Strategic Management

Strategic Management
Dr
.D.V
.MadhusudanRao
PhD,MBA,MPhil,MSc(Psy),PGDFTM,PGDIPR,UGC-NET
,APSET
,MCIM(UK),Asso.CIPD(UK)…..
Material Developed for EMBA, ITM Vocational University, Gujarat.

Creative Commons License
No Copyright associated with this material. Interested
parties can use it freely. To develop this I have used
material of Dr. T. Seshadri Kiran, Asst. Prof., CMR
CET, Secunderabad. I acknowledge and owe deep
intellect to him.

Strategic Management Process
It is a process by which mangers make a
choice of a set of strategies for the
organization that will enable it to achieve
better performance.

Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategic
Evaluation
Strategy
Implementation

Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategic
Evaluation
Strategy
Implementation
(Or)

Strategic
Management
Process
Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategy
Implementation
Strategic Intent
Strategic
Evaluation
Strategic Intent(ion)
Strategic Intent refers to the purposes of what the
organization strives for senior managers must define
“What they want to do” and “Why they want to do”
represents strategic intent of the firm.

Strategic
Management
Process
Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategy
Implementation
Strategic Intent
Strategic Intent(ion)
Vision
Strategic
Evaluation
Mission
Business
Definition
Business Model
Goals and Objectives

Strategic
Management
Process
Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategy
Implementation
Strategic Intent
simple terms, defining business in all aspects.
Strategic
Evaluation
Vision
Mission
Business Definition
Vision implies the blue print of the company’s future position. It
describes where the organization wants to land. It depicts the
organization’s aspirations and provides a glimpses of what the
organization would like to become in future.
Mission delineates the firm’s business. Its goals and ways to reach the
goals. It explains the reason for the existence of the firm. Through this
statement one can understand the purpose of the company.
It seeks to explain the business undertaken by the firm with respect to
the customer needs, target markets, and alternative technologies. In

Strategic
Management
Process
Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategy
Implementation
Strategic Intent
Strategic
Evaluation
Business Model
Goals and Objectives
Business Model, as the name implies is a strategy for the effective
operation of the business, ascertaining sources of income, desired
customer base and financial details. Rival firm, operating in the same
industry rely on the different business model due to their strategic choice.
Goals are the end results, that the organization attempts to achieve. On
the other hand, objectives are the time based measurable targets, which
helps in the accomplishment of goals.

Strategic
Management
Process
Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategy
Implementation
Environment Scanning
Internal Environment
Strategic
Evaluation
External Environment

Strategic
Management
Process
Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategy
Implementation
Strategic Formulation
Strategic
Evaluation
Strategic Formulation is the process of deciding best
course of action for accomplishing organizational
objectives and hence achieving organizational
purpose.
As a process of strategy Formulation, the concerned managers
formulate three types of strategies…..
• Corporate level strategies
• Business level Strategies
• Functional Level Strategies

Strategic
Management
Process
Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategy
Implementation
Strategy Implementation
Strategic
Evaluation
Strategy implementation implies making the strategy work as
intended or putting the organizations’ chosen strategy into
action. Strategy implementation includes project
implementation, procedural implementation, Budget,
organization’s structure, distributing resources.

Strategic
Management
Process
Strategic
Intent
Environment
Scanning
Strategic
Formulation
Strategy
Implementation
Strategy Evaluation
Strategic
Evaluation
This is the final step in the process of strategic management.
The activities are…….
• Appraising internal and External factors
• Understand the present strategy
• Measuring performance of the strategy
• Taking corrective actions (If necessary)
This last stage makes sure that the strategy which is
formulated and implemented meets the organizational pre-
determined objectives.

Strategic Intent
Developing a Strategic Vision
“ Vision implies the blue print of the company’s future position. It describes where
the organization wants to land. It depicts the organization’s aspirations and
provides a glimpses of what the organization would like to become in future.”
Vision represents future aspirations that lead to inspiration to be the best in
one’s field of activity.
Agenda
1. Characteristics of Vision Statement
2. Developing Vision Process
3. Communicating the strategic Vision

Strategic Intent
Agenda
1. Characteristics
2. Vision Process
3. Communicating
Characteristics of Vision
1. Directional
2. Focused
3. Flexible
4. Feasible
5. Desirable (Long term interest)
6. Easy to explain

Strategic Intent
Agenda
1. Characteristics
2. Vision Process
3. Communicating
Process of Developing Vision Statement
Understand
the
Organization
Conduct
Vision Audit
Target the
Vision
Set the
context
Generate
Alternative
Visions
Choose the
Final One
* To Craft the vision, one must think about what the future organization’s environment looks like…
*

Strategic Intent
Agenda
1. Characteristics
2. Vision Process
3. Communicating
Communicating Vision Statement
Formulating of Vision by strategies
Strategies Communicating to
Middle Level
Strategies Communicating to Low
Level

Strategic Intent
Mission is a statement which defines the role that an organization plays in a society
Agenda
1. Key Elements in Developing Mission
2. Characteristics of Mission statement
3. Functions and Need of Mission statement
4. Contents of Mission statement
Developing a Strategic Mission
“Mission is the purpose or reason for the organization’s existence”

Strategic Intent
Agenda
1. Key Elements
2. Characteristics
3. Functions and Need
4. Contents
Key Elements in Developing Mission
1. History of the organization
2. Distinctive Competencies of the organization
3. Organization’s Environment

Strategic Intent
Agenda
1. Key Elements
2. Characteristics
4. Contents
Characteristics of Mission statement
1. Market rather than product focus
2. Achievable
3. Motivational
4. Specific
5. Clear
6. Distinctive
7. Achievement of Policies

Strategic Intent
Agenda
1. Key Elements
2. Characteristics
4. Contents
Functions of Mission statement
1. Should define what the organization is and what aspires to
be.
2. Should differentiate an organization from others
3. Should serve as a frame work for evaluating both current
and prospective activities.
4. Should be in understandable manner.

Strategic Intent
Agenda
1. Key Elements
2. Characteristics
4. Contents
Need of Mission statement
1. To ensure unanimity of purpose within the organization
2. To provide a basis for motivating the use of organizational
resources
3. To develop a basis for allocating organizational resources.
4. To establish a good climate in the organization with the
central focus.
5. It will serve as a focal point to identify who is working
towards mission or not.

Strategic Intent
Agenda
1. Key Elements
2. Characteristics
4. Contents
Contents of Mission statement
1. Company product or service
2. Markets
3. Technology
4. Organizational objectives
5. Organizational philosophy or core values
6. Public Image

Mission
Mission:
The ‘fundamental objective(s) of an entity expressed in general terms’.
(CIMA)
The mission therefore is the basic purpose of the organisation and
tries to identify the reason it exists. It is important that the
organisation is able to communicate its mission both internally and
externally, which requires the creation of a mission statement.
‘The mission says why you do what you do, not the means by which you do
it.’ - Peter Drucker
Mission statement:
A ‘published statement, apparently of the entity’s fundamental
objective(s). This may or may not summaries the true mission of the
entity’. (CIMA)
The mission statement outlines the organisation’s mission and
summarises the reasoning and values that underpin its operations.

