Op ididyc

Corporate Strategy
the growth design of the firm;
Corporate strategy is basically
firm- the direction, extent, pace
i t spells out the growth objective of the an
timing of the firm's growth.
I t also spells out the strategy for achieving the growth.

Nature, scope, and concerns of corporate strategy

Corporate strategy is concerned with the choice of businesses, products, a
markets.
I t is the design for filling the firm's strategic planning gap.
I t ensures that the right fit is achieved between the firm and its environment
Corporate objectives and corporate strategy together describe the firm's conce
of business.
What does corporate strategy ensure?
1. Corporate strategy in the first place ensures the growth of the firm and ensure
the correctlalignmentof the firm with its environment.
2. Masterminding andworking out the right fit between the firm and its exter
environment is the primary contribution of corporate strategy.
3. The purpose of corporate strategy is to lharness the opportunities available
the environment, countering the threatsembeddedjtherein.
Q. Howgood or howmethodicalis the response to the environment?
Strategy is the opposite ofjadhoc responses to the changes in the environment
competition, consumer tastes, technology and other variables. It amounts to lo
term, well thought-out and prepared responses to the various forces in the busine
environment.
Strategy is partly proactive and partly reactive
Acompany's strategy is typically a blendof
1) proactive actions on the part of managers to improve the company's mane
position and financial performance and
2) as needed reactions to unanticipated developments and fresh maie
conditions.
Partly Proactive: One part of managemene's program is deliberate and proac
standing as the product of management's analysis and strategic thinking about
Company's situation and its conclusions about how to position the company1n
marketplace and tackle the task of competing for buyerpatronage.
Reactive: Whe
hen market and competitive conditions take an unexpected turn or some
Reactiveompany's strategy hits a stonewall, some kind of strategic reaction or
company's

aspect ofa
a d j u s t m e n tiS r e q u i r e d .

Abandonedstrategyfeatures

PLANED STRATEGY

New initiatives plus ongoing strategy

features continued from prior periods Actual
Company Experiences
Company
Know-how, Resource
Strategy
Strength & weaknesses,

and Competitive
Capabilities

REACTIVE STRATEGY
ACompany's Actual Strategy is Partly Planned & Partly Reactive

Hence, a portion of a company's strategy is always developed on the fly, coming as a

reasned response to unforeseen developments-fresh strategic maneuvers on the part of
rival frms, shifting customer requirements and expectations, new technologies and
market opportunities, a changing political or economic climate in the surrounding
environment
A CORPORATE STRATEGY has the following characteristics:
I t is generally longrun in the nature
I t is action oriented and more specific than objectives
I t is integrated and multipronged (involving several different approaches
or aspects) and integrated
I t is flexible and dynamic
I t is made at the top management level
It helps in dealing with competitive and complex setting of business
I t is a result of goals and objectives
of the enterprise
WHICH NEED TO BE TRANSLATED TO REALITIES
Ithelps perceive (recognise) opportunities & threats and initiative to cope with them
It gives importance to combination, sequence, timing, direction and depth of
vañous moves and actions taken
by the managers to handle environment
uncertainties and complexities.
It gives a unified criteria for decision making
Strategy can be devised at
Corporate,
Divisional and
Functional level
 Corporate level strategies: Top-level managers about business lines, exna
growth, vertical horizontal integration diversification takeovers, merqers expans
investment, disinvestment, R&D, make them and so on.

Divisional and Functional Strategies: the corporate strategies need to be turned

reality by divisional and functional strategies regarding product lines, productk
volumes, quality ranges, prices, product promotion, market penetration, purchas
SOurces, personnel development and like.

Strategy is a set of Enterprise strategy is

analytic techniques ( concerned with the
for understanding match between your
and influencing your Corporate hst tncompany's internal
company's position
in the market place
Strategy enhen& capabilities and
Business you should be in its external
environment
Business Strategy,
Tactics Si S)
to beat the
competion ck Hha am.
amw
pehh
Functional Strategy étrs (S)
Operational methods
to implement the tactics
Jmpro
S Strategy can never
EPhueny
be perfect flawless/ and optimal However, in a sound
allowances are
strategy
made for possible miscalculations and unanticipated events.
 Strategy is
advcnt
plan ofldeliberate
F a rb e t t e ra n a

action thatsearch
a
a p p r o x i m a t ea n s w e r

for
h er i g h tq u e s t i o n

develop businessa will

whichis
tothe
ten/vague
a n s w e r
competitive
advantage and compound it.
e x a c t

than
an
wrong questior
ion, Bruce D. Henderson
t ot h e w r o

which canbe
madeprecise.

