402 – STRATEGIC MANAGEMENT

UNIT – II
Strategy Formulation–Defining the Company Mission–Assessing the External
Environment–Remote and Industry Environment–Industry Analysis–How Competitive
Forces Shape Strategy–The Company profile: Internal Analysis of the firm.

STRATEGY FORMULATION
Strategy formulation is the process by which an organization chooses the most. appropriate
courses of action to achieve its defined goals. This process is. essential to an organization's success,
because it provides a framework for the. actions that will lead to the anticipated results.
Definition:
Strategy Formulation is an analytical process of selection of the best suitable course of action
to meet the organizational objectives and vision. It is one of the steps of the strategic
management process. The strategic plan allows an organization to examine its resources, provides a
financial plan and establishes the most appropriate action plan for increasing profits.
It is examined through SWOT analysis. SWOT is an acronym for strength, weakness,
opportunity and threat. The strategic plan should be informed to all the employees so that they know
the company’s objectives, mission and vision. It provides direction and focus to the employees.
 Steps of Strategy Formulation
The steps of strategy formulation include the following:

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1. Establishing Organizational Objectives: This involves establishing long-term goals of
an organization. Strategic decisions can be taken once the organizational objectives are determined.
2. Analysis of Organizational Environment: This involves SWOT analysis, meaning
identifying the company’s strengths and weaknesses and keeping vigilance over competitors’ actions
to understand opportunities and threats.
Strengths and weaknesses are internal factors which the company has control over. Opportunities and
threats, on the other hand, are external factors over which the company has no control. A successful
organization builds on its strengths, overcomes its weakness, identifies new opportunities and protects
against external threats.
3. Forming quantitative goals: Defining targets so as to meet the company’s short-term and
long-term objectives. Example, 30% increase in revenue this year of a company.
4. Objectives in context with divisional plans: This involves setting up targets for every
department so that they work in coherence with the organization as a whole.
5. Performance Analysis: This is done to estimate the degree of variation between the actual
and the standard performance of an organization.
6. Selection of Strategy: This is the final step of strategy formulation. It involves evaluation of
the alternatives and selection of the best strategy amongst them to be the strategy of the organization.
Strategy formulation process is an integral part of strategic management, as it helps in framing
effective strategies for the organization, to survive and grow in the dynamic business environment.
Levels of strategy formulation
There are three levels of strategy formulation used in an organization:

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 Corporate level strategy: This level outlines what you want to achieve: growth, stability,
acquisition or retrenchment. It focuses on what business you are going to enter the market.
 Business level strategy: This level answers the question of how you are going to compete. It
plays a role in those organization which have smaller units of business and each is considered as
the strategic business unit (SBU).
 Functional level strategy: This level concentrates on how an organization is going to grow.
It defines daily actions including allocation of resources to deliver corporate and business level
strategies.
Hence, all organisations have competitors, and it is the strategy that enables one business to become
more successful and established than the other.
DEFINING THE COMPANY MISSION
What is a Mission Statement?
A mission statement is used by a company to explain, in simple and concise terms, its
purpose(s) for being. The statement is generally short, either a single sentence or a short paragraph.
These statements serve a dual purpose by helping employees remain focused on the tasks at
hand, as well as encouraging them to find innovative ways of moving toward an increasingly
productive achievement of company goals.
Definition
Mission statement is the written declaration of an organization's core purpose and focus that
normally remains unchanged over time.
It reveal important aspects of your company. People that want to become a client or consider to
work with your work might have the following questions:
 Question #1: Who is your company?
 Question #2: What do you do? What do you stand for? And why do you do it?
 Question #3: Do you want to make a profit, or is it enough to just make a living?
 Question #4: What markets are you serving, and what benefits do you offer them?
 Question #5: Do you solve a problem for your customers?
 Question #6: What kind of internal work environment do you want for your employees?
Mission Statements vs. Vision Statements
A company’s mission statement differs from its vision statement. While the mission statement
remains unchanged for the most part and represents who the company is or aspires to be for the
entirety of its existence, the vision statement can change. This statement outlines what the company
needs to do to remain the way it has presented itself to be. In effect, a company’s mission is its
identity, and the vision is its journey to accomplishing its mission.
Example of a Mission Statement
Let’s look at Microsoft Corp.’s mission statement. Microsoft Corp. is an American
multinational company that develops, manufactures, licenses, and sells technology products, including

