Formula Sheet for Strategy Management

This study material provides a comprehensive formula sheet for Strategy Management covering SWOT, Porter's 5 Forces, PESTEL, 7S Framework, VRIO, SAFE, and Balanced Score Card. It includes theories, strategy frameworks, models, tools, and formulas for each concept. The material is suitable for students studying management courses in college or university.

FORMULA SHEET FOR STRATEGY MANAGEMENT
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Table of Contents
1.0 SWOT:.......................................................................................................................................5
1) Theories:..................................................................................................................................5
2) Strategy framework:................................................................................................................5
3) Strategy Models:......................................................................................................................5
4) Strategy tools:..........................................................................................................................6
5) Formulas:.................................................................................................................................6
2.0 PORTER’S 5 FORCES:............................................................................................................7
1) Theories:..................................................................................................................................7
2) Strategy framework:................................................................................................................8
3) Strategy Models:......................................................................................................................8
4) Strategy tools:..........................................................................................................................8
5) Formulas:.................................................................................................................................9
3.0 PESTEL:..................................................................................................................................10
1) Theories:................................................................................................................................10
2) Strategy framework:..............................................................................................................10
3) Strategy Models:....................................................................................................................10
4) Strategy tools:........................................................................................................................10
5) Formulas:...............................................................................................................................11
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4.0 7S FRAMEWORK:.................................................................................................................12
1) Theories:................................................................................................................................12
2) Strategy framework:..............................................................................................................12
3) Strategy Models:....................................................................................................................12
4) Strategy tools:........................................................................................................................13
5) Formulas:...............................................................................................................................13
5.0 VRIO:......................................................................................................................................14
1) Theories:................................................................................................................................14
2) Strategy framework:..............................................................................................................14
3) Strategy Models:....................................................................................................................15
4) Strategy tools:........................................................................................................................15
5) Formulas:...............................................................................................................................15
6.0 SAFE:......................................................................................................................................17
1) Theories:................................................................................................................................17
2) Strategy framework:..............................................................................................................17
3) Strategy Models:....................................................................................................................18
4) Strategy tools:........................................................................................................................18
5) Formulas:...............................................................................................................................18
7.0 BALANCED SCORE CARD:................................................................................................19
1) Theories:................................................................................................................................19
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2) Strategy framework:..............................................................................................................19
3) Strategy Models:....................................................................................................................20
4) Strategy tools:........................................................................................................................20
5) Formulas:...............................................................................................................................20
References:....................................................................................................................................21
Appendix:......................................................................................................................................23
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1.0 SWOT:
1) Theories:
 SWOT is a strategic planning model to evaluate strength, weakness, opportunity and
threat of a business model.
 Strength is the attributes which could help in achieving future business goals and
sustainability.
 Weakness is the attribute that puts a barrier in the overall business growth.
 Opportunity factor reads how the external business condition can help in achieving the
business objective.
 Threat provides an insight which external factors could hamper the business performance.
2) Strategy framework:
Figure 1: Strategy framework of SWOT
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(Source: (Source: Phadermrod, Crowder & Wills, 2019)
3) Strategy Models:
The right strategy model for SWOT:
Useful Harmful
Internal
factors
Strength Weakness
External
factors
Opportunities Threats
4) Strategy tools:
SWOT tool executes a few benefits such as:
 Helps in assessing future goals through adequate analysis of opportunity and threats
 Prioritizes on key external and internal factors
 Easy to understand by the organization
5) Formulas:
 2*2 Matrix is used to execute strategic analysis of internal and external factors
 Strength and opportunity is placed in the matrix using an aggressive strategy
 Weakness and threat is placed using a defensive strategy
Example: Penetration into a new market based on the existing strength and weakness of the
brand and future opportunity and threat perceived out of the market is a real-world example of
application SWOT framework.
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2.0 PORTER’S 5 FORCES:
1) Theories:
Threat of new entrants: Threat is high when:
 Investment is lesser
 Competitors are weak
 Government is liberal and
 Products are almost similar
Bargaining power of suppliers: Bargaining power is high when:
 Number of suppliers are less
 Suppliers have scarce products
 Switching cost is high
Bargaining power of buyers: Bargaining power is high when:
 Number of suppliers are higher
 Suppliers have varied substitutes
 Switching cost is low
Threat of substitutes: The threat is high when the product ranges are varied, upgraded in quality
and cheap against others.
Rivalry within existing competitors: Rivalry is high when:
 Customer loyalty is low
 Equal competition among rivals
 Exit barriers are high
 Product substitution is higher
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2) Strategy framework:
Figure 2: Porter’s 5 forces model
(Source:Bruijl, 2018, 18)
3) Strategy Models:
 Five forces determine the industry structure and the overall competition level.
 Stronger competitions are low in profit.
