Business Strategy 1

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Business Strategy
Application Level

Important Model
Sl. No. Chapter Name of Model Page Manual
Page
1 1 Rational Approach 2 9
2 1 Mintzberg identified strategies 3 15
3 2 Stakeholder mapping: power and interest (Mendelow) 4 51
4 3 PESTEL analysis and underlying assumptions 5 83
5 3 Porter: The Competitive Advantage of 7 95
Nations/(Diamond)
6 4 The basic model/(Porter’s 5 factors) 9 120
7 5 Core competences –Kay's three sources 11 156
8 5 A checklist of resources/(9Ms) 11 159
9 5 Benchmarking Competent 12 161
10 5 Porter’s Value Chain 12 164
11 5 Product life cycle (PLC) revisited 14 180
12 5 Boston Consulting Group (BCG) matrix 15 181
13 6 SWOT Analysis 16 209
14 6 Weirich's TOWS matrix 18 210
15 6 Porter's three generic strategies 18 215
16 6 Product-market growth matrix (Ansoff Matrix) 21 221
17 7 Marketing Mix 7ps 23 264
18 8 Models on structure 24 333
19 9 Overall Risk 27 406
20 11 Balance Scorecard 28 497
21 14 The Gemini 4Rs framework for planned strategic change 29 638
22 14 Force field analysis 29 643
23 14 The Lewin/Schein 3 step (iceberg) approach 30 647
24 14 The project life cycle (4D Model) 31 648
25 6 Bringing them together –the cruciform chart 33 209
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1 Rational Approach:

PESTEL OT SW
8 Ms

1 Ms Value Chain

Ansoff Matrix
Porter’s 5 SWOT
Factors Balance Scorecard

The main stages in the rational approach are:

1. Conduct a corporate appraisal: This involves assessing the present business environment and
assessing how it may develop over the timescale of the plan horizon (typically five + years). It will also
consider the internal position of the business, including such things as its present staffing, quality of
products and financial condition.
2. Set mission and objectives: Management will assess whether the long-term interests of the business
are best met in its present industry and competing in its present way or whether the business needs to
strike out in a new direction. This is called its mission. Objectives will be set for the coming
years. The job of strategy is to attain them.
3. Gap analysis: Involves forecasting performance forward and comparing it with the strategic objectives
set by management. If forecast performance is below the objectives set then this exposes a gap which
must be filled by new and better strategy.
4. Strategic choice: Management must generate new business options for the firm such as new products
or markets, and evaluate these to arrive at a set of potentially successful and affordable strategies to help
the firm reach the objectives set.
5. Strategy implementation: Management carries out the strategy at corporate, business and functional
levels by the development of organisational structures, policies and programmes to carry it out.
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2. Mintzberg identified strategies

Definitions
Intended strategies (which, if implemented, are referred to as deliberate strategies) are conscious plans
imposed by management.
Emergent strategies are behaviours which are adopted and which have a strategic impact.

Mintzberg (The Strategy Process) identified the following.

 Intended: The result of a deliberate planning process.
 Deliberate: Where the intended plans have been put into action.
 Unrealised: Not all planned strategies are implemented.
 Emergent: Sometimes strategies are created by force of circumstances.
 Realised: It can be seen that the final realised strategy results from a balance of forces of the other
types of strategies.
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3. Stakeholder mapping: power and interest (Mendelow)

Mendelow suggests that stakeholders may be positioned on a matrix whose axes are power held and the
likelihood of showing an interest in the organisation's activities. These factors will help define the type of
relationship the organisation should seek with its stakeholders.

Minimal effort kept informed  Community representatives

 Employee

kept satisfied Key players

 institutional  major customer
shareholders  Share holder

a) Key players are found in segment D: strategy must be acceptable to them, at least. An example
would be a major customer.
b) Stakeholders in segment C must be treated with care. While often passive, they are capable of
moving to segment D. They should, therefore be kept satisfied. Large institutional shareholders
might fall into segment C.
c) Stakeholders in segment B do not have great ability to influence strategy, but their views can be
important in influencing more powerful stakeholders, perhaps by lobbying. They should therefore be
kept informed. Community representatives and charities might fall into segment B.
d) Minimal effort is expended on segment A.

A single stakeholder map is unlikely to be appropriate for all circumstances. In particular, stakeholders
may move from quadrant to quadrant when different potential future strategies are considered. This
aspect will be returned to in Chapter 11 where we deal with the evaluation of strategic options.

