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Exhibit 5–6
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Management by Objectives (MBO) Management by Objectives
Step 1. Set individual objectives and plans.
Step 2. Give feedback and evaluate performance.
Step 3. Reward according to performance. Sources of MBO Failures
Lack of top management commitment and follow-through on MBO.
Employees’ negative beliefs about management’s sincerity in its efforts to include them in the decision-making process.
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Exhibit 5–10
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Dimensions:
Long-term industry attractiveness
Business strength/Competitive position
SBUs plotted as circles with area proportional to the size of the industry, & a sector within each circle representing the SBUs market share in its industry
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Strong Average Weak
H
M
L
GE 9-Cell MatrixGE 9-Cell MatrixBusiness Strength/Competitive Position
Long-Term Industry Attractiveness
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SBUs in 3 upper left cells get top investment priority
SBUs in 3 middle diagonal cells merit steady investment to maintain & protect their industry positions
SBUs in 3 lower right cells are candidates for harvesting or divestiture
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Advantages of G.E. 9-Cell MatrixAdvantages of G.E. 9-Cell Matrix
Allows for intermediate rankings between high & low and between strong & weak
Incorporates a wider variety of strategically relevant variables than the BCG matrix
Stresses the channeling of corporate resources to SBUs with the greatest potential for competitive advantage &
superior performance
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Weaknesses of G.E. 9-Cell MatrixWeaknesses of G.E. 9-Cell Matrix
Provides no guidance on specifics of SBU strategy
Only suggests general strategic posture -- aggressive expansion, fortify-&-defend, or harvest/divest
Doesn’t address the issue of strategic coordination across related SBUs
Tends to obscure SBUs about to “take off” or “crash & burn” -- static, not dynamic
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Life-Cycle Portfolio MatrixLife-Cycle Portfolio Matrix
Dimensions:
Industry stage in the life cycle
SBU’s competitive position
Area of each SBU circle is proportional to size of the industry; sectors denote SBU’s market share in its industry
This matrix displays the distribution of the firm’s businesses across the various stages of industry evolution
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Strong Average Weak
SBUs Competitive Position
Life-Cycle Portfolio MatrixLife-Cycle Portfolio Matrix
Introduction
Growth
Early Maturity
Late Maturity
Decline
Life-Cycle Stages
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Strategy Formulation vs. Implementation
• Strategy Formulation = stage of strategic management that involves planning and decision making that lead to the establishment of the organization’s goals and of a specific strategic plan
• Strategy Implementation = stage of strategic management that involves the use of managerial and organizational tools to direct resources toward achieving strategic outcomes
Experiential Exercise: Developing Strategy for a Small Business
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Portfolio Strategy
• Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage
BCG Matrix
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Three Levels of Strategy in Organizations
Corporate-Level Strategy: What business are we in?
Corporation
Business-Level Strategy: How do we compete?
Textiles Unit Chemicals Unit Auto Parts Unit
Functional-Level Strategy:
How do we support the business-level strategy?
Finance R&D Manufacturing Marketing