Position Audits

3.
Position Audits
D R . S H A A N J AYA S E K E R A ( P H D )
S H A A N @ KC O V E R S E A S . L K
+94772220332
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The learning outcomes
UNDERSTAND AN INTERNAL UNDERSTAND STRATEGIC APPLY TOOLS AND TECHNIQUES TO

ENVIRONMENTAL ANALYSIS. CAPABILITIES AND TOOLS AND DO A POSITION AUDIT
TECHNIQUES .
Key topics of
discussion
1. Strategic capabilities-resources
and competencies
2. Resource and competency

stretch
3. Analytical models- Ms Model

value chain, matrix analysis,
CSFs, Baldridge performance
excellence , benchmarking
An organization should be a ‘portfolio of
resources and competencies’ that can
leverage its competitive advantage in its
business environment.
The organization Good organizations learn to ‘stretch’ these

as a portfolio of capabilities in such a way as to take
advantage of opportunities in environments
capabilities as well as protect against threats
Strategies developed on this basis become

more ‘Resource Based
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Resources and competitive advantage
capabilities Competencies
Cost/differenti
competencies Resources Competitive
capabilities processes ation ROI
advantage
advantage
Tangible Intangible Resources
The business model and capabilities
Vision and objective
Business model
Processes
Activities
Capabilities-
resources and
competencies
Resources Vs Competencies
Resources-What you have or Competencies- critical skills in

can access which give future how resources are used to
economic returns. Can be perform activities and process.
financial, physical, human and They ‘ integrate multiple skills
informational and diverse technologies’
IF YOU HAVE A HAMMER…..YOU HAVE A IF YOU KNOW HOW TO PERFORM AN
RESOURCE ‘ACTIVITY’ USING THE HAMMER( HITTING
SOMETHING LIKE DRIVING A NAIL) YOU
HAVE A COMPETENCE
It is no use having a hammer if you can't drive a

nail!
Competencies-
speed painters
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Speed painter-
differentiation
Competencies-
the cobra
maneuver
Ice sculpture
Mel Blanc- the man with a thousand voices
Mel Blanc
Sesame street
Elmo voice actor
Kevin Jeffrey Clash (born
September 17, 1960) is an
American puppeteer director and pr
oducer. He performed and
voiced Elmo on Sesame Street from
1985 to 2012. He also performed
puppets
for Labyrinth, Dinosaurs, Oobi, and
various Muppet productions.
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SHAAN@STUDIES-OVERSEAS.COM 17
Is performing a
magic trick a
process ?
Yes!
Magicians will always show the inputs and

the outputs but never what happens in the
middle! It is a ‘trade secret’ and sworn to
secrecy ( etchics and the magicians code)
Magicians ( illusionists) are some of the

highest paid entertainers in the world
◦ Chris Angel- Net worth $50m
◦ Siegfried and Roy- net worth $150m
◦ Pen and Teller- Net worth $300m
◦ David Copperfield net worth $800m
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Illusionist with
close up magic
How do they do
it?
•Resources – some magicians have
designed’ props’ which they have
patent rights for . Its usually the
equipment that does the trick !
•Competencies- the act itself using

ones fingers, ones own body and ‘
performing’ the illusion.

SHAAN@KCOVERSEAS.LK +947722220332 20
The saw of
death-David
copperfield
+947722220332 21
Crafting a
montblanc
Capabilities are needed to perform activities and processes better than competition to drive
its chosen business model based on how it is positioned in its given industry
If the organization has unique resources and core competitiveness to support the
positioning will be in a position to deliver superior sustainable competitive advantage
generating economic profit
These core resources and competencies will have the potential to address critical success
factors of the business and in turn add value to its chosen target markets
Using strategic capabilities for competitive advantage

Anchor to CSF
Protect against Take advantage

Capabilities
threats of opportunities
Competencies-skills Performing effective

Resources-what the
of using resources activities and
organization has or
to perform processes
can access
activities
e.g. reputation,
e.g. innovation and
networks and
creativity, quality Competitive
connections,
and craftsmanship, advantage
finance, machinery,
adaptability,
buildings
Classifying
resources and
competencies
•Competencies and resources at the
‘ threshold level’ will not give a
competitive advantage. i.e. ‘you
have them and competition has
them……..so what ?
•Competitive advantage starts when
these resources are ‘beyond the
threshold’ which competition does
not have, cannot access or imitate.
These become unique resources and
core competencies.

Underwater
Hotels
Same as competition/easy to Unique from competition/difficult to
imitate imitate
Resources Unique resources

Basic/Threshold
Unique Resources and core
Resources
competencies are
the ones responsible
for creating and
sustaining the
competitive
advantage !! The
need to underpin
Threshold Core business CSF
Competencies competencies competencies
Unique resources
1. ownership of scarce raw materials, such as ownership of
exploration rights or mines
2. unique location: for example a hydroelectric power

generating company benefits from being located close to a
large waterfall or dam, and a bank might benefit from a city
centre location, or the non availability of real estate
property
3. a special privilege, such as the ownership of patents

copyrights or a unique franchise.
Unique
locations –
Aman hotels
Unique
locations –
Aman hotels
Unique
locations –
Aman hotels
Unique
locations-Aman
Hotels
Unique
locations-Aman
Hotels
Pixar animation studio
What do these have in common ?
Kale Brussel sprouts Cabbage Broccoli Cauliflower
The were all created by farmers by cross breeding and artificial selection and was not created by
nature !
Patent protected
apples
Pinatas are among the new
generation of club apples —
varieties that are not just patented,
but also trademarked and
controlled in such a way that only a
select "club" of farmers can sell
them.

