Integrated Management

INTEGRATED
MANAGEMENT
Evolution of Strategic Management
Global considerations impact virtually all strategic
decisions.
– Geographical boundaries no longer define the limits of our
imaginations.
– The survival of businesses hinges on the perception of others
about your business.
– The success of St. Mgt depends upon the manager’s degree of
understanding of competitors, markets, prices, suppliers,
distributors, governments, creditors, shareholders, and consumers
on worldwide basis.
Technological Changes
Electronic Commerce (e-commerce) has become a vital St.
Mgt tool.
– Companies getting competitive advantage by using internet for direct

selling and comm. with suppliers, customers, creditors,
partners/shareholders, clients and competitors dispersed globally.
– E- Commerce allows firms to sell products, advertise, purchase
supplies bypassing intermediaries, track inventory, eliminate
paperwork and share information.
– E-commerce is reducing expense, time, distance and space in doing
business thus giving better customer service, greater efficiency
improved product and higher profitability.
Internet and PCs are changing our lifestyle the way we

interact with our families, friends neighbors etc.
– It promotes endless comparison shopping thus enabling consumers

worldwide to band together to demand discounts.
– It has transferred power from businesses to individuals - may
lead to regulation on consumers in future.
– Buyers can get best price and service by quickly scanning
hundreds of vendor offerings.
Internet has changed the economics of business in every

single industry worldwide.
– Slogans and company’s like e-Bay, e-Trade, e-commerce, e-mail

and e-toys have become integral part of everyday life worldwide.
– Business to Business e-commerce is five time greater than
consumer e-commerce.
– According to seventy four percent Americans in a survey; the
Internet will change society more than telephone and television
combined.
Strategic Management
Definition
The art and science of formulating implementing and
evaluating cross-functional decisions that enable an
organization to achieve it’s objectives.
• It focuses on integrating management, marketing, finance/ accounting,

production /operations, research and development, and computer
information systems to achieve organizational objectives.
• The purpose of strategic management is to exploit and create new and

different opportunities for tomorrow.
Strategic Management Process
It is an objective, logical, systematic approach for making major
decisions in an organization. It attempts to organize qualitative and
quantitative information in a way that allows effective decision
making under uncertainty.
Three stages of Strategic Management Process;
– Strategy formulation.
– Strategy implementation.
– Strategy evaluation.
Strategy Formulation
Developing a vision and mission, identifying an organization’s
external opportunities and threats, determining internal strengths
and weaknesses, establishing long term objectives, generating
alternative strategies and choosing particular strategy to pursue.
Vision Statement
What do we want to become?
A vision statement of an eye clinic;

“ Our vision is to take care of your vision”
A vision statement of Atlanta Web Printers;

“ To be the first choice in the printed communication
business. The first choice is the best choice, and being the
best is what Atlanta Web pledges to work hard at being –
every day.
Mission Statement
An enduring statement of purpose that distinguishes one

organization from other similar enterprise, - it is a
declaration of an organization’s “ reason for being
“answering the pivotal question “ what is our business”.
A clear mission statement is essential for effectively

establishing objectives and formulating strategies.
Importance of Vision and Mission Statements
• Ensure unanimity of purpose within the organization.

• Provide a basis, or standard, for allocating organizational resources.
• Establish a general tone or organizational climate.
• Facilitate the translation of objectives in to work structure involving
the assignment of tasks to responsible elements in organization.
• Specify organization’s purpose and then translate these into objectives
in such a way that cost, time and performance parameters can be
assessed and controlled.
External Opportunities and Threats
The trends and events that could significantly benefit or harm an

organization in the future are referred to external opportunities and
threats like economic, social, cultural, demographic, environmental,
political, legal, governmental, technological or competitive trends.
They are largely beyond the control of a single organization-thus the word
external.
Firms to formulate strategies to take advantage of external opportunities
and to avoid/reduce the impact of external threats.
Internal Strengths and weaknesses

An organization’s controllable activities that are performed especially
well or poorly.
• They arise in the management, marketing, finance/accounting,

production/ operations, research and development and management
information system activities of a business.
• Organizations strive to pursue strategies that capitalize on Internal

strengths and eliminate internal weaknesses.
• Strengths and weaknesses are determined relative to competitors.
• Strengths and weaknesses can be determined by elements of being rather

than performance.
• Strengths and weaknesses can be determined relative to a firm’s own

objectives.
• Internal factors can be determined by computing ratios, measuring

performance and comparing to past periods and industry averages.
• Survey method could be used to determine employee morale, production

efficiency, advertising effectiveness and customer loyalty.
Long Term Objectives

Specific results that an organization seeks to achieve in pursuing its
basic mission during a period of more than one year.
Objectives state direction, aid in evaluation, create synergy, reveal

priorities, focus coordination and provide a basis for effective
planning, organizing, motivating and controlling activities.
Objectives should be challenging, measurable, consistent, reasonable and

clear.
Strategy
It is the means by which long-term objectives can be achieved.
Business strategies may include geographic expansion, diversification,

acquisition, product development, market penetration, retrenchment,
liquidation and joint venture.
Strategies are potential actions thus future- oriented having

multifunctional or multidivisional consequences for the organization.
Strategy formulation issues
• Deciding what new business to enter

• What businesses to close.
• How to allocate resources.
• Whether to expand operations or diversify.
• Whether to enter international market.
• Whether to merge or form a joint venture
• How to avoid a hostile takeover.
Strategy Implementation
It is also called “the action stage of strategic management”. It entails
establishment of annual objectives, devise policies, motivate
employees, and allocate resources so that formulated strategies can be
executed.
Strategy Implementation includes;

Developing a strategy-supporting culture
Creating an effective organizational structure.
Redirecting marketing efforts.
Preparing budget.
Developing and utilizing information systems. and
Linking employee compensation to organizational performance
Implementing Strategies
Strategy implementation is different than strategy formulation;
Strategy formulation – positioning forces before the action
Strategy implementation – managing forces during the action
Strategy formulation - focuses on effectiveness
Strategy implementation - focuses on efficiency
Strategy formulation – primarily an intellectual process
Strategy implementation – primarily an operational process
strategy formulation - requires good intuitive and analytical skills
Strategy implementation - requires special motivation and leadership
skills
Strategy formulation - requires coordination among a few individuals

