Strategic Management Final Paper Guide - Prof Martin

7/27/2019 Strategic Management Final Paper Guide - Prof Martin

1/16

Strategic Management: A Step by Step Guide to the Final Paper

Authored by Professor Naomi Martin

Strategic Management:

A Step by Step Guide to the

Final Paper

Professor Naomi Martin

Masters in Business

Administration

Ateneo Graduate School of

Business


2/16



Overview

This document provides an overview of the expectations from the strategic

management paper with guidance on the general story flow, key points in

each section which serve to lead into the next section, and reminders on

the proper application of each tool . Questions to anticipate in eachsection are also provided to guide the students in ensuring completeness

and relevance of statements included in the paper.

EXECUTIVE SUMMARY

This section should give the readers an overview of the business and the

industry it participates in, its biggest present and future challenges from

both an external and internal perspective, the key objectives for the

company based on the strategic issues identified (financial and strategic

objectives) and the recommended strategies and action plans to achieve

the objectives.

The Executive Summary sets the stage for the readers to focus on key

sections of the paper that gives evidence for the conclusions highlighted

therein.

Make sure this section answers the following questions:

1. What is this companys business and what specific industry does itparticipate in? Is there anything special about this industry in terms oftrends, past performance and future growth prospects?

2. Where is the company going? What are its aspirations?

3. Where is it right now?

4. What are the critical success factors in this industry and howcompetitive is the company?

5. What external and internal factors are hindering it from getting to itsmission/ vision?

6. What financial and strategic issues must be addressed to get it on itscourse towards the mission and vision?

Remember:

Do this portion last, after completing all the required analysis on the entire

paper. You know that you have understood your paper very well when you

have been able to write an accurate and concise Executive Summary.

Have several people read the Executive Summary and validate if their

understanding of your key points are similar to yours.

General Tips

Always distinguish between

knowledge (facts which can be

supported by data) and your

belief.

The first parts of the paper

(Background, External and

Internal Analysis) should be

based on knowledge and

research culled from credible

sources (publications, relevant

firsthand interviews, books,

videos that can be referenced).

The authors opinions generally

come into play in the sections

explaining the IFE and EFE,analysis of the strategic

recommendations and action

planning.

Formatting Tips

The syllabus requires that the ES

should be a maximum of 2 pages.


3/16



INTRODUCTION AND COMPANY BACKGROUND

This section should give the readers clear picture of the subject

company and all the required data in about 2-3 pages.

It should, UPFRONT include data on

! the nature of the business

!its specific product categories and services and an example ofany of its famous brands

! shareholding if relevant

! major markets served in terms of demography and geography

! current revenue size and growth rates

! current profits as a percentage % of sales and growth rates

! number of employees

! number of plants/ factories if applicable

! relevant historical milestones

It should also include a brief background of the industry , its current

size and growth rates and any significant trends around the industry

LINKING THE STORY :

WHAT IS THIS BACKGROUND SETTING THE STAGE FOR?

You are telling your readers about the company to give them idea of

its history, its mandate, its current status in terms of finances

(revenue and profit) its capability, and its standing within the

industry.

This sets the stage for your reader to see where you would like to

take a company like this, which will be seen in the Mission andVision analysis.


1. Is the companys business clear enough for me to describewhy it is capable (from a financial and capabilityperspective) of aspiring for its vision?

2. Is the description setting the stage for issue identification inlater chapters?

General Tips

This section should contain

FACTS culled from research into

the companys financial reports,

book chapters on the industry

and company if any, printed and

online reports, firsthand, well-

quoted interviews. All facts must

be referenced appropriately.

Specific numbers should be

stated instead of just vague

generalizations. Be specific but

relevant in the data you choose

to include.

Examples:

X The company has existed for

a long time and is run as a familybusiness

" The company was founded

in 1982 and has operated as a

single proprietorship for 10

years until its incorporation

in 1992. It is run by Mr Jun

Go with members of his

immediate family in 5 of the

key management committee

positions.

X The company participates in

a sunset industry.

" Company A holds 20%

market share in the

photocopying industry, which

has seen a steady decline in

growth rates since 2007. The

2010 growth rate was at (-

6%), worse than the two

previous years rates (-2% for

2008 and -3% for 2009),

shrinking the entire industry

by 50million pesos in 3 years.


