Paper 301 Strategic Management

Paper: 301
Strategic Management
Unit – I Introduction to Strategic Management. (08)
1.1. Evolution of Business Policy, it's Nature, Objectives and Significance
1.2. Introduction to Strategic Management- Concept, & Benefits of Strategic Management.
1.3. Concept, Features and Process of Strategic Planning
1.4. Strategic Planning Vs. Strategic Management
1.5. Formulation of -Vision, Mission, Goals & Objectives,
1.6. Levels of Strategic Management,
Unit – 2 Strategy Formulation (10)

2.1. Environmental & Organizational Appraisal
2.1.1. SWOT and PESTLE Analysis
2.1.2. Environmental Scanning-Competitive intelligence
2.1.3. Organisational appraisal – Organisational Capability factors, Value chain analysis
2.2. Corporate & Business Level Strategies
2.2.1. Types- Expansion, Stability, Retrenchment and combination, Integration & Diversification Strategies
2.2.2. Porter’s Generic Business Strategies
Unit- 3 Strategic Analysis and Choice (06)

3.1. Strategic Analysis- Product Portfolio - BCG Matrix and GE Nine Matrix Cell, Competitor Analysis
3.2. Industry Analysis- Porter five forces analysis
3.3. Selecting the best Strategy, Process of Strategic Choice
Unit-4 Strategy Implementation (08)

4.1. Procedural Implementation & Resource Allocation
4.2. Behavioural Implementation-Strategic Leadership.
4.3. Issues in Strategy Implementation - Interrelationship of Structure and Strategy, Functional, Divisional,
SBU’s & Matrix Structures.
4.4. Functional Implementation.
4.5 McKinsey 7 S Framework
Unit-5 Strategy Evaluation and Control (06)

5.1. Strategic Evaluation- Nature, Importance and Barriers
5.2. Strategic Control and Operational Controls.
5.3. Techniques of Strategic Evaluation and Control
Unit-6. Case Studies: (10)

Cases based on the topics covered in the curriculum on various strategic situations and based on
application of strategic management must be discussed & solved.
Unit – I Introduction to Strategic Management
1.2. Introduction to Strategic Management- Concept, & Benefits of Strategic Management.
1.5. Formulation of -Vision, Mission, Goals & Objectives,
1.6. Levels of Strategic Management

Business policy is a set of management decisions to sustain and improve the firm’s competitive
advantage. It is based on a system of internal and external values. The area within which decisions
can be taken by the subordinates in an organization is called policies. It allows the lower-level
management to make decisions regarding the organizational issues and disputes without
approaching the top-level management.
➢ Definitions of Business Policy

• According to Koontz and O’Donnell, “Policies delimit an area within which a decision is to be
made and assure that decision will be consistent with and contribution to objectives.”
• According to Miller, “A policy is a statement or a commonly accepted understanding of
decision-making, criteria or formulae, prepared or evolved to achieve economy in operations
by making decisions relatively routine on frequently occurring problems and consequently,
facilitating the delegation of such decisions to lower managerial levels”.
• Business policies are long-term plans, also termed strategic management and long-range
planning. These are man-made policies or predefined sets of actions. It is framed to direct
and assess the work performance of an organization towards the organizational objectives.
➢ Nature of Business Policy

The nature of the business policy is as follows:
1. Future-oriented Decision-making
The business policy generally entails formulating decisions about existing business prospects.
2. Implicit Guide
A business policy acts as an implicit guide that outlines the general limits and directs the actions of
managers for the firm.
3. Top Management Activity
These decisions are taken by the top-level authorities after analyzing the strengths and weaknesses
of the firm in terms of the product price, quality, leadership position, resources, etc., which are
associated with its environment.
4. Defines Business Objectives
A business policy states the main purpose, the organizational character, the description of what is to
be achieved, and the utilization of resources for business objectives.
5. Proper Allocation of Scarce Resources
It focuses extensively on allocating scarce resources. Theoretically, strategy is allocating resources,
while planning sets the distribution boundaries.
6. Represents the Best Thinking
The business policy denotes the best outlook of the firm to achieve its business objectives in the
present social and economic situation.
7. Analyses the Nature and Procedure of Choice
A business policy studies the nature and procedure of choice concerning the prospects of
independent firms. This study is carried out by the person responsible for making and executing
decisions.
8. Longevity
Usually, all business policies are long-term. These are developed after a comprehensive assessment
of several internal and external factors that influence the firm’s market position.
➢ Strategic Business Objectives

1. Improved Operational Efficiency
Efficiency in operations is one of the vital measures of a company's strength. In order to achieve
higher profits, companies continuously aim to improve the efficiency and productivity of their
operations. This could include streamlining tasks, improving technology or cutting back on
production waste. Cutting back on unnecessary paperwork, for example, allows companies to save
money on supplies, as well as gives employees a chance to use that wasted time more efficiently in
other areas.
Improving operational efficiency comes down to one thing: improving a company's bottom line. If
costs can be cut without sacrificing business productivity, that is a win-win for businesses.
2. New Means of Making Money
For a company to sustain competitiveness, it needs to introduce new products, services and
business models every so often. Business models are the processes in which businesses make
money from their products or services, and remaining stagnant is a sure-fire way for a company to
become irrelevant. Even the most successful companies have had to divert away from their initial
bread and butter and introduce new products, services and business models to remain relevant and
competitive in an ever-changing business landscape.
3. Customer and Supplier Relationships
When a company truly knows its customers well, that allows them to serve those customers better.
They know what their customers want, when they want it and how they want it. In return,
customers tend to become loyal and increase spending over time, which, of course, increases a
company's revenues and profits.
The same applies when it comes to relationships with suppliers. The more interactions between a
company and a supplier — particularly with improved communication — the more likely it is that
services can be tailored for a particular company and costs can be lowered.
4. Improving the Decision-Making
Before the prevalence of easily accessed and readily available data, most company leadership had
to make decisions based on best guesses and forecasts by analysts. Now, with the availability of
real-time data, company management is much more equipped to set company strategic objectives
based on accurate, real-time information. Data-driven decision-making is much more effective for
improving business functions.
5. Keeping a Competitive Advantage
Whether it is a company's ability to perform a service more efficiently, charge less for a product or
provide better customer service, they must maintain a competitive advantage to remain viable in
the marketplace. Sectors are continuously being disrupted by newer, more innovative companies,
and to survive, companies must provide something to their customer that they cannot receive from
their competitors. Doing so almost inevitably increases a company's revenues and profits.
6. Survival of the Fittest
The business landscape is steadily changing, and with an increase in innovation and available
information, it is showing no signs of slowing down or becoming stagnant. To survive, companies
must adjust with the times. These changes can happen on an industry level, like with the
introduction of ATMs in the banking industry, or they can be byproducts of government regulations,
such as the banning of television advertisements for tobacco companies.
➢ Importance of a Business Policy:

Policies are the key for success of the business. Policies offer great advantages to the management
if they are stated with clarity. It raises the confidence of the line managers. They make the decisions
within a given boundary. The managers act without the need for consulting the senior managers
every time which minimizes the need for close supervision. It also builds the confidence of the
managers. The importance of business policies is discussed as follows:
1. Control:
Policy facilitates effective control on the working of the organization. It indirectly controls the
managers at different levels without directly interfering in their routine working.
2. Effective Communication:
Generally, policies are written and well drafted statements. Hence there is not a remote chance of
confusion or miscommunication. By setting policies the management ensures that decisions made
will be consistent and in the best interest of the organization. Clearly laid down policies try to
eliminate personal hunch and biasness.
3. Clarity:
Policies clarify the viewpoint of the management for the purpose of running a particular activity /
activity.
4. Motivation:
Policy enables the line managers to be self-reliant. They take the decision on their own in the
confined border of the policy. This raises their confidence and motivates them. A well drafted policy
provides a pattern within which delegation of authority is possible.
5. Policy Review:
Regular review of policy is must to see to it that the existing policies are relevant in the given
situation. If required policy may be modified or altered depending on the business environment.
Review of policy at regular intervals provides a method of anticipating future conditions and
situations and helps to resolve how to deal with them.
6. Economical and Efficient:
Policy enables the management to carry out its operations effectively and efficiently. It enhances
the working of the organization.
7. Coordination of Efforts:
Policies ensure coordination of efforts and activities at different levels in the organization. Activities
and duties are assigned in such a way that all activities in the organization are integrated effectively.
Policy coordinates with individual efforts.
8. High Morale:
A well-crafted policy can raise the overall morale of an enterprise. Policy enables the managers to
understand the intention of the management.
1.2. Introduction to Strategic Management- Concept, & Benefits of Strategic

Management.
Strategic Management is all about identification and description of the strategies that managers can
carry so as to achieve better performance and a competitive advantage for their organization. An
organization is said to have competitive advantage if its profitability is higher than the average
profitability for all companies in its industry.
Strategic management can also be defined as a bundle of decisions and acts which a manager
undertakes and which decides the result of the firm’s performance. The manager must have a
thorough knowledge and analysis of the general and competitive organizational environment so as
to take right decisions.
➢ Concept
Strategic management is a continuous process that evaluates and controls the business and the
industries in which an organization is involved; evaluates its competitors and sets goals and
strategies to meet all existing and potential competitors; and then reevaluates strategies on a
regular basis to determine how it has been implemented and whether it was successful or does it
need replacement
➢ Benefits of strategic management
Achieving organizational goals takes planning
and patience. Strategic management can help
companies reach their goals. Strategic
management ensures the steps necessary to
reach a business goal are implemented
company-wide.
Strategic management offers many benefits
to companies that use it, including:
• Competitive advantage: Strategic
management gives businesses an
advantage over competitors because its proactive nature means your company will always
be aware of the changing market.
• Achieving goals: Strategic management helps keep goals achievable by using a clear and
dynamic process for formulating steps and implementation.
• Sustainable growth: Strategic management has been shown to lead to more efficient
organizational performance, which leads to manageable growth.
• Cohesive organization: Strategic management necessitates communication and goal
implementation company-wide. An organization that is working in unison towards a goal is
more likely to achieve that goal.
• Increased managerial awareness: Strategic management means looking toward the
company's future. If managers do this consistently, they will be more aware of industry
trends and challenges. By implementing strategic planning and thinking, they will be better
prepared to face future challenges.

What is Strategic Planning?
Strategic planning is the art of creating specific business strategies, implementing them, and
evaluating the results of executing the plan, in regard to a company’s overall long-term goals or
desires. It is a concept that focuses on integrating various departments (such
as accounting and finance, marketing, and human resources) within a company to accomplish its
strategic goals. The term strategic planning is essentially synonymous with strategic management.
Process of Strategic Planning

The 5 Steps of Strategic Planning Process
There are mainly 5 steps during the strategic planning in general:
Step 1: Clarify Your Strategic Position
This phase of preparation sets the stage for all the work to progress. It would help if you decided
where to go, and how to get there.
Considering both internal and external sources, get the right stakeholders involved right from the
start. Identify main competitive issues by talking to the company's managers, collecting input from
clients, and gathering business and consumer data to get a better view of the market and customer
role.
Use a SWOT-diagram as a framework for your initial assessment. The diagram below is built in
EdrawMax, illustrates the SWOT analysis of Apple Inc.
Step 2: Prioritize Your Objectives
After the current market position has been established, objectives that will help meet expectations.
Specific objectives will be in accordance with the mission and direction of the organization.
Objectives ought to be distinguishable and quantifiable to help achieve the strategic long-term goals
and initiatives identified in step one.
SMART - Specific, Measurable, Actionable, Relevant, and Timeliness. SMART goals are useful in
setting a timeline and identifying the capital and resources should be achieved, and also key
performance indicators (KPIs) for measuring the success. So that everyone in the organization could
incline to work harder for making goals true.
Step 3: Formulate A Strategy
This phase involves identifying the strategies required to accomplish the goals and mapping out a
schedule and effective communication of responsibilities.
Strategy mapping is an excellent tool for making to visualize the entire plan. Furthermore, operating
from the top-down structural maps makes it possible to see market operations and to find progress
opportunities. Since the market and economic conditions are dynamic, the creation of alternative
solutions to address each phase of the strategy is crucial at this point.
Step 4: Implement and Manage the Strategy
Effective implementation of the strategy is key to the growth of the business enterprise. This phase
is the action stage for the strategic management process. In case the cumulative strategy does not
work with the existing operations of the business, a new structure and strategy should be installed
at the beginning of this phase.
By mapping the processes, the broader strategy can be transformed into a concrete plan. Use the
KPI dashboards to communicate the team responsibilities effectively.
Step 5: Monitor and Evaluate Strategy
The strategic plans and priorities will be checked and revised once a year to incorporate with new
business adjustments, and ensure targets are based on the organization's constantly-changing
environment.
Strategy assessment and control actions include performance measurements, consistent review of
internal and external issues and, where necessary, corrective actions. Any successful strategic
evaluation starts with the definition of the parameters to be measured.
In the hyper-competitive environment, it is difficult for business houses to survive, grow and expand
in the long-run if they do not have strategic planning. A strategic planning is an activity, which
determines the objectives and considers both internal and external environment to design,
implement, analyze and adjust the strategies, to gain competitive advantage.
Strategic Planning is not exactly same as strategic management, which implies a stream of decisions
and actions taken by the top-level managers to achieve organizational goals. It is nothing but the
identification and application of strategies, to improve their performance level and attain
dominance in the industry.
BASIS FOR
STRATEGIC PLANNING STRATEGIC MANAGEMENT
COMPARISON
Meaning Strategic Planning is a future Strategic Management implies a

oriented activity which tends to bundle of decisions or moves taken in
determine the organizational relation to the formulation and
strategy and used to set execution of strategies to achieve
priorities. organizational goals.
Stresses on It stresses on making optimal It stresses on producing strategic

strategic decisions. results, new markets, new products,
new technologies etc.
Management Strategic planning is a Strategic management is a

management by plans. management by results.
Process Analytical process Action-oriented process
Function Identifying actions to be taken. Identifying actions to be taken, the

individuals who will perform the
actions, the right time to perform the
action, the way to perform the action.
Key Differences Between Strategic Planning and Strategic Management

The following points are substantial so far as the difference between strategic planning and
strategic management is concerned:
1. A future-oriented activity which tends to ascertain the organizational strategy and used to
set priorities, is called strategic planning. On the contrary, strategic management is a series
of decisions or moves taken by the top managers in relation to the formulation and
execution of strategies to achieve organizational goals.
2. While strategic planning focuses on making optimal strategic decisions, strategic
management is all about producing strategic results, new markets, new products, new
technologies etc.
3. Strategic planning activity uses management by plans, whereas strategic management
process uses management by results.
4. The strategic planning is an analytical activity because it is related to the thinking. On the
contrary, strategic management is an action-oriented activity.
5. Strategic planning involves the identification of actions to be taken. Conversely, Strategic
management involves identification actions to be taken, the individuals who will perform the
actions, the right time to perform the action, the way to perform those action.
1.5. Formulation of -Vision, Mission, Goals & Objectives

➢ Vision
A vision statement, in contrast, is a future-oriented declaration of the organization’s purpose and
aspirations. In many ways, you can say that the mission statement lays out the organization’s
“purpose for being,” and the vision statement then says, “based on that purpose, this is what we
want to become.” The strategy should flow directly from the vision, since the strategy is intended to
achieve the vision and thus satisfy the organization’s mission.
➢ Mission
A mission statement communicates the organization’s reason for being, and how it aims to serve its
key stakeholders. Customers, employees, and investors are the stakeholders most often
emphasized, but other stakeholders like government or communities (i.e., in the form of social or
environmental impact) can also be discussed. Mission statements are often longer than vision
statements. Sometimes mission statements also include a summation of the firm’s
values. Values are the beliefs of an individual or group, and in this case the organization, in which
they are emotionally invested.
Roles Played by Mission and Vision
Mission and vision statements play three critical roles: (1) communicate the purpose of the
organization to stakeholders, (2) inform strategy development, and (3) develop the measurable
goals and objectives by which to gauge the
success of the organization’s strategy.
These interdependent, cascading roles,
and the relationships among them, are
summarized in the figure.
Figure 4.5 Key Roles of Mission and Vision
First, mission and vision provide a vehicle
for communicating an organization’s
purpose and values to all key
stakeholders. Stakeholders are those key parties who have some influence over the organization or
stake in its future.
Second, mission and vision create a target for strategy development. That is, one criterion of a good
strategy is how well it helps the firm achieve its mission and vision.
Third, mission and vision provide a high-level guide, and the strategy provides a specific guide, to
the goals and objectives showing success or failure of the strategy and satisfaction of the larger set
of objectives stated in the mission.
➢ Strategy Formulation
Definition: Strategy Formulation is an analytical process of selection of the best suitable course of
action to meet the organizational objectives and vision. It is one of the steps of the strategic
management process. The strategic plan allows an organization to examine its resources, provides a
financial plan and establishes the most appropriate action plan for increasing profits.
It is examined through SWOT analysis. SWOT is an acronym for strength, weakness, opportunity and
threat. The strategic plan should be informed to all the employees so that they know the company’s
objectives, mission and vision. It provides direction and focus to the employees.
Steps of Strategy Formulation
The steps of strategy formulation include the following:
1. Establishing Organizational Objectives: This involves establishing long-term goals of
an organization. Strategic decisions can be taken once the organizational objectives are
determined.
2. Analysis of Organizational Environment: This involves SWOT
analysis, meaning identifying the company’s strengths and
weaknesses and keeping vigilance over competitors’ actions to
understand opportunities and threats.
Strengths and weaknesses are internal factors which the company has
control over. Opportunities and threats, on the other hand, are external
factors over which the company has no control. A successful
organization builds on its strengths, overcomes its weakness, identifies
new opportunities and protects against external threats.
3. Forming quantitative goals: Defining targets so as to meet the
company’s short-term and long-term objectives. Example, 30%
increase in revenue this year of a company.
4. Objectives in context with divisional plans: This involves setting
up targets for every department so that they work in coherence
with the organization as a whole.
5. Performance Analysis: This is done to estimate the degree of variation between the actual
and the standard performance of an organization.
6. Selection of Strategy: This is the final step of strategy formulation. It involves evaluation of
the alternatives and selection of the best strategy amongst them to be the strategy of the
organization.
Strategy formulation process is an integral part of strategic management, as it helps in framing
effective strategies for the organization, to survive and grow in the dynamic business environment.
➢ Levels of strategy formulation

