Facebook and linkedIN Sunday, Jun 9 2013 

You may check my profile on Facebook and LinkedIn to know more about my current activities.

Thanks

Manoj Onkar

Strategy Formulation: BCG Growth-Share Matrix Model Thursday, Jun 10 2010 

BCG Growth-Share Matrix:

The Boston Consulting Group, a leading consulting firm, developed and popularized a portfoilo analysis tools that helps managers develop organizational strategy based on market share of businesses and the growth of markets in which businesses exist.

The 1st step in using this model is identifying the organization’s strategic business units (SBUs). A Strategic business Unit is a significant organization segment that is analysed to develop organizational strategy aimed at generating future business or revenue.

Exactly what constitutes as SBU varies from company to company. In bigger organizations, and SBU could be a company division, a single product or a complete Product Line.

In smaller organizations, it might be the entire company.

Eventhough they vary drastically in form each SBU has the following characteristics:

  1. It is a single business or collection of related businesses.
  2. It has its own competitors.
  3. It has a manager who is accountable for its operation.
  4. It is an area that can be independently planned for within the organization.

After identifying the SBUs, the next step is to categorize each SBU within one of the 4 Matrix Quadrants:

  1. STARS – Star SBUs have a high share of a high growth market and typically need large amounts of cash to support their rapid and significant growth. Stars also generate large amounts of cash for the organization and are usually segments in which management can make additional investments and earn attractive returns.
  2. CASH COWS: SBUs that are Cash Cows have a large share of a market that is growing only slightly. Naturally, these SBUs provide the organization with large amounts of Cash, but since their market is not growing significantly, the cash is generally used to meet the financial demands of the organization in other areas, such as the expansion of a STAR SBU.
  3. QUESTION MARKS: These category of SBUs have a small share of a high growth market. These are “question marks” because it is uncertain whether management should invest more cash in them to gain a larger share of the market or deemphasize or eliminate them. Management will choose the 1st option when it believes it can turn the question mark into a star, and the 2nd option when it thinks that future investments would be fruitless.
  4. DOGS : SBUs that are dogs have a relatively small share of a low-growth market. They may barely support themselves; in some cases, they actually drain off cash resources generated by other SBUs. These are the SBUs which are likely to be shortlisted for deemphasize or elimination.

PITFALLS of the BCG Growth Matrix Model:

The matrix does not consider factors like:

  • Various types of Risk associated with product development
  • Threats that inflation and other economic conditions can create in the future.
  • Social,Political and Ecological Pressures.

A LEARNING ORGANIZATION Sunday, Jun 6 2010 

A LEARNING ORGANIZATION is an organization that does well in creating, acquiring and transferring knowledge, and in modifying behaviour to reflect the new knowledge.

Learning organizations emphasize systematic problem solving,experimenting with new ideas, learning form experience and past history, learning from the experience of others, and transferring knowledge rapidly throughout the organization.

According to Peter Senge, the 5 features of a learning organization are:

  1.  SYSTEMS THINKING: Every organization member understands her own job and how the job fits together to provide final products to the customer.                                                        
  2. SHARED VISION: All organization members have a common view of the purpose of the organization and a sincere commitment to accomplish the purpose.                                                       
  3. CHALLENGING OF MENTAL MODELS: Organization members routinely challenge the way business is done and the thought processes people use to solve the organizational Problems.                 
  4. TEAM LEARNING: Organization members work together, develop solutions to new problems together, and apply the solutions together. Working as teams rather than individuals will help organizations gather collective force to achieve organizational goals.                                                                                         
  5. PERSONAL MASTERY: All organization members are committed to gaining a deep and rich understanding of their work. 

Consumer Decision Making & Relationship Marketing Friday, May 28 2010 

The Consumer’s decision to purchase or not to purchase a product or service is an important moment for most marketers. It can signify whether a marketing strategy has been successful or not. Therefore, marketing people are interested in the consumer’s decision making process.

For a consumer to make a decision, more than one alternative must be available, including the alternative called making a decision to not buy or not buy now.

