C 1 I S M: Hapter

Introduction to Strategic Management
C HAPTER 1
I NTRODUCTION TO S TRATEGIC M ANAGEMENT
1. BUSINESS POLICY
▪ Business policy is defined as study of

➢ functions and responsibilities of Senior Management;
➢ crucial problems affecting success of Entity; and
➢ decisions that determine the direction of Organization and shapes its future.
▪ Business Policy tends to emphasize on rational-analytical aspects of strategic management.
▪ Examples
a) No exchange, no refund
b) COD allowed
c) Return allowed within 7 days
d) KYC documents must for opening Bank A/c
1.1. EVOLUTION OF BUSINESS POLICY
1911 1959 1969

Harvard Business School introduced BP formally introduced in It was made mandatory to include
interactive course in Management with Academics. course in BP in all US business
objective of creation of general management institutes.
management capabilities among
business executives.
As per “William F. Gluek”

“Business policy evolved further as managers started using long term planning and strategic planning from
short term and medium-term planning.
Phase I Phase II Phase III
Business used to be Concept of B.P. arises and B.P. was replaced by strategic
conducted on ad-hoc basis Entities started using short management as managers started using
with little or no formal term, medium term and finally strategic planning.
planning. long-term planning. Long term + short term+ Growth +
competition
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2. STRATEGIC MANAGEMENT
Strategy Management
3. S T R A T E G Y
▪ Refers to long term blueprint of Organization’s

➢ desired image i.e., what it wants to be
➢ desired direction i.e., what it wants to do
➢ desired destination i.e. where it wants to go.
▪ It is flexibly designed and provides integrated framework for Top Management to
➢ search, evaluate and exploit opportunities External
➢ perceive threats and meet it
➢ make full use of strength/ resources; and Internal
➢ offset corporate weaknesses.
▪ In large organizations, strategies are formulated at corporate, divisional and functional leveḷ.
3.1. IS STRATEGY PROACTIVE OR REACTIVE?
▪ Proactive strategy is Planned strategy. It involves

➢ Previously initiated business approach that are working well enough to continue it; and
➢ Newly launched business approach to strengthen Co’s overall position and performance.
▪ Reactive strategy is adaptive strategy.
▪ Strategy is formulated on based on business environment. As business environment is dynamic, it can’t
be predicted with absolute certainty.
▪ Hence, when market and competitive conditions take unexpected change or some aspect of Co’s strategy
hit a stonewall, entity has to take strategic reaction known as reactive strategy.
▪ Further there is a need to adapt strategy to new beginning and ideas.
▪ Thus, strategy is a mix of both proactive strategy and reactive strategy. Ideally, strategy should be more
proactive and less reactive.
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3.2. P O L I C Y & S T R A T E G Y
▪ Policy and Strategy are quite interrelated, but the interesting thing to study is how they differ.
▪ Policy is a thought process, it talks about what should be done in a particular situation, or what should
be the reaction to a given circumstance.
▪ Strategy part of it explains the real actions. Strategy talks about how the policy would be followed.
▪ For example, the policy of an organisation could be to not drop their prices to fight competition. The
strategy could be to give more quantity for the same price, or give some other product as a freebie to
attract customers without dropping their price.
4. MANAGEMENT
It is an influence backed by power, knowledge, competence & resources

➢ to make things happen;
➢ to gain command over situation/ phenomena; and
➢ to direct person and events in particular manner.
Management is used in two senses:
a) With reference to key group in Organization in- b) With reference to set of inter related functions
charge of its affairs like BOD, CEO, CFO, etc. and processes carried out by Management to
Survival & success of an Organization depends on achieve objectives.
competence and character of its management. Functions include Planning, Organizing, Staffing,
Directing & Control.
Is strategy substitute for management?
No, strategy is not substitute for sound and responsible management.
Due to dynamic and changing environment, strategy can never be perfect, flawless and optimal.
In sound strategy, allowances are made for possible miscalculations and unexpected events.
5. STRATEGIC MANAGEMENT
• It refers to managerial process of

➢ Developing strategic vision,
➢ Setting objectives,
➢ Crafting strategy,
➢ Implementing and evaluating strategy, and
➢ Initiating corrective adjustments, where deemed appropriate.
• It involves
➢ Strategy formulation
➢ Strategy implementation and
➢ Strategy evaluation.
Originally called business policy, it monitors and evaluates external threats and opportunities in light of
Company’s strengths and weaknesses for survival and growth of Company.
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Objectives of strategic Management

a) To create competitive advantage so that Company can outperform its competitors.
b) To guide the Company successfully through changes in environment.
5.1. IMPORTANCE/ BENEFITS / ADVANTAGES OF STRATEGIC MANAGEMENT
Darwin propagated “Survival of the fittest”. It is the only principle of survival of organization.
Fittest is not the largest or strongest but one which can change and adapt to changing business conditions.
Business follows the war principle of “Win or lose’. Only in rare cases, win–win situation arises. Hence, each
organization needs to build competitive edge over rivals.
a) Direction to company It gives direction to Company to move ahead. It defines objectives & goals
which are in line with Company’s vision.
b) Proactive instead of It helps company to adopt proactive strategies instead of reactive strategies.
reactive Organizations are able to analyse and take decisions in advance.
c) Future ready It prepares organization to face the future, seize business opportunities and
deal with threats.
d) Develop core It helps Organization to develop core competencies and competitive
competencies & advantages.
competitive advantage This facilitates its fight for growth and survival.
e) Corporate Defence It acts as corporate defence mechanism against mistakes and pitfalls.
mechanism Helps organization to avoid costly mistakes.
f) Framework for decision It provides framework to management for major decision making.
making
g) Enhance Longevity of It helps Organisation to face competition and dynamic market. It makes sure
Business that it is not just surviving on luck.
5.2. L I M I T A T I O N S O F S T R A T E G I C M A N A G E M E N T
SM cannot counter all hindrances/ obstacles/ roadblocks/ bottlenecks/ problems and ensure success.
a) Environment is highly Organization’s estimate about future may drastically go wrong & jeopardize/
complex and turbulent endanger all strategic plans.
b) Time consuming Organizations spend a lot of time in preparing and communicating strategies
that may affect daily routine operations.
c) Costly It adds lot of expenses to Org as expert strategic planners needs to be engaged.
d) Response to competitors Since all Organizations are trying to move strategically, it is difficult to
estimate competitive response to Firm’s strategy.
6. S T R A T E G I C L E V E L S I N A N O R G A N I Z A T I O N
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1) Corporate They participate in strategic decision making like Merger/acquisition, new product
Level launch etc.
They oversee development of strategies for whole organization. For this his task includes:
a) Defining vision, mission and objectives of Organization
b) Determining what businesses it should be in
c) Allocating resources among different divisions
d) Providing leadership for Organization
e) Acts as a linkage between Management and Shareholders i.e., owner of business.
[CEO is viewed as guardian of shareholder welfare and must make strategies to
maximize the wealth of shareholders]
2) Strategic It is self-contained Division with its own business functions like HR, CRM, Sale and
Business level Marketing, R&D etc.
(SBU) Principle General Manager or Business level manager is head of a division.
They are responsible for working of Division and overseeing all functions of the Division.
They are responsible to translate general statements of direction of Corporate Level into
concrete business plans.
3) Functional Responsible for specific business functions in a division or company like marketing,
level R&D, HR etc.
Functional managers are also responsible for
a) developing functional strategies in their area to fulfill strategic objectives set by
corporate level managers; and
b) implementing/ executing strategies of corporate level and business level managers.
They are closer to customers and provide most of information that enable corporate
level and business level managers to formulate realistic and attainable strategies.
General Managers are found at first two levels but their strategic roles differ.
7. STRATEGIC MANAGEMENT IN GOVERNMENT DEPARTMENTS AND NOT- FOR-PROFIT ORGANIZATION S
▪ Organizations can be classified, on the basis of interest they have, into

a) Commercial organization - Where profit is main objective.
b) Non-commercial organization - Where Profit is not the main objective. It exists for charitable, social or
educational purposes. Main objective is to provide service to members or public at large.
▪ Eg:- ICAI, NGOs ,Hospital, Educational Institutions etc.
▪ While an Organization may have social or charitable existence, still it has to generate revenue and use
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them wisely to meet their expenses and attain their objectives.

▪ Organization needs to be managed strategically irrespective of whether they are profit motive or not.
▪ SM process is being used by countless non-profit and Government Organizations & many NGOs & Govt.
organizations outperform commercial firms on innovation, productivity & human relations.
▪ These organization often function as a monopoly and are dependent on outside financing. For such
Organizations, SM provides excellent reasons for justifying the request for needed financial support.
7.1. E D U C A T I O N A L I N S T I T U T I O N S
▪ Educational Institutions are using strategic management techniques for

a) Creating better name and recognition
b) Attracting talented students
c) Designing better curriculum; and
d) Appointing & retaining good faculties.
▪ They have joined hands with Industries to deliver education to make Graduates more employable.
▪ Education delivery system has also changed due to computer internet and technology.
▪ Educational Institutions are now providing online classes and online degrees. This represents threat to
traditional schools and colleges.
7.2. M E D I C A L O R G A N I Z A T I O N S
▪ Modern hospitals are creating new strategies that include

a. Deep collaboration with physicians and doctors
b. Backward integration strategies like acquiring ambulance services, diagnostics services, waste
disposal services etc.
c. Online delivery of secured medical services using internet.
▪ Others successful hospital strategies are
a) Home health services like collecting blood samples by pathological labs.
b) Outpatient surgery
c) Psychiatric services
d) Women’s medical services.
7.3. G O V E R N M E N T A G E N C I E S A N D D E P A R T M E N T
▪ They use tax payer’s money to provide services to general public. Hence, they need to formulate,
implement and evaluate strategies that enable them to be more effective and efficient.
▪ They are also using SM to develop and substantiate formal request for additional funding.
▪ However, strategists in Government Organizations operate with less autonomy. They cannot diversify or
merge with other company.
▪ Politician have direct or indirect control over major decisions.
▪ Strategy gets debated in parliament and Media resulting in fewer strategic alternatives.
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Dynamics of Competitive Strategy
C HAPTER 2
D YNAMICS OF C OMPETITIVE S TRATEGY
1. COMPETITIVE STRATEGY
▪ Competitive Strategy consists of long-term plan and moves to

a) attract customers and deliver value,
b) withstand competitive pressure, and
c) strengthen market share.
▪ Objective of competitive strategy

It helps to
➢ create competitive Advantage
➢ increase market share
➢ beat competition.
▪ Examples: Cost leadership, Differentiation, Focus.
▪ Competitive advantage is necessary for a Firm to compete in market but competitive advantage should be
sustainable (not easily copied).
▪ Competitive strategy of a Firm is a based on several external factors like economic & technical components.
▪ By knowing if it is a leader, challenger or follower, Firm can adopt appropriate competitive strategy.
2. C O M P E T I T I V E L A N D S C A P E
▪ Competitive landscape is a business analysis which identifies competitors, either direct or indirect.
▪ Competitive landscape is about
➢ identifying and understanding competitors and
➢ comprehension of their vision, mission, values, niche market, strengths & weaknesses.
▪ This enables a Firm to develop competitive strategy to give competitive advantage.
▪ Understanding of competitive landscape requires an application of “competitive intelligence”
Steps to understand competitive landscape:
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a) Identifying the Need to find out who are the competitors, their actual market shares etc.
competitors This answers the question “Who are competitors and how big they are?”
b) Understanding the through market research, reports, newspapers, social media.
competition This answers the question “What are their products and services”?
c) Determine strength This answers the questions
of competition
➢ What are their financial positions?
➢ What gives them cost & price advantage?
➢ How strong is their distribution network?
➢ What are their human resource strengths?
d) Determine the through consumer reports and reviews appearing in various media.
weakness of This answers the question ‘Where are they lacking’?
competition
e) Put all information Strategist puts all information together to draw conclusion/inference about what
together competitor is not offering and how they can fill the gap.
This answers the questions
➢ What improvements does Firm needs to make.
➢ How can Firm exploit weaknesses of the competitors?
3. S T R A T E G I C A N A L Y S I S
▪ Refers to analysis of both internal as well as external environment of business based on which strategic
plans can be developed.
▪ Strategic analysis gives detailed view of industry, competition, organization’s strength and weakness.
▪ Strategic analysis helps in evaluation of alternatives to choose sound winning strategy.
Issues considered for strategic analysis
a) Strategy evolves over Strategy of a Firm is a result of series of small decisions taken over a period of
a period of time time.
b) Balancing of internal Strategy formulation involves matching internal strengths and weaknesses with
and external factors external opportunities and threats.
In reality, perfect match between them is not possible. Hence, strategic analysis
uses workable balance.
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c) Risks Competitive market, globalization, Booms and recessions, technology
advancement, etc. affect businesses and pose risk.
Various strategic risks are as given below:
Short Term Long Term
External Error in interpreting the Changes in environment leads to
environment that causes obsolescence of strategy
strategic failure
Internal Organizational capacity is Inconsistent strategy is developed
unable to cope up with on account of change in internal
demand capacities
4. I N D U S T R Y A N D C O M P E T I T I V E A N A L Y S I S
▪ Industry: Group of Firms who provide similar type of products and services to customers and strive to
acquire the customers.
▪ Industry and competitive analysis helps in getting clear picture of
➢ key industry features,
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➢ intensity of competition,
➢ drivers of change, and
➢ market position and strategies of rival companies.
Issues covered in Industry and Competitive Analysis
i) Dominant economic Industries differ significantly in their character. Factors to be considered are:
features of Industry a) Size and nature of market
b) Market growth rate and potential
c) Market profitability
d) No. of rivals and their market share
e) Capital requirement
f) Types of distribution channel
g) Impact of technology on Industry
ii) Nature and It involves analysis of Industry’s competitive pressures to decide

strengthen of
➢ main source of competitive pressure and
competition
➢ how strong each competitive force is.
Porter’s Five Forces model is useful for competition analysis. (Ch 5)
iii) Triggers of change Refers to forces that results in change in Industry and environment.
Most dominant forces are known as driving forces. Common driving forces are:
a) Internet and technological advancement
b) Increasing globalization
c) Entry/exit of major Firms
d) Product innovation
e) Marketing innovation
iv) Identifying Strategic group consists of those rivals who have similar competitive approach
Strongest and and position in market (comparable product, price, quality etc.)
Weakest Companies There may be one or more strategic groups in an Industry.
/ Strategic Group
Mapping Procedure for constructing strategic group:
a) Identify competitive characteristics that differentiate Firms in the industry.
➢ Price/ Quality (High, Medium, low)
➢ Geographic coverage (Local, National, Global)
➢ Degree of services offered (No-frills, Limited, full)
b) Plot Firms on two variable map.
c) Draw circle around each group where each group represents their market
share.
v) Likely Strategic In order to out-do competitors and survive in long run, it is essential to gain
Moves of Rivals competitive intelligence.
Competitive intelligence about strategies that rivals are deploying and their
strength and weakness is essential to anticipate next moves and its impact on
Co’s own strategy.
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Competitive intelligence helps company to determine whether
a) it needs to defend itself against specific move taken by rival; or
b) adopt offensive approach.
vi) Key Factors for Key Success factors in an industry are things like product attributes,
Competitive competencies, resources etc. that affect industry member’s ability to succeed.
Success Key factors vary from industry to industry. Key success factors in
➢ Retail Industry → Location , product range, price
➢ Apparel Industry → Appealing design, colour, price
➢ IT Industry → Technology, Efficiency, price
Generally, there are 3 to 4 key success factors in an Industry.
Identifying KSFs - Answer to 3 question helps identify an Org’s KSF:
a) On what basis customers choose between competitive sellers?
b) What a seller needs to do to be competitive successful?
c) What does it take to achieve sustainable competitive advantage?
vii) Prospects and Final step of Industry and competitive analysis is to use result of analysis of
financial previous six issues to draw conclusion about attractiveness or unattractiveness of
attractiveness of Industry.
Industry Important factors on which conclusion is based includes:
a) Industry’s growth potential.
b) Impact of competition on Industry’s profitability.
c) Impact of driving forces i.e, triggers of change on Industry’s profitability.
d) Competitive position of Firm in the Industry and whether it is likely to become
stronger or weaker.
e) Severity of problems faced by Industry as a whole.
5. C O R E C O M P E T E N C Y
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▪ Competency refers to combination of skills and techniques.

▪ Core competency refers to capabilities that is a source of competitive advantage. It simply means whatever
a Firm does best.
▪ Core competency involves utilization of several individual skills and techniques.
▪ Therefore, core competencies can’t be built on one capability or single know-how technique. Instead, it has
to be integration of many resources.
▪ Optimal way to define core competence is to consider it as sum of 5 to 15 developed expertise.
5.1. A R E A S W H E R E M A J O R C O R E C O M P E T E N C I ES A R E I D E N TI F I E D – A S PER C K P R A H L A D & G A R Y H A M E L
Competitor Differentiation Customer value Application to other markets

A co. is said to have core It includes all the skills needed Core competency must be
competency if its’s competency is to provide fundamental benefits applicable to whole organization
unique & difficult for others to copy. to a customer. and not only to a particular
Company should keep on improving Service or product has to have area.
those skills to sustain competitive real impact on customers as the A skill is considered core
position. reason to purchase them. competency only if it is
Unique skills & resources doesn’t If the customer chooses the fundamental to whole
mean that it has to be possessed by product without this, it is not organization.
one company only. core competency. Core competency should be used
If many companies have similar throughout organization to open
skills and one company is able to up potential new markets.
perform it significantly better, that
Co. has core competency.
If above three conditions are met, the Company can regard a competence as core competence.
5.2. W H Y T O I D E N T I F Y A N D D E V E L O P C O R E C O M P E TE N C Y
Core competencies distinguish a company competitively and reflect its personality.