There are three levels of strategy formulation used in an organization:
• Corporate level strategy: This level outlines what you want to achieve: growth, stability,
acquisition or retrenchment. It focuses on
what business you are going to enter the
market.
• Business level strategy: This level answers
the question of how you are going to
compete. It plays a role in those
organization which have smaller units of
business and each is considered as the
strategic business unit (SBU).
• Functional level strategy: This level concentrates on how an organization is going to grow. It
defines daily actions including allocation of resources to deliver corporate and business level
strategies.
Hence, all organizations have competitors, and it is the strategy that enables one business to
become more successful and established than the other.
1.6. Levels of Strategic Management

What is the Three Levels of Strategy?
Three levels of strategy are the different levels of
strategic management that run across the organization
from the highest corporate level to the bottom
functional level. The three levels of strategy include the
corporate-level strategy, business-level strategy, and
functional-level strategy.
The difference between the three levels of strategy is
who to implement the strategy. Since they are
affecting in the different levels;
• Corporate level strategy involves top-level management
• Business level strategy involves the ability to compete of each business unit
• Functional level strategy involves every single function in every business unit.
➢ Corporate Level Strategy

Corporate level strategy is the highest level of all three levels of strategy. The corporate level
strategies are used to define and guideline the direction for the company in the big picture. To put it
simply, the corporate strategy is the main theme of all strategies within an organization.
There are three main themes of the corporate level strategy includes growth strategy, stability
strategy, and retrenchment strategy.
• Growth strategy is a strategy that focused on expanding the business to increase the
revenue in various ways: find new customers, selling existing products to the new market,
merger, acquisition, and diversification. The growth strategies are simply found in the Ansoff
Product-market matrix
• Stability strategy is a strategy that focused on stable the business (as its name) to improve
the current business without investment or divestment.
• Retrenchment strategy is a strategy that focused on stable the company's financial position
by stop unprofitable operations to cut the company's expenses
➢ Business Level Strategy

Business level strategy is how the company competes with others in the market with its products or
services. For the business level strategy, the company needs to determine what is the competitive
advantage for each business unit.
There are 4 types of competitive advantages for the business level strategy following the Porter's
generic model: cost leadership, differentiation, cost focus, and focus differentiation.
• Cost leadership is a strategy that the company produce products in huge amounts or with
low-cost labor to compete.
• Differentiation is a strategy that seeks advantage from the different by developing brands
that stand out from the competitor.
• Cost focus is similar to the cost leadership strategy but focused on the niche market instead
of the mass market.
• Focus differentiation is similar to differentiation strategy but focused on the niche market
instead of the mass market
➢ Functional Level Strategy
The functional level strategy is a strategy that is implemented by each function in a business to
support the business-level strategy. Functional level strategies typically are developed by functional
area executives. A business's functional are include accounting, finance, production, marketing,
procurement, service, research and development (R&D), human resources, and logistics.
To put it simply, the functional level strategy is a strategy that uses in each department of a single
business unit.
Unit – 2 Strategy Formulation
2.1.3. Organizational appraisal – Organizational Capability factors, Value chain analysis
2.2.1. Types- Expansion, Stability, Retrenchment and combination, Integration & Diversification
Strategies

➢ Environmental Appraisal
There are numerous factors that affect the organization and its operations. These factors can
influence the organization in both positive as well as negative ways. Identifying the issues and
challenges. existing in the external environment is extremely important for an organization. In order
to identify the factors in external environment, an appraisal process of the industry's environment is
necessary. Environmental appraisal facilitates the managers with the ability to study the
competitive structure and competitive position of the organization along with the position of its
competitors.
By analyzing and appraising the external environment, the existing opportunities and threats can be
identified. It is the responsibility of the managers to avoid the threats and to reap the benefits from
the opportunities in the market. Environmental appraisal also helps the managers in analyzing the
effects of globalization on the level of competition within a particular industry.
It is well-known that business environment never remains
stable rather keeps on changing rapidly. As the businesses
grows and expands, the changes in external environment
compels the organizations to make efficient strategies to
deal with the contingency situations. Environmental
appraisal also allows an organization to study the steps
taken by competitors in the market. By appraising the
external environment, the companies can improve their
internal capabilities and strengths for adapting to the
changes in the external. environment.
➢ Definition of Environmental Appraisal

According to Abell :
"Environmental appraisal is the identification, measurement, and assessment of environmental
impacts".
Levels/Components of Environmental Appraisal
By analyzing the external environment of a business, the marketers are able to identify and highlight
the opportunities from the threats and strengths from the weaknesses. The factors which are not
dependent on organization and their existence is not based on the activities of the organization are
called as external factors. While strengths and weaknesses are internal. opportunities and threats
are external and are not in control of the organization. Opportunities are those situations that the
organizations can use to their advantage. While threats are those negative situations that if not
tackled promptly can harm the well-being of the organization.
➢ Analyzing the external environment requires analyzing following areas:

1) Environmental Scanning :
In environmental scanning the broad environmental factors are analyzed and studied. These factors
are not a part of the organization’s internal environment and hence are uncontrollable in nature.
These factors influence the businesses in a significant manner. These factors are a part of the macro
environment or the general environment. The common macro environmental factors are economic,
political, legal, technological, social, etc.
2) Industry Analysis :
Industry analysis is a tool which is used to assess the degree of competition and complexity within a
particular industry. With the help of industry analysis, the marketer’s study and scrutinize the macro
environmental factors that influence a particular industry. Industrial analysis helps the strategic
leaders formulate various strategies to neutralize the threats and reap the benefits from the
opportunities. Various environmental forces to be studied in the industry analysis are the bargaining
power of buyers and suppliers, position of business and competitors. and threats of new entrants as
well as the substitutes within the industry.
3) Competitive Analysis :
While appraising the external environment, it is very important to analyses the strengths and
weaknesses of the existing and probable competitors. It helps the organization to formulate the
strategies required to survive and succeed in the highly competitive environment. It also outlines
the strategies adopted by the competitors. The influence of competition is directly proportional to
the degree of concentration in the industry, i.e., if the concentration of the industry is high, the
influence of competition is high, and vice versa. Competitive analysis helps the organizations in
identifying threat sand opportunities by providing defensive and offensive strategic moves.
➢ Process of Environmental Appraisal

The process of environmental appraisal includes the following steps:
1) Understand Nature of Environment :
Before starting the environmental appraisal, the strategists must understand the nature, i.e., the
volatility of external environment. The volatility here implies to the changes in the environment. To
understand the nature of environment, the strategic leaders need to answer following questions:
• Is the environment stable or dynamic?
• In which ways does the environment change?
• Are the changes identifiable?
Answering these questions would help in deciding the future course of actions.
2) Analyze the Past Influences of Environmental Factors :
Once, the nature of external environment is identified, the next step is to identify the factors that
have influenced the performance of organization in the past. Analyzing these factors will help in
planning and formulating strategies to handle future scenarios.
3) Identify Critical Competitive Forces :
The next step is to identify the key competitive forces existing within the industry with the help of
structural analysis. This step helps to analyses the organization’s current position, the bargaining
power of buyers and suppliers, the new entrants in the industry, and the existing competitors of the
organization.
4) Analyze the Strategic Position :
In this step, the managers analyse the strategic position of the organization in relation to its
competitors in terms of resources, customers, etc. To identify and analyses the strategic position of
an organization, following ways should be adopted:
• Growth/Share analysis
• Attractiveness analysis
• Strategic group analysis
• Study of market segments and market power
• Competitor analysis
5) Identify the Opportunities and Threats :

Identify the opportunities and threats prevailing in the environment. Formulate efficient strategies
to reap the benefits from the opportunities so that the threats can be neutralized. The selection of
strategy and effective utilization of selected resources in an effective manner is crucial for this
stage.
➢ Techniques of Environmental Appraisal

While analyzing the environment, the strategists
should remember to select those techniques only
that match the needs of organization from every
aspect. There are many techniques for analyzing the
environment, among which some of the important
environmental appraisal techniques are as follows:
➢ QUEST Analysis
The QUEST or "Quick Environmental Scanning
Technique" is a technique that facilitates estimation
of wide-ranging environmental factors and assesses their influences on the organization. It tries to
scrutinize the environmental forces on the basis of events and trends occurring in the market. Some
of the assumptions made for analyzing the environment using this technique are:
• The strategic executives have views about the dynamic environmental forces.
• These views about the environment collectively signify the understanding of the
environment by the organization.
Hence, it can be said that having knowledge about the environmental forces can be useful only
when there is a mechanism to interpret and analyses them. In the absence of a specific technique, it
is possible that all the future expectations and plans go wasted, as these cannot be shared with the
executives. QUEST analysis allows the executives to understand and analyses the different
perceptions, interpretations and points of mistakes regarding the environment.
This technique helps the executives in voicing their perceptions and analyzing the points at which
their individual views differ from each other. Once the points at which the executives disagree are
identified, it is possible for the management to negotiate with them so that a consensus can be
achieved. The information generated by different views would lead to better decision-making for
the achievement of organizational goals. This also allows the organizations to make combined
decisions rather than independent and individual ones.
According to Nanus, "QUEST is a future research process designed to permit executives and
planners in an organization to share their views about trends and events in future external
environments that have critical implications for the organization’s strategies and polices. It is a
systematic, intensive, and relatively inexpensive way to develop a shared understanding of high
priority issues and to focus management's attention quickly on strategic areas for which more
detailed planning and analysis would be beneficial".
Various tools can be used to perform QUEST, such as questionnaires, stakeholder analysis, Delphi
technique, structural analysis, etc.
➢ Process of QUEST
1) Preparation for QUEST :
The first step of QUEST analysis is to make preliminary preparations. These preliminary tasks are as
follows :
• Define the environmental issues
• Select the members for the analysis (12 to 15)
• Document the complete information about the past trends of environment relevant for the
organisation
• Decide the location to carry-out the analysis
2) Analyze the Environment :

As soon as the preparations have been completed, the environment in which the organizational
activities are performed is analyzed. This step Marts with identifying the vision, mission, and
objectives of the organization. Following the discussions about organizational goals, the past trends
and environmental patterns that may influence the operations of the organization, are discussed. It
should be noted that the cross impact of these forces is also analyzed to estimate the capability and
strength of the organization Strategic leaders should devote considerable time to analyses the
environment.
3) Document the Discussions in a Report :
Once, the business environment is analyzed, all the outcomes are combined and presented in form
of a brief report. This report has two sections, where the first part illustrates about the
organization’s strategic content, the second part elaborates about the future possibilities to he
faced by the organization.
4) Discuss the Report :
At last, the strategic leaders should discuss the documented report in a meeting, and analyses the
alternative courses of actions available to the organization. These alternative courses of actions
should also be evaluated according to the desired future position of the organization keeping in
mind the resources and strengths of the organization. QUEST does not suggest the strategies to be
made; it highlights the issues and challenges to be considered while formulating the strategy.
➢ ETOP Analysis
Environmental Threats and Opportunities Profile (ETOP) is a technique used to structure the issues
of environment. This technique was given by W.F. Glueck. The ETOP categorizes different
environmental issues in various sectors which in turn helps the management to focus their attention
towards specific areas. It helps in identifying the potential factors that influence the organization.
Diagnosing the external environment closely is very essential as it points out the opportunities and
threats. While some of the factors create suitable circumstances, other factors impose threats.
ETOP facilitates an in-depth analysis of environmental factors that allows the organizations to
identify the potential opportunities and threats. This results in more efficient strategic planning. An
opportunity can be defined as a favorable situation that provides prospects for a business to grow,
expand and make profits as well. For example, an untapped market, an unaddressed potential need
of customers, new technology, etc. Constraints are those factors that limit the ability to grow and
reduce sales and profit potential. A threat can be defined as an unfavorable situation that restraints
the growth and profits of an organization.
For example, new entrants, availability of substitutes at low cost, etc.
ETOP Preparation
To prepare ETOP of an organization, the strategists need to classify the environmental factors in
specified categories, after which the impacts of those factors can be analyzed. This categorization
simplifies the overall analysis process.
1] PEST Analysis
Traditionally, the framework was referred to as a PEST analysis, which was an acronym
for Political, Economic, Social, and Technological; in more recent history, the framework was
extended to include Environmental and Legal factors as well.
"PEST" or “PESTEL” analysis is one of the techniques of environment appraisal which provides a
deep insight about the macro-environmental factors that affect the operations of a business. The
level of importance given to these factors varies as per the industry in which a company works and
the goods/services it deals in.
Some strategists have increased the scope of this technique by adding two more factors into it, i.e.,
environmental and legal factors. Hence, the extended version of this technique is known as
"PESTEL". This technique has another variant known as "LONGPESTEL" or "Local, National, Global,
Political, Economic, Social and Technological" analysis. This technique is used when the
organizations are categorized as per the geographical basis. When these macro environmental
factors are integrated with the external micro-environmental factors, then the analysis carried-out
is SWOT analysis.
Factors Analyzed in PEST Analysis