The various models of 

  1. Consumers View
  2. Passive View
  3. Cognitive View
  4. Emotional View

depict consumers and their decision making processes in distinctly different ways.

An overview consumer decision making model ties together the psychologist, social,and cultural concepts into easily understood network. This decision model has 3 sets of variables: input variables, process variables and output variables.

Input variables that affect the decision – making process include commercial marketing efforts, as well as non commercial influences from the customer’s sociocultural environment. The decision process variables are influenced by the consumer’s psychological field, including the evoked set or the brands in a particular product category considered in making a purchase choice.

The psychological field influences the consumer’s recognition of a need, pre purchase search for information and evaluation of alternatives.

The output phase of the model includes the actual purchase (either trial or repeat purchase) and post purchase evaluation. Both pre purchase and post purchase evaluation feeds back in the form of experience into the consumer’s psychological field and serves to influence future decision making process.

GIFTING:

The process of gift exchange is an important part of consumer behaviour. 

Various gift giving and gift receiving relationships are captured by the following 5 specific categories in the gifting classification scheme:

  1. Intergroup gifting: A group gives a gift to another group.
  2. Intercategory gifting: An individual gives a gift to a group or a group gives a gift to an individual.
  3. Intragroup gifting: A group gives a gift to itself or its members.
  4. InterPersonal gifting: An individual gives a gift to another individual
  5. Intrapersonal gifting: A Self Gift.

Consumer behaviour is not must making a purchase, it also includes the full range of experiences associated with using products or services. It includes the sense of pleasure and satisfaction derived from possessing or collecting “things”. The outputs of consumption are the changes in feelings,moods, attitudes, reinforcement of lifestyles, an enhanced sense of self; satisfaction of a consumer related need; belonging to groups; and expressing and entertaining oneself.

Among other things, consuming includes the simple utility of using a Superior product, the stress reduction of a vacation, the sense of having a “sacred” possession, and the pleasures of a hobby or a collection. Some possessions serve to assist consumers in their effort to create a personal meaning and to maintain a sense of the past.

Relationship Marketing impacts consumer’s decisions and their consumption satisfaction. Firms establish loyalty programs to foster usage loyalty and a commitment to continued usage of their products and services.

Relationship marketing is all about buildign trust between the firm and its customers and keeping promises made to the customers. Therefore the focus is always on developing long term bonds with customers by making them fee special and by providing them with personalized services.

How is your relationship marketing doing?

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com; manojonkar@gmail.com, 919375970812

Consumer Behaviour, Consumer Influence and the Process of Diffusion Friday, May 28 2010 

What is Opinion Leadership?

Opinion Leadership is the process by which the opinion leader informally influences the actions or attitudes of others, who may be opinion seekers or merely opinion recipients. Opinion receivers perceive the opinion leader as a highly credible, objective source of product information who can help reduce their search and analysis time and percieved risk.

Opinion leaders are motivated to give information or advice to others, in part doing so enhances their own status and self image and because such advice tends to reduce any post purchase dissonance that they may have.Other motives include product involvement, message involvement or any other involvement.

Market researchers identify opinion leaders by such methods as self designation, key informants, the sociometric method and the objective method.

Studies of opinion leadership indicate that this phenomenon tends to be product category specific, generally one of their interest. An opinion leader of one product range can be an opinion receiver for another product category.

Generally, opinion leaders are gregarious, self confident, innovative people who like to talk. Additionally, they may feel differentiated from others and choose to act differently (or public individuation).

They acquire information about their areas of interest through avid readership of special interest magazines and ezines and by means of new product trials.

Their interests may often overlap into adjacent areas and thus their opinion leadership may also extend into those areas.

Who is a market maven ?

The market maven is an intense case of a opinion leader kind of person. These consumers possess a wide range of information about many different types of products, retail outlets, and other dimensions of markets.

They both initiative discussions with other consumers and respond to requests for market information over a wide range of products and services. 

Market mavens are also distinguished from other opinion leaders because their influence stems not so much from product experience but from a more general knowledge or market expertise that leads them to an early awareness of a wide array of new products and services.

