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PROFESSOR: MASTER DEGREE HEIDI GÓMEZ CERVANTES

FECHA DE ENTREGA:18/Septiembre/2014

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ÍNDICE

EVALUATION MATRIX OF EXTERNAL FACTOR (EMEF) 4

PROCEDURE TO FORM THE EVALUATION MATRIX OF EXTERNAL FACTOR (EMEF) 4

EVALUATION MATRIX INTERNAL FACTOR MEFI 6

KEY INTERNAL FACTORS... 6WEIGHTS... 7RATING... 7MULTIPLY... 8SUM... 8EXAMPLE OF IFE MATRIX 8

COMPETITIVE PROFILE MATRIX (CPM) 10

PROCEDURE FOR DEVELOPMENT 10EXAMPLE 11

THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX 13

INTERNAL STRATEGIC DIMENSIONS 14EXTERNAL STRATEGIC DIMENSIONS 14

GROWTH–SHARE MATRIX 16

OVERVIEW. 17PRACTICAL USE. 19RELATIVE MARKET SHARE 19MARKET GROWTH RATE 20

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GRAN STRATEGY MATRIX 21

QUADRANT I 21QUADRANT II 21QUADRANT III 22QUADRANT IV 22

BALANCED SCOREDCARD (BSC) 23

BENEFITS OF BALANCED SCOREDCARD (BSC) 23STRATEGIC MAP 25LIMITATIONS OF THE BSC 28

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EVALUATION MATRIX OF EXTERNAL FACTOR (EMEF)Procedure to form the evaluation matrix of external factor (EMEF)

The external analysis of the evaluation will allow us to abstract and evaluate all the

external information. The procedures required for the construction of an external

factor matrix are:

1. Make a list of threats and opportunities to include in the external key factors

evaluation matrix, between 5 up to 20.

In this example it si visible 5 threats and opportunities of an organization.

2. Set a weighting between 0(less important) and 1(most important). The weighting

of each factor indicate the relative importance in the success of an industry. The

summation of all the weightings given must be 1.0

External key factor Weighting Clasification Weighting result

1. Growing interest rate 0.202population dispacement to the west

0.10

3. government repeal 0.304. expansión strategies of a competitor

0.20

5. Computerized information system

0.20

Total 1.0

3. Make a clasification from 1 to 4 to indicate if the variable represents:

An important threat (1)A lower warning (2)a lower opportunityr (3)An important opportunity(4)

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External key factor Weighting Clasification Weighting result

1. Growing interest rate 0.20 12population dispacement to the west

0.10 4

3. government repeal 0.30 34. expansión strategies of a competitor

0.20 2

5. Computerized information system

0.20 4

Total 1.0

4. Multiply the weighting according to its classification, this is to establish the weighting result of each variable

External key factor Weighting Clasification Weighting result

1. Growing interest rate 0.20 1 0.202population dispacement to the west

0.10 4 0.40

3. government repeal 0.30 3 0.904. expansión strategies of a competitor

0.20 2 0.40

5. Computerized information system

0.20 4 0.80

Total 1.0

5. it’s necessary to add all the weighting results of each variable to set the total

result of an organization

External key factor Weighting Clasification Weighting result

1. Growing interest rate 0.20 1 0.202population dispacement to the west

0.10 4 0.40

3. government repeal 0.30 3 0.904. expansión strategies of a competitor

0.20 2 0.40

5. Computerized information system

0.20 4 0.80

Total 1.0 2.70

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Regardless the number of key threats and opportunities on the evaluation matrix of

external factor, the higher weighting result for an organization would be 4.0, and

the lower weighting result would be 1.0. The mean weighting result would be 2.5. A

result of 4.0 indicates that an organization competes on an attractive way and that

it disposes of a lot of external opportunities. While an result of 1.0 indicates that an

organization is in an unattractive industry and it is dealing to serious threats. In the

example the result showed is 2.7, this result is just over the mean and shows that

the organization compete in an industry who has opportunities but also threats.

