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Strategic Management: A Step by Step Guide to the Final Paper
Authored by Professor Naomi Martin
Strategic Management:
A Step by Step Guide to the
Final Paper
Professor Naomi Martin
Masters in Business
Administration
Ateneo Graduate School of
Business
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Strategic Management: A Step by Step Guide to the Final Paper
Authored by Professor Naomi Martin
Overview
This document provides an overview of the expectations from the strategic
management paper with guidance on the general story flow, key points in
each section which serve to lead into the next section, and reminders on
the proper application of each tool . Questions to anticipate in eachsection are also provided to guide the students in ensuring completeness
and relevance of statements included in the paper.
EXECUTIVE SUMMARY
This section should give the readers an overview of the business and the
industry it participates in, its biggest present and future challenges from
both an external and internal perspective, the key objectives for the
company based on the strategic issues identified (financial and strategic
objectives) and the recommended strategies and action plans to achieve
the objectives.
The Executive Summary sets the stage for the readers to focus on key
sections of the paper that gives evidence for the conclusions highlighted
therein.
Make sure this section answers the following questions:
1. What is this companys business and what specific industry does itparticipate in? Is there anything special about this industry in terms oftrends, past performance and future growth prospects?
2. Where is the company going? What are its aspirations?
3. Where is it right now?
4. What are the critical success factors in this industry and howcompetitive is the company?
5. What external and internal factors are hindering it from getting to itsmission/ vision?
6. What financial and strategic issues must be addressed to get it on itscourse towards the mission and vision?
Remember:
Do this portion last, after completing all the required analysis on the entire
paper. You know that you have understood your paper very well when you
have been able to write an accurate and concise Executive Summary.
Have several people read the Executive Summary and validate if their
understanding of your key points are similar to yours.
General Tips
Always distinguish between
knowledge (facts which can be
supported by data) and your
belief.
The first parts of the paper
(Background, External and
Internal Analysis) should be
based on knowledge and
research culled from credible
sources (publications, relevant
firsthand interviews, books,
videos that can be referenced).
The authors opinions generally
come into play in the sections
explaining the IFE and EFE,analysis of the strategic
recommendations and action
planning.
Formatting Tips
The syllabus requires that the ES
should be a maximum of 2 pages.
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Strategic Management: A Step by Step Guide to the Final Paper
Authored by Professor Naomi Martin
INTRODUCTION AND COMPANY BACKGROUND
This section should give the readers clear picture of the subject
company and all the required data in about 2-3 pages.
It should, UPFRONT include data on
! the nature of the business
!its specific product categories and services and an example ofany of its famous brands
! shareholding if relevant
! major markets served in terms of demography and geography
! current revenue size and growth rates
! current profits as a percentage % of sales and growth rates
! number of employees
! number of plants/ factories if applicable
! relevant historical milestones
It should also include a brief background of the industry , its current
size and growth rates and any significant trends around the industry
LINKING THE STORY :
WHAT IS THIS BACKGROUND SETTING THE STAGE FOR?
You are telling your readers about the company to give them idea of
its history, its mandate, its current status in terms of finances
(revenue and profit) its capability, and its standing within the
industry.
This sets the stage for your reader to see where you would like to
take a company like this, which will be seen in the Mission andVision analysis.
Make sure this section answers the following questions:
1. Is the companys business clear enough for me to describewhy it is capable (from a financial and capabilityperspective) of aspiring for its vision?
2. Is the description setting the stage for issue identification inlater chapters?
General Tips
This section should contain
FACTS culled from research into
the companys financial reports,
book chapters on the industry
and company if any, printed and
online reports, firsthand, well-
quoted interviews. All facts must
be referenced appropriately.
Specific numbers should be
stated instead of just vague
generalizations. Be specific but
relevant in the data you choose
to include.
Examples:
X The company has existed for
a long time and is run as a familybusiness
" The company was founded
in 1982 and has operated as a
single proprietorship for 10
years until its incorporation
in 1992. It is run by Mr Jun
Go with members of his
immediate family in 5 of the
key management committee
positions.
X The company participates in
a sunset industry.
" Company A holds 20%
market share in the
photocopying industry, which
has seen a steady decline in
growth rates since 2007. The
2010 growth rate was at (-
6%), worse than the two
previous years rates (-2% for
2008 and -3% for 2009),
shrinking the entire industry
by 50million pesos in 3 years.
