T.C.

BAHEEHR UNIVERSITY

COMPARISON OF STRATEGIC ANALYSES WHICH APPLIED IN PRIVATE SECTOR AND PUBLIC SECTOR

Graduation Project

Tuba Gngrd

ISTANBUL, 2010

T.C. BAHEEHR UNIVERSITY SCHOOL OF ENGINEERING DEPARTMENT OF INDUSTRIAL ENGINEERING

COMPARISON OF STRATEGIC ANALYSES WHICH APPLIED IN PRIVATE SECTOR AND PUBLIC SECTOR

Graduation Project

Tuba Gngrd

Advisor: Asst. Prof. Dr. Ahmet BEKESE

STANBUL, 2010

ABSTRACT

COMPARISON OF STRATEGIC ANALYSES WHICH APPLIED IN PRIVATE SECTOR AND PUBLIC SECTOR Tuba Gngrd Faculty of Engineering Department of Industrial Engineering Advisor: Asst. Prof. Dr. Ahmet Bekese JANUARY, 2010, pages 76

Nowadays, importance of planning is increasing day by day in both private sector and public sector. Managers have to use their resources of organization effectively and efficiently, firstly to manage the organization and make profit indirectly, secondly to provide a contribution to economy of the country, maximize the return to its shareholders, provide equity between the workers, evaluate the opportunities that company confront, and overcome the threats that threaten to the company. To manage this, an organization needs a well-prepared strategic plan that provides the best evaluation of the organizations situation, suggest best solutions to the apparent problems and provide taking an action against to these situations which is prepared by getting benefit from the all available and usable strategic planning tools. After organizations realization of the importance of those issues, strategic planning becomes much more important to organizations. Generally, studies on the strategic planning include the researches on the strategic planning of private and public sector. But, there is not any study that include the analyses used in private sector and public sector and compare this analysis In this study, all the strategic planning analyses that include both sector was presented and it was handled lker- Yldz Holding as a private sector example, and Istanbul Metropolitan Municipality (IMM) as a public sector example.

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At the end of the study, strategic planning of both organizations were presented separately, and the comparison of lker and IMMs strategic planning process was handled at the last part.

Key Words: Strategic Planning, strategic analyses, private sector, public sector, non-profit organizations, comparison

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ZET

ZEL SEKTR LE KAMU SEKTRNDEK STRATEJK ANALZLERN KARILATIRILMASI Tuba Gngrd Mhendislik Fakltesi Endstri Mhendislii Blm Yrd. Do. Dr. Ahmet Bekese OCAK, 2010, sayfa 76

Gnmzde gerek zel sektrde gerek kamu sektrnde planlamann nemi gnden gne artmaktadr. Yneticiler, ncelikle banda bulunduklar organizasyonlar ynetmek ve dolayl yoldan kr elde etmek, daha sonra ise lke ekonomisine katkda bulunmak, paydalarna en fazla fayday ve geri dn salayabilmek, alanlarna en adil ekilde davranabilmek, irketin karsna kan frsatlar deerlendirebilmek ve tehditlerin stesinden gelmek adna kaynaklarn en etkili ve verimli ekilde kullanmaldrlar. Bunu baarabilmek iin, bir organizasyonun kullanlabilecek btn planlama aralarndan faydalanarak, organizasyonun durumunu en iyi ekilde deerlendirebilmesini, ortaya kan sorunlara en uygun zmleri nerilebilmesini ve bu yolda adm atabilmesini salayan iyi hazrlanm bir stratejik planlana ihtiyac vardr. Bu durumun neminin organizasyonlar tarafndan daha iyi farkna varlmasndan sonra stratejik planlama organizasyonlar iin daha da nem arzetmeye balamtr. Stratejik ynetim ile ilgili almalar, genel olarak zel sektr ve kamu sektrndeki aratrmalar iine almaktadr. Ancak her iki sektrn stratejik planlamasnda kullanlan analizleri ierecek ve bunlar kyaslayacak ekilde bir alma bulunmamaktadr. Bu almada, her iki sektr de iinde barndrancak ekilde stratejik planlama analizleri irdelenmi, zel sektr rnei olarak lker Yldz Holding, kamu sektr rnei olarak stanbul Bykehir Belediyesi ele alnmtr.

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almann sonucunda bu iki sektrn stratejik planlar ayr ayr anlatlarak son blmde iki sektr arasnda stratejik planlama uygulamalarndaki farklar ele alnmtr.

Anahtar Kelimeler: Stratejik planlama, stratejik analizler, zel sektr, kamu sektr, kar amac gtmeyen organizasyonlar, karlatrma

ACKNOWLEDGMENTS
I wish to thank to all my professors from whom I learned many things during my undergraduate education. I reached to this point with the knowledge I gained from them. Special thanks are offered to my supervisor Asst. Prof. Ahmet Bekese, who accepted to be my supervisor and guided me during my undergraduate thesis study and also for his moral supports in my undergraduate education. Finally I wish to thank to my family for their endless supports in my education life and also to my engaged for his never ending moral support, helpfulness and love in my life.

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TABLE OF CONTENTS
ABSTRACT...........................................................................................................................ii ZET....................................................................................................................................iv ACKNOWLEDGMENTS....................................................................................................vi TABLE OF CONTENTS.....................................................................................................vii LIST OF TABLES.................................................................................................................x LIST OF FIGURES..............................................................................................................xi LIST OF ABBREVIATIONS..............................................................................................xii 1. INTRODUCTION..............................................................................................................1 2. WHAT IS THE STRATEGIC PLANNING AND MANAGEMENT CONCEPT?.........3 2.1. Key Attributes of Strategic Management...............................................................4 2.2. Defining a Strategy................................................................................................4 3. VISION, MISSION AND MAJOR GOALS.....................................................................5 3.1. Vision.....................................................................................................................5 3.2. Mission...................................................................................................................5 3.3. Major Goals............................................................................................................7 4. ANALYZES.......................................................................................................................8 4.1. SWOT....................................................................................................................8 4.1.1. External Analysis..........................................................................................9 4.1.1.1. General Environment.................................................................................9 4.1.1.1.1. The Demographic Segment.....................................................................9 4.1.1.1.2. The Economic Segment........................................................................10 4.1.1.1.3. Political/Legal Segment........................................................................10 4.1.1.1.4. Socio-Cultural Segment........................................................................10 4.1.1.1.5. Technological Segment.........................................................................11 4.1.1.1.6. Global Segment.....................................................................................11 4.1.1.2. Competitive Environment (Task Environment) and Porters Approach to Industry Analyses.........................................................................................................11 4.1.1.2.1. The Threat of New Entrants .................................................................13 4.1.1.2.2. Bargaining Power of Buyers.................................................................13 4.1.1.2.3. Bargaining Power of Suppliers.............................................................14

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4.1.1.2.4. The Threat of Substitute Products and Services...................................14 4.1.1.2.5. The Intensity of Rivalry Among Competitors in an Industry...............14 4.1.2. Internal Analysis.........................................................................................14 4.1.3. SO, WO, ST, WT Strategies.......................................................................15 4.2. External Factor Evaluation Matrix (EFE Matrix)................................................15 4.2.1. Developing an EFE Matrix.........................................................................15 4.2.2. Evaluation of the EFE Matrix.....................................................................16 4.3. Internal Factor Evaluation Matrix (IFE Matrix)..................................................17 4.3.1. Developing an IFE Matrix..........................................................................17 4.3.2. Evaluation of IFE Matrix............................................................................19 4.4. Competitive Profile Matrix (CPM)......................................................................20 4.4.1. Developing a CPM......................................................................................20 4.4.2. Evaluating a CPM.......................................................................................21 4.5. Financial Ratio Analyses......................................................................................22 4.6. Strategic Position & Action Evaluation Matrix (SPACE Matrix).......................26 4.6.1. Developing a SPACE Matrix......................................................................27 4.6.2. Evaluating a SPACE Matrix.......................................................................30 4.7. Quantitative Strategic Planning Matrix (QSPM).................................................31 4.7.1. Developing a QSPM...................................................................................31 4.7.2. Evaluating the QSPM..................................................................................34 4.8. Value Chain Analyses..........................................................................................34 4.8.1. Primary Activities.......................................................................................35 4.8.1.1. Inbound Logistics.....................................................................................35 4.8.1.2. Operations................................................................................................36 4.8.1.3. Outbound Logistics..................................................................................36 4.8.1.4. Marketing and Sales.................................................................................36 4.8.1.5. Service......................................................................................................37 4.8.2. Support Activities........................................................................................37 4.8.2.1. Procurement.............................................................................................37 4.8.2.2. Technology Development........................................................................38 4.8.2.3. Human Resource Management................................................................38 4.8.2.4. General Administration (Firm Infrastructure)..........................................39

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4.9. Balanced Scorecards............................................................................................40 4.9.1. Customer Perspective..................................................................................42 4.9.2. Internal Business Perspective......................................................................44 4.9.3. Innovation and Learning Perspective..........................................................44 4.9.4. Financial Perspective..................................................................................45 4.10. Portfolio Analyses..............................................................................................47 4.10.1. Boston Consulting Group (BCG) Matrix..................................................48 4.10.2. Mc Kinsey Matrix (GE Matrix)................................................................50 4.10.2.1 Factors that Affect Market Attractiveness..............................................50 4.10.2.2. Factors that Affect Competitive Strengths.............................................51 4.10.2.3. Assessing the Competitive Position.......................................................51 4.10.2.4. Four Basic Types of Unbalanced Portfolios..........................................53 4.10.2.5. Advantages and Disadvantages of the Mc Kinsey Matrix.....................54 4.10.3. Industry Evolution Matrix.........................................................................54 4.10.4. Which Technique Should Be Use?...........................................................56 5. SOME OTHER IMPORTANT ISSUES RELATED WITH NON-PROFIT ORGANIZATIONS....................................................................................................57 6. STRATEGIC PLANNING IN LKER - YILDIZ HOLDING.......................................59 7. STRATEGIC PLANNING IN STANBUL METROPOLITAN MUNICIPALITY......66 8. COMPARISON OF STRATEGIC ANALYSES IN LKER AND IMM......................71 REFERENCES.....................................................................................................................73

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LIST OF TABLES

LIST OF FIGURES

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LIST OF ABBREVIATIONS
AS BCG CA CPM EBIT EBITDA EFE EFEM ES FS GDP GE HR IFE IFEM IMM IS IT LSH QSPM R&D ROE SBU SP Attractiveness Scores Boston Consulting Group Competitive Adventage Competitive Profile Matrix Earnings Before Interest, Taxes arnings Before Interest, Taxes, Depreciation, and Amortization External Factor Evaluation External Factor Evaluation Matrix Environmental Stability Financial Strenght Gross Domestic Product General Electric Human Resource Internal Factor Evaluation Internal Factor Evaluation Matrix Istanbul Metropolitan Municipality Industry Strength Informational Technology Laurens Spethmann Holding Quantitative Strategic Planning Matrix Research and Development Return On Equity Strategic Business Unit Strategic Plan

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SPACE SWOT TQM

Strategic Position & Action Evaluation Strenght Weaknesses Opportunities Threaths Total Quality Management

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Alice and the Cheshire Cat From nowhere, a Cheshire cat appeared in the tree and asked Alice, Can I help you? Alice said, Yes please. Im lost and need to know which road I should take. The Cheshire cat asked, Where are you going? Alice said, Gee, I dont know! Well, said the Cheshire cat, then it doesnt matter which road you take.

