Strategic Management Dr Rohit Ramesh

[STRATEGIC 2011 MANAGEMENT DR ROHIT RAMESH ]

Faculty of Management JB Knowledge Park Faridabad

Dr Rohit Ramesh, Professor & Dean Strategic Management: Structured Notes as per the Syllabus of MD University, Faculty of Rohtak, Haryana Management

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Strategic Management Dr Rohit Ramesh

Strategic Management The Strategic Management Process In today's highly competitive business environment, budget-oriented planning or forecastbased 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: The Strategic Planning Process Mission & Objectiv es

Environme ntal Scanning

Strategy Formulati on

Strategy Implementa tion

Evaluati on & Control Mission and Objectives

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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 The environmental scan includes the following components: Internal analysis of the firm Analysis of the firm's industry (task environment) External macroenvironment (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

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Levels of Strategy Strategy can be formulated on three different levels: corporate level business unit level 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. Consider Textron, Inc., a successful conglomerate corporation that pursues profits through a range of businesses in unrelated industries. Textron has four core business segments: Aircraft - 32% of revenues Automotive - 25% of revenues Industrial - 39% of revenues Finance - 4% of revenues.

While the corporation must manage its portfolio of businesses to grow and survive, the success of a diversified firm depends upon its ability to manage each of its product lines. While there is no single competitor to Textron, we can talk about the competitors and strategy of each of its business units. In the finance business segment, for example, the chief rivals are major banks providing commercial financing. Many managers consider the business level to be the proper focus for strategic planning. 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.

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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. The Business Vision and Company Mission Statement While a business must continually adapt to its competitive environment, there are certain core ideals that remain relatively steady and provide guidance in the process of strategic decision-making. These unchanging ideals form the business vision and are expressed in the company mission statement. In their 1996 article entitled Building Your Company's Vision, James Collins and Jerry Porras provided a framework for understanding business vision and articulating it in a mission statement. The mission statement communicates the firm's core ideology and visionary goals, generally consisting of the following three components:

1. Core values to which the firm is committed 2. Core purpose of the firm 3. Visionary goals the firm will pursue to fulfill its mission
The firm's core values and purpose constitute its core ideology and remain relatively constant. They are independent of industry structure and the product life cycle.

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The core ideology is not created in a mission statement; rather, the mission statement is simply an expression of what already exists. The specific phrasing of the ideology may change with the times, but the underlying ideology remains constant. The three components of the business vision can be portrayed as follows:

Core Valu es

Core Purpo se

Busine ss Vision

Visionar y Goals Core Values The core values are a few values (no more than five or so) that are central to the firm. Core values reflect the deeply held values of the organization and are independent of the current industry environment and management fads. One way to determine whether a value is a core value to ask whether it would continue to be supported if circumstances changed and caused it to be seen as a liability. If the answer is that it would be kept, then it is core value. Another way to determine which values are core is to imagine the firm moving into a totally different industry. The values that would be carried with it into the new industry are the core values of the firm. Core values will not change even if the industry in which the company operates changes. If the industry changes such that the core values are not appreciated, then the firm should seek new markets where its core values are viewed as an asset. For example, if innovation is a core value but then 10 years down the road innovation is no longer valued by the current customers, rather than change its values the firm should seek new markets where innovation is advantageous. The following are a few examples of values that some firms has chosen to be in their core: excellent customer service pioneering technology creativity

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integrity social responsibility

Core Purpose The core purpose is the reason that the firm exists. This core purpose is expressed in a carefully formulated mission statement. Like the core values, the core purpose is relatively unchanging and for many firms endures for decades or even centuries. This purpose sets the firm apart from other firms in its industry and sets the direction in which the firm will proceed. The core purpose is an idealistic reason for being. While firms exist to earn a profit, the profit motive should not be highlighted in the mission statement since it provides little direction to the firm's employees. What is more important is how the firm will earn its profit since the "how" is what defines the firm. Initial attempts at stating a core purpose often result in too specific of a statement that focuses on a product or service. To isolate the core purpose, it is useful to ask "why" in response to first-pass, product-oriented mission statements. For example, if a market research firm initially states that its purpose is to provide market research data to its customers, asking "why" leads to the fact that the data is to help customers better understand their markets. Continuing to ask "why" may lead to the revelation that the firm's core purpose is to assist its clients in reaching their objectives by helping them to better understand their markets. The core purpose and values of the firm are not selected - they are discovered. The stated ideology should not be a goal or aspiration but rather, it should portray the firm as it really is. Any attempt to state a value that is not already held by the firm's employees is likely to not be taken seriously. Visionary Goals The visionary goals are the lofty objectives that the firm's management decides to pursue. This vision describes some milestone that the firm will reach in the future and may require a decade or more to achieve. In contrast to the core ideology that the firm discovers, visionary goals are selected. These visionary goals are longer term and more challenging than strategic or tactical goals. There may be only a 50% chance of realizing the vision, but the firm must believe that it can do so. Collins and Porras describe these lofty objectives as "Big, Hairy, Audacious Goals." These goals should be challenging enough so that people nearly gasp when they learn of them and realize the effort that will be required to reach them. Most visionary goals fall into one of the following categories:

Target - quantitative or qualitative goals such as a sales target or Ford's goal to "democratize the automobile." Common enemy - centered on overtaking a specific firm such as the 1950's goal of Philip-Morris to displace RJR. Role model - to become like another firm in a different industry or market. For example, a cycling accessories firm might strive to become "the Nike of the cycling industry." Internal transformation - especially appropriate for very large corporations. For example, GE set the goal of becoming number one or number two in every market it serves.