Protecting core
competencies
1. Patent protection over processes
2. Investing in competency training and

development, emerging technology
and staying ahead of the curve
3. Maintaining trade secrets
4. Constantly investing in Research and

development and creating a culture
of learning
5. Continuous improvement
Gorilla glass by
Corning
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Fountain café elephant house hotdogs popular for its ‘ legendary secret sauce’
Toddy tapping in Sri
Lanka
The process of making toddy, an alcoholic beverage, begins
at the top of a coconut tree, where a toddy tapper climbs
to gather the sap.
They face danger as they work, walking tightropes between

trees. That danger is just one reason why fewer people
than ever before are going into the work.
Before he a climb, the tapper honors the tools of his
trade: a heavy mallet made from the pith of a tamarind
tree and a sharp, curved knife that he tucks into a basket
that is strapped around his thin waist.
The tapper also worships the coconut tree, clasping both

hands together in prayer just before he pulls himself up its
trunk. The prayer is for safety for what’s about to happen—
“a perilous journey in the sky,”
Maldives ‘pole
and line’
fishing
Maldives has a well positioned
fishing industry especially around
environmentally friendly tuna
fishing that is done without the
use of nets. This helps Maldives
command premium prices for
tuna in western markets.
Fisherman literally ‘ pull’ the
tuna fish with a pole out of the
water which can weigh in as
much as 60-100 KG!
Underwater hunter
Competency and resource
‘stretching’
•When a company has resources and competencies they can be
‘ stretched’
•i.e. they cane be used to help them enter new markets of

products with them which help them leverage and harness on
these capabilities
•Products are the outcomes of competencies like flowers and

leaves the outcomes of the trees roots
•The roots are therefore the basis of the trees strength!
Porsche design studio
‘Porsche design and precision engineering
competencies’
Johnnie
Walker-Porsche
Design
Limited edition
Bar
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Car audio Competencies in audio products
Shock absorbers
Wearables Sunglasses with sound Sleep buds with alarm
The Bose company
•The Bose company was set up in 1964 by Amar Bose an Indian by origin
(Bengali-American) with angel investor funding, including Amar's thesis advisor
and professor, Y. W. Lee. Dr Bose received his PHD from MIT and was a
professor at MIT for over 45 years
•Amar's interest in speaker systems had begun in 1956 when he purchased a

stereo system and was disappointed with its performance.
•The purpose of the company was to develop speaker systems which used
multiple speakers aimed at the surrounding walls to reflect the sound and
replicate the sound of a concert hall
•After this experience, Amar came to the conclusion that the audio system
measurement techniques of the time (such as measuring distortion and
frequency response) were not effective ways to evaluate the goal of natural
sound reproduction. Amar argued that the best measure of audio quality is the
listener's perception
•Amar Bose had a networth over USD $ 1 billion at the time of death
Cars to headphones-
Mercedes Benz
With Active road noise compensation, the interior of the already very quiet
Mercedes-Maybach S-Class becomes even quieter with noise reduction
technology .
Impulses from the road surface generate low-frequency noises which are
perceived as droning or throbbing in the interior. In the Mercedes-Maybach
S-Class with active road noise compensation, there are six acceleration
sensors in the suspension system. These send reference signals to the
control unit. Using this information, a special algorithm calculates the
necessary counter-noise in advance. The requisite sound waves phase-
shifted by 180 degrees are reproduced by the bass speakers of the
Burmester® high-end 4D surround sound system
Leveraging on competencies in sound engineering Mercedes has stretched
the competences to noise cancelling over ear headphones
Competence ‘stretch’
Theodor "Ted" Geisel political Theodor "Ted" Geisel-AKA Dr. Suess writer of children's books
cartoonist and writer
Governor California
Arnold
Schwarzenegger
Body Builder 6 times
Mr Universe

Competence stretch
Corning –competencies in gorilla glass

technology
Any firm can obtain resources and competencies……..if
you already have them you will ‘be off the start line
first
Why stretch
and leverage It is difficult to imitate competencies that are
core…….they are not well understood
on
capabilities?
The more they are used the sharper and better they
get through a ‘learning curve’
If you lack the competencies rely of on others
that do –Tag Heuer smart watches
Tag Heuer was set up in 1860 The birth of the connected

