Transcript MBA III SEMESTER : Business policy and strategic

MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2
matrix) developed by BCG, USA. 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.
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
• 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.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
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The BCG matrix
(aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix,
Boston Consulting Group analysis).
Created by Bruce Henderson for the Boston Consulting Group
in 1970 to help corporations toAnalyzing their business units or product lines.
help the company allocate resources and is used as an
analytical tool in brand marketing, product management,
strategic management, and portfolio analysis.
To use the chart, analysts plot a scatter graph to rank the
business units (or products) on the basis of their relative
market shares and growth rates.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
• As a particular industry matures and its growth slows, all
business units become either cash cows or dogs. The natural
cycle for most business units is that they start as question
marks, then turn into stars. Eventually the market stops
growing thus the business unit becomes a cash cow. At the
end of the cycle the cash cow turns into a dog.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
• The overall goal of this ranking was to help corporate analysts
decide which of their business units to fund, and how much;
and which units to sell. Managers were supposed to gain
perspective from this analysis that allowed them to plan with
confidence to use money generated by the cash cows to fund
the stars and, possibly, the question marks. As the BCG stated
in 1970:
• Only a diversified company with a balanced portfolio can use
its strengths to truly capitalize on its growth opportunities.
The balanced portfolio has:
• stars whose high share and high growth assure the future;
• cash cows that supply funds for that future growth; and
• question marks to be converted into stars with the added
funds.
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MBA III SEMESTER :
BUSINESS POLICY AND
STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
For each product or service, the
'area' of the circle represents the
value of its sales, thus offers a very
useful 'map' of the organization's
product (or service) strengths and
weaknesses, at least in terms of
current profitability, as well as the
likely cashflows.
The need which prompted this idea
was, indeed, that of managing cashflow. It was reasoned that one of
the main indicators of cash
generation was relative market
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share, and one which pointed to
cash usage was that of market
growth rate.
Derivatives can also be used to create a
'product portfolio' analysis of services. So
Information System services can be treated
accordingly.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
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[email protected]
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
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StarsStars 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.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
• 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.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
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Question MarksBusiness units having low relative market share and located in a
high growth industry. They requirehuge amount of cash to maintain or gain market share.
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 marketshare.
If ignored, then question marks may become dogs, while if huge
investment is made, then they have potential of becoming stars.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Dogs-
• 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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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
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Stars (high growth, high market share)
Stars are using large amounts of cash. Stars are leaders in the
business. Therefore they should also generate large amounts
of cash.
Stars are frequently roughly in balance on net cash flow.
However if needed any attempt should be made to hold your
market share in Stars, because the rewards will be Cash Cows
if market share is kept.
Cash Cows (low growth, high market share)
Profits and cash generation should be high. Because of the
low growth, investments which are needed should be low.
Cash Cows are often the stars of yesterday and they are the
foundation of a company.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
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Dogs (low growth, low market share)
Avoid and minimize the number of Dogs in a company.
Watch out for expensive ‘rescue plans’.
Dogs must deliver cash, otherwise they must be liquidated.
Question Marks (high growth, low market share)
Question Marks have the worst cash characteristics of all,
because they have high cash demands and generate low
returns, because of their low market share.
If the market share remains unchanged, Question Marks will
simply absorb great amounts of cash.
Either invest heavily, or sell off, or invest nothing and generate
any cash that you can. Increase market share or deliver cash.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
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Other uses and benefits of the BCG Matrix
If a company is able to use the experience curve to its
advantage, it should be able to manufacture and sell new
products at a price that is low enough to get early market
share leadership. Once it becomes a star, it is destined to be
profitable.
BCG model is helpful for managers to evaluate balance in the
firm’s current portfolio of Stars, Cash Cows, Question Marks
and Dogs.
BCG method is applicable to large companies that seek
volume and experience effects.
The model is simple and easy to understand.
It provides a base for management to decide and prepare for
future actions.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
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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 asBCG matrix classifies businesses as low and high, but generally
businesses can be medium also. Thus, the true nature of business
may not be reflected.
