Strategic Management-9-4-2023 - 230610 - 212952 - 240324 - 110953

Strategic Management
By
Reema Monga
Assistant Professor
USMS
Strategy
The word ‘strategy’ comes from the ancient Greek word ‘Strategos’, meaning ‘the art of the General’. The term Strategos was
used in military science and implied the plan to win a battle.
A strategy is a plan of action designed to achieve a specific goal or series of goals within an organizational framework.
According to Chandler, Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of
courses of action and the allocation of resources necessary for carrying out these goals. According to William F Glueck,
Strategy is unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprises are
achieved. According to Mintzberg, Strategy is a pattern in a stream of decisions and actions.
● A strategy is all about integrating organizational activities and utilizing and allocating the scarce resources within the
organizational environment so as to meet the present objectives.
● Strategy is the blueprint of decisions in an organization that shows its objectives and goals, reduces the key policies,
and plans for achieving these goals, and defines the business the company is to carry on, the type of economic and human
organization it wants to be, and the contribution it plans to make to its shareholders, customers and society at large.
● Strategy is important because the resources available to achieve goals are usually limited. Strategy generally involves,
setting goals and priorities, determining actions to achieve the goals, and mobilizing resources to execute the actions. A
strategy describes how the ends (goals) will be achieved by the means (resources).
● “Strategy is the direction and scope of an organization over the long-term. It helps achieve an advantage for the
organization through its configuration of resources within a challenging environment, to meet the needs of markets and
fulfill stakeholder expectations.”
Strategy-Examples
Strategic goals:
The success of any business is determined by the effectiveness of the strategy it follows. A strategy explains how a company
plans to compete in a market and how it intends to grow at a profit.
● Create and launch a new product(s)

● Increase customer conversion
● Become market leader
● Sales: Company’s sales growth/Market sales Growth -
● Customer satisfaction
● Gain market position
● Explore new customer segments
● Increase revenues
● Attract investment
● Return on Assets
● Diversified revenue streams
Features of Strategy
● Specialized plan to outperform the competitors.

● Details about how managers must respond to any change in the business environment.
● Redefines direction towards common goals.
● Reflects the concern to effectively mobilize resources.
● Maximizes the organization’s chances to achieve the set objectives.
● Strategic management in a business refers to the planning, management, utilization of resources to define
and achieve objectives efficiently. It also includes a review of internal processes and external factors
impacting the business. It is dynamic process of formulation, implementation, evaluation and control of
strategies.
● Strategic management is the process of setting organizational goals, performing a competitive analysis,
reflecting on a company’s internal structure, and evaluating current strategies. It is the planned use of a
business' resources to reach company goals and objectives. Strategic management requires ongoing
evaluation of the processes and procedures within an organization and external factors that may impact
how the company functions.
● In other words, it is the ongoing planning, monitoring, analysis and assessment of all necessities an
organization needs to meet its goals and objectives. It involves setting objectives, analyzing the
competitive environment, analyzing the internal organization, evaluating strategies and ensuring that
management rolls out the strategies across the organization. Strategic management is not static in nature;
the models often include a feedback loop to monitor execution and to inform the next round of planning.
● Strategic management is all about identification and description of the strategies that managers can carry
so as to achieve better performance and a competitive advantage for the organization. In other words,
Strategic management has two-fold objectives:
○ To gain competitive advantage, with an aim of outperforming the competitors, to achieve dominance
over the market.
○ To act as a guide to the organization to help in surviving the changes in the business environment.
● Strategic management is nothing but planning for both predictable as well as

