not replace this goal with a better one and General Motors overtook Ford in the 1930's.

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The Power of Vision

A strategic vision points an organization in a particular direction, charts a strategic path for it to followin preparing for the future, and moulds organizational identity. A Strategic vision is aroad map of a company’s future – providing specifics about technology andcustomer focus, the geographic and product markets to be pursued, the capabilitiesit plans to develop, and the kind of company that management is trying to create. A vision is not a strategy; it precedes a strategy and sets thetone for the corporate strategy. A vision is the prism through which thecompany’s efforts are viewed and concentrated. Sometimes, the vision is alittle out of focus, .A more recent example of the power of vision in the same industry is theturnaround of IBM. Louis Gerstner became Chairman of IBM in 1993. Hetook over a leaking boat. His first statement, The last thing IBM needs rightnow is a vision, received a lot of publicitySix months after being appointed Chairman he set out a vision for IBM whichled to the major cultural changes and subsequent financial turnaround of theorganization. As summarized in Who Says Elephants Can’t Dance?, hereare the eight principles that Louis Gerstner set out:1. The marketplace is the driving force behind everything we do.2. At our core, we are a technology company with an overridingcommitment to quality.3. Our primary measures of success are customer satisfaction andshareholder value.4. We operate as an entrepreneurial organization with a minimum ofbureaucracy and a never ending focus on productivity.

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5. We never lose sight of our strategic vision.6. We think and act with a sense of urgency.7. Outstanding, dedicated people make it all happen, particularlywhen they work together as a team.8. We are sensitive to the needs of all employees and to thecommunity in which we operate.

An effective vision is a combination of views. It requires a creative understanding and delineation of the kaleidoscope of the corporate environment, along with a sifting of the past history and experience, and a glimpse of the future. Visions inspire and mobilize human resources into action. Leaders need to develop visions. Everyone has a vision or a dream, but not every vision makes it into the world of reality. According to Norman Strauss, former adviser to Prime Minister Thatcher, “The word is reserved for those that do. Other hopes are fantasies and illusions, the impractical dreams of unsound minds.”. Visions are a source of untold power for the corporation, rarely tapped to the fullest. Chance has always favoured theprepared mind; now it favours the prepared mind with a vision. True leaders in all fields create visions. John Kennedy inspired a nation; Pierre Trudeau created a vision for Canada, adopted by millions ofCanadians; Ray Kroc of McDonald’s had a culinary vision now shared all over the world; Mother Theresa was an inspiration with her vision of humanity. Vision is one of the few variables that can be shared by everyone in a organization and well beyond the corporate boundaries; for example, to the sporting field, the political arena, and any area of human endeavour. The ability to share and the shaping of values is what gives vision power.

Types of Visions

Norman Strauss, in an article in Director, has suggested that there are several types of visions that the manager can develop. Until now, the discussion has centered on the overall corporate vision, which can be broken down into various components:Historical Vision – An understanding of the past actions and activities of the company. Understanding how the company arrived is very important; much can be learned from history.Situational Vision – An understanding of the current situation.Strategic Vision – The direction to take in the future. In essence, where we have been, where we are, and where we are going.Leadership Vision – An understanding of how to inspire people to achieve the corporate goals.Organizational Vision – Structuring the organization so that it has a competitive edge.System Vision – Strauss’ most important and all encompassing vision is theview of the totality of the company and its environment. System visiondetermines the possibilities within the constraints.

Creating a VisionVisions can be created at all levels of the organization. Leaders exist not only at the top, but also on the shop floor. Creating a vision starts with an understanding of both the internal organization and the relationship of the organization to its environment and its various stakeholders (organizations are seen to have stakeholders, or interested parties; some of these are: customers, distributors, shareholders, employees, and the community In other words, keep your eye on the future goal, but make sure that you take advantage of the opportunities that present themselves. The future vision supports day to day activities and provides them with meaning and direction, but it should not be a barrier to action and creativity. Professor G. Morgan and reported in his book, Riding the Waves of Change: It’s absolutely crucial to have a good understanding – call it whatever you want – of why you are in business and what you are doing. The rapidity of change makes it all the more important. I think this is what the great

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successful organizations have in the key places. The world is such a changeable place that you need to have a wellarticulated long-term sense of where you’re going, which gives you the base,the confidence, to take on whatever adaptability issues come along without losing your sense of direction. You’ve got to respond to the issues of the moment without losing that long-term sense. You need a sense of corporate purpose and an awareness that the organization has a personality that goes beyond what it is doing right now.First, keep in mind that a vision precedes any type of strategy . Vision is the envelope that surrounds a firm’s strategy. Vision is about ideas, values, shared meanings and understanding, and most important, it is the beacon for tomorrow. A vision is not a strategy and the two should not be confused, although theyoften are. Visions are about the future, they are inspirational, and they create motivation and commitment in an organization. Visions do not provide the specific road map; that is the business of strategy. Strategy and vision are intertwined. In his book, The Rise and Fall of Strategic Planning, Henry Mintzberg suggests that strategic plans fail if there is no vision to support the plans. According to Mintzberg, the vision also acts as a stimulant to action.For one thing, the term “vision” had been tossed around by so many people and used in so many different ways that it created more confusion than clarification. Some viewed vision as about having a crystal-ball picture of the future marketplace. Others thought in terms of a technology or product vision, such as the Macintosh computer. Still others emphasized a vision of the organization-values, purpose, mission, goals, images of an idealized workplace. Talk about a muddled mess! No wonder so many hardnosed practical businesspeople were highly skeptical of the whole notion of vision; it just seemed so –well–fuzzy, unclear and impractical.”

missionKnow Your PurposeWe can start by inquiring into what we mean by mission anyway. It is very hard to focus on what you cannot define, and my experience is that there can be some very fuzzy thinking about mission, vision, and values. Most organizations today have mission statements, purpose statements, official visions, and little cards with the organization’s values. But precious few of us can say our organization’s mission statement has transformed the enterprise. And there has grown an understandable cynicism around lofty ideals that don’t match the realities of organizational life…. A mission statement is the purpose of the organization. It states who we are, whom we serve what products and services we provide and how we make those products and services available to our customers, clients, or patients. The mission statement tells what the organization was formed to do. Some like to include levels or performance in the mission statement. I contend that just adds complexity. State what you are about and let the performance speak to the level or quality.

With values, vision and mission understood a strategy should be developed. To attempt to develop a strategy before values, vision and mission are clear, understood, and accepted is a mistake. Quite simply strategy is the observable actions in the marketplace that lead to a competitive advantage. Keys are observable actions, marketplace and competitive advantage. If any one of these is missing there may be some nice sounding words, pretty pictures and flowery talk but there is no strategy.The first obstacle to understanding mission is a problem of language. Many leaders use mission and vision interchangeably, or think that the words — and the differences between them — matter little. But words do matter. Language is messy by nature, which is why we must be careful in how we use it.. The essence of leadership — what we do with 98 percent of our time — is communication. To master any management practice, we must

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start by bringing discipline to the domain in which we spend most of our time, the domain of words.

The dictionary — which, unlike the computer, is an essential leadership tool — contains multiple definitions of the word mission; the most appropriate here is, “purpose, reason for being.” Vision, by contrast, is “a picture or image of the future we seek to create,” and values articulate how we intend to live as we pursue our mission.

Competition, Innovation, polices,environment,technology and human resource are some major concerns of the company. Companies follow the traditional ad-hoc,forecasting methods to compete in the market will not work for long term. Strategic planning is now become mandatory process to clearly define company objectives,goals,internal resources,external factors and to

Policies Changes in a firm's strategic direction do not occur automatically. On a day-to-day basis, policies are needed to make a strategy work. Policies facilitate solving recurring problems and guide the implementation of strategy. Broadly defined, policy refers to specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work toward stated goals. Policies are instruments for strategy implementation. Policies set boundaries, constraints, and limits on the kinds of administrative actions that can be taken to reward and sanction behavior; they clarify what can and cannot be done in pursuit of an organization's objective.

