MBA-III Semester

Course Title: Strategic Management

Course Code: MBA-301
Unit-4
Course Contents
Strategy Analysis & Implementation : Process, Analyzing Strategic alternative, Evaluating and
Choosing Among Strategic Alternative, Tools & Techniques of strategic Analysis, Strategic Choice.
BCG Matrix, Ansoff Grid, GE Nine Cell Planning Grid, McKinsey’s 7’S framework Implementation of
Strategy Implementing Strategy through Short-Term Objectives, Functional Tactics, Reward System
and Employee Empowerment, Leadership, and Culture

Strategy Analysis & Implementation-

Strategic analysis is a process that involves researching an organization’s business
environment within which it operates. Strategic analysis is essential to formulate strategic
planning for decision making and smooth working of that organization. With the help of
strategic planning, the objective or goals that are set by the organization can be fulfilled.
In a constant strive to improve, organizations must periodically conduct a strategic analysis
which will, in turn, help them determine what areas need improvement and areas that are
already doing well. For an organization to function efficiently, it is important to think about
how positive changes need to be implemented.
Types of Strategic Analysis
1. Internal Analysis
2. External Analysis

Internal strategic analysis: As the name suggests, through this analysis organizations
look inwards or within the organization and identify the positive and negative points, and

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establish the set of resources that can be used to improve the company’s image within the
market. Internal analysis starts from evaluating the performance of the organization. This
includes evaluating the potential of an organization and its capacity to grow.
The analysis of the strengths of the company should be oriented to the market, focusing on
the client. The strengths only make sense when they help the company to fulfill client’s
needs. When doing an internal strategic analysis one should also know the weaknesses and
limitations that a company faces existentially or in the future.

SWOT analysis is one of the most reputed techniques for internal strategic analysis. There
is no better way to benefit from a strategically performed analysis than to use it to detect
the strengths, opportunities, weaknesses, and threats that your project may suffer.
Performing SWOT analysis will help you create a strong and long term vision
through strategic planning for your organization. The important thing is to constantly
evaluate the environment in which the company operates, and act accordingly. It is
essential for an organization to take into account the SWOT principle in order to be able to
plan efficiently. Through a thorough SWOT analysis companies will be able to prevent a
number of problems that can arise if there is no systematic analysis.
Let us further break down these attributes and understand how an organization can
conduct a complete strategic analysis to be able to plan and perform better with each
passing year.
Strengths of a company: There are several attributes within the company that are
positive, that you can control in order to obtain better results, they are your strengths,
which makes you stand out from others. Surely there are certain resources or strategies
that have led to your organization’s process year on year. Knowing these resources or
strategies are also considered as strengths. Knowing this type of information is very
important because these are the elements that give you an advantage over your
competition.
Weakness of a Business: It is practically impossible for an organization or a company to
have only strengths and not have weaknesses. Therefore, there are certain characteristics
of an organization that they need to be improved in order to be able to perform better and
compete in the market. These are called business weaknesses. Most of the factors are
foreseeable and an organization needs to identify them well in advance and approach the
problems with a corrective measure.
Opportunities for the company: Detect the opportunities you have to grow. Knowing the
path organizations must follow is a great step towards success. Take advantage of all those

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external factors that are positive for the organization. Identify all the opportunities and
take advantage of them.
Threats to an organization: There are going to negative factors that will affect the growth
of the organization and these factors can be analyzed too. These factors need to detected
and a risk management strategy needs to be put in place so that threats like stronger brand
value of the competitors, better relationship of competitors with retailers etc. don’t have an
adverse effect on the company’s growth. Also, threats like multiple players in the market
with the same products, downturn in economy, better advertising of the same product by
competitors are some threats that have to be dealt with carefully so that competitors don’t
take advantage of the situation.