Various factors that are analyzed in PEST analysis are as follows :
1) Political Factors :
Political factors are the laws, orders, and interventions made by the government in order to
regulate the businesses. These regulations influence the operations of business in a significant way.
• Corporate taxation
• Other fiscal policy initiatives
• Free trade disputes
• Antitrust and other anti-competition issues
Political Factor Example: A multinational company closes several facilities in a higher tax jurisdiction
in order to relocate operations somewhere with lower tax rates and/or greater state funding and
grant opportunities.
2) Economic Factors :
Economic factors are the current and past patterns that exist in the country. These factors
encompass the rate of economic growth, inflation, exchange rates, average income, etc., which
heavily influence the money circulation and hence regulate the business activities.
• Interest rates
• Employment rates
• Inflation
• Exchange rates
Economic Factor Example: Based on where we are in the economic cycle and what Treasury yields
are doing, an equity research analyst may adjust the discount rate in their model assumptions; it
can have a material impact on the valuations of the companies they cover.
3) Social Factors :
Social factors include all those factors that are related to the general public. These factors are
closely knitted with the consumption by public, which influences the gross demand of products and
services. These factors, involve the rate of population growth. literacy rate, employment, public
safety, etc.
• Demographic considerations
• Lifestyle trends
• Consumer beliefs
• Attitudes around working conditions
Social Factor Example: Post-pandemic, management at a technology firm has had to seriously
reevaluate hiring, onboarding, and training practices after an overwhelming number of employees
indicated a preference for a hybrid, work-from-home (WFH) model.
4) Technological Factors :
Technological factors. are one of the prime factors that affect the business operations in the
dynamic business. environment. These factors involve arrival of new technology in market,
automation of business processes, research and development. projects, etc.
• Automation
• How research and development (R&D) may impact both costs and competitive advantage
• Technology infrastructure (like 5G, IoT, etc.)
• Cyber security
Technological Factor Example: A management team must weigh the practical and the financial
implications of transitioning from on-site physical servers to a cloud-based data storage solution.
5) Environmental Factor :
Environmental factors emerged as a sensible addition to the original PEST framework as the
business community began to recognize that changes to our physical environment can present
material risks and opportunities for organizations. Examples of environmental considerations are:
• Carbon footprint
• Climate change impacts, including physical and transition risks
• Increased incidences of extreme weather events
• Stewardship of natural resources (like fresh water)
Environmental Factor Example: Management at a publicly traded firm must reevaluate internal
record keeping and reporting tools in order to track greenhouse gas emissions after the stock
exchange announced mandatory climate and ESG disclosure for all listed companies.
6) Legal Factors :
Legal factors are those that emerge from changes to the regulatory environment, which may affect
the broader economy, certain industries, or even individual businesses within a specific sector.
• Industry regulation
• Licenses and permits required to operate
• Employment and consumer protection laws
• Protection of IP (Intellectual Property)
Example Legal Factors: A rating agency is assessing the creditworthiness of a technology firm that
has considerable growth prospects in emerging markets. The analyst must weigh this growth
trajectory against the inherent risk of IP theft in some jurisdictions where legal infrastructure is
weak. IP theft can severely undermine a firm’s competitive advantage.
2] SWOT Analysis
Another well-known technique for analyzing the internal and external environment of business is
"SWOT" or "Strengths, Weaknesses, Opportunities and Threat" analysis. It is a simple tool that is
helpful in studying the internal strength and weaknesses, and the external threats and opportunities
of a company. SWOT analysis involves identifying the business objectives and defining the
significant internal and external factors for achieving the identified objectives.
The main aim of conducting a SWOT analysis is to help the business in protecting itself against the
threats and to exploit the potential business opportunities. This analysis is essential for formulating
strategies as is provides a base for strategy formulation. SWOT analysis helps in studying the overall
soundness of the business.
➢ Components of SWOT Analysis
1) Internal Factors :
The first two letters in the acronym S (strength) and W (weaknesses) refers to internal factors that
are the resources available in the organization. These factors may impart strengths which can be
utilized to exploit the opportunities or become a cause of weaknesses of a strategic nature for the
organization.
i) Strengths :
These are the factors that provide competitive advantage to the organization. These factors
collectively may allow an organization to bring change in an organization. These factors can be
different for different organizations. These can be resources, skills, etc. For example,
• Presence in global market & collaboration with reputed international firms,
• Tie-ups with internationally reputed manufacturers and exporters,
• Experience in tooling selectivity and metal cutting,
• Manufacturers certified with ISO 9001 certification.
ii) Weaknesses :
Weaknesses are the factors: that limit the growth of company or restrict the company from moving
in a desired direction. These factors also hinder the organization from achieving success through the
internal capabilities. These factors vary as per the organization. A weakness can be anything such as
lack of resource, lack of market understanding, lack of fund, etc. For example,
• Inconsistencies in cash flow system,
• Lack of research facilities and use of outdated research data,
• Lack of latest technologies and no web presence,
• New firm and hence lack of goodwill.
2) External Factors :
External factors reside outside the organization. These are of two types :
i) Opportunities :
An opportunity is a major favorably situation in the firm's environment. The industry should build its
production capacity to meet the upward moving demand, both for domestic and international
markets. Opportunities are those factors which act as the favorable situations for the organization.
These situations encourage the organization to grow more and earn more profits. For example,
• Loyal customers in market,
• High demand of certain products in a particular season,
• Poor substitutes available in the market,
• Obsolete technologies of the competitors.
ii) Threat :
Threats are the external unfavorable conditions. They act as barrier for the organisation in achieving
its desired market position. These factors also differ as per the organization and the areas in which
it operates. For example,
• Too many competitors of the similar product,
• Introduction of taxes or increase in tax rates,
• Recession in economy,
• Latest technology used by competitors.

What are the basics of environmental scanning as part of the strategic planning process?
Environmental scanning is a process that systematically surveys and interprets relevant data to
identify external opportunities and threats that could influence future decisions. It is closely related
to a SWOT analysis and should be used as part of the strategic planning process.
Components of external scanning that could be considered include:
• Trends: What trends are occurring in the marketplace or industry that could affect the
organization either positively or negatively?
• Competition: What is your competition doing that provides them an advantage? Where can
you exploit your competition's weaknesses?
• Technology: What developments in technology may impact your business in the future? Are
there new technologies that can make your organization more efficient?
• Customers: How is your customer base changing? What is impacting your ability to provide
top-notch customer service?
• Economy: What is happening in the economy that could affect future business?
• Labor supply: What is the labor market like in the geographies where you operate? How can
you ensure ready access to high-demand workers?
• Political/legislative arena: What impact will election outcomes have on your business? Is
there impending legislation that will affect your operations?
Each organization must identify what external factors are most impactful to make the
environmental scan a useful tool.
The next step is to conduct an internal scan of the organization. Review the company's vision,
mission and strategic plan. Examine the organization's strengths and weaknesses. Consider where
the company is now and where it plans to be in five or 10 years. Interview or survey leaders of the
company.
Once an organization has gathered information about the external world, its competitors and itself,
it should then develop strategies to respond to impacts when the need arises.
When conducting an environmental scan, a variety of methods should be used to collect data,
including reviewing publications, conducting focus groups, interviewing leaders inside and outside
the organization, and administering surveys.
Environmental scanning is an important component of strategic planning as it provides information
on factors that will affect the organization in the future. The information gathered will allow
leadership to proactively respond to external impacts.
2.1.3. Organizational appraisal – Organizational Capability factors, Value chain analysis

Introduction
The internal environment of the organization is determined by the interplay of organization’s
resources, behavior, strengths and weaknesses, synergistic effects and the competencies.
Organizational appraisal is concerned with the internal environment of an organization. It enables a
firm to decide what it can do by analyzing the organizational resources and behavior, strengths and
weaknesses, synergistic effects and the competencies.
Organizational appraisal
Organizational appraisal is the systematic evaluation of the internal environment of a firm in order
to determine the strength and weaknesses that influences a firm’s ability to achieve its goals.
Organizational strengths enable a firm to decide the area which it should undertake. For example,
firm’s having their strengths in marketing area should go for marketing activities rather than going
for production and manufacturing. By analyzing the weaknesses, an organization can take various
actions to overcome it. Analyzing the strength and weaknesses and matching them with the
environmental opportunities and threats is very necessary for strategic formulation of a firm.
Generally, the strengths and weakness of an organization are measured in terms of its environment
otherwise it is very difficult to state which factor is strength or which weakness for a firm is. The
process of organizational appraisal is described through a sequence of activities which are as
follows:
1) Key factors identification
The various factors that can be evaluated to determine the strengths and weakness of the
organization are identified in the first step of organizational appraisal. The selection of key factors
may relate to marketing, finance, accounting, manufacturing, research and development,
organization structure and management pattern etc. The key factors should cover all aspects of the
organization.
2) Identification of importance of factors
The importance of key factors may not be equal, some factors are more important and some are
less important. The nature of the organization and its environment determines the relative
importance of the factors. The contributions of each factor in the achievement of certain key results
also determine their relative importance. Also, by relating the key Factors with the critical success
factors of the firm, the relative importance of the factors can be determined. Here the importance
of the key factors is identified and are compared with the requirements of the critical success
factors.
3) Assessing strengths and weaknesses on key factors
The strategic key factors help to assess the organizational strengths and weaknesses in respect of
these factors. The contributions made by the factors in achieving the organizational objectives
define the organizational strength on that factor. The negative contributions made by the factor in
achieving the organizational objectives define the organizational weakness on that factor. The
organizational strengths and weakness can also be assessing by making the comparative analysis of
key strategic factors with those of the competitors. Also, there are some techniques like financial
analysis, key factor rating, functional area profile and resource development matrix etc. that helps
in the assessment of organizational strengths and weakness.
4) Preparing the organizational capability profile
The organizational capability profile is prepared on the basis of organizational strengths and
weakness. This profile shows the strong areas of the organization in terms of degree. If quantitative
measurement is used for strength and weakness then positive number cab be used for strength and
negative number can be used for weakness.
5) Relating organizational capability to strategy
Here many strategic actions are taken to increase the organizational strengths and reduce the
organization weakness. The result of these strategies is long run that fits the organization into its
environment taking into account the strategic strengths.
➢ Value chain analysis as a technique of organizational appraisal

The concept of value chain analysis was developed by Porter in 1985. Based on the understanding of
the series of activities that a firm performs, this method helps to assess the strengths and
weaknesses of an organization. A value chain is a set of interlinked value creating activities
performed by an organization. The competitive advantage of a firm can be determined with the
linkages and relationships between the various activities that a firm performs. The various activities
of a firm may begin with the procurement of basic raw materials, that processes into various stages
and end with the product marketed to the ultimate consumer. Primary and support activities are
the two main parts into which the porter divides the value chain of a manufacturing concern.
Primary activities are further divided into five sub- activities and are directly related to the flow of
the product to the customers. These are:
1) Inbound logistics
These activities are concerned with the receiving, storing, transporting, and distributing inputs to
the production process. These activities include materials handling, stock control, transport,
warehousing etc.
2) Operations
These activities are concerned with the transformation of raw materials into final product or
service. For example, this would include machining, packaging, assembly, fabricating, maintaining
and testing etc.
3) Outbound logistics
These activities are concerned with the receiving, storing, transporting and distributing the outputs
out of the production process. For tangible products these activities could be warehousing, material
handling, and transport. In case of services, it may be more concerned with arrangements for
bringing customers to the service if it is a fixed location.
4) Marketing and sales
These activities are concerned with all the methods that an organization uses to market and sell its
products to the customers. For example, typical marketing and sales activities that an organization
uses are of pricing, developing products, advertising, promoting and distributing.
5) Services
These are concerned with all the activities that an organization uses to enhance/maintain the value
of its product or service. For example, service activities of an organization can be installation, repair,
spares, customers training etc.

Definition of Corporate Strategy
Corporate Strategy can be explained as the management plan formulated by the highest level of
organization echelon, to direct and operate the entire business organization. It alludes to the
master plan that leads the firm towards the success. So, the more the aptness in the degree of the
corporate level strategy, the higher will be the chances of firm’s success in the market.
Corporate Strategy is the essence of strategic planning process. It determines the growth objective
of the company, i.e., direction, timing, extent and pace of the firm’s growth. It highlights the pattern
of business moves and goals concerning strategic interest, in different business units, product lines,
customer groups, etc. It defines how the firm will remain sustainable in the long run.
Definition of Business Strategy
By the term business strategy, we mean the plan of action, crafted to reach a particular goal or set
of goals of the organization. It is formulated in reference to the corporate strategy of the concern,
which reflects the plans of the entire business. It helps in informing and attracting the investors,
about the new venture, to convince them to invest in the business. Moreover, it is used as a tool to
assure creditors about the credibility of the enterprise.
Business Strategy highlights the market opportunities that the business wants to explore, steps for
performing it and the resources required to put it into practice. It is formulated by the middle-level
management, which focuses on what’s more important for the company to achieve the desired end.
Comparison Chart
BASIS FOR
BUSINESS STRATEGY CORPORATE STRATEGY
COMPARISON
Meaning Business Strategy is the strategy Corporate Strategy is stated in

framed by the business managers the mission statement, which
to strengthen the overall explains the business type and
performance of the enterprise. ultimate goal of the firm.
Created by Middle level management Top level management
Nature Executive and Governing Decisive and Legislative
Relates to Selection of plan to fulfill the Business selection in which the

objectives of organization. company should compete.
Deals with Particular business unit or division Entire business organization
Term Short term strategy Long term strategy
Focus Competing successfully in the Maximizing profitability and

marketplace. business growth.
Approach Introverted Extroverted
Major strategies Cost Leadership, Focus and Expansion, Stability and

Differentiation Retrenchment.
➢ Key Differences Between Business Strategy and Corporate Strategy

The fundamental differences between corporate and business strategy are explained in the points
hereunder:
1. Business Strategy can be viewed as the strategy designed by the business managers to
improvise the overall performance of the firm. On the other hand, Corporate Strategy is the
one expressed in the mission statement of the company, which describes the business type
and ultimate goal of the organization.
2. Business Strategy is framed by middle-level management which comprises of division, unit or
departmental managers. Conversely, corporate strategy is formulated by top level
managers, i.e., board of directors, CEO, and managing director.
3. The nature of business strategy is executive and governing, whereas the corporate strategy
is deterministic and legislative.
4. While the business strategy is a short-term strategy, corporate strategy is a long term one.
5. The business strategies aim at selecting the business plan to fulfil the objectives of the
organization. As against, the corporate strategy focuses on the business selection in which
the company wants to compete in the marketplace.
6. Business strategy is concerned with a particular unit or division. Unlike corporate strategy
which focuses on the entire organization, comprising of various business units or divisions.
7. The business strategy focuses on competing successfully in the market place with other
firms. On the contrary, corporate strategy stresses on increasing profitability and business
growth.
8. Business Strategy has an introverted approach, i.e., it is concerned with the internal working
of the organization. In contrast, Corporate Strategy uses extroverted approach, which links
the business with its environment.
9. At the business level, strategies which are employed by the organization includes, Cost
Leadership, Focus and Differentiation. On the other hand, at the corporate level, the
strategies used are Expansion, Stability and Retrenchment.
2.2.1. Types- Expansion, Stability, Retrenchment and combination, Integration &

Diversification Strategies
Types of Corporate Level Strategy
Michael Porter has defined four corporate level strategies:
1. Stability Strategy
2. Growth Strategy
3. Retrenchment Strategy
4. Combination Strategy
#1. Stability Strategy
Here, policymakers adopt an incremental progressive approach to be on the safe side. This helps
them keep the business model safe and generates more revenue. Well-performing organizations
use this strategy. This strategy does not require any drastic changes.
An example of this strategy can be slight product updates, price tweaking, new marketing
strategies, etc.
#2. Growth Strategy
This strategy is also known as an expansion strategy.
A growth strategy is useful when an organization is planning on expansion, entering a new market,
or launching a new product portfolio. This strategy can bring the organization more revenue and
increase brand recognition.
Diversification, strategic alliance, acquisition, mergers, etc., are a few examples of this strategy.
This strategy is aggressive and can affect the organization financially if not planned well.
#3. Retrenchment Strategy
Organizations use retrenchment strategies to wrap up business from a certain market, sell the loss-
making business unit, or liquidate assets. They use retrenchment strategies as a last resort when no
other options are available.
Organizations can use retrenchment strategies because of loss-making units, shifting focus to other
business models, unavoidable financial losses, etc.
An organization needs to do a SWOT (Strength, Weakness, Opportunity, and Threats) analysis
before adopting a retrenchment strategy.
#4. Combination Strategy
Here, organizations can use any combination of the three strategies discussed to plan their business
model.
Big organizations use different strategies to achieve their goals. Hybrid strategies allow them to take
advantage of individual strategies, providing flexibility in decision-making and achieving
organizational objectives.
Characteristics of Corporate Level Strategy
• Long Term: Corporate strategies are formulated for the long term.
• Uncertain: Being long term and broad by nature, corporate strategy is uncertain.
• Dynamic: Corporate strategies are dynamic and adapted to market conditions.
• Far-Reaching: Corporate strategies are broad, far-reaching, and affect the whole
organization.
• Decided at the Top Level: Corporate level strategies are created at the top level of the
organization.
Benefits of Corporate Level Strategy
The benefits of corporate level strategy are as follows:
• It allows organizations to scale their business
• It allows businesses to be proactive
• It provides businesses with a strategic direction
• It lets businesses adapt to market conditions
• It improves the decision-making process
• It increases efficiency
• It increases profitability
• It makes businesses durable and reliable
Integration & Diversification Strategies

1] What is an integration strategy?
Integration strategies are processes that businesses can use to enhance their competitiveness,
efficiency or market share by expanding their influence into new areas. These areas can include
supply, distribution or competition. Each area requires a different integration strategy, and there
are several types that businesses can use.
Types of integrations strategies
The two main types of integration strategies are vertical and horizontal. Companies can pursue each
strategy in multiple ways. Here's more information about each type and how businesses use them:
1. Vertical integration
Vertical integration occurs when a company gains control over the production or distribution
processes of its product. This allows the company to expand its power in the market by lowering its
costs and increasing the reach of its product. A company can pursue this strategy in three primary
ways:
• Backward integration: Backward integration occurs when a business gains control over its
product's supply chain by integrating with its suppliers or by producing intermediate goods
for itself.
• Forward integration: A company pursues forward integration when it gains control over the
distribution of its finished product.
• Balanced integration: A company may want to gain the advantages of both backward and
forward strategies. If it does, it can pursue balanced integration.
➢ Advantages and disadvantages of vertical integration

