T.C. BAHÇEŞEHİR UNIVERSITY COMPARISON OF STRATEGIC ANALYSES WHICH APPLIED IN PRIVATE SECTOR AND PUBLIC SECTOR Graduation Project Tuba Güngördü
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T.C.BAHÇEŞEHİR UNIVERSITY
COMPARISON OF STRATEGIC ANALYSES WHICH APPLIED IN PRIVATE SECTOR AND PUBLIC
SECTOR
Graduation Project
Tuba Güngördü
ISTANBUL, 2010
T.C.BAHÇEŞEHİR UNIVERSITY
SCHOOL OF ENGINEERING
DEPARTMENT OF INDUSTRIAL ENGINEERING
COMPARISON OF STRATEGIC ANALYSES WHICH APPLIED IN PRIVATE SECTOR AND PUBLIC
SECTOR
Graduation Project
Tuba Güngördü
Advisor: Asst. Prof. Dr. Ahmet BEŞKESE
İSTANBUL, 2010
ABSTRACT
COMPARISON OF STRATEGIC ANALYSES WHICH APPLIED IN PRIVATE SECTOR AND PUBLIC SECTOR
Tuba Güngördü
Faculty of EngineeringDepartment of Industrial Engineering
Advisor: Asst. Prof. Dr. Ahmet Beşkese
JANUARY, 2010, pages 76
Nowadays, importance of planning is increasing day by day in both private sector
and public sector. Managers have to use their resources of organization effectively and
efficiently, firstly to manage the organization and make profit indirectly, secondly to
provide a contribution to economy of the country, maximize the return to its shareholders,
provide equity between the workers, evaluate the opportunities that company confront, and
overcome the threats that threaten to the company. To manage this, an organization needs a
well-prepared strategic plan that provides the best evaluation of the organization’s
situation, suggest best solutions to the apparent problems and provide taking an action
against to these situations which is prepared by getting benefit from the all available and
usable strategic planning tools. After organizations’ realization of the importance of those
issues, strategic planning becomes much more important to organizations.
Generally, studies on the strategic planning include the researches on the strategic
planning of private and public sector. But, there is not any study that include the analyses
used in private sector and public sector and compare this analysis
In this study, all the strategic planning analyses that include both sector was
presented and it was handled Ülker- Yıldız Holding as a private sector example, and
Istanbul Metropolitan Municipality (IMM) as a public sector example.
ii
At the end of the study, strategic planning of both organizations were presented
separately, and the comparison of Ülker and IMM’s strategic planning process was
handled at the last part.
Key Words: Strategic Planning, strategic analyses, private sector, public sector, non-profit organizations, comparison
iii
ÖZET
ÖZEL SEKTÖR İLE KAMU SEKTÖRÜNDEKİ STRATEJİK ANALİZLERİN KARŞILAŞTIRILMASI
Tuba Güngördü
Mühendislik FakültesiEndüstri Mühendisliği Bölümü
Yrd. Doç. Dr. Ahmet Beşkese
OCAK, 2010, sayfa 76
Günümüzde gerek özel sektörde gerek kamu sektöründe planlamanın önemi günden
güne artmaktadır. Yöneticiler, öncelikle başında bulundukları organizasyonları yönetmek
ve dolaylı yoldan kâr elde etmek, daha sonra ise ülke ekonomisine katkıda bulunmak,
paydaşlarına en fazla faydayı ve geri dönüşü sağlayabilmek, çalışanlarına en adil şekilde
davranabilmek, şirketin karşısına çıkan fırsatları değerlendirebilmek ve tehditlerin
üstesinden gelmek adına kaynaklarını en etkili ve verimli şekilde kullanmalıdırlar. Bunu
başarabilmek için, bir organizasyonun kullanılabilecek bütün planlama araçlarından
faydalanarak, organizasyonun durumunu en iyi şekilde değerlendirebilmesini, ortaya çıkan
sorunlara en uygun çözümleri önerilebilmesini ve bu yolda adım atabilmesini sağlayan iyi
hazırlanmış bir stratejik planlana ihtiyacı vardır. Bu durumun öneminin organizasyonlar
tarafından daha iyi farkına varılmasından sonra stratejik planlama organizasyonlar için
daha da önem arzetmeye başlamıştır.
Stratejik yönetim ile ilgili çalışmalar, genel olarak özel sektör ve kamu
sektöründeki araştırmaları içine almaktadır. Ancak her iki sektörün stratejik planlamasında
kullanılan analizleri içerecek ve bunları kıyaslayacak şekilde bir çalışma bulunmamaktadır.
Bu çalışmada, her iki sektörü de içinde barındırancak şekilde stratejik planlama
analizleri irdelenmiş, özel sektör örneği olarak Ülker – Yıldız Holding, kamu sektörü
örneği olarak İstanbul Büyükşehir Belediyesi ele alınmıştır.
iv
Çalışmanın sonucunda bu iki sektörün stratejik planları ayrı ayrı anlatılarak son
bölümde iki sektör arasında stratejik planlama uygulamalarındaki farklar ele alınmıştır.
Anahtar Kelimeler: Stratejik planlama, stratejik analizler, özel sektör, kamu sektörü, kar amacı gütmeyen organizasyonlar, karşılaştırma
v
ACKNOWLEDGMENTS
I wish to thank to all my professors from whom I learned many things during my
undergraduate education. I reached to this point with the knowledge I gained from them.
Special thanks are offered to my supervisor Asst. Prof. Ahmet Beşkese, who
accepted to be my supervisor and guided me during my undergraduate thesis study and
also for his moral supports in my undergraduate education.
Finally I wish to thank to my family for their endless supports in my education life
and also to my engaged for his never ending moral support, helpfulness and love in my
life.
vi
TABLE OF CONTENTS
ABSTRACT...........................................................................................................................ii
ÖZET....................................................................................................................................iv
ACKNOWLEDGMENTS....................................................................................................vi
TABLE OF CONTENTS.....................................................................................................vii
LIST OF TABLES.................................................................................................................x
LIST OF FIGURES..............................................................................................................xi
LIST OF ABBREVIATIONS..............................................................................................xii
1. INTRODUCTION..............................................................................................................1
2. WHAT IS THE STRATEGIC PLANNING AND MANAGEMENT CONCEPT?.........3
2.1. Key Attributes of Strategic Management...............................................................4
2.2. Defining a Strategy................................................................................................4
3. VISION, MISSION AND MAJOR GOALS.....................................................................5
3.1. Vision.....................................................................................................................5
3.2. Mission...................................................................................................................5
3.3. Major Goals............................................................................................................7
4. ANALYZES.......................................................................................................................8
4.1. SWOT....................................................................................................................8
4.1.1. External Analysis..........................................................................................9
4.1.1.1. General Environment.........................................................................9
4.1.1.1.1. The Demographic Segment.....................................................9
4.1.1.1.2. The Economic Segment.........................................................10
4.1.1.1.3. Political/Legal Segment.........................................................10
4.1.1.1.4. Socio-cultural Segment..........................................................10
4.1.1.1.5. Technological Segment.........................................................11
4.1.1.1.6. Global Segment.....................................................................11
4.1.1.2. Competitive Environment (Task Environment) and Porter’s
Approach to Industry Analyses....................................................................11
4.1.1.2.1. The Threat of New Entrants..................................................13
4.1.1.2.2. Bargaining Power of Buyers..................................................13
4.1.1.2.3. Bargaining Power of Suppliers..............................................14
vii
4.1.1.2.4. The Threat of Substitute Products and Services....................14
4.1.1.2.5. The Intensity of Rivalry Among Competitors in an Industry14
4.1.2. Internal Analysis.........................................................................................14
4.1.3. SO, WO, ST, WT Strategies.......................................................................15
4.2. External Factor Evaluation Matrix (EFE Matrix)................................................15
4.2.1. Developing an EFE Matrix.........................................................................15
4.2.2. Evaluation of the EFE Matrix.....................................................................16
4.3. Internal Factor Evaluation Matrix (IFE Matrix)..................................................17
4.3.1. Developing an IFE Matrix..........................................................................17
4.3.2. Evaluation of IFE Matrix............................................................................19
4.4. Competitive Profile Matrix (CPM)......................................................................20
4.4.1. Developing a CPM......................................................................................20
4.4.2. Evaluating a CPM.......................................................................................21
4.5. Financial Ratio Analyses......................................................................................22
4.6. Strategic Position & Action Evaluation Matrix (SPACE Matrix).......................26
4.6.1. Developing a SPACE Matrix......................................................................27
4.6.2. Evaluating a SPACE Matrix.......................................................................30
4.7. Quantitative Strategic Planning Matrix (QSPM).................................................31
4.7.1. Developing a QSPM...................................................................................31
4.7.2. Evaluating the QSPM..................................................................................34
4.8. Value Chain Analyses..........................................................................................34
4.8.1. Primary Activities.......................................................................................35
4.8.1.1. Inbound Logistics............................................................................35
4.8.1.2. Operations.......................................................................................36
4.8.1.3. Outbound Logistics.........................................................................36
4.8.1.4. Marketing and Sales........................................................................36
4.8.1.5. Service.............................................................................................37
4.8.2. Support Activities........................................................................................37
4.8.2.1. Procurement....................................................................................37
4.8.2.2. Technology Development...............................................................38
4.8.2.3. Human Resource Management.......................................................38
4.8.2.4. General Administration (Firm Infrastructure).................................39
viii
4.9. Balanced Scorecards............................................................................................40
4.9.1. Customer Perspective..................................................................................42
4.9.2. Internal Business Perspective......................................................................44
4.9.3. Innovation and Learning Perspective..........................................................44
4.9.4. Metrics For the Financial Perspective.........................................................45
4.10. Portfolio Analyses..............................................................................................47
4.10.1. Boston Consulting Group (BCG) Matrix..................................................48
4.10.2. Mc Kinsey Matrix (GE Matrix)................................................................50
4.10.2.1 Factors that Affect Market Attractiveness.....................................50
4.10.2.2. Factors that Affect Competitive Strengths....................................51
4.10.2.3. Assessing the Competitive Position..............................................51
4.10.2.4. Four Basic Types of Unbalanced Portfolios.................................53
4.10.2.5. Advantages and Disadvantages of the Mc Kinsey Matrix............54
4.10.3. Industry Evolution Matrix.........................................................................54
4.10.4. Which Technique Should be Use?............................................................56
5. SOME OTHER IMPORTANT ISSUES RELATED WITH NON-PROFIT
ORGANIZATIONS....................................................................................................57
6. STRATEGIC PLANNING IN ÜLKER - YILDIZ HOLDING.......................................59
7. STRATEGIC PLANNING IN İSTANBUL METROPOLITAN MUNICIPALITY......66
8. COMPARISON OF STRATEGIC ANALYSES IN ÜLKER AND IMM......................71
REFERENCES.....................................................................................................................73
ix
LIST OF TABLES
Table 4-1. External Factor Evaluation Matrix for a Retail Computer Store........................16
Table 4-2. Internal Factor Evaluation Matrix for a Retail Computer Store.........................19
Table 4-3. An example about the CPM................................................................................21
Table 4-4. A QSPM For A Retail Computer Store..............................................................33
Table 4-5. Four basic types of unbalanced portfolios..........................................................54
Table 7-1. Partnerships of IMM...........................................................................................70
x
LIST OF FIGURES
Figure 3-1. Diagram of Abell’s Framework..........................................................................6
Figure 4-1. Porter’s Five Forces Model of Industry Competition.......................................12
Figure 4-2.1. Financial Ratio Analysis.................................................................................24
Figure 4-2.2. Financial Ratio Analysis(Cont)......................................................................25
Figure 4-3. Completed SPACE Matrix................................................................................27
Figure 4-4. Competitive Strategies in Space Matrix............................................................30
Figure 4-5. Michael Porter’s Value Chain...........................................................................35
Figure 4-6. Balanced Scorecard Links Performance Metrics...............................................42
Figure 4-7. ECI’s Balanced Business Scorecards................................................................46
Figure 4-8. BCG Matrix.......................................................................................................48
Figure 4-9. Mc Kinsey Matrix..............................................................................................52
Figure 4-10. Mc Kinsey Matrix............................................................................................52
Figure 4-11. Industry Evolution Matrix...............................................................................55
Figure 7-1. Preperation Process of Strategic Plan and Outcomes........................................66
Figure 7-2. Some parts of the table of shareholder matrix...................................................67
Figure 7-3. Components of Strategically Mapping..............................................................68
xi
LIST OF ABBREVIATIONS
AS Attractiveness Scores
BCG Boston Consulting Group
CA Competitive Adventage
CPM Competitive Profile Matrix
EBIT Earnings Before Interest, Taxes
EBITDA arnings Before Interest, Taxes, Depreciation, and Amortization
EFE External Factor Evaluation
EFEM External Factor Evaluation Matrix
ES Environmental Stability
FS Financial Strenght
GDP Gross Domestic Product
GE General Electric
HR Human Resource
IFE Internal Factor Evaluation
IFEM Internal Factor Evaluation Matrix
IMM Istanbul Metropolitan Municipality
IS Industry Strength
IT Informational Technology
LSH Laurens Spethmann Holding
QSPM Quantitative Strategic Planning Matrix
R&D Research and Development
ROE Return On Equity
SBU Strategic Business Unit
SP Strategic Plan
xii
SPACE Strategic Position & Action Evaluation
SWOT Strenght Weaknesses Opportunities Threaths
TQM Total Quality Management
xiii
Alice and the Cheshire Cat
From nowhere, a Cheshire cat appeared in the tree and asked Alice, “Can I help you?”
