Module 1

Introduction to Strategic
Management
Strategy
Evolution of Strategic
Management
 Business Policy & Strategic Management
• Business policy is the study of the roles and responsibilities of top- level
management, the significant issues affecting organizational success and
the decisions affecting organization in the long-run.

• Business Policy defines the scope or spheres within which decisions can
be taken by the subordinates in an organization.

• It permits the lower level management to deal with the problems and
issues without consulting top level management every time for decisions.

• Business policies are the guidelines developed by an organization to

govern its actions. They define the limits (Do’s & Don’t’s) within which
decisions must be made.
 Contd….
• Business Policy includes guidelines, rules and procedures
established to support efforts to achieve stated objectives.

• Policies are guides to decision making and address repetitive or

recurring situations.

• Policy defines the area in which decisions are to be made, but it

does not give the decision.

• A policy is a verbal, written, or implied overall guide, setting up

boundaries that supply the general limits and direction in which
managerial action will take place.
 Meaning of strategy
• Strategy is the mean by which objectives are consciously and
systematically pursued and obtained over time.

• The word “strategy” derives from the Greek word stratagos; which derives
from two words:
• "stratos" meaning army.

• "ago” which is the ancient Greek for leading/guiding/moving.

• Strategy means ‘Generalship’ - the actual direction of military force.

• Strategy : Is a blueprint indicating the courses of action to achieve the

desired objectives.
 Understanding Strategy
In business field, there is no exact meaning.
A Strategy could be:
1. A plan or course of action or a set of decision rules;
2. The pattern or common thread related to the organization’s activities
which are derived from the policies, objectives and goals;
3. Those activities which move an organization from its current position
to a desired future state;
4. The resources necessary for implementing a plan;
5. Connected to the Strategic Positioning of the firm;
6. Continuously co-align the firm with its environment.
IN SIMPLE TERMS TO ACHIEVE OBJECTIVES
 Strategy
A company's strategy is
management’s game plan for:
 Growing the business.
 Staking out a market
position.
 Attracting and pleasing
customers.
 Competing successfully,
 Conducting operations and
achieving target objectives.
 Continued…..
• A company’s strategy consists of the
competitive moves and business approaches
that managers employ to attract and please
customers, compete successfully, grow the
business, conduct operations, and achieve
targeted objectives.
• Strategy is a method or plan chosen to bring
about a desired future, such as achievement of
a goal or solution to a problem
Difference between Business policy
and Strategy
Levels of Strategy
Strategic Decision Making
Issues in Strategic Decision-making
1. Criteria for decision-making.
• Maximization is the first concept.
• The second interpretation is based on the concept of
satisfying.
• The third perspective is that of the concept of
incrementalism.
2. Rationality in decision making.
3. Creativity in decision-making.
4. Variability in decision-making
5. Person-related factors in decision-making.
6. Individual versus group decision-making.
 Ten School of Thought on Strategic
Management
• The three main categories of school of thought
on strategic management are:
• Prescriptive Schools: Prescriptive schools focus
on more the process of strategy making rather than
the contents of the strategy where they are the only
strategy maker in the organization and made
without the help of any non conscious intuition.
• Descriptive Schools: Strategy formation and
implementation occur simultaneously
• Integrative School: Combining all the schools and
framing Strategies
 THE TEN SCHOOLS
• 1. The Design School
“Strategy Formation as a Process of Conception”
• 2. The Planning School
“Strategy Formation as a Formal Process”
• 3. The Positioning School
“Strategy Formation as an Analytical Process”
• 4. The Entrepreneurial School
“Strategy Formation as a Visionary Process”
• 5. The Cognitive School
“Strategy Formation as a Mental Process”
• 6. The Learning School
“Strategy Formation as an Emergent Process”
• 7. The Power School
“Strategy Formation as a Process of Negotiation”
• 8. The Cultural School
“Strategy Formation as a Collective Process”
• 9. The Environmental School
“Strategy Formation as a Reactive Process”
• 10. The Configuration School
“Strategy Formation as a Process of Transformation”
 The Design School
• This school seeks to find a match or fit for
internal capabilities and external possibilities.
• It says to think before you leap.
• It lays a lot of importance on the analysis of
external and internal situations.
• Social responsibility and Managerial values
also play a role in the formulation of the
strategy.
 Example
• Microsoft’s share has been falling in the recent past. The reason can be

attributed to lack of long term contracts with OEM manufacturers and

good design team which can influence the customers to a large extent.

