Business Strategy

LO1
 Strategic intent
 It refers to purpose for what organisation strive for. Organisation must define “What they want
to do” and “why they want to do”.
 Hierarchy of strategic intent
 Vision
 Mission
 Objective
 Goals
 Vision
 “ Description of something in the future”
 The Vision of a company are futuristic by nature. It summarises the future plans of the
company, this is what the company aspires to be in the future. So in essence it answers the
questions “Where the company wants to be in future?”
 Burt Nanus a well known expert of organizational vision has defined vision as “ a realistic,
credible and attractive future for an organisation”.
 Realistic: Vision must be based on reality to be meaningful for an organisation; it should not be
a merely day dreaming but a dream to be converted into reality
 Credible: Vision must be believable to be relevant to the members of organisation. One of the
purpose of vision is to aspire those in organisation to achieve a level of excellence
 Attractive: Vision must be attractive as to inspire and motivate the organisation members.
People must want to be a part of future of organisation
 Fuutre: vision is always for future
 Characteristics
 It is a blue print of the kind of business organisation the management is trying to create and the
market position it would occupy
 It should be forward looking a provide strategic course the management will adopt to help the
company prepare the future
 Specific and provide guidelines to managers for making decisions and allocating resources
 Flexible to changing environment
 Should be easy to explain to all stakeholders and preferably short
 Examples of Vision
 BSNL Vision statement: “To become the largest telecom service provider in Asia.”
 Walt Disney Vision statement: “Make people happy”
 Infosys Vision statement: “To be a globally respected corporation that provides best of breed
business solutions, leveraging technology, delivered by best in class people.”
 Mission
 Organisations relate their existence to satisfying a particular need of the society. They do it in
terms of their mission
 Mission is a statement which defines the role that an organisation plays in a society
 It refers to the particular need of that society for instance, its information needs
 Definition:
 “ Essential purpose of the organisation, concerning particularly why it is in existence, the nature
of the business it is in, and the customers it seeks to serve and satisfy.”
 “mission is an enduring statement of purpose that distinguishes one firm from other similar
firm.”
 Examples
 BSNL mission statement: “To provide world class state of art technology telecom services to its
customers on demand at competitive prices.
 Infosys Mission Statement: “ To achieve our objectives in an environment of fairness, honesty,
and courtesy towards our clients, employees, vendors and society at large.”
 The mission statement of an organisation is normally short, to the point, and contains the
following elements:
1. Provides a concise statement of why the organisation exists, and what it is to achieve;
2. States the purpose and identity of the organisation
3. Defines the institution’s values and philosophy
 Objectives
 Objectives are end results of planned activity
 Objectives states what is to be accomplished by when and should be quantified if possible
 Importance of Objectives
 Objectives help to define the organisation in its environment
 Objectives help in coordinating decisions and decision maker
 Objectives help in formulating strategies
 Objectives provide standards for assessing organizational performance
 Meaning of Strategy
 Strategy is a tactical course of action which is designed to achieve long term objectives. It is an
art and science of planning and organizing resources for their most efficient and effective use in
a changing environment.
 Strategy of a business enterprise consists of what management decides about the future
direction and scope of the business. It entails managerial choice among alternative action
programmes, competitive moves and different business approaches to achieve enterprise
objectives
 Strategy once formulated has long term implications. It is framed by top management in an
organisation. In short, it may be called as the ‘game plan of management.’
 Definition of Strategy
 According to Alfred D. Chandler, strategy is “The determination of basic long term goal and
objectives of an enterprise and adoption of the courses of action and the allocation of resources
necessary for carrying out these goals.
 The strategy and tactics
The tactics: using the army to win the battle.

The strategy: using the battles to win the war.