4/16



RESEARCH DESIGN AND METHODOLOGY

In this section you must write ALL data and information sources ,

classified into print, online, other media, interviews (specify the

company and position of individuals interviewed)

Specify methodologies you employed in coming up with conclusionsfor items where data was not readily available. For example, if you

estimated the market share using different sources of data, through

in-store observation, or through other means besides looking for a

formal market share table, describe that methodology in this chapter.

Spend a maximum of one paragraph explaining why certain critical

data have not been obtained, and what databases have been

exhausted in pursuit of such data.

In the absence of published information, write how you tired to fill in

and the basis of your assumptions on critical items such as your

industrys growth (past growth and future forecasts), your

competitions financial trends, and other competitive information.

General Tips

This is the ONLY part of the

paper where you are allowed to

put explanations on limited

data. Write it all down here andget it over with. After this

section, the readers will have an

idea of which information or

conclusions are based on

assumptions and how you made

them.

BEFORE YOU GO ANY FURTHER:

Remember the basic framework for any business; and you must take the mindset throughout the rest of your

paper to discuss elements and topics in accordance with basic goals:

Goal is to increaseWhat external factors have orwill potentially increase(opportunities) or decrease(threats)

What internal factors have orwill help increase (strenghts) ordecrease (weaknesses)

Goal is to decreaseWhat external factors have orwill potentially increase(threats) or decrease(opportunities)

What internal factors have orwill help increase(weaknesses) or decrease

(strenghts)

Goal is to increaseWhat external factors haveor will potentially increase(opportunities) or decrease(threats)

What internal factors haveor will help increase(strenghts) or decrease(weaknesses)


5/16



MISSION AND VISON CRITIQUE

The purpose of this section is for you to demonstrate, based on the

company background and industry status, where this company CAN be in 3-

5 years, assuming it is able to overcome the critical barriers to success.

If the mission and vision is acceptable based on Davids criteria, give your

recommendations on how it can be communicated to its stakeholders.

Mission statements should be reconciliatory and should address all

stakeholders. Make sure that is broad enough to cover the companys

present AND potential future businesses (should a strategy of diversification

or integration be beneficial).

Remember that we are also looking for a reference to ethics and nation-

building : How does and will your business contribute to building the country

?

LINKING THE STORY :

WHAT IS THIS PORTION SETTING THE STAGE FOR?

You are setting the stage for the readers to share a vision of the company in

the specified timeframe. You will try to make them believe that this state is

attainable if the company follows the strategy that you will propose. Be

careful thus not to overpromise, nor to underestimate. The vision will be

the entire basis for the strategic objectives.

Test it with a friend! Make sure this section answers the following questions:

! Is the companys vision and mission clear and inspiring enough forpeople to want to work there or to partner with the company?

! Can you imagine the company as you have described it 3-5 yearsdown the road?

! Can you safely and confidently put this mission and vision in thespeeches of the CEO to the stakeholders or on a plaque on the wallof its office for all to see?

General Tips

It is not acceptable to

simply state present

or absent when

doing the critique

based on Davids

framework.

A commentary on the

impact of the present

elements and how the

absent elements can be

formulated is needed.

Dont Forget This!

The most often-missed

element in the revisedvision statement is the

year/ period when the

vision is anticipated to

be accomplished.


6/16



LINKING THE STORY :

WHAT THE NEXT SECTION SHOULD BE ALL ABOUT

Now that you have described the company and demonstratedwhere it can go in 3-5 years, it is time to describe for thereaders the factors that will HELP and HINDER this company

from achieving that vision.

This is the basis for the External and Internal Analysis: factorsyou identify are either drivers or barriers to success, withsuccess described as the attainment of the vision.

BEFORE YOU GO ANY FURTHER, MAKE SURE YOU KNOWWHAT THE BUSINESS IS ABOUT!!!!

At every step, ask:

What Political Economic Social/ Demographic TechnologicalTRENDS will affect these steps such that

a. the companys revenue will either increase or decrease

b. the companys costs will either increase or decrease

c. the companys profits will either increase of decrease

Figure 1:

Figure 2

RAW

MATERIALS

PRODUCTION PRODUCT DISTRIBUTION RETAIL CUSTOMER

Companyvaluechain

Political/Legal

Economic

Technological

Sociologic/Demographic

CompetitiveMovements


7/16



EXTERNAL ANALYSIS : PESTC

This section shows your reader the external PESTC factors that

affect your industrys ability to grow, and you companys ability to

reach its vision in the next 3-5 years within that industry.