The link between mission, goals and objectives:Whilst the mission is an open-ended statement of the firm’s purposes and strategies, strategicgoals and objectives translate the mission into strategic milestones for the business strategy toreach. In other words, the outcomes that the organizations seeks to achieve.A strategic objective will possess four characteristics which set it apart from a mission statement:1. A precise formulation of the attribute sought;2. An index or measure for progress towards the attribute;3. A target to be achieved;4. A time-frame in which it is to be achieved.Another way of putting this is to say that objectives must be SMART, that is,· Specific- unambiguous in what is to be achieved.· Measurable- specified as a quantity;· Attainable- within reach;· Relevant- appropriate to the group or individual to whom it is applied;· Time-bound- with a completion date. Setting Objectives – Performance OutcomesThe vision must be converted into objectives which encompass what theorganization wants to accomplish. An ideal business objective is short and to the point. It is quantifiable and measurable. It has a specific time when it is expected to be achieved. For example: Our objective in manufacturing is to decrease costs an average of 10% by December. Other characteristics of a good business objective are: clear meaning; no clichés, for example, we aim to improve our delivery service to our customers; reachable, even if an objective is a stretch objective, it should be realistic and attainable. Department objectives should be aligned with overall corporate objectives (umbrella objectives).

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Objectives should be well thought out; they should not be frivolous wish

lists. The time frame for an objective should be the planning cycle, which is usually one year. If a long term objective is developed, it should be labeled as such and should not exceed two or three years. Long term objectives should be listed separately from annual business objectives. It should be noted that it may be difficult to fit completion dates on long term objectives, and even more difficult to attach specific strategies and implementation to these objectives. Longer term objectives may be covered better undervision. A company’s performance or a department’s performance is measured by how well it does when compared to the objectives the company or department sets for itself. It is a measure of outcome that helps an organization keep an eye on whether or not it is achieving what it set out to achieve. There is an old business saying that states, “You cannot manage what you cannot measure,” or put another way, “What gets measured, gets done.” Objective setting is one of the best tools for helping a company set outstrategy and action for achieving success. If you have mediocre and vague objectives – such as, lower costs, improve competitiveness, increase revenues – you will have mediocre and vague performance. Objectives must provide guidance about where a company or a department wants to be.An analysis of objectives set and objectives achieved is often labeled a gap analysis. Once a gap is identified, it is then up to management to come up with plans to narrow or close this gap. This could mean adjusting the objectives or the strategy used to reach the objectives. Realism is importantwhen setting objectives. Objectives can cover a wide area – financial, marketing, manufacturing, human resources, and technology. Setting objectives is a cornerstone for developing strategy (how to achieve the objectives), and action (what has to be done to put the strategy into action), such as activities,investments, and budgets. This is the to-do list.Objectives or Goals? What is the difference between an objective and a goal? None – objectives are generally used for business planning, and goals for personal

planning. Many people use objectives and goals to mean the same thing.

Developing the Strategy – How to Achieve the Objectives

the activities to be undertaken in order to reach theobjectives, and where these activities will take place. By defining what topursue, the company also defines what not to pursue. A strategy develops a range of activities that must be carried out in order tomeet the company’s stated objectives. Thompson, Gamble and Stricklanduse Mintzberg’s phrase, crafting a strategy, in an entrepreneurial fashion, tomean that a company should search for opportunities to do new and differentthings, or to do existing things in new and different ways. They see strategyas a series of how to:. How

3.External Enviroment

Mainly external environent consist PEST-LE PESTLE stands for:

PoliticalEconomicSocial

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TechnologicalLegalEnvironmental

Subject of PEST analysis: (define the standpoint and market here)

POLITICAL FACTORS

Political factors can have a direct impact on the way business operates. Decisions madeby government affect the operations of units within the university to a varying degree.Political refers to the big and small ‘p’ political forces and influences that may affect theperformance of, or the options open to the unit concerned. The political arena has a hugeinfluence upon the regulation of public and private sector businesses, and the spendingpower of consumers and other businesses, both within UCC and outside of UCC. Politicalfactors include government regulations and legal issues and define both formal andinformal rules under which UCC and units must operate. Depending on its role andfunction within the university a unit may need to consider issues such as:• How stable is the internal/external political environment? • Will government policy influence laws that regulate third level education?• What is the government's policy on the education? • Is the government involved in trading agreements such as the Bologna Agreement?• The impact of employment laws • The impact of environmental regulations • Trade restrictions and tariffs • Political stability (internally and externally• Decision-making structuresSeptember 2003 ECONOMIC FACTORS

All businesses are affected by economical factors nationally and globally. Whether aneconomy is in a boom, recession or recovery will also affect consumer confidence andbehaviour. The dramatic impact of reduced funds upon UCC is already very apparent.This will impact upon the nature of the competition faced by the university and particularunits within the university, upon service provision, and upon the financial resourcesavailable within UCC. Economic factors affect the purchasing power of potentialcustomers, and the state of the internal/external economy in the short and long-term. Theunit may need to consider:• Economic growth • Interest rates • Inflation rate • Budget allocation• The level of inflation • Employment level per capita • Long-term prospects for the economy and the impact upon funding of third LevelEducation etcSOCIAL/SOCIOLOGICAL FACTORS

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Social factors will include the demographic changes, trends in the way people live, workand think and cultural aspects of the macro environment. These factors affect customerneeds and the size of potential markets (inside and outside of UCC).• Population growth rate • Age distribution • Career attitudes • Internal/external emphasis on safety • Internal/external attitudes to change• What is the stakeholder expectation of the unit?• What is the perceived impact of the unit upon UCC and external stakeholders?• How are views expressed?• How does the unit respond to such views?

TECHNOLOGICAL FACTORS

New approaches to doing new and old things, and tackling new and old problems do notnecessarily involve technical factors, however, technological factors are vital forcompetitive advantage, and are a major driver of change and efficiency. Technological;factors can for example lower barriers to entry, reduce minimum efficient productionlevels, and influence outsourcing decisions. New technology is changing the waybusiness operates. The Internet is having a profound impact on the strategy oforganisations.

Legal factors include discrimination law, consumer law   antitrust law, employment law, and health and safety   law. These factors can affect how a company operates, its costs, and the demand for its products.Environmental factors include ecological and environmental aspects such as weather, climate, and CLIMATE CHANGE, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones.

4. INTERNAL ENVIROMENT

INTERNAL ENVIROMENT

4.1 The 7-S framework is especially helpful with a process redesign or a change management objective. Strategic planning must be developed within the context of an organization. The Seven S framework shows how strategy fits into the larger picture, and allows management to consider how the direction of the company will affect all facets of the company.

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The Seven S's are Structure, Systems, Strategy, Style, Skills, Staff, and Shared Values. Each element is interrelated with the other elements. Therefore, management must consider how changes to one element will affect all other elements

Structure: An organization may be structured around customers, products, functions, or other gravitaional centers. Structural elements should be semi-autonomous, yet capable of facilitating interaction amongst one another. (For example, in a functional structure, cross-functional teams will play important roles.)

Strategy: A company's strategy defines the business within the marketplace - staking out a position of strength that can be maintained for years, if not decades. Strategy begins with a theory that provides puts a company's actions into the context of a larger, explainable process. It attempts to correlate cause and effect within a business context, so that action can be evaluated on the basis of expected result.

Style (Culture): Refers to the behaviors, beliefs, and approach that is ingrained within the organization. Some corporations have innovative, risk-taking styles, others are highly conservative. A company's style affects who it does business with (i.e., vendors and partners), as well as who does business with it (i.e., customers). If a company's style clashes with its stated strategy (e.g., a conservative culture claiming a strategy of bold change), style is likely to win the day. With concerted effort, style can be changed. However this requires delicacy and patience.

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Staff includes not just the people, but the systems affecting individual and group performance. This includes training, incentives, wages, heirarchy, and intangibles that affect motivation. Although performance reviews and hiring processes are often seen as bureaucratic and unpleasant, they play a vital role in the organization and deserve as much attention as business strategy.

Skills include core compentencies and secondary competencies that are the aggregate of employees' individual skills. Companies may have funcational skills in engineering, R&D, marketing, or managing customer relationships. Skills may be based on employees' knowledge, or may involve utilization of patents, assets, or systems.