Strategy implementation - requires coordination among many
individuals
Strategy formulation - concepts and tools similar for small, large, for
profit or nonprofit organizations
Strategy implementation - varies substantially among different types
and sizes of organizations
Strategy Evaluation
It is the means for management to determine whether the strategy is
working or otherwise.
All strategies are subject to future modifications because of persistent
changes in the external and internal environment of an organization.
Three fundamental strategy evaluation activities are;
– Review external and internal environment factors which are bases
for current strategies.
– Measuring performance.
– Taking corrective actions.
Strategy evaluation is necessary because success today is no
guarantee of success tomorrow
Strategic Planning
Types of Plans
Single use plan
A plan designed to fit one-time situation. The plan becomes obsolete
when its one-time goals have been achieved. Two common types of
single-use plans are programs and projects.
Program
A complex single-use plan consisting of a set of interrelated actions
aimed at achieving a one-time major goal. To develop a program,
managers;
– 1. Divide the course of action into steps.
– 2. Determine the logical sequence of steps.
– 3. Decide who will be responsible for each step.
– 4. Establish and provide the sources necessary to complete each
step.
Strategic Planning
-5. Gauge the time needed to finish each step, and
– 6. Prepare a schedule for implementation.
Project
A single-use plan that is narrower in scope than a program and aimed
at achieving a specific one-time goal. Projects integrate fewer
activities and resources than programs and are often developed as
subunits of programs, for example, Bhasha Dam project in the
national program of provision of electricity to the whole country.
Standing plans
A plan for guiding management decisions and activities in situations
that recur repeatedly. Three commonly used types of standing plans
are policies, procedures, and rules.
- Policy – a standing plan that provides broad guidelines for directing
managerial activities in pursuit of organizational goals
Strategic Planning
– Procedure – a standing plan encompassing a series of detailed
steps to be followed in particular recurring situation.
– Rule – a standing plan specifying the circumstances in which
certain activities can or cannot be performed.
Contingency Plans
Alternative courses of actions to be followed if unforeseen
environmental shifts occur.
Strategic Planning
Levels of Planning
Strategic
Tactical
Operational
General Time Period Considered for Plans
Strategic Plans - 5 years
Tactical Plans - 3 years
Operational Plans - 1 year

The Managerial Pyramid
Mission
Strategic Goals/
Plans
(organization as a whole)
Tactical Goals/
Plans
(major divisions, functions)
Operational Goals/
Plans
(departments and units)

Strategic Planning
Who Does the Planning?
Small businesses:
– Entrepreneurs do most of the planning.
Large firms:
– Traditional:
• A central corporate planning group works with top
management and each division to solicit, challenge, and refine
the company’s plan.
– Current:
• Planning is decentralized and includes the firms’ product and
divisional managers, aided by small headquarters advisory
groups.
Strategic Planning
How to Develop a Plan
1. Set an objective.
2. Evaluate the situation.
3. Determine the procedures.
4. Set a timetable.
5. Assign responsibility.
6. Check the plan for feasibility and cost
Strategic Planning
WELL CONCEIVED PLANS MUST HAVE
1.Resources
2.Methods
3.Tasks
4.Sequence
5.Individuals
6.Location
7.Deadlines
8.Stop points
9.Measurement
Strategic Planning
Benefits of Strategic Planning
Financial Benefits
Organizations using strategic management concepts are more
profitable and successful than those who do not.
Businesses show significant improvement in sales, profitability and
productivity.
High performing firms do systematic planning to prepare for
future fluctuations in their external and internal environment.
These firms generally exhibit superior long-term financial
performance relative to their industry.
Strategic Planning
Nonfinancial Benefits
Strategic management offers;
Enhanced awareness of external threats
An improved understanding of competitors’ strategies.
Increased employee productivity.
Reduced resistance to change.
Clear understanding of performance-reward relationships.
Strategic management enhances the problem-prevention
capabilities of organizations because it promotes interaction
among managers at all divisional and functional levels.
Strategic Planning
Benefits of Strategic Planning
Allows for identification, prioritization and exploitation of
opportunities.
Presents a framework for improved coordination and control of
activities.
Directs decision making to support established objectives, and
provides a unifying framework; avoiding piecemeal decision making.
Allows more effective allocation of time and resources to identified
opportunities.
Creates a framework for internal communication among personnel.
Helps integrate the behavior of individuals into a total effort.
Provides a basis for clarifying individual responsibilities.
Encourages forward thinking.
Facilitates managerial control through setting of standards for
monitoring and measuring performance.
Strategic Planning
Reasons For No Strategic Planning By Firms
Poor reward structure – often fail to reward success but ready to

punish for failure.
Fire-fighting – busy in crisis management and not finding time to
plan.
Waste of time – see planning as waste of time since no marketable
product is produced. ( time spent on planning is investment).
Too Expensive – culturally opposed to spending resources.
Laziness – may not want to put effort needed for planning.
Content with success – they think no need to plan because things are
fine as they stand.
Strategic Planning
Fear of failure – not doing anything, no risk of failure. However
whenever something worthwhile is attempted, there is some risk of
failure.
Overconfidence – as individuals amass experience, they may rely less
on formal planning. However, being overconfident or overestimating
experience can bring failure
Prior bad experience – plans have been long, cumbersome,
impractical, or inflexible. Planning, like anything else, can also be
done badly.
Self-interest – when some one has achieved status, or privilege
through effectively using old system, he/she sees anew plan as threat.
Fear of Unknown – uncertain of abilities to learn new skills, of
aptitude with new system or of their ability to take on new roles.
Honest difference of opinion – sincerely believe the plan is wrong as
they are watching the situation from different viewpoing.
Types of Strategies
Integration Strategies
Intensive Strategies
Diversification Strategies
Defensive Strategies
Michael Porter’s Generic Strategies
Strategy is choosing among the alternatives, you cant follow a

combination strategy for too long.
According to Hansen and Smith;
Strategic planning involves “choices that risk resources” and “trade-
offs that sacrifice opportunity”.
Types of Strategies
Integration Strategies
Forward integration
Backwind integration
Horizontal integration
Forward Integration
Gaining ownership or increased control over distributors or
retailers by;.
– Establishing websites to sell products directly to consumers.
– Franchising - costs and opportunities are spread across many
individuals.
– Opening company’s stores, retail outlets
Types of Strategies
Situations when forward integration may be an effective
strategy;
Organizations present distributors are expensive, unreliable or
incapable of meeting the firms distribution needs.
Availability of quality distributors is limited; firms having forward
integration are availing competitive advantage.
When the industry is growing and expected to continue growing;
however, forward integration reduces organization’s ability to
diversify if it’s basic industry falters.
When organization has both the capital and human resources.
Advantages of stable productions are high; organizations can increase
the predictability of the demand through forward integration.
When profit margins for distributors or retailers are high.
Types of Strategies
Backward Integration
A strategy of seeking ownership or increased control of a
firm’s suppliers particularly in situations when firm’s
suppliers are unreliable, too costly or cannot meet firm’s
requirements
Firms having global sources of supply opt for
deintegration.
Firms increasingly use websites on backward integration
opportunities.
Global competition is prompting firm’s to reduce number
of suppliers and to demand higher level of service and
quality from selected ones.
Types of Strategies
Situations when backward integration may be an effective
strategy
When present suppliers are expensive, unreliable, or

