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Lecture - 1

May, 7th - 2012

The Decisions in any organization are divided to:


Operational decisions:

Day to day decisions.


Routine.
Situational.
Functional managers.

Strategic long-term decisions:

Long-term directions.
Deals with organizations scope.
Provide with competitive
advantage skills, resources,
possession.
Fit in a dynamic / changing
environment being flexible
somehow.
Build and use resources and
competencies.
Meet expectations and values of
shareholders.

Strategic thinking:
States how the functions of the whole organization relate to each other within
their internal and external environments, both now and in the Future.
Strategic thinking features:

Proactive.
Think out of the box.
Think long-term.
Use the Intuition and Analysis.

Strategic Management:

Its a style of management or Art & science of formulating,


implementing, and evaluating, cross-functional decisions that enable
an organization to achieve its objectives.

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Strategic planning: determines how the organization should look like.


Operational planning: the procedures and how to do that implementation.

Strategic thinking: the accomplishment of the two step by step approach to


strategy.

Societal / Mega Environment:


External / General Environment.
It deals with general factors PEST factors.
The general factors / PEST factors deals with the long-term objectives, and
theyre beyond control.
Outcomes of scanning the Mega Environment are opportunities & threats.
The process of studying or analyzing the Mega Environment is called

environmental analysis PEST analysis.

Task Environment:

External / General Environment.


It deals with specific factors industry factors.
They deal with short-term objectives.
Theyre within control changeable.
Outcomes of scanning the Task Environment are opportunities & threats.

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The process of studying or analyzing the Task Environment is called industry


analysis.
The tool used in analyzing the Task Environment is called Porters Five Forces

Model.

Internal Environment:

Outcomes of scanning the Internal Environment are Strengths & weaknesses.


The process of studying or analyzing the Internal Environment is called

internal analysis.
The tool used in analyzing the Internal Environment is called SWOT analysis.

The Strategic Management Model

I.

First stage: (as previous) called


Strategic analysis, Strategy analysis, Environmental scanning, Strategic audit.

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II.

III.
IV.

Strategy Formulation:
The anatomy of strategy formulation is called: VMOSA
V: Vision.
M: Mission.
O: Objectives.
S: Strategies.
A: Actions & Tactics.
Stratgy Implementation: Programs, Budgets, Procedures.
Evaluation & control: Monitoring performance, check which the strategy
achieved the objectives or not.

Therere 4 basic strategic questions must be kept in mind:

Wherere we now as a business?


Where we want to go?
How to go there?
Are we there yet?

Strategic analysis.
Strategy Formulation / Strategy planning.
Stratgy Implementation.
Strategic evaluation & control.

Vision:
Dream, what do we want to be?
Mission:
What were as a business?
Basic components should exist in the Mission statement:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Customers.
Product & service.
Market.
Technology.
Survival, growth, profits.
Philosophy (Code of ethics, values, and beliefs).
Self-concept (Competitive advantage).
Public image (Social / environment responsible).
Employees.

Lecture - 2

May, 14th - 2012

Q1 Where were now?

The external environment:


Anything surrounds the organization (favorite or unfavorite), and have the impact
on the organization.
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Environmental analysis
Ext. assessment (audit)
Industry analysis
Features:
1.
2.
3.
4.

Starting pts.
Inputs (O & T).
Ending pts.
Outputs.
Hard to control relatively.
Has a high element of uncertainty.

Note:
Expected value of any decision = the value attributable to this decision the probability of
making that decision from the historical data

From the previous, weve 3 different models of decisions:

Uncertainty: probability & value are missing, so we use the intuition to make

decision.
Certainty: probability & value exist, like the routine or day to day decisions.
Risk: probability exist but & value is missing or known but not guaranteed, so

we do risk analysis.

The Societal Environment analyzed by the PEST factors, or sometimes called PESTC factors where
C indicates to Competitive Intelligence (CI) which are some programs that studying the
competitors.

The Task Environment


1. Also called the organizational domain.
2. The analysis of this environment called Industry Analysis.
3. The Porters Five Forces Model is used make the Industry Analysis.

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Potential development of substitute products:


Threat of Substitutes

1. Switching cost: is the key of moving from product to its substitute.


2. Product Price Elasticity: The more the substitutes of any product, the less the
price of this product.

Potential Entry of new competitors:


Threat of Entrants / Mobility

The more industry profit, the greater the firms enter the market.
The less industry profit, the fewer the firms enter the market (till we reach to
market equilibrium).
So we make some strategies to prevent firms to enter the market, which
called Barriers to Entry Strategies:
-

Entry-deterring pricing: A strategy that make the profits artificially low.


