Chapter no : 3Chapter no : 3

BUSINESS MISSION AND BUSINESS MISSION AND VISIONVISION

WHAT DO WE WANT TO WHAT DO WE WANT TO BECOME? BECOME?

Importance of a Vision StatementImportance of a Vision Statement 1. A vision statement should answer the 1. A vision statement should answer the

basic question, What do we want to become?´ basic question, What do we want to become?´ A clear vision provides the foundation for A clear vision provides the foundation for developing a comprehensive mission statement.developing a comprehensive mission statement.

2. Many organizations have both a vision and 2. Many organizations have both a vision and a mission statement, but the vision statement a mission statement, but the vision statement should be established first and fore most.should be established first and fore most.

a. The vision statement should be short, a. The vision statement should be short, preferably one sentence, and as many preferably one sentence, and as many managers as possible should have input into managers as possible should have input into developing the statement.developing the statement.

WHAT IS OUR BUSINESS? WHAT IS OUR BUSINESS? AA Mission StatementsMission Statements Drucker says asking the question, ³What is our Drucker says asking the question, ³What is our

business?´ is synonymous with asking the business?´ is synonymous with asking the question, ³What is our mission?´question, ³What is our mission?´ a. An enduring statement of purpose that a. An enduring statement of purpose that

distinguishes one organization from other similar distinguishes one organization from other similar enterprises, the mission statement is a declaration enterprises, the mission statement is a declaration of an organizations reason for being.of an organizations reason for being.

b. Sometimes called a creed statement, a statement b. Sometimes called a creed statement, a statement of purpose, a statement of philosophy, a statement of of purpose, a statement of philosophy, a statement of beliefs, a statement of business principles, or a beliefs, a statement of business principles, or a statement ³defining our business,´ a mission statement ³defining our business,´ a mission statement reveals what an organization wants to be statement reveals what an organization wants to be and whom it wants to serve. and whom it wants to serve.

The Process of Developing a The Process of Developing a Vision and Mission Statement Vision and Mission Statement

As indicated in the strategic-management model, a clear mission As indicated in the strategic-management model, a clear mission statement is needed before alternative strategies can be formulated and statement is needed before alternative strategies can be formulated and implemented.implemented.

It is important to involve as many managers as possible in the It is important to involve as many managers as possible in the process of developing a mission statement, because through process of developing a mission statement, because through involvement, people become committed to an organization.involvement, people become committed to an organization.

A widely used approach to developing a mission statement is toA widely used approach to developing a mission statement is to

a. Select sever al articles about mission statements and ask all managers a. Select sever al articles about mission statements and ask all managers to read these as background information.to read these as background information.

b. Ask manager s to prepare a mission statement for the organization.b. Ask manager s to prepare a mission statement for the organization.

c. A facilitator, or committee of top managers, should then merge c. A facilitator, or committee of top managers, should then merge these statements into a single document and distribute this draft to all these statements into a single document and distribute this draft to all managers.d. A request for modifications, additions, and deletions is managers.d. A request for modifications, additions, and deletions is needed next along witha meeting to revise the documentneeded next along witha meeting to revise the document

Reasons for Developing a Written Mission Reasons for Developing a Written Mission

StatementStatement 1. To ensure unanimity of purpose within the organization1. To ensure unanimity of purpose within the organization 2. To provide a basis, or standard, for allocating 2. To provide a basis, or standard, for allocating

organizational resourcesorganizational resources 3. To establish a general tone or organizational climate3. To establish a general tone or organizational climate 4. To serve as a focal point for individuals to identify 4. To serve as a focal point for individuals to identify

with the organizations purpose and direction, and to deter with the organizations purpose and direction, and to deter those who cannot from participating further in the those who cannot from participating further in the organizations activitiesorganizations activities

5. To facilitate the translation of objectives into a work 5. To facilitate the translation of objectives into a work structure involving the assignment of tasks to structure involving the assignment of tasks to responsible elements within the organizationresponsible elements within the organization

6. To specify organizational purposes and the 6. To specify organizational purposes and the translation of these purposes into objectives in such a translation of these purposes into objectives in such a way that cost, time, and performance parameters can way that cost, time, and performance parameters can be assessed and controlledbe assessed and controlled

CHARACTERI STICS OF A MISSION CHARACTERI STICS OF A MISSION STATEMENT.STATEMENT.