While visionary goals may require significant stretching to achieve, many visionary companies have succeeded in reaching them. Once such a goal is reached, it needs to be replaced; otherwise, it is unlikely that the organization will continue to be successful. For

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example, Ford succeeded in placing the automobile within the reach of everyday people, but did not replace this goal with a better one and General Motors overtook Ford in the 1930's. Environment PEST Analysis A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

Political Economic Social Technological

The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macroenvironmental factors. A PEST analysis fits into an overall environmental scan as shown in the following diagram:

Environmental Scan / External Analysis / Macroenviron ment | P.E.S.T. \ Microenviron ment \ Internal Analysis

Political Factors Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include: tax policy employment laws environmental regulations trade restrictions and tariffs political stability

Economic Factors Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macroeconomy:

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economic growth interest rates exchange rates inflation rate

Social Factors Social factors include the demographic and cultural aspects of the external macroenvironment. These factors affect customer needs and the size of potential markets. Some social factors include: health consciousness population growth rate age distribution career attitudes emphasis on safety

Technological Factors Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include: R&D activity automation technology incentives rate of technological change

SWOT Analysis A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:

SWOT Analysis Framework Environmental Scan / \ Internal Analysis External Analysis /\ /\

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Strengths Weaknes Opportunities Th ses reats | SWOT Matrix

Strengths A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include: patents strong brand names good reputation among customers cost advantages from proprietary know-how exclusive access to high grade natural resources favorable access to distribution networks

Weaknesses The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses: lack of patent protection a weak brand name poor reputation among customers high cost structure lack of access to the best natural resources lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment. Opportunities The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include: an unfulfilled customer need arrival of new technologies loosening of regulations removal of international trade barriers

Threats Changes in the external environmental also may present threats to the firm. Some examples of such threats include: shifts in consumer tastes away from the firm's products

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emergence of substitute products new regulations increased trade barriers

The SWOT Matrix A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity. To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below: SWOT / TOWS Matrix Strengths Weakness es W-O strategies

Opportuni ties

S-O strategies

Threats

S-T strategies

W-T strategies

S-O strategies pursue opportunities that are a good fit to the company's strengths. W-O strategies overcome weaknesses to pursue opportunities. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats. W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.

BCG Growth-Share Matrix Companies that are large enough to be organized into strategic business units face the challenge of allocating resources among those units. In the early 1970's the Boston Consulting Group developed a model for managing a portfolio of different business units (or major product lines). The BCG growth-share matrix displays the various business units on a graph of the market growth rate vs. market share relative to competitors:

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BCG Growth-Share Matrix

Resources are allocated to business units according to where they are situated on the grid as follows:

Cash Cow - a business unit that has a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be used to invest in other business units. Star - a business unit that has a large market share in a fast growing industry. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, a star will become a cash cow when its industry matures. Question Mark (or Problem Child) - a business unit that has a small market share in a high growth market. These business units require resources to grow market share, but whether they will succeed and become stars is unknown. Dog - a business unit that has a small market share in a mature industry. A dog may not require substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has some other strategic purpose, it should be liquidated if there is little prospect for it to gain market share.

The BCG matrix provides a framework for allocating resources among different business units and allows one to compare many business units at a glance. However, the approach has received some negative criticism for the following reasons: The link between market share and profitability is questionable since increasing market share can be very expensive. The approach may overemphasize high growth, since it ignores the potential of declining markets. The model considers market growth rate to be a given. In practice the firm may be able to grow the market.

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GE / McKinsey Matrix In consulting engagements with General Electric in the 1970's, McKinsey & Company developed a nine-cell portfolio matrix as a tool for screening GE's large portfolio of strategic business units (SBU). This business screen became known as the GE/McKinsey Matrix and is shown below: GE / McKinsey Matrix Business Strength High Mediu m High Unit Low

Mediu m

Low

The GE / McKinsey matrix is similar to the BCG growth-share matrix in that it maps strategic business units on a grid of the industry and the SBU's position in the industry. The GE matrix however, attempts to improve upon the BCG matrix in the following two ways:

The GE matrix generalizes the axes as "Industry Attractiveness" and "Business Unit Strength" whereas the BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit. The GE matrix has nine cells vs. four cells in the BCG matrix.

Industry attractiveness and business unit strength are calculated by first identifying criteria for each, determining the value of each parameter in the criteria, and multiplying that value by a weighting factor. The result is a quantitative measure of industry attractiveness and the business unit's relative performance in that industry. Industry Attractiveness The vertical axis of the GE / McKinsey matrix is industry attractiveness, which is determined by factors such as the following: Market growth rate Market size Demand variability Industry profitability Industry rivalry Global opportunities Macroenvironmental factors (PEST)

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Each factor is assigned a weighting that is appropriate for the industry. The industry attractiveness then is calculated. Business Unit Strength The horizontal axis of the GE / McKinsey matrix is the strength of the business unit. Some factors that can be used to determine business unit strength include: Market share Growth in market share Brand equity Distribution channel access Production capacity Profit margins relative to competitors

The business unit strength index can be calculated by multiplying the estimated value of each factor by the factor's weighting, as done for industry attractiveness. Plotting the Information Each business unit can be portrayed as a circle plotted on the matrix, with the information conveyed as follows: Market size is represented by the size of the circle. Market share is shown by using the circle as a pie chart. The expected future position of the circle is portrayed by means of an arrow.