Alice said, “Yes please. I’m lost and need to know which road I should take.”
The Cheshire cat asked, “Where are you going?”
Alice said, “Gee, I don’t know!”
“Well,” said the Cheshire cat, “then it doesn’t matter which road you take.”
If you know yourself and the others, you will never fall into trouble even if you enter into
the war a hundred times. If you know just yourself but no others, you will one win,one lost.
If you know neither yourself nor others, it means you are in trouble all the wars you attend.
Anonymous
xiv
1. INTRODUCTION
Management concept is old as the mankind history and the importance of the
management is increasing day by day. While the rivalry between organizations increasing,
and resources scarcity is arising usage of the resources in the best manner is become the
most vital work for the organizations There are many studies to manage the organizations
effectively and efficiently and managers seek for the best management tools to achieve this
aim.
It is also an important issue that all the organizations subparts should be managed in
a harmony with a good managerial skill. To enhance these managerial skills, managers get
benefit from that kind of studies.
In the management concept, the most important issue is strategic management
which is include vision and mission of the organizations, and some kind of analyses in it
and this issue is controversial for both in private sector and public sector. When
organizations achive establishing a sustainable strategic plan, then they will also provide
the the sustainability of the organization.
There are many tools to construct the the strategic plan to evaluate the management
of the organization, its resource usage, to define problems in process and to recommend the
best solution for the organization.
It is also clear that there is not any study on the comparing strategic management
tools between the private sector and public sector. The aim of this study is providing a
different approach to all the other studies related with the strategic management of private
sector and public sector.
During the period of time which I studied on this project, some papers gave me a
way to develop an idea about my topic and here there are some examples of them which
plays important roles in my study:
“Strategic Management in Not-For-Profit Organization” was written by Mary
Louise Hatten from School of Management, Boston College, Chestnut Hill, Massachusetts.
U.S.A in 1982. In this paper, strategy identification, evaluation and reformulation for the
non-profit-organizations are discussed as an adoption of the principles developed for
corporate strategic management.
1
“A Strategic Planning Process for Public and Non-profit Organizations” study is
written by John M. Bryson in 1988 and printed in Great Britain. In this article, a pragmatic
approach to strategic planning is presented for use by public and non-profit organizations.
Benefits of the process are outlined and two examples of its application are presented-one
involving a city government and the other a public health nursing service. Requirements
for strategic planning success are discussed. Several conclusions are drawn, namely that:
(1) strategic planning is likely to become part of the repertoire of public and non-profit
planners; (2) planners must be very careful how they apply strategic planning to specific
situations; (3) it makes sense to think of decision makers as strategic planners and strategic
planners as facilitators of decision making across levels and functions; and (4) there are a
number of theoretical and practical issues that still need to be explored.
In a different book which named as “Strategic Management and Business Policy”
was written by Thomas L. Wheelen, J. David Hunger in 2004 to introduce the strategic
management- a field of inquiry that focuses on the organization as a whole and its
interaction with its environment with taxes and cases. The corporate world is in the process
of transformation driven by information technology and globalization. This book is
handled the panoramic view that is taken by strategic management of this changing
corporate terrain and attempts to show how large and small firms can be more effective
and efficient not only in today’s world but in tomorrows as well.
An article as “The Balanced Scorecard – Measures That Drive Performance” was
written by Robert S. Kaplan and David P. Norton in 1992to suggest four sets of parameters
to the managers who are not glad with the traditional metrics since these kind of metrics
didn’t let them manage effectively and efficiently and wanted to place them with
operational measures. These four perspectives are represented as financial perspective,
customer perspective, internal business perspective and innovation and learning
perspective. The authors search for a way to answer the questions that ‘How do we look to
shareholders?’, ‘What must we excel at?’, ‘How do customer see us?’, ‘Can we continue to
improve and create value?’
2
2. WHAT IS THE STRATEGIC PLANNING AND MANAGEMENT CONCEPT?
Leaders of an organization; in the private sector, public sector and nonprofit
organization, face and struggle a lot of issues at any moment. For all these; even if there
are so many examples,-depending on the area that a leader in-, making a profit, providing a
contribution to the County’s benefit, providing involvement of all the shareholders to the
organization frame effectively, efficient use of the resources, provide equity between the
workers, obtain the job or opportunities to larger communities etc. could be given as an
example of the issues. So how does a leader or a company overcome all the position,
evaluate the alternatives or opportunities? Leaders have to define a way to struggle these
kind of problems, to obtain a consistent harmony between the issues and to overcome the
difficulties and also get benefit from the internal and/or external benefits. Roughly, this
way-definition called as “Strategic Planning”.
The “Strategy” word is frequently-used words for the armies. Infect, resources
indicate that the etymological origin of the ‘strategy’ word is rely on the Ancient Greek;
“stratos”=army and “ago”=manage, to give direction (Tosunoğlu, 2008).
In the managerial perspective; strategic management consists of the analysis,
decisions, and actions an organization undertakes in order to create and sustain competitive
advantages and provide long-run performance and these are long-run range plans and
solutions that a company adopts in order to reach its goals in a competitive environment.
These strategies may direct a company’s behavior in the market with regard to its its
potential customers and competitors. Besides, they lead the long-range development of a
organization’s resources (Warszawski, 1996).
Strategic thinking becoming more and more important issue nowadays. In the
changing dynamics of the world, what we have to do is, make the “strategic thinking” is
the main issue of our organization and reconstructing our management according to the
conclusions of that process.
This process can be slightly different from organization to organization. Sometimes
organizations firstly determine the vision, mission and the goals then strategic analyzes and
strategic decisions are made by the managers, or vice versa. It depends on whether if the
organization is being existed for a while in the market or it is just-established organization.
3
If the vision, mission and the goals of the organization that is not a just-established
organization, the strategies will determine after the strategically analyzes are being made.
2.1. Key Attributes of Strategic Management
- Strategic management process show a way to company toward overall goals and
objectives
- It has so many participants in decision making.
- This process needs to combine short-term and long-term perspectives.
- Defining trade-offs between efficiency and effectiveness is also important.
2.2. Defining a Strategy
Strategy is more than what a company intends or plans to do; it is also what it
actually does. Based on that idea, defining a strategy is very important issue to determine
how a company will compete in their markets, which are the goals of the organization, and
to achieve those goals which methods should be applied.
4
3. VISION, MISSION AND MAJOR GOALS
Determinations of the vision and mission statements are so important to the
company in order to specify a target to itself and motivate the organization to achieve that.
Some organizations summarize and express their goals and objectives in mission statement
and/or a vision statement. On the other hand, some others set the vision statement and/or
vision statement firstly to formulate their goals and objectives.
3.1. Vision
Vision statement is the short declaration of what an organization aims to be
tomorrow and tent to be quite broad. It is the ideal state that might never be reached but
which you continually strive to achieve. It, also, can be indicated by core value, core aim
and vision target (Zhang et al., 2007). Successful visions provide a succinct guideline for
decision making.
Features of an effective vision statement include:
• Clarity and lack of ambiguity
• Vivid and clear picture
• Description of a bright future
• Memorable and engaging wording
• Realistic aspirations
• Alignment with organizational values and culture
The Vision should describe why it is important to accomplish the mission. A
Mission statement defines the purpose or wider goal for being in existence or in the
corporation and can remain the same for decades. A Vision statement is more distinctive to
what the corporation can achieve itself. Vision should describe what will be achieved in
the wider frame if the organization and others are successful.
3.2. Mission
The mission statement should be a clear and succinct representation of the
enterprise's purpose for existence. It should incorporate socially meaningful and
measurable criteria addressing concepts such as the moral/ethical position of the enterprise,
5
public image, the target market, products/services, the geographic domain and expectations
of growth and profitability (www.businessplans.org) and also include the scope of its
business activities, objectives and special codes (Warszawski, 1996).
The mission statements answer the following questions:
1) Who we are?
2) Who are the customers?
3) What we do?
4) How we do it?
Abell’s Framework:
Figure 3-1. Diagram of Abell’s Framework (Hill and Gareth, 1989)
Abell’s approach that illustrated on Figure 3-1 stresses the need for a consumer-
oriented rather than product-oriented business definition
Abell’s framework identifies the major goals of the company. A product-oriented
business definition focuses just on the products sold and the markets served.
According to the Abell; a company should answer the 3 questions to gain a
competitive advantage.
6
Who is being satisfied?
What is being satisfied?
How are customers being satisfied?
With specifying these issues, company will see who are the target of company,
what it really do to satisfy the target and how the company achieve and meet the customers
demands and expectations. By that way Company will complete its definition exactly.
3.3. Major Goals
Major goals are specify what the organization hopes to fulfill in the medium to long
term. So, it can be say that major goals are generally used to operationalize the mission
statement and determine the criteria for evaluating a company’s success (Warszawski,
1996).
There is also an “objectives” term addition to the “goals” term. These words seem
in same meaning but in fact have slightly different meanings. While the “goals” term used
to express the open-ended statement of what one wants to accomplish with no
quantification of what is to be achieved and no time criteria for completion. On the other
hand, an objective would say something includes all the qualifications and time limits in it.
In a hierarchy of goals the maximization of stockholder wealth is placed at the top.
Other goals are coming after that to achive that goal.
7
4. ANALYZES
The success of the companies depends on how the company is in a harmony with
its environment. To provide this harmony, strategic analyses are used in organizations.
Strategic analyzing processes are the second step after the defining vision, mission
and major goals and objectives of the company. These processes are so vital to the
companies to stay stable, to catch the trends, to adopt the changing in the internal and
external environment, to find the different kind of solutions to the problems and to give
right decision with predicting future (www.marketingteacher.com). Besides, strategic
analysis advices the best strategy for the organization on the basis of the internal and
external environment (Boardman and Vining, 2000).
4.1. SWOT
To perform a strategic analysis of an organization, it is necesary to analyze both
external and internal aspects related to the organizations (Owers and Weber, 1997).
SWOT analysis is one of the strategic planning methods that help to the managers
to observe and analyze the organization and its environment and evaluate the Strengths,
Weaknesses, Opportunities and Threats. It includes identifying objectives of the
organization or project, specifying the internal and the external factors that are advantages
and disadvantages to achieving those objectives and specifying major criterias that has an
impact on the competitivenes before setting up the business strategy (Collett, 1999).
The Strenght and Weaknesses part of the SWOT is refers to the internal conditions
and Opportunities and Threats are external environmental conditions of a firm. When a
manager applying the SWOT, she/he must be careful about the points that will mention
below:
Manager should be realistic about his companies’ strengths and weaknesses.
The analyses should distinguish between where your organization is today and
where it could be in the future.
Manager should always be specific when prepare a SWOT.
SWOT sentences should be simple and short.
This analysis should be perform by the managers not only once but also perform
regularly.
8
4.1.1. External Analysis
First part of the SWOT analysis is determination of the opportunities and threats to
the firm since external factor are related to the opportunities and threats (Shahir et
al.,2008). These opportunities and threats are outside effects and conditions that a company
can not control and has an important effect on the firm in a lot of aspects
(www.rapidbi.com). The aim of the external analysis that cover opportunities and threats is
to evaluate whether an enterprise can seize opportunities and avoid threats when come
across an unexpected external environment, such as fluctuating price, political
destabilization, social transition, change in the rule of law, etc.(Chang and Huang, 2006).
To completely cover the external analyses issues, company must observe and
evaluate the General Environment and the Competitive Environment of the organization.
So, we should examine these issues in the next titles:
4.1.1.1. General Environment
General environment is composed of factors that can have dramatic effects on firm
strategy (Dess et al., 2005).
General environment consist of six segments:
Demographic, economic, political/legal, socio-cultural, technological and global.
Level of competencies of industries is basically determined by these segments. This
competitive level is influenced by the degree firms can enter or leave the industry, the
availability of the substitute products, bargaining power of the industries suppliers and
buyers and the rivalry level of the industries current members.
Now, we will mention about these segments, briefly.
4.1.1.1.1. The Demographic Segment
The concept of the demography is concerning with the statistical researches of all
populations which are related with the study of the size, structure and distribution of
populations, and spatial and/or temporal changes in them in response to birth, migration,
aging and death. All these are including; aging population, rising affluence, changes in
ethnic composition, geographic distribution of population and greater disparities in income
levels.