A .A . A Declaration of AttitudeA Declaration of Attitude

1. A mission statement is a declaration of attitude and outlook 1. A mission statement is a declaration of attitude and outlook more than a statement of specific details. It is usually broad in more than a statement of specific details. It is usually broad in scope for at least two reasons: scope for at least two reasons: First, a good mission statement allows for the generation and First, a good mission statement allows for the generation and

consideration of a range of feasible alter native objectives and consideration of a range of feasible alter native objectives and strategies without unduly stifling management creativity.strategies without unduly stifling management creativity.

Second, a mission statement needs to be broad to Second, a mission statement needs to be broad to effectively reconcile differences among and appeal to an effectively reconcile differences among and appeal to an organizations diverse stakeholders, the individuals and organizations diverse stakeholders, the individuals and groups of persons who have a special stake or claim on the groups of persons who have a special stake or claim on the company.company.

2. An effective mission statement arouses positive feelings 2. An effective mission statement arouses positive feelings and emotions about an organization; it is inspiring in the and emotions about an organization; it is inspiring in the sense that it motivates readers to action.sense that it motivates readers to action.

3. It should be short less than 250 words3. It should be short less than 250 words

B. A Customer OrientationB. A Customer Orientation1. A good mission statement reflects the anticipation of customers. 1. A good mission statement reflects the anticipation of customers. Rather than developing a product and then trying to find a market, the Rather than developing a product and then trying to find a market, the operating philosophy of organizations should be to identify customers needs operating philosophy of organizations should be to identify customers needs and then to provide a product or service to fulfill those needs.and then to provide a product or service to fulfill those needs.

2. According to Vern McGinnis, mission statements should 2. According to Vern McGinnis, mission statements should 1) define what the organization is and what it aspires to be, 1) define what the organization is and what it aspires to be, 2) be limited enough to exclude some ventures and broad enough to 2) be limited enough to exclude some ventures and broad enough to

allow for creative growth allow for creative growth 3) distinguish a given organization from all other s, 3) distinguish a given organization from all other s, 4) serve as a framework for evaluating both current and prospective 4) serve as a framework for evaluating both current and prospective

activitiesactivities5) be stated in terms sufficiently clear to be widely understood 5) be stated in terms sufficiently clear to be widely understood

throughout the organizationthroughout the organization..

3. Good mission statements identify the utility of a firms products to its 3. Good mission statements identify the utility of a firms products to its customers.customers.

C.C. CC A Declaration of Social PolicyA Declaration of Social Policy1. The words 1. The words social policy social policy embrace managerial philosophy and thinking at the embrace managerial philosophy and thinking at the highest levels of an organization. For this reason, social policy affects the highest levels of an organization. For this reason, social policy affects the development of a business mission statement.development of a business mission statement.

2. Despite differences in approaches, most American companies try to assure 2. Despite differences in approaches, most American companies try to assure outsider s that they conduct business in a socially responsible way. The mission outsider s that they conduct business in a socially responsible way. The mission statement is an effective instrument for conveying this message statement is an effective instrument for conveying this message

MISSION STATEMENT COMPONENTS

A. Components and Questions That a Mission Statement A. Components and Questions That a Mission Statement Should AnswerShould Answer

1. Customers1. Customers: Who are the firms customers?: Who are the firms customers? 2. Products or services2. Products or services: What are the firms major products?: What are the firms major products? 3. Markets3. Markets: Geographically, where does the firm compete?: Geographically, where does the firm compete? 4. Technology4. Technology: Is the firm technologically current?: Is the firm technologically current? 5. Concern for survival, growth, and profitability5. Concern for survival, growth, and profitability: Is the firm : Is the firm

committed to growth and financial soundness?committed to growth and financial soundness? 6. Philosophy6. Philosophy: What are the basic beliefs, values, : What are the basic beliefs, values,

aspirations, and ethical priorities of the firm?aspirations, and ethical priorities of the firm? 7. Self7. Self--concept: concept: What is the firms distinctive competence What is the firms distinctive competence

or major competitive advantage?or major competitive advantage? 8. Concern for public image: 8. Concern for public image: Is the fir m responsive to Is the fir m responsive to

social, community, and environmental concerns?social, community, and environmental concerns? 9. Concern for employees: 9. Concern for employees: Are employees a valuable asset of Are employees a valuable asset of

the firm?the firm?