The following is an example of such a representation:

The shading of the above circle indicates a 38% market share for the strategic business unit. The arrow in the upward left direction indicates that the business unit is projected to gain strength relative to competitors, and that the business unit is in an industry that is projected to become more attractive. The tip of the arrow indicates the future position of the center point of the circle. Strategic Implications Resource allocation recommendations can be made to grow, hold, or harvest a strategic business unit based on its position on the matrix as follows:

Grow strong business units in attractive industries, average business units in attractive industries, and strong business units in average industries. Hold average businesses in average industries, strong businesses in weak industries, and weak business in attractive industries. Harvest weak business units in unattractive industries, average business units in unattractive industries, and weak business units in average industries.

There are strategy variations within these three groups. For example, within the harvest group the firm would be inclined to quickly divest itself of a weak business in an unattractive industry, whereas it might perform a phased harvest of an average business unit in the same industry.

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While the GE business screen represents an improvement over the more simple BCG growth-share matrix, it still presents a somewhat limited view by not considering interactions among the business units and by neglecting to address the core competencies leading to value creation. Rather than serving as the primary tool for resource allocation, portfolio matrices are better suited to displaying a quick synopsis of the strategic business units.

Strategic Business Unit Strategic Business Unit or SBU is understood as a business unit within the overall corporate identity which is distinguishable from other business because it serves a defined

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external market where management can conduct strategic planning in relation to products and markets. The unique small business unit benefits that a firm aggressively promotes in a consistent manner. When companies become really large, they are best thought of as being composed of a number of businesses (or SBUs). In the broader domain of strategic management, the phrase "Strategic Business Unit" came into use in the 1960s, largely as a result of General Electric's many units. These organizational entities are large enough and homogeneous enough to exercise control over most strategic factors affecting their performance. They are managed as self contained planning units for which discrete business strategies can be developed. A Strategic Business Unit can encompass an entire company, or can simply be a smaller part of a company set up to perform a specific task. The SBU has its own business strategy, objectives and competitors and these will often be different from those of the parent company. Research conducted in this include the BCG Matrix. This approach entails the creation of business units to address each market in which the company is operating. The organization of the business unit is determined by the needs of the market. An SBU is an sole operating unit or planning focus that does not group a distinct set of products or services, which are sold to a uniform set of customers, facing a well-defined set of competitors. The external (market) dimension of a business is the relevant perspective for the proper identification of an SBU. (Therefore, an SBU should have a set of external customers and not just an internal supplier.[1] Companies today often use the word Segmentation or Division when referring to SBUs, or an aggregation of SBUs that share such commonalities.

Strategy Evaluation and Control The final stage in strategic management is strategy evaluation and control. All strategies are subject to future modification because internal and external factors are constantly changing. In the strategy evaluation and control process managers determine whether the chosen

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strategy is achieving the organization's objectives. The fundamental strategy evaluation and control activities are: reviewing internal and external factors that are the bases for current strategies, measuring performance, and taking corrective actions. Each organization has its own approach to evaluation. There are not absolute answers as to the proper evaluation standards. However, there are three basic questions to ask in strategy evaluation: 1. Is the existing strategy any good? 2. Will the existing strategy be good in the future? 3. Is there a need to change a strategy? The first question may need additional detailing to indicate whether the current strategy is useful and beneficial to the organization. 1. Is the strategy internally consistent? Internal consistency refers to the cumulative impact of various strategies on the organizations. According to Tilles, a strategy must be judged not only in relationships to other strategies. 2. Is organizations strategy consistent with its environment? An important test of strategy is whether the chosen strategy in consistent with environment (constituent demands, competition, economy, product / industry life cycle, suppliers, customers) whether the really make sense with respect to what is going on outside. 3. Is the strategy appropriate in view of available resources? Resources are those things that company is or has and that help it to achieve its corporate objectives. Included are money, competence, facilities and other. Without appropriate resources, organization simply cannot make strategic work. 4. Does the strategy involve an acceptable degree of risk? Strategy and resources, taken together, determine the degree of risk which the company is undertaken. Each company must determine the amount of risk it wishes to incur. This is a critical managerial choice. In attempting to assess the degree of risk associated with a particular strategy, management must assess such issues as the total amount of resources a strategy requires, the proportion of the organization's resources that a strategy will consume, and the amount of time that must be committed. 5. Does the strategy have an appropriate time horizon? A significant part of every strategy is the time horizon on which it is based. For example, a new product developed, a plant put on stream, a degree of market penetration, become significant strategic objectives only if accomplished by a certain time. Management must ensure that the time necessary to implement the strategy is consistent. Inconsistency between these two variables can make it impossible to reach goals in a satisfactory way. 6. Is the strategy workable? 7. Is the strategy identifiable? Has it been clearly and consistently identified and are people aware of it? 8. Is the strategy appropriate to the personal values and aspirations of key managers? 9. Does strategy constitute a clear stimulus to organizational effort and commitment? 10. Is the strategy socially responsible? 11. Are there early indications of the responsiveness of markets and market segments to the strategy? 12. Does the strategy rely on weakness or do anything to reduce them? 13. Does the strategy exploit major opportunities?

