CHAPTERTWO

STRATEGY,
ORGANI
ZATI
ONDESI
GN,
ANDEFFECTI
VENESS

THEROLEOFSTRATEGI
CDI
RECTI
ONI
NORGANI
ZATI
ONDESI
GN

❖ Anor
gani
zat
ionalgoali
sadesi
redst
ateofaf
fai
rst
hatt
heor
gani
zat
ionat
tempt
sto
r
each.
o Agoalr
epr sar
esent esul
torendpoi
ntt
owar
dwhi
chor
gani
zat
ionalef
for
ts
ar
edi
rect
ed.
o Thechoi
ceofgoal
sandst
rat
egyi
nfl
uenceshowt
heor
gani
zat
ionshoul
dbe
desi
gned.
❖ Topex
ecut
ivesdeci
det
heendpur
poset
heor
gani
zat
ionwi
l
lst
ri
vef
oranddet
ermi
ne
t
hedi
rect
ioni
twi
l
ltaket
oaccompl
i
shi
t.
o I
tist
hispur
poseanddi
rect
iont
hatshapeshowt
heor
gani
zat
ioni
sdesi
gned
andmanaged.
o I
ndeed,t
hepr
i yr
mar esponsi
bil
i
tyoft
opmanagementi
stodet
ermi
nean
or
gani
zat
ion’
sgoal
s,st
rat
egy
,anddesi
gn,t
her
einadapt
ingt
heor
gani
zat
ion
t
oachangi
ngenv
ironment
.
o Mi
ddl
emanager
sdomucht
hesamet
hingf
ormaj
ordepar
tment
swi
thi
nthe
gui
del
i
nespr
ovi
dedbyt
opmanagement
.
❖ Ther
elat
ionshi
pst
hroughwhi
cht
opmanager
spr
ovi
dedi
rect
ionandt
hendesi
gn.
o Thedi
rect
ion-
set
ti
ngpr
ocesst
ypi
cal
l
ybegi
nswi
thanassessmentoft
he
oppor
tuni
ti
esandt
hreat
sint
heext
ernal
env
ironment
,incl
udi
ngt
heamountof
change,
uncer
tai
nty
,andr
esour
ceav
ail
abi
l
ity
.
o Topmanager
sal
soassessi
nter
nalst
rengt
hsandweaknessest
odef
inet
he
company
’sdi
sti
nct
ivecompet
encecompar
edwi
thot
herf
ir
msi
nthei
ndust
ry.
❖ Thenextst
epi
stodef
ineandar
ti
cul
atet
heor
gani
zat
i sst
on’ rat
egi
cint
ent
.
o Thi
sincl
udesdef
ini
nganov
eral
lmi
ssi
onandof
fi
cialgoal
sbasedont
he
cor
rectf
itbet
weenext
ernal
oppor
tuni
ti
esandi
nter
nal
str
engt
hs.

1
❖ Leader
sthenf
ormul
atespeci
fi
coper
ati
onal
goal
sandst
rat
egi
est
hatdef
inehowt
he
or
gani
zat
ioni
stoaccompl
i
shi
tsov
eral
lmi
ssi
on.
o Or
gani
zat
iondesi
gnr
efl
ect
sthewaygoal
sandst
rat
egi
esar
eimpl
ement
edso
t
hatt
he or
gani
zat
ion’
s at
tent
ion and r
esour
ces ar
e consi
stent
lyf
ocused
t
owar
dachi
evi
ngt
hemi
ssi
onandgoal
s.
o Or
gani
zat
i gni
ondesi stheadmi
nist
rat
ionandexecut
ionoft
hest
rat
egi
cpl
an.
o Or
gani
zat
ion di
rect
ion i
simpl
ement
ed t
hrough deci
sionsaboutst
ruct
ural
f
orm,i
ncl
udi
ngwhet
hert
heor
gani
zat
ionwi
l
lbedesi
gnedf
oral
ear
ningoran
ef
fi
ciencyor
ient
ati
on,as wel
las choi
ces abouti
nfor
mat
ion and cont
rol
sy
stems,
thet
ypeofpr
oduct
iont
echnol
ogy
,humanr
esour
cepol
i
cies,
cul
tur
e,
andl
i
nkagest
oot
heror
gani
zat
ions.
o Changesi
nst
ruct
ure,t
echnol
ogy
,humanr
esour
cepol
i
cies,cul
tur
e,andi
nter
-
or
gani
zat
ional
li
nkages.
▪ Thi
smeanst
hatst
rat
egi
esar
eof
tenmadewi
thi
nthecur
rentst
ruct
ure
oft
heor
gani
zat
ion,
sot
hatcur
rentdesi
gnconst
rai
ns,
orput
sli
mit
son,
goal
sandst
rat
egy
.
o Mor
eof
tent
hannot
,howev
er,
thenewgoal
sandst
rat
egyar
esel
ect
edbased
onenv
ironment
alneeds,andt
hent
opmanagementat
tempt
stor
edesi
gnt
he
or
gani
zat
iont
oachi
evet
hoseends.
o I
tisi
mpor
tantt
onot
eher
ethatper
for
mancemeasur
ement
sfeedbacki
nto
t
hei
nter
nalenv
ironment
,sot
hatpastper
for
manceoft
heor
gani
zat
ioni
s
assessedbyt
opmanagementi
nset
ti
ngnewgoal
sandst
rat
egi
cdi
rect
ionf
or
t
hef
utur
e.
o Ther
oleoft
opmanagementi
simpor
tantbecausemanager
scani
nter
prett
he
env
ironmentdi
ff
erent
lyanddev
elopdi
ff
erentgoal
s.

ORGANI
ZATI
ONALPURPOSE

Thi
spur
posemayber
efer
redt
oast
heov
eral
lgoal
,ormi
ssi
on.

✔ Di
ff
erentpar
tsoft
heor
gani
zat
ionest
abl
i
sht
hei
rowngoal
sandobj
ect
ivest
ohel
p
meett
heov
eral
lgoal
,mi
ssi
on,
orpur
poseoft
heor
gani
zat
ion.
2
 1.St
rat
egi
cInt
ent
Manyt
ypesofgoal
sexi
sti
nor
gani
zat
ions,andeacht
ypeper
for
msadi
ff
erent
f
unct
ion.
o Howev
er,
toachi
evesuccess,
organi
zat
ionalgoal
sandst
rat
egi
esar
efocused
wi
thst
rat
egi
cint
ent
.
St
rat
egi
cint
entmeans t
hatal
lthe or
gani
zat
ion’
s ener
gies and r
esour
ces ar
e
di
rect
edt
owar
daf
ocused,
uni
fyi
ng,
andcompel
l
ingov
eral
lgoal
.
St
rat
egi
cint
entpr
ovi
desaf
ocusf
ormanagementact
ion.

