INNOVATION

MANAGEMENT
MODULE II
PROF. ANTRA VOHRA
WHAT ARE ORGANIZATIONAL ASPECTS OF INNOVATION
Organizational Innovation is a process of receiving and using new ideas to satisfy
the stakeholders of an organization. It is the conversion of new knowledge into
new products and services. Organizational Innovation is about creating value and
increasing efficiency, and therefore growing business. It is a spark that keeps
organizations and people moving ever onward and upward. “Without innovation,
new products, new services, and new ways of doing business would never emerge,
and most organizations would be forever stuck doing the same old things the same
old way
The term organizational innovations covers a wide spectrum of innovations; for
example, it can mean innovations in management practices, innovations in
administrative processes or innovations in the formal organizational structure.
WHAT ARE ORGANIZATIONAL ASPECTS OF INNOVATION
Uncertainty: Uncertainty is one of the essential characteristics of the innovation
process. Innovation is, by definition, an uncertain process, in that the existence of
problems or opportunities does not clearly show the best solutions to solve or fullfil
them.
Ubiquity: Innovation is an ubiquitous phenomenon in modern economies. New
products, new processes, and new markets are constantly created in all parts of
the economy. It is then possible to consider innovation as a primary component of
economic systems, and not as the exogenous, disturbing set of events considered in
models of standard economics.
Cumulativeness: Organizational innovation can be conceived as a cumulative process
that evolves incrementally and is based upon the existing technological and
knowledge base. The cumulative nature of organizational innovation causes the firm
to be constrained by past decisions and practices.
WHAT ARE ORGANIZATIONAL ASPECTS OF INNOVATION
Uncertainty: Uncertainty is one of the essential characteristics of the innovation
process. Innovation is, by definition, an uncertain process, in that the existence of
problems or opportunities does not clearly show the best solutions to solve or fullfil
them.
Ubiquity: Innovation is an ubiquitous phenomenon in modern economies. New
products, new processes, and new markets are constantly created in all parts of
the economy. It is then possible to consider innovation as a primary component of
economic systems, and not as the exogenous, disturbing set of events considered in
models of standard economics.
Cumulativeness: Organizational innovation can be conceived as a cumulative process
that evolves incrementally and is based upon the existing technological and
knowledge base. The cumulative nature of organizational innovation causes the firm
to be constrained by past decisions and practices.
 TYPES OF ORGANIZATIONAL INNOVATION
Incremental Innovation
Incremental innovations consist of small modifications or refinements to pre-
existing processes or phenomenological states such as existing policies,
procedures, product line, and services. These innovations also manifest as
improvements in operations, cost control, and product or service performance
necessary to keep pace with competitors. Popular concepts such as continuous
improvement and reengineering are examples of incremental change that may
require “revisioning” the companies mission and competitive strategy to reflect
discontinuous change in the task environment.
 TYPES OF ORGANIZATIONAL INNOVATION
Radical Innovation
Innovations can also be considered competence destroying. The discerning
factor is whether the technology builds on the firm’s existing competences or
makes them obsolete. Radical innovations are discontinuous or dramatic
departures from the current ideal in design, application, or process. These
radical innovations are typically technological breakthroughs with no
precedents or antecedents that represent true quantum leaps in theory and
application rather than linear progression. Of course radical innovation can be
riskier and require greater investments.
 TYPES OF ORGANIZATIONAL INNOVATION
Product & Process Innovation

Product innovation focuses on the outputs of an organization, in terms of its

goods and services. This is often synonymous to technological innovation.

Process innovations improve the way organizations conduct business,

particularly in terms of their efficiency or production. These work in tandem,
in the sense that new processes may enable the production of new products
or vice versus
 HARD VERSUS SOFT INNOVATION
Hard Innovation is organized by Research and Development (R&D)
department, characterized by strategic investment in innovation, be it high-
risk-high-return radical innovation or low-risk-low-return incremental
innovation.
Soft Innovation is the clever, insightful, useful ideas that just anyone in the
organization can think up.
Innovation is the key driver of competitive advantage, growth, and
profitability. There are many parts of the whole field of innovation: strategy
innovation, new product development, creative approaches to problem
solving, idea management, suggestion systems, etc.
Innovation is neither singular nor linear, but systemic. It arises from
complex interactions between many individuals, organizations and their
operating environment.
 HARD VERSUS SOFT INNOVATION
Firms which are successful in realizing the full returns from their technologies and
innovations are able to match their technological developments with complementary
expertise in other areas of their business, such as manufacturing, distribution, human
resources, marketing, and customer service.
Innovation requires a vision change, risk and upheaval. Innovation is not done for
innovation’s sake. There must be a driving motivator compelling the organization to
develop the systems, resources and culture needed to support innovation. In today’s
environment, that driver is survival in a world of rapid change.
Innovation is customer-driven and bottom-line focused. The purpose of innovation is
to find better ways to delight customers while meeting the needs of all other
stakeholders and creating a financially viable organization. Innovation requires a
foundation of ethics as it would flourish only in an environment of mutual trust and
respect, not only within the organization but also within the surrounding community
and global environment.
 HARD VERSUS SOFT INNOVATION
Innovation requires innovative thinking, which is a skill needed among every member
of the organization. It is the ability to constantly look for new possibilities, generate
ideas, think together productively, make sound decisions and gain the commitment
needed for rapid and effective implementation.
Innovation begins with a clean slate in which prior assumptions and the way things
have always been done are set aside in order to look at possibilities with a fresh
perspective. Innovation looks at the whole system. Creating solutions in one area that
causes problems in another is not innovation; it’s chaos.
Innovation requires a diverse, information- and interaction-rich environment. People
with different perspectives, working together toward a common objective, with
accurate, up-to-date information and the proper tools are the only source of
innovation.
TECHNIQUES AND METHODS OF INNOVATION

Knowledge Management Techniques

Market Intelligence Techniques
Cooperative and Networking Techniques
HRM Techniques
Interface Management Techniques
Creativity Development Techniques
Process Improvement Techniques
Innovative project management techniques
 TECHNIQUES AND METHODS OF INNOVATION
KNOWLEDGE MANAGEMENT TECHNIQUES
Knowledge management is the process whose main objective is to generate, collect and exploit the knowledge
inside the organization in a continuous and systematic manner, and in this way improve its creative and innovative
potential as a whole. With the proper combination of human resources, process and technologies management,
this process is realized at two levels: management of the existing knowledge that is available inside the
organization, and promotion of organization’s capacity to use new knowledge, regardless of its source (from
outside or inside the organization).
Although this technique is suitable for implementation in all types of enterprises, it is still most commonly used in
those with large number of employees, which naturally leads to the increased need to exchange the relevant
information among employees in a controlled and systematic way. In those environments, the knowledge
management technique is usually implemented through technology platform for information and knowledge
exchange, which can significantly improve the innovative potential, through:

Knowledge Audits
Knowledge Mapping
Document Management
IP Management
 TECHNIQUES AND METHODS OF INNOVATION
KNOWLEDGE MANAGEMENT TECHNIQUES

Knowledge Audits
Knowledge audits as a process of evaluation and auditing of innovation capacity, gives an
insight into current knowledge base in an enterprise. In this way, the enterprise can take
advantage of being able to identify shortages, information overloads, information
duplication and barriers for the active data exchange;

Knowledge Mapping:
Knowledge mapping gives the preview of the sources, flows, limitations or halts in the
process of knowledge transfer and exchange inside the organization. In order to map
knowledge, it is extremely important to recognize it in all segments: processes, relations,
communications, users and in various forms (as explicit knowledge, hidden, knowledge
from outside and from inside the organization, etc.)
 TECHNIQUES AND METHODS OF INNOVATION
KNOWLEDGE MANAGEMENT TECHNIQUES
Document management is the source of knowledge and innovations, whether we talk
about manuals, reports, methodologies or other forms of documents. This is why it is of
utmost importance to develop tools for their classification, search, archiving and using in
order to facilitate the management of those documents through unique system based on
information technologies.

