36 Srategic Management (M.M.S. Sem.

I)

Chapter

4 BCG matrix / GE matrix, 7S Mckinsey Models as Tools

for Strategic Formulation

BCG MATRIX

.(M.U. Nov. 2017) [9 marks]

The Boston ConsultingGroup's product portfolio matrix, or a tool for long-term strategic
planning is the BCG Matrix. This analytical tool was areated in 1970 by Bruce D. Henderson as a
Support for Boston Consulting Group. This helps companies evaluate their product portfolio and
decide which goods should be discontinued, which ones should receive
additional funding, and
which ones should be developed. The matrix is used to create expansion
strategies for adding new
goods and services to the portfolio as well as determining when goods and services
shouldn't be
kept. Their product line was examined using the BCG Matrix, and a plan was created.
Boston
Consulting Group used the BCG matrix to choose how to allocate resources throughout their
product range.

High Low
Market
Growth
Rate

?
LOW

Relative Market Share

Image Source: https://www.econposts.com/

Question Marks : These are goods that have a small market share but are expected to rise
rapidly. It is unknown if these items will become stars or whether they will fall into the
Dogs
quadrant. Question marks offer a lot of room for expansion and can help you gain a
higher
market share. If the company wishes to move the product into the star
quadrant, it must make a
big investment in it. This investment poses a risk to the
company since it may be necessary to
make a significant investment to get the product to a point where it cancreate profit. Question
a
 BCGMatrix /GE Matrix, 7S Mc Kinsey Models as Tools for Strateic Formulation 37

markets are particularly common in the beginning of many products. If the question marks fail to
become the market leader despite the organization's commitment, they will utimately fall into the
Dogs quadrant. As a result, each company must carefully examine the question marks before
deciding whether to invest in the product and push it fo the star level or atbandon it and place it in
the Dogs quadrant. In the BCG Matrix, question marks may be observed on the upper right side.
Stars : Stars are goods in the organization's product range that have a large market share
and are growing rapidly. These items can be found in the rapidly expanding industry. Stars bring
in a lot of money for the organization, but they also take a lot of money away from it. This may be
the most popular product on the market, but it will take a significant amount of capital to stay
afloat. In the BCGmatrix, stars may be spotted in the upper left quadrant. Star can maintain its
into
position as the market leader when the rate of market orowth slows, and it will eventually turn
acash cOw.
rate are
Cash Cow :Products that now hold a sizable market share vet have a slow growth
items as pOssible
considered cash cows. The goal of this notion is to get as much milk out of these
profit as feasible with the
without killing the cow. Similarly, the company should make as much
minimal expenditure. These
product in the present market share without terminating it and with
established markets, which are
products make a profit that is more than the product's cost. In
Cash cows can be located in
deemed monotonous and settled, cash cow scenarios can be found.
moved to the dog industry.
the lower left quadrant of the BCG matrix. Future cash cows will be
products with a modest market
Dogs: In a company's product line, dogs and other pets are
items are believed to be the ones that
share in an established, slowly expanding industry. These break
rate of growth. These items'
should be liquidated, sold, or repositioned due to their poor
the produce's market share. Even if there are
even point barely generates enough income tÍ keep
accounting standpoint, keeping such a
social advantages to sustaining the product, from an not generate any profit.
because it does
product has negative consequences for the business
organization's return on assets ratio. The lower
These might also have a negative impact on the
dogs. Due to their low market share and poor
right quadrant of the BCG Matrix may contain
organization's cash for an extended
development, dogs can become financial traps that tie up an
period of time with little use or profit.