 Attractive and unattractive industries are high and low in profits respectively (see
appendix)
4) Strategy tools:
This tool is helpful in determining:
 The competitive position of an industry
 The structure of the industry and buyer-seller relationship
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 Industry rivalry is driven by threat of entry, bargaining power of buyer and suppliers and
threat of substitutes.
5) Formulas:
Step 1: Collect information on five forces
Step 2: Evaluate the results and make diagrammatic display
Step 3: Create strategy based on the results
Final formula: Step 1+Step 2+Step 3
Example: Launching a new product into the highly competitive market may require the
management to conduct a Five Force analysis to assess the degree of competitiveness and
organisation’s relative position with respect the same.
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3.0 PESTEL:
1) Theories:
 PESTEL is used by the global marketers to examine and monitor the macro-
environmental factors.
 Pan, Chen & Zhan (2019) stated that the analysis of an external marketing environment
affects the strategic planning of an organisation to maximize its market opportunities and
minimize its threats into the operating market
2) Strategy framework:
Figure 3: PESTEL Framework
(Source: Pan, Chen & Zhan, 2019)
3) Strategy Models:
Refer to figure 9, appendix.
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4) Strategy tools:
 Define the long-term influence on the operational activities and performance of the firm.
 Review the current and future strategies as per the marketplace.
 Focus to offer a new direction, product or plan for the business.
 Helps to identify the solution of any external issue.
 Provide strategic benefits over the opponents.
 Evaluate the risks allied with the current or new market.
5) Formulas:
Step 1: Collecting information about the PESTEL of the operating market.
Step 2: Identifying the best suitable PESTEL factors which represent the opportunities
Example: Management of a company may want to assess the viability of a newly conceived
capital intensive project that is planned to be introduced in a new territory. For the purpose, the
management may conduct a macro-economic analysis with respect to the 5 aspects of PESTLE
framework to understand the market better.
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4.0 7S FRAMEWORK:
1) Theories:
The McKinsey 7-S framework has been designed to assist the managers with its hard and soft
elements so that the influential factors of the firm can be identified and the organisational
condition can be improved accordingly.
2) Strategy framework:
Strategy: Maintaining and constructing a competitive benefit over rivals.
Structure: Dealing with all the departments of the organisation.
Systems: Regular activities that employees need to be engaged to complete the job.
Shared Values: The core values of the firm related to company culture and the general principle
Style: The leadership style adopted for the employees.
Staff: The workforces and the general competences.
Skills: The genuine skills and aptitudes of the workforces.
3) Strategy Models:
Refer to Appendix, figure 6
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4) Strategy tools:
5) Formulas:
Example: Growth strategy of a business may be finalised based on the implementation of 7S
framework that separately focuses 7 KPIs of the business and help the managers to strategise on
each of the factors as to their role and contribution towards growth and sustainability of the
business.
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5.0 VRIO:
1) Theories:
 VRIO represent a framework formed by a set of questions used to analyse the resource or
capability of a business and determine the competitive advantage.
 How much Value does a resource/capability provides to the organisation?
 How Rare is the control over the resource/capability?
 Can the process of Reproducing a resource/capability incur competitive disadvantage?
 Is the firm organised enough to use the resource/capability?
2) Strategy framework:
Figure 4: Conceptual framework behind VRIO analysis
(Source: Vargas & Garcia, 2018, 230)
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3) Strategy Models:
Figure 5: VRIO analytical model
(Source: Created by author)
4) Strategy tools:
 Aids in the long term strategy planning of an organisation.
 Explains the importance of a resource in terms of strategic advantage and value
generated.
 Provides the economic performance of a resource with respect to threat mitigation.
5) Formulas:
Step 1: Identify valuable, rare and expensive to imitate resources.
Step 2: Assess if the company is structurally organised to use the resources.
Step 3: Protect and preserve the resource
Step 4: Review and upgrade the VRIO resources.
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Example: In a moderately competitive industry, a company may want to disrupt the market by
either through cost leadership or through product differentiation. The viable option for the firm
may best be evaluated by applying VRIO that provides the optimum advice in reference to the
existing resource capacity of the business.
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6.0 SAFE:
1) Theories:
 SAFe or Scaled Agile Framework is workflow patterns meant to usher organisations to
achieve lean and agile operations.
 It is used to associate and support a substantial number of an agile team for the successful
delivery of objectives.
 The framework is the embodiment of knowledge from agile software development,
systems thinking and lean product management.
2) Strategy framework:
 The framework is primarily segmented into Team, Program and Portfolio.
 Systems thinking are applied with the economic outlook.
 The product is built incrementally with shorter and integrated cycles.
 Milestones are based on previous releases.
 Limited work-in-progress time span.
 Decentralised decision making.
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3) Strategy Models:
Figure 6: SAFe implementation model for teams
(Source: Lauersen, Andersen & Andersen, 2017)
4) Strategy tools:
The SAFe framework is based on the following development principles:
 Individuals and interconnection over process and tools.
 Working product instead of product documentation.
 Customer involvement over the contract.