Systems consist of processes and procedures that organize the flow of information and operations. Financial systems allocate and control the flow of money into (e.g., from customers) and out of (e.g., to employees and vendors) the company. Operational systems manage the flow and processing of good and services. Marketing and sales tracking systems provide information about products, customers, and sales effectiveness. Each system should have a reporting component that enables management to monitor performance, and provides data with which to make strategic and operational decisions.

Superordinate Goals are unwritten principles that shape behavior. Superordinate Goals are often unwritten, and must be learned based on the behavior and history of the company, rather than what is stated in the company's mission statement.

4.2 Corporate portfolio analysis

4.2.1BCG MATRIXX

The BCG is simple and useful technique for strategic analysis. It isconvenient for multi-product or multi-divisional companies. Itfocuses on cash flow and is useful for investment and marketingdecisions.The BCG matrix considers two variables, namely..N MARKET GROWTH RATEN RELATIVE MARKET SHAREThe market growth rate is shown on the vertical (y) axis and isexpressed as a %. The horizontal (x) axis shows relative market share. The share iscalculated by reference to the largest competitor in the marketThe BCG growth/share matrix is divided into four cells orquadrants, each of which represent a particular type of business.Divisions or products are represented by circles. The size of the

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circle reflects the relative significance of the division/product togroup sales. A development of the matrix is to reflect the relativeprofit contribution of each division and this is shown as a pie-segment within the circle

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BCG STARS (high growth, high market share)

- Stars are defined by having high market share in a growing market.- Stars are the leaders in the business but still need a lot of support for promotion a placement.- If market share is kept, Stars are likely to grow into cash cows. Successful question marks become stars. i.e. market leaders in

high growth industries. However, investment is normally stillrequired to maintain growth and to defend the leadership positionStrategic options for stars include..

Integration – forward, backward and horizontalMarket penetrationMarket developmentProduct developmentJoint ventures

BCG QUESTION MARKS (high growth, low market share)

- These products are in growing markets but have low market share.- Question marks are essentially new products where buyers have yet to discover them.- The marketing strategy is to get markets to adopt these products.- Question marks have high demands and low returns due to low market share.- These products need to increase their market share quickly or they become dogs.- The best way to handle Question marks is to either invest heavily in them to gain market share or to 

sell them. Strategic options for question marks include..

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Market penetrationMarket developmentProduct developmen

BCG CASH COWS (low growth, high market share)

- Cash cows are in a position of high market share in a mature market.- If competitive advantage has been achieved, cash cows have high profit margins and generate a lot of cash flow.- Because of the low growth, promotion and placement investments are low.- Investments into supporting infrastructure can improve efficiency and increase cash flow more.- Cash cows are the products that businesses strive for. These are characterised by high relative market share in lowgrowth industries. As the market matures the need for investment

reduces. Cash Cows are the most profitable products in theportfolio. Cash Cows may be used to fund the businesses in the other three quadrants.

strategic options include..

Product developmentConcentric diversification

BCG DOGS (low growth, low market share)

- Dogs are in low growth markets and have low market share.- Dogs should be avoided and minimized.

- Expensive turn-around plans usually do not help. Strategic options would include..

Retrenchment (if it is believed that it could be revitalised)LiquidationDivestment (if you can find someone to buy!

Some limitations of the BCG matrix model include:

The first problem can be how we define market and how we get data about market share A high market share does not necessarily lead to profitability at all times The model employs only two dimensions – market share and product or service growth

rate Low share or niche businesses can be profitable too (some Dogs can be more profitable

than cash Cows)

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The model does not reflect growth rates of the overall market The model neglects the effects of synergy between business units Market growth is not the only indicator for attractiveness of a market

There are probably even more aspects that need to be considered in a particular use of the BCG model.

4.2.2 GE/McKinsey 9-block matrix

In 1968, then-CEO of GE, Fred Borch, asked McKinsey and Co. for an examination of GE’s corporate structure. McKinsey’s examination revealed that GE’s structure was inadequate, and they argued that “the firm should be organized on more strategic lines, with greater concern for external conditions than internal controls.” The company was divided into strategic business units, or SBUs. In 1971, a GE exec. asked McKinsey to evaluate strategic plans drawn up by the SBUs. According to GE, the BCG Growth Matrix, with only two performance measures, was insufficient for the company’s needs.From this request, the GE/McKinsey 9-block matrix, a system using a “dozen measures to screen for industry attractiveness and another dozen to screen

for competitive position,” was developed

Description of the ModelThe General Electric Company, with the aid of the Boston Consulting Group and McKinsey and Company, pioneered the nine cell strategic business screen illustrated here. The circle on the matrix represents your enterprise. Both axes are divided into three segments, yielding nine cells. The nine cells are grouped into three zones:

The Green Zone consists of the three cells in the upper left corner. If your enterprise falls in this zone

you are in a favorable position with relatively attractive growth opportunities. This indicates a "green light" to invest in this product/service.

The Yellow Zone consists of the three diagonal cells from the lower left to the upper right. A position in the yellow zone is viewed as having medium attractiveness. Management must therefore exercise caution when making additional investments in this product/service. The suggested strategy is to seek to maintain share rather than growing or reducing share.

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The Red Zone consists of the three cells in the lower right corner. A position in the red zone is not attractive. The suggested strategy is that management should begin to make plans to exit the industry.

Now the GE-McKinsey model, like all generic strategy models has its own set of limitations.

A major assumption behind the GE-McKinsey matrix is that it can operate when the economies of scale are achievable in production and distribution. Unless the same holds true, the concept of leveraging the competencies of the firm and the SBU falls flat.

Also some of the factors of competitive strength and market competitiveness may be extremely important for a particular instance, while another instance may even require even other factors. The top management of the organization should decide upon these factors very carefully as there is no generic set of factors with which all SBUs may be evaluated.

The relative weightage given to each of the factors of competitive strength and market competitiveness is often arbitrary. While some methodology such as the Analytic Hierarchy Process may be used to compute the relative importance of such factors, such is mostly not done. Thus the overall position of the SBU on the matrix could come under criticism.

The core competencies of the firm or the corporation are not represented in this analysis. The core competencies may be leveraged across SBUs and can be a deciding factor while judging the competitive strength of the SBUs

4.2.3 The Value Chain

The Value Chain The term ‘Value Chain’ was used by Michael Porter in his book "Competitive

Advantage: Creating and Sustaining superior Performance" (1985). The value chain analysis describes the

activities the organization performs and links them to the organizations competitive position. Value chain analysis describes the activities within and around an organization, and

relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which

value each particular activity adds to the organizations products or services. This idea was built upon the

insight that an organization is more than a random compilation of machinery, equipment, people and

money. Only if these things are arranged into systems and systematic activates it will become possible

to produce something for which customers are willing to pay a price. Porter argues that the ability to

perform particular

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activities and to manage the linkages between these activities is a source of competitive advantage.

Porter distinguishes between primary activities and support activities. Primary activities are directly

concerned with the creation or delivery of a product or service. They can be grouped into five main

areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of

these primary activities is linked to support activities which help to improve their effectiveness or efficiency.

There are four main areas of support activities: procurement, technology development (including

R&D), human resource management, and infrastructure (systems for planning, finance, quality,

information management etc.). The basic model of Porters Value Chain is as follows:

4.2.4 HoferMatrix or "Product/Market Evolution Matrix” and is quite similar to the Arthur D. Little matrix.

Hofer matrix implies the division of the company into strategicBusiness units. The next step resides in assessing the competitive position of business units, by usingTechniques similar to those used by the McKinsey matrix. The position occupied by each strategic business Unit is graphically represented by using the two axes of the matrix. Thus, on the vertical axis (Ox) the

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Competitive position of strategic business units is set and on the vertical axis (Oy) the stage of the life cycle Specific to the market where these operate is set.

the power of the Hofer matrix resides in the fact that it may outline the distribution of strategic businessunits during stages specific to life cycle of the market (industry). Similar to the McKinsey matrix, thepresent matrix offers the company the possibility to make a diagnosis regarding the portfolio, in order toestablish if it exhibits a balanced or unbalanced structure. A balanced portfolio should be composed ofstrategic business units of the type corresponding to ”Stars” and to ”Cash Cows” and to a few ”QuestionMarks”, which have recently penetrated the market or which are about to become ”Stars”. Of course, inpractice, most of the companies will have portfolios whole salient feature will be the unbalance.

