Organizational Appraisal:

Methods & Techniques Used

 Value Chain Analysis

INTERNAL ANALYSIS:
 VRIO framework (Resource Based View)
 Organizational Appraisal
 Corporate Strategy  Business Process Analysis (IDEF tool)

 Financial Analysis - Ratio Analysis, EVA, ABC

 Organizational Capability Analysis

LPS

Organizational Capability Profile (OCP)

Generating Alternative Strategies From SWOT
Capability Factor Values:
Financial Capability
Weakness(-5), Normal (0), Strength (+5)  SWOT analysis is a tool for helping assess the current
(a) Sources of funds
(b) Usage of funds Operations Capability situation for the firm.
(c) Management of funds (a) Production system  However, we need to be able to combine the information in
Marketing Capability (b) Operation & Control system the SWOT analysis in a meaningful way to generate
(a) Product related (c) R&D system alternative strategies that we might pursue.
(b) Price related Personnel Capability  The TOWS matrix is a tool designed to match external
(c) Promotion related opportunities and threats with our internal strengths and
(a) Personnel system
(d) Integrative & Systematic weaknesses
(b) Organization/employee characteristics
Information Management
(c) Industrial Relations
(a) Acquisition & retention of info
(b) Processing & synthesis of info General Management
(c) Retrieval& usage of info (a) General Management Systems
(d) Transmission & dissemination (b) External Relations
(e) Integrative, systemic & supportive (c) Organization climate

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 Strengths Weaknesses Strengths Weaknesses

Internal Environment

Internal Environment
Resources and Capabilities?  Disadvantages of proposition? Largest online retailer  Patent infringement issues affect
Competitive advantage?  Gaps in resources / capabilities? Extending product line and stakeholder confidence
USP's (unique selling points)?  Lack of competitive strength? strengthening technical platform  Frequent outages of Amazon's
Resources, Assets, People?  Reputation, presence and reach? through strategic acquisitions web hosting and cloud computing
Experience, knowledge, data?  Our known vulnerabilities? Kindle builds strong presence in the servers
Cultural, attitudinal, behavioural?  Morale, commitment, leadership? eBooks space
Philosophy and values?  Management cover, succession?

External Environment
Opportunities Threats Opportunities Threats
External Environment

 Market developments? Political/Regulatory/Environ. effects?  Increase in online retail sales Increasing pressure to collect sales
 Competitors' vulnerabilities? Competitor intentions - various?  Growing emphasis on online display tax on merchandise sold through
 Industry or lifestyle trends? New technologies, services, ideas? advertising business online websites
 Global influences? Sustaining internal capabilities?  Growing eBook and tablet sales Intense competition in the e-reader
 New markets, vertical, horizontal? Sustainable financial backing?  Growing demand for cloud computing market
 Business and product development? Economy - home, abroad? services Risk of foreign exchange fluctuation
 Partnerships, agencies, distribution? Seasonality, weather effects?

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

• Leadership position in the Indian • The Company has little presence outside India • Growing Civil Aviation Industry in India; • Defence customers moving away from
Aerospace and Defence Industry and in in export market; • Upcoming acquisitions of Aircraft and single source to multiple sources,
Southeast Asia; • The Company’s cash flow mainly depends on Aeroengine by Defence Forces; increasing competition within the
• Long credible history of Research & Design, the allocation of budget by the Ministry of • The trend of foreign OEMs partnering with industry;
and Overhaul (MRO) services; Defence; Indian firms to outsource production in India
• Established track record in offering Product • Dependence on foreign companies/ countries creates opportunities for the company to form
Life Cycle support extending to periods for engines, avionics, critical raw materials, joint ventures with foreign OEMs for technology
beyond four decades even when OEMs systems and spares; transfer and skill development;
stopped support; • HAL’s products and business are mainly • Government’s thrust on public-private
• Skilled manpower to cater to Defence concentrated in the Defence Sector with only a partnerships;
Aviation Technical requirements; nominal presence in the Civil Sector; • Government’s efforts in increasing indigenous
• Robust Aerospace design and production • Long cycle time for product manufacturing due defence manufacturing;
infrastructure; to lack of maturity in the Indian Aerospace and • Growth potential through alliances or
• Close relationship between Management Defence Manufacturing Ecosystem supporting partnership for global market;
and workmen unions HAL; • Diversification of products and services.
• Consistent financial performance. • Compared to the Global OEMs, the Company is
required to support a platform for 40–50 years
or beyond 50 years which involves high
obsolescence.
• Mitigation of these obsolescence issues are
cost intensive which affect the profitability of
the Company.
Source: AR 2018-19
Source: AR 2018-19

