Startegic management

- 2024
By: Dr Mohamed Khaled
Assistant Professor, The Chartered Institute of Marketing -
UK
And Arab Academy for Science, Technology and Maritime
Transport
My Contacts
• LinkedIn:
https://www.linkedin.com/in/mohamed-khaled-05038920
/

• Facebook:
https://www.facebook.com/Mohamed.Mkhaled.4

• Email: [email protected]

• Cellular: +2 0100 1647 102

Introduction
Organization Overview / Background
• Organization name.

• Organization information – type of organization, size of

organization, range of products and services, customer base and
main competitors.
Market leader – challenger – followers – Nicher “product-org.-MS-
Revenues”

• Stakeholders – internal and external.

• Key customer segment.

• Type: national/multinational
For profit – not for profit
Legal status: soleproprietorship, company, limited liability ltd

Size: number of employees

1-49 small
50-249 medium
250.. Large
Trend analysis 2020,2021,2022----1b, 1.1, 1.2: growth rate
Product/Service portfolio
• Four dimensions:
1- Width: Number of different product lines within the company.

2- Length: total number of items in the product line.

3- Depth: Number of versions offered of each product in the line

“SKUs”Stock keeping units.

4- Consistency: closely related product line.

Unilever products
The product life cycle “PLC”
PLC
• Introduction stage
The product is launched into the market and generally sales are slow to pick up
because
customers and distribution have to be found and convinced. If the product is
new to the
world (e.g. the first iPad) it will face little or no competition and the company will
have
a pioneer advantage and appeal to innovators. If it is an addition (e.g. the
Samsung Edge
in the smartphone market) it will be targeted at a new segment and fit the
‘ideal’ of that
segment better than alternative solutions.

The key question here has to do with how quickly competitors will launch a
• Growth stage
The growth stage is characterized by a rapid increase in sales as
the product starts to attract different types of customers and
repeat purchases may start. Critically, it is at this stage that
competitors assess the product’s market and profit potential and
decide on their competitive moves. They may decide to modify or
improve their current offerings or enter the market with their own
new products (e.g. Microsoft Zunes as the ‘iPod killer’). If not, they
may use the other elements of the mix to detract attention from
the product, i.e. an advertising campaign or a price promotion. It is
possible that defensive attacks may be required to prevent the
curve from flattening.
PLC
• Maturity stage
At this stage the rate of growth slows down significantly. This stage
tends to last longer than the previous ones and is, probably, the most
challenging one: it is a fact of life for most marketers that the markets
they have to deal with are mature! This is a stage of severe
competition, market fragmentation and declining profits, due to over-
capacity in the industry. Indeed, competitors will try to uncover
untapped niches and/or enter price wars. This leads to a clear-out and
the weaker competitors will exit, possibly becoming suppliers to the
stronger ones or being bought by them (as we are currently seeing in
the car industry). The survivors will be either companies supplying the
bulk of the market, competing on a high volume–low margin basis, or
market nichers. Many firms will try to buck the trend and revamp their
PLCs or expand the market by creating a new segment, and hence
extra demand overall.
PLC
• Decline stage
This stage is marked by a slow or rapid decline of the sales of the
product. Decline may be due to better solutions (e.g. new
technology such as the USB flashdrive replacing floppy and zip
disks) supplanting weaker ones, a change in consumer tastes or an
increase in competition, be it domestic or international.
Customer Base
The Seven Markets Model “stakeholder
analysis”
Brand Values
• Generic Values: …… The qualities that are typical and
expected of every brand in your sector ……
• Shadow Values: …… The awkward truths that are
obvious to outsiders but not to insiders …………
positive/-ve
• Progressive Values: …… The qualities that you don’t
have but will need to achieve your vision……
• Defining Values: …… The qualities you would fight to
protect and distinguish your brand………
•External analysis
Put it all together: PESTEL Analysis
A. Political:
1. Taxation Policy.
2. Government policy.
3. Pressure groups.
4. Wars.
5. Terrorists attacks.
6. Revolutions.
7. Stability of political regime.
Put it all together: PESTEL Analysis
B. Economics:
1. Interest rate.
2. Inflation rate.
3. Unemployment rate.
4. GDP
5. Booms and recessions.
6. Energy available and cost.
7. Income.
Put it all together: PESTEL Analysis
C. Socio-Cultural:
1. Demographics.
2. Distribution of income.
3. Lifestyle: healthy – ecommerce – time poor, money rich –
showrooming - webrooming
4. Education.
5. Consumer trends.
Put it all together: PESTEL Analysis
D. Technological:
1. New discoveries and innovations.
2. Speed of technology transfer.
3. Rates of obsolescence.
4. Internet.
5. Information technology.
6. Internet.
7. Communications.
8. Pharmaceutical.
9. Electronics.
Put it all together: PESTEL Analysis
D. Technological:
Products
 Improvement in current products
 Products outdated or obsolete (e.g. camera films)
 Change in usage pattern (documents transfer & courier companies)