IP management is the ground of general corporate strategy. It includes protection of

products, corporate intellectual property and results derived from an organization’s
innovation activities.
 TECHNIQUES AND METHODS OF INNOVATION
MARKETING INTELLIGENCE TECHNIQUES
Market intelligence refers to detailed competition research and analysis which enables the
enterprise to collect, filter, analyse and distribute relevant reliable and timely information
on information on competition and end users, transforming thus information into
knowledge as the ground for decision making process. Due to this, many of these
techniques depend on information technologies, internet particularly, which enable
systematic processing and classification of information. They are most usually realized
through:

Technology Watch
Patent Analysis
Customer Relationship
Geo-Marketing
Business Intelligence
 TECHNIQUES AND METHODS OF INNOVATION
MARKETING INTELLIGENCE TECHNIQUES
Technology watch as soon as some technological advance appears on the market in order to identify
potential innovation that can influence enterprise competitiveness and analyse possible changes in
behaviour of end users;

Patents analysis enables assessment of results competitiveness before the enterprise undergo an
expensive research and development, applying for patent, etc;

Customer relationship management is about recognizing, establishing and improving the relationships with
users in order to build their loyalty and trust;

Geo-marketing or thematic market monitoring for innovative sales and marketing planning. One of the
forms of this technique is Geographical Information System (GIS), a computer tool for generating the map
that can provide all information on users, target groups and market that can be easily filtered;

Business intelligence integrates all methods for collecting, filtering, analysing and distributing the
information needed for business.
 TECHNIQUES AND METHODS OF INNOVATION
COOPERATIVE AND NETWORKING TECHNIQUES
Knowledge based economy requires team work of people from different departments and organizations as well as
connections among them which is most often realized through information technologies. However, the real challenge is to
make a transition from communication to team coordination.
In order to successfully realize such coordination and to produce expected results, various initiatives have been developed
lately to provide collaborative environment where knowledge, information and service exchange among relevant actors is
encouraged.
In this way, organization can take advantages on various levels:
• Increase of creativity and easier problem solving inside the group
• Improved, faster and clearer communication
• Developed corporate spirit
• Collection of various expertise and experiences in one place
• Forming of the group of people with common interests regardless of their current location • Reduction of travel costs for
realization of joint activities
• Savings in coordination time and costs
There are many approaches to this technique. Some of them are as follows:
TEAM BUILDING
GROUPWARE TECHNOLOGIES
SUPPLY CHAIN MANAGEMENT
INDUSTRIAL CLUSTERING
 TECHNIQUES AND METHODS OF INNOVATION
COOPERATIVE AND NETWORKING TECHNIQUES
Team building, which improves the corporate culture inside the organization by fostering the collective
obligation among members, encourages their active participation in the decision-making process, facilitates the
delegation of responsibilities and provides complementarity, i.e. adequate structure of experiences and
knowledge;

Groupware technologies as a kind of corporate software relying on three principles: communication

(dissemination and collection of information), collaboration (information exchange and building the mutual
understanding) and coordination (delegation of tasks inside the network);

Supply chain management, deals with suppliers, sub-contractors and users through active and controlled
system that integrates the whole chain into one entity;

Industrial clustering groups the organization’s capacities with the same activities and interest on regional and
local level in order to support their innovation process. The cluster members have strong support through
network and infrastructure provided by universities, research institutes, financial institutions, incubators, etc. In
this way, cluster members can additionally increase their competitiveness and reduce the time-to-market for
their products, services and processes.
 TECHNIQUES AND METHODS OF INNOVATION
HUMAN RESOURCE MANAGEMENT TECHNIQUES
Human resources management is extremely significant aspect of business. Having in mind that information
technologies are increasingly developing as the support in this area, this technique is widely accepted as
technological revolution, whether we are talking about employment, trainings, mobilities, internal
communication or assessment of the work results, team building and employees productivity monitoring. Its
application leads to improved innovative potential of an organization, because it facilitates the access to the
outside specialized knowledge (through participation in the e-learning programmes), knowledge and experience
exchange through corporate intranet and access to the most prominent experts regardless of their current
location. On the other side, it allows at the same time the automation of the employment process (through
internet), more efficient system of productivity and work quality monitoring, as well as improvement of internal
communication.
The most commonly used tools for human resources management:
Online Recruitment
Management of Employees Competencies
Corporate Intranet
Tele-working techniques
E-learning
Groupware tools
 TECHNIQUES AND METHODS OF INNOVATION
HUMAN RESOURCE MANAGEMENT TECHNIQUES
Online recruitment via internet, whether it is simple advertising of vacancies or establishing the
complete system for career development;

Management of employees competencies and skills;

Corporate intranet which through internet protocol and applications allows better availability of
data, their facilitated monitoring and transfer within an organization. In this way, the decision
making process is encouraged and improved with active participation of relevant actors;

Tele-working techniques which combine telecommunication and computer technologies, where

employees can work from remote locations, from home, etc.;

E-learning consists of trainings organized through the network (intranet or internet), facilitating in
this way interactive, personalized learning with large savings in time and money;
Groupware tools which enable groups to organize their activities within the network, offering
various options from appointment of meetings and sending the post to protection of the documents
in the network.
 TECHNIQUES AND METHODS OF INNOVATION
INTERFACE MANAGEMENT TECHNIQUES
Decision-making process is based on information coming from different departments within the organization
(marketing, R&D department, production, financial or human resources department, etc.). This is why it is very
important to connect all these units and facilitate their interaction, in order to provide the quality operations of the
organization and the decision-making process with it. If this kind of management is adequately exploited and applied
not only to individuals but their knowledge as well, it can improve the organization’s innovation potential and thus
significantly facilitate the successful realization of certain tasks or projects. Due to this, today we have several
approaches in this area:

Concurrent engineering is a systematic approach to an integrated, concurrent development of products and

accompanying processes, including production and support system. This approach held development departments to
analyse all elements of the life cycle of a product, from the concept to production and disposal. Using the
programming elements, knowledge based systems, CAD/CAM techniques, etc., reduces the product development
time 30-70%, number of engineering changes 65-90%, time-to-market 20-90%. At the same time, their application
increases the product quality 200-600% and administrative productivity for 20-110%.

R&D marketing interface as a form of interconnection between development and marketing department is of great
importance for the organization business. It depends on the fact if the certain product is based on technology
research or on specific market requirements. If the organization can provide the quality link between these two
departments, good structure and decision-making process, this approach can be very beneficial for the organization.
 TECHNIQUES AND METHODS OF INNOVATION
INTERFACE MANAGEMENT TECHNIQUES
Decision-making process is based on information coming from different departments within the organization
(marketing, R&D department, production, financial or human resources department, etc.). This is why it is very
important to connect all these units and facilitate their interaction, in order to provide the quality operations of the
organization and the decision-making process with it. If this kind of management is adequately exploited and applied
not only to individuals but their knowledge as well, it can improve the organization’s innovation potential and thus
significantly facilitate the successful realization of certain tasks or projects. Due to this, today we have several
approaches in this area:

Concurrent engineering

R&D marketing
 TECHNIQUES AND METHODS OF INNOVATION
INTERFACE MANAGEMENT TECHNIQUES
Concurrent engineering is a systematic approach to an integrated, concurrent development of
products and accompanying processes, including production and support system. This approach
held development departments to analyse all elements of the life cycle of a product, from the
concept to production and disposal. Using the programming elements, knowledge based
systems, CAD/CAM techniques, etc., reduces the product development time 30-70%, number of
engineering changes 65-90%, time-to-market 20-90%. At the same time, their application
increases the product quality 200-600% and administrative productivity for 20-110%.

R&D marketing interface as a form of interconnection between development and marketing

department is of great importance for the organization business. It depends on the fact if the
certain product is based on technology research or on specific market requirements. If the
organization can provide the quality link between these two departments, good structure and
decision-making process, this approach can be very beneficial for the organization.
 TECHNIQUES AND METHODS OF INNOVATION
CREATIVITY DEVELOPMENT TECHNIQUES
evelopment of creativity is the key element in the innovation process. It refers to creation of new
ideas or combination of existing ones in order to innovatively improve the everyday problem
solving. These techniques not only decrease the negative filtering of ideas and early giving up the
concepts, they also facilitate developing different solutions to one problem, connecting elements
that usually cannot be connected.
One of the widely spread and used techniques for developing of creativity is brainstorming. This
is a method where a number of people simultaneously generate different ideas or solutions for
defined problems. In this process, there are no good and bad ideas. The success of
brainstorming depends on the number of ideas (the more the better), which through
combination can produce expected results.

