Professional Documents
Culture Documents
A disciplined effort
to produce
fundamental
decisions and actions
that would help to
shape what an
organization is and
what it serves to do
Ring and Perry
(1985)
3
Definition of Strategic Management
4
Definition of Strategic Management
5
Definition of Strategic Management
6
Fundamental Objectives
Content
Addressing
Process
Context People
Processes / System
Technology
8
Comprehensive Strategic Management Model
Perform
External
Audit
Generate
Develop Establish Measure and
evaluate and Implement
Vision and long term Evaluate
select strategies
Mission objectives Performance
strategies
Statement
s
Perform
Internal
Audit
Strategy
Strategy Formulation Strategy Implementation 9
Evaluation
Background of Strategic Management
Hines (1991) suggest that the internal and external factors are critical
aspects and they need to be analysed and addressed appropriately so
that a relevant strategic planning can be developed (Nutt and Backoff,
1992).
This is also consistent with Hines (1991) findings suggesting that internal
and external factors are critical issues, which are very complex to
analyzed, however because their criticality, they need to be addressed
appropriately in the development of organization strategic planning.
11
Background of Strategic Management
Finally, Mintzberg (2001) explains that strategic planning in the form of an explicit
guide for future behaviour of the organization.
12
Strategic Management Theory
Firstly, a unlike private organizations that use strategic planning to gain
competitive advantage (Porter, 1985) in order to maximise profit in the long-term,
the same cannot be said about public organizations. Most of the public
organizations operates as monopoly (Tilley, 1993; and Clarke et.al. 1994). They are
established to fulfil certain mandates for the benefit of the public (Nutt and
Backoff, 1992).
This is also in line with the research findings by Moore (2000) and Bryce (2000)
that suggest the special characteristics of public organizations would be to create
public value and achieve social mission / mandate for the stakeholders.
This is consistent with the suggestion made by Nutt and Backoff (1992) that public
organizations should be vary of using private sector approaches that assume
clear goals, profit or economic purposes, unlimited authority to act, secret
development, limited responsibility for actions, and oversight through market
mechanisms that signal financial results.
13
Strategic Management Theory
Secondly, Brunsson (1989) suggests it is the tasks of public
organizations to deal with inconsistent demands i.e. their
work should involve the articulation of on-going and
irresolvable debates. Walker and Ruekert (1987) propose
that public organizations to develop enduring patterns of
demands that seek to align them to their environment.
This is often the case because, they are funded for example by
government (Boyne, 1998), parties for specific intentions (Hood
et. al., 1999), public scrutiny of all transactions (Nutt and Backoff,
1992) and etc. Based on this argument, DiMaggio and Powell
(1983) suggest that public organizations are more likely to be
subject to pressures of coercive isomorphism and that would
greatly influence their strategic planning. 15
Strategic Management Theory
Fourthly. Mintzberg (1987), suggest that in developing strategic planning, it is
important to combine the holistic perspective blending the aspects of future,
present and past i.e. strategy is the anticipation of the future but it must be
understood from patterns of the past. In management studies, strategy could be
classified into two i.e. deliberate (intended) and emergent (realized) (Mintzberg
and Waters, 1985).
In the case of pure deliberate strategy, it would preclude any learning process in
deriving to the strategy. On the other hand, a pure emergent strategy would
preclude the element of control. In reality, when trying to cope with the dynamic
changes in the environment, neither pure deliberate strategy nor pure emergence
strategy could be implemented (Mintzberg and Waters, 1985).
There are various tools and techniques that could be used to asses
a public organizations external environment such as PESTLE
analysis, competitor analysis, Four-Link model (Lynch, 2006) and
gap analysis. Some useful tools and techniques that could be used
to assess a public organizations internal environment would be
stakeholder analysis and benchmarking.
19
WHAT IS MISSION STATEMENT?
Mission statement:
WHAT IS OUR BUSINESS?