Processes
 EPOS
 Internet based supply chain
Put it all together: PESTEL Analysis
E. Ecological/Environmental:
1. Environmental regulations.
2. Environmental protection legislations.
3. Business ethics.
4. Green industries
Put it all together: PESTEL Analysis
F. Legal:
1. Employment laws.
2. Industry laws.
3. Competition law.
4. Consumer protection law.
5. Contract law.
6. Patency.
7. Anti-dumping law.
8. Advertisement law.
Macro- PESTELE
Macro- PESTELE “External analysis”
1.2 Analysing the External Environment
“Micro-Environment”
1. Micro-Environment is closer to the organization than the macro-
environment so managers can have more influence over it
through competitive and collaborative moves.

2. Porter’s Five Forces Model (Porter, 1980):

Awareness of the five forces can help a company understand the
structure of its industry and stake out a position that is more
profitable and less vulnerable to attacks.
The Five Forces Model of Competition
(Porter, 1980)
The Five Forces Model of Competition
(Porter, 1980)
1- Rivalry Among existing competitors
• Stage of the PLC of competing products.
• Use of specialized production technique.
• Ability to achieve differentiation and brand loyalty.
• Competitor intentions.
• The relative size of the competitor.
• Barriers of exit from the industry.
• Focus on competitive advantage of strategies.
• The Most power force.
The Five Forces Model of Competition
(Porter, 1980)
2- Threat of new entrants “Entry Barriers”
• Economy of scale.
• Capital investment.
• Product differentiation/ brand loyalty.
• Switching cost.
• Government regulations.
• Competitor retaliation.
• Supply channels access.
• Patency/ technology.
The Five Forces Model of Competition
(Porter, 1980)
3- Potential development of substitute products

• Price/performance ratio of substitute.

• Willingness to look for substitutes.
• Switching costs for buyers.
• Pressures increase when consumers’ switching costs decrease.
The Five Forces Model of Competition
(Porter, 1980)
4- Bargaining power of suppliers

• Availability of substitutes.
• Switching costs.
• Number of suppliers and few substitutes.
• Backward integration can gain control or ownership of suppliers.

• Supp>producer (dina farm)>destrib (carref.)>retailer>customer

The Five Forces Model of Competition
(Porter, 1980)
5- Bargaining power of buyers

Buyer leverage Price responsiveness

• Buyer concentration and size • Importance of the product
• Size of purchase • Profitability of buyer
• Availability of substitutes • Brand loyalty/ product
• Knowledge of market (price differentiation
aggregators) yashry-yaota-
pricena
Consumer power is higher where
products are standard or
undifferentiated
The Five Forces Model of Competition
(Porter, 1980)
6- Complementers
companies or entities that sell or offer goods or services that are
compatible with, or complementary to, the goods
or services produced and sold in a given industry.
Complementary goods offer more value to the consumer
together than apart.

Example: Tea and Sugar – Cars and petrol

The Competitive Profile Matrix (CPM)

• Definition

• The Competitive Profile Matrix (CPM) is a tool that compares the firm and its rivals
and reveals their relative strengths and weaknesses.
What is the Competitive Profile Matrix
• Firms often use CPM to better understand the external environment and the
competition in a particular industry. The matrix identifies a firm’s key competitors and
compares them using industry’s critical success factors.