The strategic consequences of this analysis focus on the various stages of life cycle when strategic business units are not covered. Thus, similar to the other methods of business portfolio analysis, the Hofer matrix also suggests that each position held by a strategic business unit indicates the selection of a strategic alternative The main strengths of the matrix resides in the fact that it provides an image regarding the manner of distribution of the businesses undertaken by a company during specific stages of a life cycle. The company may predict how the present portfolio will develop in the future and it may also act in real time in order to guarantee that his portfolio is in a balanced condition.  Another advantage of the present matrix is that it manages to divert the management’s attention from the corporate level and focus on potential strategies specific to the strategic business unit. According to specialty literature, the market life cycle represents one of the main factors that contribute to the adoption of strategic decisions at the level of the strategic business unit. Therefore, following the use of the Hofer matrix, the corporate management may identify strategic procedures that must be integrated and implemented at the level of strategic business units

The disadvantage of the matrix resides in the fact that it does not focus on all the relevant factors thatinfluence the level of attractiveness of a market. According to the McKinsey matrix, the present modelillustrates as well the fact that the stage of the market life cycle is very important, but this element must notbe deemed as being the only and the main influence factor of the level of market attractiveness. Therefore,there are other significant factors that may exert influence over the company’s portfolio, without beingdependent on the stage in which the market evolution is found.

MARKETING CAPABLITIES(MARKETING stretergies)

The 4 P’s of Marketing – The Marketing Mix strategies

(In addition to the 4 P's marketing mix, numerous theorists have attempted to add more P's. People/Personnel is the most commonly added fifth P.)

The term “marketing mix” was coined in the early 1950s by Neil Borden in his American Marketing Association presidential address. This is one of the preliminary knowledge every marketer must have and is considered to be the basics of every marketing theory, which emerged henceforth.

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The basic major marketing management decisions can be classified in one of the following four categories, namely Product, Price, Place (distribution) and Promotion.

Product: It is the tangible object or an intangible service that is getting marketed through

the program. Tangible products may be items like consumer goods (Toothpaste, Soaps, Shampoos) or consumer durables (Watches, IPods). Intangible products are service based like the tourism industry and information technology based services or codes-based products like cellphone load and credits. Product design which leads to the product attributes is the most important factor. However packaging also needs to be taken into consideration while deciding this factor. Every product is subject to a life-cycle including a growth phase followed by an eventual period of decline as the product approaches market saturation. To retain its competitiveness in the market, continuous product extensions though innovation and thus differentiation is required and is one of the strategies to differentiate a product from its competitors.

Price: The price is the simply amount a customer pays for the product. If the price outweigh the perceived benefits for an individual, the perceived value of the offering will be low and it will be unlikely to be adopted, but if the benefits are perceived as greater than their costs, chances of trial and adoption of the product is much greater.

Place: Place represents the location where a product can be purchased. It is often referred to as the distribution channel. This may include any physical store (supermarket, departmental stores) as well as virtual stores (e-markets and e-malls) on the Internet. This is crucial as this provides the place utility to the consumer, which often becomes a deciding factor for the purchase of many products across multiple product categories.

Promotion: This represents all of the communications that a marketer may use in the marketplace to increase  awareness  about   the  product  and  its  benefits   to   the   target   segment.  Promotion has   four distinct elements: advertising, public relations, personal selling and sales promotion. A certain amount 

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of crossover occurs when promotion uses the four principal elements together (e.g in film promotion). Sales staff often play a major role in promotion of a product

5. STRETEGIC ALTRNATIVES, ANALYSIS, AND CHOICE

5.1 CORPORATE LEVEL STRETERGY

5.1.1 GROTH STRATEGIS

5.1.1.1 The Ansoff Matrix

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the Ansoff Matrix outlines the options open to firms if they wish to grow, improve profitability and revenue. These options indicate to how to manage the development of the productrange. The Ansoff Matrix is: a model for outlining the range of marketing options open to a firm

Market Penetration— MEDIUM RISK (Existing products for existing markets.)Focusing on existing products for existing markets, means that the firm aims to increase sales within its present market place. To be successful at market penetration firms must be aware of what has made the product a success in the first place. The firms marketing strategy should be based on this existing relationship. There are several penetration strategies open to firms. These strategies include:

• The easiest method is to attract customers who have not yet become regular users, but are occasional users. This can be a successful strategy where there is fast market growth and new consumers are just 'testing the water'.• Attack competitors sales. This will often happen in mature markets, whereincreased sales will have to come from Identify new customers who would use aproduct in a different way. One method of achieving the first of these, different markets, is to find new geographical markets. The original Beetle car which ceased production for the UK market, around 1975, were still being sold in Mexico 1990. Another example of identification of new customers, is the targeting of Lucozade as a sports drink rather than something to have next to your bed when you have flu or measles. Any launch into a new geographical market is an example of the first of these options.

Market Development—LOW RISK(new markets, existing products)Develop markets for existing products.If the business takes the option of market development, the objective will be to find new markets for the firms existing products. There are two broad market development strategies. These are:• Identify users in different markets with similar needs to existing customers.• Identify new customers who would use a product in a different way. One method of achieving the first of these, different markets, is to find new geographical markets. The original Beetle car which ceased production for the UK market, around 1975, were still being sold in Mexico 1990. Another example of identification of new customers, is the targeting of Lucozade as a sports drink rather than something to have next to your bed when you have flu or measles. Any launch into a new geographical market is an example of the first of these option

Product Development—MEDIUM RISK(New products for existing markets )A third option available is to develop new products for existing markets. In this case the business will attempt to increase profitability and growth by introducing new products targeted at the existing customer base. The first and most popular option of product development in the consumption goods market is to produce and market new products which are closely associated with the products or brands which customers already consume. So Mars confectionery, now produces Mars Ice Cream, Mars drinks etc. Virgin is another good example. For the teenage market we had Virgin Mega stores and Virgin Cola - two products targeted at the same market. A further example is the move into financial services and banking by firms such as Marks & Spencer and Tesco. There are also product development strategies that can be used with industrial or producer markets. These strategies are based on examining

Diversification—HIGH RISK(Develop new products for new markets )The final option available is to develop new products for new markets. This may be attempted if the firm sees a new opportunity, and has investment funds available or alternatively the firm may be forced into this type of action because of pressures in existing markets or on existing product ranges. This diversification option comes with the greatest level of risk, as it is not based on existing knowledge within the firm. Virgin's move into trains has not been as successful as was initially hoped, and the criticisms of the service provided may have some effect on the overall strength of the brand. On the other hand Nokia,

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Europe's most successful mobile phone manufacturer, started out life as a producer of paper products. In this case diversification has been incredibly successful

The whole process of  picking up the right projects which are in true alignment to the organization’s business strategy and then monitoring the market conditions, the strategy and the continued alignment of the projects are collectively known as project portfolio management.

5.1.1.2 STRETEGIC ALLIANCE

Peter Drucker, who has been called the father of management theory, states: ``The greatest change in corporate culture, and the way business is being conducted, may be the accelerating growth of relationships based not on ownership, but on partnership'' (Drucker, 1996).

Nike, the largest producer of athletic foot- wear in the world, does not manufacture asingle shoe``How can this be?'' you ask. These companies, like many other companies these days, have entered into strategic alliances with their suppliers to do much of their actual production and manufacturing for them.

