TYPES OF CORPORATE STRATEGIES

Corporate level strategies are also termed as grand strategies. There are four types of generic
corporate strategies. They are:

• Stability strategies: make no change to the organization’s current activities

• Growth strategies: expand the organization’s activities
• Retrenchment strategies: reduce the organization’s level of activities
• Combination strategies: a combination of above strategies

Stability Strategy :
Stability strategy is a strategy in which the organization retains its present strategy at the corporate
level and continues focusing on its present products and markets. The organization stays with its
current business and product markets; maintains the existing level of effort; and is satisfied with
incremental growth. It does not seek to invest in new factories and capital assets, gain market share,
or invade new geographical territories. Organizations choose this strategy when the industry in which
it operates or the state of the economy is in turmoil or when the industry faces slow or no growth
prospects. They also choose this strategy when they go through a period of rapid expansion and need
to consolidate their operations before going for another phase of expansion.

An organization following stability strategy maintains its current business and product portfolios;
maintains the existing level of effort; and is satisfied with incremental growth. It focuses on fine-tuning
its business operations and improves functional efficiencies through better deployment of resources.
In other words, an organization is said to follow stability/ consolidation strategy if:

• It decides to serve the same markets with the same products;

• It continues to pursue the same objectives with a strategic thrust on incremental
improvement of functional performances; and
• It concentrates its resources in a narrow product-market sphere for developing a meaningful
competitive advantage

An organization’s strategists might choose stability when:

• The industry or the economy is in turmoil or the environment is volatile.

• Uncertain conditions;
• Environmental turbulence is minimal and the organization does not foresee any major threat
to itself and the industry concerned as a whole;
• The organization just finished a period of rapid growth and needs to consolidate its gains
before pursuing more growth;
• The organization’s growth ambitions are very modest and it is content with incremental
growth;
• The industry is in a mature stage with few or no growth prospects and the organization is
currently in a comfortable position in the industry.

There are various approaches to developing stability/consolidation strategy. The Management has
to select the one that best suits the corporate objective. Some of these approaches are discussed
below. In all these approaches, the fundamental course of action remains the same, but the
circumstances in which the organizations choose various options differ.
 Holding Strategy: This alternative may be appropriate in two situations: (a) the need for an
opportunity to rest, digest, and consolidate after growth or some turbulent events - before
continuing a growth strategy, or (b) an uncertain or hostile environment in which it is prudent to
stay in a “holding pattern” until there is change in or more clarity about the future in the
environment. With a holding strategy the organization continues at its present rate of
development. This approach suits an organization, which does not have requisite resources to
pursue increased growth for a longer period of time. At times, environmental changes prohibit a
continuation in growth.

Stable Growth: This alternative essentially involves avoiding change, representing indecision or
timidity in making a choice for change. Alternatively, it may be a comfortable, even long-term
strategy in a mature, rather stable environment, e.g., a small business in a small town with few
competitors. It grows slowly but surely, increasingly its market penetration by steadily adding new
products or services and carefully expanding its market.

Harvesting Strategy: In this approach, an organization has a dominant market share and seeks to
take advantage of this position thereby generating cash for future business expansion. This
approach is most suitable to an organization whose main objective is to generate cash. Even
market share may be sacrificed to earn profits and generate funds. A number of ways can be used
to accomplish the objective of making profits and generating funds. Some of these are selective
price increases and reducing costs without reducing price.

Profit or Endgame Strategy: A profit strategy is one that capitalizes on a situation in which old and
obsolete product or technology is being replaced by a new one. This type of strategy does not
require new investment, so it is not a growth strategy. Organizations adopting this strategy decide
to follow the same technology, at least partially, while transiting into new technological domains.
Strategists in these organizations reason that the huge number of product based on older
technologies on the market would create an aftermarket for spare parts that would last for years.

Growth Strategy:
Organizations choose expansion strategy when their perceptions of resource availability and past
financial performance are both high. The most common growth strategies are diversification at the
corporate level and concentration at the business level. Diversification is defined as the entry of an
organization into new lines of activity, through internal or external modes. The primary reason an
organization pursues increased diversification are value creation through economies of scale and
scope, or market dominance. In some cases organizations choose diversification because of
government policy, performance problems and uncertainty about future cash flow. In one sense,
diversification is a risk management tool. Risk plays a very vital role in selecting a strategy and hence,
continuous evaluation of risk is linked with an organization’s ability to achieve strategic advantage.
Internal development can take the form of investments in new products, services, customer segments,
or geographic markets including international expansion. Diversification is accomplished through
external modes through acquisitions and joint ventures. Concentration can be achieved through
vertical or horizontal growth. Vertical growth occurs when an organization takes over a function
previously provided by a supplier or a distributor. Horizontal growth occurs when the organization
expands products into new geographic areas or increases the range of products and services in
current markets.

Conditions for Opting for Expansion Strategy Organizations opt for expansion strategy under the
following circumstances:
 • Organization having high growth objectives;
• New opportunities in the environment;
• Market leader trying to continue being a market leader;
• Volatile situations;
• Surplus resources;
• Regulatory environment

Ansoff’s Product-Market Expansion Grid

The product/market grid first presented by Igor Ansoff (1968), has proven to be very useful in
discovering growth opportunities. This grid best illustrates the various intensification options available
to an organization. The product/market grid has two dimensions, namely, products and markets.
Combinations of these two dimensions result in four growth strategies. According to Ansoff’s Grid,
three distinct strategies are possible for achieving growth through the intensification route. These are:

• Market Penetration: The organization seeks

to achieve growth with existing products in
their current market segments, aiming to
increase its markets share.
• Market Development: The organization
seeks growth by targeting its existing
products to new market segments.
• Product Development: The organization
develops new products targeted to its
existing market segments.
• Diversification: The organization grows by
diversifying into new businesses by
developing new products for new markets.