Patents Rights.
Asset Specificity: Utilizing the organizations assets to provide specific

sophisticated product through R & D that cannot be imitated.


- Monopoly: When the government give the right of monopoly commodity.

The bargaining power of Buyers Consumers & Suppliers:

One buyer Monopsonist vs. many suppliers


Many buyers vs. one supplier Monopolist
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Relation
Relation

Monopsony.
Monopoly.
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Many buyers vs. many suppliers

Oligopoly.

Relation

Buyer is powerful if

Buyer is weak if

Many suppliers.
Concentrated buyers.
Low switching cost.
Standardized products.
Many substitutes.
Backward integration taking control

Limited suppliers.
Fragmented buyers.
High switching cost.
Differentiated products.
Low / limited substitutes.
Forward integration.

activities over the suppliers on the


value chain.

Supplier is powerful if

Supplier is weak if

Limited suppliers.
Fragmented buyers.
High switching cost.
Differentiated products.
Low / limited substitutes.
Forward integration.

Many suppliers.
Concentrated buyers.
Low switching cost.
Standardized products.
Many substitutes.
Backward integration.

Mega Environment
The steps of making the Mega Environment Analysis:

1. Strategic Myopia:
A process of filtration, i.e. eliminating all the external factors that dont have
direct impact or unfamiliar trends on the organization.
2. Prioritization:
A process of giving priority to the factors by the Issue Priority Matrix.
The probability of occurrence

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L
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the probable impact on Org.

All the factors (Opportunities & Threats) with low will be eliminated.
Medium & high factors will be considered & quantificated.

3. Quantification:
A process of giving weights and rates to the selected factors.
Conducted by, The EFAS Matrix (External Factors Analysis Summery) / EFE
Matrix (External Factors Evaluation).

EFE / EFAS Matrix

Weight
(0 1)

Key Ext. Factors

Rate
(1 4)
Weighted
score
(W R)

(indicates the relative


importance of this factor
to firms success)

(to what extent the


current strategy respond
to these factors opportunities & threats)

0.05

0.10

0.15

0.15

0.20

Opportunities:
O-1 (e.g. population
increase by 8 %
annually).
O-2 (e.g. acquiring of
weak company).
O-3:
O-4:
.
.
.
.
Threats:
T-1 (e.g. low employee
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morale).
T-2:
T-3:
.
.
.
.
=1

= TWS

Note:

This number is called TWS (Total


Weighted Score) and its the answer
of the first question: wherere we (or
stand) now?

This number must be between 1 - 4,


e.g. if it is 2.8 or more, it means that
the organization / firm is in a good
situation, i.e. it can use the
opportunities well & avoid or adopt
with threats.

Weight:
0

Rate:

Poor responding.
Average.
Above average.
Superior.

May, 21st - 2012

Lecture - 3

Revision:

Outcomes

Societal Env.

Env. Analysis

Ext. Assess.

O&T
Task Env.

Industry Analysis

==============================

Internal Assess.

Org. analysis

Outcomes (S & W)

- Structure
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- Culture
- Resources
- Values
- Competencies

We study the strengths & weakness of our organization to gain any

opportunity & avoid threats.


Strength:
any positive characteristics that help to gain and sustain a
competitive advantage. (Ex.: good facilities, staff, volunteer participation,

programs, recognition, financial resources, etc.).


Weakness: any negative characteristics that the organization may have that
lead to gain disadvantages or make the organization incapable to achieve its
goals. (Ex.: declining funding, aging and limited facilities, lack of expertise,
etc.).

Core
Competencies
Distinctive
Ex: branding loyalty "strengths"

so according to Porter's 5 forces:-

We have: no threats of entry, no threats of substitutes, and high power of supply.


Sources of strength:
1. Competencies:
The cross functional integration and coordination
between different
departments and functional divisions inside the organization.

Competencies: (2 levels)

Distinctive

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Core

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(Spread outside the org.)


Something the organization
can do exceedingly well
outside its boundaries.

Note:
Core
strength.

competencies are not source of


(Within the org.)

Strength come Something the organization


can do exceedingly well
any
source
of inside its boundaries.
The
competitive advantage by being superior (in
its competitors.

from competitive advantage,


competitive advantage is a
strength.
organization
can
gain
resources, position, & skills) over

2. Resources:
How the organization use or utilize its resources in a way to gain comp.
advantage.

First we need to classify our resources in order to measure them.