If you know yourself and the others, you will never fall into trouble even if you enter into the war a hundred times. If you know just yourself but no others, you will one win,one lost. If you know neither yourself nor others, it means you are in trouble all the wars you attend. Anonymous

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1. INTRODUCTION
Management concept is old as the mankind history and the importance of the management is increasing day by day. While the rivalry between organizations increasing, and resources scarcity is arising usage of the resources in the best manner is become the most vital work for the organizations There are many studies to manage the organizations effectively and efficiently and managers seek for the best management tools to achieve this aim. It is also an important issue that all the organizations subparts should be managed in a harmony with a good managerial skill. To enhance these managerial skills, managers get benefit from that kind of studies. In the management concept, the most important issue is strategic management which is include vision and mission of the organizations, and some kind of analyses in it and this issue is controversial for both in private sector the the sustainability of the organization. There are many tools to construct the the strategic plan to evaluate the management of the organization, its resource usage, to define problems in process and to recommend the best solution for the organization. It is also clear that there is not any study on the comparing strategic management tools between the private sector and public sector. The aim of this study is providing a different approach to all the other studies related with the strategic management of private sector and public sector. During the period of time which I studied on this project, some papers gave me a way to develop an idea about my topic and here there are some examples of them which plays important roles in my study: Strategic Management in Not-For-Profit Organization was written by Mary Louise Hatten from School of Management, Boston College, Chestnut Hill, Massachusetts. U.S.A in 1982. In this paper, strategy identification, evaluation and reformulation for the non-profit-organizations are discussed as an adoption of the principles developed for corporate strategic management. and public sector. When organizations achive establishing a sustainable strategic plan, then they will also provide

A Strategic Planning Process for Public and Non-profit Organizations study is written by John M. Bryson in 1988 and printed in Great Britain. In this article, a pragmatic approach to strategic planning is presented for use by public and non-profit organizations. Benefits of the process are outlined and two examples of its application are presented-one involving a city government and the other a public health nursing service. Requirements for strategic planning success are discussed. Several conclusions are drawn, namely that: (1) strategic planning is likely to become part of the repertoire of public and non-profit planners; (2) planners must be very careful how they apply strategic planning to specific situations; (3) it makes sense to think of decision makers as strategic planners and strategic planners as facilitators of decision making across levels and functions; and (4) there are a number of theoretical and practical issues that still need to be explored. In a different book which named as Strategic Management and Business Policy was written by Thomas L. Wheelen, J. David Hunger in 2004 to introduce the strategic management- a field of inquiry that focuses on the organization as a whole and its interaction with its environment with taxes and cases. The corporate world is in the process of transformation driven by information technology and globalization. This book is handled the panoramic view that is taken by strategic management of this changing corporate terrain and attempts to show how large and small firms can be more effective and efficient not only in todays world but in tomorrows as well. An article as The Balanced Scorecard Measures That Drive Performance was written by Robert S. Kaplan and David P. Norton in 1992to suggest four sets of parameters to the managers who are not glad with the traditional metrics since these kind of metrics didnt let them manage effectively and efficiently and wanted to place them with operational measures. These four perspectives are represented as financial perspective, customer perspective, internal business perspective and innovation and learning perspective. The authors search for a way to answer the questions that How do we look to shareholders?, What must we excel at?, How do customer see us?, Can we continue to improve and create value?

2. WHAT IS THE STRATEGIC PLANNING AND MANAGEMENT CONCEPT?

Leaders of an organization; in the private sector, public sector and nonprofit organization, face and struggle a lot of issues at any moment. For all these; even if there are so many examples,-depending on the area that a leader in-, making a profit, providing a contribution to the Countys benefit, providing involvement of all the shareholders to the organization frame effectively, efficient use of the resources, provide equity between the workers, obtain the job or opportunities to larger communities etc. could be given as an example of the issues. So how does a leader or a company overcome all the position, evaluate the alternatives or opportunities? Leaders have to define a way to struggle these kind of problems, to obtain a consistent harmony between the issues and to overcome the difficulties and also get benefit from the internal and/or external benefits. Roughly, this way-definition called as Strategic Planning. The Strategy word is frequently-used words for the armies. Infect, resources indicate that the etymological origin of the strategy word is rely on the Ancient Greek; stratos=army and ago=manage, to give direction (Tosunolu, 2008). In the managerial perspective; strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages and provide long-run performance and these are long-run range plans and solutions that a company adopts in order to reach its goals in a competitive environment. These strategies may direct a companys behavior in the market with regard to its its potential customers and competitors. Besides, they lead the long-range development of a organizations resources (Warszawski, 1996). Strategic thinking becoming more and more important issue nowadays. In the changing dynamics of the world, what we have to do is, make the strategic thinking is the main issue of our organization and reconstructing our management according to the conclusions of that process. This process can be slightly different from organization to organization. Sometimes organizations firstly determine the vision, mission and the goals then strategic analyzes and strategic decisions are made by the managers, or vice versa. It depends on whether if the organization is being existed for a while in the market or it is just-established organization.

If the vision, mission and the goals of the organization that is not a just-established organization, the strategies will determine after the strategically analyzes are being made. 2.1. Key Attributes of Strategic Management - Strategic management process show a way to company toward overall goals and objectives - It has so many participants in decision making. - This process needs to combine short-term and long-term perspectives. - Defining trade-offs between efficiency and effectiveness is also important. 2.2. Defining a Strategy Strategy is more than what a company intends or plans to do; it is also what it actually does. Based on that idea, defining a strategy is very important issue to determine how a company will compete in their markets, which are the goals of the organization, and to achieve those goals which methods should be applied.

3. VISION, MISSION AND MAJOR GOALS

Determinations of the vision and mission statements are so important to the company in order to specify a target to itself and motivate the organization to achieve that. Some organizations summarize and express their goals and objectives in mission statement and/or a vision statement. On the other hand, some others set the vision statement and/or vision statement firstly to formulate their goals and objectives. 3.1. Vision Vision statement is the short declaration of what an organization aims to be tomorrow and tent to be quite broad. It is the ideal state that might never be reached but which you continually strive to achieve. It, also, can be indicated by core value, core aim and vision target (Zhang et al., 2007). Successful visions provide a succinct guideline for decision making. Features of an effective vision statement include: Clarity and lack of ambiguity Vivid and clear picture Description of a bright future Memorable and engaging wording Realistic aspirations Alignment with organizational values and culture

The Vision should describe why it is important to accomplish the mission. A Mission statement defines the purpose or wider goal for being in existence or in the corporation and can remain the same for decades. A Vision statement is more distinctive to what the corporation can achieve itself. Vision should describe what will be achieved in the wider frame if the organization and others are successful. 3.2. Mission The mission statement should be a clear and succinct representation of the enterprise's purpose for existence. It should incorporate socially meaningful and measurable criteria addressing concepts such as the moral/ethical position of the enterprise,

public image, the target market, products/services, the geographic domain and expectations of growth and profitability (www.businessplans.org) and also include the scope of its business activities, objectives and special codes (Warszawski, 1996). The mission statements answer the following questions: 1) Who we are? 2) Who are the customers? 3) What we do? 4) How we do it? Abells Framework:

Figure 3-1. Diagram of Abells Framework (Hill and Gareth, 1989) Abells approach that illustrated on Figure 3-1 stresses the need for a consumeroriented rather than product-oriented business definition Abells framework identifies the major goals of the company. A product-oriented business definition focuses just on the products sold and the markets served. According to the Abell; a company should answer the 3 questions to gain a competitive advantage.

Who is being satisfied? What is being satisfied? How are customers being satisfied? With specifying these issues, company will see who are the target of company, what it really do to satisfy the target and how the company achieve and meet the customers demands and expectations. By that way Company will complete its definition exactly. 3.3. Major Goals Major goals are specify what the organization hopes to fulfill in the medium to long term. So, it can be say that major goals are generally used to operationalize the mission statement and determine the criteria for evaluating a companys success (Warszawski, 1996). There is also an objectives term addition to the goals term. These words seem in same meaning but in fact have slightly different meanings. While the goals term used to express the open-ended statement of what one wants to accomplish with no quantification of what is to be achieved and no time criteria for completion. On the other hand, an objective would say something includes all the qualifications and time limits in it. In a hierarchy of goals the maximization of stockholder wealth is placed at the top. Other goals are coming after that to achive that goal.

4. ANALYZES
The success of the companies depends on how the company is in a harmony with its environment. To provide this harmony, strategic analyses are used in organizations. Strategic analyzing processes are the second step after the defining vision, mission and major goals and objectives of the company. These processes are so vital to the companies to stay stable, to catch the trends, to adopt the changing in the internal and external environment, to find the different kind of solutions to the problems and to give right decision with predicting future (www.marketingteacher.com). Besides, strategic analysis advices the best strategy for the organization on the basis of the internal and external environment (Boardman and Vining, 2000). 4.1. SWOT To perform a strategic analysis of an organization, it is necesary to analyze both external and internal aspects related to the organizations (Owers and Weber, 1997). SWOT analysis is one of the strategic planning methods that help to the managers to observe and analyze the organization and its environment and evaluate the Strengths, Weaknesses, Opportunities and Threats. It includes identifying objectives of the organization or project, specifying the internal and the external factors that are advantages and disadvantages to achieving those objectives and specifying major criterias that has an impact on the competitivenes before setting up the business strategy (Collett, 1999). The Strenght and Weaknesses part of the SWOT is refers to the internal conditions and Opportunities and Threats are external environmental conditions of a firm. When a manager applying the SWOT, she/he must be careful about the points that will mention below: Manager should be realistic about his companies strengths and weaknesses. The analyses should distinguish between where your organization is today and where it could be in the future. Manager should always be specific when prepare a SWOT. SWOT sentences should be simple and short.

This analysis should be perform by the managers not only once but also perform regularly.

4.1.1. External Analysis First part of the SWOT analysis is determination of the opportunities and threats to the firm since external factor are related to the opportunities and threats (Shahir et al.,2008). These opportunities and threats are outside effects and conditions that a company can not control and has an important effect on the firm in a lot of aspects (www.rapidbi.com). The aim of the external analysis that cover opportunities and threats is to evaluate whether an enterprise can seize opportunities and avoid threats when come across an unexpected external environment, such as fluctuating price, political destabilization, social transition, change in the rule of law, etc.(Chang and Huang, 2006). To completely cover the external analyses issues, company must observe and evaluate the General Environment and the Competitive Environment of the organization. So, we should examine these issues in the next titles: 4.1.1.1. General Environment General environment is composed of factors that can have dramatic effects on firm strategy (Dess et al., 2005). General environment consist of six segments: Demographic, economic, political/legal, socio-cultural, technological and global. Level of competencies of industries is basically determined by these segments. This competitive level is influenced by the degree firms can enter or leave the industry, the availability of the substitute products, bargaining power of the industries suppliers and buyers and the rivalry level of the industries current members. Now, we will mention about these segments, briefly. 4.1.1.1.1. The Demographic Segment The concept of the demography is concerning with the statistical researches of all populations which are related with the study of the size, structure and distribution of populations, and spatial and/or temporal changes in them in response to birth, migration, aging and death. All these are including; aging population, rising affluence, changes in

ethnic composition, geographic distribution of population and greater disparities in income levels. The impact of the demographic trends is changes from industry to industry and country to country. 4.1.1.1.2. The Economic Segment The economy term has very important impact on all industries and all the components of the competition such as whole sellers, suppliers, customers and the other entities that is contribute to the competition in the market. The economic environment shows a populations production of goods, services and income. How much influenced your company from the economy depends on which product or service you are producing. The key economic indicators includes interest rates, unemployment rates, consumer price index, trends in GDP (Gross Domestic Product) and changes in stock market valuations. 4.1.1.1.3. Political/Legal Segment Political/legal environment is closely related with the social and economical conditions of the current environment that the organization exists. That is, pressures from the social environment, such as ecological and health concerns, or the economic environment, such as a slow economic growth or high unemployment, influence legislation planned to develop the particular situation. Political/legal issues are including move toward deregulation and antitrust laws. Trying to achieve a dominant market position through acquisitions by the organizations or companies can obstructed by the antitrust laws. 4.1.1.1.4. Socio-Cultural Segment The cultural environment is related with how the group of people live with their values, beliefs, ideas, attitudes, symbols and concern with their lifestyles and how they use these kind of issues to communicate and interact as a members of society. Socio-cultural segment includes the issues that, more women in the workforce, greater health consciousness, increase in temporary workers, greater concern for fitness,

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greater concern for environment, postponement of family formation, desire for convenience and the consumerism movement etc. 4.1.1.1.5. Technological Segment Technology developments force the organizations to take the technological perspective and improve themselves by adopting the changes in the technological environment and give rise the new products and services opportunities and improve the production and service tools. On the other hand, technology is a tool which is really hard to follow completely. Because very quick- changes are occur and all you have can be outdated in one night. But meanwhile, it can cause new product possibilities. Frequently, the level of R&D expenditures and patents are an indicator of technological development. Technological segment includes genetic engineering, emergence of internet technology, combination of information technology (IT) and the internet, computer-aided design/computer-aided manufacturing systems (CAD/CAM), research in synthetic and exotic materials, pollution/global warming, miniaturization of computing technologies, wireless technology. 4.1.1.1.6. Global Segment There is an increasing trend for firms to expand their operations and market reach beyond the borders of their home country. Globalization provides both opportunities to access larger potential markets and broad base of factors of production such as raw materials, labor, skilled managers, and technical professionals (Dess et al., 2005). Global segment includes, increasing global trade, currency exchange rates, emergence of the other economies related with the other critical countries, trade agreements among regional blocks etc. ( www.drkayfmu.com). 4.1.1.2. Competitive Environment (Task Environment) and Porters Approach to Industry Analyses Considering just the general environment is not enough to determine the factors that can have dramatic effects on firm strategy. Managers must also consider the competitive environment (also sometimes called as task environment).