cik
shyy eKac,a Chance favors the
J o h n Tukey, Statistician
prepared mind.
-Louis Pasteur
nrocess of strategic planning
ofthe

trengtnrne is
the firm. Corporate strategy is tested by the
he
strength

finaly
by the
forged by the game plan that actu
the efficacyof
strategy towards success.
Steersthefirm

Dealing with strategic uncertainty

ncertaintyisrepresented by afuture trendor event that has inherent unpredictability.
UncertaintythathasstrategicimpucauionsSa key construct in strategy formulation.
Given the
0.Given the fact
fact that, A typical external analysis will emerge with dozens of
strategic uncertainties.

To be manageable, they need to be grouped into logical clusters or themes.

I t is then useful toassessthe importance of each cluster in order to set priorities
with respect to Information gathenng and analysis

Scenario Analysis
Information gathering and additional analysis will not be able to reduce the uncertainty.
In that case, scenario analys1s can De employed. dcenano anaysisbasically accepts the
uncertainty as given and uses it to drnve a descrnption of two or more future scenarios
Strategies are then developed for each. One outcome could be a decision to create
organizational and strategic flexibility so that as the business context changes the
strategy willadapt.
Impact of a strategic uncertainty:
Each strategic uncertainty involves potentialtrends or events that could have an impact on
of
present, proposed, and even potential strategic business units (SBUs). The importance
established SBUs may be indicated by their associated sales, profits, or costs.

The Stages of Corporate Strategy Formulation- Implementation Process

Stage-1 Stage-4 Stage-5

Stage-2 Stage-3
Monitoring
Developing Crafting a Strategy Implementing Developments,
Strategic Setting to Achieve the &
Executing the
Evaluating
Vision Objectives Objectives performance and
and Vision Strategy Making Corrective
Adjustments

Revise as Needed in light of actual performance, changing

conditions, new opportunities and new 1deas
 nlealy uo o insion
Stage 1: Developing a strategic vision
First, a company must determine what
what
directional path the company shoul
changes the company's product-market-
in
would improve its current market customer technolo take
omer-technology
position and its future prospect. -
A
clearlyarticulated) strategicvision communicates management's
aspirai,
stakeholders and helpssteer the energies of company personnel in a
common di
eo- diuct Somushiu rectt
Mission and Strategic|Intents
Managers need to be clear about what
they see as the
their organization,and this is often
expressed
statement of mission or strategic intent.
in erole
term.
.

This is important because both external stakeholders and

managers in the organization need to be clear about wh
organization is seeking to achieve and, in broad
terms,
hat
expects to do so.
how
The
importance of clear strategic intent can go much furthen
can help galvanise motivation and enthusiasm throughout the
providing what they calla sense of destiny and discovery. organization
Stage 2:SettingobjectivesSped pe pesm tongut
Corporate objectives flow from the mission and growth ambition of the
objective provides the basis for it major decisions of the firmcorporation. T.
and says t
organizational performance to be realised at each level.
The managerial purpose of setting
objectives is to convert the strategic vision into specit
performance targets -

results and outcomes the managemet wants to achieve and the -

use these objectives

asyardsticksfor tracking company's progress and performance.
the
The balanced scorecard approach
A combination of strategic and financial
objectives-Te
balanced scorecard approach for measuring
company
performance requires setting both financial and strategi
objectives and tracking theirachievement.

p. Thesurest path to sustained future profitabilityquarte

after quarter and year after year is to/relentlesslybursu
strategic outcomes that strengthen a company's busines
position and, ideally, give it a growing compethe
advantage over rivals. To deliver better financial results from_operations 1 U
uhachievement of strategic objectives that improve its competitiveness and mare
strength Ought o expotej An emsiom, pmhtal or dfhb
uasm, or duing smuing
A need for both short-term and long-term
objectives:
As a rule, a company's set of financial and strategic objectives|ought t include bat
short-term and long-term performance targets. Having quarterly or annual objectie
focuses attention on delivering immediate performance improvements. Targetsto
achieved within three to five years promptconsiderations of what to do now to put
company in position to perform better down the road.
 (or perhaps quarterly) performance targets, management indicates
spellingo u t .

