This list becomes a source of information which is used by the strategists in forming compelling strategies. The TOWS Matrix developed by Heinz Weihrich, is an important systematic approach of scanning environment which helps in selecting strategic alternatives most suitable in the existing environment.
Environmental Threat and Opportunity Profile method of environmental scanning is a profile of opportunities and threats existing in external environment. For an organization, ETOP provides a clear picture to the strategists so that they can capitalize on an existing opportunity and formulate strategies to take its advantage and avoid an approaching threat. The environmental scanning is also structured by preparation of Strategic Advantage Profile, which involves dividing internal environment different sectors and then in identifying the impact of each sector on the organization.
These methods of environmental scanning not only help the strategists, in appraising the mass of information available which is related to dynamic and complex environment, which an organization faces, but also present a clear picture of the strengths, weaknesses, opportunities and threats operating in the environment of the organization.
Organizational diagnosis is an effective way of looking at an organization to determine gaps between current and desired performance and how it can achieve its goals.
The organizational diagnosis is the basis for sound growth and organizational development. The essential elements are structure, procedures, relationships and the cooperation within an organization. Each organization can be seen as consisting of various subsystems. Effective functioning of each of these elements is essential for smooth functioning of the organization. Moreover the coordinated functioning of these subsystems also contribute to organizational effectiveness.
For making organizational diagnosis the strengths, weaknesses and potential of each of the subsystems need to be examined. In addition the various processes that contribute to the effective functioning of the organization as a whole also needs to be examined.
The market share needs to be analyzed to verify if it is growing, stable or declining and that potential markets are being developed and targeted. The profitability of the product or brand needs to be analyzed with respect to pricing structure. This will lead to the apportionment of costs to the cost of sales in terms of promotion.
The overall turnover of the product or service will be marked from the overall sales figure in terms of targets. Resourcing: Resourcing takes into account such things as purchasing costs and how the purchasing of the organization is done. Human resources such as staff retention, wage and salary costs and staff training and promotion need to be assessed.
It is also viewed as a skill for coordinating resources and putting them to productive use. Organizational Capabilities are developed in specific areas.
We have divided an organization into six largely accepted functional areas as described below: Financial Capability: Factors influencing financial capability are: a Factors related to sources of funds b Factors related to usage of funds c Factors related to management of funds. Marketing Capability: Factors influencing marketing Capability:- a Product related factors b Price related factors c Place related factors d Promotion related factors e Integrative and systemic factors.
Information Management Capability: Factors influencing information management capability:- a Acquisition and retention of information, b Processing and synthesis of information, c Retrieval and usage of information, d Transmission and dissemination. Human ResourceAnalysis There are many techniques for analysis that can be undertaken to diagnose organizational productivity.
These include the following: 1 Rate of Employee Turnover: Mostly it is said that employee turn over is not good for the organizations. But employers should remember that turnover is not that bad either. What is required is an optimum mix of turnover, not too high-not too low. A low rate of employee turnover may result into: 1. Bringing in new ideas and skills from new hires. Better employee-job matches.
More staffing flexibility. Facilitate change and innovation. High rate of turnover may lead to decrease in: 1. Productivity 2. Service delivery 3. A grievance arises when an employee feels that something has happened or is happening to him which he thinks is unfair, unjust or inequitable. Grievances are symptoms of conflicts in the organization. Therefore, management should be concerned with both complaints and grievances, because both may be important indicator of potential problems within the workforce.
Without a grievance procedure, management may be unable to respond to employee concerns since managers are unaware of them. Hence, a formal grievance procedure is an important communication tool for the organization. The survey provides information that may be used to improve productivity and commitment. By identifying the basic causes of negative attitude in the workplace, organization can take appropriate create a positive environment and action to maximize overall job satisfaction.
Taking action as a result of the information gathered from an employee survey will lead to improved productivity. And, improving employee attitude throughout the workplace will lead to better cooperation and communication. Surveys can also uncover many cost saving opportunities. It may be used to describe an entire value stream, individual business processes that comprise a value stream, or individual activities that comprise a business process. Value chain was introduced by Porter.
