elements of strategy - 6 - strategy implementation & control
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Topic: Strategy Implementation & Control(McKinsey’s 7 S Framework, BPR, BCG Matrix, VRIO Framework, GE Matrix and
Product Life Cycle )Subject : Elements of Strategy
Prof. Sandeep Hegde
Business Strategy implementation
Using the 7 S Framework to understand its impact on the
organization
StrategySkills
Shared Values
7S FRAME WORK : THE WINNING FORMULA
Vision
Activities the organizationMust be really good at in orderTo deliver winning valueproposition
An integrated set of actions To deliver a superiorValue (benefits minusPrice) to a chosen setOf customers, with aCost structure thatAllows continuingExcellent returns
The overriding goal of the organizationA clear, compelling statement of whatIt aspires to become that is demanding butAchievable and reflects a fact-based viewOf the future
The commonly held beliefs of theOrganization – simple terms that sayWhat’s important around here
The Hard S’s
Strategy Actions a company plans in response to or anticipation of changes in its external environment.
Structure Basis for specialization and co-ordination influenced primarily by strategy and by organization size and diversity.
Systems Formal and informal procedures that support the strategy and structure. (Systems are more powerful than they are given credit)
The Soft S’s
Style / Culture The culture of the organization, consisting of two components: Organizational Culture: the dominant values and beliefs, and norms, which develop over time and become relatively enduring features of organizational life. Management Style: more a matter of what managers do than what they say; How do a company’s managers spend their time? What are they focusing attention on? Symbolism – the creation and maintenance (or sometimes deconstruction) of meaning is a fundamental responsibility of managers.
Staff The people/human resource management – processes used to develop managers, socialization processes, ways of shaping basic values of management cadre, ways of introducing young recruits to the company, ways of helping to manage the careers of employees
Skills The distinctive competences – what the company does best, ways of expanding or shifting competences
Shared Values / Superordinate Goals
Guiding concepts, fundamental ideas around which a business is built – must be simple, usually stated at abstract level, have great meaning inside the organization even though outsiders may not see or understand them.
What is Organizational Change?
• An alteration of an organization’s environment, structure, culture, technology, or people– A constant force– An organizational reality– An opportunity or a threat
• Change agent– A person who initiates and assumes the
responsibility for managing a change in an organization
Change…
• Is a process, not an event
• Is made by individuals, then organizations
• Is a highly personal experience for those involved
• Involves gradual growth in feelings and skills
What is change management?
A structured process and set of tools
for leading the people side of change.
• More than 70% of change efforts fail because of failure to focus on people issues
Why People Resist Change
Why Do Employees Resist Change• Human tendency to stay in existing comfort
zone• Lack of awareness or urgency for change• Lack of clear understanding or alignment on
purpose, vision, and process of the change• Lack of trust on the leaders• Fear of unknown/uncertainty/consequences• Comfort with long standing habits• Dependency on existing social dynamics• Lack of sufficient resources for the change• Overload of ongoing tasks and responsibilities• What is the benefit for me to change?
Kurt Lewin’s Three-Step Process in Managing Organizational Change
• Unfreezing– The driving forces, which direct
behavior away from the status quo, can be increased
– The restraining forces, which hinder movement from the existing equilibrium, can be decreased
– The two approaches can be combined• Implementation of change• Refreezing
FEAR
DENIAL
ANGER CONFRONTATION
BARGAINING
ACCEPTANCE
TIME TAKEN TO MANAGE CHANGE BY ORGANIZATIONS
RE
SIS
TA
NC
E T
O C
HA
NG
E UNFREEZING CHANGE REFREEZING
Managing Organizational ChangeManaging Organizational ChangeStrategy
• Establish a transition team to ensure consistent communication and to tackle issues raised by the change
• Promote a clear vision to clarify the direction in which the organization needs to move
Organization• Leaders should ask tough questions and challenge
the way the company does business• Good management requires respect for employees
and the organization and is responsible for shaping the new reality
People• Losing key employees may destabilize the organization;
communicating the desire to retain these people, early in the process, is important
• Give priority to the "me" issues—personal opportunity, security and the quality of the work environment
Communication• Communication plans should address four considerations:
audience, timing, mode and message• Tips include:
• Communicating rapidly, honestly and frequently• Ensuring consistency between messages• Establishing multiple mechanisms to reach employees• Repeating common themes
What is BPR?• Reengineering is the fundamental rethinking
and redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.
• BPR seeks improvements of– Cost– Quality– Service– Speed
BPR Versus Process Simplification
Process Reengineering
Radical TransformationVision-Led
Change Attitudes & BehaviorsDirector-Led
Limited Number of Initiatives
Process Simplification
Incremental ChangeProcess-Led
Assume Attitudes & BehaviorsManagement-Led
Various Simultaneous Projects
Key Steps in BPR exercise
Select The Process & Appoint Process Team
Understand The Current Process
Develop & Communicate Vision Of Improved Process
Identify Action Plan
Execute Plan
The VRIO Framework
If a firm has resources that are:
• valuable,
• rare, and
• costly to imitate, and…
• the firm is organized to exploit these resources,
then the firm can expect to enjoy a sustainedcompetitive advantage.