Learning more about the pros and cons of vertical integration can help you better navigate the
process. Here are some advantages and disadvantages to consider:
Advantages
Some advantages of vertical integration are:
• Lowers costs and uncertainty in supply: Backward integration allows a company to have
increased control of supplies and materials. This can lower costs and help the company
maintain enough raw material to match its production.
• Decreases competition: A company might pursue backward integration if it has many
competitors and supply is limited, possibly lowering competition for intermediate goods.
• Increases efficiency: If a firm's current suppliers cannot meet its needs, it can use backward
integration to build supply chains that may increase its efficiency.
• Protects against future disruption: If a company operates in a rapidly growing industry in
which the demands on suppliers may increase, backward integration can provide security
from the risk of future disruptions.
• Lowers costs and risks in distribution: Forward integration can help eliminate distribution
costs and ensure that the company can meet customer demand.
• Decreases obstacles to distribution: Sometimes, a company's distributors may not be fully
invested in selling the firm's product, or they might give preference to competitors. In this
case, forward integration can allow the company to take control over its customer-facing
operations and pursue its own best interest.
• Increases market share: If a company takes control over its own distribution, the decrease in
costs may allow it to lower the prices it charges the customer. This can give the firm an
advantage over its competitors and increase its market presence.
➢ Disadvantages
Some disadvantages of vertical integration include:
• Strains resources: A company can lose its ability to perform its original tasks by diverting
resources into new channels. The business can prevent this by keeping resources focused on
its original business model.
• Introduces new challenges: The firm may be unable to effectively manage new systems that
are different from its original strengths. New personnel with appropriate skills can prevent
this.
• Can affect existing product: The quality of the intermediate goods, raw materials or finished
products may fall because of a lack of competition. Companies can take steps, including
increased customer engagement, to ensure that they maintain a high level of quality in their
product.
• May increase risk: The risks undertaken by a firm may be greater since it will be involved in
more investments.
• Can decrease flexibility: It can be a big advantage for a business to take charge of its
sourcing and distribution. However, this investment may make the company less flexible if
less expensive sourcing or distribution becomes available.
2. Horizontal integration
Horizontal integration is another competitive strategy that businesses use to increase their power in
the market. Unlike vertical integration, horizontal integration involves gaining control over other
businesses that provide similar products or services. This helps the business increase in size or
expand into a new area or market.
Advantages and disadvantages of horizontal integration
Some of the advantages and disadvantages of horizontal integration include:
➢ Advantages
Advantages of horizontal integration include:
• Increases market share: Acquisition of other businesses may allow a company to command
a larger market for its products. This could be more attractive to distributors, giving the firm
more access to customers.
• Improves supply chain security: Through consolidation with its competitors, a company can
become a more important customer for its suppliers, gaining greater control and security in
its supply chains.
• Increases efficiency: The merged companies may be able to produce more at a lower cost
than they would separately.
• Increases competitiveness: A horizontally integrated company may be able to provide more
varied products than its competitors. It may also be able to use its greater resources to
respond more effectively to customer demand.
• Opens new markets: Horizontal integration can allow a company to access new markets for
its product by buying companies that already serve those markets.
➢ Disadvantages
The disadvantages of horizontal integration are:
• Could introduce new competencies: A company may find it difficult to manage its new
responsibilities. Careful management of resources can ensure its ability to perform key tasks
and keep the loyalty of customers, distributors and suppliers.
• May decrease flexibility: A company may become less flexible and less able to adapt to
changing conditions. To prevent this, companies can ensure that their systems remain open
to modification if more efficient ones are available.
• May not reward risk: Sometimes, the companies that merge may not perform as well
together as they expected. It may be helpful for companies to do extensive research before
integration to determine whether they could operate efficiently together.
• Might introduce data and personnel challenges: Horizontal integration can be a challenge if
data systems and personnel from different companies don't integrate properly. Companies
attempting horizontal integration can analyze data and personnel systems in order to find
the best ways to merge them, or they may introduce the same systems across both
companies.
2] What is Diversification Strategy?
A diversification strategy is a method of expansion or growth followed by businesses. It involves
launching a new product or product line, usually in a new market. It helps businesses to identify new
opportunities, boost profits, increase sales revenue and expand market share. The strategy also
gives them leverage over their competitors.
A diversification strategy is a corporate strategy to increase growth by changing or expanding
products a company manufactures or offers for sale. Companies might pursue a diversification
strategy to get an edge on competitors, a process known as offensive diversification, or a business
might embark on a defensive diversification after facing significant pressure to change.
Diversification is one of four corporate growth strategies first codified by Igor Ansoff, a
mathematician and business manager active in the 1950s. Ansoff is known for developing the Ansoff
Matrix, which charted out the four major growth strategies: market penetration, market
development, product development, and diversification.
➢ 4 Methods of Diversification
There are four principal categories of diversification strategies, each with potential advantages,
risks, and degrees of applicability. The four types of diversification include:
1. Horizontal diversification: In horizontal diversification, a company adds new products to its
operation. These products or services are entirely new but will bear some relation to the
original product, offering an expanded set of options to the customer. For example, a
gaming company getting into the virtual reality business is a horizontal diversification.
2. Vertical diversification: In vertical diversification, also known as vertical integration, a
company expands to include different portions of the manufacturing process under one
corporate structure, usually by moving up or down the supply chain. A car manufacturer
expanding into the aluminum industry to provide raw materials for its current product line is
an example of vertical diversification.
3. Concentric diversification: Concentric diversification occurs when a company develops a
new, improved product related to its existing product. For example, a company
manufacturing wired headphones might expand to offer wireless headphones—the new
product uses the latest technology and offers something new to the customer.
4. Conglomerate diversification: When a company diversifies by acquiring a different company
in an entirely unrelated field or new industry, it’s known as conglomerate diversification.
Disney is the world's largest media conglomerate. Under the direction of the former
CEO Bob Iger, the Walt Disney Company grew by acquiring other large media companies,
including Marvel, 20th Century Fox, Pixar, and Lucasfilm.
➢ 3 Benefits of a Diversification Strategy

There are several potential advantages to implementing a diversification strategy. Some of the most
important benefits are as follows:
1. 1. Flexibility: Companies can become more flexible by pursuing a diversification strategy.
With more products to offer—and increased competencies—the risk of shortfalls in any
single area is offset by potential rewards in other markets.
2. 2. Growth: Diversification can increase market share and profit margins. Whether a small
company takes the next step into a bigger market or a major brand wants to appease
shareholders, diversification can be the right move.
3. 3. Survival: Business can be challenging, and sometimes, the future of an enterprise is on the
line. You can pivot your business and avoid collapse through a successful diversification
strategy.
➢ 3 Drawbacks of a Diversification Strategy

There is a fair degree of risk in embarking on a diversification strategy. Diversification is the most
complex type of growth strategy, and some of the pitfalls might include:
1. 1. Lack of expertise: Diversifying requires an expanded skill set, especially when a company
diversifies its business in a new industry. A company expanding into a new market must
know how to reach new customers. Companies need to find capable people with experience
through strategic partnerships to have a successful diversification strategy.
2. 2. Innovation challenges: Any attempt to create new products or develop new services has a
high chance of failure. It’s wise to play the long game and work on innovation over time,
which can be challenging for companies wanting to diversify quickly.
3. 3. Complexity: The bigger a corporation, the more internal complexity it will have,
particularly for conglomerates absorbing new businesses. Expansion can lead to
management issues, inefficiency, and inadequate resource allocation. A bigger organization
requires more delegation, oversight, and quality control.
➢ 6 Reasons for a Diversification Strategy

A company might implement a diversification strategy for several reasons, including to:
1. 1. Beat competition: A company might feel that the best way to gain a competitive
advantage is to diversify. By expanding the portfolio of products or services, companies can
offer something their competitors cannot.
2. 2. Seek profit: If successful, a diversification effort can significantly increase business growth
and, by extension, its bottom line. With the imperative to keep growing, sometimes the
biggest, most successful companies find that the next logical step is through a diversification
strategy.
3. 3. Avoid downturn: Diversification can be
a proactive way to avoid the fallout of an
economic downturn. By offering different
products and services, a company can
lessen the damage of a recession, and
even take advantage of other vulnerable
companies.
4. 4. Polish brand image: A diversification
strategy can be a way to boost the image
of a brand. Either by leveraging positive
associations with the newly acquired
brand, or a perceived change in direction, diversification presents an altered face to the
public.
5. 5. Navigate industry changes: Due to predictable or unpredictable shifts in circumstances,
diversification can help companies take advantage of new technologies, avert collapse, or
find increased opportunities for synergy, cost-cutting, and profit maximization.
6. 6. Optimize resources: Diversification can be a way to optimize the resources of a company,
whether putting excess cash flow to work, better use of existing infrastructure, or
improvement of corporate-level decision-making.

Michael Porter, a Harvard professor, developed the phrase “generic competitive strategies (GCS)” in
his business planning and strategizing book, “Competitive Advantage: Creating and Sustaining
Superior Performance.” Porter’s generic competitive strategy is a framework for planning the
strategic direction of your business that assists with gaining an advantage in the marketplace over
your competitors. He also claimed that a company must only choose one of the three strategies or
risk wasting precious resources.
What are Porter’s Generic Strategies?
The Generic Strategies can be used to determine the direction (strategy) of your organization.
Michael Porter uses 4 strategies that an organization can choose from. He believes that a company
must choose a clear course in order to be able to beat the competition.
The four strategies to choose from are:
1. Cost Leadership strategy
2. Differentiation
3. Cost Focus
4. Differentiation Focus
➢ How to apply Porter’s Generic Strategies?

According to Michael Porter there are four generic strategies:
1. Cost Leadership strategy
Choosing the cost leadership strategy, you target a broad market (large demand) and offer the
lowest possible price. There are 2 options within this cost leader’s strategy. You can opt to keep
costs as low as possible; or ensure that you have a larger market share with average prices.
In both cases, the point is to keep the company costs as low as possible. The consumer price is a
different story.
Organizations that apply this strategy successfully usually have substantial investment capital at
their disposal, efficient logistics and low costs when it comes to materials and labor.
The organization is generally focused on internal processes.
2. Differentiation
You target a broad market (high demand), but your product or service has unique features. With
this strategy, you make your product as exclusive as possible, making it more attractive than
comparable products offered by the competition.
Succeeding using this strategy requires good research & development, innovation and the ability to
deliver high quality. Effective marketing is important, so that the market understands the benefits
of your unique product.
It’s important to be flexible and to be able to adapt quickly in a changing market, or you risk the
competition beating you at it. Such an organization is focused on the outside world and has a
creative approach.
3. Cost Focus
You target a niche market (little competition, ‘focused market’) and offer the lowest possible price.
In this strategy, you choose to target a clear niche market and through understanding the dynamics
of these market segments and the wishes of the consumers, you can ensure that the costs remain
low (cost advantages).
An example of low-cost producers like this are the low-cost budget airlines that achieve market
share growth by choosing cost focused strategies like offering cheap, basic services at lower prices
than the big airlines that charge much higher prices.
4. Differentiation Focus
Choosing the differentiation focus strategy, you target a niche market (little competition, ‘focused
market’) and your product or service has unique features. This strategy often involves strong brand
loyalty among consumers.
During the focus on differentiation, it’s very important to ensure that your product remains unique,
in order to stay ahead of possible competition.
In order to choose the right strategy for your organization, it’s important be aware of the
competencies and strengths of your company.
➢ Porter’s Generic Strategies: choose the right strategy
You can follow these steps to choose the right strategy:
Step 1
Do a SWOT analysis for your business. This will clarify your strengths and weaknesses as well as
highlight opportunities and threats.
Step 2
Try to truly grasp the market of your industry. This can be done, for example, through the Five
Forces Analysis, a model also developed by Michael Porter, designed to determine profit potential.
The 5 forces that influence this are:
• the (power of) suppliers;
• the (power of) the customers;
• the availability of comparable products;
• the threat of new entrants;
• and internal competition.
Step 3
Compare your SWOT analysis with the outcomes of step 2. For each of Porter’s strategies, ask
yourself how you might use that strategy to influence the previously mentioned five forces. On that
basis, determine which strategy offers you the best starting point (and profit potential).
Critical comments
Porter stressed the idea that only one strategy should be applied by an organization in order to
prevent a “stuck in the middle” scenario. However, a model in which you opt for just one single
strategy certainly also raises criticism. For example, the model isn’t particularly flexible.
There are plenty of companies that opt for a more ‘hybrid’ strategy, i.e., making use of different
(components) of Porter’s 4 general strategies. In a rapidly changing market, this flexibility, the
ability to switch quickly and respond to the market and the demand, seems to be an important
element to running a successful and long-term business.
Unit- 3 Strategic Analysis and Choice
3.1. Strategic Analysis- Product Portfolio - BCG Matrix and GE Nine Matrix Cell, Competitor Analysis
3.2. Industry Analysis- Porter five forces analysis
3.1. Strategic Analysis- Product Portfolio - BCG Matrix and GE Nine Matrix Cell,
Competitor Analysis
1] Strategic Analysis?
Strategic analysis is the process of researching and analyzing an organization along with the
environment in which it operates to formulate a strategy. This process of strategy analysis usually
includes defining the internal and external environments, evaluating identified data, and utilising
analytical strategic analysis tools.
Strategic analysis is a process that involves researching an organization’s business environment
within which it operates. Strategic analysis is essential to formulate strategic planning for decision
making and smooth working of that organization. With the help of strategic planning, the objective
or goals that are set by the organization can be fulfilled.
In a constant strive to improve, organizations must periodically conduct a strategic analysis which
will, in turn, help them determine what areas need improvement and areas that are already doing
well. For an organization to function efficiently, it is important to think about how positive changes
need to be implemented.
Strategic analysis is essential if a company has a goal and a mission for themselves. All leading
organization who are well known for their achievements have years of strategic planning being
implemented at various stages. Strategic planning is a long-term task involving continuous and
systematic planning and resource investment.
The main question that a company should consider when performing a strategic analysis is: How is
the market constituted? How are the active clients in this sector? While conducting strategic
analysis, organizations must know their competitors and thus be able to define a strategy that will
help them an unbeatable player in that market. One of the most important functions of strategic
planning is to predict future events and deduce alternative strategies if a certain plan doesn’t work
out as expected.
➢ Types of Strategic Analysis

Internal strategic analysis: As the name suggests, through this analysis organizations look inwards
or within the organization and identify the positive and negative points, and establish the set of
resources that can be used to improve the company’s image within the market. Internal
analysis starts from evaluating the performance of the organization. This includes evaluating the
potential of an organization and its capacity to grow.
The analysis of the strengths of the company should be
oriented to the market, focusing on the client. The
strengths only make sense when they help the company
to fulfill client’s needs. When doing an internal strategic
analysis one should also know the weaknesses and
limitations that a company faces existentially or in the
future.
SWOT analysis is one of the most reputed techniques for
internal strategic analysis. There is no better way to benefit from a strategically performed analysis
than to use it to detect the strengths, opportunities, weaknesses, and threats that your project may
suffer.
Performing SWOT analysis will help you create a strong and long term vision through strategic
planning for your organization. The important thing is to constantly evaluate the environment in
which the company operates, and act accordingly. It is essential for an organization to take into
account the SWOT principle in order to be able to plan efficiently. Through a thorough SWOT
analysis companies will be able to prevent a number of problems that can arise if there is no
systematic analysis.
Let us further break down these attributes and understand how an organization can conduct a
complete strategic analysis to be able to plan and perform better with each passing year.
1. Strengths of a company: There are several attributes within the company that are positive,
that you can control in order to obtain better results, they are your strengths, which makes
you stand out from others. Surely there are certain resources or strategies that have led to
your organization’s process year on year. Knowing these resources or strategies are also
considered as strengths. Knowing this type of information is very important because these
are the elements that give you an advantage over your competition.
2. Business weakness: It is practically impossible for an organization or a company to have only
strengths and not have weaknesses. Therefore, there are certain characteristics of an
organization that they need to be improved in order to be able to perform better and
compete in the market. These are called business weaknesses. Most of the factors are
foreseeable and an organization needs to identify them well in advance and approach the
problems with a corrective measure.
3. Threats to an organization: There are going to negative factors that will affect the growth of
the organization and these factors can be analyzed too. These factors need to detected and
a risk management strategy needs to be put in place so that threats like stronger brand
value of the competitors, better relationship of competitors with retailers etc. don’t have an
adverse effect on the company’s growth. Also, threats like multiple players in the market
with the same products, downturn in economy, better advertising of the same product by
competitors are some threats that have to be dealt with carefully so that competitors don’t
take advantage of the situation.
4. Opportunities for the company: Detect the opportunities you have to grow. Knowing the
path organizations must follow is a great step towards success. Take advantage of all those
external factors that are positive for the organization. Identify all the opportunities and take
advantage of them.
➢ External strategic analysis:

Once the organization has successfully completed its internal analysis, the organization needs to
know about external factors that can be a hindrance in their growth. To do so, they need to know
how the market functions and how consumers react or behave to certain products or services.
Measuring customer satisfaction is a common external analysis method. PESTLE analysis is one of
the most widely used external analysis techniques. The process one is most likely to adopt when
using a PESTLE technique is relatively a simple one.
PESTLE analysis (Political, Economic, Social, Legal and Environmental) describes a framework of
macro-environmental factors used in the environmental scanning component of external strategic
analysis. The model has been extended by adding Ethics and Demographic factors. It is a part of the
external analysis when conducting a strategic analysis or doing market research and gives an
overview of the different macroenvironmental factors that the organization has to take into
consideration. By using PESTLE analysis one can:
1. Find out the key issues beyond the organization’s control, like changes in political scenario
changing rules that can be implemented at any point in time.
2. Identify the impact of each issue.
3. See how important these issues are to the organization.
4. Rate the likelihood of its occurrence.
5. Briefly consider the implications if the issue did occur.
2] Product Portfolio
What Is a Product Portfolio Strategy?
The term product portfolio strategy refers to a company's plan of action for aligning its products
with its goals.
While the word "product" often refers to a specific physical product, in the context of this article,
the term refers to features and service offerings as well as physical products. In other words,
anything your company sells to clients is a product.
To put this concept into practice, let’s look at the following example of a product portfolio strategy.
Let’s say a CRM company is looking to increase the number of nonprofit customers using its
product. The company has developed a new feature that manages fundraising and donations; this
feature will most certainly attract new nonprofit customers. However, the organization has also
created a new reporting feature that may benefit all of its customers. In order to determine which
feature to develop, the company can use a product portfolio strategy. This strategy will allow the
team to calculate risk-reward ratios, return on investment (ROI), and other key data that are
essential to making the right decisions.
➢ The Advantages of a Product Portfolio Strategy
Companies that apply a product portfolio strategy get closer to achieving their goals. A solid product
portfolio management strategy ensures that resources that go toward the development of each
product or feature are proportional to its priority. Additionally, the strategy determines which
products help further the company's overall goals. When products and business objectives align,
companies see a much higher success rate because they have a clearly defined plan that makes
business sense. With this alignment, products are more likely to result in increased revenue and
profitability opportunities.
In addition to ensuring alignment, the product portfolio strategy requires that the team takes a big-
picture view of how a new offering fits within both existing offerings and market needs. With this
strategy oversight, a company can minimize the risk of product failure by analyzing all elements
associated with the entire product portfolio.
➢ What Happens Without a Product Portfolio Strategy?

