Mahalabya strategic plan

1. Define KRA & Strategic Objectives

a. Environmental Scanning & Industry Analysis
i.
ii.
iii.

Societal Environment PEST/STEP Analysis

Industry Analysis: "Analyzing the Task Environment"
External Factor Analysis Summary (EFAS)

b. Internal Scanning: Organizational Analysis

i.
ii.

Resource Based View RBV

Value Chain Analysis

iii.

Scanning the Functional Resources

iv.

Synthesis of Internal Factors - IFAS.

c. Strategic Factor Analysis Summary (SFAS)

d. Identify Key Results Area KRA/ Key Business Drivers KBD/
Critical Success Factors CSF

e. Setting Strategic Objectives

2. Strategy Formulation
a. Corporate Strategy
i.

Portfolio Strategy

b. Business Strategy
1. Define KRA & Strategic Objectives

Vision/ Mission Statement

Situational Analysis: SWOT

a. Environmental Scanning & Industry Analysis

b. Internal Scanning: Organizational Analysis
c. Strategic Factor Analysis Summary (SFAS)

Identify Key Results Area KRA/ Key Business Drivers KBD/ Critical Success
Factors CSF

Setting Strategic Objectives

a. Environmental Scanning & Industry Analysis

Environmental Scanning: Societal Environment

PEST/STEP Analysis

Industry Analysis: "Analyzing the Task Environment

Synthesis of External Factors - EFAS

i. Societal Environment PEST/STEP Analysis

A PEST is an analysis of the external macro-environment that affects

all firms.

PEST is an acronym for Political, Economical, Social and Technological

factors of the external macro- environment.

Such external factors usually are beyond the firm's control and
sometimes present themselves as threats.

However, changes in the external environment also create new

opportunities and the letters sometimes

are rearranged to construct the more optimistic term of STEP analysis.

Many macro-environmental factors are country specific and a PEST

analysis will need to be performed for all countries of interests.


Task/Soc
Environ.
Factors

Environmental Trend Analysis

Economica Technologica Political/Lega Social /
l
l
l
Cultural
1.
2.
3.

Buyers
Power

Suppliers
Power

1.
2.
3.

1.
2.
3.

1.
2.
3.

Substitutes

Potential
Entrants

Rivals

Interest
Groups

Governmen
t

Strategic Issues and Strategic Factors

o Strategic Issues: Trends likely to affect future environment

o Strategic Factors: Those strategic issues with high probability
of occurrence and high probable impact on corporations

Issues Priority Matrix

Probable Impact on Corporation

Probabilityo
f
Occurrence

High

Medium

Low

High

High
Priority

High
Priority

Mediu
m
Priority

Medium

High
Priority

Medium
Priority

Low
Priority

Low

Medium
Priority

Low
Priority

Low
Priority

ii. Industry Analysis: "Analyzing the Task Environment"

Porters Five Forces of Competition Framework

The Spectrum of Industry Structures

Checklist for Industry Analysis

Porters Five Forces of Competition Framework Competitive

Intensity

The Spectrum of Industry Structures

Perfect Competition

Oligopoly

Concentration

Many firms

Entry and Exit

Barriers

No barriers

A few
Two
firms
firms
Significant barriers

Duopol
y

Monopoly

One firm
High barriers

Product
Differentiatio
n

Homogeneous
Product

Potential for product differentiation

Information

Perfect
Information flow

Imperfect availability of information

Checklist for Industry Analysis

1. Threats of new entrants: (potential competitors)

a. Brand Loyalty (Product Differentiation)

b. Absolute Cost Advantages:
i.

Superior Production operation due to process

past experience, patents or secret process

ii.

Control of particular input

iii.

Access to cheaper funds

iv.

Access to distribution Channels

v.

