Cima E3 2015
Cima E3 2015
Cima E3 2015
CIMA – E3 Notes
Table of Contents
Chapter 1: The Process of Strategy Formulation ..................................................................................6
Levels of Strategy ...................................................................................................................................... 6
Approaches to Strategic Planning ............................................................................................................. 6
Rational approach ................................................................................................................................. 6
Emergent approach - Mintzberg ........................................................................................................... 8
Strategic Planning for Not-for-Profit Organizations ............................................................................. 8
Approaches to Strategic Planning ............................................................................................................. 8
Corporate Governance.............................................................................................................................. 9
Chapter 2: Mission, Vision & Stakeholders ........................................................................................ 10
Mission Statement .................................................................................................................................. 10
Vision Statement ..................................................................................................................................... 10
Objectives ............................................................................................................................................... 10
Stakeholders ........................................................................................................................................... 10
Stakeholder Mapping (Mendelow’s Power/Interest Matrix) ............................................................. 11
Resolving Stakeholder Conflicts (Cyert and March)............................................................................ 11
Non-Market Strategy .......................................................................................................................... 11
Chapter 3: Ethics and Corporate Social responsibility ........................................................................ 13
Corporate Social Responsibility (CSR) ..................................................................................................... 13
Carroll’s CSR Model ............................................................................................................................. 13
Ethical Stances (JSW) .......................................................................................................................... 13
Sustainability ....................................................................................................................................... 13
CIMA Code of Ethics ................................................................................................................................ 14
Chapter 4: External Environmental Analysis ...................................................................................... 16
PEST analysis (macro-economic environment) ....................................................................................... 16
Porter’s Five Forces analysis (Industry Attractiveness) .......................................................................... 17
Industry life cycle .................................................................................................................................... 18
Competitor Analysis (competitor intelligence) ....................................................................................... 19
Porter’s Diamond (competitive advantage of nations) .......................................................................... 19
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To develop a strategy, and gain competitive advantage, a careful understanding is required of:
1. Resources (RBV view – resources and competencies)
2. Environment (external)
3. Stakeholders expectations (stakeholder matrix)
Levels of Strategy
Corporate Strategy: Which businesses and markets should we be in?
Involves acquisition & diversification
Entering new industries
Leaving existing industries
JSW Approach
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Incrementalism (Lindblom)
Manager do not evaluate all options available and option the process is informal
Strategy making tends to involve small-scale extension to the past policy as it would be more
acceptable
Incremental rather than a radical shifts following a comprehensive search
Freewheeling Opportunism
Freewheeling opportunists do not like planning, they take opportunities as they arise
1. Effectiveness
2. Efficiency
3. Economy
2. Market-led or positioning approach: Analysis of the market & competitors before objective and
strategy formulation. Ensures that the firm has a good fit with the environment. If markets are
expected to change, the firm needs to change too. Difficult to anticipate he environment.
3. Resource-based or competence approach: Emphasis is given to the firms core competences as
anticipating the environment is difficult.
Corporate Governance
It is the system by which companies are directed and controlled
Purpose is to monitor those parties that control the resources owned by the investors
Relevant Aims:
Increase disclosure to shareholders
Ensure ethical & legal operations
Increase confidence for existing & potential investors thus promote investment and growth
Increase transparency at the board level
Key Ideas:
Leadership:
o Headed by an effective board
o Clear division of responsibility between the board (chairman) and the business (CEO)
o Board should include non-executive directors
o Chairman of the board must practice a culture of openness and debate
Effectiveness
o Board members must have appropriate skills, experience, independence & knowledge
o Formal, rigorous & transparent process of appointing new members
Accountability
o Present balanced understanding and clear assessment of the company’s position
o Publish statement of their responsibility for preparing accounts
o Review effectiveness of risk management and internal controls
Remuneration
o Formal, transparent process for developing policy on executive remunerations
Relations with shareholders
o Board must ensure satisfactory dialogue with shareholders
o Call AGM to communicate with shareholders and to encourage participation
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Vision Statement
Longer term aspirations of the organization. The ideal position that the company wants to reach within
the medium to long-term.
