CHAPTER 4- STRATEGIC

PLANNING

By: Prof Shilpa Chadichal

Outline
 Strategic planning.
 Corporate level strategies:
◦ Stability strategy.
◦ Expansion strategy.
◦ Merger strategy.
◦ Retrenchment strategy.
◦ Restructures strategy.
 Business level strategy: SBU (strategic business units), cost
leadership, decentralization.
 SWOT analysis
 Porter’s Five forces Model of competition
 Mckinsey’s 7’s framework
 GE-9 Cell Model.
 Bostan’s Consultancy Model
 value chain analysis, bench marking, service blue printing.
 Strategic Planning
 Strategic planning is a systemic and disciplined
exercise to formulate strategies.
 It relates to the enterprise as a whole or to
particular business units (SBUs).
 It consists of making risk taking decisions-
entrepreneurial decisions for the future with
the best possible knowledge of their probable
outcomes and effects.
A Good Strategic Plan should . . .
• Address critical performance issues.
• Create the right balance between what the
organization is capable of doing vs. what the
organization would like to do .
• Cover a sufficient time period to close the
performance gap.
• Visionary – convey a desired future end state.
• Flexible – allow and accommodate change.
• Guide decision making at lower levels –
operational, tactical, individual.
 Strategic Planning Model- A B C D E
Where we are Where we want to be How we will do it How are we doing

Assessment Baseline Components Down to Evaluate

Specifics

• Environmental • Situation – Past, • Performance • Performance

• Mission & Vision
Scan Present and Future Measurement Management
• Background • Significant Issues • Values / Guiding • Targets / Standards • Review Progress –
Information Principles of Performance Balanced Scorecard
• Align / Fit with • Major Goals • Initiatives and • Take Corrective
• Situational Analysis Capabilities Projects Actions
• SWOT – Strength’s, • Gaps • Specific Objectives • Action Plans • Feedback upstream –
Weaknesses, revise plans
Opportunities,
Threats
Components Major Components of the
Strategic Plan / Down to Action

Strategic Plan

Why we exist Action Plans

Mission
Evaluate Progress

Vision What we want to be

Goals What we must achieve to be successful

Objectives O1 Specific outcomes expressed in measurable

O2
terms

Initiatives Planned Actions to

AI1 AI2 AI3 Achieve Objectives

Measures Indicators and

M1 M2 M3 Monitors of success
Targets T1 T1 T1 Desired level of performance
and timelines
 Difference

Strategic Planning is Project planning Tactical Planning Operational

more Comprehensive involves looking for Is done at the Planning
Strategy- dealt with new markets for Functional level Is essentially concerned
at corporate level and is existing , developing with the existing
concerned mainly with new products, creating It is concerned product market operations
of the business.
the long term Aspects demand for the same More with the
of business. and utilizing the Present than the The scope of this planning
existing facilities , if Future. is restricted to the
It deals with what they have the capacity operations in the market
Business the company to meet the marketing with which the
wants to be in and is and selling Company has built up
concerned mainly with requirements of the A rapport with the existing
the long term aspects new product. range of
Products through the
of business.
facilities which are already
in harness.
 Levels of Strategy
 Corporate –level strategy:
◦ At the corporate level, strategic decisions relate to
organization-wide policies and are most useful in the case of
multi-divisional companies or firms having wide-ranging
business interests.
◦ Corporate strategy applies to the whole enterprise.

 Business unit strategy.

◦ At the business level ,decision- market issues are primarily
concerned with the immediate industry or product-market
issues.
◦ Business strategy defines the choice of product or
service or market of individual business within the firm.
Levels of Strategy
 Functional- level strategy:
◦ It involves decision-making at the operational level
with respect to specific functional areas-production,
Marketing, finance etc.
 Corporate and business level strategies stress
on “doing the right things”.
 Functional strategies stress on “doing things
right”.
 Classification of Strategy