by Edouard Heuer in St-Imier smart watch poses challenges
Switzerland. Since then as the company has no
company has developed competencies in software
competencies in design and development and replaces
mechanical movements with The company still relies on it core
mechanical movements .
chip sets. competencies of design, brand management
and marketing
Analytical models/
frameworks
• The Ms model
• The Mckensey 7s model
• Porters Value chain and value system
• Critical Success Factors (CSF)
• Matrix analysis
• Parenting styles and rationales
• Balance score card
• Balridge Performance excellence
• Benchmarking
The Ms Model
•This helps identify resources and competencies with the letter
M
• Money- financial resources
• Men-human resources
• Machines-production resources/physical resources
• Materials- suppliers/sources of supply
• Methods-systems and processes/techniques
• Markets-brands, patents, product portfolio
• Makeup-culture and structure
• Management information- Information resources
The Mckensey 7s Model
The organization is made up of soft and hard elements . These elements together can create a firms
competitive advantage.
The soft elements are more important for competitive advantage as it is difficult to imitate
Hard
Structure
elements
Strategy Systems
Soft
Shared elements
Values
Skills Style
Staff
The value
chain
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Collection, quality control, feeding, labour Marketing, promotions, channel management
‘Value is added every step of the way

to the consumer and they are willing
to pay for the value creation’-a
margin
Collection, quality control, facility management, Transport, warehousing, handling
Transport, handling
Bottling, printing, facilities management, quality
control
Collection, quality control, facility management,

The Value Chain- Michael Porter
EVERY PROCESSES ARE ACTIVITIES IF DONE THE REWARD FOR THE VALUE CHAIN
ORGANIZATION MADE UP OF ‘RIGHT’ (LOWER SUCH ADVANTAGE OUTLINES THESE
EXECUTES THEIR ACTIVITIES COST AND/OR IS A BETTER ACTIVITIES
BUSINESS MODEL DIFFERENTLY) CAN ROI(MARGIN)
VIA A COLLECTION GIVE A
OF COMPETITIVE
INTERCONNECTED ADVANTAGE IN
PROCESSES THEIR TARGET
MARKETS ( BETTER
FULFILMENT OF
CFS)
The Value Chain- Michael Porter
Firms infrastructure
Support
Activities Procurement
Technology development
MARGIN
Human Resource Management
Inbound Outbound Marketing and

Primary Operations Service
logistics- logistics Sales
Activities
Primary activities
INBOUND LOGICS- OPERATIONS- OUTBOUND MARKETING AND SERVICE-SPARE

TRANSPORTATION, CONVERTING LOGISTICS- SALES- PARTS SUPPLY,
WAREHOUSING, INPUTS TO TRANSPORTATION, ADVERTISING, MAINTENANCE,
HANDLING INPUTS OUTPUTS- WAREHOUSING, BRANDING, CUSTOMISATION,
MACHINING, FINISHED GOODS PROMOTIONS, SUPPORT, TRAINING
ASSEMBLY, MANAGING
PACKAGING, CHANNEL
PRINTING, TESTING, RELATIONS, PRICING
FACILITIES
MANAGEMENT
FIRMS PROCUREMENT – TECHNOLOGY HUMAN RESOURCE
INFRASTRUCTURE- PURCHASING ALL TYPES DEVELOPMENT- ‘ MANAGEMENT-
STRATEGIC PLANNING, OF INPUTS SUCH AS ENHANCING ‘ KNOW RECRUITMENT,
ACCOUNTING AND SOURCING SUPPLIERS, HOW’ WHICH CAN BE SELECTION, TRAINING,
FINANCE, LEGAL AND PURCHASING, PAYMENT INCORPORATED IN TO COMPENSATION OF ALL
PUBLIC RELATIONS, PROCESS OR PRODUCT TYPES OF STAFF
QUALITY ASSURANCE IMPROVEMENT
Support activities
Activities
involved in
manufacturing
orange juice
How scotch
whisky is made
How Haagen-
Dazs is made
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Technology
development –
Bose
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Birds nest soup
+947722220332 70
Activities and
competencies
• Activities can be thought of as the‘
‘building blocks’ of processes and it
is essential that the necessary
competencies(skills and abilities) are
in place to effectively perform the
activity.
• For e.g. the cooking process
transforms inputs to outputs though
’value addition’. To do these many
activities such as
procurement(obtaining raw
materials), Inbound logistics (
delivery and storage of raw
materials) operations ( cutting,
cleaning, assembly) , technology
development ( recipes, cooking
techniques) and firms' infrastructure
( planning) is needed.
Competencies in
the cooking
procuring process
• Competencies in selecting fresh fish
1. smell of the fish-. Good fish will
smell clean and fresh, perhaps a little
briny, like the ocean.
2. check the eyes. The eyes should be
bright, shiny and full not cloudy
3. skin and scales: the fresher the fish,
the brighter and more metallic the
skin. The skin should not be dull,
even in patches.
4. The fish should be nice and firm,
springing back from your touch (it
should not be soft or squishy).
5. Gills should be clean and a bright
red. As a fish ages, its gills will dull
and start to turn brown
‘linkages’
Linkages are the relationships
between activities. To reduce cost
and improve performance an
organization must not focus on
each value activity independently;
the analysis must include both
related activities
and linkages between activities
•E.g. if operations are done properly
quality related service cost is less
etc