A form of declaration, an
organisations reason for being
Science and
Education Utilities Legal
Technology
Economic
Welfare Tax Development
Planning
24
Need of Strategic Management in Public Sector
Client centric
25
Need of New Public Management
26
Tenets of New Public Management
Privatization
Quasi-market competition
Performance orientation
Results-oriented
Empowerment in decision
makings
Decentralization
Specialization
Client centric 28
Strategic Analysis: Internal Audit
Value Chain
Stakeholder
Activity A C Analysis
Map
Analysis
E D Internal Audit
Benchmarking
29
Generic Strategies
Borrowing from private sector, Porter (1998) developed series of generic
strategies for Strategic Business Unit (SBUs):
Cost Leadership
Not originally intended to imply lowest cost but instead
referred to ability of large international organisation to
determine price levels in different market
Differentiation Strategies
Based on distinguishing product or service from competitor
Focus
Identify market for product or service and ensure
organisational strategy focused on serving that market
30
SWOT Analysis
31
TOWS MATRIX
Strengths - S Weaknesses - W
32
TOWS Matrix Analysis for MIDA
Strengths : Weaknesses :
Internal -
-
Strong Financial Support
MIDAs strong position & brand
-
-
Complicated approval procedures
Unclear new divisions roles and
Factors - Wide Network (Overseas & State offices) functions
- Clear & Transparent Policies - Investor care needs to be enhanced
- Sufficient Human Capital - Lack of experienced officers
External - Central investment promotion agency - Lack of guidance from superior/seniors
- Abundant natural resources - Lengthy & unproductive
Factors - Malaysias strategic location meetings/activities
- Weak financial management
- Incomprehensive CBA
Opportunities : 1. To undertake SPMs to targeted 1. To assign an account manager for each
- Relocation of companies operations companies relocating their operations to potential investor
to Asia Asia 2. To replace unproductive meetings
- IP acquisitions 2. To formulate policies that encourage IP with trainings/attending seminars
- External seminars/conferences/ creation/development/acquisition 3. To analyse ROIs on programmes
training for capacity building 3. To explore new competitive edge as carried out vis--vis investments
- Gaps in current Ecosystems selling points during missions targets
34
BCG Matrix Growth Market Share
STAR
high growth market, dominant market share
requires additional resources for continued growth
35
BCG Matrix Growth Market Share
Cash Cow
low growth, dominant market share
generates surplus resources for allocation to other business units
36
BCG Matrix Growth Market Share
Question Mark
high growth market, low market share represents a high-risk/cost
opportunity requiring a large commitment of resources to build
market share
37
BCG Matrix Growth Market Share
Dog
low/declining market, subordinate market share
has diminished prospects and represents a drain on the portfolio
38
Internal Factor Evaluation
39
How can I create the IFE matrix?
The IFE matrix can be created using the following five steps:
Having identified strengths and weaknesses, the core of the IFE matrix, assign
a weight that ranges from 0.00 to 1.00 to each factor. The weight assigned to
a given factor indicates the relative importance of the factor. Zero means not
important. One indicates very important. If you work with more than 10
factors in your IFE matrix, it can be easier to assign weights using the 0 to 100
scale instead of 0.00 to 1.00. Regardless of whether a key factor is an internal
strength or weakness, factors with the greatest importance in your
organizational performance should be assigned the highest weights. After
you assign weight to individual factors, make sure the sum of all weights
equals 1.00 (or 100 if using the 0 to 100 scale weights).
The weight assigned to a given factor indicates the relative importance of the
factor to being successful in the firm's industry. Weights are industry based.
41
IFE matrix
Rating
Assign a 1 to X rating to each factor. Your rating scale can be per your preference. Practitioners
usually use rating on the scale from 1 to 4. Rating captures whether the factor represents a
major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a
major strength (rating = 4). If you use the rating scale 1 to 4, then strengths must receive a 4 or
3 rating and weaknesses must receive a 1 or 2 rating.
Note, the weights determined in the previous step are industry based. Ratings are company
based.
Multiply
Now we can get to the IFE matrix math. Multiply each factor's weight by its rating. This will give
you a weighted score for each factor.
Sum
The last step in constructing the IFE matrix is to sum the weighted scores for each factor.
42
This provides the total weighted score for your business.
IFE matrix
43
IFE matrix
What values does the IFE matrix take?
Regardless of how many factors are included in an IFE Matrix, the total
weighted score can range from a low of 1.0 to a high of 4.0 (assuming you
used the 1 to 4 rating scale). The average score you can possibly get is 2.5.
Why is the average 2.5 and not 2.0? Let's explain using an example. You have
4 factors, each has weight 0.25. Factors have the following rating: 1, 4, 1, 4.
This will result in individual weighted scores 0.25, 1, 0.25, and 1 for factors 1
through 4. If you add them up, you will get total IFE matrix weighted score
2.5 which is also the average in this case.
Total weighted scores well below 2.5 point to internally weak business.
Scores significantly above 2.5 indicate a strong internal position.