 What are Core Competencies?
 A Core competency is a concept in management theory introduced by C.K. Prahalad and Gary
Hamel. It can be defined as “a harmonized combination of multiple resources and skills that
distinguishes a firm in the marketplace.”
 Core competencies are the main strengths or strategic advantages of a business, including the
combination of pooled knowledge and technical capacity that allow a business to be
competitive in the marketplace
 Business Goal & Objectives
 For companies to be successful, profitable and compete effectively they must set goals and
objectives for the organisation
 Goals are long term aims you want to accomplish objectives are concrete and can be measured
 The goal is like the description of a destination and an objective is a measure of the progress
that is needed to get to the destination, hence the goal is the outcome.
 For example, A company’s goal is to be number one suppliers of eggs – Whilst the objective is
to sell 10000 eggs in a quarter.
 Difference between Goals & Objectives
 To accomplish something very important we need to set goals and objectives. Goals without
something can never be accomplish while objectives without goals will never get you to where
you want to be. The concept are separate but related and will help you.
 Strategic Direction
 Strategic direction refers to the foundational ideas or actions that allow for greater consistency
in strategy over time.
 It ultimately helps a company achieve its vision and helps it fulfill the goals of its organizational
strategy.
 Strategic Planning
 Strategic planning is a part of creating achievable goals through several factors, such as time
management and resource allocation.
 Strategic planning is the process of developing the strategy or direction and action plan to
achieve the goals of an organisation.
 The Strategic Planning Process
 In today's highly competitive business environment, budget-oriented planning or
forecast-based planning methods are insufficient for a large corporation to survive and
prosper. The firm must engage in strategic planning that clearly defines objectives
and assesses both the internal and external situation to formulate strategy, implement
the strategy, evaluate the progress, and make adjustments as necessary to stay on
track.
 A simplified view of the strategic planning process is shown by the following diagram:

Mission and objectives

Environmental Scanning

Strategy Formulation

Strategy Implementation

Evaluation & Control

 Mission and Objectives
 The mission statement describes the company's business vision, including the
unchanging values and purpose of the firm and forward-looking visionary goals that
guide the pursuit of future opportunities.
 Guided by the business vision, the firm's leaders can define measurable financial and
strategic objectives. Financial objectives involve measures such as sales targets and
earnings growth. Strategic objectives are related to the firm's business position, and
may include measures such as market share and reputation
 Environmental Scan
Theenvironmental scan includes the following
components:
 Internal analysis of the firm
 Analysis of the firm's industry (task environment)
 External macro environment (PEST analysis)

 The internal analysis can identify the firm's strengths and weaknesses and the external
analysis reveals opportunities and threats. A profile of the strengths, weaknesses,
opportunities, and threats is generated by means of a SWOT analysis
 An industry analysis can be performed using a framework developed by Michael Porter
known as Porter's five forces. This framework evaluates entry barriers, suppliers,
customers, substitute products, and industry rivalry.
 Strategy Formulation
 Given the information from the environmental scan, the firm should match its strengths
to the opportunities that it has identified, while addressing its weaknesses and
external threats.
 To attain superior profitability, the firm seeks to develop a competitive advantage over
its rivals. A competitive advantage can be based on cost or differentiation. Michael
Porter identified three industry-independent generic strategies from which the firm
can choose.
 Strategy Implementation
The selected strategy is implemented by means of programs, budgets, and
procedures. Implementation involves organization of the firm's resources and
motivation of the staff to achieve objectives.
The way in which the strategy is implemented can have a significant impact on whether it
will be successful. In a large company, those who implement the strategy likely will be
different people from those who formulated it. For this reason, care must be taken to
communicate the strategy and the reasoning behind it. Otherwise, the implementation
might not succeed if the strategy is misunderstood or if lower-level managers resist its
implementation because they do not understand why the particular strategy was selected.
 Evaluation & Control
 The implementation of the strategy must be monitored and adjustments made as
needed.
 Evaluation and control consists of the following steps:
1. Define parameters to be measured
2. Define target values for those parameters
3. Perform measurements
4. Compare measured results to the pre-defined standard
5. Make necessary changes
 Hierarchical Levels of Strategy
Strategy can be formulated on three different levels:
1. corporate level
2. business unit level
3. functional or departmental level.