Stakeholder mapping is used to assess the significance of stakeholder groups. This in turn has
implications for the organisation.
a) The framework of corporate governance should recognise stakeholders' levels of interest and power.
b) It may be appropriate to seek to reposition certain stakeholders and discourage others from
repositioning themselves, depending on their attitudes.
c) Key blockers and backers of change must be identified.
Stakeholder mapping can also be used to establish political priorities. A map of the current position can
be compared with a map of a desired future state. This will indicate critical shifts that must be pursued.
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4. PESTEL analysis and underlying assumptions

PESTEL is a handy checklist environmental factors.
 Political
 Economic
 Social/cultural
 Technological
 Ecological/environmental
 Legal

Political factors Economic factors Socio-cultural factors

 Government stability and likely  Growth rates  Health consciousness
changes  Inflation rate  Education level
 Bureaucracy  Interest rates  Attitudes toward imported goods and
 Corruption level  Exchange rates services
 Tax policy (rates and incentives)  Unemployment trends  Attitudes toward work, leisure, career
 Freedom of press  Labor costs and retirement
 Regulation/de-regulation  Stage of business cycle  Attitudes toward product quality and
 Trade control  Credit availability customer service
 Import restrictions (quality and  Trade flows and patterns  Attitudes toward saving and investing
quantity)  Level of consumers’ disposable  Emphasis on safety
 Tariffs income  Lifestyles
 Competition regulation  Monetary policies  Buying habits
 Government involvement in trade  Fiscal policies  Religion and beliefs
unions and agreements  Price fluctuations  Attitudes toward “green” or
 Environmental Law  Stock market trends ecological products
 Education Law  Weather  Attitudes toward and support for
 Anti-trust law renewable energy
 Climate change
 Discrimination law  Population growth rate
 Copyright, patents / Intellectual  Immigration and emigration rates
property law  Age distribution and life expectancy
 Consumer protection and e- rates
commerce  Sex distribution
 Employment law  Average disposable income level
 Health and safety law  Social classes
 Data protection law  Family size and structure
 Laws regulating environment  Minorities
pollution
Technological factors Environmental (ecological) Legal
 Basic infrastructure level  Weather  Anti-trust law
 Rate of technological change  Climate change  Discrimination law
 Spending on research & development  Laws regulating environment  Copyright, patents / Intellectual
 Technology incentives pollution property law
 Legislation regarding technology  Air and water pollution  Consumer protection and e-
 Technology level in your industry  Recycling commerce
 Communication infrastructure  Waste management  Employment law
 Access to newest technology  Attitudes toward “green” or  Health and safety law
 Internet infrastructure and penetratio ecological products  Data Protection
 Endangered species
 Attitudes toward and support for
renewable energy
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Political
Social welfare policy
Taxation policy
Regulation
Government stability
Ownership risk
Legal
Competitor legislation
Employee legislation
Consumer protection
Health & safety
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5. Porter: The Competitive Advantage of Nations/(Diamond)

Management developing strategy in a global environment needs to understand the competitive advantages they
have over firms from other countries.
Porter (The Competitive Advantage of Nations) seeks to 'isolate the national attributes that foster competitive
advantage in an industry'.
Porter identifies determinants of national competitive advantage which are outlined in the following diagram.
Porter refers to this as the Diamond.
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6. The basic model/(Porter’s 5 factors)

According to Porter, five competitive forces influence the state of competition in an industry. These collectively
determine the profit (i.e. long-run return on capital) potential of the industry as a whole.
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7. Core competences –Kay's three sources

Kay (1993) argues that there are three distinct capabilities a company can develop that add value. These
capabilities or core competences can originate from three sources.
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Competitive architecture
This is the network of relationships within and around a business. There are three divisions as described
below.
Internal architecture –relationships with employees
External architecture –relationships with suppliers, intermediaries and customers
Network architecture –relationships between collaborating businesses.
The knowledge, routines and information exchanges created by these relationships (particularly those
which are long term) can produce core competences which other businesses cannot replicate.

Reputation
This is the reason why customers come back, investors invest, potential employees apply for jobs and
suppliers supply. Reputations (at least good ones) are not developed overnight –they can take years.
Once a business has a good reputation it provides a core competence that rivals cannot match. Examples
(may) include BMW and Virgin Atlantic (reputation for quality and service).