9
The impact of the demographic trends is changes from industry to industry and
country to country.
4.1.1.1.2. The Economic Segment
The economy term has very important impact on all industries and all the
components of the competition such as whole sellers, suppliers, customers and the other
entities that is contribute to the competition in the market.
The economic environment shows a population’s production of goods, services and
income. How much influenced your company from the economy depends on which
product or service you are producing.
The key economic indicators includes interest rates, unemployment rates, consumer
price index, trends in GDP (Gross Domestic Product) and changes in stock market
valuations.
4.1.1.1.3. Political/Legal Segment
Political/legal environment is closely related with the social and economical
conditions of the current environment that the organization exists. That is, pressures from
the social environment, such as ecological and health concerns, or the economic
environment, such as a slow economic growth or high unemployment, influence legislation
planned to develop the particular situation.
Political/legal issues are including move toward deregulation and antitrust laws.
Trying to achieve a dominant market position through acquisitions by the organizations or
companies can obstructed by the antitrust laws.
4.1.1.1.4. Socio-Cultural Segment
The cultural environment is related with how the group of people live with their
values, beliefs, ideas, attitudes, symbols and concern with their lifestyles and how they use
these kind of issues to communicate and interact as a members of society.
Socio-cultural segment includes the issues that, more women in the workforce,
greater health consciousness, increase in temporary workers, greater concern for fitness,
greater concern for environment, postponement of family formation, desire for
convenience and the consumerism movement etc.
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4.1.1.1.5. Technological Segment
Technology developments force the organizations to take the technological
perspective and improve themselves by adopting the changes in the technological
environment and give rise the new products and services opportunities and improve the
production and service tools.
On the other hand, technology is a tool which is really hard to follow completely.
Because very quick- changes are occur and all you have can be outdated in one night. But
meanwhile, it can cause new product possibilities. Frequently, the level of R&D
expenditures and patents are an indicator of technological development.
Technological segment includes genetic engineering, emergence of internet
technology, combination of information technology (IT) and the internet, computer-aided
design/computer-aided manufacturing systems (CAD/CAM), research in synthetic and
exotic materials, pollution/global warming, miniaturization of computing technologies,
wireless technology.
4.1.1.1.6. Global Segment
There is an increasing trend for firms to expand their operations and market reach
beyond the borders of their home country. Globalization provides both opportunities to
access larger potential markets and broad base of factors of production such as raw
materials, labor, skilled managers, and technical professionals (Dess et al., 2005).
Global segment includes, increasing global trade, currency exchange rates,
emergence of the other economies related with the other critical countries, trade
agreements among regional blocks etc. ( www.drkayfmu.com).
4.1.1.2. Competitive Environment (Task Environment) and Porter’s Approach to Industry Analyses
Considering just the general environment is not enough to determine the factors that
can have dramatic effects on firm strategy. Managers must also consider the competitive
environment (also sometimes called as task environment).
Competitive environment includes; competitors (existing and potential), customers
and suppliers.
About this managerial issue, Michael Porter, an authority on competitive strategy,
has a well-known and most commonly used analytical model, called as “Porter’s five
11
forces model of industry competition” as illustrated in Figure 4-1. He contends “Collective
strength of these forces determines the ultimate profit potential in the industry, where profit
potential is measured in terms of long-run return on invested capital” (Wheelen, Hunger,
2004, p 60). Since external forces generally affect the all the firms, the most important
thing is the skills that the firms have to cope with the challenges appears in environment
(Porter, 2000). Besides, Michael Porter’s five forces model of industry analysis ensures
better understanding into the economics of emergency care by showing how the forces of
supplier power, buyer power, threat of substitution, barriers to entry, and internal rivalry
affect the organization (Pines, 2006).
Figure 4-1. Porter’s Five Forces Model of Industry Competition (Dess et al., 2005,
p 55)
As we see in the figure above, five forces that demonstrated by Porter and specified the
competitive nature of special industry are:
1. The threat of new entrants
2. The bargaining power of buyers
3. The bargaining power of suppliers
4. The threat of substitute products and services
5. The intensity of rivalry among competitors in an industry (Zhang et al., 2007)
These presented five forces are highly interdependent among each other
(Grundy,2006).
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In the next titles, we will mention about these forces:
4.1.1.2.1. The Threat of New Entrants
The threat of new entrants means that the organizations or companies who wants a
share from the pie of market and bring the new capacity to the market. Therefore, new
entrants are threats for the established companies. But entering a new market is not easy
for a new organization. The possible barriers to entry are:
Economies of Scale
Product Differentiation
Capital Requirements
Switching Cost
Access to Distribution Channels
Cost Disadvantages Independent of Scale
Government Policy
In an environment where few or none of above presents, it means that the threat of new
entrant is high.
4.1.1.2.2. Bargaining Power of Buyers
Buyer’s constitute a threat for an industry by their power to force down the prices, for
higher quality and more services, and play competitors against each other. A buyer group
is a dominant side if the following conditions are true:
If the buyer concentrated or purchase the large volume of the seller’s product or
services.
If the buyer purchase the standard or undifferentiated items.
If the buyer faces a few switching cost.
If a buyer has an opportunity to integrate backward by producing the product itself.
If the cost of changing supplier is low.
If the buyer earn low profit margins
4.1.1.2.3. Bargaining Power of Suppliers
Suppliers can threat industry by their ability to raise prices or reduce the quality of
purchased good and services. A supplier can be dominant in the industry if the following
conditions are hold:
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If the supplier industry is dominated by a few companies, but it sells to many.
If the supplier produce a unique products and no substitute product is exist or
producing substitutes product is not easy.
If the supplier has an opportunity for forward and backward integration.
If the supplier’s products are important inputs to the buyer’s business.
4.1.1.2.4. The Threat of Substitute Products and Services
Substitute products means that those products seem to be different but infact it can
cover the same functions as another product. If there is a few or more a substitute product
or services that can cover the same functions of the company’s product, it can assign as a
threat to the company.
4.1.1.2.5. The Intensity of Rivalry Among Competitors in an Industry
Firms in the same industry try to beat its rivals by the different kind of ways such as
price competition, advertising, product introductions and increased customer services or
warranties. According to the Porter, intense rivalry is related with the following
circumstances:
Number of competitors, rate of industry growth, product or service characteristics,
insufficient fixed cost, capacity, height of exit barriers, diversity of rivals.
4.1.2. Internal Analysis
When a manager wants to apply the SWOT analysis to the firm, she/he is first
defining its work definition, and determines the strength and weaknesses of the company.
These strength and weaknesses are derived from the evaluation of the current internal
situation of the firm. These features can changed by the manager to meet the mission and
vision of the firm. The aim of the internal analysis is evaluate how an enterprise carries out
its internal work, such as management, work efficiency, research and development, etc.
(Chang and Huang).
4.1.3. SO, WO, ST, WT Strategies
After determine all the opportunities, threats, strength and weaknesses of the
company, the next step is evaluation of he issues that will mentioned below:
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How a company use its strengths to get benefit from the opportunities (SO
Strategies).
How a company use the opportunities of the firm to strengthen its weaknesses (WO
Strategies).
How a company use its strengths to beat the threats of it (ST Strategies).
Which of the weaknesses should be strengthen to cover the threats of the company
(WT Strategies).
By that way, strategies are constructed by combining different factors (Shahir et al.,
2008).
4.2. External Factor Evaluation Matrix (EFE Matrix)
EFE matrix is one of the strategic management tool that used for evaluate the
external environment that cover the demographic, economic, politic and legal, socio-
cultural, technologic and global issues.
4.2.1. Developing an EFE Matrix
Strategists should cover five steps to develop an EFE matrix that will mentioned
below:
1. Identify key external factors (Critical Success Factors).
2. Assign to each factor a weight from .0 (not important) to 1.0 (very important). These
weights show the relative importance. The total of all the weights should equal 1.0.
3. Assign a 1-4 rating to each factor to indicate how effectively the firm’s current response
strategy is:
1= the response is poor
2 = the response is average
3 = the response is above average
4 = the response is superior.
4. Multiply each factor’s weight by its rating to get a weighted score.
5. Sum the weighted scores for each variable to determine the total weighted score for the
organization. Sum of all assigned weight to factors must be equal to 1.0 otherwise
the calculation would not be considered correct.
15
Note that; total weighted scores of below 2.5 indicate an internally weak organization
(pdfdatabase.com/), (www.mba-tutorials.com).
To give an example about the EFE matrix, we can study on the Table 4-1 as an
example:
Table 4-1. External Factor Evaluation Matrix for a Retail Computer Store
(David et al., 2009)
4.2.2. Evaluation of the EFE Matrix
Total weighted score of the matrix will show us how much a company responding
above average to the environment for exploiting opportunities and to overcome threats. the
total weighted score of 2.70 is above the average (mid-point) of 2.5, so this retail computer
business is doing pretty well taking advantage of the external opportunities and avoiding
the threats facing the firm. There is definitely room for improvement, however, as the
highest total weighted score would be 4.0. As indicated by Ratings of 1, this business
especially needs to perform better regarding three external factors (#’s 3, 8, and 12). In
16
other words, the business especially needs to pursue strategies that will take advantage of
opportunities # 3 and 8 and mitigate the impact of threat # 12.
If there was no weight column in this EFEM, note that each factor then would be
equally important. Having a weight column therefore provides a more robust analysis
because it enables strategists to assign higher and lower numbers to capture perceived or
actual levels of importance (David et al., 2009).
4.3. Internal Factor Evaluation Matrix (IFE Matrix)
One of the important tools for strategic planning is IFE matrix. IFE matrix is used
for evaluate the internal issues that firm related with, namely strength such as finance,
marketing, IT, operations, accounts and others depend upon the nature of business and its
size, strong marketing and promotion, best product quality, strong financial condition, high
market share, high value asset and weaknesses such as high cost operations, manufacturing
cost is high, high employee turnover rate, expensive products, loss in joint venture etc. On
the basis of evaluation of systems these kind of internal functions, 10-20 the strengths and
weaknesses of the most important factors were determined and expressed by the Internal
Factor Evaluation Matrix (IFE) to evaluate systems (Zhang et al., 2007).
4.3.1. Developing an IFE Matrix
Strategists should cover five steps to develop an EFE matrix that will mentioned
below:
1. List key internal factors as identified in the internal-audit process. Use a total
from ten to twenty internal factors including both strengths and weaknesses.
2. Assign a weight ranging from 0 (not important) to 1.0 (very important). The
weight indicates the relative importance of the factor to being successful in
the firm’s industry. The sum of all the weights must equal 1.0.
3. Assign a 1-4 rating to each factor
Major weakness is represented by 1.0
Minor weakness is represented by 2.0
Minor strength represented by 3.0
Major Strength represented by 4.0
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4. Multiply each factor’s weight by its rating to determine a weighted score for
each variable.
5. Sum the weighted scores for each variable to determine the total weighted
score for the organization.
Note that; total weighted scores of below 2.5 indicate an internally weak
organization (pdfdatabase.com).
To give an example about the IFE matrix, we can study Table 4-2 as an example:
Table 4-2. Internal Factor Evaluation Matrix for a Retail Computer Store
(David et al., 2009)
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4.3.2. Evaluation of IFE Matrix
While analyzing the matrix to obtain the results, the factors that have the greatest
weights are mainly important issues. For the example that exhibit above, “Revenues from
repair/service in the store” and “Location of the store.” The two most important factors to
being successful in the retail computer store business. The store may need to advertise its
repair/services more since that is a really important (weight 0.15) factor to being successful
in this business. Also note that the store is doing outstanding on “Average customer
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purchase amount” and “In-store technical support” as indicated by the 4 ratings. The store
is having major problems with its carpet, bathroom, paint, and checkout procedures as
indicated by the 1 Ratings. This retail computer store might want to hire another checkout
person and repair its carpet/paint/bathroom problems. Note also that the IFEM contains
substantial quantitative data rather than vague statements. Overall, this store receives a 2.5
total weighted score which on a 1 to 4 scale is exactly average/half way indicating there is
definitely room for improvement in store operations/strategies/policies/procedures. As
described in a moment, a firm’s strategies should be derived from a systematic matching of
strengths and weaknesses with opportunities and threats (David et al., 2009).
4.4. Competitive Profile Matrix (CPM)
Competitive profile matrix is very crucial tool used in strategic management of the
company to cover all the critical success factors of the industry and evaluate them by
comparing the company’s current condition and rival’s current condition. By determining
the success factors –these factors can be different in every industry- in the same table that
include different business or organization in the industry provide measure all organizations
on same scale and with same success factors. It also points out to the strenght and
weaknesses of the company.
Beside, while the IFE and EFE matrix have some constraint that they should be
include only internal or only external factors, CPM has no constraint while a manager
handle it. It is not an issue whether the factors are internal or external.