EVALUATION MATRIX INTERNAL FACTOR MEFI

Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing

or evaluating major strengths and weaknesses in functional areas of a business.

IFE matrix also provides a basis for identifying and evaluating relationships among

those areas. The Internal Factor Evaluation matrix or short IFE matrix is used in

strategy formulation.

The IFE Matrix together with the EFE matrix is a strategy-formulation tool that can

be utilized to evaluate how a company is performing in regards to identified internal

strengths and weaknesses of a company. The IFE matrix method conceptually

relates to the Balanced Scorecard method in some aspects.

How can I create the IFE matrix?

The IFE matrix can be created using the following five steps:

Key internal factors...Conduct internal audit and identify both strengths and weaknesses in all your

business areas. It is suggested you identify 10 to 20 internal factors, but the more

you can provide for the IFE matrix, the better. The number of factors has no effect

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on the range of total weighted scores (discussed below) because the weights

always sum to 1.0, but it helps to diminish estimate errors resulting from subjective

ratings. First, list strengths and then weaknesses. It is wise to be as specific and

objective as possible. You can for example use percentages, ratios, and

comparative numbers.

Weights... Having identified strengths and weaknesses, the core of the IFE matrix, assign a

weight that ranges from 0.00 to 1.00 to each factor. The weight assigned to a given

factor indicates the relative importance of the factor. Zero means not important.

One indicates very important. If you work with more than 10 factors in your IFE

matrix, it can be easier to assign weights using the 0 to 100 scale instead of 0.00 to

1.00. Regardless of whether a key factor is an internal strength or weakness,

factors with the greatest importance in your organizational performance should be

assigned the highest weights. After you assign weight to individual factors, make

sure the sum of all weights equals 1.00 (or 100 if using the 0 to 100 scale weights).

The weight assigned to a given factor indicates the relative importance of the factor

to being successful in the firm's industry. Weights are industry based.

Rating...Assign a 1 to X rating to each factor. Your rating scale can be per your preference.

Practitioners usually use rating on the scale from 1 to 4. Rating captures

whether the factor represents a major weakness (rating = 1), a minor weakness

(rating = 2), a minor strength (rating = 3), or a major strength (rating = 4). If you use

the rating scale 1 to 4, then strengths must receive a 4 or 3 rating and weaknesses

must receive a 1 or 2 rating.

Note, the weights determined in the previous step are industry based. Ratings are

company based.

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Multiply...Now we can get to the IFE matrix math. Multiply each factor's weight by its rating.

This will give you a weighted score for each factor.

Sum...The last step in constructing the IFE matrix is to sum the weighted scores for

each factor. This provides the total weighted score for your business.

Example of IFE matrixThe following table provides an example of an IFE matrix.

Weights times ratings equal weighted score.

What values does the IFE matrix take?

Regardless of how many factors are included in an IFE Matrix, the total weighted

score can range from a low of 1.0 to a high of 4.0 (assuming you used the 1 to 4

rating scale). The average score you can possibly get is 2.5.

Side note...

Why is the average 2.5 and not 2.0? Let's explain using an example. You have 4

factors, each has weight 0.25. Factors have the following rating: 1, 4, 1, 4. This will

result in individual weighted scores 0.25, 1, 0.25, and 1 for factors 1 through 4. If

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you add them up, you will get total IFE matrix weighted score 2.5 which is also the

average in this case.

Total weighted scores well below 2.5 point to internally weak business. Scores

significantly above 2.5 indicate a strong internal position.

What if a key internal factor is both a strength and a weakness in IFE matrix?

When a key internal factor is both a strength and a weakness, then include the

factor twice in the IFE Matrix. The same factor is treated as two independent

factors in this case. Assign weight and also rating to both factors.

What are the benefits of the IFE matrix?

To explain the benefits, we have to start with talking about one disadvantage. IFE

matrix or method is very much subjective; after all other methods such as the

TOWS or SWOT matrix are subjective as well. IFE is trying to ease some of the

subjectivity by introducing numbers into the concept.