2. External strategic analysis: Once the organization has successfully completed its
internal analysis, the organization needs to know about external factors that can be a
hindrance in their growth. To do so, they need to know how the market functions and how
consumers react or behave to certain products or services. Measuring customer
satisfaction is a common external analysis method. PESTLE analysis is one of the most
widely used external analysis techniques. The process one is most likely to adopt when
using a PESTLE technique is relatively a simple one.

PESTLE analysis (Political, Economic, Social, Legal and Environmental) describes a

framework of macro-environmental factors used in the environmental scanning
component of external strategic analysis. The model has been extended by
adding Ethics and Demographic factors. It is a part of the external analysis when
conducting a strategic analysis or doing market research and gives an overview of the
different macro environmental factors that the organization has to take into consideration.
By using PESTLE analysis one can:
1. Find out the key issues beyond the organization’s control, like changes in political
scenario changing rules that can be implemented at any point in time.
2. Identify the impact of each issue.
3. See how important these issues are to the organization.
4. Rate the likelihood of its occurrence.

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 5. Briefly consider the implications if the issue did occur

Tools & Techniques of strategic Analysis

1. Gap Analysis
2. VRIO Analysis
3. Four Corners Analysis
4. Value Chain Analysis
5. SWOT Analysis
6. Strategy Evaluation
7. Porter's 5 Forces
8. PESTEL Analysis
Analytical tools rely on historical data and prior situations to infer future assumptions.
With this in mind, caution should always be used when making assumptions based on your
strategic analysis findings.
Gap Analysis
The Gap Analysis is a great internal analysis tool that helps you identify the gaps in your
organization that is impeding progress towards your objectives and vision. The analysis
gives you a process for comparing your organization's current state to its desired future
state, in order to draw out the current gaps which you can then create a series.
Four Corners Analysis
Another internal analysis tool is the Four Corners Analysis which focuses on core
competencies of the organization, however, what differentiates this tool from the others is
its focus on the long term, rather than short. To clarify, most of the other tools are
evaluating the current state of an entity yet, the four corners analysis assesses the
company’s future strategy which is more precise because it makes the corporation one step
ahead of its competitors. By using the four corners, you will know your competitors’
motivation and consequently their current strategies that are powered by their capabilities.
This analysis will aid you in formulating the company’s trend or predictive course of action.
Value Chain Analysis -
The Value Chain Analysis is a great tool to identify and help establish a competitive
advantage for the organization. The analysis achieves this by examining the range of
activities in the business, to gain an understanding of the value each activity brings to the
final product or service.

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Value chain analysis focuses on analyzing the internal activities of a business in an effort to
understand costs, locate the activities that add the most value, and differentiate from the
competition. To develop an analysis, Porter's model outlines primary business functions as
the basic areas and activities of inbound logistics, operations, outbound logistics, marketing
and sales, and service. The model also identifies the discrete tasks found in the important
support activities of firm infrastructure, human resources management, technology, and
procurement.
The concept of the analysis is that each activity should directly or indirectly add value to
the final product/service and if you are operating efficiently should you be able to sell for
more than the total cost of adding that value. Hubspot has put together a pretty solid guide
to Value Chain Analysis, so if you want to conduct one for your organization or even just
learn a little more about it

Strategic Choice
Strategic choice or strategic decision is the process of systematically comparing the impact
of the possible strategies on product-market and the firm. Selection strategy is a careful
conscious deliberate and creative activity. It involves tradeoffs between different courses of
action. Professor Henry Mintzberg says “Strategy formulation is interplay among three
basic forces –
 A dynamic environment that changes continuously but irregularly with frequent
discontinuities and wide swings in the rate of change;
 The operating system of the organisation which seeks to stabilise its activities
despite the characteristics of the environment it serves; and
 The role of leadership mediating between two forces so as to maintain stability of
the organisation, operating system while at the same time adapting it to the
environmental change.

