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Strategic MGT - 1

The document discusses strategic management and evaluating a firm's external environment. It defines strategic management as analyzing internal and external factors to achieve corporate goals. The key processes are formulation, involving analyzing opportunities/threats and strengths/weaknesses, and implementation, involving aligning resources toward objectives. Strengths and weaknesses are determined by objectively analyzing each area and function of a company and how they interact with customers. Not all weaknesses need correcting if they are byproducts of strengths. The questions address Porter's five forces analysis, relating long and short-term objectives in strategic management, and diversification strategies.

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0% found this document useful (0 votes)
120 views22 pages

Strategic MGT - 1

The document discusses strategic management and evaluating a firm's external environment. It defines strategic management as analyzing internal and external factors to achieve corporate goals. The key processes are formulation, involving analyzing opportunities/threats and strengths/weaknesses, and implementation, involving aligning resources toward objectives. Strengths and weaknesses are determined by objectively analyzing each area and function of a company and how they interact with customers. Not all weaknesses need correcting if they are byproducts of strengths. The questions address Porter's five forces analysis, relating long and short-term objectives in strategic management, and diversification strategies.

Uploaded by

SK Lashari
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Subject

Assignment No.
Discipline
Term
Submitted By
Examination Roll No.

Strategic Management
01
M.B.A. (Executive)
III
Samiullah Khan
056

Q.1: Define strategic management. Write down process of evaluating


externally to any firm?
The systematic analysis of the factors associated with customers and competitors (the external
environment) and the organixation itself (the internal environment) to provide the basis for
maintaining

optimum

management

practices.

The objective of strategic management

to achieve better alignment of corporate policies and strategic priorities.

is

The formulation and implementation of the major goals and initiatives taken by a company's top
management on behalf of owners, based on consideration of resources and an assessment of the
internal and external environments in which the organization competes. Strategy is defined as
"the determination of the basic long-term goals of an enterprise, and the adoption of courses of
action and the allocation of resources necessary for carrying out these goals. Strategies are
established to set direction, focus effort, define or clarify the organization, and provide
consistency or guidance in response to the environment.

Strategic management involves the related concepts of strategic planning and strategic thinking.
Strategic planning is analytical in nature and refers to formalized procedures to produce the data
and analyses used as inputs for strategic thinking, which synthesizes the data resulting in the
strategy. Strategic planning may also refer to control mechanisms used to implement the strategy
once it is determined. In other words, strategic planning happens around the strategic thinking or
strategy making activity.
Strategic

management

is

often

described

as

involving

two

major

processes

i.e., formulation and implementation of strategy. While described sequentially below, in practice
the two processes are iterative and each provides input for the other.

Formulation
Formulation of strategy involves analyzing the environment in which the organization operates,
then making a series of strategic decisions about how the organization will compete. Formulation
ends with a series of goals or objectives and measures for the organization to pursue.
Environmental analysis includes the:
1. Remote external environment, including the political, economic, social, technological,
legal and environmental landscape (PESTLE);
2. Industry environment, such as the competitive behavior of rival organizations, the
bargaining power of buyers/customers and suppliers, threats from new entrants to the
industry, and the ability of buyers to substitute products (Porter's 5 forces); and

3. Internal environment, regarding the strengths and weaknesses of the organization's


resources (i.e., its people, processes and IT systems).
Strategic decisions are based on insight from the environmental assessment and are responses to
strategic questions about how the organization will compete, such as:

What is the organization's business?

Who is the target customer for the organization's products and services?

Where are the customers and how do they buy? What is considered "value" to the
customer?

Which businesses, products and services should be included or excluded from the
portfolio of offerings?

What is the geographic scope of the business?

What differentiates the company from its competitors in the eyes of customers and
other stakeholders?

Which skills and capabilities should be developed within the firm?

What are the important opportunities and risks for the organization?

How can the firm grow, through both its base business and new business?

How can the firm generate more value for investors?

The answers to these and many other strategic questions result in the organization's strategy and
a series of specific short-term and long-term goals or objectives and related measures.