Objectives
More specific and seeks to translates the mission into a series of mileposts
Stakeholders
Individuals and group that can influence (managers & staff) or are influenced (shareholders, customers
suppliers etc.) by the organization’s actions.
NGOs; people’s organizations; civic clubs; trade unions; gender, culture, and religious groups; charities;
social and sports clubs; co-operatives; environmental groups; consumers/consumer organizations and
the media.
Non-Market Strategy
A strategy to deal manage relationships with governments, regulators, NGOs, media and the
society at large influences an organization.
There are huge opportunities for companies here, as well as dangers for those who purely focus
on the market side i.e. its customers, suppliers & competitors.
Importance of a non-market strategy is increasing due to difficulty of achieving sustainable
competitive advantage.
A detailed environmental analysis is required to develop a non-market strategy.
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Capacity expansion
Demand
Divestment & exit
Infant industry protection
Entry barriers
Competition policy
New product adoption
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1. Short-term shareholder interest – maximize profit in the financial year, government should set
minimal ethical standard
2. Longer-term shareholder interest – do good for one’s own long-term interest
3. Multiple stakeholder obligation – have a role to play in the society, all stakeholders interest
4. Shaper of society – views financial interest as secondary
Sustainability
Use of resources in such a way that they do not compromise the needs of future generations.
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Objectives Create product Maximize market Maximize profit whilst Reduce expenditure
awareness & trial share defending market share & 'milk the brand'
Strategies
Product Offer basic product Offer product Diversify brands & Phase out weak items
extensions, service models
& warranty
Promotion Build product Build awareness & Stress brand Reduce to a level to
awareness amongst interest in mass differences & benefits maintain hardcore
early adopters & market loyals
dealers
Purpose (Grant)
Provide an understanding of the company's competitive advantage/disadvantage relative to its
competitor's positions
Help generate insights into competitors strategies - past, present and potential
To give an informed basis for developing future strategies to sustain/establish advantages over
competitors.
To predict competitors' likely reactions to a firm's strategic initiatives
Framework
Resource Audit
Identifies the resources that are available to an organization and seeks to start the process of
identifying competencies.
It attempts to assess the relative strength, the quantity, the nature of those resources and the
extent to which those resources are unique and difficult to imitate.
Resources
1. Physical or operational resources
2. Human resources
3. Financial resources
4. Intangibles
The key is to know what you have and what you lack, in order to make a strategy.
Competences
Resources are combined together to achieve a competence.
Core competencies – order winners; difficult to emulate; basis of competitive advantage
Threshold competencies – order qualifiers; things that we must be good at in order to be
considered a supplier
Basis of competitive advantage
Competence audit
What competences the organization has & how resources are deployed to create them
Categorization of competence as threshold or core
CSFs are often vague, therefore organizations must set up specific and measurable KPIs to
measure each CSF.
The organization’s strategy must look at ways of maximizing the correlation between the two
This is a means by which the activities within and around the organization are identified and then
related to the assessment of competitive strength.
An understanding of strategic capability must start with an identification of the separate value-adding
activities
Value drivers or are activities or features that enhance the perceived value of a product or service by
customers and which therefore create value for the producer. They can be tangible or intangible.
Primary Activities
1. Inbound logistics – receiving, storing & distributing the inputs to the product
2. Operations – transforming inputs into final products (machining, packaging, testing etc.)
3. Outbound logistics – collecting, storing & distributing products to buyers
4. Marketing & sales – customer made aware of the product & transfer is facilitated
5. Service – installation, repair, training & after-sales service
Support Services
1. Procurement – process of acquiring various resource inputs to the primary activities
2. Technology development – IT affects product design or process and material/ labor handling
3. HR management – recruiting, managing, training, developing and rewarding employees
4. Infrastructure – systems of planning, finance, quality control, information management etc.
Looks at linking the value chains of suppliers and customers to that of the organization
The model has same support activities as Porter’s value chain, but primary activities are as follows:
Position Auditing
Where we are now?
Starting point for the process of strategic choice.
Use SWOT analysis
Gap Analysis
The comparison between an entity’s ultimate objective and expected performance from projects, both
planned and underway.