In order to bridge this gap, Microsoft entered in to a strategic alliance

with NOKIA there by acquiring the capability internally

 The Planning School
• The basic idea of this thought school is to do a SWOT
analysis and articulate them in to actionable
items/objectives and then elaboration there on.
• The main steps in the process are :
• Objective setting stage
• External Audit Stage
• Internal Audit Stage
• Strategy evaluation stage
• Strategy operationalizing stage
• Scheduling the whole process
 Examples
• INFOSYS were slightly on the lower side of
the market. In the process of improving
these numbers it needs to analyse the
following :
• Internal factors : Attrition rate , Number of
new clients added
• External Factors : How European markets
are performing, General GDP outlook, etc
 The Positioning School
• Heavily influenced by the ideas of Michael
Porter, which stresses that strategy depends
on the positioning of the firm in the market
and within the industry.
• The development of school is associated
with the growth of specialised consulting
firms like BCG
 Example
• Positioning is a way to bring customers.
Toyota is perceived as an affordable car
manufacturer all around the world. When
Toyota came with Lexus its luxury Sedan, it
felt that its perception of affordable car
manufacturer would hurt the sales of Lexus.
Henceforth,it decided to hive off Lexus as
its sub brand and launched it as a different
brand
 The Entrepreneurial School
• The strategy building process is vested with
the single leader(Usually the CEO)and is built
on a vision.
• The proponents believe that the key to
organizational success was personalized
leadership based on strategic vision.
• This holds true not only in starting up and
building the organisations but also in case of
collapsing organisations
 Example
• GE is a very good example in this context
which claim s to have produced largest
number of CEOs than Harvard. When Jack
Welch took over the leadership he
dismantled the way the organization was
functioning under Jones and same was the
case when Jeff took over Jack
 The cognitive School
• The organisations following this concept
formulate their strategy by analyzing the
psychological needs of the customers
 Example
• LinkedIn has learnt over time that there is a
need for the social networking at
professional stage. They could foresee a
need for such network and came up with the
site. Now it’s a huge success
• Audio Control in steering wheel : Toyota
Premio 2008
 The Learning School
• This thought school has a view that
strategies emerge as people when work
collectively learn a lot and understand the
organization's capability of dealing with it
 Example
• Aravind Eyecare hospital has an objective
to provide affordable eye care to poor
people. The skill was obtained when a large
number of operations were performed
which helped the organization in identifying
the bottlenecks and removing them which
was possible because of continuous learning
 The Power School
• The concept suggest that organisations
following the concept formulate their
strategies based on their power, which may
be a competitive advantage. (Negotiation)
 Examples
• Vedanta used it’s relations with higher ups
in politics to get the rights for mining
.Though it got in to trouble later on but the
political relations worked out for it
 The Culture School
• This school of thought says that the mirror
image of power shows the culture.
• It takes roots from the power school.
• It was formulated by looking at how the
Japanese companies were performing. They
made culture an inherent part of their strategy.
• Japanese and Swedish were the inspiration for
this school of thought.
 Examples
• Some of the strategies are based on the
social forces of the culture. The survey
conducted to know the reason why attrition
rate of women aged 25yrs was less in
Infosys, the reason was found to be the
campuses being big and well maintained in
such a good way that they make them
forget their family problems once they are
in to the campus.
 The Environment school
• It is based on the fact that the strategy
should be so designed that it should be
reactive based on the external environment.
While other schools just factor in the
environment but this school lays a lot of
importance to the environment, it believes
that environment is the ideal.
 Principles
• Environment is the central factor for any
strategy of an organization
• Organization must respond to the
external environmental forces.
• Leadership is passive for reading and
adapting to the environment.
• Organizations try to group together in different
positions where they operate until the
resources become scarce or conditions become
unfavourable. Finally they collapse
 Examples
• When Toyota felt that there were issues in
the cars it manufactured and that the
environment was turning hostile, they
recalled the cars in huge numbers even
though it was turning against them.
 The Configuration School
• It combines all the schools of strategy and
then creates an entirely new school of
thought .The proponents of this theory are
Mintzberg,Miles & Snow, Miller, Tichy,
Stopford, Sherman and Baden-Fuller. The
two main aspects of this school are
configurations and transformations
 Strategic Management
• It is a dynamic process of formulation,
implementation, evaluation and control of
strategies to realise the organisation’s
strategic intent.
• SM is a Art & science of formulating,
implementing, and evaluating, cross-
functional decisions that enable an
organization to achieve its objectives.
Strategic Management Process