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 HAL Strategies TOWS Matrix

We intend to pursue the following principal strategies to exploit our competitive

strengths and grow our business:  Technique used in strategy formulation
for combining
 Expand our operations through partnerships and collaborations;
 Enhance customer satisfaction; – External analysis
 Diversify further into civil aircraft for both manufacturing and servicing opportunities; • Opportunities
 Develop in-house capabilities to design and develop specialised products;
• Threats
 Optimise operations to become a lead integrator of aircraft platforms;
 Enhance indigenisation to ensure higher indigenous content in our products; – Internal analysis
 Enhance export contribution to the sales of the Company; • Strengths
 Focus on becoming Industry 4.0-enabled Company. • Weaknesses

Source: AR 2018-19

TOWS Matrix
Strategic Analysis:
TOWS Matrix

 SO strategies: Utilize and reinforce its internal strengths in order to exploit the available
opportunities in the external environment.
 WO strategies: Reduce the internal weaknesses that may act as a barrier for the
implementation or diffusion of the external opportunities
 ST strategies: Use the internal strengths as a tool to minimize the external factors that are
Threatening its performance or competitiveness.
 WT strategies: Eliminate the internal weaknesses to avoid any breakthrough or
prevalence of the external threats.

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 Quantitative Strategic Planning Matrix (QSPM)
Strategic Alternatives
Key External Factors Weight Strategy 1 Strategy 2 Strategy 3
TOWS matrix: Volkswagen (1970s)

 Economy
 Political/Legal/Governmental
 Social/Cultural/Demographic/
Environmental
 Technological
 Competitive

Key Internal Factors

 Management
 Marketing
 Finance/Accounting
 Production/Operations
 Research and Development
 Computer Information
Systems

QSPM (example) SPACE Matrix

[Strategic Position & Action Evaluation Matrix]

Two Internal Dimensions

Financial Strength (FS) Aggressive
Competitive Advantage (CA)
Conservative
Two External Dimensions Defensive
Environmental Stability (ES) Competitive
Industry Strength (IS)

Attractiveness Score:
1 = not acceptable; 2 = possibly acceptable; 3 = probably acceptable; 4 = most acceptable; 0 = not relevant

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 Strategic Postures SPACE Factors
Internal Strategic External Strategic Internal Strategic External Strategic
Strategic Posture  Aggressive Competitive Conservative Defensive Position Position Position Position
Dimension 
Financial Strength Environmental Competitive Industry Strength
ENVIRONMENT Stable Unstable Stable Unstable (FS) Stability (ES) Advantage (CA) (IS)
INDUSTRY Attractive Attractive Unattractive Unattractive  Return on  Technological  Market share  Growth potential
Strong Strong Weak Weak investment changes  Product quality  Profit potential
COMPETITIVENESS
 Leverage  Rate of inflation  Product life cycle  Financial stability
FINANCIAL Strong Weak Strong Weak  Liquidity  Demand  Customer loyalty  Technological
STRENGTH  Working capital variability  Competition’s know-how
APPROPRIATE • Growth- possibly • Cost reduction; • Cost reduction & • Rationalization  Cash flow  Price range of capacity  Resource
STRATEGIES by acquisition Productivity product/service • Divestment as competing utilization utilization
• Capitalize on improvement; rationalization appropriate products  Technological  Ease of entry into
opportunities Raising more • Invest in search  Barriers to entry know-how market
• Innovate to capital to follow for new  Competitive  Control over  Productivity,
sustain comp. adv. opportunities products,
pressure suppliers & capacity
and strengthen services and
competiveness competitive  Price elasticity of distributors utilization
• Possible merger opportunities demand
with a less  Ease of exit from
competitive but market
cash-rich  Risk involved in
organization. business