Lateral thinking implies non-traditional methods which in logical thinking are dismissed as
inadequate. These nonconventional techniques increase the creativity and produce alternative
solutions.
 TECHNIQUES AND METHODS OF INNOVATION
CREATIVITY DEVELOPMENT TECHNIQUES
Theory of Inventive Problem Solving – TRIZ is creative approach based on existing solutions and
available information for solving new problems, for example in order to determine application
for already developed technology.

SCAMPER method is the model of transforming one idea into several ideas. Its name is actually
the acronym Substitution, Combination, Adaptation, Modification, Putting to other uses,
Elimination and Reversing, which tells us about the main elements of the method itself.

Mind mapping could be defined as individual brainstorming, with the aim to investigate the ideas
by graphically connecting of the term (which represents the problem) with ideas for its solution.
 TECHNIQUES AND METHODS OF INNOVATION
PROCESS IMPROVEMENT TECHNIQUES
The process of improvement allows the breakdown of tasks to the set of measures and steps in
order to find the most efficient way to exceed the expectations and pre-defined requirements of
the process. The success of this technique is based on its continuity and constant adaptation to
the business and technology requirements. Using different shapes and methods facilitates
discovering and testing of the problems cause, easier planning of activities for the business
process improvements, their realization and application in controlled environment, achieving of
higher efficiency, etc. some of those techniques are:

WORKFLOW MANAGEMENT
BUSINESS PROCESS RE-ENGINEERING
JUST-IN-TIME
TOTAL QUALITY MANAGEMENT
LEAN PROCESS TECHNOLOGY
 TECHNIQUES AND METHODS OF INNOVATION
PROCESS IMPROVEMENT TECHNIQUES TECHNIQUES
Workflow management is the process of automation of organization’s internal activities and
tasks, which leads to simpler and channelled business processes and procedures. In other words,
the document, information and tasks inside the organization “flow” in clearly defined way
following the internal rules and procedures.

Business process re-engineering is the way to restructure and transform business processes and
procedures, both industrial and administrative, in order to achieve essential improvements in the
price and quality of the product or service, but also of the organization itself. This method
eliminates activities that lead to efficiency reduction, simplification of procedures and
introduction of alternative processes, through series of steps from isolating the business process
itself and its definition, through identification of measures necessary for its improvement to the
control of those measures’ application results;
 TECHNIQUES AND METHODS OF INNOVATION
PROCESS IMPROVEMENT TECHNIQUES TECHNIQUES
The process known as just-in-time is today the most widely spread in industry, especially in
production and logistics sectors. It means that certain activities are realized or parts are delivered
exactly when needed – not before (to avoiding piling up), and not later (to avoid being late). In
this way, the maximum can be achieved in every segment of production or logistics, increasing
the enterprises’ capacity to respond to dynamic requirements of their end users.

Total quality management is the process where all activities and processes values are improved
to the highest possible level. The main objectives of this technique are to provide internal and
external users with products and services that permanently satisfy their demands. Also, this
eliminates the procedures that lead to losses in money, time or reliability of a product or a
service. This type of management is based on internal control within every system unit, where
employees on all levels are expected to participate in the decision making process relevant for
their activities.
 TECHNIQUES AND METHODS OF INNOVATION
PROCESS IMPROVEMENT TECHNIQUES TECHNIQUES

Lean process technology is the concept based on removing all traditional activities that do not
have added value (changes, waiting period, postponing, etc.) in order to prevent unnecessary
resources spending. This concept was developed from the production system of Toyota, and it
can be implemented in almost every production environment.
 TECHNIQUES AND METHODS OF INNOVATION
INNOVATIVE PROJECT MANAGEMENT TECHNIQUES
There is substantial tendency today that all innovation should be realized through projects,
regardless of the area they are in or the size and structure of the organization. Through projects,
this type of management is directed to research and development, production and marketing,
with an experienced leader team whose main role is to secure the quality if technical and
financial realization in each of these segments.
Successful management of innovation projects means pre-defined action plan, deadlines for
completion of tasks (milestones), resources planning, etc. however, organization often come
across some unexpected barriers and problems in their projects, risking in this way the
achievement of the set goals. In order to prevent and mitigate those risks, the best solution is to
break down the whole process into three phases: pre-project management, project development
management and post-project development.
PRE-PROJECT MANAGEMENT PHASE
DEVELOPMENT PROJECT MANAGEMENT PHASE
POST PROJECT MANAGEMENT PHASE
 TECHNIQUES AND METHODS OF INNOVATION
INNOVATIVE PROJECT MANAGEMENT TECHNIQUES
Pre-project management phase refers to the selection and assessment of the project idea and
the very beginning of the process realization. However, sometimes, there is insufficient
information and knowledge, so the project idea can be poorly assessed, organizations are not
able or do not have enough capacities to realize the idea, etc. The most efficient way to avoid this
risk is to develop strategic approach to this process.

Development project management phase refers to integration of the different capacities and
resources. The greatest challenge in that process, especially for organization still developing, is to
find the competent team that can develop an adequate approach to the management process
and to professionally and efficiently respond to project realization requirements.
 TECHNIQUES AND METHODS OF INNOVATION
INNOVATIVE PROJECT MANAGEMENT TECHNIQUES
Post-project management phase is not related to the project development, but to long-term
sustainability and further improvement after the project completion. What appears to be extremely
important is to learn from experience and to know the organization very well. This is important
because even the most successful development projects can face the problems when they come to the
point where the sustainability of project needs to be ensured: there is large number of complex
interaction that need to be analysed, sometimes it is difficult to foresee the nature of results before
they are achieved, lack of time or too great pressures to start the next project, etc. This is why the
project leaders are the one who must identify the need to improve and expand this kind of knowledge
and to shape their experience into systems, tools and procedures that others in the organization can
apply.
Very important segment in innovation project management is project portfolio. It is used to define the
areas and segments in which some organization can successfully realize innovative processes, through
generation of new and combination of existing ideas in order to respond to market demands. The aim
of project portfolio is to make a selection and combination of innovative projects, where organization
can take the best advantage of available resources, to expand or create new market for the application
of new technologies.
ANALYTICAL METHODS OF INNOVATION MANAGEMENT

SWOT Porter's 5 PLC

3 C ANALYSIS
ANALYSIS force Model ANALYSIS

PESTEL GAP VALUE

BCG Matrix
ANALYSIS ANALYSIS ANALYSIS
 3 C ANALYSIS
The 3C Analysis Business Model
was developed by Japanese
business strategist Kenichi
Ohmae. The 3C Model is a
marketing tool that focuses on
customers, competitors, and
the company. At the
intersection of these three
variables lies an effective
marketing strategy to gain a
potential competitive
advantage and build a lasting
company.
 3 C ANALYSIS
Competitors
A business must know where it stands in relation to its competitors. Is it bigger? Smaller? Is the
competition trying to take market share from the business, or is the opposite true?
According to Ohmae, competitor-based marketing strategies involve looking for a point of difference in
purchasing, engineering, sales, or servicing.
This can be achieved in several ways:
Investing in brand image. Ohmae noted that companies such as Sony and Honda were able to sell
more than their competitors in the Japanese market because of heavy investment in advertising and
consumer relations.
Hito-kane-mono – Japanese business planners believe in the concept of hito-kane-mono, loosely
translating to people, money, and things (assets). As a point of competitive differentiation, businesses
can ensure these three resources are in balance without waste or surplus. For example, managers
who are given money over and above what they can competently spend tend to waste that money
unnecessarily. In this case, Ohmae argues that managers should first define their ideas and then
adapt a budget to suit.
Profit and cost-structure differences. Different sources of profit can be also be exploited, such as the
profit seen in new product sales or value-adding services. Large companies with lower fixed-cost
ratios can also lower their prices in a stagnant market to gain market share.
 3 C ANALYSIS
Company
The company itself must also look inwardly to design strategies aimed at
maximizing strengths relative to the competition. This involves a combination of
short and long-term strategies, including:
Specialization. A business should always identify one or two areas of expertise,
instead of trying to specialize in everything.
Produce or procure. In terms of manufacturing, a business has two options. It
can take advantage of backward integration, taking control over its supply
chain in the process. Or, it can outsource non-value-adding activities to a third
party.
Cost-effectiveness. This is a relatively simple way of gaining a competitive
advantage. Businesses can reduce basic operating costs by focusing on
processes that have the highest potential for automation or streamlining.
Longer term, businesses can combine resources and knowledge with others in
their industry to develop a competitive advantage.
 PESTEL ANALYSIS