It is important to identify core competencies because it is difficult to retain those competencies in a price
war and cost-cutting environment.
Failing to identify core competencies is a kind of opportunity loss for a company.
A Core competency fulfills three criteria:
i) It should provide potential access to a wide variety of markets.
ii) It should make a significant contribution to the perceived customer benefits of the end product.
iii) It should be difficult to imitate for competitors/rivals.
Examples
Small retail shops have CC in Personal service to customers, Extended working hours, Easy credit, Free
the areas of home deliveries, Amicable style of the owner and Proximity.
Big retail stores & super Merchandising, Securing supplies at lower cost, In-house activity
markets have CC in areas of management, Computerized stock ordering, Billing systems and own
brand labels.
Supermarkets compete with Locational advantage, Quality assurance, Customer convenience in
one another with CC as to shopping, etc.
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5.3. H O W T O B U I L D C O R E C O M P E T E N C I E S / F O U R C R I TE R I A T O D E T ER M I N E S U S TA I N A B L E C O R E
COMPETENCY
Valuable Rare Costly to Imitate Non-substitutable

Valuable capabilities are Core competencies are It means such capabilities It means there must not
those which allow Firms rare capabilities which is not easy to copy be strategic equivalent
to exploit opportunities possessed by very few or develop. which is easily available
or tackle threats. competitors. or imitable.
When a capability is ‘valuable NCR’, it is core competency.
5.4. V A L U E C H A I N A N A L Y S I S F O R D E V E L O P I N G C O R E C O M P E TE N C Y
▪ It is analysis of value added by separate steps in complex process.

▪ Value chain analysis involves two basic steps:
➢ Identifying separate activities and
➢ Assessing value added by each activity.
▪ It was originally introduced as accounting analysis.
▪ There are 9 activities classified in two groups as follows (Michael Porter):
Primary Activities
Inbound Logistics Operations Outward logistics Marketing Service
Concerned with Concerned with Concerned with Process by which Activities which
receiving, storing transforming inputs collecting, storing consumers are enhance or maintain
and distributing into finished goods or and distributing made aware of value of product/
inputs. service. final product to goods or services. service.
Includes material Includes customers. Including Includes Installation,
handling, stock, manufacturing, Includes material promotion, Repairs, After sale
transport etc. packaging, assembly, handling, stock, Advertising, selling support etc.
testing etc. transport etc. etc.
Support Activities – Each of Primary activities are linked to following support activities:
Procurement Technology Development HR Management Infrastructure
Refers to process of It may be in relation to Involves recruitment, It supports Org. in
acquiring various training, developing executing primary
➢ Product (R&D product design)
inputs to primary and rewarding people. functions.
activities. ➢ Process i.e., process
development or
➢ Particular resource ( Raw
material improvement)
5.4.1. U S I N G V A L U E C H A I N A N A L Y S I S F O R I D EN TI F Y I N G C O R E C O M P ET EN C Y
▪ V.C. helps in analyzing separate activities performed by an Org. to achieve its goals by framing strategies.
▪ Although a threshold competence is required in all activities to succeed, it is also important to identify
those competencies which are critically important to Organization’s competitive advantage.
▪ V.C. differs from organization to organization depending on how it is positioned and what strategy it is
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following.
▪ Example: In US, GM & Ford focused on dealer network and overseas production plants while in Japan, Toyota
focused on defect free manufacturing.
5.4.2. S U S T A I N A B L E CC/ D I F F E R E N T B A S E S A S T O H O W CC C A N B E A N A L Y S ED A N D U N D E R S TO O D
a) Managing Linkages
Core competencies in various activities may provide competitive advantage but it can be easily copied by
competitors.
Core competencies are more robust and difficult to imitate if there is linkage between various processes.
Management between these linkages and ability to co-ordinate activities of different processes provide level
of performance which is difficult to imitate. This leads to sustainable core competencies.
Management of internal linkage may create competitive advantage in number of ways:
Linkage b/w Primary & Secondary
Linkage b/w Primary Activities Linkage b/w Supporting Acti.
Acti.
E.g. Decision to hold high level of E.g. Organisation using technology to E.g. Extent to which HR is
F.G. eases burden of production. sell Goods and services (Ola & Uber). comfortable with new tech.
b) Ability to complement/co-ordinate own activities with those of suppliers and customers etc. also gives
rise to competitive advantage.
Example: Total quality management which seeks to improve performance through closer relationship
between specialists in value chain.
E.g. Many manufacturers involve suppliers and distributors at design stage of product.
c) Vertical integration through ownership of more parts of value chain.
Example: Apple making its own hardware and software.
6. COMPETITIVE ADVANTAGE
▪ It is a set of unique features of a Company and its products

➢ that are perceived by target market and customers
➢ as significant and superior to competitors.
▪ Competitive advantage provides edge over rivals.
An organization is said to have competitive advantage if its profitability is higher than average profitability
of Industry.
▪ Competitive advantage is said to be achieved if other Firm’s efforts to imitate it has failed.
Resource Capabilities
It includes It exists when resources are purposefully integrated
a. tangible resources that can be seen and quantified. / used to achieve a particular task.
E.g. plant & machinery, factory E.g. Effective customer service, product innovation,
b. intangible resources like goodwill, capacity for digital technology.
innovation, HR skills, patents, copyrights etc.
It is developed over a period of time & difficult to
imitate.
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6.1. S U S T A I N A B I L I T Y O F C O M P E T I T I V E A D V A N TA G E
Sustainability of competitive advantage depends on 4 major characteristics of resource and capability:

Durability Transferability Imitability Appropriability
Period over which Competitive advantage If resources and Refers to ability of
competitive adv. is also depends on ability of capabilities can’t be Firm’s owner to
sustained depends on rivals to gain access to purchased, rivals need to appropriate the return on
the rate a Firm’s necessary resources and build it from scratch. its resource base.
resources and capabilities. If competitor is able to If resources and
capabilities E.g. Android can be build resource and capabilities provide
deteriorate. acquired by Samsung as capabilities easily, competitive advantage,
If rate of product well as Oneplus competitive advantage is there is issue of who is
innovation is fast, not sustainable. receiving return on such
patents/ tech. are resource & capabilities.
likely to get obsolete. E.g. Music industry
6.2. V A L U E C R E A T I O N
▪ Value is measured by product’s feature, quality, availability, durability and performance for which customer
is willing to pay.
▪ Value creation is an activity by Firm to create value that increases worth of goods, service and business.
▪ Value creation may be in terms of creating better value for
➢ customers as well as
➢ stakeholders who want to see their investment in business appreciate in value.
▪ Value creation gives rise to competitive advantage and helps Firm to earn higher profitability than other
Organization in the industry.
▪ Profitability of a company depends on
➢ cost of creating product
➢ price charged by company
➢ value customer places on company’s product i.e., utility a customer gets from the goods/ services.
▪ The excess amount customer wants to pay, over and above the price that business wants to charge is
called value creation.
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▪ According to Michael Porter, Co. can generate competitive advantage in two ways: (Covered in Ch 5)
Cost Advantage Differentiation
7. SWOT A N A L Y S I S
Identification and Analysis of strength, weakness, opportunity & threat of an Org. is called SWOT analysis.
Strength (+) Weakness (-) Opportunity (+) Threat (-)
Inherent capabilities Inherent limitations/ Favourable condition in Unfavourable condition in
of an Organization constraints which organization’s organization’s environment
used to gain strategic creates strategic environment to which causes risk or damage
advantage. disadvantage. strengthen its position. to organization’s position.
7.1. P U R P O S E / O B J E C T I V E O F SWOT A N A L Y S I S
It enables management to
➢ create a firm’s specific business model which
➢ best aligns/ fits/ matches an organization’s capabilities
➢ with demand of market/ environment.
SWOT Analysis provides competitive advantage to an organization.
7.2 . S I G N I F I C A N C E O F SWOT A N A L Y S I S
Guide Strategists in strategy

Logical Framework of Analysis Comparative Account
identification
It provides ~ to management to It provides ~ of internal & external It ~ in case there is any
identify all issues which may environment to managers to difficulty in selection of
impact Org. in long or short term. compare O&T with S&W of an Org. appropriate strategy.
8. TOWS M A T R I X
Strengths – S Weakness – W
Internal
List Strength List Weakness
External
SO strategies WO Strategies
Opportunities – O
Use strengths to take advantage of Overcoming weaknesses by taking
List Opportunities
opportunities advantages of opportunities
Threats – T ST Strategies WT Strategies
List Threats Use strengths to avoid threats Minimize weaknesses and avoid threats
▪ SWOT Analysis is a planning tool.

▪ TOWS is action tool and its scope is wider.
▪ TOWS Matrix is an advancement over SWOT Analysis as
a) In SWOT Analysis, individual factors i.e, S, W, O and T are analyzed whereas in TOWS matrix,
combination of factors i.e., SO, ST, WO and WT are analyzed.
b) Using SWOT Analysis, managers were finding it difficult to identify appropriate strategy whereas in
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TOWS, strategy identification is easy as it provides 4 strategic choices i.e, SO, ST, WO and WT.
4 strategic choices provided by TOWS Matrix:
SO (Maxi-Maxi strategy) Aggressive strategy -How can we use our strengths to exploit opportunities.
ST (Maxi- Mini strategy) Conservative strategy - How we can use our strengths to minimize threats.
WO (Mini-Maxi strategy) Competitive strategy - How can we minimize weakness and exploit opportunity.
WT (Mini-Mini strategy) Defensive strategy - How can we minimize weakness as well as threat
9. PORTFOLIO ANALYSIS
▪ Portfolio - Collection of businesses/ brands/ products that make up a company.

▪ Portfolio Analysis is done to determine best business portfolio i.e., one which fits Company’s strength &
weakness to opportunities in market.
▪ It is a tool by which management identifies and analyzes various businesses that makes a company.
▪ It is used in multi-product and multi-business Firm.
▪ It helps strategists to take strategic decisions w.r.t individual product or business in Firm’s portfolio.
▪ Advantage: It reveals business having more potential so that resources can be channelized to that business.
9.1. P R E -R E Q U I S I T E S F O R P O R T F O L I O A N A L Y S I S
Three concepts required to understand different models of portfolio analysis.

a) Strategic Business unit b) Experience curve c) Product life cycle
9.1.1. S T R A T E G I C B U S I N E S S U N I T (SBU)
SBU is a unit of company that has

➢ separate mission and objective and
➢ can be run independently.
It can be a company division, product line within a company or even a single product.
Characteristics of SBU
a) It has single business or collection of business that can be planned for separately.
b) It has own set of competitors.
c) It has a manager responsible for strategic planning and profitability.
9.1.2. E X P E R I E N C E C U R V E
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It is similar to learning curve which means efficiency of workers increases due to repetitive work.
It means cost per unit declines as cumulative production increases.
Reduction in cost per unit may be due to learning effect, economies of scale, technology improvement, process
improvement etc.
Characteristics of Experience curve
a) As business grows, it gains experience.
b) It provides an advantage over competition. Experience curve is key entry barrier.
c) Large businesses possess strategic experience curve.
9.1.3. P R O D U C T L I F E – C Y C L E
It is a S-shaped curve which reflects relationship of sales w.r.t time/ life of a product.
A product typically passes through 4 stages:
a) Introduction (slow sales growth)
b) Growth (rapid sales growth)
c) Maturity (slowdown in sales growth rate)
d) Decline (sharp decline in sales)
Basis Introduction Growth Maturity Decline

Market Limited Expand Stabilize Decline
Profit Low High Stable Decline/Low
Growth in sales Lower rate Rapid rate Decline in growth rate Drastic decline in
sales
Competition Negligible Increases Tough Tough
9.2. P O R T F O L I O A N A L Y S I S M O D E L S
Companies which are large enough to be categorized into SBUs face challenge of allocating resources among
them.
There are 4 portfolio analysis models for determining this:
a) BCG G-S Matrix
b) Ansoff PMG Matrix
18 | P a g e
c) ADL Matrix
d) GE Matrix
9.2.1. BCG G R O W T H S H A R E M A T R I X [B O S T O N C O N S U L T A N C Y G R O U P ]
BCG Matrix is simplest way to classify businesses on a 2-dimensional growth-share matrix where
➢ Vertical axis represents market growth rate
➢ Horizontal axis represents relative market share.
Relative Market Share
High Low
Star Question Mark
▪ SBU that is growing rapidly ▪ Known as problem child or wild cats
High ▪ Need heavy investment to maintain ▪ Require a lot of cash and investment to
their position & finance rapid growth hold their share
Market
▪ It represents opportunity for expansion. ▪ If left unattended, they become cash
Growth trap.
Rate Cash cow Dogs
▪ It generates cash and have low cost ▪ Have no future
Low ▪ Needs less investment to maintain ▪ May need cash to survive
market share ▪ Dogs should be minimized by means of
▪ In long run, when growth slows, Star divestment or liquidation.
becomes cash cow.
Standard First line of Explanation: Star is a high growth, high market share product.
BGG Matrix: Post Identification Strategies

After a firm has been classified into SBUs, it must determine which role each will play in future.
Build Hold Harvest Divest
Here objective is to increase Objective is to Objective is to increase Objective is to close /
market share even by preserve market short term cash flow by sell the business.
sacrificing short term profits. share. ignoring long term effects.
Is BCG Matrix really helpful? / Problems & Limitations of BCG Matrix

a) BCG matrix can be difficult, time-consuming, and costly to implement.
b) Management may find it difficult to define SBUs and measure market share and growth.
c) It also focuses on classifying current businesses but provide little advice for future planning.
d) They can lead the company to placing too much emphasis on market-share growth or growth through
entry into attractive new markets. This can cause unwise expansion into hot, new, risky ventures or
divesting established units too quickly.
9.2.2. A N S O F F ’ S P R O D U C T M A R K E T G R O W T H M A TR I X (PMG)
It is a P.A. tool proposed by Igor Ansoff. Using this matrix, business can get a fair idea about
➢ how its’s growth depends on
➢ its existing or new products in both existing and new markets.
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Existing Product New product

Market penetration Product Development
Existing Market
Eg: Colgate, Maggie E.g. E-vehicles by BMW
Market Development Diversification
New market
Eg: shampoo in sachet in rural area Eg: Ola in manufacturing Electric scooter
4 components / strategies
Market penetration Market Development Product development Diversification
It is a growth strategy It is a growth strategy It is a growth strategy It is a growth strategy
where business focus on where business focus on where business focus on where business focus
selling existing products to selling existing products selling new product to on selling new product
existing market. to new markets. existing market. to new market.
It can also be done by It is achieved through It is achieved through It is risky strategy as
increasing usage by existing development of new company does not have
➢ new geographical
customers. goods/ service which much experience.
markets
It involves aggressive appeals to existing It is achieved by
marketing, greater spending ➢ new distribution customers.
channels ➢ Starting up or
on advertising and a pricing
strategy to make market ➢ different pricing ➢ Acquiring other’s
unattractive for business.
competitors.
E.g. Gucci, a luxury clothing E.g. Gucci, a luxury E.g. Gucci, a luxury E.g. Gucci, a luxury
brand, selling its luxury clothing brand, clothing brand, selling clothing brand, selling
clothing in European selling its luxury casual clothing in casual clothing in
markets with new designs, clothing in Chinese European markets, is Chinese markets, is
is market penetration. markets, is market product development. diversification.
development.
9.2.3. ADL M A T R I X
It is P.A. tool proposed by Arthur D Little and is based on product life cycle.
It is a 2-dimensional four by five matrix based on:
➢ Stage of industry maturity i.e Embryonic, Growth, Maturity, Ageing/ Decline
➢ Competitive position of Firm i.e. Dominant, Favourable, Tenable, Weak
Dominant Strong Favourable Tenable Weak

It is a rare position Firms in this This position Firms in this Firms in this
& may arise due to category are comes when category perform category perform
strong enough to industry is reasonably good unsatisfactorily and
➢ monopoly or
pursue their fragmented and but are vulnerable are too weak to
➢ strong & strategy without no one leader to increased survive. However,
protected considering much stands out clearly. competition. opportunity for
technological about their improvement exists.
leadership. competitors.
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9.2.4. G E N E R A L E L E C T R I C M A T R I X [S T O P -L I G H T S TR A T EG Y M O D EL ]
This model was developed by General Electric company with assistance of consulting Firm Mckinsey & Co.
Also known as Business planning matrix; GE Nine cell Matrix; GE Model and Stop light strategy model.
Strategic planning tool in this model is inspired by traffic control lights where
➢ Green is used for Go; Yellow is used for caution and Red is used for stop.
This P.A. tool is based on two dimensions
➢ Market attractiveness [measured in terms of market growth rate, size, competition, profitability etc]
➢ Business unit strength [measured in terms of relative market share, brand image, innovation
capability, customer relationship, management capability etc.]
Business strength
Strong Average Weak
Market High Green Green Yellow
Attract Medium Green Yellow Red
iveness
Low Yellow Red Red
Analysis
Green If a product falls in this section, it is at advantageous position.
Strategy should be to invest, expand and grow.
Yellow If a product falls in this section, it needs to be cautious.
Appropriate strategy should be to hold position.
Red If a product falls in this section, it will eventually lead to loss.
Appropriate strategy should be harvest, retrenchment, divestment, liquidation.
Question – GE matrix is different from BCG Matrix. Comment.