SPACE Matrix: Example SPACE Matrix: Example

(3.00, 2.75)

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 To diagnose causes of
Steps to Developing a SPACE Matrix McKinsey’s 7S Framework organizational problems
& formulate programs
1. Select a set of variables to define FS, CA, ES, & IS
2. Assign a numerical value: Structure
 From +1 to +6 to each FS & IS dimension Strategy
 From -1 to -6 to each ES & CA dimension System
3. Compute an average score for each FS, CA, ES, & IS
4. Plot the average score on the appropriate axis
5. Add the two scores on the x-axis and plot the point. Add the two Shared
scores on the y-axis and plot the point. Plot the intersection of the Values
new xy point
6. Draw a directional vector from the origin through the new
intersection point. Skills
Style

Staff

McKinsey’s 7S Framework

Strategy: the plan devised to maintain and build competitive advantage over the
competition.
Structure: the way the organization is structured and who reports to whom.
Systems: the daily activities and procedures that staff members engage in to get the
job done.

Shared Values: (called "superordinate goals“) the core

Corporate Strategy
Directional - Portfolios - Parenting
values evidenced in the corporate culture and the
general work ethic.

Style: the style of leadership adopted.

Staff: the employees and their general capabilities.
Skills: the actual skills and competencies of the
employees working for the company.

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 Corporate Strategy: Choices and Issues Corporate Directional Strategy

C 1. Deciding in which businesses and industries a company should

H compete;
O 2. Selecting which value creation activities it should perform in those
I businesses; and
C
3. Determining how it should enter, consolidate, or exit businesses or
E industries to maximize long-term profitability.
S

I. The firm’s overall orientation toward growth, stability, or

I retrenchment (directional strategy)
S
II. The industries or markets in which the firm competes through its
S products and business units (portfolio analysis)
U
III. The manner in which management coordinates activities and
E transfers resources and cultivates capabilities among product lines
S and business units (parenting strategy)

Portfolio Analysis: BCG Matrix: Question Marks

BCG (Boston Consulting Group) Matrix (Problem Children: Low Market Share / High Market Growth)

Relative Market  Investment:

High

Low

Share
 heavy initial capacity expenditures and high R&D
costs
 Earnings: negative to low
High
 Cash-flow: negative (net cash user)
 Strategy Implications:
Market  if possible to dominate segment, go after share.
[10%]
Growth Rate  If not, redefine the business or withdraw.

Low

>1 <1
> 1 indicates market leader

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 BCG Matrix: Stars BCG Matrix: Cash Cows
(High Market Share / High Market Growth) (High Market Share / Low Market Growth)

 Investment
 Investment:  capacity maintenance
Petrochemicals
 continue to invest for capacity expansion  Earnings: high
 Earnings: low to high earnings
 Cash-flow: positive (net cash contributor)
 Cash-flow: negative (net cash user)
 Strategy Implications:
 Strategy Implications:
 maintain market share and cost leadership until further
 continue to increase market share - even at the
investment becomes marginal
expense of short-term earnings

Telecom

BCG Matrix: Dogs BCG Matrix: Amul Product SBUs

(Low Market Share / Low Market Growth)
High

Low

Relative Market
 Investment: Share
 gradually reduce capacity
 Earnings: high to low Ghee,
Ice Creams, Masti Dahi
 Cash-flow: High Cheese
 positive (net cash contributor) if deliberately Spread
reducing capacity Lassi
Indian Cotton Textiles
 Strategy Implications: Market
 plan an orderly withdrawal to maximize cash flow Growth Rate
Butter,
Fresh Milk
Low