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Factors Affecting Strategic Choice

(1) Environmental Constraints – The very survival and growth and hence, prosperity of a
unit rest on its exposure to and interaction with its environment which is external. External
environment is made up of its publics namely shareholders, suppliers, competitors,
customers, lenders, government and the community. These elements are the external
constraints. The flexibility in the choice of a strategy, is governed by the extent of the firm’s
dependence on the these elements and the extent to which these constraints cooperate.
Comparatively, those organisations which are well settled, deep rooted and large in
industries are much more powerful as against their counter part namely, the environment.
They enjoy greater flexibility and lee way in strategic choice
For example, a company which gets bulk supply of inputs raw-material and component
parts in a highly sensitive market has greater degree of flexibility in strategic choice as
compared to the company which depends for its inputs on a market which is monopolistic.
The strategies of competitors in any area of business will have impact on choice of a
strategy. What financial or production or marketing, or personnel strategies the firm is to
follow will depend on what competitors are doing. A shareholder holding majority of
shares, has say in strategy the company is to formulate because his preferences can not be
ignored. Customers are the real decision makers whose likes and dislikes can not be
thrown to winds. Changing governmental policies will have to be respected. Again, it is
community in which company is working decides what company should do and should not
do.
(2) In House Forces and Managerial Power Relations – The in house forces play a
significant role. Let us confine to only decision making process. In a highly controlled or
centralised company, it is the top management which has the total power to configure the
strategic choice. That is, the decision-strategic decision-made is by centralised
management, is quick and not diluted.