An organization's product portfolio strategy ensures that the company has the right mix of products.
Without a product portfolio strategy, the company may end up giving resources to products and
features based on who is "loudest" or has the most "clout," rather than on what supports the
company's short and long-term goals. When this happens, revenue often decreases because the
company is focusing on areas that may not help grow the company, and there's no time or money
left to spend on the products that would actually drive revenue.
➢ What Is the Role of Product Portfolio Strategy in an Organization?

Product strategy and product portfolio management are directly related, as the portfolio contains
information that helps drive strategy. For example, if revenue is low for a specific audience
segment, management starts with the portfolio to determine which products and features fit that
audience. They then use the product portfolio information to ensure they have the right mix of
products, not only to meet the needs of their audience, but also to meet the needs, resources, and
objectives of the company.
➢ How to Develop a Product Portfolio Strategy

Developing a product portfolio strategy is unique to each organization and involves understanding
business goals, analyzing and understanding the product portfolio, developing product roadmaps,
and measuring success.
Here are six fundamental tenets to help you build a product portfolio strategy:
1. Understand Your Strategic Business Goals: You cannot create an effective product portfolio
strategy without having a defined set of business goals that every member of the team fully
understands. By reviewing the business goals together and involving leadership when
needed, the team lays the foundation to build the product portfolio strategy. If any
objectives are unclear, incomplete, or outdated, the team must have the appropriate leaders
revisit and refine the goals before moving forward. Otherwise, the product portfolio strategy
is based on ambiguous information.
2. Develop a Set of Portfolio Evaluation Criteria: Using the strategic business goals, establish a
set of key performance indicators (KPIs) that you will measure all products against. “This is
the key. For example, if gaining market share in a new market is critical for your company,
then that market share should be one of your KPIs,” observes Snyder. “Which of your
products can do the most to gain that market share? Next, you need to establish weighting
criteria for each KPI, so that you know what really matters most – is revenue more important
than market share, or the other way around? Once you have three to six KPIs, and the
weighting factors for each add up to 100%, you’re ready for the next step.”
3. Develop a Product Portfolio Matrix: To ensure consistent decision-making and alignment,
the team should create a product portfolio matrix that applies the evaluation criteria to each
product. A matrix provides visibility into the performance of all products in your portfolio.
For more details on product portfolio matrices and templates, read “Achieve the Right
Balance of New and Established Products: The Product Portfolio Matrix.”
4. Perform a Product Portfolio Analysis: Use the matrix to understand each current product.
While it may be tempting to skip this step, doing so helps you determine exactly where you
are regarding goals and product alignment.
5. Develop a Roadmap for Each Product: The product roadmap defines the current and future
direction of each product and ensures all resources and features are moving toward the
same goals.
3] BCG Matrix
➢ What Is BCG Matrix?
BCG matrix (also called Growth-Share Matrix) is a
portfolio planning model used to analyse the products in
the business’s portfolio according to their growth and
relative market share.
The model is based on the observation that a company’s
business units can be classified into four categories:
• Cash Cows
• Stars
• Question Marks
• Dogs
It is based on the combination of market
growth and market share relative to the next
best competitor.
Stars
High Growth, High Market Share
Star units are leaders in the category. These
products have –
• A significant market share, hence they
bring the most cash to the business.
• A high growth potential that can be
used to increase further cash inflow.
With time, when the market matures, these stars become cash cows that hold huge market shares
in a low-growth market. Such cows are milked to fund other innovative products to develop new
stars.
Cash Cows
Low Growth, High Market Share
Cash cows are products with significant ROI but operating in a matured market which lacks
innovation and growth. These products generate more cash than it consumes.
Usually, these products finance other activities in progress (including stars and question marks).
Dogs
Low Growth, Low Market Share
Dogs hold a low market share and operate in a market with a low growth rate. Neither do they
generate cash, nor do they require huge cash. In general, they are not worth investing in because
they generate low or negative cash returns and may require large sums of money to support. Due to
low market share, these products face cost disadvantages.
Question Marks
High Growth, Low Market Share
Question marks have high growth potential but a low market share which makes their future
potential to be doubtful.
Since the growth rate is high here, with the right strategies and investments, they can become cash
cows and ultimately stars. But they have a low market share so wrong investments can downgrade
them to Dogs even after lots of investment.
A perfect example to demonstrate the BCG matrix could be the BCG matrix of Pepsico. The company
has perfected its product mix over the years according to what’s working and what’s not.
Here are the four quadrants of Pepsico’s growth-share matrix:
• Cash Cows – With a US market share of 58.8%, Frito Lay is the biggest cash cow for Pepsico.
• Stars – Even though Pepsi’s share in the market has been reduced to 8.4%, it’s still the star
for Pepsico because of its brand equity. Other stars are Aquafina (the biggest selling mineral
water brand in the USA), Tropicana, Gatorade, and Mountain Dew.
• Question Marks – Since it’s a mystery whether the diet food and soda industry will boom in
the future and will Pepsico’s products will find their place or not, Diet Pepsi, Pepsi Max,
Quaker, etc. fall in the question marks section of the Pepsico’s BCG matrix.
• Dogs – As of now, there isn’t any product line that falls in the dogs section of Pepsico’s BCG
matrix. However, seasonal and experimental products like Pepsi Real Sugar, and Mtn Merry
Mash-up can be inserted in this section.
How To Make A BCG matrix?
So far, we know products are classified into four types. Now we will see on what basis and how that
classification is done.
We shall understand the five processes of making a BCG matrix better by making one for L’Oréal in
the following sections.
Step 1: Choose the product
BCG matrix can be used to analyse Business Units, separate brands, products or a firm as a unit
itself. The choice of the unit impacts the whole analysis. Therefore, defining the unit is necessary.
Step 2: Define the market
An incorrectly defined market can lead to a poor classification of products. For example, if we would
analyse Daimler’s Mercedes-Benz car brand in the passenger vehicle market, it would end up as a
dog (it holds less than 20% relative market share), but it would be a cash cow in the luxury car
market. Therefore, defining the market accurately is an important prerequisite for better
understanding the portfolio position.
Step 3: Calculate the relative market share
Market share is the percentage of your company’s total market that is being catered to, measured
either in revenue terms or unit volume terms.
We use Relative Market Share in a BCG matrix, comparing our product sales with the leading rival’s
sales for the same product.
o Relative Market Share = Product’s sales this year/Leading rival’s sales this year
For example, if your competitor’s market share in the automobile industry was 25% and your firm’s
brand market share was 10% in the same year, your relative market share would be only 0.4.
Relative market share is given on the x-axis.
Step 4: Find out the market growth rate
The industry growth rate can be easily found through free online sources. It can also be calculated
by determining the average revenue growth of the leading firms. The market growth rate is
measured in percentage terms.
o Market growth rate is usually given by: (Product’s sales this year – Product’s sales last
year)/Product’s sales last year
Markets with high growth are ones where the total market share available is expanding, so there
are a lot of opportunities for all companies to make money.
Step 5: Draw the circles on a matrix
Having calculated the above measures, now you need to just plot the brands on the matrix. The x-
axis shows the relative market share, and the y-axis shows the industry growth rate. You can plot a
circle for each unit/brand/product, the size of which should ideally correspond to the proportion of
revenue generated by it.
4] GE 9 Cell Matrix: Strategic Analysis and Choice
GE Nine Cell Matrix is absolute expansion of BCG Matrix. It is more explanatory and elaborative. Like
the BCG, the GE matrix helps us to determine how to allocate resources with more flexibility.
GE Nice Cell Matrix was developed by Mckinsey and Company consultancy group in the 1970s. The
nine cell grid measures business unit strength against industry attractiveness and this is the key
difference. Whereas BCG is limited to products, here, business units, whole produce lines, a service
or even a brand can be products. We can plot these chosen units on the grid and this will help us to
determine which strategy to apply.
First of all, we need to understand the strategies.
Invest/Expand
Units that land in this section of the grid generally have high market share and promise high returns
in the future so should be invested in. Invest more as it provides exponential growth.
Select/Earn
Units that land in this section of the grid can be ambiguous and should only be invested in if there is
money left over after investing in the profitable units. Invest only to improve its strength.
Harvest/Divest
Poor performing units in an unattractive industry end up in this section of the grid. This should only
be invested in if they can make more money than is put into them. Otherwise they should be
liquidated. Cease the operation.
Name the Table
Before we can plot anything on the grid, first we need to decide how we will determine both
Industry Attractiveness and Business Unit Strength.
• Industry Attractiveness
o Porter 5 Forces
o Economic Factors
o Financial Norms
o Socio Political Consideration
• Business Unit Strength
o Cost Position
o Level of Differentiation
o Financial Strength
o Human Assets
o Response Time
o Public Approval
Industry Attractiveness
1. Porter 5 Forces
• Competitive rivalry
• Buyer power
• Supplier power
• Threat of new entrants
• Threat of substitution
2. Economic Factors
• How volatile is the sales? to the changes taking place in the external environment.
Some products are highly volatile while some are not. Eg. Rice vs Luxury goods.
Goods with high sales volatility is not regarded as attractive. Tourism industry is very
volatile as due to Corona Virus, the industry has came to near 0
• Cyclicity/Seasonality of sales : High cyclicity is not preferred. Eg. Green items in
Shrawan, Khasi Boka in Dasain, Gold/ornaments in Mangsir
• Market Growth : How our industry is growing compared to other? All of this factors
are relative to other industries.
• Capital Intensive: What is the level of capital required to operate business?
2. Financial Norms: It is the financial norms of the industry, not our firm.
• Average Profitability: Restaurant vs. Grossery Shop. What is the level of margin?
• Typical Leverage: Leverage means the proportion of debt in our capital structure.
Cost of debt is cheaper than equity due to tax shield benefit. So, increase in debt
reduces the cost of company. But, it increase the risk of bankruptcy.
• Credit Practices: Requirement of collateral, might depends on the riskiness of
business.
3. Socio Political Consideration
• Government Regulations: Government regulations compared to other industries. Eg.
Dance restaurant vs Colleges.
• Community Support: How supportive the community is? Eg. Dance restaurant vs
School, Liquor business or collages.
• Ethical Standards: Not mixing stones in rice. Expectancy of ethics on Dance bar vs
School. Sexual harassment in School vs Dance bars
Business Strength: Here it is our firm vs. other within the industry
3. Cost Position
• Economies of Scale: Breakeven Point of MoMo Mantra vs. Street Momo due to Fixed
cost. Breakeven Point for Boeing or Airbus is 300 Sales per year.
• Manufacturing Cost: Direct vs Indirect Costs
• Overheads/scraps/wastage/reworks
• Experience Effect/Learning Curve: Women counting bidi while packaging in Terai. As,
we move upward to the learning curve, the cost is reduced but it may also decrease
at a point due to seniority.
• Labor Price: Labor price can be different from Nawalparasi and Kathmandu
4. Level of Differentiation
• Promotional Effectiveness: Differentiation can not only be done on product but can
be done on Promotion. Ingredients of toothpaste is almost same and similar in
quality. But, Close up, pepsodent and colgate are presented as different due to
promotion differentiation. Close up – youths, Pepsodent – children.
• Product Quality : Bata Means Durability
• Company Image: Standard Chartered as a bank, Parker means high class best quality
Pen.
• Patented Products
• Brand Awareness: Bike means Honda, Photocopy means Xerox.
5. Financial Strengths
• All these ratios that we have done
• Liquidity/Solvency
• BEP
• Cash flows
• Profitability
• Growth in Revenues
• How are our ratios in-compared to the competitors?
6. Human Assets
• Turnover rate, relative wages, skill level, salary, managerial commitment, morale,
unionization.
7. Response Time
• How quickly we can adapt to the changes in environment?
• Can we remodel ourselves ?
• Manufacturing capability and flexibility
• Time need to introduce new product
• Delivery Time
• Organizational flexibility
o If required, do engineers can work as Sales Person?
8. Public Approval
• Goodwill, reputation and image of our company compared to others.
• How people generally view us ?
5] Competitor Analysis
What is a competitor analysis?
A competitor analysis, also called competitive analysis and competition analysis, is the process of
examining similar brands in your industry to gain insight into their offerings, branding, sales, and
marketing approaches. Knowing your competitors in business analysis is important if you’re a
business owner, marketer, start-up founder, or product developer. A competitor analysis offers
several benefits, including:
• Understanding industry standards so that you can meet and exceed them
• Discovering untapped niche market
• Differentiating products and services
• Fulfilling customers’ desires and solving their problems better than competitors
• Distinguishing your brand
• Standing out in your marketing
• Measuring your growth
➢ How to do competitor analysis

The sections below provide a competitor analysis framework for evaluating your industry’s
competitive landscape. Return to this framework regularly and apply insights to developing your
business.
1. Find out who your competitors are.
Start by reviewing any notes, plans, or other business development legwork you’ve completed and
ground yourself in your business values, goals, branding, products, and services. That way, you can
easily identify existing brands that target customers might choose over yours.
Next, gather information on the following:
• High-volume keywords (or search queries) that your target market uses to find information
related to your products and services
• URLs that appear at the top of search engine results pages (SERPs) for these keywords
• Social media accounts that come up in searches for relevant hashtags or keywords
Then, using the information you gathered, make a list of five to 10 brands whose offerings most
resemble yours and would present your target customers with comparable alternatives. Pull up
competitors’ websites, social media accounts, and other publicly available information, and have
this information handy for the steps that follow.
2. Describe competitors’ business structures.

For publicly traded companies, you may be able to review their annual reports and gain insight into
how much revenue they’re generating, their debt and liability, and other performance metrics.
By examining how competitors structure their businesses, you can gauge how equipped they are to
grow, gain market share, and earn customer loyalty in your target market. Review each
competitor’s website and social media profile to gather the following information:
• How large is the company, in terms of the number of leaders and employees?
• How many years has the company been in operation?
• What job openings do these companies list on Glassdoor, Indeed, or LinkedIn? What are
their areas of expansion?
3. Evaluate competitors’ value propositions.
A value proposition is a short statement that summarizes the benefits of a product and why a
customer would choose it over competing products. A value proposition often looks something like
the following: We help [target customer] do [outcome, benefit, experience] by doing / offering
[product or service].
In this section, you will find or deduce competitors’ value propositions in order to compose your
value proposition to stand out in the marketplace. Review competitors’ site copy, particularly on the
"About" or What We Do" pages, as well as taglines or slogans posted on a home page or social
media profile. Answer these questions for each competitor:
• What problems and pain points do competitors’ products solve?
• What desires do products fulfill?
• What benefits or outcomes are explicitly stated?
• What data do they cite to support their claims about products’ benefits?
• What pricing structure do competitors use, and how are customers responding?
4. Evaluate competitors’ marketing efforts.