longer-rangetargets
are to be approached.
hich w h i c

at
ojectives(Characterist
speed
istics)
he
Ohjectivesshouldbe
ould be
antitative, measurable, realistic, understandable, challenging.
quantitativ

h i e r a r c h i c a l

htainable, and congrue

o b t a i n a b l e , a n .

among organizational units. Each objective

associated

bë
with a
time lineoxt
aalso
should
0 b j e c t i v e s( b e n e f i t s )

eMs
T h e yp r o v i d ed i r e c t i o n ,

allow synergy aid in evaluation,

establish priorities, reduce uncertainty,
minimize conflicts, stimulate exertion
both
the
the
allocation of resources and the design of jobs.
in
aid
Intent:
Strategic
of
Concept
strategic intent when it relentlessly pursues an ambitious strategic
exhibits:
ompany
Acompa
hiective and concentrates its ull resources and competitive actions on achieving that
Ambitious companies
almost invariably begin with strategic intents that are
to their immediate capabilitiesaand market positions.
o b j e c t i v e . .

proportion
outof at all organízational levels:
need for objectives
The
should notstop with top management's establishing of companywide
jective setting
arformance targets. Company objectives need to be broken down into performance
targets for

each separate business,

product line,
functional department, and
dishlad- mau mo wnsie
manins
individual work unit. piHhy ouik and Kll
Stage 3: Crafting a strategy to achieve the
objectives and vision

A company's strategy is at full power only when its

many pieces are united. Ideally, the pieces and layers
a
of a companys strategy _hould fit togetper jke
jigsaw puzzle, a Ae dopt.
3houe\ indion P
Midlevel and frontline managers cannot do good
strategy making without understanding the çompany's
should >
direction and higher-level strategies.
-whal Expru
ong-term
Cohesive strategy making down through the
hierarchy becomes easier to achieve when company
strategy is distilled into pithy easy-to-grasp
terminology that can be used to drive consistent
strategic action throughout the company. Good
Communication of strategic themes and guiding
pninciples thus serves a valuable strategyuniyin
purpose.
Te
A company's strategic plan lays out

its future direction,

performance targets, and

strategy.
Developing a strategic vision, setting objectives, and crafting a strategy
are
direction-setting tasks.
In making strategic decisions, inputs from a varety of assessments are
However, the core of any strategic decision should be based on three
assessments.
three tyeevan
pes
Organizational
Strengths and
Competitor
Strengths and
First, concerns organizationa
Weaknesses Weaknesses strengths and weaknesses.

Second) evaluates competitor

STRATEGIC DECISION strengths,weaknesses.&
Strategic Investment strategies,
Functional Area Strategies
Sustainable Competitive Advantage
Third, assesses the competitive
Market Needs,
Attractiveness, and
context, the customerS and their
Key Success needs, the market, and the martes
environment

Stage 4: Implementing& executing the strategy

Managing strategy implementation and execution is an operations-oriented, activie

aimed at shaping the performance of core business activities in a strategy-supporie
manner.

To convert strategic plansinto actionsand results, a manager must be able to pertom

following:,
direct organizational change
motivate people,
build and strengthen company competencies and competitive capabilities,
Create a strategy-supportive work climate, and

meet or beat performancetargets.

Good strategy execution involves creating strong|"fits"
between strategy and organizational capabilities,

between strategy and the reward structure,

between strategy and internal operating systems, and

between strategy and the organization's work climate and culture

 itoring developments,
Stage5 Monmtoring evaluating
adustments performance and making
the trigger point for corrective
rives, strategy,deciding whether to continue or
Thefifth stag
company ision, objectives,

A
company's
vision, objectives, strategy, andand/orstrategy-execution
approachto strategy
change the
methads.
neverfinal:
execution are
trategy is ongoing process, not
Managing an every now and
direction, objectives, and then task.
A
company's
strategy have to be
Lorinternalconditions warrant. revisited anytime
be expectedthat a company will
Itis to
and strategy over time,
modify its strategic vision, direction,
objectives,
strategy execution
Proficient
is
aways the product of
earning. It is achieved unevenly coming much
in some areasorqanizational
onal
-

and problematic in others.

quickly and
nettlesome proving

Glueck & Jauch Generic Strategic alternatives

According to
William F Glueck and Lawrence R Jauch there are four
that be considered.
can
generic strategic
alternatives
a. Stability (Steadiness): When a fim decides to continue what
it has been, doing so tar then the firm would
focus on
incrementalimprovement of functional performance) One should
not confuse this with "Do Nothing" strategy. It's good for
mature business organisations.