Intuitive judgments are required in populating the IFE matrix with factors. But,

having to assign weights and ratings to individual factors brings a bit of empirical

nature into the model.

How does the IFE matrix differ from the SWOT matrix method?

More is better...

One difference is already obvious. It is the weights and ratings. This difference

leads to another one. While it is suggested that the SWOT matrix is populated with

only a handful of factors, the opposite is the case with the IFE matrix.

Populating each quadrant of the SWOT matrix with a large number of factors can

lead to the point where we are over-analyzing the object of our analysis. This does

not happen with IFE matrix. Including many factors into the IFE matrix leads to

each factor having only a small weight. Therefore, if we are subjective and assign

unrealistic rating to some factor, it will not matter very much because that particular

factor has only a small weight (=small importance) in the whole matrix.

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It is important to note that a thorough understanding of individual factors included

in the IFE matrix is still more important than the actual numbers.

Are there other models I should know about?

The IFE matrix goes side by side with so-called EFE matrix which together lead

into the IE matrix.

You might like to read about the SWOT matrix analysis, BCG matrix model, and

Product Life Cycle.

COMPETITIVE PROFILE MATRIX (CPM)

It is an analytical tool that identifies the major competitors of a company and reports on their particular strengths and weaknesses. The results of which depend in part on subjective judgment in the selection of factors, assigning weights and in determining ratings, so should be used cautiously as an aid in the process of decision making.

Procedure for Development

1.- the critical success factors the most representative market competitors in the industry are identified, as well.

2.- Assign a weight to each ponderante success factor in order to indicate the relative importance of that factor to the success of the industry.

0.0 = unimportant

1.0 = very important

NOTE: The sum must be equal to 1.

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3.- It is assigned to each of the competitors, as well as the company being studied, the weakness or strength of that signature to each key success factor.

1 = severe weakness 3 = less strength2 = minor weakness 4 = fortaleza importante

4.- Multiply the weight assigned to each key factor for the corresponding rating given to each company.

5.- Add the column for each company weighted results. The highest indicate the most dangerous competitor and lower the weakest.

ExampleVariables:

Range of products.

Quality of products

Technology

Experience

Competitiveness

Key Success Factor

Weighting CEDRIS S.A. VIDEO JET DOMINO PRINT

1.-Range of products

0.20 3 0.60 4 0.80 2 0.40

2.- Quality of products

0.20 3 0.60 3 0.60 3 0.60

3.- Technology 0.30 3 0.90 4 1.20 2 0.604.- Experience 0.15 2 0.30 3 0.45 2 0.305.- Competitiveness 0.15 2 0.30 2 0.30 3 0.45

TOTAL 1 2.70 3.35 2.35Therefore VIDEO JET is the most dangerous competitor for CEDRIS

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The competitive profile matrix results in valuable information in several ways, for example:

The grand total, Cedris (our company) gives 2.70 above that Domino Print is 2.35, however Video Jet has a total of 3.35 this means that with Video Jet so things are:

Product quality and competitiveness thus tied Cedris must strengthen these lines and also in range of PRODUCTS and Technology, Video Jet beyond us so we need to strengthen our position in the market and in particular the factors that makes the MPC in that is at a disadvantage CEDRIS.

Justification of Weights

Key Success Factor CEDRIS S.A. VIDEO JET DOMINIO PRINT

1.-Range of products

3Its product range a range of at least 20.

3Its product range a range of at least 20.

2Not having a defined product line that identifies within the market

2.- Quality of products

3Acceptable quality through the years (French).

3Acceptable quality through the years (German)

3Acceptable quality through the years (American)

3.- Technology 3Current technology

4It uses cutting edge technology

2standard technology

4.- Experience 2It's minimal but know the market (5 years)

3Reasonable and aggressive market experience (10 years)

2Little market experience (3 years)

5.- Competitiveness 2High prices because of import bills

2Fair prices and little room for negotiability dealer

3They keep domestic prices that allow them to compete with each

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THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX

The SPACE matrix evaluates different variables and assigns them a score

considering how important they are for the situation of the company. It analyzes

four different areas (two internal to the company and two external) that will

represent four quadrants in a graphic. 