IKEA linkages in the value
chain
• Älmhult, the town where IKEA was founded, is in a rather remote area of
Sweden, made it difficult to reach potential customers in the bigger cities. Due
to this, the IKEA catalogue was born in 1951, and Ingvar had already decided
IKEA should sell good furniture at low prices.
• Mail order distribution of bulky furniture was difficult and expensive, and
products often got damaged. In 1956 the company got the idea to take the legs
off the LÖVET table, which led to birth of the idea of ‘self-assembly and flat
packing’.
• In the IKEA value chain at the point of furniture design (Technology development
) designers design the furniture with ‘flat packaging’. Operations would
manufacture this but since the customer assembles the product at home it
reduces the assembly cost in IKEA operations activities. Flat packaging also
implies easy of distribution (more can be distributed in lorries ) keeping
outbound logistics costs of delivery low. Since customers can transport goods in
flat packaging themselves the goods can be further competitively priced
Ikea business model and value
chain
Porter extends the concept of the value chain to the value system which is a collection of value chains
making the supply chain
Competitive advantage not only comes for managing ones own activities but also managing and optimizing
the supply chain understanding there are linkages between activities in the chain and also the supply chain.
This is based on the principle that ‘any chain is as strong as its weakest link’! Any move towards
sustainability must come from managing the total chain
Competitive advantage can be created by creating collaborations(working together) with other member of
the value chain to reduce cost and increase more value
Competitive advantage can also be created either moving upstream of down stream towards where margins
are more attractive or using ones bargaining power over buyers or suppliers in the supply chain.
The value system

Value systems
Supplier competitor
Supplier Firms Distributor Distributor Buyer
Supplier competitor
SCM and
competitive
advantage-
ZARA
Any chain is only
as strong as its
weakest link!
•Its no use if a company strengthens
its own value chain if the others
who are in their ‘eco system’ have
weak chains!
•Competitive advantage of the
individual firm naturally erodes.
•Collaboration and working together
can thus create an advantage by
reducing costs and creating more
value

How does Ikea do it?
•Ikea the Swedish furniture manufacturer is competitively
positioned in the market for furniture by delivering value to
customers with high quality yet affordably priced products this
effectively driving a ‘hybrid strategy’
•But how does it do it?
•It simply looks at available opportunities in its value chain and

value system to keep costs down
Techniques of keeping costs low
• IKEA picks what they want to sell a product for before designing and
manufacturing it, and the designers and suppliers work together to
make sure the final product can be that price.
In 1956, IKEA founder Ingvar
• The company packs everything flat to save on storage and
Kamprad introduced "flat transportation costs.
packing," the method now • Layering sheets on a ‘honey-comb structure’ ensures lesser materials
are used and structural stability , materials are also light weight yet
synonymous with IKEA that durable
cuts costs by letting consumers • Bullk manufacturing allows bulk purchasing and economies of scale and
scope to keep costs low
purchase their furniture in • Global distribution strategy for economies of scale
pieces and assemble it • Low number of store associates/ self service models keeps staff costs
down
themselves. While it may be • Designing its own furniture inhouse rather than outsource
annoying it ‘adds value’ to • Customers have to take the furniture home themselves and assemble
products themselves
customers allowing IKEA to • Growing its own trees and maintaining its own forest. Managing
charge less for everything. sustainability and carbon fort prints
• Working closely with suppliers -The company operates 43 local trading
offices in 33 countries to manage relationship with suppliers7.
Although Ikea fosters competition among suppliers to ensure best price
and material, it believes in making long-term business relationships
with its suppliers and ensures Volume Business.
How does Rolls Royce do
it?
“Strive for perfection in everything you do. Take the best that
exists and make it better. When it does not exist, design it.” -
Henry Royce founder of the company with Charles Rolls
Rolls Royce currently a company under the BMW group has
positioned itself as the epitome of luxury which is the benchmark
other auto makers strive for.
Quality and excellent customer experience are at the heart of the
success of the company
The mantra within Rolls Royce calls for engineering integrity and
the finest materials, but above all: its people. All the procedures,
rituals and checklists are powered by the pride and passion of the
workforce
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SHAAN@KCOVERSEAS.LK +947722220332
Configuring the value chain
• To drive the strategy of focus differentiation Rolls Royce does the following in its value
chain
• Employees are hired for ‘craft’ capabilities who may come craft industries such as
saddle making as the car positions itself as hand made. The cars have a process of
‘book matching’ which matches the different grains of wood ! The ‘Starlight
headliner’ is individually placed by artisan craftsmen creating 1,600 fibre optic
stars
• Production is ‘human intensive’ and where automation is used it is not to reduce
costs but rather enhance quality
• Leather is only sourced for farms with no barb wire and high altitude (to ensure no
mosquitoes and skin blemishes) and only from bulls who are fed high protein
meals (cows give milk making the skins stretchy.) It takes 11 bulls to create a car!
• Customers can customize any aspect of the car including a choice of 44,000
colours!
The art of
‘crafting’ a
Rolls Royce
Why is a Rolls
Royce so
expensive ?
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Rolls Royce- the
pinnacle of
Bespoke
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How does Air Asia do it?
Anthony Fernandes introduced the first budget no-frills
airline, AirAsia, to Malaysians with the tagline "Now everyone
can fly".
The company successfully drives a low cost competitively