Market is not clearly defined in this model.
High market share does not always leads to high profits. There are
high costs also involved with high market share.
Growth rate and relative market share are not the only indicators of
profitability. This model ignores and overlooks other indicators of
profitability.
At times, dogs may help other businesses in gaining competitive
advantage. They can earn even more than cash cows sometimes.
This four-celled approach is considered as to be too simplistic .
Dr.N.C.Dhande SRTM University Nanded,
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
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Other uses and benefits of the BCG Matrix
If a company is able to use the experience curve to its
advantage, it should be able to manufacture and sell new
products at a price that is low enough to get early market
share leadership. Once it becomes a star, it is destined to be
profitable.
BCG model is helpful for managers to evaluate balance in the
firm’s current portfolio of Stars, Cash Cows, Question Marks
and Dogs.
BCG method is applicable to large companies that seek
volume and experience effects.
The model is simple and easy to understand.
It provides a base for management to decide and prepare for
future actions.
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
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Phases of Strategic Management:
Define the Mission, Purpose, objectives.
Formulate the strategy
Implement the strategy
Evaluate the strategy after implementation for
the expected outcome.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
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Elements of strategic management process:
Define the Business
Set the Mission
determine the purpose
Establish the objectives
Perform the Environment Scanning
Obtain Corporate Appraisal
Evolve the alternatives
Exercise the choices
Formulate the strategy
Prepare the strategic plan
Evaluate the strategy.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
• Determinants of Strategy ( Considerations
that affects the strategy)
• Demand for goods and services
• Supply of goods and services
• Competition
• Key success factors(KSF)
• Growth potential and profit prospects
• Market strength
• Financial capacity of the organization
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
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Attributes of the professional management
Knowledge
Attitude
Skills–
–
–
–
–
–
–
Technical
Human
Conceptual
Analytical
Administrative
Managerial
Etc.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
• Levels of strategic management:
• Corporate level: Board of
Directors, Chief Executive
Officers- looking after the running
the company as a whole, deciding
about the type of the business
the organization is in.
• Business level: SBU Strategic
Business Unit: e.g. Divisional G.M.
generally depends on the number
of product mix, profit centers.
• Operating level: use to take
technical decisions, e.g.
marketing, finance, operations,
manufacturing, etc.
Level
Concep Human
tual
Skills
Skills
Technic
al Skills
Top
High
Medium
Low
High
Medium
Medium
High
Middle Mediu
m
Low
Low
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Areas of Alternatives:
Production strategies
Finance strategies
Marketing strategies
Personnel strategies etc.
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Strategic Options:
Strategies of Survival
Stable growth strategy
Growth strategy
End game strategy
Retrenchment strategy
Combination of strategy
Business unit strategies
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
• 1. Strategies for Survival:
– Hold or Maintain: ( Suitable whenever there is a Risk of Loss)
– Pull Back and Redeploy: Narrow down the supply & Redesign resources
– Milk or Harvest: suits for short term gain, Best if the product is on the verge of
‘Obsolescence’, product life cycle ends, Customer confidence declining in the
product.
– Liquidation and Divestment: Withdraw from the business on failure at every
stage to save the business.
• 2. Stable Growth Strategy: Low risk, Steady growth, Change in resource
allocation.
• 3. Growth Strategies:
a. Product life cycle:
b. Expansion:
c. Concentrating on one product:
d. Vertical Integration: in two possible directions
e. Concentric diversification: Add new product similar to product line
f. Horizontal diversification: Buy the Competitor, Take over.
g. Conglomerate diversification: Add new product different than
product line
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
• 4. End Game Strategy: In situation where product demand declines,
modify leadership, diversification in ‘niche’ etc helps rescue the problem
• Retrenchment Strategies: In situation like recession, poor financial
performance of the organization.
• Turn around Strategy: Cut back on personnel, expenses, cost, promotions,
overheads etc to increase the efficiency, productivity and performance.
• Divestment Strategy: Sell the product line to another business i.e. hand
over the entire business or brand to other units. e.g. Dalda, soap, tractor
etc.
