Cover financials

Other

Factor Potential Time Frame Type Impact Relative

Impact Importance
SWOT, High medium Months Positive, Increasing, Critical
PESTLE low negative, decreasing, Important
unkown unchanged Unimportant
Unknown

Prioritizing

ANSOFF MATRIX

The market penetration strategy is the least risky since it leverages

many of the firm's existing resources and capabilities. In a growing
market, simply maintaining market share will result in growth, and
there may exist opportunities to increase market share if
competitors reach capacity limits. However, market penetration has
limits, and once the market approaches saturation another strategy
must be pursued if the firm is to continue to grow.

Market development options include the pursuit of additional market segments or geographical
regions. The development of new markets for the product may be a good strategy if the firm's core
competencies are related more to the specific product than to its experience with a specific market
segment. Because the firm is expanding into a new market, a market development strategy typically
has more risk than a market penetration strategy.

A product development strategy may be appropriate if the firm's strengths are related to its specific
customers rather than to the specific product itself. In this situation, it can leverage its strengths by
developing a new product targeted to its existing customers. Similar to the case of new market
development, new product development carries more risk than simply attempting to increase
market share.

Diversification is the most risky of the four growth strategies since it requires both product and
market development and may be outside the core competencies of the firm. In fact, this quadrant of
the matrix has been referred to by some as the "suicide cell". However, diversification may be a
reasonable choice if the high risk is compensated by the chance of a high rate of return. Other
advantages of diversification include the potential to gain a foothold in an attractive industry and the
reduction of overall business portfolio risk.

PEST ANALYSIS
TOWS

TOWS strategies

 S - O strategies: Explain how specific company strengths could help the firm take advantage
of market opportunities.
 S - T strategies: Explain how specific company strengths could be used to avoid or minimize
external threats.
  W - O strategies: Explain how the company can minimize its weaknesses to take advantage
of market opportunities.
 W - T strategies: Explain how, acting defensively, the company the company can minimize its
weaknesses and, in the process, avoid or minimize external threats

Explain the potential strategies developed in the previous step in terms of three response options:
prospect, defend or harvest. This requires you 1) determine the relative magnitude of your various
SWOT entries and 2) develop logically feasible matches between internal and external factors.

McKinsey 7s Model

Strategy:

 What is our strategy?

 How do we intend to achieve our objectives?
 How do we deal with competitive pressure?
 How are changes in customer demands dealt with?
 How is strategy adjusted for environmental issues?

Structure:

 How is the company/team divided?

 What is the hierarchy?
 How do the various departments coordinate activities?
 How do the team members organize and align themselves?
 Is decision making and controlling centralized or decentralized? Is this as it should be, given
what we're doing?
 Where are the lines of communication? Explicit and implicit?

Systems:

 What are the main systems that run the organization? Consider financial and HR systems as
well as communications and document storage.
 Where are the controls and how are they monitored and evaluated?
 What internal rules and processes does the team use to keep on track?

Shared Values:

 What are the core values?

 What is the corporate/team
culture?
 How strong are the values?
 What are the fundamental
values that the company/team
was built on?

Style:

 How participative is the

management/leadership
style?
 How effective is that
leadership?
  Do employees/team members tend to be competitive or cooperative?
 Are there real teams functioning within the organization or are they just nominal groups?

Staff:

 What positions or specializations are represented within the team?

 What positions need to be filled?
 Are there gaps in required competencies?

Skills:

 What are the strongest skills represented within the company/team?

 Are there any skills gaps?
 What is the company/team known for doing well?
 Do the current employees/team members have the ability to do the job?
 How are skills monitored and assessed?

GAME THEORY:

Provided a systematic way to understand the behaviour of players in situations where their fortunes
are interdependent.

There are 2 types of games, rule-based games (rules from contracts, agreements etc) and
freewheeling games(where buyer and seller interact without any external constraints)

For rule based games, game theory follows the principal of, for every action, there is a reaction,
need not be equal in magnitude. You have to look forward into the game and then reason
backwards, regarding which action of today will lead to where.

For freewheeling games, the game theory follows the principle which says that you cannot take
away from the game more than you bring to it.

The main insight of game theory is, allocentrism, focussing on all the players.

Eg: US Automobile Industry

Problem: Cut throat competition, dealer discounts and customer rebates were killing the companies.
Customers were expecting the rebates and hence sales were held up until they were offered.

Solution: General Motors

It introduced a credit card, and changed the game to win win situation.

The only thing which matters in changing the game is “value”

ValueNet
 Customers

Complimentors Company Substitutors

Suppliers

A player can play numerous roles at the same time.

Reveals 2 fundamental symmetries in the game of business.

1. Between customers and suppliers

2. Between subsitutors and complementors.

Along the vertical dimension, there is a mix of competition and cooperation.