A plan is what you want to happen whilst a forecast is what you predict will happen given the current
context and assumptions. The whole approach of gap analysis is based upon the feed forward control
concept, i.e. the comparison of plan with forecast.
Feedforward control is about identifying deviance before the problems of missed targets arise so that
corrective action can take place in advance. Proactive approach rather than reactive control are needed
for strategy development.
Benefits
Easily understood
Long-term focus
Provides basic options for closing the gap (efficiency & expansion)
Questions realism of objectives
Forecasting
1. Statistical models – exponential smoothing, regression analysis, risk analysis
2. System modeling – sophisticated software packages (ERM software)
3. Intuitive forecasting methods: judgment based on systematic expert knowledge
a. Think tanks: informal; no leader; experts; independence;
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Scenario Planning
Managers need a picture (scenario) of where the world may be in a few years’ time.
Strategic Models
Benefits Limitations
Useful starting point, initiate discussion Simplistic, two-by-two
Well-known, easily applicable, less resistance Too much reliance on model for solution
Generate options, allow comparisons Dated, environments have changed
Can be linked with each other Do not apply in every situation
Can be developed in complicated applications
Cost-Leadership Strategy
Benefits:
Business can earn higher profits by charging same as competitors
Let’s the company built a defense strategy against price wars
Allow price penetration entry into new markets
Enhances barrier to entry
Develop new market segments
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Differentiation Strategy
It is based on the idea of persuading customers that a product is superior to that offered by the
competition (product features, perception, product or process).
Benefits:
Products command a premium price so higher margins
Demand becomes less price elastic and so avoids costly price wars
Life cycle extends as branding becomes possible- strengthens barrier to entry
How
Creating products that are superior to competitors in term of design, performance etc.
Offer after-sales service
Create brand strength
Product augmentation
Packaging
Promoting innovative culture necessary
Focus Strategy
Benefits:
Smaller investment
Allows specialization
Less competition
Entry is cheap and easier
How:
Detailed research on customer needs
Reliable segment identification
Competition needs to be fully understood
Direct focus on consumer needs
Niche must be:
o Large enough; growth potential; of negligible interest to competitors; strategically
possible
o Based on: location, type of end user, quality, price, size of customer, product feature
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Ansoff Matrix
Directions for growth, i.e. possible strategic options
Market Penetration
Approach:
Existing customers – adverts, promos, sponsorships, quantity discounts
New customers – pricing, adverts, promos, process redesign (e-commerce)
Considered when:
Growing market, not saturated
Competitors leaving or weak
Strong brands and marketing capability
Market Development
Approach:
Add geographical areas
Add demographic areas
New distribution channels
Key notes:
Slightly product modifications
Adverts in different media
Research
Organization structured to produce one product & there are high switching costs
Strong marketing ability
Product Development
Approach:
Develop products & features of a significant nature
Create different quality versions
Key notes:
Company needs to be innovative, strong R&D and an established, reliable marketing database
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Diversification
Approach:
New products to new markets
Key noted:
When existing market is saturated or product lifecycle is ending
Can create synergic benefits
High risk high return
Brand stretching ability is a CSF
Teething problem with new business, might damage brand reputation
Reasons:
Objectives can’t be met due to change in external environment
Excess cash & powerful stakeholders
Possible brand stretch, benefit from past adverts and promotion in other SBUs
Can spread risk and also provide greater returns
Greater use of existing distribution systems & corporate resources, synergies
Diversification
Related Diversification (concentric diversification)
1. Vertical Integration
a. Vertical backward – Operate in markets in which it currently obtains its resources from
b. Vertical forward – seeks to move into its customer base
Key issues:
a. Cost – cheaper to produce or to buy
b. Quality – better control, customization, propriety expertise
c. Risk/flexibility – outsourcing gives buyer power i.e. prices bargain & flexibility to switch
2. Horizontal – entering into complementary or competing markets, bi-products
Advantages Disadvantages
Economies of combined operations Increase fixed cost
Internal control and coordination Reduced flexibility to change partners
Avoiding the market (negotiation, packing, Capital investment needs
advertising avoided) Cut off from the flow of technology
Tap into technology (pc manufactures) Dulled incentives could lead to inefficiencies
Safeguarding propriety knowledge Different managerial requirements
Assured supply and demand
Reduction in bargaining power of buyer and
supplier
Defend against lockout
Enhanced ability to differentiate
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Unrelated Diversification
Likely reasons:
Existing market saturated
Reduced variability in returns, greater spread of overall portfolio risk
Possibility of brand stretch
Opportunity for returns and nothing else to do with existing resources
10%
Appropriate strategies:
1. Hold – keep product in its existing quadrant i.e. invest heavily on adverts for stars
2. Build – increase investment in the product to boast its market share
3. Harvest – reduce investment in the product to maximize net cash return
4. Divest – disposal of the product to release any cash tied up
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Acquisition
Acquisition versus organic growth, tradeoff between risk and cost.