• Liquidation Strategy: In the extreme case – sell out the entire business
• Combination of the Strategies:
Simultaneous: Two or more strategies at a time
Sequential: Time bound implementation of plan one by one
• Business Unit Strategies:
a. Overall cost leadership i.e. keep the costs lower than competitors.
b. Differentiation Strategy: Maintain the Uniqueness in the business line.
c. Focus Strategies: Concentrate on particular group of customers.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
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Mintzberg's 5 Ps for Strategy
The word "strategy" has been used implicitly in
different ways even if it has traditionally been
defined in only one. Explicit recognition of
multiple definitions can help people to
manoeuvre through this difficult field. Mintzberg
provides five definitions of strategy:
Plan
Ploy
Pattern
Position
Perspective.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
PLAN
• Strategy is a plan - some sort of consciously
intended course of action, a guideline (or set of
guidelines) to deal with a situation. By this
definition strategies have two essential
characteristics: they are made in advance of the
actions to which they apply, and they are
developed consciously and purposefully.
PLOY
• As plan, a strategy can be a ploy too, really just a
specific manoeuvre intended to outwit an
opponent or competitor.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
PATTERN
• If strategies can be intended (whether as general plans or
specific ploys), they can also be realised. In other words,
defining strategy as plan is not sufficient; we also need a
definition that encompasses the resulting behaviour:
Strategy is a pattern - specifically, a pattern in a stream of
actions. Strategy is consistency in behaviour, whether or
not intended. The definitions of strategy as plan and
pattern can be quite independent of one another: plans
may go unrealised, while patterns may appear without
preconception.
• Plans are intended strategy, whereas patterns are realised
strategy; from this we can distinguish deliberate strategies,
where intentions that existed previously were realised, and
emergent strategies where patterns developed in the
absence of intentions, or despite them.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
POSITION
• Strategy is a position - specifically a means of locating an
organisation in an "environment". By this definition
strategy becomes the mediating force, or "match",
between organisation and environment, that is, between
the internal and the external context.
PERSPECTIVE
• Strategy is a perspective - its content consisting not just of a
chosen position, but of an ingrained way of perceiving the
world. Strategy in this respect is to the organisation what
personality is to the individual. What is of key importance is
that strategy is a perspective shared by members of an
organisation, through their intentions and / or by their
actions. In effect, when we talk of strategy in this context,
we are entering the realm of the collective mind individuals united by common thinking and / or behaviour.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
The 7-S Framework
• It is a management model which describes 7 factors to organize a
company in an holistic and effective way. The model is developed by
McKinsey is termed as 7-S Framework. These factors are helpful to
determine the way in which a corporation operates. Managers needed to
take into account all of the seven factors so as to achieve the successful
implementation of a strategy for the organization, large or small. Since all
are interdependent, the failure to pay proper attention to one of them
may effect all others as well.
Origin of the 7-S Framework. History
• The 7-S Framework was first mentioned in "The Art Of Japanese
Management" by Richard Pascale and Anthony Athos in 1981while
investigating about the successful performance of the Japanese industry.
At around the same time that Tom Peters and Robert Waterman were
exploring what made a company excellent. The Seven S model was born at
a meeting of these four authors in 1978. It appeared also in "In Search of
Excellence" by Peters and Waterman, and was taken up as a basic tool by
the global management consultancy company McKinsey. Since then it is
known as their 7-S model.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
1.Shared Values
• The interconnecting center of
McKinsey's model is: Shared
Values. What does the
organization stands for and
what it believes in. Central
beliefs and attitudes.
2. Strategy
• Plans for the allocation of a
firms scarce resources, over
time, to reach identified goals.
Environment, competition,
customers.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
3. Structure
• The way in which the
organization's units relate to each
other: centralized, functional
divisions (top-down);
decentralized; a matrix, a
network, a holding, etc.
4. Systems
• The procedures, processes and
routines that characterize how
the work should be done:
financial systems; recruiting,
promotion and performance
appraisal systems; information
systems.