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14. Does it avoid, reduce, or mitigate the major threats? If not, are there adequate contingency plans? All these questions can be applied as the strategy progresses through its various stages, including implementation. The answers can provide guidelines as to how the strategy should be altered or changed. The second basic question "Will the existing strategy be good in the future?" seeks to ascertain if the strategy would continue to satisfy the firm's objective in the future. The answer to this is based upon unforeseeable changes in the organization's environment or resources, or changes in its mission, goals, or objectives. The answer to the third question "Is there a need to change the strategy?" will provide direction toward a strategy formation task. Control of Strategy Strategy control refers to the process by which an organization influences its subunits and members to behave in ways that lead to the attainment of organizational objectives. Types of Control Management can implement controls before an activity commences, while the activity is going on, or after the activity has been completed. The three respective types of control based on timing are feed-forward, concurrent, and feedback. Strategic Control Strategic control is concerned with tracking the strategy as it is being implemented, detecting any problems areas or potential problem areas, and making any necessary adjustments. Newman and Logan use the term "steering control" to highlight some important characteristics of strategic control Ordinarily, a significant time span occurs between initial implementation of a strategy and achievement of its intended results. During that time, numerous projects are undertaken, investments are made, and actions are undertaken to implement the new strategy. Also the environmental situation and the firm's internal situation are developing and evolving. Strategic controls are necessary to steer the firm through these events. They must provide some means of correcting the directions on the basis of intermediate performance and new information. Henry Mintzberg,one of the foremost theorists in the area of strategic management, tells us that no matter how well the organization plans its strategy, a different strategy may emerge. Starting with the intended or planned strategies, he related the 3 types of strategies in the following manner:

1. Intended strategies that get realized; these may be called deliberate strategies. 2. Intended strategies that do get realized; these may be called unrealized strategies. 3. Realized strategies that were never intended; these may be called emergent
strategies. Recognizing the number of different ways that intended and realized strategies may differ underscores the importance of evaluation and control systems so that the firm can monitor its performance and take corrective action if the actual performance differs from the intended strategies and planned results.

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Where management control is imposed, it functions within the framework established by the strategy. Normally these objectives (standards) are established for major subsystems within the organization, such as SBUs, projects, products, functions, and responsibility centers. Typical management control measures include ROI, residual income, cost, product quality, and so on. These control measures are essentially summations of operational control measures. Corrective action may involve very minor or very major changes in the strategy.

Strategy Implementation The implementation of organization strategy involves the application of the management process to obtain the desired results. Strategy implementation is "the process of allocating resources to support the chosen strategies". This process includes the various management activities that are necessary to put strategy in motion, institute strategic controls that monitor progress, and ultimately achieve organizational goals. For example, according to Steiner, "the implementation process covers the entire managerial activities including such matters as motivation, compensation, management appraisal, and control processes". As Higgins has pointed out, "almost all the management functions -planning, controlling, organizing, motivating, leading, directing, integrating,

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communicating, and innovation implementation process". -are in some degree applied in the

Pierce and Robinson say that "to effectively direct and control the use of the firm's resources, mechanisms such as organizational structure, information systems, leadership styles, assignment of key managers, budgeting, rewards, and control systems are essential strategy implementation ingredients". The implementation activities are in fact related closely to one another and decisions about each are usually made simultaneously. Aspects of Strategy Implementation Aspects of strategy implementation include: 1. 2. 3. 4. Designing the organization's structure, Allocating resources, Developing information and decision process, Managing human resources, including such areas as the reward system, approaches to leadership, and staffing.

Structure of Strategy Implementation Structure of strategy implementation involves identifying the activities, decisions, and relationships critical to accomplishing the activities. There are six principal administrative tasks that shape a manager's action agenda for implementing strategy. In general, every unit of an organization has to ask, "What is required for us to implement our part of the overall strategic plan and how can we bets get it done?". The specific components of each of the six strategy-implementation tasks:

1. Building an organization capable of executing the strategy. The organization

must have the structure necessary to turn the strategy into reality. Furthermore, the firm's personnel must possess the skill needed to execute the strategy successfully. Related to this is the need to assign the responsibility for accomplish key implementation tasks to the right individuals or groups.

2. Establishing a strategy-supportive budget. If the firm is to accomplish strategic

objectives, top management must provide the people, equipment, facilities, and other resources to carry out its part of the strategic plan. Further, once the strategy has been decided on, the key tasks to performed and kinds of decision required must be identified, formal plans must also be developed. The tasks should be arranged in a sequence comprising a plan of action within targets to be achieved at specific dates.

3. Installing internal administrative support systems. Internal systems are

policies and procedures to establish desired types of behavior, information systems to provide strategy-critical information on a timely basis, and whatever inventory, materials management, customer service, cost accounting, and other administrative systems are needed to give the organization important strategy-executing capability. These internal systems must support the management process, the way the managers in an organization work together, as well as monitor strategic progress.

4. Devising rewards and incentives that are tightly linked to objectives and
strategy. People and departments of the firm must be influenced, through incentives, constraints, control, standards, and rewards, to accomplish the strategy.

5. Shaping the corporate culture to fit the strategy. A strategy-supportive

corporate culture causes the organization to work hard (and intelligently) toward the accomplishment of the strategy.

