Topic: Strategy Implementation & Control(McKinsey’s 7 S Framework, BPR, BCG Matrix, VRIO Framework, GE Matrix and

Product Life Cycle )Subject : Elements of Strategy

Prof. Sandeep Hegde

Business Strategy implementation

Using the 7 S Framework to understand its impact on the

organization

StrategySkills

Shared Values

7S FRAME WORK : THE WINNING FORMULA

Vision

Activities the organizationMust be really good at in orderTo deliver winning valueproposition

An integrated set of actions To deliver a superiorValue (benefits minusPrice) to a chosen setOf customers, with aCost structure thatAllows continuingExcellent returns

The overriding goal of the organizationA clear, compelling statement of whatIt aspires to become that is demanding butAchievable and reflects a fact-based viewOf the future

The commonly held beliefs of theOrganization – simple terms that sayWhat’s important around here

The Hard S’s  

Strategy Actions a company plans in response to or anticipation of changes in its external environment.

Structure Basis for specialization and co-ordination influenced primarily by strategy and by organization size and diversity.

Systems Formal and informal procedures that support the strategy and structure. (Systems are more powerful than they are given credit)

The Soft S’s  

Style / Culture The culture of the organization, consisting of two components:       Organizational Culture: the dominant values and beliefs, and norms, which develop over time and become relatively enduring features of organizational life.       Management Style: more a matter of what managers do than what they say; How do a company’s managers spend their time? What are they focusing attention on? Symbolism – the creation and maintenance (or sometimes deconstruction) of meaning is a fundamental responsibility of managers.

Staff The people/human resource management – processes used to develop managers, socialization processes, ways of shaping basic values of management cadre, ways of introducing young recruits to the company, ways of helping to manage the careers of employees

Skills The distinctive competences – what the company does best, ways of expanding or shifting competences

Shared Values / Superordinate Goals

Guiding concepts, fundamental ideas around which a business is built – must be simple, usually stated at abstract level, have great meaning inside the organization even though outsiders may not see or understand them.

What is Organizational Change?

• An alteration of an organization’s environment, structure, culture, technology, or people– A constant force– An organizational reality– An opportunity or a threat

• Change agent– A person who initiates and assumes the

responsibility for managing a change in an organization

Change…

• Is a process, not an event

• Is made by individuals, then organizations

• Is a highly personal experience for those involved

• Involves gradual growth in feelings and skills

What is change management?

A structured process and set of tools

for leading the people side of change.

• More than 70% of change efforts fail because of failure to focus on people issues

Why People Resist Change

Why Do Employees Resist Change• Human tendency to stay in existing comfort

zone• Lack of awareness or urgency for change• Lack of clear understanding or alignment on

purpose, vision, and process of the change• Lack of trust on the leaders• Fear of unknown/uncertainty/consequences• Comfort with long standing habits• Dependency on existing social dynamics• Lack of sufficient resources for the change• Overload of ongoing tasks and responsibilities• What is the benefit for me to change?

Kurt Lewin’s Three-Step Process in Managing Organizational Change

• Unfreezing– The driving forces, which direct

behavior away from the status quo, can be increased

– The restraining forces, which hinder movement from the existing equilibrium, can be decreased

– The two approaches can be combined• Implementation of change• Refreezing

FEAR

DENIAL

ANGER CONFRONTATION

BARGAINING

ACCEPTANCE

TIME TAKEN TO MANAGE CHANGE BY ORGANIZATIONS

RE

SIS

TA

NC

E T

O C

HA

NG

E UNFREEZING CHANGE REFREEZING

Managing Organizational ChangeManaging Organizational ChangeStrategy

• Establish a transition team to ensure consistent communication and to tackle issues raised by the change

• Promote a clear vision to clarify the direction in which the organization needs to move

Organization• Leaders should ask tough questions and challenge

the way the company does business• Good management requires respect for employees

and the organization and is responsible for shaping the new reality

People• Losing key employees may destabilize the organization;

communicating the desire to retain these people, early in the process, is important

• Give priority to the "me" issues—personal opportunity, security and the quality of the work environment

Communication• Communication plans should address four considerations:

audience, timing, mode and message• Tips include:

• Communicating rapidly, honestly and frequently• Ensuring consistency between messages• Establishing multiple mechanisms to reach employees• Repeating common themes

What is BPR?• Reengineering is the fundamental rethinking

and redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.

• BPR seeks improvements of– Cost– Quality– Service– Speed

BPR Versus Process Simplification

Process Reengineering

Radical TransformationVision-Led

Change Attitudes & BehaviorsDirector-Led

Limited Number of Initiatives

Process Simplification

Incremental ChangeProcess-Led

Assume Attitudes & BehaviorsManagement-Led

Various Simultaneous Projects

Key Steps in BPR exercise

Select The Process & Appoint Process Team

Understand The Current Process

Develop & Communicate Vision Of Improved Process

Identify Action Plan

Execute Plan

The VRIO Framework

If a firm has resources that are:

• valuable,

• rare, and

• costly to imitate, and…

• the firm is organized to exploit these resources,

then the firm can expect to enjoy a sustainedcompetitive advantage.