Thr
eeaspect
srel
atedt
ost
rat
egi
cint
entar
ethemi
ssi
on,cor
ecompet
ence,and
compet
it
iveadv
ant
age.
a)Mi
ssi
on.The ov
eral
lgoalf
oran or
gani
zat
ion i
s of
ten cal
l
ed t
he mi
ssi
on—t
he
or
gani
zat
ion’
sreasonf
orexi
stence.
▪ Themi
ssi
ondescr
ibest
heor
gani
zat
ion’
sshar
edv
aluesandbel
i
efsandi
ts
r
easonf
orbei
ng.
▪ Themi
ssi
oni
ssomet
imescal
l heof
edt fi
cialgoal
s,whi
chr
efer
stot
he
f
ormal
l
y st
ated def
ini
ti
on of busi
ness scope and out
comes t
he
or
gani
zat
ioni
str
yingt
oachi
eve.
▪ Of
fi
ci
algoalst
atement
sty
pical
l
ydef
inebusi
nessoper
ati
onsandmay
f
ocusonv
alues,
mar
ket
s,andcust
omer
sthatdi
sti
ngui
sht
heor
gani
zat
ion.
▪ Whet
hercal
l
edami
ssi
onst
atementorof
fi
cialgoal
s,t
heor
gani
zat
ion’
s
gener
alst
atementofi
tspur
poseandphi
l
osophyi
sof
tenwr
it
tendowni
na
pol
i
cymanual
ort
heannual
repor
t.
✔ Oneoft
hepr
imar
ypur
posesofami
ssi
onst
atementi
stoser
veasacommuni
cat
ion
t
ool
.
o Themi
ssi
onst
atementcommuni
cat
est
ocur
rentandpr
ospect
iveempl
oyees,
cust
omer
s,i
nvest
ors,suppl
i
ers,and compet
it
ors whatt
he or
gani
zat
ion
st
andsf
orandwhati
tist
ryi
ngt
oachi
eve.

3
 o A mi
ssi
on st
atementcommuni
cat
es l
egi
ti
macyt
oint
ernaland ex
ter
nal
st
akehol
der
s,whomayj
oinandbecommi
tt
edt
otheor
gani
zat
ionbecause
t
heyi
dent
if
ywi
thi
tsst
atedpur
poseandv
isi
on.
o Most t
op l
eader
s want empl
oyees,cust
omer
s,compet
it
ors,suppl
i
ers,
i
nvest
ors,andt
hel
ocalcommuni
tyt
olookont
hem i
naf
avor
abl
eli
ght
,and
t
heconceptofl
egi
ti
macypl
aysacr
it
ical
rol
e.
o I
ntoday
’scor
por
ate wor
ld ofweakened t
rust
,incr
easi
ng r
egul
ati
on,and
concer
nfort
henat
uralenv
ironment
,manyor
gani
zat
ionsf
acet
heneedt
o
r
edef
inet
hei
rmi
ssi
ont
oemphasi
zet
hef
ir
m’spur
posei
nmor
ethanf
inanci
al
t
erms.
b)Compet
it
ive Adv
ant
age.The ov
eral
lai
m of st
rat
egi
cint
enti
sto hel
pthe
or
gani
zat
ionachi
eveasust
ainabl
ecompet
it
iveadv
ant
age.
▪ Compet
it
iveadv
ant
ager
efer
stowhatset
stheor
gani
zat
ionapar
tfr
om ot
her
s
andpr
ovi
desi
twi
thadi
sti
nct
iveedgef
ormeet
ingcust
omerorcl
i
entneedsi
n
t
hemar
ket
place.
▪ St
rat
egynecessar
il
ychangesov
ert
imet
ofi
tenv
ironment
alcondi
ti
ons,and
goodmanager
spaycl
oseat
tent
iont
otr
endst
hatmi
ghtr
equi
rechangesi
n
howt
hecompanyoper
ates.
▪ Manager
sanal
yzecompet
it
orsandt
hei
nter
nalandext
ernalenv
ironment
sto
f
ind pot
ent
ialcompet
it
ive openi
ngs and l
ear
n whatnew capabi
l
iti
es t
he
or
gani
zat
ionneedst
ogai
ntheupperhandagai
nstot
hercompani
esi
nthe
i
ndust
ry.
c)Cor
eCompet
ence.Acompany
’scor
ecompet
encei
ssomet
hingt
heor
gani
zat
ion
doesespeci
all
ywel
li
ncompar
isont
oit
scompet
it
ors.
▪ Acor
ecompet
encemaybei
nthear
eaofsuper
iorr
esear
chanddev
elopment
,
exper
ttechnol
ogi
calknow-
how,pr
ocessef
fi
ciency
,orexcept
ionalcust
omer
ser
vice.
▪ I
neachcase,l
eader
sident
if
iedwhatt
hei
rcompanydoesespeci
all
ywel
land
bui
l
tthest
rat
egyar
oundi
t.

4
d)Oper
ati
veGoal
s.Theor
gani
zat
ion’
smi
ssi
onandov
eral
lgoal
spr
ovi
deabasi
sfor
dev
elopi especi
ngmor fi
coper
ati
vegoal
s.
▪ Oper
ati
vegoal
sdesi
gnat
etheendssoughtt
hrough t
heact
ualoper
ati
ng
pr
ocedur
esoft
heor
gani
zat
ionandex
plai
nwhatt
heor
gani
zat
ioni
sact
ual
l
y
t
ryi
ngt
odo.
▪ Oper
ati
ve goal
s descr
ibe speci
fi
c measur
abl
e out
comes and ar
e of
ten
concer
nedwi
tht
heshor
trun.
▪ Oper
ati
vegoal
sty
pical
l
yper
tai
ntot
hepr
imar
ytasksanor
gani
zat
ionmust
per
for
m.
▪ Speci
fi
cgoal
sforeachpr
imar
ytaskpr
ovi
dedi
rect
ionf
ort
heday
-to-
day
deci
si
onsandact
ivi
ti
eswi
thi
ndepar
tment
s.
▪ Ty
picaloper
ati
vegoal
sincl
udeper
for
mancegoal
s,r
esour
cegoal
s,mar
ket
goal
s,empl
oyee dev
elopmentgoal
s,pr
oduct
ivi
ty goal
s,and goal
sfor
i
nnov
ati
onandchange.
e)Ov
eral
lPer
for
mance.Pr
ofi
tabi
l
ityr
efl
ect
sthe ov
eral
lper
for
mance off
or-
prof
it
or
gani
zat
ions.
▪ Pr
ofi
tabi
l
itymaybeexpr
essedi
nter
msofneti
ncome,ear
ningspershar
e,or
r
etur
noni
nvest
ment
.
▪ Ot
herov
eral
lper
for
mancegoal
sar
egr
owt
handout
putv
olume.

▪ Gr
owt
hper
tai
nst
oincr
easesi
nsal
esorpr
ofi
tsov
ert
ime.

▪ Vol
umeper
tai
nst
otot
alsal
esort
heamountofpr
oduct
sorser
vicesdel
i
ver
ed.

▪ Expandi
ngt
hei
rser
vicest
onew cl
i
ent
sisapr
imar
ygoalf
ormanysoci
al
ser
viceagenci
es,
forex
ampl
e.
f
) Resour
ces.Resour
ce goal
s per
tai
ntot
he acqui
sit
ion ofneeded mat
eri
aland
f
inanci
alr
esour
cesf
rom t
heenv
ironment
.
▪ Theymayi
nvol
veobt
aini
ngf
inanci
ngf
ort
heconst
ruct
ionofnew pl
ant
s,
f
indi
ng l
ess expensi
ve sour
ces f
orr
aw mat
eri
als,orhi
ri
ng t
op-
qual
i
ty
t
echnol
ogygr
aduat
es.

