Topic: Strategy Implementation & Control

(McKinsey’s 7 S Framework, BPR, BCG

Matrix, VRIO Framework, GE Matrix and
Product Life Cycle )
Subject : Elements of Strategy
Prof. Sandeep Hegde
 Business Strategy
implementation

Using the 7 S Framework to

understand its impact on the
organization
 7S FRAME WORK : THE WINNING FORMULA

Activities the organization

Must be really good at in order
An integrated set of actions To deliver winning value
To deliver a superior proposition
Value (benefits minus
Skills
Price) to a chosen set
Strategy
Of customers, with a
Cost structure that
Allows continuing Vision
Excellent returns

The overriding goal of the organization Shared

A clear, compelling statement of what Values
The commonly held beliefs of the
It aspires to become that is demanding but
Organization – simple terms that say
Achievable and reflects a fact-based view
What’s important around here
Of the future
The Hard S’s

Strategy Actions a company plans in response to or anticipation of changes in its external

environment.

Structure Basis for specialization and co-ordination influenced primarily by strategy and by
organization size and diversity.

Systems Formal and informal procedures that support the strategy and structure. (Systems
are more powerful than they are given credit)

The Soft S’s

Style / Culture The culture of the organization, consisting of two components:

• Organizational Culture: the dominant values and beliefs, and norms, which
develop over time and become relatively enduring features of organizational life.
• Management Style: more a matter of what managers do than what they say;
How do a company’s managers spend their time? What are they focusing attention
on? Symbolism – the creation and maintenance (or sometimes deconstruction) of
meaning is a fundamental responsibility of managers.

Staff The people/human resource management – processes used to develop managers,

socialization processes, ways of shaping basic values of management cadre, ways
of introducing young recruits to the company, ways of helping to manage the
careers of employees

Skills The distinctive competences – what the company does best, ways of expanding or
shifting competences

Shared Values / Superordinate Guiding concepts, fundamental ideas around which a business is built – must be
Goals simple, usually stated at abstract level, have great meaning inside the organization
even though outsiders may not see or understand them.
 What is Organizational Change?
• An alteration of an organization’s
environment, structure, culture, technology,
or people
– A constant force
– An organizational reality
– An opportunity or a threat
• Change agent
– A person who initiates and assumes the
responsibility for managing a change in an
organization
 Change…
• Is a process, not an event
• Is made by individuals, then organizations
• Is a highly personal experience for those
involved
• Involves gradual growth in feelings and
skills
 What is change
management?

A structured process and set of tools

for leading the people side of change.

• More than 70% of change efforts fail because

of failure to focus on people issues
Why People Resist Change
Why Do Employees Resist Change
• Human tendency to stay in existing comfort
zone
• Lack of awareness or urgency for change
• Lack of clear understanding or alignment on
purpose, vision, and process of the change
• Lack of trust on the leaders
• Fear of unknown/uncertainty/consequences
• Comfort with long standing habits
• Dependency on existing social dynamics
• Lack of sufficient resources for the change
• Overload of ongoing tasks and responsibilities
• What is the benefit for me to change?
Kurt Lewin’s Three-Step Process in
Managing Organizational Change
• Unfreezing
– The driving forces, which direct behavior
away from the status quo, can be
increased
– The restraining forces, which hinder
movement from the existing equilibrium,
can be decreased
– The two approaches can be combined
• Implementation of change
• Refreezing
 UNFREEZING CHANGE REFREEZING
RESISTANCE TO CHANGE

ANGER CONFRONTATION

DENIAL BARGAINING

FEAR ACCEPTANCE

TIME TAKEN TO MANAGE CHANGE BY ORGANIZATIONS

Managing Organizational Change
Strategy
• Establish a transition team to ensure consistent communication and
to tackle issues raised by the change
• Promote a clear vision to clarify the direction in which the
organization needs to move
Organization
• Leaders should ask tough questions and challenge
the way the company does business
• Good management requires respect for employees
and the organization and is responsible for shaping
the new reality
People
• Losing key employees may destabilize the organization;
communicating the desire to retain these people, early in the process,
is important
• Give priority to the "me" issues—personal opportunity, security and the
quality of the work environment

Communication
• Communication plans should address four considerations:
audience, timing, mode and message
• Tips include:
• Communicating rapidly, honestly and frequently
• Ensuring consistency between messages
• Establishing multiple mechanisms to reach employees
• Repeating common themes
 What is BPR?
• Reengineering is the fundamental rethinking
and redesign of business processes to achieve
dramatic improvements in critical,
contemporary measures of performance, such
as cost, quality, service and speed.
• BPR seeks improvements of
– Cost
– Quality
– Service
– Speed
 BPR Versus Process
Simplification

Process Simplification Process Reengineering

Incremental Change Radical Transformation

Process-Led Vision-Led
Assume Attitudes & Behaviors Change Attitudes & Behaviors
Management-Led Director-Led
Various Simultaneous Projects Limited Number of Initiatives
 Key Steps in BPR exercise

Select The Process & Appoint Process Team

Understand The Current Process

Develop & Communicate Vision Of Improved Process

Identify Action Plan

Execute Plan
 The VRIO Framework

If a firm has resources that are:

• valuable,
• rare, and
• costly to imitate, and…
• the firm is organized to exploit these resources,
then the firm can expect to enjoy a sustained
competitive advantage.
Applying the VRIO Framework

The Question of Value

• Does the resource enable the firm
to exploit an external opportunity or neutralize
an external threat?