GE matrix is different from BCG Matrix in the following manner:
a) In BCG matrix, two dimensions considered are market growth rate and relative market share.
In GE matrix, two dimensions considered are industry attractiveness and business unit strength.
b) In BCG matrix, two levels i.e. high and low are considered whereas in GE matrix, three levels i.e., High ,
Medium and low are considered.
c) Hence, the scope of GE matrix is wider than BCG matrix.
10. G L O B A L I Z A T I O N
For developing countries, it means integrating At company level, it means 2 things,

with world economy. a) Company’s ability to compete in domestic market
It visualizes world as one market and calls for with foreign competitors.
removal of trade barriers. b) Company invests heavily in manufacturing
locations around the world and offers products in
several diversified markets.
A company which has gone global is called MNC/ TNC.
An MNC is, therefore, one that, by operating in more than one country gains R&D, production, marketing
P a g e | 21
and financial advantages in its costs and reputation that are not available to purely domestic competitors.
Super National Enterprise - Worldwide enterprises approved by Non-political International bodies like WTO,
IMF, UN, etc. It serves all nations without specially being attached to any one country.
10.1. C H A R A C T E R I S T I C S O F G L O B A L C O M P A N Y
Common It is conglomerate of multiple units located in various part of the world but linked by
ownership common ownership.
Common pool of Multiple units use common pool of resource such as
resources
➢ Money; Technology/ patents; Brand name etc
Common strategy Units of global company follow common strategy.
10.2. W H Y D O C O M P A N I E S G O G L O B A L ?
a) Domestic market no longer adequate (saturated domestic market).

b) Need to grow [exploit opportunities in other countries]
c) Shrinking of time and distance [faster modes of communication and transportation]
d) Cost effective [lower cost of labour and raw material in other countries]
e) Reducing trade barriers
f) Export incentives.
MNC TNC
1. MNC is based in a home country and have Do not have subsidiary Co. but are linked to other Co.
subsidiary companies in other countries. through other modes like agreement, association.
2. It has centralized management system It does not have centralized management system.
3. It faces banners in decision making due to Units of TNC do not face barriers in decision making. Hence,
centralized management they are able to gain more interest in local markets.
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22 | P a g e
Strategic Management Process
C HAPTER 3
S TRATEGIC M ANAGEMENT P ROCESS
1. STRATEGIC PLANNING
▪ Planning is future oriented and it bridges gap between where we are and where we want to go.
▪ It means deciding what is needed to be done in future [today, next day, next week, next month, next year,
next couple of years] and generating blueprint of action.
▪ It involves determination of course of action to attain a pre-determined objective.
Strategic planning Operational planning

▪ It is developed by Senior Management of Org as per SWOT ▪ It is done by middle level and lower-level
management.
▪ It is a process of determining
▪ Concerned with how to use the resources
➢ objectives of Organization;
efficiently for achieving objectives.
➢ resource required to attain the objective; and
➢ formulation of policies for acquisition, usage and
disposal of resources.
▪ SM is a process of strategic planning which results in
formulation of corporate strategy.
1.1. STRATEGIC UNCERTAINTY
Dealing with Strategic uncertainty Impact of uncertainty

Strategic planning is future oriented & future is Each element of strategic uncertainty i.e., event
uncertain. or trend can have impact on present or proposed
Strategic uncertainty refers to future event or trend business.
that is unpredictable. E.g. Manufactures of aerated drinks now moving
Information gathering and additional analysis does not to manufacture juices.
reduce uncertainty. Impact of uncertainty depends on importance of
To manage it, these uncertainties need to be grouped in the SBU.
logical clusters.
It is then useful to assess the impact of each cluster in
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order to reduce impact of uncertainty.
2. S T R A T E G I C D E C I S I O N M A K I N G
Decision making is a managerial process of selecting best course of action out of several alternative courses
of actions for the purpose of achieving the objectives.
Two types of decisions are
a) Strategic decision making
b) Operational decision making.
Strategic decision making is the process of implementing & executing Organization’s strategic plans by
matching company’s capabilities with market demand.
E.g. Product to be launched (Oreo dairy milk); Markets to serve (Kia); Functions to perform (in house or
outsourcing); and major policies needed to execute these decisions.
2. 1. DIMENSIONS OF STRATEGIC DECISION
1. S.D. requires top management as it involves entire organization.

involvement
2. S.D. requires commitment of Org’s E.g. strategic decision to launch new product.
resources
3. S.D. requires consideration of Firm’s It needs matching of internal environment with changes in external
external environment environment.
4. S.D. has significant impact on long Generally the impact of strategic decisions are not visible quickly.
term prosperity of organization
5. S.D. is future oriented It involves predicting future environmental conditions and how to
adapt to changing conditions.
6. S.D. has major multi-function and Since entire organisation is involved, it affects different sections of
multi-business consequences. Organisation with varying degree.
3. S T R A T E G I C I N T E N T
▪ It refers to purpose of what the organization tries to do.

▪ It is philosophical base of strategic management. Senior manager must define what they want to do and
why they want to do.
▪ “Why they want to do” reflects strategic intent.
▪ It answers the question “what the organization stands for”.
▪ It could be in the form of
➢ vision and mission of Organization at corporate level; and
➢ business definition and business model at business level.
▪ Strategic intent is generally stated in broad terms but when stated in precise specific terms, it is referred
as goals and objectives.
Elements of Strategic Intent:
24 | P a g e
Vision Mission Business definition Business model Goals and objective
3.1. VISION
▪ It implies blueprint of company’s future. It describes where company wants to land.

▪ It is a road map of company’s future providing specifics about
➢ Technology,
➢ customer focus,
➢ geographic or product and market to be pursued,
➢ capabilities it plans to develop and
➢ kind of company it wants to create.
Elements of 1. Coming up / developing mission statement that defines
strategic vision
➢ Who we are
➢ What business are we in
➢ What we do
➢ Where we are now
2. Mission statement is used as a basis for deciding long term path about where we are
going.
3. Communicating the strategic vision across Organization in clear terms to enhance
commitment of employees.
Essentials of a) Creative thinking - Developing strategic vision involves thinking creatively about how
strategic vision to prepare a company for future.
b) Developing strategic vision requires intelligent entrepreneurship.
c) It creates enthusiasm among members of Organization.
d) It shows/ illuminates direction in which Organization is headed.
3.2. M I S S I O N
▪ Mission statement defines ‘Who we are’, ‘What business are we in’, ‘What we do’ and ‘Where we are now’.
▪ It justifies the presence and existence of the Firm and legitimizes Firm’s presence.
▪ It is not a PR document and outlines Firm’s business, it’s goal and how to reach goals.
▪ It defines present capabilities, activities and role in society.
Why a company a) To ensure unanimity of purpose within Organization.
should have mission? b) To develop basis for allocation of Organization’s resources.
c) To develop basis for utilization of Organization’s resources.
d) To translate objectives and goals into work structure.
e) To establish general tone of Organization.
Things to consider a) Good mission statements are unique to Organization for which it is developed.
while writing Mission b) Mission should give organization its own special identity and business emphasis.
of company
c) It should be based on current capabilities of business.
d) It should give internal direction to employees for future of Organization.
P a g e | 25
DIFFERENCE BETWEEN VISION & MISSION
Vision Mission
a) Definition Definition
b) It states future direction of Organization It states ongoing activities of Organization
c) It is wider in scope & emphasises on long term concept It is more specific
d) It remains unchanged for decades if crafted carefully It changes more frequently
3.3. B U S I N E S S D E F I N I T I O N & B U S I N E S S M O D E L
Business It explains business undertaken by Firm w.r.t

Definition
➢ Customer needs
➢ Target market [US , India, Rest of the world]
➢ Technologies
It helps ascertain strategic business choices like organization restructuring.
Business Model Refers to strategy for effective operation of business, ascertaining source of income
and customer base.
Rival firms operating in same industry rely on different models due to strategic choice.
3. 4. G O A L S A N D O B J E C T I V E S
▪ Business organisation translates their vision and mission into goals and objectives.
▪ It provides base of measurement of Company’s performance.
▪ Goals are open-ended attributes that denote the future states or outcomes. It is end result an Organization
wants to achieve.
▪ Objectives are close-ended attributes which are precise and expressed in specific terms.
▪ Objectives are needed at all levels of organization and should not stop with Top management. Rather, it
should be broken down into performance target for each separate business, product line function, etc.
▪ In practical word, they are used interchangeably.
▪ Characteristics
a) It should facilitate achievement of vision and mission.
b) It should be concrete and specific.
c) It should be measurable and challenging.
d) It should provide basis for performance appraisal.
e) It should provide basis for strategic decision.
▪ Benefits of objectives
a) Helps in allocation of resources and establishing priorities.
b) It provides direction to the Company and reduce uncertainty.
c) It translates Company’s vision and mission into goals and objectives.
Types (Both are important)
26 | P a g e
Short term objectives Long term objectives
Quarterly or annual objectives Represents results expected from following any strategy.
It focuses on achieving short term targets and Time frame for objective is set generally 2 to 5 years.
provide immediate performance improvement Long term objectives may be set for
It indicates the speed at which long term targets
➢ Profitability/ Revenue
are to be achieved
➢ Productivity
E.g. If a company has objective of doubling its
sales over next 5 years, it should also set specific ➢ Competitive position
annual targets. ➢ Employee development &
➢ Tech leadership
DIFFERENCE BETWEEN GOALS & OBJECTIVES
Goals Objectives
1. Open ended attributes Close ended attributes
2. Wider in scope More specific
3. Long term Short term
4. Eg: Maximize profit, sales growth Eg: Earn 15% return on investment, 20% increase in sales
4. STRATEGIC MANAGEMENT MODEL
▪ Identifying Vision, Mission, Goals and objectives is the starting point of strategic Management process.
▪ Every organization, large or small, has Vision, Mission, Goals and objective; even if these elements are not
clearly written or communicated.
▪ Strategic management process is a dynamic and continuous process as any change in any component of
model can result in change in other components.
E.g.: Change in economy may present opportunity for Org. leading to change in long term objective &
strategy.
▪ Strategic management process can be best understood using a strategic management model.
▪ Although, this model is widely accepted and comprehensive, it does not guarantee sure shot success.
However, it represents practical approach for formulation, implementation and evaluation of strategy.
▪ It is not necessary that strategist follow these steps strictly / lockstep fashion.
4 .1. STAGES IN STRATEGIC MANAGEMENT PROCESS
P a g e | 27
Stage 1:
Stage 2: Stage 5:
Developing a Stage 3: Stage 4:
Environmental and
strategic Vision, Formulating Strategic evaluation
Organizational Implementing strategy
Mission, Goals and strategy and control
Analysis
Objectives
First, Co. should It is a diagnostic First stage in It is operation- Final stage of SM
develop a Vision phase of SM. strategy oriented activity. process involves
i.e. future It involves: formulation is Most demanding & ➢ evaluating Co.’s
blueprint. developing time-consuming.
a) Environmental strategy
It answers the strategic
Analysis - It implementation &
question ‘where it alternatives in line Strategy execution
consists of with SWOT of process includes: ➢ assessing impact
wants to land’. economic, organization. a) Developing budget of new external
Top management’s social, technical to allocate ample developments and
views and & market Second stage
resource for make corrective
conclusions about analysis. involves choosing
strategy adjustments to V,
company’s appropriate
It is dynamic implementation M, Objectives &
direction and alternative which
and uncertain strategy.
product, customer, will serve as b) Staffing Org. with
& helps in strategy of Firm. needed skills & Successful strategy
market, technology determining expertise execution requires
focus constitute opportunities Examples of
searching for:
strategic vision of and threats. strategic c) Motivating people to
company. alternatives: pursue target a) Ways to
b) Organizational energetically continuously
Mission Analysis - It a) Should
improve and
statements define consists of company d) Creating a Co.
what we are and continue in culture & work b) Corrective
analysis of Co.
what we do. same business climate that adjustments
resources, tech
Hence, the focus is on same level support successful whenever external
resources,
on the role played of operation? strategy execution & and internal
Productive
by organizational environment
capacity, b) If it should e) Ensuring policies,
in society and demands.
distribution continue in procedures and
overall direction channel, R&D, same business, It may be in form
and not any SBU internal operations
HR, etc. should it grow facilitate effective of –
specific direction. by expanding
It reveals execution ➢ Simple fine-
Objectives & goals strength and same unit; tuning strategy
f) Leadership is
of an Org flows weakness of establishing if it is working
from V & M. new units; or needed for strategic
Org. execution and well; or
They provide a acquiring other
This stage helps units in same continuous ➢ Modifying
means of in SWOT analysis. improvement. strategy when
performance Industry?
Good strategy there is change
measurement at c) If it should
in environment.
each level of diversify, execution creates
management. should it strong fits between
diversify into a) Strategy & Org’s
related or capability
unrelated b) Strategy & reward
areas? structure
d) Should it get c) Strategy & Org
out of existing work culture
business fully
or partially? d) Strategy &
internal system
28 | P a g e
Corporate Level strategies
C HAPTER 4
C ORPORATE L EVEL S TRATEGIES
1. INTRODUCTION
▪ It refers to organization wide decisions taken by Corporate/ Top Level Management w.r.t
➢ defining objectives of organization,
➢ determining what business, it should be in,
➢ allocating resources among different businesses, and
➢ providing leadership for organization.
▪ It is value oriented and less concrete than business or functional level strategies.
▪ CL strategies are also known as Grand strategies or Directional strategies which provides direction to
company.
▪ William F. Gluek and Lawrence R Jaunch discussed 4 generic Strategies which are as follows:
Stability Growth Retrenchment Combination

Firm stays with its Firms seeks significant Firm retrenches Firm combines above
current business, growth. some of activities strategic alternatives in
product & market. in some business or some permutation and
➢ Within current business
It maintains existing exits a business combination so as to suit
level of efforts. ➢ Entering into new through sell out or their specific
business that are related liquidation. requirement.
In this, Firm is satisfied to existing business
with incremental
growth. ➢ Entering into new
business that are
unrelated to existing
business.
2. S T A B I L I T Y S T R A T E G Y
Reasons for opting this

Meaning Characteristics
strategy
It is pursued when i) Product has reached a) Firms opting for stability strategy follow
maturity stage.
➢ an Org. continues to ➢ Same business; Same product; Same
P a g e | 29
Reasons for opting this

Meaning Characteristics
strategy
serve in same or similar ii) Expansion may be market
market and difficult (recession in b) It does not involve redefinition of business
economy)
➢ deals in same or of company
similar products iii) Org. is smaller in size.
c) It does not require significant investment
Strategic focus is on iv) Consolidation is preferred
d) It is safety oriented and status quo-
incremental growth & through stability after a oriented strategy
improvement in functional period of rapid growth
performance. e) It focuses on enhancing functional
v) Org. is less risk taking
efficiency
f) It involves minor improvement in product.
Question: Is stability strategy a ‘Do Nothing’ strategy? - Incorrect
3. G R O W T H / E X P A N S I O N S T R A T E G Y
Meaning Reason for opting this strategy Characteristics

It is implemented by i) Environment demands: It may a) It involves redefinition of
be necessary if environment business
➢ redefining the business,
demands increase in speed of b) It leads to growth of business
➢ by enlarging the scope of growth.
business and c) It facilitates renewal of Firm
ii) Advantage from experience through fresh investment &
➢ substantially increasing curve & economies of scale new product, market and
investments. may occur. technology.
It is relatively risky but offers iii) It is more satisfying to pursue d) It is opposite of stability
greater growth potential. this strategy. Chief executives strategy. While rewards are
take pride in presiding over limited in stability strategy, it
It includes growth oriented company. is higher in growth strategy.
a. Diversification iv) Expansion leads to greater
e) It is highly versatile in nature.
b. Merger & Acquisition control over market as It offers various permutation &
c. Strategic Alliance compared to competitors. combination for growth.
3.1. TYPES OF GROWTH / EXPANSION STRATEGY
Growth Strategy
Internal External
Intensification Merger & Acquisition
Diversification Strategic Alliance
3.2. E X P A N S I O N T H R O U G H I N T E N S I F I C A T I O N
30 | P a g e
Market Penetration Market Development Product Development

Highly common expansion It consists of marketing present Product development involves
strategy is market penetration products to customers in related substantial modification of existing
/concentration on the current market areas by products or creation of new but
business. related items that can be marketed to
➢ adding different channels of
The firm directs its resources to current customers through establish
distribution or
the profitable growth of its channels.
existing product in the existing ➢ changing the content of
market. advertising or promotional
media.
Igor Ansoff gave a framework as shown in figure which describes the intensification options available to a Firm.
Market Penetration Product Development

Increase market share Add product features, product refinement
Increase product usage Develop a new-generation product
Increase the frequency used Develop new product for the same market
Increase the quantity used
Find new application for current users
Market Development Diversification involving new products and new markets
Expand geographically Related / Unrelated
Target new segments
3.3. E X P A N S I O N T H R O U G H D I V E R S I F I C A T I O N
Diversification is defined as entry into

➢ new product or product line, new service or new market
➢ involving different skills, technology and knowledge.
Reason for diversification
a) It is means of utilization of existing spare capacity in more effective and efficient manner.
b) Synergetic advantage i.e possibility to improve sales & profits of existing product by adding new product.
Horizontally Integrated Concentric Conglomerate

Vertically Integrated Diversification
Diversification Diversification Diversification
In this, Firm engage in businesses that are It involves acquisition It is a related It is unrelated
vertically related to existing business. of similar business diversification. diversification.
Firm remains vertically within same operating at same In this, new business In this, new
process sequence. stage of product - is linked to existing product is
marketing chain. business through completely
It just moves forward or backward in the
value chain and enter into new specific It may be process, technology or different from
marketing/ customer. Firm’s existing
product/ process that are linked with the ➢ competitor’s
same chain. New product is spin products,
product;
off from existing technology or
Forward integration Backward integration ➢ By product; or facilities and process. market.
It involves moving It involves moving ➢ complimentary New product does not There is no
forward in the backward in value product. fall in firm’s existing linkage
P a g e | 31
Horizontally Integrated Concentric Conglomerate

Vertically Integrated Diversification
Diversification Diversification Diversification
value chain and chain and entering in vertical chain but is between new
entering into new business of supplier connected at one or and existing
business that uses of raw material. more point in Firm’s business.
existing business. It facilitates increase existing process,
It also takes place in profit, decrease in technology or market
when organization cost and have chain.
enter into business greater control over
of distribution manufacturing
network. process .
3.3.1. R E L A T E D V S . U N R E L A T E D D I V E R S I F I C A T I O N
Related diversification Unrelated diversification

Exchange or share assets or competencies by exploiting • Investment in new product portfolios.
• Brand name • Employment of new technologies.
• Marketing skills • Focus on multiple products.
• Sales and distribution capacity • Reduce risk by operating in multiple product
• Manufacturing skills markets.
• R&D and new product capability • Defend against takeover bids.
• Economies of scale • Provide executive interest.
3. 4. E X P A N S I O N T H R O U G H M E R G E R A N D A C Q U I S I T I O N
Refers to process of combining two or more organizations together.