Huge Capital Requirements

c. Economies of Scale: Cost reduction through mass

producing a standardized output

d. Switching Cost:: Consumer cost to switch form one

product to another

e. Government Regulation:
2. Rivalry among existing firms:
a. Competition Structure: Number & Size of competitor
companies: Fragmented -consolidated

b. Demand Condition & Rate of Industry Growth:

Declining or growing Demand

c. Exit Barriers:
d. Diversity of Rivals:
e. Capacity: Low price
f. Product or Service Characteristics: undifferentiated
product
Commodity: a product whose characteristics are the
same

3. Substitute products or services:

4. Bargaining power of buyers:
a. Few Number of Buyers & Larger Number of suppliers
b. Buyers Purchasing Large quantity
c. Potential Integration backward
d. Other
5. Bargaining Power of Suppliers

a. Few Suppliers domination

b. Unique Product & high switching Cost
c. Supplier could integrate forward
d. Other
6. Relative Power of other Stake holders
a. Government
b. Trade Associations
c. Unions
d. Complementors
e. Other
iii. External Factor Analysis Summary (EFAS)

Sample Environment Opportunities Table

Key Strategic Factors

PEST Analysis

Weight Rating Weighted

Score

Political
O1 Environmental protection laws
O2 Government policies
Economic
O3 Energy availability and cost
O4 Funding, grants and initiatives
Social
O5 Environment awareness
O6 Demographics (population in remote
areas
Technology
O7 Manufacturing maturity and capacity
Key Strategic Factors
Basic POTER Five +1
O8 Rivalry among existing firms

Key Strategic Factors

PEST Analysis
Political
T1 Political Stability
T2 Lobbying/pressure groups
Economic

0.1

0.4

Long

0.1

0.4

Long

0.4
0.2

5
5

2
1

Long
Medium

0.05
0.05

1
2

0.05
0.1

Long
Long

0.05

0.15

Long

Weight Rating Weighted

Score
0.05
4
0.2

O9 Bargaining power of buyers

0.05

0.15

Sample Environment Threats Table

Weight Rating Weighted
Score
0.05
0.1

2
4

Range

0.1
0.4

Range

Long
Medium

Range
Short
Short

T3 Devaluation/revaluation
T4 Interest rates
T5 Market Instability
Social
T6 Consumer attitudes and opinions
Technology
T7 Maturity of technology
T8 Patent protection
Key Strategic Factors
Basic POTER Five +1
T9 New Entrance
T10 Substitute products or services
T11 Bargaining power of suppliers

0.05
0.05
0.25

3
2
5

0.15
0.1
1.25

Medium
Short
Medium

0.2

Medium

3
Long
0.05
0.15
2
Long
0.05
0.1
Weight Rating Weighted Range
Score
4
Long
0.1
0.4
3
Medium
0.05
0.15
0.05
1
0.05
Short

b. Internal Scanning: Organizational Analysis

i.
ii.

Resource Based View RBV

Value Chain Analysis

iii.

Scanning Functional Resources

iv.

Synthesis of Internal Factors - IFAS

i. Resource Based View RBV

A resource is an asset, process, skills, or knowledge controlled by the

organization.

A competitive advantage is rooted in developing key resources that are

different.

The RBV explains organizational existence based on internal assets

that are Valuable, Rare, Inimitable, and have an Organizational focus
(VRIO).

Resources that meet the VRIO criteria contribute to an organizations

competitive advantage.

Most companies have many resources (both tangible and intangible)

but few that are strategic in nature.

Most strategic assets tend to be knowledge-based and are intangible.

Although tangible resources enable a company to execute business
processes, it is the intangible ones that are more likely to serve as
sources for competitive advantage.

Core Competencies and Distinctive Competencies

o Core Competencies: Things a corporation can do exceedingly

well

o Distinctive Competencies: Core competencies that are superior

to those of competitors

A Distinctive Competency Meets Three Tests

o Customer value
It must make a disproportional contribution to customer
perceived value.

o Competitor unique
It must be unique and superior to competitors capabilities

o Extendability
It must be something that can be used to develop new
products/ services or enter new markets.

b. VRIO Framework of Resources Analysis

o Value

Does the resource provide competitive advantage?

Does the resource enable the firm to exploit an

external opportunity or neutralize an external threat?

Valuable resources contribute to an organizations

efficiency and effectiveness

o Rareness

Do other competitor posses?

A resource must be rare enough that perfect

competition has not set in

There may be other firms that possess the resource,

but still few enough that there

o Imitability

Is it costly to other to imitate?

