The document focuses on strategic management concepts, particularly emphasizing internal and external analysis, including SWOT analysis, gap analysis, and McKinsey's 7S framework. It outlines the benefits and limitations of SWOT analysis, the procedure for conducting gap analysis, and the importance of core competencies in strategic planning. Furthermore, it describes the elements of the McKinsey 7S framework, detailing how alignment among the seven internal aspects of an organization is crucial for success.

1. STRATEGIC
MANAGEMENT – UNIT 3
Alex Kuruvilla

2. Syllabus
Internal and External Analysis
Internal and external analysis; SWOT analysis; benefits
and pitfalls of SWOT analysis; role of SWOT analysis in
strategic management. Gap analysis, organizational
capability profile; strategic advantages profile; core
competencies; McKinsey’s 7 S framework.

3. Environment analysis - Introduction
Internal External

4. Internal Environment analysis
These are factors from inside the firm that could affect
performance and decision making
1. Finance Available
2. Ability of Staff
3. Information Available
4. ICT Availability
5. Ability of Management
6. Changes in Cost
7. Mission and vision
8. Culture
9. Marketing
10. R & D

5. External Analysis - This is an analysis of the
factors outside the firms influence but impacting the
firm’s decision making
Macro environment
• Political
• Economic
• Social
• Technological
• Environmental
• Demographic
Micro environment
• Suppliers
• Customers
• Competitors
• Publics
• Marketing
intermediaries

9. Turning your SWOT into strategies

10. Benefits of SWOT in strategic
management
• It is a source of information for strategic planning.
• Builds organization’s strengths.
• Reverse its weaknesses.
• Maximize its response to opportunities.
• Overcome organization’s threats.
• It helps in identifying core competencies of the firm.
• It helps in setting of objectives for strategic planning.
• It helps in knowing past, present and future so that by
using past and current data, future plans can be chalked
out

11. Limitations of SWOT analysis
• Over emphasize strengths and downplay threats
• SWOT can be static and can ignore change
• Over emphasize a single strength
• Strength is not necessarily a source of competitive
advantage

12. GAP analysis
• Gap analysis is used to
identify the strategic and
operational gaps in the
performance
• “What are we doing
today and how will this
lead us to our next
goal?”
• It analysis the current
capabilities of the
company and its future
development
Present
state
GAP
analysis
Desired
state

13. Gaps
• Strategic gap
• Operational gap
Operational gap
• Performance gap
• Competitive gap

14. Procedure – Gap Analysis strategic
planning
• Target
Value
Determinati
on
Step 1
• Determine
and
extrapolate
current value
Step 2 • Designate
the gap
Step 3
•Develop ideas
to bridge the
operational and
strategic gap
Step 4 •Plan actions to
bridge the
operational and
strategic gap
Step 5
•Implement
actions
Step 6

15. Gap analysis model – Servqual Model
• Discrepancy between customer expectation and their
perceptions of management
Gap 1
• Discrepancy between perception of customer expectation of
management and its implementation of service quality
specifications
GAP 2
• Discrepancy between the service quality specifications and
actual performance
GAP 3
• Discrepancy between service and communication directed to
the customer about the said service
GAP 4
• Discrepancy between customer expectation and perceived
service quality
GAP 5

16. Organization capability profile
• Key functional strengths of organizations
• Compare and measure the capability in functional areas.
• Organizational capability factors are strategic strengths
and weaknesses existing in different companies which are
crucial in strategy formulation and implementation.
• Six functional crucial areas
1. Finance
2. Marketing
3. Operations
4. Personnel
5. Information
6. General management

17. Core competencies
• Capabilities that the firm emphasizes and performs
especially well while pursuing its vision.
—————————————————————
• Core competencies help the firm achieve a competitive
advantage when the firm’s core competencies are
different from those held by competitors.
• Core competencies enable a firm to complete activities
effectively.
• Distinctive competencies provide products to customers
that are superior to those provided by competitors.

18. Managing Resources to Develop
Capabilities and Core Competencies

19. Examples of Core Competencies
• Expertise in integrating multiple technologies
to create families of new products
• Know-how in creating operating systems
for cost efficient supply chain management
• Speeding new/next-generation products to market
• Better after-sale service capability
• Skills in manufacturing a high quality product
• System to fill customer orders accurately and swiftly

20. Examples
Financial Capability
• Bajaj: Cash management
• LIC: centralized payment,
decentralized collection
• Reliance: High investor
confidence
Marketing
• Hindustan Lever: distribution
channel
• IDBI: Wide variety of
products
• Tata: Company / Product
Image
Operation
• GE: Global production
• Toyota: High Quality
Personnel
• Apollo Tyres: Industrial
relation
General Management
• Malayalam Manaroma:
Unchallenged leadership,
unified and stable

21. Mckinsey’s 7S framework
• Developed in the early 1980s by Tom Peters and Robert
Waterman
• The basic premise of the model is that there are seven
internal aspects of an organization that need to be aligned
if it wants to be successful.

22. Where 7S model can be used?
• To improve the performance of a company,
• To examine the likely effects of future changes within a
company,
• To align departments and processes,
• To determine what is the best way to implement a
proposed strategy.

23. The Seven Elements
Hard elements Soft elements
Strategy Shared values
Structure Skills
Systems Style
Staff
"Hard" elements are easier to define or identify and management can directly
influence them: These are strategy statements; organization charts and
reporting lines; and formal processes and IT systems.
"Soft" elements, on the other hand, can be more difficult to describe, and are
less tangible and more influenced by culture. However, these soft elements are
as important as the hard elements if the organization is going to be successful.

24. • The key point of the
model is that all the
seven areas are
interconnected and
a change in one area
requires change in
the rest of them for it
to function effectively.

25. • Strategy: the plan devised to maintain and build
competitive advantage over the competition.
• Structure: the way the organization is structured and who
reports to whom.
• Systems: the daily activities and procedures that staff
members engage in to get the job done.

26. • Shared Values: these are the core values of the
company that are evidenced in the corporate culture and
the general work ethic.
• Style: the style of leadership adopted.
• Staff: the employees and their general capabilities.
• Skills: the actual skills and competencies of the
employees working for the company

27. Apple Inc
• Shared Values - business is aligned
around the values of design and user
experience
• Strategy - focus on a small number of
products and to make them innovative
and excellent – enabling the business
to capture a huge market share
relative to its size, and build a loyal
customer following

28. • Staff - offers their employees huge benefits
• Skills - highly qualified and creative employees
• Systems - supply chain with built capacity for launching
and supplying huge new market-dominating products
• Style - people are free to innovate – as long as they met
Jobs’ high standards

29. How to use the tool?
• Step 1. Identify the areas that are not effectively aligned
• Step 2. Determine the optimal organization design
• Step 3. Decide where and what changes should be made
• Step 4. Make the necessary changes
• Step 5. Continuously review the 7s