Four
Links Analysis
Model
Competitor
GAP
45
Layers of External Environment
4. Macro-environment
3. Industry / Sector
1. The Organization
46
PESTLE Analysis
Political
Economy
PESTLE Socio-cultural
Technology
Legal
Environment
PESTLE Analysis
Political
Issues to consider include government policy and ideology,
taxation and social insurance policy, social welfare policies,
foreign trade regulations and regulatory agencies
Economic
Issues might include business and economic growth cycles,
interest rates, inflation rates, average disposable income,
levels of unemployment and deprivation
Socio-cultural
Issues will be particularly important for many public sector
organisations and could include such issues as demographic
trends, increased cultural diversity, the distribution of income,
social mobility, life style, education and etc
PESTLE Analysis
Technological
Issues may link to technology capabilities and
computerisation, automation, internet, mobile phone
technologies and etc
Legal
Issues can and do have a big impact on public sector
organisations including employment law, health and safety
legislation, regulatory systems and product safety rules
Environmental
Issues are prominent in public sector for example
environmental protection legislation, waste disposal policies,
energy consumption regulations
Competitor Analysis: Porters Five Forces
50
Four Link Model
3. Complementors
Assign weights
Assign a weight to each factor. The value of each weight
should be between 0 and 1 (or alternatively between 10
and 100 if you use the 10 to 100 scale). Zero means the
factor is not important. One or hundred means that the
factor is the most influential and critical one. The total
value of all weights together should equal 1 or 100.
How can I create the EFE matrix?
Rate factors
Assign a rating to each factor. Rating should be between
1 and 4. Rating indicates how effective the firms current
strategies respond to the factor. 1 = the response is poor.
2 = the response is below average. 3 = above average. 4
= superior. Weights are industry-specific. Ratings are
company-specific.
The next step is to identify environmental opportunities and threats. Here you should
apply all information you have learned on industry and microenvironments, to analyze
the environment the company is confronting. Of particular importance at the industry
level is Porter's five forces model and the stage of the life cycle model. Which factors
in the microenvironment will appear salient depends on the specific company being
analyzed. However, use each factor in turn (for instance, demographic factors) to see
whether it is relevant for the company in question. Having done this analysis, you will
have generated both an analysis of the company's environment and a list of
opportunities and threats. The SWOT checklist lists some common environmental
opportunities and threats that you may look for, but the list you generate will be
specific to your company.
Detailed Analysis of Case Study
Evaluate the SWOT analysis
Having identified the company's external opportunities and threats as well as its
internal strengths and weaknesses, you need to consider what your findings mean.
That is, you need to balance strengths and weaknesses against opportunities and
threats. Is the company in an overall strong competitive position? Can it continue to
pursue its current business- or corporate-level strategy profitably? What can the
company do to turn weaknesses into strengths and threats into opportunities? Can it
develop new functional, business, or corporate strategies to accomplish this change?
Never merely generate the SWOT analysis and then put it aside. Because it provides a
succinct summary of the company's condition, a good SWOT analysis is the key to all
the analyses that follow.
Detailed Analysis of Case Study
Analyze corporate-level strategy
To analyze a company's corporate-level strategy, you first need to define the company's
mission and goals. Sometimes the mission and goals are stated explicitly in the case; at
other times you will have to infer them from available information. The information you
need to collect to find out the company's corporate strategy includes such factors as its
line(s) of business and the nature of its subsidiaries and acquisitions. It is important to
analyze the relationship among the company's businesses. Do they trade or exchange
resources? Are there gains to be achieved from synergy? Alternatively, is the company just
running a portfolio of investments? This analysis should enable you to define the corporate
strategy that the company is pursuing (for example, related or unrelated diversification, or a
combination of both) and to conclude whether the company operates in just one core
business. Then, using your SWOT analysis, debate the merits of this strategy. Is it
appropriate, given the environment the company is in? Could a change in corporate
strategy provide the company with new opportunities or transform a weakness into a
strength? For example, should the company diversify from its core business into new
businesses?
Detailed Analysis of Case Study
Other issues should be considered as well. How and why has the company's strategy
changed over time? What is the claimed rationale for any changes? Often it is a good idea
to analyze the company's businesses or products to assess its situation and identify which
divisions contribute the most to or detract from its competitive advantage. It is also useful
to explore how the company has built its portfolio over time. Did it acquire new businesses,
or did it internally venture its own? All these factors provide clues about the company and
indicate ways of improving its future performance.
Detailed Analysis of Case Study
Analyze business-level strategy
Once you know the company's corporate-level strategy and have done the SWOT analysis,
the next step is to identify the company's business-level strategy. If the company is a single-
business company, its business-level strategy is identical to its corporate-level strategy. If
the company is in many businesses, each business will have its own business-level strategy.
You will need to identify the company's generic competitive strategy - differentiation, low
cost, or focus - and its investment strategy, given the company's relative competitive
position and the stage of the life cycle. The company also may market different products
using different business-level strategies. For example, it may offer a low-cost product range
and a line of differentiated products. Be sure to give a full account of a company's business-
level strategy to show how it competes.