Implementation

The second major process of strategic management is implementation, which involves decisions
regarding how the organization's resources (i.e., people, process and IT systems) will be aligned
and mobilized towards the objectives. Implementation results in how the organization's resources
are structured (such as by product or service or geography), leadership arrangements,
communication, incentives, and monitoring mechanisms to track progress towards objectives,
among others. Running the day-to-day operations of the business is often referred to as
"operations management" or specific terms for key departments or functions, such as "logistics
management" or "marketing management," which take over once strategic management

Q.2: How are strengths and weaknesses of any company determined? Write in
detail.
Listing of a company's strengths and weaknesses are a normal part of any attempt at strategic
planning for virtually all companies. No shock there! But, why do we perform these analyses,
and what do we expect to learn by doing them? To be sure the company is headed in the right
direction, a competent, thoughtful review and updating of your strengths and weaknesses is a
fundamental element of good strategic planning.
First, we must be sure we are actually doing the analysis of our strengths and weaknesses
properly. Some teams just get together and throw a bunch of ideas on the page or flip chart, then
go on to their next exercise. Little additional thought is given to the importance or impact of
strengths and weaknesses and the reasons for defining them and analyzing them.
To set the stage for analysis of strengths and weaknesses, the team should first discuss why the
team is looking for them, what is being looked for, and what will be done with the results when
they have completed their work.
Why does your team want to determine what your strengths are?
Simply put, your strengths are those things that your company does well which help you perform
your jobs, deliver value to your customers and/or give you an advantage over your competition.
They are some of the cornerstones you use to build your business and to build and maintain
competitive advantages in the market place.

Why should your team determine your weaknesses?


Most people answer that the team needs to correct weaknesses in order to remain competitive
and effective. The real reason your team should determine what your weaknesses are is to get
them out in the open, with everyone in basic agreement that these are actually weaknesses, so the
team can determine what to do about each one, if anything.
Why wouldn't your team want to address and correct each weakness?
There are other considerations which must be taken into account.
Firstly, we must recognize that we can't possibly be good at everything. Each company focuses
its efforts to maximize results in its own core business, and does not get distracted into areas
where it may have limited appeal and expertise. We need to choose those characteristics
(strengths) which help us build our business most effectively and address only those critical
weaknesses which truly interfere with or prevent us from being successful.
Secondly, think about the relationship between strengths and weaknesses. Almost all strengths
have off-setting weaknesses of some kind. By correcting the weakness, we may lessen the
strength or eliminate it altogether. He would lose the strengths that make him one of the premier
players in the world by correcting a perceived weakness. The conclusion from this is that your
team must be very careful to differentiate between weaknesses which must be corrected, and
those which are the natural off-shoots of the strengths on which you are building your business.
Thirdly, your team must be very careful to be objective in its analyses. It is easy to get into a selfcritical mode in which everything is a weakness, or, conversely, the team may lead itself into a
rosy scenario in which its strengths are overstated and weaknesses understated. In every session,
it is a positive idea to have an experienced process leader with no vested interest in the process
beyond assuring that the right things are addressed, that conclusions are reached objectively and
every effort is made to assure the financial, physical and human assets of the company are used
to obtain the highest and best results for the company. We have found that some companies are
too introspective, and in looking out at the real world, think that they are the only ones with
problems and challenges. Others are just the opposite. They go blithely along, thinking that they

are doing very well, with little consideration of what is happening in the real world. Your leader's
job is to assure that the team's approach is fair, balanced and objective, so each analysis obtains
the best, real world result.
What areas of the company should be addressed?
While this varies within each company depending on what the company does and how it
operates, generally, the team should look at the overall company strengths and weaknesses as
well as the strengths and weaknesses of key areas within the company. It is important to look at
how each area interacts with the customer world, both inside and outside the company, as well as
analyzing the entity as a whole. Recognize that it may well happen that some areas have different
strengths or weaknesses when examined individually, but the company performance may be
totally different when viewed as an integrated unit.
When you have laid the groundwork for your team to begin analyzing your strengths and
weaknesses by setting out expectations and limitations as discussed above, your leader should
throw the floor open for ideas.

Q.3: Write detail notes on the following?