 While strategy may be about competing and surviving as a firm, one can argue that
products, not corporations compete, and products are developed by business units.
The role of the corporation then is to manage its business units and products so that
each is competitive and so that each contributes to corporate purposes.
 Corporate Level Strategy
 Corporate level strategy fundamentally is concerned with the selection of businesses in
which the company should compete and with the development and coordination of that
portfolio of businesses
 Corporate level strategy is concerned with:

Reach - defining the issues that are corporate responsibilities; these might include identifying the overall goals of the corporation, the types of businesses in which the

corporation should be involved, and the way in which businesses will be integrated and managed.

Competitive Contact - defining where in the corporation competition is to be localized. Take the case of insurance: In the mid-1990's, Aetna as a corporation was clearly

identified with its commercial and property casualty insurance products. The conglomerate Textron was not. For Textron, competition in the insurance markets took place

specifically at the business unit level, through its subsidiary, Paul Revere. (Textron divested itself of The Paul Revere Corporation in 1997.)

Managing Activities and Business Interrelationships - Corporate strategy seeks to develop synergies by sharing and coordinating staff and other resources across business

units, investing financial resources across business units, and using business units to complement other corporate business activities. Igor Ansoff introduced the concept of

synergy to corporate strategy.

Management Practices - Corporations decide how business units are to be governed: through direct corporate intervention (centralization) or through more or less

autonomous government (decentralization) that relies on persuasion and rewards.

Corporations are responsible for creating value through their businesses. They do so by managing their portfolio of businesses, ensuring that the businesses are successful

over the long-term, developing business units, and sometimes ensuring that each business is compatible with others in the portfolio
 Business Unit Level Strategy
 A strategic business unit may be a division, product line, or other profit center that can be
planned independently from the other business units of the firm.
 At the business unit level, the strategic issues are less about the coordination of operating
units and more about developing and sustaining a competitive advantage for the goods
and services that are produced. At the business level, the strategy formulation phase
deals with:
positioning the business against rivals
anticipating
changes in demand and technologies and adjusting the strategy to
accommodate them
Influencing
the nature of competition through strategic actions such as vertical integration
and through political actions such as lobbying.
Michael Porter identified three generic strategies (cost leadership, differentiation, and focus)
that can be implemented at the business unit level to create a competitive advantage and
defend against the adverse effects of the five forces.
 Functional Level Strategy
The functional level of the organization is the level of the operating divisions and
departments. The strategic issues at the functional level are related to business
processes and the value chain. Functional level strategies in marketing, finance,
operations, human resources, and R&D involve the development and coordination of
resources through which business unit level strategies can be executed efficiently and
effectively.
Functional units of an organization are involved in higher level strategies by providing
input into the business unit level and corporate level strategy, such as providing
information on resources and capabilities on which the higher level strategies can be
based. Once the higher- level strategy is developed, the functional units translate it into
discrete action-plans that each department or division must accomplish for the strategy to
succeed.
Analytical frameworks of the macro
environment
 Stakeholder Analysis
 A stakeholder analysis is a process of identifying these people before the project begins;
grouping them according to their levels of participation, interest, and influence in the project;
and determining how best to involve and communicate each of these stakeholder groups
throughout.
 Purpose of a Stakeholder Analysis
 To enlist the help of key organizational players.
 To gain early alignment among all stakeholders on goals and plans.
 To help address conflicts or issues early on.
 Why perform stakeholder analysis?
Understanding who your stakeholders are and the impact they may have on your business or
project is crucial to success. Not engaging key players in the right way at an early stage can
have disastrous results for a project.. The development of a stakeholder map:
 Creates a shared understanding of the key people who can impact on your success.
 Provides a foundation for your communications and engagement strategy.
 Identifies potential risks from negative stakeholders or those who feel they are not being heard.
 Prioritizes stakeholders so the appropriate amount of resources can be assigned and the right
engagement strategy is applied.
 Stakeholder Mapping
 A stakeholder map is a business tool that allows you to see a visual representation of your
company’s various stakeholders (individual and groups), their level of interest in the company
and their
 Different stakeholders or groups of stakeholders are categorized and listed on a chart according
to their level of interest and the power they exert over a company. importance to the company.
 Level of Interest – How much a stakeholder cares about the outcomes. Are they beneficiaries
or will there be negative effects?
 Level of Influence – The degree in which a stakeholder can make or break the project. For
example through funding, legislation, protests, etc.
 Environmental Analysis
 PESTLE
 Porter’s Five forces model
 What is PESTLE Analysis?
Political
 A PESTLE Analysis is a framework or tool
used by marketers to analyse and monitor the
macro-environmental (external marketing
Environ Econom
environment) factors that have an impact on
an organisation. The result of which is used to ment ic
identify threats and weaknesses which is used
PESTL
in SWOT analysis E