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Strategic Management: A Step by Step Guide to the Final Paper
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RESEARCH DESIGN AND METHODOLOGY
In this section you must write ALL data and information sources ,
classified into print, online, other media, interviews (specify the
company and position of individuals interviewed)
Specify methodologies you employed in coming up with conclusionsfor items where data was not readily available. For example, if you
estimated the market share using different sources of data, through
in-store observation, or through other means besides looking for a
formal market share table, describe that methodology in this chapter.
Spend a maximum of one paragraph explaining why certain critical
data have not been obtained, and what databases have been
exhausted in pursuit of such data.
In the absence of published information, write how you tired to fill in
and the basis of your assumptions on critical items such as your
industrys growth (past growth and future forecasts), your
competitions financial trends, and other competitive information.
General Tips
This is the ONLY part of the
paper where you are allowed to
put explanations on limited
data. Write it all down here andget it over with. After this
section, the readers will have an
idea of which information or
conclusions are based on
assumptions and how you made
them.
BEFORE YOU GO ANY FURTHER:
Remember the basic framework for any business; and you must take the mindset throughout the rest of your
paper to discuss elements and topics in accordance with basic goals:
Goal is to increaseWhat external factors have orwill potentially increase(opportunities) or decrease(threats)
What internal factors have orwill help increase (strenghts) ordecrease (weaknesses)
Goal is to decreaseWhat external factors have orwill potentially increase(threats) or decrease(opportunities)
What internal factors have orwill help increase(weaknesses) or decrease
(strenghts)
Goal is to increaseWhat external factors haveor will potentially increase(opportunities) or decrease(threats)
What internal factors haveor will help increase(strenghts) or decrease(weaknesses)
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Strategic Management: A Step by Step Guide to the Final Paper
Authored by Professor Naomi Martin
MISSION AND VISON CRITIQUE
The purpose of this section is for you to demonstrate, based on the
company background and industry status, where this company CAN be in 3-
5 years, assuming it is able to overcome the critical barriers to success.
If the mission and vision is acceptable based on Davids criteria, give your
recommendations on how it can be communicated to its stakeholders.
Mission statements should be reconciliatory and should address all
stakeholders. Make sure that is broad enough to cover the companys
present AND potential future businesses (should a strategy of diversification
or integration be beneficial).
Remember that we are also looking for a reference to ethics and nation-
building : How does and will your business contribute to building the country
?
LINKING THE STORY :
WHAT IS THIS PORTION SETTING THE STAGE FOR?
You are setting the stage for the readers to share a vision of the company in
the specified timeframe. You will try to make them believe that this state is
attainable if the company follows the strategy that you will propose. Be
careful thus not to overpromise, nor to underestimate. The vision will be
the entire basis for the strategic objectives.
Test it with a friend! Make sure this section answers the following questions:
! Is the companys vision and mission clear and inspiring enough forpeople to want to work there or to partner with the company?
! Can you imagine the company as you have described it 3-5 yearsdown the road?
! Can you safely and confidently put this mission and vision in thespeeches of the CEO to the stakeholders or on a plaque on the wallof its office for all to see?
General Tips
It is not acceptable to
simply state present
or absent when
doing the critique
based on Davids
framework.
A commentary on the
impact of the present
elements and how the
absent elements can be
formulated is needed.
Dont Forget This!
The most often-missed
element in the revisedvision statement is the
year/ period when the
vision is anticipated to
be accomplished.
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Strategic Management: A Step by Step Guide to the Final Paper
Authored by Professor Naomi Martin
LINKING THE STORY :
WHAT THE NEXT SECTION SHOULD BE ALL ABOUT
Now that you have described the company and demonstratedwhere it can go in 3-5 years, it is time to describe for thereaders the factors that will HELP and HINDER this company
from achieving that vision.
This is the basis for the External and Internal Analysis: factorsyou identify are either drivers or barriers to success, withsuccess described as the attainment of the vision.
BEFORE YOU GO ANY FURTHER, MAKE SURE YOU KNOWWHAT THE BUSINESS IS ABOUT!!!!
At every step, ask:
What Political Economic Social/ Demographic TechnologicalTRENDS will affect these steps such that
a. the companys revenue will either increase or decrease
b. the companys costs will either increase or decrease
c. the companys profits will either increase of decrease
Figure 1:
Figure 2
RAW
MATERIALS
PRODUCTION PRODUCT DISTRIBUTION RETAIL CUSTOMER
Companyvaluechain
Political/Legal
Economic
Technological
Sociologic/Demographic
CompetitiveMovements
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Strategic Management: A Step by Step Guide to the Final Paper
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EXTERNAL ANALYSIS : PESTC
This section shows your reader the external PESTC factors that
affect your industrys ability to grow, and you companys ability to
reach its vision in the next 3-5 years within that industry.