(a)

Porters five forces analysis,

(b)

Strategic Management With Long and Short Term Objectives

(c)

Diversification Strategy

(a)

Porters five forces analysis:

Porter five forces analysis is a framework to analyze level of competition within an industry
and strategy development. It draws upon industrial organization (IO) economics to derive five
forces that determine the competitive intensity and therefore attractiveness of an Industry.
Attractiveness in this context refers to the overall industry profitability. An "unattractive"
industry is one in which the combination of these five forces acts to drive down overall

profitability. A very unattractive industry would be one approaching "pure competition", in


which available profits for all firms are driven to normal profit. This analysis is associated with
its principal innovator Michael E. Porter of Harvard University.
Porter referred to these forces as the micro environment, to contrast it with the more general
term macro environment. They consist of those forces close to a company that affect its ability to
serve its customers and make a profit. A change in any of the forces normally requires a business
unit to re-assess the marketplace given the overall change in industry information. The overall
industry attractiveness does not imply that every firm in the industry will return the same
profitability. Firms are able to apply their core competencies, business model or network to
achieve a profit above the industry average. A clear example of this is the airline industry. As an
industry, profitability is low and yet individual companies, by applying unique business models,
have been able to make a return in excess of the industry average.
Porter's five forces include - three forces from 'horizontal' competition: the threat of substitute
products or services, the threat of established rivals, and the threat of new entrants; and two
forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of
customers.
Porter developed his Five Forces analysis in reaction to the then-popular SWOT analysis, which
he found un-rigorous and ad hoc. Porter's five forces is based on the Structure-ConductPerformance paradigm in industrial organizational economics. It has been applied to a diverse
range of problems, from helping businesses become more profitable to helping governments
stabilize industries.[2] Other Porter strategic frameworks include the value chain and the generic
strategies.

Threat of new entrants:


Profitable markets that yield high returns will attract new firms. This results in many new
entrants, which eventually will decrease profitability for all firms in the industry. Unless the
entry of new firms can be blocked by incumbents (which in business refers to the largest
company in a certain industry, for instance, in telecommunications, the traditional phone
company, typically called the "incumbent operator"), the abnormal profit rate will trend towards
zero (perfect competition).

The following factors can have an effect on how much of a threat new entrants may pose:
Potential factors:
1. The existence of barriers to entry (patents, rights, etc.). The most attractive segment is
one in which entry barriers are high and exit barriers are low. Few new firms can enter
and non-performing firms can exit easily.
2. Government policy
3. Capital requirements
4. Absolute cost
5. Cost disadvantages independent of size
6. Economies of scale
7. Economies of product differences
8. Product differentiation
9. Brand equity
10. Switching costs or sunk costs
11. Expected retaliation
12. Access to distribution
13. Customer loyalty to established brands
14. Industry profitability (the more profitable the industry the more attractive it will be to
new competitors)

Threat of substitute products or service:

The existence of products outside of the realm of the common product boundaries increases
the propensity of customers to switch to alternatives. For example, tap water might be considered
a substitute for Coke, whereas Pepsi is a competitor's similar product. Increased marketing for
drinking tap water might "shrink the pie" for both Coke and Pepsi, whereas increased Pepsi
advertising would likely "grow the pie" (increase consumption of all soft drinks), albeit while
giving Pepsi a larger slice at Coke's expense. Another example is the substitute of traditional
phone with a smart phone.
Potential factors:
1. Buyer propensity to substitute
2. Relative price performance of substitute
3. Buyer switching costs
4. Perceived level of product differentiation
5. Number of substitute products available in the market
6. Ease of substitution
7. Substandard product
8. Quality depreciation
9. Availability of close substitute

Bargaining power of customers (buyers):


The bargaining power of customers is also described as the market of outputs: the ability of
customers to put the firm under pressure, which also affects the customer's sensitivity to price
changes. Firms can take measures to reduce buyer power, such as implementing a loyalty
program. The buyer power is high if the buyer has many alternatives. The buyer power is low if
they act independently e.g. If a large number of customers will act with each other and ask to

make prices low the company will have no other choice because of large number of customers
pressure.
Potential factors:
1. Buyer concentration to firm concentration ratio
2. Degree of dependency upon existing channels of distribution
3. Bargaining leverage, particularly in industries with high fixed costs
4. Buyer switching costs relative to firm switching costs
5. Buyer information availability
6. Force down prices
7. Availability of existing substitute products
8. Buyer price sensitivity
9. Differential advantage (uniqueness) of industry products
10. RFM (customer value) Analysis
11. The total amount of trading