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computer software, electronics, and personal computers. It is also one of the largest corporations in
the world, alongside companies such as Apple, Inc. and [Link], Inc.

 Microsoft’s mission is:

 The statement above is a good example of a mission statement because it provides a broad
enough scale of scope to explain what the company can do, and it is also inspirational – it’s all about
empowering people. It is the kind of statement that people can get excited about and can rally behind.
It also defines Microsoft’s strategy, which is reaching out to the whole world and making an influence
on all individuals and organizations.
Why is a Mission Statement Important?
As shown in the diagram above, the combination of a mission statement, vision, and values
tells a full story about Microsoft’s businesses and points out the things that matter to the company.
Being able to build an influential statement is the first step to business success because all strategies
are developed and executed with a solid mission as the foundation. The statement guides the
management team in implementing strategies that help reinforce the company’s identity and achieve
its goals.
It is important for:
 Motivating employees
 Inspiring customers

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  Strategic planning
 Setting values
 Understanding why a business exists
How to write a Mission Statement?
Here are five steps to help you write your own mission statement:
 Step #1: Explore or Define your identity as organization or company
 Step #2: Write a Story about how you see and define your market
 Step #3: Define why and how your clients or customer benefit directly and indirectly from
your company (services and products)
 Step #4: Define why and how your employees and suppliers benefit directly and indirectly
from your companies existence
 Step #5: Define why and how the owners and other stakeholders of the company benefit
directly and indirectly from the companies existence
Examples of Mission Statements
Examples are a great way to help you get started writing your own statement of a mission.
Below we have selected 10 for your of amazing companies.
10 examples of mission statements
Example #1: Amazon
to be earth’s most customer centric company. To build a place where people can come to find &
discover anything they want to buy online
Example #2: Apple
committed to bringing the best personal computing experience to students, educators, creative
professionals & consumers around the world through innovative hardware, software & internet
offerings
Example #3: Dell
to be the most successful computer company in the world at delivering the best customer experience
in markets we serve
Example #4: Facebook
to give people the power to share and make the world more open and connected
Example #5: Google
to organize the world‘s information & make it universally accessible and useful
Example #6: Microsoft
to enable people & businesses throughout the world to realize their full potential
Example #7: Skype
to be the fabric of real time communication on the web.
Example #8: Twitter
“a work in progress”

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Example #9: Yahoo!
be the most essential global internet service for consumers & businesses
Example #10: YouTube
to provide fast & easy video access & the ability to share videos frequently
Assessing the External Environment
Environmental Analysis
Definition:
Environmental Analysis is described as the process which examines all the components,
internal or external, that has an influence on the performance of the organization. The internal
components indicate the strengths and weakness of the business entity whereas the external
components represent the opportunities and threats outside the organization.
To perform environmental analysis, a constant stream of relevant information is required to
find out the best course of action. Strategic Planners use the information gathered from the
environmental analysis for forecasting trends for future in advance. The information can also be used
to assess operating environment and set up organizational goals.
It ascertains whether the goals defined by the organization are achievable or not, with the
present strategies. If is not possible to reach those goals with the existing strategies, then new
strategies are devised or old ones are modified accordingly.
Advantages of Environmental Analysis
The internal insights provided by the environmental analysis are used to assess employee’s
performance, customer satisfaction, maintenance cost, etc. to take corrective action wherever
required. Further, the external metrics help in responding to the environment in a positive manner and
also aligning the strategies according to the objectives of the organization.
Environmental analysis helps in the detection of threats at an early stage, that assist the
organization in developing strategies for its survival. Add to that, it identifies opportunities, such as
prospective customers, new product, segment and technology, to occupy a maximum share of the
market than its competitors.
Steps Involved in Environmental Analysis
1. Identifying: First of all, the factors which influence the business entity are to be identified, to
improve its position in the market. The identification is performed at various levels, i.e.
company level, market level, national level and global level.
2. Scanning: Scanning implies the process of critically examining the factors that highly
influence the business, as all the factors identified in the previous step effects the entity with
the same intensity. Once the important factors are identified, strategies can be made for its
improvement.
3. Analysing: In this step, a careful analysis of all the environmental factors is made to
determine their effect on different business levels and on the business as a whole. Different