This cost may be due to: patent, or because the

organization is the first mover

o Organizational Focus

Is the company organized to exploit of its valuable,

rare, and costly to imitate resources?

Organizational focus, refers to

o Integrated and aligned managerial practices,
routines, and processes.

o Managerial leadership and decisions that

support key assets in terms of how these
assets are developed and sustained.

Sustainability of a Distinctive Competency

a. Durability

New Technology can make a company's core

competency obsolete or irrelevant.

b. Imitability
Imitability depends on
Transparency: The speed by which the other competitors can

understand the relationship of resources and capabilities

supporting SE Strategy

Resources
&
Capabilities

Transferability: The ability of competitors to gather &

mobilize resources to support a competitive strategy.

Replicability: The ability of competitors to use duplicate

resources to imitate our company success

The VRIO Framework (amended for sustainability)

Valuable?

Rare?

Costly
to
Imitate?

Exploited by
Organization?

Durability

No

Competitive
Implications

Disadvantage

Yes

No

Parity

Yes

Yes

No

Yes

Yes

Yes

Temporary
Advantage

Yes

No

Competitive
Advantage with
limited

sustainability

Yes

Yes

Yes

Yes

Yes

Sustainable
Competitive
Advantage

Using Resources for Competitive Advantage

o Identify & Classify Resources in Terms of Strengths &

Weaknesses

o Combine Strengths into Specific Capabilities

o Appraise Potential in Terms of Sustainable Competitive Advantage
& Profits

o Select Strategy that Best Exploits Resources & Capabilities

relative to External Opportunities

o Identify Resource Gaps & Invest in Upgrading Weaknesses

ii. Value Chain Analysis

The Value Chain Concept

o Identifies the separate activities and business processes

performed to design, produce, market, deliver,

o and support a product / service Consists of two types of

activities

Primary activities

Support activities

Business Functions & Value Chain Analysis

o Value Chain Analysis studies business functions or chain of

activities that transform inputs into outputs to create value for
customers.

o Each activity incurs cost

o The organization margin or profit depends on its effectiveness
in performing these activities efficiently, so that the amount that
the customer is willing to pay for the products exceeds the cost
of the activities in the value chain.

o It is in these activities that a firm has the opportunity to

generate superior value.

A Typical Company Value Chain

Value Chain Analysis studies business functions or chain of activities
that transform inputs into outputs to create value for customers. Each
activity incurs cost and the organization margin or profit depends on its
effectiveness in performing these activities efficiently, so that the
amount that the customer is willing to pay for the products exceeds the

cost of the activities in the value chain. It is in these activities that a firm
has the opportunity to generate superior value.

o Primary activities are:

R&D and Technical Support

Production

Sales & Marketing

Services

o Supporting activities are:

Material Management

Inbound & Outbound Logistics

Financial Function

HR & General Administration

Value Chain Center of Gravity

o That part of the chain that is most important to the organization

and the point where it has its greatest expertise & capabilities

o Often it is the point at which the organization was founded.

Industry Value Chain Analysis (the Value System)

o A company's value chain is part of a larger system that

includes the value chains of upstream suppliers and
downstream channels and customers. Porter calls this series of
value chains the value system, shown conceptually below:

Assessing a companys cost competitiveness involves

comparing costs all along the industrys value chain

o Suppliers value chains are relevant because

Costs, quality, and performance of inputs provided by

suppliers influence a firms own costs and product
performance

o Forward channel allies value chains are relevant because

Forward channel allies costs and margins are part of

price paid by ultimate end-user

Activities performed affect end-user satisfaction

Outsourcing Value Chain Activities

o The Company may specialize in one or more value chain

activities and outsource the rest. The extent to which it
performs upstream and downstream activities is described by
its degree of vertical integration.

o To decide which activities to outsource, managers must

understand the companys strengths and weaknesses in each
activity, both in terms of cost and ability to differentiate.

o Managers may consider the following when selecting activities

to outsource:

o Whether the activity can be performed cheaper or better by

suppliers.

o Whether the activity is one of the firm's core competencies

o The risk of performing the activity in-house.