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Another very important variable is that of managerial power relations. It is normally found
that the major decisions are influenced by the power play among interest groups that differ
widely. Even the strategic choice is influenced by this variable. In case a influencing chief
executive is in favour of a strategic choice which also benefits other top management
members, it may be endorsed easily by other senior member. This happens when unity
prevails. However, this can be opposed in case there is power politics or power game as we
find in Indian Parliamentary Affairs.
(3) Managerial Attitudes towards Risk – Managerial attitudes towards risk is yet another
significant factor that affects the choice of a strategy. The managerial decision is guided by
the attitude of the decision- maker towards risk. Based on this “attitude towards risk”
decision-makers can be of three types namely, Risk lover, Risk Averse and Risk
neutral. Then one may distinguish between the following attitudes reflecting the order of
risk preferences.
 Risk is necessary for success
 Risk is a fact of life and some risk is desirable and
 High risk destroys enterprises and needs to be minimised as given by Professor
William F.Glueck.
By nature executives who are risk lovers go in for high returns, high growth, less stable
markets as there is direct relationship between risk and the reward. These people prefer to
be pioneers, innovators, early birds.
On the other hand, the risk averse or people who want to take least risks are those who
want to be followers than leaders and challengers, they prefer stable conditions, low
returns and go in for safer options.
Age factor also plays decisive role. The old managers tend to take no extra risk unlike
young people who are yet to make mark. Those who deal with risk and uncertainty easily
are able to face successfully the complex problems than those who are risk averse. Risk
prone decision makers limit the amount of information and make decisions quickly as if it
is an impulsive task.
(4) Influence of Past Strategy – Future has its roots in the past. To this, past strategy is no
exception. That is, choice of the current and the future is influenced by the past strategy
due to number of reasons. The foundation for formulation of new strategies is the past
strategy. In the light of the past strategy, the strategist either might not have thought of
altering it or it is also possible that the strategists might have taken the things lightly and
might not have thought of alternatives with the seriousness that they deserve due to
intertia. Personal involvement of the decision maker with the past strategy will continue to
do so. Thus, the present and future strategies will be influenced by personal involvement.
(5) Time Dimension of Strategic Choice – Yet another very important factor in the process
of strategic decision making is the time dimension of strategic choice. This time dimension
has four elements which one can not ignore, these are-time pressure, time frame, time
horizon and timing of the decision.
 Time Pressure
 Time Frame
 Time Horizon
 Timing of Decision
(6) Reaction of Competitors – The strategic choice of a strategy option is bound to reflex in
the competitors’ reaction. Therefore, a wise strategist places himself in the shoes of the
competitor or competitors to know where exactly the shoe bites. Only after studying the
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reactions, he may be able to take correct decision than ignoring the impact of competitor
reaction. Much depends on your market position. That is, whether you are leader,
challenger, follower or nicher. Say, both your firm and your arch-rival firm are challengers.
In this case, it is quite possible that your competitor may take your strategic option as very
aggressive and makes the competitor to have counter strategy to over power you.
Say, you reduced the price of your branded product, then other company might reduce
equally and give some addition incentive in kind. If you are a followers, then the strategy of
follow the suit operates. We know the case of price war going on between arch rivals
namely Hindustan Lever and Proctor and Gamble. If the first company has reduced the
price of Surf Excel from 85 to 70 for a half kilo pack, Proctor and Gamble has done so in
case of Arial. Later, Surf Excel has been introduced with new proposition.” The followers
say Nirma and others being followers, have no choice than to follow the suit without
option. Thus, the competitors reaction has far reaching impact on the choice of a strategy.
(7) Availability of Relevant Information – When it is a question of choice rather rational
choice, the quality and quantity of information decide the strategy choice. The choice or
strategic decision that is based on facts, the considered opinions other sources of
information written as oral are more sound and acceptable that is, the degree of risk and
uncertainty depends on the amount and quality of information made available to the
decision makers.
There is inverse relationship between the available information and the degree of accuracy
of strategic choice. That is, the greater the amount of high quality information, lesser the
risk and uncertainty. The decision maker is a risk-prone or a risk averter or risk neutral.
Risk prone and risk averters need the information to decide whether to take or not the
calculated risks which are unavoidable in the world of business. Hence, the decision
makers need a package of relevant information to analyse and interpret and act. The
information is not easily available which costs in terms of treasure, time and talent.
Process of Strategic Choice
(1) Focusing on alternatives – The aim of this step is to narrow down the choice to a
manageable number of feasible strategies. It can be done by visualizing a future
state and working backwards from it. Managers generally use GAP analysis for this
purpose. By reverting to business definition it helps the managers to think in a
structured manner along any one or more dimensions of the business.
 At Corporate level strategic alternatives are -Expansion, Stability, Retrenchment,
Combination
 At Business level strategic alternatives are – Cost leadership, Differentiation or
focused business strategy.
(2) Analyzing the strategic alternatives – The alternatives have to be subjected to a
thorough analysis which rely on certain factors known as selection factors. These
selection factors determine the criteria on the basis of which the evaluation will
take place. They are –
 Objective factors – These are based on analytical techniques and are hard facts used
to facilitate strategic choice.
 Subjective factors – These are based on one’s personal judgment, collective or
descriptive factors.
(3) Evaluation of strategies – Each factor is evaluated for its capability to help the
organization to achieve its objectives. This step involves bringing together analysis

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 carried out on the basis of subjective and objective factors. Successive iterative
steps of analyzing different alternatives lie at the heart of such evaluation.
(4) Making a strategic choice – A strategic choice must lead to a clear assessment of
alternative which is the most suitable alternative under the existing conditions. A
blueprint has to be made that will describe the strategies and conditions under
which it operates. Contingency strategies must be also devised.

Boston Consulting Group (BCG) Matrix

The growth share matrix (BCG matrix) was created by Boston Consulting Group’s founder
Bruce Henderson in 1968. 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.
It is the most renowned corporate portfolio analysis tool. It provides a graphic
representation for an organization to examine different businesses in it’s portfolio on the
basis of their related market share and industry growth rates. It is a two dimensional
analysis on management of SBU’s (Strategic Business Units). In other words, it is a
comparative analysis of business potential and the evaluation of environment.
According to this matrix, business could be classified as high or low according to their
industry growth rate and relative market share.
Relative Market Share = SBU Sales this year leading competitors sales this year.