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6. Exercising strategic leadership. Strategic leadership consists of obtaining
commitment to the strategy and its accomplishment. It also involves the constructive use of power and politics, and politics in building a consensus to support the strategy. Strategy Design and Change Implementing Business Level Strategies Strategy implementation at the business level takes place in the areas of manufacturing, accounting and finance, marketing sales, and organizational culture. The primary organizational functions are integrated to design the implementation of Porter's generic strategies and Miles and Snow's strategies. Michael Porter described three strategic options available to firms at the business level: overall cost leadership, differentiation, and focus strategies. Pure cost leadership strategies focus on those variables that will allow the firm to achieve and maintain a low cost position. An organization implements an overall cost leadership strategy when it attempts to gain a competitive advantage by reducing its costs below the costs of competing firms. The tasks associated with the cost strategy variables focus mostly upon the internal operations of the business, emphasizing the productive employment of capital and human resources. A cost strategy requires attention to operational details. For example, it focuses on simple products attributes and how these product meet customers needs in a low-cost and effective manner. In general, an organization that chosen a cost leadership strategy sells a mass-produced product to large members of customers and provide strong incentives to its salespeople to increase the volume of sales. Conversely, a business with a pure differentiation strategy attempts to enhance the price component of the profit quation by offering customer something they perceive as unique and for which they are willing to pay a higher price. An organization implements a differentiation strategy when it seeks to distinguish itself from competitors through the high quality of its products or services. This strategy incorporates variables dealing principally with the business' environment. The products and services must be designed to meet unique customer needs. Quality, product performance, perceived quality, and new technical features added are more important components of the marketing effort that is a concern for low price. An organization implements a focus strategy when it uses either a differentiation strategy or an overall cost leadership focus strategy in a particular market segment or geographic area. Miles and Snow identified four business-level strategies: defender, prospector, analyzer, and reactor. Defender Strategy. Organizations implementing a defender strategy attempt to protect their market from new competitors. As result of this narrow focus, these organizations seldom need to make major adjustments in their technology, structure, or methods of operation. Instead, they devote primary attention to improving the efficiency of their existing operations. Defenders can be successful especially when they exist in a declining industry or a stable environment. Prospector Strategy. Organizations implementing a prospector strategy are innovative, seek out new opportunities, take risks and grow. To implement this strategy, organizations need to encourage creativity and flexibility. They regularly experiment with potential responses to emerging environmental trends. Thus, these organizations often are the creators of change and uncertainty to which their competitors must respond. In such an environment, creativity is more important then efficiency.

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Analyzer Strategy. Organizations implementing analyzer strategies attempt to their current businesses and to be somewhat innovative in new businesses. Some are targeted toward stable environments, in which an efficiency strategy designed current customers is employed. Others are targeted toward new, more environments. maintain products to retain dynamic

They attempt to balance efficient production for current lines along with the creative development of new product lines. Analyzers have tight accounting and financial controls and high flexibility, efficient production and customized products, creativity and low costs. However, it is difficult for organizations to maintain these multiple and contradictory processes. new product lines. Reactor Strategy. Organizations that follow a reactor strategy have no a consistent strategy-structure relationship. Rather than defining a strategy to suit a specific environment, reactors respond to environmental threats and opportunities in ad hoc fashion. Sometimes these organizations are innovative, sometimes they attempt to reduce costs, and sometimes they do both. Reactors are organizations in which top management frequently perceive change and uncertainty occurring in their organizational environments but are unable to respond effectively. Therefore, failed organizations often are the result of reactor strategies. Design and Implementation of Corporate Level Strategies Corporate-level strategy focuses on how organizations manage their operations across multiple business and markets. The most important corporate strategy decisions that organizations need to make concerns the type and degree of corporate diversification. Designing Diversification Strategies A central concept to understanding and proposing diversification strategies is relatedness. A range of diversification strategies-from highly related to highly unrelated -can be observed. Pitts and Hopkins (1982) have conducted an extensive literature review and summary on this topic. As they suggested, "the first tasks facing a researcher wishing to measure a firm's diversity therefore, is to identify its individual businesses". In this review of strategic diversity, Pitts and Hopkins cite three primary approaches: * The first, resource independence, sees a business as discrete from others of the corporation if the "resources involved are separate from those supporting the firm's other activities." * The least-employed approach, due to data collection difficulties, defines businesses in terms of market discreteness. * Finally, businesses can be defined in terms of product differences, viewing each product offering as a separate business. Pitts and Hopkins here note two primary approaches to the measurement of diversity: (1) the first is based upon the number of businesses in which the firm is positioned; (2) the second approach is termed strategic and assesses diversity by either the relatedness of various businesses or the firm's historical growth pattern. Rumelt developed, as a variation of Wrigley's (1970) scheme, a typology -single business, dominant business, related business, and unrelated business -according to the degree of strategic interdependence across businesses as well as "the proportion of a firm's revenues that can be attributed to its largest single business in a given year". Nathanson (1980) has developed a system that captures both product and market diversity. Strategies Changes

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Most organizations do not start out completely diversified. Therefore, in implementing a diversification strategy organizations face two important questions: 1. How will the organizations move from a single product strategy to some form of diversification? 2. How will it manage diversification effectively? The concept of center of gravity opens a broader range of strategic options to the firm. These include vertical integration; by-product, related, intermediate, and unrelated diversification and finally, a shift in center of gravity. Vertical Integration The first strategic change that an organization sometimes makes is to vertically integrate within its industry. The organization can move backward to prior stages to guarantee sources of supply and secure bargaining leverage on vendors; or it can move forward to guarantee markets and volume for capital investments, and became its own customer to feed back data for new products. Each company can have its center of gravity at a different stage. However, this initial strategic move does not change the center of gravity, because the prior and subsequent stages are usually operated for the benefit of the center of gravity stage. Research findings indicate that the poorest performer of the strategic categories is the vertically integrated by-product seller (Rumelt 1974). These companies are all upstream, row material, and primary manufacturers. Their resource allocation was within a single business, not across multiple products. Significant here is their inability to change, because the management skills-partly technological know-how does not transfer across industries at the primary manufacturing center of gravity. Diversification The next strategic change that a company usually takes is diversification. There are different types of diversification. By-Product Diversification. One of the first diversification moves that are vertically integrated company makes is to sell by-products from points along the industry chain. But the company has changed neither its industry nor its center of gravity. A key dimension that distinguishes among companies pursuing this strategy is the number of industries into which by-products are sold. Related Diversification. Related Diversification is a strategic change in which the company moves its core industry into other industries that are related to the core industry. The position taken here is that relatedness has two dimensions: 1. one is the degree to which the new industry is related to the core industry; 2. the other - more important - is the degree to which the company operates at the same center of gravity in the new industry. Related diversification is a strategic change in which the company diversifies be entering new industry but always enters business in that industry at the same center of gravity. An appreciation for the degree of relatedness is needed to estimate the amount of strategic change that is being attempted. A scale of relatedness could be constructed by listing the functional aspects of any business, such as process technology, product technology, product development, purchasing, assembly, packing, shipping, inventory management, quality, labor relations, distribution, selling, promotion, advertising, consumer / customer, buying habits, working capital, and credit. The magnitude of strategy implementation problem is directly proportional to the amount of relatedness in the diversification move. The less related the diversification, the greater the difficulty of strategy implementation, and the greater the likelihood of acquisition versus internal growth.