Types of expansion/ growth strategy

Expansion through intensification

Intensification involves expansion within the existing line of business. Intensive expansion strategy
involves safeguarding the present position and expanding in the current product-market space to
achieve growth targets. Such an approach is very useful for organizations that have not fully exploited
the opportunities existing in their current products-market domain. An organization selecting an
intensification strategy concentrates on its primary line of business and looks for ways to meet its
growth objectives by increasing its size of operations in its primary business. Intensive expansion of an
organization can be accomplished in three ways, namely, market penetration, market development
and product development. Intensification strategy is followed when adequate growth opportunities
exist in the organization’s current products-market space.

Expansion through integration

In contrast to the intensive growth, integration strategy involves expanding externally by combining
with other organizations. Combination involves association and integration among different
organizations and is essentially driven by need for survival and also for growth by building synergies.
Combination of organizations may take the merger or consolidation route. Merger implies a
combination of two or more concerns into one final entity. The merged concerns go out of existence
and their assets and liabilities are taken over by the acquiring organization. A consolidation is a
combination of two or more business units to form an entirely new organization. All the original
business entities cease to exist after the combination. Organizations use integration to:

• increase market share;

• avoid the costs of developing new products internally and bringing them to the market;
• reduce the risk of entering new business;
• speed up the process of entering the market;
• become more diversified and
• reduce the intensity of competition by taking over the competitor’s business.

There are many forms of integration, but the two major ones are vertical and horizontal integration.

1. Vertical Integration: Vertical integration refers to the integration of organizations involved in

different stages of the supply chain. Thus, a vertically integrated organization has units
operating in different stages of supply chain starting from raw material to delivery of final
product to the end customer. An organization tries to gain control of its inputs (called
backwards integration) or its outputs (called forward integration) or both.
2. Horizontal Combination / Integration: The acquisition of additional business in the same line
of business or at the same level of the value chain (combining with competitors) is referred to
as horizontal integration. Horizontal growth can be achieved by internal expansion or by
external expansion through mergers and acquisitions of organizations offering similar
products and services. An organization may diversify by growing horizontally into unrelated
business. This sort of integration is sought to reduce intensity of competition and also to build
synergies.

Diversification
Diversification involves moving into new lines of business. When an industry consolidates and
becomes mature, most of the organizations in that industry would reach the limits of growth using
vertical and horizontal growth strategies. If they want to continue growing any further the only option
available to them is diversification by expanding their operations into a different industry.

Diversification strategies also apply to the more general case of spreading market risks; adding
products to the existing lines of business can be viewed as analogous to an investor who invests in
multiple stocks to “spread the risks”. Diversification into other lines of business can especially make
sense when the organization faces uncertain conditions in its core product-market domain.

Diversification of an organization can take the form of concentric and conglomerate diversification.

Concentric (Related) diversification is appropriate when an organization has a strong competitive

position but industry attractiveness is low. Conglomerate (unrelated) diversification is an appropriate
strategy when current industry is unattractive and that the organization lacks exceptional and
outstanding capabilities or skills in related products or services. Generally, related diversification
strategies have been demonstrated to achieve higher value creation (profitability and stock value)
than unrelated diversification strategies (conglomerates). The interpretation of this finding is that
there must be some advantage achieved through shared resources, experience, competencies,
technologies, or other value-creating factors. This is the so called synergy effect of diversification i.e.,
‘the whole is greater than the sum of its parts’.
ALTERNATIVE ROUTES TO DIVERSIFICATION
Once an organization opts for diversification, it must select one of the options discussed below. There
are three broad ways to implement diversification strategies:

• Mergers and Acquisitions A merger is a legal transaction in which two or more organizations
combine operations through an exchange of stock. In a merger only one organization entity
will eventually remain. An acquisition is a purchase of one organization by another. In recent
years, there were quite a few acquisitions in which the target organizations resisted the take-
over bids. These acquisitions are referred to as hostile takeovers. It is natural for the target
organization’s management to try to defend against the takeover. Although they are used
synonymously, there is a slight distinction between the terms ‘merger’ and ‘acquisition’. This
will be discussed more in detail in the later sections.
• Strategic Partnering Strategic partnering occurs when two or more organizations establish a
relationship that combines their resources, capabilities, and core competencies to achieve
some business objective. The three major types of strategic partnerships include: joint
ventures, long-term partnerships, and strategic alliances which are discussed below:
• Joint Ventures: In a joint venture, two or more organizations form a separate, independent
organization for strategic purposes. Such partnerships are usually focused on accomplishing a
specific market objective. They may last from a few months to a few years and often involve a
cross-border relationship. One organization may purchase a percentage of the stock in the
other partner, but not a controlling share.
• Long-Term Contracts: In this arrangement, two or more organizations enter a legal contract
for a specific business purpose. Long-term contracts are common between a buyer and a
supplier. Many strategists consider them more flexible and less inhibiting than vertical
integration. It is usually easier to end an unsatisfactory long-term contract than to end a joint
venture.
• Strategic Alliances: In a strategic alliance, two or more organizations share resources,
capabilities, or distinctive competencies to pursue some business purpose. Strategic alliances
often transcend the narrower focus and shorter duration of joint ventures. These alliances
may be aimed at world market dominance within a product category. While the partners
cooperate within the boundaries of the alliance relationship, they often compete fiercely in
other parts of their businesses.