priced strategy. But how does it keep its costs low?
1. Planes are fitted with a ‘ wing tip device’ that improves fuel economy.
The company also uses one type of plane (the fleet consists of 24
Airbus A330-300 aircraft, and the airline has 100 Airbus A330-
900neo aircraft on order.) this creates economies of scale in
maintenance
2. all seats are economy and discriminated by price in terms of leg

space
Configuring the 3. Meals and luggage are considered ‘frills’ and charged for separately.
Since it is no frills there are no entertainment systems of board
value chain to 4. Seats are made of rexine as opposed to cloth which keep cleaning
costs down
keep costs low 5. Planes deploy staff who are multi skilled keeping staff cost down.
6. Planes are parked no longer than 25 minutes on a tarmac ( this

reduces airport charges and ensures the plane is in the air generating
revenue )
7. Passengers are boarded using gangways rather than air bridges
8. Most activities are electronic to reduce costs
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‘No frills’ flying
The limited areas in a business that must go
right for it to flourish and achieve a
competitive advantage over rivals
The relate to the attributes of a product or

Critical
service that a valued by the firms target
markets
Success
Factors (CSF)
CSFs should generally target those things that
affect quality, cost, customer satisfaction,
market share and increased revenues
Automobiles Supermarkets Smart phones
Speed and performance, location, battery life,
fuel economy, convenience, camera,
quality and attention to detail, parking, speed,
ease of maintenance, product assortment, size,
spare parts availability opening times, connectivity,
maintenance and after sales, payment mechanisms resolution,
safety, weight
CSFs can vary by industry and customer type.
To deliver performance in the CSF
the business should have resources
and competencies in place
CSFs ,KPIs and To monitor performance in the CSF

there needs to be Key Performance
KPTs Indicators (KPI)
Key Performance Targets (KPTs)

can be established for continuous
improvement
+947722220332 92
CSF, IPI and KPT
CSF( where should be excel?) KPI (How well are we doing?) KPT( what is our target ?)
Market share % of the market Capture x% of market share
customer satisfaction No of repeat customers, % Increase no of repeat

customers satisfied customers by x%
Quality of product % of defective products, % Improve defect rates by x%
products re-worked
Production cost Variable cost Reduce variable cost by x%
Competitive strategy How do we hope to
compete?
What areas need to

go right to achieve CSF1 CSF2 CSF3 CSF4
the competitiveness
?
What
capabilities
Resources and competencies to underpin CSF(Threshold and Core)
need to be
in place?
What indicators
tell us the CSFs KPI1 KPI2 KPI3 KPI4
are being fulfilled
?
You have a CSF…..Prove it!
3 M-unbreakable
glass
The campaign was simple. Three million in
Canadian dollars was placed inside the
advertising casing at a bus stop in
Vancouver, Canada.
The poster case was covered at the edges

with a 3M product, Scotchshield, a see-
through film that, when applied, makes
glass stronger.
The premise of the campaign was simple.

Members of the public were challenged to
break the glass, and if they did, they would
walk away with the money.

Pushing the boundaries of competencies for
CSF- Tag Heuer Mikrogirder
Matrix analysis
Can be used to ‘structure’ business Useful when companies have many Matrix models
scenarios so that they are better business units that compete in
understood different products and markets
The BCG matrix
Public sector portfolio matrix
Ashridge portfolio matrix/ parenting
matrix
BCG matrix
•Analyse business units by considering
• Market growth rate – annual % increase in consumer
spending(>10% considered high growing)
• Relative market share-ones market share relative to the
largest or next largest( if one is already the largest). >1
relative market share considered high
e.g. unit Market Turnover Market Market share Relative
growth $m share % of largest/next market
rate % largest share
A company operates with 4
business units of which A 12 100 20 10 20/10=2
information is provided B 15 50 8 25 8/25=0.32
C 8 300 50 10 50/10=5
D 4 25 5 20 5/20=0.25
Solution
Note- size of circle is relative
20% to turnover
15% B
Market A
growth 10%
C
rate %
5%
D
0%
10 1 0.1
Relative market share (log scale )
High(>10%)
Those that put us on the What do we do with these?

map, but also expensive to Do we invest to grow
Market maintain market share ?
Growth rate
Low(<10%)
Those that generate a good What do we do with these?
cashflow Should we divest?
Relative Market share

High(>1) Low(<1)
High(>10%) Question Marks/Wild
Stars
The products we are known for cats/Problem child
but consume a lot of resources What do we do with them?
and need investment to Do we take a risk and grow
maintain or grow market share market share or discontinue?
Market
Growth rate
Cash Cows Dogs

Our Cash generators that can
If the market shows no
Low(<10%) be used to support our other
prospects in the future should
products . With high market
we build market share? Should
share we may enjoy economies
be divest instead?
of scale