Mission Statement
We are a global family with a proud heritage passionately committed toproviding
personal mobility for people all around the world. - (Ford Motor Company)
Our Mission is:
 To refresh the world in mind, body and spirit.
 To inspire moments of optimism through our brands and actions.
 To create value and make a difference everywhere we engage. - (Coca
Cola)
To create lasting solutions to poverty, hunger and social injustice. - (Oxfam)
Google’s mission is to organise the world’s information and make ituniversally
accessible and useful. - (Google)
Vision Statement
Vision statement identifies the ideal position that the company wants to reach
within the medium to long-term.
A just world without poverty. - (Oxfam)
Our vision is a world without Alzheimer’s. - (Alzheimer’s Association)
To make people happy. - (Disney)
To become the world’s leading consumer company for automotiveproducts
and services. - (Ford Motor Company)

Differences between Vision and Mission
Basis Mission Statement Vision Statement
About A Mission statement talks about HOW you
will get to where you want to be. Defines the
purpose and primary objectives related to
your customer needs and team values.
A Vision statement outlines WHERE
you want to be. Communicates both
the purpose and values of your
business.
Answer It answers the question, “What do we do?
What makes us different?”
It answers the question, “Where do
we aim to be?”
Time A mission statement talks about the present
leading to its future.
A vision statement talks about your
future.
Function It lists the broad goals for which the
organization is formed. Its prime function is
internal; to define the key measure or
measures of the organization's success and
its prime audience is the leadership, team
and stockholders.
It lists where you see yourself some
years from now. It inspires you to
give your best. It shapes your
understanding of why you are
working here.

Change Your mission statement may change, but it
should still tie back to your core values,
customer needs and vision.
As your organization evolves, you might
feel tempted to change your vision.
However, mission or vision statements
explain your organization's foundation, so
change should be kept to a minimum.
Developing
a statement
What do we do today? For whom do we
do it? What is the benefit? In other words,
Why we do what we do? What, For
Whom and Why?
Where do we want to be going forward?
When do we want to reach that stage? How
do we want to do it?
Features of
an effective
statement
Purpose and values of the organization:
Who are the organization's primary
"clients" (stakeholders)? What are the
responsibilities of the organization
towards the clients?
Clarity and lack of ambiguity: Describing a
bright future (hope); Memorable and
engaging expression; realistic aspirations,
achievable; alignment with organizational
values and culture

Meaning A statement that describes the company's
objectives and its approach to reach those
objectives
A short statement that depicts the
company's aspiration for the
future position of the company.
What it is? Cause Effect
Talks about Present Future
Shows Where we are at present? Where we wants to be?
Term Short term Long term
Purpose To inform To inspire

Strategic Intent
Developing a Strategic Objective
A specific result that a person or system aims to achieve within a time frame
and with available resources.
Agenda
1. Role of Objectives
2. Characteristics of Objectives
3. Areas of Objectives
4. Guidelines for formulating Objectives
5. Factors considered for Objective setting
6. Process of Setting Mission & Objective

Strategic Intent
Agenda
2. Characteristics
3. Guidelines for setting
Objectives
4. Factors to be considered
for Objective setting
5. Process of Setting Mission
& Objective
Role of Objectives
• Objectives define the organization’s relationship with its
environment.
• Objectives help an organization to pursue its mission and
purpose.
provide the basis for strategic decision
provide the standards for performance
• Objectives
making.
• Objectives
appraisal.

Strategic Intent
Agenda
2. Characteristics
Objectives
& Objective
Characteristics of Objectives
• Objective should be understandable
• Objectives must be specific
• Objectives must be related to time frame
• Should be measurable and controllable
• Objectives should be challenging
• Different objectives must be correlated

Strategic Intent
Agenda
2. Characteristics
Objectives
& Objective
Guidelines for setting an Objectives
• Involve all those who is responsible for carrying out.
• Each Functional objectives should aim at main objective.
• Objectives should have some ‘reach’.
• Objectives should be contemporary and innovative.
• One functional manager should not have too many.
• Objectives must relate to the environment.

Strategic Intent
Agenda
2. Characteristics
Objectives
& Objective
Factors to be considered for setting an Objectives
Objectives
Forces in the Environment Resources of Organization
Value system of Top Level
Awareness of Past Objectives

Strategic Intent
Agenda
2. Characteristics
Objectives
& Objective
Process of setting an Mission and Objectives
Environmental Scanning
Formulate and Understand Mission
Organizational Objectives
Specific Targets

Objectives
Objectives are more specific and seek to translate the mission into a series of mile posts
for the organisation to follow.
To be useful for motivation, evaluation and control purposes, objectives shouldbe
SMART:
 Specific – clear statement, easy to understand
 Measurable – to enable control and communication down the organisation
 Attainable – it is pointless setting unachievable objectives
 Relevant – appropriate to the mission and stakeholders
 Timed – have a time period for achievement.
Typical issues this gives rise to objectives are as follows:
 Objectives drive action, so it is important that goal congruence is achieved and the
agreed objectives do drive the desired strategy.
 It can be difficult (although necessary) to priorities multiple, oftenconflicting
objectives.
 This is made more complex when some objectives are hard to quantify(e.g.
environmental impact).
 There will be a mixture of financial and non-financial objectives.
 There is always the danger of short-termism.
 Objectives will vary across stakeholder groups and a strategy may satisfysome groups
but not others.

Strategic Intent
Developing a Strategic Policies
A policy is a course or principle of action adopted or proposed by an
organization or individual.
Agenda
1. Characteristics of Good policy
2. Importance or need of a policy

Strategic Intent
Business Policies are the
guideline developed by an
organization to govern its
actions. They define the limits
within which decisions must be
made.

Strategic Intent
Policy Vs Rule

Strategic Intent
1. Characteristics of Good policy
1. Broad Outline
2. Consistent
3. Adequate Number
4. Flexible
5. Objective Related
6. Inclusive / Comprehensive
7. Simple
8. Clear

Strategic Intent
2. Need of a Policy
1. Achieving Objective
2. Clear thinking
3. Uniformity
4. No Exploitation
5. Continuity
6. Delegation of Authority
7. Stability
8. Efficiency
9. Training
10. Self Confidence
11. Motivation
12. Guide to Management
13. Quick Decision

Strategic Intent
3. Scope of a Policy
1. It covers many aspects of Business
2. It includes the function and the responsibilities of the top level
management related to the organizational problems, which affects
the success of the total enterprise.
3. It includes the resources by the help of which the organization can
achieve its goals.