Strategic Control
 Benefits of S M
• Establish the mission • Establish procedures
• Formulate • Provide facilities
philosophy. • Provide capital
• Establish policies. • Set standards
• Develop strategy • Establish programs
• Planning the and plans
organizational • Control information
structure • Activate people
• Provide personnel
Comprehensive model of SM
 Strategic Intent
• Strategic intent is defined as a compelling statement about
where an organization is going that briefly conveys a sense of
what that organization wants to achieve in the long term.

• Strategic intent is a high-level statement of the means by which

your organization will achieve its vision.

• It is a statement of design for creating a desirable future (stated

in present terms). Simply put, a strategic intent is your
company's vision of what it wants to achieve in the long term.
 Strategic Intent
• The success stories of companies such as Toyota, Canon and
Komatsu share an underlying theme:

• All embraced bold ambitions beyond the limits of existing

capabilities and resources.
• Komatsu wanted to outperform Caterpillar,

• Canon sought to beat Xerox and

• Honda wanted to become an automotive pioneer like Ford.

• The concept of strategic intent holds important lessons for small

businesses aiming to grow and succeed.
Concept of Stretch, leverage and fit
 STRETCH : Misfit between Resources &
Aspirations
 LEVERAGE: Refers to concentrating,
accumulating, conserving. contemplating and
utilizing precious & scarce resources in such a
manner that these are stretched to meet the
aspirations of a company.
 FIT : Positioning the firm by matching its
organizational resources to its environment.
Hierarchy of Strategic Intent
Vision

Mission
Business
Definition
Business Model

Objectives
“If u don’t know where you are going , any road will you take you
there.” - The Koran
“Management’s job is not to see the company as it is . . . but as it can
become.” – John W Teets
 Vision

 Where we are going?

 What is the company heading after 5
or 10 years?
 Vision
• Vision is that igniting spark that can inspire and energize people
to do better.

• The focus of vision is to reach out hungrily for the future and
drag it into the present.

• A vision articulates the position that an organization would like

to attain in the distant future.

• Vision therefore is future aspirations that lead to an inspiration

to be the best in one’s field of activity.
 Strategic Vision
Where we are going and why?
• It refers to the long term intentions that organization wishes to pursue.
• It is broad and futuristic.
• It is an image of how an organization sees itself over a period of time.
• In most cases it is the dream of an organization.
• It is the aspirations an organization holds for it’s future.
• A mental image of the future state.
• It might seem therefore difficult at times for the organization to achieve
vision even in the long run but it provides the direction and energy to work
towards it.
 Strategic Vision
• A strategic vision describes the route a company intends to
take in developing and strengthening its business. It lays out
the company’s strategic course in preparing for the future.

• “Vision is a road map showing the route a company intends to

take in developing and strengthening its business. It paints a
picture of a company’s destination and provides a rationale for
going there.”
 Before deciding the vision ….?
• External Factors.
• Which emerging market opportunities should the firm
pursue and which ones to avoid?
• What new geographic market or the customer group should
the company try to enter and benefit?
• Should the company plan to abandon any of the market,
market segment, or customer group that they are serving?
• Internal Factors.
– What are the ambitions of the company?

– Where does the management want the company to stand?

– Will the company’s present business generate sufficient growth and

profitability in the years to come to meet shareholders’ expectations?