4.4.1. Developing a CPM
Strategists should cover five steps to develop an CPM that will mentioned below:
1. List the critical success factors that extracted from the deep internal and external analysis.
2. Assign a weight ranging from 0 (not important) to 1.0 (very important). The weight
indicates the relative importance of the factor to being successful in the firm’s industry.
The sum of all the weights must equal 1.0.
3. is Assign a 1-4 rating to each factor
The response poor represented by 1.0
The response is average is represented by 2.0
The response is above average represented by 3.0
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The response is superior represented by 4.0 (www.mba-tutorials.com).
4. Multiply each factor’s weight by its rating to determine a weighted score for each variable.
5. Sum the weighted scores for each variable to determine the total weighted score for the
organization.
Note that; total weighted scores of below 2.5 indicate an internally weak organization
To give an example about the CPM, we can study on Table 4-3 as an example:
Table 4-3. An example about the CPM (www.mba-tutorials.com).
Harley Honda Yamaha
Critical Success
FactorsWeight Rating W.Score Rating W.Score Rating W.Score
Advertising 0.20 4 0.80 2 0.40 2 0.40
Product Quality 0.15 4 0.60 3 0.45 3 0.45
Price
Competitiveness 0.10 2 0.20 2 0.20 2 0.20
Management 0.10 3 0.30 2 0.20 2 0.20
Financial Position 0.15 4 0.60 3 0.45 2 0.30
Customer Loyalty 0.10 3 0.30 2 0.20 2 0.20
Global Expansion 0.15 2 0.30 2 0.30 2 0.30
Market Share 0.05 3 0.15 2 0.10 2 0.10
Total 1.00 3,25 2,30 2,15
4.4.2. Evaluating a CPM
While analyzing the matrix to obtain the results, the factors that have the greatest
weights are mainly important issues. For the example that exhibit above, “Advertising” is
the most important factor to being successful in the motorcycle business. Companies may
need to improve its “product quality”, strengthen the “financial position” and “global
expansion” since that is a really important (weight 0.15) factor to being successful in this
business, too. Also, if we evaluate the performance of Harley, note that the company doing
outstanding on “advertising”,” Product quality” and” financial position” as indicated by the
21
4 ratings. The company is having some problems with “price competitiveness” and “global
expansion” as indicated by the 2 Ratings.
Overall, while Honda and Yamaha receives 2.30 and 2.15 respectively, Harley
receives a 3.25 total weighted score which on a 1 to 4 scale is represent a strong position
comparing to its rivals and also represent a strong position in the market. From that matrix,
managers can realize the strength and weaknesses and opportunities and threats of the
company and determine which factor should be developed or which one is one of the most
powerful factors to the company.
4.5. Financial Ratio Analyses
Financial ratio analysis is a useful and very important tool for strategic planning for
interpreting financial statements to provide an assessment of viability, stability,
profitability and performance of a business, sub-business or a project comparing to
themselves’ ratios (to understand the past and future’s performance) and especially
comparing to the market’s average. Financial statements or some financial reports include
some ratios and ratio analysis is the calculation of ratios from data in these statements. It is
very useful to determine some strengths and weaknesses of the company. By that way,
managers can use the financial ratios to the SWOT analysis as an important input and have
a chance to evaluate the company’s performance and financial state. In addition to that,
some ratios are not significantly meaningful without a comparison according to some
indicators such as industry trends or yearly trends (Öcal et al., 2005).
According to the consequences of these analyses, company’s top management can
decide some actions that are mentioned below:
Continue or discontinue its main operation or part of its business;
Make or purchase certain materials in the manufacture of its product;
Acquire or rent/lease certain machineries and equipment in the production of its
goods;
Issue stocks or negotiate for a bank loan to increase its working capital;
Make decisions regarding investing or lending capital;
Other decisions that allow management to make an informed selection on various
alternatives in the conduct of its business (en.wikipedia.org).
22
Different kinds of ratios are used in these kind of analysis such as liquidity ratios
that allows ability to maintain positive cash flow while satisfying immediate obligations,
profitability ratios that provide ability to earn income and provide growth in both short
term and long term, performance ratios that measure the returns of company on its capital
investment and about the profit margins, working capital ratios that used to form an
opinion about how quickly are debts paid or how many times is inventory turned, solvency
ratios to determine the level of debt in relation to other assets and to equity and whether if
the level of interest out of profits are payable or stability ratios to determine the firm’s
ability to remain in business in the long run, without having to sustain significant losses in
the conduct of its business.
All these ratios can present in some categories which are (1) liquidity ratios, (2)
Profitability ratios, (3) activity ratios, (4) leverage ratios and some other ratios are
illustrated in Figure 4-2.1 and Figure 4-2.2.
23
Figure 4-2.1. Financial Ratio Analysis (Wheelen and Hunger, 2004, p 344)
24
Figure 4-2.2. Financial Ratio Analysis (Cont.) (Wheelen and Hunger, 2004, p 345)
25
Financial ratios help to financial analyst to;
Standardize information from financial statements across multiple financial years to
allow comparison of a firm’s performance over time in a financial model.
Standardize information from financial statements from different companies to
allow an apple to apples comparison between firms of differing size in a financial
model.
Measure key relationships by relating inputs (costs) with outputs (benefits) and
facilitates comparison of these relationships over time and across firms in a financial
model (www.financialmodelingguide.com). For all these reasons these analyses should be
used in strategic management of the business.
4.6. Strategic Position & Action Evaluation Matrix (SPACE Matrix)
SPACE matrix is an strategic management tool that used to analyze and evaluate
the company’s strategic position and action and focuses on the strategy formulation of an
organization.
SPACE matrix includes four quadrants that each quadrant indicates one of four type
of strategy. These are:
Aggressive
Conservative
Defensive
Competitive
Beside, the axes of the SPACE matrix represents two internal dimensions which are
financial strength abbreviated with FS and its competitive advantage that abbreviated with
CA and two external dimensions which are environmental stability that shortening with ES
and industry strength that shortening with IS.
Figure 4-3 is what a completed SPACE matrix looks like.
26
Figure 4-3. Completed SPACE Matrix (www.maxi-pedia.com)
Depending on the type of the firm and its industry, a number of variables could
make up each of the dimensions represented on the axes of the typical SPACE Matrix.
Factors that are typically included are those found in the firm's External Factor Evaluation
Matrix and its Internal Factor Evaluation Matrix (EFE & IFE) and these should be
considered in developing a SPACE Matrix.
Other important variables that can be included in a SPACE Matrix examination are
a firm's financial performance such as return on investment, leverage, liquidity, working
capital, and cash flow commonly are considered determining factors of an organization's
financial strength (www.researchandwriting.org).
4.6.1. Developing a SPACE Matrix
Space matrix calculates the importance of each dimension and places them into the
four-quadrant framework with X and Y coordinates.
To construct a SPACE matrix following steps should be followed:
Select a set of variables to define financial strength (FS), competitive advantage
(CA), environmental stability (ES), and industry strength (IS).
Assign a numerical value ranging from +1(worst) to +6 (best) to each of the
variables that make up the FS and IS dimensions. Assign a numerical value ranging
from -1 (best) to -6 (worst) to each of the variables that make up the ES and CA
dimensions.
27
Compute an average score for FS, CA, IS, and ES by summing the values given to
the variables of each dimension and dividing by the number of variables included
in the respective dimension.
Plot the average scores for FS, IS, ES, and CA on the appropriate axis in the
SPACE Matrix.
Add the two scores on the x-axis and plot the resultant point on X. Add the two
scores on they-axis and plot the resultant point on Y. Plot the intersection of the
new xy point.
Draw a directional vector from the origin of the SPACE Matrix through the new
intersection point. This vector reveals the type of strategies recommended for the
organization: aggressive, competitive, defensive, or conservative.
As an example of SPACE matrix, we can study on the example related to Financial
Institution SPACE Matrix below:
FINANCIAL STRENGTH Rating
The bank's primary capital ratio is 7.23 percent, which is 1.23
percentage points over the generally required ratio of 6 percent. 1.0
The bank's return on assets is negative 0.77, compared to a bank
industry average ratio of positive 0.70. 1.0
The bank's net income was $183 million, down 9 percent from
a year earlier. 3.0
The bank's revenues increased 7 percent to $3.46 billion. 4.0
Total 9.0
INDUSTRY STRENGTH
Deregulation provides geographic and product freedom. 4.0
Deregulation increases competition in the banking industry. 2.0
Pennsylvania's interstate banking law allows the bank to acquire
other banks in New Jersey, Ohio, Kentucky, the District of Columbia,
and West Virginia. 4.0
Total 10.0
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ENVIRONMENTAL STABILITY
Less-developed countries are experiencing high inflation and
political instability. 4.0
Headquartered in Pittsburgh, the bank historically has been heavily
dependent on the steel, oil, and gas industries. These industries are depressed. 5.0
Banking deregulation has created instability throughout the industry. 4.0
Total 13.0
COMPETITIVE ADVANTAGE
The bank provides data processing services for more than 450
institutions in 38 states. 2.0
Superregional banks, international banks, and nonbanks are becoming
increasingly competitive. 5.0
The bank has a large customer base 2.0
Total 9.0
CONCLUSION
ES Average is -13.0 ÷ 3 = -4.33
IS Average is + 10.0 ÷ 3 = 3.33
CA Average is -9.0 ÷ 3 = -3.00
FS Average is + 9.0 ÷ 4 = 2.25
Directional Vector Coordinates:
x-axis: -3.00 + (13.33) = +0.33
y-axis: -4.33 + (12.25) = -2.08
So, the bank should pursue Competitive Strategies as we can see from the Figure 4-4.
29
Figure 4-4. Competitive Strategies in Space Matrix (www.researchandwriting.org)
4.6.2. Evaluating a SPACE Matrix
According to the conclusion of the SPACE Matrix company define the type of
strategy the company should persue. According to the conclusion of that, some kind of
actions should be taken.
If the directional vector appears in the conservative quadrant (upper-left quadrant)
of the SPACE Matrix, the recommended strategy will be indicated staying close to the
company's basic competencies and not taking excessive risks. As an example of the actions
under the conservative strategies, market penetration, market development, product
development, and concentric diversification can be mentioned.
On the other hand, if the directional vector exists in the defensive quadrant of the
SPACE Matrix, the recommended strategy will be indicated to focus on rectifying internal
weaknesses and avoiding external threats. As an example of the actions under the
defensive strategies retrenchment, divestiture, liquidation, and concentric diversification
can be considered.
Beside, if the directional vector located in the competitive quadrant of the SPACE
Matrix, competitive strategies that include backward, forward and horizontal integration;
market penetration; market development; product development; and joint venture would be
the most appropriate action to be taken.
Finally, if the directional vector exists in the aggressive quadrant of the SPACE
Matrix, according to the company’s competitive position, recommended strategy should be
developing a market penetration and market development strategy that may include
30
product development, integration with other companies, acquisition of competitors, and so
on.
4.7. Quantitative Strategic Planning Matrix (QSPM)
The Quantitative Strategic Planning Matrix is one of the most important managerial
tools that used to make a selection among the set of strategies that presented before and
find the most attractive one for the organization to apply (David, 1986).
QSPM forms the decision stage of the strategy formulation. The Matrix is
constructed on the EFE Matrix, IFE Matrix, CPM, SWOT, SPACE matrix, BCG Matrix
and IE Matrix and based on three primary inputs that are indicated below:
The critical success factors of your business unit.
The relative importance of each of these critical success factors.
How you rate a particular strategy by each success factor (www.mindtools.com).
4.7.1. Developing a QSPM
To construct QSPM the following steps should be applied:
Make a list of the firm’s key external opportunities/threats and internal
strengths/weaknesses in the left column of the QSPM. This information should be
taken directly from the EFE Matrix and IFE Matrix. A minimum of 10 external
critical success factors and 10 internal critical success factors should be included in
the QSPM.
Assign weights to each key external and internal factor. These weights are identical
to those in the EFE Matrix and the IFE Matrix. The weights are presented in a
straight column just to the right of the external and internal critical success factors.
Examine the Stage 2 (matching) matrix and identify alternative strategies that the
organization should consider implementing. Record these strategies in the top row
of the QSPM. Group the strategies into mutually exclusive sets if possible.
Determine the Attractiveness Scores (AS), defined as numerical values that indicate
the relative attractiveness of each strategy in a given set of alternatives.
Attractiveness Scores are determined by examining each key external or internal
factor, one at a time, and asking the question, “Does this factor affect the choice of
strategies being made?” If the answer to this question is yes, then the strategies
31
should be compared relative to that key factor. Specifically, Attractiveness Scores
should be assigned to each strategy to indicate the relative attractiveness of one
strategy over others, considering the particular factor. The range for Attractiveness
Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and
4 = highly attractive. If the answer to the above question is no, indicating that the
respective key factor has no effect upon the specific choice being made, then do not
assign Attractiveness Scores to the strategies in that set. Use a dash to indicate that
the key factor does not affect the choice being made.