This is not merely a laundry list of PESTC factors. You have to

prioritize which one is most important and arrange your essay

accordingly.

Put only the factors that are relevant to your paper, and as

emphasized by the syllabus, exert a significant impact on your

industry. If you cannot link a factor directly to the ability to influence

your attainment of the vision, do not force it!


! As I pick out a factor to describe, does it impact my value chain(as described in Figure 1 and 2) insofar as increasing revenue,decreasing costs and increasing profits? Does the trend make itharder or easier to secure funding (through debt or equity) andsupport to grow the business?

! Did I describe a TREND, not just a one-time status? Did I makean analysis of the past trend and forecasted a future trend forthe factor?

X The industry had a 14% growth from last year.

" The industry has demonstrated a robust double-digitgrowth of 10-14% for the past 3 years and isexpected to continue to grow from 8-9% for the next3 years.

" There is a pending bill in Congress that mayincrease costs of production by 4% and but this is

expected to be deprioritized for the next session in2013.

! Does the trend help or hinder the companys market demand,ability to offer current and future products, advantage ordisadvantage the competitors, affect the suppliers or distributors,labor force and ability to compete ethically?

LINKING THE STORY:


This portion should enable the readers to predict the presence and

ranking of the various factors on the EFE table. As you describe the

factors, use language to emphasize which is most important and thus

needs to be addressed by the company. This is the most critical

factor for the company to address to maintain profitability

NO SURPRISE FACTORS ON THE EFE! It should be a summary of

l relevant factors already discussed, ranked according to impact to

e business. Thus spend more time explaining your companys scores

General Tips

THIS SECTION IS CALLED

EXTERNAL ANALYSIS, NOT

EXTERNAL DESCRIPTION.

on't just describe the factor---

analyze what the trend in that

actor means for your current and

uture business!

TRENDS are always better

than one-year snapshots. Has

the factor been intensifying or

diminishing? What is the

impact of that development?

WRITING TIPS

All descriptions must be referenced! State

the actual figures, not just your beliefs on

them.

Examples:

X The economy of the

Philippines is booming

" Philippine GDP growth has

been at 5-6% over the last 3

quarters and is expected to

remain robust at 5% for 2013

THE EFE TABLE IS A

NUMERICAL

REPRESENTATION OF THE

RELATIVE MAGNITUDE OF

EXTERNAL

OPPORTUNITIES AND

THREATS, and the

companys response.


8/16



EXTERNAL ANALYSIS: INDUSTRY AND

COMPETITOR ANALYSIS

This section should reflect the history, status and forecasted future

of the entire industry as supported by Porters 5 factors analysis and

an in-depth discussion of the characteristics and competitiveness of

the major players/competitors in the industry.


! What is the market size and growth over the last few years?

! What is the forecasted growth and why?

! Did I show a market share trend over the past 3 years?

! Who are my major competitors and what are their revenue sizes,growth rates, key competitive strategies?

! Did I demonstrate and forecast for the next 3-5 years (based onsolid research) the industrys

o Customer growth, change in customer profile

o Production methods

o Mergers and acquisitions, partnerships

o Present and future issues/ problems

! What does it take to be a successful player in this industry?

LINKING THE STORY:


This portion should enable the readers to understand the CRITICAL

SUCCESS FACTORS to compete and achieve goals in this industry.

If those are the PEST factors to consider, and the Porters showed

that those are the forces to contend with, then to be successful a

company must have or focus on!..

THIS WILL BE THE BASIS FOR YOUR COMPETITIVE PROFILE

MATRIX (CPM).

NO SURPRISE FACTORS ON THE CPM! It should be a summary

and numerical representation of all critical factors to compete well inthe industry, and how each major competitor responds to those

factors. The CPM usually reflects the competitive share of the player

in the market.

CONCEPT REVIEW

PORTERs ANALYSIS IS ANANALYSIS OF PROFITABILITY

OF THE INDUSTRY

What is the effect of each force to the

companys profits? Does it have to

pend more to get the supply? Does it

have to spend to defend itself against

new entrants and substitutes? Does

rivalry cut into revenues and thus

rofits?