Retrenchment Strategy:
Many organizations experience deteriorating financial performance resulting from market erosion
and wrong decisions by management. Managers respond by selecting corporate strategies that
redirect their attempt to turnaround the organization by improving their organization’s competitive
position or divest or wind up the business if a turnaround is not possible. Turnaround strategy is a
form of retrenchment strategy, which focuses on operational improvement when the state of decline
is not severe. Other possible corporate level strategic responses to decline include growth and
stability. Combination Strategy The three generic corporate strategies can be used in combination;
they can be sequenced, for instance growth followed by stability, or pursued simultaneously in
different parts of the business unit.
There are three major variants of retrenchment strategy which are:

• Turnaround strategy: A turnaround situation exists when an organization encounters multiple

years of declining financial performance subsequent to a period of prosperity. Turnaround
situations are caused by combinations of external and internal factors and may be the result
of years of gradual slowdown or months of precipitous financial decline. The strategic causes
of performance downturns include increased competition, raw material shortages, and
decreased profit margins, while operating problems include strikes and labour problems,
excess plant capacity and depressed price levels
• Survival strategy: When the organization is on the verge of extinction, it can follow several
routes for renewing the fortunes of the organization. These are discussed in the following
sections.
o Divestment: An organization divests when it sells a business unit to another
organization that will continue to operate it.
o Spin-Off: In a spin-off, an organization sets up a business unit as a separate business
through a distribution of stock or a cash deal. This is one way to allow a new
management team to try to do better with a business unit that is a poor or mediocre
performer.
• Liquidation strategy: Liquidation is the final resort for a declining organization. This is the
ultimate stage in the process of renewing organization. Sometimes a business unit or a whole
organization becomes so weak that the owners cannot find an interested buyer. A simple
shutdown will prevent owners from throwing good money after bad once it is clear that there
is no future for the business. In such a situation, liquidation is the best option. Bankruptcy is a
last resort when the business fails financially

Combination Strategy:
It is designed to mix growth, retrenchment, and stability strategies and apply them across a
corporation’s business units. An organization adopting the combination strategy may apply the
combination either simultaneously (across the different businesses) or sequentially.

Mergers and acquisitions (M&A) involve the consolidation of companies through various transactions
such as mergers, acquisitions, takeovers, and joint ventures. These strategic moves are driven by the
desire to achieve growth, gain market share, access new technologies or markets, diversify operations,
or achieve synergies. Here are some strategic fundamentals of M&A:

1. Strategic Fit: The merging companies should have a strategic fit, which means their businesses
complement each other and create value through synergies. Synergies can be operational, financial, or
strategic in nature, and they should enhance the competitive advantage of the combined entity.

2. Due Diligence: Thorough due diligence is crucial to assess the potential risks, opportunities, and
value of the target company. It involves evaluating financial records, legal contracts, intellectual
property, market position, operations, and other relevant aspects. Due diligence helps the acquiring
company make an informed decision and negotiate favorable terms.

3. Valuation: Proper valuation is essential to determine the fair price of the target company. Various
valuation methods, such as discounted cash flow (DCF), comparable company analysis, and asset-
based approaches, are used to assess the financial worth of the target. A fair valuation ensures that
the acquiring company does not overpay and maximizes shareholder value.

4. Integration Planning: Successful integration planning is crucial to realize the anticipated benefits of
the merger or acquisition. It involves integrating operations, processes, technologies, cultures, and
people from both companies. Developing a comprehensive integration plan, identifying synergies, and
establishing clear communication channels are essential for a smooth transition.

5. Cultural Compatibility: Cultural compatibility between the merging entities is often overlooked but
critical for a successful integration. Misalignment of values, work styles, or management philosophies
can hinder collaboration and create internal conflicts. Assessing and addressing cultural differences
early in the process can help build a cohesive and productive combined organization.

6. Regulatory and Legal Considerations: M&A transactions are subject to regulatory approvals and
legal requirements, which vary by jurisdiction and industry. Compliance with antitrust, competition,
securities, and other regulations is necessary to ensure a smooth and legal transition. Engaging legal
advisors and experts familiar with M&A regulations is essential to navigate these complexities.

7. Stakeholder Management: Managing stakeholders' expectations and concerns is important for the
success of an M&A transaction. Stakeholders include shareholders, employees, customers, suppliers,
and the broader community. Effective communication and transparency throughout the process help
build trust and mitigate resistance or negative impacts on various stakeholders.

8. Post-Merger Integration: The integration process continues beyond the completion of the deal. A
well-executed post-merger integration plan focuses on capturing synergies, aligning operations,
optimizing resources, and realizing the intended benefits of the transaction. Timely decision-making,
effective leadership, and change management are critical during this phase.

9. Risk Management: M&A transactions come with inherent risks, such as integration challenges,
cultural clashes, financial uncertainties, and market volatility. Assessing and mitigating these risks
through comprehensive risk management strategies and contingency plans can increase the chances
of a successful outcome.

10. Long-Term Strategy: M&A should align with the long-term strategic goals of the acquiring
company. A clear understanding of how the transaction fits into the broader business strategy is
essential. This includes evaluating market dynamics, competitive landscape, growth opportunities, and
the potential impact on the overall business portfolio.

Overall, successful M&A transactions require careful planning, rigorous analysis, effective execution,
and continuous evaluation. Companies that can effectively integrate their operations, realize
synergies, and adapt to change have the potential to create significant value from mergers and
acquisitions.

