Toyota is the most leading Japanese automobile company. By creating more innovative car design and spending billions dollars in advertisement a year, Toyota has appeared in the eyes of many auto consumers worldwide. By producing high quality vehicles at affordable prices, Toyota has built its reputation globally. Toyota has reduced their prices as compared to other automobile makers. Toyota believes that the role of purchasing should be long term at the lowest price and no compromise on the production of quality products. Normally, companies do not want to cut their targeted return and they follow the strategy which is formulated in to the cost + profit = selling price. But Toyota takes a slightly different strategy which is formulated in to the price-cost=profit. Strategic management has a direct impact on its business in all organizations. That’s why Toyota has become leading company in auto industry because of the attractive strategic Continue reading
Strategic Management Tools
McKinsey’s 7S Model – A Great Strategic Management Tool
The McKinsey’s 7S Model was created by the consulting company McKinsey and Company in the early 1980s and subsequently has become the de facto standard used by practitioners and academics alike in analysing the performance of an organization. The McKinsey’s 7S model is a value based management (VBM) model that describes how one can holistically and effectively organize a company and together, these factors determine the way a company operates. There are seven variables in the model which include structure, strategy, systems, skills, style, staff and shared values. All beginning with ‘s’, justifying why it was termed as the 7S model. These seven variables can be classified as soft components and hard components. Strategy, structure and system were hard components which are usually feasible and easy to identify because they are usually in the policy statements, business plans, organizational charts, organizational structures and systems as recorded in the report. The 7S Continue reading
Strategic Inflection Point
A term coined by Andrew Grove, former CEO of Intel to describe a dramatic change in competitive forces. At that time, the leaders must give up the past, see closely how the industry is evolving and find new ways of competing. This point of dramatic change in the industry is known as Strategic Inflection Point. “a strategic inflection point is a time in the life of business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end” Andrew S. Grove, Only the Paranoid Survive. For example, the arrival of containers marked a strategic inflection point in the shipping industry. The introduction of the IBM PC was a strategic inflection point in the computer industry. The emergence of large discount store chains like Walmart and Tesco may well turn out to Continue reading
Seven Strategy Questions
“The most serious mistakes are not being made as a result of the wrong answers. The truly dangerous thing is asking the wrong questions.” – Peter Drucker Executing a successful business strategy often requires making tough, sometimes uncomfortable choices. But we frequently avoid making choices in the mistaken belief that we can have it all. Robert Simons, Professor of Business Administration at Harvard Business School, addresses this issue in his latest book, Seven Strategy Questions: A Simple Approach for Better Execution. He identifies what he calls the questions that will “stress test your strategy”. The goal of this seven strategy questions is to help marketers identify the weakest parts of their business strategy in order to understand where confusion and inefficiency lie. Simons presents the seven strategy questions you and your team must regularly explore together: Who is your primary customer? Have you organized your company to deliver maximum value Continue reading
Business Model Canvas – Business Model Generation
Business Model Canvas is the most popular tool for entrepreneurs to create their business models. The Business Model Canvas is an analytical tool outlined in the book Business Model Generation by Alex Osterwalder. It is a visual template preformatted with the nine blocks of a business model, which allows you to develop and sketch out new or existing business models. It’s an amazing and powerful too and instantly creates a shared visual language while defining a business. A business model describes the rationale of how an organization creates, delivers and captures value. Using the Business Model Canvas, the business model is defined across 9 key areas. With a central focus on the value proposition facilitated groups are able to quickly capture (i) how the business will actually create the products, (ii) how customers will access the products, and (iii) how the business will monetize the transactions. The nine building Continue reading
Jay Galbraith’s Star Model of Organizational Design
Organizational design is not simply about structure and the resulting organizational chart. It is about the relationships between people, work, formal structures and informal practices and behaviors. It is about the way in which an organization structures and coordinates its people and process so it can benefit from its unique capabilities over the long-term. It determines who makes decisions and how those decisions will be made. It changes the role of the leaders as they become less decision makers and more decision shapers. Through organizational design, leaders become the shapers of the organization’s decision-making process. Organizational design and the resulting capabilities are the last sustainable sources of competitive advantage. Star Model of Organizational Design is a well-known model that has been used for decades to identify the key elements of an organization and focus on the issue of strategy and strategy implementation. Developed by Jay Galbraith, an American consultant and Continue reading