The conclusion of Porters is not just

attractive or not attractive but it

hould tell you the most critical

elements that impact profit.

X The analysis shows that this

industry is not an attractive

one.

" The analysis shows that profitsin this industry may be limited

by the ease of entry of new

competition, which magnifies

the already intense rivalry for

a shrinking customer pool.

Thus, to be a successful player

in this industry, a company

must continuously invest in

innovation and differentiation.


9/16



LINKING THE STORY :

WHAT THE NEXT SECTION SHOULD BE ALL ABOUT

Using the EFE, you have described the external factors that help or hinder the

industrys growth and your evaluation of how your company has been able torespond to these factors.

Using the CPM, you compared the performance of your company on the criticalsuccess factors versus its competitors, justifying its market rank and thus itscompetitiveness in the operating environment.

Now it is time to show WHY the company performed as such, with an analysisof its INTERNAL ENVIRONMENT. You thus have to ensure that the next

section is built to link to the explanation of the EFE score and the CPM score.

INTERNAL ANALYSIS: LOOKING FOR STRENGTHS AND WEAKNESSES

According to the syllabus you must FIRST, review the companys performance

! Revenue/ sales in the past 3 years; compute for yearly growth

! Profits in the past 3 years

! How does the companys growth compare to industry growth? Conclude

The different auditing tools (Davids Functional, McKinsey 7S, Weisbord) serve as a checklist for you to

ensure that you are not missing any relevant factor when you audit. This section, however, is not meant to

be just a laundry list of factors. The entire section MUST SHOW FROM THE WAY IT IS WRITTEN what

the most important factors contributing to the evaluation in the EFE and CPM are. You are at liberty to

arrange the functional audit, the 7S or the Weisbord in the order of importance to your industry.

The section is capped by a summary which is the IFE matrix.

NO SURPRISES IN THE IFE MATRIX! It is but a numerical representation of the factors you already

discussed, ranked / weighted according to impact and scored according to how the company is reinforcing

its strengths and doing something to correct its weaknesses. Thus spend more time explaining the way you

scored the company.

LINKING THE STORY :

At the end of this section, your readers would have fully understood why the companyhas performed the way it has over the years, and how that has affected its ranking in theindustry. You should have also set the stage for identifying the course of action to take inorder for this company with its strengths and weaknessesto move towards its vision.


10/16


Authored by Professor Naomi Mart

STRATEGY FORMULATION:

THE MATCHING STAGE

FIRST, HAVE A HYPOTHESIS ON THE DIRECTION YOU SHOULD

TAKE. Given the competitive position and the financial status of the

company, should it be aggressive, conservative or defensive? Can it

reach its goals alone or does it need to partner?

The tools will then help you prove your hypothesis to the reader.

SWOT, SPACE, IE, GE/McKinsey , GRAND and QSPM matrices

should all align towards general strategy buckets.

Your strategy choices should reflect decisions on these major buckets

General Tips

WRITING TIPS

Students often make a mistake on

the way they state an Opportunity

or Threat. It should be a

description of an external trend,

not an action the company should

take. It should be true of the

environment for all competitors.

Examples:

NOT a statement of opportunity:

The company should tap the

female video-gamers/ entry into

the female market

Statement of opportunity

" The female video-gamers

have been increasing from

30%-40% of all video-game

buyers

" Purchases from females

have increased by 20% in

the past 3 years

You should also make that strategy choice in consideration of

1. Your industry are you in an emerging, growing, maturing or declining one

2. Your competition - are there many of you (fragmented), few /monopoly

3. Your rank are you a leader or a follower?

LINKING THE STORY:


This portion sets the stage for your objectives. The strategy should be reflected in one or more of the key

strategic objectives of the company

Example

Objective 1 : to become the #1 local Mexican taco fastfood company by 2016 with revenues of P50M

Objective 2 : to penetrate the Metro Manila area taking 50% of the market by 2016

Objective 3 : to develop the Cebu and Davao markets with 2 branches each generating P5million by 2016