 Responding to change than following a plan.
5) Formulas:
Refer to figure 10, appendix.
Example: A company may consider revamping its internal process by optimising its human
resource, capacity and infrastructure. For the purpose, SAFe model may be applied.
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7.0 BALANCED SCORE CARD:
1) Theories:
 A Balance scorecard is a measure of performance management that is used by managers
to monitor the activities of the employees and take suitable actions.
 Internal functions are quantified and compared against set standards.
 Key features:
 Oriented on strategic agenda
 Quantifiable items to monitor
 Uniform combination of financial and non-financial items.
2) Strategy framework:
Figure 7: Perspective framework for Balanced Scorecard
(Source: Syahdan, Munawaroh, Akbar, 2018)
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3) Strategy Models:
Figure 8: KPI model for balanced scorecard method
(Source: Syahdan, Munawaroh, Akbar, 2018)
4) Strategy tools:
 The organisation is viewed from four different perspectives which are the basis for
developing objectives and the Key Performance Indicators (KPIs).
 Mission and vision of an organisation are broken into actionable steps to achieve the
strategic objectives.
 It is a closed loop controller as the actual performance can be directly measured.
5) Formulas:
Step 1: Create strategic Operational goals based on perspectives.
Step 2: Connect goals to individual KPIs and reference standard for each.
Step 3: Compare the KPI value to the standard and strategise policies based on feedback.
Example: A firm may primarily want to be customer-focus and necessary measures may be
undertaken by indentifying the parameters of BSC without hampering other KPIs.
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References:
Bruijl, G. (2018). The Relevance of Porter's Five Forces in Today's Innovative and Changing
Business Environment, SSRN Electronic Journal, 3(4), 1-21.
https://www.researchgate.net/profile/Gerard_Bruijl2/publication/326026986_The_Releva
nce_of_Porter's_Five_Forces_in_Today's_Innovative_and_Changing_Business_Environ
ment/links/5c14165c299bf139c7593f03/The-Relevance-of-Porters-Five-Forces-in-
Todays-Innovative-and-Changing-Business-Environment.pdf
Lauersen, B.J.,Andersen, E. T. & Andersen, L.B. (2017). Strength training as superior, dose
dependent and safe prevention of acute and overuse sports injuries: a systematic review,
qualitative analysis and meta-analysis, British Journal of Sports Medicine. 7(8), 78-91.
https://bjsm.bmj.com/content/52/24/1557.abstract
Martin, C.A., Pinfield, S. & Rutter, S. (2018). Extending McKinsey’s 7S model to understand
strategic alignment in academic libraries, Library Management. 9 (11), 56-77.
https://www.emeraldinsight.com/doi/abs/10.1108/LM-06-2018-0052
Pan, W., Chen, L. & Zhan, W. (2019). PESTEL Analysis of Construction Productivity
Enhancement Strategies: A Case Study of Three Economies, Journal of Management in
Engineering, 35(1). 99-114.https://ascelibrary.org/doi/abs/10.1061/(ASCE)ME.1943-
5479.0000662
Phadermrod, B. Crowder, M. R. & Wills. B. J. (2019). Importance-Performance Analysis based
SWOT analysis, International Journal of Information Management, 194-204.
https://www.sciencedirect.com/science/article/pii/S0268401216301694
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Syahdan, A.S., Munawaroh, S. R. R., Akbar, M. (2018). Balance Scorecard implementation in
public sector organization, a problem?International journal of Accounting, Finance and
Economics. 1(1). 45-61.
http://journal.stkipsingkawang.ac.id/index.php/IJAFE/article/view/557
Vargas, H. G.J. &Garcia. C.G. (2018). The link between a firm´s internal characteristics and
performance, GPTW & VRIO dimension analysis, 8(2), 222-235.
https://dialnet.unirioja.es/servlet/articulo?codigo=6784268
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Appendix:
Figure 1: Chart analysis of SWOT
(Source: Phadermrod, Crowder & Wills, 2019)
Figure 2: PESTEL impact map
(Source: Pan, Chen & Zhan, 2019)
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Figure 3: Spider Chart on Porter’s five forces
(Source: Bruijl, 2018, 18)
Figure4: Strategy Models of Porter’s 5 forces
(Source: Bruijl, 2018, 18)
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Figure 5: PESTEL variations
(Source: Pan, Chen & Zhan, 2019)
Figure 6: Strategy of 7s models
(Source: Martin, Pinfield & Rutter, 2018)
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Figure 7: Hard and Soft elements of McKinsey’s 7S Model
(Source: Martin, Pinfield & Rutter, 2018)
Figure 8: The McKinsey 7S Framework
(Source: Martin, Pinfield & Rutter, 2018)
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Figure 9: PESTLE strategy
(Source: Pan, Chen & Zhan, 2019)
Figure 10: SAFe implementation flow
(Source: Lauersen, Andersen & Andersen, 2017)
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