Market share
control of one corporation is known as
The percentage of the market that is under the
business is faring in a certain market or sector.
market share. It provides a clear picture of how a
businesses. A companys ability to do more
Gaining market share is a major goal for many
affects how investors see the business. While
business is reflected in its market share, which also
company's overall strength, a company with a declining
an increasing market share is a sign of a
from an investment perspective.
market share may be considered as undesirable
 38
Strategic Manaqernent (MMS Sern lIl
Absolute market share
.....M.U. Nov. 2017) (2 marks)
Absolute market share illustrates how well abusiness is performing in comparison to its
Tvals. Additionally, it nmakes it possible for outside investors to assess a company's performance in
relation to a bigger market. A company reporting sales data on its own is one thing, but
cOmparing those figures to those of other businesses in the same sector gives a much more
comprehensive picture.
Market share is measured by dividinga company's total sales for a given time period (such
S a year or quarter) by the total sales of its sector over the same time period. Let's imagine yvou
want to determine Company X's market share over the course of a year as a manufacturer of
coBee machines. A 10% market share for Company X would be obtained by dividing the
company's total revenues of $10 milion during that time period by the $100 million total
revenues of the coffee maker industry. Thus, you'd divide $10 million by $100 million to arive at
a 10% market share for Company X.

Relative market share

....M.U.Nov. 2017) [2 marks]
Relative market share illustrates how well a business is performing in comparison to its main
rival. Because it provides additional context for an organization's absolute market share, relative
market share is a crucial calculation. Consider that Company Z controls 30% of the mattress
market. That indicates that other businesses dominate 70% of the mattress market. A30% market
share may indicate a corporation is the market leader in some sectors, while in others, it may
indicate second or third place among the big companies. In order to make strategic decisions to
boost sales, organizations (and their investors) might use relative market share to gauge how they
are doing in comparison to their top rivals.
By deducting a companys market share from 100 to determine the portion it does not
control, relative market share is determined. IfCompany Zcontrols 30% of its market, this means
it does not control 70%. The percentage of the market that the company does not control is then
divided by the company's market share. In our case, we would divide 30% by 70% to get
Company Z's relative market share, which comes out to be 42.8%.

Significance
Businesses can use both absolute and relative market share to inform their strategic choices
and drive growth. Relative market share provides information on how to identify and outperform
Specific competitors, whereas absolute market share illustrates the amount of rowth potential a
company has within its industry. It's also beneficial to continuously calculate absolute and relative
market share to see whether a company is strengthening its position within its industry or slipping
further behind the competition.
 39
BCG Matrix /GE Matrix, 7S Mc Kinsey Models as Tools for Strategic Formulation

BCG Matrix Advantages

1. It is straightforward to use and simple to comprehend.
2. Larger businesses may utilize it to obtain volume and achieve results. It foretells a
company's future behavior. As a result, the business may select the best managernent
approach.
3. the firm's present portfolio of Stars, Cash Cows, Question Marks, and Dogs is useful for
managers to assess balance
4. According to the matrix, the company's earnings are closely correlated with its market
share. In light of this, a business may expand its market share if it appears lucrative.
5 It simply has four categories, which gives it a basic enough structure to work well.

BCG Matrix Limitations

1 Businesses may typically be cdassified as medium in the BCG matrix, in addition to the
low and high categories. As a result, the genuine character of the company could not
be apparent.
2. The line between high and low is really subjective.
3 BCG analysis cannot assist managers in considering potential synergies between the
various SBUs in the product portfolio.
4. In this paradigm, the market is not precisely defined.
5 Each business unit is viewed as independent of the others in the framework.
Example of BCG Matrix - APPLE INC
In terms of revenue Cupertino-based Apple is the biggest firm in the world. The electronics
giant has enjoyed a successful decade primarily due to some of its best-seling items, including the
iPod, iPhone, iPad, MacBook, Apple Watch, etc.
By charting Apple's product portfolio on the BCG growth-share matrix, we can learn which
products generate cash flow and which ones put a strain on the company's financial sheet.