CORPORATE LEVEL BUSINESS LEVEL

STRATEGIES STRATEGIES

Stability
Strategy Cost
Growth
Leadership
Strategy Retrenchment Differen Focused
Strategy -tiation Low Cost
Combination Focused
Strategy Differen-
tiation
CORPORATE LEVEL- STABILITY
STRATEGY
1. The firms should concentrate on utilizing its
present resources so as to develop its
competitive strength within a restricted
product-market configuration.
2. Focus on improvements of functional
performance and maintaining the level of
achievements as in the immediate past.
 STABILITY STRATEGY
 Distinctive elements of stability strategy:-
1) There is no major change in the product or
service line , markets or functions.
2) The focus is on maintaining and developing
competitive advantages consistent with the
present resources and market requirements.
3) The aim is not only to maintain the present level
of performance but also to ensure that the rate
of improvement continuing in the past is
sustained.
WHY STABILITY STRATEGY???
 The firm has succeeded in achieving its
objectives and the level of performance is
considered to be satisfactory.
 The management doesn’t visualize any major
change in the environment.
 Potentially the threats are not so serious and
opportunities not so attractive.
 Resistance to change
 Internal Resource Constraint.
Examples for Stability Strategy
 SAIL has adopted this strategy because of
overcapacity in steel sector.
 Instead it has concentrated on increasing
operational efficiency of its various plants
rather than going for expansion.
 Other industries like heavy commercial
vehicle, coal industry.
 Apart from over capacity, regulatory
restrictions in some industries. Eg Cigarette,
liquor etc.
 Corporate Level- GROWTH
STRATEGY

Concentric

Integration

Diversification

Cooperation

Internationaliz
-ation
Corporate Level- GROWTH STRATEGY
 A growth strategy is one that an enterprise
pursues when it increases its level of
objectives upward in significant increment,
much higher than its past achievement level.
 The most frequent increase indicating a
growth strategy is to raise the market share
or sales objectives upward significantly.
 Eg, Reliance, Nirma
 Why Growth Strategies??
1. In the long run, growth is necessary for the
very survival of the organizations themselves,
particularly when the environment is quite
volatile.
2. Growth offers many economies because of
large scale operations.
3. Growth Strategy is taken up because of
managerial motivation to do so. Managers with
high degree of achievement and recognition
always prefer to grow.
 Concentric Strategy
 It takes place when the products or services
added are in different industry but are similar
to the existing products or service line with
respect to technology or production or
marketing channels or customers.
 Types Of Growth Strategies-
CONCENTRIC
Expand the present line of business aiming at:
i)Market penetration-capture market share in the
existing product and aims at expanding its business at a
rate higher than the industry . Eg. Reliance(product and
markets already exist).
ii) Market development- selling present products in
new markets( geography wise/ segment wise) eg. HUL,
Colgate, Amul etc.
iii) Product development- developing new products
for present markets. Eg SAMSUNG (TV) may offer slim
line TV, Plasma TV, etc
Benefits Of Concentric Strategy
 A firm that is familiar with an industry would
naturally like to invest more in known
business rather than unknown ones. Eg. Bajaj
Auto, hence involves minimal organizational
change.
 It enables the firm to master one or a few
businesses and enable it to specialize by
gaining an in depth knowledge of these
businesses.
 Managers face fewer problems when dealing
with known situations.
 Limitations of Concentric Strategies
 Concentration strategies are heavily
dependent on the industry-Factors like
product obsolescence, fickleness of markets,
and emergence of newer technologies are
threats to concentrated firms.
 This may create an organizational inertia;
managers may not be able to sustain interest
and find the work less challenging and less
stimulating.
Types Of Growth Strategies-
INTEGRATION
 Integration basically means combining
activities related to the present activity of a
firm.
 When firms use their existing base to
expand in the direction of their raw
materials or the ultimate consumers, or,
alternatively they acquire complimentary or
adjacent businesses, integration takes place.
 VERTICAL HORIZONTAL
INTEGRATION INTEGRATION

