Strategic Management - Module 3 – MG University - Manu Melwin Joy
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Transcript of Strategic Management - Module 3 – MG University - Manu Melwin Joy
Strategic ManagementModule 3 – MG University
Prepared By
Kindly restrict the use of slides for personal purpose. Please seek permission to reproduce the same in public forms and presentations.
Manu Melwin JoyAssistant Professor
Ilahia School of Management Studies
Kerala, India.Phone – 9744551114
Mail – [email protected]
Contents
• Implementation and Control.
• Leadership in Strategic Management.
• Portfolio Analysis - BCG Matrix, GEC Model.
• Control Process Analysis and Follow-up Action
for Control.
• Evaluation Strategy.
McKinsey 7s Model• McKinsey 7s model is a
tool that analyzes firm’s organizational design by looking at 7 key internal elements: strategy, structure, systems, shared values, style, staff and skills, in order to identify if they are effectively aligned and allow organization to achieve its objectives.
McKinsey 7s Model
Strategy• Strategy is a plan developed
by a firm to achieve sustained competitive advantage and successfully compete in the market. In general, a sound strategy is the one that’s clearly articulated, is long-term, helps to achieve competitive advantage and is reinforced by strong vision, mission and values.
Structure• Structure represents the
way business divisions and units are organized and includes the information of who is accountable to whom. In other words, structure is the organizational chart of the firm. It is also one of the most visible and easy to change elements of the framework.
Systems• Systems are the processes
and procedures of the company, which reveal business’ daily activities and how decisions are made. Systems are the area of the firm that determines how business is done and it should be the main focus for managers during organizational change.
Skills• Skills are the abilities that
firm’s employees perform very well. They also include capabilities and competences. During organizational change, the question often arises of what skills the company will really need to reinforce its new strategy or new structure.
Staff • Staff element is
concerned with what type and how many employees an organization will need and how they will be recruited, trained, motivated and rewarded.
Style• Style represents the way
the company is managed by top-level managers, how they interact, what actions do they take and their symbolic value. In other words, it is the management style of company’s leaders.
Shared Values • Shared Values are at the
core of McKinsey 7s model. They are the norms and standards that guide employee behavior and company actions and thus, are the foundation of every organization.
Example of McKinsey 7s Model
Strategy
• Imagine that your
organization is planning
to implement lean
culture.
Strategy
• Focus on the firms core
competencies and
deploying lean
manufacturing principles
throughout the firm,
targeting and
eliminating waste.
Structure
• A small hierarchy is
needed, which
encompasses self
directed work teams.
Daily interdepartmental
stand up meetings to be
held daily.
Systems
• A bonus system which
supports Lean
improvement and the
new ways of working, a
pay grade structure that
is aligned to the new
team structure.
Skills
• Develop new team skills,
problem solving, waste
elimination and process
analysis skills,
empowerment to make
decisions, the ability to
run and close out Kaizen.
Staff
• Team players, goal
sharing, acting as
change agents and
driving improvements
on an individual level.
Style• Leadership that is
trained in Emotional Intelligence and the courage to delegate and empower subordinates. Leadership that leads by example and can coach and mentor employees in Lean techniques.
Shared Values • Creating an organization
that respects each and every employee, committed to the environment and continuously strives for waste elimination and perfection in everything it does.
Leadership in strategic management
Strategic leadership• The term strategic
leader is used to describe the manager who head the organization and who are primarily responsible for creating and implementing strategic change.
Themes of strategic leadership
Strategic Vision• A well crafted, appreciated
and supported mission is at the heart of a leader’s strategic vision. It may reflect his own current assessment of where the firm should go or how he may continue to carry out the long term plans established by his predecessor.
Pragmatism
• Pragmatism is the ability
to make things happen
and achieve positive
results. This can happen
only when leader utilize
resource in an efficient
and effective way.