In this section, you will evaluate how competitors position themselves in the marketplace. This will
allow you to create a marketing strategy that gets your brand in front of your target audience.
For each competitor, answer these questions:
• What social media influencers does this company partner with to leverage their authority,
authentic content, and personal connections to target customers?
• What affiliate marketing or brand ambassador programs does this company offer to leverage
the recommendations of satisfied customers?
• What kind of digital or traditional paid advertising presence does this company have?
• On what marketing channels do competitors publish organic content, including websites,
landing pages, social media platforms, and email?
• What type of content do you see, including articles, videos, ebooks, reports, commercials,
and digital ads?
5. Audit competitors’ brand identities.

In this section, you will get to know competitors’ brand identities to understand the customer
experiences they’ve created.
For each competitor, answers these questions:
• If this company were a person, how would you describe its personality?
• What words, phrases, tone, and style does this company use in its messaging?
• What values do competitors communicate through their messaging?
• How would you describe the visual elements of this company’s branding? And how do those
elements correspond to the brand’s values, voice, and personality?
• What emotions do the brand elements evoke in customers?
6. Follow each competitor’s customer journey.

In this section, you will study the customer journeys competitors have set up to nurture and convert
customers. Your goal is to gauge how seamless, integrated, and logical it is to go from the first
touchpoint to making a purchase and beyond.
Start by following your competitors on social media, subscribing to them via email, and purchasing
products and services to experience each customer journey for yourself.
As you experience the customer journey for each competitor, gather information on the following:
• What are the different touchpoints along this company’s customer journey?
• What elements make it easy to keep moving along the customer journey?
• What calls to action and instructions are there to make it clear how to proceed?
• What kinds of content educate and entertain you at each touchpoint?
• What elements create friction or make it difficult to advance to the next step?
• What do you experience after subscribing or making a purchase? Do you find customer
support, upsells, and access to a community?
7. Examine audience engagement.

In this step, you will scour competitors’ customer reviews, reactions, and comments on their social
media posts, social media mentions, media appearances, and even employee reviews on job sites to
understand the perception of competitors in the marketplace. With this information, you can
strategize how to garner a positive reputation for your brand, learn from competitors’ mistakes and
challenges, and work to avoid any pitfalls yourself.
For each competitor, explore the following:
• How do followers and subscribers interact with this company’s public content?
• What is the general public sentiment regarding this company, based on mentions, product
reviews, and social media likes and comments? Include praise as well as complaints.
• What experiences do employees have, based on reviews on job sites like Glassdoor and
Indeed?
Share of voice measures how much of the market your brand owns compared to competitors. By
determining the share of voice, you can gauge how visible, authoritative, and popular your brand is
in the marketplace.
8. Conduct a SWOT Analysis of your competition.

A SWOT analysis is a classic exercise for identifying the strengths, weaknesses, opportunities,
and threats that exist within the competitive landscape. In this section, you’ll conduct a SWOT
analysis of competitors to consolidate everything you’ve learned into a succinct story about your
competitive position.
• What strengths recur across competitors’ branding, marketing, customer journeys, and
products?
• What weaknesses recur across competitors’ branding, marketing, customer journeys, and
products?
• What opportunities do you see for your business to capitalize on?
• What is your competition doing that might pose a threat to your business?
3.2. Industry Analysis- Porter five

forces analysis
Porter’s Five Forces framework was
developed by Harvard's Michael Porter using
concepts from industrial organization
economics to analyze five interacting factors
critical for an industry to become and remain
competitive: industry competition, threat of
new entrants, threat of substitutes,
bargaining power of buyers and bargaining
power of suppliers.
This chart identifies Porter's 5 Forces for assessing the profitability of a value chain: threat of
substitutes, threat of new entrants, bargaining power of buyers, bargaining power of suppliers, and
rivalry among existing competitors.
Each of these forces has several determinants.
• The intensity of industry competition: number of competitors, rate of industry growth,
industry overcapacity , exit barriers, diversity of competitors, informational complexity and
asymmetry, brand equity, fixed cost allocation per value added, protection against imports,
government policies to support/hinder competition or monopolices, coordination within the
industry participants.
• The bargaining power of buyers: buyer volume , buyer switching costs relative to firm
switching costs, buyer information availability, availability of existing substitute products,
buyer price sensitivity, price of total purchase, consumer protection laws.
• The bargaining power of suppliers: degree of differentiation of inputs, presence of
substitute inputs, supplier concentration to firm concentration ratio, cost of inputs relative
to selling price of the product, importance of volume to supplier, existing laws and
regulations to protect local suppliers.
• The threat of new entrants: the existence of barriers to entry, economies of product
differences, brand equity, capital requirements, access to distribution, absolute cost
advantages, learning curve advantages, government policies.
• The threat of substitute products: buyer propensity to substitute, relative price
performance of substitutes, buyer switching costs, perceived level of product differentiation.

1] Selecting the best Strategy:
What is Strategic Choice?
Strategic Choice involves a whole process through which a decision is taken to choose a particular
option from various alternatives. There can be various methods through which the final choice can
be selected upon. Managers and decision makers keep both the external and internal environment
in mind before narrowing it down to one.
Importance of Strategic Choice
Some of the strategic choices make up a part of bigger strategic policies of the company. Hence,
important emphasis is given to them and decision makers follows due diligence before coming up
with a final strategic choice. At times, majority shareholder uses his influence for the final strategic
choice benefiting his agendas.
In nutshell, we can summarize that, it’s a combination of intent, analysis and options available.
Strategic Choice Parameters
The initial process involves identifying the problem completely. Once, we have the clear picture of
the problem in hand, and then the process of short listing various solutions is undertaken. Then
comes up the strategic choice process where decision for final choice is taken considering the
various parameters in mind.
Some of these parameters could be:
1. Feasibility
2. Prudence
3. Consensus
4. Acceptability
Strategic Choice Example

Following example best describe the Strategic Choice:
Suppose a company has a dilemma in front of it of whether or not to invest in a new inorganic
growth process. There are multiple options available for overtaking purpose. Now the process
involved would be observing pros and cons of the companies being overtaken. Then after short
listing few of them considered the business, their advantages, and their value addition to parent
company.
After having the list of few, now the final narrowing down to a single company would be a strategic
choice on the factors mentioned above. Many stakes would be considered considering both internal
and external situations.
Process of Strategic Choice

Strategic choice refers to the decision which determines the future strategy of a firm. It addresses
the question “Where shall we go”.
A SWOT analysis is conducted to examine the strengths and weaknesses of the firm and
opportunities that can be exploited are also determined.
Based on the analysis the firm selects a path among various other alternatives that will successfully
achieve the firm`s objectives. Strategic choice is, therefore, the decision to select from among the
grand strategies considered, the strategy which will best meet the enterprise objectives. The
decision involves the following four steps – focusing on a few alternatives, considering the selection
factors, evaluating the alternatives
against these criteria and making the actual choice.
Factors Affecting Strategic Choice
• Environmental constraints
• Internal organizations and management power relationships
• Values and preferences
• Management`s attitude towards risk
• Impact of past strategy
• Time constraints- time pressure, frame horizon, the timing of the decision
• Information constraints
• Competitors reaction
Process of Strategic choice
1. Focusing on alternatives – The aim of this step is to narrow down the choice to a manageable
number of feasible strategies. It can be done by
visualizing a future state and working backward from it. Managers generally use GAP analysis for
this purpose. By reverting to a business definition it helps the managers to think in a structured
manner along any one or more dimensions of the business.
• At the Corporate level, strategic alternatives are -Expansion, Stability, Retrenchment,
Combination
• At the Business level, strategic alternatives are – Cost leadership, Differentiation or Focused
business strategy.
2. Analyzing the strategic alternatives- The alternatives have to be subjected to a thorough analysis
that relies on certain factors known as
selection factors. These selection factors determine the criteria on the basis of which the evaluation
will take place. They are:
Objective factors – These are based on analytical techniques and are hard facts used to facilitate
strategic choice.
Subjective factors – These are based on one`s personal judgment, collective or descriptive factors.
3. Evaluation of strategies – Each factor is evaluated for its capability to help the organization to
achieve its objectives. This step involves bringing together analysis carried out on the basis of
subjective and objective factors. Successive iterative steps of analyzing different alternatives lie at
the heart of such evaluation.
4. Making a strategic choice– A strategic choice must lead to a clear assessment of alternatives
which is the most suitable alternative under the
existing conditions. A blueprint has to be made that will describe the strategies and conditions
under which it operates. Contingency strategies
must be also devised.
Unit-4 Strategy Implementation
4.2. Behavioural Implementation-Strategic Leadership.
4.3. Issues in Strategy Implementation - Interrelationship of Structure and Strategy, Functional,
Divisional, SBU’s & Matrix Structures.
4.4. Functional Implementation.
4.5 McKinsey 7 S Framework

1] Procedural Implementation
Strategy implementation is a procedure through which a chosen strategy is put into action.
Strategies are only a means to an end i.e., achievement of organization’s objectives which have to
be activated through implementation. This is because both strategic formulation and strategic
implementation process are intervened into each other.
Strategy formulation and implementation are interconnected though skills and levels of skills are
dissimilar. The relationship between the two can be better understood in terms of forward and
backward linkages. Forward linkage means elements in strategy formulation influence strategy
implementation.
Strategy implementation is the sum total of the activities and choices required for the execution of
a strategic plan. It is the process by which objectives, strategies, and policies are put into action
through the development of programs, budgets, and procedures. In a simple way, strategy
implementation can be defined as a process through which a chosen strategy is put into action.
Definitions and Concept
According to Glueck, “Strategy implementation is the assignment or reassignment of corporate and
Strategic Business Unit leaders to match the strategy. The leaders will communicate the strategy to
the employees. Implementation also involves the development of functional policies about the
organization structure and climate to support the strategy and help achieve organizational
objectives”.
Steiner, Miner and Gray have defined strategic implementation as “Implementation of strategies is
concerned with the design and management of systems to achieve the best integration of people,
structure, processes and resources in reaching organizational purposes”.
➢ Top 5 Features of Strategy Implementation
Features of strategy implementation are explained in the following points:
1. Action Oriented:
It implies that a strategy should be actionable. A strategy is made actionable with the help of
different management processes, such as – planning and organizing. The role of management is not
just restricted to formulating the plans, but also extends to converting these plans into actions.
2. Varied Skills:
ADVERTISEMENTS:
It implies that strategy implementation involves wide-ranging skills. In an organization, vast
knowledge, attitude, and abilities are required to implement a strategy. These skills help in
allocating resources, designing structures, and formulating policies.
3. Wide Involvement:
It means that strategy implementation requires the participation of the top, middle, and lower level
management. The top management must clearly communicate the strategy, which needs to be
implemented, to the middle management. You should note that the middle management plays an
active role in strategy implementation.
4. Wide Scope:
It involves a range of managerial and administrative activities. In simpler words, any managerial
action can be a part of the strategy implementation process because of its wide scope. For example,
implementing a marketing strategy may involve preparing marketing budget, conducting market
research, developing advertising and promotional plan, conducting test marketing, launching
product, and collecting customers’ feedback.
5. Integrated Process:
It refers to the fact that different activities in the strategy implementation process are
interdependent. Therefore strategy implementation is an integrated and holistic process. For
example, different activities of a promotional strategy of an organization are interrelated; therefore
one needs to be executed in accordance with other activities.
2] Resource Allocation
Resource allocation is a process of planning, managing, and assigning resources in a form that helps
to reach your organization’s strategic goals. It can make a project manager’s work effective and
significant. Even though it sounds simple, it is vital in delivering project efficiently.
Why You Need Effective Resource Allocation
1. Flexible For All Size
Large organizations might be dealing with multiple projects. Effective allocation of resources helps
project managers to plan to assign resources to project and manage them effectively.
So whether it is about 1 project or 10 projects, if you are allocating resources properly, then you can
handle them all without any hassle.
2. Save Money
Effective resource allocation leads to no waste of money. It lets you know the performance of team
members in a project. Hence it can be easier for you to assign tasks to the resource according to
their skills.
3. Boost Productivity
It is the first and foremost reason to choose resource allocation.
If you have finished a project or task before the deadline without compromising the quality, then
definitely it will enhance your business productivity. No more time loss, no more extra efforts, and
no more extra labor charge.
Resource allocation helps you to know who is overloaded and who is free at that instant. So you can
assign tasks to the available resource without much workload.
4. Improve Time Management
To run a project efficiently, it is important to know how long it takes the resources to complete the
projects or tasks. Sometimes resources lag actual time. But this deficiency can make a large
difference. Proper allocation of resources can set the actual estimate hours to complete the tasks.
5. Improve Staff Morale
By allocating resources wisely, you can see who is leading and who is lagging. In most cases, project
managers can’t be able to figure out which team member is putting his/her best effort.
But if you are allocating your resources wisely, then you can identify who is doing what, who is
lagging or leading, who is taking more time to complete a project as compared to the estimated
hour(s). By filtering these factors, you can easily get the most deserving.
So without harming their self-confidence, you can encourage them to work better.
6. Predict The Future Project Plan
Proper resource allocation can help you to identify the presence of the team member(s) or
employee(s) in a particular task and it makes easier for you to assign tasks as per their availability.
Seeing the project requirement and deadline, sometimes one resource can be assigned to multiple
tasks. By allocating resources, employees can prioritize their tasks and execute them based on their
priorities. The project can be completed without much hassle and the future planning of the project
can be done flawlessly.
7. Strategic Planning
When a company sets its vision and goal, resource allocation plays a vital role. Proper allocation of
resources can help to achieve and fulfill project needs. So ultimately vision and strategic goals can
be done effectively by eliminating existing risks.
8. Manage Team Workload
Let a project is running over schedule and you need to adjust the team’s workload to deliver the
project on time without any obstacle.
Here, resource allocation can help you in managing team workload. It can help you to check the task
list of team members and let you know who is overloaded with tasks and whose schedule has more
capacity.
Now you can rearrange the task to balance the workload and no one will get overloaded.
As a result, it increases the team’s effectiveness and later it leads to successful project completion.
9. Maintain An Accurate Time Log
Knowing exactly how long it takes team members to complete a task is a vital part in running project
efficiently. Sometimes team members run-out actual working hour(s). In those cases, business
growth suffers a big loss.
By allocating resources you can draw an accurate picture of actual time taken by the team members
to complete the project.
10. Eliminate Risk
Identifying the potential risks beforehand can definitely bring amazing results to the project. By
taking preventive actions, you can eliminate all the risks and complete projects on time.
4.2. Behavioral Implementation-Strategic Leadership

➢ What is Behavioral Implementation?
Successful strategy preparation does not assure the effective implementation of the same. To
implement strategy effectively the organization needs discipline, motivation and hard work from all
the employees in the organization. There needs to be goal congruence in the efforts of the
employees. Managers have to play a very critical role in the implementation of strategy. They need
to see if the resources of the organization are aligned properly and the critical aspects of
organization like leadership, power and culture are managed properly so that the employees work
in a united manner in the realization of the company's objectives.
➢ Behavioral Implementation in Strategic Management

Organizations which exist in relatively stable and predictable industries have a tendency of building
up tall structures. Such structures are characterized by many hierarchy levels and narrow spans of
control. On the other hand, companies which exist in dynamic and volatile industries tend to adopt
a very flat structure and managers have very wide span of control. a functional structure
organization are aligned on functional lines such as finance, manufacturing, personnel, R&D etc.
Employees in functional organizations perform set tasks. As these organizations grow, they adopt a
'product divisional structure. This allows the organization flexibility in terms on product focus, co-
ordination, development of general managers, bottom line responsibilities etc.
When organizations are multi-product and multi plant, they adopt a "geographic divisional
structure". This helps them in meeting the needs of customers belonging to different geographical
areas. With the addition of new product lines, the multi-divisional structure is favored by companies
as it gives more independence and flexibility to divisional managers.
Sometimes growth is responsible for accepting the SBU structure by an organization, particularly
when the organization is big and diversified, where different divisions with related products,
technologies, market, or mission statement, can be shared to form a strategic business unit.
Behavioral implementation is concerned with those features of strategy implementation that is
concerned with the behavior of individuals in organizations.
➢ Issues in Behavioral Implementation