Objective 4 : to strengthen the partnership with Ayala Malls

Decision

Bucket1 Aggressive

Conservative

Defensive

Decisionbucket2

:Specific Market development

Market penetration

Product developmentIntegration

Diverstification,

Retrenchment

Divestiture

Liquidation

Decision

bucket3 Organic

Joint ventures

Merger or acquisitionOther partnerships


11/16



OBJECTIVES, STRATEGY RECOMMENDATIONS AND

ACTION PLANS

BEFORE YOU PROCEED

1. Look back on the vision statement. This should guide the formulation ofthe objectives.

a. e.g. If the vision is to be #1, the financial objectives should be the

revenue equivalent to being #1.

b. If the vision is to have a certain market share or rank, the revenue

objective must match this rank according to projections of the

revenues of the company and its competitors

2. Look back on the mission statement. If you choose a diversification,

integration or product development strategy, will this still be aligned with

the companys mission scope as stated?

CONCEPT REVIEW

The questions below should be used to guide hierarchy of strategy and to

construct the strategy map, which should show how all activities and goals of

each function will align towards the achievement of the corporate goals.

GENERAL TIPS

Financial projections are

critical.

Make an excel sheet

reflecting the revenue

projections of the

company and its

competitors, the growths

per year, and the resultin

market shares.

Reflect on the growth

needed to achieve therevenue or market

share goal required. Is

this realistic? How does

it compare vs the

industry growth? What

major move should be

done to achieve these

required growths?What businesses should we be in?How do we grow the whole company organically or throughpartnerships?

How do we address the biggest environmental opportunities andthreats?

How do we compete?Do we adopt a low-cost, differentiation or focus strategy for ourbusiness units or product segments?

How do we ensure we gain market share from competitors?

How can each functional unit contribute to the business goals?How might we organize our company to successfully support thegoals?


12/16



EXAMPLES OF STATEMENTS OF OBJECTIVES AND STRATEGIES

CORPORATE LEVEL

1. Financial (examples)

i. To achieve revenues of!..by!

ii. To achieve a net income of!.by!

iii. To increase profit margins to!.by!

2. Strategic : should match the strategy choice

i. To be in the top 5 players of the industry!

ii. To be recognized as the leading provider of!

iii. To be the #3 player in the Cebu area!

iv. To launch 5 new products in 3 years

v. To successfully partner with Company V in a joint venture to penetrate the Indonesian market

vi. To divest the smallest subsidiary by!

vii. To diversify into the ready-to-wear category

viii. To acquire a downstream retailing company

ix. To open our own retail stores in Pampanga

x. To open a franchise line to develop the Mindanao market

BUSINESS STRATEGIES : Should support the Financial and Strategic Objectives

Examples

1. Invest in the Non-Food packaging units and ensure market leadership in this category

2. Launch a new line of clothing exclusively for girls 9-14 years old

3. Develop a product for the growing population of call center agents in North Quezon City

4. Reduce prices on the small household appliances line while maintaining price flexibility on the

large household appliances business, with price increases of 5% yearly

ORGANIZATIONAL STRATEGIES

1. What changes in the structure should the company do to support the Business and Corporate

objectives?

2. What new skills, capabilities and people should be added?

3. What financial (financing, investing, borrowing) strategies to be done to finance the strategies?

4. What new machines, plants, sites, operational and technological changes/ advancements should be

made?

5. What internal leadership and communication styles should be instituted, if any?


13/16



LINKING THE STORY: ALL THE OUTPUTS FROM ALL THESE

LEVELS SHOULD TIE TOGETHER TO FORM THE STRATEGY MAP

Strategy flows from the top

FINANCIAL PROJECTIONS

2012

2013

2014

2015

2016

REVENUES

GROWTH

COST OF GOODS

% TO SALES

GROSS MARGIN

% TO SALES

OPERATING COSTS

ADMINISTRATIVE

SALES AND MARKETING

OTHERS% TO SALES

NET INCOME (BEFORE TAX)

% TO SALES

Ensure the following:

1. The projections match the financial objectives and vision

2. The operating costs reflect the budgets for the activities suggested to reach the objectives (eg,

purchase of a plant, increase in marketing and advertising , hiring more people, adding training, salary

increases OR reduction in costs, shutting down facilities, letting go of employees)3. The trends are well-explained

a. Are the growths aligned and realistic?

b. Are the ratios improving over the years?

c. Are profits increasing in percentage and in absolute value?