The purpose of this matrix is to situate the company in one of these four quadrants

and give a suggestion about what type of strategies a company should follow:

conservative, aggressive, defensive or competitive. 

The first step is to address each of the four areas of question: the internal

strategic dimensions represented by the financial strength (FS) and the

competitive advantage (CA); and the external strategic dimensions represented

by the environmental stability (ES) and the industry strength (IS)

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Internal strategic dimensions

Financial strength (FS)

It includes everything that refers to the financials of the company. We can consider

the Return on Investment (ROI), which is how much money is recovered from each

unit of money invested, the liquidity of the company –it means how easy a

company can make cash all his assets- and the cash flow. Each one of these

variables is given a numeric value from 1 (worst) to 6 (best) according to our

perception of how good the company is doing regarding that variable. If the

company has a high ROI compared to the industry, the variable can have a 6;

conversely, in the case of a Web based company that has not much concrete

materials to sell, the liquidity will be low, let’s say 2. Experience is required to

evaluate each factor as there is no procedure defined on how to do it. The result

will mostly depend on knowledgeable people that can have an idea of how these

variables weigh among each other within the company.

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Competitive Advantage (CA)

This is the next variable considered in the internal strategic dimension. Market

share, quality of the product, product life cycle, customer loyalty, the know-how and

the power of company over its suppliers and intermediaries are some of the

variables to be considered. As in the other internal strategic dimension, each

variable considered is given a numerical value, but in this case from -1 (being the

best) to -6 (being the worst).

External strategic dimensions

Industry strength (IS)

It considers external forces that belong to the industry where the company

develops its activities. Variables as growth potential, profit potential, financial

stability, resource utilization and productivity are considered. As well, in this

dimension each of these variables is given a score that goes from 1 (worse) to 6

(best).

Environmental stability (ES)

Last, ES is considered. It refers to how stable is the market where the company

operates. Things like rate of technological change, inflation, demand variability,

price range of competing products, risks of the industry and the barriers to enter or

exit the market are considered. The more stable is the market; more favorable is

for the company to operate in it. A score from -1 (best) to -6 (worst) is given to

each of the variables considered.

By now, you may have recognized many of these variables from the Porter’s

forces. If you prefer, those variables can be scored and used to construct the

SPACE matrix.

Once all the variables have been considered and scored, an average score is

calculated for each internal and external dimension. This is done by adding all the

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scores of the single variables and dividing it by the number of variables considered

in that dimension. Each of these four numbers is plotted in the x and y axis of the

matrix. By definition, the CA and IS are plotted on the x axis, while the FS and ES

in the y axis. The next step is to figure out in which of the four quadrants the

company will fall. To do this, the x value is obtained by adding CA and IS, and

the y value by adding FS and ES.  These two new values are plotted and they will

determine the quadrant. We’ll see this with an example in a little bit.

GROWTH–SHARE MATRIX  

The growth–share matrix (aka the product portfolio, BCG-matrix, Boston

matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that was

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created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help

corporations to analyze their business units, that is, their product lines. This helps

the company allocate resources and is used as an analytical tool in brand

marketing, product management, strategic management, and portfolio analysis.

Analysis of market performance by firms using its principles has recently called its

usefulness into question.

Overview.To use the chart, analysts plot a scatter graph to rank the business units (or

products) on the basis of their relative market shares and growth rates.

Cash cows is where a company has high market share in a slow-growing

industry. These units typically generate cash in excess of the amount of cash

needed to maintain the business. They are regarded as staid and boring, in a

"mature" market, yet corporations value owning them due to their cash

generating qualities. They are to be "milked" continuously with as little

investment as possible, since such investment would be wasted in an industry

with low growth.