Market Growth Rate = Industry sales this year - Industry Sales last year.
The analysis requires that both measures be calculated for each SBU. The dimension of
business strength, relative market share, will measure comparative advantage indicated by
market dominance. The key theory underlying this is existence of an experience curve and
that market share is achieved due to overall cost leadership.
BCG matrix has four cells, with the horizontal axis representing relative market share and
the vertical axis denoting market growth rate. The mid-point of relative market share is set
at 1.0. if all the SBU’s are in same industry, the average growth rate of the industry is used.
While, if all the SBU’s are located in different industries, then the mid-point is set at the
growth rate for the economy.
Resources are allocated to the business units according to their situation on the grid. The
four cells of this matrix have been called as stars, cash cows, question marks and dogs. Each
of these cells represents a particular type of business.
Figure: BCG Matrix

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1. Stars- Stars represent business units having large market share in a fast growing
industry. They may generate cash but because of fast growing market, stars require
huge investments to maintain their lead. Net cash flow is usually modest. SBU’s located
in this cell are attractive as they are located in a robust industry and these business
units are highly competitive in the industry. If successful, a star will become a cash cow
when the industry matures.
2. Cash Cows- Cash Cows represents business units having a large market share in a
mature, slow growing industry. Cash cows require little investment and generate cash
that can be utilized for investment in other business units. These SBU’s are the
corporation’s key source of cash, and are specifically the core business. They are the
base of an organization. These businesses usually follow stability strategies. When cash
cows loose their appeal and move towards deterioration, then a retrenchment policy
may be pursued.
3. Question Marks- Question marks represent business units having low relative market
share and located in a high growth industry. They require huge amount of cash to
maintain or gain market share. They require attention to determine if the venture can
be viable. Question marks are generally new goods and services which have a good
commercial prospective. There is no specific strategy which can be adopted. If the firm
thinks it has dominant market share, then it can adopt expansion strategy, else
retrenchment strategy can be adopted. Most businesses start as question marks as the
company tries to enter a high growth market in which there is already a market-share.
If ignored, then question marks may become dogs, while if huge investment is made,
then they have potential of becoming stars.
4. Dogs- Dogs represent businesses having weak market shares in low-growth markets.
They neither generate cash nor require huge amount of cash. Due to low market share,
these business units face cost disadvantages. Generally retrenchment strategies are
adopted because these firms can gain market share only at the expense of
competitor’s/rival firms. These business firms have weak market share because of high
costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim,
it should be liquidated if there is fewer prospects for it to gain market share. Number of
dogs should be avoided and minimized in an organization.

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Limitations of BCG Matrix
The BCG Matrix produces a framework for allocating resources among different business
units and makes it possible to compare many business units at a glance. But BCG Matrix is
not free from limitations, such as-
1. BCG matrix classifies businesses as low and high, but generally businesses can be
medium also. Thus, the true nature of business may not be reflected.
2. Market is not clearly defined in this model.
3. High market share does not always leads to high profits. There are high costs also
involved with high market share.
4. Growth rate and relative market share are not the only indicators of profitability.
This model ignores and overlooks other indicators of profitability.
5. At times, dogs may help other businesses in gaining competitive advantage. They
can earn even more than cash cows sometimes.
6. This four-celled approach is considered as to be too simplistic.

Ansoff Grid
The Ansoff Matrix, also called the Product/Market Expansion Grid, is a tool used by firms
to analyze and plan their strategies for growth. The matrix shows four strategies that can
be used to help a firm grow and also analyzes the risk associated with each strategy. Learn
more about business strategy in CFI’s Business Strategy Course.

The matrix was developed by applied mathematician and business manager, H. Igor
Ansoff, and was published in the Harvard Business Review in 1957. The Ansoff Matrix has
helped many marketers and executives better understand the risks inherent in growing
their business.

The four strategies of the Ansoff Matrix are:

1. Market Penetration: This focuses on increasing sales of existing products to an existing
market.
2. Product Development: Focuses on introducing new products to an existing market.
3. Market Development: This strategy focuses on entering a new market using existing
products.