Along the horizontal dimension, there can be cooperation among the substitutors and competition
among the complementors.

Changing the game:

1. Draw the value net to analyse all the interdependencies.

2. Indentifying all the elements of the game, there are five, players, added values, rules, tactics
and scope i.e., PARTS
To change the game, we need to change one or more elements.
Changing the Players:
 A company can benefit from bringing players into the Subsitutors market, Eg,
nutrasweet
 A company can benefit from bringing players into the complements market. Eg: 3DO
Company
Changing the Added Value:
 Increasing your value Eg: TWA Airlines
 Decreasing the value of the other player. Eg: Nitendo, video games company
Changing the Rules:
 One price for all. Concept of judo economics.
 Eg: Kiwi International Airlines. Vs Eastern Airlines.
Changing the tactics:
 Tactics work in 2 ways, by reducing misperceptions Eg: New York daily News, and
 Maintaining the fog

Changing the Scope:

 One can expand a game by linking it with the other games or shrink the game by
severing the linkages.
 Linking to other games: Sega Vs Nitendo
 SCENARIO PLANNING

It is a disciplined method for imagining possible futures that companies have applied to a great
range of issues.

Royal Dutch/ Shell have used this process in forecasting the demands of oil.

It simplifies the avalanche of data into a limited number of possible states. Each scenario tells a
different story of how various elements might interact under certain conditions. When relationships
between the elements can be formalized, a company can develop quantitative models.

Different from other planning tools like, contingency planning (presents a basic case of “what if?”,
sensitivity analysis(change in one variable keeping all the variables constant)

When should a company go for scenario planning?

Scenario planning deals avoids two main errors, over prediction and under prediction.

It starts with dividing our knowledge into two halves,

1. Things we believe we know something about.

2. Things which we consider uncertain or unknowable.

Steps involved:

 Define the Scope

 Identify the Stakeholders
 Identify basic trends
 Identify key trends
 Construct Initial scenario themes
 Check for consistency and plausibility
 Develop learning scenarios
 Identify research needs
 Develop quantitative models
 Evolve towards decision scenario

 Identify the focal question

 Environmental scanning – internal and external

 Selecting drivers of change and ranking

 Building the scenario matrix

 Developing the scenarios

 Presenting the scenarios

 Considering the strategic implications

5 force model
Threat of new entrant Power of buyers
 Economies of scale  Concentration of buyers
 Capital requirement  Large no. of small operators
 Access to distribution channel  Alternative sources of supply
 Cost advantage independent of size  Material cost is high percentage of total cost
 Expected retaliation  Cost of switching supplier is low
 Legislation or Govt.  Threat of backward integration by buyer
 Differentiation
Power of supplier Threat of substitute
 Conc of supplier  Product for product substitution
 High switching cost from 1 to another  Substitution of needs
supplier  Generic substitution
 Brand of supplier is powerful  Doing without
 Forward integration is possible

Internal Rivalry
 Competitors in balance
 Growth rates in market
 Existence or development of global customer
 High fixed cost (price wars)
 Extra capacity is in large increments
 Differntiation
 Acquisition
 High exit barriers

Delta model
Balance Score card
Cultural Web

Stories

 What stories do people currently tell about your organization?

 What reputation is communicated amongst your customers and other stakeholders?
 What do these stories say about what your organization believes in?
 What do employees talk about when they think of the history of the company?
 What stories do they tell new people who join the company?
 What heroes, villains and mavericks appear in these stories?

Rituals and Routines

 What do customers expect when they walk in?

 What do employees expect?
 What would be immediately obvious if changed?
 What behavior do these routines encourage?
 When a new problem is encountered, what rules do people apply when they solve it?
 What core beliefs do these rituals reflect?

Symbols

 Is company-specific jargon or language used? How well known and usable by all is this?
 Are there any status symbols used?
 What image is associated with your organization, looking at this from the separate viewpoints
of clients and staff?

Organizational Structure

 Is the structure flat or hierarchical? Formal or informal? Organic or mechanistic?

 Where are the formal lines of authority?
 Are there informal lines?

Control Systems

 What process or procedure has the strongest controls? Weakest controls?

 Is the company generally loosely or tightly controlled?
 Do employees get rewarded for good work or penalized for poor work?
 What reports are issued to keep control of operations, finance, etc...?

Power Structures

 Who has the real power in the organization?

 What do these people believe and champion within the organization?
 Who makes or influences decisions?
 How is this power used or abused?
Global

Going GLobal

Why Companies Expand Into Foreign Markets?

1. Gain access to new customers

2. Achieve lower costs & enhance the firm’s competitiveness

3. Capitalize on its core competencies

4. Spread its business risk across a wider market base

Competing Internationally v/s Globally

• International/ Multinational Competitor: When a company competes in a select few foreign

markets

• Global Competitor: When it has or is pursuing a market presence on most continents & in
virtually all of the world’s major countries

International Scale & Scope

1. Which markets to enter internationally?

2. Which elements of the value chain might be located in different parts of the world?
 3. Extent to which products & services or assets are standardized or locally specific?