Legal Social
 Political Factors
 The political factors account for all the political activities that go on within a country and if any
external force might tip the scales in certain way.
 Political factors include government regulations and legal issues and define both
formal and informal rules under which the firm must operate.
1. Trading policies
2. Government changes
3. Funding
4. Foreign pressures
5. Conflict in the political areas
6. Stakeholder and their demands
 Economic Factors
 The Economic factors take into view the economic condition prevalent in the country and if the
global economic scenarios might make it shift or not.
1. Disposable income
2. Unemployment level
3. Foreign Exchange rates
4. Interest rates
5. Trade tariffs
6. Inflation rate
 Social Factor
 Social factors are your consumers. You need to look at buying habits, emotional needs, and
consumer behaviour in this section. Because these are the people who directly influence your
sales
1. Ethnic/religious factors
2. Major world events
3. Demographics
4. Consumer opinions and attitudes
5. Trends
6. Education
7. Brand preferences
 Technological Factors
 Technology can be directly involved with company product, like manufacturing technologies.
1. Technological development
2. Research and development
3. Associated technologies
4. Patents
5. Licensing
6. Information technology
7. Communication
 Legal Factors
 Legal factors have to do with all the legislative and procedural components in an economy.
Also, this takes into account certain standards that your business might have to meet in order to
start production/promotion.
1. Employment law
2. Consumer protection
3. Industry specific regulations
4. Competitive regulations
5. Future legislation
6. Environmental regulations
 Environmental Factors
 Environmental factors have to do with geographical locations and other related environmental
factors they may influence upon the nature of the trade you’re in. for example, agro- business
hugely depend on this form of analysis.
1. Ecological
2. Environmental issues
3. Staff attitudes
4. Management style
5. Environmental regulations
6. Consumer values
 Porter’s Five Forces model
 The Five Forces Model was developed by Michael E. Porter to help companies assess the
nature of an industry’s competitiveness and develop corporate strategies accordingly.
 Through his model, Porter classifies five main competitive forces that affect any market and all
industries. It is these forces that determine how much competition will exist in a market and
consequently the profitability and attractiveness of this market for a company. Through sound
corporate strategies, a company will aim to shape these forces to its advantage to strengthen the
organizations position in the industry.
 This model aimed to provide a new way to use effective strategy to identify, analyze and
manage external factors in an organization’s environment.
 Porter’s five forces model is an analysis tool that usesfive industry forces to determine
the intensity of competition in an industry and its profitability level
 An attractive market place does not mean that all companies will enjoy similar success levels.
Rather, the unique selling propositions, strategies and processes will put one company over the
other.
 The Five Forces were Porter’s conclusions on the reasons for differing levels of competition,
and hence profitability, in differing industries. They are empirically derived, i.e. by observation
of real companies in real markets, rather than the result of economic analysis.
 Components of Porter’s Five Force Model
 Threat of new entrants
 Threat of substitutes
 Bargaining power of buyers
 Bargaining power of suppliers
 Revelry inside the industry
Threat of New Entry Competitive Rivalry
- Time and cost of - Number of
entry
Threat competitors
- Quality difference
- Specialist knowledge of New - Other difference
- Economics of Scale
- Cost advantage
Entrants - Switching costs
- Technology - Customer loyalty
protection
- Barriers to entry

