Dimensions Of Strategic Management
Hence, problems calling for strategic decisions require to be considered by the top management. 2. Strategic Issues involve the allocation of large amounts of company resources: It may require either a huge financial investment to venture into a new area of business or the organization may require a huge amount of manpower with new skill sets. 3. Strategic issues are likely to have a significant Impact on the long term prosperity of the firm: Generally the results of strategic implementation are seen on a long term basis and not on immediate terms. 4.
Strategic issues are future oriented: Strategic thinking involves predicting the future environmental conditions and how to orient for the changed conditions. 5. Strategic Issues usually have major multifunctional or multi- business consequences: As they involve organization in totality they affect different sections of the organization with varying degree. 6. Strategic issues necessitate consideration of factors in the firm’s external environment: strategic focus In an organization Involves relenting Its Internal environment to the changes of external environment. Boston Consulting Group (BCC)
Matrix Is a four celled matrix (a 2 * 2 matrix) developed by COG, USA. It is the most renowned corporate portfolio analysis tool. It provides a graphic representation
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Relative Market Share = SUB Sales this year leading competitors sales this year. Market Growth Rate = Industry sales this year – Industry Sales last year. The analysis requires that both measures be calculated for each SUB. The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance. The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership. BCC matrix has four cells, with the horizontal axis representing relative market share and the retrial axis denoting market growth rate.
The mid-point of relative market share is set at 10. If all the Saw’s are in same industry, the average growth rate of the industry is used. While, if all the Saw’s are located in different industries, then the ‘Off business units according to their situation on the grid. The four cells of this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a particular type of business. Lox lax 0. 1 x Figure: BCC Manta 1 . Stars- Stars represent business units having large market share in a fast growing industry.
They may generate cash but because of fast growing market, stars require huge investments to maintain their lead. Net cash flow is usually modest. Sub’s located in this cell are attractive as they are located in a robust industry and these business units are highly competitive in the industry. If successful, a star will become a cash cow when the industry matures. 2. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be utilized for investment n other business units.
These Sub’s are the corporation’s key source of cash, and are specifically the core business. They are the base of an organization. These businesses usually follow stability strategies. When cash cows loose their appeal and move towards deterioration, then a retrenchment policy may be pursued. 3. Question Marks- Question marks represent business units having low relative market share and located in a high growth industry. They require huge amount of cash to maintain or gain market share. They require attention to determine if the venture can be viable.
Question marks are generally new goods and services which have a good commercial prospective. There is no specific strategy which can be adopted. If the firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be adopted. Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market- share. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars. 4. Dogs- Dogs represent businesses having weak market shares in low-growth markets.
They neither generate cash nor require huge amount of cash. Due to low market share, these business units face cost disadvantages. Generally retrenchment strategies are adopted because these firms can gain market share only at the expense of competitor’s/rival firms. These business firms have weak market share because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share. Number of dogs should be avoided and minimized in an organization.