incapable of meeting the firms needs.
when the number of suppliers is small and the number of
competitors is large.
When an organization competes in an industry that is
growing rapidly.
When an organization has both capital and human
resources to manage the new business of supplying its own
raw material.
Types of Strategies
Situations when backward integration may be an effective
strategy (contd)
When the advantages of stable prices are particularly

important; as organization can stabilize the cost of its raw
materials and associated products through backward
integration.
When present supplies have high profit margin; tempting
to invest into the venture.
When an organization needs to acquire a needed resource
quickly.
Types of Strategies
Horizontal Integration
A strategy of seeking ownership of or increased control

over a firm’s competitors.
It is increasingly being used by the firms as growth
strategy.
Mergers, acquisitions and takeovers among competitors
allow for increased economies of scale and enhanced
transfer of resources and competencies.
Mergers between direct competitors create efficiencies
because of potential for eliminating duplicate facilities.
Types of Strategies
Situations when horizontal integration may be an effective
strategy
When an organization can gain a monopolistic
characteristics without being challenged by the law
(SECP).
when a firm competes in a growing industry.
When increased economies of scale provide major
competitive advantage.
When the firm has the necessary resources of capital and
human talent to manage the expanded organization.
when competitors are faltering due to lack of managerial
expertise or a need for particular resources that an
organization possesses.( not if competitors are doing
poorly, and overall industry sales are declining.
Types of Strategies
Intensive Strategies
Requires intensive effort from the firm to improve it’s
competitive position with existing products.
Market Penetration
Market Development
Product Development
Market Penetration
This strategy seeks to increase market share for present
product or services in present markets through greater
marketing efforts.
Market penetrations includes increasing number of
salespersons, advertising expenditure, publicity efforts or
offering extensive sales promotion items.
Types of Strategies
Situations when market penetration may be an effective
strategy
Current markets are not saturated with a particular product
or service.
The usage rate of present customers could be increased
significantly.
Market shares of major competitors have been declining
while total industry sales have been increasing.
The correlation between dollar sales and dollar marketing
expenditure has been high.
Increased economies of scale provide major competitive
advantage.
Types of Strategies
Market Development
It involves introducing present products or services into
new geographic areas.
Situations when market development may be an effective
strategy
New, reliable, inexpensive and good quality channels of
distribution are available.
Organization is very successful at what it does.
New untapped or unsaturated markets exist.
Organization has the necessary resources to expand
operations.
Organization has excess production capacity.
Organization’s basic industry is becoming global.
Types of Strategies
Product Development
A strategy that seeks increased sales by improving or
modifying present products or services. It normally entails
large R & D expenditure.
Situations when Product development may be an effective

strategy
Organization’s successful product has reached the maturity
stage and organization wants its customers to try it’s new
or improved product.
Organization competes in an industry that is characterized
by rapid technological development.
Types of Strategies
Major competitors offer better -quality products at
comparable prices.
Organization competes in a high-growth industry.
Organization has strong research and development
capabilities
Diversification Strategies
Diversification strategy is followed to avoid dependence
on any single industry, especially when the company is
competing in an un attractive industry.
There are three types of diversification strategies;
Concentric, Horizontal and conglomerate.
Concentric Diversification
Acquiring new, but related, products or services.
Types of Strategies
Situations when Concentric diversification may be an
effective strategy
When an organization competes in a no-growth/ slow-
growth industry.
When adding new but related products would significantly
enhance the sales of current products.
When new related products could be offered at highly
competitive prices.
When new related products have seasonal sales levels that
counterbalance a company’s existing peaks and lows.
When the company’s products are in the declining stage of
the product’s life cycle.
When an organization has strong management team.
Types of Strategies
Horizontal Diversification
Adding new, unrelated products or services for present
customers.
Situation when Horizontal Diversifications may be an
effective strategy.
Revenue of the organization would increase significantly.
Organization competes in a highly competitive and / or a
no growth industry yielding low returns and profit
margins.
Organization’s present marketing channels can be used to
market new products to current customers.
The new product has countercyclical sales patterns
compared to an organization’s present products.
Types of Strategies
Conglomerate Diversification
Adding new, unrelated products or services.
Situations when conglomerate diversification may be an