Innovative ability
This is the ability to develop new products and services and maintain a competitive advantage.
Organisation structure, culture, routines, etc. and collaboration between employees, customers and
suppliers (i.e. the architectures discussed above) influence the ability of a business to innovate. Sony has
consistently been innovative.

8. A checklist of resources/(9Ms)
The 9Ms model summarises the resources and sources of competences to be evaluated. The audit should
be comprehensive, but it is useful to identify the unique resources which underlie the firm's sustainable
competitive advantage (i.e. what sets it apart from other organisations) as opposed to those that are
necessary (i.e. threshold) but do not form the basis of sustainable competitive advantage.

1. Men and women: Assessment of the number of men, skills (production, marketing e-commerce, etc),
motivation, adaptability, etc.
2. Machines: Number, productive capacity, age, condition, location, etc. Appropriate technological and
applications infrastructure for e-commerce, etc.
3. Money: Sources, uses, cash flow forecasts, relationship with shareholders, bankers, etc.
4. Materials: Supplier reliability, flexibility, costs, distribution systems, etc.
5. Markets: Market status, position and market share, brand image, customer loyalty, customer
goodwill, distribution systems, etc.
6. Management: Quality, skills, ability of senior management. One key management skill is that of good
Corporate Governance and managing risk. (See Chapter 8 for further discussion.)
7. Methods: Activities and processes used, outsourcing, capital or labour intensive production methods,
etc.
8. Management information systems: Quality, timeliness, etc (see Chapter 13 for further discussion).
9. Make up: Structure, culture, etc.
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9. Benchmarking Competent

10.Porter’s Value Chain

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Cost drivers
A cost driver is the unit of an activity that drives the change of cost in production or servicing. It refers to
any activity that causes a cost to be incurred. In traditional costing, the cost driver used to allocate
overhead costs to cost objects relates to quantity of output.

Value Drivers
Value drivers are anything that can be added to a product or service that will increase its value to
consumers. These differentiate a product or service from those of a competitor and make them more
appealing to consumers. The greatest benefit of a value driver is that it provides a competitive advantage
to a business, giving that business an upper hand in its industry. Value drivers can come in many forms,
such as superior brand awareness or revolutionary technology.
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11.Product life cycle (PLC) revisited

12.Boston Consulting Group (BCG) matrix

This matrix was developed by the Boston Consulting Group (BCG) in 1968 and was based on extensive work into the
presence of experience effects in industry.
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13.SWOT Analysis:
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14.Weirich's TOWS matrix

Weirich, one of the earliest writers on corporate appraisal, originally spoke in terms of a TOWS matrix in
order to emphasise the importance of threats and opportunities. It has several benefits:
 It provides a clear set of steps to move from SWOT to the formulation of strategic options.
 It makes management aware of the need for defensive strategies (WT) in addition to strategies to
grasp opportunities.

Note that this is therefore an inherently positioning approach to strategy. A further important element of
Weirich's discussion was his categorisation of strategic options:
 SO strategies employ strengths to seize opportunities.
 ST strategies employ strengths to counter or avoid threats.
 WO strategies address weaknesses so as to be able to exploit opportunities.
 WT strategies are defensive, aiming to avoid threats and the impact of weaknesses.

15. Porter's three generic strategies

Illustrated in the diagram below:
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 Cost leadership
A cost leadership strategy seeks to achieve the position of lowest-cost producer in the industry as a
whole. By producing at the lowest cost, the manufacturer can compete on price with every other
producer in the industry, and earn the higher unit profits, if the manufacturer so chooses.
How to achieve overall cost leadership
a) Set up production facilities to obtain economies of scale.
b) Use the latest technology to reduce costs and/or enhance productivity (or use cheap labour if
available).
c) In high technology industries, and in industries depending on labour skills for product design and
production methods, exploit the learning curve effect. By producing more items than any other
competitor, a firm can benefit more from the learning curve, and achieve lower average costs.
d) Concentrate on improving productivity.
e) Minimise overhead costs.
f) Get favourable access to sources of supply.
g) Use value chain to streamline activities and reduce non-value adding activities (see Chapter 5).

Classic examples of companies pursuing cost leadership are Black and Decker and South West Airlines.
Large out-of-town stores specialising in one particular category of product are able to secure cost
leadership by economies of scale over other retailers. Such shops have been called category killers; an
example is Toys R Us.