b. Expansion Strategy: Adding to the scope of business and increasing the area of
thinking. One should have vigour hunger for more and promise to grow. It
would force the business to think beyond the ordinary. Expansion will attract the

following things
New technology,
New markets,
Innovative decisions, in various ways
yng, acquiring or merging new business, It is achieved

or product ines, new

products
SOn through diversification: Entry into new
sen technology, and knowledge
O new markets, involving different skills, for which a totally
new
something new
Conglomerate
Diversificatio Creating
The technology and market for the product
is

Customers need to be created.

totally new then the previous <perience of the firm.
Onseli )aihcann Reicad
 Concentric Diversification: When an organisation builds around
already know and what they already have is concentric what
diversificatio
utilise their existing capacities in more efficient manner. Such cation. Thh
diversification may occur due to organisation having excess
i a l l ,

funds, marketing channels, market prestige. Another reason iscapacit

also tha
ity, Sunl
hat i
have asynergistic
advantage. t. A al wg o ) l
Expansion through acquisitions and mergers: A sudden
way to
than the ordinary means. Not having the time effort and grow
Qtow bigge
energy to h
resource base, customer base all over again. Ihe entrepreneur buil
wants a read
ofthe infrastructure to work up his idea. A SYNERGY would result in
facilities, technical and managerial skills,|distribution channels,
administration, research, and development. Rads konas ereh
phyoia
C.Retrenchment strategy: Organisations may some time do away with cloe
business line or leaving a particular market. It may be
necessary to deal siwithng a
hostile environment or adverse situation. is not a bad idea to reduce
It
the a
situation by closing a business line or stopping the production of a
productadverse
strategy may work in different stages. The
Stage-1
Acut on following expenditures
Administration;
Reduction in repairs and maintenanceexpenditure
Replacement of old machinery
Suspension of capital expenditure
Reduction in staff welfare
Executive perks etc.

Stage-2
The focus of the organisation now shifts on to purely Cost Cutting Aspects suchas
Inventory Levels
Manufacturing level
Manpower
Plant maintenance
Dividend to shareholders
Interest on deposits

Stage-3
The enterprise would decide to withdraw from some markets, some brands andsi
o of products
nd h , Discontinuation of a product
A. Discontinuation of a brand
Withdrawal form some marginal markets
Winding up of branch offices
Abolitionbf someexecutive positions
 Stage-4
risemay
resort to sale of some manutactuning facilities and
company. The enterpriseindividual
more a burder to the
hat are
T h e

take o v e r by another viable enterprise. may also

prod
offei ffor a
rt s e l f r

Stage-5
may inally lead to seekin
finally a
liquidation i.e. asking for a Corporate
option
last
DeathneALigui
The dataa

C o m b i n a t i o nS t r a t e g i e s

hard and
that one strategy can be applied at a time. A
fast rule
no company
There
is in om areas, retrenchm in others. Oofimtuohab
expansion

canle ok
for
bund ale,
ko
kaal
bund (ap tal uu Pau uoa So no thena
imus orss Used eApunsim otsbpS.
Strategic Alternatives
Porter's
Generic Strategies Orgrigalun Jov ha ka0.m
Michael strategies allow organizations to gain competitive advantage from
str
Porter,
to
cording
A c c o r

t h r e ed i f e r e n tb a s e s :

leadership emphasizes producing:standardized products at a very low per

Cost price-sensitive.
unit cost for
consumerswhoare
Differentiation is a strategy med at producing products and services
Dif
and directed at consumers who are relatively
considered unique industry wide
price-insensitive.

Focus
means produing services that fulfil the needs of small
oroducts and

groups of
consumers.
. Choolade maa my mp
access to resources typically compete
on a cost leadership
firms with greater
Larqer
firms often compete on a focus basis.
differentiation basis, whereas smaller
and/or
strategic advantage

uniqueness low-cost
perceived by position
the customer

overall cost
industry differentiation
wide leadership

multi-segment

c particular focus
segment
 Porter's Emphasises on following:
Perform cost-benefit analysis to evaluate "sharing
firm's existing and potential business units. opportunitier"
Firms to "transfer" skills and expertise among
effectively in order to gain competitive advantage. autonomous
Tu1T
busin.