Explain why a mission statement should not include Explain why a mission statement should not include strategies and objectives.strategies and objectives.

Answer: Answer:

A mission statement should not include strategies and A mission statement should not include strategies and objectives because the statement needs to be broad in objectives because the statement needs to be broad in scope to effectively provide a basis for performing an scope to effectively provide a basis for performing an external and internal audit and for generating and selecting external and internal audit and for generating and selecting among alternative strategies. among alternative strategies. Including specific strategies and objectives in a mission Including specific strategies and objectives in a mission statement could reduce the level of innovative and creative statement could reduce the level of innovative and creative thinking in an organization Also, including specific thinking in an organization Also, including specific strategies and objectives in a mission statement strategies and objectives in a mission statement jeopardizes the potential for the statement to be widely jeopardizes the potential for the statement to be widely accepted by all managers and employees of the accepted by all managers and employees of the organization. organization. Acceptance of a clear mission is a prerequisite for gaining Acceptance of a clear mission is a prerequisite for gaining acceptance for strategies and objectives of the organizationacceptance for strategies and objectives of the organization

Chapter No 4Chapter No 4THE EXTERNAL ASSESSMENTTHE EXTERNAL ASSESSMENT

examines the tools and concepts needed to conduct an examines the tools and concepts needed to conduct an external strategic-management audit external strategic-management audit

(sometimes called environmental scanning or industry (sometimes called environmental scanning or industry analysis)analysis)

An external audit focuses on identifying and An external audit focuses on identifying and evaluating trends and events beyond the control evaluating trends and events beyond the control of a single firmof a single firm. .

An external audit reveals key opportunities An external audit reveals key opportunities and threats confronting an organization, so and threats confronting an organization, so managers can formulate strategies to take managers can formulate strategies to take advantage of the opportunities and avoid or advantage of the opportunities and avoid or reduce the impact of threatsreduce the impact of threats

ECONOMICFORCES

SOC, CULL, DEM & ENVTAL

FORCES

POL, GOV & LEG

FORCES

TECHNOLOGICAL FORCES

COMPETETIVE FORCES

THE EXTERNAL ASSESSMENT

1. Economic factors have a direct impact on the potential attractiveness of 1. Economic factors have a direct impact on the potential attractiveness of various strategies. For example, if interest rates rise, then funds needed for capital various strategies. For example, if interest rates rise, then funds needed for capital expansion become more costly or unavailable.expansion become more costly or unavailable.

2. The key economic variables that a firm should monitor for strategy formulation 2. The key economic variables that a firm should monitor for strategy formulation are listedare listed

(1) shifts to a service economy (1) shifts to a service economy (2) availability of credit;(2) availability of credit; (3) level of disposable income; (3) level of disposable income; (4) propensity of people to spend; (4) propensity of people to spend; (5) interest rates;(5) interest rates; (6)inflation rate;(6)inflation rate; (7) unemployment trends; and so on(7) unemployment trends; and so on..

3. The economic standard of living varies considerably across cities and countries. 3. The economic standard of living varies considerably across cities and countries. the cost of living in various cities worldwide. For example, a cup of coffee is $4.76 the cost of living in various cities worldwide. For example, a cup of coffee is $4.76 in Tokyo but just 94 cents in Rio de Janeiro.in Tokyo but just 94 cents in Rio de Janeiro.

ECONOMICFORCES

SOCIAL, CULTURAL, DEMOGRAPHIC, AND

ENVIRONMENTAL FORCES 1. 1. Social, cultural, demographic, and environmental Social, cultural, demographic, and environmental

changes have a major impact on virtually all changes have a major impact on virtually all products, services, markets, and customersproducts, services, markets, and customers..