Advantages Disadvantage
High-speed access to resources/ brand More costly
Maybe the only way to enter the market Cultural mismatch
Less reaction from competitors (as the Difference in salaries
capacity of the competitive arena is same Risk of the unknown
Can reduce overcapacity Reduction in return on capital employed
If P/E ratio is high in the existing company,
EPS can boasted by issuing its own equity
Asset stripping for undervalued assets
Divestment
May occur because:
SBU does not fit the existing group, company wished to focus on core competences
SBU may be too small for management attention
Selling SBU as a going may be much cheaper
Parent company may need to improve liquidation
Individual parts are worth more than the whole
MBO is one way for divestment
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International Growth
Possible strategies for international growth:
Export
Oversees manufacture
Multinational
Transnational
Evaluating Strategies
Strategies need to have ‘strategic fit’ with the environment in order to be effective:
Advantages Disadvantages
Culturally accepted Inflation distortion
Focus on financial objectives Lack of comparability
Comparable across companies Understood by a select few
Cheap Leads to suboptimal & short-termist
Established framework behavior
Focus on resource generation Subjectivity – depreciation
Advantages Disadvantages
Wider view Sometimes difficult to calculate
Easier to calculate Subjectivity in design, interpretation &
Easier to understand calculation
Not distorted by inflation Can lead to indicator overload
Cover broad system of management Costly
Positive motivational implications Cultural clash
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Balance Scorecard
Benefits Drawbacks
Avoids reliance on short-termist or Does not provide a single overall view of
incomplete financial measures. performance
Helps identify problems earlier No clear relation between the balanced
It can ensure that divisions develop success scorecard and shareholder analysis
measures that relate to the overall corporate Measures may give conflicting signals and
goals of the organization confuse management
It can assist stakeholders in evaluating the Often involves a substantial shift in corporate
firm if measures are communicated externally culture in order to implement it
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Performance Pyramid
The performance pyramid is designed to understand and define the links between objectives &
performance measures at different levels in the organization
It is designed to ensure that the activities of every department, system and business unit
support the overall vision of the organization
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Benchmarking
The purpose of benchmarking is to help management understand how well the firm is carrying out its
key activities and how its performance compares with best in class.
Competitor
o Uses a direct competitor
o Aims to render competitions core competence as threshold
Process or activity
o Focus on similar processes of an indirect competitor
o Look for innovative ways to create advantage
o Takes time and is expensive
o Less resistance, can provide the new basis for advantage
Divisional Performance
Some measure for divisional performance are:
EVA
It is an estimate of true economic profit
SVA
The main aim of an organization is to add value to shareholder wealth. This usually results in the form of
a balance scorecard, as value can be financial as well as non-financial (social responsibility etc.)
Rapport’s model to increase SVA (increasing cash flows and decreasing cost of capital)
Sales growth rate ↑
Life of the project ↑
Operating profit margin ↑
Working capital ↓
Cost of capital ↓
Asset investment ↓
Taxation ↓
Managers should set targets in these areas in order to ensure they are maximizing shareholder wealth
Advantages Disadvantages
Adjustment made to profit effectively mean Involves subjective provisions & estimates
we are looking at cash flow measures Ignores intangible assets like brand, staff etc.
