The Balanced Scorecard The Balanced Scorecard Robert S. Kaplan and David P. Norton developed the Balanced Scorecard. It was designed to more effectively turn strategic plans into action. The scorecard creates a way to measure performance in strategic terms. It is not ... [full story]

Using the Porter Model to Drive Value The Porter Model provides an industry view of the business. The strength of the model is that it identifies where a firm must improve its competitive position. This model forces you to identify your ... [full story]

Substitute Products Items that decrease sales of products within an industry are substitute products. For example, frozen yogurt is considered a substitute for ice cream. Sport utility vehicles (SUVs) can be considered a substitute product to the automobile. Substitutes can be ... [full story]

Bargaining Power of Buyers The ability of the buyer to negotiate the terms of sale significantly affects pricing and profits. As the customer becomes more powerful, downward pressure is exerted on pricing and profitability. Customer service begins to improve as industry ... [full story]

Bargaining Power of Suppliers High supplier bargaining power constrains market participants' ability to negotiate pricing, quality, and service. As supplier power increases, industry profit margins will decline because costs will increase. Companies are unable to pass price increases on to customers, ... [full story]

Threat to Entry Porter states that when barriers to entry are high, the danger of new competition breaking into the market diminishes. The threat from outside competition coming into the market is related to the six barriers to entry in the ... [full story]

Intensity of Rivalry Among Competitors Competitive intensity is dependent on the number and magnitude of actions taken by market players. Competitive actions can take many forms, such as changes in price, service, and quality. More actions and reactions to competitive movements ... [full story]

Equivalence of Response Balancing long- and short-term feedback is the key to success. Delivering immediate financial results must not come at the expense of the future viability of the business. This means that Strategic Alternatives must respond to market changes in ... [full story]

Validation of Strategic Alternatives Using the Economic Screen Alignment with Market Demand Validation of Strategic Alternatives Using the Economic Screen Alignment with Market Demand Finding opportunities in a state of continual economic evolution requires vigilance of emerging trends and structural changes in ... [full story]

Resource Availability: Land, Labor, Capital, and Technology What does your business need to implement your strategy? What is the resource availability and cost? Where can you get them? The nature of how we do business is shifting continually. Managers are continuously ... [full story]

Interest Rates Interest rates are a closely watched economic indicator. They are driven by inflation and have a significant impact on economic sectors that require use of debt for asset acquisition such as real estate, heavy equipment, and financial services. Relatively ... [full story]

Inflation (Deflation) CPI Inflation and deflation are two of the key drivers of product-pricing decisions. Inflation, or increased costs of goods and services, tends to erode profits and exert upward pressure on prices to customers. Price increases to your customers without ... [full story]

Gross Domestic Product GDP is defined as "the total value of goods and services produced within the borders of the United States, regardless of who owns the assets or the nationality of the labor used in producing that output".[2] The growth ... [full story]

Gross National Product "GNP measures the output of the citizens of the U.S. and the income from assets owned by U.S. entities, regardless of where they are located".[1] Since GNP includes output from multinational corporations, it may not be a true ... [full story]

Economic Factors that Drive Market Demand By linking the business planning process to the economic environment, business managers are better equipped to understand whether Strategic Alternatives are creating value. Assessment of the economy involves both examining current conditions and analyzing the ... [full story]

What Is Market Demand and Why Is It Important? Estimating the growth rate for your business is an important part of your strategic plan. Pricing, product, and channel decisions are vastly different between high growth and mature industries. Investment decisions will ... [full story]

The Economic Filter BUILDING A BRIDGE between strategy and finance requires an analysis of economic factors that affect a business. A macroview of market conditions provides the first level of validation of Strategic Alternatives. This chapter will discuss the economic filter ... [full story]

Reengineering as a Strategic Alternative By now you should have a clear picture of reengineering. This Strategic Alternative has many compelling positive and negative features. There are various instances where reengineering is a viable solution to creating shareholder value. This SA ... [full story]

Risks of Reengineering We mentioned earlier that the business cases for reengineering are extremely compelling. Any bank CEO would want to dramatically reduce her cost per loan. Yet, why do BPR efforts fail? There are four major risk points in a ... [full story]

Rationale for BPR The justification for BPR is normally found in two areas: efficiency and competitive repositioning. Since these efforts involve a large amount of change, it seems that many BPRs tend to have their value proposition change along with the ... [full story]

Enterprise Use of Technology to Create Efficiencies One of the key drivers in reengineering efforts is the use of technology to create efficiencies in the improved process. This is also the "Achilles heel" of reengineering projects. The success of the entire ... [full story]

Dramatic Operational Shifts When a process is redesigned there is a radical difference in how things get done. The following diagram illustrates the magnitude of the change between the current and target (reengineered) process in a loan-granting function. The current process ... [full story]

Top-Down-Driven Initiative BPR efforts that originate from the higher levels of a business will tend to have greater repercussions than those that begin in the middle management ranks. These efforts are not simple modifications to business processes occurring in the normal ... [full story]

Business Process Reengineering Business process reengineering (BPR) involves radically changing a process in order to increase efficiency. The term was first coined by Michael Hammer and James Champy in their book Reengineering the Corporation: A Manifesto for Business Revolution. The radical ... [full story]

Information Technology as a Strategic Alternative IT is emerging as a critical means of putting strategy into action. IT distributes processes and analyzes information. Information technology can be divided into three components: software, data, and infrastructure. Infrastructure supports the technology architecture ... [full story]

Risks of IT There are several risks in implementing IT projects. Channel Cannibalization To understand the risk of channel cannibalization we have to go back to our retailer who is selling brown leather couches. What if existing customers decided to buy through the ... [full story]

Rationale for Information Technology Many companies have a great deal of difficulty validating the value derived from technology because the benefits of technology are not easily translated into financial terms. The increase in revenues from combining companies is much more visible ... [full story]

Demystifying Information Technology: What Is IT? Information technology is considered anything that transports, processes, analyzes, and presents information to a user. In this book we are not necessarily interested in how the technology functions, but whether it can effectively enhance shareholder ... [full story]

Internal Strategic Alternatives Overview STRATEGIC ALTERNATIVES are normally viewed as initiatives that are external in nature. Mergers and acquisitions and outsourcing are well publicized and make headlines in major business and industry periodicals. There has been a growing preference toward external Strategic ... [full story]

Outsourcing as a Strategic Alternative Outsourcing creates value through increasing strategic focus, improving processes, reducing costs, and eliminating risks. Outsourcing gives firms the ability to focus on their core competencies, leaving non-value-added activities to the outsourcing provider. Processes have the potential ... [full story]

Exit Barriers Outsourcing leads to limited commitment of internal resources to a process, function, and or infrastructure. The risk is that the business does not have the capacity to perform the function, leaving the firm at the mercy of the service ... [full story]

Risks of Outsourcing Despite the tremendous growth in outsourcing, the failure rate is quite high. "Dun & Bradstreet Barometer of Global found that 25 percent of all firms … report an outsourcing relationship failure within the past two years".[3] Productivity Gaps A ... [full story]