Principles of Strategic Management: Strategy Implementation - Strategic Control Systems, Balanced Scorecard Financial Customer Internal Processes Learning Growth

What This Is

Strategic control systems are frameworks and tools that help organizations align their strategies with their goals and objectives. A key example is the Balanced Scorecard, which provides a comprehensive framework for evaluating an organization's performance from four perspectives: financial, customer, internal processes, and learning and growth. For instance, Apple uses the Balanced Scorecard to track its progress in delivering innovative products and services that meet customer needs, while also improving its operational efficiency and driving growth.

Key Frameworks & Tools

• Balanced Scorecard: A framework that evaluates an organization's performance from four perspectives: financial, customer, internal processes, and learning and growth.
• BCG Matrix: A tool used to evaluate a company's portfolio of products or businesses based on their market growth rate and relative market share.
• Ansoff Matrix: A framework that identifies four strategies for growth: market penetration, market development, product development, and diversification.
• SWOT Analysis: A tool used to identify an organization's strengths, weaknesses, opportunities, and threats.
• Porter's Five Forces: A framework that analyzes the competitive forces in an industry, including the threat of new entrants, buyer power, supplier power, threat of substitutes, and rivalry.
• VRIO Framework: A tool used to evaluate an organization's resources and capabilities, considering their value, rarity, imitability, and organization's ability to capture value.
• Value Chain Analysis: A framework that identifies the activities that create value for a company, including primary and support activities.
• Competitive Advantage: A sustainable advantage that a company has over its competitors, which can be based on cost leadership, differentiation, or focus.
• Blue Ocean Strategy: A framework that involves creating a new market or industry space, rather than competing in an existing one.
• Red Ocean Strategy: A framework that involves competing in an existing market or industry space.

Step-by-Step Application

1. Conduct a Balanced Scorecard Analysis:
   • Identify the organization's goals and objectives.
   • Develop a set of metrics to measure progress towards these goals.
   • Evaluate the organization's performance from four perspectives: financial, customer, internal processes, and learning and growth.
2. Use the BCG Matrix:
   • Identify the company's products or businesses.
   • Evaluate the market growth rate and relative market share for each product or business.
   • Plot the products or businesses on the BCG matrix.
3. Apply the Ansoff Matrix:
   • Identify the company's current market position.
   • Evaluate the opportunities for growth.
   • Choose a growth strategy: market penetration, market development, product development, or diversification.
4. Conduct a SWOT Analysis:
   • Identify the organization's strengths, weaknesses, opportunities, and threats.
   • Evaluate the impact of each factor on the organization's performance.
5. Analyze Porter's Five Forces:
   • Identify the competitive forces in the industry.
   • Evaluate the threat of new entrants, buyer power, supplier power, threat of substitutes, and rivalry.
6. Evaluate Resources and Capabilities using the VRIO Framework:
   • Identify the organization's resources and capabilities.
   • Evaluate their value, rarity, imitability, and the organization's ability to capture value.

Common Mistakes

• Mistake: Confusing industry attractiveness with competitive position.
• Correction: Industry attractiveness refers to the overall attractiveness of the industry, while competitive position refers to the company's position within the industry.
• Mistake: Using the wrong level of strategy.
• Correction: The right level of strategy depends on the company's goals and objectives, and may involve different levels of strategy, such as corporate, business, or functional strategy.
• Mistake: Failing to consider the organization's resources and capabilities when evaluating its competitive advantage.
• Correction: The organization's resources and capabilities are critical in determining its competitive advantage.

Case Interview / Exam Tips

• Common question patterns: Expect to be asked to apply frameworks and tools to case studies or scenarios.
• Tricky distinctions: Be prepared to distinguish between different concepts, such as differentiation vs low cost, blue ocean vs red ocean, and related vs unrelated diversification.
• Framing answers: Use clear and concise language to frame your answers, and be sure to address all parts of the question.

Quick Practice Scenario

A company has low market share in a high-growth industry – where does it sit on the BCG matrix?

Answer: The company sits in the "question mark" quadrant, indicating that it has high market growth potential but low relative market share.

Last-Minute Cram Sheet

• A company's competitive advantage is not sustainable if it is based on cost leadership alone.
• The Balanced Scorecard evaluates an organization's performance from four perspectives: financial, customer, internal processes, and learning and growth.
• The BCG matrix is used to evaluate a company's portfolio of products or businesses based on their market growth rate and relative market share.
• Porter's Five Forces analyze the competitive forces in an industry, including the threat of new entrants, buyer power, supplier power, threat of substitutes, and rivalry.
• The VRIO framework evaluates an organization's resources and capabilities, considering their value, rarity, imitability, and organization's ability to capture value.
• A blue ocean strategy involves creating a new market or industry space, rather than competing in an existing one.
• A red ocean strategy involves competing in an existing market or industry space.
• A company's value chain includes primary and support activities that create value for the company.
• A company's competitive advantage can be based on cost leadership, differentiation, or focus.
• The Ansoff matrix identifies four strategies for growth: market penetration, market development, product development, and diversification.