Unit 4
Strategic Gap Analysis:

Strategic gap analysis is a process used to assess the difference between a company's current state
and its desired future state. It helps identify gaps or discrepancies in performance, capabilities,
resources, or market positioning. Here are the key steps involved in conducting a strategic gap
analysis:

1. Define the desired future state: Clearly articulate the strategic objectives, goals, and targets that the
organization aims to achieve. This could include market share, revenue growth, profitability, customer
satisfaction, or any other relevant metrics.

2. Assess the current state: Evaluate the organization's current performance, capabilities, resources,
and market position. This involves analyzing financial statements, operational metrics, competitive
analysis, customer feedback, and internal assessments.

3. Identify the gaps: Compare the desired future state with the current state to identify gaps or
discrepancies. Determine the specific areas where the organization falls short in terms of
performance, capabilities, or resources. These gaps could include product offerings, market presence,
operational efficiency, talent acquisition, technological advancements, or any other relevant aspect.

4. Analyze the root causes: Understand the underlying factors contributing to the identified gaps. This
may involve analyzing internal factors such as organizational structure, processes, systems, culture, or
external factors such as market trends, competition, regulatory environment, or customer demands.

5. Develop strategies and action plans: Once the gaps and their root causes are identified, develop
strategies and action plans to bridge the gaps. This could involve initiatives such as investing in new
technologies, expanding product lines, entering new markets, improving operational processes,
enhancing talent development programs, or implementing marketing and sales strategies.

6. Implement and monitor progress: Execute the identified strategies and action plans while closely
monitoring progress. Establish key performance indicators (KPIs) and milestones to track the
effectiveness of the initiatives. Regularly review and assess the progress to ensure the organization is
moving closer to the desired future state.

Portfolio Analysis:

Portfolio analysis is a strategic tool used to evaluate and manage a company's portfolio of businesses,
products, or investments. It helps determine the allocation of resources, assess the performance of
individual components, and make strategic decisions regarding investment, growth, or divestment.
Here are the key elements of portfolio analysis:

1. Portfolio Segmentation: Divide the portfolio into different segments or categories based on
predefined criteria. This could be by business unit, product line, market segment, geographic location,
or any other relevant factor. This segmentation allows for a more focused analysis and evaluation of
each component.

2. Evaluation Criteria: Establish criteria for evaluating the performance and potential of each portfolio
component. This may include factors such as market growth rate, market share, profitability, return on
investment (ROI), competitive position, customer satisfaction, or strategic fit. The evaluation criteria
should align with the organization's strategic objectives and priorities.

3. Assessing the Portfolio: Evaluate each portfolio component based on the established criteria. This
could involve analyzing financial data, market research, customer feedback, competitive analysis, and
internal assessments. The evaluation process helps identify the strengths, weaknesses, opportunities,
and threats associated with each component.
4. Portfolio Analysis Models: Various models can be used for portfolio analysis, such as the Boston
Consulting Group (BCG) Matrix, GE–McKinsey Matrix, or product lifecycle analysis. These models
provide a structured framework for assessing the relative attractiveness and competitiveness of
portfolio components.

5. Strategic Decisions: Based on the portfolio analysis, make strategic decisions regarding resource
allocation, growth opportunities, divestment, or repositioning. This could involve investing more
resources in high-potential components, divesting underperforming or non-strategic components,
acquiring new businesses or products, or developing strategies to improve the performance of specific
components.

6. Monitoring and Adjustments: Continuously monitor the performance of the portfolio components
and make necessary adjustments as the market dynamics or strategic priorities change. Regularly
reassess the portfolio to ensure it remains aligned with the organization's goals and market
conditions.

BCG Matrix:
The BCG matrix, also known as the Boston Consulting Group
matrix or growth-share matrix, is a strategic planning tool used to
analyze and classify a company's portfolio of products or business
units. It was developed by the Boston Consulting Group in the
1970s and is still widely used today.

The BCG matrix categorizes products or business units into four

quadrants based on their market growth rate and relative market
share. The four quadrants are:

1. Stars: Products or business units with high market share in a high-growth market. Stars have the
potential to generate substantial revenue and profits for the company. They require significant
investment to maintain their growth and market leadership.

2. Cash Cows: Products or business units with high market share in a low-growth market. Cash cows
generate steady cash flow and profits for the company, but they have limited opportunities for future
growth. They typically require less investment to maintain their market position.

3. Question Marks (or Problem Children): Products or business units with low market share in a high-
growth market. Question marks have the potential for rapid growth, but they also require substantial
investment to increase their market share. It is uncertain whether they will become stars or eventually
decline.

4. Dogs: Products or business units with low market share in a low-growth market. Dogs have limited
prospects for growth and often generate low or negative cash flow. They usually require minimal
investment and may be candidates for divestment or discontinuation.