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Competitive environment includes; competitors (existing and potential), customers and suppliers. About this managerial issue, Michael Porter, an authority on competitive strategy, has a well-known and most commonly used analytical model, called as Porters five forces model of industry competition as illustrated in Figure 4-1. He contends Collective strength of these forces determines the ultimate profit potential in the industry, where profit potential is measured in terms of long-run return on invested capital (Wheelen, Hunger, 2004, p 60). Since external forces generally affect the all the firms, the most important thing is the skills that the firms have to cope with the challenges appears in environment (Porter, 2000). Besides, Michael Porters five forces model of industry analysis ensures better understanding into the economics of emergency care by showing how the forces of supplier power, buyer power, threat of substitution, barriers to entry, and internal rivalry affect the organization (Pines, 2006).

Figure 4-1. Porters Five Forces Model of Industry Competition (Dess et al., 2005, p 55) As we see in the figure above, five forces that demonstrated by Porter and specified the competitive nature of special industry are: 1. The threat of new entrants 2. The bargaining power of buyers 3. The bargaining power of suppliers

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4. The threat of substitute products and services 5. The intensity of rivalry among competitors in an industry (Zhang et al., 2007) These presented five forces are highly interdependent among each other (Grundy,2006). In the next titles, we will mention about these forces: 4.1.1.2.1. The Threat of New Entrants The threat of new entrants means that the organizations or companies who wants a share from the pie of market and bring the new capacity to the market. Therefore, new entrants are threats for the established companies. But entering a new market is not easy for a new organization. The possible barriers to entry are: Economies of Scale Product Differentiation Capital Requirements Switching Cost Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy

In an environment where few or none of above presents, it means that the threat of new entrant is high. 4.1.1.2.2. Bargaining Power of Buyers Buyers constitute a threat for an industry by their power to force down the prices, for higher quality and more services, and play competitors against each other. A buyer group is a dominant side if the following conditions are true: If the buyer concentrated or purchase the large volume of the sellers product or services. If the buyer purchase the standard or undifferentiated items. If the buyer faces a few switching cost. If a buyer has an opportunity to integrate backward by producing the product itself. If the cost of changing supplier is low. If the buyer earn low profit margins

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4.1.1.2.3. Bargaining Power of Suppliers Suppliers can threat industry by their ability to raise prices or reduce the quality of purchased good and services. A supplier can be dominant in the industry if the following conditions are hold: If the supplier industry is dominated by a few companies, but it sells to many. If the supplier produce a unique products and no substitute product is exist or producing substitutes product is not easy. If the supplier has an opportunity for forward and backward integration. If the suppliers products are important inputs to the buyers business.

4.1.1.2.4. The Threat of Substitute Products and Services Substitute products means that those products seem to be different but infact it can cover the same functions as another product. If there is a few or more a substitute product or services that can cover the same functions of the companys product, it can assign as a threat to the company. 4.1.1.2.5. The Intensity of Rivalry Among Competitors in an Industry Firms in the same industry try to beat its rivals by the different kind of ways such as price competition, advertising, product introductions and increased customer services or warranties. According to the Porter, intense rivalry is related with the following circumstances: Number of competitors, rate of industry growth, product or service characteristics, insufficient fixed cost, capacity, height of exit barriers, diversity of rivals. 4.1.2. Internal Analysis When a manager wants to apply the SWOT analysis to the firm, she/he is first defining its work definition, and determines the strength and weaknesses of the company. These strength and weaknesses are derived from the evaluation of the current internal situation of the firm. These features can changed by the manager to meet the mission and vision of the firm. The aim of the internal analysis is evaluate how an enterprise carries out its internal work, such as management, work efficiency, research and development, etc. (Chang and Huang).

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4.1.3. SO, WO, ST, WT Strategies After determine all the opportunities, threats, strength and weaknesses of the company, the next step is evaluation of he issues that will mentioned below: How a company use its strengths to get benefit from the opportunities (SO Strategies). How a company use the opportunities of the firm to strengthen its weaknesses (WO Strategies). How a company use its strengths to beat the threats of it (ST Strategies). Which of the weaknesses should be strengthen to cover the threats of the company (WT Strategies). By that way, strategies are constructed by combining different factors (Shahir et al., 2008). 4.2. External Factor Evaluation Matrix (EFE Matrix) EFE matrix is one of the strategic management tool that used for evaluate the external environment that cover the demographic, economic, politic and legal, sociocultural, technologic and global issues. 4.2.1. Developing an EFE Matrix Strategists should cover five steps to develop an EFE matrix that will mentioned below: 1. Identify key external factors (Critical Success Factors). 2. Assign to each factor a weight from .0 (not important) to 1.0 (very important). These weights show the relative importance. The total of all the weights should equal 1.0. 3. Assign a 1-4 rating to each factor to indicate how effectively the firms current response strategy is: 1= the response is poor 2 = the response is average 3 = the response is above average 4 = the response is superior. 4. Multiply each factors weight by its rating to get a weighted score.

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5. Sum the weighted scores for each variable to determine the total weighted score for the organization. Sum of all assigned weight to factors must be equal to 1.0 otherwise the calculation would not be considered correct. Note that; total weighted scores of below 2.5 indicate an internally weak organization (pdfdatabase.com/), (www.mba-tutorials.com). To give an example about the EFE matrix, we can study on the Table 4-1 as an example: Table 4-1. External Factor Evaluation Matrix for a Retail Computer Store (David et al., 2009)

4.2.2. Evaluation of the EFE Matrix Total weighted score of the matrix will show us how much a company responding above average to the environment for exploiting opportunities and to overcome threats. the total weighted score of 2.70 is above the average (mid-point) of 2.5, so this retail computer business is doing pretty well taking advantage of the external opportunities and avoiding

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the threats facing the firm. There is definitely room for improvement, however, as the highest total weighted score would be 4.0. As indicated by Ratings of 1, this business especially needs to perform better regarding three external factors (#s 3, 8, and 12). In other words, the business especially needs to pursue strategies that will take advantage of opportunities # 3 and 8 and mitigate the impact of threat # 12. If there was no weight column in this EFEM, note that each factor then would be equally important. Having a weight column therefore provides a more robust analysis because it enables strategists to assign higher and lower numbers to capture perceived or actual levels of importance (David et al., 2009). 4.3. Internal Factor Evaluation Matrix (IFE Matrix) One of the important tools for strategic planning is IFE matrix. IFE matrix is used for evaluate the internal issues that firm related with, namely strength such as finance, marketing, IT, operations, accounts and others depend upon the nature of business and its size, strong marketing and promotion, best product quality, strong financial condition, high market share, high value asset and weaknesses such as high cost operations, manufacturing cost is high, high employee turnover rate, expensive products, loss in joint venture etc. On the basis of evaluation of systems these kind of internal functions, 10-20 the strengths and weaknesses of the most important factors were determined and expressed by the Internal Factor Evaluation Matrix (IFE) to evaluate systems (Zhang et al., 2007). 4.3.1. Developing an IFE Matrix Strategists should cover five steps to develop an EFE matrix that will mentioned below: 1. List key internal factors as identified in the internal-audit process. Use a total from ten to twenty internal factors including both strengths and weaknesses. 2. Assign a weight ranging from 0 (not important) to 1.0 (very important). The weight indicates the relative importance of the factor to being successful in the firms industry. The sum of all the weights must equal 1.0.

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3. Assign a 1-4 rating to each factor

Major weakness is represented by 1.0 Minor weakness is represented by 2.0 Minor strength represented by 3.0 Major Strength represented by 4.0 4. Multiply each factors weight by its rating to determine a weighted score for each variable. 5. Sum the weighted scores for each variable to determine the total weighted score for the organization.

Note that; total weighted scores of below 2.5 indicate an internally weak organization (pdfdatabase.com). To give an example about the IFE matrix, we can study Table 4-2 as an example:

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Table 4-2. Internal Factor Evaluation Matrix for a Retail Computer Store (David et al., 2009)

4.3.2. Evaluation of IFE Matrix While analyzing the matrix to obtain the results, the factors that have the greatest weights are mainly important issues. For the example that exhibit above, Revenues from

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repair/service in the store and Location of the store. The two most important factors to being successful in the retail computer store business. The store may need to advertise its repair/services more since that is a really important (weight 0.15) factor to being successful in this business. Also note that the store is doing outstanding on Average customer purchase amount and In-store technical support as indicated by the 4 ratings. The store is having major problems with its carpet, bathroom, paint, and checkout procedures as indicated by the 1 Ratings. This retail computer store might want to hire another checkout person and repair its carpet/paint/bathroom problems. Note also that the IFEM contains substantial quantitative data rather than vague statements. Overall, this store receives a 2.5 total weighted score which on a 1 to 4 scale is exactly average/half way indicating there is definitely room for improvement in store operations/strategies/policies/procedures. As described in a moment, a firms strategies should be derived from a systematic matching of strengths and weaknesses with opportunities and threats (David et al., 2009). 4.4. Competitive Profile Matrix (CPM) Competitive profile matrix is very crucial tool used in strategic management of the company to cover all the critical success factors of the industry and evaluate them by comparing the companys current condition and rivals current condition. By determining the success factors these factors can be different in every industry- in the same table that include different business or organization in the industry provide measure all organizations on same scale and with same success factors. It also points out to the strenght and weaknesses of the company. Beside, while the IFE and EFE matrix have some constraint that they should be include only internal or only external factors, CPM has no constraint while a manager handle it. It is not an issue whether the factors are internal or external. 4.4.1. Developing a CPM Strategists should cover five steps to develop an CPM that will mentioned below: 1. List the critical success factors that extracted from the deep internal and external analysis. 2. Assign a weight ranging from 0 (not important) to 1.0 (very important). The weight indicates the relative importance of the factor to being successful in the firms industry. The sum of all the weights must equal 1.0.

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3. is Assign a 1-4 rating to each factor The response poor represented by 1.0 The response is average is represented by 2.0 The response is above average represented by 3.0 The response is superior represented by 4.0 (www.mba-tutorials.com).