2. 2. Social, cultural, demographic, and environmental Social, cultural, demographic, and environmental trends are shaping the way of live, work, produce, trends are shaping the way of live, work, produce, and consume. New trends are creating a different type and consume. New trends are creating a different type of consumer and, consequently, a need for different of consumer and, consequently, a need for different products, services, and strategies.products, services, and strategies.

3. 3. Significant trends for the future include Significant trends for the future include consumers becoming more educated, the population consumers becoming more educated, the population aging, minorities becoming more influential, people aging, minorities becoming more influential, people looking for local rather than federal solutions to looking for local rather than federal solutions to problems, and fixation on youth decreasingproblems, and fixation on youth decreasing

Key variables of social forces which represent the opportunities and threats in

organization for formulating strategy Attitude towards retirementAttitude towards retirement Attitude towards product qualityAttitude towards product quality Attitude towards customer servicesAttitude towards customer services Attitude towards investingAttitude towards investing Attitude towards careerAttitude towards career Attitude towards authorityAttitude towards authority Attitude towards pollutionAttitude towards pollution Attitude towards waste managementAttitude towards waste management Attitude towards trustAttitude towards trust Attitude towards social securityAttitude towards social security Attitude towards birth, marriage, death.Attitude towards birth, marriage, death.

POLITICAL, GOVERNMENTAL, AND

LEGAL FORCES A. Political, Governmental, and Legal Factors Represent Key Forces . Federal, state, A. Political, Governmental, and Legal Factors Represent Key Forces . Federal, state,

local, and foreign governments are major regulators, deregulators, subsidizers, local, and foreign governments are major regulators, deregulators, subsidizers, employers, and customers of organizations.employers, and customers of organizations.

B. Political, governmental, and legal factors therefore can represent key B. Political, governmental, and legal factors therefore can represent key opportunities or threats for both small and large organizations.opportunities or threats for both small and large organizations.

1. For industries and firms that depend heavily on government contracts or subsidies, 1. For industries and firms that depend heavily on government contracts or subsidies, political forecasts can be the most important part of an external audit.political forecasts can be the most important part of an external audit.

2. Changes in patent laws, antitrust legislation, tax rates, and lobbying activities can affect 2. Changes in patent laws, antitrust legislation, tax rates, and lobbying activities can affect firms significantly.firms significantly.

C. The increasing global interdependence among economies, markets, C. The increasing global interdependence among economies, markets, governments, and organizations make it imperative that firms consider the governments, and organizations make it imperative that firms consider the possible impact of political variables on the formulation and implementation of possible impact of political variables on the formulation and implementation of competitive strategies. Increasing global competition accents the need for competitive strategies. Increasing global competition accents the need for accurate political, governmental, and legal forecasts.accurate political, governmental, and legal forecasts.

D. Although the EU strives to standardize tax breaks, member countries defend their D. Although the EU strives to standardize tax breaks, member countries defend their right to politically and legally set their own tax rates.right to politically and legally set their own tax rates.

E. Local, state, and federal laws, regulatory agencies, and special interest groups E. Local, state, and federal laws, regulatory agencies, and special interest groups can have a major impact on the strategies of small, large, for-profit, and nonprofit can have a major impact on the strategies of small, large, for-profit, and nonprofit organizations organizations

Government regulation and Government regulation and deregulationderegulation

Changes in tax lawsChanges in tax laws Government fiscal and monetary policyGovernment fiscal and monetary policy Level of defense expenditureLevel of defense expenditure Political pressurePolitical pressure Political actionsPolitical actions Environmental protectionEnvironmental protection

Variables which represent firms opportunities and threats for

formulate strategy

TECHNOLOGICAL FORCES TECHNOLOGICAL FORCES Technological Forces Play a Key Role. The Internet is changing the very Technological Forces Play a Key Role. The Internet is changing the very

nature of opportunities and threats by altering the life cycles of products, nature of opportunities and threats by altering the life cycles of products, increasing the speed of distribution, creating new products and services, increasing the speed of distribution, creating new products and services, erasing limitations of traditional geographic markets, and changing the erasing limitations of traditional geographic markets, and changing the historical trade-off between production standardization and flexibility.historical trade-off between production standardization and flexibility.