Cash Cows

iPhone: The iPhone has had a phenomenal run in the last decade with its sales catapulting
from a mere $25.1 billion in 2010 to $137.7 bllion in 2020. In fact, sales of the iPhone accounted
for almost 50% of the company's total revenues in 2020. Most of the iPhones command a
premium and cost upwards of $1,000. iPhone's brand visibility and quick brand recall ensure that
there is substantial hype and publicity around the much-awaited launch of an iPhone every year.
Mac: Mac's product line includes the iMac (Desktops) and MacBook (Laptops). Revenue
from the Mac line stood at $28.6 bilion in 2020. These figures eclipse the total revenues of many
mid-size companies. Both the iMac and MacBook command a hefty premium and are famous for
their build quality, design, style, and durability.
 40 Strategic Management (M.M.S. Sem. I)

Stars
The smartwatch market has been completely transformed by the Apple Watch as reported
Dy Counterpoint Research. The report claims that in Q4 2020, Apple Watch accounted for 40%
Of all shipments of smartwatches worldwicde. The combined sales of the Apple Watch Series 6 and
Watch SE totaled12.9 million units over the same quarter.
Apple AirPods: Since their 2017 launch,Apple AirPods have experienced phenomenal
growth. The number of units sold increased from 15 milion in 2017 to 100 million in 2020. The
regular AirPod and AirPod Pro are included in the product line.
Apple Services includes the App Store, iTunes, Apple Music, and iCloud. Apple's Services
division incudes products including Apple Music, iTunes, iCloud, and the App Store. Over the
past three years, the services sector has consistently grown by double digits. Most iPhone or Mac
Users would sign up for these services to experience the Apple ecosystem seamlessly. In 2020, the
services segment's gross margin was a staggering 66%. Considering that only 20% of total
revenues, or $53 billion, came from the Services area in 2020, this perfomance is rather
impressive.
Question Mark
iPad: Although it continues to hold a dominant position in the tablet market, overalltablet
demand is declining and the market is slowing down. Larger smartphones from Apple's own line
up and competing manufacturers can be partially blamed for this. In Q1 2021, Apple's market
share in terms of shipment volume was 37%. In the same quarter, the overall tablet market
expanded by 53%, a 22% fall from the previous quarter.
Apple TV+: The company has been unable to continue its phenomenal expansion in the
streaming services market. Apple TV+ has a meagre 3% market share in the US. Given that
Apple's streaming service has been available for almost 2 years, these figures are not
encouraging.
Dog
iPod: The product has been credited with turning Apple's fortunes. It changed
the listening
habits of a lot of people across generations. The advent of their own
smartphone the iPhone
and streaming services such as Spotify could be credited to the downfall of the iPod.
Conclusion

The BCG group is guaranteed to have a bird's-eye perspective of the product

portfolio and
business units thanks to the Boston Consultancy Group matrix. The relative market
share and
market growth rate combined ensure that the organisation is not
caught off quard by just one
metric.

For instance, a huge market share could appear to suggest

dominance, but if the demand tor
the product is slowing down, the company will eventually see a
fall in revenues and earnings. Ihe
Apple iPad serves as an example of this.
 BCG Matrix / GE Matrix, 7S Mc Kinsey Models as Tooks tor Strategic Formulation 41

Strateqic Business Unit (SBU)

.(M.U. Nov. 2017) [2 marks]
AStrategic Business Unit refers to a division of a large corporation that is indeperndently
managed, has its own vision, goal, and objectives, and plans independently of the company's
other companies. The division's vision, mission, and goals are separate from those of the parent
company and essential to the enterprise's long-term success.
An SBU is, to put it simply, a group of related businesses that are in charge of their
combined planned treatment, i.e., the coporation that engages in a variety of businesses that are
division
scientifically divided into a small number of divisions. The task might entail the study and
of various enterprises.
a certain market sector that needs
A strategic business unit is created specifically to target
does not possess. It could be a
production or management capabilities that the parent firm
specialized product or brand that
corporate division, a product line within the division, or even a
caters to a certain demographic or geographic area.