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Intermediate diversification. Between related and unrelated diversifiers are a large number of firms whose businesses are somewhat related but operate at a number of centers of gravity. The strategic change hypothesized is to be more difficult because it involves managing businesses with different centers of gravity. The company must learn not only new businesses but also new ways of doing business. Unrelated Diversification. The unrelated company has several centers of gravity, operate in many industries, and actually seek to avoid relatedness (e.g., electronic, energy). However, the intermediate and unrelated diversification does not change the centers of gravity of their core business. Changes in Center of Gravity Changes in the center of gravity usually occur by a new star-up at a new center of gravity rather than by a shift in the center of established firms. Changing of gravity is difficult because it requires a dismantling of the current power structure, rejection of parts of the old culture, and establishing all new management systems. The companies that are successful are those that began as downstream companies and established their center of gravity there. Strategy And Structure Each strategy has an associated organizational structure consistent with the above view of strategy and diversification. These relationships are summarized in the tale below. Strategy Single business Vertical by Products Structure Functional Functional centers with profit

Related businesses Divisional Intermediate businesses Unrelated Businesses Mixed structures

Holding company

Managing Diversification An organizations implements diversification must monitor and manage its strategy. The two major tools for managing diversification are organization structure and portfolio management techniques. Behavioral Aspects of Strategy Implementation Leadership If the CEO does not exert the leadership needed to drive strategy implementation, change will just not happen. Ultimately, the CEO determines how successful strategy implementation is going to be. How CEOs lead the strategy implementation depends on a number of factors: 1. leadership style they are comfortable with

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2. their administrative, interpersonal and problem-solving skills 3. their personal relationships within the organization 4. their experience in business 5. their perspective on their role Major initiatives to implement business strategies are usually led by the CEO and supported by the top-level managers. Weak leadership can destroy the soundest of strategies. The single most visible factor that differentiates successful strategy implementation from failed attempts is competent leadership at the top. CEOs plant the seeds of change. Change has to be driven from the top. Only they have the power and organizational influence to bring about change. Culture Peters and Waterman focused attention on the role of culture in strategic management. Organizational culture is more than emotional rhetoric; the culture of an organization develops over a period of time is influenced by the values, actions and, beliefs of individuals at all levels of the organization. Organization culture may also limit the ability of a firm to change strategy. As the experience at Levi Strauss & Co. suggests, it is often hard to convince employees of the need for change when their peers and other members of the organization are not supportive of the proposed change. Management must also recognize the existing organization culture and learn to work within or change its parameters. As the strategic plan and performance measures are being created, the organization must make sure that they are aligned with the systems, structure, culture, and performance management architecture. The best plans may fail because the reward systems motivate different behaviors than those called for in the strategy map and measurement design. For example, if a team approach to business development is outlined in the plan, but sales commission remains individual, organizations will be hard pressed to see a team focus. Culture is formed by screening and selecting new employees who share the same values as your organization. However, culture evolves, it is not static. Both internal (hiring, staff turnover, etc) and external (technology, competition, etc.) factors shape your culture. Your beliefs, vision, objectives and business practices may be compatible with culture. If this is the case, your culture becomes a valuable ally in strategy implementation. On the other hand, if there is conflict then you do not have a strategy-culture fit and you need to do something about it quickly. Strong cultures promote successful strategy implementation while weak cultures do not. By strong culture, I mean there is a shared belief in practices, norms and other practices within the organization that helps energize everyone to do their jobs to promote successful strategy implementation. For example, if your culture is built around listening to customers and empowering employees (both authority and responsibility), it promotes the execution of a strategy that supports superior customer service. In weak cultures, employees have no pride in ownership of work, work is sloppy, there are very few values and people form political groups within the organization. Such cultures provide little or no assistance to implement strategy. In todays dynamic business world, strategies are dynamic. Hence, it is but logical that your organizational culture has to be dynamic too. It needs to adapt to the demands of business. In such cultures, all employees have confidence in the teams ability to meet any challenge.