Applying the VRIO Framework

The Question of Value• Does the resource enable the firm

to exploit an external opportunity or neutralizean external threat?

The Question of Rarity

• if a resource is not rare, then perfect competitiondynamics are likely to be observed (i.e., nocompetitive advantage, no above normal profits)

• a resource must be rare enough that perfect competition has not set in

Applying the VRIO Framework

Valuable and Rare

If a firm’s resources are: The firm can expect:

Not Valuable Competitive Disadvantage

Valuable, but Not Rare Competitive Parity

Valuable and RareCompetitive Advantage

(at least temporarily)

Applying the VRIO Framework

The Question of Imitability

• the temporary competitive advantage of valuableand rare resources can be sustained only if competitors face a cost disadvantage in imitatingthe resource

» intangible resources are usually morecostly to imitate than tangible resources(Harley-Davidson’s styles may be easilyimitated, but its reputation cannot)

Applying the VRIO Framework

Value, Rarity, & Imitability

If a firm’s resources are: The firm can expect:

Valuable, Rare, butnot Costly to Imitate

TemporaryCompetitive Advantage

Valuable, Rare, and Costly to Imitate

SustainedCompetitive Advantage

(if Organized appropriately)

Applying the VRIO Framework

The Question of Organization

• a firm’s structure and control mechanismsmust be aligned so as to give people abilityand incentive to exploit the firm’s resources

• examples: formal and informal reporting structures,management controls, compensation policies,relationships, etc.

• these structure and control mechanisms complementother firm resources—taken together, they can help a firm achieve sustained competitive advantage(3M Company)

The VRIO Framework

Valuable? Rare?Costly toImitate?

Exploited byOrganization?

CompetitiveImplications

No

Yes

Yes

Yes

Yes

Yes Yes Yes

No

No

No Disadvantage

Parity

TemporaryAdvantage

SustainedAdvantage

The VRIO Framework

Valuable? Rare?Costly toImitate?

Exploited byOrganization?

CompetitiveImplications

No

Yes

Yes

Yes

Yes

Yes Yes Yes

No

No

No Disadvantage

Parity

TemporaryAdvantage

SustainedAdvantage

EconomicImplications

BelowNormal

Normal

AboveNormal

AboveNormal

Product Life Cycles and the BCG Matrix

Sales

Time

Development Introduction Growth Maturity Saturation Decline

Product Life Cycles and the BCG Matrix

Sales

Time

Effects of ExtensionStrategies

Product Life Cycles and the BCG Matrix

Sales/Profits

Time

PLC and Profits

PLC

Losses

Break Even

Profits

BOSTON CONSULTING GROUP (BCG) MATRIX

MARKET SHARE• Market share is the percentage of the total market that is

being serviced by your company, measured either in revenue terms or unit volume terms.

• RELATIVE MARKET SHARE

• RMS = Business unit sales this year Leading rival sales this year

• The higher your market share, the higher proportion of the market you control.

MARKET GROWTHRATE

• Market growth is used as a measure of a market’s attractiveness.

• MGR = Individual sales - individual sales this year last year Individual sales last year • Markets experiencing high growth are ones where the

total market share available is expanding, and there’s plenty of opportunity for everyone to make money.

STARSHigh growth, High market share

• Stars are leaders in business.

• They also require heavy investment, to maintain its large market share.

• It leads to large amount of cash consumption and cash generation.

• Attempts should be made to hold the market share otherwise the star will become a CASH COW.

CASH COWS Low growth , High market share

• They are foundation of the company and often the stars of yesterday.

• They generate more cash than required.

• They extract the profits by investing as little cash as possible

• They are located in an industry that is mature, not growing or declining.

DOGSLow growth, Low market share

• Dogs are the cash traps.

• Dogs do not have potential to bring in much cash.

• Number of dogs in the company should be minimized.

• Business is situated at a declining stage.

QUESTION MARKSHigh growth , Low market share

• Most businesses start of as question marks.• They will absorb great amounts of cash if the

market share remains unchanged, (low).• Why question marks?• Question marks have potential to become

star and eventually cash cow but can also become a dog.

• Investments should be high for question marks.

BCG MATRIX WITH CASH FLOW

LIMITATIONS

• BCG MATRIX uses only two dimensions, Relative market share and market growth rate.

• Problems of getting data on market share and market growth.

• High market share does not mean profits all the time.

• Business with low market share can be profitable too.

GE Multifactor Portfolio MatrixIndustry Attractiveness

Bu

sin

ess

Str

eng

ths

High

High

Medium

Medium

Low

Low

Invest/Grow

Selectivity/earnings

Harvest /Divest

Protect Position

Invest to Build

Build selectively

Build selectively

Selectively manage for earnings

Limited expansion or harvest

Protect & refocus

DivestManage for earnings