High(>1) Low(<1)
Question marks They almost always
Stars -It nearly always shows reported require far more cash than they can
profits, but it may or may not generate. If cash is not supplied, they
generate all of its own cash. If it stays fall behind and die. Even when the
a leader, however, it will become a cash is supplied, if they only hold their
large cash generator when growth share, they are still pets when the
slows and its reinvestment growth stops. The question marks
requirements diminish. The star require large added cash investment
eventually becomes the cash cow, for market share to be purchased. The
providing high volume, high margin, low market share, high growth
high stability, security, and cash there product is a liability unless it becomes
off for reinvestment elsewhere. a leader. It requires very large cash
inputs that it cannot generate itself.
Cash cows - Characteristically, they
generate large amounts of cash, in
excess of the reinvestment required to Dogs They may show an accounting
maintain share. This excess need not, profit, but the profit must be
and should not, be reinvested in those reinvested to maintain share, leaving
products. In fact, if the rate of return no cash throw off. The product is
exceeds the growth rate, the essentially worthless, except in
cash cannot be reinvested indefinitely, liquidation. All products eventually
except by depressing returns. become either cash cows or pets. The
value of a product is completely
dependent upon obtaining a leading
share of its market before the growth
slows.
High(>10%) Cash in balance/surplus Cash in deficit Cash movement
Life cycle
movement
Market Opportunity
Growth rate cost
Low(<10%)
Cash in surplus Cash in balance/deficit

High(>1) Low(<1)
choose to continue doing the same things to maintain the status
Hold quo.
Sacrifice short term profitability for long-term growth. select to

Build make further investments, either to grow the market share of a Star
or make a Question Mark into a Star.
From analysis
Harvest
utilize the cash flow from a Star or Cash Cow to reduce the burden
of investment and maximize profits. Usually sacrificing long-term
to strategy
profitability for short-term gains
sell off or withdraw Dogs so that human resources and financial

Divest capital can be invested in your Star and Question Mark products
and business units.
Public sector portfolio matrix
•Useful in the public sector when there is an absence of a
profit motive
•Similar to the BCG but different axis
•Each business in the public sector such as healthcare,

education, transport etc can be analysed in terms
• Public need and the funding attractiveness
• Value for money in terms of whether the service is
delivered effectively or not i.e. economy, efficiency and
effectiveness.
High Political Hot box
Public sector Stars hotly debated areas as public
Areas going well and good need is not met . Resource
justification of resources investment needed perhaps
diverting resources from golden
Public need fleece
+funding
attractiveness
Golden fleece Back drawer issue
Waste of resources. Divert the
Low Least of priorities. Consider
resources to other priorities
even discontinuing and use
such as the political hot box or
resources for other priorities .
stars.
Value for money of

High service provision Low
Parenting matrix/Ashridge portfolio display
• Developed by Goold, Campbell and Alaxander the matrix analyses business units to
determine parental involvement in their portfolio of business units. It is used to evaluate
the attractiveness of potential acquisition target or existing business to the parent
• Parental involvement should be with a view to adding value through the involvement
rather than destroying it
• Adding value could be providing resources, centralized services, strategic support, access
to markets, expertise,
• Destroying value could be adding overheads, creating bureaucracies or not properly
understanding the business
• The matrix argues that business units can be analysed in terms of
• Benefit/ opportunity to add value - are there opportunities for the parent to get
involved and add value to their business units?
• Feel/ ability to add value– how well does the parent understand the business units
and how well do your resources and competencies as a parent tie in and contribute
to the CSFs of the business units?
High Ballast businesses Heartland businesses
Parent understands SBU well Parent can add value without
but can do little to add value. risk of harming SBU
Needs a light touch from the Core of the future corporate

Ability to add parent strategy.
value (Feel) .
Alien territory Value trap businesses
Parent can add value but may
businesses do more harm than good
Parent has poor fit with the
Low SBU and can do little to help Only focus if can be moved to
anyway. heartlands. For this parent
must be willing to learn SBU
Dispose of them business
Opportunity to add
Low value (benefit) High
Alien Businesses: These are the business
Value Trap Businesses: These are the
outside the industry of the business
business outside the industry of the
considering takeover or merger proposal,
business considering takeover or merger
so business has no knowledge of internal
proposal. It can be said that it has low
and external factors affecting the
feel. There are opportunities for the
business operating in that industry,
parent to add value by helping it because
needed to make it successful. It can be
the business possess resources and
said that it has low feel. There are no
capability to help the potential acquisition
opportunities for the parent to add value
target lacks the skills necessary for its
by helping it because potential business
success. It can be said that it has high
has the skills necessary for its success. It
benefits.
can be said that it has low benefits.
Ballast Businesses: These are the business Heartland Businesses: These are the
inside the industry of the business business inside the industry of the
considering takeover or merger proposal. business considering takeover or merger
It can be said that it has high feel. There proposal. It can be said that it has high
are no opportunities for the parent to add feel. There are opportunities for the
value by helping it because parent to add value by helping it because
potential acquisition target has the skills potential business lacks the skills
necessary for its success. It can be said necessary for its success. It can be said
that it has low benefits. that it has high benefits.
Parenting styles- Goold, Campbell and Alexander Financial control
argue display different styles with regard to how
they wish to get involved with and manage their
Strategic planning
business units Strategic control
Parenting rationales-Johnson and Scholes argue Portfolio managers

that a good parent should have the ability to add
value through involvement and rationales or
Synergy managers
roles they can play in doing so Parental developers
Parenting styles and rationales