To effectively capitalize on information technology, a number of To effectively capitalize on information technology, a number of organizations are establishing two new positions in their firms: chief organizations are establishing two new positions in their firms: chief information officer (CIO) and chief technology officer (CTO)information officer (CIO) and chief technology officer (CTO)

The technological changes and discoveries may make opportunities and The technological changes and discoveries may make opportunities and threats in organization for formulate strategy only in products, services, threats in organization for formulate strategy only in products, services, suppliers and distributors, competitors and customers etc.suppliers and distributors, competitors and customers etc. Space communicationSpace communication Unstaffed factoriesUnstaffed factories SatelliteSatellite fiber opticsfiber optics LaserLaser NetworkingNetworking Making revolution in business operation especially in transportation, utility, Making revolution in business operation especially in transportation, utility,

health, and computer industrieshealth, and computer industries Now a days the main decisions in company are taken from computers, and Now a days the main decisions in company are taken from computers, and

computers interpreted the results and decide which one is best one for our computers interpreted the results and decide which one is best one for our organizationorganization

COMPETITIVE FORCES COMPETITIVE FORCES An important part of an external audit is identifying rival firms and An important part of an external audit is identifying rival firms and

determining their strengths, weaknesses, capabilities, determining their strengths, weaknesses, capabilities, opportunities, threats, objectives, and strategies.opportunities, threats, objectives, and strategies.

Collecting and evaluating information on competitors are Collecting and evaluating information on competitors are essential for successful strategy formulationessential for successful strategy formulation

There seven characteristics of company which represent the There seven characteristics of company which represent the competitive in compare to other in U.S.A, these are given below.competitive in compare to other in U.S.A, these are given below.

Market shareMarket share Understand the businessUnderstand the business Make it better, not only from the side of product but according to company Make it better, not only from the side of product but according to company

as wellas well InnovativeInnovative AcquisitionAcquisition Different Different No SubstituteNo Substitute

Competitive Intelligence (CI) ProgramsCompetitive Intelligence (CI) Programs

1. Good CI in business, as in the military, is one of 1. Good CI in business, as in the military, is one of the keys to success. The more information and the keys to success. The more information and knowledge a firm can obtain about competitors, the more knowledge a firm can obtain about competitors, the more likely it can formulate and implement effective strategies.likely it can formulate and implement effective strategies. a. What is CI? CI, as formally defined by the Society of a. What is CI? CI, as formally defined by the Society of

Competitive Intelligence Professionals (SCIP), is a systematic Competitive Intelligence Professionals (SCIP), is a systematic and ethical process of gathering and analyzing information and ethical process of gathering and analyzing information about the competitions activities and general business about the competitions activities and general business trends to further a business own goals (SCIP website).trends to further a business own goals (SCIP website).

2. Firms need an effective competitive intelligence 2. Firms need an effective competitive intelligence program. program.

The three basic missions of a CI program are The three basic missions of a CI program are (1) to provide a general understanding of an industry and its (1) to provide a general understanding of an industry and its

competitors, competitors, (2) to identify areas in which competitors are vulnerable and to (2) to identify areas in which competitors are vulnerable and to

assesses the impact strategic actions would have on competitors, and assesses the impact strategic actions would have on competitors, and (3) to identify potential moves that a competitor might make that (3) to identify potential moves that a competitor might make that

would endanger a firms position in the market.would endanger a firms position in the market.

3. Unethical tactics such as bribery, wiretapping, and 3. Unethical tactics such as bribery, wiretapping, and computer break-ins should never be used to obtain computer break-ins should never be used to obtain information information

Cooperation Among CompetitorsCooperation Among Competitors

1. Strategies that stress cooperation among competitors are 1. Strategies that stress cooperation among competitors are being used more. being used more. For example, Lockheed recently teamed up with British For example, Lockheed recently teamed up with British

Aerospace PLC to compete against Boeing Company to develop Aerospace PLC to compete against Boeing Company to develop the next generation U.S. fighter jet.the next generation U.S. fighter jet.