A strategic alliances is ``an agreement between firms to do business together in ways that go beyond normal company-to- company dealings, but fall short of a merger or a full partnership'' however, there is an increasing trend towards multi-company alliances. As an example, a six-company strategic alliances was formed between Apple, Sony, Motorola, Philips, AT&T and Matsushita to form General Magic Corporation to develop Telescript communications software. it can dramatically improve an

organization's operations and competitiveness Companies are forming alliances to obtain technology, to gain access to specific markets, to reduce financial risk, to reduce political risk, to achieve or ensure competitive advantage The failure rate of strategic alliances strategy is projected to be as high as 70percent. Success factors for strategic Alliances

Senior management commitment

The commitment of the senior management of all companies involved in a strategic alliance is a key factor in the alliance's ultimate success. Effective and strong management team A McKinsey study found that 50 percent of alliance failures are due to poor management. Thorough planning Planning, commitment, and agreement are essential to the success of any relationship.The overall strategy for the alliance must be mutually developed. Key managing individuals and areas of focus for the alliance must be identified. Partner selection Partnership selection is perhaps the mostimportant step in creating a successful alliance. A successful alliance requires the joining of two competent firms, seeking a similar goal and both intent on its success Communication between partners:maintaining relationships As with any relationship, communication is an essential attribute for the alliance to be successful. Without effective communication between partners, the alliance will inevitably dissolve as a result of doubt and mistrust which accompany any relationship which does not manifest good communication practices. International vision In order to succeed in an internationalstrategic alliance, managers of firms must incorporate a global strategic vision intotheir enterprise Clearly understood roles In forming strategic alliances the partnersmust have clearly understood roles. Questions which must be answered concerning the role of each partner would include the following: Do you share equally in the marketing and operations management

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of the alliance with your partner, or will he run the show? On what basis is control of the alliance determined: commitment of manpower? Cash?A McKinsey study found that 50 percent of alliance failures are due to poor strategy while 50 percent are the result of poor management Clearly defined, shared goals and objectives In forming a strategic alliance the question must be asked: ``How integrated will the alliance be with the parent organizations?''Some alliances are highly integrated with one or more of the parent organizations and share such resources as manufacturing facilities, management staff, and support functions like payroll, purchasing, and research and development. Whatever the relationship between the two partners, the merging of separate corporate cultures in which the parent firms may have different, even ultimately conflicting, strategic intents can be difficult and anything but smooth. It is extremely important that alliances are aligned with the company strategy. Frequent performance feedback In order for strategic alliances to succeed, their performance must be continually assessed and evaluated against the short andlong-term goals and objectives for the alliance. Hewlett-Packard business development manager, Bryon Look states that: ``after each alliance is formed, we hold a postmortem with all the involved (HP) parties. We look at the original objectives, the implementation, what went right andwhat went wrong Conclusions Strategic alliances strategy has been prescribed as an important tool forattaining and maintaining a competitive advantage. In addition, strategic alliances concept is growing in appeal to organizations because of the cost savings achieved in executing operations. Indeed,many companies are forming alliances looking for the best quality or technology or the cheapest labor or

production costs

5.1.1.3 Turnaround Strategies

Most managers and management researchers view organizational decline as reversible (Chowdhury & Lang, 1993; Porter, 1985). Specific turnaround strategies have been proposed to enhance a firm’s chances of persevering through an existence-threatening performance decline, ending the threat, and achieving sustainable performance recovery (Chowdhury, 2002).We define turnaround strategies as a set of consequential, directive, long-term decisions and actions targeted at the reversal of a perceived crisis that threatens the firm’s survival. Turnaround strategies have received systematic research attention in the management literature (e.g., Barker & Duhaime, 1997; Hofer, 1980; Lohrke & Bedeian, 1998; Schendel, Patton, & Riggs, 1976); however, the accumulated empirical and conceptual studies have resulted in a rather fragmented understanding and in some important areas the empirical findings have remained ambiguous— especially with regard to firm recovery (Nystrom & Starbuck, 1984; Pearce & Robbins, 1993). Under some conditions, turnaround may not be feasible. In other settings, the organization may lack the capabilities or resources to implement an appropriate turnaround strategy correctly. Even if implemented correctly, in a feasible setting, organizational outcomes of a turnaround strategy still depend on emergent factors (e.g., competitor actions), which can prevent or delay any turnaround.

Finally, turnaround attempts often face additional challenges in the form of severe time pressures, extremely limited slack resources, and diminishing stakeholder support (Arogaswamy, Barker, & Yasai-Ardekani, 1995).

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Top-management changes. According to the turnaround literature, top management develops and implements turnaround strategies that address an imminent organizational crisis. Top managers become the change agents to reverse organizational decline. Hofer (1980) claims that there is an almost universal need to change the current top management in a turnaround situation. Research finds that incumbent managers are less motivated to engage in turnaround strategies (Ford, 1985; Ford & Baucus, 1987)—especially if they are strongly committed to the firm’s current strategy or attribute decline to external causes only (Barker & Barr, 2002; D’Aveni & MacMillan, 1990).In addition,changes of the top-management team can provide important signals to outside stakeholders (e.g., lenders and creditors) that the firmis separating itself frompast failed strategies.Such signals can increase thewillingness of outside stakeholders to support the struggling organization(Bernabeo, 2002). Thus, the turnaround literature supports top-management change for organizational turnaround—in spite of potential disadvantages associated with organizational knowledge loss and transition frictions (Arogaswamy et al., 1995; Barker & Mone, 1994; Lohrke, Bedeian,& Palmer, 2004).

5.1.1.4 Grand strategy matrix (four quadrant)GRAND SRTERGY

Grand strategies, often called master or business strate provide basic direction for strategic actions lndicate the time period over which long-range objectives be achieved •Firms involved with multiple industries, businesses, produ lines, or customer groups usually combine several grand strategies •Any one of these strategies could serve as the basis for achieving the major long-term objectives of a single firm

Four Alternatives Stability Growth Combination Retrenchment

Stability •To remain the same size or •To grow slowly and in a controlled fashion

Growth lnternal growth: can include development of new or changed products External growth:

typically involves diversification — businesses related to current product lines or into new areas

Combination It involves deliberate use of different strategies for diffe or divisions at the same time or chronological use of dii strategies over the period of time. Retrenchment

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The organization goes through a period of forced decline by either shrinking current

businessunits or selling off or liquidating entire businesses.

Grand strategy matrix is a last matrix of matching strategy formulation framework. Grand strategy matrix it is popular tool for formulating alternative strategies. In this matrix all organization divides into four quadrant.

Any organization should be placed in any one of four quadrants. Appropriate strategies for an organization to consider are listed in sequential order of attractiveness in each quadrant of the matrix.

It is based two major dimensions

1.  Market growth

2.  Competitive position

Quadrant I

RAPID MARKET GROWTH Qurdant-1 contains that company’s strong having competitive situation Firms located in Quadrant I of the Grand Strategy Matrix are in an excellent strategic position . These firms must focus on current market and appropriate to follow market penetration market development and products development are appropriate strategies. Companies positioned in this quadrant have very strong strategic position. These firms focus on their established competitive advantage (CA) and take advantage of it as long as it allows them. These companies

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must concentrate on the existing market by adopting the set of product development, market development and market penetration strategies. Organizations that fall in quadrant 1 have focus on a single product and can go for related diversification strategy to minimize the risk related to limited product line. If these organizations have higher resources they can go for horizontal, backward and forward set of strategies. These firms can take risks being an aggressive and can afford to obtain advantage of opportunities in numerous

ways.  

Quadrant II

contains that company’s having weak competitive situation and rapid market growth. Firms positioned in QUADRANT II need to evaluate their present approach to the marketplace seriously. Although their industry is growing, they are unable to compete effectively, and they need to determine why the firm’s current approach is ineffectual and how the company can best change to improve its competitiveness. Because QUADRANT II firms are in a rapid-market-growth industry, an intensive strategy (as opposed to integrative or diversification) is usually the first option that should be considered. Firms laying in this quadrant have the rapid growing industry but can not fight competently. Due to the growth of the industry, firms in this quadrant use intensive strategy as a first strategic option. If companies do not have competitive advantage, horizontal integration is more advantageous option. Last but not the least strategic option is the liquidation which provides fund needed for other Strategic Business Unit (SBU) or to acquire other businesses

Quadrant III

 All those firms which fall in this quadrant have slow growth market and have relatively weak position. contains that company’s weak competitive situation and slow market growth. Firms have to make noticeable modifications to sustain their position. Retrenchment strategy has priority in this quadrant followed by diversification to transfer resource to another growing business. Last strategic option available for the firms positioned in this quadrant is liquidation or divestiture of the business.