• The analysis also reveals company’s relative strengths and weaknesses against its
competitors, so a company would know, which areas it should improve and, which
areas to protect.
Critical Success Factors
• Critical success factors (CSF) are the key areas that must be performed at the highest
possible level of excellence if organizations want succeed in a particular industry. They
vary between different industries or even strategic groups and include both internal
and external factors.
Weight
• Each critical success factor should be assigned a weight ranging from 0.0 (low
importance) to 1.0 (high importance). The number indicates how important the factor is
in succeeding in the industry. If there were no weights assigned, all factors would be
equally important, which is an impossible scenario in the real world.

• The sum of all the weights must equal 1.0. Separate factors should not be given too
much emphasis (assigning a weight of 0.3 or more) because success in an industry is
rarely determined by one or few factors. In our first example, the most significant
factors are ‘strong online presence’ (0.15), ‘market share’ (0.14), ‘brand reputation’
(0.13).
Rating
• Rating

• The ratings in CPM refer to how well companies are doing in each area. They range
from 4 to 1, where 4 means a major strength, 3 – minor strength, 2 – minor weakness
and 1 – major weakness. Ratings, as well as weights, are assigned subjectively to each
company, but the process can be done easier through benchmarking.

• Benchmarking reveals how well companies are doing compared to each other or
industry’s average. Just remember that firms can be assigned equal ratings for the
same factor. For example, if Company A, Company B and Company C, have market
share of 25%, 27% & 28% accordingly, they would all receive the rating of 4 rather
than receiving ratings 2, 3 & 4.
• Score & Total Score

• The score is the result of weight multiplied by the rating. Each company receives a
score on each factor. The total score is simply the sum of all individual scores for the
company. The firm that receives the highest total score is relatively stronger than its
competitors. In our example, the strongest performer in the market should be Company
B (2.94 points).
Benefits of the CPM:
 The same factors are used to compare the firms. This makes the comparison more
accurate.
 The analysis displays the information on a matrix, which makes it easy to compare the
companies visually.
 The results of the matrix facilitate decision-making. Companies can easily decide
which areas they should strengthen and protect or what strategies they should pursue.
Using the tool

 Step 1. Identify the critical success factors

 To make it easier, use our list of CSFs and include as many factors as possible. In
addition, following questions should be helpful identifying industry’s CSF:

 Why do consumers prefer Company A over Company B or vice versa?

 What resources, capabilities and competencies do firms possess?
 What sustainable competitive advantages do companies have in the industry?
 Why do some companies succeed and others fail in the industry?
• Step 2. Assign the weights and ratings

• The best way to identify what weights should be assigned to each factor is to compare
the best and worst-performing companies in the industry. Well-performing companies
will usually undertake activities that are significant for success in the industry.

• They will put most of their resources and energy into those activities compared to low-
performing organizations. Weights can also be determined in discussions with other
top-level managers.
Ratings should be assigned using benchmarking or during team discussions.
• Step 3. Compare the scores and take action

• You should compare the scores on each factor to identify where the company’s relative
strengths and weaknesses. In our first example, Company A had relative strength in
‘level of product integration’, ‘product range’ and ‘variety of distribution channels’.
Therefore, Company A should protect these areas while trying to improve its
weaknesses in ‘sales per employee’ and ‘market share’.
The company should also improve its strategy to become more successful in the
industry.
Issue Priority Matrix
EFAS Matrix (External Strategic Factors Analysis Summary)
• Weight: assign a weight to each factor from 1.0 (Most Important)
to 0.0 (Not Important) based on that factor’s probable impact on
a particular company’s current strategic position. The higher the
weight, the more important this factor is to the current and future
success of the company. (All weights must sum to 1.00 regardless
of the number of factors.)
• Rating Scale: assign a rating to each factor from 4
(Outstanding) to 1 (Poor) based on the company’s current
response to that particular factor. Each rating is a judgment
regarding how well the company is currently dealing with each
external factor.
• Weighted Score: multiply the weight in Column 2 for each
factor times its rating in Column 3 to obtain that factor’s
weighted score.
• Let's start this paper by evaluating Apple’s opportunities and
threats. First, I will start with opportunities. Opportunities are
elements in the environment that the business or project could
exploit to its advantage (Hunger & Wheelen, 2011).
Internal analysis
Thompson framework to identify
resources
• Tangible resources