Consistent with NPV so should ensure better Confuses management, rarely trained
goal congruence between divisional Costly to maintain, resistance initially high
performance & maximizing shareholder value Equates value with money
Cost of financing emphasized Judgment involved in selection of K%
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Three areas:
Profit (economic prosperity) – economic benefit to the surrounding community & society
People (social justice) – fair & favorable business practices regarding labor & wider community
Planet (environmental quality) – use of sustainable environmental practices
Transfer pricing
Dysfunctional behavior is possible because transfer prices are imposed form outside the group
Managers would have little control over reported profit & thus would be demotivated if their
bonuses/ rewards are links to divisional profit. This might lead to dysfunctional behavior in the
form of risky unnecessary cost cuts
If prices are set at marginal costs, the SBU’s manager won’t an incentive to supply as they may
choose to sell resources to outside parties. This can lead to quality implications for the group
Likewise, if prices are set too high, the purchasing subsidiary will find it cheap to buy from
elsewhere
Buying as marginal cost gives a misrepresented position as performance appears to be better
Transfer pricing arrangement take up a great deal of management’s time in the form of
arguments and speculation for favorable changes that can be immediately implemented
Difficult to identify arm’s length market prices as there are often no direct comparisons
In order to prevent dysfunctional behavior & provide true reflection of performance,
subsidiaries could report on the basis of value added rather than profit
Communication
Effective communication of performance mix is important as:
More likely to buy-in
Better understand how to meet targets
Explaining the positive impact of hitting the target will improve motivation
Getting feedback can ensure that the target set are achievable. Important for motivation
Sub-optimization
Refers to improving divisional situation at the expense of the company as a whole
IS Strategy
Concerned with aligning IS development with organizational needs & with seeking strategic
advantage from IT.
Long term orientation
Refers to the interconnected organizational activities that gather and process data and provide
information
Business led and demand oriented and is either supporting existing business or developing new
strategic choices
Concerned with identifying the information that is needed at all levels of business, to ensure
that the business achieves its objectives. Includes considering information needs at all levels
May be formed with the key objective of using information resource to generate new business
Must be business driven and capable of delivering tangible benefits: increased productivity;
increase profit and reduction in labor force
IM Strategy
Concerned with the role and structure of IT activities
Focuses on relationship between users and specialists
Management controls for IT, management responsibilities, performance measurement and
management processes
Described as organization-based, relationships-oriented and management focused
Identifying sources of info; collecting; storing; facilitating existing methods or using info;
identifying new ways of using info; ensuring controlled access
IT Strategy
Activity-based, supply-orientated and technology-focused.
It focuses on the selection, use and management of the technology itself.
Resources include:
o Hardware & software for data processing
o Communication
o Office automation
o Production automation
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E-business
E-business is the transformation of key business processes through the use of internet technologies
Stages of e-business:
Benefits Barriers
Cost reduction Technophobia – senior management
Increase revenue (sales & use of CRM) distrustful of the alleged benefits
Better information control – web sales Security concerns about hackers & e-fraud
Increased visibility High initial cost
Enhanced customer service e.g. extranet Running costs
Improved marketing Eliminates personal touch
Market penetration e.g. global presence Warehousing & distribution
Meeting customer need to shop online Reluctance of customer to shop online
More responsive to customer needs (after Staff reluctant in adopting the system
office hours through web i.e. 24/7)
Search with multiple criteria
Less inventory required
Employees can work from anywhere
E-procurement would also reduce cost
Intranets:
Internal internet commonly containing:
Information about customers, products & competitors
News/ updates
Procedure manuals
Virtual Organizations
This occurs where an organization outsources many of its functions to other organizations and simply
exists as a network of contracts with few, if any functions being kept in-house. They have a small central
core of staff who coordinate all of these different third parties.
Benefits Drawback
Ability to exploit opportunities Difficulty in negotiating revenue sharing
Can be made to look much larger, this will Loss of control over the product or service
enable them to compete with large rivals provided to the customer
Teams of experts can be formed to meet the Partner organizations may also work for
needs of a project competitors, reducing any competitive
Lower costs advantage
Advantages:
Lower cost
Easy customization to individual customer
Wider audience reached
Allows customer interaction
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Data Warehousing
A data warehouse is a subject based, integrated collection of data that helps management in its decision
making process. It collects information from various sources, both internal and external to the
organization and makes it available to the end-users in an understandable and usable format to assist
them in decision making.