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 tools available for the analysis include benchmarking, Delphi technique and scenario
building.
4. Forecasting: After identification, examination and analysis, lastly the impact of the variables
is to be forecasted.
Environmental analysis is an ongoing process and follows a holistic approach, that continuously scans
the forces effecting the business environment and covers 360 degrees of the horizon, rather than a
specific segment.
Tools of External Environment Analysis:
1. SWOT Analysis
2. PESTEL Analysis
3. Porter’s Five Forces Model

SWOT Analysis
Definition:
SWOT Analysis is a strategic management tool that assists an enterprise in discerning their
internal Strengths, and Weaknesses, and external Opportunities, and Threats, to determine its
competitive position in the market.
The SWOT Analysis helps in ascertaining the factors that influences the efficiency and
effectiveness of any product, project, or business entity. These are explained as under:

1. Strengths: The strengths of a company are the core competencies, in which the business has
an edge over its competitors. It covers aspects such as:
o Strong financial condition
o A large customer base.
o Strong brand name or a unique product
o Latest technology or patents
o Influential advertising and promotion.
o Cost Advantage
o Quality in product and customer service.

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 2. Weaknesses: Weaknesses can be described as the areas of limitations of the business, that
hinders the growth of the company and even leads to a strategic disadvantage. These are the
areas which need improvement to perform competitively. It encompasses:
o Obsolete facilities and outdated technology.
o The unit cost of a product is higher than the competitors.
o No or less internal control.
o Less quality in products and services offered.
o Weak brand image.
o Financial condition is not very sound.
o Underutilization of plant capacity.
o Lack of major skills or competencies, and intellectual capital.
3. Opportunities: Opportunities can be understood as the condition, which is favourable or
beneficial to the organization in the business environment, that the business could exploit to
gain an advantage. These are:
o Looking for areas of development, by utilizing skills and technology to enter new
markets
o Adding new products to the existing product line to increase customer base.
o Forward and backward integration.
o Acquiring rivals businesses.
o Joint ventures, mergers and alliances to increase market coverage.
4. Threats: Threat implies an adverse condition which can lead the business enterprise to losses,
and can also harm the overall position and reputation of the enterprise. It entails:
o A downtrend in market growth.
o A new entrant to the market.
o Substitute products that can decrease sales.
o Increasing the bargaining power of customers and suppliers.
o New regulatory requirements
o Changes in a demographic environment that will decrease demand for firm’s product.
Importance of SWOT Analysis
 Logical framework of analysis: SWOT Analysis equips the management with an insightful
framework for eliminating issues in a systematic manner, that can influence the condition of
business, formulation of various strategies and their selection.
 Presents a comparative report: The analysis facilitates in presenting systematic information
about the internal and external environment. This helps in making a comparison of external
opportunities and threats with internal strengths and weaknesses, as well as reconciling the

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 internal and external business environment, to help the managers in choosing the best
strategy, by considering various patterns.
 Strategy Identification: Every organization has its strengths weakness, opportunities and
threats. So, the SWOT Analysis acts as a guide to the strategist to reckon the exact position,
i.e. where the business stands, so as to identify the primary objective of the strategy under
consideration.
SWOT Analysis helps the company’s management in designing a business model specific to the firm.
The model perfectly suits or aligns the company’s resources or competencies, as per the needs of the
business environment, wherein the organization operates and helps in gaining a competitive advantage
over the rivals. This will increase the profitability, market share and the chances to survive in the
dynamic competitive business environment.