2. The idea of joining forces with a competitor is not easily accepted by 2. The idea of joining forces with a competitor is not easily accepted by Americans, who often view cooperation and partnerships with skepticism Americans, who often view cooperation and partnerships with skepticism and suspicion. Indeed, joint ventures and cooperative arrangements among and suspicion. Indeed, joint ventures and cooperative arrangements among competitors demand a certain amount of trust to combat paranoia about competitors demand a certain amount of trust to combat paranoia about whether one firm will injure the other.whether one firm will injure the other.

Market Commonality and Resource SimilarityMarket Commonality and Resource Similarity

1.Competitors are firms that offer similar products in the same 1.Competitors are firms that offer similar products in the same market.market.

2. Markets can be geographic, product areas, or segments.2. Markets can be geographic, product areas, or segments.3. Market commonality can be defined as the number and 3. Market commonality can be defined as the number and

significance of markets that a firm competes in with rivals.significance of markets that a firm competes in with rivals.4. Resource similarity is the extent to which the type and 4. Resource similarity is the extent to which the type and

amount of a firms internal resources are comparable to a amount of a firms internal resources are comparable to a rival rival

PORTERS FIVE-FORCES MODELPORTERS FIVE-FORCES MODEL

in competitive analysisin competitive analysis According to Porter, the nature of competitiveness in a given industry can be viewed as a According to Porter, the nature of competitiveness in a given industry can be viewed as a

composite of five forces.composite of five forces.a. Rivalry among competitive firms.a. Rivalry among competitive firms.b. Potential entry of new competitors.b. Potential entry of new competitors.c. Potential development of substitute products.c. Potential development of substitute products.d. Bargaining power of suppliers.d. Bargaining power of suppliers.e.e. BargainingBargaining power of consumerspower of consumers

a. Rivalry among competing firms. Is usually the most powerful of the five competitive forces. The strategies pursued by one fir m can be successful only to the extent that they provide competitive advantage over the strategies pursued by rival firms.

b. Potential entry of new competitors. Whenever new firms can easily enter a particular industry, the intensity of competitiveness among fir ms increases.

c. Potential development of substitute products. In many industries, firms are in close competition with producers of substitute products in other industries.

d. Bargaining power of suppliers. The bargaining power of suppliers affects the intensity of competition in an industry, especially when there are a large number of suppliers, when there are only a few good substitute raw materials, or when the cost of switch ingraw materials is especially costly.

e. Bargaining power of consumers. When customers are concentrated, large, or buy in volume, their bargaining power represents a major force affecting intensity of competition in an industry. In particular, consumers gain increasing bargaining power under the following circumstances:

a. If they can inexpensive switch to competing brands or substitutes,b. If they are particularly important to the seller,c. If sellers are struggling in the face of falling consumer demand,d. If they are well informed about sellers products, prices, and costs, ande. If they have discretion in whether and when they purchase the product

SOURCES OF EXTERNAL INFORMATIONSOURCES OF EXTERNAL INFORMATION

A. Information is Available from Both Published A. Information is Available from Both Published and Unpublished Sourcesand Unpublished Sources

1. Unpublished sources include customer surveys, 1. Unpublished sources include customer surveys, market research, speeches at professional and market research, speeches at professional and shareholders meetings, television programs, interviews, shareholders meetings, television programs, interviews, and conversations with stakeholders.and conversations with stakeholders.

2. Published sources of strategic information include 2. Published sources of strategic information include periodicals, journals, reports, government documents, periodicals, journals, reports, government documents, abstracts, books, directories, newspapers, and manualsabstracts, books, directories, newspapers, and manuals..

B. InternetB. Internet

1. Millions of people today use on- line services for both 1. Millions of people today use on- line services for both business and personal purposes.business and personal purposes.

2. The Internet offers consumers and businesses a 2. The Internet offers consumers and businesses a widening range of services and information resources widening range of services and information resources from all over the world from all over the world

FORECASTING TOOLS AND TECHNIQUESFORECASTING TOOLS AND TECHNIQUES

A. ForecastsA. Forecasts1. Forecasts are educated assumptions about future trends and 1. Forecasts are educated assumptions about future trends and

events.events.2. Forecasting is a complex activity due to factors such as 2. Forecasting is a complex activity due to factors such as

technological innovation, cultural changes, new products, improved technological innovation, cultural changes, new products, improved services, stronger competitors, shifts in government priorities, changing services, stronger competitors, shifts in government priorities, changing social values, unstable economic conditions, and unforeseen events.social values, unstable economic conditions, and unforeseen events.