TYPES OF
INTEGRATION

FORWARD BACKWARD
INTEGRATION INTEGRATION
 Vertical Integration
 Type of growth strategy wherein new products or
services are added which are complementary to the
existing product or service line.
 Any new activity undertaken with the purpose of either
supplying inputs (such as raw materials) or serving as a
customer for outputs (such as, marketing of firm’s
product) is vertical integration.
 A company can grow by taking over functions earlier in
the value chain that were previously provided by
suppliers or other organizations ("backward
integration")
 Advantages- in cost, stability and quality of components,
and making operations more difficult for competitors
 Disadvantages- reduces flexibility, raises exit barriers for
the company to leave that industry, and prevents the
company from seeking the best and latest components
from suppliers competing for their business.
 Vertical Integration
 A company also can grow by taking over
functions forward in the value chain previously
provided by final manufacturers, distributors, or
retailers ("forward integration").
 Advantages- provides more control over such
things as final products/services and
distribution.
 Disadvantage- Involve new critical success
factors that the parent company may not be
able to master and deliver.
 For example, being a world-class manufacturer
does not make a company an effective retailer.
 Examples Of Vertical Integration
 Some of the best known examples of vertical
integration have been in the oil industry. In the
1970s and 1980s, many companies that were
primarily engaged in exploration and the
extraction of crude petroleum decided to
acquire downstream refineries and distribution
networks. Eg Shell, BP
 Dell assembles computers from other firms’
parts, but it has relationships with those firms
that are more binding than the traditional links
between buyer and supplier.
 Examples Of Vertical Integration
 Reliance started its business with textiles and
went for backward integration to produce PFY
( Polyester Filament Yarn) and PSF(
Phosphorus,Sulphur, Fluorine), critical raw
materials for textiles, PTA(pure terapthalic acid)
and MEG(glycol)-raw materials for PSF and PFY,
paraxylene -raw materials for PTA and MEG,
and finally naphtha for producing paraxylene.
 BACKWARD FORWARD
NO INTEGRATION
INTEGRATION INTEGRATION

Raw Material Raw Material Raw Material

Intermediate Intermediate
Manufacturing Intermediate Manufacturing
Manufacturing

Assembly Assembly
Assembly

Distribution Distribution Distribution

End Customer End Customer

End Customer
 Horizontal Integration
 When an organization takes up the same type of
products at the same level of production or
marketing process, it is said to follow a strategy
of horizontal integration.
 Horizontal Integration strategy may be
frequently adopted with a view to expand
i) geographically by buying a competitor’s
business,
ii) to increase the market share or
iii) to benefit from economies of scale
 Examples of Horizontal Integration-
Coke
 Exclusive deals with Burger King & Mc
Donalds
 Purchased Minute maid, Duncan Foods &
Belmont Spring Water
 Acquired Planet Java Coffee Drink Brand
 Acquired Mad river juices and Tea.
 Examples
 A media company’s ownership of radio,
television , newspapers, books and magazines.
 TEXTILE
TEXTILE PRODUCER
PRODUCER

SHIRT SHIRT
MANUFACTURER MANUFACTURER

CLOTHING STORE CLOTHING STORE

Advantages
 achieve economies of scale
 widening the line of products
 decrease in working capital and fixed assets
investment
 getting rid of competition
 minimizing the advertising expenses,
 enhancing the market capability and to get
more dominance on the market.
Disadvantages
 do not have the capacity to ensure the market
about the product and steady or uninterrupted
raw material supply.
 sometimes result in monopoly and absorption
of economic power in the hands of a small
number of commercial entities
 Diversification Strategy
 Diversification is the process of entry into a
business which is new to an organization either
marketwise or technology wise or both.
 Diversification may involve internal or external,
related or unrelated, horizontal or vertical.
 Concentric Diversification: When an organization
takes up an activity in such a manner that it is
related to the existing business defining of one or
more of a firm’s business, either in terms of
customer groups, customer functions or
alternative technologies, it is called Concentric
Diversification.
 Diversification Strategy
 For example: a company in the sewing
machine business diversifies into kitchenware
and household appliances, which are sold to
housewives through a chain of retail stores.
 Diversification Strategy
 Conglomerate Diversification-When an
organization adopts a strategy which requires
taking up those activities which are unrelated to
the existing business defining of one or more of
its business, either in terms of their respective
customer groups, customer functions or
alternative technologies.
For Example:
 – ITC, a cigarette company diversifying into the
hotel industry.
 – Essar Group in shipping, Steel, Energy, Power,
Communications, Shipping Ports & Logistics
 Cooperation Strategy
 This can be done through simultaneous
competition and cooperation among rival
firms for mutual benefit.

MERGER ACQUISITION JOINT STRATEGIC

STRATEGY STRATEGY VENTURE ALLIANCES
 Cooperation Strategy- MERGER

 A merger is a combination of two or more

organizations in which one acquires the assets
and liabilities of the other in exchange for
shares or cash, or both the organizations are
dissolved, and the assets and liabilities are
combined and new stock is issued.
◦ Eg: J.P Morgan and Chase Manhattan to form JP
Morgan chase.
Cooperative Strategy- Acquisition or
Takeover Strategy
 Acquisition or Takeover is the attempt of
one firm to acquire ownership or control
over another firm against the wishes of the
latter’s management.
 Eg: Tata Tea acquired loss making Tetley of UK
in 2000.
Tata Group acquired US telecom
network operator Tyco Global, Daewoo
commercial vehicles and Boston’s Ritz
Carlton Hotel.
Cooperative Strategy-Joint Venture

 Joint Ventures are partnerships in which two or more firms

carry out a specific project or corporate in a selected area
of business.