Bargainin Competitiv Bargainin

g Power e Rivalry g Power
of within an of
Suppliers Industry Custome
Supplier Power rs
- Number of suppliers
- Size of suppliers
- Uniqueness of service Buyer Power
- Your ability to - Number of
substitute customers
- Cost of changingj -- Differences
Size of each orders
Threat of between
Threat of Substitute competitors
- Substitute - Price sensitivity
Substitut - Ability to
performance
- Cost of change es substitute
- Cost of changing
 Threat of new entrants
 The market is full of competition. Not only the existing firms pose threat to the business, but the
arrival of new entrants is also a challenge
 As per the ideal scenario, the market is always open for entry and exists, resulting in
comparable profits to all the firms
 But, this is not applicable in real picture market
 In reality, all industries have some traits that product their high profits and help them in warding
off potential new entrants by erecting barriers.
 This force determines how easy (or not) it is to enter a particular industry. If an industry is profitable and
there are few barriers to enter, rivalry soon intensifies. When more organizations compete for the same
market share, profits start to fall. It is essential for existing organizations to create high barriers to enter to
deter new entrants. Threat of new entrants is high when:
 Low amount of capital is required to enter a market
 Existing companies can do little to retaliate
 Existing firms do not possess patents, trademarks or do not have established brand reputation
 There is no government regulation
 There is low customer loyalty
 Products are nearly identical
 Economies of scale can be easily achieved
 Threat of substitutes
 The substitute can be defined as the product of other industries that have the ability to satisfy
similar needs
 Example: Coffee can be substitute for tea, as it can be also used as a caffeine drink in the
morning
 When price of a substitute product changes, the demand of a related product also gets affected
 When the number of substitute product increases, the competition also increases as the
customers have more alternatives to select from. This forces the companies to raise or lower
down the prices. Hence, it can be concluded that the competition created by the substitute firms
is ‘price competition’.
 This force is especially threatening when buyers can easily find substitute products with attractive
prices or better quality and when buyers can switch from one product or service to another with
little cost. For example, to switch from coffee to tea doesn’t cost anything, unlike switching from
car to bicycle.
 Determining Factors :-
 First, if the consumer’s switching costs are low
 Second, if the substitute product is cheaper than the industry’s product
 Third, if the substitute product is of equal or superior quality compared to the industry’s product, the
threat of substitutes is high
 Fourth, if the functions, attributes, or performance of the substitute product are
 equal or superior to the industry’s product
 Bargaining power of buyers
 This has an important effect on the manufacturing industry
 Where there many producers and there is a single customer in the market, then that situation is
called as ‘monopsony’
 In these markets, the position of the buyer is very strong and he sets the price. In reality, only a
few monopsony market exists.
 The bargaining power of the buyer compels the firms to reduce the prices and may also
demand a product or service of higher quality at low price
 Customers have the power to demand lower price or higher product quality from industry
producers when their bargaining power is strong. Lower price means lower revenues for the
producer, while higher quality products usually raise production costs. Both scenarios result in
lower profits for producers. Customers exert strong bargaining power when:
 - Buying in large quantities or control many access points to the final customer
 - Only few customers exist
 - Switching costs to other supplier are low
 - They threaten to backward integrate
 - There are many substitutes
 - Customers are price sensitive
 Bargaining power of suppliers
 Since the company needs raw materials for producing, therefore the producers have to build a
relationship with its suppliers.
 When suppliers have the power in their hands, they can exert influence on the producing firms
by selling them raw materials at higher prices.
 Example: Wal-mart as an organization thrives on the basis of its relationship with its suppliers
 Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to
their buyers. This directly affects the buying firms’ profits because it has to pay more for
materials. Suppliers have strong bargaining power when:

 There are few suppliers but many buyers

 Suppliers are large and threaten to forward integrate
 Few substitute raw materials exist
 Suppliers hold scarce resources
 Cost of switching raw materials is especially high.
 This force is the major determinant on how competitive and profitable an industry is. In
competitive industry, firms have to compete aggressively for a market share, which results in
low profits. Rivalry among competitors is intense when:

