Strategic models Flashcards
Introduction
Is the strategic model a good one for Performance management model and can we use it for CSF’S and KPI’S?
Strategic models were not created as performance management tools but for strategy creation
PEST Analysis
Its all about CSF and KPI’s
Positives
- useful checklist of areas for consideration
- wide ranging
- PESTEL can include ethics and the law
Negatives
- Not specific to the business more related to the industry
- No measures implied - CSF and KPI still need to be created
- Everything is exogenous (outside the control of the business) so we need to MONITOR and RESPOND
Examiner can ask to create/ Critique /Evaluate suitable CSF/KPI
suitability of the model for performance managements system
Boston Consulting Group Matrix
Relative market share - are we dominant in the market
Market Growth - is the market growing
star - maintain position, spend on R&D and marketing, develop new products. maybe cash negative
cash cow - milk the cow take cash out, operate for cash cash generating abilities, reduce R&D, simplify product range.
problem child - double down or quit, if doubling down increase R&D and marketing or quit and treat it as a dog.
dog - Disinvest sell or redefine market
Calculate which buckets the products belong on the matrix, use the actions in each buckets as KPI’s and CSF’s.
Positives
1. Can help balance portfolio of products
2. Top strategic level model
3. If understood can lead to good CSF and KPIs
Negatives
1. There is no middle ground, it depends whether you are the
market leader or not.
2. Redefining the market is easy to do and this will manipulate
results
3. Measure of market growth is subjective, what is high?
4. Ignores product dependency measures
Mendelow’s Matrix -Stakeholders
Stakeholders wishes must be catered for in a business performance management system.
Level of interest v level of power
keep satisfied, minimal effort, key players, keep informed
Positives
1. Prioritisation is implied
2. All stakeholders are considered but different strategy for each
one.
3. KPIs are easy to produce
Negatives
1. Model is a little outdated
2. interest levels can change rapidly , regulator can become
interested quickly
3. only people not processes.
Mckinsey’s 7S Model - Business systems
the systems in a business must be consistent, broken into hard and soft elements
Hard elements include - Strategy, systems and structure
Soft elements include - skills, MGT style, staff, shared values
Positives
1.Useful checklist
2. emphasizes relationships that exist between features of a businesses
3. more likely to result in consistency between features
4. useful split between soft and hard features. Probably need to get hard features in place before soft features
Negatives
1. No measures implied by the model
Clonyard 2020 - PQ
GAP Analysis/ Ansoff matrix
Ansoff matrix
analyses where the business and how it can improve to get were i needs to get to.
Improve with existing products or developing new products
Improve by entering an existing market or enter into a new market
Gap analysis
Objective axis - Be prepared to evaluate/challenge choice of objectives for a business.
1. Profit - it is manipulatable, but covers revenue and cost, commonly used.
2. Revenue - This is a narrow measure, ignores cost, market share focus, scale is viewed as important
3. share prices - theoretically better, subject to extraneous factors, cash and dividend stressed.
Black Line - current performance is extrapolated - If nothing changes and the past is representative of the future then this is where you will be.
One could argue if nothing is changed then past growth may not be continued as competitors will act.
Extrapolation is easy to do but may not represent actual result realised.
difference between ultimate objective and current performance is objective
Ultimate objective
How much growth is enough
It is difficult to manage expectations
Efficiency gap - getting more from existing customers and customers and products (market penetration)
1. improve value propositions - increase quality or reduce prices (be careful as these may be imply lower quality)
2. Efficiency - improve productivity or reduce waste
Effectiveness Gap - This gap is closed by a combination of Market development (taking existing products to a wider audience) or product development( designing new products)
Diversification gap - sometimes not needed if other strategies are sufficient
can high risk particularly if unrelated , it can also offer high rewards and ensure long term survival of the business
Exam tip-evaluate a performance improvement strategy against stated objectives
Financial and non financial impact of new product, will it meet stated objectives
Porter Five forces
The greater the degree of competitive rivalry and the pressures that create competition, the more your margin will be under threat. it is about margin threat.
Threat of new Entrants
Threat of substitutes
Power of suppliers
Power of suppliers
Substitutes depress prices
strong customers can demand high level of service and also demand discounts
strong suppliers - they control the market, no level of services and charge high prices
Positives
1. useful checklist of ideas for consideration
2. competition awareness is critical as customers often have
multiple options.
3. considers present and future
Negatives
1. No measures implied
2. measures are difficult to control
3. some items are exogenous and outside of control o the business so need to MONITOR and RESPOND e.g. New entrants
Porter’s value chain
CSF and KPI need to be consistent across departments
positives
useful checklist for all departments within an organisation
emphasizes the inter relationships that exist within an organisation
consistency between department measures more likely to yield results
Negatives
No measures implied by the model
Assumes margin is the primary objectives