Bargaining power of suppliers:


The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw
materials, components, labor, and services (such as expertise) to the firm can be a source of
power over the firm when there are few substitutes. If you are making biscuits and there is only
one person who sells flour, you have no alternative but to buy it from them. Suppliers may refuse
to work with the firm or charge excessively high prices for unique resources.
Potential factors:
1. Supplier switching costs relative to firm switching costs

2. Degree of differentiation of inputs


3. Impact of inputs on cost or differentiation
4. Presence of substitute inputs
5. Strength of distribution channel
6. Supplier concentration to firm concentration ratio
7. Employee solidarity (e.g. labor unions)
8. Supplier competition: the ability to forward vertically integrate and cut out the buyer.

Intensity of competitive rivalry:


For most industries the intensity of competitive rivalry is the major determinant of the
competitiveness of the industry.
Potential factors:
1. Sustainable competitive advantage through innovation
2. Competition between online and offline companies
3. Level of advertising expense
4. Powerful competitive strategy
5. Firm concentration ratio
6. Degree of transparency

Usage

Strategic consultants occasionally use Porter's five forces framework when making a qualitative
evaluation of a firm's strategic position. However, for most consultants, the framework is only a
starting point or "checklist." They might use value chain or another type of analysis in
conjunction.[3] Like all general frameworks, an analysis that uses it to the exclusion of specifics
about a particular situation is considered naive.
According to Porter, the five forces model should be used at the line-of-business industry level; it
is not designed to be used at the industry group or industry sector level. An industry is defined at
a lower, more basic level: a market in which similar or closely related products and/or services
are sold to buyers. (See industry information.) A firm that competes in a single industry should
develop, at a minimum, one five forces analysis for its industry. Porter makes clear that for
diversified companies, the first fundamental issue in corporate strategy is the selection of
industries (lines of business) in which the company should compete; and each line of business
should develop its own, industry-specific, five forces analysis. The average Global 1,000
Company competes in approximately 52 industries (lines of business).

Criticisms
Porters framework has been challenged by other academics and strategists such as Stewart Neill.
Similarly, the likes of ABC, Kevin P. Coyne and Somu Subramaniam have stated that three
dubious assumptions underlie the five forces:
1. That buyers, competitors, and suppliers are unrelated and do not interact and collude.
2. That the source of value is structural advantage (creating barriers to entry).
3. That uncertainty is low, allowing participants in a market to plan for and respond to
competitive behavior.
An important extension to Porter was found in the work of Adam Branden burger and Barry
Nalebuff of Yale School of Management in the mid-1990s. Using game theory, they added the
concept of complementors (also called "the 6th force"), helping to explain the reasoning behind
strategic alliances. Complementors are known as the impact of related products and services
already in the market. The idea that complementors are the sixth force has often been credited

to Andrew Grove, former CEO of Intel Corporation. According to most references, the sixth
force is government or the public. Martyn Richard Jones, whilst consulting at Group Bull,
developed an augmented 5 forces model in Scotland in 1993. It is based on Porter's model and
includes Government (national and regional) as well as Pressure Groups as the notional 6th
force. This model was the result of work carried out as part of Groupe Bull's Knowledge Asset
Management Organization initiative.
Porter indirectly rebutted the assertions of other forces, by referring to innovation, government,
and complementary products and services as "factors" that affect the five forces.
It is also perhaps not feasible to evaluate the attractiveness of an industry independent of the
resources a firm brings to that industry. It is thus argued (Wernerfelt 1984) that this theory be
coupled with the Resource-Based View (RBV) in order for the firm to develop a much more
sound strategy. It provides a simple perspective for accessing and analyzing the competitive
strength and position of a corporation, business or organization.