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Strategy Implementation - Personal Values and Business Ethics Personal values refer to a persons view of life and judgment of what is desirable that is very much part of a persons personality. 1. A benign attitude to labor welfare is a value which may prompt an industrialist to do much more for workers than the labor laws stipulate. 2. Service mindedness is value which when cherished in an organization, manifests in better customers satisfaction. 3. Personal values are imbibed from: Parents Teachers and Elders 4. Values are adapted and refined in the light of new knowledge and experiences. Within organizations, values are imparted by the founder-entrepreneur or a dominant chief executive. Ethics are related to personal values and choices and focuses on standards, rules and codes of conduct that govern the behavior of a person or a group with respect to what is right or wrong. Business ethics operate as a system of values and are concerned primarily with the relationship of business goals and techniques to specifically human ends. Specifically human ends mean viewing the needs and aspirations of individuals not merely as individuals but as a part of society. Borrowing office supplies for personal use Surfing the net for personal interest on organizations time. Plagiarism Filing inflated information about the organization Getting things done through unfair means like providing financial incentives and so on. Producing goods or services harmful to the society and the customers. Following production practices not in tune with the prevailing laws. Promotion of goods and services with features and qualities which are nonexistent.

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Determinants of ethical behavior Family influences Peer influences Experiences Situational factors Personal values and morals

5. Managerial ethics
The standards that guide individual managers in their work behavior. Three areas of concern: How the organization treats its employees? How employees treat their organizations? How the organization treats its other stakeholders? Managing ethical behaviors Hiring employees with high ethical behaviors Establishing codes of ethics and decision rules Leading by example Delineating job goals Providing ethical trainings

Role of a Strategist A major task of leadership (strategist) is to inculcate personal values and impart a sense of business ethics to the organizational members. Values and ethics shape the corporate culture and dictate the way how politics and power will be used. These also clarify Corporate Social Responsibility of the organization. Strategists have to reconcile divergent values and modify values, if necessary.

6. Leadership Style and Culture Change: Culture is the set of values, beliefs,
behaviours that help its members understand what the organization stands for, how it does things and what it considers important. Firms culture must be appropriate and support their firm. The culture should have some value in it . To change the corporate culture involves persuading people to abandon many of their existing beliefs and values, and the behaviours that stem from them, and to adopt new ones. The first difficulty that arises in practice is to identify the principal characteristics of the existing culture. The process of understanding and gaining insight into the existing culture can be aided by using one of the standard and properly validated inventories or questionnaires that a number of consultants have developed to measure characteristics of corporate culture. These offer the advantage of being able to benchmark the culture against those of other, comparable firms that have used the same instruments. The weakness of this approach is that the information thus obtained tends to be more superficial and less rich than material from other sources such as interviews and group discussions and from study of the companys history. In carrying out this diagnostic exercise, such instruments can be supplemented by surveys of employee opinions and attitudes and complementary information from surveys of customers and suppliers or the public at large.

7. Values and Culture: Value is something that has worth and importance to an
individual. People should have shared values. This value keeps the every one from

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the top management down to factory persons on the factory floor pulling in the same direction.

8. Ethics and Strategy: Ethics are contemporary standards and a principle or

conducts that govern the action and behviour of individuals within the organization. In order that the business system function successfully the organization has to avoid certain unethical practices and the organization has to bound by legal laws and government rules and regulations

Functional Implementation Functional Strategy A functional strategy is one that is implemented and activated by functional areas that support product and service development. These could be human resources, marketing and/or research and development. Their functional strategies have to be customized to ensure that the business strategy adopted by the business team will be able to succeed. The functional strategy therefore supports the business strategy. Effective functional strategies will help the corporation develop competitive advantages for the company. Functional strategy- selection of decision rules in each functional area. Thus, functional strategies in any organization, some (eg, marketing strategy, financial strategy, etc.). It is desirable that they have been fixed in writing. In particular, functional strategies are as follows: Production strategy( "make or buy") - defines what the company produces itself, and that purchases from suppliers or partners, that is, how far worked out the production chain. Financial Strategy- to select the main source of funding: the development of their own funds (depreciation, profit, the issue of shares, etc.) or through debt financing (bank loans, bonds, commodity suppliers' credits, etc.). Organizational strategy- decision on the organization of the staff (choose the type of organizational structure, compensation system, etc.). May be allocated and other functional strategies, for example, the strategy for research and experimental development (R & D), investment strategy, etc. In addition, each of the functional strategies can be divided into components. For example, organizational strategy can be divided into three components: strategy of building organizations - to select the type of structure (divisional, functional, project, etc.); strategy to work with the staff - a way of training (mainly administrative staff), training of staff (in a business or educational institutions), career planning, etc.;

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Strategy wages (in the broader sense - rewards and penalties) - in particular, the approach to the compensation of senior managers (salary, bonuses, profit sharing, etc.).

It is important that an organization periodically (at least annually, usually as part of the medium-term planning process) review all functional strategies to assure that they are: Consistent with the business strategy Supportive of the business strategy Consistent with other functional strategies Supportive of other functional strategies Best utilize the organizations strengths Lead to the level of efficiency and effectiveness desired Create or maintain functional competitive advantages, if desired Are within the organization's resource constraints Each organization may contain a variety of functional areas, however, the following represent what are usually the most significant functional areas of concern regarding strategy. Finance and Accounting: Functional Strategies Human Resources: Functional Strategies Information Systems: Functional Strategies Marketing: Functional Strategies Production/Operations: Functional Strategies Research & Development: Functional Strategies Finance and Accounting Examples of Functional Strategies Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves. Capital structure Medium-term planning methods Budget systems and approaches Emphasis between leasing and buying How owners are rewarded Capital investment methods and systems Credit strategies Liquidity strategies Human Resources Examples of Functional Strategies Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves. Job design Job specifications Recruiting Selection approaches and criteria Hiring methods

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Compensation systems and level Evaluation systems and criteria Training and development Promotion criteria Information Systems Examples of Functional Strategies Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves.

