As western automobile markets reached saturation, automobile giants like Chrysler and Volkswagen resorted to restructuring. Volkswagen had concentrated on its portfolio restructuring since early 90’s. Volkswagen acquired Skoda in 1991. Volkswagen helped Skoda to emerge out of bankruptcy and Skoda soon became “U.K.’s best loved car”. This in turn helped Volkswagen, whose profits were declining around the same time. It gained access to the little penetrated car market of Eastern Europe. In 2009, it acquired 49.9% stake in Porsche. During recession, Porsche plunged into debts. Volkswagen used this opportunity to gain from its rival, who had a respected brand name globally. Even though the car market has matured in western parts of the globe, Volkswagen has been using strategic acquisitions to grow further. The financial restructuring process of Volkswagen, called as ‘ForMotion’ is well-known. This restructuring process began in 2004. With the commencement of ‘ForMotion’, a number of workers lost Continue reading
Strategic Management Tools
The Importance of Core Competencies in Strategy Formulation
Strategy allows an organisation to deliver its vision. To develop a deliberate strategy which could potentially increase the sustainability of an organisation clearly requires the identification of core competencies but often a single strategy is not the answer. Organisations require a headline strategy to fit a brief which resonates the vision but several strategies are required over many departments such as research and development, production and marketing to deliver the main strategy. The process of strategy development is complex and methodology depends on several factors including the availability of resources and the external environment. The first step in strategy development is the identification of core competencies then followed by the the process of leveraging resources so they can be exploited for maximum benefit. Strategy development is a crucial step in attaining competitive advantage but a strategy is only as successful as its implementation. The process of leveraging core competencies therefore Continue reading
The Strategic Position and Action Evaluation Matrix (SPACE)
Strategic Position and Action Evaluation Matrix (SPACE) is “an approach to hammer out an appropriate strategic posture for a firm and its individual business.” SPACE is an analysis of the following four dimensions in as in a two-dimensional portfolio analysis and involves a consideration of: Company’s competitive advantage Company’s financial strength Industry strength Environmental stability Various factors are evaluated for determining each of the dimensions and they are summarized below: Dimensions Factors Evaluated Company’s competitive advantage Market Share Product Quality Product life cycle Product Replacement cycle Customer Loyalty Competitor’s Capacity Utilization Technological knowhow Vertical integration Company’s Financial Strength Return on investment Leverage liquidity Capital Required/Available Cash Flow Ease of exit from market Risk involved in business Industry Strength Growth potential Profit potential Financial Stability Technological know how Resource utilization Capital intensity Ease of entry into market Productivity Capacity Utilization Environmental Stability Technological charges Rate if inflation Demand variability Prices of Continue reading
The Innovation Ambition Matrix
An interesting evolution of the Ansoff matrix, the Innovation Ambition Matrix, coined in an article from Harvard Business Review by two recognized consultants, Bansi Magji and Geoff Tuff, entitled ‘Managing Your Innovation Portfolio’. Innovation Ambition Matrix is a simple six-cell model with the vertical axis concerned with where an organisation is competing (ranging from serving existing markets/customers at the bottom, entering adjacent markets in the middle, and creating new markets at the top end of the axis) and the horizontal axis referring to type of products/assets used (using existing products, adding incremental products, and developing new products/assets). The axes of the matrix are labeled as follows: “How to Win.” This is designated for the novelty of the product that you are offering to customers. Are you using existing, adding incremental, or developing new products? “Where to Play.” This measures the novelty of your customers. Will the innovation serve an existing, Continue reading
External Factor Evaluation (EFE) Matrix
An External Factor Evaluation (EFE) Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information. EFE Matrix indicates whether the firm is able to effectively take advantage of existing opportunities along with minimizing the external threats. Similarly, it will help the strategists to formulate new strategies and policies on the basis of existing position of the company. External factors are extracted after deep internal analysis of external environment. Obviously there are some good and some bad for the company in the external environment. That’s the reason external factors are divided into two categories opportunities and threats. Opportunities are the chances exist in the external environment, it depends firm whether the firm is willing to exploit the opportunities or may be they ignore the opportunities due to lack of resources. Threats are always evil for the firm, minimum no of threats in Continue reading
Porter’s Five Forces Analysis of Microsoft
Microsoft Corporation is the largest software company founded by Paul Allen and Bill Gate in 1975, the company controlled an overwhelming share of the personal computer operating system, cloud storage, office software suite, video game console Xbox, servers etc. Microsoft Company has intense pressure in the software competition over Google and Apple since they introduce operating system in both mobile device and PC. But still Microsoft conquer the market of operating system and software which resulting in more than 90% market share of operating system. Their vison is to create innovative technology that can be accessible to everyone. Therefore, to archive that vision, they decide to reduce the cost of software and service and make sure everyone can afford to use it. By doing so, they manage to lock-in their customer and influence the world to use more their products and service than others. Besides that, Microsoft trying to differentiate Continue reading