Note that if you assign an AS score to one strategy, then assign AS score(s) to the
other. In other words, if one strategy receives a dash, then all others must receive a dash in
a given row.
Compute the Total Attractiveness Scores. Total Attractiveness Scores are defined
as the product of multiplying the weights (Step 2) by the Attractiveness Scores
(Step 4) in each row. The Total Attractiveness Scores indicate the relative
attractiveness of each alternative strategy, considering only the impact of the
adjacent external or internal critical success factor. The higher the Total
Attractiveness Score, the more attractive the strategic alternative (considering only
the adjacent critical success factor).
Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in
each strategy column of the QSPM. The Sum Total Attractiveness Scores reveal
which strategy is most attractive in each set of alternatives. Higher scores indicate
more attractive strategies, considering all the relevant external and internal factors
that could affect the strategic decisions. The magnitude of the difference between
the Sum Total Attractiveness Scores in a given set of strategic alternatives indicates
the relative desirability of one strategy over another (www.mba-tutorials.com)
To give an example about the QSPM, we can study on the Table 4-4 as an example.
32
Table 4-4. A QSPM For A Retail Computer Store (David et al., 2009)
33
4.7.2. Evaluating the QSPM
When manager evaluate the matrix, it is current that the higher the score will
present the more attractive the strategy and the highest is the optimal strategy (Zhang et al.,
2007).
In the example, the first strategic alternative should be select, since its sum total
attractiveness score is greater than the other one.
In order to identify the strategically choice in the organization, QSPM can be very
useful for all kinds of the organization that small, large, profit or non-profit organizations.
QSPM does not force the manager about the decision but develop as input into the
manager’s final decision.
To get better result from the QSPM it is needed to good judgment in assigning
attractiveness scores.
4.8. Value Chain Analyses
When a company intent to renovate the company’s position and processes, value
chain analysis should be used to control the activities that add value to the product and
services of the company.
Value chain concept describes firstly by Michael Porter, in Competitive Advantage
book as the whole process that starts with the purchasing of the raw material(s) from the
supplier(s), follow with the production and marketing processes, service and distribution to
the end destination and each process should add a value to the product. So what is value?
34
Value is the thing that customer accept to pay money to that product because of that
because of that specialties and wants to be an owner such kind of product.
The approach is beneficial to understand the building blocks to competitive
adventage (Dess et al., 2005) and there is ahighly interactive relations among the
components of the value chain (Kimura et al., 2005).
Figure 4-5. Michael Porter’s Value Chain (www.12manage.com)
In his book, Porter identify two categories of activities as primary activities –
includes inbound logistics, operations, outbound logistics, marketing and sales and service
activities- and support activities – includes general administration (firm infrastructure),
human resource planning, technology development and procurement as illustrated in
Figure 4-5.
The goal of these activities is to offer the customer a level of value that exceeds the
cost of the activities, thereby resulting in a profit margin (www.netmba.com).
4.8.1. Primary Activities
Primary activities responsible for the physical creation of the product, its marketing
and delivery to buyers, and its support and after sales service.
We divided primary activities into five distinctive categories that can include
different frame of actions in every category according to the business that company in:
4.8.1.1. Inbound Logistics
Inbound logistics functions basically include receiving, storing, and disseminating
incoming goods or material for use (www.businessdictionary.com).
35
In this content, determination of distribution facilities to minimize shopping times
is being made. Also it covers the material and inventory control systems and also deals
with the reducing time to send returns to suppliers. Beside, warehouse layout and designs
to increase efficiency of operations for incoming materials issues are also important to
inbound logistics.
4.8.1.2. Operations
Operations part of the primary activities is basically include manufacturing or
assembling activities. But individual operations can change such as lending books in a
library, purchasing something in a store etc. depends which business you are in.
In this content, efficient plant operations and quality production control systems are
being made to minimize costs and enhance quality and providing the appropriate level of
automation in manufacturing should be provided, also. Efficient plant layout and workflow
design is also important issue in operations concept. Under this category, quality control
systems are used to reduce costs and enhance quality
4.8.1.3. Outbound Logistics
Outbound logistics function basically associated with movement of material
associated with storing, transporting, and distribution a firm's goods to its customers
(www.businessdictionary.com).
In outbound logistics content, effective shipping processes to provide quick
delivery and minimizes damages is very important issue. Also, efficient finished goods
warehousing processes are considered. Shipping of goods in large lot sizes to minimizes
transportation costs and using quality material handling equipment to increase order
picking is also handle.
4.8.1.4. Marketing and Sales
Marketing and sales parts of the primary activities includes purchasing of the
products and introduce to sell this products by meetings, promotions, advertising, channel
selection and pricing.
In marketing and sales part, highly motivated and competent sales forces are
required. Innovative approaches to promotion and advertising are also required to attract
customers. Beside, selection of most appropriate distribution channel is very important to
36
reduce costs and proper identification of customer segments and needs will be useful tool
for marketing and sales. To cover all the issues, effective pricing strategies must be
developed.
4.8.1.5. Service
Service parts of the primary activities include installation, testing, after-sale
services, repairing, training, parts supply, covering complaints etc.
To supply the services effectively, effective use of procedures to solicit customer
feedback and to act on information is very important. Also, quick response to customer
needs and emergencies and ability to furnish replacement parts as required should be
handling. Besides, effective management of parts and equipment inventory and quality of
service personnel and ongoing training activities are one another part of the service
operations. Warranty and guarantee policies can be discussed in the content of service
activities.
Again, it should be mention that, all the activities that handled above can change
according to the market that company in (Lumpkin et al., 2005).
4.8.2. Support Activities
Support activities in business are represented in four distinctive categories: general
administration, human resources management, technology development and procurement.
According to the market that business in, each of the support activities can be
divided into many sub-categories, also.
4.8.2.1. Procurement
Procurement covers all the purchasing activities of the firm related with materials,
goods and services.
To cover all the purchasing activities successfully firm should answer the questions
below:
Have we developed alternate source for obtaining needed resources?
Are resources procured in a timely fashion? At lowest possible cost? At acceptable
quality level?
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How efficient and effective are our procedures for procuring large capital
expenditures resources such as plant, machinery and buildings?
Are criteria in place for deciding n lease-versus- purchase decisions?
Have we established sound long-term relationships with reliable suppliers?
(www.biztree.com).
By answering and applying the answers of all these questions, the points that
related with the most important issues of procurement will be provided.
4.8.2.2. Technology Development
One of the most important ways to have competitive advantage is to have strong
and wide technological opportunities. Nowadays, so many different technology types are
exist for instance internet marketing activities, customer relationship management,
different kind of production technologies, lean manufacturing and so on. These are used
for different kinds of purposes such as for reducing the costs, for gaining time etc.
To alter all the issues successfully firm should answer the questions below:
How successful have our R&D activities been in product and process innovation?
Is the relationship between the R&D employees and other departments strong and
reliable?
Have technology development activities be able to meet critical deadlines?
What is the quality of our organization’s laboratories and/or other research
facilities?
How qualified and trained are our laboratory technicians and scientists?
Does our organizational culture encourage creativity and innovation?
(www.biztree.com).
By answering and applying the answers of all these questions, the points that
related with the most important issues of procurement will be provided.
4.8.2.3. Human Resource Management
One of the most important and expensive part of support activities is HR
management. The main fields of the HR management are recruiting, hiring, firing, training,
development and compensation.
To manage all the HR activities successfully, firm should answer the questions
below:
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How effective our procedures for recruiting, selecting, orienting and training
employees?
Are there appropriate employee promotion policies in place and are they used
effectively?
How appropriate are reward systems for motivating and challenging employees?
Do we have a work environment that minimizes absenteeism and keeps turn over at
reliable levels?
Are union organization relations acceptable?
Do managers and technical personnel actively participate in professional
organization?
Are levels of employee motivation, job commitment and job satisfaction
acceptable? (www.biztree.com).
By answering and applying the answers of all these questions, the points that
related with the most important issues of procurement will be provided.
4.8.2.4. General Administration (Firm Infrastructure)
As a support activity, general administration can be a source of competititve
adventage, even if it is generally mentioned as just to be made up of organizational
structure, control systems, company culture etc. that include general management,
planning, accounting, information systems etc.
To execute general administration successfully firm should answer the questions
below:
Is our organization able to identify potential external and internal opportunities and
threats?
Does our strategic planning facilitate and enhance the accomplishment of
organizational goals?
Are value-chain activities coordinated and integrated throughout the organization?
Can we obtain relatively low-cost funds for capital expenditures and working
capital?
Do our information systems provide timely and accurate information on general
environmental trends and competitive conditions?
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Do we have good relationships with our stakeholders including public policy
maker’s interest groups?
Do we have a good public image of being responsible corporate citizen?
(www.biztree.com).
By answering and applying the answers of all these questions, the points that
related with the most important issues of procurement will be provided. (Lumpkin et al.,
2005).
4.9. Balanced Scorecards
The balance scorecard is a new approach for strategy development and deployment
that has entered the management applications during the last decade. In a nutshell,
balanced scorecards are the multi-faceted approach to performance measurement and
management control that is linked specifically to organisational strategy (Dabhilkar and
Bengtsson, 2004). This approach based on existing vision and strategies, lets us to expand
on this integrated approach, to understand the essential elements for management and
success in their cause and effect relations, and so, to increase an even more efficient
business administration (Ritter, 2003)
The balanced scorecard term firstly mentioned by Robert S. Kaplan and David P.
Norton, in 1992, to put forward the revolutionized conventional thinking about
performance metrics.
On the contrary to the conventional approach that limited and insufficient to cover
all the needs of the company about the measurements of financial performance, that
concept helps to managers to generate wider approach for company and provide better
understanding of how their companies are really doing.
These nonfinancial metrics that are handled in balanced scorecard are so important
to the companies since they predict the future’s financial situation.
Authorities are accepting that the measurement system of the organization
dominantly affects the behavior of the managers and employees. To identify a way to
organization, these kinds of tools are useful to achieve its mission and vision.
Balanced scorecards are providing a meaningful integration of many issues that
come into evaluating a firm’s performance. Determination of the critical success factors- or
key performance indicators- as a measure will provide special attention to be paid on the
40
critical areas, thus improving performance of the briefing process. Moreover, identification
of this kind of performance measurement will provide the limited resources of time,
manpower, and money to be allocated appropriately (Yu et al., 2006).
The balanced scorecards enable managers to observe their businesses from four key
perspectives:
• How do customers see us? (Customer perspective)
• What must we excel at? (Internal business perspective)
• Can we continue to improve and create value? (Innovation and learning
perspective)
• How do we look to shareholders? (Financial perspective)
From these perspective, strategic objectives are extracted, measurement factors are
defined, and the visualized changes are changed into operating objectives via the different
measurement factors (Ritter, 2003).
By determining the issues mentioned in the balanced scorecard concept, managers
have a chance to focus on just the useful measures that are most critical metrics to the firm.
Beside, the scorecard guards against sub optimization which refers to the
phenomenon when a unit optimizes its goal accomplishment to the detriment of the
organization as a whole. By forcing senior managers to consider all the important
operational measures together, the balanced scorecard lets them see whether improvement
in one area may have been accomplished at the expense of another. For instance,
companies can decrease time to market in two different methods: by developing the
management of new product introductions or by allow only products that are considerably
different from existing products. Spending on setups can be cut either by decreasing setup
times, or by increasing batch sizes. Similarly, production output and first-pass yields can
rise, but the increases may be due to a shift in the product mix to more standard, easy-to
produce but lower-margin products.
Besides, balanced scorecards expressed that corporate communications
management is measurable and via this method different aspects of the organization of
communicaiton area is appeared. But actually, they show to managers that how our actions
is advencing in line with the corporate vision and strategy (Ritter, 2003). However, the this
method is more as a means for effective measurement of strategy inplace of as a means for
deciding strategy (Chong and Lee, 2007).
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The summarized scheme is presented in Figure 4-6 that show the links between
balanced scorecard and performance metrics:
Figure 4-6. Balanced Scorecard Links Performance Metrics (Kaplan and Norton, 1992)
4.9.1. Customer Perspective
The most important asset of any organization of any organization is its customers.
An organization’s success depends on how many customers it has, how much they buy and
how often they buy.
As a primary goal of the company, providing the customer satisfaction is very
important issue. To cover this issue and to manage the corporate mission of the company,
managers use some metrics that are handling in balanced scorecard. Balanced scorecard
necessitate that managers translate their mission statements on customer service into
specific measures that reflect the factors that really matter to customer.
To evaluate the balanced scorecard for customer perspective, firstly managers
should determine the customers’ natural tendency measures explicitly. Customers’
concerns are including four key categories, which we can handle in our metric concept:
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Time
Quality
Performance and Service
Cost
For example, lead time may be measured as the time required from the time the
company’s receipt of an order to the time it actually delivers the product or service to the
customer. For new products, lead time represents the time to market, or how long it takes
to bring a new product from the product definition stage to the start of shipments. Quality
measures the defect level of incoming products as perceived and measured by the
customer.