This is not merely a laundry list of PESTC factors. You have to
prioritize which one is most important and arrange your essay
accordingly.
Put only the factors that are relevant to your paper, and as
emphasized by the syllabus, exert a significant impact on your
industry. If you cannot link a factor directly to the ability to influence
your attainment of the vision, do not force it!
Make sure this section answers the following questions:
! As I pick out a factor to describe, does it impact my value chain(as described in Figure 1 and 2) insofar as increasing revenue,decreasing costs and increasing profits? Does the trend make itharder or easier to secure funding (through debt or equity) andsupport to grow the business?
! Did I describe a TREND, not just a one-time status? Did I makean analysis of the past trend and forecasted a future trend forthe factor?
X The industry had a 14% growth from last year.
" The industry has demonstrated a robust double-digitgrowth of 10-14% for the past 3 years and isexpected to continue to grow from 8-9% for the next3 years.
" There is a pending bill in Congress that mayincrease costs of production by 4% and but this is
expected to be deprioritized for the next session in2013.
! Does the trend help or hinder the companys market demand,ability to offer current and future products, advantage ordisadvantage the competitors, affect the suppliers or distributors,labor force and ability to compete ethically?
LINKING THE STORY:
WHAT IS THIS PORTION SETTING THE STAGE FOR?
This portion should enable the readers to predict the presence and
ranking of the various factors on the EFE table. As you describe the
factors, use language to emphasize which is most important and thus
needs to be addressed by the company. This is the most critical
factor for the company to address to maintain profitability
NO SURPRISE FACTORS ON THE EFE! It should be a summary of
l relevant factors already discussed, ranked according to impact to
e business. Thus spend more time explaining your companys scores
General Tips
THIS SECTION IS CALLED
EXTERNAL ANALYSIS, NOT
EXTERNAL DESCRIPTION.
on't just describe the factor---
analyze what the trend in that
actor means for your current and
uture business!
TRENDS are always better
than one-year snapshots. Has
the factor been intensifying or
diminishing? What is the
impact of that development?
WRITING TIPS
All descriptions must be referenced! State
the actual figures, not just your beliefs on
them.
Examples:
X The economy of the
Philippines is booming
" Philippine GDP growth has
been at 5-6% over the last 3
quarters and is expected to
remain robust at 5% for 2013
THE EFE TABLE IS A
NUMERICAL
REPRESENTATION OF THE
RELATIVE MAGNITUDE OF
EXTERNAL
OPPORTUNITIES AND
THREATS, and the
companys response.
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Strategic Management: A Step by Step Guide to the Final Paper
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EXTERNAL ANALYSIS: INDUSTRY AND
COMPETITOR ANALYSIS
This section should reflect the history, status and forecasted future
of the entire industry as supported by Porters 5 factors analysis and
an in-depth discussion of the characteristics and competitiveness of
the major players/competitors in the industry.
Make sure this section answers the following questions:
! What is the market size and growth over the last few years?
! What is the forecasted growth and why?
! Did I show a market share trend over the past 3 years?
! Who are my major competitors and what are their revenue sizes,growth rates, key competitive strategies?
! Did I demonstrate and forecast for the next 3-5 years (based onsolid research) the industrys
o Customer growth, change in customer profile
o Production methods
o Mergers and acquisitions, partnerships
o Present and future issues/ problems
! What does it take to be a successful player in this industry?
LINKING THE STORY:
WHAT IS THIS PORTION SETTING THE STAGE FOR?
This portion should enable the readers to understand the CRITICAL
SUCCESS FACTORS to compete and achieve goals in this industry.
If those are the PEST factors to consider, and the Porters showed
that those are the forces to contend with, then to be successful a
company must have or focus on!..
THIS WILL BE THE BASIS FOR YOUR COMPETITIVE PROFILE
MATRIX (CPM).
NO SURPRISE FACTORS ON THE CPM! It should be a summary
and numerical representation of all critical factors to compete well inthe industry, and how each major competitor responds to those
factors. The CPM usually reflects the competitive share of the player
in the market.