Features of Business Policy
An effective business policy must have following features-
1. Specific- Policy should be specific/definite. If it is uncertain, then the
implementation will become difficult.
2. Clear- Policy must be unambiguous. It should avoid use of jargons and
connotations. There should be no misunderstandings in following the
policy.
3. Reliable/Uniform- Policy must be uniform enough so that it can be
efficiently followed by the subordinates.
4. Appropriate- Policy should be appropriate to the present organizational
goal.
5. Simple- A policy should be simple and easily understood by all in the
organization.
6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be
comprehensive.
7. Flexible- Policy should be flexible in operation/application. This does not
imply that a policy should be altered always, but it should be wide in scope
so as to ensure that the line managers use them in repetitive/routine
scenarios.
8. Stable- Policy should be stable else it will lead to indecisiveness and
uncertainty in minds of those who look into it for guidance.

Functions of Business policy
1. Objectives of the company are defined and classified.
2. The planning function is done systematically.
3. Business policy clearly states the amount of authority that the subordinates
have. It also specifies the limits of the authority of the subordinates. Thus it
tightens the authority on one hand and provides initiatives to the
subordinates.
4. Subordinates can use the policy directives intelligently and carefully. It
also helps the managerial personnel to perform the functions of control and
coordination successfully.
5. Policy acts as the main foundation for evaluation and determining the
quality of action and decisions taken by executives

Environment
Environment is surroundings in which business operates. This environment will
have high influence on one’s business
Environment Analysis is the process by which strategies monitor the
environmental changes to identify opportunities and threats in the market.
Elements of EnvironmentAnalysis
Scanning
Monitoring
Forecasting
Identifying early signals
of environmental changes
and trends
Assessing

Environment
Scanning
Monitoring
Forecasting
Detecting meaning
through ongoing
observations and trends
Assessing

Environment
Scanning
Monitoring
Forecasting
Developing projections
of anticipated
outcomes based on the
monitored changes and
trends
Assessing

Environment
Scanning
Monitoring
Forecasting
Determining the
timings and
importance of
environmental changes
and trends for firms’
strategies and their
management.
Assessing

Characteristics of Environment
• Environment is complex
• Environment is dynamic
• Environment is multi-faceted
• Environment has a far-reaching impact

Environment
Internal
Environment
External
Environment
Evaluating Company Resources
Evaluating Competitive capabilities
SWOT Analysis
Value Chain Analysis
Competitive Advantage

Environment
Internal
Environment
External
Environment
Remote / General Environment
Industry Environment
Operating Environment

The factors beyond the control of the firm that influences its choice of
direction and action, organizational structure and internal process.
Remote Environment Industry Environment Operating Environment
• Demographical
• Economical
• Political
• Technological
• Socio cultural
• Entry Barriers
• Supplier Power
• Buyer Power
• Substitute Availability
• Competitive Rivalry
• Competitors
• Creditors
• Customers
• Labour
• Suppliers
The
Firm
In Combination, these factors form the basis of the opportunities and
threats that a firm faces in its competitive environment

The factors beyond the control of the firm that influences its
choice of direction and action, organizational structure and
internal process.
Remote Environment
• Demographical
• Economical
• Political
• Technological
• Socio cultural
Elements
Population Size
Age structure
Geographical Distribution
Income distribution

The factors beyond the control of the firm that influences its choice of
direction and action, organizational structure and internal process.
Remote Environment Industry Environment
• Entry Barriers
• Supplier Power
• Buyer Power
• Demographical
• Economical
• Political
• Technological
• Socio cultural
Operating Environment
In Combination, these factors form the basis of the opportunities and
threats that a firm faces in its competitive environment
• Competitors
• Creditors
• Customers
• Labour
• Suppliers
The
Firm

TheGeneral Conditions for competition that
influences all businesses that providesimilar
productsand services.

Firm
Industry
Environment
General
Environment
“Firms must be able to identify direct and indirect competition
which effects the ability of the firm.”
Industry Profit Potential = f (Entry Barriers, Supplier Power, Buyer Power, Substitute
Availability, Competitive Rivalry)
Source: Strategic Management : South-Asian Perspective (9th Edition) by Hitt and Ireland, Cenage Publication, Pg: 44

• Entry Barriers
• Supplier Power
• Buyer Power
Threat of New Entrants
Identifying New entrants is very important
because…….
they can threaten the market share of
existing competitors
New Entrants
Five Forces of Competition
Entry Barriers The Retaliation
Source: Strategic Management : South-Asian Perspective by Hitt and Ireland, Cenage Publication, Pg: 45

• Entry Barriers
• Supplier Power
• Buyer Power
New Entrants
Source: Strategic Management : South-Asian Perspective by Hitt and Ireland, Cenage Publication, Pg: 45

• Entry Barriers
• Supplier Power
• Buyer Power
“ Firms competing in an industry try to develop
entry barriers to thwart potential competitors.”
Source: Strategic Management : South-Asian Perspective by Hitt and Ireland, Cenage Publication, Pg: 46-48
New Entrants
several significant entry barriers may
discourage competitors from entering a market
are…..

• Entry Barriers
• Supplier Power
• Buyer Power
New Entrants
Economies of Scale
Product Differentiation
Capital Requirements
Access to Distribution Channels
Government Policies
The savings that
companies achieve
because of increased
volume
Strategic Management: Formulation, Implementation and Control by JohnA Pears, Richard B, TMH, Pg:106-110
To overcome this the new
company need to enter into
market either to come in
large scale or to accept a
cost disadvantage.

• Entry Barriers
• Supplier Power
• Buyer Power
New Entrants
Economies of Scale
Government Policies
The extent to which
customers perceive
differences among
products and services
The product differentiation
creates a barrier by
forcing new players to
spend heavily to overcome
customer loyalty.

• Entry Barriers
• Supplier Power
• Buyer Power
New Entrants
Economies of Scale
Government Policies
It is a need for the new
firm to invest large
financial resources in
order to compete the
existing firms. This may
become hurdle for the
companies who wants to
enter into a market.

• Entry Barriers
• Supplier Power
• Buyer Power
New Entrants
Economies of Scale
Government Policies
Over time, existing
companies in the industry
typically develop effective
means of distribution
channel. This is the big
barrier for the new players
to enter into industry.
Price breaks and cooperative
advertising allowances may be used
by the new players.

• Entry Barriers
• Supplier Power
• Buyer Power
New Entrants
Economies of Scale
Government Policies
Through licensing and
permit requirements,
governments can also
control entry into an
industry.
Ex: Liquor Industry, Petrol bunks etc.