effective strategy.
Organization’s basic industry is experiencing decline in sales / profits.
Organization has the capital and managerial talent to successfully
compete in a new industry.
Organization has the opportunity to purchase unrelated business
providing an attractive investment opportunity.
The existing markets for company’s present products are saturated.
There exists financial synergy between the acquired and acquiring
firms.
Antitrust action could be charged against an organization that has
concentrated on a single industry.
Types of Strategies
Defensive Strategies
Retrenchment, Divestiture and Liquidation are defensive
strategies.
Retrenchment
An organization regroups through cost and asset reduction to reverse
declining sales and profits.
Also called a turnaround or reorganization strategy; is designed to
fortify an organization’s basic distinctive competence.
Entails selling off land and buildings to raise needed cash, pruning
product lines, closing marginal businesses, closing obsolete factories,
automating processes, reducing the number of employees and
controlling expenses.
Bankruptcy can be an effective type of retrenchment strategy;
allowing a firm to avoid major debt obligations and to void union
contracts..
Types of Strategies
Situations when retrenchment may be an effective
strategy.
An organization has failed to meet it’s objectives and
goals repeatedly overtime.
The organization is a weaker competitor in the industry.
The organization is plagued by inefficiency, low
profitability, poor employee morale, and pressure from
stakeholders to improve performance.
The organization’s strategic managers have failed; could
not capitalize on external opportunities, minimize external
threats, take advantage of internal strengths and overcome
internal weaknesses overtime.
Organization has grown so large so quickly that major
internal reorganization is needed.
Types of Strategies
Divestiture
Selling a division or part of an organization.
The strategy is used to raise capital for further strategic
acquisition or investments.
Divestiture can be apart of an overall retrenchment
strategy to rid an organization of businesses that are
unprofitable, that require too much capital, or that do not
fit well with the firm’s other activities.
Types of Strategies
Situations when Divestiture may be an effective strategy.
The organization has pursued a retrenchment strategy but
failed to accomplish needed improvements.
A division needs more resources to be competitive than
the company can provide.
A division is responsible for an organization’s overall
poor performance.
A division is misfit with the rest of an organization; may
be due to different markets, customers, managers,
employees, values or needs.
A large amount of cash is required quickly and cannot be
obtained from other sources.
Government antitrust action threatens an organization
Types of Strategies
Liquidation
Selling all of a company’s assets, in parts, for their
tangible worth is called liquidation. Liquidities is a
recognition of defeat and therefore, can be an emotionally
difficult strategy. It is better to cease operating than to
continue loosing large sums of money.
Situations when liquidation may be an effective strategy
to pursue.
Organization has pursued both a retrenchment strategy
and divestiture strategy and both have failed.
When only alternative left is bankruptcy, than liquidation
is the only way to orderly get max cash from firm’s assets.
When stockholders of a firm can minimize their losses by
selling the organization’s assets.
Types of Strategies
Michael Porter’s Generic Strategies.
Strategies allow organizations to gain competitive
advantage from three different bases; cost leadership,
Differentiation and focus.
Cost leadership emphasis on producing standardized
products at a very low per unit cost for price sensitive
consumers. Differentiation strategy aims at producing
unique products for relatively price sensitive consumers
and focus means producing products & services to fulfill
the needs of small groups of consumers.
These strategies imply different organizational
arrangements, control procedures and incentive systems.
Large firms with greater resources compete on a cost
leadership and or differentiation basis while small firms
often compete on focus basis.
Types of Strategies
Cost Leadership Strategy
Reason for forward, backward and horizontal integration
is to gain cost leadership.
Pursue cost leadership in conjunction with differentiation.
Perform cost-benefit analysis to evaluate “sharing
opportunities” of resources and knowledge among firm’s
existing and potential business units.
It is an effective strategy in situations where customers are
price sensitive, there is few ways of achieving product
differentiation, buyer are not bothered about brands and
there are large no. of buyers with significant bargaining
power.
Types of Strategies
Implies high efficiency, lower overheads, limited perks,

intolerance of waste, rewards linked with cost
containment.
Competitors imitation of strategy may result in lowering
overall Industry profits; technology break through make
strategy ineffective; buyer’s interest switching to other
differentiating features beside price.
Types of Strategies
Differentiation Strategy.
Follow a strategy after careful study of buyers needs and
preferences to determine and incorporation of one or more
differentiations features.
Special features could be superior service, spare parts
availability, engineering design, product performance,
useful life, gas mileage or ease of use.
Strategy requires strong coordination between R&D and
marketing functions.
Will allow a firm to charge high price, gain customer
loyalty.
Types of Strategies
Focus Strategies
To concentrate on a particular group of customers,
geographic market, or on a particular product-line
segments in order to serve a well defined but narrow
market better than competitors who serve a broader
market.
Focus Strategies are most effective when;
– Consumers have distinctive preferences or
requirements.
– Rival firms are not attempting to specialize in the same
target market.
Market Penetration and Market Development strategies
offer substantial focusing advantages.
Types of Strategies
Medium to large firms can pursue focus strategies only in
conjunction with differentiation or cost leadership-based
strategies.
 Risks of pursuing Focus Strategies;

 The possibility of many competitors recognizing the
successful focus strategy and copying it.
 The consumer preferences drifting towards the product
attributes desired by the market as a whole.
Types of Strategies
Means For Achieving Strategies
Joint Venture / Partnership
It is a popular strategy when two or more companies form
a temporary partnership or consortium for the purpose of
capitalizing on some opportunity.
The sponsoring firms normally form a separate
organization with shared ownership.
Other types of cooperative arrangements could be;
– Research and development partnerships,
– Cross-distribution agreements,
– Cross-licensing agreements,
Types of Strategies
– Cross-manufacturing agreements, and
– Joint-bidding consortia.
Common Problems Leading To Failure Of Joint
Ventures
1.Managers who must collaborate daily in operating the
venture are not involved in forming or shaping the venture.
2. The venture may not be supported equally by both
partners, if supported unequally, problems arise.
3.The venture may begin to compete more with one of the
partners than the other.
Types of Strategies
Merger / Acquisition
Merger – When two organizations of about equal size
unite to form one enterprise.
Acquisition- when a large organization purchases
(acquires) a smaller firm, or vice versa.
Takeover/Hostile Takeover - When a merger or
acquisition is not desired by both parties.
Friendly Merger - If the acquisition is desired by both
firms.
Types of Strategies
Forces driving Mergers/ Acquisitions
Technological Change
Excess capacity
Inability to boost profits through price increases
A depressed stock market
Need to gain economies of scale
Bargains galore as companies struggle and while stock
prices are low.
Not all mergers are effective and successful – about half
produced negative returns to shareholders (Wall Street
Journal studies)
Types of Strategies
Reasons for Mergers and Acquisitions

To provide improved capacity utilization.
To make better use of the existing sales force.
To reduce managerial staff.
To gain economies of scale
To smooth out seasonal trends in sales.
To gain access to new suppliers, distributors, customers,
products and creditors.
To gain new technology.
To reduce tax obligations.
Types of Strategies
First Mover Advantages
The benefits a firm may achieve by entering a new market
or developing a new product or service prior to rival firm
is known as first mover advantages.
It may include;
– Securing access to rare resources.
– Gaining new knowledge of key factors of issues, and
– Carving out market share and a position that is easy to defend and
costly for rival firms to overtake.
Risk associated being first mover – unexpected and
unanticipated problems and costs may occur being the first
firm doing business in the new market.
Types of Strategies
According to research, first mover advantages tend to be
greatest when competitors are roughly the same size and
possess similar resources. Otherwise, larger competitors
can wait while others make initial investments and
mistakes, and then respond with greater effectiveness and
resources
Out Sourcing
Business Process Outsourcing (BPO) involves companies
taking over the functional operations, such as human
resource, information systems, payroll, accounting,
customer service, and even marketing of other firms.
Types of Strategies
Companies choose to outsource because;
It is less expensive,
It allows the firms to focus on its core business, and
It enables the firm to provide better service.
BPO is the means for achieving strategies that are similar
to partnering and joint venture.
The Organizational Environment
All forces with potential to influence the organization and its