The BCG matrix helps organizations make strategic decisions about resource allocation, portfolio
management, and future growth opportunities. It suggests different strategies for each quadrant, such
as investing in stars, milking cash cows, managing question marks carefully, and divesting or
restructuring dogs.
Product Life cycle Matrix in Strategic Management
The product life cycle portfolio matrix is specifically designed to deal with the criticisms that
the BCG matrix ignores products that are new, and that it overlooks markets with a negative
growth rate, i.e. markets that are in decline. Because of this, the product life cycle portfolio
matrix includes a specific focus on the growth and maturity stages of the product life cycle in
developing the portfolio technique. However, the same assumptions that underlie both the
conventional product life cycle experience curves and the BCG growth/share matrix are also
built into this model. These assumptions, which we have already witnessed, are repeated:
• Products have finite life spans. They enter the market, pass through a period of
growth, reach a stage of maturity, subsequently move into a period of decline and
finally disappear.
• Strategic objectives and marketing strategy should match the market growth rate
changes to take advantage of the challenges and opportunities as the product goes
through the different stages.
• For most mass-produced products, costs of production are closely linked to
experience (volume). Hence, for most types of products, the unit cost goes down
as volume increases.
• Expenditures – investment in plant and equipment and marketing expenses are
directly related to rate of growth. Consequently, products in growth markets will
use more resources than products in mature markets.
• Margins and the cash generated are positively related to share of the market.
Products with high relative share of the market will be more profitable than
products with low shares.
• When the maturity stage is reached, products with high market share generate a
stream of cash greater than that needed to support them in the market. This cash
is available for investment in other products or in research and development to
create new products.
Building on these assumptions, Barksdale and Harris also highlight the additional issues which
arise out of pioneering new products, which they label infants, and products in declining markets
which they label as either warhorses (high share products in declining markets) or dodos (low
share products in declining markets). The result is combined PLC/product portfolio model. This
approach is based on the notions that both the initial and decline stages of the life cycle are
important and, more specifically, recognizes that product innovations as well as products with
negative growth rates are important and should not be ignored in strategic analysis. The result is
an expanded (2 _ 4) portfolio matrix. The seven-cell matrix is composed of the usual four BCG
categories plus the new categories as outlined.
Warhorses
When a market begins to exhibit negative growth, cash cows become warhorses. These products
still have high market share and hence can still be substantial cash generators. This might require
reduced marketing expenditure or it may take the form of selective withdrawal from market
segments or elimination of certain models.

Dodos
These are products that have low shares of declining markets with little opportunity for growth or
cash generation. The appropriate strategy is to remove them from the portfolio, but if
competitors have already removed themselves from the market it may still be marginally
profitable to remain. Timing is thus crucial.

Infants
These are pioneering products that possess a high degree of risk. They do not immediately earn
profits and consume substantial cash resources. The length of the innovation can vary from a
short time with consumer packaged goods to an extended period with a product that is
innovative enough to require a shift in buying habits.

Barksdale and Harris combined PLC/BCG matrix

Life Cycle Portfolio Matrix

Product life cycle portfolio matrix

Uses and limitations of the product life cycle portfolio matrix
The developers of the matrix claim that it is comprehensive. Regardless of the level of analysis –

corporate, business division or product/market categories – they suggest that the expanded model

provides an improved system for classifying and analysing the full range of market situations.

Classification of products according to this expanded model is meant to reveal the relative

competitive position of products, indicate the rate of market growth and enable the configuration of

strategic alternatives in a general sense if not in specific terms.

The key here is that it is only ‘general’. Barksdale and Harris admit that the new matrix does not

eliminate the problems involved in defining, say, products and markets, or rates of growth. As with

the other strategic planning tools, the benefits a company can achieve are only as good as the inputs

upon which they are based.

It is claimed that it provides an improved framework that identifies the cash flow potential and the

investment opportunity for every product offered by an organization. In addition, it helps

conceptualize the strategic alternatives of all product/market categories of an organization.

The grand strategy selection matrix, also known as the GE–McKinsey matrix, is a strategic

management tool used to evaluate and prioritize various strategic options or business units within a

company. It helps identify which strategies or units have the most potential for growth and

profitability. The matrix was developed by the consulting firm McKinsey & Company in collaboration

with General Electric (GE).

The matrix consists of a two-dimensional grid with the x-axis representing the attractiveness of the

industry and the y-axis representing the competitive strength of the business unit or strategic option.

The industry attractiveness is typically determined by factors such as market size, growth rate,

profitability, competitive intensity, and technological advancements. The competitive strength is

evaluated based on factors like market share, brand reputation, distribution channels, financial

resources, and technological capabilities.

The strategic options or business units are categorized into the following quadrants:

1. Invest/Build: This quadrant represents strategic options or business units with high industry

attractiveness and strong competitive strength. These are considered the most promising

opportunities for investment and growth. Companies should allocate resources to further strengthen

their competitive position and take advantage of the attractive market conditions.

2. Selectivity/Earn: This quadrant represents strategic options or business units with high industry

attractiveness but relatively weaker competitive strength. While they may have growth potential, they

require selective investments and focused efforts to improve their competitive position. Companies

should carefully evaluate these options and consider investing in them if they can enhance their

competitiveness.

3. Harvest/Divest: This quadrant represents strategic options or business units with lower industry

attractiveness but strong competitive strength. These options or units may generate stable cash flow

but have limited growth potential. Companies should consider harvesting profits from these options

or divesting them to redirect resources to more attractive opportunities.

4. Exit/Kill: This quadrant represents strategic options or business units with low industry

attractiveness and weak competitive strength. These options or units are typically not viable and may

even be dragging down the company's overall performance. Companies should consider exiting or

discontinuing these options or units to minimize losses and focus on more promising areas.

The grand strategy selection matrix helps companies assess and prioritize their strategic options based

on industry attractiveness and competitive strength. It provides a visual representation that aids
decision-making, resource allocation, and long-term planning. However, it's important to note that the

matrix should be used in conjunction with other strategic tools and analysis to make well-informed

decisions and consider the specific context of each option or business unit.