• Financial control
• Planning timescales tend to be shorter.
• The head office takes a 'hands-off' approach but sets stringent short-term
financial targets that have to be met to ensure continued funding of capital
investment plans.
• Failure to meet financial targets will lead to the possibility of divestment.
• Strategic control.
• Corporate management take a middle course, accepting that subsidiaries
must develop and be responsible for their own strategies, while being able to
draw on headquarters' expertise.
• Evaluation of performance extends beyond short-term financial targets to
embrace strategic objectives such as growth in market share and technology
Parenting styles development, that are seen to support long-term financial and operational
effectiveness.
• Strategic planning
• There is a focus on a limited number of businesses where significant synergies
exist leading to a concentration on a few core areas where it is possible to
have a degree of expertise.
• Corporate management play a major role in setting the strategies for each of
the SBUs.
• The approach is based on the belief that strategic decisions occur relatively
infrequently and that when they do, it is important for corporate headquarters
to frame and control the strategic planning and decision-making process.
Portfolio managers
• are corporate parents effectively acting as agents for financial markets and
shareholders to enhance the value from individual businesses more effectively than
the financial markets could
• identify and acquire under-valued businesses and improve them, perhaps by
divesting low-performance businesses or improving the performance of others
• keep the costs of the centre low by minimising the provision of central services and
allowing business units autonomy whilst using targets and incentives to encourage
high performance
• may manage a large number of businesses, which may be unrelated.
Synergy managers
• enhance value by sharing resources and activity, such as distribution systems offices
Parenting or brand names
• may have difficulty in bringing synergy as cultures and systems in different business
rationales units may not be compatible
• may need to be very hands-on and intervene at the business unit level to ensure
that synergy is actually achieved
parental developers.
• use their own central competences to add value to the businesses by applying
specific skills required by business units for a particular purpose, such as financial
management or research and development
• need to have a clear understanding of the value-adding capabilities of the parent
and the needs of the business units in order to identify how these can be used to
add value to business units
Tata Motors acquires
Jaguar and Land Rover
Jaguar and Land Rover were part of British Leyland for parts of their histories
until 1984, both were reunited into the same group again by the Ford Motor
Company in 2002. However the two brands were failing in the USA .
In an all-cash transaction of $2.3 billion Tata purchased both companies from

Ford in June 2008. (Nearly half of what Ford Motor paid to acquire both
brands.)
For Tata it gave the company the ability to enter the luxury car markets and
the access to two established brands .
In 2013 Tata invested £3 billion in "product creation" which was claimed to be

the "biggest R&D investor in the UK in the automotive business.
In January 2014, the Wall Street Journal reported that Jaguar Land Rover sold a
record 425,006 vehicles in 2013 as demand for its luxury vehicles increased
in all major markets including in China, North America and Europe
Parenting styles and How should a corporate parent get involved
rationales and manage SBUs to add value?
Approach to Approach a
corporate strategy corporate parent
based on can use to add
Parenting styles- management style Parenting rationales- value to their SBUs
Goold and Campbell i.e. planning and Johnson and Scholes
control influence
Financial control Strategic control Strategic planning Portfolio manager Synergy manager Parental
developer
Setting financial Parent drives the strategy Acting as agents for Enhancing value use own competences
Setting strict
targets developed around financial markets by combining to add value to SBU by
financial and
monitoring significant synergies to acquiring undervalued resources, applying specific skills
strategic targets,
investment created linkages between and/or divesting poor distribution required by them such
SBU develops
performance . SBUs. SBU implements performing businesses systems, brand as financial
own strategy
SBU operates names and offices management & R&D
autonomous
The balance score card (BSC)
•Developed by Kaplan and Norton the BSC takes a multi
dimensional approach towards performance by looking at
financial and non-financial, short term and long term
measures of performance which are needed to translate and
achieve organizational mission
•Critical success factors and key performance indicators can be

attached to each perspective.
FINANCIAL
PERSPECTIVE –
CUSTOMER
PERSPECTIVE –
LEARNING AND
INNOVATION
INTERNAL
BUSINESS
The 4
WHETHER AN
ORGANIZATION IS
WHETHER THE
ORGANIZATION IS
PERSPECTIVE-
WHETHER THE
PROCESS
PERSPECTIVE –
perspectives
ACHIEVING ITS MEETING ORGANIZATION IS WHETHER
FINANCIAL CUSTOMER CONTINUING TO PROCESSES ARE
TARGETS AND NEEDS DEVELOP EFFICIENT AND
MEETING THE EMPLOYEES AND
NEEDS OF SATISFIED AND
SHAREHOLDERS MOTIVATED
The balanced score card-HBR
Learning and growth
perspective
to achieve our vision how will
we sustain our ability to
change and improve
Customer perspective Internal business perspective

to achieve vision how should Vision and to satisfy our stakeholders and
we appear to our customers ? Strategy customers here must we excel
in our business processes?
Financial perspective
to succeed financially how
should we appear to our
shareholders?
Creating sustainable value
for shareholders Financial results Financial perspective
Anticipating and meeting

customer needs in Customer perspective
Customer needs
target markets
Developing and
improving processes that Internal business perspective
Internal business processes
add and create value
Building and sustaining Learning and growth perspective

strategic capabilities Learning and innovation and growth
Developed by Malcom Baldridge it is a way of measuring
and rewarding organizations that have performed better
than others
Baldridge (who was greatly responsible for the quality