5
 ▪ Resour
ce goal
s f
or St
anf
ord Uni
ver
sit
y i
ncl
ude at
tr
act
ing t
op-
not
ch
pr
ofessor
sandst
udent
s.
▪ Aut
o manuf
act
urer
s such as Honda Mot
orCompanyand Toy
ota Mot
or
Cor
por
ati
onhav
eresour
cegoal
sofobt
aini
nghi
gh-
qual
i
tyaut
opar
tsatl
ow
cost
.Fornonpr
ofi
tor
gani
zat
ions,r
esour
cegoal
smi
ghti
ncl
uder
ecr
uit
ing
dedi
cat
edv
olunt
eer
sandexpandi
ngt
heor
gani
zat
ion’
sfundi
ngbase.
g)Empl
oyeeDev
elopment
.Empl
oyeedev
elopmentper
tai
nst
othet
rai
ning,pr
omot
ion,
saf
ety
,andgr
owt
hofempl
oyees.I
tincl
udesbot
hmanager
sandwor
ker
s.
h)Pr
oduct
ivi
ty.Pr
oduct
ivi
ty goal
s concer
nthe amountofout
putachi
eved f
rom
av
ail
abl
eresour
ces.
▪ Theyt
ypi
cal
l
ydescr
ibet
heamountofr
esour
cei
nput
srequi
red t
oreach
desi
redout
put
sandar
ethusst
atedi
nter
msof“
costf
orauni
tofpr
oduct
ion,
”
“
uni
tspr
oducedperempl
oyee,
”or“
resour
cecostperempl
oyee.
”Manager
sat
AkamaiTechnol
ogi
es,
whi
chsel
l
sWebcont
entdel
i
ver
yser
vices,
keepacl
ose
ey
eonsal
esperempl
oyeet
oseei
fthecompanyi
smeet
ingpr
oduct
ivi
ty
goal
s.
i
)Innov
ati
onandChange.I
nnov
ati
ongoal
sper
tai
ntoi
nter
nalf
lexi
bil
i
tyandr
eadi
ness
t
oadaptt
ounexpect
edchangesi
ntheenv
ironment
.
▪ I
nnov
ati
on goal
s ar
e of
ten def
ined wi
thr
espectt
othe dev
elopmentof
speci
fi
cnewser
vices,
product
s,orpr
oduct
ionpr
ocesses.
▪ Al
thoughpr
ofi
tabi
l
itygoal
sar
eimpor
tant
,someoft
oday
’sbestcompani
es
r
ecogni
zet
hatasi
ngl
e-mi
ndedf
ocusonbot
tom-
li
nepr
ofi
tsmaynotbet
he
bestwayt
oachi
evehi
ghper
for
mance.
▪ I
nnov
ati
onandchangegoal
sar
eincr
easi
ngl
yimpor
tant
,ev
ent
hought
hey
mayi
nit
ial
l
ycauseadecr
easei
npr
ofi
ts.
▪ Empl
oyeedev
elopmentgoal
sar
ecr
it
icalf
orhel
pingt
omai
ntai
namot
ivat
ed,
commi
tt
edwor
kfor
ce.

TheI
mpor
tanceofGoal
s

6
 ▪ Bot
hof
fi
ci
algoal
sandoper
ati
vegoal
sar
eimpor
tantf
ort
heor
gani
zat
ion,
but
t
heyser
vev
erydi
ff
erentpur
poses.Of
fi
cialgoal
sandmi
ssi
onst
atement
s
descr
ibeav
aluesy
stem f
ort
heor
gani
zat
ionandsetanov
eral
lpur
poseand
v
isi
on;
oper
ati
vegoal
srepr
esentt
hepr
imar
ytasksoft
heor
gani
zat
ion.
▪ Of
fi
ci
algoal
slegi
ti
mizet
heor
gani
zat
ion;oper
ati
vegoal
sar
emor
eexpl
i
cit
andwel
ldef
ined.
▪ Oper
ati
vegoal
sser
vesev
eralspeci
fi
cpur
poses.Foronet
hing,goal
spr
ovi
de
empl
oyeeswi
thasenseofdi
rect
ion,
sot
hatt
heyknowwhatt
heyar
ewor
king
t
owar
d.Thi
scanhel
ptomot
ivat
eempl
oyeest
owar
dspeci
fi
ctar
get
sand
i
mpor
tantout
comes.
Anot
heri
mpor
tantpur
poseofgoal
sist
oactasgui
del
i
nesf
orempl
oyeebehav
ior
anddeci
sionmaki
ng.
Appr
opr
iat
egoal
scanactasasetofconst
rai
ntsoni
ndi
vi
dualbehav
iorand
act
ionssot
hatempl
oyeesbehav
ewi
thi
nboundar
iest
hatar
eaccept
abl
etot
he
or
gani
zat
ionandl
argersoci
ety
.
Theyhel
ptodef
inet
heappr
opr
iat
edeci
sionsconcer
ningor
gani
zat
ionst
ruct
ure,
i
nnov
ati
on,
empl
oyeewel
far
e,orgr
owt
h.
Fi
nal
l
y,goal
spr
ovi
deast
andar
dforassessment
.Thel
evelofor
gani
zat
ional
per
for
mance,whet
heri
nter
msofpr
ofi
ts,uni
tspr
oduced,degr
eeofempl
oyee
sat
isf
act
ion,l
evelofi
nnov
ati
on,ornumberofcust
omercompl
aint
s,needsa
basi
sforev
aluat
ion.

AFRAMEWORKFORSELECTI
NGSTRATEGYANDDESI
GN

● Tosuppor
tandaccompl
i
sht
heor
gani
zat
ion’
sst
rat
egi
cint
entandkeeppeopl
e
f
ocused i
nthe di
rect
ion det
ermi
ned by or
gani
zat
ionalmi
ssi
on,v
isi
on,and
oper
ati
vegoal
s,manager
shav
etosel
ectspeci
fi
cst
rat
egyanddesi
gnopt
ions
t
hatcan hel
pthe or
gani
zat
ion achi
evei
ts pur
pose and goal
s wi
thi
nit
s
compet
it
ive env
ironment
.Int
hissect
ion,we exami
ne a coupl
e ofpr
act
ical
appr
oachest
osel
ect
ingst
rat
egyanddesi
gn.Ast
rat
egyi
sapl
anf
ori
nter
act
ing

7
 wi
tht
he compet
it
ive env
ironmentt
o achi
eve or
gani
zat
ionalgoal
s.Some
manager
sthi
nkofgoal
sandst
rat
egi
esasi
nter
changeabl
e,butf
orourpur
poses,
goal
sdef
inewher
etheor
gani
zat
ionwant
stogoandst
rat
egi
esdef
inehowi
twi
l
l
gett
her
e.St
rat
egi
escani
ncl
udeanynumberoft
echni
quest
oachi
evet
hegoal
.
Theessenceoff
ormul
ati
ngst
rat
egi
esi
schoosi
ngwhet
hert
heor
gani
zat
ionwi
l
l
per
for
m di
ff
erentact
ivi
ti
est
hani
tscompet
it
orsorwi
l
lexecut
esi
mil
aract
ivi
ti
es
mor
eef
fi
ci
ent
lyt
hani
tscompet
it
or’
sdo.

