Posts Tagged: "Strategic Management Tools"

The Strategic Position and Action Evaluation (SPACE) Matrix

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The Strategic Position and Action Evaluation (SPACE) Matrix

Strategic Position and Action Evaluation (SPACE) Matrix is “an approach to hammer out an appropriate strategic posture for a firm and its individual business.” SPACE is an analysis of the following four dimensions in as in a two-dimensional portfolio analysis and involves a consideration of:

  1. Company’s competitive advantage
  2. Company’s financial strength
  3. Industry strength
  4. Environmental stability

Various factors are evaluated for determining each of the dimensions and they are summarized below:

Dimensions Factors Evaluated
Company’s competitive advantage
  1. Market Share
  2. Product Quality
  3. Product life cycle
  4. Product Replacement cycle
  5. Customer Loyalty
  6. Competitor’s Capacity Utilisation
  7. Technological knowhow
  8. Vertical integration

 
Company’s Financial Strength
  1. Return on investment
  2. Leverage liquidity
  3. Capital Required/Available
  4. Cash Flow
  5. Ease of exit from market
  6. Risk involved in business
Industry Strength
  1. Growth potential
  2. Profit potential
  3. Financial Stability
  4. Technological know how
  5. Resource utilization
  6. Capital intensity
  7. Ease of entry into market
  8. Productivity
  9. Capacity Utilization
Environmental Stability
  1. Technological charges
  2. Rate if inflation
  3. Demand variability
  4. Prices of competing products
  5. Barriers to entry into market
  6. Competitive pressure
  7. Price elasticity of demand

Various factors on each of the four dimensions, as illustrated above, are evaluated and scored on a seven-point scale varying from 0 to –7, with 0 reflecting the most favorable assessment and –7 the most unfavorable.…

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Alcar Model of Value Based Management

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The Alcar Approach is a type of Value Based Management model

The Alcar model, developed by the Alcar Group Inc., a company into management education and software development, uses the discounted cash flow analysis to identify value adding strategies.

According to Alcar model, there are seven ‘value drivers’ that affect a firm’s value. These are

  1. The growth rate of sales
  2. Operating profit margin
  3. Income tax rate
  4. Incremental investment in working capital
  5. Incremental investment in fixed assets
  6. Value growth duration
  7. Cost of capital.

Value growth duration refers to the time period for which a strategy is expected to result in a higher than normal growth rate for the firm. The first six factors affect the value of the strategy for the firm by determining the cash flows generated by a strategy. The last term, i.e. the cost of capital, affects the value of the strategy by determining the present value of these cash flows. The following figure represents the Alcar approach.

According to the model, a strategy should be implemented if it generates additional value for a firm.…

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McKinsey Model of Value Based Management

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The McKinsey model, developed by leading management consultants McKinsey & Company, is a comprehensive approach to value-based management. It focuses on the identification of key value drivers at various levels of the organization, and places emphasis on these value drivers in all the areas, i.e. in setting up of targets, in the various management processes, in performance measurement, etc. According to Copeland, Roller and Murrin, value-based management is “an approach to management whereby the company’s overall aspirations, analytical techniques, and management processes are all aligned to help the company maximize its value by focusing management decision-making on the key drivers of value”.

According to McKinsey model, the key steps in maximizing the value of a firm are as follows:

  • Identification of value maximization as the supreme goal
  • Identification of the value drivers
  • Development of strategy
  • Setting of targets
  • Deciding upon the action plans
  • Setting up the performance measurement system

1. Value Maximization – The Supreme Goal

A firm may have many conflicting goals like maximization of PAT, maximization of market share, achieving consumer satisfaction, etc.…

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Survey Feedback as an Organizational Development Tool

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The study of Survey Feedback played an important role in formation and history of Organizational Development (OD). Developed as an organization wide intervention by Mann and his associates (1957-1965), survey feedback is a process in which organizational members complete questionnaires on various organizational issues, receive feedback on the results, then take appropriate actions to address the critical needs and concerns.

Though some type of survey method was prevalent in various organizations earlier, Institute for Social Research (ISR) of University of Michigan, USA developed a comprehensive questionnaire for conducting survey in different aspects of an organization. The basic objectives of survey feedback method are as follows:

  1. To assist the organization in diagnosing its problems and developing action plan for problem-solving.
  2. To assist the group members to improve the relationships through discussion of common problems.

Process of Survey Feedback

Survey feedback method usually proceeds with sequential activities involving data collection, feedback of information, developing action plans based on feedback, and follow up.

  1. Data Collection: The first step in survey feedback is data collection usually by a consultant based on a structured questionnaire.

    2. …

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Grid Training

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Grid training is basically based on grid organization development developed by Blake and Mouton. It is a comprehensive and systematic Organizational Development programme which aims at individuals, groups, and the organization as a whole. Grid training utilizes a considerable number of instruments, enabling individuals and groups to assess their own strengths and weaknesses; focuses on skills, knowledge, and processes necessary for effectiveness at the individual, group, inter-group, and total organizational levels. Its specific objectives are as follows:

  1. To study the organization as an interactive system and apply techniques of analysis in diagnosing its problems.
  2. To understand the importance and rationale of systematic change.
  3. To evaluate the styles of leadership and techniques of participation to produce desirable results.

Process of Grid Training

The basic content of grid organization development is managerial grid as discussed. The whole orientation is to develop managerial style through the application of behavioural science knowledge. The grid organization development consists of six phases.

  1. Managerial Grid: It covers various aspects of assessing managerial styles, problem-solving, communication skills, and teamwork.

    2. …

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Thomas-Kilmann Conflict Mode Instrument (TKI)

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Thomas-Kilmann-Conflict-Mode-Instrument-mbaknol

Organizational Conflicts are resolved mostly through behavioral measures. Thomas-Kilmann Conflict Mode Instrument is one of the tools used to assess an individual’s behavior in conflict situations. Research has shown that there are five basic styles or modes for handling conflict. The Thomas Kilmann-Conflict Mode Instrument provides a profile of individuals and teams that indicates the gamut of conflict-handling skills which one uses in the kinds of conflict situations one faces. Five basic ways of addressing conflict, namely Avoidance, Collaboration, Compromise, Competition and Accommodation were identified by Thomas and Kilman. This is suited for organizational conflicts.

1. Avoidance

Avoid or postpone conflict by ignoring it, changing the subject, etc. Avoidance can be useful as a temporary measure to buy time or as an expedient means of dealing with very minor, non-recurring conflicts. In more severe cases, conflict avoidance can involve severing a relationship or leaving a group. If we avoid discussing the conflict at all, both parties may remain clueless about the real underlying issues and concerns, only to be dealing with them in the future.…

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