4. Multiply each factors weight by its rating to determine a weighted score for each variable. 5. Sum the weighted scores for each variable to determine the total weighted score for the organization. Note that; total weighted scores of below 2.5 indicate an internally weak organization To give an example about the CPM, we can study on Table 4-3 as an example: Table 4-3. An example about the CPM (www.mba-tutorials.com). Harley Critical Success Factors Advertising Product Quality Price Competitiveness Management Financial Position Customer Loyalty Global Expansion Market Share Total Honda Yamaha

Weight Rating W.Score Rating W.Score Rating W.Score 0.20 0.15 0.10 0.10 0.15 0.10 0.15 0.05 1.00 4 4 2 3 4 3 2 3 0.80 0.60 0.20 0.30 0.60 0.30 0.30 0.15 3,25 2 3 2 2 3 2 2 2 0.40 0.45 0.20 0.20 0.45 0.20 0.30 0.10 2,30 2 3 2 2 2 2 2 2 0.40 0.45 0.20 0.20 0.30 0.20 0.30 0.10 2,15

4.4.2. Evaluating a CPM While analyzing the matrix to obtain the results, the factors that have the greatest weights are mainly important issues. For the example that exhibit above, Advertising is the most important factor to being successful in the motorcycle business. Companies may need to improve its product quality, strengthen the financial position and global expansion since that is a really important (weight 0.15) factor to being successful in this business, too. Also, if we evaluate the performance of Harley, note that the company doing

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outstanding on advertising, Product quality and financial position as indicated by the 4 ratings. The company is having some problems with price competitiveness and global expansion as indicated by the 2 Ratings. Overall, while Honda and Yamaha receives 2.30 and 2.15 respectively, Harley receives a 3.25 total weighted score which on a 1 to 4 scale is represent a strong position comparing to its rivals and also represent a strong position in the market. From that matrix, managers can realize the strength and weaknesses and opportunities and threats of the company and determine which factor should be developed or which one is one of the most powerful factors to the company. 4.5. Financial Ratio Analyses Financial ratio analysis is a useful and very important tool for strategic planning for interpreting financial statements to provide an assessment of viability, stability, profitability and performance of a business, sub-business or a project comparing to themselves ratios (to understand the past and futures performance) and especially comparing to the markets average. Financial statements or some financial reports include some ratios and ratio analysis is the calculation of ratios from data in these statements. It is very useful to determine some strengths and weaknesses of the company. By that way, managers can use the financial ratios to the SWOT analysis as an important input and have a chance to evaluate the companys performance and financial state. In addition to that, some ratios are not significantly meaningful without a comparison according to some indicators such as industry trends or yearly trends (cal et al., 2005). According to the consequences of these analyses, companys top management can decide some actions that are mentioned below:

Continue or discontinue its main operation or part of its business; Make or purchase certain materials in the manufacture of its product; Acquire or rent/lease certain machineries and equipment in the production of its goods; Issue stocks or negotiate for a bank loan to increase its working capital; Make decisions regarding investing or lending capital;

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Other decisions that allow management to make an informed selection on various alternatives in the conduct of its business (en.wikipedia.org). Different kinds of ratios are used in these kind of analysis such as liquidity ratios

that allows ability to maintain positive cash flow while satisfying immediate obligations, profitability ratios that provide ability to earn income and provide growth in both short term and long term, performance ratios that measure the returns of company on its capital investment and about the profit margins, working capital ratios that used to form an opinion about how quickly are debts paid or how many times is inventory turned, solvency ratios to determine the level of debt in relation to other assets and to equity and whether if the level of interest out of profits are payable or stability ratios to determine the firms ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. All these ratios can present in some categories which are (1) liquidity ratios, (2) Profitability ratios, (3) activity ratios, (4) leverage ratios and some other ratios are illustrated in Figure 4-2.1 and Figure 4-2.2.

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Figure 4-2.1. Financial Ratio Analysis (Wheelen and Hunger, 2004, p 344)

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Figure 4-2.2. Financial Ratio Analysis (Cont.) (Wheelen and Hunger, 2004, p 345)

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Financial ratios help to financial analyst to; Standardize information from financial statements across multiple financial years to allow comparison of a firms performance over time in a financial model. Standardize information from financial statements from different companies to allow an apple to apples comparison between firms of differing size in a financial model. Measure key relationships by relating inputs (costs) with outputs (benefits) and facilitates comparison of these relationships over time and across firms in a financial model (www.financialmodelingguide.com). For all these reasons these analyses should be used in strategic management of the business. 4.6. Strategic Position & Action Evaluation Matrix (SPACE Matrix) SPACE matrix is an strategic management tool that used to analyze and evaluate the companys strategic position and action and focuses on the strategy formulation of an organization. SPACE matrix includes four quadrants that each quadrant indicates one of four type of strategy. These are: Aggressive Conservative Defensive Competitive Beside, the axes of the SPACE matrix represents two internal dimensions which are financial strength abbreviated with FS and its competitive advantage that abbreviated with CA and two external dimensions which are environmental stability that shortening with ES and industry strength that shortening with IS. Figure 4-3 is what a completed SPACE matrix looks like.

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Figure 4-3. Completed SPACE Matrix (www.maxi-pedia.com) Depending on the type of the firm and its industry, a number of variables could make up each of the dimensions represented on the axes of the typical SPACE Matrix. Factors that are typically included are those found in the firm's External Factor Evaluation Matrix and its Internal Factor Evaluation Matrix (EFE & IFE) and these should be considered in developing a SPACE Matrix. Other important variables that can be included in a SPACE Matrix examination are a firm's financial performance such as return on investment, leverage, liquidity, working capital, and cash flow commonly are considered determining factors of an organization's financial strength (www.researchandwriting.org). 4.6.1. Developing a SPACE Matrix Space matrix calculates the importance of each dimension and places them into the four-quadrant framework with X and Y coordinates. To construct a SPACE matrix following steps should be followed: Select a set of variables to define financial strength (FS), competitive advantage (CA), environmental stability (ES), and industry strength (IS). Assign a numerical value ranging from +1(worst) to +6 (best) to each of the variables that make up the FS and IS dimensions. Assign a numerical value ranging from -1 (best) to -6 (worst) to each of the variables that make up the ES and CA dimensions.

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Compute an average score for FS, CA, IS, and ES by summing the values given to the variables of each dimension and dividing by the number of variables included in the respective dimension.

Plot the average scores for FS, IS, ES, and CA on the appropriate axis in the SPACE Matrix. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on they-axis and plot the resultant point on Y. Plot the intersection of the new xy point.

Draw a directional vector from the origin of the SPACE Matrix through the new intersection point. This vector reveals the type of strategies recommended for the organization: aggressive, competitive, defensive, or conservative. As an example of SPACE matrix, we can study on the example related to Financial

Institution SPACE Matrix below: FINANCIAL STRENGTH The bank's primary capital ratio is 7.23 percent, which is 1.23 1.0 1.0 3.0 4.0 Total INDUSTRY STRENGTH Deregulation provides geographic and product freedom. Deregulation increases competition in the banking industry. Pennsylvania's interstate banking law allows the bank to acquire 4.0 Total 10.0 4.0 2.0 9.0 The bank's return on assets is negative 0.77, compared to a bank industry average ratio of positive 0.70. The bank's net income was $183 million, down 9 percent from The bank's revenues increased 7 percent to $3.46 billion. a year earlier. percentage points over the generally required ratio of 6 percent. Rating

other banks in New Jersey, Ohio, Kentucky, the District of Columbia, and West Virginia.

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ENVIRONMENTAL STABILITY Less-developed countries are experiencing high inflation and 4.0 5.0 4.0 13.0 Headquartered in Pittsburgh, the bank historically has been heavily Banking deregulation has created instability throughout the industry. Total COMPETITIVE ADVANTAGE The bank provides data processing services for more than 450 2.0 5.0 2.0 Total CONCLUSION ES Average is -13.0 3 = -4.33 IS Average is + 10.0 3 = 3.33 CA Average is -9.0 3 = -3.00 FS Average is + 9.0 4 = 2.25 Directional Vector Coordinates: x-axis: -3.00 + (13.33) = +0.33 y-axis: -4.33 + (12.25) = -2.08 So, the bank should pursue Competitive Strategies as we can see from the Figure 4-4. 9.0 Superregional banks, international banks, and nonbanks are becoming The bank has a large customer base institutions in 38 states. increasingly competitive. political instability. dependent on the steel, oil, and gas industries. These industries are depressed.

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Figure 4-4. Competitive Strategies in Space Matrix (www.researchandwriting.org) 4.6.2. Evaluating a SPACE Matrix According to the conclusion of the SPACE Matrix company define the type of strategy the company should persue. According to the conclusion of that, some kind of actions should be taken. If the directional vector appears in the conservative quadrant (upper-left quadrant) of the SPACE Matrix, the recommended strategy will be indicated staying close to the company's basic competencies and not taking excessive risks. As an example of the actions under the conservative strategies, market penetration, market development, product development, and concentric diversification can be mentioned. On the other hand, if the directional vector exists in the defensive quadrant of the SPACE Matrix, the recommended strategy will be indicated to focus on rectifying internal weaknesses and avoiding external threats. As an example of the actions under the defensive strategies retrenchment, divestiture, liquidation, and concentric diversification can be considered. Beside, if the directional vector located in the competitive quadrant of the SPACE Matrix, competitive strategies that include backward, forward and horizontal integration; market penetration; market development; product development; and joint venture would be the most appropriate action to be taken. Finally, if the directional vector exists in the aggressive quadrant of the SPACE Matrix, according to the companys competitive position, recommended strategy should be developing a market penetration and market development strategy that may include

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product development, integration with other companies, acquisition of competitors, and so on. 4.7. Quantitative Strategic Planning Matrix (QSPM) The Quantitative Strategic Planning Matrix is one of the most important managerial tools that used to make a selection among the set of strategies that presented before and find the most attractive one for the organization to apply (David, 1986). QSPM forms the decision stage of the strategy formulation. The Matrix is constructed on the EFE Matrix, IFE Matrix, CPM, SWOT, SPACE matrix, BCG Matrix and IE Matrix and based on three primary inputs that are indicated below:

The critical success factors of your business unit. The relative importance of each of these critical success factors. How you rate a particular strategy by each success factor (www.mindtools.com).

4.7.1. Developing a QSPM To construct QSPM the following steps should be applied: Make a list of the firms key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM. This information should be taken directly from the EFE Matrix and IFE Matrix. A minimum of 10 external critical success factors and 10 internal critical success factors should be included in the QSPM. Assign weights to each key external and internal factor. These weights are identical to those in the EFE Matrix and the IFE Matrix. The weights are presented in a straight column just to the right of the external and internal critical success factors. Examine the Stage 2 (matching) matrix and identify alternative strategies that the organization should consider implementing. Record these strategies in the top row of the QSPM. Group the strategies into mutually exclusive sets if possible. Determine the Attractiveness Scores (AS), defined as numerical values that indicate the relative attractiveness of each strategy in a given set of alternatives. Attractiveness Scores are determined by examining each key external or internal factor, one at a time, and asking the question, Does this factor affect the choice of strategies being made? If the answer to this question is yes, then the strategies

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should be compared relative to that key factor. Specifically, Attractiveness Scores should be assigned to each strategy to indicate the relative attractiveness of one strategy over others, considering the particular factor. The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. If the answer to the above question is no, indicating that the respective key factor has no effect upon the specific choice being made, then do not assign Attractiveness Scores to the strategies in that set. Use a dash to indicate that the key factor does not affect the choice being made. Note that if you assign an AS score to one strategy, then assign AS score(s) to the other. In other words, if one strategy receives a dash, then all others must receive a dash in a given row. Compute the Total Attractiveness Scores. Total Attractiveness Scores are defined as the product of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each row. The Total Attractiveness Scores indicate the relative attractiveness of each alternative strategy, considering only the impact of the adjacent external or internal critical success factor. The higher the Total Attractiveness Score, the more attractive the strategic alternative (considering only the adjacent critical success factor). Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in each strategy column of the QSPM. The Sum Total Attractiveness Scores reveal which strategy is most attractive in each set of alternatives. Higher scores indicate more attractive strategies, considering all the relevant external and internal factors that could affect the strategic decisions. The magnitude of the difference between the Sum Total Attractiveness Scores in a given set of strategic alternatives indicates the relative desirability of one strategy over another (www.mba-tutorials.com) To give an example about the QSPM, we can study on the Table 4-4 as an example.

