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Strategic Management Topics

The document discusses strategic management topics, focusing on the analysis of internal resources and corporate capabilities using frameworks like VRIO, RBV, and SWOT analysis. It outlines major strategy options including Stability, Growth/Expansion, and Retrenchment, detailing their definitions, types, and when to use them. Additionally, it introduces the McKinsey 7S Model, which highlights the importance of aligning seven internal elements for organizational success.

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20 views4 pages

Strategic Management Topics

The document discusses strategic management topics, focusing on the analysis of internal resources and corporate capabilities using frameworks like VRIO, RBV, and SWOT analysis. It outlines major strategy options including Stability, Growth/Expansion, and Retrenchment, detailing their definitions, types, and when to use them. Additionally, it introduces the McKinsey 7S Model, which highlights the importance of aligning seven internal elements for organizational success.

Uploaded by

Byg Basher
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Strategic Management Topics

Analysis of Internal Resources (in BPSM)


Diagnosing corporate capabilities is a fundamental aspect of strategic management,
enabling organizations to assess their internal strengths and weaknesses. This evaluation
informs strategic decisions and helps in achieving a sustainable competitive advantage.

Key Frameworks for Diagnosing Corporate Capabilities:

1. VRIO Framework:
- Value: Does the resource or capability provide value to the organization?
- Rarity: Is it rare among current and potential competitors?
- Imitability: Is it costly for others to imitate?
- Organization: Is the firm organized to exploit this resource or capability effectively?
Resources and capabilities that meet all four criteria can offer a sustained competitive
advantage.

2. Resource-Based View (RBV):


- Focuses on identifying and leveraging internal resources and capabilities that are
valuable, rare, inimitable, and non-substitutable.
- Emphasizes the development of core competencies that provide a competitive edge.

3. Functional Area Profiling:


- Involves assessing capabilities across various organizational functions such as
marketing, operations, finance, and human resources.
- Helps in identifying areas of strength and those requiring improvement.

4. Strategic Advantage Profile (SAP):


- A tool that maps an organization's strengths and weaknesses against key success factors
in the industry.
- Assists in visualizing areas where the organization holds a competitive advantage.

5. Capability Maturity Models:


- Assess the maturity of specific capabilities within the organization.
- Helps in understanding the current state and planning for capability development.

Steps in Diagnosing Corporate Capabilities:

1. Identify Key Capabilities:


- Determine the critical capabilities that drive value in your industry.

2. Assess Current Performance:


- Evaluate how well these capabilities are currently performing.
3. Benchmark Against Competitors:
- Compare your capabilities with industry standards and competitors to identify gaps.

4. Analyze Gaps and Develop Action Plans:


- Identify areas needing improvement and develop strategies to enhance these
capabilities.

5. Monitor and Review:


- Regularly review the performance of capabilities and adjust strategies as necessary.

By systematically diagnosing corporate capabilities, organizations can align their resources


and competencies with strategic objectives, ensuring long-term success and
competitiveness in the market.

Major Strategy Options: Stability, Growth, and Expansion (in BPSM)


In Business Policy and Strategic Management (BPSM), organizations employ various
strategies to navigate their competitive environments. Three primary strategic options are:
Stability, Growth/Expansion, and Retrenchment. Each serves distinct purposes based on the
organization's goals and market conditions.

1. Stability Strategy

Definition: A Stability Strategy involves maintaining the current business operations


without significant growth or reduction. It's often adopted when an organization is
performing satisfactorily and the external environment is stable.

Types:
- No-Change Strategy: Continuing current operations without any alterations.
- Profit Strategy: Focusing on improving profitability without expanding operations.
- Pause/Proceed with Caution: Temporarily halting growth to consolidate gains before
future expansion.

When to Use:
- During periods of economic uncertainty.
- When the organization has recently undergone rapid growth.
- If the company operates in a saturated market.

2. Growth/Expansion Strategy

Definition: This strategy aims to increase the company's market share, sales, and overall
size. Growth can be achieved through various means, depending on the organization's
capabilities and market opportunities.

Types:
- Intensive Growth:
- Market Penetration: Increasing sales of existing products in current markets.
- Market Development: Entering new markets with existing products.
- Product Development: Introducing new products to existing markets.
- Integrative Growth:
- Horizontal Integration: Acquiring or merging with competitors.
- Vertical Integration: Controlling additional stages of the supply chain.
- Diversification:
- Concentric Diversification: Adding related products or services.
- Conglomerate Diversification: Entering entirely new industries.

When to Use:
- When market opportunities are abundant.
- To achieve economies of scale.
- To reduce dependence on a single market or product.

3. Retrenchment Strategy

Definition: A Retrenchment Strategy involves reducing the company's activities to improve


financial stability. It's typically adopted during periods of financial distress or declining
performance.

Types:
- Turnaround Strategy: Implementing measures to reverse negative trends.
- Divestment Strategy: Selling off parts of the business that are underperforming or not
aligned with core activities.
- Liquidation Strategy: Closing down parts of the business and selling assets.

When to Use:
- When facing persistent losses.
- If certain business units are underperforming.
- To reallocate resources to more profitable areas.

Understanding and selecting the appropriate strategy is crucial for an organization's long-
term success. The choice depends on internal capabilities, market conditions, and overall
corporate objectives.

Short Note on: SWOT Analysis and McKinsey 7S Model


SWOT Analysis

Definition: SWOT Analysis is a strategic planning technique used to identify an


organization's internal Strengths and Weaknesses, as well as external Opportunities and
Threats. This framework aids in understanding the current position of an organization and
in formulating strategies accordingly.

- Strengths: Internal attributes that are helpful to achieving the objective.


- Weaknesses: Internal attributes that are harmful to achieving the objective.
- Opportunities: External conditions that are helpful to achieving the objective.
- Threats: External conditions that could do damage to the business.
It is widely used for strategic planning, personal development, and competitive analysis.

McKinsey 7S Model

Definition: The McKinsey 7S Model is a management framework that describes seven


internal elements of an organization that need to align for it to be successful.

The seven elements are divided into “hard” and “soft” elements:

Hard Elements:
- Strategy: The plan devised to maintain and build competitive advantage.
- Structure: The way the organization is structured and who reports to whom.
- Systems: The daily activities and procedures that staff use to get the job done.

Soft Elements:
- Shared Values: Core values of the company that are evidenced in the corporate culture and
the general work ethic.
- Skills: The actual skills and competencies of the employees working for the company.
- Style: The style of leadership adopted.
- Staff: The employees and their general capabilities.

The model emphasizes the interconnectedness of these elements and how a change in one
affects all the others.

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