When choosing a strategy, there are several behavioral considerations that can influence the decision-
making process. These considerations take into account human psychology and the impact of
cognitive biases, emotions, and organizational culture. Here are some key behavioral factors that can
affect strategy selection:
1. Cognitive biases: Humans are prone to various cognitive biases that can affect decision-making.
Confirmation bias, for example, can lead decision-makers to favor information that supports their
existing beliefs or preconceptions. Anchoring bias may cause decision-makers to rely heavily on the
first piece of information they encounter, even if it's not the most relevant. Being aware of these
biases and actively working to mitigate them is crucial when choosing a strategy.
2. Risk aversion: People tend to be risk-averse, preferring to avoid losses rather than acquire gains.
This can influence strategy selection, as decision-makers may be more inclined to choose conservative
strategies with lower perceived risks, even if more innovative or aggressive strategies may offer higher
potential rewards. Striking a balance between risk and reward is important in strategy formulation.
3. Short-term focus: Humans often have a bias towards short-term thinking and immediate
gratification. This can lead decision-makers to prioritize strategies that deliver quick wins or short-term
financial gains over long-term investments or transformative strategies. Organizations need to
consider the long-term implications of their strategies and avoid succumbing to short-term biases.
4. Emotional influences: Emotions play a significant role in decision-making. Fear, overconfidence,
excitement, and other emotional states can influence strategy selection. For instance, fear may lead to
a conservative approach, while overconfidence can result in the pursuit of overly ambitious strategies
without adequate evaluation. It's important for decision-makers to recognize and manage their
emotions, ensuring that strategies are based on rational analysis rather than emotional biases.
5. Organizational culture: The culture within an organization can heavily influence strategy selection.
Culture shapes norms, values, and beliefs that guide decision-making. If an organization has a risk-
averse culture, it may favor safe and incremental strategies. Conversely, a culture that embraces
innovation and calculated risk-taking may be more inclined towards disruptive strategies. Aligning the
chosen strategy with the prevailing organizational culture can increase the chances of successful
implementation.
6. Group dynamics: Decision-making in organizations often involves group processes and dynamics.
Groupthink, where the desire for consensus overrides critical thinking, can hinder the selection of
alternative strategies. Additionally, power dynamics, hierarchical structures, and social influence can
impact the choice of strategy. Encouraging open communication, diverse perspectives, and
challenging the status quo can mitigate these effects and lead to more effective strategy selection.
Considering these behavioral factors can help decision-makers make more informed and well-rounded
strategic choices. By recognizing and addressing cognitive biases, managing emotions, and fostering a
supportive organizational culture, companies can enhance their ability to select strategies that align
with their goals and drive long-term success.
Culture and Strategic Leadership
Culture plays a crucial role in strategic leadership as it shapes the values, beliefs, norms, and behaviors
within an organization. Strategic leadership refers to the ability of leaders to set a clear vision, make
important decisions, and align the organization's resources and actions to achieve strategic goals.
Here's how culture influences strategic leadership:

1. Vision and Direction: Culture influences the formation and communication of the organization's
vision and direction. Leaders need to consider the existing culture and align their strategic vision with
it. If the organizational culture values innovation and risk-taking, leaders may emphasize bold and
disruptive strategies. Conversely, if the culture is more conservative and risk-averse, leaders may focus
on incremental improvements. Aligning the vision with the cultural values increases acceptance and
commitment from employees.

2. Decision-Making: Culture influences the decision-making process within an organization. In some

cultures, there may be a preference for consensus and collaboration, while in others, decisions may be
centralized and hierarchical. Strategic leaders need to understand the cultural dynamics and adapt
their decision-making approaches accordingly. They may need to foster a culture that encourages
open discussion, diverse perspectives, and the integration of multiple viewpoints to make well-
informed strategic decisions.

3. Risk-Taking and Innovation: Organizational culture can significantly impact the willingness to take
risks and embrace innovation. In a culture that encourages experimentation and learning from
failures, strategic leaders are more likely to pursue innovative and disruptive strategies. Conversely, a
risk-averse culture may hinder the adoption of bold strategies. Leaders play a vital role in shaping the
culture by promoting a supportive environment for risk-taking and learning from failures, fostering
innovation and adaptability.

4. Organizational Values and Behavior: Culture establishes the values and norms that guide behavior
within the organization. Strategic leaders set an example by embodying and reinforcing these values.
They play a crucial role in modeling the desired behaviors and aligning them with the strategic
objectives. By consistently demonstrating and reinforcing the cultural values, leaders create a cohesive
and purpose-driven environment that supports the execution of strategic initiatives.

5. Change Management: Culture can either enable or hinder change initiatives. Strategic leaders need
to understand the existing culture and its potential impact on the change process. They should
consider how to align the strategic changes with the cultural values and manage any resistance or
challenges that may arise. Leaders may need to actively communicate, engage, and involve employees
in the change process, emphasizing the benefits and aligning the change with the cultural fabric of the
organization.

In summary, culture and strategic leadership are closely intertwined. Leaders must be aware of the
existing culture within their organization and leverage it to shape the strategic direction. By aligning
the vision, decision-making processes, risk-taking, and behaviors with the cultural values, strategic
leaders can create an environment conducive to successful strategy execution and organizational
performance.

The structure, culture, and leadership within an organization have a profound impact on its
overall performance and ability to achieve strategic objectives. Let's explore the influence of
each of these elements:
1. Organizational Structure:

- Communication and Collaboration: The structure of an organization determines how information

flows and how departments or teams collaborate. A flat and decentralized structure promotes open
communication, quick decision-making, and cross-functional collaboration, fostering innovation and
agility. In contrast, a hierarchical and centralized structure may hinder communication and slow down
decision-making processes, limiting responsiveness and adaptability.