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Quadrant IV

 contains that company’s strong competitive situation and slow market growth. Finally, Quadrant IV businesses have a strong competitive position. but are in a slow-growth industry. These firms have the strength to launch diversified programs into more promising growth areas. Quadrant IV firms have characteristically high cash flow levels and limited internal growth needs and often can pursue concentric, horizontal, or conglomerate diversification successfully. Quadrant IV firms also may pursue joint ventures Companies competing in this quadrant have slow growth industry but have a strong competitive position. These firms can diversify into different untapped businesses by utilizing their existing resource. These firms face restricted internal growth and have high cash flow intensity which allows them to practice related and unrelated diversifications effectively. Finally these firms can go for joint ventures to fulfill their internal growth needs.     

6. STRETEGIC ANALYSIS FOR CHOICE

INDUSTRY ANALYSIS

Porter’s five forceThis tool was created by Harvard Business School professor, Michael Porter, to analyze the attractiveness and likely-profitability of an industry. Since publication, it has become one of the most important business strategy tools. The classic article which introduces it is “How Competitive Forces Shape Strategy” in Harvard Business Review 57, March – April 1979, pages 86-93

 There is 3 key strategic environments, these three strategic enviroments are your 

macro environment

Industry environment Internal environment

Porters five forces is a competitive analysis model, it helps you to understand at the nature of competition within your industry, hence it is used when completing your industry analysis.

The model of the Five Competitive Forces was developed by Michael E. Porter in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980. Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes.

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This model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change. Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industryThe objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization

Bargaining Power of SuppliersThe term 'suppliers' comprises all sources for inputs that are needed in order to providegoods or services. Supplier bargaining power is likely to be highwhen:• The market is dominated by a few large suppliers rather than a fragmented source of supply,• There are no substitutes for the particular input,• The suppliers customers are fragmented, so their bargaining power is low,• The switching costs from one supplier to another are high,• There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins This threat is especially high when• The buying industry has a higher profitability than the supplying industry,• Forward integration provides economies of scale for the supplier,• The product is undifferentiated and can be replaces by substitutes,• Switching to an alternative product is relatively simple and is not related to high costs,• Customers have low margins and are price- sensitive, • Customers could produce the product themselves,• The product is not of strategical importance for the customer,• The customer knows about the production costs of the product• There is the possibility for the customer integrating backwards.Threat of New Entrants and Entry Barriers

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The competition in an industry will be the higher, the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants ofthe market environment (e.g. market shares, prices, customer loyalty) at any time. There isalways a latent pressure for reaction and adjustment for existing players in this industry.

Barriers to entry are unique industry characteristics that define the industry. Barriers reduce the rate of entry of new firms, thus maintaining a level of profits for those already in the industry. From a strategic perspective, barriers can be created or exploited to enhance a firm's competitive advantage. Barriers to entry arise from several sources:

1. Government creates barriers., government also restricts competition through the granting of monopolies and through regulation. Industries such as utilities are considered natural monopolies because it has been more efficient to have one electric company provide power to a locality than to permit many electric companies to compete in a local market. To restrain utilities from exploiting this advantage, government permits a monopoly, but regulates the industry.

2. Patents and proprietary knowledge serve to restrict entry into an industry. Ideas and knowledge that provide competitive advantages are treated as private property when patented, preventing others from using the knowledge and thus creating a barrier to entry.

3. Asset specificity inhibits entry into an industry. Asset specificity is the extent to which the firm's assets can be utilized to produce a different product. When an industry requires highly specialized technology or plants and equipment, potential entrants are reluctant to commit to acquiring specialized assets that cannot be sold or converted into other uses if the venture fails. Asset specificity provides a barrier to entry for two reasons: First, when firms already hold specialized assets they fiercely resist efforts by others from taking their market share. New entrants can anticipate aggressive rivalry. For example, Kodak had much capital invested in its photographic equipment business and aggressively resisted efforts by Fuji to intrude in its market. These assets are both large and industry specific. The second reason is that potential entrants are reluctant to make investments in highly specialized assets.

4. Organizational (Internal) Economies of Scale. The most cost efficient level of production is termed Minimum Efficient Scale (MES). This is the point at which unit costs for production are at minimum - i.e., the most cost efficient level of production. If MES for firms in an industry is known, then we can determine the amount of market share necessary for low cost entry or cost parity with rivals. For example, in long distance communications roughly 10% of the market is necessary for MES. If sales for a long distance operator fail to reach 10% of the market, the firm is not competitive.The existence of such an economy of scale creates a barrier to entry. The greater the difference between industry MES and entry unit costs, the greater the barrier to entry.

Barriers to exit work similarly to barriers to entry. Exit barriers limit the ability of a firm to leave the market and can exacerbate rivalry - unable to leave the industry, a firm must compete. Some of an industry's entry and exit barriers can be summarized as follows:

Easy to Enter if there is:

Common technology Little brand franchise Access to distribution channels Low scale threshold

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Difficult to Enter if there is:

Patented or proprietary know-how Difficulty in brand switching Restricted distribution channels High scale threshold

Easy to Exit if there are:

Salable assets Low exit costs Independent businesses

Difficult to Exit if there are:

Specialized assets High exit costs Interrelated businesses

The threat of new entries will depend on the extent to which there are barriers to entry. These are typically• Economies of scale (minimum size requirements for profitable operations),• High initial investments and fixed costs,• Cost advantages of existing players due to experience curve effects of operation with fully depreciated assets,• Brand loyalty of customers• Protected intellectual property like patents, licenses etc,• Scarcity of important resources, e.g. qualified expert staff• Access to raw materials is controlled by existing players,• Distribution channels are controlled by existing players,• Existing players have close customer relations, e.g. from long-term service contracts• High switching costs for customers• Legislation and government action

Threat of SubstitutesA threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume andhence reduce the potential sales volume for existing players. This category also relates tocomplementary products. Similarly to the threat of new entrants, the treat of substitutes is determined by factors like• Brand loyalty of customers,• Close customer relationships,• Switching costs for customers,• The relative price for performance ofsubstitutes,• Current trends.

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Competitive Rivalry between ExistingPlayers

This force describes the intensity of competition between existing players(companies) in an industry. High competitive pressure results in pressure on prices,margins, and hence, on profitability for every single company in the industry.

The intensity of rivalry is influenced by the following industry characteristics:

1. A larger number of firms increase rivalry because more firms must compete for the same customers and resources. The rivalry intensifies if the firms have similar market share, leading to a struggle for market leadership.

2. Slow market growth causes firms to fight for market share. In a growing market, firms are able to improve revenues simply because of the expanding market.

3. High fixed costs result in an economy of scale effect that increases rivalry. When total costs are mostly fixed costs, the firm must produce near capacity to attain the lowest unit costs. Since the firm must sell this large quantity of product, high levels of production lead to a fight for market share and results in increased rivalry.

4. High storage costs or highly perishable products cause a producer to sell goods as soon as possible. If other producers are attempting to unload at the same time, competition for customers intensifies.

5. Low switching costs increases rivalry. When a customer can freely switch from one product to another there is a greater struggle to capture customers.

6. Low levels of product differentiation is associated with higher levels of rivalry. Brand identification, on the other hand, tends to constrain rivalry.

7. Strategic stakes are high when a firm is losing market position or has potential for great gains. This intensifies rivalry.

8. High exit barriers place a high cost on abandoning the product. The firm must compete. High exit barriers cause a firm to remain in an industry, even when the venture is not profitable. A common exit barrier is asset specificity. When the plant and equipment required for manufacturing a product is highly specialized, these assets cannot easily be sold to other buyers in another industry.

9. A diversity of rivals with different cultures, histories, and philosophies make an industry unstable. There is greater possibility for mavericks and for misjudging rival's moves. Rivalry is volatile and can be intense..

