Organization Strategy

and Project Selection

Chapter 2
 What is STRATEGY?
Strategy is a structured plan or approach that an organization uses to
achieve its long-term goals and competitive advantage. It involves
decision-making on resource allocation, market positioning, and
execution to fulfill the company's mission and vision.

1. Market Leadership Strategy

Example: Coca-Cola – Maintains market dominance through:
• Branding & Advertising – Heavy investments in global marketing
campaigns.
• Global Expansion – Localized flavors and aggressive market
penetration.
• Product Innovation – Launching new variants (Coke Zero, energy
drinks).
• Strategic Partnerships – Sponsoring major events (Olympics, FIFA).
2. Survival Strategy
Example: Nokia – Pivoted from mobile phones to 5G and network technology.
Example: Ford (2008 Financial Crisis) – Restructured, cut costs, and focused
on fuel-efficient vehicles to survive the recession.
  Examples of STRATEGY
3. Cost Leadership Strategy (Winning with Low Costs)
 Example: Walmart – Minimizes costs through bulk purchasing, supply chain efficiency,
and automation.
4. Differentiation Strategy (Standing Out from Competitors)
 Example: Apple – Premium quality, unique design, and strong brand identity.
5. Focus/Niche Strategy (Specializing in a Target Market)
 Example: Rolex – Targets high-end customers with luxury watches and exclusivity.
6. Digital Transformation Strategy (Tech-Driven Growth)
 Example: Netflix – Transitioned from DVDs to AI-powered streaming.
 Example: Microsoft – Shifted from software licensing to cloud computing (Azure).
7. Market Expansion Strategy (Growing into New Regions)
 Example: McDonald's – Adapts menus to local cultures while expanding globally.
 Example: Starbucks – Enters new markets with culturally relevant store designs.
 Examples of STRATEGY
8. Innovation Strategy (Staying Ahead Through R&D)
 Example: Tesla – Pioneers electric vehicles, AI-powered self-driving, and energy storage
solutions.
 Example: Google – Invests in AI, quantum computing, and futuristic projects.
9. Customer-Centric Strategy (Prioritizing Customer Experience)
 Example: Amazon – Fast delivery, AI-driven personalization, and customer-first
policies.
10. Sustainability Strategy (Eco-Friendly & Ethical Business)
 Example: Unilever – Uses sustainable sourcing, eco-friendly packaging, and ethical
business practices.
11. Acquisition & Merger Strategy (Growth by Buying Other Companies)
 Example: Facebook (now Meta) – Acquired Instagram, WhatsApp, and Oculus to
dominate social media and VR markets.
 Example: Disney – Acquired Pixar, Marvel, Lucasfilm, and 21st Century Fox to expand
its entertainment empire.
 Examples of STRATEGY
12. Blue Ocean Strategy (Creating an Uncontested Market)
13. First-Mover Strategy (Being the Pioneer in a Market)
14. Turnaround Strategy (Recovering from Business Decline)
15. Franchise Strategy (Scaling via Franchising)
16. Subscription-Based Strategy (Recurring Revenue Model)
17. Cross-Selling & Upselling Strategy (Maximizing Sales
from Existing Customers)
18. Corporate Social Responsibility (CSR) Strategy (Building
a Responsible Brand)
Why Project Managers Need to
Understand the Strategic
Management Process
 Changes in the Organization’s Mission and
Strategy
◦ Project managers must respond to changes with
appropriate decisions about future projects and
adjustments to current projects.
◦ Project managers who understand their
organization’s strategy can become effective
advocates of projects aligned with the firm’s
mission.
The Strategic Management Process:
An Overview

 Strategic Management
◦ Provides the theme and focus of the future
direction for the firm.
 Responding to changes in the external
environment—environmental scanning
 Allocating scarce resources of the firm to improve
its competitive position—internal responses to new
action programs
◦ Requires strong links among mission, goals,
objectives, strategy, and implementation.
Strategic Management Process
(cont’d)
 Four Activities of the Strategic Management
Process
1. Review and define the organizational mission.
2. Set long-range goals and objectives.
3. Analyze and formulate strategies to reach
objectives.
4. Implement strategies through projects.
Strategic
Manage
ment
Process

FIGURE 2.1
 NUST & SMME Mission
 MISSION
 To develop NUST as a comprehensive, research-led university with a focus on
Technology, Innovation, Entrepreneurship and Community Service.

 SMME MISSION
 To develop SMME as a world class engineering institution focused on learning
environment, quality teaching and research addressing problems of industry and
community.​​

 Mission – Defines the purpose and long-term goals of the organization.

 Objectives – Are specific, measurable targets set to make progress toward the
mission.
 Strategy – The plan or approach that outlines how to achieve the objectives and,
ultimately, the mission.
Characteristics of Objectives
S Specific Be specific in targeting an objective

M Measurable Establish a measurable indicator(s) of progress

A Assignable Make the objective assignable to one person for

completion

R Realistic State what can realistically be done with available

resources

T Time related

EXHIBIT 2.1
A Portfolio Management System
 Portfolio management system provides
information that allows people to make better
business decisions.
 Design of a project portfolio system should
include classification of a project, selection
criteria depending upon classification, sources of
proposals, evaluating proposals and managing
the portfolio of projects.
Project Portfolio Management
Problems
 1. The Implementation Gap
◦ The lack of understanding and consensus on
strategy among top management and middle-level
(functional) managers who independently implement
the strategy.
 2. Organization Politics
◦ Project selection is based on the persuasiveness and
power of people advocating the projects.
 3. Resource Conflicts and Multitasking
◦ The multi project environment creates
interdependency relationships of shared resources
which results in the starting, stopping, and restarting
projects.
Benefits of Project Portfolio Management
 Builds discipline into project selection process.
 Links project selection to strategic metrics.
 Prioritizes project proposals across a common
set of criteria, rather than on politics or
emotion.
 Allocates resources to projects that align with
strategic direction.
 Balances risk across all projects.
 Justifies killing projects that do not support
organization strategy.
 Improves communication and supports
agreement on project goals.
EXHIBIT 2.2
Portfolio of Projects by Type -
Classification