This call RBV (Resource Best View):

Tangible resource (Physical Resources).


Intangible Resources (Human- made Resources).
Org. Resources (Skills, capabilities).

After this we will value the organization resources to know what a source of
strength is.

Criteria that make a resource is valuable:

Benefit.
Scarcity.
Durability / sustainability.
Measurable.

There're 4 criteria that tell us which the resource is valuable or not (i.e. does
it provide us with comp. advantage or not).
We do it by using VRIO Frame work:
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i.
ii.
iii.
iv.

Value
does this resources add a value to org.?
Rarity
can other provide it or not? If rare
Strength.
Inimitability
can other imitate?
Organization
can the org. utilizes this resource efficiently well and
gain a maximum benefit (so its not an idle resource).

3. Value chain:

Porter said that any organization should have a value chain / supply chain.
5 primary activities need to be supported by sub-activities.

4. Organizational culture:

The org. has 2 variables

Freedom & Fear, when interact each other, they

make us know the strengths and weakness of the organization.


We use Freedom-Fear Matrix.

High fear

Decision making by meetings to


share decision

Innovation (low level)


Upward delegation

Low
freedom

High
freedom

Creativity
Acceptance of change
Low fear

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Every quadrant has its strength and weakness, and this is the best one.

Quantification of S & W:
Conducted by, The IFE Matrix (Internal Factors Evaluation) / IFAS Matrix
(Internal Factors Analysis Summary).
Note:
As we did previously in the Mega Environment, we must first filter the
strengths & weaknesses and eliminate all the factors (with low-priority) that
dont have direct impact on the organization (Strategic Myopia), as well give
.priority to the factors (Prioritization)

IFE Matrix

Key Int. factors

:Strengths
S-1: Brand Loyalty
S-2:
S-3:
.
.
.

Weaknesses:

W-1:

W-2:

W-3:

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Weight (0 1)

Rate (1 4)

To what extent this


factor is important to
the org. success

The
perception
of the
internal factors S / W, i.e.
how the internal factors S /
W are being perceived - a
major or minor

Weighted Score
(W R)

0.3
.
.
.
.

3
.
.
.
.

0.9
.
.
.
.

.
.
.
.

.
.
.
.

.
.
.
.

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.
.
.
TWS =

1=

Note:

This number is called TWS (Total


Weight:
Weighted Score).
1
0
This number must be within 1 - 4, e.g.
if it is 2.8 (judgmental
figure)
Rate: or more,
it means that the organization
/ firm is
1- Major W.
in a good situation or
position,
2- Minor W.i.e. it
has enough strengths
obtain
3- to
Minor
S.
opportunities & limited
weaknesses
to
4- Major
S.
avoid threats.

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Note:

Till now we just only answered the first strategic question:


Wherere we now?
Ext.
Societal / Mega

Int.
Task

All what we did is a phase of strategic audit.


If any organization wanna make strategic planning, it should do the Int. and
Ext. analysis simultaneously (the ext. scanning doesnt have a time frame, it
could take 3 months or 1 year).

All the factors (Int. & Ext.) are changeable or beyond our control, so we
must do the strategic audit (Int. & Ext.) simultaneously.

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May, 28st - 2012

Lecture - 4

Wrapping up
I. Where are we now?

1) Environmental Scanning
(St. Audit / St. Analysis)
Mega (PEST Analysis)
Ext. Env.

O&T
Task (Porters 5 Forces Model)

Int. Env.

EFE/EFAS (T.W.S)

S & W (IFE / IFAS)


====================

II.

Where do we wanna go?


2) Strategy Formulation ( St. planning )
2. 1

Input

(the outputs of stage I, EFE & IFE)

Define strategies

2. 2

Matching

Basic tools will be used:


- SWOT / TOWS
- Space Matrix
- Grand St. Matrix

Outcome of them is the recommended solutions / strategies

- B.C.G
- IE Matrix
2. 3

Decision

by

QSPM a tool by which you decide which of the

recommended Solution will be chosen in implementation.


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V
M
O

What is the organizational objective?

Define strategies

A
Objective

Financial Obj.

(Theres a relation between them)

Strategic Obj.

Ex.
Revenue by 6% long-term

engaged with

Max. Market share


"Market penetration"

Also there's a conflict:


Financial situation
By increasing prices

Market share

Specific

Measurable

Time bounded

So we have to set SMART objectives.