Baldridge
revolution in the USA) developed criteria for performance
excellence with the belief that organizations that
incorporated them into their organizational practices can
performance
achieve superior performance over counterparts
excellence
The mode argues that organizations must build into their
processes certain values and principles that have the
potential to eventually yield performance results
Baldridge performance
excellence
Developed by Malcom Baldridge it is a way of measuring and
rewarding organizations that have performed better than
others
Baldridge (who was greatly responsible for the quality

revolution in the USA) developed criteria for performance
excellence with the belief that organizations that incorporated
them into their organizational practices can achieve superior
performance over counterparts
The mode argues that organizations must build into their

processes certain values and principles that have the potential
to eventually yield performance results
The Baldridge Principles
Organizational Valuing workforce
Visionary Customer-driven
and personal members and
leadership excellence
learning partners
Focus on the Managing for Management by

Agility
future innovation fact
Focus on results
Societal Systems
and creating
responsibility perspective
value
Balridge
performance
excellence
Benchmarking
This is the systematic comparison of one self Benchmarking can facilitate organizational
against a benchmark or one who is considered learning by incorporating ‘best practices’
star in their class with a view to learning and
improvement
Benchmarking at Xerox
In the early 1980s, Xerox the photocopier giant found itself
increasingly vulnerable to intense competition from both the US and
Japanese competitors. It ignored new entrants such as Ricoh, Canon,
and Sevin) who were consolidating their positions in the lower-end
market and in niche segments. The company's operating cost (and
therefore, the prices of its products) was high and its products were of
relatively inferior quality in comparison to its competitors.
As a result of this, ROA fell to less than 8% and market share in

copiers came down sharply from 86% in 1974 to just 17% in 1984.
Between 1980 and 1984, Xerox's profits decreased from $ 1.15
billion to $ 290 million.In 1982, the new CEO discovered that the
average manufacturing cost of copiers in Japanese companies was
40-50% of that of Xerox. As a result, Japanese companies were able
to undercut Xerox's prices effortlessly.
Internal benchmarking is a comparison of a business
process to a similar process inside the organization.
Competitive benchmarking is a direct competitor-to-

competitor comparison of a product, service, process,
or method.
Types of
benchmarking
Functional benchmarking is a comparison to similar or
identical practices within the same or similar functions
outside the immediate industry.
Generic benchmarking broadly conceptualizes unrelated

business processes or functions that can be practiced
in the same or similar ways regardless of the industry.
+947722220332 129
Collection of
Plan benchmark
data
Analysis of data
Identify Stages of
improvement
benchmarking
Monitor and
implementation
review
Conclusion
• organizations are portfolios of resources and competencies
•Strategies need to be developed using these to position

themselves in the environments by matching capabilities to
opportunities and threats
•Unique resources and core competencies contribute to

competitive advantage as they relate directly to CSF
•Core competencies are more important for sustainable

competitive advantage

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3.

UNDERSTAND AN INTERNAL UNDERSTAND STRATEGIC APPLY TOOLS AND TECHNIQUES TO

2. Resource and competency

3. Analytical models- Ms Model

The organization Good organizations learn to ‘stretch’ these

Strategies developed on this basis become

Tangible Intangible Resources

Resources-What you have or Competencies- critical skills in

It is no use having a hammer if you can't drive a

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Magicians will always show the inputs and

Magicians ( illusionists) are some of the

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•Competencies- the act itself using

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Using strategic capabilities for competitive advantage

Protect against Take advantage

Competencies-skills Performing effective

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Resources Unique resources

2. unique location: for example a hydroelectric power

3. a special privilege, such as the ownership of patents

Kale Brussel sprouts Cabbage Broccoli Cauliflower

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2. Investing in competency training and

3. Maintaining trade secrets

4. Constantly investing in Research and

They face danger as they work, walking tightropes between

The tapper also worships the coconut tree, clasping both

•i.e. they cane be used to help them enter new markets of

•Products are the outcomes of competencies like flowers and

•The roots are therefore the basis of the trees strength!

Wearables Sunglasses with sound Sleep buds with alarm

•Amar's interest in speaker systems had begun in 1956 when he purchased a

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Corning –competencies in gorilla glass

Tag Heuer was set up in 1860 The birth of the connected

• The Mckensey 7s model

• Porters Value chain and value system

• Critical Success Factors (CSF)

• Parenting styles and rationales

• Balance score card

• Balridge Performance excellence

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‘Value is added every step of the way

Collection, quality control, facility management, Transport, warehousing, handling

Collection, quality control, facility management,

Inbound Outbound Marketing and

INBOUND LOGICS- OPERATIONS- OUTBOUND MARKETING AND SERVICE-SPARE

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The value system

Supplier Firms Distributor Distributor Buyer

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•But how does it do it?

•It simply looks at available opportunities in its value chain and

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The company successfully drives a low cost competitively

2. all seats are economy and discriminated by price in terms of leg

6. Planes are parked no longer than 25 minutes on a tarmac ( this

7. Passengers are boarded using gangways rather than air bridges

8. Most activities are electronic to reduce costs

The relate to the attributes of a product or