Unit 4

Strategic Framework: Strategic analysis & choice, Strategic gap analyses with examples

Certainly! A strategic framework provides a structured approach for analyzing the internal and
external factors affecting an organization's performance and making informed strategic choices to
achieve its objectives. Two essential components of a strategic framework are strategic analysis and
strategic gap analysis. Here's an overview of each with examples:

1. Strategic Analysis & Choice:

Definition: Strategic analysis involves assessing the internal strengths, weaknesses, external
opportunities, and threats (SWOT analysis) facing the organization. Based on this analysis, strategic
choices are made to determine the most appropriate course of action to achieve the organization's
objectives.

Example:

 Google:

 Strengths: Google's strengths include its dominant position in the search engine
market, innovative culture, and strong brand reputation.

 Weaknesses: Google's weaknesses may include privacy concerns, dependence on

advertising revenue, and regulatory challenges.

 Opportunities: Opportunities for Google may include expanding into new markets
(e.g., cloud computing, artificial intelligence), developing new products and services,
and strategic partnerships.

 Threats: Threats to Google may include competition from rivals (e.g., Bing, Yahoo),
regulatory scrutiny, and disruptive technologies.

2. Strategic Gap Analysis:

Definition: Strategic gap analysis involves identifying the gaps between the organization's current
performance and its desired future state. It helps prioritize strategic initiatives and allocate
resources effectively to bridge these gaps and achieve strategic objectives.

Example:

 Amazon:

 Current State: Amazon's current state may include market leadership in e-

commerce, cloud computing (Amazon Web Services), and digital streaming (Amazon
Prime Video).

 Desired State: Amazon's desired state may involve further market expansion,
diversification into new industries (e.g., healthcare, logistics), and sustainable
profitability.

 Gap Analysis: By conducting a gap analysis, Amazon can identify areas where it
needs to improve (e.g., operational efficiency, customer experience, regulatory
compliance) to bridge the gap between its current and desired states.
portfolio analyses – BCG, GE, product market evolution matrix, experience curve, directional policy
matrix, life cycle portfolio matrix, grand strategy selection matrix with examples

Portfolio analyses are strategic management tools used to evaluate and manage a company's
portfolio of businesses or products. Each analysis provides insights into the performance and
strategic positioning of different components within the portfolio. Here's an overview of several
portfolio analyses, including the BCG matrix, GE matrix, Product-Market Evolution Matrix,
Experience Curve, Directional Policy Matrix, Life Cycle Portfolio Matrix, and Grand Strategy Selection
Matrix, along with examples:

1. BCG Matrix (Boston Consulting Group):

Definition: The BCG matrix categorizes a company's portfolio of businesses or products into four
quadrants based on their market growth rate and relative market share. These quadrants are stars,
question marks, cash cows, and dogs, each requiring different strategies.

Example:

 Apple:

 Stars: iPhone (high market growth rate, high market share)

 Question Marks: Apple Watch (high market growth rate, low market share)

 Cash Cows: Mac (low market growth rate, high market share)

 Dogs: iPod (low market growth rate, low market share)

2. GE Matrix (General Electric):

Definition: The GE matrix evaluates a company's portfolio of businesses based on their market
attractiveness and competitive strength. It classifies businesses into nine cells, ranging from "highly
attractive" to "unattractive," to guide resource allocation and strategic decision-making.

Example:

 General Electric:

 Highly Attractive: Renewable Energy Division

 Attractive: Aviation Division

 Medium Attractiveness: Healthcare Division

 Average: Lighting Division

 Unattractive: Transportation Division

3. Product-Market Evolution Matrix:

Definition: The Product-Market Evolution Matrix assesses the strategic position of products or
businesses within their respective markets based on market maturity and competitive intensity. It
categorizes products into pioneers, settlers, migrators, and refugees, each requiring different
strategic responses.

Example:

 Netflix:
  Pioneers: DVD-by-mail subscription service (during the early stages of the streaming
market)

 Settlers: Streaming video-on-demand service (after establishing dominance in the

market)

 Migrators: Original content production (expanding into new market segments)

 Refugees: DVD-by-mail service (as the market shifted towards streaming)

4. Experience Curve:

Definition: The Experience Curve illustrates the relationship between cumulative production volume
and unit production costs. It suggests that as cumulative production increases, unit costs decline due
to learning effects, economies of scale, and process improvements.

Example:

 Tesla:

 Experience Curve Effect: As Tesla increases its production volume of electric

vehicles, it benefits from economies of scale, technological advancements, and
production efficiencies, leading to lower unit costs and improved profitability.

5. Directional Policy Matrix:

Definition: The Directional Policy Matrix evaluates strategic options based on market attractiveness
and competitive position. It categorizes businesses into four strategic quadrants: invest/grow,
selectivity, harvest/divest, and turnaround, to guide resource allocation and strategic focus.