• Entry Barriers
• Supplier Power
• Buyer Power
New Entrants
“Companies seeking to enter an industry also anticipate
the reactions of the firms in the industry. An expectation
of vigorous response from the competitor will reduces
the likelihood of entry.”

• Entry Barriers
• Supplier Power
• Buyer Power
Bargaining Power of Suppliers
Suppliers are also essential for the success of an
organization. Raw material is deadly needed to
complete the process of production. The supplier enjoys
the power when….
1. If there are only one supplier or few suppliers who
supply that particular raw material.
2. If it costly for the organization to move from one
supplier to another (Known as switching cost).
3. If there is no other substitute for their product.

• Entry Barriers
• Supplier Power
• Buyer Power
Bargaining Power of Buyers
Buyers or customers will have control over an industry
in certain circumstances. In the following situations the
customer can enjoy power…..
1. There is a little and differentiation over the product.
2. Substitute products are widely available.
3. Customers are sensitive to price.
4. Switching to another product is not costly.

• Entry Barriers
• Supplier Power
• Buyer Power
SubstituteAvailability
Substitute products are goods and services from outside
a given industry that perform similar or the same
functions as a product that the industry produces.
Product substitutes present a strong threat to a firm
when substitute product’s price and quality are in
greater close to the competitors’products.
So, in order to avoid the effect of substitute products, the
competitor firms should differentiate product in different
dimensions like quality, price etc. to reduce substitute
attractiveness.

• Entry Barriers
• Supplier Power
• Buyer Power
Competitive Rivalry
In one industry, generally the actions taken by one
company invites competitive responses.
Competitive rivalry intensifies when a company
challenges by other firms or when company identifies an
opportunity.
Also the following are the different situations where
competitive rivalry will be intensified…..
1. There is a little differentiation between the products
2. Competitors are approximately the same size of
each other.
3. If the competitors have similar strategies.

Industry Environment Analysis
This industry environment analysis tells us a clear,
complete story about the companies’environment
needed for shrewdly matching a strategy to the
company’s external situation.
Source: Strategic Management: Formulation, Implementation and Control by JohnA Pears, Richard B, TMH, Pg:111-116

• Industry Features
• Industry Boundaries
• Industry Structure
• Industry performance
• Industry Practices
• Industry attractiveness
• Industry prospects for future
 Overall Size
 Market Growth rate
 Geographic boundaries of the market
 Number and size of the competitor
 Pace of technological change
 Product innovatons…

 Product and Service Quality
 Geographic distribution
 Level of Vertical Integration
 Profit Motives

 Concentration
 Economies of Scale
 Product Differentiation
 Barriers to entry

 Production
 Sales
 Profitability
 Technical Advancement

 Product Policy
 Pricing Policy
 Promotion Policy
 Distribution Policy
 R&D Policy
 Competitive Tactics

 Profit Potential
 Growth Prospects
 Competition
 Industry Barriers

 Innovation in product and services
 Trends in consumer preferences
 Emerging changes in regulatory mechanisms
 Product Life Cycle of the Industry

Operative / Competitive Environment
The competitor analysis is focuses on each company against
which a firm directly competes.
In competitive analysis, the firm should understand the following,
1. What drives the competitor ?
2. What Competitor is doing and can do ?
3. What the competitor believes about the industry ?
4. What the competitors’capabilities are ?
- Future Objectives
- Current Strategy
- Assumptions
- Strengths and weaknesses

Operative / Competitive Environment
In competitive analysis, the firm should understand the following,

Methods of Industry and Competitive Analysis
Methods of Industry Analysis:
• External Factor Evaluation Matrix (EFE Matrix)
• Competitive Profile Matrix (CPM)
EFE Matrix allows strategist to summarize and
evaluate economic, social, cultural,
demographical, political, legal, technological,
and competitive information
CPM Identifies the major competitors and its
particular strengths and weaknesses in relation
to sample firm’s strategic position.

Methods of Industry and Competitive Analysis
Methods of Competitive Analysis:
• Competitor Array
• Competitor Profiling
• Media Scanning
• New Competitors
 Define your industry – scope and nature of industry
 Determine who your competitors are
 Determine who is your customer are and what
benefits they expect
 Determine what the key success factors are in your
industry

Resources
Capabiliti es
Core
Capabilities
Discovering Core
Competencies
Competitive
Advantage
Strategic
Competitiveness
Components of
internal Analysis
leading to
competitive
advantage and
strategic
competitiveness

Resources
Core
Capabilities
Competitive
internal Analysis
competitive
advantage and
strategic
competitiveness
Strategic
Components ofResources alone do not yield a competitive advantage. Competitiveness
leCaodminpgettoitiveadvantage is generally based on the u
n
i
q
A
u
d
e
v
a
b
n
u
t
n
a
d
g
l
e
eof several
resources.
Tangible Resources Discovering Core
Competencies
Intangible Resources
Financial Resources The firms borrowing capacity
The firm’s ability to generate internal funds
Organizational Resources The firm’s formal reporting structure and its
formal planning, controlling, and coordinating
systems
Capabilities Physical Resources Sophistication and Location of a firm’s plant and
equipment.
Access to Raw material
Technological Resources Stock of technology, such as patents, trade
marks, copyrights, and trade secrets.

Capabilitie
Resources
s
Co
Core
Capabilities
petencies
Competitive
internal Analysis
competitive
Strategic
Components ofResources alone do not yield a competitive advantage. Competitiveness
leCaodminpgettoitiveadvantage is generally based on the u
n
i
q
A
u
d
e
v
a
b
n
u
t
n
a
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eof several
resources.
advantage and
T
angiblestRreasteoguircces
competitiveness
Intangible ResourcD
eis
scovering Core
Human Resources
m
• Knowledge
• Trust
• Managerial capabilities
• Organizational routines
Innovation Resources • Ideas
• Scientific capabilities
• Capacity to innovate
Reputational Resources • Reputation with customers
• Brand Name
• Perceptions of product quality, durability, and
reliability
• Reputation with suppliers
• For efficient, effective, supportive, and mutually
beneficial interactions and relationships.

Resources
Capabilities
Core
Capabilities
Advantage
Strategic
Components of
internal Analysis
leading to
strategic
competitiveness
Capabilities exists when resources have been purposely integrated to aCcohmiepveetaitiveness
specific task or set of tasks which includes from human resource selection to
product marketing and R&D ActivitCieosm.petitive
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ao
pm
ab
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w
eill be based on developing, carrying, and exchanging of information
advanta
ag
ne
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kn
nd
owledge through firm’s hu
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isa
co
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ea
rip
nig
ta
Clo
,rc
eustomers or clients.
Competencies
Capacity is …………….
“Managing Human
intellectual and to convert it
into useful products and
services”
Contd….