(b)

Strategic Management With Long and Short Term Objectives

Setting goals and objectives for your small business is important to ensure its growth and
sustainability. Defining goals and putting together a comprehensive, employee-focused
management strategy represents an important part of strategic management. This means
analyzing the major initiatives that your company takes and putting translating initiatives into
reasonable and workable goals.
Management by Objectives
In 1954, leadership and management expert Peter Drucker introduced the concept of
"Management by Objectives," sometimes also called "Management by Results." MBO is a
cooperative, business-wide strategy for setting goals and implementing organizational change.
Importantly, MBO compares progress toward meeting goals with the actual performance of the
business and its employees. The idea is that when employees are involved in helping to set their

own goals and those of the business, they'll be more likely to meet the goals because a sense of
buy-in gets created.
Short-Term Objectives
Short-term objectives represent the goals an organization sets that are centered on tasks that can
be achieved within the next six months or, at the outset, within one year. An example of a shortterm goal might be to increase sales by 10 percent. This is an easily measurable goal and
employees can be held directly accountable for ensuring that it is met.
Long-Term Objectives
Long-term objectives define any goal that has a time frame exceeding one year. Business goals
that are normally considered long term include developing a new product, growing annual
revenue and developing a comprehensive marketing and public relations strategy. Importantly,
long-term goals must not go on forever. While they take more time than short-term objectives,
long-term goals must be realistic and time bound.
Strategic Management
A business's long-term and short-term goals can be put together into a comprehensive strategic
management plan for the company. The concept of strategic management says that goals should
conform to the organization's mission and vision statements and that goals ought to reflect the
direction the business owner and general managers wish to take the company. Essentially, goals
that are superfluous or which detract from the company's mission should play second fiddle to
more serious and beneficial objectives.

(c)

Diversification Strategy

Diversification is a corporate strategy to enter into a new market or industry which the business
is not currently in, whilst also creating a new product for that new market. This is most risky
section of the Ansoff Matrix, as the business has no experience in the new market and does not
know if the product is going to be successful.
Diversification is part of the four main growth strategies defined by Igor Ansoff's
Product/Market matrix:

Ansoff pointed out that a diversification strategy stands apart from the other three strategies. The
first three strategies are usually pursued with the same technical, financial, and merchandising
resources used for the original product line, whereas diversification usually requires a company
to acquire new skills, new techniques and new facilities.
Note: The notion of diversification depends on the subjective interpretation of new market and
new product, which should reflect the perceptions of customers rather than managers. Indeed,
products tend to create or stimulate new markets; new markets promote product innovation.
Product diversification involves addition of new products to existing products either being
manufactured or being marketed. Expansion of the existing product line with related products is
one such method adopted by many businesses. Adding tooth brushes to tooth paste or tooth
powders or mouthwash under the same brand or under different brands aimed at different
segments is one way of diversification. These are either brand extensions or product extensions
to increase the volume of sales and the number of customers.

Types of diversification strategies:


The strategies of diversification can include internal development of new products or markets,
acquisition of a firm, alliance with a complementary company, licensing of new technologies,
and distributing or importing a products line manufactured by another firm. Generally, the final
strategy involves a combination of these options. This combination is determined in function of
available opportunities and consistency with the objectives and the resources of the company.

There are three types of diversification: concentric, horizontal, and conglomerate.


Concentric diversification
This means that there is a technological similarity between the industries, which means that the
firm is able to leverage its technical know-how to gain some advantage. For example, a company
that manufactures industrial adhesives might decide to diversify into adhesives to be sold via
retailers. The technology would be the same but the marketing effort would need to change.
It also seems to increase its market share to launch a new product that helps the particular
company to earn profit. For instance, the addition of tomato ketchup and sauce to the existing
"Maggi" brand processed items of Food Specialities Ltd. is an example of technological-related
concentric diversification.
The company could seek new products that have technological or marketing synergies with
existing product lines appealing to a new group of customers.This also helps the company to tap
that part of the market which remains untapped, and which presents an opportunity to earn profit.
Horizontal diversification
The company adds new products or services that are often technologically or commercially
unrelated to current products but that may appeal to current customers. This strategy tends to
increase the firm's dependence on certain market segments. For example, a company that was
making notebooks earlier may also enter the pen market with its new product.
When is Horizontal diversification desirable?
Horizontal diversification is desirable if the present customers are loyal to the current products
and if the new products have a good quality and are well promoted and priced. Moreover, the
new products are marketed to the same economic environment as the existing products, which
may lead to rigidity or instability.
Horizontal integration occurs when a firm enters a new business (either related or unrelated) at
the same stage of production as its current operations. For example, Avon's move to market
jewelry through its door-to-door sales force involved marketing new products through existing
channels of distribution. An alternative form of that Avon has also undertaken is selling its
products by mail order (e.g., clothing, plastic products) and through retail stores (e.g.,Tiffany's).
In both cases, Avon is still at the retail stage of the production process.