 It can be temporary; disbanding after the project is finished,

or long-term.

 Ownership of the firms remains unchanged.

 Even a successful joint venture may not last forever. Nor

does the collapse of a joint venture always imply failure.
Cooperative Strategy-Joint Venture

 IBM World Trade Corporation and Tata

Industries Ltd. Created joint venture to form
Tata Information Systems Ltd. The stated
purpose was to make it India’s top
information technology company.
 Vodafone-Essar is a joint venture of Essar
Communication Holdings Ltd and the UK-
based Vodafone Group.
 Cooperative Strategy-Strategic
Alliances
 Strategic Alliance is a combination of the efforts
of two or more organizations to develop
competitive advantage.
 In Strategic Alliance, two or more partners join
hands together for certain specified objectives,
generally, for certain specific period.
 When these objectives are achieved, partners
terminate their alliance.
Cooperative Strategy-Strategic
Alliances
 Examples: Oberoi group of Hotels’ has entered into
Strategic Alliance with ‘Lufthansa Airlines’, ‘Hong Kong
Bank’, and ‘Mercury Travels’.
All these four organizations undertake promotional
activities jointly. Any person who stays in Oberoi
hotels gets bonus point. His bonus point increases if
he travels by Lufthansa, uses Hong Kong Bank facilities,
and engages Mercury Travel’s services. On the basis of
his accumulated bonus points, he gets various prizes
including free air ticket to New York.
 Internationalization Strategy
 International Strategy is a type of expansion
strategy that requires firms to market their
products or services beyond the domestic
or national market
 Firm would have to assess the international
environment, evaluate its own capabilities,
and devise strategies to enter foreign
markets.
Internationalization Strategy
 International Strategy- Firms adopt International
Strategy when they create value by transferring
products and services to foreign markets where
these products and services are not available.
 International firm, by maintaining a tight control
over its overseas operations, offers standardized
products and services in different countries with
little or no differentiation .
 Like IBM, Kellogg, Proctor& Gamble, Microsoft,
etc adopt this strategy for the different countries
they operate in.
 International Strategy Lifecycle
Selling Products or Services Outside a Firm’s Domestic Market

2 Product Demand
Develops and Firm
Exports Products

1 Innovation
Firm Introduces
in Domestic 3 Foreign Competition
Market Begins Production

5
Production Becomes
Standardized and is Relocated to
Low Cost Countries 4 Firm Begins Production
Abroad
Internationalization Strategy- Types
 Multidomestic Strategy- Firm adopts a
Multidomestic Strategy when they try to achieve
a high level of local responsiveness by matching
their products and services offerings to the
national conditions operating in the countries
they operate in.
 Multidomestic firm attempts to extensively
customize their products and services according
to the local conditions operating in the different
countries. Like McDonald, Pizza Hut, Philips,
(innovation from R&D, Product tailored to
individual countries, high quality due to backward
integration)
Internationalization Strategy- Types
 Global strategy-The global firms try to focus
intensively on a low cost structure
 by leveraging their expertise in providing
certain products and services, and
 concentrating the production of these
standardized products and services at a few
favourable locations around the world.
 These products and services are offered in an
undifferentiated manner in all countries the
global firm operates in, usually at competitive
prices.
Global strategy- Source of Competitive
advantage
i) economies of scale from access to more
customers and markets
ii) Exploit another country’s resources
iii) Extend the PLC, older products can be
sold in lesser developed countries.
iv) Operational Flexibility- shift production
as costs, exchange rates etc change over
time.
v) First mover advantage
Example
Matsushita- i) Strong global distribution network
ii) Company wide mission statement that was
followed closely
iii) Financial Control
iv) More applied R&D
v) Ability to get into market quickly
Challenges:-
i) Too much dependency on one product(VCR)
ii) Loss of Non Asian Employees because of glass
ceilings.
Internationalization Strategy- Types
 Transnational Strategy:-Firms adopt a
Transnational strategy when they adopt a
combined approach of low-cost and high
local responsiveness simultaneously for their
products and services.
 Seeks to achieve both global efficiency and
local responsiveness
Transnational Strategy