Beside, quality measures may denote the level of on-time delivery—the accuracy
of the organization’s delivery forecasts. The combination of performance and service
measures how the company’s products or services contribute to creating value for its
customers.
To put the balanced scorecard to work, companies should articulate goals for time,
quality and performance and service and then turn these goals round into specific
measures. For instance, managers can determine some goals such as:
Get standard products to market sooner,
Improve customers’ time to market,
Become customers’ supplier of choice through partnerships with them,
Develop innovative products tailored to customer needs
to provide the customer satisfaction. Then these main goals should be translated into
specific goals and determine a suitable metric for each one.
For example, to goal of new product, percentage of sales from new products can be
use as a metric. Percentage of sales from on-time delivery which is the specifications of it
are determined by customer can be another metric for the company according to which
kind of job it has.
Also some other kinds of metrics can be mentioned it this category such as:
How much the company provide the performance of quantity?
How far the companies facilities to the customer and its geographical location?
How the company sensitive to the changing cost in value chain or country’s
financial situation?
43
How a company can be adopted themselves according to the changing on the
customer needs?
How a company is reliable, have good relationships with the customer and/or its
suppliers etc.?
4.9.2. Internal Business Perspective
Even if the customer based measures are very vital to company, these measures
must be turned into indicator of what the company must do internally to meet its customer
expectations. Excellent customer performance gets out from processes, decisions, and
actions occurring throughout an organization and so, managers need to focus on those
critical internal operations that enable them to customer satisfaction.
The internal metrics should reflect business process that has greatest impact on
customer satisfaction. These metrics can be cited as, for example:
Cycle – Time (Lowest cycle time to respond rapidly to changes in the market)
Break – Even Time (To measure the effectiveness of its product development
cycle)
Quality (Provide the company’s total quality by TQM programs to provide the
employees internalizing and acting on the program’s messages)
Employee Skills
Productivity and
Cost
Companies should make an effort on determine and measure their core
competencies of them, the vital technologies to provide the continuous market leadership.
By that way, companies should define what processes and competencies they must excel at
and specify measures for each.
4.9.3. Innovation and Learning Perspective
The customer and internal business process measures on the balanced scorecard
determine the parameters that the company considers most critical to success.
Nevertheless, given the increasing rate of markets, global competition and technologies,
the metrics of success are changing day by day.
44
A company’s performance on the adaptation itself to these kinds of changes,
capability to innovate, and responsiveness of the system, improvement and learning are
directly related with its value. Basically, by developing a new products and services,
establish greater value to the customer, and develop operating efficiencies continually can
a company penetrate new markets, increase revenues and margins. By that way, companies
enhance its shareholder’s value.
To expand these issues, for example, we can mention about some metrics to
achieve the determined goal:
How much the company has ability to develop and introduce standard products
rapidly?
How long the process time to maturity in manufacturing learning?
What are the percentages of products that equal to certain percentage of sales?
How a company can be adopted themselves according to the changing on the
customer needs?
How companies provide the training opportunities to educate and help its
employees for adoption to new innovations? etc.
4.9.4. Financial Perspective
In today’s business environment it is so vital to look at business from a financial
perspective, pay attention to short-term financial measures like quarterly sales and
operating income.
Metrics for financial performance specify that whether the company’s strategy,
implementation, and execution are contributing to bottom-line improvement. Typical
financial goals have to do with profitability, growth, and shareholder value.
Periodic financial statement are an indicator to managers about improved quality,
response time, productivity and innovative products benefit from the firm only when they
result in improved sales, increased market share, decreases operating expenses or higher
asset turnover.
As companies develop their quality and response time, they cancel out the need to
build, inspect and rework out-of-conformance products or to reschedule and expedite
delayed orders.
Some applied metrics affect the financial situations of the company are:
45
Amounts of cash flows
Quarterly sales growth
Operating income by division
Increased market share and ROE
Improvement rate in quality an on-time delivery performance
Decreases in cycle time
As a comprehensive example, Figure 4-7 is show one of the company’s balanced
scorecard application.
Figure 4-7. ECI’s Balanced Business Scorecards (Kaplan and Norton, 1992)
To sum up, this new approach to performance measurements is consistent with the
initiatives under way in many companies: cross-functional integration, customer-supplier
partnerships, global scale, continuous improvement, and team rather than individual
accountability. By gathering the financial, customer, internal process and innovation, and
organizational learning perspectives, the balanced scorecard give a way to managers
understand many interconnections. This understanding can help managers transcend
traditional notions about functional barriers and ultimately lead to improved decision
46
making and problem solving. The balanced scorecard keeps companies looking—and
moving—forward instead of backward (Kaplan and Norton, 1992).
4.10. Portfolio Analyses
Portfolio of the firm can be define as, the work fields of the firm that give a market-
share to it. This fields can represent by the SBU (Strategic Business Unit) which can be
explain as the every component of the value chain, different kind of profit centers or
basically every firm of the corporation. We can determine the best portfolios of the firm as
the portfolios that can provide the best adoption of the strengths and weaknesses to the
external opportunities and threats.
Generally, all the cash flows coming from the whole SBUs are gathered in a pool
and this cash are allocated among the SBU’s by the head officers, according to their
strategic values. Principally, managers prefer making an investment not on the firm that
provide the most cash-flow to the firm but on the firm that has the increasing growth rate.
In the Portfolio analysis, the operations and activities of the firms are evaluated and
according to the conclusion of this evaluation, firm can see which activities or portfolios
are beneficial and profitable for them and which are unprofitable and not good to company.
By that way, company can realize the competitive position of itself, determine which kind
of way should they follow to survive in the market and determine which field need to more
investment on it and which field should be canceled out.
Portfolio strategies create value by an internal capital market that takes over some
of the functions of the stock market.
While these analyses happened, the managers have some of important roles:
To perform strategic planning functions including the total of the corporate
portfolio (decisions about acquisitions and divestments)
Setting financial targets and monitor the performance of business units after the
actions taken, intervening selectively in underperforming units to correct any
problems
Allocation of corporate capital among the different business units
In all the portfolio analyzing processes, the most important action is to determine
the most important, key activities of the firm.
Three the most controversial matrix that used by the companies are:
47
Boston Consulting Group Matrix (BCG Matrix)
Mc Kinsey Matrix
Industry Evolution Matrix
Portfolio matrices are effective analysing tools to help in optimizing the
strategicmanagerial decision-making (Zic et al., 2009).
4.10.1. Boston Consulting Group (BCG) Matrix
Boston Consulting Group Matrix are the simplest matrix that help the managers by
determining the needs of cash flow of the SBUs. With this matrix, SBUs of the company
are evaluated in terms of industry growth rate vs. relative market share. These matrix
include 3 main steps:
Firstly, manager should determine the SBU in company and evaluate the long term
prospects of each
Comparing SBU’s among each other by means of a matrix that indicates the
relative prospects of each.
Developing strategic objectives according to the situation of each SBU.
BCG’s product portfolio matrix is like as in the Figure 4-8.
Figure 4-8. BCG Matrix
When it comes to explain all the issues on the figure, the points can be clarify as
below:
48
The different size of circles are representing the SBUs, proportional to the sales
revenue, generated by each business in the company’s portfolio. Center of the circles
shows the position of the SBU.
The firm that has a high industry growth rate represents the future’s portfolios. The
ones that have a low industry growth rate are, represented as a “threat”, also. (These points
are also valid for all the matrices that will mention.) Then we can say, growth is one of the
best measurements for the portfolio analysis. Besides, in the BCG matrix, market growth
rates are related with the market attractiveness (Dawid and Reimann, 2004). On the other
hand, if we consider about the growth market, demand often will exceed supply and excess
demand will support premium prices and profit levels. Moreover, by aggressively entering
into a growth market and establishing a sustainable competitive advantage, a firm can
discourage competitor from the entering the market.
The midpoint of the growth dimension is somewhat arbitrary is usually set at a 10
percent annual growth rate. Thus, markets growing in excess of 10 percent are considered
to be high- growth markets, whereas the growing below the 10 percent are low growth
markets (Aaker, 1995).
High relative market share represent the powerful market share in the industry.
Besides, in the BCG matrix, market shares are related with the firm competitiveness
(Dawid and Reimann, 2004). Here, the largest share firm will generally take the
advantages of the size such as economies of scale, high brand recognition, channel
dominance and the strongest bargaining position with customers and suppliers (Aaker,
1995).
The next are the explanation and discussion of the matrix and its components.
Stars are the SBU’s that has the high growth rate and also high relative market
share. Under this title we will mention about two kinds of stars:
Emerging Stars needs high level of the cash flows to gain the market leadership.
Established Stars are the SBUs that can cover its own needs and investments.
The most important issue here is the successful managers that have the managerial
attributes to cover and manage the processes perfectly.
Cash cows have low industry growth rates but high relative market share. These are
the cash sources of the firm. Cash cows require not so much investment on it and provide a
cash to the future’s SBU’s; namely to the stars and the question marks.
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Question marks represent high industry growth rate but low relative market share. It
has opportunity to grow in the long run. If the question marks are feeds enough, these can
be a star. Here the most important issue is that managers must decide whether a question
mark has the potential of star or not.
Dogs are the SBU(s) that represent the SBU(s) which has a low growth rate and
low relative market share. These kinds of SBUs are the most unwanted ones(s) in the
corporate portfolio, and managers generally want to cancel out from that unit.
This matrix provide some indicators that will mention below have some powerful
effects:
Shows the cash flow needs in the portfolio.
Shows that which one of the firms should be canceled out
Shows that which kind of new SBUs should be added to the portfolio.
On the other hand, this matrix misses some important details such as the business
that has a low market share can be very profitable. Besides the industries that have a low
growth share can be vey competitive and stay in that kind of industries needs more cash
flows.
4.10.2. Mc Kinsey Matrix (GE Matrix)
These kind of matrices are 3x3 matrix and used for evaluate the SBUs in terms of
industry attractiveness vs. competitive position. This matrix especially pays attention on
some important criterias for market evaluation (Dawid and Reimann, 2004) and covers the
weaknesses of the BCG matrix.
4.10.2.1 Factors that Affect Market Attractiveness
By the effect of some issues, market attractiveness will be change. These issues are
stated below:
Market Size
Market Growth
Market Profitability
Pricing Trends
Competitive Intensity and Rivalry
Over all risks of returns
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Demand variability
Segmentation
Customer satisfaction levels
Governmental Regulations
Technological Environment (El-Diraby et al., 2006)
4.10.2.2. Factors that Affect Competitive Strengths
The factors that affect the competitive strengths are:
Strength of assets and competencies
Relative brand strength
Market share
Customer loyalty
Relative cost position
Distribution strengths
Record of technological or other innovation
Access to financial and other investment resources
Management Strength
Flexibility
Organization
Quality
Patents (El-Diraby et al., 2006)
4.10.2.3. Assessing the Competitive Position
The criteria’s that will identify the industry attractiveness are determined related to
the scale, growth rate, needs to cash-flow and density of competition.
The weights of the criteria’s are determine according to the importance of the
criteria and sum of the all weights will equals to 1. All the sectors in the portfolio are
evaluated with these criteria’s. 1 (equals to in attractive) – 5 (equals to attractive) or
another scale can be used.
Each point that given to the sectors multiply with the weights of criteria’s and
finally all the multiplications are added to each other. According to these derivations the
Figure 4-9 is formed
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Figure 4-9. Mc Kinsey Matrix
The different size of circles is representing the SBUs, proportional to the size of the
industry in which the SBU is based. Center of the circles that are derived from the
calculations above, are shows the position of the SBU. Beside, the shaded areas in the
circles are representing the market share of the relevant SBU.
Figure 4-10. Mc Kinsey Matrix (Aaker, 1995).
As demonstrated in the Figure 4-10, three kinds of way can be followed according
to the business market position. If the SBU is assign as winner (marked 1), then the firm
should probably invest and attempt to grow. When the position of the SBU is more
negative, marked as 3, losers, than firm should prefer harvest or divest the SBU. When it
comes to the boxes that are marked 2, question marks, average business and profit
52
producer, firm should make an investment if there is a specific and valid reason that brings
a profit to the firm, selectively.
The alternatives that are mentioned are explained below:
Invest to hold: Attempt to stop erosion in position by investing enough to
compensate for environmental and competitive forces.
Invest to penetrate: Aggressively attempt to move the position up, even at the
sacrifice of earnings.
Invest to rebuild: attempt to regain a previously held position that has been lost by
a milking strategy that, for whatever reason, is no longer appropriate.
Selective investment: Attempt to strengthen position in some segments and let
position weaken in other segments.
Low investment: Attempt to harvest the business, drawing cash out and cutting
investment to a minimum.
Divestiture: Sell or liquidate the business (Aaker, 1995).
4.10.2.4. Four Basic Types of Unbalanced Portfolios
There are four basic types of unbalanced portfolios; its typical symptoms and the
corrective action that should be held are illustrated in Table 4-5.