Applying the VRIO Framework
The Question of Value• Does the resource enable the firm
to exploit an external opportunity or neutralizean external threat?
The Question of Rarity
• if a resource is not rare, then perfect competitiondynamics are likely to be observed (i.e., nocompetitive advantage, no above normal profits)
• a resource must be rare enough that perfect competition has not set in
Applying the VRIO Framework
Valuable and Rare
If a firm’s resources are: The firm can expect:
Not Valuable Competitive Disadvantage
Valuable, but Not Rare Competitive Parity
Valuable and RareCompetitive Advantage
(at least temporarily)
Applying the VRIO Framework
The Question of Imitability
• the temporary competitive advantage of valuableand rare resources can be sustained only if competitors face a cost disadvantage in imitatingthe resource
» intangible resources are usually morecostly to imitate than tangible resources(Harley-Davidson’s styles may be easilyimitated, but its reputation cannot)
Applying the VRIO Framework
Value, Rarity, & Imitability
If a firm’s resources are: The firm can expect:
Valuable, Rare, butnot Costly to Imitate
TemporaryCompetitive Advantage
Valuable, Rare, and Costly to Imitate
SustainedCompetitive Advantage
(if Organized appropriately)
Applying the VRIO Framework
The Question of Organization
• a firm’s structure and control mechanismsmust be aligned so as to give people abilityand incentive to exploit the firm’s resources
• examples: formal and informal reporting structures,management controls, compensation policies,relationships, etc.
• these structure and control mechanisms complementother firm resources—taken together, they can help a firm achieve sustained competitive advantage(3M Company)
The VRIO Framework
Valuable? Rare?Costly toImitate?
Exploited byOrganization?
CompetitiveImplications
No
Yes
Yes
Yes
Yes
Yes Yes Yes
No
No
No Disadvantage
Parity
TemporaryAdvantage
SustainedAdvantage
The VRIO Framework
Valuable? Rare?Costly toImitate?
Exploited byOrganization?
CompetitiveImplications
No
Yes
Yes
Yes
Yes
Yes Yes Yes
No
No
No Disadvantage
Parity
TemporaryAdvantage
SustainedAdvantage
EconomicImplications
BelowNormal
Normal
AboveNormal
AboveNormal
Product Life Cycles and the BCG Matrix
Sales
Time
Development Introduction Growth Maturity Saturation Decline
Product Life Cycles and the BCG Matrix
Sales
Time
Effects of ExtensionStrategies
Product Life Cycles and the BCG Matrix
Sales/Profits
Time
PLC and Profits
PLC
Losses
Break Even
Profits
BOSTON CONSULTING GROUP (BCG) MATRIX
MARKET SHARE• Market share is the percentage of the total market that is
being serviced by your company, measured either in revenue terms or unit volume terms.
• RELATIVE MARKET SHARE
• RMS = Business unit sales this year Leading rival sales this year
• The higher your market share, the higher proportion of the market you control.
MARKET GROWTHRATE
• Market growth is used as a measure of a market’s attractiveness.
• MGR = Individual sales - individual sales this year last year Individual sales last year • Markets experiencing high growth are ones where the
total market share available is expanding, and there’s plenty of opportunity for everyone to make money.
STARSHigh growth, High market share
• Stars are leaders in business.
• They also require heavy investment, to maintain its large market share.
• It leads to large amount of cash consumption and cash generation.
• Attempts should be made to hold the market share otherwise the star will become a CASH COW.
CASH COWS Low growth , High market share
• They are foundation of the company and 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.
DOGSLow growth, Low market share
• Dogs are the cash traps.
• Dogs do not have potential to bring in much cash.
• Number of dogs in the company should be minimized.
• Business is situated at a declining stage.
QUESTION MARKSHigh growth , Low market share
• Most businesses start of as question marks.• They will absorb great amounts of cash if the
market share remains unchanged, (low).• Why question marks?• Question marks have potential to become
star and eventually cash cow but can also become a dog.
• Investments should be high for question marks.
BCG MATRIX WITH CASH FLOW
LIMITATIONS
• BCG MATRIX uses only two dimensions, Relative market share and market growth rate.
• Problems of getting data on market share and market growth.
• High market share does not mean profits all the time.
• Business with low market share can be profitable too.
GE Multifactor Portfolio MatrixIndustry Attractiveness
Bu
sin
ess
Str
eng
ths
High
High
Medium
Medium
Low
Low
Invest/Grow
Selectivity/earnings
Harvest /Divest
Protect Position
Invest to Build
Build selectively
Build selectively
Selectively manage for earnings
Limited expansion or harvest
Protect & refocus
DivestManage for earnings
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