4. The profits are plugged into the correct portion in the projected balance and cash flow sheets

5. Assets purchased or divested should be reflected in the balance sheets

Vision and Mission Corporate BusinessOrganizationalor Functional


14/16



DETAILED ACTION PLAN

What will each department do to accomplish the goals? (top 3 action items per Organizational Strategy will d

Plan Timeline Person or

Department

Responsible

Expected Output

Objective

STRATEGY EVALUATION, MONITORING AND CONTROL

CONCEPT REVIEW: THE BALANCED SCORECARD

The elements of the balanced scorecard should flow into each other as follows:

Financial: What should we be measuring to get to theobjectives and vision?

Low cost airline-- revenues per plane

Customer: To get to the financial objectives, how should ourcustomers see us? What should we be measuring to ensurethat customers will continue buying?

Low cost airline-- best prices, most number of flights todomestic destinations

Internal Processes: For our customers to see us this way,what internal processes should we be good at?

Low cost airline --- Ground turnaround time, cost-efficientprocurement of materials, availability of staff, % occupancyrate per flight

Learning and Growth : For our processes to be this good,what should our employees learn? How should they bedeveloped?

Low cost airline-- Six Sigma training for technical crew;Procurement training; HR connections with flight schools


15/16



BALANCED SCORECARD Example

Objective: To become a 130M company by 2015 with a market share of 10%; To gain share by growing

the fruit juice business unit in Visayas and Mindanao to 30M, capitalizing on product differentiation

through the launch of 3 new innovative flavors and an aggressive distribution strategy in all malls

OBJECTIVE MEASURE TARGET TIME LEAD

Financial Revenues % growth

Overall Yearendsales

Sales of juiceunit

15%

10%8%8%

100M110M119M128M

15M25M30M

2012

201320142015

2012201320142015

201320142015

CEO

SalesDirector

Head ofJuices unit

Customer Gain share Overall Market

share

Fruit juice sharein Visayas andMindanao

4%

7%8%10&

12%15%20%

2012

201320142015

2015

Marketing

Director,Head ofJuice unit

Processes Launch 3new flavors

Distribution

Marketing

Timely launch of3 flavors

% of groceriespenetrated andstocked

Awareness ofnew brands inVisMinTrial rateRepeat purchase

2013

50%75%100%

100%

80%50%

201320142015

2015

2013

20142015

R&D unitProduction

DistributionManager

Marketingdirector

LearningandGrowth

SalesTraining forVismin

Discoveryandmapping ofgroceries

Productionline training

% of teamtrained on newproducts

% of groceriesmapped andapproached bysales team

% trained onproduction anddistribution ofnew flavors

100%

100%

100%

2013

mid-2014

2013

Head ofdigitalpublishingand HRmanager


16/16



AND FINALLY, USUAL MISTAKES:

1. Use of the BCG matrix

The BCG matrix is used to prioritize investments in products or business units

within a company to yield the best returns. Companies usually invest in the

Star products or services, which have a high share in a fast growing market.

Companies usually deprioritize or divest Dogs, which are products not doingwell in markets which are expected to decline. Cash cows are products that

can continue to be milked without investing much (as they already have a high

recall and loyalty among customers).

COMMON MISTAKE: Categorizing the entire company as a whole. (Bench is a

Star or Meralco is a cash cow)

2. Mistaking slowing of growth for no growth

Just because a company grew 8% two years ago and is now growing by 6% doenot mean that it is declining. It is still growing, albeit at a slower rate, perhaps in

part due to the size of the base. The better way to analyze is to compare this

growth with the industry and its competitors.

3. Mistaking substitutes for rivals in the Porters analysis

Rivals are companies which make the same products or offer the same services

most times with the same business model. Substitutes are products that are NO

similar to the offering but are patronized by the customers in lieu of the product

offered by the industry.

eg. Medical City, Makati Med and St. Lukes are rivals as hospitals. Their

substitutes could be the diagnostic centers and standalone clinics which are not

hospitals but may be patronized to get the same kind of service.

4. Not aligning market shares with financial projections

As you compute for your financial projections, you should also compute for your

competitors and see the resulting market shares of each. You have to determine

if the growth rates of each competitor allow them to catch up with the shares.

The projections for the competition should be backed up by rational assumptions

Strategic Management Final Paper Guide - Prof Martin

Documents

Transcript of Strategic Management Final Paper Guide - Prof Martin