Structure and policies
• A visionary strategic
leader, as an agent of
change, should lay down
the rules of the game in
concrete terms and
resolve all contentious
issues in a proper way
Communication network• Both formal and informal
network should be used by the leader to inform people about priorities and strategies and ensure that these are implemented expeditiously. Lateral communication should be encouraged, in addition to upward and downward communication channels, between various departments and divisions.
Culture• A strategic leader can
influence the culture of a company significantly. In fact, every company reflects the character and personality of its leader. The beliefs and values of the leader have a strong bearing on how employees behave and react to situations on a daily basis.
Managing change• Effective leaders are
responsible for initiating necessary changes that ensure continued organizational success. To manage change effectively, the leader need to have a clear vision of the future – where the organization is heading together with the means for creating and reaching this future.
Governance and Management• The major responsibilities of
strategic leaders with respect to corporate governance are provide direction in the form of mission, formulate and implement changes, monitor and control operations, provide policies and guidelines to other team members and achieve results in a manner acceptable to society at large.
Portfolio Analysis
Portfolio Analysis
• Executives in charge of
firms involved in many
different businesses
must figure out how to
manage such portfolios.
Portfolio Analysis• General Electric (GE), for
example, competes in a very wide variety of industries, including financial services, insurance, television, theme parks, electricity generation, lightbulbs, robotics, medical equipment, railroad locomotives, and aircraft jet engines. When leading a company such as GE, executives must decide which units to grow, which ones to shrink, and which ones to abandon.
The Boston Consulting Group (BCG) Matrix
(BCG) Matrix• The Boston Consulting
Group (BCG) matrix is the best-known approach to portfolio planning. Using the matrix requires a firm’s businesses to be categorized as high or low along two dimensions: its share of the market and the growth rate of its industry.
Question Marks• Divisions in Quadrant I have a
low relative market share position, yet they compete in a high-growth industry. Generally these firms’ cash needs are high and their cash generation is low. These businesses are called Question Marks because the organization must decide whether to strengthen them by pursuing an intensive strategy.
Stars• Quadrant II businesses (Stars)
represent the organization’s best long-run opportunities for growth and profitability. Divisions with a high relative market share and a high industry growth rate should receive substantial investment to maintain or strengthen their dominant positions. Forward, backward, and horizontal integration; market penetration; market development; and product development are appropriate strategies for these divisions to consider.
Cash Cows• Divisions positioned in
Quadrant III have a high relative market share position but compete in a low-growth industry. Called Cash Cows because they generate cash in excess of their needs, they are often milked. Many of today’s Cash Cows were yesterday’s Stars. Cash Cow divisions should be managed to maintain their strong position for as long as possible.
Dogs• Quadrant IV divisions of the
organization have a low relative market share position and compete in a slow- or no-market-growth industry; they are Dogs in the firm’s portfolio. Because of their weak internal and external position, these businesses are often liquidated, divested, or trimmed down through retrenchment.
GEC Model
GEC Model• In consulting
engagements with General Electric in the 1970's, McKinsey & Company developed a nine-cell portfolio matrix as a tool for screening GE's large portfolio of strategic business units (SBU).
GEC Model• The GE matrix attempts to
improve upon the BCG matrix in the following two ways:– The GE matrix generalizes the
axes as "Industry Attractiveness" and "Business Unit Strength" whereas the BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market shares as a proxy for the strength of the business unit.
– The GE matrix has nine cells vs. four cells in the BCG matrix.
GEC Model
Strategic Implications
• Grow strong business
units in attractive
industries, average
business units in
attractive industries, and
strong business units in
average industries.
Strategic Implications
• Hold average businesses
in average industries,
strong businesses in weak
industries, and weak
business in attractive
industries.
Strategic Implications
• Harvest weak business
units in unattractive
industries, average
business units in
unattractive industries,
and weak business units
in average industries.
Strategic control
Strategic control• Strategic control is concerned
with tracking a strategy as it is being implemented, detecting problems or changes in its underlying premises and making necessary adjustments. The most important purpose of strategic control is to help top achieve organizational goals through monitoring and evaluating the strategic management process.