4.1 GE MATRIX:

Business Strength
Medium Weak
Strong

Invest to Build
Protect
Market
Attractiveness Position Build Selectively
High

Selectivity/ Limited
Build
Manage for Expansion or
Medium Selectively Harvest
Earnings

Protect and Manage for Divest

Refocus Earnings
Low

Strategies
Image Source: htps://studiousguy.com/ge-mckinsey-matrix/
 42
Strategic Management (M.M.S. Sem. Il
GE matrix has been designed by General Electric (GE) Company and Mckinsey and Co. The
matrix was designed to overcome loopholes in the BCG matrix. The nine-box structure wac
Created after GE worked with Mckinsey &Company. The nine-box matrix depicts the BUs on is
9 cels, indicating whether the corporation should invest in a product, harvestldivest it, or
undertake further study on the product and invest in it if resources are stillavailable. The BUs are
rated on two axes: industrv attractiveness and a unit's competitive strength.
The atractiveness of an industryreflects how dificult or easy it will be fora firm to compete
n the market and make money. The more prosperous abusines is, the more appealing it is. The
attractiveness of an industry is determined by the following factors:
Rate of long-term growth
Size of the industry
Entry obstacles, exit barriers, supplier power, buyer power, threat of substitutes, and
available complements (apply Porter's Five Forces analysis to establish this) are al
factors that affect industry profitability.
Structure of the Industry
Changes in the product life cycle
Price Trends Changes in Demand
Environmental factors at a macro level

Seasonality
Market segmentation based on labor availability
The matrix analyses how competitively powerful a given business unit is in comparison to its
competitors along the Xaxis. To put it another way, managers try to figure out whether a business
unit has a long-term (or at least temporary) competitive advantage.
The competitive strength of a business unit is determined by the following factors:
Market share in total

Compared to competitors, market share growth

Strength of the brand
The company's profitability
Customer loyalty is important
VRIO's capabilities or resources
Your company's ability to fulfillthe industry's crucial success elements
Avalue chain's strength
Product differentiation level

Flexibility in production
 BCGMatrix /GE Matrix, 75 Mc Kinsey Models as Tools for Strategic Formulation 43

The 9 cells of the GE matrix are divided into 3 colors - Green (GO), Orange (WAÏT) and
Red (STOP). These are similar to traffic signals.
1) Green Zone - Invest/Expand
In this zone, firms have both the industry attractivenesS and business strengths to different
deqrees. This is a favorable situation for the business.
a) Protect Position Strong Business strength and High Business
Attractiveness.
Important strategy for firms here is to expand and invest in their business.
It is the most ideal position of the business.
b Invest to build - Pump in money.
unfavorable in tuture
Ifthe firm does not improve its strenath. it may prove to be
c) Build selectively - Cautious Approach
These firms need to developa very cautious approach as the market
attractiveness is medium.
going from medium to low in
Cautious approach needs to be taken to avoid
terms of market attractiveness.

2) Orange Zone -Manage for earnings

have both the industry attractiveness and business strengths to different
In this zone, firmns
situation for the business.
degrees. This is a not so favorable
Manage from existing
Selectivity/Manage for earnings -No investment.
a)
earnings
that is, to earm profits at existing
This situation indicates a strategy to hold,
capacity.
for other markets
b) Protect and Refocus - Look
for other markets.
The companyshould look out
c) Build Selectively
business strength.
One option is to Improve your
turn into a
company is unable to improve its business strength, it may
If the
Question Mark.

3) Red Zone - Harvest/Divest different

both the industry attractiveness and business strengths to
In this zone, firms have
situation for the business.
degrees. This is not a favorable
a) Expansion or Harvest - Slow exit
Limited
gradually.
quits the business but withdraws
In Harvesting the company
 44 Strategic Management (M.M.S. Sern. l
In this situation, the inital emphasis is on reducing the cost by stopping those
activities that have a long-term horizon.
b) Manage for Earnings/Harvest.
c) Divest - Shut it.
In this situation we shut down business immediately
Company should divest its capital.
Benefits of Ge Matrix
1) Itused nine cells as opposed to four in the BCG
2)
It takes into account avariety of factors and avoids drawing generalizations.
3) Strong/average/low and high/medium/low classifications allow for a more precise
differentiation between business portfolios.
4) It assesses industry attractiveness and business strength using a variety of metrics, allowing
users to choose the ones that are most relevant to their circumstance.