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Table 4-5. Four basic types of unbalanced portfolios (Jones, 1989; p:196).
Problem action Typical Symptoms Typical Corrective
Too many loser
Inadequate cash flow
Inadequate profits
Inadequate growth
Divest/liquidate/harvest
losers
Acquire profit producers
Acquire winners
Too many question marksInadequate cash flow
Inadequate profits
Divest/liquidate/harvest
selected question marks
Too many profit
producers
Inadequate growth
Excessive cash flow
Acquire winners
Nurture/Develop selected
question marks
Too many developing
winner
Excessive cash demand
Excessive demand on
management
Unstable growth and
profit
Divest selected developing
winners if its necessary
Acquire profit producer
4.10.2.5. Advantages and Disadvantages of the Mc Kinsey Matrix
Compare to the BCG matrix, Mc Kinsey matrix accepts that different sectors can
have different kinds of specialties and includes this acceptation into the analyzing process
and different kinds of strategic issue takes place in the Mc Kinsey matrix.
On the other hand, all the numbers that deal with are subjective and the data’s are
just related with today, not give an idea about the industry life cycle of the SBUs.
4.10.3. Industry Evolution Matrix
One of the portfolio analyzing methods is industry evolution matrix. With this
method, mangers can analyze the dimensions of environmental assesment through
competitive position and business strenght assesment through industry maturity category
(Zic et al., 2009). For applying this matrix, the first step is dividing a company into SBUs.
54
After that, manager should assess the competitive position of each SBU using the similar
to those of the Mc Kinsey Matrix.
With industry evolution matrix, SBUs of the company are evaluated in terms of
stage of industry development vs. competitive position in fifteen cells.
The different sizes of circles are representing the SBUs, as in the previous matrix,
proportional to the size of the industry that SBU exist. Center of the circles are shows the
position of the SBU. Shaded areas represent the market share of the SBU. The matrix can
show about the distribution of a companies business across different stages of the industry
life cycle as illustrated in the Figure 4-11.
Figure 4-11. Industry Evolution Matrix
Letters are illustrated in the Figure 4-11 have the meanings that are clarified below:
A represent high potential question mark.
B is developing winner.
C looks like a developing loser.
D will probably survive and enter into maturity as a market leader or a profit
producer.
E looks to be a profit producer.
F is turning to be a loser from its current position of profit producer.
G is definite loser.
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By that matrix, a company can have an idea about the position of the portfolio and
its trend in a few years. But not include the industry attractiveness issues.
4.10.4. Which Technique Should Be Use?
Instead of the BCG matrix, both Mc Kinsey and industry evolution matrix are more
realistic and detailed. While Mc Kinsey matrix evaluated the industry attractiveness of
related SBU, the industry evolution matrix give an idea about the competitive position of
the organization related to its industry development stages and the how the attractiveness
of the portfolio might change in the future. A powerful plan can be made up with both of
two technique together. This will provide different but complementary perspective to the
manager about the organization’s portfolios. On the other hand, some researches indicated
that decisions based on the BCG matrix are sensitive to the measures used for market share
and growth (Dawid and Reimann, 2004). So to obtain an idea about the market share and
growth of the company, also BCG matrix should be used with the other matrices. By that
way, managers can handle a comprehensive point of view to the organization’s overall
portfolios about both current situation and future’s situation of the organization.
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5. SOME OTHER IMPORTANT ISSUES RELATED WITH NON-
PROFIT ORGANIZATIONS
Strategic planning in non profit organizations are generally similar to the for-profit
organizations. Small non-profit organizations and for-profit organizations especially have
same manner of conducting business and planning activities. But larger scale not-profit
organizations and for-profit organizations are different from smaller one.
On the other hand, there are some characteristic distinctions between non-profit and
for profit organizations. Contrary to the for profit organizations which focus on
maximizing profit and the activities that provide this aim, not for profit organizations are
more focus on matters of board development, fundraising and volunteer management.
Fundraising, soliciting and gathering money or some other resources from some
kind of organizations and individuals, is a kind of blood for most of non-profit
organizations.
Beside, volunteer management is also important issue in non profit organizations to
provide the public service without any payments for worker.
One another important issue for non-profit organizations is tax-exempt status.
Many non profit organizations are seeking nonprofit corporate status to obtain exemptions
from federal and state income taxes.
If a group acquire the tax exempt status, not only this group free from paying taxes
on all income from activities related to its nonprofit purpose but also organizations that
donate to the nonprofit can take a tax deduction for their contributions.
Besides, establishing the non profit organization, guard the managers, directors,
officers and members other members of the non-profit organizations from personal liability
for the corporation's debts and other obligations. Limited liability situation provide that
anyone who obtains a judgment against the nonprofit can reach only the assets of the
corporation, not the bank accounts, houses, or other property owned by the individuals who
manage, work for, or participate in the business.
Beside, the other general issues about the strategic plan are similar to the for-profit
organizations. These strategic plans should generally contain followings:
A mission statement
An outline of goals, objectives, and activities
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An assessment of current resources, and
A strategic analysis (especially SWOT)
Mergers and acquisition and strategic alliances and joint ventures issues
58
6. STRATEGIC PLANNING IN ÜLKER - YILDIZ HOLDING
As in every company, everything related with strategic plan and management is
starting with vision and mission statements. Major goals are derived from these mission
and vision statements. According to the Yıldız Holding Company’s authorities, in fact,
vision and mission statement is coming from heart. The things that you want to realize will
be your mission. Vision and mission statements of Ülker-Yıldız Holding Company are
stated below:
Vision Statement of Ülker :
We established the Ülker brand 63 years ago with this vision in mind. This dream
also indicated the path we had to follow: to bring all the products that children have access
to in developed countries, first, to Turkey and, second, to the rest of the world. Our
products should always be available. We should not forget that small joys can cause big
changes. We must always invest what we earn back into our business and always be a
brand full of surprises. People should always associate our brand with excellent taste,
health and nutrition. If we are a brand that continuously gives life energy to people, then
we are successful.
Mission Statement of Ülker :
For Ülker, customer satisfaction comes above all. We are aware of the needs of the
society that we live in and our aim is to achieve customer satisfaction through providing
products that meet customers’ needs, produced using the latest technology and with no
compromises on hygiene and quality (www.ulker.com.).
Before start to explain the strategic management of the Ülker – Yıldız Holding
Company, the important point is that in Ülker, every business units are handled as an
individual company under the Ülker brand and each business unit have its own strategic
plan. But of course, there is one management team included the owner of the brand over all
these companies. There is one general director of each department and there are several
director connected with that general director. All general directors are connected with the
owner of the company.
The first concern in Ülker is defining corporate strategy. In that part, the main aim
is using resources, that is man, money, managerial skills, in the most efficient way and
provide the highest return to the shareholder with these resources. With corporate strategy
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Ülker define what will company do in the next decade, determine the segments that
company take place in, how much resources should be allocated on which kind of business
unit, which fields are not suitable for the company, so it should be leave out that business
unit. By that way, Ülker try to maximize profit to maximize the 11-12 billion dollars yearly
endorsement of it.
Here, Ülker uses Boston Consulting Group matrix to determine the cash cows. But
in fact this matrix is not used completely but partially. The most used matrix in Ülker is
GE Matrix. Ülker try to ensure all the factors that affect the market attractiveness and
competitive strengths onto company. According to that values, company determines the
invest area, divest or harvest areas. To cover all these, company also determine what is the
company expect from that kind of business unit and what are the opportunities. With these
kinds of activities, company can cover the issues in space matrix that related with being
conservative, aggressive, defensive or competitive. By that way, company provides the
allocation of the resources, management of time, allocation of cash and human resources
and technology and the engineer infrastructure more efficiently. For these kinds of
allocations, company should deal with the entire business unit that it contains. To give an
example, some of the commodity products mentioned in question mark category. For
example, Ülker’s starch investment is a question mark in the future even if it looks as a
profit producer for nowadays. If Turkey becomes a member of EU then when all the
boundaries canceled out, price of the sugar will fall down and will not profitable as in
nowadays.
After corporate strategy, the other important issues are marketing strategies and
business unit strategies. The business unit strategies are related with the units individually
in the company. For instance, biscuit business unit can be handled in that issue. Not only
the branded biscuits but also private labeled products are handled in that business unit. All
the companies that related with manufacturing, marketing, sales etc.form this individual
unit. As a conclusion of the activities of all these parts, some judgments are presented to
evaluate the company’s current situation: I was that point preceding year, I grew at that
point, or market is shifting from this point to that point etc.
After put forward all these issues, the next step is realizing the business landscape
analysis and consumer analysis. These are very important issues for Ülker as well as all the
other companies. All the trends that consumer show tendency are determined. For
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example, are the customers buy their milk from the milk man or from the market? Is the
trust to the milk man decrease while trust to the market increase? How many people live in
a house nowadays? What kind of eating habits these kinds of families have? Which kinds
of products are preferred more?
Besides, market trends are also very important issues. These trends are generally
related with suppliers. To give an example, are the suppliers pay attentions on cardboard?
What are the trends in packaging? To extend, shifting from glass to the plastic bottle is
very important trend to reduce the cost of the product. Also, these shifts provide decrease
on scraps (broken bottles) and even decrease on the fuel cost of the transportation vehicles.
Moreover, some other questions about trends, for example, we produce milk with fruit. But
which kind of milk with fruit preferred by consumer. What is the rate of the fruit in the
milk? Can we ask to analyze the market trends?
After that, company dwells upon the competitive activities. These are related with
the changes in competition. Who are the rivals? Where they earn their money from and
where they invest their money? What are the points that the rivals’ try to strengthen? What
is the main strategy of your rival and which kind of attacks would it realized? What are the
intentions of them fort he next decade? etc.
After all these, Ülker start to analyze its interior. The questions are answered that
are written below:
Which points can be hold as the good points of my company? Where am I
successful? Where am I lost my market-share? Where am I catching the market-share?
What can I do to catch the market trend? Should I pay attention on R&D or technology, or
should I have reduced my cost?
All these issues are related with internal factors analysis. But Ülker does not rate
the factors since these kinds of rates causes misunderstanding about issues. It is needed to
explain why this rate is presented there. So company prefer write all the issues down on
paper one by one.
In internal assessment the most important thing is writing the most accurate
information’s about the strength and weaknesses that related to each internal factor.
Ülker also uses the financials ratios and current analyses to evaluate themselves and
their rivals in their internal analysis. The most important aspects of using financial ratios is,
this kind of ratios provide the comparison of business on same measurement scales.
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Therefore, company catches a chance to see what their rivals are doing, where they are and
what is the relative situation of the company among the rivals. Current ratio, liquidity
ratios, EBIT, EBITDA are all used by Ülker - Yıldız Holding Company. While only the
biscuit part of the Ülker is open to the stock exchange, others’ nearly all parts of the
company is open to the stock exchange.
When it comes to the analyses of general environment in Ülker, socio-cultural
segment is including by the demographic segment and technological analysis are handled
in business units. The larger scale and global analyzes that include the political, legal and
economic analyses are handled in the corporate level. In this kind of large scale analysis,
the questions that where the world and Turkey is going etc. are tried to estimate by the
ombudsman of the company and the outside sources. It is given place to the J.P. Morgan’s
and/or Garanti Bank’s estimates about the next decade for the larger scale analyses, also.
There is huge and combined information flow to managers and planners of company.
In business unit, four comprehensive analyses are handled: company’s analysis,
market analysis, competitor analysis and consumer analysis. Even if the analyses that are
explained in the previous sections of the thesis does not handled with its own name such as
Internal Evaluation Matrix or External Factor Evaluation Matrix, the analyses mentioned in
the thesis are fed into these four categories.
As a conclusion of these four, company decides what the company will do for all
business units of the company. To extend, company came to a decision about how a
company continue to its way? Which categories will be stay? How is the future of the
market or this business unit? Which kind of issues should be taken in consider? Where is
the potential of sale? Which of the categories have potential to enter? For example if there
is an increasing trend with diabetic products, pay attention and allocate some more
resource on it, and so on.
After all these analyzes on company, market, competitor and consumer, every
business unit turn to its inside and start to negotiate what will it done? To give an example,
if there is a decision about focusing on diabetics, marketing department of the company
start to study on the communication activities, advertisement activities, specialties of the
diabetic people, consumer recognition tests and so on. Production study on the investment
plan according to the future of market and so on.
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As a conclusion of these studies, an overall and comprehensive report is revealed
and the allocation of budged of the company and all kind of resource allocations are made
according to this report.
Of course all the plans could not apply always. There are some revisions needed
sometimes. Some external effects could affect all the plans, such as unsuggested crisis in
country etc.
In Ülker, SWOT analysis is used exactly as explained in the previous sections. All
the strength and weaknesses and opportunities and threats are written down in details.