Dogs, more charitably called pets, are units with low market share in a mature,

slow-growing industry. These units typically "break even", generating barely

enough cash to maintain the business's market share. Though owning a break-

even unit provides the social benefit of providing jobs and possible synergies

that assist other business units, from an accounting point of view such a unit is

worthless, not generating cash for the company. They depress a profitable

company's return on assets ratio, used by many investors to judge how well a

company is being managed. Dogs, it is thought, should be sold off.

Question marks (also known as problem children) are business operating in

a high market growth, but having a low market share. They are a starting point

for most businesses. Question marks have a potential to gain market share and

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become stars, and eventually cash cows when market growth slows. If question

marks do not succeed in becoming a market leader, then after perhaps years of

cash consumption, they will degenerate into dogs when market growth

declines. Question marks must be analyzed carefully in order to determine

whether they are worth the investment required to grow market share.

Stars are units with a high market share in a fast-growing industry. They are

graduated question marks with a market or niche leading trajectory, for

example: amongst market share front-runners in a high-growth sector, and/or

having a monopolistic or increasingly dominant USP with

burgeoning/fortuitous proposition drive(s) from: novelty (e.g. Last.FM upon CBS

Interactive's due diligence), fashion/promotion (e.g. newly prestigious celebrity

branded fragrances), customer loyalty (e.g. greenfield or military/gang

enforcement backed, and/or innovative, grey-market/illicit retail of addictive

drugs, for instance the British East India Company's, late-1700s opium-based

Qianlong Emperor embargo-busting, Canton

System), goodwill (e.g. monopsonies) and/or gearing (e.g. oligopolies, for

instance Portland cement producers near boomtowns) etc. The hope is that

stars become next cash cows.

Stars require high funding to fight competitions and maintain a growth rate.

When industry growth slows, if they remain a niche leader or are amongst

market leaders its have been able to maintain their category leadership stars

become cash cows, else they become dogs due to low relative market share.

As a particular industry matures and its growth slows, all business units become

either cash cows or dogs. The natural cycle for most business units is that they

start as question marks, then turn into stars. Eventually the market stops growing

thus the business unit becomes a cash cow. At the end of the cycle the cash cow

turns into a dog.

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As BCG stated in 1970:

Only a diversified company with a balanced portfolio can use its

strengths to truly capitalize on its growth opportunities. The balanced

portfolio has:

stars whose high share and high growth assure the future;

cash cows that supply funds for that future growth; and

question marks to be converted into stars with the added funds.

Practical Use."To be successful, a company should have a portfolio of products with different growth rates

and different market shares. The portfolio composition is a function of the balance

between cash flows. High growth products require cash inputs to grow. Low growth

products should generate excess cash. Both kinds are needed simultaneously."

Bruce Henderson

For each product or service, the 'area' of the circle represents the value of its sales.

The growth–share matrix thus offers a "map" of the organization's product (or

service) strengths and weaknesses, at least in terms of current profitability, as well

as the likely cashflows.

The need which prompted this idea was, indeed, that of managing cash-flow. It

was reasoned that one of the main indicators of cash generation was relative

market share, and one which pointed to cash usage was that of market growth

rate.

Relative market shareThis indicates likely cash generation, because the higher the share the more cash

will be generated. As a result of 'economies of scale' (a basic assumption of the

BCG Matrix), it is assumed that these earnings will grow faster the higher the

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share. The exact measure is the brand's share relative to its largest competitor.

Thus, if the brand had a share of 20 percent, and the largest competitor had the

same, the ratio would be 1:1. If the largest competitor had a share of 60 percent;

however, the ratio would be 1:3, implying that the organization's brand was in a

relatively weak position. If the largest competitor only had a share of 5 percent, the

ratio would be 4:1, implying that the brand owned was in a relatively strong

position, which might be reflected in profits and cash flows. If this technique is used

in practice, this scale is logarithmic, not linear.

On the other hand, exactly what is a high relative share is a matter of some debate.