ECONOMIC

POLITICAL SOCIAL

PESTEL

TECHNOLOGICAL LEGAL

ENVIRONMENTAL
 PESTEL ANALYSIS
Political Factors
These are all about how and to what degree a government intervenes in the economy.
This can include – government policy, political stability or instability in overseas markets,
foreign trade policy, tax policy, labour law, environmental law, trade restrictions and so
on.
It is clear from the list above that political factors often have an impact on organisations
and how they do business. Organisations need to be able to respond to the current and
anticipated future legislation, and adjust their marketing policy accordingly.
 PESTEL ANALYSIS

Economic Factors
Economic factors have a significant impact on how an organisation does business and
also how profitable they are. Factors include – economic growth, interest rates,
exchange rates, inflation, disposable income of consumers and businesses and so on.
These factors can be further broken down into macro-economical and micro-
economical factors. Macro-economical factors deal with the management of demand in
any given economy. Governments use interest rate control, taxation policy and
government expenditure as their main mechanisms they use for this.
Micro-economic factors are all about the way people spend their incomes. This has a
large impact on B2C organisations in particular.
 PESTEL ANALYSIS
Social Factors
Also known as socio-cultural factors, are the areas that involve the shared belief and
attitudes of the population. These factors include – population growth, age distribution,
health consciousness, career attitudes and so on. These factors are of particular
interest as they have a direct effect on how marketers understand customers and what
drives them.

Technological Factors
We all know how fast the technological landscape changes and how this impacts the
way we market our products. Technological factors affect marketing and the
management thereof in three distinct ways:
New ways of producing goods and services
New ways of distributing goods and services
New ways of communicating with target markets
 PESTEL ANALYSIS
Environmental Factors
These factors have only really come to the forefront in the last fifteen years or so. They have
become important due to the increasing scarcity of raw materials, pollution targets, doing
business as an ethical and sustainable company, carbon footprint targets set by governments
(this is a good example where one factor could be classed as political and environmental at the
same time). These are just some of the issues marketers are facing within this factor. More and
more consumers are demanding that the products they buy are sourced ethically, and if
possible from a sustainable source.

Legal Factors
Legal factors include - health and safety, equal opportunities, advertising standards, consumer
rights and laws, product labelling and product safety. It is clear that companies need to know
what is and what is not legal in order to trade successfully. If an organisation trades globally
this becomes a very tricky area to get right as each country has its own set of rules and
regulations.
 PESTEL ANALYSIS
Ethical Factors
The most recent addition to PESTEL is the extra E - making it
PESTELE or STEEPLE. This stands for ethical, and includes
ethical principles and moral or ethical problems that can arise
in a business. It considers things such as fair trade, slavery acts
and child labour, as well as corporate social responsibility
(CSR), where a business contributes to local or societal goals
such as volunteering or taking part in philanthropic, activist, or
charitable activities.
 PESTEL ANALYSIS
Ethical Factors
The most recent addition to PESTEL is the extra E - making it
PESTELE or STEEPLE. This stands for ethical, and includes
ethical principles and moral or ethical problems that can arise
in a business. It considers things such as fair trade, slavery acts
and child labour, as well as corporate social responsibility
(CSR), where a business contributes to local or societal goals
such as volunteering or taking part in philanthropic, activist, or
charitable activities.
 GAP ANALYSIS
Gap analysis is defined as a method of assessing the differences between the actual performance
and expected performance in an organization or a business. The term “gap” refers to the space
between “where we are” (the present state) and where “we want to be” (the target state). A gap
analysis can also be referred to as need analysis, need assessment or need-gap analysis.
Consider hypothetically, as an organization you have manufactured a product A. This product has
reached the target audience in the market. Product A has all the qualities to excel in the market, the
right features, pricing margin, and demand. Yet for some reason, the product didn’t perform well in
the market
Gap analysis can be performed on:
A Strategic Level- to compare the condition or level of your business with that of the industry
standards
At an Operational Level – To compare the current state or performance of your business with
what you had desired.
 GAP ANALYSIS
Here are the 3 gap analysis tools you can use when doing a gap analysis for your business or
organization:

1. SWOT Analysis
2. McKinsey's 7s
3. Nadler-Tushman's Congruence Model
 SWOT ANALYSIS
SWOT stands for Strengths,
Weaknesses, Opportunities, and
Threats, and so a SWOT Analysis is a
technique for assessing these four
aspects of your business.
You can use SWOT Analysis to make
the most of what you've got, to your
organization's best advantage. And
you can reduce the chances of
failure, by understanding what
you're lacking, and eliminating
hazards that would otherwise catch
you unawares.
 SWOT ANALYSIS
Strengths
Strengths are things that your organization does particularly well, or in a way that
distinguishes you from your competitors. Think about the advantages your organization has
over other organizations. These might be the motivation of your staff, access to certain
materials, or a strong set of manufacturing processes.
Your strengths are an integral part of your organization, so think about what makes it "tick."
What do you do better than anyone else? What values drive your business? What unique or
lowest-cost resources can you draw upon that others can't? Identify and analyze your
organization's Unique Selling Proposition (USP), and add this to the Strengths section.
Then turn your perspective around and ask yourself what your competitors might see as your
strengths. What factors mean that you get the sale ahead of them?
Remember, any aspect of your organization is only a strength if it brings you a clear
advantage. For example, if all of your competitors provide high-quality products, then a high-
quality production process is not a strength in your market: it's a necessity.
 SWOT ANALYSIS
Weaknesses
Now it's time to consider your organization's weaknesses. Be honest! A SWOT
Analysis will only be valuable if you gather all the information you need. So,
it's best to be realistic now, and face any unpleasant truths as soon as
possible.
Weaknesses, like strengths, are inherent features of your organization, so
focus on your people, resources, systems, and procedures. Think about what
you could improve, and the sorts of practices you should avoid.
Once again, imagine (or find out) how other people in your market see you.
Do they notice weaknesses that you tend to be blind to? Take time to examine
how and why your competitors are doing better than you. What are you
lacking?
 SWOT ANALYSIS
Opportunities
Opportunities are openings or chances for something positive to happen, but you'll need
to claim them for yourself!
They usually arise from situations outside your organization, and require an eye to what
might happen in the future. They might arise as developments in the market you serve, or
in the technology you use. Being able to spot and exploit opportunities can make a huge
difference to your organization's ability to compete and take the lead in your market.
Think about good opportunities you can spot immediately. These don't need to be game-
changers: even small advantages can increase your organization's competitiveness. What
interesting market trends are you aware of, large or small, which could have an impact?
You should also watch out for changes in government policy related to your field. And
changes in social patterns, population profiles, and lifestyles can all throw up interesting
opportunities.
 SWOT ANALYSIS
Threats
Threats include anything that can negatively affect your business from the outside, such as supply
chain problems, shifts in market requirements, or a shortage of recruits. It's vital to anticipate threats
and to take action against them before you become a victim of them and your growth stalls.
Think about the obstacles you face in getting your product to market and selling. You may notice that
quality standards or specifications for your products are changing, and that you'll need to change
those products if you're to stay in the lead. Evolving technology is an ever-present threat, as well as
an opportunity!
Always consider what your competitors are doing, and whether you should be changing your
organization's emphasis to meet the challenge. But remember that what they're doing might not be
the right thing for you to do, and avoid copying them without knowing how it will improve your
position.
Be sure to explore whether your organization is especially exposed to external challenges. Do you
have bad debt or cash-flow problems, for example, that could make you vulnerable to even small
changes in your market? This is the kind of threat that can seriously damage your business, so be
alert.
 SWOT ANALYSIS
Threats
Threats include anything that can negatively affect your business from the outside, such as supply
chain problems, shifts in market requirements, or a shortage of recruits. It's vital to anticipate threats
and to take action against them before you become a victim of them and your growth stalls.
Think about the obstacles you face in getting your product to market and selling. You may notice that
quality standards or specifications for your products are changing, and that you'll need to change
those products if you're to stay in the lead. Evolving technology is an ever-present threat, as well as
an opportunity!
Always consider what your competitors are doing, and whether you should be changing your
organization's emphasis to meet the challenge. But remember that what they're doing might not be
the right thing for you to do, and avoid copying them without knowing how it will improve your
position.
Be sure to explore whether your organization is especially exposed to external challenges. Do you
have bad debt or cash-flow problems, for example, that could make you vulnerable to even small
changes in your market? This is the kind of threat that can seriously damage your business, so be
alert.
 MCKINSEY'S 7 S FRAMEWORK
The model was developed in the late 1970s by Tom Peters and Robert Waterman, former
consultants at McKinsey & Company. They identified seven internal elements of an organization that
need to align for it to be successful.