 Differentiation
A differentiation strategy assumes that competitive advantage can be gained through particular
characteristics of a firm's products.
How to differentiate
a) Build up a brand image (e.g. Pepsi's blue cans are supposed to offer different 'psychic benefits' to
Coke's red ones).
b) Give the product special features to make it stand out (e.g. Russell Hobbs' Millennium kettle
incorporated a new kind of element, which boils water faster).
c) Exploit other activities of the value chain (see Chapter 5).
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Focus (or niche) strategy

In a focus strategy, a firm concentrates its attention on one or more particular segments or niches of the
market, and does not try to serve the entire market with a single product.
Porter suggests that a focus strategy can achieve competitive advantage when 'broad-scope' businesses
fall into one of two errors:
 Underperformance occurs when a product does not fully meet the needs of a segment and offers the
opportunity for a differentiation focus player.
 Overperformance gives a segment more than it really wants and provides an opportunity for a cost
focus player.
Advantages
 A niche is more secure and a firm can insulate itself from competition.T
 The firm does not spread itself too thinly.
 Both cost leadership and differentiation require
superior performance –life is easier in a niche, where there may be little or no competition.
Drawbacks of a focus strategy
 The firm sacrifices economies of scale which would be gained by serving a wider market.
 Competitors can move into the segment, with increased resources (e.g. the Japanese moved into the
US luxury car market, to compete with Mercedes and BMW).
 The segment's needs may eventually become less distinct from the main market.
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16.Product-market growth matrix

Ansoff drew up a growth vector matrix, describing how a combination of a firm's activities in current and new
markets, with existing and new products can lead to growth.

 Market penetration
The firm seeks to do four things:
 Maintain or to increase its share of current markets with current products, e.g. through competitive pricing,
advertising, sales promotion
 Secure dominance of growth markets
 Restructure a mature market by driving out competitors
 Increase usage by existing customers (e.g. airmiles, loyalty cards)
The ease with which a company can pursue this strategy depends on its market and its competitors. If the market is
growing it may be relatively easy to gain share. However if markets are static (mature) it is not.

 Market development: present products and new markets

 There are many possible approaches. Here are some examples. New geographical areas and export markets
(e.g. a radio station building a new transmitter to reach a new audience).
 Different package sizes for food and other domestic items so that both those who buy in bulk and those who
buy in small quantities are catered for.
 New distribution channels to attract new customers (e.g. organic food sold in supermarkets not just
specialist shops, Internet sales).
 Differential pricing policies to attract different types of customer and create new market segments. For
example, travel companies have developed a market for cheap long-stay winter breaks in warmer countries
for retired couples.
This strategy is likely to be more successful, the closer the characteristics of the new market are to existing markets
(or segments).

 Product development: new products and present markets

This has several advantages.
 The company can exploit its existing marketing arrangements such as promotional methods and distribution
channels at low cost.
 The company should already have good knowledge of its customers and their wants and habits.
 Competitors will be forced to respond.
 The cost of entry to the market will go up.
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 Diversification: new products and new markets

Diversification occurs when a company decides to make new products for new markets. It should have a clear
idea about what it expects to gain from diversification.
 Growth: New products and new markets should be selected which offer prospects for growth which the
existing product-market mix does not.
 Investing surplus funds not required for other expansion needs, bearing in mind that the funds could be
returned to shareholders. Diversification is a high risk strategy, having many of the characteristics of a new
business start-up. It is likely to require the deployment of new competences.
Because of the extent of the change, diversification normally involves more risk than the other strategies.

 Types of diversification
Ansoff identifies two classes of diversification:
1. Related diversification: Integrating activities in the supply chain or leveraging technologies or competences.
2. Conglomerate diversification: The development of a portfolio of businesses with no commercial similarity or
links between them.

 Related diversification
 Horizontal integration is development into activities which are competitive with or directly complementary
to a company's present activities.
 Competitive products: Taking over a competitor can have obvious benefits, leading eventually towards
achieving a monopoly. Apart from active competition, a competitor may offer advantages such as completing
geographical coverage.
 Complementary products: For example, a manufacturer of household vacuum cleaners moving into
commercial cleaners. A full product range can be presented to the market and there may well be benefits
from having many of the components common between the different ranges.
 By-products: For example, a butter manufacturer discovering increased demand for skimmed milk. Generally,
income from by-products is a windfall to be counted, at least initially, as a bonus.
 Vertical integration occurs when a company becomes its own supplier (backward) or distributor forward).