The best evidence is that the most stable position (at least in fast-moving

consumer goods markets) is for the brand leader to have a share double that of the

second brand, and triple that of the third. Brand leaders in this position tend to be

very stable—and profitable; the Rule of 123.

The reason for choosing relative market share, rather than just profits, is that it

carries more information than just cash flow. It shows where the brand is

positioned against its main competitors, and indicates where it might be likely to go

in the future. It can also show what type of marketing activities might be expected

to be effective.

Market growth rateRapidly growing in rapidly growing markets, are what organizations strive for; but,

as we have seen, the penalty is that they are usually net cash users – they require

investment. The reason for this is often because the growth is being 'bought' by the

high investment, in the reasonable expectation that a high market share will

eventually turn into a sound investment in future profits. The theory behind the

matrix assumes, therefore, that a higher growth rate is indicative of accompanying

demands on investment. The cut-off point is usually chosen as 10 per cent per

annum. Determining this cut-off point, the rate above which the growth is deemed

to be significant (and likely to lead to extra demands on cash) is a critical

requirement of the technique; and one that, again, makes the use of the growth–

share matrix problematical in some product areas. What is more, the

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evidence, from fast-moving consumer goods markets at least, is that the most

typical pattern is of very low growth, less than 1 per cent per annum. This is

outside the range normally considered in BCG Matrix work, which may make

application of this form of analysis unworkable in many markets. Where it can be

applied, however, the market growth rate says more about the brand position than

just its cash flow. It is a good indicator of that market's strength, of its future

potential (of its 'maturity' in terms of the market life-cycle), and also of its

attractiveness to future competitors. It can also be used in growth analysis.

GRAN STRATEGY MATRIXGrand Strategy Matrix has emerged into a powerful tool in devising alternative

strategies. This matrix is basically based on four important elements:

Rapid Market Growth

Slow Market Growth

Strong Competitive Position

Weak Competitive Position

These elements form a four quadrant matrix in which all organizations can be

positioned in such a way that identification and selection of appropriate strategy

becomes an easy task. Moreover, this matrix helps in adopting the best strategy

based on the current growth and competitive state of the firm. A large scale firm

segregated into many divisions can also plot its divisions in this four quadrant

Grand Strategy Matrix for formulating the best strategy for each division.

Quadrant IThe quadrant one of the Grand Strategy Matrix is meant for those firms which are

in a strong competitive position and flourishing with rapid market growth. Firms

located in this quadrant are in excellent strategic position and they need to

concentrate on current markets and products.

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Quadrant IIFirms and divisions falling in quadrant two of the Grand Strategy Matrix are

characterized with a weak competitive position in fast growing market. The present

market position of these firms must click in the minds of the management and they

need to weigh up the firms’ present market place critically. The opportunity lagging

here is that such firms are operating in a growing industry but the problem area is

that they are competing ineffectively. An in-depth analysis is necessary to identify

the gray areas of incompetence and the reasons behind such ineffectiveness.

Moreover, adoption of counteractive measures is also indispensable so that ability

to compete effectively is strengthen and firm can find its space in the more

competitive environment.

Quadrant IIIThe quadrant three firms are operating in a slow growth industry with a weak

competitive position. These firms are prone to further decline which may result

possibly in liquidation. To avoid such situations quadrant three firms needs

introduce drastic changes in almost all the areas of managing the company. The

management has to change its philosophy and should necessarily adopt new

approaches of governing the firm. The management should be willing to incur

some extensive costs in the overall revamp of the organization.

Quadrant IVThe firms falling in quadrant IV are characterized as having a strong competitive

position but are operating in a slow growth industry. These firms have to quest for

the promising growth areas and to exploit the opportunities in the growing markets

as they possess the strengths to instigate diversified programs in growing

industries.

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BALANCED SCOREDCARD (BSC) The Balanced Scoredcard (BSC) is a powerful tool in the strategic planning

process for describing and communicating a strategy coherently and clearly.

Kaplan and Norton (2001) state that the BSC's main purpose is to convert a

company's strategy into action and results through alignment of the objectives of all

perspectives; financial, customer, internal and learning and growth processes.