If the activity relies on fast-changing technology or

the product is sold in a rapidly-changing market,

o Whether the outsourcing of an activity can result in business

process improvements such as reduced lead time, higher
flexibility, reduced inventory, etc
The Company Value Chain

The Value Chain System

iii. Scanning the Functional Resources

Assessment of each of the company's functional areas & their

operational activities, identifying constraints and clarifying areas where
performance improvements should be achieved & how.

Describe the nature of the market segment in which the company

operates.

Provides a summary information concerning the opportunity reached

for the company in both local and export markets.

Organizational Structure

Corporate Culture

Strategic Marketing issues

Strategic Finance issues

Strategic R & D issues

Strategic Operations issues

Strategic Human Resources issues

Strategic Information Systems issues

Human Resources & Organization Structure

Basic Structures of Corporations

Strategic Business Unit SBU

Independent product-market unit with:

a. Unique mission
b. Identifiable competitors
c. External market focus
d. Control of its business functions

Corporate Culture

a. Attributes of Corporate Culture

b. Intensity
o Integration
a. Functions of Corporate Culture
a. Conveys sense of identity
b. Generates employee commitment
c. Adds to organizational stability
d. Serves as a frame of reference
Strategic Marketing Issues
o Marketing Position & Segmentation
o Marketing Mix Variables
o Product Life Cycle

Marketing Position & Segmentation

Marketing Position:

o Deals with the question: What are our customers?

o It refers to the selection of specific markets, products,
and geographic location
Marketing Segmentation:

o The organization defines what niches it seeks

o Do products and services directly compete with each
other?

Product

Marketing Mix Variables

Place

Promotion

Price

Quality

Channels

Advertising

List price

Features

Coverage

Personal selling

Discounts

Options

Locations

Sales promotion

Allowances

Style

Inventory

Brand name

Transport

Publicity

Packaging

Sizes

Services

Warranties

Returns

The Product Life Cycle

Strategic Financial Issues

Financial Leverage

Payment periods

Credit terms

o It is the Ratio of total debit to total assets

o It is helpful in deciding how debit is used in increase the
earnings

Capital Budgeting

o It is the analyzing and ranking of possible investments in fixed

assets such as land, buildings, and equipment in terms of the
additional receipt that will result form each investment.

Strategic R&D Issues

o R&D Intensity, Technological competence, and Technology
Transfer

o R&D Mix
o Impact of Technological Discontinuity on Strategy

R&D Mix

o Basic R&D
o Product R&D
o Process (Engineering) R&D

Technological Discontinuity

Strategic Operation

Strategic Operation Issues

o Manufacturing, Distribution & Materials Management

o Experience Curve
o Flexible Manufacturing for Mass Customization

Manufacturing, Distribution & Materials Management

o Manufacturing Capabilities, Resources & Efficiency

o Operations Planning, & Control & Material Mgmt.

o Maintenance Management System
o Quality Systems

Experience Curve

Economies of Scale versus Economies of Scope

Experience Curve

Economies of Scale versus Economies of Scope

Positioning Strategy

HMLV High Mix Low Volume Manufacturing - Process Focused

(Organizing the Productive Resources According to Capability)

o Low Volume
o Wide Variety /High Customization
o Not as Efficient/ Highly Flexible
o General Purpose Equipment
o High Skilled and Highly Trained Workforce
o Jumbled and Complex Work Flow

HVLM High Volume Low Mix Manufacturing - Product Focused

(Organizing the Productive resources around the Product)

o High Volume
o Limited variety Products/Services

o Line Flows
o Special Purpose Equipment
o Low Labor Skills
o Capital intensive/ High Automation
o Efficient
iv. Synthesis of Internal Factors - IFAS.