 Conglomerate diversification
Not very unfashionable in the USA and Europe where its financial returns have been disappointing, however, it
has been a key strategy for companies in Asia, particularly South Korea.
Conglomerates
 The characteristic of conglomerate (or unrelated) diversification is that there is no common thread, and the
only synergy lies with the management skills. Outstanding management seems to be the key to success as a
conglomerate, and in the case of large conglomerates they are indeed able, because of their size and
diversity, to attract high-calibre managers with wide experience.
 Two major types of conglomerate can be identified. The financial conglomerate provides a flow of funds to
each segment of its operation, exercises control and is the ultimate risk taker. In theory it undertakes
strategic planning but does not participate in operating decisions. The managerial conglomerate extends
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this approach by providing managerial counsel and interaction on operating decisions, on the assumption
that general management skills can be transferred to almost any environment.
Advantages of conglomerate diversification
 Risk-spreading: Entering new products into new markets offers protection against the failure of current
products and markets.
 High profit opportunities: An improvement of the overall profitability and flexibility of the firm through
acquisition in industries which have better economic characteristics than those of the acquiring firms.
 Escape from the present business.
 Better access to capital markets.
 No other way to grow.
 Use surplus cash.
 Exploit under-utilised resources.
 Obtain cash, or other financial advantages (such as accumulated tax losses).
 Use a company's image and reputation in one market to develop into another where corporate image and
reputation could be vital ingredients for success.
The example of Virgin Group above may be an example of conglomerate diversification.
Disadvantages of conglomerate diversification
 The dilution of shareholders' earnings if diversification is into growth industries with high P/E ratios.
 Lack of a common identity and purpose in a conglomerate organisation. A conglomerate will only be successful
if it has a high quality of management and financial ability at central headquarters, where the diverse
operations are brought together.
 Failure in one of the businesses will drag down the rest, as it will eat up resources.
 Lack of management experience: Japanese steel companies have diversified into areas completely unrelated to
steel such as personal computers, with limited success.
 Poor for shareholders: Shareholders can spread risk quite easily, simply by buying a diverse portfolio of shares.
They do not need management to do it for them.

17.Marketing Mix 7Ps

Marketing strategy and Porter
Porter's three generic strategies are recipes to create superior long-term profitability.
Overall cost leadership –achieve lowest delivered cost to customer to boost margins and survive market
entry and price wars better than competitors.
Differentiation –acquire status of premium perceived value in the market to enable higher prices to be
charged and to resist competition from cheaper 'follower' products.
Focus –monopolise a niche segment by provided either a specifically tailored product of very high
perceived value or by cutting extraneous costs to gain access to the lowest price segments.
Marketing strategy positions products in the market place according to these generic strategies. This will
involve correct tailoring of the main elements of marketing, the marketing mix:
 Product –the offering the customer consumes.
 Price –the pricing point and actual cost in use to customer.
 Promotion –how it's advertised and sold.
 Place –where it is available, can be accessed or bought from.
 People –the personnel the customer meets.
 Physical –the look and feel of the business premises, publicity etc.
 Process –the way the clients make a purchase or the way the client is dealt with.
The final three Ps are particularly important for service companies' marketing
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18.Models on structure:
 Functional structure
 Geographic structure
 Product/brand divisionalisation
 Hybrid structures

 Functional structure
Functional structure leads to departments that are defined by their functions, that is, the work that they do.

Advantages
 It is based on work specialism and staff and managers can be technical experts.
 The firm can benefit from economies of scale and division of labour.
 It offers a career structure within the specialism.
 Specialised resources and equipment are used efficiently.
 It can enhance quality by deploying expertise.
 It can promote the acquisition of technical skills.
Disadvantages
 It does not reflect the actual business processes by which value is created. This means that a mechanism for co-
ordinating the departments will be needed, such as a corporate board.
 It is hard to identify where profits and losses are made on individual products.
 It can lead to mutual suspicion and conflict between specialisms which may be dysfunctional (e.g. between
production and sales)
 It hampers cross-functional innovation and creativity.

 Geographic structure
Some authority is retained at Head Office (organised, perhaps, on a functional basis) but day-to-day service
operations are handled on a territorial basis. Within many sales departments, the sales staff are organized on
this basis.
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Advantages of geographic divisionalisation

 Better and quicker local decision making at the point of contact between the organisation (e.g. a sales
executive) and its customers.
 It may be less costly to establish area factories/offices than to run everything centrally (e.g. costs of
transportation and travelling may be reduced).
 It might be essential for overseas operations to cope with different environments.
Disadvantages of geographic divisionalisation
 Duplication of management effort, (e.g. a national organisation divided into ten regions might have a customer
liaison department in each regional office).
 It struggles to cope with large clients who span the divisions.