Cost Leadership Strategies

A primary reason for pursuing
forward, backward,and horizontal integratian
is to gain cost leadership benefits.
Striving to be the low-cost producer in an ind
industrys
be especiallyeffective when
C
When to pursue cost leadership.
the market is composed of
many price-sensitive buyers,
when there are few ways to achieve
product differentiation,
when
buyers do not care much about differences from brand to
brand, or
when there are a large number
of buyers with significant bargaining power,
The basic idea is to under
price competitors and thereby gain market share
driving some competitors out of the market entirely. and sl

How to achieve cost

leadership.
Asuccessful cost gles
leadership strategy usually permeates the entire firm, as
evidenced by
high efficiency, low overhead,
limited perks, intolerance of waste,
intensive screening pf budget requests, wide spans of control,
rewards linked to cost
containment, and
broad employee participation in cost control efforts.

Differentiation Strategies
Different strategies offer different degrees of differentiation.
guarantee competitive advantage, if rapid imitation Differentiation does n"

products protected by barriers to quick copying by by competitors is possible. Duran

When differentiation should be done
competitors are best. zulN
Only after a careful study of buyers' needs and
preferences to determine the feasibiug
incorporating one or more differentiating features into a unique product that feature>
desired attributes. 5 u
Benefits of Differentiation
A successful differentiation strategy allows a firm
and to gain customer loyalty because
to charge a higher price for itsorodit
p
consumers may become tothe
differentiation features. strongly attacne
 be achleved?
ntiatoncan
o w d t e r e n t l a t t o nc a

l lesturest that differentiate one's product can

superiorservice
Include
s p a r ep a r t s a v a i l a b

ility,
i l i n

engineeringdesign,

p r o d u c tp e r t o r m a n c e

usefullife,

gas mileage,o r

easeofuse
with differentiation
ttached

Risks
pursuing a
A iskof highly enough by customers to that the differentiation strategy is
be valed
justify the higherunique product may not
famDetitors may develop to copy the wayokan
Compe

achieve
differentiation?
differentiating features, quickly.
Wayto T
thus must
Gind durable sources of uniqueness that cannot
ms
Firms
rival firms. Common imitated quickly or
organizat
be
by requirements
eapy
cheaply
strategy include strong coordination
for a
successful
d i f e r e n t i a t i o n

among the R&D and

and substantialamenitiedto attract scientists.and creative marketing
functions.
people.
Focus Strategies
AUgcesful focus strategy depends on an industry segment that is of

Sufficient size,
has good growth potential, and
is not crucial to the success of other major competitors.

Ways to achieve it
Strateqies such as market penetration and market development offer substantial
focusing advantages.
How to achieve it
Midsize and large firms can effectively pursue focus-based strategies only in
Conjunction)with differentiation or cost leadership-based strategies.-
Focus strategies are most effective when consumers have distinctive preferences
or requirements and when rival firms are not attempting to specialize in the
same target segment.

Risks of pursuing it:

the
rategy include the possibility that numerous competitors will recognize the
will dnift toward
cus strategy and copy it, or that consumer preferences
product Shut
attributes desired by the market as a whole.
organization particular group of concentrate on a
using markets,
customers, ographic
a focus strategy may
or on particular product-line segments inin order
order to
to serve
serve
awell-definendrow market betterthan competitors who serve a broader market
hduy urbsik
ie' igmvin sfihel hi és.
 Maat dp Strategy Alternatives

aala h

Retrenchment Combination
Stability Expansion
st Aayy dt quhn may ha
a pon Hun Topiu
Intensification
Diversification
(ao io k d. i

Product Vertically Concentric Conglomerate Horizontally

Market Market Diversificatio | | Diversification
Development Integrated
Penetration Development
J hcd 3

Forward Backward

STT biy t 3TA Gi T

TE Sue sA
34TaTshga
 thenewbusiness and the existing ones.
Divestment strategy:
Divestment strategy involves retrenchment of some of the activities in a divestmento
given
of the firm or sell-out of some of the businesses as such. Compulsions for divestme
be many and varied, such as
Obsolescence of product/process Business becoming unprofitah
tde.
High competition Industry overcapacity
 TOWSMatrix