It is instant means of achieving the expansion.
Reason for M&A
32 | P a g e
a) It helps Organization to bypass/ avoid/ circumvent time & risk involved in initial stage of expansion.
b) To achieve synergy between parent and acquired entity.
While Merger and Acquisition are used interchangeably, there is a thin line of difference:
Merger Acquisition
Two or more companies come together for mutual When one financially strong organization takes over
benefit i.e, to increase their strength & resources to other organization and control its business.
expand. Combined operation runs in name of powerful entity.
Deal is finalized on friendly terms. Deal is often finalized on unfriendly terms.
3. 4.1. T Y P E S O F M E R G E R S
Horizontal merger Vertical merger Co-generic merger Conglomerate

Refers to combination Refers to combination of Refers to combination of Refers to combination of
of two businesses in two businesses that two businesses who are two business which are
same Industry. operate in same industry linked in some way in not connected with each
It is a merger with at different stages of production process, other.
direct competitor. process sequence. market or technology. There is no linkage w.r.t
Reason Reason- Synergy benefit It facilitates a business to process, market or
If organization takes diversify around common technology.
a) Economies of scale resources.
over supplier of raw Eg: L&T acquires Mind
b) Avoiding duplication material, it is backward Eg: Manufacturer of white Tree
of facility & efforts merger. category goods [AC,
c) Reduced working If organization takes fridge, W.M] mergers with
capital requirement over buyer organization an organization dealing in
and investment in of the product or kitchen appliances.
fixed assets distribution channel, it
d) Increased is forward merger.
competitive
advantage
3.5. E X P A N S I O N T H R O U G H S T R A T E G I C A L L I A N C E
A strategic alliance is a relationship between

➢ two or more businesses that
➢ enable each to achieve certain strategic objectives
➢ which neither would be able to achieve on their own.
S.A. is often formed in global market where businesses are based in different parts of world.
S.A. partners maintain their status as independent & separate entities. They share benefits & control over
partnership.
Advantages
Organizational Economic Strategic Political
It helps Organization to learn It helps in reduction Rivals may join to co- It may be formed
necessary skills & capabilities of cost & risk by operate rather than with local foreign
from S.A. partners. distribution of cost & compete. business to gain entry
S.A. partners may help to risk to S.A. partners. in foreign country due
P a g e | 33
enhance production capacity It also facilitates It is used to to political or legal

or provide distribution economies of scale & a) Get access to tech basis.
channel. co-specialization.
b) Develop new product
In case of new venture, having
well known strategic alliance c) Generate competitive
partners increases credibility. advantage
d) Pursue joint research
Disadvantages
a) Sharing S.A. requires sharing of resources, skills and profits. However, sharing knowledge
and skill may be problematic if they involve trade secrets.
b) Potential competitor It may create a potential competitor if S.A. partner decides to part ways in future.
4. RETRENCHMENT STRATEGY
It means organization substantially reduces its scope of activity.

Reasons a) A business is acquired which proves to be mismatch and can’t be integrated with
company.
b) Severe competition and inability to face it.
c) Technology upgradation is required but company is in no position to invest.
d) Persistent negative cashflow.
e) Better alternative business may be available for investment.
Characteristics Retrenchment/ Turnaround should be viewed as an integrated part of corporate

strategy without any stigma attached.
Like expansion strategy, it also involves redefinition of business.
Steps i) Find out the problem area.
ii) Diagnose cause of problem.
iii) Take steps to solve the problem.
The above steps result in 3 different types of Retrenchment strategies:
a) Turnaround / Internal Retrenchment
b) Divestment External Retrenchment
c) Liquidation
4 .1. TURNAROUND STRATEGY
It is known as internal retrenchment where emphasis is laid on improving internal efficiency of Organization.
It means taking steps to reverse decline and convert loss making company into profit making company.
Danger signals which point out that turnaround strategy is needed for survival of Organization are:
i) Uncompetitive product or service
ii) Declining market share
iii) Mismanagement
iv) Over staffing, high employee turnover, low morale
34 | P a g e
v) Deterioration in physical facility
vi) Persistent negative cashflow from business
4 .1.1. A C T I O N P L A N F O R T U R N A R O U N D
Focus is on short term financial needs + Long term financial needs + Strategic issues.
Assessment of Analyse the Implementing an
current situation & develop Emergency Reconstructing the Business Return to Normal
problems Strategic Plan Action Plan
This involves It involves This includes This includes Organization
should show signs
➢ assessing ➢ determining ➢ HR, financials, ➢ Change in product mix
of profitability and
the current chances of marketing
➢ Products neglected over ROI.
problem survival and operating
years may be give more Emphasis is
action.
➢ It’s root ➢ Doing SWOT importance placed on no. of
cause Analysis ➢ Reconstructing strategic efforts
➢ Some facilities may be
debt, reducing like
➢ Extent of ➢ Developing a closed and Org. may
cost, reducing
damage it strategic plan withdraw from some ➢ Adding new
loss making
has with specific markets products,
product line
caused. goals and
and focusing ➢ Change in people mix i.e, ➢ increasing
action plan.
on potential staff with required skills Market share,
growth are hired; reward and
product compensation should be ➢ increasing
such that it encourages customer base.
Objective is to
become Org with & motivates employees.
positive cashflow.
Important elements of Turnaround strategy
a) Change in Top Management
b) Quick cost reduction
c) Revenue generation
d) Asset liquidation for generating cash
e) Better internal co-ordination
f) Neutralizing external pressure (from bank etc.)
4 .2. D I V E S T M E N T S T R A T E G Y
It involves sale of Portion of business; Major division or SBU.

Reasons i) It is a part of rehabilitation strategy.
ii) It is adopted when turnaround strategy is attempted but failed.
iii) Other common Reasons.
4 .3. L I Q U I D A T I O N S T R A T E G Y
It is most extreme and unattractive retrenchment strategy.

It involves dosing down a Firm and selling its assets.
It is considered as last resort due to
P a g e | 35
a) Loss of employment
b) Loss of future opportunities
c) Stigma of failure.
Company management, Government, Bank etc. are reluctant for this decision.
It may be taken when ‘Dead business is worth more than alive’
Reasons iv) Turnaround & Divestment strategy has been attempted but failed.
v) Management no longer wishes to be in the business due to persistent losses.
vi) Other common Reasons.
5. COMBINATION STRATEGY
Meaning Reasons
Above strategies are not mutually exclusive. a) Organization is large and faces complex
A company may adopt a mix of above strategies to environment.
suit their specific requirements. b) Organization is composed of different businesses,
A Firm may seek each of which lies in different Industry requiring
different strategic response.
➢ Stability in some business
➢ Expansion in some and
➢ Retrenchment in some.

a) Free Lectures &
36 | P a g e
Business Level Strategies
C HAPTER 5
B USINESS L EVEL S TRATEGIES
1. INTRODUCTION
▪ Business level strategy refers to

➢ course of action adopted by an Organization for each of its business separately
➢ to serve identified customer group and
➢ provide value to customers by satisfying their needs.
▪ Customers are foundation of Company’s business level strategy.
▪ Business managers must decide
a) Who are customers i.e. target market? Knowing the customers is very important for achieving and
sustaining competitive advantage.
b) What needs have to be met? Predicting and satisfying future needs is also important.
c) How to satisfy customer needs? How to use Co’s resources and core competency to satisfy customer
needs and add value to them.
▪ Thus, BL strategy focuses on using core competencies to satisfy customer needs & gain competitive
advantage.
2. P O R T E R ’ S F I V E F O R C E S M O D E L O F C O M P E T I T I V E A N A L Y S I S
▪ Every business operates in a competitive environment. Various competitive forces in an industry determine
➢ attractiveness and profitability of Industry; and
➢ how an Organization develops its business level strategies.
▪ A powerful and widely used tool for systematic analysis of significant competitive pressures and assessing
its importance is Porter’s 5 forces model.
▪ This model reflects that state of competition in an Industry is influenced by 5 competitive pressures:
a) Competitive pressure associated with Threat of New Entrants
b) Competitive pressure associated with bargaining power of Buyers
c) Competitive pressure associated with bargaining power of Suppliers
d) Competitive pressure associated with Nature of Rivalry
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e) Competitive pressure associated with Substitute products.

▪ Inter-relation among these five forces gives each Industry its own particular competitive environment.
2.1. T H R E A T O F N E W E N T R A N T S
New entrants are powerful source of competition. They reduce industry profitability as they
➢ add new production capacity leading to increase in supply at lower price.
This erodes market share of existing players/ incumbents.
Bigger the new entrant, greater is the threat.
To discourage new entrants, existing players try to raise entry barriers.
a) Capital Requirement If entry in an Industry requires huge capital, Organizations having less funds
are effectively barred from entry.
b) Economies of scale It refers to reduction of cost per unit. As volume increases, large Firms enjoy
economies of scale which discourages new entrants.
c) Product It refers to uniqueness of a product in eyes of customer. Since cost of creating
differentiation unique product is high, it also acts as an entry barrier.
d) Brand identity Brand building is long process involving substantial resources. It is important in
case of products which have high prices and are infrequently purchased.
e) Access to Unavailability of distribution channel is another barrier for new entrants.
distribution channel
f) Possibility of This may also act as an entry barrier for new entrants.
aggressive retaliation
by incumbent
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g) Switching cost New entrant needs to convince existing customers of other company to switch
to its product.
Buyer often incurs financial & psychological cost in switching existing player.
When switching cost is high, buyer is reluctant to switch.
2.2. B A R G A I N I N G P O W E R O F B U Y E R S
It means buyers exert some pressure on Organization to reduce its cost.

This force is significant when buyers form group or cartel. Mostly seen in industrial goods.
Buyer’s bargaining power is evident when
a) Buyer has full knowledge of source of raw material and substitutes.
b) They are big buyers and spend a lot of money.
c) Buyers are more concentrated than suppliers.
d) Product is not considered critical for buyer who can switch to substitutes.
2.3. B A R G A I N I N G P O W E R O F S U P P L I E R S
It means suppliers exert pressure on Organization by increasing price of its supplies (Raw material).
Bargaining power of supplier determines cost of raw material & inputs, thus affecting profitability of
industry.
Supplier can have bargaining power when
a) Their product is critical to buyer and substitutes are not available.
b) No. of supplier is less and they are more concentrated.
c) There is higher switching cost.
2.4. N A T U R E O F R I V A L R Y
Intensity of rivalry is significant determinant of profitability and attractiveness of Industry.

It influences cost, price being charged, advertisement etc.
More intensive the rivalry, less attractive is the Industry.
It is cut-throat when
a) Industry has no Strong leaders discourage price wars by disciplining initiator of price war.
clear leader
b) Competitors are If no. of competitors is high, ability of industry leader to control them decreases.
numerous
c) Competitors have Hence, they try to utilize the capacity. This increases supply and profitability
higher fixed cost/ decreases.
production capacity
d) Competitors face If exit barrier is low, competitors can exit market if they are not profitable.
high exit barriers But, if asset of an Organization is specialized and of little value to others,
Organization can’t sell the asset.
e) Competitors have If there is opportunity for differentiation, increased price may be charged thus
little opportunity to increasing profitability.
differentiate
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f) Industry faces slow If industry’s growth is slow, rivals try hard to hold or grow by reducing price
down further, thus reducing profitability.
2.5. T H R E A T O F S U B S T I T U T E S
It is the latent source of competition.

If they offer price advantage or performance advantage, it may constitute major source of competition.
Threat of substitute product increases
➢ when there is significant investment in research & development
➢ in highly technological industry.
2.6. P R O C E S S O F A N A L Y S I N G C O M P E T I T I O N I N A N I N D U S T R Y ( 3 S T E PS )
a) Identify the competitive pressure associated with each of 5 forces.

b) Determine strength of each pressure [fierce, strong, moderate, normal, weak]
c) Determine whether collective strength of 5 competitive forces is conducive for industry’s profitability.
3. B U S I N E S S L EV E L S T R A T E G I E S
Business level strategy is concerned with 3 issues:

i) Meeting the needs of the customer
ii) Achieving advantage over competition
iii) Avoiding competitive disadvantage
According to Michael Porter, 3 generic strategies can be followed by a Firm.
3.1. COST LEADERSHIP
It involves producing
➢ standard products
➢ at very low cost per unit
➢ for price sensitive market (Broad mass market)
It involves efforts to reduce cost in area of Procurement; Production; Storage and Distribution of goods.
40 | P a g e
Also, economies of scale and reduction in overhead is done.
Because of lower cost, cost leader is able to change lower price than its competitors and still make
satisfactory profit
But cost leadership strategy must be pursued along with differentiation.
Vertical integration strategy is pursued for cost leadership.
When is cost leadership strategy effective? How to achieve cost leadership?

a) Market has many price sensitive customers. a) Forecast the demand of product/ service
b) Buyers do not care much about differentiation or b) Optimum utilization of resources
brand. c) Achieving economies of scale to reduce cost per unit
c) There is few scope of differentiation.
d) Standardization of product for mass production
d) There are large no. of buyers with bargaining e) Low overhead
power.
f) No tolerance of wastage
g) Reward of employees linked with cost reduction
h) Invest in cost saving techniques
3.1.1. A D V A N T A G E S O F C O S T L E A D E R S H I P S T R A T E G Y
Cost leadership strategy enables a Firm to be profitable even with 5 forces of Porter’s Five Forces Model:
Rivalry Buyer Supplier New Entrants Substitute
Competitors try to Powerful buyers Since cost leader Cost leader creates Cost leader is able
avoid price wars, will not be able has lowest cost in entry barriers for to lower cost to
since low-cost to exploit cost Industry, it is able new entrants due ensure that buyer
Firm will continue leader as its cost to absorb greater to low cost. continues with their
to earn profit even is already lowest. price increase by its product.
if they reduce Hence, buyer will suppliers before it is They can also
their profit. continue to buy compelled to invest to develop
from it. increase the price. substitutes.
3.1.2. D I S A D V A N T A G E S O F C O S T L E A D E R S H I P S TR A T EG Y
a) Cost advantage may not be for long period as competitors may follow cost reduction techniques as well.
b) This strategy can be successful only if Firm can achieve higher sales volume.
c) In this strategy, expenses on advertisement, marketing, research & development etc. is minimal which
may be counter-productive in long run.
d) Technological changes are great threat to cost leader.
3.2. D I F F E R E N T I A T I O N S T R A T E G Y
It aims at producing
➢ unique products and service
➢ directed at customers who are relatively price insensitive.
Because of differentiation, businesses can charge premium for its products and also gain customer loyalty
as customer gets strongly attached to differentiating features.
Differentiation/ uniqueness can be in
P a g e | 41
➢ Product design; Brand; Features; Quality; Customer service etc.

Note: All Firms essentially follow differentiation strategy because only one Firm can be cost leader.
Basis/ form/ Types of Differentiation
Product Differentiation Price Differentiation Organizational Differentiation
It means innovative products which It means company can It involves using specific advantage of
give Org. an edge over competitors either offer lowest price or Organization to differentiate its
New product involves higher cost can charge highest price. products.
due to R&D, marketing but return Eg: Brand image, customer loyalty,
may be higher if it is valued by locational advantage.
customers.
3.2.1. Achieving Differentiation Strategy

a) Offer utility to customers and match the product with their taste and preference.
b) Improve performance of product and its quality.
c) Rapid product innovation by investing in R&D.
d) Take steps for enhancing the brand image.
Differentiate → Charge premium → customer loyalty
3.2.2. A D V A N T A G E S O F D I F F E R E N T I A T I O N S T R A TE G Y
Rivalry Buyer Supplier Entrants Substitute

Brand loyalty If buyers get Since Since, innovative Substitutes can’t
gives an unique features differentiation products are replace
Organization which they allows Org. to expensive to make & differentiated
competitive value, they don’t charge higher price, offer, it acts as a product due to high
advantage over bargain hard for they can absorb barrier for new brand value &
rivals. prices. increase in price of entrants. customer loyalty.
raw material.
3.2.3. D I S A D V A N T A G E S O F D I F F E R E N T I A T I O N S TR A T EG Y
a) It does not guarantee competitive advantage if standard product sufficiently meets customer needs.
b) If differentiation is not valued by customer, this strategy fails. In such cases, C.L. strategy is preferred.
c) In long run, uniqueness is difficult to sustain as competitors may copy differentiating uniqueness.
d) Charging too high price for differentiated product may cause customers to switch to different product.
3.3. F O C U S S T R A T E G Y
It means an organization concentrates on

➢ particular group of customers, geographic market or product line
➢ in order to serve well defined but narrow market
➢ better than competitors who serve broader market.
Focus strategy is successful when
42 | P a g e
a) Industry segment is of sufficient size,
b) Has good growth potential, and
c) Not crucial to success of other major competitors.
Focus strategy can be pursued along with cost leadership strategy or differentiation strategy.
Focused C.L. strategy Focused Differentiation strategy

In this, Firm competes with its competitors on price It requires offering unique products that fulfill
to charge in target narrow market. demand of a narrow market.
It does not mean that the Firm charges lowest price Some Firms using F.D. strategy concentrate their
in industry. efforts on
Rather, it charges low price as compared to its ➢ Particular sale channel likes selling over Internet,
competitors in target market. or
➢ A particular demographic group.
Achieving Focus Strategy Advantage Disadvantage

a) Selecting specific niche not a) Premium price can be a) Due to limited demand of
covered by CL or differentiator. charged for such product/ product, sales may be limited
b) Creating superior skills for
service. & cost may not be recovered.
catering to such niche market. b) Rivals & new entrants find b) Niche could disappear or be
c) Generating higher efficiency for it difficult to compete due taken over by competitors by
catering to such niche market. to enhanced expertise in acquiring same competencies.
target market. c) Firms lacking distinctive
d) Developing Innovative ways for
catering to such niche market. competencies may not pursue
this strategy.
4. BEST COST PROVIDER STRATEGY
It is further development of 3 generic strategies.