5. Staff
• Numbers and types of personnel
within the organization.
6. Style
• Cultural style of the organization
and how key managers behave in
achieving the organization's
goals.
7. Skills
• Distinctive capabilities of
personnel or of the organization
as a whole. Compare: Core
Competences.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
The ADL Matrix from Arthur D. Little is a portfolio management
method.
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The ADL portfolio management approach uses an industry
assessment and a business strength assessment as its dimensions.
The industry measurement is an identification of the life cycle of
the industry. The business strength measure is a categorization of
the corporation's SBU's into one of five (six) competitive positions:
dominant, strong, favorable, tenable, weak (and non-viable). This
yields a matrix of 5 competitive positions by 4 life cycle stages.
Positioning in the matrix identifies a general strategy.
• Defining the line of business in the ADL matrix
• In the ADL Matrix approach, the strategist must identify discrete
businesses by finding commonalities among products and business
lines using the following criteria as guidelines:Common rivals
• Prices, Customers, Quality/Style, Substitutability, Divestment or
liquidation.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Dr.N.C.Dhande SRTM University Nanded,
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
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ASSESSING THE INDUSTRY LIFE CYCLE STAGE IN THE ADL MATRIX
The assessment of the Industry Life Cycle stage of each company is made on the basis of:
Business market share,
Investment, and
Profitability and cash flow.
ASSESSING THE COMPETITIVE POSITION IN THE ADL MATRIX
The competitive position of a firm is based on an assessment of the following criteria:
Dominant. Rare, often the result from a almost-monopoly or protected leadership.
Strong. A strong company can follow a strategy without too much consideration of moves by
rival companies.
Favorable. Industry is fragmented. No clear leader among stronger rivals.
Tenable. The company has a niche, either geographical or defined by the product.
Weak. Business is too small to be profitable or survive over the long term. Critical
weaknesses.
LIMITATIONS
Some known limitations of the ADL Matrix are:
There is no standard life cycle length.
Determining the current industry life cycle phase is difficult.
Competitors may influence the length of the life cycle.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
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Strategic Review Evaluation and Control
• Levels of review: 1. Strategic 2. operational
Basic Steps in the process of review:1. Develop Criteria for evaluation
2. Measure actual Performance
3. define Tolerance Limits / Acceptance levels
4. Analyze deviation from acceptable limits
5. Get feedback
6. Analyze and modify the process.
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
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Need of Evaluation to1. Check whether decisions are in tune with the
Policy
2. Check whether sufficient resources are made
available
3. Check whether resources are used wisely
4. Check whether ‘events’ are as anticipated
5. Check whether ‘Goals’ are achieved
6. Check whether to continue with the ‘plan’
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What to Evaluate?
1. Objectives
2. environment
3. Internal Conditions
4. Resource Capitalization
5. Risk
6. Time Horizon
7. Feasibility
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Check while developing the criteria for evaluation—
1. Performance Target and Standards
2. Quantitative criteria ( ROI, Dividend, Turn Over, Mkt
Share etc)
3. Qualitative criteria like ‘Consistency’,
’Appropriateness’, ‘Workability’
Systems Approach for Control Action
Objectives  Set Standards Measure & Monitor 
Analyze deviation  Feedback  Modify 
Implement.
( Have Flow Chart Method)
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Control is a continuous and Dynamic Process, there fore have —
1.Budgets
2. Audits
3. Time based Control like PERT,CPM,
GERT ( Graphical Evaluation & Review Tech.)
PDM ( Precedence Diagramming Method)
4. Strategy Audit on ( Validity, Consistency,
Effectiveness)
5. MIS
6. Motivation & Reward system
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
40
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Beneficiaries of Strategic Control:• Shareholders, Creditors, Govt, Board of
Direcotors, CEO, Finance, Profit Centers,
Middle level management.