Conglomerate diversification (or lateral diversification)


The company markets new products or services that have no technological or commercial
synergies with current products but that may appeal to new groups of customers. The
conglomerate diversification has very little relationship with the firm's current business.
Therefore, the main reasons for adopting such a strategy are first to improve the profitability and
the flexibility of the company, and second to get a better reception in capital markets as the
company gets bigger. Though this strategy is very risky, it could also, if successful, provide
increased growth and profitability.

Goals of diversification
According to Calori and Harvatopoulos (1988), there are two dimensions of rationale for
diversification. The first one relates to the nature of the strategic objective: Diversification may
be defensive or offensive.
Defensive reasons may be spreading the risk of market contraction, or being forced to diversify
when current product or current market orientation seems to provide no further opportunities for
growth. Offensive reasons may be conquering new positions, taking opportunities that promise
greater profitability than expansion opportunities, or using retained cash that exceeds total
expansion needs.
The second dimension involves the expected outcomes of diversification: Management may
expect great economic value (growth, profitability) or first and foremost great coherence with
their current activities (exploitation of know-how, more efficient use of available resources and
capacities). In addition, companies may also explore diversification just to get a valuable
comparison between this strategy and expansion.

Q.4: Explain why strategy implementation is more difficult than strategy


formulation?
It has been found that companies formulate strategy very easily but when it comes to
implementation of the strategy, they face many problems. There is big gap between the strategy
formulation and strategy implementation. The strategy for the company is formulated by the
management. There are hardly 10-15 people who formulate the strategy for the company. On the

other hand, implementation of the strategy is carried out by other set of people, which were never
consulted by the management while formulation of the company strategy. Many employees of
the company resist changing. They hardly took any effects to implement the strategy. Addition to
this, management is unaware of the ground realties of the market. As a result they did not
consider the obstacles, which implementation team might face while implementing the company
strategy.All chosen strategies, regardless of the resulting positioning of the company, tend to be
conceptual in nature and associated with a mission and vision that may be only understood at a
high level.
Although

it

is

good

thing

for

company to have a focus and a general direction, the top-level strategy is


usually not sufficient for rank and file employees in terms of providing direction
for their day-to-day work. For this reason, effective execution of strategy involves
the

breaking

down

of

the

top-level

strategy

into

tangible

work.

For

large

company this can be rather daunting. For example, imagine that you are a CEO
of

company

that

employs

thousands

of

people.

Since

company

is

only

profitable when it is doing work that advances its strategy, each employee must
be advancing the strategy of the company every hour of every day by doing only
those things which contribute to products and services that customers value and
are willing to pay for. How is this done? The process starts with critical success
factors.
Critical
place

success
in

company

order
intends

factors

spell

for

company

to

compete

out

important
to

using

achieve
a

strategic

elements

its

strategy.

For

high-end

product

line,

that

must

example,
then

be
if

in
the

critical

success factor may be marketing a line of full-featured product line within the
next 18 months. If marketing such a product line is critical for the success and
profitability of the company, then it is correct to identify this as a critical success
factor. Although this does break down a top-level strategy into a greater level of
detail, it is still not sufficiently elaborated for an organization to take action. It is
for this reason that objectives are so important. A critical success factor such as

marketing a full-featured product line may involve a number of more detailed


objectives

such

as

creating an initial product

design concept, or developing a

business plan, or finally, increasing the research and development team by 10%.
Are these objectives significantly detailed to allow for action? You could argue
that yet more detail is needed, and it is for this reason that underneath the level
of objectives is more specific direction in the form of critical business activities.
These are actions that a company must take in order to achieve its objectives.
As an example, if increasing the research and development team by 10% is an
objective, then a critical business activity associated with this objective would be
to place a series of recruiting ads in the top three target markets.