Germany
Engines
U.S.
CAR
Mexico
Final
Assembly

Malaysia
Trim, seats,
glass
 Strategic choices:
Managing Dual Pressures
Pressures for cost reduction

High

Low

Low High
Pressures for Local Responsiveness
 Strategic choices:
Managing Dual Pressures
Pressures for cost reduction

High

international
Low Strategy

Low High
Pressures for Local Responsiveness
 Strategic choices:
Managing Dual Pressures
Pressures for cost reduction

High
Transnational
Strategy

International
Strategy
Low

Low High
Pressures for Local Responsiveness
International Corporate Strategy
When is each strategy appropriate?
High

Need for Global

Integration

Multi-
Domestic

Low
Low High
Need for Local Market Responsiveness
International Corporate Strategy
When is each strategy appropriate?
High

Global
Strategy

Need for Global

Integration

Multi-
Domestic

Low
Low High
Need for Local Market Responsiveness
International Corporate Strategy
When is each strategy appropriate?
High

Global Trans-
Strategy national

Need for Global

Integration

Multi-
Domestic

Low
Low High
Need for Local Market Responsiveness
Corporate Level – Retrenchment
Strategy
 A strategic option which involves reduction
of any existing product or service line when
the firm’s position is disappointing or its
survival is at stake.
Corporate Level- Combination
Strategy
 Combination Strategies are a mixture of
stability, expansion or retrenchment strategies
applied either simultaneously (at the same time
in different businesses) or sequentially (at
different times in the same business).
 It would be difficult to find any organization
that has survived and grown by adopting a
single ‘pure’ strategy.
 The complexity of doing business demands
that different strategies be adopted to suit the
situational demands made upon the
organization
 The Strategic Management Process

External
Analysis

Strategic Strategy Competitive

Mission Objectives
Choice Implementation Advantage

Internal
Analysis
Business Level Corporate Level
Strategy Strategy

How to Position a Which Businesses

Business to Enter?
in the Market?
Business Level Strategies
 A business level strategy is an integrated and
coordinated set of commitments and actions
designed to provide value to customers and gain a
competitive advantage by exploiting core
competencies in specific, individual product markets.

 These strategies are concerned with a firm’s

business position relative to those of competitors.
 Business-Level Strategy
A successful business model results from
business level strategies that create a
competitive advantage over its rivals.
They must decide on:
1. Customer needs –
WHAT is to be satisfied
2. Customer groups –
WHO is to be satisfied
3. Distinctive competencies –
HOW customers are to be satisfied
These decisions determine
which strategies are formulated & implemented
to put a business model into action.
 Customer Needs: Product Differentiation
• Customer needs
The desires, wants, or cravings that can be
satisfied through product attributes
 Customers choose a product based on:
1. The way the product is differentiated from the other product of its
types
2. The price of the product

Designing products to satisfy customers’ needs in

ways that competing products cannot:
• Different ways to achieve distinctiveness
• Balancing differentiation with costs
• Ability to charge a higher or premium price
 Basis for Customer Segmentation
Consumer Markets
1. Demographic factors (age, income, sex, etc.)
2. Socioeconomic factors
(social class, stage in the family life cycle)
3. Geographic factors
(culture, region or country differences)
4. Psychological factors (lifestyle, personality traits)
5. Consumption patterns
(heavy, moderate, and light users)
6. Perceptual factors
(benefit segmentation, perceptual mapping)
7. Brand loyalty patterns
Identifying Customer Groups and Market
Segments
Three Approaches to Market Segmentation
Implementing the Business Model
To develop a successful business model,
strategic managers must devise a set of
strategies that determine:
◦ How to DIFFERENTIATE their product
◦ How to PRICE their product
◦ How to SEGMENT their markets
◦ How WIDE A RANGE of products to develop
A profitable business model depends on
providing the customer with the most
value while keeping cost structures
viable.
Wal-Mart’s Business Model
Competitive Positioning at the Business Level
Maximizing the profitability of the company’s business
model is about making the right choices with regard to
value creation through differentiation, costs, and pricing.
Generic Business-Level Strategies
Specific business-level strategies that give
a company a specific competitive position
and advantage against its rivals
Characteristics of Generic Strategies
◦ Can be pursued by all businesses regardless of
whether they are manufacturing, service, or
nonprofit
◦ Can be pursued in different kinds of industry
environments
◦ Results from a company’s consistent choices on
product, market, and distinctive competencies
The Four Principal Generic Business-Level Strategies
1. Cost Leadership
Lowest cost structure vis-à-vis competitors
allowing price flexibility & higher profitability
2. Focused Cost Leadership
Cost leadership in selected market niches
where it has a local or unique cost advantage
3. Differentiation
Features important to customers & distinct
from competitors that allow premium pricing
4. Focused Differentiation
Distinctiveness in selected market niches
where it better meets the needs of customers
than the broad differentiators
Cost Leadership
Cost leaders establish a cost structure that
allows them to provide goods and services at
lower unit costs than competitors.