Limitations of Ge Matrix
1) With the proliferation of businesses, it can become fairly difficult and time-consuming.
2) Despite appearing to be objective, industry atractiveness and business strength are actually
subjective judgments that can differ from person to person.
3) It cannot accurately portray the status of new business units in developing industries.
4) It only offers general strategy prescriptions rather than detailed
corporate policy
recommendations.
Criteria weightages in application of GE Matrix
..( M.U. Nov. 2018) [5 marks]
Imagine that we are plotting just two businesS units, Business Unit A and B, on the GE
Matrix.

Step 1. Determine the industry attractiveness of each business unit

List the factors: To determine industry
attractiveness, the following are among factors
taken into consideration: the industry gowth rate, market size,
industry profitability, low
competition, and PEST factors.
Decide weights: To keep it simple, let us take just three of the factors that
make an
industry attractive for investments: High profit, industry growth, and low
competition.
Now, we need to decide the weight of each factor that is, how important
each factor isby
giving it points from 1 (not important) to 10 (very important).
The total of all the weights should be 10. Let us assume that high profit is the
most important
of the factors; if so, give it a weight of, say, 5 out of 10.
 RCGMatrix /GE Matrix, 7S Mc Kinsey Models as Tools for Strateic Formulation 45

Give industry growth 3 out of 10, and low competition 2 out of 10 (these are just random
weights, given only for example).
So, this means that the possbility of making a high profit is the most important consideration
in entering the market, followed by market growth and low competition.
Rate the factors: Now, rate each factor for each business unit on a scale of 1 (not
attractive) to 10 (very attractive). Let us say that for Unit A, low competition is the most attractive
factor.
If so, it is put at 6 (for example) on the scale. Industry growth and high profit get scores of 4
6, and low
and 1, respectively, for Unit A. For Unit B, industry arowth scores 3, high profit
competition 1 (the ratings need not add up to 10).
attractiveness, we
Weighted score: To get the weighted score for each factor of industry
weighted scores for Unit A
multiply the weight of the factor by the rate for the unit. Here are the
and UnitB.
growth: 3 x 4 = 12. High
Unit A: Low competition: 2 (weight) x 6 (rate) = 12. Industry
profit: 5 x 1=5. Total weighted score for Unit A= 12 + 12 + 5 = 29.
=9. High profit: 5 x6 =30.
Unit B: Low competition: 2 x 1 = 2. Industry arowth: 3 x 3
Total weighted score for UnitB =2+9 + 30 = 41.
Step 1. Determine the competitive strength of each business unit
attractiveness, we try to find out the
Step 2 is similar to Step 1, but instead of industry
competitive strengths of Units A and B.
Units A and B, the following
List the factors: To determine the competitive strengths of
consideration: market share, growth rate,
are among the factors that can be taken into
profitability, brand reputation, and customer service.
into account only three factors here:
Decide weights: For simplicity's sake, let us take
reputation.
market share, profitability of the unit, and brand
above, we need to decide the weight of each
As in the case of industry attractiveness
from 1(not important) to 10 (very
factor-that is, howimportant each factor is -on a scale
important).
it 5 out of 10. Give profitability 3 out
Say, market share is the most important factor, so give
weights must add up to 10).
of 10, and brand reputation 2 out of 10 (the
is being considered as the most important
So, this means that, in this example, market share
factor in evaluating the relative strengths of the two units.
factor for each business unit on a scale of 1
Rate the factors: Now, as above, rate each
(not important) to 10 (very important factor).
is the strongest factor, and gets 5 out of 10.
Let us imagine that for Unit A, brand reputation
Market share and profitability score 1 each for Unit A.
brand reputation 1 (the ratings
For Unit B, market share getsa score of3, profitability 6, and
need not add up to 10).
 46 Strategic Management (M.M.S. Ser
Weighted score: To get the weighted score for each factor of competitive strength for o
unit, we multiply the weight for the factor by the rate for the unit. Here are the weighted
Unit A
and Unit B. SCores for
Unit A: 1. Brand reputation: 2 (weight) x 5 (rate) = 10. Market share: 5 x 1 t
Profitability: 3 x 1 =3. Total weighted score = 10+ 5+3 = 18.
Unit B: Brand reputation: 2 x 1 = 2. Market share: 5 x3 15. Profitability: 3 x6 =
18.
lotal weighted score: 2 + 15 + 18 = 35.
Step 3. Determine the position of the units on the matrix
Once we have the weighted scores of the units, we can plot the units on the matrix. Here i
the example, Unit Aand Unit Bscore 29 and 41 in industry attractiveness, and 18 and 35 in t
strength, respectively.
Each unit is represented bya circle with its size showing the unit's market size. A pie cha
can also be shown on the circle showing its market share.
Generally, unit that are aboOve the diagonal of the matrix would be candidates for additional
investments and those below candidates for divestment.
Units that fall on or about thediagonal are usually put in the "hold" category. A dimension
showing the outlook for the units can also be incuded, and it is explained in Step 5.
Industry
Attractiveness
50
Invest Invest Hold
B
40