 Product/brand divisionalisation
Product divisionalisation: The elements of an organisation are grouped by products or product lines. Some
functional divisionalisation remains (e.g. manufacturing, distribution, marketing and sales) but a divisional
manager is given responsibility for the product or product line, with authority over personnel of different
functions.
Advantages
 Individual managers can be held accountable for the profitability of individual products.
 Specialisation can be developed. For example, some salesmen will be trained to sell a specific product in which
they may develop technical expertise and thereby offer a better sales service to customers. Service engineers
who specialise in a single product should also provide a better after sales service.
 The different functional activities and efforts required to make and sell each product can be co-ordinated and
integrated by the divisional/product manager.
 It should be focused on how a business makes its profits.

The disadvantage of product divisionalisation is that it increases the overhead costs and managerial
complexity of the organisation.

Brand: A brand is the name or design which identifies the products or services of a manufacturer or provider and
distinguishes them from those of competitors. Brands may denote different products or, often, similar products
made by the same firm.

 Branding implies a unique marketing position. It becomes necessary to have brand divisionalisation. As with
product divisionalisation, some functional divisionalisation remains (especially on the manufacturing side) but
brand managers have responsibility for the brand's marketing and this can affect every function.
 Brand divisionalisation has similar advantages and disadvantages to product divisionalisation. In particular,
overhead costs and complexity of the management structure are increased, the relationships of a number of
different brand departments with the manufacturing department, if there is only one, being particularly
difficult.
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 Hybrid structures
Very few organisations divisionalise on one basis alone. This was clear in the NHS example above. Many
organisation hierarchies in practice combine elements of a number of these approaches. In the example below,
research and development is centrally organised, but the operating activities of the firm are geographically
arranged. This is an example of a hybrid structure.

 Business and financial risk

Business risk is the variability of returns due to how a business trades or operates, its exposure to markets,
competitors, exchange rates etc. This business risk itself can be sub-analysed into:
 Strategic risk: Risks associated with the long-term strategic objectives of the business, potential variability of
business returns arising as a result of the company strategy and its strategic position with respect to
competitors, customers, reputation, legal or regulatory change, political change. Strategic risk also
encompasses knowledge management, i.e. the effective management and control of the knowledge
resources including key personnel, intellectual property and production technology.
 Operational risk: Variability arising from the effectiveness of how the business is managed and controlled
on a day to day basis, the accuracy and effectiveness of its information/accounting systems, its reporting
systems and its management and control structures. Operational risk also encompasses compliance with
issues such as health and safety, consumer protection, data protection etc.
 Hazard risk: The exposure a business may have to natural events and their impacts, the actions of
employees, the consequences of accidents etc, be it on the business, its trading partners or customers.

Financial risk is the risk arising as a result of how the business is financed –its level of gearing or leverage, its
exposure to credit, interest rates and exchange rates, liquidity risks. Financial risk tends to amplify the inherent
business risk at low levels of gearing, and at higher levels may directly contribute to the risk of business failure.

Compliance risk is the risk arising from non compliance with laws or regulations. This includes breach of
laws/regulations by the company, or breaches by a stakeholder (e.g. customer or supplier) which may have
consequences for the company. It may relate to financial laws/regulations (e.g. contracts, tax, financial reporting,
pensions and social security, company law etc) or to non-financial laws/regulations (e.g. health and safety,
employment law etc).

 Systematic and unsystematic risk

Systematic risk is the variability of returns as a result of market wide forces such as changes in interest rates or
exchange rates, factors that are external to the company. The beta coefficient is a statistical measure of this
risk.

Unsystematic risk arises from factors specific to the company leading to variability of returns such as the clients
and contracts a business has or the business exposure to a foreign currency due to the nature of its trading or
finance, factors that are internal to the company.
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19.Overall Risk:
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20.Balance Scorecard
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21.The Gemini 4Rs framework for planned strategic change

Management consultants Gouillart and Kelly describe a four-dimensional process for business
transformation in their book Transforming the Organisation. Known as the Gemini 4Rs framework, this
approach aims to cover all the important components of the organisation's identity.