- Resource Allocation and Efficiency: Structure influences how resources are allocated and utilized. A
well-designed structure ensures the efficient allocation of people, finances, and other resources to
support strategic initiatives. It can facilitate coordination, streamline workflows, and avoid duplication
of efforts. A misaligned or overly complex structure, on the other hand, can create bottlenecks, hinder
resource allocation, and impede the organization's ability to execute its strategy.

2. Organizational Culture:

- Values and Beliefs: Culture encompasses the shared values, beliefs, and norms within an
organization. It shapes employees' behavior, attitudes, and decision-making. A strong culture that
aligns with the strategic objectives can foster a sense of purpose, drive employee engagement, and
reinforce desired behaviors that support the strategy. Conversely, a culture that contradicts or
undermines the strategy can create resistance, conflict, and hinder the organization's ability to
implement strategic initiatives.

- Adaptability and Innovation: Culture influences an organization's ability to adapt to change and
embrace innovation. A culture that encourages experimentation, learning from failures, and embraces
calculated risk-taking promotes innovation and agility. In contrast, a risk-averse or bureaucratic culture
may stifle creativity and hinder the organization's ability to adapt to market dynamics and implement
innovative strategies.

- Employee Engagement and Performance: A positive organizational culture that values employee
well-being, collaboration, and growth fosters higher levels of employee engagement and performance.
Engaged employees are more committed to achieving strategic goals, willing to go the extra mile, and
contribute their best efforts. A toxic or disengaged culture, on the other hand, can lead to low morale,
increased turnover, and diminished performance, undermining the execution of the strategy.

3. Leadership:

- Vision and Direction: Effective leadership provides a clear vision and strategic direction to guide the
organization. Leaders articulate the strategic objectives, communicate the importance of the strategy,
and inspire employees to rally behind the vision. They set the tone for the organization's culture and
align the strategic goals with the values and behaviors they promote.

- Decision-Making and Strategy Execution: Leaders make critical decisions that shape the strategy
and allocate resources accordingly. Their ability to make informed decisions, consider diverse
perspectives, and navigate complexities influences the success of strategy execution. Effective leaders
also establish performance metrics, monitor progress, and hold individuals and teams accountable for
achieving strategic objectives.
 - Change Management: Leaders play a crucial role in leading and managing organizational change.
They must effectively communicate the need for change, address concerns, and provide support
during the transition. They must also model the desired behaviors, champion the change, and create a
supportive environment that fosters employee buy-in and commitment to the strategic initiatives.

The interaction between structure, culture, and leadership is dynamic and interdependent. A well-
aligned structure supports the desired culture, and effective leadership reinforces both structure and
culture. When structure, culture, and leadership are properly aligned with the strategic objectives,
organizations are better positioned to execute their strategy, foster innovation, and achieve
sustainable success.

Functional strategies are specific plans and actions implemented within individual functional areas of
an organization to support the achievement of broader business-level strategies. Functional strategies
focus on optimizing the activities and resources within specific departments, such as marketing,
operations, finance, human resources, and information technology. These strategies are
interconnected with business-level strategies in the following ways:

1. Marketing Strategy:

- Business-Level Strategy Link: Marketing strategies are aligned with the business-level strategy to
achieve the organization's marketing goals. For example, if the business-level strategy is focused on
product differentiation, the marketing strategy may emphasize branding, product innovation, and
targeted marketing campaigns to highlight unique features and benefits.

- Integration: The marketing strategy collaborates closely with other functional areas, such as
operations and finance, to ensure product availability, pricing, and promotion are aligned with the
overall business strategy. Marketing teams provide valuable market insights to inform business-level
strategic decision-making.

2. Operations Strategy:

- Business-Level Strategy Link: The operations strategy is designed to support the chosen business-
level strategy. For instance, if the business-level strategy is based on cost leadership, the operations
strategy may focus on streamlining processes, optimizing supply chains, and improving efficiency to
reduce costs and increase profitability.

- Integration: Operations strategy works in conjunction with other functional areas to ensure
operational capabilities are aligned with the organization's strategic objectives. This involves
collaborating with marketing, finance, and other departments to develop products or services that
meet customer needs, align with marketing initiatives, and are financially viable.

3. Financial Strategy:
 - Business-Level Strategy Link: The financial strategy is closely tied to the business-level strategy, as it
aims to allocate resources effectively, optimize financial performance, and support the organization's
strategic goals. The financial strategy may align with cost leadership, differentiation, or other business-
level strategies.

- Integration: The financial strategy interacts with other functional areas to ensure financial
resources are allocated in line with the business strategy. It collaborates with operations, marketing,
and other departments to develop budgets, financial projections, and investment plans that support
the strategic initiatives.

4. Human Resources Strategy:

- Business-Level Strategy Link: The human resources (HR) strategy is aligned with the business-level
strategy to ensure the organization has the right talent, skills, and culture to execute the strategy
effectively. The HR strategy may focus on talent acquisition, development, and retention in line with
the organization's strategic objectives.

- Integration: The HR strategy works in collaboration with other functional areas to support the
alignment of human capital with the business strategy. This involves partnering with operations,
marketing, and other departments to identify workforce needs, provide training and development
programs, and create a supportive culture that fosters strategic execution.