It has been criticized

that arter conducting the
choice
SWOT Analysis
managers frequent
that the outcomes
m

to come to terms with the strategic

this, Piercy argues for the TOWS Matrix, which, while using
mand. In ory
me îng
(Threats, Opportunities, Weakness and Strengths) reorganizes them and integrates
intothe strategic planning
process.
more fully
Organisational Strength Organisational Weaknes
Strategic Options
Environmental S0: Strength can be used to WO: The strategies develope
Opportunities capitalize or built upon existing need to overcome
or emerging opportunities organizational weakness if
existing or emerging
atfotk opportunities are to be
exploited 6y
Strengths in the organization The strategies
Environmental ST:
minimize
pursued
minimize or overcome
Threats can be used to weakne
dxisting or emerging threats and as far possible, cope
as

ths dred threats existing oremei erging

threats Suav
Combinaton ot
mny tigg y2h PORTFOLIO ANALYSIS
A business portfolio is a collection of businesses and products that make up
company. a tool by which management identifies and evaluates the various businer
that make up the company.
inesas
In portfolioanalysistop management views its product lines and business units as
seriesof investments from which it expects returns. A set of techniques that e
strategistsintaking strategic decisions with regard to individual products or business
in a firm's portfolio.

Used where?
I t is primarily used for competitive analysis and corporate strategic planningi
multi product and multi business firms.
They may also be used in less-diversified firms, ifthese consist ofa main busines
and other minor complementary interests.

Benefits The main advantage in adopting a portfolio approach in a multi-produt

multi-business firm is that resources could be channelised at the corporate level
those businesses that posses the greatest potential.
Pr-requisite?
In order to design the business portfolio, the business must analyse its current busine
portfolio and decide which business should receive more, less, or no investment.
Howto Do it?
Depending upon analysis businesses may develop growth strategies for adding
products or businesses to the portfolio.
 Cóncept of SBU
Analysmg
portfolio
ma.
may begin with identifying key businesses also termed as strategic
p u s i n e su
s n i t
( S B U ) .

Strategic
b u s i n e s su n i t s
SBU is a unit of the company that has a separate mission and
hich can be planned independently from other company businesses.
o b j e c t i v ea
s n o

mpany division, a product line withina division, or even

a single
TheSBU
can enile are common in organisations that are located in
and. multiple
c o u n t r i e s

product
w i t h
or br
i n d e p e n ,
ndent manufacturing and marketing setups. An SBU has following
characteristiS: of ted businesses that
or collection can be
Single bus, ess planned for
s e p a r a t e l y

competitors.
its own
set of
who is responsible for strategic planning and profit.
Has who
manager

a
.Has simil Experience Curve
an important concept used for applying a portfolio approach. The
Expenence cun
a learning curve, which explains the efficiency increase gained by
akin to a
is The implication is that larger firms in an
repetitive productive work
ncept

workers t hrough
e n d to have lowerunit costs as compared to those for smaller companies,
industry
wouldten

acompetitiv cost advantage.

therebygaining
esults from a variety of ctors such as learning effects, economies of
Experience curveresul
re-design and echnological improvements in production.
scale, product
experience curve?
look at
Angles to
Experience curve
is considered a barmier for new firmacontemplatingjentry in an industry
to build market share and discouragecompetition.
I t is also used
Experience Curve in India: Experience curve phenomenon seems
Two wheeler Industry
for the past decade has been selling, on an
fn he working
in favour of Bajaj Auto, which
more than 60 per cent of the market. Its only
average, 5 lakh
scooters a year and retains
LML Vespa Ltd., which has a far lesser share of
the market. The
serious competitor is
that Bajaj Auto has is in terms of costs.
primary strategic advantage
Other competitors bike Gujarat Narmada
and Kinetic Honda find it extremely difficult to
compete due to the cost differentialsthat currentlyerist.,.
The likely strategic choice for underdogcompetitors should
be to develop á niche market
oF segmentation based on demography orgeography.
tSpR
PLC
choice. Essentialy, PLC
Froduct Life Cycle (PLC): A useful concept for guiding strategic of time for a
5
an-shaped curve which exhibits the relationship of sales with respect
product that passes through the four successive stages of
First: introduction
(slow sales growth)
Second : growth
(rapid market acceptance)
Ihird maturity (slow down in growth rate) ana
ourth:decline
1F (sharp downward drift). a
ousinesses are subst
bstituted for product, the concept of PLC
could workjust as well.
md Lona
Sing by he tolkplh bi y
A is a
Sak Sales

