BPSM- MODELS OF STRATEGIC MANAGEMENT DETAILED THEORY:-

1. BALANCED SCORECARD
Dr. Robert Kaplan of the Harvard Business School and Dr. David Norton developed the
balanced scorecard in the 1990s, the Balanced Scorecard Institute says. Customer,
financial, business processes and learning and growth are the four components of the
model.
Balanced scorecard essentially "translates" your company's strategy into the four
perspectives. It compares internal and external metrics, objective and subjective metrics and
performance results and contributors to them. Ultimately, your goal is to figure out how the
company is carrying out its strategy in each of these areas.

The system connects the dots between big picture strategy elements such as mission (our
purpose), vision (what we aspire for), core values (what we believe in), strategic focus areas
(themes, results and/or goals) and the more operational elements such as objectives
(continuous improvement activities), measures (or key performance indicators, or KPIs, which
track strategic performance), targets (our desired level of performance), and initiatives
(projects that help you reach your targets).

What are the Components of a Balanced Scorecard?

The balanced scorecard helps initiate four management processes that link short-term initiatives with
long-term objectives:

 The first process translates the company vision and strategy into operational steps.
 The second process communicates the operational terms to the company's various departments.
 The third process is business planning, which helps managers choose the most effective strategies
toward achieving organizational objectives.
 The fourth and final process is feedback and learning, which helps the organization adapt to
changing circumstances.

ADVANTAGES OF BSC-
Overcoming Challenges

It is often said that traditional financial performance measures do not reflect today’s business environment

and do not encourage long-term thinking. Thus, the balanced scorecard helps organizations overcome

three fundamental challenges to these goals:

 Rise of intangible assets

 Implementing strategy
 Performance measurement
Intangible assets create about 75 percent of the value generated within organizations. The balanced

scorecard provides metrics for the effective use of these assets. Successful strategy implementation is

also a major challenge for organizations. Vision, people, resources and management barriers can thwart

even the most well thought out strategies. Financial measures of performance do not address these

issues, whereas the balanced scorecard does.

Employee Engagement

Motivated and effective employees are the cornerstone of customer satisfaction. Personal scorecards

translate the company’s scorecard into tangible objectives that are tailored to the roles and strengths of

individual employees. Personal scorecards should create synergy among employees and encourage

cooperation and specialization. With the improvement in employee learning and behavior, internal

business processes improve. This creates better products and services; therefore, higher customer

satisfaction and higher market share is achieved, which is reflected in financial measures. This will ensure

the long-term survival of the organization.

Small Business Benefits

Small business often struggle to survive; hence, they mostly emphasize financial goals. This makes

planning for the future difficult. However, in comparison with larger firms, small businesses also need

smaller volumes of information to operate and evaluate performance. A balanced scorecard helps

organize the most relevant information to the organization, whether financial or non-financial, in a way

that is both streamlined and actionable, saving valuable financial resources in the process. Moreover, the

smaller number of employees acting on the scorecard data reduces challenges to building consensus and

facilitates team participation in strategizing.

 Balance Scorecard Model
This is just one example of the many diagrams. It provides high-level details into measures
and initiatives. Balance Scorecard or this strategic management model shows the status of
each objective, measure, and initiative. Here green indicates planned, whereas yellow and
red indicate the degrees of trouble.

02. Strategy Map:

A strategy map is another strategic management model. It is a visual tool which design to clearly
communicate a strategic plan and accomplish high-level organizational goals. Strategy mapping is a
main part of the Balanced Scorecard, although it is one more strategic management model. And
offers a brilliant way to communicate the high-level data across of organization in a simply-edible
format.

Strategy mapping is a tool created by Balanced Scorecard (BSC) pioneers Robert S Kaplan and David P
Norton.
A strategy map is a diagram that is used to document the primary strategic goals being pursued by an
organization or management team.
A strategy map is a diagram that shows your organization's strategy on a single page. It's great for
quickly communicating big-picture objectives to everyone in the company. With a well-designed strategy
map, every employee can know your overall strategy and where they fit in.