Example:

 Procter & Gamble (P&G):

 Invest/Grow: High-growth markets with strong competitive positions (e.g.,

healthcare and personal care products)

 Selectivity: Moderate-growth markets with competitive positions needing

improvement (e.g., household cleaning products)

 Harvest/Divest: Low-growth markets with strong competitive positions (e.g., mature

brands in saturated markets)

 Turnaround: Underperforming businesses in unattractive markets requiring

restructuring or divestment (e.g., struggling brands or divisions)

6. Life Cycle Portfolio Matrix:

Definition: The Life Cycle Portfolio Matrix assesses the strategic position of businesses or products
based on their stage in the product life cycle (introduction, growth, maturity, decline). It guides
resource allocation and strategic focus according to the specific challenges and opportunities at each
stage.

Example:

 IBM:
  Introduction: Emerging technologies (e.g., artificial intelligence, blockchain)

 Growth: Established solutions with expanding market adoption (e.g., cloud

computing, cybersecurity)

 Maturity: Mature product lines with stable market share (e.g., enterprise software,
hardware)

 Decline: Legacy products or services facing declining demand (e.g., traditional IT

infrastructure)

7. Grand Strategy Selection Matrix:

Definition: The Grand Strategy Selection Matrix evaluates strategic options based on market growth
rate and competitive position. It categorizes businesses into four quadrants: market development,
market penetration, product development, and diversification, to guide strategic decision-making.

Example:

 Google:

 Market Development: Expanding into new geographic markets or customer

segments (e.g., entering emerging markets with internet connectivity initiatives)

 Market Penetration: Increasing market share in existing markets (e.g., strengthening

advertising dominance in digital advertising)

 Product Development: Introducing new products or services to existing markets

(e.g., launching Google Pixel smartphones)

 Diversification: Entering new industries or markets unrelated to the core business

Behavioral considerations affecting choice of strategy; Culture and Strategic with examples

Behavioral considerations play a significant role in shaping the choice of strategy within an
organization. These considerations encompass the beliefs, attitudes, values, and cognitive biases of
individuals and groups involved in the strategic decision-making process. One crucial aspect
influencing strategy choice is organizational culture. Let's explore how culture influences strategy
choice along with examples:

Behavioral Considerations Affecting Choice of Strategy:

1. Risk Appetite:

 Example: A risk-averse culture may lead to conservative strategies focused on

incremental growth and stability, while a risk-taking culture may encourage more
aggressive strategies such as innovation and market disruption.

2. Decision-Making Style:

 Example: An organization with a hierarchical decision-making style may prefer top-

down strategic planning, while a more decentralized organization might favor
participatory decision-making processes that involve input from various levels of the
hierarchy.

3. Resistance to Change:
  Example: Employees' resistance to change can influence the adoption of new
strategies. A culture that embraces innovation and change may facilitate the
implementation of bold strategies, whereas a culture resistant to change may hinder
strategic initiatives.

4. Leadership Style:

 Example: The leadership style of top executives can significantly impact strategy
choice. Autocratic leaders may impose their vision and preferences on strategy,
while transformational leaders may inspire and empower employees to contribute
to strategic decision-making.

5. Organizational Learning:

 Example: An organization that values continuous learning and experimentation may

be more inclined to pursue adaptive strategies that allow for flexibility and
responsiveness to changing market conditions.

Culture and Strategy:

Organizational culture encompasses shared values, norms, beliefs, and behaviors that shape how
individuals within an organization interact and make decisions. Culture profoundly influences
strategic choices and implementation. Here are examples of how culture and strategy are
intertwined:

1. Innovation Culture:

 Example: Google fosters a culture of innovation characterized by risk-taking,

experimentation, and creativity. This culture aligns with Google's strategy of
developing ground breaking products and services, such as Google Search, Android,
and self-driving cars.

2. Customer-Centric Culture:

 Example: Zappos is renowned for its customer-centric culture, emphasizing

exceptional customer service and employee empowerment. This culture supports
Zappos' strategy of delivering superior customer experiences, driving customer
loyalty and brand reputation.

3. Performance Culture:

 Example: General Electric (GE) historically had a performance-driven culture focused

on metrics, accountability, and competitiveness. This culture aligned with GE's
strategy of operational excellence and continuous improvement across its diverse
portfolio of businesses.

4. Collaborative Culture:

 Example: Toyota cultivates a collaborative culture known as "Toyota Way,"

emphasizing teamwork, consensus-building, and continuous improvement. This
culture supports Toyota's strategy of lean manufacturing and quality excellence.

5. Inclusive Culture:
  Example: Salesforce promotes an inclusive culture that values diversity, equality,
and social responsibility. This culture aligns with Salesforce's strategy of fostering
innovation, attracting top talent, and serving a diverse customer base.

