Strategic Management

Vineet. M. Ganvi.
PGDBM Year – II

1) McKinsey 7S framework:

While some models of organizational effectiveness go in and out of fashion, one that has
persisted is the McKinsey 7S framework. Developed in the early 1980s by Tom Peters and Robert
Waterman, two consultants working at the McKinsey & Company consulting firm, the basic premise of
the model is that there are seven internal aspects of an organization that need to be aligned if it is to be
successful.

 The 7S model can be used in a wide variety of situations where an alignment perspective is
useful, for example to help you:

 Improve the performance of a company.

 Examine the likely effects of future changes within a company.
 Align departments and processes during a merger or acquisition.
 Determine how best to implement a proposed strategy.

The McKinsey 7S model can be applied to elements of a team or a project as well. The alignment
issues apply, regardless of how you decide to define the scope of the areas you study.

 The McKinsey 7S model involves seven interdependent factors which are categorized as either
"hard" or "soft" elements:

Hard Elements Soft Elements

Strategy Shared Values

Structure Skills

Systems Style

Staff

 "Hard" elements are easier to define or identify and management can directly influence them:
These are strategy statements; organization charts and reporting lines; and formal processes
and IT systems.
 "Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and
more influenced by culture. However, these soft elements are as important as the hard
elements if the organization is going to be successful.
  Let's look at each of the elements specifically:

 Strategy: the plan devised to maintain and build competitive advantage over the competition.
 Structure: the way the organization is structured and who reports to whom.
 Systems: the daily activities and procedures that staff members engage in to get the job done.
 Shared Values: called "superordinate goals" when the model was first developed, these are the
core values of the company that are evidenced in the corporate culture and the general work
ethic.
 Style: the style of leadership adopted.
 Staff: the employees and their general capabilities.
 Skills: the actual skills and competencies of the employees working for the company.

Placing Shared Values in the middle of the model emphasizes that these values are
central to the development of all the other critical elements. The company's structure, strategy,
systems, style, staff and skills all stem from why the organization was originally created, and what it
stands for. The original vision of the company was formed from the values of the creators. As the values
change, so do all the other elements.
2) Michael E Porter's five forces of competitive position model

Michael Porter's famous Five Forces of Competitive Position model provides a simple
perspective for assessing and analysing the competitive strength and position of a corporation or
business organization.

American Michael Porter was born in 1947. After initially graduating in aeronautical
engineering, Porter achieved an economics doctorate at Harvard, where he was subsequently awarded
university professorship, a position he continues to fulfil at Harvard Business School. His research group
is based at the Harvard Business School, and separately he co-founded with Mark Kramer the
Foundation Strategy Group, 'a mission-driven social enterprise, dedicated to advancing the practice of
philanthropy and corporate social investment, through consulting to foundations and corporations'. A
prime example of someone operating at a self-actualization level if ever there was one.

After his earlier work on corporate strategy Porter extended the application of his ideas and
theories to international economies and the competitive positioning of nations, as featured in his later
books. In fact in 1985 Porter was appointed to President Ronald Reagan's Commission on Industrial
Competitiveness, which marked the widening of his perspective to national economies. By the 1990's
Porter had established a reputation as a strategy guru on the international speaking circuit second only
to Tom Peters, and was among the world's highest earning academics.

Porter's first book Competitive Strategy (1980), which he wrote in his thirties, became an
international best seller, and is considered by many to be a seminal and definitive work on corporate
strategy. The book, which has been published in nineteen languages and re-printed approaching sixty
times, changed the way business leaders thought and remains a guide of choice for strategic managers
the world over.