The opinion leadership process usually take place among friends, neighbours and work associates who have frequent physical proximity and thus have ample opportunity to hold informal product related conversations. These conversations usually occur naturally in the context of the product-category usage.

The two – step flow of communication theory highlights the role of interpersonal influence in the transmission of information from the mass media to the populations at large. This theory provides the foundation for a revised multi step flow of communication model, which takes into account the fact that information and influence often are 2 way processes and that the opinion leaders both influence and are influenced by opinion receivers.

It is important for the marketers to segment their audiences into opinion leaders and opinion receivers for their respective product categories. When marketers can direct their promotional efforts to the more influential segments of these markets, these opinion leaders will transmit the information to those who seek product advice.

Marketers try to simulate and stimulate opinion leadership. They have also found that they can create opinion leaders for their products by taking socially involved or influential people and deliberately increasing their enthusiasm for a product category.

The diffusion process and the adoption process are 2 closely related concepts concerned with the acceptance of new products by customers.

The diffusion process is a macro process that focuses on the spread of an innovation from its source to the consuming public.

The adoption process is a micro process that examines the stages through which an individual consumer passes when making a decision to accept or reject a new product.

The definition of the term innovation can be

1. Firm oriented(new to the firm),

2. Product oriented(a continuous innovation, a dynamically continuous innovation, or  A discontinuous innovation),

3. Market oriented(how long the product has been on the market or an arbitrary percentage of the potential target market that has purchased it), or

4. Consumer oriented (new to the customer).

Market-oriented definitions of innovation are most useful to consumer researchers in the study of the diffusion and adoption of new products.

Five Product Characteristics influence the consumers acceptance of a new product:

 

  1. Relative Advantage
  2. Compatibility
  3. Complexity
  4. Trialability
  5. Observability

 

Diffusion researchers are concerned with 2 aspects of communication – the channels through which word about a new product or service is spread to the public and the types of messages that influence the adoption or rejection of new products or services.

Diffusion is always examined in the context of a specific social system, such as a target market, a community, a region or even a nation.

Time is an integral consideration in the diffusion process. Researchers are concerned with the amount of purchase time required for an individual customer to adopt or reject a new product/service, with the rate of adoptions and with the identification of sequential adopters.

The 5 adopter categories are innovators, early adopters, early majority, late majority and laggards.

Marketing Strategists try to control the rate of adoption through their new product pricing policies. Companies who wish to penetrate the market to achieve market leaderships try to acquire wide adoption as quickly as possible by using low prices. Those who wish to recoup their developmental costs quickly use a skimming pricing policy but lengthen the adoption process.

The traditional adoption process model describes 5 stages through which an individual consumer passes to arrive at the decision to adopt or reject a new product:

  1. Awareness, 
  2. Interest,
  3. Evaluation
  4. Trial
  5. Adoption

To make it more realistic, an enhanced model is recommended as one that considers the possibility of a pre existing need or problem, the likelihood that some form of evaluation might occur through the entire process, and that even after adoption there will be post adoption or purchase evaluation that might either strengthen the commitment or alternatively lead to discontinuation of the product/service.

Companies marketing new products are vitally concerned with identifying the consumer innovator so that they may direct their promotional campaigns to the people who are most like to try new products, adopts them and influences others.

Consumer Research has identified a number of consumer related characteristics, including product interest, opinion leadership, personality factors, purchase and consumption traits, media habits, social characteristics, and demographic variables that distinguish consumer innovators from later adopters. These serve as useful variables in the segmentation of markets for new product introductions.

Who are the innovators and early adopters for your products and services? How have you planned your diffusion strategy for the current products and the new products?

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com; manojonkar@gmail.com; 919375970812

PRICING STRATEGY IN COMPETITIVE TIMES Tuesday, May 25 2010 

Pricing has lot to do with the target audience that you are positioning your product and service offerings for?

Do you want to target the uber rich and super rich or you want to target the rich and the upper middle class?

These competitive times along with the recessionary pressures will force most of the organizations to relook at their pricing strategy?