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Table 4-4. A QSPM For A Retail Computer Store (David et al., 2009)

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4.7.2. Evaluating the QSPM When manager evaluate the matrix, it is current that the higher the score will present the more attractive the strategy and the highest is the optimal strategy (Zhang et al., 2007). In the example, the first strategic alternative should be select, since its sum total attractiveness score is greater than the other one. In order to identify the strategically choice in the organization, QSPM can be very useful for all kinds of the organization that small, large, profit or non-profit organizations. QSPM does not force the manager about the decision but develop as input into the managers final decision. To get better result from the QSPM it is needed to good judgment in assigning attractiveness scores. 4.8. Value Chain Analyses When a company intent to renovate the companys position and processes, value chain analysis should be used to control the activities that add value to the product and services of the company. Value chain concept describes firstly by Michael Porter, in Competitive Advantage book as the whole process that starts with the purchasing of the raw material(s) from the supplier(s), follow with the production and marketing processes, service and distribution to the end destination and each process should add a value to the product. So what is value?

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Value is the thing that customer accept to pay money to that product because of that because of that specialties and wants to be an owner such kind of product. The approach is beneficial to understand the building blocks to competitive adventage (Dess et al., 2005) and there is ahighly interactive relations among the components of the value chain (Kimura et al., 2005).

Figure 4-5. Michael Porters Value Chain (www.12manage.com) In his book, Porter identify two categories of activities as primary activities includes inbound logistics, operations, outbound logistics, marketing and sales and service activities- and support activities includes general administration (firm infrastructure), human resource planning, technology development and procurement as illustrated in Figure 4-5. The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin (www.netmba.com). 4.8.1. Primary Activities Primary activities responsible for the physical creation of the product, its marketing and delivery to buyers, and its support and after sales service. We divided primary activities into five distinctive categories that can include different frame of actions in every category according to the business that company in: 4.8.1.1. Inbound Logistics Inbound logistics functions basically include receiving, storing, and disseminating incoming goods or material for use (www.businessdictionary.com).

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In this content, determination of distribution facilities to minimize shopping times is being made. Also it covers the material and inventory control systems and also deals with the reducing time to send returns to suppliers. Beside, warehouse layout and designs to increase efficiency of operations for incoming materials issues are also important to inbound logistics. 4.8.1.2. Operations Operations part of the primary activities is basically include manufacturing or assembling activities. But individual operations can change such as lending books in a library, purchasing something in a store etc. depends which business you are in. In this content, efficient plant operations and quality production control systems are being made to minimize costs and enhance quality and providing the appropriate level of automation in manufacturing should be provided, also. Efficient plant layout and workflow design is also important issue in operations concept. Under this category, quality control systems are used to reduce costs and enhance quality 4.8.1.3. Outbound Logistics Outbound logistics function basically associated with movement of material associated with storing, transporting, and distribution a firm's goods to its customers (www.businessdictionary.com). In outbound logistics content, effective shipping processes to provide quick delivery and minimizes damages is very important issue. Also, efficient finished goods warehousing processes are considered. Shipping of goods in large lot sizes to minimizes transportation costs and using quality material handling equipment to increase order picking is also handle. 4.8.1.4. Marketing and Sales Marketing and sales parts of the primary activities includes purchasing of the products and introduce to sell this products by meetings, promotions, advertising, channel selection and pricing. In marketing and sales part, highly motivated and competent sales forces are required. Innovative approaches to promotion and advertising are also required to attract customers. Beside, selection of most appropriate distribution channel is very important to

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reduce costs and proper identification of customer segments and needs will be useful tool for marketing and sales. To cover all the issues, effective pricing strategies must be developed. 4.8.1.5. Service Service parts of the primary activities include installation, testing, after-sale services, repairing, training, parts supply, covering complaints etc. To supply the services effectively, effective use of procedures to solicit customer feedback and to act on information is very important. Also, quick response to customer needs and emergencies and ability to furnish replacement parts as required should be handling. Besides, effective management of parts and equipment inventory and quality of service personnel and ongoing training activities are one another part of the service operations. Warranty and guarantee policies can be discussed in the content of service activities. Again, it should be mention that, all the activities that handled above can change according to the market that company in (Lumpkin et al., 2005). 4.8.2. Support Activities Support activities in business are represented in four distinctive categories: general administration, human resources management, technology development and procurement. According to the market that business in, each of the support activities can be divided into many sub-categories, also. 4.8.2.1. Procurement Procurement covers all the purchasing activities of the firm related with materials, goods and services. To cover all the purchasing activities successfully firm should answer the questions below: Have we developed alternate source for obtaining needed resources? Are resources procured in a timely fashion? At lowest possible cost? At acceptable quality level?

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How efficient and effective are our procedures for procuring large capital expenditures resources such as plant, machinery and buildings? Are criteria in place for deciding n lease-versus- purchase decisions? Have we established sound long-term relationships with reliable suppliers? (www.biztree.com). By answering and applying the answers of all these questions, the points that related with the most important issues of procurement will be provided. 4.8.2.2. Technology Development One of the most important ways to have competitive advantage is to have strong and wide technological opportunities. Nowadays, so many different technology types are exist for instance internet marketing activities, customer relationship management, different kind of production technologies, lean manufacturing and so on. These are used for different kinds of purposes such as for reducing the costs, for gaining time etc. To alter all the issues successfully firm should answer the questions below: How successful have our R&D activities been in product and process innovation? Is the relationship between the R&D employees and other departments strong and reliable? Have technology development activities be able to meet critical deadlines? What is the quality of our organizations laboratories and/or other research facilities? How qualified and trained are our laboratory technicians and scientists? Does our organizational culture encourage creativity and innovation? (www.biztree.com). By answering and applying the answers of all these questions, the points that related with the most important issues of procurement will be provided. 4.8.2.3. Human Resource Management One of the most important and expensive part of support activities is HR management. The main fields of the HR management are recruiting, hiring, firing, training, development and compensation. To manage all the HR activities successfully, firm should answer the questions below:

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How effective our procedures for recruiting, selecting, orienting and training employees? Are there appropriate employee promotion policies in place and are they used effectively? How appropriate are reward systems for motivating and challenging employees? Do we have a work environment that minimizes absenteeism and keeps turn over at reliable levels? Are union organization relations acceptable? Do managers and technical personnel actively participate in professional organization? Are levels of employee motivation, job commitment and job satisfaction acceptable? (www.biztree.com). By answering and applying the answers of all these questions, the points that related with the most important issues of procurement will be provided. 4.8.2.4. General Administration (Firm Infrastructure) As a support activity, general administration can be a source of competititve adventage, even if it is generally mentioned as just to be made up of organizational structure, control systems, company culture etc. that include general management, planning, accounting, information systems etc. To execute general administration successfully firm should answer the questions below: Is our organization able to identify potential external and internal opportunities and threats? Does our strategic planning facilitate and enhance the accomplishment of organizational goals? Are value-chain activities coordinated and integrated throughout the organization? Can we obtain relatively low-cost funds for capital expenditures and working capital? Do our information systems provide timely and accurate information on general environmental trends and competitive conditions?

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Do we have good relationships with our stakeholders including public policy makers interest groups? Do we have a good public image of being responsible corporate citizen? (www.biztree.com). By answering and applying the answers of all these questions, the points that related with the most important issues of procurement will be provided. (Lumpkin et al., 2005). 4.9. Balanced Scorecards The balance scorecard is a new approach for strategy development and deployment that has entered the management applications during the last decade. In a nutshell, balanced scorecards are the multi-faceted approach to performance measurement and management control that is linked specifically to organisational strategy (Dabhilkar and Bengtsson, 2004). This approach based on existing vision and strategies, lets us to expand on this integrated approach, to understand the essential elements for management and success in their cause and effect relations, and so, to increase an even more efficient business administration (Ritter, 2003) The balanced scorecard term firstly mentioned by Robert S. Kaplan and David P. Norton, in 1992, to put forward the revolutionized conventional thinking about performance metrics. On the contrary to the conventional approach that limited and insufficient to cover all the needs of the company about the measurements of financial performance, that concept helps to managers to generate wider approach for company and provide better understanding of how their companies are really doing. These nonfinancial metrics that are handled in balanced scorecard are so important to the companies since they predict the futures financial situation. Authorities are accepting that the measurement system of the organization dominantly affects the behavior of the managers and employees. To identify a way to organization, these kinds of tools are useful to achieve its mission and vision. Balanced scorecards are providing a meaningful integration of many issues that come into evaluating a firms performance. Determination of the critical success factors- or key performance indicators- as a measure will provide special attention to be paid on the

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critical areas, thus improving performance of the briefing process. Moreover, identification of this kind of performance measurement will provide the limited resources of time, manpower, and money to be allocated appropriately (Yu et al., 2006). The balanced scorecards enable managers to observe their businesses from four key perspectives: How do customers see us? (Customer perspective) What must we excel at? (Internal business perspective) Can we continue to improve and create value? (Innovation and learning perspective) How do we look to shareholders? (Financial perspective) From these perspective, strategic objectives are extracted, measurement factors are defined, and the visualized changes are changed into operating objectives via the different measurement factors (Ritter, 2003). By determining the issues mentioned in the balanced scorecard concept, managers have a chance to focus on just the useful measures that are most critical metrics to the firm. Beside, the scorecard guards against sub optimization which refers to the phenomenon when a unit optimizes its goal accomplishment to the detriment of the organization as a whole. By forcing senior managers to consider all the important operational measures together, the balanced scorecard lets them see whether improvement in one area may have been accomplished at the expense of another. For instance, companies can decrease time to market in two different methods: by developing the management of new product introductions or by allow only products that are considerably different from existing products. Spending on setups can be cut either by decreasing setup times, or by increasing batch sizes. Similarly, production output and first-pass yields can rise, but the increases may be due to a shift in the product mix to more standard, easy-to produce but lower-margin products. Besides, balanced scorecards expressed that corporate communications management is measurable and via this method different aspects of the organization of communicaiton area is appeared. But actually, they show to managers that how our actions is advencing in line with the corporate vision and strategy (Ritter, 2003). However, the this method is more as a means for effective measurement of strategy inplace of as a means for deciding strategy (Chong and Lee, 2007).

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The summarized scheme is presented in Figure 4-6 that show the links between balanced scorecard and performance metrics:

Figure 4-6. Balanced Scorecard Links Performance Metrics (Kaplan and Norton, 1992) 4.9.1. Customer Perspective The most important asset of any organization of any organization is its customers. An organizations success depends on how many customers it has, how much they buy and how often they buy. As a primary goal of the company, providing the customer satisfaction is very important issue. To cover this issue and to manage the corporate mission of the company, managers use some metrics that are handling in balanced scorecard. Balanced scorecard necessitate that managers translate their mission statements on customer service into specific measures that reflect the factors that really matter to customer. To evaluate the balanced scorecard for customer perspective, firstly managers should determine the customers natural tendency measures explicitly. Customers concerns are including four key categories, which we can handle in our metric concept:

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Time Quality Performance and Service Cost For example, lead time may be measured as the time required from the time the

companys receipt of an order to the time it actually delivers the product or service to the customer. For new products, lead time represents the time to market, or how long it takes to bring a new product from the product definition stage to the start of shipments. Quality measures the defect level of incoming products as perceived and measured by the customer. Beside, quality measures may denote the level of on-time deliverythe accuracy of the organizations delivery forecasts. The combination of performance and service measures how the companys products or services contribute to creating value for its customers. To put the balanced scorecard to work, companies should articulate goals for time, quality and performance and service and then turn these goals round into specific measures. For instance, managers can determine some goals such as: Get standard products to market sooner, Improve customers time to market, Become customers supplier of choice through partnerships with them, Develop innovative products tailored to customer needs to provide the customer satisfaction. Then these main goals should be translated into specific goals and determine a suitable metric for each one. For example, to goal of new product, percentage of sales from new products can be use as a metric. Percentage of sales from on-time delivery which is the specifications of it are determined by customer can be another metric for the company according to which kind of job it has. Also some other kinds of metrics can be mentioned it this category such as: How much the company provide the performance of quantity? How far the companies facilities to the customer and its geographical location? How the company sensitive to the changing cost in value chain or countrys financial situation?

