The document discusses Management by Objectives (MBO). It describes MBO as having three steps: 1) set individual objectives and plans, 2) give feedback and evaluate performance, 3) reward according to performance. It also lists two common sources of MBO failure: lack of top management commitment and employees' negative beliefs about management's sincerity in including them in decision making. The document provides information on various strategic management frameworks including the GE 9-cell matrix, life-cycle portfolio matrix, and differences between strategy formulation and implementation.

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Exhibit 5–6

2. Management by Objectives (MBO)
 Management by Objectives
Step 1. Set individual objectives and plans.
Step 2. Give feedback and evaluate performance.
Step 3. Reward according to performance.
 Sources of MBO Failures
 Lack of top management commitment and follow-
through on MBO.
 Employees’ negative beliefs about management’s
sincerity in its efforts to include them in the
decision-making process.
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Exhibit 5–10

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Dimensions:
Long-term industry attractiveness
Business strength/Competitive position
SBUs plotted as circles with area proportional to the size
of the industry, & a sector within each circle representing
the SBUs market share in its industry

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Strong Average Weak
H
M
L
GE 9-Cell MatrixGE 9-Cell Matrix
Business Strength/Competitive Position
Long-Term
Industry
Attractiveness

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SBUs in 3 upper left cells get top investment priority
SBUs in 3 middle diagonal cells merit steady investment
to maintain & protect their industry positions
SBUs in 3 lower right cells are candidates for
harvesting or divestiture

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Advantages of G.E. 9-Cell MatrixAdvantages of G.E. 9-Cell Matrix
Allows for intermediate rankings between high & low
and between strong & weak
Incorporates a wider variety of strategically relevant
variables than the BCG matrix
Stresses the channeling of corporate resources to SBUs
with the greatest potential for competitive advantage &
superior performance

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Weaknesses of G.E. 9-Cell MatrixWeaknesses of G.E. 9-Cell Matrix
Provides no guidance on specifics of SBU strategy
Only suggests general strategic posture -- aggressive
expansion, fortify-&-defend, or harvest/divest
Doesn’t address the issue of strategic coordination across
related SBUs
Tends to obscure SBUs about to “take off” or “crash &
burn” -- static, not dynamic

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Life-Cycle Portfolio MatrixLife-Cycle Portfolio Matrix
Dimensions:
Industry stage in the life cycle
SBU’s competitive position
Area of each SBU circle is proportional to size of the
industry; sectors denote SBU’s market share in its
industry
This matrix displays the distribution of the firm’s businesses
across the various stages of industry evolution

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Strong Average Weak
SBUs Competitive Position
Life-Cycle Portfolio MatrixLife-Cycle Portfolio Matrix
Introduction
Growth
Early
Maturity
Late Maturity
Decline
Life-
Cycle
Stages

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15
Strategy Formulation vs.
Implementation
• Strategy Formulation = stage of strategic
management that involves planning and decision
making that lead to the establishment of the
organization’s goals and of a specific strategic
plan
• Strategy Implementation = stage of strategic
management that involves the use of managerial
and organizational tools to direct resources
toward achieving strategic outcomes
Experiential Exercise: Developing Strategy for a Small Business

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16
Portfolio Strategy
• Mix of business
units and
product lines
that fit together
in a logical way
to provide
synergy and
competitive
advantage
BCG Matrix

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17
Three Levels of Strategy in Organizations
Corporate-Level Strategy:
What business are we in?
Corporation
Business-Level Strategy:
How do we compete?
Textiles Unit Chemicals Unit Auto Parts Unit
Functional-Level Strategy:
How do we support the business-level
strategy?
Finance R&D Manufacturing Marketing