What should be your strategy? What target market will fulfill the sustainable growth requirements for your organization? 

How would your budgets look with high pricing and low volumes vs little lower pricing or even half pricing and increased volumes?

What Volumes are you expecting at what price point?

What will be the increased sales and marketing costs required based on change of the target market segments and the pricing policy to ensure the successful implementation.

What is the scalability in your production capacity, especially if you are a service organization?

Service offerings may have more restriction on their capacities and hence more restrictions on how much they can play around with their pricing models.

What is your product or service packages? What pricing models are your exploring? What optional target market segments are you considering?

Contact: MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com, manojonkar@gmail.com; 919375970812

STRATEGY FORMULATION TOOLS Wednesday, Dec 10 2008 

After the managers involved in the strategic management process have analyzed the environment and determined organizational direction through the development of a mission statement and organizational objective, they are ready to formulate strategy.

STRATEGY FORMULATION is the process of determining appropriate courses of action for achieving organizational objectives and thereby accomplishing organizational purpose.

Managers formulate strategies that reflect environmental analysis, lead to fulfillment of organizational mission, and result in reaching organizational objectives.

Special tools they can use to assist them in formulating strategies include the following:

  1. CRITICAL QUESTION ANALYSIS
  2. SWOT ANALYSIS
  3. BUSINESS PORTFOLIO ANALYSIS
  4. PORTER’S MODEL FOR INDUSTRY ANALYSIS.

These 4 strategy development tools are related but distinct. Managers should use the tools or combination of tools that seems most appropriate for them and  their organizations.

CRITICAL QUESTION ANALYSIS:

The 4 critical questions to be answered here are:

  1. What are the purposes and objectives of the Organization?
  2. Where is the Organization presently going?
  3. In what kind of environment does the organization now exist?
  4. What can be done to better achieve organizational objectives in the future?

 

SWOT ANALYSIS:

SWOT Analysis is a strategic development tool that matches internal organizational strengths and weaknesses with external opportunities and threats.

SWOT is an acronym for the organization’s Strengths, Weakness, Opportunities and Threats.

It is based on the assumption that if managers carefully review such strengths, weaknesses, opportunities and threats, a useful strategy for ensuring organizational success will become evident to them.

 

BUSINESS PORTFOLIO ANALYSIS:

Business Portfolio Analysis is an organizational strategy formulation technique that is based on the philosophy that Organizations should develop strategy much as they handle investment portfolios.

In the way, in which the sound financial investments should be supported and unsound ones discarded, sound organizational activities should be emphasized and unsound ones deemphasized.

2 Business Portfoilo tools are:

  1. The BCG Growth Share Matrix by Boston Consulting Group.
  2. GE Multifactor Portfolio Matrix by General Electric Company.

BCG Growth-Share Matrix:

The Boston Consulting Group, a leading consulting firm, developed and popularized a portfoilo analysis tools that helps managers develop organizational strategy based on market share of businesses and the growth of markets in which businesses exist.

The 1st step in using this model is identifying the organization’s strategic business units (SBUs). A Strategic business Unit is a significant organization segment that is analysed to develop organizational strategy aimed at generating future business or revenue.

Exactly what constitutes as SBU varies from company to company. In bigger organizations, and SBU could be a company division, a single product or a complete Product Line.

In smaller organizations, it might be the entire company.

Eventhough they vary drastically in form each SBU has the following characteristics:

  1. It is a single business or collection of related businesses.
  2. It has its own competitors.
  3. It has a manager who is accountable for its operation.
  4. It is an area that can be independently planned for within the organization.