Invest Hold Divest /

30 Harvest
A

20 Divest /
Hold Divest /
Harvest Harvest
10
50 40 30 20 10 0

Strength of Business Unit

Image Source :
https:/ www.mbacrystalbal.com/blog/strategy/ge-mckinsey-matrix/
Step 4. Determine the strategy option for the units
Depending on the position of the unit on the matrix and the box on the matrix in which it
has been placed, three categories of investment or
divestment decisions can be made: (1) invest;
(2) hold; (3) harvest or divest.
Step 5. Forecast the future of the units
The wisdom of business analysts is necessary to predict
the outlook for any industry. For
example, the matrix shows that Unit B is in the invest category.
pcGMatrix / GE Matrix, 7S Mc Kinsey Models as Tools for Stralecqic Formulation 47

However, if the outlook for its industry shows that the market is likely to shrink and it might
ngo strength, Unit B would become much less attractive for investrment.
On the other hand, if the future scenario for Unit Ashows that its industry is poised for
orowth, the unit, now placed in the "hold" category by the matrix, will become attractive for
investment.

EXAMPLE OF GE MATRIX:APPLE INC

We will consider the example of Apple Inc and its various business's that can be placed in
the three zones.

Growth : iphone, Apple watch, Apple service, Apple airpods

Hold: Apple TV, Ipad
Harvest: ipod

4.2 MCKINSEY'S 7S MODEL

. . M.U. Nov. 2017) [10 marks]

.... (M.U. Nov. 2018) (5 marks]
...... M.U. Nov. 2019) [10 marks]
consultants Julien Philips,
The Mckinsey 7s model was created in the 1980s by Mckinsey
and Richard Waterman.
Richard Pascale, and Tom Peters with assistance from Anthony G. Athos
a company to be
They identified seven internal organizational factors that must be in sync for
professionals since its
successful. The model has been utilized extensively by academics and
tools today. Instead of the
inception and is stillone of the most regularly used strategicplanning
it aimed to
conventional mas-production tangibles of capital, infrastructure, and equipment,
organizational performance. The
emphasize people resources (Soft S) as the key to improved
components
model's objective was to demonstrate how the alignment of seven corporate
result in effectiveness in
Structure, Strategy, Skills, Staff, Style, Systems, and Shared Values-can
are interrelated, and changes in one
acorporation. The model's main idea is that all seven sectors
for it to work efficiently.
area necessitate changes in the rest of the company in order
The following are the elements of Mckinsey's 7S model:
Soft Elements
Hard Elements
Shared Values
Strategy
Structure Style
Systems Staff
Skills
 48
Strategic Management IMMS.Sem
Hard Elements
a) Strategy
The plan devised to maintain and build
competitive advantage over the competitio
1) What is our strategy?
2) Howdo we achieve our objectives?
3) How do we deal with
competitive pressure?
4 What is the
strategy for our customers?
5) What is
the Pricing Strategy?
6) What is promotion and
b) Structure distribution strategy
The way the
organization is structured and who reports to whom.
1) What is the hierarchy in an
2) Which are the various
organization?
3)
departments and how do they coordinate?
How is the company or the team
4)
divided?
Which are the lowest and highest level of
c) Systems positions in the company?
The daily activities and
1)
procedures that staff members engage in to get the job
Internal Process done.
2) What is the day
to day
3) How do you procedure?
manage day to day hours?
4) How are the
controls monitored and evaluated?
Soft Elements -
a) Shared values
Core values of the
companythat are evidenced in the
work ethic. corporate culture and the general
1) What are the core values of the
2)
company?
What is the corporate culture
followed in the company?
3) How is the Team culture in the
4)
company?
What are the basic or
fundamental values the company has been built on?
 49
BCG
GMatrix/GE Matrix, 7S Mc Kinsey Models as Tools for Strateqic Forrnulation