Resources
Capabilities
Core
Capabilities
Competitive
Advantage
Strategic
Competitiveness
leading to
internal AnalM
ysa
isny global business leaders have strong belief that…..
competitive
advantage and
Knowl
se
trd
at
g
ee
gic
possessed by
c
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Hp
ue
mt
i
t
i
av
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nn
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Cs
aspital
Contd….
Components of
Organization Capability
Discovering Core
Competencies Competitive Advantage
Root
With the view of this… it’s a challenge for the firms………
To create an environment that allows people to integrate their individual knowledge
with that held by others in the firm so that, collectively, the firm has a significant
organization knowledge.

INTERNAL ENVIRONMENT-Organization’s Value Chain
 Value chain analysis (VCA) is a process where a firm identifies its primary and
support activities that add value to its final product and then analyze these activities
to reduce costs or increase differentiation.
 Value chain represents the internal activities a firm engages in when transforming
inputs into outputs.
 Value chain analysis is a strategy tool used to analyse internal firm activities.
 Its goal is to recognize, which activities are the most valuable (i.e. are the source of
cost or differentiation advantage) to the firm and which ones could be improved to
provide competitive advantage.
 In other words, by looking into internal activities, the analysis reveals where a firm’s
competitive advantages or disadvantages are.

Organization’s Value Chain
 The firm that competes through differentiation advantage will try to perform its
activities better than competitors would do.
 If it competes through cost advantage, it will try to perform internal activities at
lower costs than competitors would do.
 When a company is capable of producing goods at lower costs than the market price
or to provide superior products, it earns profits.
 M. Porter introduced the generic value chain model in 1985.
 Value chain represents all the internal activities a firm engages in to produce goods
and services.
 VC is formed of primary activities that add value to the final product directly and
support activities that add value indirectly.

The two levels of value chain analysis
 To conduct a value chain analysis, businesses need to split the chain into two levels:
 Primary activities
 Supporting activities
 A primary activity is anything that directly impacts the input, output or distribution
of products or services. These business activities include:
 Inbound/outbound logistics: Receiving, storing and distributing products, goods
and services. This activity takes into account practical processes like storage and
warehousing, deliveries, stock and transport needs and costs.

 Operations: Anything that falls under the banner of machinery costs, product
assembly and packaging.
 Sales & Marketing: Promoting, advertising, sales and marketing. The specific
activities your company undertakes to boost product awareness, increase trust,
improve business relationships and close deals.
 Service: From customer support to your finance team, anything that is required to
maintain quality control and quality assurance during and after a sale.

 The second level, supporting activities, takes into account:
 Research & Development/Technology development: Any budget that’s been
allocated to innovative activities such as developing and enhancing new and existing
products and services.
 Procurement: Any materials or input that allow a company to undertake its primary
activities, such as machinery, consumables and infrastructure.
 Human resource management: All processes and systems relating to managing the
people in your organization, such as recruiting, training and retention.
 Infrastructure: Departments like finance, planning, IT and legal.

UNIT - II
Tools and Techniques
For
StrategicAnalysis

Tools and Techniques for StrategicAnalysis
UNIT - II
Term to Understand…..
Strategic Analysis implies the examination of the present condition of
a business and consequently developing an appropriate business
strategy.
Strategic Business Unit (SBU) is a unit of the company that has a
separate mission and objectives and that can be planned
independently from the other businesses. An SBU can be a company
division, a product line or even individual brand.
Business Portfolio is the collection of businesses and products that
make up the company. The best business portfolio is one that fits the
company’s strengths and helps to exploit the most attractive
opportunities.

Strategic Leadership-Actions- Human Capital- Social Capital
Global trends and technological disruption present new
leadership challenges. The market is constantly changing, so we
must adapt. Leaders in agile organizations are change-oriented
and willing to make transformational changes. That’s where
strategic leadership comes in.
Strategic leadership is defined as the ability to influence others to
voluntarily make day-to-day decisions that enhance the long-term
viability of the organization while maintaining its short-term
financial stability. (W. Glann Rowe, 2001).
For a strategic leader, strategy and leadership should go hand-in-
hand. They must be able to see the big picture and focus on
results more than the methods. In today’s disruptive environment,
such leaders ensure that their company maintains a competitive
edge.

Skills of Strategic Leaders
As per Ireland and Hitt (1999), there are six components of
strategic leadership enhancing organizational performance:
 Determining The Firm’s Purpose or Vision
 Developing Human Capital
 Exploiting and Maintaining Main Strengths
 Emphasizing Ethical Practices
 Establishing Balanced Organizational Controls
 Sustaining an Effective Organizational Culture

Pros and Cons of Strategic Leadership
Strategic Leadership Actions and Success of Leaders
The leadership actions are designed to apply managerial, executive, political and
ethical behaviors to satisfy the organizations need for control, continuity and
change, therefore inducing followers to join in a common purpose.
Strategic Actions are projects or programs outside of an organization's day-to-
day operational. activities that are meant to help the organization achieve its
strategy. They are such things as. instituting change, creating capability to do
something new or better, or improving performance.
3 C’s of Strategic Action

Types/ Styles of Strategic Leadership
Transactional Leadership
Transformational Leadership
Charismatic Leadership
Democratic leadership
Autocratic leadership
Servant leadership (laissez-faire)
Collaborative leadership

Human Capital and Social Capital
The key difference between human capital and social capital is
that human capital refers to Intangible assets- knowledge, skills,
experience, etc. possessed by different individuals whereas
social capital refers to the resources we gain from being a
social network.
The key distinction between human and social capital is that the
former focuses on individual agents, and the latter on
relationships between them and the networks they form.
Human capital allows an economy to grow.

Human Capital
Knowledge capital Social capital Emotional capital
 Trade school
education
Relationships Emotional
intelligence
 College degree Fame Creativity
 Hard skills Social status Problem-solving
 Work experience Professional network Personal resilience
 Situational
knowledge
Health Critical thinking
 Intelligence Loyalty
Leadership behaviors
Other soft skills

Strategies for Human Capital Development

Types of Social Capital
Social Capital are typically defined as structural social capital,
cognitive social capital, and relational social capital. Another
common categorisation of social capital is the following types:
bonding social capital, bridging social capital, and linking social
capital.