Twomodel
sforf
ormul
ati
ngst
rat
egi
esar
ethePor
termodelofcompet
it
ivest
rat
egi
es
andMi
l
esandSnow’
sst
rat
egyt
ypol
ogy
.Eachpr
ovi
desaf
ramewor
kforcompet
it
ive
act
ion.Af
terdescr
ibi
ngt
het
womodel
s,wewi
l
ldi
scusshow t
hechoi
ceofst
rat
egi
es
af
fect
sor
gani
zat
iondesi
gn.Por
ter
’sCompet
it
iveFor
cesandSt
rat
egi
esOnepopul
ar
and ef
fect
ive modelf
orf
ormul
ati
ng st
rat
egy i
s Por
ter
’s compet
it
ivef
orces and
st
rat
egi
es.Mi
chaelE.Por
terst
udi
edanumberofbusi
nessor
gani
zat
ionsandpr
oposed
t
hatmanager
scanf
ormul
ateast
rat
egyt
hatmakest
heor
gani
zat
ionmor
epr
ofi
tabl
e
andl
essv
ulner
abl
eift
heyunder
standf
ivef
orcesi
nthei
ndust
ryenv
ironment
.Por
ter
f
oundt
hef
oll
owi
ngf
orcesdet
ermi
neacompany
’sposi
ti
onv
is-
à-v
iscompet
it
orsi
nthe
i
ndust
ry:

❖ TheThr
eatofNew Ent
rant
s:Thet
hreatofnew ent
rant
stoani
ndust
rycancr
eat
e
pr
essur
eforest
abl
i
shedor
gani
zat
ions,whi
chmi
ghtneedt
ohol
ddownpr
icesor
i
ncr
easet
hei
rlev
elofi
nvest
ment
.Thet
hreatofent
ryi
nani
ndust
rydependsl
argel
y
ont
heamountandext
entofpot
ent
ialbar
ri
ers,suchascost
.Iti
sfarmor
ecost
lyt
o
ent
ert
heaut
omanuf
act
uri
ngi
ndust
ry,f
ori
nst
ance,t
hant
ost
artaspeci
alt
ycof
fee
shop.
❖ ThePowerofSuppl
ier
s:Lar
ge,power
fulsuppl
i
erscanchar
gehi
gherpr
ices,l
i
mit
ser
vicesorqual
i
ty,
andshi
ftcost
stot
hei
rcust
omer
s,keepi
ngmor
eoft
hev
aluef
or
t
hemsel
ves.The concent
rat
ion ofsuppl
i
ers and t
he av
ail
abi
l
ity ofsubst
it
ute
suppl
i
ersar
esi
gni
fi
cantf
act
orsi
ndet
ermi
ningsuppl
i
erpower
.Thesol
esuppl
i
erof
mat
eri
alsori
nfor
mat
iont
oacompanywi
l
lhav
egr
eatpower
,forexampl
e.The
Ni
elsenCompanyhaswi
eldedt
remendouspowerwi
tht
elev
isi
onnet
wor
ksbecause

8
 i
thasunt
ilr
ecent
lybeent
hesol
esour
ceofr
ati
ngsdat
athatnet
wor
kexecut
ivesuse
t
o make adv
ert
isi
ng and pr
ogr
ammi
ng deci
sions.Ni
elsen’
spowerhasr
ecent
ly
wanedduet
oqual
i
tycont
rolpr
obl
ems,aswel
last
het
hreatpr
esent
edbyTi
Vo,a
pr
ovi
derofdi
git
alv
ideo r
ecor
der
s,whi
ch has begun of
fer
ing i
ts own det
ail
ed
audi
enceandr
ati
ngsdat
atot
henet
wor
ks.
❖ ThePowerofBuy
ers:Power
fulcust
omer
s,t
hef
li
psi
deofpower
fulsuppl
i
ers,can
f
orcedownpr
ices,demandbet
terqual
i
tyorser
vice,anddr
iveupcost
sfort
he
suppl
yi
ngor
gani
zat
ion.Wal
-Mar
t,f
orexampl
e,i
ssopower
fult
hati
tcaneasi
l
yput
t
hescr
ewst
omanuf
act
urer
swhosuppl
ygoodsf
orsal
eati
tsst
ores.
❖ The Thr
eatofSubst
it
utes:The powerofal
ter
nat
ives and subst
it
utes f
ora
company
’spr
oductorser
vicemaybeaf
fect
edbychangesi
ncost
,newt
echnol
ogi
es,
soci
alt
rendst
hatwi
l
ldef
lectbuy
erl
oyal
ty,andot
herenv
ironment
alchanges.Lar
ge
phar
maceut
icalcompani
esar
eunderi
ntensepr
essur
efr
om gener
iccompet
it
ionas
pat
ent
sonnumer
ouspopul
ardr
ugshav
eexpi
redi
nrecenty
ear
s.Pr
ovi
der
sof
conv
ent
ionall
ong-
dist
ancet
elephoneser
viceshav
esuf
fer
edf
rom t
hei
ntr
oduct
ion
ofi
nexpensi
veI
nter
net
-basedphoneser
vices.
❖ Ri
val
ryamongExi
sti
ngCompet
it
ors:Ri
val
ryamongcompet
it
orsi
sinf
luencedbyt
he
pr
ecedi
ngf
ourf
orces,aswel
lasbycostandpr
oductdi
ff
erent
iat
ion.Por
terhas
r
efer
redt
othe“
adv
ert
isi
ngsl
ugf
est
”whendescr
ibi
ngt
hescr
ambl
i
ngandj
ockey
ing
f
orposi
ti
ont
hatoccur
samongf
ier
cer
ival
swi
thi
nani
ndust
ry.Ther
ival
rybet
ween
CokeandPepsi
isaf
amousexampl
e.Recent
ly,
Cokescor
edbi
gwi
thi
tssponsor
shi
p
of t
he Bei
j
ing Ol
ympi
cs,butPepsi
’
s cr
eat
ive mar
ket
ing had many Chi
nese
consumer
sthi
nki
ngi
twasanof
fi
cial
sponsort
oo.

I
nfi
ndi
ngi
tscompet
it
iveedgewi
thi
nthesef
ivef
orces,
Por
tersuggest
sthatacompany
canadoptoneoft
hreest
rat
egi
es:di
ff
erent
iat
ion,l
ow-
costl
eader
shi
p,orf
ocus.The
f
ocusst
rat
egy
,inwhi
cht
heor
gani
zat
ionconcent
rat
esonaspeci
fi
cmar
ketorbuy
er
gr
oup,i
sfur
therdi
vi
dedi
ntof
ocusedl
owcostandf
ocuseddi
ff
erent
iat
ion.Touset
his
model
,manager
sev
aluat
etwof
act
ors,compet
it
iveadv
ant
ageandcompet
it
ivescope.
Wi
thr
espectt
oadv
ant
age,manager
sdet
ermi
newhet
hert
ocompet
ethr
oughl
ower
cost
sort
hrought
heabi
l
ityt
oof
feruni
queordi
sti
nct
ivepr
oduct
sandser
vicest
hatcan
9
commandapr
emi
um pr
ice.Manager
sthendet
ermi
newhet
hert
heor
gani
zat
ionwi
l
l
compet
eonabr
oadscope(
compet
ingi
nmanycust
omersegment
s)oranar
rowscope
(
compet
ingi
nasel
ect
edcust
omersegmentorgr
oupofsegment
s).

Di
ff
erent
iat
ion:I
nadi
ff
erent
iat
ionst
rat
egy
,or
gani
zat
ionsat
temptt
odi
sti
ngui
sht
hei
r
pr
oduct
sorser
vicesf
rom ot
her
sint
hei
ndust
ry.Anor
gani
zat
ionmayuseadv
ert
isi
ng,
di
sti
nct
ivepr
oductf
eat
ures,
except
ional
ser
vice,
ornewt
echnol
ogyt
oachi
eveapr
oduct
per
cei
vedasuni
que.Thi
sst
rat
egyusual
l
ytar
get
scust
omer
swhoar
enotpar
ti
cul
arl
y
concer
nedwi
thpr
ice,
soi
tcanbequi
tepr
ofi
tabl
e.