After identifying the SBUs, the next step is to categorize each SBU within one of the 4 Matrix Quadrants:

  1. STARS – Star SBUs have a high share of a high growth market and typically need large amounts of cash to support their rapid and significant growth. Stars also generate large amounts of cash for the organization and are usually segments in which management can make additional investments and earn attractive returns.
  2. CASH COWS: SBUs that are Cash Cows have a large share of a market that is growing only slightly. Naturally, these SBUs provide the organization with large amounts of Cash, but since their market is not growing significantly, the cash is generally used to meet the financial demands of the organization in other areas, such as the expansion of a STAR SBU.
  3. QUESTION MARKS: These category of SBUs have a small share of a high growth market. These are “question marks” because it is uncertain whether management should invest more cash in them to gain a larger share of the market or deemphasize or eliminate them. Management will choose the 1st option when it believes it can turn the question mark into a star, and the 2nd option when it thinks that future investments would be fruitless.
  4. DOGS : SBUs that are dogs have a relatively small share of a low-growth market. They may barely support themselves; in some cases, they actually drain off cash resources generated by other SBUs. These are the SBUs which are likely to be shortlisted for deemphasize or elimination.

PITFALLS of the BCG Growth Matrix Model:

The matrix does not consider factors like:

  • Various types of Risk associated with product development
  • Threats that inflation and other economic conditions can create in the future.
  • Social,Political and Ecological Pressures.

 

GE Multifactor Portfolio Matrix:

GE Multifactor Portfolio Matrix is a tools that helps managers develop organizational strategy that is based primarily on market attractiveness and business strengths.

The GE Multifactor Portfolio was deliberately designed to be more complete than the BCG Growth Share Matrix.

Each of the organization’s SBUs are plotted on a 2 dimensional matrix of Industry Attractiveness and Business Strength.

Each of these 2 dimensions are a composite of  a variety of factors that each firm must determine for itself, given its own unique situation.

As examples, Industry Attractiveness might be determined by such factors as:

  • No. of Competitors in the Industry
  • Rate of Industry Growth
  • Weakness of Competitors within an Industry

Business Strengths might be determined by such factors as:

  • Company’s Financial Solid Position
  • Its Good Bargaining Position over Suppliers
  • Its high level of Technology Use.

Specific strategies for a company are implied by where their businesses fall on the matrix.

 

While portfolio models are useful frameworks and reference points, no model is yet designed that will deal with all the various dynamics involved in an organization and an industry and the changing environment. Hence Portfolio models should never be applied in a mechanistic fashion and sound managerial judgement and experience is to be applied alongwith.

 

PORTERS MODEL FOR INDUSTRY ANALYSIS:

Perhaps the best known tool for formulating strategy is the model developed by Michael E. Porter, an internationally acclaimed strategic management expert.

Essentially, Porter’s model outlines the primary forces that determine competitiveness within an industry and illustrates how those forces are related.

The model suggests that in order to develop effective organizational strategies, managers must understand and react to those forces within an industry that determine an organization’s level of competitiveness within that industry.

According to these model, competitiveness within an industry is determined by the following factors:

  1. New Entrants or New Companies within the Industry
  2. Substitute Products or Services – for goods or services that the companies within the industry produce/provide.
  3. Supplier’s Ability to control issues like costs of material/ inputs that industry companies use to manufacture their products or provide their services.
  4. Competition level among the firms in the industry.

According to the model, buyers, product substitutes, supplier and potential new companies within an Industry all contribute to the level or rivalry among industry firms.

 
For further support and clarifications contact:

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com;  manojonkar@gmail.com

919375970812

ORGANIZATIONAL DIRECTION: MISSION & OBJECTIVES Tuesday, Dec 9 2008 

DETERMINING ORGANIZATION DIRECTION:

Through an interpretation of information gathered during environmental analysis, managers can determine the direction in which an organization should move.

2 important ingredients of organizational direction are Organizational Mission and Organizational Objectives.

DETERMINING ORGANIZATIONAL MISSION:

The most common initial act in establishing organizational direction is determining an organizational mission.

ORGANIZATIONAL MISSION is the purpose for which the Organization exists.

The firms organizational mission reflects such information as what types of products or services it produces, who its customers tend to be, and what important values it holds.

Organizational Mission is a very broad statement of organizational direction and is based on a thorough analysis of information generated through environmental analysis.

DEVELOPING A MISSION STATEMENT:

A MISSION STATEMENT is a written document developed by management, normally based on input by managers as well as non managers, that describes and explains what the mission of an organization actually is.