3. Forecasting tools can be broadly categorized into two groups: 3. Forecasting tools can be broadly categorized into two groups: quantitative techniques and qualitative techniques. quantitative techniques and qualitative techniques.

a. Quantitative forecasts are most appropriate when a. Quantitative forecasts are most appropriate when historic data are available and when the relationships among key variables historic data are available and when the relationships among key variables are expected to remain the same in the future. The three basic types of are expected to remain the same in the future. The three basic types of quantitative forecasting techniques are econometric models, regression, quantitative forecasting techniques are econometric models, regression, and trend extrapolation. and trend extrapolation.

b. Qualitative forecasts. The six basic qualitative b. Qualitative forecasts. The six basic qualitative approaches to forecasting are: approaches to forecasting are:

(1)sales force estimates, (1)sales force estimates, (2) juries of executive opinions, (2) juries of executive opinions, (3) anticipatory surveys or market research, (3) anticipatory surveys or market research, (4) scenario forecasts, (4) scenario forecasts, (5) Delphi forecasts, and (5) Delphi forecasts, and (6)brainstorming.(6)brainstorming.

B. Making AssumptionsB. Making Assumptions

By identifying future occurrences that could have a major effect on the firm By identifying future occurrences that could have a major effect on the firm and making reasonable assumptions about those factors, strategists can carry the and making reasonable assumptions about those factors, strategists can carry the strategic-management process forward.strategic-management process forward.

INDUSTRY ANALYSIS: THE EXTERNAL FACTOR EVALUATION(EFE) MATRIX.INDUSTRY ANALYSIS: THE EXTERNAL FACTOR EVALUATION(EFE) MATRIX.

1.1. An EFE Matrix allows strategists to summarize and evaluate economic, social, cultural, An EFE Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive demographic, environmental, political, governmental, legal, technological, and competitive information.information.

There are five steps in developing an EFE Matrix There are five steps in developing an EFE Matrix 11 List key external factors as identified in the external-audit process. Include a total of 10-20 List key external factors as identified in the external-audit process. Include a total of 10-20

factors from both the opportunities and threats.factors from both the opportunities and threats.22 Assign to each factor a weight from .Assign to each factor a weight from .

0 (not important) to 1.0 (very important). 0 (not important) to 1.0 (very important). These weights show the relative importance. The total of all the weights should equal 1.0These weights show the relative importance. The total of all the weights should equal 1.0 ..

33 Assign a 1-4 rating to each factor to indicate how effectively the firms current response Assign a 1-4 rating to each factor to indicate how effectively the firms current response strategy is: strategy is:

1 = the response is poor,1 = the response is poor,2 = the response is average, 2 = the response is average, 3 = the response is above average, 3 = the response is above average, 4 = the response is superior4 = the response is superior

44 Multiply each factors weight by its rating to get a weighted score.Multiply each factors weight by its rating to get a weighted score.55 Sum the weighted scores for each variable to determine the total weighted score for the Sum the weighted scores for each variable to determine the total weighted score for the

organization. organization.

THE COMPETITIVE PROFILE MATRIX (CPM)

1. The CPM, identifies a firms major competitors and their particular strengths and 1. The CPM, identifies a firms major competitors and their particular strengths and weaknesses in relation to a sample firms strategic position.weaknesses in relation to a sample firms strategic position.

2. There are some important differences between the EFE and CPM. 2. There are some important differences between the EFE and CPM.

First, the critical success factors in a CPM are broader. These factors are also not First, the critical success factors in a CPM are broader. These factors are also not grouped into opportunities and threats as in the EFE. In a CPM, the ratings and weighted grouped into opportunities and threats as in the EFE. In a CPM, the ratings and weighted scores can be compared to rival firms scores can be compared to rival firms