Detailed Analysis of Case Study
Identifying the functional strategies that a company pursues to build competitive advantage
through superior efficiency, quality, innovation, and customer responsiveness and to
achieve its business-level strategy is very important. The SWOT analysis will have provided
you with information on the company's functional competencies. You should further
investigate its production, marketing, or research and development strategy to gain a
picture of where the company is going. For example, pursuing a low-cost or a differentiation
strategy successfully requires a very different set of competencies. Has the company
developed the right ones? If it has, how can it exploit them further? Can it pursue both a
low-cost and a differentiation strategy simultaneously?
The SWOT analysis is especially important at this point if the industry analysis, particularly
Porter's model, has revealed the threats to the company from the environment. Can the
company deal with these threats? How should it change its business-level strategy to
counter them? To evaluate the potential of a company's business-level strategy, you must
first perform a thorough SWOT analysis that captures the essence of its problems. Once you
complete this analysis, you will have a full picture of the way the company is operating and
be in a position to evaluate the potential of its strategy. Thus, you will be able to make
recommendations concerning the pattern of its future actions. However, first you need to
consider strategy implementation, or the way the company tries to achieve its strategy.
Detailed Analysis of Case Study
Analyze structure and control systems
The aim of this analysis is to identify what structure and control systems the company
is using to implement its strategy and to evaluate whether that structure is the
appropriate one for the company. Different corporate and business strategies require
different structures. For example, does the company have the right level of vertical
differentiation (for instance, does it have the appropriate number of levels in the
hierarchy or decentralized control?) or horizontal differentiation (does it use a
functional structure when it should be using a product structure?)? Similarly, is the
company using the right integration or control systems to manage its operations? Are
managers being appropriately rewarded? Are the right rewards in place for
encouraging cooperation among divisions? These are all issues that should be
considered. In some cases there will be little information on these issues, whereas in
others there will be a lot. Obviously, in analyzing each case you should gear the
analysis toward its most salient issues. For example, organizational conflict, power,
and politics will be important issues for some companies. Try to analyze why
problems in these areas are occurring. Do they occur because of bad strategy
formulation or because of bad strategy implementation?
Detailed Analysis of Case Study
Organizational change is an issue in many cases because the companies are
attempting to alter their strategies or structures to solve strategic problems. Thus, as
a part of the analysis, you might suggest an action plan that the company in question
could use to achieve its goals. For example, you might list in a logical sequence the
steps the company would need to follow to alter its business-level strategy from
differentiation to focus.
Detailed Analysis of Case Study
Make recommendations
The last part of the case analysis process involves making recommendations based on
your analysis. Obviously, the quality of your recommendations is a direct result of the
thoroughness with which you prepared the case analysis. The work you put into the case
analysis will be obvious to the professor from the nature of your recommendations.
Recommendations are directed at solving whatever strategic problem the company is
facing and at increasing its future profitability. Your recommendations should be in line
with your analysis; that is, they should follow logically from the previous discussion. For
example, your recommendation generally will centre on the specific ways of changing
functional, business, and corporate strategy and organizational structure and control to
improve business performance. The set of recommendations will be specific to each
case, and so it is difficult to discuss these recommendations here.
Detailed Analysis of Case Study
Such recommendations might include an increase in spending on specific research and
development projects, the divesting of certain businesses, a change from a strategy of
unrelated to related diversification, an increase in the level of integration among
divisions by using task forces and teams, or a move to a different kind of structure to
implement a new business-level strategy. Again, make sure your recommendations are
mutually consistent and are written in the form of an action plan. The plan might
contain a timetable that sequences the actions for changing the company's strategy and
a description of how changes at the corporate level will necessitate changes at the
business level and subsequently at the functional level.
After following all these stages, you will have performed a thorough analysis of the case
and will be in a position to join in class discussion or present your ideas to the class,
depending on the format used by your professor. Remember that you must tailor your
analysis to suit the specific issue discussed in your case. In some cases, you might
completely omit one of the steps in the analysis because it is not relevant to the
situation you are considering. You must be sensitive to the needs of the case and not
apply the framework we have discussed in this section blindly. The framework is meant
only as a guide and not as an outline that you must use to do a successful analysis.
Strategy Clock: Johnson et.al (2006)
4
differentiation
3 5
High
hybrid focused
differentiation
Perceived 2 6
product low price
/ services
benefits
Strategies
7 destined
1 for ultimate
Low no frills 8
failure
Learning and
Growth
How will we sustain our
ability to change and
improve
Development of Strategy Map
SWOT analysis
Strategy Map
Stakeholder Mapping
Addressing
External and
internal environment
Learning
Financial Customer Internal and
Perspectives Perspectives Perspectives Growth
Best practices
and benchmarks
70
Strategy Map
71
Thank You
72