– What are the company’s strengths that the company should try to encash
on if it wants to add new products or get into new business?

– Is the company’s technology too broad or too narrow?

– Does the company need any changes?

 Examples of vision statements
• ITC : Sustain ITC's position as one of India's most
valuable corporations through world class
performance, creating growing value for the Indian
economy and the Company's stakeholders.
• Ford: To become the world's leading Consumer
Company for automotive products and services
• Honda: To Be a Company that Our Shareholders,
Customers and Society Want.
• Caterpillar: Be the global leader in customer value.
• Nike: To be the number one athletic company in the
world
• Disney: To make people happy.
• Stanford University: To become the Harvard of the
West.
 Longer and more detailed vision
statement
• Coca Cola – To achieve sustainable growth, we have established a vision

with clear goals:

– Profit: Maximizing return to share owners while being mindful of our overall

responsibilities.

– People: Being a great place to work where people are inspired to be the best they can be.

– Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy

peoples; desires and needs.

– Partners: Nurturing a winning network of partners and building mutual loyalty.

– Planet: Being a responsible global citizen that makes a difference.

 Competitor based statements
• This type is becoming less common, but
famous examples are:

• Honda – in 1970: We will destroy Yamaha.

• Nike – in 1960s: Crush Adidas.

 Characteristics of Vision Statement
1. Graphic: A well stated vision paints a picture of the kind of company that management

is trying to create and the market position the company’s striving to stake.

2. Directional: A well stated vision says something about the company’s journey or

destination and signals the kinds of business and strategic changes that will be forth

coming.

3. Focused: A well stated vision is specific enough to provide managers with guidance in

making decisions and allocating resources.

4. Flexible: A well stated vision is not at once –and-for-all-time pronouncement visions

about a company’s future path may need to change as events unfold and circumstances

change.
5. Feasible: A well stated vision is within the realm of what the
company can reasonably expect to achieve in due time.
6. Desirable: A well stated vision appeals to the long term
interests of stakeholders particularly shareowners, employees,
and customers.
7. Easy to communicate: A well stated vision is explainable in
less than 10 minutes and ideally can be reduced to a simple ,
memorable slogan.
 Benefits of having a good vision
1. Good visions are inspiring & exhilarating.
2. Good vision helps in the creation of a common
identity and a shared sense of purpose.
3. Good visions are competitive, original and
unique, they make sense in the market place.
4. Good vision foster risk taking and
experimentation.
5. Good vision fosters long term thinking.
 Shortcomings in a vision statement
• Vague or incomplete
• Not forward looking.
• Too broad.
• Bland or uninspiring
• Not distinctive
• Too very superlatives.
Mission
 Mission statement
• A mission statement is a
statement of the
• purpose of a company, or
organization or person;
• its reason for existing;
• a written declaration of an
organization's core
purpose and
• focus that normally
remains unchanged over
time.
• It provides the overview of the company’s
present business purpose and its geographic
coverage or standing as a market leader.
• Mission is that statement which defines the
role that an organization plays in the
society.
 Components of a mission statement
• Customers: who are the firm’s customers?
• Products and services: what are the firm’s major products/services?
• Markets: Geographically, where does the firm compete?
• Technology: is the firm technologically current and viable?
• Concern for survival, growth and profitability: is the firm committed to
growth and financial soundness?
• Philosophy: what are the basic beliefs, values, aspirations and ethical priorities
of the firm?
• Self-concept: what is the firm’s distinctive competence or major competitive
advantage?
• Concern for public image: is the firm responsive to social, community, and
environmental concerns?
• Concern for employees: Are employees a valuable asset for a firm?
 Few mission statements
• Microsoft: our mission and values are to help people
and businesses throughout the world realize their full
potential.
• Adidas: The Adidas Group strives to be the global
leader in the sporting goods industry with sports brands
built on a passion for sports and a sporting lifestyle.
• Nike: To bring inspiration and innovation to every
athlete* in the world.*If you have a body, you are an
athlete.
 Characteristics of mission statement
1. It should be feasible: A mission should always aim high but should not be an
impossible statement, it should be realistic and achievable.
2. It should be precise: A mission statement should not be so narrow nor it
should be very broad. Ex. Manufacturing bicycles makes it very narrow and
mobility business makes it very broad.
3. It should be clear: The mission should be clear enough to lead to action. Ex.
Mission statement of India today is Making sense of India; HUL – Add
vitality to life
4. It should be motivating: A mission statement should be motivating for the
members of the organization and they should feel it worthwhile for working
in such an organization.
5. It should be distinctive: The mission statement should be distinct and should
create a feeling of distinct in the minds of the people concerned.
6. It should indicate the major components of strategy: A
mission statement along with organizational purpose should
indicate the major components of the strategy to be
adopted.
7. It should indicate how objectives are to be accomplished:
a mission statement should also provide clues regarding the
manner in which their objectives will be accomplished.
Mission of LG Electronics: Become 2 by 10 which means
that double the sales volume and profit by the end of 2010.
 Strategic Vision vs. Mission
 A strategic vision concerns a firm’s  The mission statement of most
future business path - “where we are companies focuses on current
going” business activities - “who we are
• Markets to be pursued and what we do”
• Future technology-product- • Current product and service
customer focus offerings
• Kind of company management is • Customer needs being served
trying to create • Technological
and business
capabilities
 BUSINESS DEFINITION
• Defined along 3 parameters
• CUSTOMER GROUPS: WHO is being satisfied