A strategy map offers a host of benefits:

 It unifies all goals into a single strategy.

 It provides an easy, simple, visual representation that is clearly referred back to.
 While accomplishing tasks and measures, it gives every employee a clear goal to keep
in mind.
 It helps to identify your key goals.
 Strategy map helps you see how your objectives affect the others.

It allows you to better understand which elements of your strategy need work.
 Balance Scorecard Strategy Map

03. Value Chain Analysis:

Value chain analysis is a strategy tool used to analyze internal firm activities. Its goal is to
recognize, which activities are the most valuable (i.e. are the source of cost or differentiation
advantage) to the firm and which ones could be improved to provide competitive advantage.

Value Chain Analysis has two types of activities. One primary activities and another
supportive activities. Such as:-

1. Primary Activities
 Inbound Logistic
 Operation
  Outbound Logistic
 Marketing
 Service
2. Supportive Activities
 Firm’s infrastructure
 Human resource management
 Technological development
 Procurement of resources, finance, inventory etc.

4. SWOT Analysis/SWOT Matrix:

A SWOT matrix is our third strategic management model. SWOT is an acronym for
strength, weakness, opportunity, and threat. Strength and weakness are measured as the
internal issues. Whereas opportunity and threat are measured as the external issues.

Below is an example SWOT matrix from the Queensland, Australia ,government:

 SOWT Analysis Model
Through a SWOT matrix helps an organization detect where they’re doing fine and in what
zones they can develop.
Strengths
An organization's strengths are its resources that lie in:

 Cost advantages from proprietary know how

 Patents
 Influential brand names
 Access to natural resources
 Accessible distribution network

Weakness
The weakness can be lack of certain strengths that include:

 Lack of patent protection

 Deprived of access to main distribution channels
 Weak brand name
 Poor customer reputation
 High cost structure
 Inaccessible natural resources

Opportunities
The assessment of external environment may bring forth certain new opportunities which are as
follows:

 Technologies innovations
 Elimination of international trade barriers
 An untapped market need

Threats
Unfavorable changes in external environment may pose threat to the organization. Some of them
are as follows:

 Consumers shift to different brand

 Arrival of substitutes
 Strict regulations
 Growing trade barriers

05. PEST/PESTEL Model:

The PEST is an acronym for “political, economic, socio-cultural, and technological” like
SWOT analysis. Each of these aspects is used to look at a business environment, and
define what could touch a health of an organization. The PEST of strategic management
model is often used in conjunction with the external factors of a SWOT analysis.
 PEST Analysis Model
With the PEST model adds a few extra letters as like PESTEL (or PESTLE) considers
“environmental” and “legal” factors. STEEPLED is additional variation, which stands for
“sociocultural, technological economic, environmental, political, legal, education, and
demographics.”

PESTEL (Political, economic, social, technological, legal and

environmental) analysis is a framework for marketers. This tool helps to identify all of
the various external factors that might affect a business. The goal is to figure out just
how the different factors influence business performance

06. Gap Planning:

Gap planning is also called as a “the Strategic-Planning Gap”, “Need Assessment,” or

“Need-Gap Analysis” in strategic management model. It is applied to compare where an
organization exists, where it expects to be, and how to solve the gap between. It is mainly
used to pinpoint precise internal shortages.

In gap planning examination, investigators may also hear about a “shift chart” or “change
agenda”. These are akin to gap planning, as they both take into concern the difference
between where the organization has existed and where it expects to be along numerous
axes. From there, its planning procedure is about how to ‘close the gap.’

There is mentioned an example of gap planning of strategic management model the

difference between the desired and projected sales of a mock company:
 Strategic Gap Planning Model
07. Red-Blue Ocean Strategy:

Red-Blue Ocean Strategy is a strategic management model. It originated in a book “Blue

Ocean Strategy” in 2004 and written by W. Chan Kim and Renée Mauborgne, professors at
INSEAD (European Institute of Business Administration).