Strategic Choices
• The cost leader does not try to be the industry
innovator.
• The cost leader positions its products to
appeal to the “average” or typical customer.
• The overriding goal of the cost leader is to
increase efficiency and lower its costs relative
to industry rivals.
 Advantages of Cost Leadership Strategies
 Protected from industry competitors by cost
advantage
 Less affected by increased prices of inputs if there are
powerful suppliers
 Less affected by a fall in price of inputs if there are
powerful buyers
 Purchases in large quantities increase bargaining power
over suppliers
 Ability to reduce price to compete with substitute
products
 Low costs and prices are a barrier to entry
Cost leader is able to charge a lower price or is able to achieve
superior profitability than its competitors at the same price.
Disadvantages Cost Leadership Strategies

Competitors may lower their cost

structures.

 Competitors may
imitate the cost
leader’s methods.

 Cost reductions may

affect demand.
Why Focus Strategies Are Different

 

 
 Focus
Generic Business-Level Strategies
The focuser strives to serve the need of a
targeted niche market segment where it
has either a low-cost or differentiated
competitive advantage.

Strategic Choices
• The focuser selects a specific market niche
that may be based on:
➢ Geography
➢ Type of customer
➢ Segment of product line
• Focused company positions itself as either:
➢ Low-Cost or
➢ Differentiator
Advantages: Focus Strategies
• The focuser is protected from rivals to the
extent it can provide a product or service they
cannot.
• The focuser has power over buyers because they
cannot get the same thing from anyone else.
• The threat of new entrants is limited by
customer loyalty to the focuser.
• Customer loyalty lessens the threat from
substitutes.
• The focuser stays close to its customers and
their changing needs.
Disadvantages: Focus Strategies
• The focuser is at a disadvantage with regard to
powerful suppliers because it buys in small
volume but it may be able to pass costs along to
loyal customers.
• Because of low volume, a focuser may have
higher costs than a low-cost company.
• The focuser’s niche may disappear because of
technological change or changes in customers’
tastes.
• Differentiators will compete for a focuser’s
niche.
 Differentiation: Generic Business-Level
Strategies
Companies with a differentiation strategy create a
product that is different or distinct from its
competitors in an important way.

Strategic Choices
• A differentiator strives to differentiate itself on as
many dimensions as possible.
• Differentiator focuses on quality, innovation, and
responsiveness to customer needs.
• May segment the market in many niches.
• A differentiated company concentrates on the
organizational functions that provide a source of
distinct advantages.
Advantages of Differentiation Strategies
 Customers develop brand loyalty.
 Powerful suppliers are not a problem because the
company is geared more toward the price it can charge
than its costs.
 Differentiators can pass price increases on to customers.
 Powerful buyers are not a problem because the product
is distinct.
 Differentiation and brand loyalty are barriers to entry.
 The threat of substitute products depends on
competitors’ ability to meet customer needs.

Differentiators can create demand for their

distinct products and charge a premium price,
resulting in greater revenue and higher
profitability.
Disadvantages of Differentiation Strategies

 Difficulty maintaining long-term

distinctiveness in customers’ eyes.
◦ lively competitors can quickly imitate.
◦ Patents and first-mover advantage are limited.
 Difficulty maintaining premium price.
Corporate Level Strategies
corporate level strategy concerns itself with
the whole corporation as a unit and
consequently, aims to answer the purpose
or the mission of the organization.
Corporate level strategy makers analyze
the commonalities of various business units
and work to add value to the whole system
besides individual growth of participating
business units.
Issues concerning the introduction
of new products or expansion into new
markets or segments are all a part of this
strategic level. Assessing the value of a
business unit in the overall portfolio of
activities is also a corporate level decision
alongside optimal resource allocation
for units.
Business Level Strategies
Business level strategies are essentially
positioning strategies
whereby businesses tend to secure for
themselves an identity and position in the
market.
The aim here is to increase the business
value for the corporate and stakeholders by
increasing the brand awareness and value
perceived by the customers.
they can either focus on pricing or product
differentiation to increase the perceived
customer value.
10 Commandments for Crafting Successful Business
Strategies
1. Always put top priority on crafting and executing strategic moves
that enhance a firm’s competitive position for the long-term and
that serve to establish it as an industry leader.