UNIT - II
strategy.
Characteristics of Strategic Analysis
The following are the features of Strategic analysis:
 Formulation and Establishment of long term goals
 Producing Strategy Options
 Choosing strategies to act on
 Selecting the best option and accomplishing mission and goals

UNIT - II
strategy.
Benefits of Strategic Analysis
There are several reasons to understand strategic analysis:
 Sustainability
 Funding
 Whole OrganizationApproach
 External Focus
 Clear Expectations
 Effectiveness

UNIT - II
Tools and Techniques for Strategic Analysis
The following are the methods for strategic analysis
1. Traditional Method
2. InstitutionApproach
3. Ad hocApproach
4. Porters’Five Forces Model
5. PortfolioAnalysis
6. Matrix L
• iB
fe
CC
G
yM
cle
atM
rix
odel
• GE Model
7. Experie•
nc
T
eO
C
W
uS
rvM
e atrix
8. Impact M
• I
a
E
tri
M
xatrix
9. Capital •
I
n
G
v
e
r
a
s
t
n
m
d
e
S
n
t
t
r
a
M
t
e
e
g
t
h
y
o
M
datrix
10. Contingency Strategy

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
• Grand Strategy Matrix
3. Matrix Life Cycle Model
4. Experience Curve
5. Impact Matrix
 An Industry is a group of companies who produces similar
set of products and services.
 The companies in one industry will influence one another.
 Three environmental factors will have great effect on firm’s
strategic competitiveness and above-average returns.
 The Five Force model deals with competition.
 This present model gives a clear picture about, how to
understand direct and indirect competition in the present
scenario.
 The intensity of industry competition and an industry profit
are the functions of Five Forces of Competition……
Contd….

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Porters’Five Forces Model
Threat of
New Entrance
Bargaining
Power of
Suppliers
Bargaining
Power of
Buyers
Threat of
Substitute
of Products
Rivalry among
Competing
firm

Turnaround and Diversification Strategies
Ansoff Matrix

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Business Portfolio is the collection of businesses and products
that make up the company. The best business portfolio is one
that fits the company’s strengths and helps to exploit the most
attractive opportunities.
As pa part of portfolio Analysis, A company must…..
 Analyze its current business portfolio and decide which
business should receive more or less investment.
 Develop growth strategies for adding new products and
businesses to the portfolio.
 Also should know, when to stop product or business unit.

Portfolio Management and Balancing
Portfolio management is the selection, prioritisation and
control of an organisation's programmes and projects, in line
with its strategic objectives and capacity to deliver. The goal is
to balance the implementation of change initiatives and the
maintenance of business-as-usual, while optimising return on
investment.
Portfolio balancing is the process of organizing the prioritized
components into a component mix that, when implemented, is
best aligned with, and best supports the organization's
strategic plan. A balanced business portfolio is a product
strategy in which a firm maintains an even combination of
new, growing and mature products.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Boston Consulting Group Matrix
Matrix is developed by Bruce Henderson of the Boston
Consulting Group in the early 1970’s
This matrix will helps to analyze portfolio analysis by plotting
them on a matrix, we can take the decision on whether we
should invest more money into it or whether we should stops the
production of that product.
This BCG Matrix uses Market growth rate and relative market
share….

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Individual Sales this year - Individual Sales last year
MGR =
Individual Sales last year
Market
Growth
Rate
Relative Market Share

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Market share of a firm in relation to
largest competition.
Market
Growth
Rate
Business Unit sales this year
Leading rival Sales this year
RMS =

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Market
Growth
Rate
High
Low
High Low
Stars Question Mark
Cash Cow Dog

UNIT - II
PortfolioAnalysis
Low
Market
Growth
Rate
High
High Low
Stars Question Mark
Cash Cow Dog

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
PortfolioAnalysis
5. Impact Matrix
 Most business start of as question marks
 They will absorb great amount of cash if the market share
remains unchanged (low)
 Question marks have potential to become star & evenly
cash cow but can also become dog.
 Investment should be high for question marks.
Question Mark
(HIGH GROWTH, LOW MARKET SHARE)
Problem Child

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
PortfolioAnalysis
5. Impact Matrix
Stars
Stars are leader in business
 They also require heavy investment to maintain it’s large
market share.
 It leads to large amount of cash consumption & cash
generation.
 Attempts should be made to hold the market share
otherwise the star will became a cash cow.
(HIGH GROWTH, HIGH MARKET SHARE)

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
 They are foundation of the company & often the stars of
yesterday.
 They generate more cash than required.
 They extract the profits by investing as little cash as
possible.
 They are located in an industry that is mature not
growing or declining
Cash Cow
(LOW GROWTH, High MARKET SHARE)

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
 Dogs are the cash traps
 Dogs do not have potential to bring
 High cost – Low quality
 Business is situated at a declining stage
Dog
(LOW GROWTH, LOW MARKET SHARE)

Limitations of BCG Matrix:
High market share does not always leads to high profits.
There are high costs also involved with high market share.
Growth rate and relative market share are not the only
indicators of profitability. This model ignores and overlooks
other indicators of profitability.
CONCLUSION:
This technique is particularly useful for multidivisional or
multiproduct companies. The divisions or products
compromise the organisations “business portfolio”. The
composition of the portfolio can be critical to the growth and
success of the company.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
GE Model
Or
GE-McKinsey Matrix
Or
GE Stop Light Matrix
Or
Industry Attractiveness (IA)-
Business Strength (BS) Matrix

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
GE Model / GE-Mckinsey Matrix / GE Stop Light Matrix
 The GE / McKinsey Matrix is a nine – cell (3 X 3)
matrix used to perform business portfolio analysis as
a step in the strategic planning process.
 The objective of this matrix is to position each SBU
on the chart which consists SBU’s Strength and
MarketAttractiveness in X and Y axis respectively.
 This Matrix was developed jointly by McKinsey and
General Electric in 1970s.
 It helps in better strategic decision making and better
understanding.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Market
Attractiveness
Factors to be used to define….
1. Annual Market Growth Rate
2. Overall Market Size
3. Historical Profit Margin
4. Current Size of Market
5. Market Structure
6. Market rivalry
7. Demand Variability
8. Global opportunities
Business Unit Strength

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Market
Attractiveness
Factors to be used to define….
1. Current Market Share
2. Brand Image
3. Production Capacity
4. Corporate Image
5. Profit Margins relative to competitors
6. R&D performance
7. Promotional effectiveness

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Market
Attractiveness
Low
Medium
High
Strong
Grow
Grow
Grow
Hold
Hold
Hold
Harvest
No extra investments
Harvest Harvest
mainly focusing on maximizing returns
Medium Low

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
• Grow: Business Units that fall under Grow attract high
investment. Firms may go for product differentiation or
cost leadership. Hege cash is generated in this phase.
Market leaders exist in this phase.
• Hold : Business units that fall under Hold phase attract
moderate investment. Market segmentation, Market
penetration, imitation strategies are adopted in this
phase. Followers exists in this phase.
• Harvest : Business Units that fall under this Phase are
unattractive. Low priority is given in this phase.
Strategies like disinvestment, Diversification, Mergers
are adopted in this phase.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
TOWS Matrix