Adi
ff
erent
iat
ionst
rat
egycanr
educer
ival
rywi
thcompet
it
orsandf
ightof
fthet
hreatof
subst
it
utepr
oduct
sbecausecust
omer
sar
eloy
alt
othecompany
’sbr
and.

Howev
er,compani
esmustr
emembert
hatsuccessf
uldi
ff
erent
iat
ionst
rat
egi
esr
equi
re
anumberofcost
lyact
ivi
ti
es,suchaspr
oductr
esear
chanddesi
gnandext
ensi
ve
adv
ert
isi
ng.Compani
est
hatpur
sueadi
ff
erent
iat
ionst
rat
egyneedst
rongmar
ket
ing
abi
l
iti
es and cr
eat
ive empl
oyees who ar
e gi
ven t
he t
ime and r
esour
ces t
o seek
i
nnov
ati
ons.

Onegoodi
l
lust
rat
ionofacompanyt
hatbenef
it
sfr
om adi
ff
erent
iat
ionst
rat
egyi
sAppl
e.
Appl
ehasnev
ert
ri
edt
ocompet
eonpr
iceandl
i
kesbei
ngper
cei
vedasan“
eli
te”br
and.
I
tsper
sonalcomput
ers,f
orexampl
e,cancommandsi
gni
fi
cant
lyhi
gherpr
icest
han
ot
herPCsbecauseoft
hei
rdi
sti
nct
iveness.Thecompanyhasbui
l
tal
oyalcust
omer
basebypr
ovi
dingi
nnov
ati
ve,
sty
li
shpr
oduct
sandcr
eat
ingapr
est
igi
ousi
mage

Low-
CostLeader
shi
p:Thel
ow-
costl
eader
shi
pst
rat
egyt
ri
est
oincr
easemar
ketshar
e
bykeepi
ngcost
slowcompar
edt
ocompet
it
ors.

✔ Wi
thal
ow-
costl
eader
shi
pst
rat
egy
,theor
gani
zat
ionaggr
essi
vel
yseeksef
fi
cient
f
aci
l
iti
es,
pur
suescostr
educt
ions,
andusest
ightcont
rol
stopr
oducepr
oduct
sor
ser
vicesmor
e ef
fi
cient
lyt
han i
tscompet
it
ors.Low-
costdoesn’
tnecessar
il
y
meanl
ow-
pri
ce,buti
nmanycases,l
ow-
costl
eader
spr
ovi
degoodsandser
vices
t
ocust
omer
satcheaperpr
ices.

10
 ✔ Thel
ow-
costl
eader
shi
pst
rat
egyi
sconcer
nedpr
imar
il
ywi
thst
abi
l
ityr
athert
han
t
aki
ngr
isksorseeki
ngnew oppor
tuni
ti
esf
ori
nnov
ati
onandgr
owt
h.Al
owcost
posi
ti
onmeansacompanycanachi
evehi
gherpr
ofi
tst
hancompet
it
orsbecause
ofi
tsef
fi
ci
encyandl
oweroper
ati
ngcost
s.
✔ I
naddi
ti
on,i
fsubst
it
utepr
oduct
sorpot
ent
ialnewcompet
it
orsent
ert
hepi
ctur
e,
t
hel
ow-
costpr
oduceri
sinabet
terposi
ti
ont
opr
eventl
ossofmar
ketshar
e.

Focus:Wi
thPor
ter
’st
hir
dst
rat
egy
,thef
ocusst
rat
egy
,theor
gani
zat
ionconcent
rat
eson
aspeci
fi
cregi
onalmar
ketorbuy
ergr
oup.Thecompanywi
l
ltr
ytoachi
eveei
theral
ow-
costadv
ant
ageoradi
ff
erent
iat
ionadv
ant
agewi
thi
nanar
rowl
ydef
inedmar
ket
.One
goodexampl
eofaf
ocusedl
ow-
costst
rat
egyi
sEdwar
dJones,aSt
.Loui
s–based
br
oker
agehouse.Thef
ir
m hassucceededbybui
l
dingi
tsbusi
nessi
nrur
alandsmal
l
-
t
ownAmer
icaandpr
ovi
dingi
nvest
orswi
thconser
vat
ive,
long-
ter
minv
est
ment
s.

Mi
lesandSnow’
sSt
rat
egyTy
pol
ogy

Anot
herst
rat
egyt
ypol
ogywasdev
elopedf
rom t
hest
udyofbusi
nessst
rat
egi
esby
Ray
mondMi
l
esandChar
lesSnow.TheMi
l
esandSnowt
ypol
ogyi
sbasedont
hei
dea
t
hatmanager
sseekt
ofor
mul
atest
rat
egi
est
hatwi
l
lbecongr
uentwi
tht
heex
ter
nal
env
ironment
.Or
gani
zat
ionsst
ri
vef
oraf
itamongi
nter
nalor
gani
zat
ionchar
act
eri
sti
cs,
st
rat
egy
,andt
heext
ernalenv
ironment
.Thef
ourst
rat
egi
est
hatcanbedev
elopedar
e
hepr
t ospect
or,
thedef
ender
,theanal
yzer
,andt
her
eact
or.

Pr
ospect
or:The pr
ospect
orst
rat
egy i
stoi
nnov
ate,t
ake r
isks,seek outnew
oppor
tuni
ti
es,andgr
ow.Thi
sst
rat
egyi
ssui
tedt
oady
nami
c,gr
owi
ngenv
ironment
,
wher
e cr
eat
ivi
tyi
s mor
eimpor
tantt
han ef
fi
ciency
.Ni
ke,whi
ch i
nnov
ates i
n bot
h
pr
oduct
sandi
nter
nalpr
ocesses,exempl
i
fiest
hepr
ospect
orst
rat
egy
.Ni
ke’
snew Ai
r
Jor
danXX3,f
orexampl
e,i
sthef
ir
sti
napr
ogr
am ofshoesbasedondesi
gnst
hatcan
bepr
oducedusi
ngr
ecy
cledmat
eri
alsandl
i
mit
edamount
soft
oxi
cchemi
cal
based
gl
ues.CEO Mar
k Par
kersay
s Ni
ke’
s gr
owt
h st
rat
egy i
s based on bot
h out
war
d
expansi
onandi
nwar
dredesi
gnofoper
ati
ons.Onl
i
necompani
essuchasFacebook,
Googl
e,andMy
Spaceal
sor
efl
ectapr
ospect
orst
rat
egy
.

11
Def
ender
:Thedef
enderst
rat
egyi
sal
mostt
heopposi
teoft
hepr
ospect
or.Rat
hert
han
t
aki
ngr
isksandseeki
ngoutnewoppor
tuni
ti
es,
thedef
enderst
rat
egyi
sconcer
nedwi
th
st
abi
l
ityorev
enr
etr
enchment
.Thi
sst
rat
egyseekst
ohol
dont
ocur
rentcust
omer
s,but
i
tnei
theri
nnov
atesnorseekst
ogr
ow.Thedef
enderi
sconcer
nedpr
imar
il
ywi
thi
nter
nal
ef
fi
ciencyandcont
rolt
opr
oducer
eli
abl
e,hi
gh-
qual
i
typr
oduct
sforst
eadycust
omer
s.
Thi
sst
rat
egycanbesuccessf
ulwhent
heor
gani
zat
ionexi
stsi
nadecl
i
ningi
ndust
ryora
st
abl
eenv
ironment
.