One can use the 7-S model in a wide variety of situations where it's useful to examine how the
various parts of your organization work together.
For example, it can help you to improve the performance of your organization, or to determine the
best way to implement a proposed strategy.
The framework can be used to examine the likely effects of future changes in the organization, or to
align departments and processes during a merger or acquisition. You can also apply the McKinsey 7-
S model to elements of a team or a project.
 MCKINSEY'S 7 S FRAMEWORK

The three "hard" elements are strategy,

Hard structures (such as organization charts Soft Elements
Elements and reporting lines), and systems (such as
formal processes and IT systems.) These Shared Values
Strategy are relatively easy to identify, and
management can influence them directly. Skills
Structure The four "soft" elements, on the other
hand, can be harder to describe, less Style
Systems tangible, and more influenced by your
company culture. But they're just as Staff
important as the hard elements if the
organization is going to be successful.
MCKINSEY'S 7 S FRAMEWORK
Placi n g s h ared valu es i n th e
ce nter o f th e m od el
e mphas i zes th at th es e v a lu es
are cen t r al to th e d ev elo p m en t
o f all t h e oth er c r i ti c a l
e le me n t s.

T he m odel s tates th a t th e
se v e n ele m en ts n eed to
balan c e an d rei n fo rc e ea c h
o the r fo r an organi z a ti o n to
pe rfor m well.
 MCKINSEY'S 7 S FRAMEWORK
Let's look at each of the elements individually:

Strategy: this is your organization's plan for building and maintaining a

competitive advantage over its competitors.
Structure: this how your company is organized (that is, how departments and
teams are structured, including who reports to whom).
Systems: the daily activities and procedures that staff use to get the job done.
Shared values: these are the core values of the organization, as shown in its
corporate culture and general work ethic. They were called "superordinate
goals" when the model was first developed.
Style: the style of leadership adopted.
Staff: the employees and their general capabilities.
Skills: the actual skills and competencies of the organization's employees.
 CHECKLIST QUESTIONS FOR MCKINSEY'S 7 S
FRAMEWORK
The following questions are a starting point for exploring your situation in terms of
the 7-S framework. Use them to analyze your current (Point A) situation first, and
then repeat the exercise for your proposed situation (Point B).
Strategy:
What is our strategy?
How do we intend to achieve our objectives?
How do we deal with competitive pressure?
How are changes in customer demands dealt with?
How is strategy adjusted for environmental issues?
 CHECKLIST QUESTIONS FOR MCKINSEY'S 7 S
FRAMEWORK
Structure:
How is the company/team divided?
What is the hierarchy?
How do the various departments coordinate activities?
How do the team members organize and align themselves?
Is decision making and controlling centralized or decentralized? Is this as it
should be, given what we're doing?
Where are the lines of communication? Explicit and implicit?
Systems:
What are the main systems that run the organization? Consider financial and
HR systems as well as communications and document storage.
Where are the controls and how are they monitored and evaluated?
What internal rules and processes does the team use to keep on track?
 CHECKLIST QUESTIONS FOR MCKINSEY'S 7 S
FRAMEWORK
Shared Values:
What are the core values?
What is the corporate/team culture?
How strong are the values?
What are the fundamental values that the company/team was built on?
Style:
How participative is the management/leadership style?
How effective is that leadership?
Do employees/team members tend to be competitive or cooperative?
Are there real teams functioning within the organization or are they just
nominal groups?
 CHECKLIST QUESTIONS FOR MCKINSEY'S 7 S
FRAMEWORK
Staff:
What positions or specializations are represented within the team?
What positions need to be filled?
Are there gaps in required competencies?
Skills:
What are the strongest skills represented within the company/team?
Are there any skills gaps?
What is the company/team known for doing well?
Do the current employees/team members have the ability to do the job?
How are skills monitored and assessed?
MINI CASE: MCKINSEY'S 7 S
 NADLER-TUSHMAN'S CONGRUENCE MODEL

NADLER-TUSHMAN'S CONGRUENCE MODELTHIS MODEL IS BASED ON THE PRINCIPLE

THAT A BUSINESS PERFORMANCE IS THE RESULT OF 4 KEY ELEMENTS: WORK,
PEOPLE, STRUCTURE, AND CULTURE.
HOW TO APPLY TO THIS MODEL?
FIRST AND FOREMOST GATHER ALL THE DATA THAT POINT YOU TOWARDS ANY
OR ALL SYMPTOMS OF POOR PERFORMANCE.
SPECIFY INPUTS I.E WHETHER ITS ENVIRONMENT, RESOURCES OR HISTORY THAT
IS CAUSING THESE POOR PERFORMANCES.
IDENTIFY WHICH OUTPUTS ARE REQUIRED AT THE ORGANIZATIONAL LEVEL SO
THAT THE ORGANIZATION CAN MEET ALL STRATEGIC OBJECTIVES.
NOW ASSESS THE DEGREE OF CONGRUENCE AMONG ALL THE MENTIONED
COMPONENTS.
STRATEGIZE AND PUT DOWN A PLAN OF ACTION.
 VALUE ANALYSIS

Before understanding the meaning of phrase “value analysis” or “value

engineering”, let us know about value. ‘Value’ is one of those terms having good
many connotations and even contradictory definitions.
‘Value’ is a word that is very often used by individuals without being clearly
understood. Forget about common people. Even different departments of the
same organisation have different opinions of the ‘value’ of the product that the
company manufactures.
The designer equates value with reliability; purchase people with price paid for
them; production personnel with that of cost from the angle of manufacture;
sales people with what customer is willing to pay.
In the field of value investigation, value refers to economic value, which itself
can be sub-divided into four types as cost value, exchange value, use value and
esteem value.
 VALUE ANALYSIS

Before understanding the meaning of phrase “value analysis” or “value

engineering”, let us know about value. ‘Value’ is one of those terms having good
many connotations and even contradictory definitions.
‘Value’ is a word that is very often used by individuals without being clearly
understood. Forget about common people. Even different departments of the
same organisation have different opinions of the ‘value’ of the product that the
company manufactures.
The designer equates value with reliability; purchase people with price paid for
them; production personnel with that of cost from the angle of manufacture;
sales people with what customer is willing to pay.
In the field of value investigation, value refers to economic value, which itself
can be sub-divided into four types as cost value, exchange value, use value and
esteem value.
 VALUE ANALYSIS
“Cost Value” is the measure of sum of all costs incurred in producing the
product. The ‘cost value’, therefore is the sum of raw-material cost, labour cost,
tool cost and overheads expended to produce the product.
“Exchange Value” is the measure of all the properties, qualities and features of
the product which make the product possible of being traded for another product
or for money. In a conventional sense, ‘exchange value’ refers to the price that a
purchaser will offer for the product, the price being dependent upon the
satisfaction value which derives from the product.
Value derived from the product consists of two components namely (a) value due
to reliability of performance of the product and the value which the possession
bestows upon the buyer. These are often referred to as “value in value” and
“esteem in value”.
“Use Value” is the measure of properties, qualities and features which make the
product accomplish a use, work or service. Use value, therefore, is the price paid
by the buyer or the cost incurred by the manufacturer in order to ensure that the
product performs its intended function efficiently.
 Product Life Cycle
The product life cycle is the process a product goes through from when it is
first introduced into the market until it declines or is removed from the
market. The life cycle has four stages - introduction, growth, maturity and
decline.
While some products may stay in a prolonged maturity state, all products
eventually phase out of the market due to several factors including
saturation, increased competition, decreased demand and dropping sales.