Behind the concept of Blue Ocean Strategy is the developing “uncontested market space”
(Blue Ocean) instead of a market space. It is either saturated or developed (Red Ocean). If
the organization is able to build a blue ocean, it can mean a gigantic value enhancement for
its business, its employees, and its buyers.

Below shows a humble evaluation chart from the Blue Ocean Strategy web page. It will help
to understand if anybody works in a blue ocean or a red ocean:
 Red-Blue Ocean Strategy
08. Porter’s Five Forces Model:

Michael Porter’s Five Forces Model is an older strategic management model in 1979. The
Porter’s 5 forces model are:

1. The threat of entry

2. The threat of substitute products or services
3. The bargaining power of customers
4. The bargaining power of suppliers
5. The competitive rivalry among existing firms
The number of pressure on each of these porter’s 5 forces can help to determine how future
outlets will influence the upcoming of business.

Threat of new entrants. This force determines how easy (or not) it is to enter a
particular industry. If an industry is profitable and there are few barriers to enter, rivalry
soon intensifies. When more organizations compete for the same market share, profits
start to fall. It is essential for existing organizations to create high barriers to enter to
deter new entrants. Threat of new entrants is high when:

 Low amount of capital is required to enter a market;

 Existing companies can do little to retaliate;
 Existing firms do not possess patents, trademarks or do not have established
brand reputation;
 There is no government regulation;
  Customer switching costs are low (it doesn’t cost a lot of money for a firm to
switch to other industries);
 There is low customer loyalty;
 Products are nearly identical;
 Economies of scale can be easily achieved.

Bargaining power of suppliers. Strong bargaining power allows suppliers to sell

higher priced or low quality raw materials to their buyers. This directly affects the buying
firms’ profits because it has to pay more for materials. Suppliers have strong bargaining
power when:

 There are few suppliers but many buyers;

 Suppliers are large and threaten to forward integrate;
 Few substitute raw materials exist;
 Suppliers hold scarce resources;
 Cost of switching raw materials is especially high.

Bargaining power of buyers. Buyers have the power to demand lower price or higher
product quality from industry producers when their bargaining power is strong. Lower
price means lower revenues for the producer, while higher quality products usually raise
production costs. Both scenarios result in lower profits for producers. Buyers exert
strong bargaining power when:

 Buying in large quantities or control many access points to the final customer;
 Only few buyers exist;
 Switching costs to other supplier are low;
 They threaten to backward integrate;
 There are many substitutes;
 Buyers are price sensitive.

Threat of substitutes. This force is especially threatening when buyers can easily find
substitute products with attractive prices or better quality and when buyers can switch
from one product or service to another with little cost. For example, to switch from
coffee to tea doesn’t cost anything, unlike switching from car to bicycle.

Rivalry among existing competitors. This force is the major determinant on how
competitive and profitable an industry is. In competitive industry, firms have to compete
aggressively for a market share, which results in low profits. Rivalry among competitors
is intense when:

 There are many competitors;

 Exit barriers are high;
 Industry of growth is slow or negative;
 Products are not differentiated and can be easily substituted;
 Competitors are of equal size;
 Low customer loyalty.
Although, Porter originally introduced five forces affecting an industry, scholars have
suggested including the sixth force: complements. Complements increase the demand
of the primary product with which they are used, thus, increasing firm’s and industry’s
profit potential. For example, iTunes was created to complement iPod and added value
for both products. As a result, both iTunes and iPod sales increased, increasing Apple’s
profits.

In Porter’s Five Forces Model arises some drawbacks to overcome these, Thompson and
Strickland identified the seven factors in the strategic management model. Such as:-

1. Industry’s dominant economic features

2. Main sources of competitive pressure and the strengths of the competitive forces
3. Driving forces
4. Market position of the rival companies
5. Competitor’s strategic moves
6. Industry’s key success factors
7. Industry’s overall attractiveness and profitability prospects

10. VRIO Framework:

VRIO is a business analysis framework that forms part of the firm's larger strategic scheme. The
basic strategic process that any firm goes through begins with a vision statement, and continues on
through objectives, internal & external analysis, strategic choices, and strategic implementation.