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How a company can be adopted themselves according to the changing on the customer needs? How a company is reliable, have good relationships with the customer and/or its suppliers etc.?

4.9.2. Internal Business Perspective Even if the customer based measures are very vital to company, these measures must be turned into indicator of what the company must do internally to meet its customer expectations. Excellent customer performance gets out from processes, decisions, and actions occurring throughout an organization and so, managers need to focus on those critical internal operations that enable them to customer satisfaction. The internal metrics should reflect business process that has greatest impact on customer satisfaction. These metrics can be cited as, for example: Cycle Time (Lowest cycle time to respond rapidly to changes in the market) Break Even Time (To measure the effectiveness of its product development cycle) Quality (Provide the companys total quality by TQM programs to provide the employees internalizing and acting on the programs messages) Employee Skills Productivity and Cost Companies should make an effort on determine and measure their core competencies of them, the vital technologies to provide the continuous market leadership. By that way, companies should define what processes and competencies they must excel at and specify measures for each. 4.9.3. Innovation and Learning Perspective The customer and internal business process measures on the balanced scorecard determine the parameters that the company considers most critical to success. Nevertheless, given the increasing rate of markets, global competition and technologies, the metrics of success are changing day by day.

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A companys performance on the adaptation itself to these kinds of changes, capability to innovate, and responsiveness of the system, improvement and learning are directly related with its value. Basically, by developing a new products and services, establish greater value to the customer, and develop operating efficiencies continually can a company penetrate new markets, increase revenues and margins. By that way, companies enhance its shareholders value. To expand these issues, for example, we can mention about some metrics to achieve the determined goal: How much the company has ability to develop and introduce standard products rapidly? How long the process time to maturity in manufacturing learning? What are the percentages of products that equal to certain percentage of sales? How a company can be adopted themselves according to the changing on the customer needs? How companies provide the training opportunities to educate and help its employees for adoption to new innovations? etc. 4.9.4. Financial Perspective In todays business environment it is so vital to look at business from a financial perspective, pay attention to short-term financial measures like quarterly sales and operating income. Metrics for financial performance specify that whether the companys strategy, implementation, and execution are contributing to bottom-line improvement. Typical financial goals have to do with profitability, growth, and shareholder value. Periodic financial statement are an indicator to managers about improved quality, response time, productivity and innovative products benefit from the firm only when they result in improved sales, increased market share, decreases operating expenses or higher asset turnover. As companies develop their quality and response time, they cancel out the need to build, inspect and rework out-of-conformance products or to reschedule and expedite delayed orders. Some applied metrics affect the financial situations of the company are:

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Amounts of cash flows Quarterly sales growth Operating income by division Increased market share and ROE Improvement rate in quality an on-time delivery performance Decreases in cycle time As a comprehensive example, Figure 4-7 is show one of the companys balanced

scorecard application.

Figure 4-7. ECIs Balanced Business Scorecards (Kaplan and Norton, 1992) To sum up, this new approach to performance measurements is consistent with the initiatives under way in many companies: cross-functional integration, customer-supplier partnerships, global scale, continuous improvement, and team rather than individual accountability. By gathering the financial, customer, internal process and innovation, and organizational learning perspectives, the balanced scorecard give a way to managers understand many interconnections. This understanding can help managers transcend traditional notions about functional barriers and ultimately lead to improved decision

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making and problem solving. The balanced scorecard keeps companies lookingand movingforward instead of backward (Kaplan and Norton, 1992). 4.10. Portfolio Analyses Portfolio of the firm can be define as, the work fields of the firm that give a marketshare to it. This fields can represent by the SBU (Strategic Business Unit) which can be explain as the every component of the value chain, different kind of profit centers or basically every firm of the corporation. We can determine the best portfolios of the firm as the portfolios that can provide the best adoption of the strengths and weaknesses to the external opportunities and threats. Generally, all the cash flows coming from the whole SBUs are gathered in a pool and this cash are allocated among the SBUs by the head officers, according to their strategic values. Principally, managers prefer making an investment not on the firm that provide the most cash-flow to the firm but on the firm that has the increasing growth rate. In the Portfolio analysis, the operations and activities of the firms are evaluated and according to the conclusion of this evaluation, firm can see which activities or portfolios are beneficial and profitable for them and which are unprofitable and not good to company. By that way, company can realize the competitive position of itself, determine which kind of way should they follow to survive in the market and determine which field need to more investment on it and which field should be canceled out. Portfolio strategies create value by an internal capital market that takes over some of the functions of the stock market. While these analyses happened, the managers have some of important roles: To perform strategic planning functions including the total of the corporate portfolio (decisions about acquisitions and divestments) Setting financial targets and monitor the performance of business units after the actions taken, intervening selectively in underperforming units to correct any problems Allocation of corporate capital among the different business units In all the portfolio analyzing processes, the most important action is to determine the most important, key activities of the firm. Three the most controversial matrix that used by the companies are:

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Boston Consulting Group Matrix (BCG Matrix) Mc Kinsey Matrix Industry Evolution Matrix Portfolio matrices are effective analysing tools to help in optimizing the

strategicmanagerial decision-making (Zic et al., 2009). 4.10.1. Boston Consulting Group (BCG) Matrix Boston Consulting Group Matrix are the simplest matrix that help the managers by determining the needs of cash flow of the SBUs. With this matrix, SBUs of the company are evaluated in terms of industry growth rate vs. relative market share. These matrix include 3 main steps: Firstly, manager should determine the SBU in company and evaluate the long term prospects of each Comparing SBUs among each other by means of a matrix that indicates the relative prospects of each. Developing strategic objectives according to the situation of each SBU. BCGs product portfolio matrix is like as in the Figure 4-8.

Figure 4-8. BCG Matrix When it comes to explain all the issues on the figure, the points can be clarify as below:

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The different size of circles are representing the SBUs, proportional to the sales revenue, generated by each business in the companys portfolio. Center of the circles shows the position of the SBU. The firm that has a high industry growth rate represents the futures portfolios. The ones that have a low industry growth rate are, represented as a threat, also. (These points are also valid for all the matrices that will mention.) Then we can say, growth is one of the best measurements for the portfolio analysis. Besides, in the BCG matrix, market growth rates are related with the market attractiveness (Dawid and Reimann, 2004). On the other hand, if we consider about the growth market, demand often will exceed supply and excess demand will support premium prices and profit levels. Moreover, by aggressively entering into a growth market and establishing a sustainable competitive advantage, a firm can discourage competitor from the entering the market. The midpoint of the growth dimension is somewhat arbitrary is usually set at a 10 percent annual growth rate. Thus, markets growing in excess of 10 percent are considered to be high- growth markets, whereas the growing below the 10 percent are low growth markets (Aaker, 1995). High relative market share represent the powerful market share in the industry. Besides, in the BCG matrix, market shares are related with the firm competitiveness (Dawid and Reimann, 2004). Here, the largest share firm will generally take the advantages of the size such as economies of scale, high brand recognition, channel dominance and the strongest bargaining position with customers and suppliers (Aaker, 1995). The next are the explanation and discussion of the matrix and its components. Stars are the SBUs that has the high growth rate and also high relative market share. Under this title we will mention about two kinds of stars: Emerging Stars needs high level of the cash flows to gain the market leadership. Established Stars are the SBUs that can cover its own needs and investments. The most important issue here is the successful managers that have the managerial attributes to cover and manage the processes perfectly. Cash cows have low industry growth rates but high relative market share. These are the cash sources of the firm. Cash cows require not so much investment on it and provide a cash to the futures SBUs; namely to the stars and the question marks.

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Question marks represent high industry growth rate but low relative market share. It has opportunity to grow in the long run. If the question marks are feeds enough, these can be a star. Here the most important issue is that managers must decide whether a question mark has the potential of star or not. Dogs are the SBU(s) that represent the SBU(s) which has a low growth rate and low relative market share. These kinds of SBUs are the most unwanted ones(s) in the corporate portfolio, and managers generally want to cancel out from that unit. This matrix provide some indicators that will mention below have some powerful effects: Shows the cash flow needs in the portfolio. Shows that which one of the firms should be canceled out Shows that which kind of new SBUs should be added to the portfolio. On the other hand, this matrix misses some important details such as the business that has a low market share can be very profitable. Besides the industries that have a low growth share can be vey competitive and stay in that kind of industries needs more cash flows. 4.10.2. Mc Kinsey Matrix (GE Matrix) These kind of matrices are 3x3 matrix and used for evaluate the SBUs in terms of industry attractiveness vs. competitive position. This matrix especially pays attention on some important criterias for market evaluation (Dawid and Reimann, 2004) and covers the weaknesses of the BCG matrix. 4.10.2.1 Factors that Affect Market Attractiveness By the effect of some issues, market attractiveness will be change. These issues are stated below: Market Size Market Growth Market Profitability Pricing Trends Competitive Intensity and Rivalry Over all risks of returns

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Demand variability Segmentation Customer satisfaction levels Governmental Regulations Technological Environment (El-Diraby et al., 2006)

4.10.2.2. Factors that Affect Competitive Strengths The factors that affect the competitive strengths are: Strength of assets and competencies Relative brand strength Market share Customer loyalty Relative cost position Distribution strengths Record of technological or other innovation Access to financial and other investment resources Management Strength Flexibility Organization Quality Patents (El-Diraby et al., 2006)

4.10.2.3. Assessing the Competitive Position The criterias that will identify the industry attractiveness are determined related to the scale, growth rate, needs to cash-flow and density of competition. The weights of the criterias are determine according to the importance of the criteria and sum of the all weights will equals to 1. All the sectors in the portfolio are evaluated with these criterias. 1 (equals to in attractive) 5 (equals to attractive) or another scale can be used.

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Each point that given to the sectors multiply with the weights of criterias and finally all the multiplications are added to each other. According to these derivations the Figure 4-9 is formed

Figure 4-9. Mc Kinsey Matrix The different size of circles is representing the SBUs, proportional to the size of the industry in which the SBU is based. Center of the circles that are derived from the calculations above, are shows the position of the SBU. Beside, the shaded areas in the circles are representing the market share of the relevant SBU.

Figure 4-10. Mc Kinsey Matrix (Aaker, 1995). As demonstrated in the Figure 4-10, three kinds of way can be followed according to the business market position. If the SBU is assign as winner (marked 1), then the firm

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should probably invest and attempt to grow. When the position of the SBU is more negative, marked as 3, losers, than firm should prefer harvest or divest the SBU. When it comes to the boxes that are marked 2, question marks, average business and profit producer, firm should make an investment if there is a specific and valid reason that brings a profit to the firm, selectively. The alternatives that are mentioned are explained below: Invest to hold: Attempt to stop erosion in position by investing enough to compensate for environmental and competitive forces. Invest to penetrate: Aggressively attempt to move the position up, even at the sacrifice of earnings. Invest to rebuild: attempt to regain a previously held position that has been lost by a milking strategy that, for whatever reason, is no longer appropriate. Selective investment: Attempt to strengthen position in some segments and let position weaken in other segments. Low investment: Attempt to harvest the business, drawing cash out and cutting investment to a minimum. Divestiture: Sell or liquidate the business (Aaker, 1995). 4.10.2.4. Four Basic Types of Unbalanced Portfolios There are four basic types of unbalanced portfolios; its typical symptoms and the corrective action that should be held are illustrated in Table 4-5.