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4. Diversification: Focuses on entering a new market with the introduction of new
products.

Out of the above four strategies, market penetration is the least risky, while diversification
is the riskiest.

The Ansoff Matrix: Market Penetration

In a market penetration strategy, the firm uses its products in the existing market. In other
words, a firm is aiming to increase its market share with a market penetration strategy.
The market penetration strategy can be executed in a number of ways:
1. Decreasing prices to attract new customers
2. Increasing promotion and distribution efforts
3. Acquiring a competitor in the same marketplace
For example, telecommunication companies all cater to the same market and employ a
market penetration strategy by offering introductory prices and increasing their promotion
and distribution efforts.

The Ansoff Matrix: Product Development

In a product development strategy, the firm develops a new product to cater to the existing
market. The move typically involves extensive research and development and expansion of
the company’s product range. The product development strategy is employed when firms
have a strong understanding of their current market and are able to provide innovative
solutions to meet the needs of the existing market.
This strategy, too, may be implemented in a number of ways:
1. Investing in R&D to develop new products to cater to the existing market
2. Acquiring a competitor’s product and merging resources to create a new product
that better meets the need of the existing market
3. Forming strategic partnerships with other firms to gain access to each partner’s
distribution channels or brand

For example, automotive companies are creating electric cars to meet the changing needs
of their existing market. Current market consumers in the automobile market are becoming
more environmentally conscious.
The Ansoff Matrix: Market Development
In a market development strategy, the firm enters a new market with its existing
product(s). In this context, expanding into new markets may mean expanding into new
geographic regions, customer segments, etc. The market development strategy is most
successful if (1) the firm owns proprietary technology that it can leverage into new
markets, (2) potential consumers in the new market are profitable (i.e., they possess
disposable income), and (3) consumer behavior in the new markets does not deviate too
far from that of consumers in the existing markets.
The market development strategy may involve one of the following approaches:
1. Catering to a different customer segment
2. Entering into a new domestic market (expanding regionally)
3. Entering into a foreign market (expanding internationally)

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For example, sporting goods companies such as Nike and Adidas recently entered the
Chinese market for expansion. The two firms are offering roughly the same products to a
new demographic.

The Ansoff Matrix: Diversification

In a diversification strategy, the firm enters a new market with a new product. Although
such a strategy is the riskiest, as both market and product development are required, the
risk can be mitigated somewhat through related diversification. Also, the diversification
strategy may offer the greatest potential for increased revenues, as it opens up an entirely
new revenue stream for the company – accesses consumer spending dollars in a market
that the company did not previously have any access to.
There are two types of diversification a firm can employ:
1. Related diversification: There are potential synergies to be realized between the
existing business and the new product/market.
For example, a leather shoe producer that starts a line of leather wallets or
accessories is pursuing a related diversification strategy.
2. Unrelated diversification: There are no potential synergies to be realized between
the existing business and the new product/market.
For example, a leather shoe producer that starts manufacturing phones is pursuing
an unrelated diversification strategy.

GE Nine Cell Planning Grid

GE nine-box matrix is a strategy tool that offers a systematic approach for the multi
business enterprises to prioritize their investments among the various business units. It is
a framework that evaluates business portfolio and provides further strategic implications.
Each business is appraised in terms of two major dimensions – Market Attractiveness and
Business Strength. If one of these factors is missing, then the business will not produce
desired results. Neither a strong company operating in an unattractive market, nor a weak
company operating in an attractive market will do very well