Anal
yzer
:Theanal
yzert
ri
est
omai
ntai
nast
abl
ebusi
nesswhi
l
einnov
ati
ngont
he
per
ipher
y.I
tseemst
oli
emi
dwaybet
weent
hepr
ospect
orandt
hedef
ender
.Some
pr
oduct
swi
l
lbet
arget
edt
owar
dst
abl
eenv
ironment
sinwhi
chanef
fi
ciencyst
rat
egy
desi
gnedt
okeepcur
rentcust
omer
sisused.Ot
her
swi
l
lbet
arget
edt
owar
dnew,mor
e
dy
nami
cenv
ironment
s,wher
egr
owt
hispossi
ble.Theanal
yzerat
tempt
stobal
ance
ef
fi
cientpr
oduct
ionf
orcur
rentpr
oductorser
vicel
i
neswi
tht
hecr
eat
ivedev
elopmentof
newpr
oductl
i
nes.Amazon.
com pr
ovi
desanex
ampl
e.Thecompany
’scur
rentst
rat
egy
i
stodef
endi
tscor
ebusi
nessofsel
l
ingbooksandot
herphy
sicalgoodsov
ert
he
I
nter
net
,butal
sot
obui
l
dabusi
nessi
ndi
git
almedi
a,i
ncl
udi
ngi
nit
iat
ivessuchasa
di
git
albookser
vice,
anonl
i
neDVDr
ent
albusi
ness,
andadi
git
almusi
cst
oret
ocompet
e
wi
thAppl
e’
siTunes.

React
or:Ther
eact
orst
rat
egyi
snotr
eal
l
yast
rat
egyatal
l
.Rat
her
,react
orsr
espondt
o
env
ironment
alt
hreat
sandoppor
tuni
ti
esi
nanadhocf
ashi
on.I
nar
eact
orst
rat
egy
,top
managementhasnotdef
inedal
ong-
rangepl
anorgi
vent
heor
gani
zat
ionanexpl
i
cit
mi
ssi
onorgoal
,sot
heor
gani
zat
iont
akeswhat
everact
ionsseem t
omeeti
mmedi
ate
needs.Al
thought
her
eact
orst
rat
egycansomet
imesbesuccessf
ul,i
tcanal
sol
eadt
o
f
ail
edcompani
es.

HowSt
rat
egi
esAf
fectOr
gani
zat
ionDesi
gn

Choi
ceofst
rat
egyaf
fect
sint
ernalor
gani
zat
ionchar
act
eri
sti
cs.Or
gani
zat
iondesi
gn
char
act
eri
sti
cs need t
o suppor
tthe f
ir
m’s compet
it
ive appr
oach.Forexampl
e,a
companywant
ingt
ogr
ow andi
nventnew pr
oduct
slooksand“
feel
s”di
ff
erentf
rom a
companyt
hati
sfocusedonmai
ntai
ningmar
ketshar
eforl
ong-
est
abl
i
shedpr
oduct
sin

12
ast
abl
eindust
ry.Wi
thal
ow-
costl
eader
shi
pst
rat
egy
,manager
stakeanef
fi
ciency
appr
oacht
oor
gani
zat
iondesi
gn,wher
easadi
ff
erent
iat
ionst
rat
egycal
l
sforal
ear
ning
appr
oach.A l
ow-
costl
eader
shi
p st
rat
egy (
eff
ici
ency
)is associ
ated wi
th st
rong,
cent
ral
i
zedaut
hor
it
yandt
ightcont
rol
,st
andar
doper
ati
ngpr
ocedur
es,
andemphasi
son
ef
fi
cientpr
ocur
ementanddi
str
ibut
ionsy
stems.Empl
oyeesgener
all
yper
for
mrout
ine
t
asksundercl
osesuper
visi
onandcont
rolandar
enotempower
edt
omakedeci
sionsor
t
akeact
ionont
hei
rown.Adi
ff
erent
iat
ionst
rat
egy
,ont
heot
herhand,r
equi
rest
hat
empl
oyeesbeconst
ant
lyexper
iment
ingandl
ear
ning.St
ruct
urei
sfl
uidandf
lexi
ble,
wit
h
st
ronghor
izont
alcoor
dinat
ion.Empower
edempl
oyeeswor
kdi
rect
lywi
thcust
omer
s
and ar
erewar
ded f
orcr
eat
ivi
tyand r
iskt
aki
ng.Theor
gani
zat
ion v
aluesr
esear
ch,
cr
eat
ivi
ty,andi
nnov
ati
venessov
eref
fi
ciencyandst
andar
dpr
ocedur
es.Thepr
ospect
or
st
rat
egyr
equi
reschar
act
eri
sti
cssi
mil
art
oadi
ff
erent
iat
ionst
rat
egy
,andt
hedef
ender
st
rat
egyt
akesan ef
fi
ciencyappr
oach si
mil
art
olow-
costl
eader
shi
p.Becauset
he
anal
yzerst
rat
egyat
tempt
stobal
anceef
fi
ciencyf
orst
abl
epr
oductl
i
neswi
thf
lexi
bil
i
ty
andl
ear
ningf
ornew pr
oduct
s,i
tisassoci
atedwi
thami
xofchar
act
eri
sti
cs.Wi
tha
r
eact
orst
rat
egy
,manager
shav
elef
ttheor
gani
zat
ionwi
thnodi
rect
ionandnocl
ear
appr
oacht
odesi
gn.

ASSESSI
NGORGANI
ZATI
ONALEFFECTI
VENESS

Under
standi
ngor
gani
zat
ionalgoal
sandst
rat
egi
es,aswel
last
heconceptoff
it
ti
ng
desi
gnt
ovar
iouscont
ingenci
es,i
saf
ir
stst
ept
owar
dunder
standi
ngor
gani
zat
ional
ef
fect
iveness.Or
gani
zat
ionalgoal
srepr
esentt
her
easonf
oranor
gani
zat
ion’
sexi
stence
andt
heout
comesi
tseekst
oachi
eve.Ef
fect
ivenessi
sabr
oadconcept
.Iti
mpl
i
cit
ly
t
akes i
nto consi
der
ati
on a r
ange of v
ari
abl
es at bot
hthe or
gani
zat
ionaland
depar
tment
all
evel
s.

Ef
fect
iveness ev
aluat
es t
he ex
tentt
o whi
ch mul
ti
ple goal
s—whet
herof
fi
cialor
oper
ati
ve—ar
eat
tai
ned.

Ef
fi
ciencyi
samor
eli
mit
edconceptt
hatper
tai
nst
othei
nter
nalwor
kingsoft
he
or
gani
zat
ion.Or
gani
zat
ionalef
fi
ciencyi
stheamountofr
esour
cesusedt
opr
oducea
uni
tofout
put
.Itcanbemeasur
edast
her
ati
oofi
nput
stoout
put
s.