Attainable

Relevant come from mission

==============================
Define strategies
Types of strategies
Corporate / Grand Strategies

Define the scope of org.

Business / Competitive Strategies

How should every business unit


compete to gain CA?

i.e.: what industry & market the


org. compete in?

Therere 4 Business Strategies.

Therere 12 Grand Strategies.

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Grand Strategies: classified into 4 different families


A.
B.
C.
D.

Integration St.
Intensive St.
Diversification St.
Defensive St.

A) Integration Strategies

Growth Strategies

Called

1. Forward integration strategy:


Value chain

Integration: expand by business function in the same value chain.


Forward Integration means, if we moved one or more step forward in the
same value chain gaining control over distributers on the same value chain.

Motives / reasons / incentive of doing forward integration strategies:


Expansion.
Control.
Improve services.
Exp. Distributer.

Franchising is an integration forward strategy.

2. Backward integration strategy:


Value chain

When we decide to gain control over the suppliers.

Motives:
Quality of suppliers.
Just in time.
Cost & control.
Outsourcing is de-integration activity; its not an integration activity because it
provides with business function outside value chain.

3. Horizontal integration strategy:


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Gaining control over competitors


Like (merging-acquiringetc.)
Motives:

B. V. Integration St.
"Suppliers"

Tough /severe competition.


Rapid growing market.

Upstream Integration

Company

Horizontal Integration
"Competitors"'

Downstream Integration

F. V. Integration St.
"Distributers"

==============================
B) Intensive Strategies

Called

Stability / Aggressive Strategies

When the organization try to improve its competitive position using an


existing products or services.
1. Market penetrations strategy: tending to increase the market share for this
product / service.
The objective is to increase the market share within the same market size, i.e.
same product / service same market, so the organization wont open new
markets, or increase the market size.
Motives:

Big market size.


Prevent entry.
Increase revenue.
Unsaturated markets.
Product at maturity.

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2. Market development strategy: Opening new markets.


Type of markets:

Behavioral.
Geographical.
Psycho-graphic.
Demographic.

Motives :

Growth.
New untargeted market segments.
Profit.
Excess production.

3. Product development strategy:

New- developed product

When changing or adding one or more developed product into the same
market.
Motives:

Growth
Targeting new market.
Original product @ maturity extended product Life cycle.

C) Diversification Strategies
Strategies

Called

Growth & Expansion

New product / service related/unrelated.


A similarity between the original & developed product should exist (e.g. raw
material, businessetc.).
1. Concentric diversification strategy:
Introducing a new related product / service to attract new customers &
increase current customers. Like Dunlop

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2. Horizontal diversification strategy:


Introducing new unrelated product / service to existing customers (and new
customers as well). Like Zara
3. Conglomerate diversification strategy:
Introducing new unrelated product / service to new customers.
Philip Moris acquire Craft Cheese Company.
Motives:
Concentric:

Seasonal sales
Existing product @ decline phase.
Competitor better prices.

Horizontal:

Attract new customers.


Expansion.
Grand loyalty.

Conglomerate:
Tough competition.
New market.
Increase profit.
Synergy.
D) Defensive Strategies
1. Retrenchment strategy:
Its a cutting cost strategy.

e.g.

Laying-off (Redundancy)

Reasons / motives:

Weak position.
Fail to meet objectives.

2. Divestiture strategy:
Partial liquidation; selling the weakest unit / division in the organization and
supporting the other units.
This strategy is applied or conducted when the retrenchment strategy failed.
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3. Complete liquidation:
Selling the company assets for its tangible worth.
This strategy is applied or conducted when the divestiture strategy failed.

Business Strategies
Making each single unit in the organization have or gain competitive
advantage by developing some strategies.
How the organization gain competitive advantage in position positionaladvantage; a good position that permits the org. to gain competitive
advantage in

Low cost / differentiation.

Positional advantage (competitive advantage)

1. Low cost:
Provide the same / standardized product or service with the same
benefits (of competitors) @ the lowest possible cost (economy of
scale)

Cost positional advantage competitive advantage.

2. Differentiation:
Provide a unique product or service with benefits exceeding competitors
benefits @ the best value

Differentiation advantage competitive-

advantage.

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We've to define the scope of the mkt. "competitive scope"

the breadth

of the market.
Competitive scope
3. Broad market
4. Narrow market: (Niche)

a group of customers with unsatisfied

needs.
If we put the previous 4 each other

we gain the 4 business strategies

that provide the business units with competitive advantage.