Description:
Database
Data extraction tool
Decision support system
Allows users to dynamically extract summary information
Data Mining
Data mining is the analysis of data to unearth unsuspected or unknown relationships, patterns and
associations.
It involves advanced analytical techniques to discover useful relationships in large databases.
It uses statistical techniques and technologies to discover relationships and builds models based
on them.
It turns data/ information into insights for decision making.
Big Data
Big Data is a term for a collection of data which is so large that it becomes difficult to store and process
using traditional databases and data processing applications. It is often unstructured.
Knowledge Management
It an approach to business in which an organization consciously and comprehensively gathers, organizes,
shares and analyses its knowledge to further its aims.
Types of Knowledge
Explicit – knowledge that has been identified and codified. Relatively easy for the organization
to manage and share
Tacit – knowledge that people are often not aware that they possess or that it has value to
others. It is therefore very difficult for the organization to manage.
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Appropriate Systems
1. Networks – LANs enables the sharing of data and peripherals
2. Groupware – software that helps ‘work groups’ to collaborate on projects
3. Intranet – private network for sharing information & computing resources among employees
4. Extranet – private secure extension of the enterprise via corporate intranet. Business
information or operations are shared with suppliers, customers & other business partners using
the internet
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Learning Organizations
A learning organization is one which facilitates the learning of all its members and continuously
transforms itself.
A learning organization is skilled at creating, acquiring and transferring knowledge and at
modifying its behavior to reflect new knowledge and insights from both within its external &
internal environment
Learning organizations encourage questions and explicitly recognize mistakes as part of the
learning process. There is a need to share information on all new products & services
They encourage testing and experimentation.
Important for a changing & highly competitive environment.
Antagonism or Partnership
Partnership
Successful management of supplier is based on collaboration and offers benefits to both parties. By
working together, customer needs can be served better & thus both can increase their market share.
Partnerships with key customers & suppliers help better understand how to provide value and
customer service
Organization’s product design process involves input from customer & suppliers. By opening up
the design departments & supply problems, synergy results (new innovation ideas & products)
Long term sole sourcing agreements in return of greater level of support, commitments to
ongoing improvements of material, and deliveries and relationships
E-Procurement
Benefits Risks
Labor costs reduced Technology risk – system might not function
Inventory costs reduced properly due to incompatibility
Fewer stock-outs due to ordering accuracy Staff resistance to use new system
Wider range of suppliers No cost savings realized, difficult to measure
Greater financial transparency & intangible benefits like customer service
accountability
Greater control over inventories
Quick ordering makes JIT systems possible
Strengthens relationship with supplier
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E-sourcing – electronic methods for finding new suppliers and establishing contracts
Advantages Disadvantages
Takes account of non-production costs Can encourage ill-judged product changes
Identifies customer groups that are of value Difficult to get customer revenue & cost
which helps in deciding which of are worth figures
additional expenditure to retain May overlook combination of products
Provides technique for assessing marketing & bought
product development expenditure Can overlook life cycle value of the customer
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Inputs to CLV
Chun rate - % of customers who end their relationship with the company in a given period
Discount rate – cos of capital
Retention cost – amount of money needed to spend in a given period to retain a customer
Period – unit of time into which customer relationship is divided for analysis
Periodic revenue – amount of revenue collected from a customer in the period
Profit Margin -
Marketing audits
1. Define the market
2. Determine performance differentials
3. Profile the strategies of competitors
4. Determine the strategic planning structure
Downstream SCM
How e-business affects relationships with customers
Benefits of extranet
Information sharing in a secure environment
Cost reduction
Order processing and distribution
Improved customer service
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Customer Acquisition
Search Engine Marketing
SEO
Pay per click (PPC)
Trusted feed
Online PR
Media alerting services (yahoo
Portal representation (search engines and directories, yahoo, yellow pages etc.)