2. Be prompt in adapting and responding to changing

market conditions, unmet customer needs and buyer
wishes for something better, emerging technological
alternatives, and new initiatives of rivals. Responding
late or with too little often puts a firm in the
precarious position of playing catch-up.
 10 Commandments for Crafting Successful Business
Strategies
3. Invest in creating a sustainable competitive advantage,
for it is a most dependable contributor to above-
average profitability.
4. Avoid strategies capable of succeeding only in the
best of circumstances.
5. Don’t underestimate the reactions and the
commitment of rival firms.
6. Consider that attacking competitive weakness is
usually more profitable than attacking competitive
strength.
7. Be judicious in cutting prices without an established
cost advantage.
 10 Commandments for Crafting Successful Business
Strategies
8. Employ bold strategic moves in pursuing differentiation
strategies so as to open up very meaningful gaps in
quality or service or advertising or other product
attributes.
9. Endeavor not to get “stuck back in the pack” with no
coherent long-term strategy or distinctive competitive
position, and little prospect of climbing into the ranks of
the industry leaders.
10. Be aware that aggressive strategic moves to wrest crucial
market share away from rivals often provoke aggressive
retaliation in the form of a marketing “arms race” and/or
price wars.
 TAILORING STRATEGY TO FIT
SPECIFIC INDUSTRY AND
COMPANY SITUATIONS
Module -3 Strategic analysis and
choice
 Boston Consulting Group Matrix
 The BCG Growth Share Matrix is a portfolio planning
model developed by Bruce Henderson of the Boston
Consulting Group in the early 1970's.
 It is based on the observation that a company's business
units can be classified into four categories based on
combinations of market growth and market share relative
to the largest competitor, hence the name "growth share".
 Market growth serves as a proxy for industry
attractiveness, and relative market share serves as a proxy
for competitive advantage. The growth share matrix thus
maps the business unit positions within these two
important determinants of profitability
Boston Consulting Group Matrix

Relative Market Share

Question
Stars
Marks
Growth
Rate

Cash
Dogs
Cows
The four categories are:
 Dogs : have low market share and a low growth rate and
thus neither generate nor consume a large amount of cash.
However, dogs are cash traps because of the money tied up
in a business that has little potential. Such businesses are
candidates for divestiture.
 Question marks : marks are growing rapidly and thus consume
large amounts of cash, but because they have low market shares they
do not generate much cash.
 The result is a large net cash consumption. A question mark (also
known as a "problem child") has the potential to gain market share and
become a star, and eventually a cash cow when the market growth
slows. If the question mark does not succeed in becoming the market
leader, then after perhaps years of cash consumption it will degenerate
into a dog when the market growth declines.
 Question marks must be analysed carefully in order to determine
whether they are worth the investment required to grow market share.
The four categories are:
 Stars : generate large amounts of cash because of their
strong relative market share, but also consume large
amounts of cash because of their high growth rate;
therefore the cash in each direction approximately nets
out.
 If a star can maintain its large market share, it will become
a cash cow when the market growth rate declines. The
portfolio of a diversified company always should have stars
that will become the next cash cows and ensure future
cash generation.
The four categories are:
 Cash cows : As leaders in a mature market, cash cows
exhibit a return on assets that is greater than the market
growth rate, and thus generate more cash than they
consume.
 Such business units should be "milked", extracting the
profits and investing as little cash as possible. Cash cows
provide the cash required to turn question marks into
market leaders, to cover the administrative costs of the
company, to fund research and development, to service the
corporate debt, and to pay dividends to shareholders.
 Because the cash cow generates a relatively stable cash flow,
its value can be determined with reasonable accuracy by
calculating the present value of its cash stream using a
discounted cash flow analysis.
Conclusion
 Under the growth share matrix model, as an
industry matures and its growth rate declines, a
business unit will become either a cash cow or a
dog, determined soley by whether it had become
the market leader during the period of high
growth.
THANK YOU