Business Strategies:
1. Cost Leadership Strategy:
Providing

standardized

product

service

with

the

same

benefits

as

competitors to broad range of customers whose prices are sensitive @ the


lowest possible price.

Competitive advantage gained by making this strategy:

High market share (act as an entry barrier).


Cost advantage.
The grand strategies which help to gain benefits from cost-leadership:
All the grand strategies will help.

2. Differentiation Strategy:
The ability to provide a unique product / service with benefits exceeding
competitors to a broad range of customers whose prices are insensitive with
the best possible value.
One and only one of the grand strategies will help:
The Product Development strategy.
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3. Cost - Focus Strategy:


The ability to provide product / service with the same benefits as competitors
to a narrow range of customers whose prices are sensitive with the lowest
possible price.
4. Differentiation focus:
Like

Differentiation

strategy

but

for

Providing a unique product / service

a
to

narrow

range

of

customers.

narrow range of customers

whose prices are insensitive with the best possible value. E.g. Rolls Royce /
Bentley.
3 & 4 called Focus Strategies.
Type of Grand Strategies will help:
All the Intensive strategies:

Market penetration.
Market development.
Product development.
Lecture - 5

2. 2

Matching

SWOT / TOWS
Space Matrix.
Grand Strategy Matrix.
B.C.G
IE Matrix.

2. 3

June, 4th - 2012

Grand Strategies / Solutions

Decision QSPM.
=====================
SWOT / TOWS

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Strengths:
IFE
EFE

S1:
S2:
S3:

Weaknesses:
W1:
W2:
W3:

Opportunities:

O1:
O2:
O3:

SO Strategies
Maxi - Max

WO Strategies
Mini - Max

ST Strategies
Maxi - Mini

WT Strategies
Mini - Mini

Threats:

T1:
T2:
T3:

SO Strategies (Maxi Max):


Match strategic fit between O & S (using internal strengths to take
advantage of all external opportunities).

ST Strategies (Maxi Mini):


Use all strengths to minimize or avoid threats.

WT Strategies (Mini Mini):


Improve weaknesses and avoid all external threats.

WO Strategies (Mini Max):


Use all external opportunities to improve all weaknesses.

Note:

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SWOT / TOWS Matrix; is one of the basic matching tools, theres no doing of
analysis without doing SWOT / TOWS.

====================

SWOT Matrix Application

A SWOT matrix for a retail computer store

Strengths

1.
2.

Inventory turnover up 5.8 to 6.7.


Average customer purchase up $97 to

3.
4.

$128.
Employee morale is excellent.
In-store promotions = 20% increase in

5.

sales.
Newspaper advertising expenditures

6.

down 10%.
Revenues from repair / service in-store

7.

up 16%.
In-store technical support persons have

8.

Weaknesses
1.
2.
3.
4.
5.
6.
7.

Software revenues in store down 12%.


Location of store hurt by new Hwy 34.
Carpet and paint in store in disrepair.
Bathroom in store needs refurbishing.
Total store revenues down 8%.
Store has no web site.
Supplier on-time delivery up to 2.4

8.

days.
Customer checkout process too slow.

9.

Revenues per employee up 19%.

MIS degrees.
Store's debt-to-total assets ratio down
34%.

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Opportunities
1.
2.

Population of city growing 10%.


Rival computer store Opening

3.
4.

1kilometer away.
Vehicle traffic passing Store up 12%.
Vendors average six new Products /

5.
6.
7.

year.
Senior citizen use of computers up 8%.
Small business growth in area up 10%.
Desire for web sites up 18% by

8.

Realtors.
Desire for web sites up 12% by small

SO Strategies
1.

WO Strategies

Add 4 new in store promotions


monthly (S4, O3).

1.

Purchase land to build new store (W2,


O2).

2. Add 2 new repair / service persons (S6,


O5).

2.

Install new carpet / paint / bath (W3,


W4, O1).

3. Send flyer to all seniors over age 55 (S5,


O5). Market Dev. Strategy

3.

Up website services by 50% (W6, O7,


O8). Forward Integration Strategy

4.

Launch mail-out to all Realtors in city


(W5, O7).

firms.

Threats

ST Strategies

WT Strategies

1.

Best Buy opening new store in 1 year


nearby.

1. Hire two more repair persons and market


these new services (S6, S7, T1).

1.

Hire 2 new cashiers (W8. T1, T4).


Solution

2.

Local university offers Computer repair.

2.

3.

New bypass Hwy 34 in 1 year will divert


traffic.