Types of strategic control
Premise control • Premise control is
designed to check systematically and continuously whether the premises on which the strategy is based are still valid. If an important premise is no longer valid, the strategy may have to be changed.
Premise control • It involves the checking of
environmental conditions. Premises are primarily concerned with two types of factors: – Environmental factors (for
example, inflation, technology, interest rates, regulation, and demographic/social changes).
– Industry factors (for example, competitors, suppliers, substitutes, and barriers to entry).
Implementation control • Implementation control is
aimed at assessing whether the plans, progammes and policies are actually guiding the organization towards its predetermined objectives or not. If the resources that are committed to a project at any point of time would not benefit an organization as envisaged, corrective steps should be undertaken immediately.
Implementation control • The two basis types of
implementation control are: – Monitoring strategic thrusts -
to agree early in the planning process on which thrusts are critical factors in the success of the strategy or of that thrust.
– Milestone Reviews. Milestones are significant points in the development of a programme, such as points where large commitments of resources must be made.
Strategic surveillance• Strategic surveillance aims at a
more generalized overreaching control designed to monitor “ a broad range of events inside and outside the company that are likely to threaten the course of firm’s strategy”. It is done generally through a general kind of monitoring based on selected information sources to uncover events that are likely to affect the strategy of an organization.
Strategic surveillance• For example, the success
of Arvind Mill’s Ruf and Tuf brand encouraged rampant sale of spurious products under the same brand name forcing the company to constitute vigilance squads to crack down on the unscrupulous businessmen
Strategic alert control• A strategic alert control is the
thorough and often rapid consideration of the firm’s strategy because of a sudden unexpected event. Examples of such events can be the sudden fall of the government, a natural calamity etc. In the face of such unexpected events, the firm should respond immediately, and releases it strategies quickly.
Control Process Analysis
Control Process Analysis
• Setting performance
standards.
• Measuring the
performance.
• Variance Analysis.
• Taking corrective action.
Setting performance standards
• This is the starting phase of
control process where the
strategists lays down
foundation for comparing
actual performance with the
planned one, variance
analysis and taking of
corrective action if needed.
Measuring the performance• Operationally, measurement of
performance is done through
accounting, reporting and
communication systems. What
is important is that
performance evaluation should
reflect the actual position
which may be plus, minus or
nil.
Variance Analysis• Variance analysis is to point out the
variation of actual performance
from the standard one. Variation
can be positive, negative or
matching. The main idea behind
variation analysis is to find out the
extent of deviation and the causes
for the same so to hold responsible
the person in charge of cost or
profit centres.
Taking corrective action
• Findings of variance analysis
paves way for taking
necessary corrective actions.
Correcting the performance
calls for further details as to
the organizational structure
and systems plus behavioral
implementations.
Evaluation Strategy
Activity one: Reviewing Bases of Strategy
• Develop a revised External
Factor Evaluation EFE Matrix
- A revised EFE Matrix should
indicate how effective a
firm’s strategies have been in
response to key
opportunities and threats.
Activity one: Reviewing Bases of Strategy
• Develop a revised Internal Factor
Evaluation IFE Matrix – A revised
IFE Matrix should focus on
changes in the organization’s
management, marketing,
finance/accounting
production/operations, R&D, and
management information systems
strengths and weaknesses.
Activity two – Measuring Organizational Performance
• Another important strategy-
evaluation activity is measuring
organizational performance. This
activity includes comparing
expected results to actual results,
investigating deviations from plans,
evaluating individual performance,
and examining progress being made
toward meeting stated objectives.
Activity Three – Taking Corrective Action
• The final strategy-evaluation
activity, taking corrective actions,
requires making changes to
competitively reposition a firm for
the future. Examples of changes
that may be needed are altering an
organization’s structure, replacing
one or more key individuals, selling
a division, or revising a business
mission.