Aside from his innovative thinking, Porter has a special ability to represent complex
concepts in relatively easily accessible formats, notably his Five Forces model, in which market factors
can be analysed so as to make a strategic assessment of the competitive position of a given supplier in a
given market. The five forces that Porter suggests drive competition are:

 Porter's five forces

 Existing competitive rivalry between suppliers

 Threat of new market entrants
 Bargaining power of buyers
 Power of suppliers
 Threat of substitute products (including technology change)
3) Business process reengineering

The analysis and design of workflows and processes within an organization. A business
process is a set of logically related tasks performed to achieve a defined business outcome. Re-
engineering is the basis for many recent developments in management. The cross-functional team, for
example, has become popular because of the desire to re-engineer separate functional tasks into
complete cross-functional processes. Also, many recent management information systems
developments aim to integrate a wide number of business functions. Enterprise resource planning,
supply chain management, knowledge management systems, groupware and collaborative systems,
Human Resource Management Systems and customer relationship management.

Business Process Reengineering is also known as Business Process Redesign, Business

Transformation, or Business Process Change Management.
 Business process reengineering (BPR) began as a private sector technique to help
organizations fundamentally rethink how they do their work in order to dramatically improve customer
service, cut operational costs, and become world-class competitors. A key stimulus for reengineering has
been the continuing development and deployment of sophisticated information systems and networks.
Leading organizations are becoming bolder in using this technology to support innovative business
processes, rather than refining current ways of doing work.

Reengineering guidance and relationship of Mission and Work Processes to Information

Technology. Business process reengineering is one approach for redesigning the way work is done to
better support the organization's mission and reduce costs.
4) The BCG matrix

The BCG matrix method is based on the product life cycle theory that can be used to
determine what priorities should be given in the product portfolio of a business unit. To ensure long-
term value creation, a company should have a portfolio of products that contains both high-growth
products in need of cash inputs and low-growth products that generate a lot of cash. It has 2
dimensions: market share and market growth. The basic idea behind it is that the bigger the market
share a product has or the faster the product's market grows the better it is for the company.

Placing products in the BCG matrix results in 4 categories in a portfolio of a company:

1. Stars (=high growth, high market share)

- use large amounts of cash and are leaders in the business so they should also generate large amounts
of cash.

- frequently roughly in balance on net cash flow. However if needed any attempt should be made to
hold share, because the rewards will be a cash cow if market share is kept.

2. Cash Cows (=low growth, high market share)

- profits and cash generation should be high , and because of the low growth, investments needed
should be low. Keep profits high

- Foundation of a company

3. Dogs (=low growth, low market share)

- avoid and minimize the number of dogs in a company.

- beware of expensive ‘turn around plans’.

- deliver cash, otherwise liquidate

4. Question Marks (= high growth, low market share)

- have the worst cash characteristics of all, because high demands and low returns due to low market
share

- if nothing is done to change the market share, question marks will simply absorb great amounts of cash
and later, as the growth stops, a dog.

- either invest heavily or sell off or invest nothing and generate whatever cash it can. Increase market
share or deliver cash
5) SWOT analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths,

Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves
specifying the objective of the business venture or project and identifying the internal and external
factors that are favorable and unfavorable to achieve that objective. The technique is credited to Albert
Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from Fortune
500 companies.

A SWOT analysis must first start with defining a desired end state or objective. A SWOT
analysis may be incorporated into the strategic planning model. Strategic Planning, has been the subject
of much research.

 Strengths: characteristics of the business or team that give it an advantage over others in the
industry.
 Weaknesses: are characteristics that place the firm at a disadvantage relative to others.
 Opportunities: external chances to make greater sales or profits in the environment.
 Threats: external elements in the environment that could cause trouble for the business.

Identification of SWOTs are essential because subsequent steps in the process of planning for
achievement of the selected objective may be derived from the SWOTs.

First, the decision makers have to determine whether the objective is attainable, given the
SWOTs. If the objective is NOT attainable a different objective must be selected and the process
repeated.

The SWOT analysis is often used in academia to highlight and identify strengths, weaknesses,
opportunities and threats. It is particularly helpful in identifying areas for development.
Use of SWOT analysis

The usefulness of SWOT analysis is not limited to profit-seeking organizations. SWOT analysis may be
used in any decision-making situation when a desired end-state (objective) has been defined. Examples
include: non-profit organizations, governmental units, and individuals. SWOT analysis may also be used
in pre-crisis planning and preventive crisis management. SWOT analysis may also be used in creating a
recommendation during a viability study/survey.