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
TOWS Matrix
• TOWS Matrix is same as SWOT analysis, which
helps the company to analyse the Internal and
External factor.
• The only difference between them is that SWOT
analysis only gives you the description about internal
and external factors.
• Whereas TOWS matrix shows the relation between
internal and external factor, so that company can
frame their strategies to take maximum benefit from
it.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
PortfolioAnalysis
TOWS Matrix
4. Experience Curve
5. Impact Matrix
Mini
Maxi
Mini
Maxi

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
TOWS Matrix
Four Combinations of TOWS Matrix
SO Strategy
This strategy is also named as Maxi-Maxi Strategy. SO
strategy tells about how to utilize your internal strength to
grab external opportunity.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
TOWS Matrix
WO Strategy
This strategy is also named as Mini-Maxi Strategy. This
strategy tells the company to strengthen their weaknesses
to take benefit of prevailing opportunities.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
TOWS Matrix
ST Strategy
This strategy is also named as Maxi-Mini Strategy. In this,
company tries to minimize threats by their strengths. This
strength empowers the company, because by this company
knows why they are existing and how they can manage
external threats.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
TOWS Matrix
WT Strategy
This strategy is also named as Mini-Mini Strategy. This
can be considered as defensive strategy, where company
tries to strengthens their weakness and avoid any external
threats.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
TOWS Matrix
Proforma

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Grand Strategy Matrix
Source
https://www.mbaknol.com/strategic-management/grand-strategy-matrix/

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
• Grand strategy matrix is the instrument for creating
alternative and different strategies for the organization.
• All companies and divisions can be positioned in one of the
Grand Strategy Matrix’s four strategy quadrants.
• The Grand Strategy Matrix is based on two dimensions:
competitive position and market growth.
• Data needed for positioning SBUs in the matrix is derived
from the portfolio analysis.
• This matrix offers feasible strategies for a company to
consider which are listed in sequential order of
attractiveness in each quadrant of the matrix.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Quadrant I (Strong Competitive Position and Rapid Market Growth)
• Firms located in Quadrant I of the Grand Strategy Matrix are in an excellent
strategic position.
• The first quadrant refers to the firms or divisions with strong competitive base
and operating in fast moving growth markets.
• Such firms or divisions are better to adopt and pursue strategies such as market
development, market penetration, product development etc.
• The idea behind is to focus and make the current competitive base stronger.
• In case such firms possess readily available resources they can move on to
integration strategies

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Quadrant II (Weak Competitive Position 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.
• The suitable strategies for such firms are to develop the products,
markets, and to penetrate into the markets.
• To achieve the competitive advantage or becoming market leader
Quadrant II firms can go into horizontal integration subject to availability
of resources.
• However if these firms foresee a tough competitive environment and
faster market growth than the growth of the firm, the better option is to go
into divestiture of some divisions or liquidation altogether and change the
business.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Quadrant III (Weak Competitive Position and Slow
Market Growth)
• The firms fall in this quadrant compete in slow-growth industries and
have weak competitive positions.
• These firms must make some drastic changes quickly to avoid further
demise and possible liquidation.
• Extensive cost and asset reduction (retrenchment) should be pursued first.
• An alternative strategy is to shift resources away from the current
business into different areas.
• If all else fails, the final options for Quadrant III businesses
are divestiture or liquidation.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Quadrant IV (Strong Competitive Position and Slow
Market Growth)
• Finally, Quadrant IV businesses have a strong competitive position but
are in a slow-growth industry.
• Such firms are better to go into related or unrelated integration in order to
create a vast market for products and services.
• These firms also 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

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
IE Matrix

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
IE Matrix
• The Internal-External (IE) Matrix positions an
organization’s various divisions in a nine cell matrix.
• The IE Matrix is a strategic management tool which is used
to analyze the current position of the divisions and suggest
the strategies for the future.
• This Matrix is based on an analysis of internal and external
business factors which are combined into one suggestive
model.
• The IE matrix is a continuation of the EFE matrix and IFE
matrix models.
• This Matrix is based on two key dimensions: the IFE total
weighted scores on the x-axis and the EFE total weighted
scores on the y-axis.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
IE Matrix
Whatis
IFE Total Weighted
Score and
EFE Total WeightedScores???

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
IE Matrix
Internal Factor Evaluation Total Weighted Score
An Internal Factor Evaluation (IFE) Matrix is a
strategy formulation tool that summarizes and
evaluates the major strengths and weaknesses in the
functional areas of a business, and it also provides a
basis for identifying and evaluating relationships
among those areas.
The IFE Total Weighted Scores Can be calculated as follows,

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
IE Matrix
The IFE Total Weighted Scores Can be calculated as follows,
• List key internal factors (Strengths & Weaknesses) as identified in the
internal-audit process. List strengths first and then weaknesses.
• Assign a weight that ranges from 0.0 (not important) to 1.0
(all-important) to each factor. Regardless of whether a key factor is an
internal strength or weakness, factors considered to have the greatest
effect on organizational performance should be assigned the highest
weights. The sum of all weights must equal 1.0.
• Assign a 1 to 4 rating to each factor to indicate whether that factor
represents a major weakness (rating = 1), a minor weakness (rating =
2), a minor strength (rating = 3), or a major strength (rating = 4). Note
that strengths must receive a 4 or 3 rating and weaknesses must receive
a 1 or 2 rating. Ratings are thus company-based, whereas the weights in
Step 2 are industry-based.
• Multiply each factor’s weight by its rating to determine a weighted
score for each variable.
• Sum the weighted scores for each variable to determine the total
weighted score for the organization.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
IE Matrix
Internal Factor Evaluation (IFE) Matrix, the total weighted score can
1 4
2.5
range from a low of 1.0 to a high of 4.0
Weak Internal Position Strong Internal Position

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
IE Matrix
External Factor Evaluation Total Weighted Score
An External Factor Evaluation (EFE) Matrix allows strategists to
summarize and evaluate economic, social, cultural, demographic,
environmental, political, governmental, legal, technological, and
competitive information.
EFE Matrix indicates whether the firm is able to effectively take
advantage of existing opportunities along with minimizing the external
threats. Similarly, it will help the strategists to formulate new strategies
and policies on the basis of existing position of the company.
An External Factor Evaluation (EFE) Matrix can
be developed in five steps:

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
IE Matrix
An EFE total weighted Scores can be developed in five steps:
• List key external factors as identified in the external-audit process.
List the opportunities first and then the threats.
• Assign to each factor a weight that ranges from 0.0 (not important) to
1.0 (very important). The weight indicates the relative importance of
that factor to being successful in the firm’s industry. Opportunities
often receive higher weights than threats, but threats too can receive
high weights if they are especially severe or threatening. The sum of
all weights assigned to the factors must equal 1.0.
• Assign a 1 to 4 rating to each key external factor to indicate how
effectively the firm’s current strategies respond to the factor, where 4
= the response is superior, 3 = the response is above average, 2 = the
response is average, and 1 = the response is poor: Ratings are based on
effectiveness of the firm’s strategies. Ratings are thus company-based,
whereas the weights in Step 2 are industry-based. It is important to
note that both threats and opportunities can receive a 1, 2, 3, or 4.
• Multiply each factor’s weight by its rating to determine a weighted
score.
• Sum the weighted scores for each variable to determine the total
weighted score for the organization.