unfeasible contingencies. It is applicable to both small as well as large organizations as
even the smallest organization face competition and, by formulating and implementing
appropriate strategies, they can attain the sustainable competitive advantage.
● It is a continuous process that evaluates and controls the business and the industries in
which an organization is involved; evaluates its competitors and sets goals and strategies
to meet all existing and potential competitors; and then reevaluates strategies on a
regular basis to determine how it has been implemented and whether it was successful
or does it needs replacement.
Benefits of Strategic Management
Achieving organizational goals takes planning and patience. Strategic management can help companies reach their
goals. Strategic management ensures the steps necessary to reach a business goal are implemented company-wide.
Strategic management offers many benefits to companies that use it, including:
● Sustained Competitive advantage: Strategic management gives businesses an advantage over competitors
because its proactive nature means your company will always be aware of the changing market.
● Achieving goals: Strategic management helps keep goals achievable by using a clear and dynamic process
for formulating steps and implementation.
● Alternative of strategies: It helps the organization to opt for the best strategy options considering all possible
pros and cons of the market environment.
● Formulating Resources: Organizing adequate resources becomes possible only when the management has a
systematic plan regarding what, where and how the resources have to be utilized.
● Stimulates in assessment: To make sure that the strategies and plans of the organization are effective and
efficient; Strategic Management becomes a decisive aspect.
● Sustainable growth: Strategic management has been shown to lead to more efficient organizational
performance, which leads to manageable growth.
● Cohesive organization: Strategic management necessitates communication and goal implementation
company-wide. An organization that is working in unison towards a goal is more likely to achieve that goal.
● Prepare for future: Strategic management means looking toward the company's future. If managers do this
consistently, they will be more aware of industry trends and challenges. By implementing strategic planning
and thinking, they will be better prepared to face future challenges.
Benefits of Strategic Management
Vision in Strategic Management
❖ A vision serves the purpose of stating what an organization wishes to achieve in the long run. According to
Kotler “It is a description of something (an organization, corporate culture, business, technology and act)
in the future. A vision statement looks forward and creates a mental image of the ideal state that the organization
wishes to achieve.
❖ What problem are we seeking to solve?
❖ Where are we headed?
❖ If we achieved all strategic goals, what would we look like 10 years from now?
❖ A vision statement describes what a company desires to achieve in the long-run, generally in a time frame
of five to ten years, or sometimes even longer. It depicts a vision of what the company will look like in the
future and sets a defined direction for the planning and execution of corporate-level strategies.
❖ A Vision Statement describes the desired future position of the company.
❖ In the context of management, a vision is an expression of what the organization wants to become, what it
wants to be, to be known as or to be known for. It is the long-term objective of the organization.
❖ Below are the main elements of an effective vision statement:
❖ 1. Forward-looking
❖ 2. Motivating and inspirational
❖ 3. Reflective of a company’s culture and core values
❖ 4. Aimed at bringing benefits and improvements to the organization in the future
❖ 5. Defines a company’s reason for existence and where it is heading
Vision
Vision Examples
● Tesla: vision statement is "to create the most compelling car company of the 21st
century by driving the world's transition to electric vehicles."
● Amazon: Their vision is “To be the world’s most customer-centric company.”
● Walmart: Their vision is “To become the worldwide leader of all retailing.”
● Nike: Their vision is ““To bring inspiration and innovation to every athlete in the
world.”
● IKEA: Their vision is to “Create better everyday lives for as many people as possible.”
● Unilever: Their vision is "To make sustainable living commonplace."
● Procter & Gamble: Their vision is "Be, and be recognized as, the best consumer
products and services company in the world."
● Pfizer: Their vision is “To be the world's most valued company to patients, customers,
colleagues, investors, business partners, and the communities where we work and
live.”
● Johnson & Johnson: Their vision is “for every person to use their unique experiences
and backgrounds, together – to spark solutions that create a better, healthier world.”
● L’Oreal: Their vision is “Offering all women and men worldwide the best of cosmetics
innovation in terms of quality, efficacy and safety.”
Vision Examples
● Facebook: Their vision is “ People use Facebook to stay connected with friends and family, to discover what’s going on in
the world, and to share and express what matters to them.
● LinkedIn: Their vision is “To connect the world’s professionals to make them more productive and
successful.”
● Google: Their vision is to provide access to the world’s information in one click.”
● Zoom: Their vision is “Video communications empowering people to accomplish more.”
● Wikipedia: Their vision is “A world in which every single person is given free access to the sum of all
human knowledge.”
● Twitter: Their vision is “To give everyone the power to create and share ideas and information instantly,
without barriers.”
● Starbucks: Their vision is “To establish Starbucks as the most recognized and respected brand in the
world.”
● McDonalds: Their vision is “To be the world’s best quick service restaurant experience.”
● Pepsico: Their vision is “Be the global leader in convenient foods and beverages by winning with
purpose.”
● Nestle: Their vision is “To bring consumers safe, high quality foods that provide optimal nutrition.”
● Burger King: vision statement is “to be the most profitable QSR business, through a strong franchise system
and great people, serving the best burgers in the world.”
Mission in Strategic Management
A mission statement is a concise explanation of the organization's reason for existence. It describes the organization's
purpose and its overall intention. A mission statement is a statement of the purpose of the organization. It is a description
of what an organization actually does – what its business is – and why it does it.
A mission statement is a short summary of an organization’s core purpose, focus, and aims. This usually is comprised of a
brief description of what the organization does and its key objectives. The mission statement supports the vision and
serves to communicate purpose and direction to employees, customers, vendors and other stakeholders. Questions
to consider when drafting mission statements could include:
● What is our organization's purpose? Or What do we do?