PESTLE Analysis / Analysing Macro Environment

PESTEL or PESTLE  is an abbreviation for Political, Economic, Social, Technological,
Environmental and Legal. By analyzing these 5 categories, the data provided will offer an overview of
the external environment and will serve as a support for the strategic planning process.
 Political & Legal Factors– With the change in political parties, several changes are seen in
the market in terms of trade, taxes, and duties, codes and practices, market regulations, etc. So
the firm has to comply with all these changes and the violation of which could penalize its
business operations.
 Economic Factors– Every business operates in the economy and is affected by the different
phases it is undergoing. In the case of recession, the marketing practices should be different as
what are followed during the inflation period.
 Social Factors– since business operates in a society and has some responsibility towards it
must follow the marketing practices that do not harm the sentiments of people. Also, the
companies are required to invest in the welfare of general people by constructing public
conveniences, parks, sponsoring education, etc.
 Technological Factors– As technology is advancing day by day, the firms have to keep
themselves updated so that customers needs can be met with more precision.
Advantages:
 It offers and overview of the current external environment;
 Analyzes what external forces can influence the company;
 Provides a useful input for SWOT analysis.

REMOTE AND INDUSTRY ENVIRONMENT :

1. PESTLE  Discussed above
2. Porter’s 5 Forces Model

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PORTER’S FIVE FORCES MODEL
Porter’s Five Forces Model is used to analyze the opportunities and threats posed by an
industry to a specific business. As the name states, the model focuses on 5 different forces that can
influence the direction of a business:
 The risk of entry by potential competitors;
 The bargaining power of the buyers;
 The bargaining power of suppliers;
 The intensity of rivalry among established companies within an industry;
 The substitutes to an industry’s products.
Definition:
Porter’s five forces model, refers to a framework based on the competitive analysis,
introduced by Harvard Business School Prof. Michael E. Porter. The model determines the
intensity of competition in any industry is a mix of five competitive factors operating in different
areas of the whole market.
The framework is an outside-in strategy tool for the business unit that evaluates the
attractiveness (profitability) of an industry. Thus, helps the business-persons to identify existing and
potential lines of business.
It is a useful tool for accurately diagnosing important competitive elements in the market, as
well as determining the strength and significance of each five forces.
Advantages:
 Analyzes what external factors can influence the profitability of the company;
 Shapes the competitive strategy of the company;
 Provides a useful input for SWOT analysis.
Porter’s Five Forces Model

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1. Threat of new entrants: Potential entrant is the major source of competition in the industry.
The product range, quality, capacity, etc. brought by them, increases competition. The size of the new
entrant plays a major role here, i.e. the bigger the entrant, the more intense is the competition.
Moreover, the prices are slashed, and the overall profitability of existing players is also affected, by
the new entry.
It analyses the ease of entry to the new market, i.e. if the entry is easy, then the level of
competition in the industry is severe.
2. Bargaining power of suppliers: Suppliers, also exert substantial bargaining power over the
firms, by threatening to increase prices or degrade quality. They are likely to exercise power if:
o The number of suppliers in the industry is limited in number.
o They offer the specialised product.
o The supplier’s product is an important input, to the buyer’s product.
o The product has a few substitutes.
Thus, the factor analyses bargaining power of industry suppliers, which directly affects the
profitability, i.e. the higher the cost, the lesser is the profitability.
3. Bargaining power of customers: The market of outputs, i.e. the customers have the ability to
compete with the supplying industry and put the companies under pressure, by forming groups or
cartels. This force not only affects the prices but also influences the producer’s cost and investments
in certain circumstances, as the powerful buyers influence producers to offer better quality which
involves cost and investment.
Buyer groups are likely to exercise power if, they are concentrated, products are homogeneous, the
switching cost is low, and full information is available.
4. Threat from substitutes: It is the quiescent source of competition, present in the industry.
They are the key cause of competition in many industries. Substitute products are offered at
reasonable prices along with high quality, to the customers can radically change the competitive
scenario of industry, especially, when the introduction is sudden.
5. Rivalry among current players: Last but not the least, is the rivalry among current players,
which is all that is known as competition. It can be shown in a number of ways such as:
o Price competition
o Advertising battles
o New introductions
o Improving quality
o Increasing consumer warranties
So, this factor analyses, how ruthless the competition is, by identifying the existing player and
marketing down their moves and activities. The competition is said to be acute when, there are a few