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Table 4-5. Four basic types of unbalanced portfolios (Jones, 1989; p:196). Problem action Typical Symptoms Inadequate cash flow Too many loser Inadequate profits Inadequate growth Too many question marks Too many profit producers Inadequate cash flow Inadequate profits Inadequate growth Excessive cash flow Excessive cash demand Too many developing winner Excessive demand on management Unstable growth and profit Divest selected developing winners if its necessary Acquire profit producer Typical Corrective Divest/liquidate/harvest losers Acquire profit producers Acquire winners Divest/liquidate/harvest selected question marks Acquire winners Nurture/Develop selected question marks

4.10.2.5. Advantages and Disadvantages of the Mc Kinsey Matrix Compare to the BCG matrix, Mc Kinsey matrix accepts that different sectors can have different kinds of specialties and includes this acceptation into the analyzing process and different kinds of strategic issue takes place in the Mc Kinsey matrix. On the other hand, all the numbers that deal with are subjective and the datas are just related with today, not give an idea about the industry life cycle of the SBUs.

4.10.3. Industry Evolution Matrix One of the portfolio analyzing methods is industry evolution matrix. With this method, mangers can analyze the dimensions of environmental assesment through

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competitive position and business strenght assesment through industry maturity category (Zic et al., 2009). For applying this matrix, the first step is dividing a company into SBUs. After that, manager should assess the competitive position of each SBU using the similar to those of the Mc Kinsey Matrix. With industry evolution matrix, SBUs of the company are evaluated in terms of stage of industry development vs. competitive position in fifteen cells. The different sizes of circles are representing the SBUs, as in the previous matrix, proportional to the size of the industry that SBU exist. Center of the circles are shows the position of the SBU. Shaded areas represent the market share of the SBU. The matrix can show about the distribution of a companies business across different stages of the industry life cycle as illustrated in the Figure 4-11.

Figure 4-11. Industry Evolution Matrix Letters are illustrated in the Figure 4-11 have the meanings that are clarified below: A represent high potential question mark. B is developing winner. C looks like a developing loser. D will probably survive and enter into maturity as a market leader or a profit producer. E looks to be a profit producer.

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F is turning to be a loser from its current position of profit producer. G is definite loser. By that matrix, a company can have an idea about the position of the portfolio and its trend in a few years. But not include the industry attractiveness issues. 4.10.4. Which Technique Should Be Use? Instead of the BCG matrix, both Mc Kinsey and industry evolution matrix are more realistic and detailed. While Mc Kinsey matrix evaluated the industry attractiveness of related SBU, the industry evolution matrix give an idea about the competitive position of the organization related to its industry development stages and the how the attractiveness of the portfolio might change in the future. A powerful plan can be made up with both of two technique together. This will provide different but complementary perspective to the manager about the organizations portfolios. On the other hand, some researches indicated that decisions based on the BCG matrix are sensitive to the measures used for market share and growth (Dawid and Reimann, 2004). So to obtain an idea about the market share and growth of the company, also BCG matrix should be used with the other matrices. By that way, managers can handle a comprehensive point of view to the organizations overall portfolios about both current situation and futures situation of the organization.

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5. SOME OTHER IMPORTANT ISSUES RELATED WITH NONPROFIT ORGANIZATIONS

Strategic planning in non profit organizations are generally similar to the for-profit organizations. Small non-profit organizations and for-profit organizations especially have same manner of conducting business and planning activities. But larger scale not-profit organizations and for-profit organizations are different from smaller one. On the other hand, there are some characteristic distinctions between non-profit and for profit organizations. Contrary to the for profit organizations which focus on maximizing profit and the activities that provide this aim, not for profit organizations are more focus on matters of board development, fundraising and volunteer management. Fundraising, soliciting and gathering money or some other resources from some kind of organizations and individuals, is a kind of blood for most of non-profit organizations. Beside, volunteer management is also important issue in non profit organizations to provide the public service without any payments for worker. One another important issue for non-profit organizations is tax-exempt status. Many non profit organizations are seeking nonprofit corporate status to obtain exemptions from federal and state income taxes. If a group acquire the tax exempt status, not only this group free from paying taxes on all income from activities related to its nonprofit purpose but also organizations that donate to the nonprofit can take a tax deduction for their contributions. Besides, establishing the non profit organization, guard the managers, directors, officers and members other members of the non-profit organizations from personal liability for the corporation's debts and other obligations. Limited liability situation provide that anyone who obtains a judgment against the nonprofit can reach only the assets of the corporation, not the bank accounts, houses, or other property owned by the individuals who manage, work for, or participate in the business. Beside, the other general issues about the strategic plan are similar to the for-profit organizations. These strategic plans should generally contain followings:

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A mission statement An outline of goals, objectives, and activities An assessment of current resources, and A strategic analysis (especially SWOT) Mergers and acquisition and strategic alliances and joint ventures issues

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6. STRATEGIC PLANNING IN LKER - YILDIZ HOLDING

As in every company, everything related with strategic plan and management is starting with vision and mission statements. Major goals are derived from these mission and vision statements. According to the Yldz Holding Companys authorities, in fact, vision and mission statement is coming from heart. The things that you want to realize will be your mission. Vision and mission statements of lker-Yldz Holding Company are stated below: Vision Statement of lker : We established the lker brand 63 years ago with this vision in mind. This dream also indicated the path we had to follow: to bring all the products that children have access to in developed countries, first, to Turkey and, second, to the rest of the world. Our products should always be available. We should not forget that small joys can cause big changes. We must always invest what we earn back into our business and always be a brand full of surprises. People should always associate our brand with excellent taste, health and nutrition. If we are a brand that continuously gives life energy to people, then we are successful. Mission Statement of lker : For lker, customer satisfaction comes above all. We are aware of the needs of the society that we live in and our aim is to achieve customer satisfaction through providing products that meet customers needs, produced using the latest technology and with no compromises on hygiene and quality (www.ulker.com.). Before start to explain the strategic management of the lker Yldz Holding Company, the important point is that in lker, every business units are handled as an individual company under the lker brand and each business unit have its own strategic plan. But of course, there is one management team included the owner of the brand over all these companies. There is one general director of each department and there are several director connected with that general director. All general directors are connected with the owner of the company. The first concern in lker is defining corporate strategy. In that part, the main aim is using resources, that is man, money, managerial skills, in the most efficient way and provide the highest return to the shareholder with these resources. With corporate strategy

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lker define what will company do in the next decade, determine the segments that company take place in, how much resources should be allocated on which kind of business unit, which fields are not suitable for the company, so it should be leave out that business unit. By that way, lker try to maximize profit to maximize the 11-12 billion dollars yearly endorsement of it. Here, lker uses Boston Consulting Group matrix to determine the cash cows. But in fact this matrix is not used completely but partially. The most used matrix in lker is GE Matrix. lker try to ensure all the factors that affect the market attractiveness and competitive strengths onto company. According to that values, company determines the invest area, divest or harvest areas. To cover all these, company also determine what is the company expect from that kind of business unit and what are the opportunities. With these kinds of activities, company can cover the issues in space matrix that related with being conservative, aggressive, defensive or competitive. By that way, company provides the allocation of the resources, management of time, allocation of cash and human resources and technology and the engineer infrastructure more efficiently. For these kinds of allocations, company should deal with the entire business unit that it contains. To give an example, some of the commodity products mentioned in question mark category. For example, lkers starch investment is a question mark in the future even if it looks as a profit producer for nowadays. If Turkey becomes a member of EU then when all the boundaries canceled out, price of the sugar will fall down and will not profitable as in nowadays. After corporate strategy, the other important issues are marketing strategies and business unit strategies. The business unit strategies are related with the units individually in the company. For instance, biscuit business unit can be handled in that issue. Not only the branded biscuits but also private labeled products are handled in that business unit. All the companies that related with manufacturing, marketing, sales etc.form this individual unit. As a conclusion of the activities of all these parts, some judgments are presented to evaluate the companys current situation: I was that point preceding year, I grew at that point, or market is shifting from this point to that point etc. After put forward all these issues, the next step is realizing the business landscape analysis and consumer analysis. These are very important issues for lker as well as all the other companies. All the trends that consumer show tendency are determined. For

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example, are the customers buy their milk from the milk man or from the market? Is the trust to the milk man decrease while trust to the market increase? How many people live in a house nowadays? What kind of eating habits these kinds of families have? Which kinds of products are preferred more? Besides, market trends are also very important issues. These trends are generally related with suppliers. To give an example, are the suppliers pay attentions on cardboard? What are the trends in packaging? To extend, shifting from glass to the plastic bottle is very important trend to reduce the cost of the product. Also, these shifts provide decrease on scraps (broken bottles) and even decrease on the fuel cost of the transportation vehicles. Moreover, some other questions about trends, for example, we produce milk with fruit. But which kind of milk with fruit preferred by consumer. What is the rate of the fruit in the milk? Can we ask to analyze the market trends? After that, company dwells upon the competitive activities. These are related with the changes in competition. Who are the rivals? Where they earn their money from and where they invest their money? What are the points that the rivals try to strengthen? What is the main strategy of your rival and which kind of attacks would it realized? What are the intentions of them fort he next decade? etc. After all these, lker start to analyze its interior. The questions are answered that are written below: Which points can be hold as the good points of my company? Where am I successful? Where am I lost my market-share? Where am I catching the market-share? What can I do to catch the market trend? Should I pay attention on R&D or technology, or should I have reduced my cost? All these issues are related with internal factors analysis. But lker does not rate the factors since these kinds of rates causes misunderstanding about issues. It is needed to explain why this rate is presented there. So company prefer write all the issues down on paper one by one. In internal assessment the most important thing is writing the most accurate informations about the strength and weaknesses that related to each internal factor. lker also uses the financials ratios and current analyses to evaluate themselves and their rivals in their internal analysis. The most important aspects of using financial ratios is, this kind of ratios provide the comparison of business on same measurement scales.

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Therefore, company catches a chance to see what their rivals are doing, where they are and what is the relative situation of the company among the rivals. Current ratio, liquidity ratios, EBIT, EBITDA are all used by lker - Yldz Holding Company. While only the biscuit part of the lker is open to the stock exchange, others nearly all parts of the company is open to the stock exchange. When it comes to the analyses of general environment in lker, socio-cultural segment is including by the demographic segment and technological analysis are handled in business units. The larger scale and global analyzes that include the political, legal and economic analyses are handled in the corporate level. In this kind of large scale analysis, the questions that where the world and Turkey is going etc. are tried to estimate by the ombudsman of the company and the outside sources. It is given place to the J.P. Morgans and/or Garanti Banks estimates about the next decade for the larger scale analyses, also. There is huge and combined information flow to managers and planners of company. In business unit, four comprehensive analyses are handled: companys analysis, market analysis, competitor analysis and consumer analysis. Even if the analyses that are explained in the previous sections of the thesis does not handled with its own name such as Internal Evaluation Matrix or External Factor Evaluation Matrix, the analyses mentioned in the thesis are fed into these four categories. As a conclusion of these four, company decides what the company will do for all business units of the company. To extend, company came to a decision about how a company continue to its way? Which categories will be stay? How is the future of the market or this business unit? Which kind of issues should be taken in consider? Where is the potential of sale? Which of the categories have potential to enter? For example if there is an increasing trend with diabetic products, pay attention and allocate some more resource on it, and so on. After all these analyzes on company, market, competitor and consumer, every business unit turn to its inside and start to negotiate what will it done? To give an example, if there is a decision about focusing on diabetics, marketing department of the company start to study on the communication activities, advertisement activities, specialties of the diabetic people, consumer recognition tests and so on. Production study on the investment plan according to the future of market and so on.