The mission is expressed in writing to ensure that all organization members will have easy access to it and thoroughly understand exactly what the organization is trying to accomplish.

IMPORTANCE OF ORGANIZATIONAL MISSION:

An organization mission is very important to an organization because it helps management increase the probability that the organization will be successful.

There are several reasons why it does this.

First, the existence of an organizational mission helps management focus human effort in a common direction.

The mission makes explicit the major targets the organization is trying to reach and helps managers keep these targets in mind as they make decisions.

Second, an organizational mission serves as a sound rationale for allocating resources.

A properly developed mission statement gives managers useful guidelines about how resources should be used to best accomplish organizational purpose.

Third, a mission statement helps management define broad but important job areas within an organization and therefore critical jobs that must be accomplished.

RELATION BETWEEN MISSION & OBJECTIVES:

Sound organizational objectives reflect and flow naturally from the purpose of the organization.

The organization’s purpose is expressed in its mission statement.

Thus organizational objectives must reflect and flow naturally from an organizational mission that, in turn, was designed to reflect and flow naturally from the results of an environmental analysis.

STRATEGY PLANNING – ENVIRONMENTAL ANALYSIS Tuesday, Dec 9 2008 

The 1st step of the strategy management process is environmental analysis. An organization can only be successful if it is appropriately matched to its environment.

ENVIRONMENT ANALYSIS is the study of the organizational environment to pinpoint environmental factors that can significantly influence organizational operations.

MANAGERS commonly perform environmental analyses to help them understand what is happening both inside and outside their organizations and to increase the probability that the organizational strategies they develop will appropriately reflect the organizational environment.

In order to perform an environmental analysis efficiently and effectively, a manager must thoroughly understand how organizational environments are structured.

For purposes of environmental analysis, the environment of an organization is generally divided into 3 distinct levels:

  1. General Environment
  2. Operating Environment
  3. Internal Environment

Managers must be well aware of these 3 organizational environmental levels, understand how each level affects organizational performance and then formulate organizational strategies in response to this understanding.

THE GENERAL ENVIRONMENT:

The components normally considered part of the general environment are:

  • Economic
  • Social: Including Demographics and Social Values
  • Political
  • Legal
  • Technological

THE OPERATING ENVIRONMENT:

The operating Environment includes various components like:

  • Customer
  • Competition
  • Labour
  • Supplier
  • International Issues.

THE INTERNAL ENVIRONMENT:

The level of an organization’s environment that exists inside the organization and normally has immediate and specific implications for managing the organization is the internal environment.

It includes marketing, finance and accounting,planning,organizing, influencing and controlling within the organization.

FUNDAMENTALS OF STRATEGIC PLANNING Tuesday, Dec 9 2008 

STRATEGIC PLANNING:

Strategic Planning is  the long range planning that focuses on the organization as a whole. In doing strategic planning, managers consider the organization as a total unit and ask themselves what must be done in the long term( 3 to 5 years) to attain organizational goals.

In strategic planning, managers try to determine what their organization should do to be successful 3 – 5 years from now. The most successful managers tend to be those who are capable of encouraging innovative strategic thinking within their organization.

STRATEGY:

Strategy is defined as a broad and general plan developed to reach long term objectives.Organizational strategy can and generally does focus on many different organizational areas such as Finance, Sales,Marketing,Production, Research and Development and PR.

It gives broad direction to the organization.

Strategy is actually the end result of strategic planning. Although larger organizations tend to be more precise in  developing organizational strategy than smaller organization, every organization must have a strategy.

For a strategy to be worthwhile, it must be consistent with organizational objectives, which, in turn, must be consistent with organizational purpose.

STRATEGY MANAGEMENT:

Strategy management is the process of ensuring that an organization possesses and benefits from the use of an appropriate organization strategy. An appropriate strategy is one best suited to the needs of an organization at a particular time.

The strategy management process is generally thought to consist of 5 sequential and continuing steps:

  1. Environmental Analysis
  2. Establishment of an Organizational Direction.
  3. Strategy Formulation
  4. Strategy Implementation
  5. Strategic Control

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