performance is known as organizational environment.
The organizational environment consists of the internal environment
and the external environment. Within the external environment are the
forces of the general environment or macro environment and the
forces of the task environment or industry environment
THE ENVIRONMENT
The macro-environment
Industry
Operating Envrnmt
Internal
Environment
The organization
Task Environment
Environmental Scanning
Scan external environment to identify possible
opportunities and threats.
Scan Internal environment to ascertain strengths and
weaknesses
Monitor, evaluate and disseminate information from
external and internal environment to the management.
Thus,
It is a tool used by corporations to avoid strategic surprise
and to ensure long-term health .
The Industrial Organization (IO) View
According to IO approach, the external (industry) factors
are more important than internal factors in a firm
achieving competitive advantage.
Competitive advantage is determined largely by
competitive positioning within and industry.
IO perspective requires the firms to compete in attractive
industries, avoid weak or faltering industries, and gain a
full understanding of key external factors relationships
within that industry.
The IO theorist argue that the industry in which a firm
competes has stronger influence on the firm’s performance
than the internal functional decisions managers make in
marketing, finance etc.
Firm performance is primarily based more on industry
properties, such as economies of scale, barriers to market
entry, product differentiation, and level of competitiveness
than on internal resources, capabilities, structures, and
operations.
However;
Research findings suggest that approximately 20 percent

of a firm’s profitability can be explained by the industry,
whereas 36 percent of the profitability is attributed to the
firm’s internal factors.
Key External Forces:
– Economic forces.
– Social, cultural, demographic and environmental forces.
– Political, governmental and legal forces.
– Technological forces.
– Competitive forces.
Organization’s Operating Environment:

Competitors, Suppliers, Distributors, Creditors, Customers,
Employees, Communities, Managers, Stockholders, Labor Unions,
Governments, Trade Associations, Special interest groups, Products,
Services, Markets and Natural Environment.
The effects/influences of external environment on organizations
operating environments give rise to opportunities and threats for the
organization.
Changes in external forces is reflected into:

– Changes in consumer demand for both industrial and consumer
products and services.
– The nature of positioning and market segmentation strategies.
– The choice of businesses to acquire or sell.
External forces directly effect both suppliers and distributors.

External opportunities /threats enable organizations to develop clear
missions and strategies to achieve their objectives.
Get the participation of max. number of managers and employees.
Gather competitive intelligence about key external force’s trends by
using print/electronic media, human resources and internet.
Evaluate and assimilate the info. to identify key external factors which
are;
– Important for achieving long-term and annual objectives.
– Measurable.
– Applicable to all competing firms.
– Hierarchical effecting overall company and functional/ divisional
areas.
List of key external factors be communicated to all in the organization.
Economic Forces
The Nature and direction of economy in which firm operates.
Consumption patterns are effected by the relative affluence of various
market segments-the firm to consider economic trends in the segments
that affect its industry.
The firm must consider;
– General availability of credit.
– The level of disposable income.
– Interest rates, stock prices.
– Low/ high value of dollar
– Gross domestic product trend
– Right sizing/ downsizing or derecruiting
– Deregulation of Industries to restrain inflation
Emergence of economic blocs/ organizations like EEC, OPEC.
NAFTA, etc.
Social, Cultural, Demographic and Environmental
forces.
Changes in social, cultural, demographic and environmental factors
have impact on virtually all products, services, markets and customers
and all sorts of organizations, and all industries are challenged by the
opportunities and threats arising from these changes.
Political, Governmental and Legal Forces
Federal, state, local and foreign governments are major regulators,
subsidizers, employers and customers of organizations.
Political, governmental and legal factors can represent key

opportunities or threats for both small and large organizations.
Companies have to pay heavy penalty in shape of expensive severance

packages, (Golden hand shake) under Govt. rules for laying off
employees
Political forecast is vital part of external audit for industries/ firms

depending on Govt. contracts, subsidies.
Political forecasts is critical for multinational firms that depend on
foreign countries for natural resources, facilities, or markets for their
products.
Changes in tax rates, import duty on raw materials, special tariffs can
affect firms significantly.
Mass communication and high technology is creating similar patterns
of consumption in diverse cultures world wide; companies relying
only on domestic market may find it difficult to survive.
Technological Forces
Technological advances have brought revolution in
business operations.
Internet is saving companies billions of dollars in
distribution and transaction from direct sales. It is
changing the nature of opportunities and threats by altering
the life cycle of products; increasing speed of distribution ;
erasing limitations of traditional geographical markets;
altering economies of scale and changing entry barriers.
New positions of CIO and CTO are being introduced in
companies to effectively capitalize on e-commerce.
Technological forces represent major opportunities and threats which
should be taken care of while formulating strategies.
Technological breakthroughs can dramatically affect;
– Products, services, markets, suppliers, distributors, operations,
customers, manufacturing processes, marketing practices and
competitive position.
– Change the relative cost position in an industry.
– Render existing products and services obsolete.
– Create shorter production runs.
– Create shortage in technical skills.
– Change values and expectations of employees, managers and
customers.
– Create new more powerful competitive advantage.
Competitive Forces
It is imperative in external audit to identify rival firms and determine
their strengths, weaknesses, capabilities, opportunities, threats,
objectives and strategies.
Characteristics of a competitive firm;
– Market share.
– Understanding and remembering precisely what is your business.
– Bringing improvement, not just in product but the whole company.
– Innovate or evaporate. Nothing quite recedes like success.
– Acquisition is essential to growth. The most-successful purchases
are in niches that add technology or a related market.
– People make a difference, tired of hearing it? Too bad.
– There is no substitute for quality and no greater threat than failing
to be cost-effective on a global basis.
Competitive Intelligence (CI)
A systematic and ethical process for gathering and analyzing info
about competitors activities and general business trends to further a
business’ own goals.
Good competitive intelligence in business is one of the key to success.
Major competitor’s weakness can represent external opportunity and
major strength may represent key threat.
Benefits of corporate spying include increased revenues, lower costs
and better decision making.
Competitive intelligence is equally applicable for strategy formulation,
implementation and evaluation decisions.
Objectives of Competitive Intelligence (CI)
To provide general understanding of an industry and its competitors.
Identify areas in which competitors are vulnerable and assess the
impact strategic actions would have on competitors.
Identify competitors potential moves that might endanger a firm’s
position in the market.
Sources of CI
Internet, employees, managers, suppliers, distributors, customers,
creditors, trade journals, want ads, newspaper articles, online
interviews with celebrities and government filings.
Cooperation Among Competitors
Unethical tactics like bribery, wiretapping, and computer
break-ins should not be used in CI.
Industry Environment
Competitive Analysis: Porter’s Five-Forces Model.
A widely used approach for developing strategies in many
industries.
According to Model, the nature of competitiveness in a
given industry can be viewed as a composite of five forces;
– Rivalry among competing firms.
– Potential entry of new competitors.
– Potential development of substitute products.
– Bargaining power of suppliers.
– Bargaining Power of consumers.
Michael Porter’s Model
POTENTIAL
ENTRANTS
Threat of new
entrants
INDUSTRY
COMPETITORS
Bargaining power
Bargaining power of customers
of suppliers
CUSTOMS
SUPPLIERS
Rivalry Among
Existing Firms
Threat of
substitute products
or services
SUBSTITUTES
Rivalry among Competing firms

The most powerful of five Competitive forces.
A successful strategy giving competitive advantage to a firm can be
pursued by rival firms.
Change in strategy by one firm may be met with retaliating
countermoves like lowering of prices, enhancing quality, adding
features, providing services, extending warranties or increasing
advertising.
The intensity of rivalry increases;
– with the increase in number of competitors.
– By becoming more equal in size and capability.
-With decrease in demand of industry’s products.