Generic Strategy Options In Foreign Markets

1. Export strategies- maintain a national production base & export goods to foreign markets

2. License foreign firms to use the company’s technology or produce & distribute the
company’s products

3. Franchising strategy

4. Multi-country strategy

5. Global strategy

6. Strategic alliances/ Joint-ventures

Fig: Subsidiary’s role in MNC

GE Matrix

 Market size is represented by the size of the circle.

 Market share is shown by using the circle as a pie chart.
 The expected future position of the circles is indicated by an arrow.

The sample diagram shows the relative position of an SBU with a market share of 65%. The arrow in the
upward right position indicates that the SBU is expected to lose strength relative to competitors, and the
that the business unit is in an industry that is projected to become increasingly less attractive. The tip of
the arrow indicates the future position of the center point of the circle

The nine cells are grouped into three zones:

 The Green Zone consists of the three cells in the upper left corner. If the SBU falls in this
zone, it’s in a favorable position with relatively attractive growth opportunities. This position
indicates a "green light" to invest and grow this SBU.
 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 SBU. The suggested
strategy is to protect or allocate resources on a selective basis rather than growing or
reducing share.
 The Red Zone consists of the three cells in the lower right corner. A harvest strategy should
be used in the two cells just below the three-cell diagonal. These SBUs shouldn’t receive
substantial new resources. The SBUs in the lower right cell shouldn’t receive any resources
and should probably be divested or eliminated from a firm’s portfolio.

Prospect
o Develop new distinguishing competency
o Initiate R&D in new technology
o Learn new manufacturing process
o Learn how to design and promote new product

Defend
o Preserve existing distinguishing competency
o Reduce price of existing product
o Increase price of existing product
o Intensify R&D in existing technology
Harvest
o Gradually dissolve the business
o Increase promotion of existing product
o Reduce expenditures for existing product

Bowman Strategy Clock

The clock accounts for eight major strategic options:

 Low Price/Low Added-Value. This strategy is commonly considered to be appropriate only

on a segment-by-segment basis.
 Low Price. This strategy calls for the company to position itself as the 'low cost leader.' The
company risks low margins and a price war.
 Hybrid of Low Price/Differentiation. Here, the company establishes a low cost base and
reinvests to keep prices low, while still seeking differentiation.
 Differentiation. There are two versions of this strategy-with and without a price premium.
With a price premium, the company adds enough value to the product to justify its relatively
high price and so, increase margins. Without a price premium, the company adds value to
the product in hopes of gaining market share despite lower margins.
 Focused Differentiation. Here, the company adds enough value to the product for a specific
customer segment to justify a price premium.
 Increased Price/Standard Product. With this strategy, the company raises prices without
adding value to the product in hopes of higher margins. Unless the product is the de facto
industry standard, however, the company risks losing market share.
 Increased Price/Low Values. This strategy pertains only to monopoly situations.
 Low Value/Standard Price. This strategy invariably means loss of market share.
Value Chain
IFE MATRIX

Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating major
strengths and weaknesses in functional areas of a business. IFE matrix also provides a basis for identifying
and evaluating relationships among those areas.

Steps:

1. Identify 10 to 20 internal factors,

2. Assign a weight that ranges from 0.00 to 1.00 to each factor
3. Assign a 1 to X rating to each factor. e. Practitioners usually use rating on the scale from 1 to
4. major weakness (rating = 1) , a minor weakness (rating = 2), a minor strength (rating = 3), or a
major strength (rating = 4)
4. Multiply each factor's weight by its rating.
5. The last step in constructing the IFE matrix is to sum the weighted scores for each factor.
This provides the total weighted score for your business.

Total weighted scores well below 2.5 point to internally weak business. Scores significantly above
2.5 indicate a strong internal position.

EFE matrix

List factors: The first step is to gather a list of external factors. Divide factors into two groups:
opportunities and threats.
Assign weights: Assign a weight to each factor. The value of each weight should be between 0 and 1 (or
alternatively between 10 and 100 if you use the 10 to 100 scale). Zero means the factor is not important.
One or hundred means that the factor is the most influential and critical one. The total value of all weights
together should equal 1 or 100.

Rate factors: Assign a rating to each factor. Rating should be between 1 and 4. Rating indicates how
effective the firm’s current strategies respond to the factor. 1 = the response is poor. 2 = the response is
below average. 3 = above average. 4 = superior. Weights are industry-specific. Ratings are company-
specific.

Multiply weights by ratings: Multiply each factor weight with its rating. This will calculate the weighted
score for each factor.