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The vertical axis represents -
Industry attractiveness indicates how hard or easy it will be for a company to compete in
the market and earn profits. The more profitable the industry is the more attractive it
becomes. When evaluating the industry attractiveness, analysts should look how an
industry will change in the long run rather than in the near future, because the investments
needed for the product usually require long lasting commitment.
1. Long run growth rate
2. Industry size
3. Industry profitability: entry barriers, exit barriers, supplier power, buyer power,
threat of substitutes and available complements (use Porter’s Five Forces analysis
to determine this)
4. Industry structure (use Structure-Conduct-Performance framework to determine
this)
5. Product life cycle changes
6. Changes in demand
7. Trend of prices
8. Macro environment factors (use PEST or PESTEL for this)
9. Seasonality
10. Availability of labor
11. Market segmentation
Horizontal axis represents -
Along the X axis, the matrix measures how strong, in terms of competition, a particular
business unit is against its rivals. In other words, managers try to determine whether a
business unit has a sustainable competitive advantage (or at least temporary competitive
advantage) or not.
1. Total market share
2. Market share growth compared to rivals
3. Brand strength (use brand value for this)
4. Profitability of the company
5. Customer loyalty
6. VRIO resources or capabilities (use VRIO framework to determine this)
7. Your business unit strength in meeting industry’s critical success factors
(use Competitive Profile Matrix to determine this)
8. Strength of a value chain (use Value Chain Analysis and Benchmarking to determine
this)
9. Level of product differentiation
10. Production flexibility
Green zone
Suggests you to ‘go ahead’, to grow and build, pushing you through expansion strategies.
Businesses in the green zone attract major investment.
Yellow zone
Cautions you to ‘wait and see’ indicating hold and maintain type of strategies aimed at
stability.
Red zone
Indicates that you have to adopt turnover strategies of divestment and liquidation or
rebuilding approach

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Advantages
1. Helps to prioritize the limited resources in order to achieve the best returns.
2. The performance of products or business units becomes evident.
3. It’s more sophisticated business portfolio framework than the BCG matrix.
4. Determines the strategic steps the company needs to adopt to improve the performance
of its business portfolio.
Disadvantages
1. Needs a consultant or an expert to determine industry’s attractiveness and business
unit strength as accurately as possible.
2. It is expensive to conduct.
3. It doesn’t take into account the harmony that could exist between two or more business
units.

McKinsey’s 7’S framework Implementation of Strategy

The McKinsey 7S Model refers to a tool that analyzes a company’s “organizational design.”
The goal of the model is to depict how effectiveness can be achieved in an organization
through the interactions of seven key elements – Structure, Strategy, Skill, System, Shared
Values, Style, and Staff.

The focus of the McKinsey 7s Model lies in the interconnectedness of the elements that are
categorized by “Soft Ss” and “Hard Ss” – implying that a domino effect exists when changing
one element in order to maintain an effective balance. Placing “Shared Values” as the
“center” reflects the crucial nature of the impact of changes in founder values on all other
elements.

Structure of the McKinsey 7S Model

Structure, Strategy, and Systems collectively account for the “Hard Ss” elements, whereas
the remaining are considered “Soft Ss.”

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1. Structure
Structure is the way in which a company is organized – chain of command and
accountability relationships that form its organizational chart.
2. Strategy
Strategy refers to a well-curated business plan that allows the company to formulate a
plan of action to achieve a sustainable competitive advantage, reinforced by the
company’s mission and values.
3. Systems
Systems entail the business and technical infrastructure of the company that establishes
workflows and the chain of decision-making.
4. Skills
Skills form the capabilities and competencies of a company that enables its employees
to achieve its objectives.
5. Style
The attitude of senior employees in a company establishes a code of conduct through
their ways of interactions and symbolic decision-making, which forms the management
style of its leaders.
6. Staff
Staff involves talent management and all human resources related to company
decisions, such as training, recruiting, and rewards systems
7. Shared Values
The mission, objectives, and values form the foundation of every organization and play
an important role in aligning all key elements to maintain an effective organizational
design.
Practical Example
The McKinsey 7S model can be applied in circumstances where changes are being brought
into the organization that may affect one or more of the shared values. Suppose a company
is planning to undertake a merger. It will affect how the company is organized since new
staff will be coming in. It will also affect the structure of the company, along with strategic
decision-making, as new ideas flow in through synergy.
In such a case, the McKinsey 7s model can be used to first identify the inconsistent areas –
here, it would primarily be the structure, staff, and strategy. After identifying the relevant
areas, the company can make effective decisions to optimally re-organize and incorporate
the changes in a way that streamlines the merger process – after conducting extensive
research and analysis of the consequences that the changes bring to the company.