• CUSTOMER FUNCTIONS: WHAT is being satisfied

• ALTERNATIVE TECHNOLOGIES: HOW the need is being satisfied

• Provides powerful insights into understanding and defining business

• Helpful in Strat. Mgmt in many ways Indicates choice of objectives
and helps exercising best choice.
 BUSINESS DEFINITION
• A single business firm has simple Business Definition. Company with
several businesses has separate BD for each of its business.
• 3 dimensions provide scope for further activities and facilitates
understanding of company’s performance areas
• At corporate level ,BD concerns itself with a wider meaning of 3
dimensions.
• Each division of highly diversified co. can have more accurate BD at SBU
level
• BD offers unique insights to companies operating in a competitive market.
where customer is an important stakeholder of the firm.
 EXAMPLES
EX: Time Keeping Business:
• Customer Groups: ‘Individual customers” & Industrial Customers”
• Customer Functions: Finding time, Recording time, Using watches as
• fashionable accessories and gift items.
• Alternative Technologies: Mechanical. Quartz digital, Quartz Analog

Ex Modi Xerox
• Customer groups are individual organizations government department and
the expert market
• Customer function is to provide communication with ease of production
• Technology is of high quality and the latest available from Rank Xerox of
the US.
 Objectives
• Objectives are the ends that state
specifically how the goals shall be achieved.
• Organization always has a potential set of
goals. It has to exercise a choice from
among these goals.
• This choice must be further elaborated and
expressed as operational and financial
objectives.
 Importance of objectives
1. Justify the organization – indicates the purpose and
aims and thereby the social justification for the
existence of the organization.
2. Provide direction – direction for the functioning of the
organization. When objectives are clear, the aims of
the activities of different people in the organization
converge for the achievement of the common purpose.
3. Basis for Management by Objectives - Management
for results.
4. Help strategic planning/management - a means to
achieve objectives, thus help effective function of the
organization in a given environment.
5. Help coordination – the attention of the
employees to desirable standards of behavior
6. Provide standards for assessment and control-
Making clear what the results should be, provide
the basis for control and assessment of
organizational performance.
7. Help decentralization – by assigning decision-
making to lower level personnel, given a
subordinate executive or operator considerable
scope in deciding how to perform his work.
 Objectives
• A company in the course of achieving its
strategic and financial objectives, it is
necessary to set itself both short term and long
term objectives.
• Having quarterly or annual objectives focuses
attention on attaining its immediate
performance targets..
• Short range objectives serve as the stair steps or
milestones in achieving the long term
objectives.
 Role of objectives
1. Objectives define the organization's
relationship with its environment.
2. Objectives help an organization pursue its
vision and mission.
3. Objectives provide the basis for strategic
decision making.
4. Objectives provide the standards for
performance appraisal.
 Characteristics of objectives
• Objectives should be understandable to those
who have to achieve them. A CEO who says
something ought to be done to set right
something is not clear as it does not convey
what needs to be done to the employees.
• Objectives should be concrete and specific:
our objective is to achieve a 12% increase in
sales is anyway better than saying we want to
increase sales
• Objectives should be related to a time frame:
for the above objective if it is related to time
ie. To achieve 12% increase in sales in two
years would be specific and time bound than
just to increase sales.
• Different objectives should be correlated to
one another: If there is no correlation between
the objectives of two different departments,
then this would lead to some performance
related problems.
• Objectives should be measurable and
controllable
• Objectives should be challenging:
Objectives that are either too difficult or too
easy are both equally demotivating,
therefore the objectives should be
challenging enough to motivate the
employees.
• Objectives should be set within the
constraints: Both internal and external
constraints has to be considered and the
objectives has to be set.
 Issues in Objective setting
• Specificity
• Multiplicity
• Periodicity
• Verifiability
• Reality
• Quality
Types of Objectives
 Examples: Financial
Objectives
• X % increase in annual revenues
• X % increase annually in after-tax profits
• X % increase annually in earnings per share
• Annual dividend increases of X %
• Profit margins of X %
• X % return on capital employed (ROCE)
• Increased shareholder value
• Strong bond and credit ratings
• Sufficient internal cash flows to fund 100% of new
capital investment
• Stable earnings during periods of recession
 Examples: Strategic
Objectives
• Winning an X % market share
• Achieving lower overall costs than rivals
• Overtaking key competitors on product performance or quality
or customer service
• Deriving X % of revenues from sale of new products introduced
in past 5 years
• Achieving technological leadership
• Having better product selection than rivals
• Strengthening company’s brand name appeal
• Having stronger national or global sales and distribution
capabilities than rivals
• Consistently getting new or improved products to market ahead
of rivals
Unilever’s Strategic and Financial
Objectives
• Grow annual revenues by 5-6% annually
• Increase operating profit margins from 11% to 16%
within 5 years
• Trim company’s 1200 food, household, and personal
care products down to 400 core brands
• Focus sales and marketing efforts on those brands
with potential to become respected,
market-leading global brands
• Streamline company’s supply chain
 Differences between goals and
objectives
Goals Objectives

 Goals are broad  Objectives are narrow

 Goals are general intentions  Objectives are precise.