_ Consumers can switch brands easily.
– Barriers to leaving the market are high.
– When fixed costs are high.
– when product is perishable.
– When mergers and acquisitions are common in the industry.
As rivalry among competing firms intensifies;
– Industry’s profits decline.
– The industry becomes Inherently unattractive.
Potential Entry of New Competitors

Easy entry of a firm in an industry, increases the intensity of
competitiveness among the firms.
Barriers to entry include;

Economy of scale, sophisticated technology and know how, strong
customer loyalty, strong brand preference, large capital requirement,
Govt. regulatory policies, lack of access to raw materials, possession
of patents, undesirable locations, counterattack by entrenched firms or
potential saturation of the market:
New firms enter the industry with;
– High quality products.
– lower prices.
– Substantial market resources.
Strategist must identify new entrants, their strategies, plan counter

attack if required and capitalize on existing strengths and weaknesses.
Potential Development of Substitute Products
Firms are in close competition with producers of substitute products;
like plastic container producer competing with glass, paperboard, or
aluminum can producer.
Presence of substitute put ceiling on the price of a product.
competitive pressure arise when price of the substitute product
decreases or consumer’s switching cost decreases.
Competitive strength of the substitute product could be measured by
its market share. Or the firms plane for increased capacity and market
penetration.
Bargaining Power of Suppliers
It affects the intensity of competition in industry when;

– There is large number of suppliers.
– There are only few substitute raw materials.
– When cost of switching raw materials is high.
Firms may pursue a backward integration strategy to gain control or
ownership of suppliers.
This strategy is effective when suppliers are unreliable, too costly or
not capable of meeting a firm’s demand on consistant bases.
Bargaining Power of Consumers
Intensity of competition in an industry increases by the bargaining

power of consumers if;
– Consumers are concentrated or large.
– Buy in volume.
– Products being purchased are standard or undifferentiated.
Rival firms offer extended warranties or special services to gain
consumer loyalty.
Consumers can negotiate selling price, warranty coverage, and
accessory packages.
The External Factor Evaluation (EFE) Matrix
The matrix allows the strategists to summarize and
evaluate economic, social, cultural, demographic,
environmental, political, governmental, legal,
technological, and competitive information.
The Matrix can be developed in five steps;

– i) List external factors identified in external audit
(about 10 to 20 factors) including both opportunities
and threats, by writing opportunities first and than
threats.
– ii) Assign each factor a weight ranging from 0.0 (not
important) to 1.0 (very important). The weight
indicates the relative importance of that factor in
success of the firm’s industry. Appropriate weight can
be determined by comparing successful with
unsuccessful competitors or by discussing the factor
and reaching a group consensus. The total of all weight
assigned to the factors must be equal 1.0.
– iii) Assign a rating of 1 to 4 to each key external factor
to indicate how effectively the firm’s current strategies
respond to the factor, where;
• 4 = the response is superior,
• 3 = the response is above average,
• 2 = the response is average, and
• 1 = the response is poor.
Ratings are based on effectiveness of the firm’s strategies
thus company-based, whereas the weights in step 2 are
industry based.
– iv) Multiply each factor’s weight by its rating to
determine a weighted score.
– v) Sum the weighted score for each variable to
determine the total weighted score for the organization.
The highest possible total weighted score for an
organization is 4.0 and the lowest 1.0. The average total
weighted score is 2.5.
The score of 4.0 indicates that the organization is
responding in an outstanding way to existing opportunities
and threats in its industry, or taking advantage of
opportunities and minimizing effects of threats.
A SAMPLE INTERNAL FACTOR EVALUATON MARTRIX
Key Internal Factors Weight Rating Weighted Score

Internal Strength
Largest Casino in country .05 4 .20
Room Occupancy 95% in L.V .10 4 .40
Increasing free cash flow .05 3 .15
Owns one mile on beach .15 4 .60
Strong management team .05 3 .15
Buffet at most facilities .05 3 .15
Long-range planning .05 4 .20
Reputation as family friendly .05 3 .15
Financial ratios .05 3 .15
Key Internal Factors Weight Rating
Weighted Score
Internal Weaknesses
Most properties located in L.V .05 1 .05
Little diversification .05 2 .10
Family reputation, not high .05 2 .10
Recent loss of joint venture .10 1 .10
Total 1.00 2.75

The Competitive Profile Matrix (CPM)
The CPM identifies a firm’s major competitors and its
particular strengths and weaknesses in relation to a
competitor firm’s strategic position.
The weights and total weighted scores in both a CPM and
EFE have the same meaning. However,
Critical success factors in a CPM include both internal and
external issues; therefore the ratings refer to strengths and
weaknesses, where;
– 4 = major strength
– 3 = minor strength
– 2 = minor weakness
– 1 = major weakness
For example critical success factors for firms may include

advertising, product quality, price competitiveness,
management, financial position customer loyalty, global
expansion and market share.
Other than critical success factors, could be; breadth of
product line, effectiveness of sales distribution, proprietary
or patent advantages, location of facilities, production
capacity and efficiency, experience, union relations,
technological advantages and e-commerce expertise.
Internal Environment Analysis
The Importance of Internal Analysis
Internal strengths/ weaknesses coupled with external
opportunities/threats and a clear statement of mission, provide the
basis for establishing objectives and strategies.
Three critical ingredients of a successful strategy.
– Strategy be consistent with conditions in competitive environment.
– Strategy to place realistic requirements on the firm’s resources.
– Strategy be carefully executed.
Involvement of representatives of managers and employees from
throughout the firm to determine firm’s internal strengths and
weaknesses
The Resource-Based View (RBV)
According to RBV approach, internal resources are more
important for a firm than external factors in achieving and
sustaining competitive advantage. The organizational
performance will primarily be determined by internal
resources, which can be grouped into three categories.
Three Basic Resources