Total all weighted scores: Add all weighted scores for each factor. This will calculate the total weighted
score for the company.

You can find more details about this approach as well as about possible values that the EFE matrix can
take on theIFE matrix page.

EFE matrix example

Total weighted score of 2.46 indicates that the business has slightly less than average ability to respond to
external factors. (See the page on IFE matrix for an explanation of what category the 2.46 figure falls to.)
 COMPONENTS OF A EFFECTIVE ORGANISATION

CHANGE MANAGEMENT

“ When the rate of change outside exceeds the rate of change inside, the end is in sight”

Jack Welch

Five Activities Contributing to Effective Change Management

1. Motivating Change- Motivating change and creating readiness for change Sensitize
organizations to pressure for change Reveal discrepancies between current and desired states
Convey credible positive expectations for the change
2. Creating Vision of Change - Constructing the Envisioned Future Bold and Valued Outcomes
Desired Future State
3. Developing Political Support - Assessing Change Agent Power Identifying Key Stakeholders
Influencing Stakeholders Developing Political Support
4. Managing the Transition of Change
5. Sustaining Momentum Effective Change Management
 1. Start phase, engage, and motivate your team, and create understanding for the
process as a whole. This we call the “Unfreeze phase”
2. Action phase, where we solving the project. This is called “the Move Phase”
3. End phase, finishing the job and celebrating – called “The Freeze Phase”

Mission and vision

What Is the Purpose of a Vision or Mission Statement?
Vision and mission statements are most commonly prepared as initial steps in the strategic planning
process. The planning team develops the vision of the desired future state. Next, the mission is developed
to describe current reality. The vision (what we want to become) and mission (what we are) are usually
compared with a rather wide gap between present and future.

INDUSTRY BEST PRACTICES

A best practice is a technique, method, process, activity, incentive, or reward which conventional
wisdom regards as more effective at delivering a particular outcome than any other technique,
method, process, etc. when applied to a particular condition or circumstance. The idea is that with
proper processes, checks, and testing, a desired outcome can be delivered with fewer problems and
unforeseen complications. Best practices can also be defined as the most efficient (least amount of
effort) and effective (best results) way of accomplishing a task, based on repeatable procedures that
have proven themselves over time for large numbers of people.

BENCHMARKING
 Benchmarking is the process of comparing one's business processes and performance
metrics to industry bests and/or best practices from other industries. Dimensions typically
measured are quality, time, and cost. Improvements from learning mean doing things better,
faster, and cheaper.
 Benchmarking involves management identifying the best firms in their industry, or any other
industry where similar processes exist, and comparing the results and processes of those
studied (the "targets") to one's own results and processes to learn how well the targets perform
and, more importantly, how they do it.

1. Identify your problem areas - Because benchmarking can be applied to any business
process or function, a range of research techniques may be required. They include: informal
conversations with customers, employees, or suppliers; exploratory research techniques such
as focus groups; or in-depth marketing research, quantitative
research,surveys, questionnaires, re-engineering analysis, process mapping, quality control
variance reports, or financial ratio analysis. Before embarking on comparison with other
organizations it is essential that you know your own organization's function, processes; base
lining performance provides a point against which improvement effort can be measured.
2. Identify other industries that have similar processes - For instance if one were interested
in improving hand offs in addiction treatment he/she would try to identify other fields that
also have hand off challenges. These could include air traffic control, cell phone switching
between towers, transfer of patients from surgery to recovery rooms.
 3. Identify organizations that are leaders in these areas - Look for the very best in any
industry and in any country. Consult customers, suppliers, financial analysts, trade
associations, and magazines to determine which companies are worthy of study.
4. Survey companies for measures and practices - Companies target specific business
processes using detailed surveys of measures and practices used to identify business process
alternatives and leading companies. Surveys are typically masked to protect confidential data
by neutral associations and consultants.
5. Visit the "best practice" companies to identify leading edge practices - Companies
typically agree to mutually exchange information beneficial to all parties in a benchmarking
group and share the results within the group.
6. Implement new and improved business practices - Take the leading edge practices and
develop implementation plans which include identification of specific opportunities, funding
the project and selling the ideas to the organization for the purpose of gaining demonstrated
value from the process.

IMPLEMENTATION

 BALANCE SCORECARD
 PMS, ESOPSCULTURE
 ORGANISATIONAL HIERACHY
 CHANGE MANAGEMENT
 CENTRALISATION VS DECENTRALISATION
 BUSINESS PROCESS RE ENGINEERING
 DELTA MODEL

BCG Matrix

Cash Cows: - little investment and generate cash

that can be used to invest in other business units.

Star: - Stars may generate cash, but because market is growing rapidly they require investment to
maintain their lead.

Dog: may not require substantial cash, but it ties up capital that could be better deployed
somewhere else.