It is a chain of value creating activities in an organization. Two broad categories of value activities are- Primary and Support. Primary activities include activities connected with the physical creation of product and its marketing. Support activities include those which provide inputs for primary activities to be carried out. Say, value chain may start with purchasing of raw material, then processing in various stages and finally continue till marketing of end products to the consumer.
The value chain depicts a systematic progress and analysis of all the activities performed by an organization which are interrelated. Value-chain surely affects the profit margin of the organization. Dimensions typically measured are quality, time and cost. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful.
It identifies following performance measures: - Perspective of customer - Internal business perspective - Learning perspective of value creation - Financial perspective Using these perspectives together paves the way to a balanced approach in strategy formulation. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one. It is concerned with the length of time it takes to complete a work task assigned to a specific job.
There are also a number of jobs for which the techniques of work measurement are inappropriate. This would apply to most professional and managerial jobs, where the measures have to be based more on capabilities and competencies.
Together these factors determine the way in which a corporation operates. What does the organization stands for and what are its central beliefs and attitudes.
Various management Styles are practiced by managers to achieve desired objectives. Core Competences are developed through the skills that the people in the organization possess.
It is appropriate to mention that appraisal should be carried within some framework and that the framework should be rational. Some measures might be for the specific parts of the organisation indicating their performance, while other measures might be organisation-wide. The top management of the organisation can make a composite of all of these measures to form a so-called balanced scorecard. How it is done? What should be the scope of operations; i. How should the firm allocate its resources among existing businesses?
What level of diversification should the firm pursue; i. Are there additional businesses the firm should enter or are there businesses that should be targeted for termination or divestment? Should we pursue related diversification; i. If we pursue related diversification, how will the firm leverage potential cross-business synergies? How should the firm be structured? Where should the boundaries of the firm be drawn and how will these boundaries affect relationships across businesses, with suppliers, customers and other constituents?
Do the organizational components such as research and development, finance, marketing, customer service, etc. Are the responsibilities or each business unit clearly identified and is accountability established? Should the firm enter into strategic alliances-cooperative, mutually-beneficial relationships with other firms? If so, for what reasons? If not, what impact might this have on future profitability? The managers at corporate level should be aware about the various courses of action available to them.
To achieve organizational mission by pursuing the relevant strategic alterative. It provides a basic direction for strategic action in line with major corporate objectives of a company. Thus, these grand strategies are a blue print for action and operational decisions.
It works as a choice of direction that corporates adopts in order to achieve its objectives. The corporate strategy sets the direction in which the organization will go. Even where the organization simply comprises a single business with only one or few products, corporate strategy is relevant. And where an organization is made up of many business units operating in different markets, corporate strategy is also concerned with how resources are to be allocated across the business units.
This step is taken when the environment in which the business is operating does not change. Hence, the firms pursue the same strategy as they were in the past. When the environment becomes a little unstable, the firms has be to take the decision to do something. They decide to act in a manner so as to systain profitability by whatever means possible. So it just works like tide. As the opportunity is visualized the firm takes advantage. It may also happen that the cost of growth is more than the benefit for the same.
So this strategy only works if the problems are of temporary in nature. Organizations opt for expansion strategy either or all of the following reasons: growing economy, changing taste and preferences of customers, emerging technologies bottle neck competition burgeoning market etc..
A growth strategy signifies something different from stable growth or substantial growth. When the firm increases the level of objectives higher than what it has achieved in the immediate past, may be in terms of sales revenue or market share, or strategic decision center around increased functional performance in major respects, then we can say that growth strategy is followed.
Characteristics of Expansion Strategy : 1. Expansion strategy is risky in Nature. It is most commonly employed strategy. It involves redefinition of the business of the corporation. Thrust areas for expansion strategy could be new business, new products or new markets. It is a highly versatile strategy; it offers several permutations and combinations for growth.
Increase in size of business leads to more control over the market as well as on competitors also. Expansion strategy denotes the health of an organization. A company which does not expand is said to be stagnat and on other hand a growing company enjoys more visibility and is better known and attracts better management. Indicators of Growth — There are a number of indicators of growth. The important indicators are — 1. Increase in net worth 2. Increase in total assets 3.
Increase in the number of employees 4. Hence, to avoid such a situation the following three questions should be answered before embarking on a growth strategy. If the company is stopped short in pursuing the strategy for any reason, will its position be competitively viable?