Additionally, companies use PLC analysis (examining their product's life

cycle) to create strategies to sustain their product's longevity or change it
to meet with market demand or developing technologies.
Stages of Product
Life Cycle
 1. Introduction
Once a product has been developed, the first stage is its introduction stage. In this stage, the
product is being released into the market. When a new product is released, it is often a high-
stakes time in the product's life cycle - although it does not necessarily make or break the
product's eventual success.
During the introduction stage, marketing and promotion are at a high - and the company often
invests the most in promoting the product and getting it into the hands of consumers. It is in
this stage that the company is first able to get a sense of how consumers respond to the
product, if they like it and how successful it may be. However, it is also often a heavy-spending
period for the company with no guarantee that the product will pay for itself through sales.
Costs are generally very high and there is typically little competition. The principle goals of the
introduction stage are to build demand for the product and get it into the hands of consumers,
hoping to later cash in on its growing popularity.
 2. Growth
By the growth stage, consumers are already taking to the product and
increasingly buying it. The product concept is proven and is becoming more
popular - and sales are increasing.
Other companies become aware of the product and its space in the market,
which is beginning to draw attention and increasingly pull in revenue. If
competition for the product is especially high, the company may still heavily
invest in advertising and promotion of the product to beat out competitors. As a
result of the product growing, the market itself tends to expand. The product in
the growth stage is typically tweaked to improve functions and features.
As the market expands, more competition often drives prices down to make the
specific products competitive. However, sales are usually increasing in volume
and generating revenue. Marketing in this stage is aimed at increasing the
product's market share.
 3. Maturity
When a product reaches maturity, its sales tend to slow or even stop - signaling a
largely saturated market. At this point, sales can even start to drop. Pricing at this
stage can tend to get competitive, signaling margin shrinking as prices begin falling
due to the weight of outside pressures like competition or lower demand. Marketing
at this point is targeted at fending off competition, and companies will often develop
new or altered products to reach different market segments.
Given the highly saturated market, it is typically in the maturity stage of a product
that less successful competitors are pushed out of competition - often called the
"shake-out point."
In this stage, saturation is reached and sales volume is maxed out. Companies often
begin innovating to maintain or increase their market share, changing or developing
their product to meet with new demographics or developing technologies.
The maturity stage may last a long time or a short time depending on the product.
For some brands, the maturity stage is very drawn out, like Coca-Cola
 4. Decline
Although companies will generally attempt to keep the product alive in the
maturity stage as long as possible, decline for every product is inevitable.
In the decline stage, product sales drop significantly and consumer
behavior changes as there is less demand for the product. The company's
product loses more and more market share, and competition tends to
cause sales to deteriorate.
Marketing in the decline stage is often minimal or targeted at already loyal
customers, and prices are reduced.
Eventually, the product will be retired out of the market unless it is able to
redesign itself to remain relevant or in-demand. For example, products
like typewriters, telegrams and muskets are deep in their decline stages
(and in fact are almost or completely retired from the market).
 Some examples
VCR
Many of us probably grew up watching or using VCRs (videocassette recorders for any Gen Z
readers), but you would likely be hard pressed to find one in anyone's home these days.
With the rise of streaming services like Netflix (NFLX) - Get Report and Amazon (AMZN) - Get
Report (not to mention the interlude phase of DVDs), VCRs have been effectively phased out and
are deep in their decline stage.
Once groundbreaking technology, VCRs are now in very low demand (if any) and are assuredly
not bringing in the sales they once did.

Electric Vehicles
The rise of electric vehicles shows more of a growth stage of the product life cycle. Companies
like Tesla (TSLA) - Get Report have been capitalizing on the growing product for years, although
recent challenges may signal changes for the particular company.
Still, while the electric car isn't necessarily new, the innovations that companies like Tesla have
made in recent years are consistently adapting to new changes in the electric car market,
signaling its growth phase.
 Use of PLC
Conducting PLC analysis can help companies determine if their
products are servicing the market they target efficiently, and when
they might need to shift focus.
By examining their product in relation to the market on the whole,
their competitors, sales and expenses, companies can better decide
how to pivot and develop their product for longevity in the
marketplace.
Examining their product's life cycle, specifically paying attention to
where their products are in the cycle, can help companies determine
if they need to develop new products to continue generating sales -
especially if the majority of their products are in the maturity or
decline stages of the product life cycle.
 BCG Matrix
The Boston Consulting group’s product portfolio matrix
(BCG matrix) is designed to help with long-term strategic
planning, to help a business consider growth
opportunities by reviewing its portfolio of products to
decide where to invest, to discontinue or develop
products. It's also known as the Growth/Share Matrix.The
Matrix is divided into 4 quadrants based on an analysis of
market growth and relative market share, as shown in
the diagram
1. Dogs: These are products with low growth or market share.
2. Question marks or Problem Child: Products in high growth markets with
low market share.
3. Stars: Products in high growth markets with high market share.
4. Cash cows: Products in low growth markets with high market share

BCG Modelling is not a new phenomenon, but in the changing digital

landscape, its meaning for and application to your marketing strategy will
continue to develop. That's why this blog addresses not just how to use the
BCG Matrix but also the practical application of this matrix to your strategy,
as well as other essential digital marketing matrixes.
 How to use the BCG Matrix
To apply the BCG Matrix you can think of it as showing a portfolio of products
or services, so it tends to be more relevant to larger businesses with multiple
services and markets. However, marketers in smaller businesses can use
similar portfolio thinking to their products or services to boost leads and sales
Considering each of these quadrants, here are some recommendations on
actions for each:
Dog products: The usual marketing advice here is to aim to remove any
dogs from your product portfolio as they are a drain on resources.
However, this can be an over-simplification since it's possible to generate
ongoing revenue with little cost.
For example, in the automotive sector, when a car line ends, there is still a
need for spare parts. As SAAB ceased trading and producing new cars, a
whole business emerged providing SAAB parts.
 Question mark products: As the name suggests, it’s not known if they will
become a star or drop into the dog quadrant. These products often require
significant investment to push them into the star quadrant. The challenge is
that a lot of investment may be required to get a return. For example, Rovio,
creators of the very successful Angry Birds game has developed many other
games you may not have heard of. Computer games companies often
develop hundreds of games before gaining one successful game. It’s not
always easy to spot the future star and this can result in potentially wasted
funds.
Star products: Can be the market leader though require ongoing investment
to sustain. They generate more ROI than other product categories.
Cash cow products: The simple rule here is to ‘Milk these products as much
as possible without killing the cow! Often mature, well-established products.
The company Procter & Gamble which manufactures Pampers nappies to
Lynx deodorants has often been described as a ‘cash cow company’.
 1. Close Up
1. AXE Deodorant 2. Pepsodent
2. Fair & Lovely 3. Annapurna
3. Lakme Anti Ageing 4. Fair & Lovely Menz
4. Vim Active
5. Wheel
5. Domex
6. Surf Excel
6. Rin
7. Lifebuoy
8. Lux BCG 7. Breeze
9. Kwality Walls 8. Taj Mahal Tea Bags
10. Kissan Jam Matrix 9. Kissan Ketchup
11. Knor Soup 10. Knor Meal Maker
for
HUL
1. Clinic Plus
2. Sunsilk
3. Vaseline
1. Taaza
4. Red Label
2. Brooke Bond Sehatmand
3. Bru
 Explanation of BCG Matrix for HUL
Hindustan Unilever Limited (HUL) is India’s biggest quick moving purchaser products organization. The Anglo-
Dutch organization Unilever claims a 52% lion’s share stake. HUL was framed in 1933 as Lever Brothers India
Limited and appeared in 1956 as Hindustan Lever Limited through a merger of Lever Brothers, Hindustan
Vanaspati Mfg. Co. Ltd. furthermore, United Traders Ltd. It is headquartered in Mumbai, India and has
employee strength of more than 15,000 representatives and contributes to indirect livelihood of more than
52,000 individuals. The organization was renamed in June 2007 as “Hindustan Unilever Limited”. The
organization meets each day requirements for sustenance, cleanliness, and individual care, with brands that
individuals feel great, look great and get more out of life.
HUL have a to a great degree wide market introduction with more than 35 brands traversing crosswise over
20 particular classifications, for example, cleansers, cleansers, shampoos, healthy skin, toothpastes,
antiperspirants, beautifying agents, tea, espresso, bundled sustenance, dessert, and water purifiers. HUL’s
brands – like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair and Lovely, Sunsilk, Clinic, Close-up, Pepsodent, Lakme,
Brooke Bond, Kissan, Knorr, Annapurna, Kwality-Walls – are commonly recognized names the nation over and
traverse numerous classifications – cleansers, cleansers, individual items, tea, espresso, marked staples,
dessert and culinary items. They are fabricated in more than 35 manufacturing plants, a few of them in
reverse territories of the nation. The operations include over 2,000 suppliers and partners. HUL’s conveyance
organizes covers 6.3 million retail outlets counting direct reach to more than 1 million. The explanation of
BCG analysis of HUL is as followed:
 Star is a specialty unit that has a substantial Question Mark (or Problem Child) – a specialty unit that has a little
piece of the overall industry in a quickly piece of the pie in a high development showcase. Question marks are
developing industry. Stars produce a lot of becoming quickly and in this way devour huge measures of money, but
money on account of their solid relative piece since they have low pieces of the pie they don’t produce much money.
of the overall industry, additionally expend a The outcome is huge net money utilization. A question mark
lot of money in view of their high (otherwise called an “issue kid”) can possibly pick up piece of the pie
development rate; consequently the money in and turn into a star, and in the end a money dairy animals when the
every bearing roughly nets out. On the off market development moderates.Since they are the new participants or
chance that a star can keep up its substantial strugglers in the market for real share where the market is changing at
piece of the overall industry, it will end up a high pace, endeavors are being made to ensure that the pick up on
being a cash cow when the market their piece of the pie. Pepsodent went into a noteworthy change of its
development rate decays. All products Germ check and Whitening toothpaste by thinking of the Sensitive and
discussed are contributing maximum to the Gum care scope of toothpastes. (ArtiVaish, 2014) Knor soups thinking
market share. of the whole scope of soups running from tomato blend vegetable,
Chinese to chicken soups.