CONCEPT REVIEW
PORTERs ANALYSIS IS ANANALYSIS OF PROFITABILITY
OF THE INDUSTRY
What is the effect of each force to the
companys profits? Does it have to
pend more to get the supply? Does it
have to spend to defend itself against
new entrants and substitutes? Does
rivalry cut into revenues and thus
rofits?
The conclusion of Porters is not just
attractive or not attractive but it
hould tell you the most critical
elements that impact profit.
X The analysis shows that this
industry is not an attractive
one.
" The analysis shows that profitsin this industry may be limited
by the ease of entry of new
competition, which magnifies
the already intense rivalry for
a shrinking customer pool.
Thus, to be a successful player
in this industry, a company
must continuously invest in
innovation and differentiation.
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Strategic Management: A Step by Step Guide to the Final Paper
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LINKING THE STORY :
WHAT THE NEXT SECTION SHOULD BE ALL ABOUT
Using the EFE, you have described the external factors that help or hinder the
industrys growth and your evaluation of how your company has been able torespond to these factors.
Using the CPM, you compared the performance of your company on the criticalsuccess factors versus its competitors, justifying its market rank and thus itscompetitiveness in the operating environment.
Now it is time to show WHY the company performed as such, with an analysisof its INTERNAL ENVIRONMENT. You thus have to ensure that the next
section is built to link to the explanation of the EFE score and the CPM score.
INTERNAL ANALYSIS: LOOKING FOR STRENGTHS AND WEAKNESSES
According to the syllabus you must FIRST, review the companys performance
! Revenue/ sales in the past 3 years; compute for yearly growth
! Profits in the past 3 years
! How does the companys growth compare to industry growth? Conclude
The different auditing tools (Davids Functional, McKinsey 7S, Weisbord) serve as a checklist for you to
ensure that you are not missing any relevant factor when you audit. This section, however, is not meant to
be just a laundry list of factors. The entire section MUST SHOW FROM THE WAY IT IS WRITTEN what
the most important factors contributing to the evaluation in the EFE and CPM are. You are at liberty to
arrange the functional audit, the 7S or the Weisbord in the order of importance to your industry.
The section is capped by a summary which is the IFE matrix.
NO SURPRISES IN THE IFE MATRIX! It is but a numerical representation of the factors you already
discussed, ranked / weighted according to impact and scored according to how the company is reinforcing
its strengths and doing something to correct its weaknesses. Thus spend more time explaining the way you
scored the company.
LINKING THE STORY :
At the end of this section, your readers would have fully understood why the companyhas performed the way it has over the years, and how that has affected its ranking in theindustry. You should have also set the stage for identifying the course of action to take inorder for this company with its strengths and weaknessesto move towards its vision.
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Strategic Management: A Step by Step Guide to the Final Paper
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STRATEGY FORMULATION:
THE MATCHING STAGE
FIRST, HAVE A HYPOTHESIS ON THE DIRECTION YOU SHOULD
TAKE. Given the competitive position and the financial status of the
company, should it be aggressive, conservative or defensive? Can it
reach its goals alone or does it need to partner?
The tools will then help you prove your hypothesis to the reader.
SWOT, SPACE, IE, GE/McKinsey , GRAND and QSPM matrices
should all align towards general strategy buckets.
Your strategy choices should reflect decisions on these major buckets
General Tips
WRITING TIPS
Students often make a mistake on
the way they state an Opportunity
or Threat. It should be a
description of an external trend,
not an action the company should
take. It should be true of the
environment for all competitors.
Examples:
NOT a statement of opportunity:
The company should tap the
female video-gamers/ entry into
the female market
Statement of opportunity
" The female video-gamers
have been increasing from
30%-40% of all video-game
buyers
" Purchases from females
have increased by 20% in
the past 3 years
You should also make that strategy choice in consideration of
1. Your industry are you in an emerging, growing, maturing or declining one
2. Your competition - are there many of you (fragmented), few /monopoly
3. Your rank are you a leader or a follower?
LINKING THE STORY:
WHAT IS THIS PORTION SETTING THE STAGE FOR?