Time

It can be used to diagnose a portfolio of products (or businesses) in orderto

the stage at which each of them exists. Particular attention is to be Daid taby
businesses that are in the declining stage. Depending on the diagnosis, apprn
strategic choice could be made. For instance,
Expansion may be a feasible alternative for businesses in the introducton
growth stages.
Mature businesses may be used as sources of cash for investment in oth
businesses which need resources. te
A combination of strategies like selective harvesting, retrenchment, etc. may
adopted for declining businesses.
M

Boston Consulting Group MATRIX (BCG)

It
is the simplest way to portray a corporation's portfolio of investments. Using the Btg
approach, a company classifies its different businesses on a two-dimensional growth
share matrix.
The vertical axis represents market growth rate and provides a measure of market
attractiveness.
The horizontal axis represents relative market share and serves as a measure of
company strength in the market

Stars Question Marks

High
0? ?

Cash Cows Dogs

R&D

Low

High Low
Relative Market Share
 atrix, organisatio can identi four different types of
Usingt h em a t

r o d u c t so rS 8 U ,
follows:

products
orSBUs that are growing rapidly.
orSBUst
are
stars
They also need heavy investme to maintain their

sition
p o s i t
and inance their rapid growth potential.

They
represent bestopportuniti for expansion,

Cows
are low-grow high market share
Cash
businesses o r products.

and hhave
cash and low costs.
generate
They
established, successful, & need less
are
They
nvestment
to naintain their market share.
growth rate slows
In long run when thecash cows.
down,stars become

sometim called problem children or

Ouestion
Question

wildcats,
Marks,
2
low market share
business in high-growth markets.
Thev are

theirshare.
They reguirealot ofcash to hold
heavy investments
with low potential to generate
Thev need
cash.
becoming.cashtraps,
Question marks ifleftunattended are capable of
easier. It is for
is high, increasing it should be relatively
Since growth rate the growth
to turn them stars and then to cash cows when
business organisations
rate reduces.

low-share businesses & products.

Dogs are low-growth,
They generate enough cash to maintain
may
themselves,but do not have much future.
Sometimes they may need cash to survive.
Dogs should be minimised by means of divestment or
liquidation.
What to do after classification as above is thru...?
The four strategies that can be pursued are:
short-term
even by forgoing
DUd: objective is to increase market share.
Here the
market share.
earings in favour of building a strong future with large
Hold: Here theobjectiveistopreserve marketshare.
short-term cash flow regardless of long-
Here the objective is to increase
term effect.
4 business because resources can
ha ere the
De better
objective is to sell or liquidate the
used elsewhere
 Limitations to the above method

1.
BCG matrix can be difficult, time-consuming, and costlyto implement.
2. Management may find it difficult to define SBUs and measure market ch.
et sharea
growth.
3. It also focuses on classifying current businesses but provide little advice for
planning.
efor fut
4. They can lead the company to placing too much emphasis on market-share ,
or growth through entry into attractive new markets. grone
This unwise into hot, new,
5. can
cause expansion
established units too quickly.
risky ventures or
giving
ng up
e

SIJ. Ansoff's Product Market Growth Matrix

The Ansoff's product market growth matrix (proposed by Igor Ansoff) is a
useh
portfolio-planning tool for identifying company growth opportunities.
Purpose
It helps businesses decide their product and market growth strategy.
With the use
this matrix a business can get a fair idea about how its growth
depends upon market:
it
innew orexisting productsinboth new and existing
markets.
Existing Products New products
Existing Markets Market Penetrations
du Product Development

New Markets Market Development Diversification

P 8 1 eka Sc(0«dsd sans Mend)
Market Penetration: Market penetration refers to a growth strategy where the business
focuses on selling existing products into existing
more sales to present customers without
markets. Tt is achieved by making
changing products in any major way.
How Achieved

Penetration might require greater spending on advertising or personal selling

Overcoming competition in a mature market requires an aggresiwe
promotionalcampaign supported by a pricing strategy designed to make the
market unattractive
fod competitors.
Penetration is also done by effort on
increasing usage by existing customers.
Market Development: Market development refers to a
business seeks to sell its 'existing
growth strategy where t
products into new markets It is a strategy
company growth by identifying and developing new markets for current compd
products.
 HowAchieved

achieved through new geographical markets, new product

strategy maybe.
nsoOf packaging, newdistributionchannels ordifferent pricing policies
This

dimensions
create new market segments.
different customers or
t oa t t r a c tdiffer