 Goals are intangible  Objectives are tangible

 Goals are abstract  Objectives are concrete

 Goals can't be validated  Objectives can be validated

 Business Model
• A business model is the strategy that a company uses to
generate revenue from its product or service offering.
• The model determines the sales and marketing strategies of the
company, including branding, pricing, sales channels and
potential partners.
• Example: Wal-Mart follows a business model of offering the
lowest possible price so it can sell more products -- maximizing
its profit that way.
 Some Examples
• “Razor Blade Model”
• Sell razors ‘cheaply’ (below cost)
• Create a ‘locked in’ customer base
• Sell blades well above cost
• Same model used by ink jet printer firms
• Sell printer ‘cheaply’ (below cost)
• Create a ‘locked in’ customer base
• Sell inks well above cost
Key elements of a business model
• What’s the product or service?
• Who will pay for it, why, and how much (the value
proposition)?
• How much it costs to make or deliver
• How much is left (profit)
• Who are partners, suppliers, competitors.
• Structure and processes
• Marketing
• Distribution
• Operating / manufacturing
• Supply chain
• Finance (sources of funds, returns to investors)
• Other Stakeholders
 Dell’s Business Model
• Beyond Its Own Boundaries
• It’s important to understand that a firm’s business
model takes it beyond its own boundaries.
• Almost all firms partner with others to make their
business models work.
• In Dell’s case, it needs the cooperation of its suppliers,
customers, and many others to make its business model
work.
Dell’s Business Model
 The Importance of Business Models
• Having a clearly articulated business model is
important because it does the following:
• Serves as an ongoing extension of feasibility analysis. A business
model continually asks the question, “Does this business make
sense?”
• Focuses attention on how all the elements of a business fit
together and constitute a working whole.
• Describes why the network of participants needed to make a
business idea viable are willing to work together.
• Articulates a company’s core logic to all stakeholders, including
the firm’s employees.
 How Business Models Emerge
• The Value Chain
• The value chain is the string of activities that moves a
product from the raw material stage, through
manufacturing and distribution, and ultimately to the
end user.
• By studying a product’s or service’s value chain, an
organization can identify ways to create additional
value and assess whether it has the means to do so.
• Value chain analysis is also helpful in identifying
opportunities for new businesses and in understanding
how business models emerge.
How Business Models Emerge
 How Business Models Emerge
• The Value Chain (continued)
• Entrepreneurs look at the value chain of a product or a
service to pinpoint where the value chain can be made
more effective or to spot where additional “value” can
be added.
• This type of analysis may focus on:
• A single primary activity such as marketing and sales.
• The interface between one stage of the value chain and
another, such as the interface between operations and outgoing
logistics.
• One of the support activities, such as human resource
management.
 Types of well-known business
models
1. The Add-On model.
2. The Advertising model.