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sellers, offering similar products to the customers because it is easy for buyers to switch to the one
offering product at low prices.

INDUSTRY ANALYSIS
Industry analysis is a tool that gives investors an A to Z insight into any industry. This
encompasses insights about the level of competition in the industry, demand and supply situation,
how easily can new companies enter the industry etc. The analysis takes into account external and
internal factors that can impact an industry.
What Does this Analysis Entail?
Before placing big bucks on any company, understanding the industry is extremely important.
Say you are investing in a pharmaceutical company, there are a few things you will have to keep in
mind.
For example drug regulations and patenting, demand situation of medicines, FDA regulations
and more.
Such factors tell investors which are the threats that the pharma industry faces, which factors
go in favour and the competitive landscape of the industry. Thorough industry analysis will help you
to understand such unique aspects of any industry.
Who Can Benefit From an Industry Analysis?
Industry analysis is for anyone who is interested in investing in a company; large scale
investors, institutional investors and even retail investors.
Understanding the industry is a key component of understanding a company. So it helps
investors and other stakeholders to position a company against other peers from the same industry. It
gives investors a picture of roadblocks and opportunities that come in the way of the company and its
industry
How to Conduct Industry Analysis?
There are many ways in which you can do this. However, we have zeroed down on two of the
best methods to help you analyse an industry:
 Porter’s Five Forces
 SWOT Analysis  Already Discussed in above Points

HOW COMPETITIVE FORCES SHAPE STRATEGY

Refer Porter’s Five Forces Model
Porter's Five Forces is a simple but powerful tool for understanding the competitiveness of
your business environment, and for identifying your strategy's potential profitability.
This is useful, because, when you understand the forces in your environment or industry that
can affect your profitability, you'll be able to adjust your strategy accordingly. For example, you could

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take fair advantage of a strong position or improve a weak one, and avoid taking wrong steps in
future.

THE COMPANY PROFILE: INTERNAL ANALYSIS OF THE FIRM.

What is an Internal Analysis?
An internal analysis examines your organization’s internal environment in order to assess its
resources, competencies, and competitive advantages. Performing an internal analysis allows you to
identify the strengths and weaknesses of your organization. This knowledge then aids the strategic
decision-making of management while they carry out the strategy formulation and execution process.
These include:
 Gap Analysis
 Strategy Evaluation
 SWOT Analysis
 VRIO Analysis
 OCAT
 McKinsey 7S Framework
 Core Competencies Analysis

Internal Analysis Tools

Before undertaking an internal analysis, you'll need to decide which tool(s) you'd like to use to
conduct the analysis. Many tools and frameworks exist and each is valuable for a certain purpose. To
help you choose the right tool, we've compiled a list of some popular and effective internal analysis
tools with a description of what each tool will help you achieve.
GAP Analysis
Definition: Gap Analysis can be understood as a strategic tool used for analyzing the gap
between the target and anticipated results, by assessing the extent of the task and the ways, in which
gap might be bridged. It involves making a comparison of the present performance level of the entity
or business unit with that of standard established previously.