The Question of Rarity

• if a resource is not rare, then perfect competition
dynamics are likely to be observed (i.e., no
competitive advantage, no above normal profits)
• a resource must be rare enough that perfect
competition has not set in
 Applying the VRIO Framework

Valuable and Rare

If a firm’s resources are: The firm can expect:

Not Valuable Competitive Disadvantage

Valuable, but Not Rare Competitive Parity

Competitive Advantage
Valuable and Rare
(at least temporarily)
Applying the VRIO Framework

The Question of Imitability

• the temporary competitive advantage of valuable

and rare resources can be sustained only if
competitors face a cost disadvantage in imitating
the resource
» intangible resources are usually more
costly to imitate than tangible resources
(Harley-Davidson’s styles may be easily
imitated, but its reputation cannot)
 Applying the VRIO Framework

Value, Rarity, & Imitability

If a firm’s resources are: The firm can expect:

Valuable, Rare, but Temporary

not Costly to Imitate Competitive Advantage

Sustained
Valuable, Rare, and
Competitive Advantage
Costly to Imitate
(if Organized appropriately)
Applying the VRIO Framework

The Question of Organization

• a firm’s structure and control mechanisms
must be aligned so as to give people ability
and incentive to exploit the firm’s resources
• examples: formal and informal reporting structures,
management controls, compensation policies,
relationships, etc.
• these structure and control mechanisms complement
other firm resources—taken together, they can help a
firm achieve sustained competitive advantage
(3M Company)
 The VRIO Framework
Costly to Exploited by Competitive
Valuable? Rare? Imitate? Organization? Implications

No No Disadvantage

Yes No Parity

Temporary
Yes Yes No Advantage

Sustained
Yes Yes Yes Yes
Advantage
 The VRIO Framework
Costly to Exploited by Competitive Economic
Valuable? Rare? Imitate? Organization? Implications Implications

No No Disadvantage Below
Normal

Yes No Parity Normal

Temporary Above
Yes Yes No Advantage Normal

Sustained Above
Yes Yes Yes Yes Normal
Advantage
 Product Life Cycles and the BCG Matrix
Sales
Development Introduction Growth Maturity Saturation Decline

Time
 Product Life Cycles and the BCG
Matrix
Sales

Effects of Extension
Strategies

Time
 Product Life Cycles and the BCG
Matrix
Sales/Profits PLC and Profits

PLC

Profits

Time
Losses
Break Even
BOSTON CONSULTING GROUP (BCG)
MATRIX
 MARKET SHARE
• Market share is the percentage of the total market that is being
serviced by your company, measured either in revenue terms
or unit volume terms.

• RELATIVE MARKET SHARE

• RMS = Business unit sales this year

Leading rival sales this year

• The higher your market share, the higher proportion of the

market you control.
 MARKET GROWTH
RATE
• Market growth is used as a measure of a market’s
attractiveness.

• MGR = Individual sales - individual sales

this year last year
Individual sales last year

• Markets experiencing high growth are ones where the

total market share available is expanding, and there’s
plenty of opportunity for everyone to make money.
 STARS
High growth, High market share

• Stars are leaders in business.

• They also require heavy investment, to maintain its large market
share.
• It leads to large amount of cash consumption and cash generation.
• Attempts should be made to hold the market share otherwise the star
will become a CASH COW.
 CASH COWS
Low growth , High market share

• They are foundation of the company and often the

stars of yesterday.
• They generate more cash than required.
• They extract the profits by investing as little cash as
possible
• They are located in an industry that is mature, not
growing or declining.
 DOGS
Low growth, Low market share

• Dogs are the cash traps.

• Dogs do not have potential to bring in
much cash.
• Number of dogs in the company should
be minimized.
• Business is situated at a declining
stage.
 QUESTION MARKS
High growth , Low market share
• Most businesses start of as question marks.
• They will absorb great amounts of cash if the
market share remains unchanged, (low).
• Why question marks?
• Question marks have potential to become
star and eventually cash cow but can also
become a dog.
• Investments should be high for question
marks.
BCG MATRIX WITH CASH FLOW
 LIMITATIONS

• BCG MATRIX uses only two dimensions, Relative market

share and market growth rate.
• Problems of getting data on market share and market
growth.
• High market share does not mean profits all the time.
• Business with low market share can be profitable too.
GE Multifactor Portfolio Matrix
Industry Attractiveness

High Medium Low

Protect Invest to Build

High Position Build selectively
Business Strengths

Selectively Limited
Build manage for expansion or Invest/Grow
Medium selectively earnings harvest
Selectivity
/earnings
Protect & Manage for Divest
Low refocus earnings Harvest
/Divest