Problems in Evaluation and Control:• Difficulty in deciding ‘Limit of Strategic
Control’
• Difficulty in measurements of control
• Resistance to change and Evaluation
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Types of Strategic Control:• Premise of Control
• Implementation of Control
• Strategic Surveillance
• Special alert Control
Methods / Techniques in Strategic Evaluation & Control:• Strategic Control: (i) Strategic momentum (ii) Strategic Leap Control
• Assumption:- There is no change in the strategy
1. Responsibility Control Centre :- From Core Mgmt Control system
( Revenue, Expenses, Profits, Investments)
2. Underlying Success Factors: ( Key Success Factors like KPI Key Performance
Index)
3. Generic Strategies: ( Based on Comparison with other organization
strategies)
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
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MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Strategic Leap Control: ( Environment is relatively ‘Unstable’ it
helps to redefine strategy)
1.
2.
3.
4.
5.
Types of Strategic leap Control:
Strategic issue management
Strategic Field assignment
Modeling
Scenarios
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
43
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Evaluation Method for Operational Controls:
1. Financial Techniques: Budgetary Control ,
ZERO Based Budgets, Financial Analysis,
‘PARTAVA’ System
2. Network Technique: PERT CPM
3. MBO Management By Objectives:
Performance of Jr. Sr. Executives
4. MOU Memorandum of Understanding
5. Strategic Audit: Validity, Consistency,
Effectiveness.
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
44
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Some Quotes
• “The price of greatness is responsibility.”
• “A pessimist sees the difficulty in every opportunity; an
optimist sees the opportunity in every difficulty.”
•
“Continuous effort - not strength or intelligence - is the key
to unlocking our potential”
• “The farther backward you can look, the farther forward you
are likely to see.”
• “You have enemies? Good. That means you've stood up for
something, sometime in your life.”
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
45
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
However beautiful the strategy, you should occasionally look at the results
Sir Winston Churchill 1874-1965, English statesman
There is always a better strategy than the one you have; you
just haven't thought of it yet
Sir Brian Pitman, former CEO of Lloyds TSB, Harvard Business Review, April
2003
Unless a variety of opinions are laid before us, we have no
opportunity of selection, but are bound of necessity to
adopt the particular view which may have been brought
forward
Herodotus, 5th century BC, Greek historian
The processes used to arrive at the total strategy are typically
fragmented, evolutionary, and largely intuitive
James Quinn in Strategic Change: Logical Incrementalism, 1978
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
46
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
How many senior executives discuss the crucial distinction
between competitive strategy at the level of a business and
competitive strategy at the level of an entire company?
C.K. Prahalad and Gary Hamel, in their article: The core competence of the
corporation, 1990
What's the use of running if you are not on the right road
German proverb
I claim not to have controlled events, but confess plainly that
events have controlled me
Abraham Lincoln 1809-1865, sixteenth American president
Perception is strong and sight weak. In strategy it is important
to see distant things as if they were close and to take a
distanced view of close things
Miyamoto Musashi 1584-1645, legendary Japanese swordsman
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
47
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Do not repeat the tactics which have gained you one victory,
but let your methods be regulated by the infinite variety of
circumstances
Sun Tzu c. 490 BC, Chinese military strategist
There is always a better strategy than the one you have; you
just haven't thought of it yet
Sir Brian Pitman, former CEO of Lloyds TSB, Harvard Business Review, April
2003
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
48
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Unless a variety of opinions are laid before us, we have no
opportunity of selection, but are bound of necessity to
adopt the particular view which may have been brought
forward
Herodotus, 5th century BC, Greek historian
The processes used to arrive at the total strategy are typically
fragmented, evolutionary, and largely intuitive
James Quinn in Strategic Change: Logical Incrementalism, 1978
How many senior executives discuss the crucial distinction
between competitive strategy at the level of a business and
competitive strategy at the level of an entire company?
