An Internal Factor Evaluation (IFE) Matrix is a strategy formulation tool that summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas. Intuitive judgments are required in developing an IFE Matrix, so the appearance of a scientific approach should not be interpreted to mean this is an all €‘powerful technique. A thorough understanding of the factors included is more important than the actual numbers. An Internal Factor Evaluation (IFE) Matrix can be developed in five steps: List key internal factors as identified in the internal €‘audit process. Use a total of from ten to twenty internal factors, including both strengths and weaknesses. List strengths first and then weaknesses. Be as specific as possible, using percentages, ratios, and comparative numbers. Assign a weight that ranges from 0.0 (not important) to 1.0 (all Continue reading
Strategic Management
Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It involves the systematic identification of specifying the firm’s objectives, nurturing policies and strategies to achieve these objectives, and acquiring and making available these resources to implement the policies and strategies to achieve the firm’s objectives. Strategic management, therefore, integrates the activities of the various functional sectors of a business, such as marketing, sales, production etc. , to achieve organizational goals. It is generally the highest level of managerial activity, usually initiate by the board of directors and executed by the firm’s Chief Executive Officer (CEO) and executive team.
Evaluation of Acquisition Targets
Valuing an acquisition candidate is similar to valuing any investment. The analyst estimates the incremental cash flows, determines an appropriate risk-adjusted discount rate, and then computes the net present value (NPV). If firm A is acquiring firm B, for example, then the acquisition makes economic sense if the value of the combined firm is greater than the value of firm A plus the value of firm B. Synergy is said to exist when the cash flow of the combined firm is greater than the sum of the cash flows for the two firms as separate companies. The gain from the merger is the present value of this difference in cash flows. Sources of Gains from Acquisitions The gains from an acquisition may result from one or more of the following five categories:1) revenue enhancement, 2) cost reductions, 3) lower taxes, 4) changing capital requirements, or 5) a lower cost of Continue reading
Stability Strategies Followed by MNC’s
The stability grand strategy is adopted by an organization when it attempts at an incremental improvement of its functional performance by marginally changing one or more of its businesses in terms of their respective customer groups, customer functions, and alternative technologies — either singly or collectively. E.g: A copier machine company provides better after sales service to its existing customer to improve its company product image, and increase the sale of accessories and consumables. This strategy may be relevant for a firm operating in a reasonably certain and predictable environment. Stability strategy can be of three types; No Change Strategy, Profit Strategy, Pause/ Proceed with caution Strategy. 1. No-Change Strategy It is a conscious decision to do nothing new. The firm will continue with its present business definition. When a firm has a stable internal and external environment the firm will continue with its present strategy. The firm has no Continue reading
The Nature of Strategic Decisions
Although the process of creating strategy is often discussed as if it were an unconstrained design process, keep in mind that while strategists evaluate strategy, the firm is operating. This evaluation involves assessing the extent to which present strategy is meeting expectations. It may be the case that only a small part of, say, marketing strategy would have to be changed to correct a problem. In effect, then, such a change would constitute an acceptance of corporate- and business-level strategy, and also of the firm’s functional strategy set. Marketing strategy would be all that was rejected. When a firm’s performance is less than satisfactory, the reason often is a functional strategy shortcoming. One might say that a “good” business-level strategy would have been poorly implemented by part of its functional strategy set. For this simple example, a change in marketing strategy could improve performance while other levels of strategy would Continue reading
Definitions of Corporate Governance
The concept of corporate governance is poorly defined because it covers various economics aspects. As a result of this different people have come up with different definitions on corporate governance. It is hard to point on any one definition as the ultimate definition on corporate governance. So the best way to define the concept is to provide a list of the definitions given by some noteworthy people. Various Definitions of Corporate Governance 1. According to Sir Adrian Cadbury “The system by which companies are directed and controlled Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society” 2. According Continue reading
Difference between Business Vision and Company Mission
Vision Statement of a Company Business success almost always begins with a vision, a perception of marketplace needs and the methods an organization can use to satisfy them. Vision serves as the target for a firm’s actions, helping to direct the company toward opportunities and differentiating it from its competitors. Vision is a concept, that refers to one’s mental image of the future. Vision refers to the optimum future state of affairs that one can imagine for an individual or for an institution. (Wallace, Engel et al, 1997) A vision consists of three characteristics: 1) an organization’s fundamental reason for existence beyond just making money or providing more service 2) its timeless unchanging core values, and 3) a “big picture” aspiration for its own future. The vision of an organization defines who and what the organization is about, why it exists, and where it is going in the grand scheme Continue reading