b)
Style
The style of leadership which the leader showcases at the time of crisis decision making
1) What is the style of leadership? (Autocratic, Democratic, etc.)
2) How effective is that leadership style?
3) Are the Employees comfortable with current style of leadership?
c) Staff
The employees and their general capabilities.
1) What are the positions in the organization that need to be filled?
2) What is the bifurcation of various positions in the organization?
How are recruitments done?
3)
levels?
4) What is the minimum qualification required for recruitment at various
5) How fast are people promoted?

d) Skill
company.
The actual skills and competencies of the employees working for the
1) What are the skills and competencies of the employees?
How are the skills monitored?
2)
3) Do the employees have requisite skills to do the duty?

Application of the McKinsey 7S Model

. . . M.U. Nov. 2018) [5 marks]
in relation to the seven main elements is
one
The subjectivity around the idea of alignment However, a top-down
looks to be challenging.
of the reasons why this model's application
advised, encompassing everything from broad strategy and agreed values to style and
approach is
staff.
in step one.
Step 1: Determine the areas that are not properly aligned
values, strategy, structure, and systens consistent? Look for holes and contradictions
Are the
What should be altered?
in the way the pieces are connected.
Step 2: Select the ideal organizational structure
combined to develop a general, ideal
The ideas of senior management should be
goals and objectives that are both
organizational structure that would enable the business to set
industry templates" to use, the step
attainable and practical. Since there are no "organizational
necessitates extensive investigation and analysis.
50 Strategic Managernent (M.M.S. Serm. In
Step 3: Decide where and what modifications need to be made
Once the outliers have been located, a plan of action can be developed, which calls for
alterations to the reporting structures, communication channels, and hierarchy. It will enable the
business to develop an effective organizational structure.
Step 4: Cany out the required adjustments
The decision strategy's implementation will determine if the organization can realisticaltu
accomplish the goals it has set. A well-thought-out implementation plan is the greatest way to
overcome the various obstacles that arise during the implementation process.
Advantages of the Model
It makes it possible for several company departments to function in unison and in
"sync."
It makes it possible to monitor the effects of changes to important factors effectively.
It is regarded as an old hypothesis because many organizations have used it for a long
time.

Limitations of the McKinsey's 7S model

...... M.U. Nov. 2018) [5 marks]
This model is complex in nature - f any change has to be made in 1 factor, all
the
components will get affected
Difficult to analyze - It is a difficult model to be analyzed for all practical purposes.
Static model - This model is Static mode. This means that it is
difficult to recommend
changes over a time period. Thus, the model should be developed and analyzed on an
ongoing basis.
Huge effect and High Risk -When one of the parts changes, all the parts
change as the
factors are interrelated. Companies using this model have been known to have a
incidence of failure.
high

Ignores external environment - This model describes the

interconnectedness of the
important processes and forces within the organization, but tends to ignore the
of the external environment and only portrays the significance
most essential components.
prGMatrix /GE Matrix, 75 Mc Kinsey Models as Tools for Strategic Formulation 51

REVIEW QUESTIONS|

01 The BCG matrix is used to create expansion strategies for adding new goods and services to
the portfolio as well as determining when goods and services shouldn't be kept. Explain the
statement.

02. The GE matrix devises strategies based on market attractiveness & business strength.
Explain the statement.
03. Write short notes on
a) SBUs

b) Absolute Market Share

c) Relative market Share

Q4. McKinsey's 7S model identifies seven internal organizational factors that must be in sync tor
acompany to be successful. Explain the statement.
Q5. Explain the limitations of Mckinseys 7S model.