Cash Cow – a specialty unit that has a vast piece of the pie
Dogs – a specialty unit that has a little piece of the overall industry in a
in develop, moderate developing industry. As pioneers in a
develop showcase, cash cows display an arrival on
develop industry. A dog may not require significant money since they
resources that is more prominent than the market have low piece of the pie and a low development rate and in this
development rate, and along these lines create more manner neither create nor expend a lot of money, and they are money
money than they expend. Such specialty units ought to be traps as a result of the cash tied up in a business that has minimal
“drained”, separating the benefits and contributing as potential and the capital that could better be conveyed somewhere
meager money as could reasonably be expected.Sunsilk else. Brooke Bond Sehatmad ought to be sold off in light of the fact
made the biggest group for Indian young ladies which are – that the client tastes and wholesome necessities have changed from
www.sunsilkgangofgirls.com. Sunsilk inventively thinks of tasting vitamin B improved tea to hostile to oxidants improved tea.
a whole item scope of Soft and Smooth, Thick and Long, With the advancement of green tea, the request by wellbeing
Damaged Repair, Hair Fall Solution, Stunning Black Shine cognizant people is a greater amount of against oxidants rather
and Hostile to Dandruff. Similar steps are taken for the vitamin b, as natural products give an abundant wellspring of vitamins.
other cash cows as well.
GE/McKinsey (9 Grid)Matrix
 GE/McKinsey (9 Grid)Matrix
The GE McKinsey matrix is a nine-box matrix which is used as a strategy tool. It
helps multi-business corporations evaluate business portfolios and prioritize
investments among different business units in a systematic manner.
This technique is used in brand marketing and product management. The analysis
helps companies decide what products need to be added to a product portfolio as
well as what other opportunities should continue to receive investments. Though
similar to the BCG matrix, the GE version is a lot more complex. The analysis begins
as a two-dimensional portfolio matrix but the dimensions are multifactorial with
nine industry attractiveness measures and twelve business strength measures.
The business world is becoming increasingly focused on its investment decisions as
resources become more and more scarce. Each decision needs to be the best use of
investments and aim to bring in the most return on this investment. For diversified
businesses, the fight for resource allocation becomes even more complex because
multiple products, brands and portfolios need to be managed. This matrix helps
companies make these decisions in a more systematic and informed manner.
 GE/McKinsey (9 Grid)Matrix
The matrix is a 3×3 grid. The Y-axis measures market
attractiveness while the x-axis measures the business strength.
The scale is high, medium and low. A few key steps are necessary
to create this matrix.
List the entire range of products created or sold by a
particular strategic business unit.
Identify the factors that make a specific market attractive.
Evaluate the strategic business unit’s position in the market.
Calculate the business strength and market attractiveness.
Determine the strategic business unit’s category: High,
Medium or low.
 1. Market Attractiveness
This dimension helps determine the attractiveness of the market by analyzing the
benefits a company is likely to get by entering and competing within the market. A
number of factors are studied within this analysis. These include the size of the market,
its rate of growth, profit potential, and the nature, size and weaknesses of the
competition within the industry. Some factors used to determine market attractiveness
include:
Long term growth rate
Size of the industry
Industry Profitability (Entry barriers, exit barriers, supplier power, buyer power,
threat of substitutes etc)
Structure of the industry
Product life cycle
Demand
Pricing trends
Labor
Market Segmentation
 2. Business/Competitive Strength
The other main dimension that makes up this grid is the competitive or business
strength of the company itself. An assessment along this dimension helps understand
whether a company has the required competence to compete in a particular market.
This can be determined by internal factors such as assets, market share and
development of this market share, brand position and loyalty, creativity, and handling
of market changes and fluctuations. This can also be determined by external factors
such as environmental concerns, government regulations and laws, energy consumption
etc. Some factors that can determine this business/competitive strength include:
Total market share
Market share growth compared to competitors
Strength of the brand
Company profitability
Customer loyalty
Value chain
Product differentiation
 3. Measurement and Plotting
After identifying and rating the factors that are needed to
determine both dimensions, these factors are given a magnitude
and a calculation is made. This calculation is:
Factor1 rating x Factor1 magnitude + Factor2 rating x Factor2
magnitude + …..FactorN rating x FactorN magnitude
The strategic business unit is taken as a circle when plotting on the
graph. Its size is determined by the size of the market. A pie chart
within the circle shows the brands or products within that unit and
an arrow outside it shows where the unit is expected to be in the
future.
 4. Investment Strategies
Once the chart is plotted, investment strategies can be created based on which
box within the matrix the strategic business unit appears in. The three options
are:
Grow – Business units that fall within this category attract investment by the
corporation because they are in a position to bring high returns in the future.
Investments include those in research and development, acquisitions,
advertisement and brand expansion as well as an expansion in production
capacity.
Selectivity – These business units are in a more ambiguous position and it is
unclear whether they will grow in the future or become stagnant. Investments
in this category may happen after money has already been put into ‘grow’ units
and if there is a strategic purpose for these units.
Harvest – Units in this category may be poor performers and in less attractive
industries and markets. Investment will be put into these if they generate
revenues to equal this investment. If this does not happen, then these units
 Limitations of McKinsey Model
As with any tool, there are some limitations to keep in mind.
For the Mckinsey matrix, these limitations include:
The industry attractiveness and business unit strength can
only be accurately determined by a consultant or a very
experienced person.
The entire exercise can be costly to conduct for a company
Potential synergies and dynamics between 2 or more
business units are not taken into account.
The weight given to different factors can be very subjective
as there is no set of rules to determine this.
 Porters five forces rule
Porter’s Five Forces is a framework that examines the competitive market forces in an industry or segment. It helps
you evaluate an industry or market according to five elements: new entrants, buyers, suppliers, substitutes, and
competitive rivalry. According to Michael Porter’s model, these are the key forces that directly affect how much
competition a business faces in an industry.
 Value Chain Analysis
Value chain analysis is a strategy tool used to analyze internal firm
activities. Its goal is to recognize, which activities are the most valuable
(i.e. are the source of cost or differentiation advantage) to the firm and
which ones could be improved to provide competitive advantage. In
other words, by looking into internal activities, the analysis reveals
where a firm’s competitive advantages or disadvantages are. The firm
that competes through differentiation advantage will try to perform its
activities better than competitors would do. If it competes through cost
advantage, it will try to perform internal activities at lower costs than
competitors would do. When a company is capable of producing goods
at lower costs than the market price or to provide superior products, it
earns profits.