It aims to provide more value to customer by Low cost & differentiated products.
It can be done in following two ways: [Sub strategies]
a) By offering products at a price lower than what is being offered by rivals for same / similar quality; or
b) Charging similar price as rivals for better quality product as compared to rivals.
5. D I S T I N C T I V E F E A T U R E S O F G E N E R I C C O M P E TI T I V E S T R A T E G I ES
Broad Best-Cost Focused Low-Cost and

Features Low-Cost Provider
Differentiation Provider Focused Differentiation
Strategic A broad cross- A broad cross Value-conscious A narrow market niche where
target section of the section of the buyers buyer needs and preferences
market market are different from the rest of
the market
Basis of Lower cost than An ability to offer More value for Lower cost in serving the
competitive competitors buyers something the money niche (focused low cost) or
advantage different from special attributes that appeal
competitors to the tastes or requirements
of niche members (focused
differentiation)
P a g e | 43
Broad Best-Cost Focused Low-Cost and

Features Low-Cost Provider
Differentiation Provider Focused Differentiation
Market Try to make a Build in whatever Either underprice Communicate how the
emphasis virtue out of features buyers rival brands with focuser’s product attributes
product features are willing to pay comparable and capabilities aim at
that lead to low for. features or catering to niche member
cost Charge a premium match the price tastes and/or specialised
price to cover the of rivals and requirements
extra cost of provide better
differentiating features, thus
features delivering the
best value
Sustaining Offer economical Communicate the Develop unique Remain totally dedicated to
the strategy prices/good value. points of expertise in serving the niche better than
Key is to manage difference in simultaneously other competitors; don’t
costs down, year credible ways. managing costs blunt the firm’s image and
after year, in Stress constant down and efforts by entering other
every area of the improvement & upscaling segments or adding other
business use innovation to features product categories to widen
stay ahead of attributes market appeal.
initiative
competitors
Product line A good basic Many product Good-to- Features and attributes that
product with few variations, wide excellent appeal to the tastes and/or
frills (acceptable selection, strong attributes, special needs of the target
quality & limited emphasis on several-to-many segment
selection) Differentiating upscale features
features
Product A continuous Creation of value Incorporation of Tailor-made for the tastes
emphasis search for cost for buyer; strive upscale features and requirements of niche
reduction without for product and attributes at members
sacrificing superiority low cost
acceptable quality
and essential
features
44 | P a g e
Functional Level Strategies
C HAPTER 6
F UNCTIONAL L EVEL S TRATEGIES
1. INTRODUCTION
▪ Functional strategies help in implementation of corporate level and business level strategies.
▪ It is made within the framework of CL and BL strategies.
▪ It performs two important roles:
➢ Provide support to overall business strategies; and
➢ Provides direction as how functional managers will work to ensure better performance.
▪ It involves formulating and implementing strategies for each of inter-related and inter dependent
functional areas/ departments like:
Marketing Finance Production R&D Logistics HR
2. R E A S O N S W H Y F U N C T I O N A L L E V E L S T R A T E G Y I S I M P O R T A N T
a) It lays down clearly what is to be done at functional level. Thus, it provides direction to functional staff.
b) It facilitates implementation of BL and CL strategy.
c) It acts as basis for control activities (measure performance & take corrective actions).
d) It helps in maintaining harmony & coordination among various functional areas.
e) It ensures that consistent policies are followed across all functional areas.
3. M A R K E T I N G S T R A T E G Y
▪ Marketing is the process of

➢ analyzing market opportunities
➢ selecting target market
➢ developing market mix and
➢ managing marketing effort.
P a g e | 45
▪ It encompasses all activities related to identifying needs of customers and takings steps to satisfy it.
▪ Thus, target market is at center of marketing process.
▪ In marketing, it’s more important to do what is strategically correct rather than what is immediately
profitable.
Examples of Marketing Decisions
a) Amount and extent of advertisement – whether to use heavy or light advertisement; media to be used
[print, electronic or internet]
b) Kind of distribution channel to be used – whether use exclusive dealership or multiple channels of
distribution
c) Whether to be price leader or follower
d) Whether to reward the sales person based on fixed salary or commission or combination of both.
e) Whether to offer full or limited warranty.
3.1. NEED FOR MARKETING STRATEGY
Marketing helps in carrying out Org. objectives by undertaking following activities:

Delivering value to Customers Connecting with Customer
It facilitates delivery of value to customers. Success of an organization depends on how satisfied
However, it cannot alone deliver high value to Company’s customers are.
customers as many departments/ participants Since a Company can’t satisfy all customers in a market,
are involved. it must
To create and deliver value, it needs to look ➢ divide the total market (market segmentation)
beyond its department & consider activities of
supplier, Research & development, distributor ➢ choose the target market segment and
and customer as well. ➢ design strategies for serving target market better
than competitors.
3.2. M A R K E T I N G M I X
It is a set of controllable marketing variables

➢ that Firms blend in a co-ordinated way
➢ to make its offer in target market.
It Comprises of 4Ps [4 Cs from angle of Customers]
Promotion /
Product / Customer Solution Price / Customer Cost Price / Convenience
Communication
Refers to combination of Goods It refers to the Money Refers to Place where Refers to activities that
& Services that Company customer has to pay to product is made communicates merits
offers to target market. obtain product. available to target of product to convince
Strategies are needed for It reflects a customers. potential customers.
managing existing products, combination of value, Product should be It is simultaneously a

utility, demand, made available at a communication,
➢ adding new products, and competition etc. convenient place for persuasion &
46 | P a g e
➢ dropping failed products Price may be decided customers to buy. conditioning process.
based on market forces It involves selecting Various promotional
Strategies are also needed for
or cost-plus price. marketing channels methods like
branding, packaging and other
features. However, generally for transfer of advertisement, personal
Organization opts for ownership of product. selling, sales promotion
Organization should
market determined need to be organized
differentiate products on the
price in competitive and co-ordinated.
basis of features, colour, brand
environment. Promotional strategies
name, etc.
must be adjusted as a
It helps them to develop
product more from
customer loyalty.
earlier stage to later
stage of its life.
3.2. 1. F O U R M A J O R P R O M O T I O N A L T O O L S / M E T H O D S
Personal selling Advertisement Publicity Sales Promotion

It is one of the oldest forms It is non personal, flexible It is also a non- It is a wider term that
of Promotion and used in and dynamic promotional personal form of includes all activities
case of all products. method. promotion but no undertaken to promote
Involves face to face It involves usage of payment is made for the business but are
interaction of sales person mediums like publicity. not covered under any
with prospective customer. Basic tools are of 3 modes.
➢ Pamphlet, broucher
It focuses on developing It includes activities
- Press conference
relationship with potential ➢ Newspaper, magazine like
customer and is an effective ➢ TV, Radio - Internet release - Discount
way of convincing him to (trailer)
buy product. ➢ Internet, digital - Cashback
marketing etc. - Press release etc.
It is not cost effective as it Org. skillfully try to - Installment
suffers from high cost. Choice of appropriate
medium is important for promote themselves & - Exhibition and fairs
Sales person are expensive effective promotion. their products without
and can engage only one any payment through - Money back
customer at a time. Its effectiveness w.r.t publicity. guarantee etc.
expense can’t be directly
measured.
3.2. 2. E X P A N D E D M A R K E T I N G M I X
With changing market conditions & growth of service sector, 3 new elements also form part of marketing mix.
People Physical Evidence Process
Refers to all human actors who Refers to Environment where Firm Actual procedure or mechanism
make contact with customer and customers interact and that delivers product to customers.
while delivering the product. product is offered to customers. E.g: Advance payment, COD
It includes waiter, sales person, E.g: Design of premises/ shop
CRM.
3.3. P R E - R E Q U I S I T E S F O R F O R M U L A T I O N O F M A R K E T I N G S T R A T E G Y
Environmental analysis and diagnosis: Before making any strategy, it is imperative for a marketer to
understand the environment in which the organisation is operating.
Marketing has 3 components:
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a) Planning - Develop marketing plan

b) Implementation - Carry out plan
c) Control - Measure performance and take corrective action
Areas to be analysed in environment include:

a) Forces close to Org. such as its ability to serve customer, distribution channel, supplier, competitor etc.
b) Broader forces such as demographics, economic forces, political and legal forces, technology, society
and cultural forces.
This analysis is used to provide input to each of other marketing function [Plan, Implement, control]
3.3.1. S T R A T E G I C M A R K E T I N G P L A N
After completing Environmental analysis and diagnosis, marketing strategy is decided that will help
Company achieve its objectives.
Detailed plan is needed for each business, product or brand.
This plan contains various sections such as:
i) Executive summary Short summary of marketing goals and recommendations presented in plan.
ii) Current Market It describes the target market and company’s situation in it
situation
➢ Market description
➢ Distribution channel
➢ Competition Analysis
iii) Threat & opportunity Contains assessment of important developments that may have positive or
Analysis negative impact on Firm.
iv) Objectives & issues It contains goals that company likes to attain during plan’s term.
v) Market strategy Strategy adopted to achieve marketing objective.
vi) Action plan i.e, implement the market strategy.
vii) Strategy control Involves monitoring and measuring result/ performance and take corrective action
in 4Ps of marketing.
3. 4. T Y P E S O F M A R K E T I N G S T R A T E G I E S / T E C H N I Q U E S
1. Social marketing It refers to design, implementation and control of programs which aims to increase
acceptability of a social idea, cause or practice.
E.g. Campaign for No smoking, No dowry, No tax evasion.
2. Augmented It means providing additional benefits to a customer w.r.t a product.
marketing E.g: Extra warranty, 24x7 online tech support, etc.
3. Direct marketing It involves using advertisement medium that interacts directly with customers.
E.g. Email, SMS, catalogue marketing, electronic marketing, Tele calling etc.
4. Person marketing People are also marketed. It involves activities to create, maintain or change
attitude and behavior of target audience towards a particular person. Eg: politician
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5. Organization It involves activities to create, maintain or change attitude and behavior towards a
marketing particular Organization.
Both profit and non-profit organizations practice Organization marketing.
6. Place marketing It involves activities to create, maintain or change attitude or behavior towards a
particular place. E.g. Tourism marketing
7. Relationship It involves creating, maintaining and enhancing strong relationship with customers
marketing and other stakeholders. E.g: Airlines Loyalty programs
8. Service marketing It involves applying concepts of marketing to service sector.
9. Differential It involves activities to target several market segments and design separate offer
marketing for each segment.
E.g: HUL – Lux in popular segment and Pears in premium segment.
10. Concentrated In this, Firm goes after large chunk of a target market.
Marketing
11. Synchro When demand for a product is irregular due to season or during certain part of day,
marketing it causes overworked capacity or idle capacity.
Synchro marketing is used to find ways to alter the demand pattern through
flexible pricing and other incentives.
E.g: Movie tickets sold at lower rate during weekdays, Happy Hours in Restaurants.
12. Demarketing It involves activities to reduce demand temporarily or permanently.
It does not aim to destroy demand but only reduce it or shift it. It is pursued when
there is overflow of demand. E.g. zoological parks are overcrowded on weekends.
13. Enlightened It is a marketing philosophy that Company’s marketing should support long term
marketing performance of an Organization and marketing.
Five principles are :
a) Value marketing
b) Innovative marketing
c) Customer oriented marketing
d) Societal marketing
e) Sense of mission marketing
3.5. S E L E C T I N G A P P R O P R I A T E P R I C I N G S T R A T E G Y
For new product, pricing objective should be

a) to make product acceptable to customer,
b) produce reasonable margin over cost and
c) develop market share.
Price Skimming Price Penetration

Prices are set at very high level initially for new Prices are kept quite low for new product which itself is
product. it’s selling point.
Product is directed towards customers who are This enables a large no of potential customers to afford
and buy new product.
➢ insensitive to price and
E.g: Jio
➢ sensitive to brand and loyalty.
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E.g: Apple → Airpods
4. FINANCIAL STRATEGY
▪ Financial strategy of Organization is considered integral part of strategy implementation.

▪ Financial Strategy includes
➢ acquiring needed capital/ source of fund
➢ developing projected financial statement/ budget
➢ usage and management of funds and
➢ evaluating the worth of a business.
▪ Examples of financial decision
a) To raise funds through short term debt, long term debt, equity or Preference shares.
b) To lease or buy fixed asset.
c) To determine appropriate dividend payout ratio.
d) To determine the amount of cash that should be kept in hand.
4 .1. FOUR ELEMENTS OF FINANCIAL STRATEGY
1. Acquiring capital to ▪ Successful strategy implementation requires additional capital.

implement strategy
[source of fund] ▪ In addition to net profit from operations and sale of assets, two basic source of
funds are debt and equity.
Determining appropriate mix of debt and equity in a capital structure is vital for
success of strategy implementation.
▪ Theoretically, debt is cheaper source of fund. However, for a loss-making
company, where ROI is less than interest on debt, it is not suitable as payment
of interest is mandatory.
▪ Similarly, issuance of stock for raising capital may not involve compulsory
payment of dividend but it may result in dilution of control and ownership.
This may result in hostile takeover/ acquisition.
▪ Hence, careful financial strategy needs to be made w.r.t Capital structure,
Working capital and Relationship with banks and financial institutions.
2. Projected Financial ▪ Projected financial statements help an Organization to examine expected result
Statement/ Budget of various actions/ approach/ strategy.
E.g: Impact on profit if marketing expense is increased by 50%.
▪ A company is required to make projected F.S. if it seeks loans from Banks.
▪ Financial Budget is a document which helps in planned allocation of various
resources to activities over a period of time based on forecast [one day to more
than 10 years]. It involves estimation of cost, revenue and profit.
▪ Examples: Sales budget; Cash budget, Operating budget, Expense budget
Ques- Is budget a tool to limit expenses?
No, it is a tool to ensure optimum allocation and utilization of resources.
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▪ Limitations of Financial budget
a) It may become cumbersome and expensive. Under-budgeting and over-
budgeting can be problematic.
b) It is not a substitute for objective. It is a tool and not end in itself.
c) It may be used to hide inefficiency if based on past only rather than present
condition.
d) It may be used as instrument of Tyranny. This results in frustration,
resentment, absenteeism and resignation.
3. Utilization and ▪ It deals with decision w.r.t investment and asset-mix decision.
management of
funds ▪ Some decisions to be made are
➢ capital investment
➢ fixed asset acquisition
➢ current assets
➢ loan and advances
➢ dividend decision.
▪ Implementation of strategy involves utilization of funds.
▪ Management of fund plays an important role in strategy implementation as it
aims to ensure effective and efficient usage of funds.
▪ It involves decision w.r.t risk management, cost control, cost reduction and tax
planning.
4. Evaluating worth of ▪ While implementing strategies like merger & acquisition, divestment etc., it is
a business essential to evaluate the financial worth or cash value of a business.
▪ Three main approaches for determining worth of a business are as follows:
a) Net worth or shareholder’s equity approach
Determine net worth i.e, Total Assets – Outside Liabilities or Share Capital
& Reserve and Surplus.
Add or subtract appropriate amount for goodwill and overvaluation/
undervaluation of assets.
b) Future benefit to Owner through Net Profit
Worth of a business is equal to current year profit multiplied by 5.
c) Market based valuation i.e., letting market decide the value
i) Worth of a business is determined based on selling prices of similar
company. Problem is that comparable figures may not be available.
ii) Price earning ratio method = MPS/EPS x Avg. profit for past 5 FYs
iii) Outstanding share method = No. of outstanding shares x MPS +
premium amount acquirer is willing to pay to acquire Company.
5. PRODUCTION/ OPERATIONS STRATEGY
▪ Production strategy is related to

➢ Production system (factory); Operation planning & control and Logistics management
Understanding Production System Production Planning & Control Logistics Management
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It is concerned with It is concerned with It is process of managing

➢ Capacity of factory ➢ Production planning ➢ flow of supplies into, through
and out of Organization.
➢ Location of factory ➢ Material / Inventory
It ensures that right material of
➢ Layout of factory ➢ Cost of production right quality is available at right
➢ Degree of automation ➢ Quality place at right cost.
➢ Extent of vertical integration. ➢ Maintenance of plant &
Decision w.r.t production system machinery.
has long term implications & It seeks to ensure that resources
influences operational capability. are effectively utilized and day to
It determines ability to implement day operations are managed to
strategy to achieve objectives. obtain long term objectives.
5.1. LOGISTICS MANAGEMENT
Effective logistics strategy helps to find solution to following questions:

a) Which source of raw material is available? [No. of supplier, their location]
b) How many manufacturing units are there?
c) What products are made at each unit?
d) Which mode of transport is used?
e) What is nature of distribution channel? [direct sale or through intermediaries]
f) Should the business own transport vehicles or lease it?
Organizations try their best to keep cost of transport at lowest. Improvement in logistics help in
➢ Cost saving
➢ Reduced inventory
➢ Improved delivery time
➢ Customer satisfaction
➢ Competitive advantage.
5.2. S U P P L Y C H A I N M A N A G E M E N T
▪ Supply chain management helps in logistics.