The VRIO framework of strategic management model is an acronym for “value, rarity,
imitability, organization.” This model relates more to the vision statement than overall
strategy.

There are mentioned the complements of the VRIO framework. Such as:-

1. Value: Are you able to exploit an opportunity or neutralize an outside threat using a
particular resource?
2. Rarity: Is there a great deal of competition in your market, or do only a few companies
control the resource referred to above?
3. Imitability: Is your organization’s product or service easily imitated, or would it be
difficult for another organization to do so?
4. Organization: Is your company organized enough to be able to exploit your product or
resource?
Once you answer these four questions, you’ll be able to formulate a more precise vision
statement to help carry you through all the additional strategic elements in your plan.
11. Andrew’s Model:

Kenneth Andrews formulated a strategic management model in 1965 that called Andrew’s
Model. This model comprises the choice of a strategy but ignores control and
implementation. In 1971, Kenneth Andrews developed a more complete model that
encompassed implementation, but it still ignores a strategic evaluation and control.

According to Andrews' model formulation and implementation of

corporate strategy are the two factors responsible for influencing organizational
structure, behavior, processes and internal and external business relationships.

12. Glueck’s Model:

William F. Glueck formulated several strategic management models based on the decision-making
procedure. The phases of this model are given below. For instance:-

Strategic managements elements: "...to determine mission, goals, and values of the
firm and the key decision makers."

Analysis and diagnosis: " ...to search the environment and diagnose the impact of the
threats and opportunities."

T Choice: ...to consider various alternatives and assure that the appropriate strategy
is chosen."

h Implementation: "...to match plans, policies, resources, structure, and

administrative style with the strategy."

e Evaluation: "...to ensure strategy and implementation will meet objectives."phases

of this model are as follows:

* Moreover, Glueck broke down the planning process into analysis and diagnosis,
choice, implementation, and evaluation functions. This model also treats leadership,
policy, and organizational factors.

However, Glueck omitted the important medium- and short-range planning activities
of strategy implementation.
13. The Schendel and Hofer Model:

Dan Schendel and Charles Hofer formulated a strategic management model, joining both
control and planning functions. It has several steps. Such as:-

1. Goal creation
2. Environmental study
3. Strategy design
4. Evaluation of strategy
5. Implementation of strategy
6. Strategic control
According to Dan Schendel and Charles Hofer, the formulation share of strategic
management model consists of as a minimum three sub-processes. Such as:-

1. Environmental analysis
2. Resources analysis
3. Value analysis
Resource analysis and value analyses are not particularly shown but are well-thought-out to
be involved under other things.

14. Korey’s Model:

The founder and President Canadian School of Management; and also modern theorist
Jerzy Korey-Krzeczowski have recommended an integrated strategic management model.
Jerzy Korey-Krzeczowski’s model has three phases. Such as:-

1. Preliminary phase
2. Strategic planning phase
3. Strategic management phase.
Additional, Jerzy Korey-Krzeczowski tells, here has at least four continuous sub-processes.
Such as:-

1. Planning study
2. Review
3. Control
4. Feasibility study
The planning is continuing procedure, consequently, all these sub-procedures are united.
They are interrelated with each other; making the fully active strategic management model.

15. Schematic Model:

This strategic management model was established by Mark Kroll, Charles Pringle and Peter
Wright (1994). It has five steps. Such as:-

1. Analyzing the environmental opportunity and threat

2. The internal strengths and weaknesses of an organization
3. Establishing the organizational mission and vision
4. Strategy construction
5. Strategy Implementation
6. Strategic Control.
The Schematic model begins with the analyzing of environmental opportunity and threat.
The organization is exaggerated by environmental factors, but the organization can also
have an influence upon its environment.

Competency Management

A competency model is a framework for defining the skill and knowledge

requirements of a job. It is a collection of competencies that jointly define successful
job performance. Competency models are widely used in business for defining and
assessing competencies within organizations in both hard and soft skills.

The competency management is comprised with three features. Such as:-

1. Competence or Competency
2. Core Competence or Core Competency
3. Distinctive Competence or Distinctive Competency