 Reframing involves fundamental questions about what the organisation is and what it is for:
 Achieve mobilisation: Create the will and desire to change.
 Create the vision of where the organisation is going.
 Build a measurement system that will set targets and measure progress.
 Restructuring is about the organisation's structure, but is also likely to involve cultural changes:
 Construct an economic model to show in detail how value is created and where resources should
be deployed.
 Align the physical infrastructure with the overall plan.
 Redesign the work architecture so that processes interact to create value.
 Revitalising is the process of securing a good fit with the environment:
 Achieve market focus.
 Invent new businesses.
 Change the rules of competition by exploiting technology.
 Renewal ensures that the people in the organisation support the change process and acquire the
necessary skills to contribute to it:
 Create a reward system in order to motivate.
 Build individual learning.
 Develop the organisation and its adaptive capability.

22.Force field analysis

There is a technique developed by Lewin to visualise the change process called force field analysis. It is
based on the idea that in any group or organisational situation there is an interplay of restraining and
driving forces that keeps things in equilibrium.
Lewin's force field analysis maps the forces that are pushing toward the preferred state and the
restraining forces, which are pushing back to the current state. They can then be presented in a chart.
The example below describes a public sector organisation whose management are introducing a
performance review system. A group of workers are producing at 70% of the efficiency that might be
expected on purely technical grounds. Their output can be visualised as a balance between two opposing
sets of forces, i.e. driving forces which are propelling their output upwards and restraining forces which
are preventing it from going beyond the 70% level.
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23.The Lewin/Schein 3 step (iceberg) approach

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24.The project life cycle (4D Model)

The life cycle concept can be useful in the management of projects, since it breaks the whole down into more easily
manageable parts. This is particularly applicable to the allocation and management of resources, since their type
and quantity vary from phase to phase.
Maylor (Project Management) describes four phases or stages: this is the 4D model.

(1) Define the project

Larger projects are likely to involve the creation of a project brief or terms of reference for discussion. A project
initiation document may be prepared, if it is decided to continue with the project. This will include a statement of
requirements, a statement of the vision for the project and a business case.

(2) Design the project

There are several techniques used for scheduling and time planning, such as network analysis and Gantt charts
(diagram below). This stage also deals with the need to plan for cost, quality and risk using techniques such as risk
assessment, resource budgeting, and cost budgeting.
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(3) Deliver the project

This is the operational phase of the project. Planning will continue as required in order to control agreed
changes and to deal with unforeseen circumstances, but the main emphasis is on getting the work done.
There are several important themes.
 Management and leadership: People management assumes a greater importance as the size of the
project work force increases.
 Control: Time, cost and quality must be kept under control, as must the tendency for changes to
proliferate.
 Supply chain: All the aspects of logistics management must be implemented, especially with projects
involving significant physical output.
 Problems and decisions: Problems are bound to arise and must be solved sensibly and expeditiously.
Complex problems will require careful analysis using the scientific tools of decision theory.

(4) Develop the process

Improve the way the organisation and project teams cope with projects:
 Completion: All activities must be properly and promptly finished; care must be taken that
contractors do not either leave small things undone or, if paid by time, spin things out for as long as
possible.
 Documentation must be completed: This is important on any project but it is vital if there are quality
certification issues or it is necessary to provide the user with operating documentation.
 Project systems must be closed down, but in a proper fashion: In particular, the project accounts and
any special accounting systems must remain in operation and under control until all costs have been
posted but must then be closed down to avoid improper posting.
 Handover must take place where the project has been managed for a client under contract: At some
point the client must formally accept that the contract is complete and take responsibility for any
future action that may be required, such as the operation and maintenance of a system.
 Immediate review is required to provide staff with immediate feedback on performance and to
identify short-term needs such as staff training or remedial action for procedure failures.
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25.Bringing them together –the cruciform chart

Effective SWOT analysis does not simply require a categorisation of information, it also requires some evaluation of
the relative importance of the various factors under consideration.
A cruciform chart (literally 'cross form') can be drafted on a flip-chart by the person facilitating the strategy
discussions. Its benefits are:
 Limitations on space restricts management to focusing on the big points
 Allows mapping of connections between points (see below)

 Match strengths with market opportunities

Strengths which do not match any available opportunity are of limited use while opportunities which do not
have any matching strengths are of little immediate value.
 Conversion
This requires the development of strategies which will convert weaknesses into strengths in order to take
advantage of some particular opportunity, or converting threats into opportunities which can then be matched
by existing strengths.