Gap Analysis is a process of diagnosing the gap between optimized distribution and integration of
resources and the current level of allocation. In this, the firm’s strengths, weakness, opportunities, and

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threats are analyzed, and possible moves are examined. Alternative strategies are selected on the basis
of:
 Width of the gap
 Importance
 Chances of reduction
If the gap is narrow, stability strategy is the best alternative. However, when the gap is wide,
and the reason is environment opportunities, expansion strategy is appropriate, and if it is due to the
past and proposed bad performance, retrenchment strategies are the perfect option.
Types of Gap
The term ‘strategy gap’ implies the variance between actual performance and the desired one,
as mentioned in the company’s mission, objectives, and strategy for reaching them. It is a threat to the
firm’s future performance, growth, and survival, which is likely to influence the efficiency and
effectiveness of the company. There are four types of Gap:

1. Performance Gap: The difference between expected performance and the actual
performance.
2. Product/Market Gap: The gap between budgeted sales and actual sales is termed as
product/market gap.
3. Profit Gap: The variance between a targeted and actual profit of the company.
4. Manpower Gap: When there is a lag between required number and quality of workforce and
actual strength in the organization, it is known as manpower gap.
For different types of gaps, various types of strategies are opted by the firm to get over it.
Alternative Courses of Action
In case, gaps are discovered the company’s management has three alternatives:

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  Redefine the objectives: If there is any difference between objectives and forecast, first and
foremost the company’s top executives need to check whether the objectives are realistic and
achievable or not. If the objectives are intentionally set at a high level, the company should
redefine them.
 Do nothing: This is the least employed action, but it can be considered.
 Change the strategy: Lastly, to bridge the gap between the company’s objectives and
forecast, the entity can go for changing strategy, if the other two alternatives are considered
and rejected.
Before making any change in the strategy, one must consider that the gap exists between the present
and proposed state of affairs. It is too wide to be noticed, and the organization is encouraged to reduce
it. The company’s management is of the opinion that something can be done to reduce it.
Stages in Gap Analysis
1. Ascertain the present strategy: On what assumptions the existing strategy is based?
2. Predict the future environment: Is there any discrepancy in the assumption?
3. Determine the importance of gap between current and future environment: Are changes
in objectives or strategy required?
Whether it is anticipated sales, profit, capacity or overall performance, they are always based on the
past, and present figures and some amount of guess are also involved in it. So, the occurrence of the
gap is quite natural, but if the gap is large, then it is a point to ponder because it might have an
adverse affect on the company’s future.

Strategy Evaluation
A strategy evaluation analyses the results of the implementation of a strategic plan in your
organization. It is useful to undertake a strategy evaluation at certain intervals during your
implementation of strategies such as every 6 months, 1 year, or conclusion of your strategy.  The
strategy evaluation process involves looking back at the goals in your strategic plan and assessing
how well you've done against achieving them.
Process of Strategy Evaluation:

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 1. Fixing
Benchmark of 3. Analyzing
Performance Variance

2. 4. Taking
Measurement Corrective
of Action
Performance

The process of strategy evaluation consists of following steps:

1. Fixing Benchmark of Performance:
While fixing the benchmark, strategists encounter questions such as – what benchmarks to
set, how to set them and how to express them. In order to determine the benchmark performance to be
set, it is essential to discover the special requirements for performing the main task.
The performance indicator that best identify and express the special requirements might then
be determined to be used for evaluation. The organization can use both quantitative and qualitative
criteria for comprehensive assessment of performance.
A quantitative criterion includes determination of net profit, ROI, earning per share, cost of
production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation of
factors such as – skills and competencies, risk taking potential, flexibility etc.
2. Measurement of Performance:
The standard performance is a bench mark with which the actual performance is to be
compared. The reporting and communication system help in measuring the performance. If
appropriate means are available for measuring the performance and if the standards are set in the right
manner, strategy evaluation becomes easier.
But various factors such as managers’ contribution are difficult to measure. Similarly
divisional performance is sometimes difficult to measure as compared to individual performance.
Thus, variable objectives must be created against which measurement of performance can be done.
The measurement must be done at right time else evaluation will not meet its purpose. For
measuring the performance, financial statements like – balance sheet, profit and loss account must be
prepared on an annual basis.
3. Analyzing Variance:
While measuring the actual performance and comparing it with standard performance there
may be variances which must be analyzed. The strategists must mention the degree of tolerance limits
between which the variance between actual and standard performance may be accepted.