Business blogs
Community C2C portals
Online Partnerships
Link-building
Affiliate marketing
Sponsorship
Co-branding
Aggregators
Interactive Adverts
Banners
Rich-media
Change with user mouse movement
Opt-in e-mail
1. Cold, rented list
2. Co-branded emails
3. 3rd party newsletters
4. House list e-mails
Viral Marketing (via email & social media, must be a clever idea, a game or a shocking)
Customer Extension
Relates to increasing the lifetime value of a customer. It involves:
Re-sell – similar products to previous sales
Cross sell – sell closely related products
Up sell – more expensive products
Reactivate – sell to customers who have not bought for some time
Propensity modeling
Involves evaluating customer behavior and then making recommendations to them for further products
Transformation
Realignment
Entails changing the
Does not involve a
organization’s culture.
fundamental reappraisal
Top down process,
of assumptions & beliefs
Driven by external events
Organizational Culture
Culture is the set of values, guiding beliefs, understandings and ways of thinking that are shared by the
members of an organization & is taught to new members as correct.
Existing culture can become embedded and hence resistant to change. It can limit the types of strategy
development and change that are considered by the managers, in order to avoid ambiguity uncertainty
McKinsey 7S Model
Corporate culture has seven interconnected elements. All these elements need to aligned with each in
order for the organization to operate efficiently
Use to:
Identify factors that could be affected by the change process
Helps the organization in understanding the wider effects of change
If one S factors changes then, it will have a knock-on effect on the other S factors
Resistance to Change
Refreezing – Ensure that people do not slip to the old ways (reinforcement of the new work pattern)
Larger rewards for people who have embraced the new culture
Publicity of success stories & new heroes
Theory E strategies – measures where shareholder value is the main concern (layoffs, downsizing,
restricting)
Theory O strategies – softer approaches to change involving cultural adjustment or enhancing employee
capabilities. It requires involving employees in the change process
Both approaches have downsides and organization need to implement them simultaneously
Change Leadership
In order to successfully implement change, a change leader is required who takes overall control of the
change process
He is responsible for articulating what change is needed and why, acting as a figurehead for the
change process, as well as helping to deal with the problems and conflicts
Team formation
Change leader needs to make a team who can help control & implement any proposed changes. He
must be able to manage them effectively.
A team is a set of individuals who must work together in order to accomplish shared objectives
The team members come from various parts of the organization
Teams usually:
o Share a common goal
o Enjoy working together
o Are to achieving certain goals
o Has its own culture and leader
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Team building
Team building exercises are necessary to increase the ability of team members to work together.
Benefits Drawbacks
A mixture of skills and abilities within the Slower decision-making, increased conflict
team. Decisions may be compromises
Better control, with opportunities for Groupthink
individual performance to be reviewed and Teams may have a lack of individual
controlled by other team members responsibility, may therefore be more willing
Improved communication – this can also lead to take riskier courses of action
to increased buy-in by the rest of the
organization
Key considerations:
Speed of change
Strength of the pressure of change
Level of resistance expected
Amount of power you hold
How much information is needed & how long will it take to get it
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Change Agents
A change agents must be a familiar and non-threatening to other people. Also the quality of
relationship between the change agent and key decision makers is very important.
Coaching
Coaching refers to developing a person’s skills and knowledge so that their job performance improves,
hopefully leading to the achievement of organizational objectives. It targets high performance and
improvement at work. It usually lasts for a short period and focuses on specific skills and goals.’
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Coaching and mentoring is a key part of the change management process – it can help keep the change
management process moving forward and help reduce the amount of resistance that the organization
faces.
Managing Decline
When attempting to help a business recover from a period of decline, a manager’s strategic priorities
are likely to be:
Reducing costs to improve efficiency
Improving competitiveness to increase revenue
Many of the changes that a business may wish to make during a period of decline, such as compulsory
redundancies or improving factory layout, may require some initial expenditure. If this money isn’t
there, a fundamental change to the business strategy may be made:
Retrenchment – doing the same as before but drastically cutting costs
Turnaround – repositioning to gain competitive advantage
Divestment – sale of part of the organization or closure of a unit as part of rationalization
Liquidation – entire organization is sold off, last resort
Continuous Change
Change is an ongoing process, rather than an event.
Skills of leaders:
Salman Naqi