It is imperative that organizational change should not create and design more complex organization
structures but rather the changing of the people's attitudes, feelings and behavior. The behavior of
the employees affects the performance of the organization and can become the determining factor
in the success or failure of an organizational initiative.
Strategic implementation requires that all the employees of the organization are disciplined,
motivated and committed to work hard for the achievement of the organization’s goals.
The issues in behavioral implementation are:
1) Influence Tactics:
The leaders and the top management of the organization have to implement the strategies and
objectives. The leaders therefore need to influence the behavior of managers, employees and
peers. They need to communicate effectively the vision of the organization and motivate the
employees to give their best performance.
2) Power:
Power is the potential ability of influencing the behavior of others in an organization Leaders
effectively use their power to influence their subordinates to act in a particular manner. The leaders
have a formal authority which is derived from the position that they occupy in the organization.
3) Empowerment:
Leaders cannot implement everything themselves. They need to delegate and empower their
subordinates. The leader can empower the employees in many ways. Some of the common
techniques used are training, self-managed work groups (which redefine organizational reporting
relationships), and the extensive use of automation.
4) Political Implications of Power:
The organizations are also subject to politics. Organizational politics is the set of actions which
people follow to acquire and increase power to achieve their preferred or vested interests. The
leaders need to manage the organizational politics so that it does not become an obstacle in the
implementation of the strategy.
5) Managing Resistance to Change:
Rapid change in an organization is often met by resistance from workers as they have to discard
their existing ways of working. Top management can prepare the workers in advance for the change
and show the positive impacts that are likely to take place. This often reduces the resistance to
change.
6) Managing Conflict:
Conflict occurs when one individual or business unit in an organization deliberately obstructs
another individual or business unit from achieving its objective. The leaders have to manage these
conflicts in order to achieve their goals.
7) Linking Performance and Pay to Strategies:
The organization also has to plan the performance of its strategies if it needs to achieve its
objectives. To do this, efficient coordination of promotions, salary increases, bonuses, etc., is
required.
➢ Aspects of Behavioral Implementation

The human resources of an organization become absolutely critical in the implementation of a
strategy. Their activities and their behavior can lead to the failure or success of a strategy. The
various aspects or elements of behavioral implementation are as follows:
1) Leadership:
Leadership plays an important role in
implementation of strategy in an organization.
The leadership plays a critical role in the
execution and leader through his personal
traits acts as a catalyst within the structure of
the organization. The transformation of
strategy from a good concept to actual
implementation is made possible only by the
leadership of the organization.
2) Corporate Culture:
The culture of the organization is the environment which prevails through the interactions of the
various employees. It is defined by the experiences, education, mind-set, attitudes, beliefs,
strengths and weaknesses of the employees of the organization. The leaders contribute to the
leadership aspect of the organization whereas the employees create the culture of the organization.
3) Power and Politics:
The power denotes the ability of a person to influence the behavior of another person. A person
who has the power can influence the behavior and actions of other people in the organization. In a
sense it denotes a sense of control. The supervisory aspect in a manager bestows on him the power
his subordinates and get influence him to do what he wants. Politics on the other hand is the
manner in which a person gains power over another. It is thus the process of acquiring power in an
organization to attain some desired objective.
4) Values:
A value system is a framework or a set of ideals which govern the person's behavior. In a sense they
are similar to attitudes but are more permanent in nature and not easy to change. A value may be
defined as "a concept of a desirable, an internalized criterion or standard of evaluation a person
possesses. Such concepts and standards are relatively few and determine or guide an individual's
evaluations of the many. objects encountered in everyday life".
5) Ethics:
Ethics in management refers to "the study of how personal moral norms apply to activities and
goals of a commercial enterprise. It is not a separate moral standard, but the study of how the
business context poses its own unique problems for the moral person who acts as they are the
agent of this system". It thus relates the goals and objectives value of the organization to the
personal systems of the individual. To incorporate ethics in business strategy managers, have to ask
three questions - What do we stand for? What is the objective? What kind of values do we have?
6) Social Responsibilities:
Social responsibility is a concept which states that every entity individual or organization has a
responsibility to the society that it exists in and its actions should benefit the society. The entity
needs to see that all its actions maintain a balance between the economy and the ecosystem. Social
responsibility means that the organization needs to balance between its economic development
and the benefits /costs to the society and environment. The organization can be passive in its role
whereby it refrains from indulging in destructive acts to the society or it can play an active role in
the betterment of society at large.
4.3. Issues in Strategy Implementation - Interrelationship of Structure and Strategy,

Functional, Divisional, SBU’s & Matrix Structures.
1] Issues In Strategy Implementation
The different issues involved in strategy implementation cover practically everything that is included
in the discipline of management studies. A strategist, therefore, has to bring a wide range of
knowledge, skills, attitudes, and abilities. The implementation tasks put to test the strategists’
abilities to allocate resources, design organizational structure, formulate functional policies, and to
provide strategic leadership.
• The strategic plan devised by the organization proposes the manner in which the strategies
could be put into action. Strategies, by themselves, do not lead to action. They are, in a
sense, a statement of intent. Implementation tasks are meant to realise the intent.
Strategies, therefore, have to be activated through implementation.
• Strategies should lead to formulation of different kinds of programmes. A programme is a
broad term, which includes goals, policies, procedures, rules, and steps to be taken in
putting a plan into action. Programmes are usually supported by funds allocated for plan
implementation.
• Programmes lead to the formulation of projects. A project is a highly specific programme for
which the time schedule and costs are predetermined. It requires allocation of funds based
on capital budgeting by organizations. Thus, research and development programme may
consist of several projects, each of which is intended to achieve a specific and limited
objective, requires separate allocation of funds, and is to be completed within a set time
schedule.
Implementation of strategies is not limited to formulation of plans, programmes, and projects.
Projects would also require resources. After resources have been provided, it would be essential to
see that a proper organizational structure is designed, systems are installed, functional policies are
devised, and various behavioural inputs are provided so that plans may work. Given below in
sequential manner the issues in strategy implementation which are to be considered:
• Project implementation
• Procedural implementation
• Resource aIIocation
• Structural implementation
• Functional implementation
• Behavioural implementation
It should be noted that the sequence does not mean that each of the above activities are necessarily
performed one after another. Many activities can be performed simultaneously, certain other
activities may be repeated over time; and there are activities, which are performed only once. Thus
there can be overlapping and changes in the order in which these activities are performed. In all but
the smallest organizations, the transition from strategy formulation to strategy implementation
requires a shift in responsibility from strategists to divisional and functional managers.
Implementation problems can arise because of this shift in responsibility, especially if strategic
decisions come as a surprise to middle and lower-level managers.
Managers and employees are motivated more by perceived self-interests than by organizational
interests, unless the two coincide. Therefore, it is essential that divisional and functional managers
be involved as much as possible in the strategy-formulation process. similarly, strategists should
also be involved as much as possible in strategyimplementation activities.
Management issues central to strategy implementation include establishing annual objectives,
devising policies, allocating resources, altering an existing organizational structure, restructuring
and reengineering, revising reward and incentive plans, minimizing resistance to change, developing
a strategysupportive culture, adapting production/operations processes, developing an effective
human resource system and, if necessary, downsizing.
Management changes are necessarily more extensive when strategies to be implemented move a
firm in a new direction. Managers and employees throughout an organization should participate
early and directly in strategy-implementation activities. Their role in strategy implementation
should build upon prior involvement in strategy-formulation activities. Strategists’ genuine personal
commitment to implementation is a necessary and powerful motivational force for managers and
employees. Too often, strategists are too busy to actively support strategy-implementation efforts,
and their lack of interest can be detrimental to organizational success. The rationale for objectives
and strategies should be understood clearly throughout the organization.
Major competitors’ accomplishments, products, plans, actions, and performance should be
apparent to all organizational members. Major external opportunities and threats should be clear,
and managers and employees’ questions should be answered satisfactorily. Top-down flow of
communication is essential for developing bottom-up support. Firms need to develop a competitor
focus at all hierarchical levels by gathering and widely distributing competitive intelligence; every
employee should be able to benchmark her or his efforts against best-in-class competitors so that
the challenge becomes personal. This is a challenge for strategists of the firm. Firms should provide
training for both managers and employees to ensure that they have and maintain the skills
necessary to be world-class performers.
2] Interrelationship of Structure and Strategy

Strategy vs. Structure: How Do They Differ?
Strategy and structure are two distinct business concepts that affect how a company operates.
Running a successful business requires careful planning of both strategy and structure. Learning
more about these two ideas and how they differ could help you manage or begin your business. In
this article, we define strategy and structure, explain why they are important and show how they
influence each other.
What is strategy?
Strategy is the action steps a business takes to reach its goals. This is typically part of the business
plan, which is a document detailing a business's goals and approaches. A business strategy can
detail many company elements, including:
• Marketing plan
• Branding ideas
• Price models
• Growth plans
• Market analysis
• Cost, profits and revenue requirements
• Potential business risks
Why is strategy important?

A business strategy can help companies plan their growth and meet their goals. Creating a strategy
can help business owners in the following ways:
• Set specific goals: A clear strategy can help businesses set specific, actionable goals. Business
owners may create milestones or performance indications in their strategy to help them
measure and track their progress.
• Increase efficiency: By researching the current market and drafting a business plan, a
company may increase its efficiency. Business owners or financial managers can assess a
strategy to find areas to improve or adjust to improve production.
• Identify strengths and weaknesses: A business strategy can help professionals analyze a
company's strengths and weaknesses. By assessing risks and analyzing the market, business
owners can discover areas where they can improve to increase revenues.
• Increase market advantages: Creating a business strategy could help businesses reach their
goals and compete with other companies in their industry.
• Build a company reputation: Part of a business's strategy is the branding and marketing
plan. A company's brand is the message or personality they want to reflect. Creating a
strategy can help them design a stronger brand, which could help them attract new
customers or investors.
What is structure?
An organization's structure reflects the overall company formation. The organizational structure
describes many components within the business, including:
• People in the company
• Leadership positions and teams
• Job positions and number of employees
• Technical procedures
• Business methods
• Operational processes
• Technology
• Company culture
• Mission statement and values
There are many different types of organizational structures. Each one has its own benefits and
possibilities. The structure you choose could affect your strategy. Alternatively, the strategies you
choose might affect the structure you use. Some companies change or refine their structure over
time. Here are a few common structure types:
1. Hierarchal
In a hierarchal structure, the company divides employees into groups. Each group has a designated
manager or leader. These leaders report to another manager and the middle-managers report to
upper-managers or executives. This structure may increase communication and show employees a
clear line of advancement opportunities.
2. Functional
A functional structure is a common formation in modern businesses. In this structure, the company
groups employees into teams based upon their responsibilities. For example, there might be a
marketing team, a sales team or a technology team within a financial business. This structure can
increase collaboration and productivity.
3. Matrix
In a matrix structure, employees belong to groups based on their skills. They report to multiple
managers, such as a functional manager and a project manager for new tasks. This type of structure
promotes communication and can create a more flexible work environment.
4. Divisional
Division structures separate employees into different categories based on their location, products or
services. For example, a company with multiple locations may have a division for each country they
work in. This structure is most common in large or global companies. It can help companies track
their progress and productivity for certain locations or services.
5. Flat
In a flat structure, employees have more decision-making power. They report directly to upper-
management and may have more responsibility. This structure is common for new businesses or
start-ups. It can reduce costs and improve colleague relationships.
6. Strategic Business Unit (SBU) Structure

Strategic Business Unit (SBU) is that business unit which has all the required elements to be
considered as complete corporate business entity like vision & mission statements, certain external
market with proper products & customers and management of that business unit can perform
strategic planning. When the organization expands to very large size, then it is better for them to
involve in Strategic Business Unit Structure.
7. Matrix Structure
Matrix Structure is the most complicated structure among all other alternatives because it is based
on both horizontal & vertical flow of communication & authority. On the other hand the divisional &
functional structures are based on vertical flows of communication & authority. The overheads are
much increased in matrix structure because there are more management positions present in it.
There are certain other features of matrix structure that increase the complexity of the structure
like dual sources of punishment & reward, dual lines of budget authority, dual reporting channels,
shared authority and requirement for potential & effective communication system.
➢ Why is structure important?

Organizational structure is an important part of a company's operation and growth. An
organizational structure can help businesses achieve the following:
• Increased employee performance: With a clear organizational structure, employees know
more about their responsibilities. This can help improve employee performance and increase
collaboration within teams.
• Improved efficiency: An organizational structure can show the different departments and
teams, which can increase a business's efficiency. With a structure plan, teams have a
designated leader who can delegate tasks.
• Better communication and culture: An organizational plan can show employees where to go
for certain information. This can help improve communication within teams and between
departments. It can also help improve the workplace culture.
➢ How do strategy and structure influence each other?
Strategy and structure are both important components within a business, and changing one can
affect the other. Some professionals believe business owners should choose a strategy first, then
the structure. Others believe structure should come first. Depending on your industry, company and
decisions, you may choose to design either component first, but learning how each one affects the
other could help you make important business plans. The two aspects can affect each other in the
following ways:
➢ Strategy shifts structure
A company's strategy can cause the structure to change or shift. As a business creates specific goals,
marketing strategies and market analysis, it may need to change its structure. For example, a
company whose goal is to open a new location may need to adjust its teams and department sizes.
They may choose to revise their structure to accomplish the new goals from their business strategy.
➢ Structure supports strategy
An organization's structure can help the company reach its business goals. As the business grows
and operates, the structure may change as leadership adds new positions and employees. This
change to the structure may eventually change the strategy. For example, a growing business might
move from a flat structure to a functional structure as they grow. This might cause them to change
their strategies and add specific goals for new departments.
4.4. Functional Implementation

Idea in short
A functional strategy is the approach a business functional takes to achieve corporate and business
unit objectives and strategies by maximizing resource productivity. It deals with a relatively
restricted plan that provides the objectives for a specific business function.
A functional strategy helps set objectives that guide the optimum allocation of resources among
different business functions. This strategy also guides and facilitates coordination among the
functions to maximise their outcomes. Functional Strategy is concerned with the question – How do
we support the business strategy within functional departments, such as Marketing, HR, Production
and R&D?
➢ Why is it important?
Functional strategy often aims to improve the effectiveness of a company’s operations within
departments. Within these departments, employees often refer to their Marketing Strategy, Human
Resource Strategy or Innovation Strategy. When all the functional departments of a company work
together in same direction, they ultimately achieve the business and corporate. Hence, the goal of
functional strategy is to align these strategies as much as possible with the business strategy.
If the business strategy is to offer new products to customers, the marketing department should
design efficient marketing campaigns targeting innovators and early adopters through the right
channels. Functional strategies are operating level of strategies. The decisions taken at this level are
referred as tactical decisions. Hence, these decisions are very operational in nature and are
therefore not really part of strategy. As a consequence, it is better to call them tactics instead of
strategies. Nevertheless, the main purpose of a functional strategy is to enable the company’s
strategy – not to achieve functional excellence.
➢ Case for functional strategy
Macro trends, such as globalization, digitization, automation, outsourcing, increased competition,
and process improvement have raised expectations for efficiency gains. Correspondingly, the
business functions are often the first ones to suffer from the incoherent corporate and business
strategies. Furthermore, in most companies, each business function has multiple, competing
priorities. As a result, functional strategy is growing in importance and relevance. As the need for
focus is growing, functional strategies help their organization become coherent and fit for purpose.
Functional strategies help enhance focus only on those value-adding portfolio of activities that are
strategically important to the company. Thus, functional strategy also helps drive a company’s
distinctive value proposition. Ultimately, functional strategy also helps shape the corporate
strategy.
Because functional level strategy is so specific, it is usually more difficult to set than corporate and
business strategies. But, taking the time to hammer out the actionable strategies of each
department can help align goals from the top of your organization all the way down to the
individual employees. This will help the managers throughout your organization get a better
understanding of how their departments and employees impact the business and corporate
strategies. When all these pieces fit together in achieving a singular goal, success is inevitable.
Case – Google
In 2017, for example, Google addressed two complaints, one primarily from advertisers and the
other from customers. Advertisers complained that their ads were appearing on the same screen
with content they felt put the company in a bad light (soft porn clickbait and on white supremacist
videos on Google’s YouTube). Customers complained that their search inquiries were exposing them
to fake news sites, and they were growing increasingly discontent with the way in which their
personal information was being used to develop sellable information to other companies. In
response, Google gave advertisers more control over where their ads appeared, purged
objectionable political and sexual content from YouTube, and removed egregious sexual and
political content from search results.
Case – Yahoo!
When Yahoo! hired Marissa Mayer, a highly visible and successful Google executive, to turn around
a struggling Yahoo, investors originally believed she would succeed, but she didn’t. Many of her
problems had to do with her not understanding how the company functioned operationally. She
underestimated the resistance of lower level Yahoo! employees to Meyer’s proposals to change.
Eventually, in response to her lack of success in changing the company, she determined the best
available solution was to sell it. In 2016, Meyers sold what was once a $135 billion company to
Verizon for $5 billion. Meyer’s vision for the company, incorporated in the corporate strategies she
planned, failed because the company proved incapable or unwilling to carry out those strategies at
the functional level. Eventually, this required Meyer’s revised corporate strategy of selling off the
company’s assets to Verizon.
4.5. McKinsey 7 S Framework