13
TRADI
TIONALEFFECTI
VENESSAPPROACHES

Or
gani
zat
ions br
ing r
esour
ces i
nfr
om t
he env
ironment
,and t
hose r
esour
ces ar
e
t
ransf
ormedi
ntoout
put
sdel
i
ver
edbacki
ntot
heenv
ironment
.Tr
adi
ti
onalappr
oaches
t
omeasur
ingef
fect
ivenessl
ookatdi
ff
erentpar
tsoft
heor
gani
zat
ionandmeasur
e
i
ndi
cat
orsconnect
edwi
thout
put
s,i
nput
s,ori
nter
nal
act
ivi
ti
es.

GoalI
ndi
cat
ors

Thegoalappr
oacht
oef
fect
ivenessconsi
stsofi
dent
if
yinganor
gani
zat
ion’
sout
put
goal
sandassessi
nghowwel
ltheor
gani
zat
ionhasat
tai
nedt
hosegoal
s.Thei
mpor
tant
goal
stoconsi
derar
eoper
ati
vegoal
s,becauseof
fi
cialgoal
s(mi
ssi
on)t
endt
obe
abst
ractanddi
ff
icul
ttomeasur
e.

I
ndi
cat
orst
rackedwi
tht
hegoal
appr
oachi
ncl
ude:

•Pr
ofi
tabi
li
ty—t
he posi
ti
ve gai
nfr
om busi
ness oper
ati
ons ori
nvest
ment
s af
ter
expensesar
esubt
ract
ed

•Mar
ketshar
e—t
hepr
opor
ti
onoft
hemar
kett
hef
ir
misabl
etocapt
urer
elat
ivet
o
compet
it
ors

•Gr
owt
h—t
heabi
l
ityoft
heor
gani
zat
iont
oincr
easei
tssal
es,
prof
it
s,orcl
i
entbaseov
er
t
ime

•Soci
alr
esponsi
bil
it
y—howwel
ltheor
gani
zat
ionser
vest
hei
nter
est
sofsoci
etyaswel
l
asi
tsel
f

•Pr
oductqual
it
y—t
heabi
l
ityoft
heor
gani
zat
iont
oachi
evehi
ghqual
i
tyi
nit
spr
oduct
s
orser
vices

Resour
ce-
basedI
ndi
cat
ors

Ther
esour
ce-
basedappr
oachl
ooksatt
hei
nputsi
deoft
het
ransf
ormat
ionpr
ocess.I
t
assumes or
gani
zat
ions mustbe successf
uli
n obt
aini
ng and managi
ng v
alued
r
esour
cesi
nor
dert
obeef
fect
ive.Fr
om ar
esour
ce-
basedper
spect
ive,or
gani
zat
ional
ef
fect
ivenessi
sdef
inedast
heabi
l
ityoft
heor
gani
zat
ion,i
nei
therabsol
uteorr
elat
ive

14
t
erms,t
oobt
ainscar
ceandv
aluedr
esour
cesandsuccessf
ull
yint
egr
ateandmanage
t
hem.Ther
esour
ce-
basedappr
oachi
sval
uabl
ewhenot
heri
ndi
cat
orsofper
for
mance
ar
edi
ff
icul
ttoobt
ain.I
nmanynonpr
ofi
tandsoci
alwel
far
eor
gani
zat
ions,
forexampl
e,i
t
i
shar
dtomeasur
eout
putgoal
sori
nter
nal
eff
ici
ency
.

I
n a br
oad sense,r
esour
ce i
ndi
cat
ors ofef
fect
iveness encompass t
he f
oll
owi
ng
di
mensi
ons:

•Bar
gai
ningposi
ti
on—t
heabi
l
ityoft
heor
gani
zat
iont
oobt
ainf
rom i
tsenv
ironment
scar
ce and v
alued r
esour
ces,i
ncl
udi
ng f
inanci
alr
esour
ces,r
aw mat
eri
als,human
r
esour
ces,
knowl
edge,
andt
echnol
ogy

•Theabi
l
iti
esoft
heor
gani
zat
ion’
sdeci
sionmaker
stoper
cei
veandcor
rect
lyi
nter
pret
t
her
eal
proper
ti
esoft
heext
ernal
env
ironment

•Theabi
l
iti
esofmanager
stouset
angi
ble(
e.g.
,suppl
i
es,peopl
e)andi
ntangi
ble(
e.g.
,
knowl
edge,cor
por
ate cul
tur
e)r
esour
ces i
n day
-to-
day or
gani
zat
ionalact
ivi
ti
es t
o
achi
evesuper
iorper
for
mance

•Theabi
l
ityoft
heor
gani
zat
iont
orespondt
ochangesi
ntheenv
ironment

I
nter
nalPr
ocessI
ndi
cat
ors

I
nthei
nter
nalpr
ocessappr
oach,ef
fect
ivenessi
smeasur
edasi
nter
nalor
gani
zat
ional
heal
th and ef
fi
ci
ency
.An ef
fect
ive or
gani
zat
ion has a smoot
h,wel
l
-oi
l
ed i
nter
nal
pr
ocess.Empl
oyeesar
ehappyandsat
isf
ied.Depar
tmentact
ivi
ti
esmeshwi
thone
anot
hert
oensur
ehi
ghpr
oduct
ivi
ty.Thi
sappr
oachdoesnotconsi
dert
heext
ernal
env
ironment
.Thei
mpor
tantel
ementi
nef
fect
ivenessi
swhatt
heor
gani
zat
iondoeswi
th
t
her
esour
cesi
thas,asr
efl
ect
edi
nint
ernalheal
thandef
fi
ciency
.Thebest
-known
pr
oponent
sofani
nter
nalpr
ocessmodelar
efr
om t
hehumanr
elat
ionsappr
oacht
o
or
gani
zat
ions.

I
nter
nalpr
ocessi
ndi
cat
orsi
ncl
ude:

•Ast
rong,
adapt
ivecor
por
atecul
tur
eandposi
ti
vewor
kcl
i
mat
e

•Oper
ati
onal
eff
ici
ency
,suchasusi
ngmi
nimal
resour
cest
oachi
eveout
comes

15
•Undi
stor
tedhor
izont
alandv
ert
ical
communi
cat
ion

•Gr
owt
handdev
elopmentofempl
oyees

THEBALANCEDSCORECARDAPPROACHTOEFFECTI
VENESS

Busi
nessor
gani
zat
ionshav
ety
pical
l
yfocusedonf
inanci
almeasur
essuchaspr
ofi
tand
r
etur
noni
nvest
mentt
oassessper
for
mance.Nonpr
ofi
tor
gani
zat
ionsal
sohav
eto
assessbudget
s,spendi
ng,andf
und-
rai
singi
ncome,andeachoft
hesemeasur
esi
s
concer
nedwi
thf
inances.Tr
adi
ti
onalappr
oachesbasedongoal
,resour
ce-
based,or
i
nter
nalpr
ocessi
ndi
cat
orsal
lhav
esomet
hingt
oof
fer
,buteachone,j
ustl
i
kesol
e
r
eli
anceonf
inanci
alnumber
s,t
ell
sonl
ypar
toft
hest
ory
.Inr
ecenty
ear
s,anew
appr
oacht
hatbal
ancesaconcer
nforv
ari
ouspar
tsoft
heor
gani
zat
ionr
athert
han
f
ocusi
ngononeaspecthasbecomepopul
ar.