10. Industry Shakeout. A growing market and the potential for high profits induces new firms to enter a market and incumbent firms to increase production. A

Competition between existing players is likely to be high when• There are many players of about the same size,• Players have similar strategies• There is not much differentiation between players and their products, hence, there is much price competition• Low market growth rates (growth of a particular company is possible only at the expense of a competitor),• Barriers for exit are high (e.g. expensive and highly specialized equipment)

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It works by looking at the strength of five important forces that affect competition:• Supplier Power: The power of suppliers to drive up the prices of your inputs; • Buyer Power: The power of your customers to drive down your prices; • Competitive Rivalry: The strength of competition in the industry; • The Threat of Substitution: The extent to which different products and services can be used in placeof your own; and • The Threat of New Entry: The ease with which new competitors can enter the market if they see thatyou are making good profits (and then drive your prices down)

Reducing the Bargaining Power of Suppliers•Partnering•Supply chain management • Supply chain training• Increase dependency • Build knowledge of supplier costs and Methods • Take over a supplierReducing the Bargaining Power of Customers•Partnering •Supply chain management • Increase loyalty •Increase incentives and value added•Move purchase decision away from price •Cut put powerful intermediaries (go directly to customer)Reducing the Treat of New Entrant•Increase minimum efficient scales of operations •Create a marketing / brand image (loyalty as a barrier)•Patents, protection of intellectual property•Alliances with linked products / services •Tie up with suppliers •Tie up with distributors •Retaliation tactics

Reducing the Threat of Substitutes•Legal actions •Increase switching costs •Alliances •Customer surveys to learn about their Preferences •Enter substitute market and influence from Within •Accentuate differences (real or perceived)

Reducing the Competitive Rivalry betweenExisting Players•Avoid price competition •Differentiate your product•Buy out competition •Reduce industry over-capacity •Focus on different segments •Communicate with competitors

CritiquePorter’s model of five Competitive Forces hasbeen subject of much critique. Its main weakness results from the historical context inwhich it was developed. In the early eighties, cyclical growth characterized the global economy. Thus, primary corporate objectives consisted of profitability and survival. A major prerequisite for achieving these objectives has been optimization of strategy in relation to theexternal environment. At that time,development in most industries has been fairlystable and predictable, compared with today’sdynamics

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SWOT –TOWS

SWOT

This remarkable piece of history as to the origins of SWOT analysis was provided by Albert S

Humphrey, one of the founding fathers of what we know today as SWOT analysis

Why use the tool?SWOT Analysis is an effective way of identifying your Strengths and Weaknesses, and ofexamining the Opportunities and Threats you face.How to use tool:To carry out a SWOT Analysis, write down answers to the following questions. Whereappropriate, use similar questions:Strengths:• What advantages do you have? • What do you do well?• What relevant resources do you have access to? • What do other people see as your strengths?Consider this from your own point of view and from the point of view of the people you dealwith. Don't be modest. Be realistic. If you are having any difficulty with this, try writing downa list of your characteristics:

• Economies of scale • Proprietary technology

• Patented processes • Lower costs (raw materials or processes)• Respected company, product, or brand image • Superior management talent• Better marketing skills • Superior product quality• Alliances with other firms • Good distribution skills• Committed employees

.Weaknesses:A popular example is poor retention rate of employeesLack of strategic direction • Limited financial resources • Weak spending on R & D• Very narrow product line • Limited distribution• Higher costs • Weak market image • Poor marketing skills • Limited management skills

• Under-trained employees • Alliances with weak firms • Internal operating problems

Again, consider this from an internal and external basis: Do other people seem to perceiveweaknesses that you do not see? Are your competitors doing any better than you? It is best

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to be realistic now, and face any unpleasant truths as soon as possible.

Opportunities:.An opportunity allows a company to increase profits by offering a gap in demand, a wider consumer base, or an opportunity to reduce costs. A company's strategic goal is to move forward to achieving opportunities that arise in the markeRapid market growth• Rival firms are complacent • Changing customer needs/tastes• Opening of foreign markets • Mishap of a rival firm• New uses for product discovered • Economic boom• Government deregulation • New technology• Demographic shifts • Other firms seek alliances• Sales decline for a substitute product • New distribution methods

• Changes in technology and markets on both a broad and narrow scale• Changes in government policy related to your fieldA useful approach to looking at opportunities is to look at your strengths and ask yourselfwhether these open up any opportunities. Alternatively, look at your weaknesses and askyourself whether you could open up opportunities by eliminating them.Threats:• Entry of foreign competitors• Introduction of new substitute products • Product life cycle in decline• Changing customer needs/tastes • Rival firms adopt new strategies• Increased government regulation • Economic downturn• New technology • Demographic shifts• Foreign trade barriers • Poor performance of ally firm • What obstacles do you face? • What is your competition doing? • Is changing technology threatening your position? • Do you have bad debt or cash-flow problems?

Example:A start-up small consultancy business might carry out the following SWOT analysis:Strengths:• We are able to respond very quickly as we have no red tape, no need for highermanagement approval, etc.

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• We are able to give really good customer care, as the current small amount of workmeans we have plenty of time to devote to customers• Our lead consultant has strong reputation within the market• We can change direction quickly if we find that our marketing is not working• We have little overhead, so can offer good value to customersWeaknesses:• Our company has no market presence or reputation• We have a small staff with a shallow skills base in many areas• We are vulnerable to vital staff being sick, leaving, etc.• Our cash flow will be unreliable in the early stagesOpportunities:• Our business sector is expanding, with many future opportunities for success• Our local council wants to encourage local businesses with work where possible• Our competitors may be slow to adopt new technologiesThreats:• Will developments in technology change this market beyond our ability to adapt?• A small change in focus of a large competitor might wipe out any market position weachieveThe consultancy might therefore decide to specialize in rapid response, good value services tolocal businesses. Marketing would be in selected local publications, to get the greatestpossible market presence for a set advertising budget. The consultancy should keep up-todatewith changes in technology where possible.

Case Study-SWOT Analysis Wal-MartStrengths• Wal-Mart is a powerful retail brand. It has a reputation for value for money,convenience and a wide range of products all in one store.• Wal-Mart has grown substantially over recent years, and has experienced globalexpansion (for example its purchase of the United Kingdom based retailer ASDA).• The company has a core competence involving its use of information technology tosupport its international logistics system. For example, it can see how individualproducts are performing country-wide, store-by-store at a glance. IT also supportsWal-Mart's efficient procurement.

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• A focused strategy is in place for human resource management and development.People are key to Wal-Mart's business and it invests time and money in trainingpeople, and retaining a developing them.Weaknesses• Wal-Mart is the World's largest grocery retailer and control of its empire, despite itsIT advantages, could leave it weak in some areas due to the huge span of control.• Since Wal-Mart sell products across many sectors (such as clothing, food, orstationary), it may not have the flexibility of some of its more focused competitors.• The company is global, but has has a presence in relatively few countries Worldwide.Opportunities• To take over, merge with, or form strategic alliances with other global retailers,focusing on specific markets such as Europe or the Greater China Region.• The stores are currently only trade in a relatively small number of countries.Therefore there are tremendous opportunities for future business in expandingconsumer markets, such as China and India.• New locations and store types offer Wal-Mart opportunities to exploit marketdevelopment. They diversified from large super centers, to local and mall-based sites.• Opportunities exist for Wal-Mart to continue with its current strategy of large, supercenters.Threats• Being number one means that you are the target of competition, locally and globally.• Being a global retailer means that you are exposed to political problems in thecountries that you operate in.• The cost of producing many consumer products tends to have fallen because of lowermanufacturing costs. Manufacturing cost has fallen due to outsourcing to low-costregions of the World. This has lead to price competition, resulting in price deflation insome ranges. Intense price competition is a threat

Analyzing with swot you can maximize strength and minimize weakness how? You have draw tows matrix

Understanding TOWS MatrixWhy use the tool?TOWS Analysis is an effective way of combining a) internal strengths with externalopportunities and threats, and b) internal weaknesses with external opportunities and threatsto develop a strategy.