UNIT - II
PortfolioAnalysis
IE Matrix
1 2.5 4
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
EFE total weighted score can range from a low of 1.0 to a high of 4.0
Weak Reaction Strong Reaction

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
3. Market Life Cycle Model
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
IE Matrix

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
Market Life Cycle Model

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
PortfolioAnalysis
From Market point of view, product as well as technology
is at most important. These two important factors will
have to come across through different stages in their own
life cycles.
The following are the life cycles of factors……
• Business-Oriented / Product Oriented Life Cycle
• Technically-Oriented Life Cycle

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Business-Oriented / Product Oriented Life Cycle

PRODUCT LIFE CYCLE

Development Stage (NPD Stage)
This stage may took years
Evaluate at each stage and, if necessary, abort the product idea
Market testing will takes place to reduce the risk of failure
Most product ideas do not reach the launch phase
Causes of elimination before Launch
Inadequate demand
Action of competitors
Change in the external environment
High cost of production
Does not fit for the firm’s image

PRODUCT LIFE CYCLE

Introduction Stage
 New product launched in the market
 Sales will be very low
 Profits cannot be expected
 High expenses
 Obtaining the distributors is difficult
Strategies at the Introduction Stage
 Framing the Objective to attract trend setters
 High spending on Promotional activities
 Either skimming or Penetration pricing
 Need to build channels of distribution

PRODUCT LIFE CYCLE

Growth Stage
 Expanding market
 Arrival of competitor
 The product takes off in terms of market acceptance
 Profits will begin
 Market grows, profits rise and also competitors will increase
Strategies at the Growth Stage
 Advertise to promote brand awareness
 Maintaining quality to increase Brand loyalty
 Go for Market penetration
 Target on potential buyers
 Improving the features of product
 Brand extension is also beneficial at this stage
 Continue high promotional spending

PRODUCT LIFE CYCLE

Maturity Stage
 Tough competition
 Fight for market share
 Weak competitor start to leave the market
 Prices and profits fall
 Profits will be stable at one condition
Strategies at the Maturity Stage
 Need to defend position
 Product differentiation - product improvements
 Competitor based pricing
 Promotion focuses on differentiation
 Enter new segments
 Increase more usage of the product
 Must be ready with offensive strategies

PRODUCT LIFE CYCLE

Decline Stage
 Falling sales
 Market saturation or Competition
 Decline in Profits
 Customers may loose the faith on the product
Strategies at the Decline Stage
Increase in promotion
Focus on profitable segments
Reduce prices
Shortening the distribution channel
Reposition the product

PRODUCT LIFE CYCLE

After Decline Stage
WITHDRAWAL FROM THE MARKET !!!!!
(Or)
Extension of Product Life Cycle

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
• A. D. Little Life cycle
Matrix
4. Experience Curve
5. Impact Matrix
Technically-Oriented Life Cycle
The Technically oriented PLC is based on the stages of a
products’ existence and use than how it performs in the market.
1. Pre-Design
a. Strategic Planning
b. Research (Market, Technology, Competition and Users)
c. Requirement Analysis and Specification
2. Design
a. Conceptual Design
b. System Design
c. Embodiment (Prototype) Design
d. Detailed Design
3. Fabrication
a. Manufacture
b. Assembly
c. Testing

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Technically-Oriented Life Cycle
The Technically oriented PLC is based on the stages of a
products’ existence and use than how it performs in the market.
4. Pre-Operation
a. Inventory
b. Testing
c. Distribution
d. Storage
e. Installation
5. Operation
a. Startup
b. Use
c. Maintenance
d. Shutdown
6. End of life
a. De-installation
b. Recycle/Remanufacture/Disposal

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Experience Curve

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Experience Curve
The Experience Curve makes use of the changing role of costs in
different market conditions. The Price of the product in seller’s
market is usually fixed on a cost plus basis
Price = Internal Cost + Desired Profit
The main Idea behind Experience Curve is……

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Experience Curve
Cost
Per
Unit
Cumulative Production (In Units)

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Experience Curve
• This concept introduced by Boston Consulting Group
• During the manufacturing of semiconductors: unit cost
of manufacturing feel by about 25% for each doubling
of the volume that it produced.
• Concluded as: the more experience a firm has in
producing a particular product, the lower are its costs.
Why might the Experience Curve Happen?
• More Efficient and Better skilled labour
• More standardization of production and speciazation
• Better use of technology as a result of experience
• Product improvement and redesign

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Experience Curve
Effects / Implications of Experience Curve
• Business with most experience will have high
significant cost advantage.
• Business with highest market share likely to have the
most / best experience.
• Therefore:
• Experience is a barrier to entry
• Try to maximize the market share.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Experience Curve
Likely Features of Low Cost Operator
• High Level of productivity and efficiency
• High Capacity Utilization
• Large scale = Economies
• Use Bargaining power to negotiate lowest prices from
suppliers
• Lean production methods and culture
• Access to widest and most important distribution
channels.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Impact Matrix

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Impact Matrix
• Matrix that explains the impact of Opportunities and threats to
the business or organization is called an Impact Matrix.
• It’s a powerful tool to explore opportunities and threats for a
business.
• Business can be diversified only when opportunities and
threats are calculated.
• The Impact matrix covers the following two matrices…..
 Impact of Threat Matrix
 Impact of Opportunity Matrix

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Impact Matrix
 Impact of Threat Matrix
A Threat is a challenge posed by an unfavorable trend or
development emerging from the environment that may lead
to the down slide of company.

UNIT - II
• BCG Matrix
• GE Model
• TOWS Matrix
• IE Matrix
4. Experience Curve
5. Impact Matrix
Impact Matrix
 Impact of Opportunity Matrix
An Opportunity is a development in the environment that
would strengthen a company’s position if properly availed
by the company.

Arthur D. Little (ADL) Life Cycle Matrix
or
Strategic Condition Matrix
The ADL model from Arthur D. Little is a portfolio
management method that is based on product life cycle
thinking. The ADL portfolio management approach uses the
dimensions of environmental assessment and business strength
assessment. The environmental measure is an identification of the
industry's life cycle. The ADL Matrix consists of two important
dimensions: the competitive position and industry maturity
(maturity of the product).
The ADL Matrix allows you to manage your portfolio by
making judgements around the overall market and industry
life cycle, along with your own placement within that market.
It can be a quick tool for creating a list of your products.

Strategic Management

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