Product deve
development is refers to a growth strategy where
Development:

P r o d u c t
introduce
new products into existing markets, It is a strategy for
to
business aims to
modified or new products to current markets.
company
growtha byoffering
H o wa c h i e v e d

development of new competencies and requires the

require the
strategy may
his modified products which can appealto existing markets.
ess to develop
busin
where a business markets new
Diversification refers to growth strategy
D i v e r s i fiic
cae tion: Diversificatic
a
ian:
outside
markets. It iis a
It strategy by starting up or acquiring businesses
product
the
in n e w
companyscurrent products and
markets. CCaoss nkeoopk 4
H o wa c h i e v e d

into markets in which it has little or no

he business is moving
Typically, because it does not rely on either the company's
narience. This strategy is risky
expen
established markets.
successful
productorits positioni
ADL matrix
method that isbased on product life
D. Little jtis a portfolio analysis
Given by Arthur
ycle.
dimensional matrix based on
forms a two
The approach
i.e. position in industry's life cycle
fembryonic,
+stage of industry
maturity
growth, matureJageing)Jand
helps in
that
position, i.e. measure of business strengths
the firms competitive
into one of five competitive positions
categorization of products
or SBU'$
weak)
(dominant, strong, favorable,tenable,
cases is
This is a
position and in many
comparatively rare
Dominant:
technological
or a strong and protected
attributable either to a monopoly SamImg
aImasmonopolist)ppte
leadership. Clad malT,
considerable degree of
the firm has a
Strong: By virtue of this position, without its market
freedom over its choice of strategies and is often able to act
its competitions.
position being unduly threatened by
comes about when theindustryis
Favourable: This position, which generally
results in the market
stand out clearly,
ragmented and no one competitor
leaders a reasonable degree of freedom.
 Although the firms
within this category are ahie
to e
Tenable:
staying in the industry,
try, they
they.
satisfactorily and can justify are
kd the face of increased competition
from stronger geng
and
vulnerable in
in the market.
and
proactive companies
in this category is generally unsas
Weak: The performance of firms
for improvement do exist.
unsatish
although the opportunity
It is 5x4 matrix

Ck Competitive Stage of industry marutity

Growth Mature
Position Embryonic
Defend Position
Ageing
Dominant Fast Grow Fast Grow
Attend Cost
Defend Pae
Attend Cost Renew
Leadership Leadership Focus
Defend
Position
Differentiate Differentiate Lower Cost Fined Niche
Strong Focus
Lower Cost Hold Niche
DFkn
|h- Focus Focus Harvest
Favourablee Focus
Defend Fined Niche
Fast Grow
Hold Niche
Turnaround
etaux
Ham 46i|

Tenable Focus Hold Niche Turnaround Divest

T- 7he Rah
Nepirya)
Wea Find Niche Turnaround Divest Withdraw

n The General Electric Model

The General Electric Model (developed by GE with the assistance of the consulting in
Mckinsey &Company) is similar to the BCG growth-share matrix. However, there a
differences.
Difference between BCG matrix &GE Model
Firstly, market attractiveness replaces market growth as dimension
the of
inou
attractiveness, and includes a broader range of factors other than just the
growth rate.
ma
Secondly, competitive strength replaces market share as the dimension t
competitive position of each SBU is by Wn
assessed.
 Process: ect to all criteria.
15
r

ated w
a t e d
wit
Baseddl
Finally,
Based on these ratings, each
overall rating for
SBU
each.
SBU.
BU is both factors
calculatedfor
Each
a(Culsted
respect
to labelled high, mediumareor
as

market attractiveness and

with

ow

business position.

Usefulness
has to make
mak decisions about how to use its
limited
organization

planning models can help resources most

Fvery
That's yhere this determining which SBU should be
effectively. That's
Eve
hich one maintained in their present
which
market
stimulate
for
growth,
position and which
o n ee l i m i n a t e d .

Business Position
High Medium Low
Invest Invest Protect
High

Medium Invest Protect Harvest

Protect Harvest Divest

Low

Evaluating market Effectiveness

Business Position:
Criteria for
Size
Size
Growth
Growth
Customer satisfaction levels
Share by segment
Competition: quality. types,
Customer loyalty Effectiveness, commitment

Margins Price levels

Distribution
Profitability
Technology skills
Technology
Patents Government regulations
Marketing economic trends
Sensitivity to
Flexibility
Organization