• Physical resources: owned or with rights to access and control

“land, factories, equipment, logistics assets, oil”
• Financial resources: cash flow, borrowing capacity, working
capital.
• Technological resources: copyrights, patents and production
technology.
• Organizational resources: systems-based assets such as
planning, coordination and control systems, MIS and databases.
“www.Marketo.com”
Thompson framework to identify
resources
• Intangible resources

• Human assests and intellectual capital: experience,

knowledge, innovation, creativity and knowhow of employees.
• Brands image and reputational assets: customer and
stakeholder-based assets such as trademarks, brand names and
country of origin.
• Relationships: distribution, dealer networks and level of control.
• Organizational culture and incentive systems: beliefs,
values and norms, level of innovation and motivation within the
organization.
The McKinsey 7-S Model

• McKinsey’s 7-S Framework was first introduced in the 1970s by

business consultants Robert Waterman and Tom Peters in the
book In Search of Excellence, who examined the role of
coordination in organizational effectiveness.

• The framework mapped the intersectionality of seven factors that

influence an organization’s ability to adapt and change. It
highlighted the interdependence of these factors and that without
working on these seven factors in a coordinate way, no single
factor would experience improvements.
The Elements of the McKinsey 7-S Framework

• he McKinsey 7-S Model depicts seven share

values: Structure, Strategy, System, Shared Values, Skill, Style,
and Staff.
• The McKinsey 7-S Framework then categorizes these seven
elements into two categories: hard elements and soft elements.
• Hard ‘S’ elements are easily identifiable and influenced by
leadership and management. They include Strategy, Structure,
and Systems.
• Soft ‘S’ elements are those that are intangible and culture-
driven. They include Shared Values, Style, Staff, and Skills.
1. Strategy

The strategy element is a detailed plan that organizations create

for successful change implementation and to gain a competitive
edge.
A well-crafted strategy is aligned with the other six elements of the
7-S model and is reinforced by a strong vision, mission, and values.

• The strategy is the plan deployed by an organization in order to remain

competitive in its industry and market. An ideal approach is to establish a long-
term strategy that aligns with the other elements of the model and clearly
communicates what the organization’s objective and goals are.
2. Structure

• Structure or organizational structure refers to a clear chain of

command to avoid chaos & confusion. Structure is a simple yet
crucial element as it creates a sense of employee accountability
within the organization.

• The structure of the organization is made up of its corporate hierarchy, the

chain of command, and divisional makeup that outlines how the operations
function and interconnect. In effect, it details the management configuration
and responsibilities of workers.
Mintzberg's Organizational Types
• The Entrepreneurial or Simple Organization “flat”
• An entrepreneurial organization usually assigns most of
the major decision-making to one or a few leaders. This
means the founder of a company, for example, not only
makes the big-picture strategic decisions for her
company, but she also directs the work of the HR,
marketing, accounting, sales and IT managers.
• This is the way many companies begin because
founders are usually risking their own money (and their
dreams) and are nervous about delegating important
decisions to anyone else.
• The Machine Organization “Bureaucracy”
• This type of organization has rigid roles, policies, guidelines,
operating methods and reporting procedures. The positives of
this type of organization is clear communication – everyone
knows exactly what they are supposed to be doing and how to
do it.
• One of the problems with this type of organization is that
instead of setting goals and letting talented people figure out
how to best reach these goals, the management orientation
creates a machine bureaucracy that can lead to stifled
creativity, longer production and problem-solving times and
lack of interdepartmental and team communication.
• The Professional Organization
• When a business is reliant on more than a few experts in their
fields, the company might go with a professional organizational
model. Examples of these types of companies might include law
firms, schools, consulting firms or innovative tech companies.
• This type of model gives experts more autonomy to create and
reach their goals. Executive management still sets the long-
term strategic goals for the company, but professionals have
more input into new product or service development and
product development. Each professional who leads an area
often has staff under him who follow a more traditional
organizational “totem pole” type of hierarchy.
• The Divisional Organization
• Some companies have so many different business lines, or sell
products or services that are so different, that each different unit
operates independently. A classic example is a sporting goods
company that has separate offices, brands and employees for its
tennis, golf, soccer and baseball divisions.
• In some divisional organizations, the different business units share
certain functions provided by the corporate office, such as insurance,
telecommunications, real estate and even HR, IT and accounting
support. With other models, each division is almost entirely
independent. Chevrolet, Cadillac, Buick and GMC, all working under
General Motors corporate oversight, fall into the "divisional" category
of Mintzberg's organizational structure examples.
• The Innovative Organization
• An innovative organization differs from an entrepreneurial
organizational model in that the former refers to more control by
new founders, while the latter refers to an emphasis on continuing
new product development. Innovative organizations often bring in
temporary staff to create a new product or service.
• The people brought in are experts at what they do, and they often
do work for multiple companies. Think of a movie studio making a
movie, bringing in a director, producer, scriptwriter and actors to
make one film. Pharmaceutical companies often use this
management model to put together temporary scientific teams to
create new drugs, which are then turned over to the marketing
team.
3. Systems

