Page 110 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes It is very important to identify the CSFs for a particular industry. Many elements relate not only
to the environment but also to the resources of organisations in the industry. To identify the CSFs
in an industry, it is therefore useful to examine the type of resources and the way they are
employed in the industry and then use this information to analyze the environment outside the
organisation. Hence CSFs require an exploration of the resources and skills of the industry
before they can be applied to the environment.

Importance of Critical Success Factors

The Japanese strategist Kenichi Ohamae, the former head of the management consultants Mc
Kinsey, in Japan, has suggested that the CSFs (or key success factors, as he calls them) are likely
to deliver the company’s objectives. He argues that, when resources of capital, labour and time
are scarce, it is important that they should be concentrated on the key activities of the firm, that
is, those activities that are considered most important to the delivery of whatever the organisation
regards as success.
Ohamae treats CSFs as a basic business strategy for competing wisely in any industry. He
suggests identifying the CSFs in an industry or business and then to “inject resources into the
most important business functions.” The aim is to invest in the parts of the company that matter
most for its success.
Rockart (1979) has applied the CSFs approach to several organisations through a three step
process for determining CSFs. These steps are:
1. Generate CSFs (asking, What does it take to be successful in business?)
2. Convert CSFs into objectives (asking, “What should the organisation’s goals and objectives
be with respect to CSFs)
3. Set Performance standards (asking “How will we know whether the organisation has
been successful in this factor?”)

Rockart has also identified four major sources of CSFs:
1. Structure of the industry: Some CSFs are specific to the structure of the industry. For
example, the extent of service support expected by the customers. Automobile companies
have to invest in building a national network of authorized service stations to ensure
service delivery to their customers.

2. Competitive strategy, industry position and geographic location: CSFs also arise from
the above factors. For example, the large pool of English-speaking manpower makes
India an attractive location for outsourcing the BPO needs of American and British firms.
3. Environmental factors: CSFs may also arise out of the general/business environment of
a firm, like the deregulation of Indian Industry. With the deregulation of
telecommunications industry, many private companies had opportunities of growth.
4. Temporal factors: Certain short-term organisational developments like sudden loss of
critical manpower (like the charismatic CEO) or break-up of the family owned business,
may necessitate CSFs like “appointment of a new CEO” or “rebuilding the company
image”. Temporarily such CSFs would remain CSFs till the time they are achieved.

6.4 Benchmarking

Benchmarking is the process of comparing the business processes and performance metrics
including cost, cycle time, productivity, or quality to another that is widely considered to be an
industry standard benchmark or best practice. Essentially, benchmarking provides a snapshot
of the performance of a business and helps one understand where one is in relation to a particular

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