Thebal
ancedscor
ecar
dcombi
nessev
erali
ndi
cat
orsofef
fect
ivenessi
ntoasi
ngl
e
f
ramewor
k,bal
anci
ngt
radi
ti
onalf
inanci
almeasur
eswi
thoper
ati
onalmeasur
esr
elat
ing
t
oacompany
’scr
it
icalsuccessf
act
ors.Br
ief
caseAsanor
gani
zat
ionmanager
,keep
t
hese gui
del
i
nes i
n mi
nd:Use t
he goalappr
oach,i
nter
nalpr
ocess appr
oach,and
r
esour
ce-
basedappr
oacht
oobt
ainspeci
fi
cpi
ctur
esofor
gani
zat
ionalef
fect
iveness.
Assesst
hef
ourcomponent
soft
hebal
ancedscor
ecar
dtoobt
ainabr
oader
,mor
e
bal
ancedpi
ctur
eofef
fect
iveness.Wi
thi
neachar
eaofef
fect
iveness—

f
inanci
alper
for
mance,
cust
omer ser
vice,i
nter
nalbusi
ness pr
ocesses,and t
he
or
gani
zat
ion’
scapaci
tyf
orl
ear
ningandgr
owt
h—manager
sident
if
ykeyper
for
mance
i
ndi
cat
orst
heor
gani
zat
ionwi
l
ltack.Thef
r inanci
alper
spect
iver
efl
ect
saconcer
nthat
t
he or
gani
zat
ion’
s act
ivi
ti
es cont
ri
but
etoi
mpr
ovng shor
i t-and l
ong-
ter
m f
inanci
al
per
for
mance.I
tincl
udes t
radi
ti
onalmeasur
es such as neti
ncome and r
etur
n on
i
nvest .Cust
ment omerser
vicei
ndi
cat
orsmeasur
esucht
hingsashowcust
omer
svi
ew
t
heor
gani
zat
ion,aswel
lascust
omerr
etent
ionandsat
isf
act
ion.Busi
nesspr
ocess
i
ndi
cat
orsf
ocus on pr
oduct
ion and oper
ati
ng st
ati
sti
cs,such as speed ofor
der
f
ulf
il
lmentandcostperor
der
.Thef
i ooksatt
nalcomponentl heor
gani
zat
ionspot
ent
ial
f
orl
ear
ningandgr
owt
h,f ngonhowwel
ocusi lresour
cesandhumancapi
talar
ebei
ng
managedf
ort
hecompany’
sfut
ure.Measur
ement
sincl
udesucht
hingsasempl
oyee

16
sat
isf
act
ion and r
etent
ion,amountoft
rai
ning peopl
erecei
ve,busi
ness pr
ocess
i
mpr
ovement
s,andt
hei
ntr
oduct
ionofnewpr
oduct
s.Thecomponent
soft
hescor
ecar
d
ar
edesi
gnedi
nani
ntegr
ati
vemannersot
hatt
heyr
einf
orceoneanot
herandl
i
nkshor
t-
t
erm act
ionswi
thl
ong-
ter
m st
rat
egi
cgoal
s.

The bal
anced scor
ecar
d hel
ps manager
s assess t
he or
gani
zat
ion f
rom many
per
spect
ivessot
heyhav
eabet
terunder
standi
ngoft
otalef
fect
iveness.Successf
ul
manager
skeept
heor
gani
zat
ionf
ocusedondat
ainal
lfourcomponent
srat
hert
han
r
ely
ingonj
ustone,suchasf
inances,whi
cht
ell
sonl
ypar
toft
hest
ory
.Thus,t
he
bal
anced scor
ecar
d has ev
olv
ed i
nto a sy
stem t
hathel
ps manager
s see how
or
gani
zat
ionalef
fect
ivenessr
esul
tsf
rom accompl
i
shi
ngout
comesi
nfourconsi
stent
andmut
ual
l
ysuppor
ti
vear
eas.Ov
eral
lef
fect
ivenessi
sar
esul
tofhow wel
lthese
i
nter
dependentel
ement
sar
eal
i
gned,sot
hati
ndi
vi
dual
s,t
eams,depar
tment
s,andso
f
ort
har
ewor
kingi
nconcer
ttoat
tai
nspeci
fi
cgoal
sthatul
ti
mat
elyhel
ptheor
gani
zat
ion
achi
evehi
ghper
for
manceandf
ulf
il
li
tsmi
ssi
on.

DESI
GNESSENTI
ALS

■Or
gani
zat
ionsexi
stf
orapur
pose.Topmanager
sdeci
det
heor
gani
zat
ion’
sst
rat
egi
c
i
ntent
,incl
udi
ngaspeci
fi
cmi
ssi
ont
obeaccompl
i
shed.Themi
ssi
onst
atement
,or
of
fi
cialgoal
s,makesexpl
i
citt
hepur
poseanddi
rect
ionofanor
gani
zat
ion.Oper
ati
ve
goal
sdesi
gnat
especi
fi
cendssoughtt
hroughact
ualoper
ati
ngpr
ocedur
es.Of
fi
cialand
oper
ati
ve goal
s ar
e a key el
ementi
n or
gani
zat
ions because t
hey meett
hese
needs—est
abl
i
shi
ng l
egi
ti
macywi
th ext
ernalgr
oups.Two ot
heraspect
srel
ated t
o
st
rat
egi
cint
ent ar
e compet
it
ive adv
ant
age and cor
e compet
ence.Compet
it
ive
adv
ant
ager
efer
stowhatset
stheor
gani
zat
ionapar
tfr
om ot
her
sandpr
ovi
desi
twi
tha
di
sti
nct
iveedge.Acor
ecompet
encei
ssomet
hingt
heor
gani
zat
iondoesext
remel
ywel
l
compar
ed t
o compet
it
ors.Manager
slook f
orcompet
it
ive openi
ngs and dev
elop
st
rat
egi
esbasedont
hei
rcor
ecompet
enci
es.

■ St
rat
egi
esmayi
ncl
udeanynumberoft
echni
quest
oachi
evet
hest
atedgoal
s.Two
model
sforf
ormul
ati
ngst
rat
egi
esar
ePor
ter
’scompet
it
ivef
orcesandst
rat
egi
esandt
he
Mi
l
es and Snow st
rat
egy t
ypol
ogy
.Or
gani
zat
ion desi
gn needs t
ofi
tthe f
ir
m’s

17
compet
it
iveappr
oacht
ocont
ri
but
etoor
gani
zat
ional
eff
ect
iveness.

■Assessi
ngor
gani
zat
ionalef
fect
ivenessr
efl
ect
sthecompl
exi
tyofor
gani
zat
ionsasa
t
opi
cofst
udy
.No easy
,si
mpl
e,guar
ant
eed measur
e wi
l
lpr
ovi
de an unequi
vocal
assessmentofper
for
mance.Or
gani
zat
ionsmustper
for
m di
ver
seact
ivi
ti
eswel
l
—fr
om
obt
aini
ng r
esour
ce i
nput
sto del
i
ver
ing out
put
s—t
o be successf
ul. Tr
adi
ti
onal
appr
oachesuseout
putgoal
s,r
esour
ceacqui
sit
ion,ori
nter
nalheal
thandef
fi
ciencyas
t
hei
ndi
cat
orsofef
fect
iveness.

■Noappr
oachi
ssui
tabl
eforev
eryor
gani
zat
ion,
buteachof
fer
ssomeadv
ant
agest
hat
t
heot
her
smayl
ack.I
naddi
ti
on,amor
erecentappr
oacht
omeasur
ingef
fect
ivenessi
s
t
hebal
ancedscor
ecar
dappr
oach,
whi
cht
akesi
ntoconsi
der
ati
onf
inanci
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