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As a conclusion of these studies, an overall and comprehensive report is revealed and the allocation of budged of the company and all kind of resource allocations are made according to this report. Of course all the plans could not apply always. There are some revisions needed sometimes. Some external effects could affect all the plans, such as unsuggested crisis in country etc. In lker, SWOT analysis is used exactly as explained in the previous sections. All the strength and weaknesses and opportunities and threats are written down in details. These datas are obtained from the four analyses that are mentioned above as company, market, competitor and consumer. lker represents its strengths as, strong heritage, trusted brand image, the greatest distribution channels, financial power, and customer loyalty, participate too many categories, being global brand, participating social responsibility programs and so on. Besides, weaknesses are shown as the below: Packaging Communication with customer Has not the shelf portion parallel to the market share Innovation Porters approach is one of the useful tool in the strategic management of lker. Even if lker seems as very big and rooted company, some threats are current for it, also. These threats change from business unit to business unit. Although, the biggest business unit of lker is biscuit and chocolate, threat of new entrance current for these business unit, also. To give an example, Mars brand is a big threat for lker. Nowadays, Mars just sell into the petrol offices as a promotion product as a result of opportunistic approach of Mars to Turkey. If Mars starts to the aggressive marketing activities in Turkey it will be a threat for lker. Besides, Cadbury, an English brand, is a potential threat for Turkey. Again, if Cadbury starts to the aggressive marketing activities in Turkey, with its most powerful chocolate brands Dairy Milk, for example, it will be a threat for lker, also. Moreover, five forces of Porter are studied about the packaging. For solid packaging firms, the new entrances are also very important issue. As an example, if a company produces a plastic bottle, such as water bottle, it puts a vey big effort to prevent the new entrances. Because, this field is open to the new job opportunities. Every firm puts a very big effort to prevent the new entrances by making new investments and giving ads

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to the press such as I will make an investment with ten thousand tones, to frighten the entrants. With that kind of ad, company tries to give a message to the new entrant that, there is excess capacity in the market anyway. By that kind of investment that Ill make, prices will fall down and profit margins will also fall down. The market will loose past profitability. If you enter the market, I and you will bankrupt together. Power of buyers issue is more important in the middle sectors. With consumer analysis this threat is handled. If company achieve to effect the end customer to buy companys products, then company can persuade the big markets to sell my product to the end customer. In lker, very big portion of the budget is allocated for the R&D studies to achieve that aim. Insight of company is very important but not enough. Here, market research is very important issue to cover all the points that company must study on. For example, power of buyer is very strong in packaging. Company should study on what is the source of power of Pnar, Sta or some other companies that participate to this competition. The questions related with how the rivals perceive the packaging and how the producers sell their product are important to lker. Power of supplier is also important issue for lker. For packaging issue, lker study on why its own company sells plastic packaging to the rivals such as Eti, Nestle, Sta or Pnar. What are the powers of buyers? What they promise to the packaging supplier and persuade him to sell its packaging to them? The other important issue in lker is value chain. When lker wants to work with some other company, the most important part lker investigates on the strategic plan of the company is the value chain. For example, Data Teknik, a company works depend to lker which produces Exper Computers is one of the partners of Yldz Holding Company. Before lker start with this company, it investigates its whole value chain. What are the steps of company from its start point to end point? That is to say, Intel produces processors that added to mother boards, other parts are coming from different suppliers and all these are assembled in somewhere. Who, which brand owners buy this assembled computer? Who are the distributors of the brands in any country? Where they sell its computers? All these represent the whole value chain. The aim of this investigation understands where the value created, which portion of the value stay at where who earn the money, and where am I obliged to.

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Beside, determination of the key success factors are very important issue in lkers strategic planning to understand the successful companys specialties to determine how a company can be successful by doing what, what are the key performance indicators related with financial power, service, quality, image and so on. Searching for the companies that are successful in the market and copying their work shape not their products is very important issue for the companies to develop their working process and service quality. Balanced scorecards are very essential tool for lker as any other company to control the strategies, jobs and the performance of the company. All the related issues about companys strategy is placed in it. These including has to be controlled regularly. In lker all business units have its own balanced scorecard that controlled periodically. One another most important issue in lker is mergers, acquisitions, strategic alliances and joint ventures. In lkers firm structure there is an individual team just pay attention on these kind of issues. For example there is an strategic alliance between lker and Kellogg. Kellogg have never done this kind of alliance with some other company but lker. It tried to distribute its products but did not achieve distribution process successfully. Then it made an alliance with lker. Now, Kellogg is producing the products and lker is making distribution of them since lker has greatest distribution network in Turkey reach even to the smallest grocers in the smallest town of the country. lker had joint venture with Hero Baby and Pendik Niasta Sanayi Co, Godiva Belgim BVBA, G-New Inc and also with Gumlink which is the biggest gum company in the Europe. After a while lker acquisited Godiva Belgium BVBA and G-New Inc. Nowadays lker negotiating with Laurens Spethmann Holding AG & Co KG (LSH) which is one of the most important tea producer in Europe foe a new joint venture. Also there are many subsidiaries work with lker such as, Birlik Pazarlama A.. on flour production, deal Gda San. ve Tic. A.. on biscuit and cracker production, stanbul Gda D Tic. A.on international marketing, BM Birleik Maazalar A..on retail, Netlog Lojistik A.. on logistics and transportation, Fresh Cake A.. on cake production and so on.

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7. STRATEGIC PLANNING IN STANBUL METROPOLITAN MUNICIPALITY

The last strategic plan studies of the IMM were started in November 2008 and was ended in September 2009. During this eleven month, different kinds of analysis and activities were made. Figure 7-1 presents the preperation process of strategic plan and outcomes. To start with, the process analysis that ended in September 2008 was used as base for the situational analysis. Legal obligations and the body of current law analysis were made to put forward the legal bases for the public service. After that, scenario analysis were realized by the ombudsmen that include scenarios for 2023 for all main service area of the IMM.(There are 9 main service areas of IMM that are public improvements, transportation, social support, environment) To extend that, where will be the IMM in 2023 in health area, and so on. But at the end step, scenario analysis was not used completely.

Figure 7-1. Preperation Process of Strategic Plan and Outcomes (www.ibb.gov.tr)

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After scenario analysis, external environment analysis was made. All the technologic, politic and legal, economic, socicultural analyses were included in this study. The examples around the world and resources were studied. Some other plans and programs such as 9th development plan, Europe Urban Provision were studied. These datas were used as base for the SWOT analysis. After external analysis, shareholder analysis was made. Firstly, internal and external shareholders were determined. In second step, some meetings were arranged and for each shareholder, several authorities were participated to the meetings with Strategic Planning Department. Beside some studies were made to test the shareholders satisfaction and understand what is the view of these shareholders to IMM, what are the strength weaknesses opportunities and threats to IMM according to their view. To achieve that, a survey was prepared and sends with a formal writing. These surveys was prepare for each main service area of the IMM. Since there were so many shareholders, IMM choose the most important ones to apply the survey and for the meetings arranged. According to the outcomes of these surveys, Strategic Planning Department constructed a two quadrantshareholder matrix (Figure 7-2). While on one quadrant main service areas were presented, on the other quadrant corrective actions related with the main service area according to importance degree of each corrective action were presented. By that way, all the outcomes were evaluated according to the main service area of the of Municipality. All these outcomes were used base to SWOT, also.

Figure 7-2. Some parts of the table of shareholder matrix (www.ibb.gov.tr)

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In addition to these analyses, internal analyses were also made. To completely cover this analysis, a survey was applied too all employees included general directors and directors as well. All the resources were determined and evaluated. For instance, how many car, how many employee, how many computer in Municipality and so on. Beside, changes in the organizational structure in last decade were studied. At the end of all these process, SWOT analysis was constructed with 22 meeting and 307 authorities for each main service area of IMM during one and half month. At the end, with all the datas coming from, internal analysis, external analysis, shareholder analysis and SWOT strategically mapping include strategic themes, strategic objective, strategic goals and strategic layers, was applied. First of all, general strategically mapping of the municipality was constructed. Than this kind of strategically mapping was applied on all the main service area of IMM (Figure 7-3).

Figure 7-3. Components of Strategically Mapping (www.ibb.gov.tr)

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The final goal of the strategic planning in public sector is planning the next five years with the resources available. While constructing this plan, vision and mission statements are very important issue. Vision of IMM: To be a leader and Pioneer municipality to develop Istanbul into a level of sustainable high quality living area which is a center of economy as the modern face and the world window of turkey by claiming its unexampled historical inherit. Mission of IMM: Present the public services with a managerial perspective which has justice, ability to change, good quality, effectivity and efficiency to enhance the life quality, consolidate the authentic identity and contribute the process of the becoming a respected city in the world by fulfilling the historical responsibility to the Istanbul which is the meeting point of the civilization. According to the law, vision and mission statement that set at the beginning of construction plan of the strategic plan cannot change but can be revised after two years from the completion of strategic plan just on the quantitative datas. Since the previous strategic plan was made before two years, this process was revising process of strategic plan. In this process, vision and mission statements remained same. Vision and mission statements can change only if the new period of five year starts to construct a new strategic plan or if new election and new mayor come to the head of municipality. After all these process, strategic planning department defined the strategic goals and objectives with the authorities of the main service areas and also indicators were identified fort he next 5 years. At the end, all the general managers, managers, office managers and general secretary were met to negotiate all the issues determined and evaluated in strategic planning process. According to the end outcomes, budgets were determined by the authorities at the end. All points were revised and took the approval of council firstly, then parliament and become valid for IMM.

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Mergers, acquisitions, strategic alliances and joint ventures are also very important issues for IMM. There are more that twenty partnerships of IMM as presented in Table 7-1 which was formed by that kind of ways. Table 7-1. Partnerships of IMM. .D.T.M. Co STON Co AA Co. STANBUL ENERJ Co. KPTA Co. BELBM Co GDA SFALT Co. KONUT Co SALIK Co. HALK EKMEK BELTUR Co. Co. SBAK Co. KLTR Co BMTA SPARK Co. L KLTR Co. HAMDYE Co. STA Co. SPOR Co. DO Co. STANBUL MAR Co. STANBUL ULAIM Co. UGETAM Co.

Partnership Chairmanship provides the coordination among the partnerships an IMM.

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8. COMPARISON OF STRATEGIC ANALYSES IN LKER AND IMM

Strategic planning process is the most important issue in the organizations both lker and IMM as we demonstrated in the article. Without strategic planning organizations can not construct an stable and sustainable management. As we see in the article, lker has more comprehensive strategic planning process since the company aim make profit via using its all resources, such as money, technology and employee, more effectively and efficiently. To realize this aim, the basic analyses that lker used are SWOT, internal analyses and external analyses. In addition to these analyses, lker also uses the EFE and IFE matrices, GE matrix not with an presented scheme as in the thesis but using some other ways such as writing all the variables down on the paper one by one to explain all the issues in the matrices to all the related authorized with matrices. On the other hand, IMM does not have such kind of comprehensive analyses in its strategic plan since Government Planning Organization brings a constraint to municipalities with a guide that municipalities can not go beyond that guide. Because of that, strategic plan can include just the analyses that presented in the guide. The guide recommends to municipalities SWOT analysis as a tool of the strategic planning, in addition to internal and external analyses. But IMM used the strategic mapping tool in addition to the Government Planning Organizations guide in the last strategic planning process that covers the years 2010-2014. Besides, lker uses financial ratio analysis to compare its own situation with its rivals but there is not such kind of a tool for IMM since there is no need to this. Because the aim of the municipalities is just provide a good and sufficient service to public, there is no comparison with some other municipalities. In fact, if we mention about the comparison of the municipalities this comparison is not made on the endorsement of these municipalities but its service rate to the public. Moreover, Porters five forces can be mention about lker, but IMM has not such kind of threats. Value chain analysis is also handled in lker this issue is not a deal for IMM on its own. This issue may be handled for the partnerships of IMM.

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It is seen that, during the interviews with the authorities of both lker and IMM, even if a company or an organization has enough capacity, knowledge or resource, sometimes it could not manage the process or the improvements that is required because of different kind of reasons such as peoples resistance to change, or their thoughts such as its not time to do it. So that, improvements sometimes have to wait for a while even if there is a need for it. Beside, in the municipalities, the evaluation of the institution is not being made and pressed impartially since municipality has a political identity. It is a huge disadvantage to the municipality but this situation could not be changed.

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