M. Porter introduced the generic value chain model in 1985. Value chain
represents all the internal activities a firm engages in to produce goods
and services. VC is formed of primary activities that add value to the
final product directly and support activities that add value indirectly.
 Value Chain Analysis
Porter’s Value Chain Model
Primary Activities

Inbound Outbound Marketing

Operations Service P
Logistics Logistics & Sales
R
O
F
Firm Infrastructure Human Resource Management
I
T
Procurement Technology

Support Activities
 Value Chain Analysis
Although, primary activities add value directly to the production
process, they are not necessarily more important than support
activities. Nowadays, competitive advantage mainly derives from
technological improvements or innovations in business models or
processes. Therefore, such support activities as ‘information
systems’, ‘R&D’ or ‘general management’ are usually the most
important source of differentiation advantage. On the other hand,
primary activities are usually the source of cost advantage, where
costs can be easily identified for each activity and properly
managed.

Firm’s VC is a part of a larger industry's VC. The more activities a

company undertakes compared to industry's VC, the more
vertically integrated it is. Below you can find an industry's value
chain and its relation to a firm level VC.
Value Chain Analysis
T here a r e two d iffe re n t
a p p roa ches on h ow to
p erf o r m the a na ly s is , wh ic h
d ep end on wha t ty pe of
c omp e titiv e a d v a n tage a
c omp any wa nts to c re ate
( c ost or d if f er entiation
a d va ntag e). The tablE lis ts
a ll the s tep s nee de d to
a c hiev e cos t or
d if f er entia tion adv an tage
using VC A.
Value Chain Analysis
 Value Chain Analysis
T o g a in cos t a d van tage a firm h a s t o g o t hr oug h 5
a n a lys is s tep s :

Step 1 . I dentif y th e firm’ s primary a nd s up p or t

a c tiv itie s . Al l the ac tiv itie s ( from r ecei v i ng a nd
storing ma ter ia l s to marke tin g, selli ng a nd a ft er
sa les s up p or t) th at are un de rtaken t o p r od uce
g ood s or s er v ices h av e to be c le a r ly i d ent i fi ed a nd
sep a r ate d f r om eac h oth e r. T h is r eq ui r es a n
a d eq u a te k nowl edge of c ompan y ’ s op er a t i ons
b ec a us e v a l ue chain ac tiv itie s are not or g a ni zed i n
the sa me wa y a s th e c ompan y its elf. The m a na g er s
wh o id entif y v a l u e c h ain ac tiv itie s ha v e t o look
into h ow wor k is don e to de liv e r c us t om er v a lue.
 Value Chain Analysis
Step 2 . E s ta b l is h th e re lativ e impor t a nce of ea ch a ct i v i t y i n
the total cos t of th e produc t. T h e t ot a l cos t s of p r od uci ng a
p rod u ct or s er v ic e mus t be broke n d own a nd a s s i g ned t o
ea c h activ ity . Ac tiv ity bas e d c ost i ng i s us ed t o ca lcula t e
c osts f or ea ch p r oc e s s . A c tiv itie s t ha t a r e t he m a j or s our ces
of c os t o r d one in e ffic ie n tly ( wh en b enchm a r ked a g a i ns t
c omp e titor s ) must be addre s s e d fi r s t .

Step 3. I d entif y c os t driv e rs for e a ch a ct i v i t y . Only b y

un d er stand ing wh at fac tors driv e t he cos t s , m a na g er s ca n
f oc us on imp r ov in g th e m. C os ts f or la b or - i nt ens i v e a ct i v i t i es
will b e d r iv en b y work h ours , work s p eed , wa g e r a t e, et c.
Dif f er ent a ctiv itie s will h av e differ ent cos t d r i v er s .
 Value Chain Analysis
Step 4. I d entif y l in ks be twe e n act i v i t i es . R ed uct i on of cos t s
in one a ctiv ity m ay le ad to furth e r cos t r ed uct i ons i n
sub se q uent a ctivitie s . For e xamp le, fewer com p onent s i n t he
p rod u ct d es ig n m ay le ad to le s s fa ult y p a r t s a nd lower
servic e cos ts . Th e re fore ide n tify ing t he li nks b et ween
a c tiv itie s wil l l ead to be tte r un der s t a nd i ng how cos t
imp ro v ements wo uld affe c t h e wh ole v a lue cha i n.
Sometimes , cos t re duc tion s in one a ct i v i t y lea d t o hi g her
c osts f or other a c tiv itie s .

Step 5. I d entif y opportun itie s for r ed uci ng cos t s . W hen t he

c omp any k nows its in e ffic ie n t ac t i v i t i es a nd cos t d r i v er s , i t
c a n p l a n on how to improv e th e m. Too hi g h wa g e r a t es ca n
b e d e a l t with b y in c re as in g product i on s p eed , out s our ci ng
job s to l ow wa g e c oun trie s or in st a lli ng m or e a ut om a t ed
p roc es s es .
 Di f f er ent i at i on adv ant age

VCA i s done di f f er ent l y when a f i r m compet es on di f f er ent i at i on r at her t han

cos t s . Thi s i s becaus e t he sour ce of di f f er ent i at i on adv ant age comes f r om
cr eat i ng s uper i or pr oduct s, addi ng mor e f eat ur es and s at i s f y i ng v ar y i ng
cus t omer needs , whi ch r esul t s i n hi gher cost st r uct ur e.

St ep 1 . I dent i f y t he cus t omer s’ v al ue- cr eat i ng act i v i t i es . Af t er i dent i f y i ng al l

v al ue chai n act i v i t i es , manager s hav e t o f ocus on t hos e act i v i t i es t hat
cont r i but e t he mos t t o cr eat i ng cust omer v al ue. For ex ampl e, Appl e pr oduct s ’
s ucces s mai nl y comes not f r om gr eat pr oduct f eat ur es ( ot her compani es hav e
hi gh- qual i t y of f er i ngs t oo) but f r om successf ul mar ket i ng act i v i t i es .

St ep 2 . E v al uat e t he di f f er ent i at i on st r at egi es f or i mpr ov i ng cus t omer v al ue.

Manager s can us e t he f ol l owi ng st r at egi es t o i ncr eas e pr oduct di f f er ent i at i on
and cus t omer v al ue:

Add mor e pr oduct f eat ur es;

F ocus on cus t omer s er v i ce and r esponsi v eness;
I ncr eas e cus t omi z at i on;
Of f er compl ement ar y pr oduct s.
Step 3. I d entif y th e be s t s us tain ab le d i ffer ent i a t i on. Us ua lly ,
sup er ior d if f er entiation an d c us t om er v a lue wi ll b e t he
resul t o f ma ny inte rre late d ac tiv i t i es a nd s t r a t eg i es us ed .
T he bes t comb ina tion of th e m s h ould b e us ed t o p ur s ue
susta ina b l e d if f e re n tiation adv ant a g e.

Exa mpl e

T h is ex a mp l e is p artially adopte d fr om R . M . G r a nt ’ s b ook

‘C on te mp or a r y S trate gy A n aly s is ’ p . 2 41. It i llus t r a t es t he
b a sic VC A f or a n automobile man ufa ct ur i ng com p a ny t ha t
c omp e te s on cos t adv an tage . T h i s a na ly s i s d oes n’ t i nclud e
sup p o r t a ctiv ities th at are e s s e nt i a l t o a ny fi r m ’ s v a lue
c h a in, th us the a n aly s is its e lf is n ot com p let e.