2. Purchase land to build new store (S8, T3).


Market Dev. Strategy

Install new carpet / paint / bath (W3,


W4, T1).

4.

New mall being built nearby.

5.

Gas prices up 14%.

6.

Vendors raising prices 8%.

3. Raise out-of-store service calls from $60


to $80 (S6, T5).

Strengths (S)
Factors

Internal

Weaknesses (W)

S1 Quality Maytag culture.

W1 Processoriented R&D.

S2 Experienced top

W2 Distribution channels.

management.

External Factors

W3 Financial position.

S3 Vertical integration.

W4 Global positioning.

S4 Employee relations.

W5 Manufacturing facilities.

S5 Hoover's international orientation.

SO Strategies

Opportunities (O)
O1 Economic integration Of
European Community.
O2 Demographics favor quality.

S1+S5+O1: Horizontal integration.


S5+O4:

Market development.

S3+O5:

Forward integration.

WO Strategies

W2+O4.
W4+O1+O4+O3 solution.

O3 Economic development Of Asia.


O4 Opening of Eastern Europe.
O5 Trend toward super stores.

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Threats (T)
T1 Increasing government
regulation.
T2 Strong U.S competition.
T3 Whirlpool and Electrolux

ST Strategies

WT Strategies

S2+S5+T2+T5: market penetration.

W1+W3+T4: Defensive

S1+S2+S4+T5: Horizontal integration.

strategy divestiture.
Improving all weaknesses
by getting acquired by T3

positioned for Global economy.


T4 New product advances.
T5 Japanese appliance companies.

& T5.

Generating TOWS Matrix for Maytag Corporation

Internal Factors
Weakness (W)
(IFAS Table 5-2)

External Factors
(EFAS Table 4-5)
Opportunities (O)
WO Strategies

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Strengths (s)

SO Strategies

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Threats
WT Strategies

ST Strategies

st.
divestiture st.

improving all weakness by


getting acquired by T3 & T5.

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6
2

SPACE Matrix
Strategic Position

& Action

To determine we need:1- Analyze the org.


(and according to it, we determin which grand strategies (12
st.) we'll use.
According 4 dimensions

2 internal

External

*Comp. position (cp)

* Industry position (IP)

* Financial position (FP)

* Stability position (SP)

EX

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Comparing to Competitors

)X-axis (+ ve

Y-

)axis (- ve

)(IFE
Internal strategic position
)Comp. position (CP

)Financial position (FP


* ROI

-1

* Liquidity

-2

* Leverage
* Cash Flow

* Mkt share
5
* Product quality
6
* Customer loyalty
7

-3
-6

8
20

AV. = - 2

AV. = 5

Comparing to whole Industry


)X-axis (-ve

Y-axis
)(EFE
External st. Position
)stability Position (SP
* Demand Elasticity.
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Industry Position IP
6

* Growth Potential.
-2
Strategic Management

* Profitability.
-1

* Tech. Changes.

* Productivity.
-4

* Inflation.

15
AV. =5

AV. =2.3

x-axis = -2 + 5 =

(x,y) = (3,2.7)

y-axis = 5 + (-2.3) = 2.
7

FP(int)

Conservative

st. position
Agressive
* Integ.
* Intensive

* Intensive st.

6-

* Rel. div.

5-*

* Div

Directional
Vector

4Action Evaluation
2CP (int.)
IP(ext.)
-6

1-5

-4

-3

-2

-1

6
-1

Defensive

* Defensive

Strategic Management

-2

Competitive
* Integ.

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* unrelated Div.
Intensive

-3

*
-4

Defensive
-5
-6

SP(ext.)

* Every Quadrant has its st. position name.


Q1 it means that the strategic position of your org. is aggressive. "the best
position ever"
It must take advantage of all opportunities
and utilize its strength
What determine which of strategies to use are the values of x, y
not the direct vector.

Q2 Conservative:
The org. Should stick to its basic competencies don't take
excessive Risks
Need to stabilize your self.
Q3 Defensive:
The org. must defend its position as much as it can ( improve
weakness and
avoid threats).

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Q4 Competitive:
The org. is competing in changing Env.
==================================================
3
============
Grand st. matrix:-

Mkt growth rate


Comp. position
5% annually

Rapid mkt growth


Q2
* CA

Q1

intensive st.

* Integration

Mor. Integ.