Leadership: Implementing & operationalizing strategic choice, Impact of structure, culture &
leadership, functional strategies & their link with business level strategies with examples

Implementing and operationalizing strategic choices require effective leadership, alignment with
organizational structure and culture, and the integration of functional strategies with business-level
strategies. Let's explore how leadership impacts the implementation of strategic choices, the
influence of structure and culture, and the link between functional and business-level strategies,
along with examples:

Leadership: Implementing & Operationalizing Strategic Choice:

1. Clear Vision and Communication:

 Example: Tim Cook's leadership at Apple involved implementing the strategic choice
of expanding the company's ecosystem through product diversification, such as
launching new iPhone models, Apple Watch, and services like Apple Music. Cook
effectively communicated this vision to employees and stakeholders, driving
alignment and commitment.

2. Empowerment and Accountability:

 Example: Satya Nadella's leadership at Microsoft involved operationalizing the

strategic choice of shifting towards cloud computing and subscription-based
services. Nadella empowered teams to innovate and take risks, fostering a culture of
accountability and agility that enabled the successful implementation of the cloud-
first strategy.

Impact of Structure, Culture & Leadership:

1. Organizational Structure:

 Example: Google's flat organizational structure promotes collaboration, innovation,

and rapid decision-making, facilitating the implementation of its strategic choices.
This structure aligns with Google's culture of creativity and agility, driving initiatives
such as the development of new products like Google Maps and Google Drive.

2. Organizational Culture:

 Example: Southwest Airlines' culture of employee empowerment and customer-

centricity supports its strategy of delivering low-cost, high-quality service. This
culture, combined with a decentralized organizational structure, enables employees
to make real-time decisions and contribute to the successful implementation of the
company's strategy.

3. Leadership Style:

 Example: Under Elon Musk's leadership, SpaceX operationalized the strategic choice
of revolutionizing space exploration through innovation and cost efficiency. Musk's
visionary leadership, hands-on approach, and willingness to take calculated risks
 have been instrumental in driving SpaceX's achievements, such as reusable rocket
technology and missions to Mars.

Functional Strategies & Their Link with Business-Level Strategies:

1. Marketing Strategy:

 Example: Coca-Cola's marketing strategy aligns with its business-level strategy of

global brand leadership and market penetration. Through targeted advertising
campaigns, sponsorships, and product diversification, Coca-Cola reinforces its brand
image and expands its market share worldwide.

2. Operations Strategy:

 Example: Toyota's operations strategy focuses on lean production, continuous

improvement, and quality management, supporting its business-level strategy of
operational excellence and cost leadership. Toyota's renowned Toyota Production
System (TPS) enables efficient manufacturing processes and superior product
quality.

3. Human Resource Strategy:

 Example: Netflix's human resource strategy complements its business-level strategy

of innovation and talent retention. By offering competitive compensation, fostering
a culture of freedom and responsibility, and investing in employee development,
Netflix attracts top talent and drives innovation in content creation and technology.

Balanced Score Card; Introduction to Strategic control & evaluation, Strategic surveillance with
examples

1. Balanced Scorecard (BSC):

Definition: The Balanced Scorecard translates an organization's strategic objectives into a set of
performance metrics across four perspectives: financial, customer, internal processes, and learning
and growth. It enables organizations to track performance holistically and ensure alignment with
strategic priorities.

Example:

 Starbucks: Starbucks utilizes the Balanced Scorecard to measure performance across

various dimensions:

 Financial Perspective: Revenue growth, profitability, and return on investment.

 Customer Perspective: Customer satisfaction, loyalty, and market share.

 Internal Processes Perspective: Efficiency of store operations, product quality, and

supply chain management.

 Learning and Growth Perspective: Employee training, innovation, and organizational

culture.

2. Introduction to Strategic Control & Evaluation:

Definition: Strategic control and evaluation involve assessing the effectiveness and efficiency of
strategies in achieving organizational objectives. It includes comparing actual performance against
predetermined standards, identifying deviations, and taking corrective actions when necessary to
ensure strategic success.

Example:

 Apple: Apple continuously evaluates its strategic performance through financial analysis,
customer feedback, and internal assessments. If actual sales of a new product fall below
projections, Apple may analyze the root causes, such as pricing, product features, or
competition, and adjust its marketing or product development strategies accordingly.

3. Strategic Surveillance:

Definition: Strategic surveillance involves systematically monitoring the external environment for
changes, trends, and developments that may impact the organization's strategic decisions and
competitive position. It helps identify emerging opportunities and threats in a timely manner,
enabling proactive strategic responses.

Example:

 Google: Google employs strategic surveillance to monitor developments in technology,

regulation, and market trends. For instance, Google continuously tracks advancements in
artificial intelligence, shifts in consumer behavior towards online search and advertising, and
changes in privacy regulations. This surveillance informs Google's strategic decisions
regarding product development, investment priorities, and market expansion.