C.K. Prahalad and Gary Hamel, in their article: The core competence of the
corporation, 1990
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
49
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
What's the use of running if you are not on the right road
German proverb
I claim not to have controlled events, but confess plainly that
events have controlled me
Abraham Lincoln 1809-1865, sixteenth American president
Perception is strong and sight weak. In strategy it is important
to see distant things as if they were close and to take a
distanced view of close things
Miyamoto Musashi 1584-1645, legendary Japanese swordsman
Do not repeat the tactics which have gained you one victory,
but let your methods be regulated by the infinite variety of
circumstances
Sun Tzu c. 490 BC, Chinese military strategist
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
50
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Explanation of Benchmarking.
• Benchmarking is a systematic tool that allows a
company to determine whether its performance of
organizational processes and activities represent the
best practices. Benchmarking models are useful to
determining how well a business unit, division,
organization or corporation is performing compared
with other similar organizations. A benchmark is a
point of reference for a measurement. The term
'benchmark' presumably originates from the practice
of making dimensional height measurements of an
object on a workbench using a gradual scale or similar
tool, and using the surface of the workbench as the
origin for the measurements.
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
51
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
52
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
•
•
•
•
•
•
1.
2.
3.
4.
5.
Business benchmarking is related to Kaizen and competitive advantage thinking.
BENEFITS OF BENCHMARKING.
Improving communication
Professionalizing the organization / processes, or for
Budgetary reasons
In outsourcing projects
Traditionally, performance measures are compared with previous measures from
the same organization at different times. Although this can be a good indication of
the speed of improvement within the organization, it could be that although the
organization is improving, the competition is improving faster...
FIVE TYPES OF BENCHMARKING
Internal benchmarking (benchmark within a corporation, for example between
business units)
Competitive benchmarking (benchmark performance or processes with
competitors)
Functional benchmarking (benchmark similar processes within an industry)
Generic benchmarking (comparing operations between unrelated industries)
Collaborative benchmarking (carried out collaboratively by groups of companies
(e.g. subsidiaries of a multinational in different countries or an industry
organization).
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
53
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
TYPICAL STEPS IN A BENCHMARKING PROCESS
• Scope definition
• Choose benchmark partner(s)
• Determine measurement methods, units, indicators and data collection method
• Data collection
• Analysis of the discrepancies
• Present the results and discuss implications / improvement areas and goals
• Make improvement plans or new procedures
• Monitor progress and plan ongoing benchmark.
COST OF BENCHMARKING
There are costs to benchmarking, although many companies find that it pays for itself. The three
main types of costs are:
1.
Visit costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labour time.
2.
Time costs - Members of the benchmarking team will be investing time in researching
problems, finding exceptional companies to study, visits, and implementation. This will take
them away from their regular tasks for part of each day so additional staff might be
required.
3.
Benchmarking database costs - Organizations that institutionalize benchmarking into their
daily procedures find it is useful to create and maintain a database of best practices and the
companies associated with each best practice.
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
54
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
•
•
•
•
•
•
LIMITATIONS OF BENCHMARKING
Benchmarking is a tough process that needs a lot of commitment to
succeed.
Time-consuming and expensive.
More than once benchmarking projects end with the 'they are different
from us' syndrome or competitive sensitivity prevents the free flow of
information that is necessary.
Comparing performances and processes with 'best in class' is important
and should ideally be done on a continuous basis (the competition is
improving its processes also...).
Is the success of the target company really attributable to the practice that
is benchmarked? Are the companies comparable in strategy, size, model,
culture?
What are the downsides of adopting a practice?
Book: Christopher E. Bogan, Michael J. English - Benchmarking for Best Practices Book: Peter Bolstorff, Robert Rosenbaum - Supply Chain Excellence Book: Joe Zhu - Quantitative Models for Performance Evaluation and Benchmarking –
Stanley Stringer - USA How should I put together a Peer Group? "How do I determine the right
companies to compose a Peer Group... Does anybody have an approach or criteria?"
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
55
MBA III SEMESTER : BUSINESS POLICY AND STRATEGIC MANAGEMENT
Course No 301 Paper No. XVIII
• Assignment
• Use the suitable tools while developing and
evaluating a strategy
• Analyse using the same for your presentation
• Thanks…….
Dr.N.C.Dhande SRTM University Nanded,
[email protected]
56