 There are many competitors

 Exit barriers are high
 Industry growth is slow or negative
 Products are not differentiated and can be easily substituted
 Competitors are of equal size
 Low customer loyalty
 Structure- conduct- performance model
 Economists have developed a branch of economic analysis called Industrial Organization to
trace the relationship between the structure of a market and the performance of the firms in that
market.
 Markets have three elements that may be the focus of public policy: structure, conduct, and
performance
 Structure
The structure of a market is the set of conditions and characteristics that
describe and define the market type. To describe market structure,
economists consider
 the number and size distribution of firms;
 the extent of product differentiation;
 the effectiveness of barriers to entry; and
 the degree to which the industry is vertically integrated.
 Market Structures
Perfect Monopolistic Oligopoly Pure
Competition Competition Monopoly

No. and Many Many A Few One

Size of
Firm
Extent of Identical Different Identical or No Close
Product Different Substitute
Differentiation

Barriers to None None Moderate to Blocked

Entry Difficult
 Conduct
Conduct refers to the behavior, policies, and strategies used by the firms in
the industry. To describe firms’ conduct, economists consider the strategies
used by firms as they affect
 pricing;
 production;
 promotion; and
 distribution
 Performance
Performance refers to the economic outcomes that result from the market
structure and the firms’ conduct. To evaluate an industry’s performance,
economists consider
 allocation efficiency;
 production efficiency;
 equity; and
 technological advancement.
 Strategic Positioning
 Ansoff’s Growth Vector Matrix
 Ansoff’s Matrix
 Ansoff’s Growth Vector matrix helps a business to understand the business development and/or
marketing strategy that it should use to enable growth. It may consider existing markets, or new
markets in which to sell its products or services , or existing products or services, or new
products or services to sell to customers.
 Market Penetration
 This is the objective of higher market share in existing markets
 Aim of the strategy:
 To maintain or increase share of the current market with current products
 To secure dominance of a growth market or restructure a mature market by driving out competition
 Market penetration involves an increase in sales of existing products to existing markets - selling
more of the same to the same people
 But it is difficult to achieve growth through increased market penetration if the market is saturated
 In a stagnating market increase in sales is only possible by grabbing market share from rivals.
Hence competition will be intense in such markets
 Risks are low but the prospects of success are low unless there is strong growth in the market
 Market penetration strategies
 How is increased market penetration achieved?
 Increase usage by existing customers
 Attract customers away from rivals
 Gain market. share at the expense of rivals
 Encourage increase in frequency of use
 Devise and encourage new applications
 Encourage non buyers to buy
 Use market penetration when...
 The market is not saturated
 There is growth in the market
 Competitors’ share of the market is falling
 Increased volumes lead to economies of scale
 There is scope for selling more to existing customers
 Market development
 This is the strategy of selling an existing product to new markets. This could
involve selling to an overseas market, or a new market segment
 This involves
 Selling the same product to different people
 Entering new markets or segments with existing products
 Gaining new customers,new segments,new markets
 Entering overseas markets
 Market development will require changes to marketing strategy e.g. new distribution
channels, different pricing policy, now promotional strategy to attract different types
of customers
 Market development
 Market development is used when…
 Untapped markets are beckoning
 The firm has excess capacity
 There are attractive channels to access new market
 Market development involves moderate risk - there is a lack of familiarity with customers but at
least the product is familiar
 Product development
 This is the development of new products for the existing market
 New products come in the form of:
 New products to replace current products
 New innovative products
 Product improvements
 Product line extensions
 New products to complement existing products
 Products at a different quality level to existing products
 Product development
 Product development is used when:
 The Firm has strong R&D capabilities
 The market is growing
 There is rapid change
 The firm can build on existing brands
 Competitors have better products
 But new product development is costly and there are moderate risks associated with this
strategy
 Diversification
 This is the process of selling different, unrelated goods or services in unrelated markets
 Diversification in the Ansoff Matrix means:
 New products sold to new markets
 New products for new customers
 It is a risky strategy because it involves two unknowns
 Therefore new products and new markets should be selected which offer the prospect for
growth which the exiting product market mix does not
 One problem is to identify real life examples of firms developing new products for
genuinely new groups of customers
 Diversification can be sub-divided into related and unrelated
 Related diversification
 This is development beyond present product market but still within the broad confines of the