*excess Res.
*stress more

Integ.
intensive
On market

Weak comp.
strong comp

*Comitt to a

unrel

position
*CA

unrel.dive

Strategic Management

*unrel. div.
Page 34 of 49

*Defensive
or

*Mor. Integ.

by merging

Acquiring

Slow mkt grouth




Space matrix

It's the weakest matching tool among the


5 matching tools

Q1: un org. with strong comp. position competing in a


Q2: un org. with a weak comp. position competing in a rapid glowing
mkt.
Q3: un org. with weak comp. position competing in a slowly growing mkt.
Q4: un org. strong comp. position competing in growing mkt.

===============================================
==============
Example Strategy Profiles
Aggressive Profiles
FP
FS

FS
(+4,+4)

(+1,+5)
CA
IS
cp

Strategic Management

IS ip

CA

Page 35 of 49

ES sp
AH int.

ES

FS

Conservative Profiles

FS
Mkt penetration
mkt develop (-5,+2)

(-2,+4)
CA
IS

IS

CA

ES

ES

FS

Competitive Profiles

CA
IS

IS

FS

CA

(+5,-1)
(+1,-4)
Get acquired
ES

ES

defensive

FS

CA
IS

Defensive Profiles

IS

(-5,-1)
Def.
ES

FS

CA

(-1,-5)
unrel.div

ES

Strategic Management

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Source: H. Rowe, R. Mason and K Dicker, Strategic Management and Business


Policy : A Methodological Approach (Reading, MA. Addision-wesley Publishing Co.
.Inc. c 1982) : 155. Permission of the publisher

7
BCG
Portfolio Analysis

IE

Boston consulting Gap (BCG) :Portfolio Analysis .


Resources
Strategic Management

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Mkt share
growth rate

mkt

(cash generation)
consumption)

(cach

Migh mrk share means high cash generation

BCG matrix

Mkt share (cash generation)


high

Mkt Growth
rate

Stars

(cash
consumpitio
n)

Cash
cows

low
Question
Weak
(problem child)
Dogs
(Pets)

Question mark :- if it still as it is it will lose money and will be total loss.
This is a product line or bunnies unit has low mkt share and competing in a
High growing market .
There is a 2 options :
a). heavy amusements and change it to stars by only mkt Penetration st.
b). change it to dogs using the Divest defensive st.
starts :
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business

theat generations high cash and cause high cash.

This the best long run growth and profitability


Called mkt leader
Type of strategy :
All the integration as mkt leader / stars.
When the mkt reach the maturity it changes to cash cow
( we can't control that ) .
Cash cow :
A business unit
High cash generation vs low cash consumption
The excess cash coming frar cash from cash cow we use it
And push it to Question mark and make an intrusive investment and push it to
stars .
But if we lease it as it is, this will be an exhausting of resources.
The strategies used in this :Product develop.
Un related dvrrsification.
If a business unit as product line continue in cash low it'll turn automatically to
Dogs :

Low cash generation & low cash consumption which is every weak int.
fext. Position we have no option but Divest Defensive st.
BCG not only (not rely alone) to make strategic decision
* limitations :1- the position of business unit on the BCG. (if its in the tassectliue
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2- there're other dimensions to judge other than mkt share and mkt growth ,it's
competitive position of the unit.
3- we can't make aur strategic decision analy pathetical relationship
(the mkt share

cash generation) .
======================================

IE Matrix (internal/ external/matrix) :It based an factual data than BCG.

Strong
3-4

Strategic Management

AV.
2:2.9
9

1:1.9
2 9

Weak
3

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* grow & build :-

like strain BCG

Type of strategies help in grow fustian integ. & intensive st.


* hold & maintain :Strategies

intensive (stability st.)

* Harvest or Divest :
Strategies

like dogs in BCG

Defensive .

We always do BCG & IE matrix


(one only is wrong ) .
We may do IE again after BCG in order to
Avoid or decrease errors.

8
Decision Stage

QSPM: Quantitative St. Planning Matrix analytical tool


It can make comparison between 2 or more strategies but it must be
relevant or relative
======================
In the final aim ( Stability, Growth ..)
Key
Factor

weigh
t

Strategic Management

Mkt
penetration
( sales in
present mkt)
AS
TAS

( the similar st. in the matching tools)


Mkt develop.
Mit a new
geographic
mkt
AS
TAS

Related
AS

TAS

Page 41 of 49

OPP.
Pop 10%
annual

0.10

0.30

0.20

0.10

Threats
Rival
nearby

Strength.
Weaknes
s.
STAS
3.72

STAS
4.10

STAS
3.97

*AS: All activeness score: 1:4


Indicates to what extent that each factor has an impact on each strategy.
To what extent it attractive
The minimum rate is from 1:4
* if st. are 5

1:5

1:6

The highest STAS number


means the most feasible or optimum strategy for implementation.
( the most ready st. for implementation )
STAS

4.10

STAS

3.97 ( plan B ) ( contingency plan ) .