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 The positive deviation indicates a better performance but it is quite unusual exceeding the
target always. The negative deviation is an issue of concern because it indicates a shortfall in
performance. Thus in this case the strategists must discover the causes of deviation and must take
corrective action to overcome it.
4. Taking Corrective Action:
Once the deviation in performance is identified, it is essential to plan for a corrective action.
If the performance is consistently less than the desired performance, the strategists must carry a
detailed analysis of the factors responsible for such performance. If the strategists discover that the
organizational potential does not match with the performance requirements, then the standards must
be lowered.
Another rare and drastic corrective action is reformulating the strategy which requires going
back to the process of strategic management, reframing of plans according to new resource allocation
trend and consequent means going to the beginning point of strategic management process

SWOT Analysis
The SWOT analysis is one of the most well-known and used business analysis tools around. It
gained popularity due to its simplicity (covers both an internal and external analysis), though equally
for its effectiveness. The name SWOT is derived from the factors in its grid, - Strengths, Weaknesses,
Opportunities, and Threats.
This tool can be used to create a sustainable niche in your market. The SWOT analysis allows
organizations to uncover the opportunities they have the strength to exploit and minimize their
weaknesses and the risk of impending threats. Using this tool, organizations are able to distinguish
themselves from competitors and successfully compete in their given marketplace.
VRIO Analysis
The VRIO framework is a great tool for specifically assessing an organization's internal
environment. It looks at the different internal resources of an organization and categorizes each based
on overall value to the organization. VRIO is a framework that allows organizations to identify their
competitive advantages and promotes the development of these competitive advantages to sustainable
competitive advantages.
If you're looking to develop a strategy that builds on your organization's competitive advantage, but
you've yet to define what that is - VRIO analysis is the tool you need. 
OCAT
The Organizational Capacity Assessment Tool was designed for non-profit organizations
looking to assess their internal environment. OCAT assesses how well your organization performs
across 10 internal dimensions, including:
 Aspirations
 Strategy

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  Leadership, Board & Staff
 Funding
 Marketing & Communications
 Advocacy
 Business Processes
 Infrastructure & Organizational Structure
 Culture and shared values
 Innovation and adaptation
The results of the assessment help non-profits evaluate and improve their organizational capacity. 
McKinsey 7S Framework
Another highly popular and battle-tested tool is the McKinsey 7S Framework. McKinsey 7S is ideal
for organizations looking to improve the alignment between departments and processes. The model
can be used to assess an organization's current state, as well as a proposed future state, and the gaps
and inconsistencies between them. McKinsey 7S prompts you to analyze 7 internal aspects of your
organization that need to ultimately be aligned for your organization to truly compete and be
successful. The model's 7 elements include:
 Strategy
 Structure
 Systems
 Shared Values
 Skills
 Style
 Staff

Core Competencies Analysis

The core competency analysis is an internal analysis tool that helps organizations create
strategies that move them ahead of their competitors. The basic premise of the analysis is to identify
the organization's core competencies - the combined resources, knowledge, and skills of an
organization that creates unique value to their customer. Once organizations have identified their core
competencies, strategies can be created to focus on only what the organization does well and provides
unique value to the customer.
[END OF UNIT - II]

402 – Strategic Management – Unit - II Page 18