Will government regulators permit the company to follow the strategy it has chosen? Types of Expansion Strategies: An organization can expand its business in terms of new product, new market, new technology or new costumers. On the basis of these parameters different types of expansion strategies are categorized as: 1 Concentration Strategy: Under this strategy an organization pursue growth by going in for internal growht.
It means an organization concentrate on its primary business. It is a simple strategy and is least ambiguous as every one in the organization is familiar with the products and markets. Intensive Growth — A profit market expansion grid has been proposed by Ansof which is a very useful framework for detecting new intensive growth opportunities.
Market Penetration — Market penetration strategy strives to increase the sale of the current products in the current markets. There are three major approaches to increasing current products market share in their current markets.
Frequency of use — For example, if customer of tooth paste, who brushes teeth once a day now, is habituated to brush twice a day, the sale of product to the current consumer would almost double. Usage per Use of the Product — For example, every time you shampoo your hair, repeat it two times for better results. This is growth at the expense of the competitors.
The competitors would, naturally fight back. This strategy will, therefore, succeed only if the company has some distinctive edge over the competitors. To keep and even improve its competitive position through backward integration, the company may act to minimize resource acquisition costs and inefficient operations, as well as to gain more control over quality and product distribution through forward integration.
Outsourcing, the use of long-term contracts to reduce internal administrative costs, has become more popular as large corporations have worked to reduce costs and become more competitive by becoming less vertically integrated.
Backward and forward integration: Backward integration means relating to the source of raw material. Whereas forward integration means relating to the supply of finished good to ultimate user.
For Eg: Raw materials, machinery and labour are all important inputs into a manufacturing company. Backward integration involves starting the preceding stage of the current business.
For example, manufacture of a finished product may start the manufacture of the raw material required for the finished product. For instance, a detergent manufacturer may take up the manufacturer of Linear Alkaline Benzyne LAB which is a raw material for detergents as has been done by Nirma.
A company which currently only markets a product, taking up the manufacturing of it is another example of backward integration. For example, the Brooke Bond resorted to backward integration by acquiring two tea plantations. Backward integration has certain advantages. It ensures smooth supply of materials for production or good for marketing. This is particularly important when there are supply bottlenecks. Secondly, it may enable the company to obtain the goods cheaply or to make some profits out of the manufacturing.
Thirdly, it may also help the company to ensure quality of the goods. Further, it may also facilitiate tax savings. Backward integration, however is not a unmixed blessing. In some cases it may have the following problems— 1. The cost of making may be higher than the cost of buying. Integration may make exit from a business more difficult. Forward integration means entering the subsequent stage of the industry. For example— i The manufacturer of a product who does not do the marketing of it currently, may start marketing it.
For instance, a LAB manufacturer may start the manufacture of detergents. So corporate add new product or markets to its existing business line.
This approach toward growth is known as diversification strategy. This diversification involves all dimensions of strategic alternatives.
Either related or unrelated to the product, technology, or market of one or more firms singly or collectively. Through diversification organisation enjoys reduced competitive pressure and gains greater profitability. Simultaneously risk is spread over the firm. Diversification strategies can be categories as : a Concentric diversification b Conglomerate diversification a Concentric Diversification : When an organisation acquires the business of other organisation related in terms of similar product, similar technology or similar customer group, it is said to be concentric diversification.
It can and should be managed for successful outcomes. I call him the Deming of Innovation because, more than anyone else, Tony has turned innovation into a science. That additional clarity further enables us to develop and deliver solutions that provide real customer value, as well as deep, ongoing benefits to my organization and me.
Our understanding of client needs and how to gain insight into those needs has been greatly improved. It impacts revenue growth through new product development and identification of new customer segments. Even in established markets, we gained new insights enabling stronger value propositions, more impactful customer communications, and innovation better aligned with market needs.
Our innovation teams have seen the Outcome-Driven Innovation process work not just once, but over and over again. Without a doubt, it brings predictability to innovation and contributes to growth. Each time he has elevated our thinking and brought us a way to drive innovation that is radically different from traditional methods. It has been a great journey watching our team think and act with a focus on customer-centric outcomes. Reeve 9 Test Bank.
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