▪ It refers to linkage between supplier, manufacture and customer.
▪ It involves all activities like sourcing of raw material, conversion to finished goods and logistics.
▪ It includes movement & storage of raw material, WIP and finished goods from point of origin till point of
consumption.
5.2. 1. I M P L E M E N T A T I O N O F S U P P L Y C H A I N M A N A G E M E N T
▪ It requires integrating individual activities into supply chain process.

▪ It is collaboration between buyers, suppliers and information system.
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▪ Successful implementation of supply chain management involves:
i) Product development Customer and supplier work together to develop required product.
Product is developed in shorter time & helps organization remain competitive.
ii) Procurement It involves procuring inputs needed for manufacturing.
It requires careful planning w.r.t quantity, quality, negotiation, order placement,
inbound transportation and storage.
iii) Manufacturing Manufacturing process must be flexible to respond to market changes. It should
be done on the basis of JIT.
iv) Physical distribution It involves delivery of finished goods to customers. Supply chain management
includes customer as integral part.
v) Outsourcing It involves focusing on those activities where organization has competency and
outsourcing other activities.
vi) Customer service Organization provide service to customers to enhance their satisfaction and
develop brand loyalty and relationship.
vii) Improved Performance is measured in terms of cost, quality and customer service.
Performance
Is logistics management same as supply chain Management?

SCM is an extension of logistics management and is wider in scope.
Thus, there is difference between logistics management and supply chain management. Logistics
management activities includes management of flow of supplies i.e., inbound and outbound of goods,
transportation, warehousing, inventory management, etc.
Although these activities are part of SCM as well, but SCM has additional components as well like product
development, manufacturing, planning, customer service etc.
Thus, SCM is a wider concept and is regarded as tool of business transformation which ensures that right
product is available at right place at right time at right quality and cost
SCM helps in reduction of cost and customer satisfaction.
6. RESEARCH AND DEVELOPMENT STRATEGY
▪ Research and development department is involved in

➢ developing new products and
➢ improving old products
➢ in such a way that allows effective strategy implementation.
▪ R&D personnel can play an integral part in strategy implementation.
▪ Strategies such as product development, market development and concentric diversification requires that
➢ New product is developed and
➢ Old product is improved.
▪ R&D employees and managers perform tasks that include transferring complex technology, adjusting
processes to local raw material, adapting processes to local markets and altering product to particular taste
and specification.
Research and development policies help to decide whether to
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a) Emphasize product or process improvement.

b) Undertake basic and applied research.
c) Spend high, average or low amount of money on research and development.
d) Perform research and development within Organization or outsource it.
e) Use university researcher or private sector researcher for research.
f) Be leader or follower in research and development.
6.1. WHETHER FIRM SHOULD DEVELOP RESEARCH AND DEVELOPMENT EXPERTISE INTERNALLY OR OUTSOURCE IT?
Rate of Market Growth
Fast Slow
Fast Organization should obtain R&D Organization should not do major R&D as it
expertise through acquisition of well- may lead to development of a product that
Rate of
established organization in industry. has no market and will get obsolete quickly.
Tech.
change/ Slow Obtain R&D expertise from outsourcing Organization should undertake in-house
Progress it. Generally, there is no time for in R&D because if successful, it will result in
house development, so company should temporary product monopoly which it can
focus on marketing and production. exploit.
Standard Line: If rate of market growth is _______, & rate of technology progress is _______, ______.
6.2. T H R E E R E S E A R C H A N D D E V E L O P M E N T A P P R O A C H
Be the Leader Be an Innovative Imitator Be a Low-Cost Producer

First strategy is to be the “First Second strategy is to be “innovative Third strategy is to be “Low-cost
Firm to Market” new technology. imitator” of successful products. producer” by mass producing
It makes the Co. pioneer in a field This minimizes risk & cost of R&D. product similar to but less
expensive than product already
It is exciting strategy but It means Org. allows a pioneer introduced.
dangerous as rival companies may company to develop a first version
copy & seize the initiative. of new product and then develops It requires substantial
similar product. investment in plant &
Requires excellent research and machinery and less investment
development. This strategy needs excellent R&D in R&D.
and marketing team.
7. HUMAN RESOURCE STRATEGY
7.1. R O L E O F H U M A N R E S O U R C E S I N S T R A T E G I C M A N A G E M E N T
Strategic responsibilities of the human resource manager include

➢ assessing staffing needs of an Organisation and
➢ developing a staffing plan for effective implementation of strategy.
HR manager is also responsible for
➢ motivating employees;
➢ developing performance incentives that clearly link performance and pay to strategies;
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➢ linking company and personal benefits i.e., synchronizing personal and organizational goals;
➢ maintaining conductive work environment and work life balance.
The process of empowering managers and employees through their involvement in strategic management
activities yields the greatest benefits when all organizational members understand clearly how they will
benefit personally if the Firm does well.
7.2. M A J O R S T R A T E G I C D E C I S I O N S / C O N C E R N S R E L A T E D T O H U M A N R E S O U R C E M A N A G E M E N T ; O R
REASONS DUE TO WHICH HR MAY CREATE PROBLEM IN STRATEGY IMPLEMENTATION
Failure to match individual’s Inadequate Top Management

Disruption of social and political
skills/ aptitude with support for strategy
structure
implementation task implementation
Implementation of strategy may While job is specific, people are Personal commitment of top
result in change of roles, dynamic. management is pre-requisite for
responsibilities and powers of Matching job with employee’s skill successful strategy
employees. is important. implementation.
This may cause employees to Commonly used method for This commitment must be
resist strategy implementation. building support for strategy expressed in visible ways.
While formulating and implementation are training,
implementing strategy, such transfer of job, promotion,
disruption should be considered. workshop etc.
Best method for overcoming HR problem in SM is to actively involve as many managers and employees as
possible in process of strategy formulation and implementation.
7.3. R O L E O F HR M I N A C H I E V I N G C O M P E T I T I V E A D V A N T A G E
An organization’s recruitment, selection, training, performance appraisal, and compensation practices can
have a strong influence on employee competence.
The following points should be kept in mind while determining employee competence:
Recruitment & selection Training Performance Appraisal Compensation
Workforce will be more Workforce will be more It is done to measure Competence of workforce
competent if Firm can competent if employees performance & to identify can be increased by
are well trained to do any deficiency due to offering a compensation
➢ Identify
their job. incompetence. more attractive than
➢ Attract and Such deficiencies can be those of competitors.
➢ Select most solved through training
competent applicant. and counselling.
7. 4. S T R A T E G I C H U M A N R E S O U R C E M A N A G E M E N T
SHRM refers to linking of HRM with

➢ strategic goals and objectives
➢ to improve business performance and
➢ develop Organization culture that focus on innovation and flexibility.
Success of an organization depends on its HR and HRM must support organization strategy to achieve
organization’s objective.
HRM practices can be important source of competitive advantage. For this, strategic focus should be on:
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Pre selection practice Selection practice Post- selection practice

Includes HR planning Recruitment and selection of This is done to maintain and improve job
and job analysis employee should be done as per performance level through training,
mission of Organization development, compensation and performance
appraisal.
7.5. S T R A T E G I C R O L E O F H R M A N A G E R
i) Providing purposeful HR managers lead employees and Org. towards achieving Org. objective.
direction
ii) Building core HR managers play great role in building core competencies.
competencies
iii) Creating competitive HR managers helps in creating competitive advantage. There are 2 ways of
advantage achieving competitive advantage i.e. cost leadership and differentiation.
iv) Facilitation of change HR managers help Organization to deal with change and manage the change in
Organization environment.
v) Managing workforce Workforce diversity may be in terms of male and female workers, young and old
diversity workers, employees of different caste, religion etc.
HR manages this diversity in workforce which is a challenging task.
vi) Empowerment of HR manager empowers employees by giving them suitable role, responsibility
human resources and power to realize his full potential.
vii) Development of work HR managers help to develop a vibrant, safe and trustworthy atmosphere among
ethics and culture employees in the Organization.
How does HRM play a role in organization strategy?

HR helps organization to effectively deal with external environment.
HRM function is accepted as strategic partner in formulation & implementation of organization’s strategy.
Competent HR is very important for successful strategy implementation.
An organization’s recruitment, selection, training, performance appraisal and compensation influence
competence of employees.
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Organizational structure & strategic leadership
C HAPTER 7
O RGANIZATIONAL S TRUCTURE & S TRATEGIC L EADERSHIP
1. ORGANIZATIONAL STRUCTURE
▪ Refers to company’s formal configuration /arrangement of employees that

➢ links authority, communication, rights and duties of an Organization.
▪ It determines decision making process and how roles, power and responsibilities are assigned, co-ordinated
and how information flows between different levels of an Organization.
▪ Organizational structure must fit with company’s strategy and facilitate its implementation. Ineffective
organization structure match may result in rigidity and lead to un-achievement of objectives.
▪ Thus, strategist leader seeks to develop an organization structure that matches strategy and is superior to
competition. This gives competitive advantage to an organization.
▪ An organization is structured for two major reasons:
a) Structure decides how operational objectives and policies are established to achieve strategic obj.
b) Structure decides how resources will be allocated to achieve strategic objectives.
▪ There is no single optimal organization structure for a given strategy. What is appropriate for one
Organization may not be appropriate for another.
▪ However, successful Firms in a given Industry tend to organize themselves in a similar way.
▪ Small Firms are generally functionally structured. [centralized]
▪ Medium sized Firms are generally divisionally structured. [decentralized]
▪ Large Firms use SBU or Matrix structure.
2. C H A N D L E R ’ S S T R A T E G Y – S T R U C T U R E R E L A T I O N S H I P
According to Chandler, change in corporate strategies leads to change in organization structure.

Structure should be designed or redesigned to facilitate strategy implementation.
Thus, organization structure follows strategy.
Chandler’s strategy-structure relationship is depicted below.
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Organizational Structure & Strategic Leadership
2. 1. SYMPTOMS OF INEFFECTIVE ORGANIZATION STRUCTURE
Symptoms of an ineffective organizational structure include

➢ too many levels of management,
➢ too many meetings attended by too many people,
➢ too much attention being directed towards solving inter-departmental conflicts,
➢ too large a span of control and
➢ too many unachieved objectives.
3. TYPES OF ORGANIZATIONAL STRUCTURE
Simple Functional Divisional Multi- SBU Matrix Hourglass Network

Divisional
3.1. SIMPLE STRUCTURE
It is most appropriate for Organizations that follow

➢ single business strategy and
➢ offer line of product in single geographic market or
➢ focused cost leadership or
➢ focused differentiation strategy.
In this structure, owner-manager make all major decisions directly and monitors all activities while other
staffs merely execute functions.
Characteristics of simple structure
a) Specialization of task
b) Few rules and little formal environment
c) Unsophisticated information system
d) Direct involvement of owner-manager in day-to-day operations.
Due to above characteristics, co-ordination problems that exist in larger organizations are few.
3.1.1. H O W C A N S I M P L E O R G A N I Z A T I O N S T R U C T U R E H E L P T O G E T C O M P E T I T I V E A D V A N T A G E ?
58 | P a g e
Since communication / information flow in simple organization structure is frequent and direct, new
products can be launched into market quickly which gives rise to competitive advantage.
Other potential competitive advantages
a) Openness to innovation
b) Greater structural flexibility
c) Ability to respond more rapidly to changes in environment.
3.2. F U N C T I O N A L O R G A N I Z A T I O N S T R U C T U R E
Functional organization structure is a hierarchical type of organization structure.

In this
➢ people/ employees are grouped as per their area of specialization; and
➢ supervised by a functional manager with expertise in same field.
Functional organizational structure consists of
➢ CEO or MD, and
➢ supported by functional managers and functional workforce in the field of finance, marketing,
production, R&D, HRM, etc.
Note: It is preferred in case of companies which has outgrown simple structure and are less diversified.
3.2. 1. A D V A N T A G E S & D I S A D V A N T A G E S O F F U N C T I O N A L O R G A N I Z A T I O N S T R U C T U R E
Advantages a) It is simple and inexpensive.

b) It promotes specialization of workforce.
c) Encourages efficiency.
d) Minimizes need for elaborate control system.
e) Allows rapid decision making.
Disadvantages a) Difference in functional specialization hampers communication and co-ordination.

b) Functional specialists may develop narrow/ myopic perspective and may lose focus of
strategic vision and mission.
c) Low employee morale due to repetitive work.
d) It creates line-staff conflict.
CEO must integrate functional decisional making and co-ordinate actions of various
functions.
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3.3. D I V I S I O N A L S T R U C T U R E
As a Firm grows, it faces difficulty in managing different products/services in different markets.

Hence, Divisional structure is preferred. It is suited to large enterprise which deals in
➢ multiple products
➢ to serve more than one distinctive market.
In this organization structure, people are organized in one of 4 ways:
Divisional structure by Divisional structure by Divisional structure by Divisional structure by
geographic area product or service customer process
It is appropriate for Appropriate when Appropriate when there Similar to functional
organizations which specific product or are few major customers organization structure.
formulate strategies to service need special of high importance. However, there is one
cater to specific needs in emphasis. It allows an organization difference that while
different geographic It is used in to cater effectively to functional department is
areas. organization which requirements of clearly not accountable for profit,
offer few products or defined customer group. divisional process
services that differ department is responsible
significantly. for its profit.
In this, independent divisions are created under overall control of Head office.
Each divisional manager is given autonomy to run all functions of the division and is responsible for
functioning and profitability of the division.
3.3.1. A D V A N T A G E S & D I S A D V A N T A G E S O F D I V I S I O N A L O R G A N I Z A T I O N S T R U C T U R E
Advantages a) Promotes accountability since division managers can be held responsible for sales and
profitability of the division.
b) Higher career development for managers.
c) Employee morale is comparatively higher as there is extensive delegation of work.
d) Allows better control of local situation.
e) Allows new business and products to be added easily.
Disadvantages a) It is costly structure as it requires functional specialists for each division who are
highly paid.
b) There is duplication of functions across organization.
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c) It requires elaborate HQ driven control system which may be costly.

d) Certain regions, products or customers may receive special treatment and it may be
difficult to maintain consistency in Company.
3. 4. M U L T I - D I V I S I O N A L S T R U C T U R E ( M- F O R M )
Multi divisional structure was developed in 1920s in response to co-ordination control & related problems in
larger firms.
This structure is composed of
➢ operating divisions where each division represents separate business.
Top corporate manager delegate responsibility and authority
➢ for day-to-day operations and business unit strategies to divisional managers.
It calls for
a) Creating separate divisions where each division represents a business. [semi- autonomous]
b) Each division, has its own functional hierarchy/ department.
c) Divisional managers are given responsibility for day-to-day operations of divisional level strategies.
d) Corporate office determines long term strategies and exercise overall financial control.
How are divisions managed?

When firms are less diversified When firm is highly diversified
Strategic control is used to manage divisions. It is not possible for corporate officers (Strategic
Strategic control refers to operational Business Managers) to fully understand operations of
understanding by corporate officers of strategies all business units.
being implemented by division. Financial control is used to manage divisions which
enables corporate business managers to manage
cashflow of division through budgets.
3.5. S T R A T E G I C B U S I N E S S U N I T ( S BU )
SBU concept is relevant for multiproduct, multi –business enterprise.

It is a group of related businesses which can be planned independently.
A strategic business unit (SBU) structure consists of at least three levels, with a
a) corporate headquarters at the top,
b) SBU groups at the second level, and
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c) divisions grouped by relatedness within each SBU at the third level.

