Month: December 2010

Strategic Fit

Firms operate in an environment where external opportunities always prevail as a striking option and considerably be lucrative for firms to adopt such strategies coping with the requirements to reap the fruits from the prospects around. Moreover, each company has its internal resources and capabilities to exploit and deal with its exteriors and usually endeavors to adopt the strategies most suitably are in accordance with the prerequisites of potential externalities. This matching of inner possessions and aptitudes to the outer opportunities is termed as strategic fit. To be strategically fit not only the understanding of external milieu in which the company is actually functioning is indispensable but a clear and critic view of internal resources and capabilities is also essential to execute and support the strategy. The philosophy of strategic fit can be used to analyze the strategic position of a firm or division in the sense that either the firm or division is using its strength to exploit the superficial opportunities or is capable of doing so. The strategic fit theory also supports the postulation of Resource Based View of the firm and suggests utilizing the exceptional characteristics of its internal strengths, resources, and capabilities portfolio. Eventually a sustainable competitive advantage can be developed through an unanimated combination of the firm’s internal strengths and resources. Generally the resources and capabilities are spoken as common lexis for internal strengths...

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Porter Supply Chain Model

Firms create value trough series of activities. These activities are described as a value chain which includes specific activities for adding value to the products and services the firms’ offer. Michael Porter presents a value chain framework as a model that assists in analyzing the various functions cohesive and interrelated to each other in such a way that each function creates value to the products and service. This whole process of value creation or some specific activities can result in a sustainable competitive advantage for a firm. The value chain activities can be segregated into the primary activities and support activities. Primary activities called line functions are further divided into inbound logistics, operations, outbound logistics, marketing and sales, and services. Inbound logistics are such activities relating to the receiving, storing, inventory management, and transportation etc. in other words inbound logistics are functions which are required up to the level of availability of raw material in the form in which it is required and at the place where it is required for the start of production. Operations are the activities needed to be performed from the level of raw material to the level of making the product or service available for sale. in its wider spectrum operations include assembling, machining, packaging, repairing the equipments, quality control, and testing. More specifically operations include all activities needed to convert the inputs into...

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GE / Mckinsey Matrix

Business portfolio management is a promising field of strategic management in view of the today’s competitive environment. Due to the risks associated with a single business because of today’s uncertain economic gestures in the global world the firms prefer to diversify in related and unrelated fields and create business portfolios to ensure minimum required returns. The management of these portfolios become a big task and requires strategic vision to ensure the eminent performance of the components of each portfolio. GE Matrix or McKinsey Matrix has been developed by General Electric and Mckinsey in 1970s as a strategic tool for portfolio study. Boston Consulting Group first developed the BCG Matrix for similar purpose and GE is also analogous to the BCG Matrix. One can say the GE / McKinsey Matrix is actually an extension of the BCG Matrix. GE Mckinsey is a multifactor portfolio analysis tool which compares the different businesses on basis of two variables "Competitive Strength" and "Market Attractiveness". These two variables are further divided according to their intensity level i.e. high, medium, or low.  This segregation permits the business managers to compare business or competitive strength and market attractiveness for diverse strategic business units (SBUs) or different product offerings. The GE Matrix is an unconventional tool used in portfolio management and also called Directional Policy Matrix. It is mainly used to decide which products and business to...

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Strategic Position and Action Evaluation (SPACE) Matrix

Strategic Position and Action Evaluation (SPACE) Matrix has been materialized as a dominant instrument in formulating alternative strategies. Like Grand Strategy Matrix this matrix is also based on four important elements called four quadrants of SPACE Matrix. First two elements called internal dimensions which are Financial Strength (FS) and Competitive Advantage (CA) and other two are called external dimensions namely Environmental Stability (ES) and Industry Strength (IS). Undoubtedly these four rudiments are conceivably the most imperative determinants of an organization’s by and large strategic position. The four quadrants framework of SPACE Matrix represents the suitability or appropriateness of the strategies to be selected by a company such as aggressive, conservative, defensive, or competitive strategies.  Organizations falling in four quadrants should adopt the strategies as follows: Quadrant I    Financial Stability and Industry Strength                         Aggressive Quadrant II    Financial Stability and Competitive Advantage              Conservative Quadrant III    Competitive Advantage and Environmental Stability    Defensive Quadrant IV    Industry Strength and Environmental Stability             Competitive The steps required to develop a SPACE Matrix 1. A set of variables should be selected to define financial strength, competitive advantage, environmental stability, and industry strengths. The set of variables could be as follows: Internal Dimensions Financial Strength •    Return of investment •    Financial and operating leverage •    Liquidity •    Working capital •    Cash flows Competitive Advantage •    Market share •    Quality •    Product life cycle •    Customer preference •    Technological...

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Grand Strategy Matrix

Grand Strategy Matrix has emerged into a powerful tool in devising alternative strategies. This matrix is basically based on four important elements: • Rapid Market Growth • Slow Market Growth • Strong Competitive Position • Weak Competitive Position These elements form a four quadrant matrix in which all organizations can be positioned in such a way that identification and selection of appropriate strategy becomes an easy task. Moreover, this matrix helps in adopting the best strategy based on the current growth and competitive state of the firm. A large scale firm segregated into many divisions can also plot its divisions in this four quadrant Grand Strategy Matrix for formulating the best strategy for each division. The key area of management is to suitably select the strategy cohesive with the firms’ market and competitive position. The Grand Strategy Matrix makes it an easy going job. It helps in scientific analysis of firms‘current position and selection of best strategy in accordance with the revealed competitive position and market place. Broadly speaking four elements of the Grand Strategy Matrix can be described as two evaluative dimensions namely market growth and competitive position. In each quadrant of the matrix the apt strategies are enlisted in sequential order for each organization or division keeping in view the attractiveness in each quadrant of the matrix. Quadrant I The quadrant one of the Grand Strategy Matrix...

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