STAS

3.72 ( plan C) .
=========================

Till here we've finished the second stage ( St. formulation )St.
. thinking
===========================
* St. Implementation

( operation stage )

The role is functional managers.


"It's easy set than done".
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St. formulation
Good
Good F.
Good Imp.
Oct. 1973 war

Bad
Bad F.
Good Imp.
H1N1

Good
St. Imp.

Good F.
Bad Imp

Bad

2 models

Modify the current cultures st.

Create new st. for org. culture.

One of this
Triangulation: ( to manage one org. culture) homogeneous cult.
a) Observation.
b) Self-administered Question.
c) Personal interviews.
In a question

merging. (diversified culture ) multi- culture

In order to know it we've to study 2 dimensions


Strategic Management

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Acquirer

US

Acquired

French
Preservation of acquired firm
To its own culture

Not at all

Very

attract

Very

v. high
Integration
culture

(becoming part of)


As simulation
culture

Separation
culture

Decultration
( lock of integration)

Perception of
acquired to
acquirer's culture

unattract

Intensive and diversification st. are mkting st.


* segmentation:Sub divide my mkt into sub sets of customers (pshyco, geographicect)
* implementation of mkt st.:
Do it with STP technique

Segmentation

Product positioning

STP

Find what customer


wants and need
and perception and
what comp. doesn't

them
(customer with unsatisfied need)

Strategic Management

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Positioning map
Sony
Acer
Dell

after sale service


sony
Dell
sony
acer

price

reposition the product give in the mkt needs.


9
Environmental Scanning

1- where are we now?


Beyond control
Mega ( PEST analysis)
Ext

EFE EFAS

(env. Analysis)
Task

Poter 5 forces model

(industry analysis)

O&T

Ext.
T.W.S

written control

S&W
Int.

V
M
O
S
A
St. Formulation

Strategic Management

Org. analysis IFE

IFAS

Int. T.W.S.

Page 45 of 49

2- Where do we wanna go?


Input ( Int. T.w.s & Ext. T.w.s)
Swot/tows
Matching

space

Similar

Grand

Strategies

BCG
IE
Decision
will be

QSpm / stas>>> key term that tell me which strategy


implement

3) How to go there ?
3) st. Implementation
4) Are WR there yet or not ?
4) St. evaluation & control
Test of the implemented st. in terms the objectives
Six sigma: help in efficient implementation
Its outcome is to reach me near perfect result
To reach the six sigma we must have:
3.4 detect/ mv. output.
WR have 2 models of six sigma
analyze
reactive
DMAIC
define

measure

control

DMADV

proactive

improve

difference between them is when you apply the six sigma in your product
line.
define or decide

measure(CTQ) critical to quality

analyze
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DMADV

you design the production line based on six sigma

(DFSS)
define for six sigma
design

verify

* Evaluating the performance of strategies

do they match the result or not?


Steps:
1- Determine what to measure.
2- Set standards to measure.

(Obj from VMOSA)

3- Measure performance (Quantitative and Qualitative terms).


Yes

then stop

4- Does performance achieve obj.


No

Then go to
5- Corrective action.
==========================
* Evaluating from strategic perspective:
ACT.1:

Revise inputs of st.

Revised EFE

Revise IFE

Compare actual EFE


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Vs. Revised EFE


Do any significant difference occur? Yes
ACT.2:measure performance
Do any significant difference occur? Yes
no
ACT.3 Corrective action
The criteria which indicate if the strategies implemented are or not.
1- consistency
2- Feasibility: is the strategy implemented within the org. resources planned
budget.
3- Consonance: Following trends (using updated st. not outdated strategies)
4- Advantage: does st. provide any C.A or any superiority in skills or resources or
position

Cost

Value

(mkt leader)

(mkt leader)

* Tools to measure performance of strategy:


V
Balanced Scorecard

M
O
S

Gap

A
1

Financial Performance:

blocked by BSC

How should we appear to share holders?


KPIS of per.
2

Financial ratios

Customer knowledge
How should

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KPIS
3

Satisfaction, loyalty.

Internal business processes


What business should we use. KPIS

Strategic Management

process automation, 6 sigma.

Page 49 of 49