FIGURE 2.2
Portfolio of Projects by Type -
Classification
1. Compliance projects are typically those needed to meet regulatory
conditions required to operate in a region; hence, they are called “must
do” projects. Emergency projects, such as rebuilding a soybean factory
destroyed by fire, meet the must do criterion. Compliance and
emergency projects usually have penalties if they are not implemented.
2. Operational projects are those that are needed to support current
operations. These projects are designed to improve efficiency of
delivery systems, reduce product costs, and improve performance.
Total quality management (TQM) projects are examples of operational
projects.
3. Strategic projects are those that directly support the organization’s
long-run mission. They frequently are directed toward increasing
revenue or market share. Examples of strategic projects are new
products, research, and development. For a good, complete discussion
on classification schemes found in practice,
A Portfolio Management
System
 Selection Criteria
◦ Financial: payback, net present value (NPV),
internal rate of return (IRR)
◦ Non-financial: projects of strategic importance
to the firm.
 Two Multi-Criteria Selection Models
◦ Use several weighted selection criteria to
evaluate project proposals.
 Checklist models
 Multi-Weighted scoring models
Financial Models of
Selection
 The Payback Model
◦ Measures the time it will take to recover the
project investment.
◦ Shorter paybacks are more desirable.
◦ Emphasizes cash flows, a key factor in
business.
◦ Limitations of payback:
 Ignores the time value of money.
 Assumes cash inflows for the investment period (and
not beyond).
 Does not consider profitability.
Pay Back Model
NPV Model
 The Net Present Value (NPV) Model
◦ Uses management’s minimum desired rate-
of-return (discount rate) to compute the
present value of all net cash inflows.
 Positive NPV: the project meets the minimum desired
rate of return and is eligible for further consideration.
 Negative NPV: project is rejected.
NPV Model (cont’d)
NPV Model (cont’d)
Net Present Value (NPV) and Internal Rate of
Return (IRR): Example Comparing Two Projects

EXHIBIT 2.3
Non-Financial Criteria
A firm may support projects that do not have
high profit margins for other strategic
reasons including:
 To capture larger market share
 To make it difficult for competitors to enter the
market
 To develop an enabler product
 To develop core technology that will be used in
next-generation products
 To reduce dependency on unreliable suppliers
 To prevent government intervention and
regulation
1- Checklist Selection Model-Sample
Selection Questions Used in Practice
 Strategy alignment: What specific organization does this
project align with?
 Driver: What business problem does the project solve?
 Success metrics: How will we measure success?
 Sponsorship: Who is the project sponsor?
 Risk: What is the impact of not doing this project?
 Risk: What is the project risk to our organization?
 Benefits: What is the value of the project to this organization?
 Organization culture: Is our organization culture right for
this type of project?
 Approach: Will we build or buy?
 Training/resources: Will staff training be required?
 Finance: What is estimated cost of the project?
 Portfolio: How does the project interact with current projects?
2- Multi-Weighted Scoring Model
(Project Screening Matrix)

FIGURE 2.3
Applying a Selection Model
 Project Classification
◦ Regardless of criteria differences among different types of
projects, the most important criterion for selection is the
project’s fit to the organization strategy.
◦ Therefore, this criterion should be consistent across all types
of projects and carry a high priority relative to other criteria.
 Selecting a Model
◦ Applying a weighted scoring model to bring projects to
closer with the organization’s strategic goals.
 Reduces the number of wasteful projects
 Helps identify proper goals for projects
 Helps everyone involved, understand how and why a project is
selected
Applying a Selection Model
 Selecting a Model
◦ Criteria for project selection are the area where
the power of your portfolio starts to make itself
visible. New projects are aligned with the
strategic goals of the organization.
◦ With a clear method for selecting projects in
place, project proposals can be asked.
Project Proposals
 Sources and Solicitation of Project Proposals
◦ Within the organization
◦ Request for proposal (RFP) from external sources
(contractors and vendors)
 Ranking Proposals and Selection of Projects
◦ Prioritizing requires discipline, accountability,
responsibility, constraints, reduced flexibility, and
loss of power
 Managing the Portfolio
◦ Senior management input
◦ The priority team (project office) responsibilities
Major
Project
Proposal

FIGURE 2.4A
Risk
Analysis

FIGURE 2.4B
Managing the Portfolio
 Senior Management Input
◦ Provide guidance in selecting criteria that are
aligned with the organization’s goals
◦ Decide how to balance available resources
among current projects
 The Priority Team Responsibilities
◦ Publish the priority of every project
◦ Ensure that the project selection process is
open and free of power politics
◦ Reassess the organization’s goals and priorities
◦ Evaluate the progress of current projects
Project
Screening
Process

FIGURE 2.5
Project Portfolio Matrix
Project Portfolio Matrix Dimensions
 Bread-and-Butter Projects
◦ Involve evolutionary improvements to current
products and services.
 Pearls
◦ Represent revolutionary commercial advances
using proven technical advances.
 Oysters
◦ Involve technological breakthroughs with high
commercial payoffs.
 White Elephants
◦ Projects that at one time showed promise but
are no longer viable.
Key Terms
Implementation gap
Net present value
Payback
Organizational politics
Priority system
Priority team
Project portfolio
Project screening matrix
Sacred cow
Strategic management process