Strategy As a Series of Projects


Ultimately, all strategies may be broken down to the point that individuals can
actually

do

lowest

level

something
that

implementation

of

that

project

contributes

management

strategic

initiatives.

to

the

practices
Project

company
support

strategy. It
the

management

is

at

this

management

of

the

spell

out

processes

how to take very large pieces of work, and break them down into units that one
person, or a small team of people, can complete within a timeframe of about two
weeks. The detailed decomposition of the top level work is referred to as the
Work Breakdown Structure. The smallest actionable unit of work is referred to as
the work package. As you can see, a CEO is able to guide a company in the
pursuit of its strategy by successively breaking down a top level strategy into
critical

success

factors,

objectives,

critical

business

activities,

and

finally

work

packages that employees can actually complete. It is, in effect, a hierarchy of


strategic implementation.
Policies
Strategic

objectives

strategic

success.

outline

what

the

company

However,

such

objectives

has

dont

to

in

explicitly

order

to

state

how

achieve
things

should be done, or the basic approach the company will take in its execution of

objectives.

Polices

companies

use

provide

guidance

policies.

Some

in

this

companies,

area

and

this

especially

is

typically

traditional

how

manufacturing

companies, use an annual policy system as a means for carrying out strategy.
The policy for the year becomes the strategic activities of focus, to the exclusion
of others. Some companies use the annual policy process as a means for rolling
out

not

only

strategy,

but

the

annual

business

plan

of

the

company.

Conflict
It is one thing to formulate a strategy, and have a framework for its execution. It
is quite another to get all employees to support the stated strategy. Employees
who have been with a company for many years, for example, may seek to work
against a strategy that breaks

with

the past in

order to try something

new.

Likewise, new employees may see the company as living in the past and may
push

for

new

approach.

These are but two simple examples of a myriad of possible reasons for conflict
to exist in the development and execution of strategy. Regardless of the source
of the conflict, it is essential to recognize that conflict will always exist among
any who have an interest in the strategic direction of the company. This means
that it is not only employees that may have conflictcustomers, investors, and
even

competitors,

or

any

stakeholders

(ie

those

who

have

an

interest

in

the

company) may have a role to play. This infers that the CEO must think about
conflict in the context of strategy, and consider how to deal with it.
Rewards and Culture
When

the

stakeholders

of

the

company

are

progressing

toward

the

strategic

goals, the company is said to be in a state of strategic alignment. This is not


easy to achieve, but rewards and culture go a long way toward aligning the
efforts

of

employees.

Rewards

incentivize

work

that

progresses

toward

strategic

goals, and are not available to those who work against the company strategy.
Further,
successful

having
culture

an
is

environment
all

about.

conducive

to

Motivated

and

strategic

success

incentivized

is

really

stakeholders

can

what
be

contagious,

and

as

result,

success

has

way

of

spreading

through

the

companyleaving strategic alignment in its wake!

Techniques of Strategy Evaluation


Internal Forces
Strategy evaluation should begin with an examination of the internal forces that will influence
you company's ability to follow the strategic plan. Your evaluation should consider the value of
company resources such as financial assets, proprietary information and the people who are
available to guide the company to meet its goals. This evaluation will help you understand how
these assets can be developed to expand the company's capabilities. All of these internal forces
combined are what set your company apart from your competitors.
External Forces
The next technique for strategy evaluation is to consider the external forces that will influence
your company's ability to complete its mission. The primary external force your company must
face are you customers. Customers purchasing the products and services your company produces
will determine the success of your company. Is your company meeting the expectations of your
customer base? Along with the consideration of your customers, you must evaluate the strengths
and weaknesses of your competitors. Do your competitors have differentiating capabilities that
will pull your customers away?
Measuring Performance
The Evaluation process will help you determine if the strategy you have developed is leading the
company to meet its mission and goals. Begin this evaluation technique by evaluating if the
results that have been realized through company operations have been successful. Evaluate if the
sales force has been successful in meeting all of the sales goals. If you have a manufacturing
facility, are production targets being met? Also evaluate if your company has been able to garner
a greater share of the market.
Correcting Performance
After your evaluation has considered all of the company's historical performance data, the next
step is determine what corrective measures should be taken to insure company operations are

correctly aligned with the strategic plan. Many times making corrections to strategic operations
will force changes that will cause objections, yet change is an essential element of the controlling
process. You must ensure the company will be able to meet all of its short and long term strategic
goals. Adjusting strategic operations is an essential technique of strategy evaluation.

THE END

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