● Why does our organization exist?
● How do we do?
● Whom do we serve?
A Mission Statement defines the company’s business, its objectives and its approach to reach those objectives. It defines
what line of business a company is in, and why it exists or what purpose it serves. The statement guides the management
team in implementing strategies that help reinforce the company’s identity and achieve its goals.
Mission
Mission statement is important for:
● Informs organization’s stakeholders about its plans and goals;

● Unifies employees’ efforts in pursuing company goals;
● Serves as an effective public relations tool;
● Provides basis for allocating resources;
● Guides strategic or daily decision making;
● Shows that a company is proactive.
Mission Examples
● Google: Their Mission is “To organize the world‘s information and make it universally
accessible and useful.”
● Tesla: Their mission is to accelerate the world's transition to sustainable energy.
● Amazon: Their mission statement is “We strive to offer our customers the lowest possible
prices, the best available selection, and the utmost convenience.
● Nike: Their mission is create groundbreaking sports innovations, make our products
sustainably, build a creative and diverse global team, and make a positive impact in
communities where we live and work.
● Unilever: Their corporate mission is “to add vitality to life. We meet everyday needs for
nutrition, hygiene and personal care with brands that help people feel good, look good and get
more out of life.”
● Burger King: Mission Statement. Burger King's mission statement is to “offer reasonably
priced quality food, served quickly, in attractive, clean surroundings.”
● Facebook: Their mission is “To give people the power to share and make the world more
open and connected.”
● Procter & Gamble: Their mission statement is “We will provide branded products and
services of superior quality and value that improve the lives of the world’s consumers, now
and for generations to come.
Vision Vs Mission
● A vision statement focuses on tomorrow and what an organization
ultimately wants to become. A mission statement focuses on today and
what an organization does to achieve it.
● A vision statement is one that tells the desired future position of the
entity. On the other hand, a mission statement expounds the entity’s
business, its goals and approach to reach the goals.
● A vision statement shows where we want to be? While Mission statement
shows where we are at present?
● The Vision Statement shows the company’s future aspirations whereas the
Mission Statement explains the company’s core purpose.
Strategic Management Process
Strategic Management Process
Stages of Strategic Management Process
1. Strategic Objectives and Analysis (Environmental Scanning): Strategic
management process begins with the development of corporate vision,
mission and objectives. In other words, the first step is to define the vision,
mission, and values statements of the organization. The first step in strategic
management is evaluating the company’s current direction. This is done in
combination with the external analysis of the business environment
(PESTLE) and internal analysis of the organization. The first step involves
environmental scanning which is a process of collecting, securitizing and
providing information for strategic purpose. It helps in analysing internal
and external factors influencing an organization. After executing the
environmental analysis process, management should evaluate it on a
continuous basis and strive to improve it.
2. Strategy Formulation: It is the process of deciding best course of action for achieving
organizational objectives after conducting environmental scanning process, managers formulate
business, functional and global strategies. Formulating a strategy is an important step to enhancing
organisational position and building competitive advantages not only in the national but also in the
global arena. Strategy formulation is the development of long-range plans for the effective
management of environmental opportunities and threats. Strategy formulation include deciding
what new businesses to enter, what businesses to abandon, how to allocate resources, whether to
expand operations or diversify, whether to enter international markets, whether to merge or form a
joint venture, and how to avoid a hostile takeover.
Because, every organization has limited resources, strategists must decide which
alternative strategies will benefit the firm most. Strategy formulation decisions commit on
organization to specific products, markets, resources and technologies over an extended
period of time. Strategies decide long-term competitive advantages.
3. Strategy Implementation: Sometimes referred to as strategic execution, this stage is when
the planning stops and the action begins. It is frequently called as the action stage of
Strategic Management. Strategy implementation implies putting the organization’s chosen
strategy in to action and making it work as intended.
Strategy implementation includes designing the organization’s structure, distributing