Physical resources, human resources, and organizational
resources.
Physical Resources
Plant and equipment, location, technology, raw materials
and machines.
Human Resources
All employees, training, experience, intelligence,
knowledge, skills, and abilities
Organizational Resources
Firm structure, planning processes, information systems,
patents, trademarks, copyrights, databases, accumulated
experience within organization and so on.
RBV theory asserts that sources are actually what helps a
firm exploit opportunities and neutralize threat.
The firm must consider the mix, type, amount, and nature
of a firm’s internal resources first in devising strategies
that can lead to sustainable competitive advantage.
Organizational Abilities
The skills, abilities and ways of combining assets, people, and
processes that a company uses to transform inputs into outputs.
Finely developed capabilities can be a source of sustained competitive
advantage.
They enable the firm to take the same input factors as rivals and
convert them into products and services, either with greater efficiency
in the processes or greater quality in the output or both.
Core Competence
A capability or skill running through a firm’s businesses and that once
identified, nurtured and deployed throughout the firm, becomes the
basis for lasting competitive advantage.
What Makes a Resource valuable?
Competitive Superiority : Does the resource help fulfill a
customer’s needs better than those of the firm’s
competitors?
Resource scarcity: Is the resource in short supply?
Inimitability: Is the resource easily copied or acquired?
Inimitability doesn’t last for ever, competitors will match
or better any resource sooner than later.
Easy to imitate.
– Cash.
– Commodities.
Can be imitated (but may not be).
– capacity
– Economy of scale
Difficult to Imitate
– Brand loyalty.
– Employee Satisfaction.
– Reputation for fairness.
Cannot be Imitated.
– Patents.
– Unique locations.
– Unique assets (mineral rights).
Durability: How rapidly will the resource depreciate?
Substitutability: Are other alternatives available?
Using Resource- Based View in Internal Analysis.

Involves identifying and evaluating firm’s resources that
possess strategic value and can provide basis for future
competitive advantage.
Methods to identify resources with strategic value.

Disaggregate resources: Break them into more specific
competencies rather than stay with broad categorizations.
Utilize a functional perspective. Separating tangible and
intangible assets as well as organizational capabilities can
uncover value-building resources and activities.
Look at organizational processes and combinations of
resources and not only at isolated assets or capabilities.
Use value chain approach to identify capabilities, activities
and processes having potential competitive advantage.
Disaggregating a Restaurant’s Customer Service
Resource.
Providing ease of access
– Parking (where appropriate).
– Door Positioning and style.
– External Signs/ welcome
Offering a delightful ambiance

– Floor design.
• Theme, color scheme. floor materials,
– Bar positioning.
– Features/décor, window decorations
– Table layout
• Table materials
Providing a Special welcome
– Host greeting
– Welcome drinks/ eats
– Menu introduction
– Table decoration
Ensuing waiting time at the table is” as expected” and as enjoyable as

possible.
– Visible queuing system.
– Marketing literature.
– Entertainment for queuers.
Providing a customer with delightful service
Developing a special relationship between waiter/ waitress and table
– Waiter selection
– waiter training/ development
• Personality training
• Assessing customers
• Handling disasters
• Coping with pressures.
• Menu training.
• Job experience Motivation awards.
• Daily Meetings, coaching process
• Discipline system.
– System of gaining waiter’s attention
Ensuring that Menu is fun to use and caters to the diners’ needs.
– Size of Menu
– Material Menus made off
– Menu dishes
– Menu layout
Providing speed of service appropriate to the occasion.

– Kitchen queuing system
– Service standards
Reducing the pain of paying the bill.

Organizational Culture
A pattern of behavior (that has been) developed by an
organization as it learns to cope with its problem of
external adaptation and internal integration, and that has
worked well enough to be considered valid and to be
taught to new members as the correct way to perceive,
thing, and feel.
This definition emphasizes the importance of matching
external with internal factors in making strategic choices.
Cultural products or dimensions include values, beliefs,
rites, rituals, ceremonies, myths, stories, legends, saga,
language, metaphors, symbols, heroes, and heroines.
These dimensions are levers that strategists can use to
influence and direct strategy formulation, implementation,
and evaluation activities.
Every organization like an individual’s personality have
different cultures – they could be warm, aggressive,
friendly, open, innovative, conservative, liberal, harsh, or
likable.
The strategic management process takes place largely
within a particular organization culture.
An organization’s culture must support the collective
commitment of its people to a common purpose. It must
foster competence and enthusiasm among managers and
employees
Organizational culture significantly affects business
decisions and thus must be evaluated during an internal
strategic management audit.
If strategies can capitalize on cultural strengths, like strong
work ethic or highly ethical beliefs, then management can
implement changes swiftly. However,
If the firm’s culture is not supportive, strategic changes
may be ineffective or even counterproductive.
The challenge of strategic management is to bring about
the changes in organizational culture and individual mind-
sets that are needed to support the formulation,
implementation, and evaluation of strategies.
Cultural Products or Dimensions
Rites - Relatively elaborate, dramatic, planned sets of
activities that consolidate various forms of cultural
expressions into one event, carried out through social
interactions, usually for the benefit of an audience.
Ceremonial – A system of several rites connected with a
single occasion or event.
Ritual – A standardized, detail set of techniques and
behaviors that manage anxieties, but seldom produce
intended, technical consequences of practical importance.
Myth – A dramatic narrative of imagined events, usually
used to explain origins or transformation of something.
Also, an unquestioned belief about the practical benefits of
certain techniques and behaviors that is not supported by
facts.
Saga – A historical narrative describing the unique
accomplishments of a group and its leaders, usually in heroic
terms.
Legend – A handed down narrative of some wonderful event
that is based on history but has been blown up with fictional
details.
Story – A narrative based on true events, sometimes a
combination of truth and fiction.
Folktale – A completely fictional narrative.
Symbol – Any object, act, event, or relation that serves as a
vehicle for conveying meaning, usually by representing
another thing.
Language – A particular form or manner in which members
of a group use sounds and written signs to convey meanings
to each other.
Metaphors – Shorthand words used to capture a vision or
to reinforce old or new values.
Values - life-directing attitudes that serve as behavioral
guidelines.
Belief – An understanding of a particular phenomenon.
Heroes/Heroines – Individuals whom the organization has
legitimized to model behavior for others.
Management
The function of management are five basic activities;
planning, organizing, motivating, staffing, and controlling.
Planning
The only thing certain about the future of any organization
is change, and planning is the essential bridge between the
present and the future that increases the likelihood of
achieving the desired results.
Planning is an up-front investment in success.
Planning enables a firm to take into account relevant
factors and focus on the critical ones.
Planning enables a firm to gather the resources needed and
carry out tasks in the most efficient way.
Planning enables a firm to identify precisely what is to be
achieved and to detail precisely the who, what, when,
where, why, and how needed to achieve desired objectives.
Planning helps ensure that the firm can be prepared for all
reasonable eventualities and for all changes that will be
needed.
Strategic management can be viewed as a formal planning
process that allows an organization to pursue proactive
rather than reactive strategies.
Successful organizations strive to control their own futures
rather than merely react to external forces and events as
they occur.
Organizing
The purpose of organizing is to achieve coordinated efforts
by defining tasks and authority relationship.
Organizing means determining who does what and who
reports to whom.
Resources are allocated more effectively and used more
efficiently in a well organized firm than in a disorganized
firm.
The organization function consist of three sequential
activities;
– Breaking tasks down into jobs ( work specialization ).
– Combining jobs to form departments ( departmentalization), and
– Delegation authority.
Breaking tasks down into jobs require development of job
description and job specification, which lead to
specialization and according to Adam Smith (Wealth of
Nations published 1776) would lead to higher productivity.
Combining jobs to form departments results in an

