Cooper’s Stage Gate process focuses on innovations during project management/product development. The stage gate process, a notable project management technique pioneered by Dr. Robert G. Cooper in the early ’80s, systematically breaks down a project into distinct, manageable stages, punctuated by decision points known as gates. At these gates, the project’s progress is critically evaluated against predefined benchmarks, determining whether the project should progress, be adjusted, or discontinued. Entrepreneurs use a set of approaches and tools to assess the viability and potential of ideas and profit from them by developing and launching products. Cooper’s stage gate process model is one such approach that is key to any product or service in the commercial or non-commercial sector. Cooper’s stage gate process model is critical to the processes and performance of an organization as it reduces production errors and therefore saves the company from losses. This technique divides a project into different Continue reading
Strategic Management Tools
Free Cash Flow Theory of Mergers and Acquisitions (M&A)
In the late 1980s, Jensen (1987) introduced the free cash flow theory to explain the financial decisions of managers in investing surplus money (excess cash flow). The free cash flow theory stems from the availability of corporate funds, after the deduction of all expenses. Managers often use this fund for purposes of expanding their businesses or paying out dividends to their shareholders. However, studies shows that many managers prefer to use this excess cash to enter into merger and acquisition agreements. Their incentive may be higher profitability and business advantages that mergers and acquisitions offer (compared to other investments). Occasionally, despite the failure of some investments to increase shareholder value, managers may decide to use these funds to expand businesses (through these mergers and acquisitions). They often prefer this option because the second alternative of paying out dividends to shareholders leads to the loss of financial resources and managerial power. Continue reading
Strategic Planning Tools – SPACE, GRAND, and QSP Matrices
Strategic planning is an integral part of a successful company’s operations and processes. It allows organizations to assess their positions within industries and define the steps necessary to solve issues or rise to a higher level. Strategic planning may be performed using different tools, including SPACE, Grand, and QSP matrices. While all three are effective and helpful, the last one is implemented during the final stage of strategic planning. 1. SPACE Matrix Overall, the SPACE matrix is a specific strategic management tool that companies use to analyze their positions. SPACE stands for the Strategic Position and Action Evaluation, focusing on strategy formulation and especially the improvement of competitiveness. It has four quadrants, each defining the specific temperament of the strategy to choose: competitive, defensive, conservative, and aggressive. Further, the Y-axis top is financial strength, and the bottom is environmental stability, being the factors of the external environment. The right of Continue reading
Key Performance Indicators (KPI) – Definition and Implementation
Meaning of Key Performance Indicators (KPI) Key Performance Indicators, abbreviated as KPI, are indicators that are used in an organization to define and measure company’s progress and how all operations are being carried out towards achievement of the already set goals by the organization. By Key performance indicators (KPI), the organization can judge its most critical aspects of organizational performance, and subsequently choose how to increase this performance. KPIs are non-financial, they are frequently measured, decided by the CEO and the higher-level management, require an understanding by the staff, provide responsibility, can significantly impact the organization, and have a positive effect on other measures. This comes in after an organization has laid down a well stated Mission and Vision. After that, goals are set whereby all the stakeholders in the organizational operations are involved. This is then followed by an analysis to see if these indicators are workable. This plays Continue reading
The Nadler-Tushman Congruence Model
The main responsibility of the management is to ensure smooth operations of a firm. In addition, the management must ensure that the goals being pursued by the organization are attained. Essentially, the goals of the organization can only be reached when the inputs are transformed into the final products and services. In other words, the major function of the management is to ensure that they put in place strategies that will ensure effective transformation of the organization’s inputs into the desired outputs. In addition, the management must also be efficient in all other operations related to the company’s functioning. However, managing the organization effectively has remained a challenge for the most of managers. Understanding the dynamics occurring within the organization including the group and individual behaviors, changing processes as well as the relationships that exist between the processes is complex . Despite the complexity of these processes, the changes occurring Continue reading
Reputation Risk – Meaning, Definition and Management
Reputation is an accumulation of perceptions and opinions about an organization that reside in the consciousness of its stakeholders. Reputation has becoming increasingly important to any company as the world becomes more complex. Tangible factors of business are becoming less significant and rapidly replaced by the intangible factors. Reputation is considered as the most valuable intangible asset. Though reputation is considered as an intangible asset which will not be presented in any balance sheet, it will represent the market value. Warren Buffet said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” The hard-owned reputation is much more vulnerable in 21st century, as the globalization and development of technologically interconnection make news more easily transmitted and more transparent. Once reputation is compromised, it may be costly to rebuild reputation and the period may be extremely long. Continue reading