• Systems refer to the business processes and operational

procedures employed to complete a business’s routine activities.
An organization’s SOPs consist of such practices and workflows
that directly impact productivity and decision-making.
• CRM
• ERP
• Automation
4- Shared values
are the commonly accepted standards and norms within the company that both
influence and temper the behavior of the entire staff and management. This may
be detailed in company guidelines presented to the staff. In practice, shared
values relate to the actual accepted behavior within the workplace.
• See creative culture?!
5. Style

• This element refers to the management style prevalent in a

company that decides the level of employee productivity and
satisfaction.

• Style speaks to the example and approach that management takes in leading
the company, as well as how this influences performance, productivity, and
corporate culture.
Lewin and white leadership styles
• Autocratic/Authoritarian leaders: these leaders use
their authority to impose the ways of working and often
make decisions without consulting their team or
followers. This can work in organizations where input
from followers needs to be minimal and where their
motivation to ‘follow’ is not affected by not being
involved in the decision.
• Limited input from stakeholders.
• Highly structured environment.
• Clearly defined rules and processes.
• Participative or democratic leaders: these leaders
usually involve their followers in the decision-making
process. They tend to encourage participation from the
team and also delegate authority to team members.
This style of leadership is important when team
agreement matters.
• Delegative or free rein (laissez-faire) leaders:
these leaders give followers full freedom to make most
decisions and to perform work in the manner that is
most convenient for them. This type of leadership works
when the team is highly motivated and capable.
Bass and avolio leadership styles
• Transactional: where a leader influences others by what
they offer in exchange, the transaction.

• Transformational: where a leader connects with

followers in such a way that it raises the level of
motivation and morality.
Transformational leadership
• Idealized influence, or charisma: Transformational leaders
have an uncanny ability to make you want to follow the vision
they establish.
• Inspirational motivation: Communication is a vehicle of
inspiration for transformational leaders; they use words to
encourage others and inspire action.
• Intellectual stimulation: Transformational leaders stretch
others to think more deeply, challenge assumptions, and
innovate.
• Individualized concern: Finally, while focused on the
common good, transformational leaders show care and concern
for individuals.
6- Staff

This element represents the talent pool required, the size of the
existing workforce, and their motivations. It also considers how
they are trained and rewarded within the organization.

refers to the personnel of the company, how large the workforce is, where their
motivations reside, as well as how they are trained and prepared to accomplish
the tasks set before them.
7- Skills

• Skills refer to the abilities of employees to complete tasks. A

study suggests that 45% of respondents reported that a skill gap
caused a loss in productivity. Skills gaps overburden experienced
employees who have to pick up the slack for their coworkers’
inexperience. It’s essential to identify the skill gaps and create
relevant employee training programs to bridge these gaps.
Michael Porter's Value Chain

• Successful businesses create value with each transaction—for

their customers in the form of satisfaction and for themselves
and their shareholders in the form of profit. Companies that
generate greater value with each sale are better positioned to
profit than those that produce less value.

• To evaluate how much value your company is creating, it’s critical

to understand its value chain. Below is an overview of what a
value chain is, why it’s important to understand, and steps you
can take to conduct one and help your company create and
retain more value from its sales.
What Is a Value Chain?