Implementing Strategy through Short-Term Objectives

Functional Tactics
Functional tactics are the key, routine activities that must be undertaken in each functional
area-marketing, finance, production, R&D, and human resource management to provide the
business products and services.

Functional tactics are the key activities that have to be executed in each functional area –
human resources, production, financial, marketing, product research, and development –
so that the farming business's products can be produced and marketed.

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Functional tactics are the routine key activities that must be performed in every functional
area i.e. human resource management, operations/production, finance, marketing, and
research and development for providing the products and services of the business. Thus,
these tactics translate grand strategy (thought or idea) into action planned to achieve
certain short-term objectives.

Reward System
Behavioral research consistently demonstrates that performance levels are highest when
rewards are contingent upon performance. Thus, in this section, we will examine five
aspects of reward systems in organizations: (1) functions served by reward systems, (2)
bases for reward distribution, (3) intrinsic versus extrinsic rewards, (4) the relationship
between money and motivation and, finally, (5) pay secrecy.

Employee Empowerment
When someone is empowered, they have the ability to accomplish something and they
know it, giving them the confidence needed to succeed. Employee empowerment refers to
the manner in which companies provide their employees with anything and everything
they need to succeed. This involves far more than simple resource allocation, however.
Companies that are interested in empowering employees should act on the following:
 Give employees a voice by regularly soliciting and acting on their feedback.
 Provide opportunities for employees to grow through more autonomy, additional
responsibilities, or even an entirely new role.
 Recognize employees frequently to increase their engagement and confidence in
their own abilities.
 And, of course, provide employees with the tools, training, and authority they need
to excel.
A company’s leaders, HR professionals, and fellow employees all play key roles in
establishing a supportive, empowered environment. All parties need to establish mutual
trust, feel comfortable taking risks, and establish clear expectations and guidelines.
Without this collaboration, truly empowering employees is impossible.

Leadership
Leadership is the ability of an individual or a group of individuals to influence and guide
followers or other members of an organization.
Leadership involves making sound -- and sometimes difficult -- decisions, creating and
articulating a clear vision, establishing achievable goals and providing followers with the
knowledge and tools necessary to achieve those goals.
Leaders are found and required in most aspects of society, from business to politics to
region to community-based organizations.
An effective leader possess the following characteristics: self-confidence, strong
communication and management skills, creative and innovative thinking, perseverance in
the face of failure, willingness to take risks, openness to change, and levelheadedness and
reactiveness in times of crisis.

Culture

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Culture is an umbrella term which encompasses the social behavior and norms found in
human societies, as well as the knowledge, beliefs, arts, laws, customs, capabilities, and
habits of the individuals in these groups.
 Culture refers to the cumulative deposit of knowledge, experience, beliefs, values,
attitudes, meanings, hierarchies, religion, notions of time, roles, spatial relations,
concepts of the universe, and material objects and possessions acquired by a group of
people in the course of generations through individual and group striving.
 Culture is the systems of knowledge shared by a relatively large group of people.
 Culture is communication, communication is culture.
 Culture in its broadest sense is cultivated behavior; that is the totality of a person's
learned, accumulated experience which is socially transmitted, or more briefly,
behavior through social learning.
 A culture is a way of life of a group of people--the behaviors, beliefs, values, and
symbols that they accept, generally without thinking about them, and that are passed
along by communication and imitation from one generation to the next.
 Culture is symbolic communication. Some of its symbols include a group's skills,
knowledge, attitudes, values, and motives. The meanings of the symbols are learned and
deliberately perpetuated in a society through its institutions.

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