These datas are obtained from the four analyses that are mentioned above as company,
market, competitor and consumer. Ülker represents its strengths as, strong heritage, trusted
brand image, the greatest distribution channels, financial power, and customer loyalty,
participate too many categories, being global brand, participating social responsibility
programs and so on. Besides, weaknesses are shown as the below:
Packaging
Communication with customer
Has not the shelf portion parallel to the market share
Innovation
Porter’s approach is one of the useful tool in the strategic management of Ülker.
Even if Ülker seems as very big and rooted company, some threats are current for it, also.
These threats change from business unit to business unit. Although, the biggest business
unit of Ülker is biscuit and chocolate, threat of new entrance current for these business
unit, also. To give an example, Mars brand is a big threat for Ülker. Nowadays, Mars just
sell into the petrol offices as a promotion product as a result of opportunistic approach of
Mars to Turkey. If Mars starts to the aggressive marketing activities in Turkey it will be a
threat for Ülker. Besides, Cadbury, an English brand, is a potential threat for Turkey.
Again, if Cadbury starts to the aggressive marketing activities in Turkey, with its most
powerful chocolate brands ‘Dairy Milk’, for example, it will be a threat for Ülker, also.
Moreover, five forces of Porter are studied about the packaging. For solid
packaging firms, the new entrances are also very important issue. As an example, if a
company produces a plastic bottle, such as water bottle, it puts a vey big effort to prevent
the new entrances. Because, this field is open to the new job opportunities. Every firm puts
a very big effort to prevent the new entrances by making new investments and giving ads
63
to the press such as ‘I will make an investment with ten thousand tones’, to frighten the
entrants. With that kind of ad, company tries to give a message to the new entrant that,
“there is excess capacity in the market anyway. By that kind of investment that I’ll make,
prices will fall down and profit margins will also fall down. The market will loose past
profitability. If you enter the market, I and you will bankrupt together.”
Power of buyers issue is more important in the middle sectors. With consumer
analysis this threat is handled. If company achieve to effect the end customer to buy
company’s products, then company can persuade the big markets to sell my product to the
end customer. In Ülker, very big portion of the budget is allocated for the R&D studies to
achieve that aim. Insight of company is very important but not enough. Here, market
research is very important issue to cover all the points that company must study on. For
example, power of buyer is very strong in packaging. Company should study on what is
the source of power of Pınar, Sütaş or some other companies that participate to this
competition. The questions related with how the rivals perceive the packaging and how the
producers sell their product are important to Ülker.
Power of supplier is also important issue for Ülker. For packaging issue, Ülker
study on why its own company sells plastic packaging to the rivals such as Eti, Nestle,
Sütaş or Pınar. What are the powers of buyers? What they promise to the packaging
supplier and persuade him to sell its packaging to them?
The other important issue in Ülker is value chain. When Ülker wants to work with
some other company, the most important part Ülker investigates on the strategic plan of the
company is the value chain. For example, Data Teknik, a company works depend to Ülker
which produces Exper Computers is one of the partners of Yıldız Holding Company.
Before Ülker start with this company, it investigates its whole value chain. What are the
steps of company from its start point to end point? That is to say, Intel produces processors
that added to mother boards, other parts are coming from different suppliers and all these
are assembled in somewhere. Who, which brand owners buy this assembled computer?
Who are the distributors of the brands in any country? Where they sell its computers? All
these represent the whole value chain. The aim of this investigation understands where the
value created, which portion of the value stay at where who earn the money, and where am
I obliged to.
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Beside, determination of the key success factors are very important issue in Ülker’s
strategic planning to understand the successful company’s specialties to determine how a
company can be successful by doing what, what are the key performance indicators related
with financial power, service, quality, image and so on. Searching for the companies that
are successful in the market and copying their work shape not their products is very
important issue for the companies to develop their working process and service quality.
Balanced scorecards are very essential tool for Ülker as any other company to
control the strategies, jobs and the performance of the company. All the related issues
about company’s strategy is placed in it. These including has to be controlled regularly. In
Ülker all business units have its own balanced scorecard that controlled periodically.
One another most important issue in Ülker is mergers, acquisitions, strategic
alliances and joint ventures. In Ülker’s firm structure there is an individual team just pay
attention on these kind of issues. For example there is an strategic alliance between Ülker
and Kellogg. Kellogg have never done this kind of alliance with some other company but
Ülker. It tried to distribute its products but did not achieve distribution process
successfully. Then it made an alliance with Ülker. Now, Kellogg is producing the products
and Ülker is making distribution of them since Ülker has greatest distribution network in
Turkey reach even to the smallest grocers in the smallest town of the country.
Ülker had joint venture with Hero Baby and Pendik Nişasta Sanayi Co, Godiva
Belgim BVBA, G-New Inc and also with Gumlink which is the biggest gum company in
the Europe. After a while Ülker acquisited Godiva Belgium BVBA and G-New Inc.
Nowadays Ülker negotiating with Laurens Spethmann Holding AG & Coç KG
(LSH) which is one of the most important tea producer in Europe foe a new joint venture.
Also there are many subsidiaries work with Ülker such as, Birlik Pazarlama A.Ş. on
flour production, İdeal Gıda San. ve Tic. A.Ş. on biscuit and cracker production, İstanbul
Gıda Dış Tic. Aş.on international marketing, BİM Birleşik Mağazalar A.Ş.on retail, Netlog
Lojistik A.Ş. on logistics and transportation, Fresh Cake A.Ş. on cake production and so
on.
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7. STRATEGIC PLANNING IN İSTANBUL METROPOLITAN
MUNICIPALITY
The last strategic plan studies of the IMM were started in November 2008 and was ended
in September 2009. During this eleven month, different kinds of analysis and activities
were made. Figure 7-1 presents the preperation process of strategic plan and outcomes.
To start with, the process analysis that ended in September 2008 was used as base
for the situational analysis. Legal obligations and the body of current law analysis were
made to put forward the legal bases for the public service. After that, scenario analysis
were realized by the ombudsmen that include scenarios for 2023 for all main service area
of the IMM.(There are 9 main service areas of IMM that are public improvements,
transportation, social support, environment) To extend that, where will be the IMM in 2023
in health area, and so on. But at the end step, scenario analysis was not used completely.
Figure 7-1. Preperation Process of Strategic Plan and Outcomes (www.ibb.gov.tr)
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After scenario analysis, external environment analysis was made. All the
technologic, politic and legal, economic, socicultural analyses were included in this study.
The examples around the world and resources were studied. Some other plans and
programs such as 9th development plan, Europe Urban Provision were studied. These datas
were used as base for the SWOT analysis.
After external analysis, shareholder analysis was made. Firstly, internal and
external shareholders were determined. In second step, some meetings were arranged and
for each shareholder, several authorities were participated to the meetings with Strategic
Planning Department. Beside some studies were made to test the shareholders satisfaction
and understand what is the view of these shareholders to IMM, what are the strength
weaknesses opportunities and threats to IMM according to their view. To achieve that, a
survey was prepared and sends with a formal writing. These surveys was prepare for each
main service area of the IMM. Since there were so many shareholders, IMM choose the
most important ones to apply the survey and for the meetings arranged. According to the
outcomes of these surveys, Strategic Planning Department constructed a two quadrant-
shareholder matrix (Figure 7-2). While on one quadrant main service areas were presented,
on the other quadrant corrective actions related with the main service area according to
importance degree of each corrective action were presented. By that way, all the outcomes
were evaluated according to the main service area of the of Municipality. All these
outcomes were used base to SWOT, also.
Figure 7-2. Some parts of the table of shareholder matrix (www.ibb.gov.tr)
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In addition to these analyses, internal analyses were also made. To completely
cover this analysis, a survey was applied too all employees included general directors and
directors as well. All the resources were determined and evaluated. For instance, how
many car, how many employee, how many computer in Municipality and so on. Beside,
changes in the organizational structure in last decade were studied.
At the end of all these process, SWOT analysis was constructed with 22 meeting
and 307 authorities for each main service area of IMM during one and half month.
At the end, with all the datas coming from, internal analysis, external analysis,
shareholder analysis and SWOT strategically mapping include strategic themes, strategic
objective, strategic goals and strategic layers, was applied. First of all, general strategically
mapping of the municipality was constructed. Than this kind of strategically mapping was
applied on all the main service area of IMM (Figure 7-3).
Figure 7-3. Components of Strategically Mapping (www.ibb.gov.tr)
68
The final goal of the strategic planning in public sector is planning the next five
years with the resources available. While constructing this plan, vision and mission
statements are very important issue.
Vision of IMM:
To be a leader and Pioneer municipality to develop Istanbul into a level of
sustainable high quality living area which is a center of economy as the modern face and
the world window of turkey by claiming its unexampled historical inherit.
Mission of IMM:
Present the public services with a managerial perspective which has justice, ability
to change, good quality, effectivity and efficiency to enhance the life quality, consolidate
the authentic identity and contribute the process of the becoming a respected city in the
world by fulfilling the historical responsibility to the Istanbul which is the meeting point of
the civilization.
According to the law, vision and mission statement that set at the beginning of
construction plan of the strategic plan cannot change but can be revised after two years
from the completion of strategic plan just on the quantitative datas. Since the previous
strategic plan was made before two years, this process was revising process of strategic
plan. In this process, vision and mission statements remained same.
Vision and mission statements can change only if the new period of five year starts
to construct a new strategic plan or if new election and new mayor come to the head of
municipality.
After all these process, strategic planning department defined the strategic goals
and objectives with the authorities of the main service areas and also indicators were
identified fort he next 5 years.
At the end, all the general managers, managers, office managers and general
secretary were met to negotiate all the issues determined and evaluated in strategic
planning process. According to the end outcomes, budgets were determined by the
authorities at the end. All points were revised and took the approval of council firstly, then
parliament and become valid for IMM.
69
Mergers, acquisitions, strategic alliances and joint ventures are also very important issues
for IMM. There are more that twenty partnerships of IMM as presented in Table 7-1 which
was formed by that kind of ways.
Table 7-1. Partnerships of IMM.
İ.D.T.M. Co İGDAŞ İSFALT Co. İSTAÇ Co.
İSTON Co KONUT Co SAĞLIK Co. SPOR Co.
AĞAÇ Co. BELTUR Co.HALK EKMEK
Co.İDO Co.
İSTANBUL ENERJİ
Co.İSBAK Co. İSPARK Co. İSTANBUL İMAR Co.
KİPTAŞ Co. KÜLTÜR CoŞİŞLİ KÜLTÜR
Co.
İSTANBUL ULAŞIM
Co.
BELBİM Co BİMTAŞ HAMİDİYE Co. UGETAM Co.
Partnership Chairmanship provides the coordination among the partnerships an
IMM.
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8. COMPARISON OF STRATEGIC ANALYSES IN ÜLKER AND IMM
Strategic planning process is the most important issue in the organizations both
Ülker and IMM as we demonstrated in the article. Without strategic planning organizations
can not construct an stable and sustainable management.
As we see in the article, Ülker has more comprehensive strategic planning process
since the company aim make profit via using its all resources, such as money, technology
and employee, more effectively and efficiently. To realize this aim, the basic analyses that
Ülker used are SWOT, internal analyses and external analyses. In addition to these
analyses, Ülker also uses the EFE and IFE matrices, GE matrix not with an presented
scheme as in the thesis but using some other ways such as writing all the variables down
on the paper one by one to explain all the issues in the matrices to all the related authorized
with matrices.
On the other hand, IMM does not have such kind of comprehensive analyses in its
strategic plan since Government Planning Organization brings a constraint to
municipalities with a guide that municipalities can not go beyond that guide. Because of
that, strategic plan can include just the analyses that presented in the guide. The guide
recommends to municipalities SWOT analysis as a tool of the strategic planning, in
addition to internal and external analyses. But IMM used the strategic mapping tool in
addition to the Government Planning Organization’s guide in the last strategic planning
process that covers the years 2010-2014.
Besides, Ülker uses financial ratio analysis to compare its own situation with its
rivals but there is not such kind of a tool for IMM since there is no need to this. Because
the aim of the municipalities is just provide a good and sufficient service to public, there is
no comparison with some other municipalities. In fact, if we mention about the comparison
of the municipalities this comparison is not made on the endorsement of these
municipalities but its service rate to the public.
Moreover, Porter’s five forces can be mention about Ülker, but IMM has not such
kind of threats.
Value chain analysis is also handled in Ülker this issue is not a deal for IMM on its
own. This issue may be handled for the partnerships of IMM.
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It is seen that, during the interviews with the authorities of both Ülker and IMM,
even if a company or an organization has enough capacity, knowledge or resource,
sometimes it could not manage the process or the improvements that is required because of
different kind of reasons such as people’s resistance to change, or their thoughts such as
“it’s not time to do it”. So that, improvements sometimes have to wait for a while even if
there is a need for it.
Beside, in the municipalities, the evaluation of the institution is not being made and
pressed impartially since municipality has a political identity. It is a huge disadvantage to
the municipality but this situation could not be changed.
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