Strategic information systems Centralization/decentralization of IS people, computers, and databases Standardization policies and approaches Support for mobile computing Policies towards technology (leaders, late adopters, followers) Systems strategic control methods and approaches Steering committees Integration of systems Inter-functional versus functional systems Inter-organizational systems EDI Partnering and level of systems integration Internet, intranet, and extranet support Marketing Examples of Functional Strategies

Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves.

Price: What is included in the initial price Price level Discounts Terms Product Quality Features and options Styling Brand name Product line and related products Warranties and guarantees Service and after-sale items Promotion Advertising Personal selling Promotion Publicity

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Place Distribution channels Distribution coverage Inventory levels and locations Transportation methods Production/Operations Examples of Functional Strategies Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves. Size of facility Location of facility Product design Type of equipment Type of tooling Inventory size and strategy Quality control methods Degree and types of cost controls Use of standards Level of specialization Degree and approach towards technological innovation Focus between product and process Research and Development Examples of Functional Strategies Below are some of the more important functional strategies. It is important that functional strategies be supportive of the overall business strategy and consistent between themselves.

Which level(s) of R&D to support and emphasis between them Basic research Applied research Development New product type New product of existing type Improvement of existing product Centralization/decentralization of R&D Emphasis between product and process R&D Innovate versus imitate strategies Where to have R&D done Internal Private outside R&D contractor University

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QSP Matrix The Quantitative Strategic Planning Matrix is a strategic tool which is used to evaluate alternative set of strategies. The QSPM incorporate earlier stage details in an organize way to calculate the score of multiple strategies in order to find the best match strategy for the organization. The QSPM comes under the third stage of strategy formulation which is called The Decision Stage and also the final stage of this process. The best thing about QSPM is that it never insist the strategist to enter the information on assumptions, it extracts the information from stage 1 The Input Stage and stage 2 the matching stage. The input stage is based on EFE Matrix, IFE Matrix and CPM and stage 2 made up of TOWS matrix, SPACE Matrix, BCG Matrix, IE Matrix, Grand Strategy Matrix. The QSPM combine the intuitive thinking of managers with the analytical process to decide the best strategy for the organization success. There are four main columns in QSPM, the left column list down the key internal and external key factors which are same as in EFE and IFE matrix. Adjacent column to key factors is Weight (relative importance of the factor) which hold the numeric value obtained from EFE and IFE matrix weight column. The next to weight is AS stands for attractive score assign priority to key factors using the numeric value 4 for most importance and 1 for least importance and the last column TAS (Total attractive score) is the value calculated by multiplying weight by AS. One thing important to note for each strategy separate AS and TAS value added in the table, weight remain same for all set of strategies mentioned in QSPM. The topmost shows the strategies are compared in the QSPM matrix, below mentioned table illustrate the structure of QSPM matrix.

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Steps to develop Quantitative Strategic Planning Matrix (QSPM) Step 1 Make a list of the firms key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM. This information should be taken directly from the EFE Matrix and IFE Matrix. A minimum of 10 external critical success factors and 10 internal critical success factors should be included in the QSPM. Step 2 Assign weights to each key external and internal factor. These weights are identical to those in the EFE Matrix and the IFE Matrix. The weights are presented in a straight column just to the right of the external and internal critical success factors. Step 3 Examine the Stage 2 (matching) matrices and identify alternative strategies that the organization should consider implementing. Record these strategies in the top row of the QSPM. Group the strategies into mutually exclusive sets if possible. Step 4 Determine the Attractiveness Scores (AS), defined as numerical values that indicate the relative attractiveness of each strategy in a given set of alternatives. Attractiveness Scores are determined by examining each key external or internal factor, one at a time, and asking the question, Does this factor affect the choice of strategies being made? If the answer to

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this question is yes, then the strategies should be compared relative to that key factor. Specifically, Attractiveness Scores should be assigned to each strategy to indicate the relative attractiveness of one strategy over others, considering the particular factor. The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. If the answer to the above question is no, indicating that the respective key factor has no effect upon the specific choice being made, then do not assign Attractiveness Scores to the strategies in that set. Use a dash to indicate that the key factor does not affect the choice being made. Note: If you assign an AS score to one strategy, then assign AS score(s) to the other. In other words, if one strategy receives a dash, then all others must receive a dash in a given row. Step 5 Compute the Total Attractiveness Scores. Total Attractiveness Scores are defined as the product of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each row. The Total Attractiveness Scores indicate the relative attractiveness of each alternative strategy, considering only the impact of the adjacent external or internal critical success factor. The higher the Total Attractiveness Score, the more attractive the strategic alternative (considering only the adjacent critical success factor). Step 6 Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in each strategy column of the QSPM. The Sum Total Attractiveness Scores reveal which strategy is most attractive in each set of alternatives. Higher scores indicate more attractive strategies, considering all the relevant external and internal factors that could affect the strategic decisions. The magnitude of the difference between the Sum Total Attractiveness Scores in a given set of strategic alternatives indicates the relative desirability of one strategy over another. Limitations of QSPM A limitation of the QSPM is that it can be only as good as the prerequisite information and matching analyses upon which it is based. Another limitation is that it requires good judgment in assigning attractiveness scores. Also, the sum total attractiveness scores can be really close such that a final decision is not clear. Like all analytical tools however, the QSPM should not dictate decisions but rather should be developed as input into the owners final decision. Advantages of QSPM A QSPM provides a framework to prioritize the strategies it can be used for comparing strategies at any level such as corporate, business and functional. The other positive feature of QSPM that it integrates external and internal factors into decision making process. A QSPM can be developed for small and large scale profit and non-profit organizations.

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