This portion sets the stage for your objectives. The strategy should be reflected in one or more of the key
strategic objectives of the company
Example
Objective 1 : to become the #1 local Mexican taco fastfood company by 2016 with revenues of P50M
Objective 2 : to penetrate the Metro Manila area taking 50% of the market by 2016
Objective 3 : to develop the Cebu and Davao markets with 2 branches each generating P5million by 2016
Objective 4 : to strengthen the partnership with Ayala Malls
Decision
Bucket1 Aggressive
Conservative
Defensive
Decisionbucket2
:Specific Market development
Market penetration
Product developmentIntegration
Diverstification,
Retrenchment
Divestiture
Liquidation
Decision
bucket3 Organic
Joint ventures
Merger or acquisitionOther partnerships
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Strategic Management: A Step by Step Guide to the Final Paper
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OBJECTIVES, STRATEGY RECOMMENDATIONS AND
ACTION PLANS
BEFORE YOU PROCEED
1. Look back on the vision statement. This should guide the formulation ofthe objectives.
a. e.g. If the vision is to be #1, the financial objectives should be the
revenue equivalent to being #1.
b. If the vision is to have a certain market share or rank, the revenue
objective must match this rank according to projections of the
revenues of the company and its competitors
2. Look back on the mission statement. If you choose a diversification,
integration or product development strategy, will this still be aligned with
the companys mission scope as stated?
CONCEPT REVIEW
The questions below should be used to guide hierarchy of strategy and to
construct the strategy map, which should show how all activities and goals of
each function will align towards the achievement of the corporate goals.
GENERAL TIPS
Financial projections are
critical.
Make an excel sheet
reflecting the revenue
projections of the
company and its
competitors, the growths
per year, and the resultin
market shares.
Reflect on the growth
needed to achieve therevenue or market
share goal required. Is
this realistic? How does
it compare vs the
industry growth? What
major move should be
done to achieve these
required growths?What businesses should we be in?How do we grow the whole company organically or throughpartnerships?
How do we address the biggest environmental opportunities andthreats?
How do we compete?Do we adopt a low-cost, differentiation or focus strategy for ourbusiness units or product segments?
How do we ensure we gain market share from competitors?
How can each functional unit contribute to the business goals?How might we organize our company to successfully support thegoals?
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Strategic Management: A Step by Step Guide to the Final Paper
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EXAMPLES OF STATEMENTS OF OBJECTIVES AND STRATEGIES
CORPORATE LEVEL
1. Financial (examples)
i. To achieve revenues of!..by!
ii. To achieve a net income of!.by!
iii. To increase profit margins to!.by!
2. Strategic : should match the strategy choice
i. To be in the top 5 players of the industry!
ii. To be recognized as the leading provider of!
iii. To be the #3 player in the Cebu area!
iv. To launch 5 new products in 3 years
v. To successfully partner with Company V in a joint venture to penetrate the Indonesian market
vi. To divest the smallest subsidiary by!
vii. To diversify into the ready-to-wear category
viii. To acquire a downstream retailing company
ix. To open our own retail stores in Pampanga
x. To open a franchise line to develop the Mindanao market
BUSINESS STRATEGIES : Should support the Financial and Strategic Objectives
Examples
1. Invest in the Non-Food packaging units and ensure market leadership in this category
2. Launch a new line of clothing exclusively for girls 9-14 years old
3. Develop a product for the growing population of call center agents in North Quezon City
4. Reduce prices on the small household appliances line while maintaining price flexibility on the
large household appliances business, with price increases of 5% yearly
ORGANIZATIONAL STRATEGIES
1. What changes in the structure should the company do to support the Business and Corporate
objectives?
2. What new skills, capabilities and people should be added?
3. What financial (financing, investing, borrowing) strategies to be done to finance the strategies?
4. What new machines, plants, sites, operational and technological changes/ advancements should be
made?
5. What internal leadership and communication styles should be instituted, if any?
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Strategic Management: A Step by Step Guide to the Final Paper
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LINKING THE STORY: ALL THE OUTPUTS FROM ALL THESE
LEVELS SHOULD TIE TOGETHER TO FORM THE STRATEGY MAP
Strategy flows from the top
FINANCIAL PROJECTIONS
2012
2013
2014
2015
2016
REVENUES
GROWTH
COST OF GOODS
% TO SALES
GROSS MARGIN
% TO SALES
OPERATING COSTS
ADMINISTRATIVE
SALES AND MARKETING
OTHERS% TO SALES
NET INCOME (BEFORE TAX)
% TO SALES
Ensure the following:
1. The projections match the financial objectives and vision
2. The operating costs reflect the budgets for the activities suggested to reach the objectives (eg,
purchase of a plant, increase in marketing and advertising , hiring more people, adding training, salary
increases OR reduction in costs, shutting down facilities, letting go of employees)3. The trends are well-explained
a. Are the growths aligned and realistic?
b. Are the ratios improving over the years?
c. Are profits increasing in percentage and in absolute value?