•
A value chain is the series of steps or actions that a business enacts to create a
product and deliver it to a customer. Taken from start to finish, it is the series of
systems that the business uses to make money. The idea of a value chain was
first described by Michael Porter, an academic in the fields of business
management and economics, in his 1985 book "Competitive Advantage:
Creating and Sustaining Superior Performance."
COMPONENTS OF A VALUE CHAIN

• According to Porter’s definition, all of the activities that make up

a firm's value chain can be split into two categories that
contribute to its margin: primary activities and support activities.
Primary Aactivties
• Inbound Logistics
• Inbound logistics include the receiving, warehousing, and inventory control of a company's
raw materials. This also covers all relationships with suppliers. For example, for an e-
commerce company, inbound logistics would be the receiving and storing of products from a
manufacturer that it plans to sell.
• Operations
• Operations include procedures for converting raw materials into a finished product or
service. This includes changing all inputs to ready them as outputs. In the above e-commerce
example, this would include adding labels or branding or packaging several products as a
bundle to add value to the product.
• Outbound Logistics
• All activities to distribute a final product to a consumer are considered outbound logistics.
This includes delivery of the product but also includes storage and distribution systems and
can be external or internal. For the e-commerce company above, this includes storing
products for shipping and the actual shipping of said products.
• Marketing and Sales
• Strategies to enhance visibility and target appropriate customers—such as
advertising, promotion, and pricing—are included in marketing and sales.
Basically, these is all activities that help convince a consumer to purchase a
company’s product or service. Continuing with the above example, an e-
commerce company may run ads on Instagram or build an email list for email
marketing.
• Services
• This includes activities to maintain products and enhance consumer experience
—customer service, maintenance, repair, refund, and exchange. For an e-
commerce company, this could include repairs or replacements, or a warranty.
Secondary activities
• Secondary activities help primary activities become more efficient—effectively
creating a competitive advantage—and are broken down into:
• Procurement
• Procurement is the acquisition of inputs, or resources, for the firm. This is how
a company obtains raw materials, thus, it includes finding and negotiating
prices with suppliers and vendors. This relates heavily to the inbound logistics
primary activity, where an e-commerce company would look to procure
materials or goods for resale.
• Human Resource Management
• Hiring and retaining employees who will fulfill business strategy, as well as
help design, market, and sell the product. Overall, managing employees is
useful for all primary activities, where employees and effective hiring are
needed for marketing, logistics, and operations, among others.
• Infrastructure
• Infrastructure covers a company's support systems and the
functions that allow it to maintain operations. This includes all
accounting, legal, and administrative functions. A solid
infrastructure is necessary for all primary functions.
• Technological Development
• Technological development is used during research and
development and can include designing and developing
manufacturing techniques and automating processes. This
includes equipment, hardware, software, procedures, and
technical knowledge. Overall, a business working to reduce
technology costs, such as shifting from a hardware storage
system to the cloud, is technological development.
WHAT IS VALUE CHAIN ANALYSIS?

Value chain analysis is a mean of evaluating each of the activities in a

company’s value chain to understand where opportunities for
improvement lie.
• Conducting a value chain analysis prompts you to consider how each
step adds or subtracts value from your final product or service. This,
in turn, can help you realize some form of competitive advantage,
such as:
• Cost reduction, by making each activity in the value chain more
efficient and, therefore, less expensive
• Product differentiation, by investing more time and resources into
activities like research and development, design, or marketing that
can help your product stand out
• Typically, increasing the performance of one of the four secondary
activities can benefit at least one of the primary activities.
Financial analysis
• 1- Liquidity ratios:
• Inventory to working capital is the measurement of how much of
a company's working capital is funded by its inventory. This is an
important ratio for any company to monitor as it gives
information on the efficiency of its operations.

• The current ratio is a liquidity ratio that measures a company's ability to

pay short-term obligations or those due within one year.