How to use tool:To carry out a TOWS Analysis, consider the following combinations:Strengths/Opportunities:Consider all strengths one by one listed in the SWOT Analysis with each opportunity todetermine how each internal strength can help you capitalize on each external opportunity.Strength/Threats:Consider all strengths one by one listed in the SWOT Analysis with each threat to determinehow each internal strength can help you avoid every external threat.Weaknesses/Opportunities:Consider all weaknesses one by one listed in the SWOT Analysis with each opportunity todetermine how each internal weakness can be eliminated by using each external opportunity.Weaknesses/Threats:

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Consider all weaknesses one by one listed in the SWOT Analysis with each threat todetermine both can be avoided.

Strengths/Opportunities:Consider all strengths one by one listed in the SWOT Analysis with each opportunity todetermine how each internal strength can help you capitalize on each external opportunity.Strength/Threats:Consider all strengths one by one listed in the SWOT Analysis with each threat to determinehow each internal strength can help you avoid every external threat.Weaknesses/Opportunities:Consider all weaknesses one by one listed in the SWOT Analysis with each opportunity todetermine how each internal weakness can be eliminated by using each external opportunity.Weaknesses/Threats:Consider all weaknesses one by one listed in the SWOT Analysis with each threat todetermine both can be avoided.

Strengths and Opportunities (SO) – How can you use your strengths to take advantage of these opportunities?

Strengths and Threats (ST) – How can you take advantage of your strengths to avoid real and potential threats?

Weaknesses and Opportunities (WO) – How can you use your opportunities to overcome the weaknesses you are experiencing?

Weaknesses and Threats (WT) – How can you minimize your weaknesses and avoid threats?

Case Study- Application of the TOWS Matrix toVolkswagenVolkswagen (VW) was chosen because it demonstrates how a successful companyexperienced great difficulties in the early 1970s, but then developed a strategy that resultedin an excellent market position in the late 1970s. The TOWS Matrix shown in Figure 1 willfocus on the crucial period from late 1973 to early 1975. The external threats andopportunities pertain mostly to the situation VW faced in the United States, but a similarsituation prevailed in Europe at that time.

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Weaknesses and Threats (WT)A company with great weaknesses often has to resort to a survival strategy. VW could haveseriously considered the option of a joint operation with Chrysler or American Motors.Another alternative would have been to withdraw from the American market altogether.Although in difficulties VW did not have to resort to a survival strategy because the companystill had much strength. Consequently, a more appropriate strategy was to attempt toovercome the weaknesses and develop them into strengths. In other words, the directionwas toward the strength-opportunity position (SO) in the matrix shown as Figure 1.Specifically, the strategy was to reduce the competitive threat by developing a more flexiblenew product line that would accommodate the needs and desires of the car-buying public.Weaknesses and Opportunities (WO)The growing affluence of customers has resulted in 'trading up' to more luxurious cars. Yet,VW had essentially followed a one-model policy which presented a problem when the designof the Beetle became obsolete A new model line had to be introduced to reach a widerspectrum of buyers. In order to minimize the additional costs of a multi product line, thebuilding block principle was employed in the design of the new cars. This allowed using thesame parts for different models that ranged from the relatively low-priced Rabbit to thehigher priced Audi line.Another weakness at VW was the rising costs in Germany. For example, in 1973 wages andsalaries rose 19 per cent over the previous year. Similarly, increased fuel costs made theshipping of cars to the United States more costly. This situation favored setting up anassembly plant in the United States. However, this also created some problems for VWbecause it had no experience in dealing with American organized labor. To overcome thisweakness, VW's tactic was to recruit managers from Detroit who were capable of establishinggood union relations.Strengths and Threats (ST)One of the greatest threats to VW was the continuing appreciation of the DeutscheMark against the dollar. For example, from October 1972 to November 1973 the markappreciated 35 percent. This meant higher prices for the buyer. The result, of course, was aless competitive posture. Japanese and American automakers obtained an increasingly largershare of the small-car market. To reduce the threats of competition and the effects of theunfavorable exchange rate, VW was forced to build an assembly plant in the United States.Another strategy for meeting competitive pressures was to build on VW's strengths bydeveloping a car based on advanced-design technology. The result of this effort was theRabbit, a model with features later adopted by many other car manufacturers.Shahzad The oil crisis in 1973-1974 not only caused a fuel shortage, but also price rises, a trend thathas continued. To meet this threat, VW used its technological capabilities not only to improveits engines (through the use of fuel injection, for examples), but also to develop the veryfuel-efficient Diesel engine. This tactic, which was congruent with its general strategy, helpedimprove the firm’s market position.Strengths and Opportunities (SO)In general, successful firms build on their strengths to take advantage of opportunities. VW isno exception. Throughout this discussion VW's strengths in research, development,engineering, and its experience m production technology became evident. These strengths,under the leadership of Rudolf Leiding, enabled the company to develop a product line thatmet market demands for an economical car (the Rabbit, successor to the Beetle), as well asthe tastes for more luxurious cars with many available options (Scirocco and the Audi line).

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Eventually the same company's strengths enabled VW to plan and build the assembly facilityin New Stanton, Pennsylvania. Thus, YW could benefit from substantial concessions grantedby the state government to attract VW which, in turn, provided many employmentopportunities.In another tactical move, VW manufactured and sold small engines to Chrysler and AmericanMotors. These companies urgently needed small engines for installation in their own cars andrevenues from these sales improved the financial position of VW

7. Strategy implementation_ Allocation and management of sufficient resources (financial, personnel,time, technology support)_ Establishing a chain of command or some alternative structure (such as crossfunctional teams)_ Assigning responsibility of specific tasks or processes to specific individuals orgroups_ It also involves managing the process. This includes monitoring results,comparing to benchmarks and best practices, evaluating the efficacy andefficiency of the process, controlling for variances, and making adjustments tothe process as necessary._ When implementing specific programs, this involves acquiring the requisiteresources, developing the process, training, process testing, documentation, andintegration with (and/or conversion from) legacy processes.Thus this type of problem can occur in strategyIn order for a policy to work, there must be a level of consistency from everyperson in an organization, including from the management. This is what needs tooccur on the tactical level of management as well as strategic.

8. Strategy evaluation_ Measuring the effectiveness of the organizational strategy. It's extremelyimportant to conduct a SWOT analysis to figure out the strengths, weaknesses,opportunities and threats (both internal and external) of the entity in question.This may require to take certain precautionary measures or even to change theentire strategy.In corporate strategy, Johnson and Scholes present a model in which strategicoptions are evaluated against three key success criteria:_ Suitability (would it work?)_ Feasibility (can it be made to work?)_ Acceptability (will they work it?)SuitabilitySuitability deals with the overall rationale of the strategy. The key point to consideris whether the strategy would address the key strategic issues underlined by theorganisation's strategic position._ Does it make economic sense?_ Would the organisation obtain economies of scale, economies ofscope or experience economy?

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_ Would it be suitable in terms of environment and capabilities?Tools that can be used to evaluate suitability include:_ Ranking strategic options_ Decision trees_ What-if analysisFeasibilityFeasibility is concerned with the resources required to implement the strategy areavailable, can be developed or obtained. Resourcesinclude funding, people, time and information.Tools that can be used to evaluate feasibility include:_ cash flow analysis and forecasting_ break even analysis_ resource deployment analysisAcceptabilityAcceptability is concerned with the expectations of the identified stakeholders(mainly shareholders, employees and customers) with the expected performanceoutcomes, which can be return, risk and stakeholder reactions._ Return deals with the benefits expected by the stakeholders (financial andnon-financial). For example, shareholders would expect the increase of theirwealth, employees would expect improvement in their careers and customerswould expect better value for money._ Risk deals with the probability and consequences of failure of a strategy(financial and non-financial)._ Stakeholder reactions deals with anticipating the likely reaction ofstakeholders. Shareholders could oppose the issuing of new shares, employeesand unions could oppose outsourcing for fear of losing their jobs, customerscould have concerns over a merger with regards to quality and support.Tools that can be used to evaluate acceptability include:_ what-if analysis_ stakeholder mapping

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