Therefore, the BSC is conceived as a process of descending translate the mission

and overall strategy of the company in more concrete objectives and measures

that could lead to timely and relevant corporate action (White, Olite and Cantorna,

1999).

Most organizations today recognize that competitive advantage comes from

knowledge, skills and intangibles relationships created by employees of investment

in physical assets. The implementation of the strategy requires, therefore, that all

employees and all business units and supports are aligned and linked to Kaplan

and Norton (2001) strategy.

Kaplan and Norton (1992) designed the Balanced Scorecard as a tool to measure

results, on the basis of the establishment of financial and non-financial derivatives

of vision, mission and strategy of the company, so it becomes a tool for manage

strategy.

Benefits of Balanced Scoredcard (BSC) The BSC shows a methodology that links enterprise strategy to action, according

to the stipulations Norton and Kaplan (2001), and its main objective is to make a

company's strategy into action and results through the alignment objectives of

perspectives: financial, customer, internal processes and learning and

development. Then the following benefits to organizations opting for

implementation are mentioned.

1 Aligning employees to the vision of the company.

2 Improved communications to all staff and compliance objectives.

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3 Redefining strategy based on results.

4 Translation of the vision and strategy into action.

5 Orientation towards value creation.

6 Integration of information from different business areas.

7 Improved capacities for analysis and decision making.

Altair (2005) mention that the present and the immediate future of the BSC is

becoming a key tool for managing strategic change in organizations, a new

business management tool that allows quickly adapt to the frequent changes in

strategic direction caused by applicant increasingly competitive environment. Altair

(2005) states that some of the strategic situations that are reinforced by the BSC

are:

Creating sustainable value, the BSC facilitates sustainable value creation to set the

vision for the short, medium and long term. A key element is the establishment of

the strategic objectives in the four perspectives

Growth, long-term sustainability is based more on increasing revenue and

positioning in front of customers, and not just cut costs and increase productivity.

To achieve growth requires that the products and services offered create satisfied

customers so that translates into increased revenues and thus contribute to

growth.

Alignment to align all resources (human, material, financial, etc.) resources to the

strategy and mission of permeating the organization to different organizational

levels.

Making the strategy is everyone's job, the BSC allows a structured way to

communicate the strategy to all levels and make key elements of the daily

performance by creating dashboards for each department, equipment and even

people.

Instead, the BSC is a key to develop and communicate a new strategy for a more

competitive environment methodology. People participate in the process of defining

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objectives, indicators, targets and projects, so that changes in the strategy should

be assumed to be themselves and not by imposition.

Strategic Map A strategic map presents a simple and coherent description of the strategy of an

organization, in order to set targets and indicators in the financial, customer,

internal processes and learning and growth.

According to Fernandez (2001), the BSC design process starts with defining the

vision, mission and values of the organization and from that strategy, which is

represented through the strategic map is developed. A strategy map is a set of

strategic objectives related through cause-effect relationships, helping to

understand the coherence between strategic objectives and strategy of the

organization.

As mentioned above, the BSC strategy map shows the strategic objectives from

four perspectives; financial, customer, internal processes and learning and growth.

In this regard Dávila (1999) mentions that the outlook help organize the business

model and structure indicators and information.

The financial perspective describes the tangible outcomes of the strategy in

traditional financial terms, indicators such as return on investment, shareholder

value, revenue growth, unit costs, among others, and measuring the value creation

for the organization.

The customer perspective reflects the positioning of the organization in the market,

identifying customer segments; define the value proposition to target customers.

Amaro and Fuentes (2004) note that the indicators considered in this perspective

usually are: customer satisfaction and retention as well as new customer

acquisition, customer profitability and market share in which the organization

participates. If customers value consistent quality, timely delivery, constant

innovation and high performance products and services offered by the

organization, then that is the skills, systems and processes involving the production

of products and services acquire value for the organization (Altair 2005).