• The quick ratio is a calculation that measures a company's ability to

meet its short-term obligations with its most liquid assets.
• 2- Profitability Ratios:
• Net profit is calculated by deducting all company expenses from
its total revenue. The result of the profit margin calculation is a
percentage

• the Basic Earning Power ratio (BEP). The purpose of BEP is to

determine how effectively a firm uses its assets to generate
income. The BEP ratio is simply EBIT divided by total assets . The
higher the BEP ratio, the more effective a company is at
generating income from its assets.
• Return on Assets (ROA) is a type of return on investment (ROI)
metric that measures the profitability of a business in relation to
its total assets. This ratio indicates how well a company is
• Return on equity (ROE) is a measure of a company's financial
performance. It is calculated by dividing net income by
shareholders' equity. Because shareholders' equity is equal to a
company's assets minus its debt, ROE is a way of showing a
company's return on net assets.

• Return on equity (ROE) is a measure of a company's financial

performance. It is calculated by dividing net income by
shareholders' equity. Because shareholders' equity is equal to a
company's assets minus its debt, ROE is a way of showing a
company's return on net assets.
• 3- Activity Ratios (Asset management ratios)
• Net working capital turnover measures how effectively the firm is
used the net working capital to generate sale

• Total Asset Turnover Measure the utilization of all the company

assets (fixed; plant, equipments or current); measure how many
sales are generated by each dollar of assets

• Inventory turnover ratio measures how effectively the firm is

managing its inventories, measure the number of times that
average inventory of finished goods was turned over or sold
during a period of time usually a year
• Fixed Asset Turnover Measure the utilization of the company's
fixed assets; plants, equipment-measure how many sales are
generated by each dollar of fixed assets

• Average Collection Period Indicates the average length of time in

days that a company must wait to collect a sale after making it,
may be compared to credit terms offered by the company to its
customers
• 4- Leverage (Debt) Ratios:

• Debt to Asset Ratio (Total Debt Ratio) Measure the extent to

which borrowed funds have been used to finance the company's
assets

• Current Liabilities to Equity the company managed to pay its debt

and decrease its dependence on dept in its growth
VRIO Model
• VRIO is a strategic framework to evaluate a company's internal
resources and capabilities. It helps determine if these resources
can provide a sustainable competitive advantage based on their
value, rarity, imitability, and how well the organization is set up
to exploit them
IFAS
• Assign a 1-to-4 rating to each factor to indicate whether that
factor represents a major weakness (rating = 1), a minor
weakness (rating = 2), a minor strength (rating = 3),or a major
strength (rating = 4). Note that strengths must receive a 3 or 4
rating and weaknesses must receive a 1 or 2 rating.
Strategy formulation
Ansoff “Growth” Strategy
Ansoff “Growth” Strategy
1- Market penetration:

This strategy involves using channels to sell more existing

products into existing markets. channels have great potential for
achieving sales growth or maintaining sales by the market
penetration strategy. As a starting point, many companies will use
digital channels to help sell existing products into existing markets,
although they may miss opportunities indicated by the strategies
in other parts of the matrix.
market penetration techniques
• Market share growth. Companies can compete more effectively
online if they have websites that are efficient at converting visitors
to sale

• Customer loyalty improvement. Companies can increase their value

to customers and so increase loyalty by migrating existing
customers online by adding value to existing products, services and
brands by developing their online value proposition

• Customer value improvement. The value delivered by customers to

the company can be increased by increasing customer profitability
through decreasing cost to serve (and so price to customers) and at
the same time increasing purchase or usage frequency and quantity
Ansoff “Growth” Strategy
2- Market development:

Online channels are used to sell into new markets, taking

advantage of the low cost of advertising internationally without the
necessity for a supporting sales infrastructure in the customer’s
country.

Existing products can also be sold to new market segments or

different types of customers
Ansoff “Growth” Strategy
3- Product Development:

The web can be used to add value to or extend existing products

for many companies. For example, a car manufacturer can
potentially provide car performance and service information via a
website. Facilities can be provided to download tailored brochures,
book a test drive or tailor features required from a car model. But
truly new products or services that can be delivered only by the
Internet are typically digital media or information products
Ansoff “Growth” Strategy
4- Diversification:
1. Related D
2. Unrelated D
3. Upstream integration
4. Downstream integration
Porter’s generic strategies
Cost leadership
Differntiation
SWOT/TOWS
IE Matrix
SPACE Matrix