4. The profits are plugged into the correct portion in the projected balance and cash flow sheets
5. Assets purchased or divested should be reflected in the balance sheets
Vision and Mission Corporate BusinessOrganizationalor Functional
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Strategic Management: A Step by Step Guide to the Final Paper
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DETAILED ACTION PLAN
What will each department do to accomplish the goals? (top 3 action items per Organizational Strategy will d
Plan Timeline Person or
Department
Responsible
Expected Output
Objective
STRATEGY EVALUATION, MONITORING AND CONTROL
CONCEPT REVIEW: THE BALANCED SCORECARD
The elements of the balanced scorecard should flow into each other as follows:
Financial: What should we be measuring to get to theobjectives and vision?
Low cost airline-- revenues per plane
Customer: To get to the financial objectives, how should ourcustomers see us? What should we be measuring to ensurethat customers will continue buying?
Low cost airline-- best prices, most number of flights todomestic destinations
Internal Processes: For our customers to see us this way,what internal processes should we be good at?
Low cost airline --- Ground turnaround time, cost-efficientprocurement of materials, availability of staff, % occupancyrate per flight
Learning and Growth : For our processes to be this good,what should our employees learn? How should they bedeveloped?
Low cost airline-- Six Sigma training for technical crew;Procurement training; HR connections with flight schools
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Strategic Management: A Step by Step Guide to the Final Paper
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BALANCED SCORECARD Example
Objective: To become a 130M company by 2015 with a market share of 10%; To gain share by growing
the fruit juice business unit in Visayas and Mindanao to 30M, capitalizing on product differentiation
through the launch of 3 new innovative flavors and an aggressive distribution strategy in all malls
OBJECTIVE MEASURE TARGET TIME LEAD
Financial Revenues % growth
Overall Yearendsales
Sales of juiceunit
15%
10%8%8%
100M110M119M128M
15M25M30M
2012
201320142015
2012201320142015
201320142015
CEO
SalesDirector
Head ofJuices unit
Customer Gain share Overall Market
share
Fruit juice sharein Visayas andMindanao
4%
7%8%10&
12%15%20%
2012
201320142015
2015
Marketing
Director,Head ofJuice unit
Processes Launch 3new flavors
Distribution
Marketing
Timely launch of3 flavors
% of groceriespenetrated andstocked
Awareness ofnew brands inVisMinTrial rateRepeat purchase
2013
50%75%100%
100%
80%50%
201320142015
2015
2013
20142015
R&D unitProduction
DistributionManager
Marketingdirector
LearningandGrowth
SalesTraining forVismin
Discoveryandmapping ofgroceries
Productionline training
% of teamtrained on newproducts
% of groceriesmapped andapproached bysales team
% trained onproduction anddistribution ofnew flavors
100%
100%
100%
2013
mid-2014
2013
Head ofdigitalpublishingand HRmanager
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Strategic Management: A Step by Step Guide to the Final Paper
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AND FINALLY, USUAL MISTAKES:
1. Use of the BCG matrix
The BCG matrix is used to prioritize investments in products or business units
within a company to yield the best returns. Companies usually invest in the
Star products or services, which have a high share in a fast growing market.
Companies usually deprioritize or divest Dogs, which are products not doingwell in markets which are expected to decline. Cash cows are products that
can continue to be milked without investing much (as they already have a high
recall and loyalty among customers).
COMMON MISTAKE: Categorizing the entire company as a whole. (Bench is a
Star or Meralco is a cash cow)
2. Mistaking slowing of growth for no growth
Just because a company grew 8% two years ago and is now growing by 6% doenot mean that it is declining. It is still growing, albeit at a slower rate, perhaps in
part due to the size of the base. The better way to analyze is to compare this
growth with the industry and its competitors.
3. Mistaking substitutes for rivals in the Porters analysis
Rivals are companies which make the same products or offer the same services
most times with the same business model. Substitutes are products that are NO
similar to the offering but are patronized by the customers in lieu of the product
offered by the industry.
eg. Medical City, Makati Med and St. Lukes are rivals as hospitals. Their
substitutes could be the diagnostic centers and standalone clinics which are not
hospitals but may be patronized to get the same kind of service.
4. Not aligning market shares with financial projections
As you compute for your financial projections, you should also compute for your
competitors and see the resulting market shares of each. You have to determine
if the growth rates of each competitor allow them to catch up with the shares.
The projections for the competition should be backed up by rational assumptions