When no. of products become huge, it is not practical to provide separate strategic treatment to each
product.
It is necessary to group product/ businesses into manageable no. of strategically related businesses.
How to group product/business?
Historically, large organizations make SBUs on territorial basis and strategic planning was made on the
basis of territory.
Two difficulties:
a) A given territorial SBU may have unrelated products due to which product with dissimilar
characteristics gets some strategic planning.
b) Since no. of territorial SBUs handle same product, same product gets different strategic planning
treatment.
Ideally, grouping of divisions may be done on the basis of -
➢ Similar product
➢ Similar customer
➢ Similar technology
Thus, SBU structure is composed of operating units where each unit represents separate independent
business.
Top management delegates authority and responsibility for day-to-day operations and business unit
strategies to SBU managers.
SBU manager reports to CEO of organization and is accountable for profit and sale of SBU. Thus, SBU is a
profit center.
[By such delegation, corporate officers are responsible for formulating and implementing overall corporate
strategy. They manage SBUs through financial and strategic control]
It is extension of divisional structure where similar divisions are grouped into SBUs. Divisions within a SBU
are related but SBUs are not related to each other.
Identification of SBU is starting point for strategic planning.
Characteristics → same as earlier
3.5.1. A D V A N T A G E S & D I S A D V A N T A G E S O F SBU S T R U C T U R E
Advantages a) Scientific grouping of businesses helps corporate headquarters to concentrate on

strategic planning rather than operational control.
b) In a SBU, similar divisions are grouped which may give rise to synergy benefit i.e.
advantage of doing work together.
c) Each SBU is treated as profit center. They react quickly to environmental changes.
d) It promotes accountability & enables Company to monitor performance of each SBU.
e) It helps in improved co-ordination within SBUs and organization.
f) It facilitates comparison between two or more SBUs leading to healthy competition.
Disadvantages a) It requires additional level of management, hence its costly.

b) It may result in unhealthy competition among SBUs for corporate resource.
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3.6. M A T R I X S T R U C T U R E
Operational Marketing Finance Personnel

Project 1
Project 2
Project 3
Matrix structure is an O.S. where functional and projects/ products are combined simultaneously.
It aims at combining advantages of vertical and horizontal flow of authority and communication.
In matrix structure, there are functional departments with permanent employees who are assigned to work in
different projects.
So, employees have two superiors i.e., a product/ project manager and functional manager.
Matrix structure is a complex structure since there is both vertical & horizontal flow of authority.
It is appropriate when management concludes that other forms of Organisation Structure is not right for
implementation of strategy.
It is often found in an organization or within an SBU when the following three conditions exist:
i) ideas need to be cross fertilized across projects or products,
ii) resources are scarce, and
iii) abilities to process information and to make decision needs to be improved.
3.6.1. C H A R A C T E R I S T I C S , A D V A N T A G E S & D I S A D V A N T A G E S O F M A T R I X S T R U C T U R E
Characteristics a) Dual line of authority (violation of principle of unity of command)

b) Dual source of reward and punishment.
c) Shared authority by functional and product manager.
d) Need for efficient and effective communication.
Advantages a) Project objects are clear.

b) Many channels of communication and worker can see visible result of their work.
(Better feedback)
c) Shutting down a project is relatively easier. (Employee can be shifted, no loss of job)
d) It combines stability of functional structure and flexibility of divisional structure.
Disadvantages a) Complexity due to horizontal and vertical flow of authority and command.
b) Dual chain of authority and command violates principle of unity of command.
c) Dual reporting channel leads to chaos and confusion.
d) Higher employee cost due to more management positions.
e) There may be conflict in allocation of resource to various projects.
3.6.2. P H A S E S O F M A T R I X S T R U C T U R E
Davis and Lawrence have proposed 3 distinct phases for construction of matrix structure:
1. Cross functional task ▪ It is temporary and is created when a new project is introduced.
force
▪ A project manager is in charge of the project as key horizontal link.
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2. Product/ Brand ▪ If cross functional task force becomes more permanent, project manager
manager becomes product/ brand manager.
▪ Functional is still primary organizational structure but brand manager acts as
integrator.
3. Mature Matrix ▪ It is final phase of matrix development and involves dual authority.
▪ Both functional and product structure is permanent.
▪ All employees are connected to both vertical function superior and horizontal
product manager.
▪ Functional and product manager have equal authority and must work together
to resolve disagreements over resources.
3.7. N E T W O R K S T R U C T U R E
Network structure is an example of ‘non-structure’ due to elimination of in-house business functions .

It is a series of independent businesses Firms linked together by common information system/ Head Quarter.
Many activities are outsourced.
It is also known as virtual organization.
This structure is most useful when environment is uncertain & unstable and is expected to remain so.
Basically, organization is only a shell with small HQ, acting as broker and connected to
➢ completely owned businesses,
➢ partially owned businesses, and
➢ other independent companies.
3.7.1. A D V A N T A G E S & D I S A D V A N T A G E S O F N E T W O R K S T R U C T U R E
Advantages a) Allows a company to concentrate on its own competencies & outsourcing of other
functions to experts in their field.
b) It provides more flexibility and adaptability to meet/face rapid change in technology,
taste and preferences.
c) Most useful when environment of a Firm is unstable.
Disadvantages a) Availability of numerous partners can be a source of trouble.

b) Outsourcing of functions may keep the Firm away from discovering any synergies.
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c) If a Firm overspecializes in only few functions, there is a risk that it becomes non-
competitive.
d) Low employee morale.
3. 8. H O U R G L A S S S T R U C T U R E
Hourglass structure consists of 3 layers with narrow/ constricted middle layer.

It has short or narrow middle management layer.
In recent years, IT has significantly altered the functioning of organizations.
It links top and bottom level management, thus taking away many tasks that were earlier performed by
middle managers.
A shrunken middle layer co-ordinates diverse lower-level activities.
Earlier, traditional middle level managers were often specialists. However, in hourglass structure, they are
generalists who handle variety of tasks.
3. 8.1. A D V A N T A G E S & D I S A D V A N T A G E S O F H O U R G L A S S S T R U C T U R E
Advantages a) Reduced cost due to reduction of middle level management posts.

b) Enhanced responsiveness by simplifying decision making.
c) Decision making authority is close to source of information, so it’s faster.
Disadvantages a) Since size of middle management is reduced, promotion opportunity for lower-level
managers is also reduced.
b) Lower employee morale at lower level due to monotony.
4. STRATEGIC LEADERSHIP
Leadership is ability of
➢ influencing others to voluntarily make decisions that
➢ enhance long term success while maintaining short term financial stability.
Role played by a strategic manager (General)
Visionary Chief strategist Chief administrator
Resource acquirer and allocator Culture builder Crisis manager
Motivator Policy maker and enforcer.
4 .1. FIVE LEADERSHIP ROLES PLAYED BY STRATEGIC MANAGER FOR GOOD STRATEGY EXECUTION
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a) Staying on top of what is happening, monitoring progress, solving issues and removing obstacles from the
path of strategy execution.
b) Keeping the Organization responsive to changing situation.
c) Promoting culture of espirit de corps in organization.
d) Exercising ethical leadership and ensuring that company acts as a model corporate citizen.
e) Pushing corrective actions to improve strategy execution and performance.
4 .2. R E S P O N S I B I L I T I E S O F S T R A T E G I C L E A D E R M A N A G E R
Strategic manager develops & communicates vision of future & inspires Org. members to achieve objectives.
Responsibilities of strategic leader manager are:
a) Making strategic decisions
b) Formulating policies and action plan for implementing strategic decisions.
c) Ensuring effective communication within organization.
d) Managing human capital.
e) Managing changes in organization.
f) Creating and sustaining strong corporate culture.
4 .3. T W O A P P R O A C H E S T O S T R A T E G I C L E A D E R S H I P
Transformational Leadership style Transactional Leadership style

It uses charisma and enthusiasm to These leaders try to build on existing culture and
enhance current practices.
➢ inspire people to work for good of Organization.
It uses authority of office to motivate employees to
It is appropriate
work more efficiently by giving rewards & punishment
➢ in turbulent/ unsafe environment or on achievement and non-achievement of goals.
➢ in industries at start or end of PLC or It is more formalized approach of motivation.
➢ In poorly performing organization. It focuses more on
Transformational leaders are great motivators who ➢ designing system, and
motivates its followers to do more by stretching their ➢ controlling activities
abilities & increasing self-confidence.
It is more appropriate in
They offer excitement, intellectual stimulation and
personal satisfaction. ➢ static environment, or
Transformational leadership involves followers in ➢ in mature industry; or
mission and give them vision of higher purpose so
➢ in organizations that are performing well.
as to get more dramatic changes in organization.
5. C O R P O R A T E C U L T U R E
It is known as personality of Organization and distinguishes one organization from other.

It refers to company’s
➢ philosophy, history, values,
➢ Way of approaching problem and making decisions,
66 | P a g e
➢ Own work culture,

➢ Own way of doing work,
➢ Own belief, thoughts and practices/ behavioural norms.
Corporate culture is reflected/ manifested / comes from
a) Official policies and practices
b) Ethical standards
c) Management practices
d) Dealing with stakeholders i.e, relationship with employees, shareholders, vendors, trade union, Govt. etc.
e) Employee’s attitude and behavior
f) Legends people repeat about in organization
g) Peer pressure that exists in organization.
All the above sociological factors combine to form corporate culture.
Impact of Culture on an organization/ Role of culture in strategy execution
Every company has a culture that has powerful influence on behavior of managers. Culture dictates not only
the way managers behave within the organization but also decisions they take.
Strong culture promotes good strategy execution when there is fit and obstructs / hinders/ impedes execution
if there is misfit.
A culture built around business principles like
➢ listening to employees and
➢ encouraging them to take pride in their work
➢ is conducive for successful execution of strategy.
A strong strategy supporting culture makes employee feel genuinely about their job and need of what
company is trying to achieve.
Employees are motivated to take challenging work to realize company’s vision & do their work competently.
5.1. CULTURE IS STRENGTH OR WEAKNESS?
Culture as a Strength Culture as a Weakness

As a strength, culture can facilitate As a weakness, culture may obstruct smooth implementation of
strategy by creating resistance to change.
➢ Communication among functions and
employees, An organization culture could be characterized as weak when
➢ Commitment towards Org. goals, ➢ many sub cultures exist
➢ Control over operations and ➢ few value and behavior norms are shared
➢ Decision making. ➢ traditions are rare.
In such Organization, employees do not have sense of
commitment and loyalty with the organization.
5.2. P E R I L S / D A N G E R S O F S T R A T E G Y - C U L T U R E C O N F L I C T
In such cases, culture has to be changed as rapidly as possible.

Correcting strategy-culture conflict can occasionally mean changing strategy to produce culture fit.
However, usually culture is changed to produce strategy fit.
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Creating a strong fit between strategy and culture

a) In case of unchangeable/ sacred aspects of prevailing corporate culture,
➢ it is strategy maker’s responsibility to select a strategy compatible with unchangeable aspects.
b) It is strategy implementor’s task that once strategy is chosen,
➢ they change any part of culture that obstructs strategy execution.
5.3. C H A N G I N G A P R O B L E M A T I C C U L T U R E
Changing a problematic culture is very difficult due to deeply held values and habits.
It takes combined management efforts over a point of time to replace unhealthy culture with healthy
culture or remove unwanted aspects of problem culture and instill those which are more supportive.
First step Diagnose which aspects of present culture are strategy supportive and which are not.
Second step Managers have to talk openly and truthfully to all concerned employees about the
aspects of culture that needs to be changed.
Third step The talk has to be followed swiftly by visible aggressive action to identify and modify
the culture to create right strategy-culture fit.
The culture changing actions include
a) Revising policies and procedures.
b) Altering incentive compensation. (to reward employee who follow new culture)
c) Visibly praise and recognize such employees who display new culture habits.
d) Recruiting new managers and employees.
e) Replacing employees who are strongly associated with old culture.
f) Communicate the need and benefits to employees.
6. ENTREPRENEURSHIP & INTRAPRENEURSHIP
Entrepreneurship Intrapreneurship
Entrepreneurship is an attempt to Although people use entrepreneurship and
intrapreneurship interchangeably, there is a difference
➢ create value through recognition of business
between the two terms.
opportunities,
While entrepreneur starts with his own business,
➢ management of risk and intrapreneur is an employee who promotes innovation/
➢ creating an enterprise and mobilize resources new product/ service within the limits of an
organization.
Functions/ characteristics of entrepreneur
He is an employee who operates within boundaries of a
Entrepreneur is a person who large organization.
a) Conceives the idea of starting new venture.
Job of intrapreneur is also challenging and they are
b) Recognizes and utilizes opportunities. rewarded and recognized for success achieved by them.
c) Arranges resources such as man, material, Many large organizations appoint intrapreneur within
machine and capital. organization to bring
d) Faces risks and uncertainties. ➢ operational excellence and gain, and
e) Set up a start-up company. ➢ competitive advantage in market.
f) He is responsible for profit/ loss of company.
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Strategy Implementation & Control
C HAPTER 8
S TRATEGY I MPLEMENTATION & C ONTROL
1. INTRODUCTION
▪ Strategic management process involves Strategy Formulation as well as strategy implementation.

▪ Strategic management process does not end with Firm selecting/ developing a strategy to pursue.
▪ It must be translated into strategic action. Even the most technically perfect plan will not be useful if not
implemented effectively.
▪ Change in an Organization comes through implementation and evaluation and not through plan.
2. S T R A T E G Y I M P L E M E N T A T I O N
▪ It refers to managerial exercise of putting a freshly chosen strategy into action.

▪ It translates strategic decisions into action, make it work.
▪ It involves making necessary changes in
➢ organizational structure
➢ corporate culture
➢ allocation of resources and
➢ training of personnel.
▪ Strategy implementation requires actions such as –
i) Building new facilities
ii) Adding new departments
iii) Hiring and training new employees
iv) Building better information system
v) Allocating of Resources
vi) Closing Facilities
vii) Establishing cost control measures
viii) Changing pricing structure.
3. D I S T I N G U I S H B E T W E E N S T R A T E G Y F O R M U L A TI O N A N D S T R A T EG Y I M PL E M E N T A T I O N
P a g e | 69
Basis Strategy Formulation Strategy Implementation

Process It is primarily an intellectual process. It is primarily an operational process.
Skills Required It requires conceptual and analytical skills. It requires motivation & leadership skills.
Co-ordination It requires co-ordination among employees It requires co-ordination at middle and
at top level. lower level.
Focus It focuses on effectiveness. It focuses on efficiency.
No. of employees Less employees are needed. More employees are needed.
Generally, strategy formulation concepts do It varies substantially for different types
not differ greatly for smaller, large, profit or of Organisations.
non-profit organizations.
4. R E L A T I O N S H I P B E T W E E N S T R A T E G Y F O R M U L A T I O N A N D I M P L E M EN TA T I O N
Organization success is a function of good strategy & proper implementation.

As seen above, both processes are different and require very different skills.
Strategy Implementation
Weak Excellent
A B
S
t ▪ Square A represents a situation where ▪ Square B represents a situation where
r strategy formulation is sound and strategy formulation is sound and
a
t strategy implementation is weak. strategy implementation is excellent.
e
Sound
▪ It may be due to lack of resources, ▪ Ideal situation which every Firm wants to
g
y experience, leadership etc. achieve.
F ▪ Company should try to move from

o square A to B.
r
m C D
u
l ▪ Square C represents a situation where ▪ Square D represents a situation where
a strategy formulation is flawed and strategy formulation is flawed and
t Flawed strategy implementation is weak. strategy implementation is excellent.
i
o ▪ In this case, company needs to ▪ In this case, company needs to redesign
n redesign their strategy and adjust their strategy and adjust their
their implementation skills. implementation skills.
5. R E L A T I O N S H I P B E T W E E N S T R A T E G Y F O R M U L A T I O N A N D O P E R A T I O N A L M A N A G E M EN T
S. Effectiveness Efficiency
No.
1. Concerned about “doing the right thing.” Concerned about “doing the thing right.”
2. Focuses on attainment of objectives & org. goals & Focuses on relationship between output and
achieving competitive position. input, usually for short period.
3. Externally focused and represents relationship It is internally focused.
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between organization & environment.
4. Responsibility of top management. Responsibility of operational management.
Which is more crucial? → Effectiveness. An emphasis on efficiency rather than effectiveness is clearly wrong.
Strategy Formulation
Effective Ineffective
Efficient 1 - Thrive/ Grow 2 - Die slowly
▪ Cell 1 represents a situation where ▪ Cell 2 represents a situation where
strategy formulation is effective and strategy formulation is ineffective
operational management is efficient. and operational management is
efficient.
▪ Such company is well placed and
thrives as it is achieving what it wants ▪ Such company is doomed to fail
to achieve with efficient input-output unless there is change in strategic
Operational ratio. direction.
Management
Inefficien 3 - Survive 4 - Die quickly
t
▪ Cell 3 represents a situation where ▪ Cell 4 represents a situation where
strategy formulation is effective and strategy formulation is ineffective
operational management is inefficient. and operational management is
inefficient.
▪ Such company will survive as strategic
direction to ensure effectiveness is ▪ Such company is doomed to fail
there even if too much input is used to unless there is change in strategic
generate output. direction.
6. L I N K A G E B E TW E E N S T R A T E G Y F O R M U L A TI O N & S T R A T E G Y I M P L EM EN T A T I O N
Strategy being formulated at present is influenced by past strategic actions and it affects future.
Strategy formulation and Implementation are interlinked. There are two types of linkages:
Forward Linkage Backward Linkage
Formulation of strategy determines future of Strategy formulation process is also affected by factors
organization. related to implementation.
With formulation of new strategy, we may need to While deciding strategic choices, past strategic actions
make changes in organization to ensure its also affect our decision of selecting the strategic choice.
implementation. Organizations tend to adopt those strategies which can
Changes may be made in organizational be implemented with existing resources with some
structure, corporate cultures, policies etc. Thus, additional effort.
strategy formulation has forward linkage with
its implementation.
7. I S S U E S I N S T R A T E G Y I M P L E M E N T A T I O N
Strategies do not lead to action by itself. It is a statement of intent.