3. The Affiliate model.
4. The Auction model.
5. The Bait and Hook model.
6. The Direct Sales model.
7. The Franchise model.
8. The Freemium model.
9. The Low-Cost model
10. The Internet Bubble model.
11. The Pay as You Go model
12. The Recurring Revenue model (Subscription model)
 Critical Success Factors
• CSFs are those competitive factors most affecting every
industry member’s ability to prosper. They concern
• Specific strategy elements
• Product attributes
• Resources
• Competencies
• Competitive capabilities that a company needs to have to be
competitively successful
• CSFs are attributes that spell the difference between
• Profit and loss
• Competitive success or failure
 Identifying Industry CSFs
• Pinpointing CSFs involves determining
• On what basis do customers choose between
competing brands of sellers?
• What resources and competitive capabilities
does a seller need to have to be competitively
successful?
• What does it take for sellers to achieve a
sustainable competitive advantage?
 1. Technology related CSF
• Expertise in a particular technology or in
scientific research which is vital for firms in
pharmaceuticals, internet applications,
mobiles etc.
• Proven ability to improve production
processes
 2. Manufacturing related CSF
• Ability to achieve scale economies or learning curve effects.

• Quality control know-how

• High utilization of fixed assets

• Access to attractive supplies of skilled labor

• High labor productivity

• Low cost product design and engineering

• Ability to manufacture and assemble products that are

customized to buyer specifications
 3. Distribution related CSF
• A strong network of wholesale distributors
or dealers.
• Strong direct sales capabilities via internet
or company owned retail outlets.
• Ability to secure favorable display space on
retailer shelves.
 4. Marketing related CSF
• Breadth of product line and product
selection
• A well known and well respected brand
name
• Fast, accurate technical assistance
• Courteous, personalized customer service
• Customer guarantees and warranties
• Clever advertising
 5. Skills and capability related KSF
• Talented workforce( for investment
banking)
• National or global distribution capabilities
• Design expertise (fashion)
• Short delivery time capability
• Supply chain management capability
• Strong e commerce capability
 Other types of KSF
• Overall low cost to meet low price
expectations of the customers
• Convenient locations (for retailers)
• Ability to provide fast, convenient after
sales repairs and service
• Patent production etc.
 What is KPI
Definition of 'Key Performance Indicators - KPI‘
A set of quantifiable measures that a company or
industry uses to gauge or compare performance in
terms of meeting their strategic and operational
goals. KPIs vary between companies and
industries, depending on their priorities or
performance criteria. Also referred to as
"key success indicators (KSI)".
• KPIs are directly linked to the overall goals of the company.

• KPIs are measurements that define and track specific business

goals and objectives.

• KPIs are utilized to track or measure actual performance against

key success factors.

Key Success Key Performance

Business Indicators (KPIs)
Factors (KSFs)
Objectives Determine. Tracked by.
Difference between KPI and CSF
Link between Vision, CSF and KPI