Infant Milk Food

Chocolate

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 Portfolio Analysis: GE Portfolio
GE Portfolio Matrix Industry Attractiveness Matrix
 Originally developed by GE’s planners drawing on McKinsey’s High Medium Low
approaches
Protect Invest to Build
 Market attractiveness is based on as many relevant factors as are Build
appropriate in a given context High Position selectively
 Business-position assessment also made on a many factors
SBU needs to be rated on each factor
Selectively Limited
Industry Attractiveness: Build manage for expansion or Invest / Grow
Market size & growth rate, industry profit margin, competitive intensity, pricing Medium selectively earnings harvest
practices, opportunities / threats
Select / Earn
[Scale 1 – 5: “Very unattractive” to “Very attractive”]
Protect & Manage for
Company’s Business Strengths or Competitive Position: Low refocus earnings Divest
Harvest / Divest
Market share, technological position, profitability, size, strengths & weakness,
management calibre
[Scale 1-5: “Very weak” to “Very strong”]

GE Portfolio Corporate Parenting

Industry Attractiveness Matrix
Corporate parenting (or parenting strategy) views a corporation in terms of
High Medium Low resources and capabilities that can be used to build business unit value as well
as generate synergies across business units.

High
Developing a corporate parenting strategy:

1. Examine each business unit (or target firm in the case of acquisition) in terms of
its strategic factors

Medium Invest / Grow 2. Examine each business unit (or target firm) in terms of areas in which
performance can be improved
Select / Earn
3. Analyze how well the parent corporation fits with the business unit (or target firm)

Low
Harvest / Divest

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 PIMS Program The key strategic factors
(Profit Impact of Market Strategy) influencing business performance

 The PIMS project was started by Sidney Schoeffler with GE in the 1960s Market Environment Competitive Position Stage of Lifecycle
 Administered by the Strategic Planning Institute since 1975 Marketing/Sales Market Share New Products/Sales
Customer Concentration Relative Market Share R & D/Sales
Customer Purchase Amount Relative Quality Real Market Growth
PIMS holds 6 areas of info on each biz: Industry Concentration Relative Price
 Uses multi dimensional cross-
1. characteristics of the biz environment sectional regression studies of Capital and Operating Structure
2. competitive position of the business profitability of over 3000 businesses. Investment / Sales
3. structure of the production process  Provides industry characteristics, Investment / Value Added
4. how the budget is allocated Gross Book Value of P&E / Total Investment
average profitability, and compares it
Operating Effectiveness
5. strategic movement with performance of the company
Receivables / Investment
6. operating results. concerned. Capacity Utilization
Value Added / Sales

PIMS: Strategic Benchmarks

The experience of PIMS businesses, situationally comparable to a

Analysis FACET  MOULDS MECHANISMS MANIFESTATIONS SWOT
business under study, is used to establish strategy and performance FOCUS  

benchmarks. • Vision, Mission, Values • Structure • Excellence
COMPANY
Internal Analysis

• TOWS / SPACE matrix • Processes • Innovation

Weaknesses
Strengths &
PIMS includes: • Biz Portfolios • Systems

CUSTOMER • Pricing Models • Activity Based Costing • Value Proposition

 Profitability (Return on Sales, and ROI) • Service-Profit Chain • Balanced Scorecard
• Co-Creation
 Change in market share
COMPETITOR • VRIO • Competitive Intelligence • Competitive Advantage
External Analysis

Opportunities &

• Value Net
 Marketing budget (Sales force, Advertising, Promotion and Other • Hyper-Competition
Threats

Marketing Expenses)
CONTEXT • PESTEL • Foresight • Early Warning Signals
• Five Forces • Knowledge • Blind spots
 Market attractiveness / competitive strength • Scenarios Management

STRATEGY  THINKING AND EXECUTION & IMPLEMENTATION

FORMULATION

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