5. Information Technology Strategy:

- Business-Level Strategy Link: The information technology (IT) strategy is integrated with the
business-level strategy to leverage technology as an enabler for strategic goals. The IT strategy may
focus on digital transformation, data analytics, and systems integration to support the organization's
strategic initiatives.

- Integration: The IT strategy collaborates with other functional areas to ensure technology solutions
align with business requirements. This involves working with operations, marketing, and other
departments to identify IT needs, implement systems that support business processes, and enable
effective data management for strategic decision-making.

Balanced Scorecard
The Balanced Scorecard (BSC) is a strategic management framework that provides a balanced view of
an organization's performance by measuring and tracking key performance indicators (KPIs) across
multiple perspectives. It goes beyond traditional financial metrics and incorporates additional
dimensions to evaluate the overall health and progress of the organization. The four perspectives of
the Balanced Scorecard are:
The Balanced Scorecard framework enables organizations to align their strategic objectives across
these four perspectives, providing a comprehensive view of performance. It helps organizations
balance short-term financial results with long-term strategic goals, while also considering customer
satisfaction, internal processes, and learning and growth initiatives. By tracking a balanced set of
indicators, organizations can monitor progress, identify performance gaps, and make informed
decisions to improve overall performance and achieve strategic success.

How to use it?

See example:

Introduction to
Strategic control
and evaluation
Strategic control and evaluation are essential components of the strategic management process. They
involve monitoring, assessing, and adjusting an organization's strategic activities to ensure they are on
track and aligned with the desired objectives. Strategic control and evaluation provide feedback to
decision-makers, allowing them to make informed adjustments and improve the effectiveness of the
organization's strategy implementation.

Strategic control involves the systematic monitoring and measurement of strategic activities and
outcomes to determine whether they are progressing as planned. It helps identify any deviations or
gaps between the intended strategic direction and the actual performance. Strategic control systems
may include various mechanisms such as performance metrics, regular reporting, reviews, and
feedback loops.

The evaluation of a strategy involves assessing its success in achieving desired outcomes and
objectives. It involves a comprehensive analysis of the organization's performance, including financial
results, market position, customer satisfaction, operational efficiency, and other relevant factors.
Evaluation helps to determine whether the strategy is effective, identify areas for improvement or
adjustment, and inform future decision-making.

The key components of strategic control and evaluation are as follows:

1. Performance Metrics: Establishing relevant performance metrics and key performance indicators
(KPIs) is crucial for monitoring strategic progress. These metrics should be aligned with the
organization's objectives and provide measurable criteria for evaluating success.

2. Regular Reporting: Timely and accurate reporting of performance against established metrics is
necessary for effective strategic control and evaluation. Regular reports allow decision-makers to track
progress, identify trends, and make informed decisions.

3. Feedback and Review: Feedback mechanisms, such as performance reviews, enable managers to
provide input and guidance to individuals and teams responsible for executing the strategy. These
reviews can help identify challenges, address issues, and align efforts with strategic objectives.

4. Strategic Initiatives Review: Regularly reviewing the organization's strategic initiatives allows for the
assessment of their progress and alignment with the overall strategy. It helps determine if
adjustments or corrective actions are necessary to ensure the successful execution of the strategy.

5. Environmental Monitoring: Evaluating the external environment, including market trends,

competitors, and regulatory changes, is essential for assessing the relevance and effectiveness of the
strategy. This monitoring helps identify emerging opportunities and threats that may require strategic
adjustments.

6. Continuous Improvement: Strategic control and evaluation should support a culture of continuous
improvement. It involves learning from successes and failures, identifying best practices, and
incorporating lessons learned into future strategic initiatives.

Effective strategic control and evaluation provide organizations with the necessary information to
assess their performance, make informed decisions, and adapt their strategies as needed. It ensures
that the organization remains agile, responsive to changes in the external environment, and focused
on achieving its long-term objectives.

Strategic Surveillance
key aspects of strategic surveillance:
• Information Gathering: Strategic surveillance involves collecting relevant data and information
from various sources, such as industry reports, market research, government publications,
news articles, social media, and competitor analysis. The information gathered may cover a
wide range of areas, including economic, social, technological, political, legal, and
environmental factors.
• Analysis and Interpretation: Once the information is collected, it needs to be analyzed and
interpreted to identify patterns, trends, and potential implications for the organization. This
analysis helps in understanding the significance of the information and its potential impact on
the organization's strategic objectives.
• Identifying Opportunities and Threats: Through strategic surveillance, organizations can
identify emerging opportunities that align with their strategic goals. These opportunities can
include new market segments, changing customer needs, technological advancements, or
favorable regulatory developments. Additionally, strategic surveillance helps identify potential
threats, such as new competitors, disruptive technologies, changing regulations, or economic
downturns.
• Scenario Planning: Strategic surveillance enables organizations to engage in scenario planning,
which involves developing alternative future scenarios based on different potential outcomes
identified through the surveillance process. Scenario planning helps organizations anticipate
and prepare for different possible futures, allowing them to develop flexible strategies that
can adapt to changing circumstances.
• Decision Support: The insights gained from strategic surveillance provide decision-makers with
valuable information for strategic decision-making. It helps leaders make informed choices
about resource allocation, market entry or expansion, product development, competitive
positioning, and other strategic initiatives.
• Continuous Monitoring: Strategic surveillance is an ongoing process. It requires organizations
to continually monitor the external environment, update their knowledge base, and adjust
their strategies accordingly. The business landscape is dynamic, and new opportunities and
threats can emerge at any time. Regular surveillance helps organizations stay agile and
responsive to changes.