organizational structure, span of control, and chain of
command. Changes in strategy often require changes in
structure because positions may be created, deleted, or
merged. The most common forms of departmentalization
are functional, divisional, strategic, business unit, and
matrix.
Delegation authority is an important activity as evidenced
in old saying “ you can tell how good a manager is by
observing how his/her department functions when he or
she is not there”. Employees of today are more educated
and capable of participation in organizational decision
making. They expect to be delegated authority and
responsibility, and to be held accountable for results
Delegation of authority is embedded in strategic
management process.
Motivating
Strategic Objectives
Strategic objectives or long-term objectives represent the
results expected from pursuing certain strategies.
Objectives should be quantitative, measurable, realistic,
understandable, challenging, hierarchical, and obtainable.
Objectives are commonly stated in terms of;
– Growth in assets.
– Growth in sales.
– Profitability.
– Market share.
– Degree and nature of diversification.
– Earning per share and
– Social responsibilities.
Clearly stated objectives help stakeholders understand

their role in an organization.
They provide basis for consistent decision making by

managers whose values and attitudes differ.
By making objectives through consensus, an organization

can minimize potential conflicts later during
implementation
Strategy Analysis And Choice
Identifying and evaluating alternative strategies should
involve maximum number of managers and employees.
All the participant should have the firm’s external and
internal audit information by their sides.
The firm’s external/internal audit, coupled with mission
statement, will help participants to crystallize the particular
strategy that could benefit the firm most.
All the feasible alternate strategies be discussed and
ranked in the order of attractiveness, like;
– 1. Should not be implemented.
– 2. Possibly should be implemented.
– 3. Probably should be implemented.
– 4. Definitely should be implemented.
The process will result in prioritized list of best strategies
reflecting the collective wisdom of the group.
Internal Environment Analysis
Business Ethics and Social Responsibility
Ethics
A system of behaviors, expectations and morals comprising standards of
conduct for a population or profession.
Ethical Behavior
Conduct that is considered ‘right’ or ‘good’ in the context of a
governing moral code. It conforms not only to the law, but also to
broader set of moral principles expected by all or by a segment of
society.
Unethical Behavior
Conduct that is considered ‘wrong’ or ‘bad’ in the context of a moral
code.
Code Of Ethics
A formal statement of the organization’s values, ethical principles, and
ethical rules.
Ethical Standard
A guidelines governing moral conduct of a particular group.

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INTEGRATED

– Companies getting competitive advantage by using internet for direct

Internet and PCs are changing our lifestyle the way we

– It promotes endless comparison shopping thus enabling consumers

Internet has changed the economics of business in every

– Slogans and company’s like e-Bay, e-Trade, e-commerce, e-mail

• It focuses on integrating management, marketing, finance/ accounting,

• The purpose of strategic management is to exploit and create new and

A vision statement of an eye clinic;

A vision statement of Atlanta Web Printers;

An enduring statement of purpose that distinguishes one

A clear mission statement is essential for effectively

Importance of Vision and Mission Statements

• Ensure unanimity of purpose within the organization.

External Opportunities and Threats

The trends and events that could significantly benefit or harm an

Internal Strengths and weaknesses

• They arise in the management, marketing, finance/accounting,

• Organizations strive to pursue strategies that capitalize on Internal

• Strengths and weaknesses are determined relative to competitors.

• Strengths and weaknesses can be determined by elements of being rather

• Strengths and weaknesses can be determined relative to a firm’s own

• Internal factors can be determined by computing ratios, measuring

• Survey method could be used to determine employee morale, production

Long Term Objectives

Objectives state direction, aid in evaluation, create synergy, reveal

Objectives should be challenging, measurable, consistent, reasonable and

Business strategies may include geographic expansion, diversification,

Strategies are potential actions thus future- oriented having

Strategy formulation issues

• Deciding what new business to enter

Strategy Implementation includes;

Strategy formulation - requires coordination among a few individuals

Operational Plans - 1 year

(departments and units)

Poor reward structure – often fail to reward success but ready to

Strategy is choosing among the alternatives, you cant follow a

When present suppliers are expensive, unreliable, or

When the advantages of stable prices are particularly

A strategy of seeking ownership of or increased control

Situations when Product development may be an effective

Situations when conglomerate diversification may be an

Implies high efficiency, lower overheads, limited perks,

 Risks of pursuing Focus Strategies;

Reasons for Mergers and Acquisitions

All forces with potential to influence the organization and its

Research findings suggest that approximately 20 percent

Organization’s Operating Environment:

Changes in external forces is reflected into:

External forces directly effect both suppliers and distributors.

Political, governmental and legal factors can represent key

Companies have to pay heavy penalty in shape of expensive severance

Political forecast is vital part of external audit for industries/ firms

Rivalry among Competing firms

-With decrease in demand of industry’s products.

Potential Entry of New Competitors

Barriers to entry include;

Strategist must identify new entrants, their strategies, plan counter

It affects the intensity of competition in industry when;

Intensity of competition in an industry increases by the bargaining

The Matrix can be developed in five steps;

Key Internal Factors Weight Rating Weighted Score

Total 1.00 2.75

For example critical success factors for firms may include