Sample Internal Factors (Strength)

Key Strategic Factors

S1 Reputation, presence and
reach
S2 Experience, knowledge, data
S3 Innovative aspects
S4 Accreditations, qualifications,
certifications
S5 Cultural, attitudinal,
behavioral
S6 Management System

Weight

Rating

Range

Weighted
Score
1

0.2
0.2
0.2
0.1

5
5
4

1
1
0.4

Long
Long
Long

0.1

0.3

Long

0.1

0.2

Long

Long

Sample Internal Factors (Weakness)

Key Strategic Factors

W1 Marketing , distribution, awareness
W2 Continuity, supply chain robustness
W3 Financial: Cash flow, start-up cash-drain
W4 Gaps in Sustaining internal capabilities
W5 Resources, Assets, People

Weight Rating Weighted Range

Score
0.3
5
1.5
Long
0.3
5
1.5
Long
0.2
5
1
Short
0.1
5
0.5
Medium
0.1
4
0.4
Medium

c. Strategic Factor Analysis Summary (SFAS)

Key Strategic Factors

O3 Energy availability and cost
W1 Marketing , distribution, awareness
W2 Continuity, supply chain robustness
T5 Market Instability
O4 Funding, grants and initiatives
S1 Reputation, presence and reach
S3 Innovative aspects
S2 Experience, knowledge, data
W3 Financial: Cash flow, start-up cash-drain
T6 Consumer attitudes and opinions

Weight

Rating

0.4
0.3
0.3
0.3
0.2
0.2
0.2
0.2
0.2
0.2

5
5
5
5
5
5
5
5
5
5

Weighted
Score
2
1.5
1.5
1.3
1
1
1
1
1
1

Range
Long
Long
Long
Medium
Medium
Long
Long
Long
Short
Medium

S3 Accreditations, qualifications, certifications

0.2

0.8

d. Identify Key Results Area KRA/ Key Business

Drivers KBD/ Critical Success Factors CSF

Those 4 to 6 major areas wherein performance is

essential during the coming year.

They are areas in which the organization must achieve

success to grow and prosper.
Include both financial and non-financial areas.

Will not cover the entire organizationwill identify the

critical few areas where priority efforts should be directed.

They are the areas of organizational activity in which the

organization must excel to meet customer needs, exceed
the efforts of the competition, and meet customer
expectations.

Most will require cross-functional effort.

Each will be limited, generally, to 2 or 3 words and will not

be measurable as stated, but will contain factors that
could be measurable

e. Setting Strategic Objectives

Strategic Objectives describe conditions the organization

wishes to achieve. Usually there will be one or two
strategic objectives for each KRA.

As with all objectives, it is important to make them as

quantifiable over a time span (3-5 years)

2. Strategy Formulation
a. Corporate Strategy

Long

Directional Strategy: The Organization orientation toward

growth, stability, or retrenchment.

Portfolio Strategy: The industries or Markets in which the

firm competes through its products

i. Portfolio Strategy
BCG Growth Share Matrix

Developed by Boston Consulting Group

Relative market share better indicator of business strength than actual

market share

o Eg. You have 10% share

o Market leader has 20% : relative share is 0.5
o Market leader has 50%: relative share is 0.2

Based on volume - PIMS study: market share is indicator of business

strength

Question Marks
o Low share in emerging industry

o Cash hogs/ need investment

rapid growth

high costs (low scale econ/ experience effect)

o Action

Invest and produce a star

Divest and use resources elsewhere

Stars

o High share in emerging industry

o Need investment/ working capital due to high growth

may provide from internal funds

but may be cash hogs

o Will sustain the diversified firm into the future

Cash Cows

o High share in mature industry

o Generates large amounts of cash
o Not all needs to be reinvested
o Funds other businesses (stars/ question marks)
o Important to maintain

Market position

Operating efficiencies

Dogs

o Low share in low growth industry

o many can still perform well

esp. if low scale economies/ experience effects

eg. Crown Cork and Seal

o get rid of weak dog businesses

b. Business Strategy
o Three Main Business level Strategy

Cost Leadership Strategy: generate economic value

by having lower costs than competitors

Differentiation Strategy: generate economic value by

offering a product that customers prefer over
competitors product

Focus Strategy: It is directed toward serving the needs

of limited customer group or segment.

o Three main basic decisions

Product differentiation or Customer Needs: What is to

be satisfied?

Market Segmentation or Customer Groups: Who is to

be satisfied?

Distinctive Competency: How customer needs are to

be satisfied?