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The internal process perspective identifies the internal processes that will impact

more on customer satisfaction. Rodiles and Fuentes (2004) mention that some

indicators of this perspective are: productivity, quality and innovation of products

and services. Dávila (1999) notes that this approach contributes to the customer's

perspective, to the extent that it meets the customer satisfaction indicators, market

coverage and consequently translate into higher revenues, reduced costs and

increased financial returns and social, thus contributing to the financial strategic

objectives.

The learning and growth perspective, the formation and growth of an organization

are mainly from people, systems and processes. The availability of material

resources and working people are the key to success in organizations to achieve

the strategy. Dávila (1999). According to the statement made by Altair (2005), the

objectives of this perspective identify human capital, and organizational climate

systems required to support the processes of value creation.

The four perspectives mentioned above are defined and basic yet can be modified

depending on the particular circumstances of each organization. Fidalgo C and C

Santos (2004).

For-profit organizations, financial goals and increasing profitability is not their

priority, but rather a resource that is sure to achieve its mission. Dávila (1999)

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The figure shows the relationship between vision and mission as the center of the

strategy and the four perspectives of BSC.

The strategic objectives of the four perspectives are interrelated by cause-effect

relationships, and according to Altair (2005), the process for making the strategic

map is as follows:

1 Define the vision and mission collegiate.

2 Define financial results based on the premise that customers are satisfied. This is

defined in the financial perspective.

3 Define the value proposition for the customer to help build sales and customer

loyalty. (Customer Perspective)

4. create internal processes and provide the value proposition for the customer.

(Internal Perspective)

5. intangible assets such as human capital, systems and organizational climate

contributes to the internal processes that provide the foundation of the strategy.

(Learning and growth perspective)

Align the objectives of these four perspectives with one another and with the

mission, is the key to creating value and, therefore, for focused and internally

consistent strategy (Figure 2). This cause and effect of the four perspectives, the

structure of a strategic map. Establish strategic objectives is the key to the BSC is

a management tool focused on the implementation of the strategy. The setting of

strategic objectives and their connection through cause-effect relationships allow to

explain the sequence of the strategy and the organization he will achieve strategic

and financial objectives customer satisfaction through good performance of internal

processes and enabling human, organizational and technological capital Santos

and Fidalgo (2004).

Building a strategy map reflects how the organization will create value for the

sponsors, shows the strategic objectives in each of the prospects, key elements for

the organization and to obtain long-term goals of the company (vision).

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Elements related to BSC

Limitations of the BSC According to Santos and Fidalgo (2004), the BSC is a management model that

considers elements which allows measurement and show that the company is

moving in the direction defined in strategic planning, thereby contributing to the

achievement of the objectives. However, it has some weaknesses, which is

presented in Table No. 1 Saints and Fidalgo (2004) describe as strengths and

weaknesses of the situations listed in Table 1.

Table 1 Strengths and weaknesses of BSC

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The BSC can be used in two different ways: as a traditional control system, or as

strategic management system, as a tool for organizational learning. If the

management team is confident the company's vision, strategy, business model and

the role of each person in the organization, the BSC can be used as a traditional

control system.

However, growing organizations or in uncertain and changing environments, where

the strategy is constantly evolving, where knowledge is dispersed and address

proposed new initiatives and leverage the creativity of people without losing control

of the organization, the BSC can be used as a tool for organizational learning. In

this case, the results offered by used to evaluate whether to change the business

model or strategy indicators. (Santos and Fidalgo, 2004) Saints and Fidalgo (2004)

mention that the successful design and implementation of BSC lies mainly in four

aspects: 1) defining the strategy, 2) selection of indicators, 3) process creation and

4) philosophy is to communicate through the BSC. These factors, if not adapted to

the characteristics of the organization and corporate culture will become limitations

or weaknesses of the model and you cannot consolidate the BSC as a strategic

management model. Oliver regard and Requena (2004) mention that the focus of

the strategic map is not completely describe the business model of the company,

but to focus on the key factors of strategy and strategic objectives that are most

relevant.