industry
 Markets and products share some commonality with existing products
 Therefore it builds on assets or activities which the firm has developed
 Related diversification can also be seen as synergistic diversification since it involves
harnessing exiting product market knowledge
 This closeness can reduce the risks associated with diversification
 Example: banks developing insurance products
 Related diversification
 Horizontal diversification: when new products are introduced to current markets
 Vertical diversification: when an organisation decides to move into its suppliers or customer’s
business to secure supply or to firm up the use of products in end products
 Concentric diversification: when new products closely related to current products are
introduced into new markets
 The product might be new but is it genuinely diversification into new markets?
 Unrelated diversification
 Features of unrelated diversification
 Growth in products and markets that are completely new
 Development beyond the present industry into products and markets which bear
little relation to the present product market mix
 No commonality with existing products and markets
 It is also known as conglomerate diversification: When completely
new, technologically unrelated products are introduced into new markets
 As it represents a departure from existing products and markets it does
represent considerable risk
 Examples of unrelated diversification
 In each case consider whether it is genuinely unrelated or whether there is some link be with
existing products or markets
 Water supply companies acquiring or developing hotel businesses
 Granada TV group developed motorway service areas (now sold off since the merger of ITV)
 The involvement of Pearson Group (a publisher) in television production companies and
running an exam board (Edexcel)
 British Gas offers home emergency services covering plumbing and electrical problems
 Hollywood film studios own hotels, casinos and cruise liners
 Ansoff’s matrix and risk
 The greater the degree of newness the greater the risk
 Hence:
 Market penetration - little risk involved
 Market development - moderate risk
 Product development - moderate risk
 Diversification - high risk because both product and market are new and unknown
 Uses of the Ansoff Matrix
 The matrix is a framework to explore directions for strategic growth
 It is the most commonly used model for analysing the possible strategic direction that a
business should take
 It not only identifies and analyses different growth opportunities it also encourages planners to
consider both expected returns and risks
 But, as we have seen, real world examples do not fit neatly into the four cells of the Ansoff’s
Matrix
 Organizational Audit
 Benchmarking indicators
 Benchmarking indicators
Benchmarking is a method of improving performance in a systematic and logical way by
measuring and comparing your performance against others, and then using lessons learned from
the best to make targeted improvements. It involves answering the questions:
 “Who performs better?”
 “Why are they better?”
 “What actions do we need to take in order to improve our performance?”
Whilst benchmarking has been used occasionally in the construction industry for many years, the
recent surge of interest has been encouraged by the publication of sets of national Key
Performance Indicators that allow companies to measure their performance simply and to set
targets based on national performance data.
 Types of Benchmarking
 Internal – a comparison of internal operations such as one site (or project team) against another
within the same company. Large companies will often have plenty of scope for this sort of
benchmarking, and should aim to bring the level of performance of the whole company to the
current ‘best in company.’
 Competitive – a comparison against a specific competitor for the product, service or function of
interest. This will provide data and information about what competitors are achieving. It is more
difficult and complex to carry out. A number of benchmarking clubs have been established to
allow collection and comparison of data from organisations which compete with each other.
 Generic – a comparison of business functions or processes that are the same, regardless of
industry or country. In a well-documented case in USA, a ready-mix concrete company
compared its delivery performance against a pizza delivery company. Both were in the business
of delivering products which had to arrive at the point of use promptly!
 Benefits of Benchmarking
 Benchmarking focuses improvement efforts on issues critical to success
 It ensures that improvement targets are based on what has been achieved in practice, which
removes the temptation to say ‘it can’t be done’.
 Benchmarking provides confidence that your organisation’s performance compares favourably
with best practice.
 For organisations in the public sector, benchmarking provides an assurance that ‘Best Value’ is
being achieved.
 Key Performance Indicators
 While a benchmark has a company comparing its processes, products and operations with other
entities, a key performance indicator (KPI) measures how well an individual, business unit,
project and company performs against their strategic goals.
 Company executives and managers use KPIs to understand where they are in relation to their
goals and to help them adjust if it looks like they are off course to meeting their objectives.
 KPIs are used primarily to measure and improve performance and to provide incentives for
performance improvement and to drive and implement strategy.