What is the McKinsey 7S Model?
The McKinsey 7S Model refers to a tool that analyzes a company’s “organizational design.” The goal
of the model is to depict how effectiveness can be achieved in an organization through the
interactions of seven key elements – Structure, Strategy, Skill, System, Shared Values, Style, and
Staff.
The focus of the McKinsey 7s Model lies in the interconnectedness of the elements that are
categorized by “Soft Ss” and “Hard Ss” – implying that a domino effect exists when changing one
element in order to maintain an effective balance. Placing “Shared Values” as the “center” reflects
the crucial nature of the impact of changes in founder values on all other elements.
Structure of the McKinsey 7S Model

Structure, Strategy, and Systems collectively
account for the “Hard Ss” elements, whereas the
remaining are considered “Soft Ss.”
1. Structure: Structure is the way in which a
company is organized – chain of command and
accountability relationships that form its
organizational chart.
2. Strategy: Strategy refers to a well-curated
business plan that allows the company to formulate
a plan of action to achieve a
sustainable competitive advantage, reinforced by
the company’s mission and values.
3. Systems: Systems entail the business and
technical infrastructure of the company that
establishes workflows and the chain of decision-making.
4. Skills: Skills form the capabilities and competencies of a company that enables its employees to
achieve its objectives.
5. Style: The attitude of senior employees in a company establishes a code of conduct through their
ways of interactions and symbolic decision-making, which forms the management style of its
leaders.
6. Staff: Staff involves talent management and all human resources related to company decisions,
such as training, recruiting, and rewards systems
7. Shared Values: The mission, objectives, and values form the foundation of every organization and
play an important role in aligning all key elements to maintain an effective organizational design.
Application of the McKinsey 7S Model
The subjectivity surrounding the concept of alignment concerning the seven key elements
contributes to why this model seems to have a complicated application. However, it is suggested to
follow a top-down approach – ranging from broad strategy and shared values to style and staff.
Step 1: Identify the areas that are not effectively aligned
Is there consistency in the values, strategy, structure, and systems? Look for gaps and
inconsistencies in the relationship of elements. What needs to change?
Step 2: Determine the optimal organization design
It is important to consolidate the opinions of top management and create a generic optimal
organizational design that will allow the company to set realistic goals and achievable objectives.
The step requires a tremendous amount of research and analysis since there are no “organizational
industry templates” to follow.
Step 3: Decide where and what changes should be made
Once the outliers are identified, the plan of action can be created, which will involve making
concrete changes to the chain of hierarchy, the flow of communication, and reporting relationships.
It will allow the company to achieve an efficient organizational design.
Step 4: Make the necessary changes
Implementation of the decision strategy is a make-or-break situation for the company in realistically
achieving what they set out to do. Several hurdles in the process of implementation arise, which are
best dealt with a well-thought-out implementation plan.
Advantages of the Model
• It enables different parts of a company to act in a coherent and “synced” manner.
• It allows for the effective tracking of the impact of the changes in key elements.
• It is considered a longstanding theory, with numerous organizations adopting the model
over time.
Disadvantages of the Model
• It is considered a long-term model.
• With the changing nature of businesses, it remains to be seen how the model will adapt.
• It seems to rely on internal factors and processes and may be disadvantageous in situations
where external circumstances influence an organization.
Practical Example
The McKinsey 7S model can be applied in circumstances where changes are being brought into the
organization that may affect one or more of the shared values. Suppose a company is planning to
undertake a merger. It will affect how the company is organized since new staff will be coming in. It
will also affect the structure of the company, along with strategic decision-making, as new ideas
flow in through synergy.
In such a case, the McKinsey 7s model can be used to first identify the inconsistent areas – here, it
would primarily be the structure, staff, and strategy. After identifying the relevant areas, the
company can make effective decisions to optimally re-organize and incorporate the changes in a
way that streamlines the merger process – after conducting extensive research and analysis of the
consequences that the changes bring to the company.
Unit-5 Strategy Evaluation and Control
5.1. Strategic Evaluation- Nature, Importance and Barriers
5.1. Strategic Evaluation

What is Strategy Evaluation?
Strategy evaluation is the process of analyzing a strategy to assess how well it's been implemented
and executed. A strategy evaluation is an internal analysis tool and should be used as part of a
broader strategic analysis for the organization when making decisions about your strategy.
➢ Nature of Strategic Evaluation

• Nature of the strategic evaluation and control process is to test the effectiveness of strategy.
• During the two proceedings phases of the strategic management process, the strategists
formulate the strategy to achieve a set of objectives and then implement the strategy.
• There has to be a way of finding out whether the strategy being implemented will guide the
organization towards its intended objectives.
• Strategic evaluation and control, therefore, performs the crucial task of keeping the
organization on the right track.
• In the absence of such a mechanism, there would be no means for strategists to find out
whether or not the strategy is producing the desired effect.
• Through the process of strategic evaluation and control, the strategists attempt to answer
set of questions, as below.
a. Are the premises made during strategy formulation proving to be correct?
b. Is the strategy guiding the organization towards its intended objectives?
c. Are the organization and its managers doing things which ought to be done? Is there a
need to change and reformulate the strategy?
d. How is the organization performing?
e. Are the time schedules being adhered to?
f. Are the resources being utilized properly?
g. What needs to be done to ensure that resources are utilized properly and objectives
met?
➢ Importance of Strategic Evaluation

• Strategic evaluation helps to keep a check on the validity of a strategic choice.
• An ongoing process of evaluation would, in fact, provide feedback on the continued
relevance of the strategic choice made during the formulation phase. This is due to the
efficacy of strategic evaluation to determine the effectiveness of strategy.
• During the course of strategy implementation managers are required to take scores of
decisions.
• Strategic evaluation can help to assess whether the decisions match the intended strategy
requirements.
• In the absence of such evaluation, managers would not know explicitly how to exercise such
discretion.
➢ Barriers in Strategic Evaluation

Strategic evaluation and control since an appraisal process for the organization as a whole and
people who are involved in strategic management process either at the stage of strategy
formulation or strategy implementation or both, is not free from certain barriers and problems.
These barriers and problems center around two factors: motivational and operational.
a. Motivational Problems
The first problem in strategic evaluation is the motivation of managers (strategists) to evaluate
whether they have chosen correct strategy after its results are available. Often two problems;
are involved in motivation to evaluate the strategy: psychological problem and lack of direct
relationship between performance and rewards.
b. Operational Problems
Even if managers agree for strategic evaluation, the problem of strategic evaluation is not over,
though a beginning has been made. This is so because strategic evaluation is a nebulous process;
many factors are not as clear as the managers would like these to be. These factors are in the
areas of determination of evaluative criteria, performance measurement, and taking suitable
corrective actions. All these are involved in strategic evaluation and control. However,
nebulousness nature is not unique to strategic evaluation and control only but it is unique to the
entire strategic management process.

i) Strategic Control
Strategic Control Meaning
Strategic control is a method of managing the execution of a strategic plan. It’s considered unique in
the management process, as it can handle the unknown and ambiguous while tracking a strategy’s
implementation and the subsequent results. In other words, strategic control is a way to find
different methods of strategy implementation by adapting to changing external and internal factors
to achieve strategic goals.
A strategy is usually implemented over a significant period of time during which two major
questions are answered:
a. Is strategy implementation taking place as planned?
b. Taking the observed results into consideration, does the strategy require changes or
adjustments?
The strategic control definition shows us that it’s an evaluation exercise focused on achieving the
strategic goals set by an organization. The process is crucial in bridging gaps and adapting to
changes during the implementation period.
The Strategic Control Process
Every technique of strategic evaluation follows the same method. Here are the six steps involved in
the strategic control process:
1. Determining What to Control
Prioritize evaluation of elements that relate directly with the mission and vision of the organization
and which can affect the organization’s goals.
2. Setting Standards
Past, present and future actions must be evaluated. Setting qualitative or quantitative control
standards help in determining how managers can evaluate progress and measure goals.
3. Measuring Performance
Measuring, addressing and reviewing performance on a monthly or quarterly basis can help
determine a strategy’s progress and ensure that standards are being met.
4. Comparing Performance
Performance comparison is done to determine if an organization is falling short of the set
benchmark and if these gaps between target and actuals are normal for that industry.
5. Analyzing Deviations
If there are deviations, managers have to analyze performance standards and determine why
performance was below par.
6. Corrective Action
If a deviation is due to internal factors such as resource shortage, then managers can act to sort
them out. But if it’s caused by external factors that are beyond one’s control, then incorrect actions
can worsen the outcome.
Traditional control concepts have to be replaced by the strategic control process, as it recognizes
the unique needs of long-term strategies.
Importance Of Strategic Control
Let’s look at the importance of strategic control:
• Measuring Progress
Strategic control can help measure organizational progress. As a strategy is chosen or
implemented, an outcome is determined based on the likeliness. In strategic management,
it’s important to measure results during and after implementation. This allows timely
corrective actions as well.
• Feedback For Future Actions

Since strategic management is continuous, it helps in recycling actions that are essential for
achieving the objectives of an organization. This acts as inputs for making adjustments and
implementing them in other future processes.
• Rewards And Recognition Based on Performance

A reward system based on performance that recognizes employees throughout the
implementation period is crucial for performance, desired outcome and talent retention.
The purpose of strategic control is to let managers identify changes in circumstances and
allow them to modify strategies.
Strategic Control Example

Here are some examples of strategic control:
1. A courier business decides to boost performance by setting an on-time delivery goal of
100%. Managers are alerted by the control system as it automatically reports problems even
if delivery rate falls by 1%. By using such a control strategy, the organization allows its
managers to undertake immediate corrective measures for every delivery-performance issue
that’s raised.
2.Consider a unit that produces widgets. If the error rate goes above the desired limit or the
number of widgets is lower than expected, strategic control helps an organization evaluate
the hiring criteria and employee onboarding to make necessary adjustments for achieving
strategic goals of the business.
ii) Operational Control

What is operational control?
The process of ensuring that there is an effective and efficient performance of the task is called
operational control. It imposes post-action evaluation and control, for a short period, which
encompasses evaluation of performance against the objectives set by the firm.
• Operational control systems are designed to ensure that day-to-day actions are consistent
with established plans and objectives.
• It focuses on events in a recent period.
• Corrective action is taken where performance does not meet standards.
• Allocation and use of organizational resources.
• Short term objectives and main is to control the actions.
Steps for Operational Control
1. Set performance standards

2. Measure actual performance
3. Identify deviations (if any)
4. Introduce corrective actions
Difference Between Strategic Control and Operational Control
Strategic Control is all about following the

trail or movements of the strategy as it is
implemented in order to identify the areas of
issue or potential areas of the issue so that
necessary adjustments can be made. On the
other hand, operational control is a subset of
management control whose aim is to regularly monitor and check the routine business operations
so as to confirm the consistency and quality in business activities.
BASIS FOR
STRATEGIC CONTROL OPERATIONAL CONTROL
COMPARISON
Meaning Strategic Control implies a process Operational Control systems are

of controlling the formulation and framed to make certain that the
implementation of an routine operations are in line with
organization's plan and strategy. the company's plans and
objectives.
Based on Feedforward and Steering Control Feedback Control
Exercised by Top-level executives Functional level executives
Primary Guiding the future direction of the Action control

concern company
Determines Is the company moving in the right How efficiently the company is
direction? performing?
Factors External environment Internal Environment

Affecting
Strives for Effectiveness Efficiency
Time Horizon Long Term Short Term
Focuses on Monitoring and evaluation of the Individual tasks and operations

strategic management process.

1. MANAGEMENT INFORMATON SYSTEM
The study of people, technology, organizations, and their relationships is known as management
information systems (MIS). MIS professionals assist businesses in getting the most out of their
investments in people, equipment, and business processes. Businesses acquire, process, and
store data using information systems at various levels of operation. Management compiles and
disseminates this data in the form of information required to conduct everyday business
activities.
2. BENCHMARKING
Benchmarking is the process of comparing your company's success to that of other similar
businesses to see whether there is a performance gap that can be overcome by improving your
own. Examining other businesses can reveal what it takes to improve your own efficiency and
become a greater player in your field.
3. BALANCED SCORECARD
The balanced scorecard is a management approach that aims to translate an organization's
strategic goals into a set of organizational performance objectives that are then measured,
monitored, and adjusted as needed to guarantee that the strategic goals are accomplished. The
balanced scorecard technique is based on the idea that typical financial accounting indicators for
monitoring strategic goals are insufficient to keep firms on track.
4. RESPONSIBILITY CENTRES
A responsibility center is an operational unit or entity inside an organization that is in charge of
all of the unit's actions and tasks. Each of these centers has its own mission, goals, objectives,
policies and processes, and financial reporting. And they're utilized to balance responsibility for
expenses incurred, money generated, and assets invested in a person.
5. MANAGEMENT BY OBJECTIVES
The practice of setting top corporate goals and using them to determine employee goals is
known as MBO. MBO methods are designed to establish an employee's primary goals, which are
then rated using group feedback. This allows all corporate contributors to see their
accomplishments in relation to the firm's key priorities as they complete their tasks, increasing
alignment between activity and outcome and boosting productivity significantly.
6. VALUE CHAIN ANALYSIS
One of the most essential Strategic Management Models for analyzing a company's status is the
value chain analysis system. In strategic management, value chain analysis is used to assess a
company's value chain constituents. In this article, we look at the value chain as a tool for
analyzing a company's status. However, remember that value chain analysis aids in identifying
the strengths and weaknesses of each aspect of the firm's value chain. It can't be utilized to
spot external threats or opportunities.

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Unit – 2 Strategy Formulation (10)

Unit- 3 Strategic Analysis and Choice (06)

Unit-4 Strategy Implementation (08)

Unit-5 Strategy Evaluation and Control (06)

Unit-6. Case Studies: (10)

1.1. Evolution of Business Policy, it's Nature, Objectives and Significance

➢ Definitions of Business Policy

➢ Nature of Business Policy

➢ Strategic Business Objectives

➢ Importance of a Business Policy:

1.2. Introduction to Strategic Management- Concept, & Benefits of Strategic

1.3. Concept, Features and Process of Strategic Planning

Process of Strategic Planning

Meaning Strategic Planning is a future Strategic Management implies a

Stresses on It stresses on making optimal It stresses on producing strategic

Management Strategic planning is a Strategic management is a

Process Analytical process Action-oriented process

Function Identifying actions to be taken. Identifying actions to be taken, the

Key Differences Between Strategic Planning and Strategic Management

1.5. Formulation of -Vision, Mission, Goals & Objectives

➢ Levels of strategy formulation

1.6. Levels of Strategic Management

➢ Corporate Level Strategy

➢ Business Level Strategy

2.1. Environmental & Organizational Appraisal

➢ Definition of Environmental Appraisal

➢ Analyzing the external environment requires analyzing following areas:

➢ Process of Environmental Appraisal

5) Identify the Opportunities and Threats :

➢ Techniques of Environmental Appraisal

2) Analyze the Environment :

Factors Analyzed in PEST Analysis

2.1.2. Environmental Scanning-Competitive intelligence

2.1.3. Organizational appraisal – Organizational Capability factors, Value chain analysis

➢ Value chain analysis as a technique of organizational appraisal

2.2. Corporate & Business Level Strategies

Meaning Business Strategy is the strategy Corporate Strategy is stated in

Created by Middle level management Top level management

Nature Executive and Governing Decisive and Legislative

Relates to Selection of plan to fulfill the Business selection in which the

Deals with Particular business unit or division Entire business organization

Term Short term strategy Long term strategy

Focus Competing successfully in the Maximizing profitability and

Approach Introverted Extroverted

Major strategies Cost Leadership, Focus and Expansion, Stability and

➢ Key Differences Between Business Strategy and Corporate Strategy

2.2.1. Types- Expansion, Stability, Retrenchment and combination, Integration &

Integration & Diversification Strategies

➢ Advantages and disadvantages of vertical integration

➢ 3 Benefits of a Diversification Strategy

➢ 3 Drawbacks of a Diversification Strategy

➢ 6 Reasons for a Diversification Strategy

2.2.2. Porter’s Generic Business Strategies

➢ How to apply Porter’s Generic Strategies?

3.2. Industry Analysis- Porter five forces analysis

3.3. Selecting the best Strategy, Process of Strategic Choice

➢ Types of Strategic Analysis