To realize the intent, implementation tasks are undertaken.
Strategies lead to various kinds of programmes. Programme refers to a broad term which includes goals,
policies, rules and steps to implement strategies.
Programmes are supported by funds.
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Programmes lead to formation of projects which is highly specific. Time & costs are pre-determined. It
requires allocation of resources & needs to be completed within prescribed time.
Issues in strategy implementation to be considered are
a) Project implementation
b) Procedure implementation
c) Resource allocation
d) Structural implementation
e) Functional implementation
f) Behavioural implementation
The above activities need not be performed one after other. They can be done simultaneously as well.
Strategy implementation requires shift in responsibility from Strategist to divisional and functional
managers/ employees.
This shift in responsibility may create implementation problem if new strategy comes as surprise to them.
Hence, divisional & functional managers should be involved as much as possible in strategy formulation
process.
Similarly, strategists should also be involved in strategy implementation process.
Strategist’s genuine personal commitment to implementation is necessary and powerful motivation for
managers and employees.
Management issues w.r.t strategic implementation
a) Establishing Annual objectives
b) Devising policies
c) Change in organizational structure
d) Allocating resources
e) Hiring employees and training them
f) Building strategy supportive culture
g) Minimizing resistance to change.
8. S T R A T E G I C C H A N G E
Changes in business environment requires business to make modification in their existing strategy and
develop new strategy.
Strategic change is a complex process that involves a corporate strategy which focuses on new product/
services, new market and new way of doing things.
Steps of initiating strategic change:
Create a shared vision to manage
Recognize the need for change Institutionalize the change
Change
First step is to diagnose which Objective of both organization & It is action stage that requires
aspects of current corporate individual should coincide and there implementation of change strategy.
culture & capabilities are should not be any conflict. Change process should be monitored
strategy supportive & which are This needs creation of shared vision & in case of any deviation,
not. b/w organization & management corrective action should be taken.
This involves SWOT analysis. which needs to be communicated.
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8.1. K U R T L E W I N ’ S M O D E L O F C H A N G E
Unfreezing the situation Changing to new station Refreezing

Lewin proposed that change Once unfreezing process is complete & members It occurs when new
should not come as surprise are prepared to change, their behavior pattern behavior pattern becomes
to organization members as needs to be redefined. way of life.
it lowers their morale. H.C. Kellman proposed 3 methods for redefining New behavior must replace
Process of unfreezing makes new behavior pattern: former behavior
individual aware of necessity a) Compliance – It is achieved by strictly permanently.
for change & help prepare for enforcing reward & punishment for good or Change process is not one
such change. bad behavior. Fear of punishment, actual time process but a
It involves breaking down old punishment or reward helps in changing continuous one.
attitude & behavior, custom behavior pattern.
& tradition so that they start b) Identification – In this, organization
clean slate. members are influenced psychologically to
identify themselves with some role model
whose behavior they like to adopt & become
like them.
c) Internalization – It involves internal changing
in individual’s thought process in order to
adjust to new circumstances.
9. S T R A T E G I C C O N T R O L
Controlling is one of important functions of Management & often regarded as core management.
It involves
➢ monitoring the activity,
➢ measuring results against predefined standards,
➢ analysing & correcting deviation as necessary &
➢ adapting the system.
It is a function intended to regulate & check and ensure that performance of planned activities achieve pre-
determined goals.
Elements of process of control
a) Objective of organization which can be expressed in measurable & comparable standard.
b) A mechanism for monitoring & measuring performance.
c) A mechanism for
➢ comparing Actual Result w.r.t standard,
➢ detecting deviation from standard &
➢ learning new insights.
d) A mechanism for feeding back information for taking corrective actions in order to ensure the strategy
is relevant & goals are achieved.
9.1. THREE TYPES OF ORGANIZATIONAL CONTROL
Operational Control Management Control Strategic Control

It is concerned with It is concerned with integrated It is a process of evaluating strategy
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individual task or transaction activities of a complete department, as it is formulated & implemented

as against total division or even organization. and making necessary adjustments.
management functions. It is more aggregative & inclusive than It focuses on dual question of
One of the ways to identify operational control. whether
operational control area is It is a process by which management a) Strategy is implemented as
there should be clear cut & ensure that resources obtained are used planned or not
measurable relationship b/w effectively and efficiently to achieve
input & output. b) Result produced by strategy is
objectives. effective & intended or not.
9.2. T Y P E S O F S T R A T E G I C C O N T R O L
Premise Control Strategic surveillance Special Alert Control Implementation Control

Strategies are based on It involves general Unexpected events like It assesses need for change
certain assumptions & monitoring of natural calamity, in overall strategy as per
premises w.r.t environment & various terrorist attack, change
➢ unfolding events &
environment in which sources of information in government & other
they operate. like such events may force ➢ results of strategy
Such premises may not an organization to
➢ financial newspaper It is not replacement of
remain valid over a period review & reconsider their
operational controls.
of time. ➢ business magazines strategy.
etc. Two basic forms of
Premise control is a tool To cope up with such
implementational controls
for systematically & to uncover information crisis, organizations
are:
continuously monitoring which may affect the form a crisis team to
strategy. handle the situation. a) Monitoring strategic
a) environmental factors threats - It helps
such as economic Known as loose form of managers to determine
(interest rate, ex strategic control. whether overall strategy
rate), technology, is progressing/
social and legal; and implemented in desired
b) industry factors such direction or not &
as competitors, whether there is need for
suppliers etc. adjustment,
to verify the validity & b) Milestone review - It

accuracy of the premise involves segregating
based on which strategy activities required for
was formed. strategy implementation
in terms of time &
resources in order to
review whether mile stone
is achieved or not.
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10. S T R A T E G Y A U D I T
Refers to review of existing strategy with intention of being implemented in future.

Strategy audit helps an organization to identify problem areas and correct the strategic approach that has
not been effective so far.
Company reviews their business strategies on regular basis to identify weaknesses and shortcomings.
Strategy Audit Includes 3 Basic Activities:
a) Examining underlying basis of a Firm’s strategy.
b) Comparing expected result with actual result.
c) Taking corrective action to ensure performance is as per plan.
Core of Strategy Audit lies in the following

Need for strategy Audit
questions
a) How well is current strategy working? It is needed in following cases:
b) How well will current strategy be working in a) when performance indicators reflect that strategy is
future? not working properly.
c) How can this be evaluated in present and b) When goals & objectives are not being accomplished.
future? c) When major changes take place in external
d) How urgent is there a need to change environment.
strategy? d) When top management plans to fine tune the existing
For this, periodic review and evaluation of strategy and introduce new strategies.
strategy is needed.
10.1. R I C H A R D R U M E L T ’ S C R I T E R I A F O R E V A L U A TI N G S T R A T E G Y
Consistency Consonance Feasibility Advantage

Strategy should not be Refers to need for Final broad test for Strategy must provide
inconsistent with goals & strategists to examine set strategy is feasibility creation or maintenance
objectives. of trends as well as i.e., whether it can be of competitive advantage.
3 guidelines to determine if individual trends in implemented within Competitive advantage is
organization problem is due auditing strategies. physical, financial & normally due to
to inconsistencies in Although single economic human resources of superiority in one of three
strategies: trend may appear steady organization. areas:
a) If managerial problems over the years, changes Strategy should neither a) Resource
continue despite may be happening at over tax available
interaction level. resources nor create b) Skill
change in personnel &
problem is issue based unsolvable problems. c) Position
& not people based. Good position enables
b) If success of one Org. to obtain advantage
department means or from policies that would
is interpreted to mean not benefit rivals.
failure of another While auditing a strategy,
department. nature of associated
c) If policy problems & positional advantage
issues continue to be should also be considered.
brought to top
management for
resolution.
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10.2. R E A S O N S W H Y S T R A T E G Y E V A L U A T I O N / A U D I T I S M O R E D I F F I C U L T T O D A Y
a) Dramatic increase in environmental complexity.

b) Increasing difficulty in predicting future with accuracy.
c) Increase in no. of variables in environment.
d) Rapid rate of obsolescence of even the best plans.
e) Decreasing time span for which planning can be done with certainty.
11. B U S I N E S S P R O C E S S R E E N G I N E E R I N G - I N T R O D U C TI O N
Business process is a set of logically related tasks or activities for achieving an objective.
Generally, more than one department is involved in a business process.
E.g: Order fulfillment (order to cash); Procure to pay (procurement /accounts payable)
Performance of business is outcome of functioning of business processes.
Core process refers to those processes which are critical for success and survival of enterprise.
These are source of competitive advantage.
It needs to be identified and may not always be immediately visible.
Examples / Instances of Core Processes
Industry Core process
FMCG Marketing
Electronic & semi-conductors New product
Banking Activities to mobilize deposits & generate funds for advance to customers
Insurance Activities that create balance b/w premium for customers & profit after
claims for company
11.1. I S S U E S W . R . T N E E D F O R C H A N G E I N B U S I N ES S P R O C ES S
a) Operational excellence of a company is major source of competitive advantage.

b) Business strategy should focus on using/ leveraging its operational excellence in market place.
c) Customer focused organization needs to realign in terms of process orientation.
d) Process needs to be managed and not only its components.
e) Continuous improvement is lacking in company.
f) Dramatic improvement in performance is necessary for overcoming competition.
11.2. B U S I N E S S P R O C E S S R E E N G I N E E R I N G
BPR refers to analysis and radical redesign of

➢ work flow and process
➢ within and between organizations.
Radical redesign means it is total deconstruction and rethinking of business process in entirety.
76 | P a g e
It is unaffected by existing process/ workflow.
Objective of BPR is to obtain
➢ quantum improvement in performance of business process in terms of
➢ cost, quality, responsiveness to customer.
It seeks to ensure unusual improvements in operating effectiveness through redesigning of core business
process and supporting business process.
11.3. R A T I O N A L E O F BPR
Improving Business process is pre-requisite to stay competitive in today’s market.

a) With rapid change in information technology, organization needs to be updated to meet demand.
b) With opening of Indian economy, Companies have been forced to improve business processes due to
increased competition.
c) Customers are also demanding better goods/ services and are willing to try new suppliers to meet their
demands.
11.4. E L E M E N T S O F BPR
Reengineering begins with Reengineering involves Radical Reengineering aims at achieving

Fundamental Rethinking Redesigning of process dramatic improvement in process
Reengineering does not begin with Radical redesign means going to root Marginal improvements can be
any assumption. It is totally free of problem & not some superficial done by conventional methods.
from preconceived notion/ belief. change. Reengineering is meant for
It involves asking fundamental Reengineering is about reinvention of replacement of old business
questions about organization & business process & not improvement, process by new to achieve
business processes like enhancement or modification. dramatic improvements.
➢ Why we do what we do? It involves complete deconstruction
of existing business process &
➢ Why we do it the way we evolving new ways of doing things.
do it?
11.5. G E N E R I C B U S I N E S S P R O C E S S
Since not all business processes are equally important, BPR focuses on identifying generic business process
which significantly adds values for customers.
Generic Business processes needing BPR can be grouped in 3 broad categories:
Process w.r.t Development & Process involving Interface with Process comprising of Management
Delivery of product/ service Customers Activities
This may include This may include This includes
➢ Research ➢ Marketing ➢ Strategy formulation
➢ Redesigning products ➢ Advertisement ➢ Planning
➢ Engineering ➢ Order fulfillment ➢ HRM
➢ Manufacturing ➢ After sales service ➢ Budgeting etc.
➢ Logistics etc.
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11.6. I M P L E M E N T I N G BPR
Formulate & Implement the

Determining Identify customer & Study the existing
redesign business redesigned
objective determine their needs. plan
process plan business process
Objectives are Process designers need This provides Information It involves joint
desired end result to understand important base for gathered through responsibility of
of redesigned process designers. earlier steps is management &
➢ customers
process which It gives and translated into ideal designer to
management wants ➢ their profile understanding of redesign process. operationalize
to achieve. ‘what’ and ‘why’ of Customer focused new business
➢ steps in acquiring, process.
using & disposing targeted process. redesign concepts
goods. are identified &
selected.
This is important to
redesign those business
processes that clearly
provide value to
customers.
11.7. R O L E O F ITR I N BPR
IT plays a significant role in changing business process.

A re-engineered business process, supported by IT, results in increased speed and accuracy.
It helps in meeting customer needs and expectation quickly and adequately, thereby increasing their
satisfaction level.
Impact of IT system Values provided by IT
a) Compression of time a) Efficiency: by way of increased productivity
b) Overcoming of restrictions of geography & b) Effectiveness: by achieving objectives & better
distance management
c) Restructuring of relationship c) Innovation: by way of better product service
All these can bring radical change in business process and goods/ services, thereby increasing competitive
advantage and customer satisfaction.
11.8. H O W I S BPR D I F F E R E N T F R O M O T H E R E F F O R T S O N I M P R O V I N G O R G A N I Z A T I O N A L E F F I C I EN C Y ?
Reengineering starts
BPR efforts involve massive
Discontinuous Thinking Use of IT with Process but does
organizational change
not end there
BPR focuses on radical BPR utilizes IT for It views process from Reengineering is not just
redesign of business evolving a new business cross dimensional changing the process.
process entirely. process instead of perspective. Thus it is Practically every aspect of
It does not have scope for automating existing multi-dimensional the organization changes
partial modification of process. approach. beyond recognition.
existing business process.
Due to massive changes involved, BPR must be supported by vision and commitment of top leaders of Org..
78 | P a g e
11.9. P R O B L E M S I N BPR
a) BPR involves radical change in business process. Only limited no. of companies have enough courage for
having BPR due to challenges involved.
b) It disturbs established functional structure and hierarchy. This may create resistance form employees.
c) It involves significant time and expenses.
d) There can be loss of revenue during transition process.
e) Setting of targets is tricky and difficult. If target is not set properly, reengineering effort may turn out to
be failure.
11.10. C E N T R A L T H R U S T O F BPR
BPR aims at reducing the cycle time of business process by

a) eliminating unwanted/ redundant steps,
b) simplifying the process, and
c) eliminating waiting time as far as possible.
12. B E N C H M A R K I N G
Benchmark refers to
➢ standard or point of reference against which
➢ things may be compared, measured and judged.
It is broader concept than control and is widely used by commercial and non-commercial organizations to
improve processes.
Benchmarking is an approach of
➢ setting goals and
➢ measuring productivity
➢ based on industry best practice.
It provides standard against which performance can be measured.
It involves regularly comparing different aspects of performance with industry’s best practices, identifying
gap and finding out methods to not only reduce gap but improve the situation.
12.1. O B J E C T I V E S O F B E N C H M A R K I N G
Continuous Improvement for competitive advantage.

Various functions which can be improved using benchmarking
a) Product development
b) Product distribution
c) Assessment of manufacturing cost
d) Customer service
e) Plant utilization
Example of benchmarks:
Restaurant /Healthcare Industry Waiting time
P a g e | 79
Manufacturing company Manufacturing cost

E-Commerce Delivery time
Automobile Mileage
12.2. S T E P S I N B E N C H M A R K I N G
Benchmarking process is not standardized. However, common elements are as given below.
1. Identify the need for It involves defining the objective of benchmarking exercise and selecting
benchmarking benchmarking exercise.
2. Clearly understand It involves compiling information and data on performance by methods like
existing process interviews, visits and questionnaires.
3. Identify best process It may be within same organization or external to it.
4. Compare own process This helps in identification of gap in performance which is analysed to seek
with that of other’s explanation.
process
5. Prepare a report and Report of benchmarking containing recommendations and action plan is prepared
implement the steps and implemented.
necessary to reduce
performance gap
6. Evaluation Organization must evaluate result of benchmarking process in terms of
improvement vis-à-vis set objective.
Evaluation shall be periodic and benchmarking should be reset as per change in
conditions .

a) Free Lectures &
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Introduction to Strategic Management

I NTRODUCTION TO S TRATEGIC M ANAGEMENT

▪ Business policy is defined as study of

1.1. EVOLUTION OF BUSINESS POLICY

1911 1959 1969

As per “William F. Gluek”

▪ Refers to long term blueprint of Organization’s

3.1. IS STRATEGY PROACTIVE OR REACTIVE?

▪ Proactive strategy is Planned strategy. It involves

It is an influence backed by power, knowledge, competence & resources

• It refers to managerial process of

Objectives of strategic Management

5.1. IMPORTANCE/ BENEFITS / ADVANTAGES OF STRATEGIC MANAGEMENT

7. STRATEGIC MANAGEMENT IN GOVERNMENT DEPARTMENTS AND NOT- FOR-PROFIT ORGANIZATION S

▪ Organizations can be classified, on the basis of interest they have, into

them wisely to meet their expenses and attain their objectives.

▪ Educational Institutions are using strategic management techniques for

▪ Modern hospitals are creating new strategies that include

D YNAMICS OF C OMPETITIVE S TRATEGY

▪ Competitive Strategy consists of long-term plan and moves to

▪ Objective of competitive strategy

ii) Nature and It involves analysis of Industry’s competitive pressures to decide

▪ Competency refers to combination of skills and techniques.

5.1. A R E A S W H E R E M A J O R C O R E C O M P E T E N C I ES A R E I D E N TI F I E D – A S PER C K P R A H L A D & G A R Y H A M E L

Competitor Differentiation Customer value Application to other markets

Core competencies distinguish a company competitively and reflect its personality.

Valuable Rare Costly to Imitate Non-substitutable

▪ It is analysis of value added by separate steps in complex process.

▪ It is a set of unique features of a Company and its products

Sustainability of competitive advantage depends on 4 major characteristics of resource and capability:

Guide Strategists in strategy

▪ SWOT Analysis is a planning tool.

▪ Portfolio - Collection of businesses/ brands/ products that make up a company.

Three concepts required to understand different models of portfolio analysis.

SBU is a unit of company that has

Basis Introduction Growth Maturity Decline

BGG Matrix: Post Identification Strategies

Is BCG Matrix really helpful? / Problems & Limitations of BCG Matrix

Existing Product New product

Dominant Strong Favourable Tenable Weak

Question – GE matrix is different from BCG Matrix. Comment.

For developing countries, it means integrating At company level, it means 2 things,

a) Domestic market no longer adequate (saturated domestic market).

For EIS-SM, use Code CAKISHAN on Unacademy App for

F OR T AXATION , VISIT KKC WEBSITE OR DOWNLOAD OUR KKC A PP

S TRATEGIC M ANAGEMENT P ROCESS

Strategic planning Operational planning

1.1. STRATEGIC UNCERTAINTY

Dealing with Strategic uncertainty Impact of uncertainty

order to reduce impact of uncertainty.

2. 1. DIMENSIONS OF STRATEGIC DECISION

1. S.D. requires top management as it involves entire organization.

▪ It refers to purpose of what the organization tries to do.

▪ It implies blueprint of company’s future. It describes where company wants to land.

DIFFERENCE BETWEEN VISION & MISSION

Business It explains business undertaken by Firm w.r.t

Types (Both are important)

DIFFERENCE BETWEEN GOALS & OBJECTIVES

4. STRATEGIC MANAGEMENT MODEL

4 .1. STAGES IN STRATEGIC MANAGEMENT PROCESS

C ORPORATE L EVEL S TRATEGIES

Stability Growth Retrenchment Combination

Reasons for opting this