resources, developing decision making process, and effectively managing human resources.
Everyone in the organization should be aware of his or her particular assignments,
responsibilities and authority.
4. Strategy Evaluation: The final step in the strategic management process is
evaluating results. How effective have the strategies been? What adjustments, if any,
are necessary? Such adjustments improve the company’s competitiveness. All
strategies are subject to future modification because external and internal factors are
constantly changing. Strategy evaluation comprises of three important fundamental
activities:
● Reviewing external and internal factors that are the bases for current strategies
● Measuring performance, and
● Taking remedial/corrective actions.
Evaluation assure the management that the organizational strategy as well as its
implementation meets the organizational objectives. Thus, evaluation and control is
the process by which corporate activities and performance results are monitored so
that actual performance can be compared with desired performance.
Mintzberg’s 5 Ps of Strategy
The 5 P’s of Strategy model was developed by the Canadian management scientist Henry Mintzberg
with an objective to develop five distinguished strategic visions for the organizations. The Five
strategic visions are Plan, Pattern, Position, Perspective, and Ploy. All the five components
allow the organizations to implement the strategy in a more effective manner. The 5 Ps of Strategy is a
theory used in business to help companies better define their strategy and therefore, each P relates to a
different approach for assessing a strategy.
1) Strategy as a Plan
● It is always better for the organizations to have a plan of action much in advance
to be prepared for any unforeseen internal and external situations. And a
well-planned strategy is a plan to deal with such situations. The purpose of the
plan is to get you from where you are now to where you want to be.
● A plan needs to be made with a long-term and a futuristic approach in mind with
its execution and development followed up in a detailed manner. All plans have
two characteristics: they are developed purposely and in advance.
● The business goals and objectives can be attained with a good plan plus it enables
the management and the key employees of the company with a clear vision and
mission in hand.
2) Strategy as Ploy
● You can think of a ploy as being something to get the better of a competitor. In business,
there is no way to avoid competitors. Ploys are specific tactics to try and outsmart or disrupt
what your competitors are doing.
● The second strategic choice involves a ploy that outsmarts the competition and delights
customers. Mintzberg says that getting the better of competitors, by plotting to disrupt,
dissuade, discourage, or otherwise influence them, can be part of a strategy.
● For example, a business could open a new branch in a specific, developing area, in order to
stop a competitor business opening a shop there and tapping into the new market.; or a
telecommunications company might buy up patents that a competitor could potentially use
to launch a rival product.
● Ploy is about specific actions within your strategy that relate to the competition. It might be
to disrupt them, take market share from them. The purpose of Ploy is to ensure you have
considered your competitive strategy and have a plan to get the better of the competition
through a specific, chosen approach.
● The facet of ploy is also one of the strategic options to beat the competition in the market
and gain the advantage. In this scenario, the organizations can come up with something
very outlandish and unexpected and surprise the market environment that also outsmarts the
minds of the competitors.
●
3) Strategy as Pattern
● Strategy as a pattern is about looking at what kind of behavior patterns have worked for you
in the past. It is then about deciding which of these patterns you want to continue or
enhance.
● Take advantage of patterns that have been implemented before and have achieved the
desired result. Instead of reinventing the wheel, this approach allows you to develop a
strategy quickly using tried and true methods. Pattern is about taking advantage of
observed successful behaviours that contribute to strategic success.
● As mentioned earlier, the aspect is the plan in the 5 P’s of Strategy model by Mintzberg
focuses on the intended strategy but the aspect of pattern comes into the picture where the
strategies have already been implemented. The earlier patterns that have worked wonders
for the organization before are an integral part of developing the new strategy.
● The regular pattern that has been quite successful in nature is used in the decision making
flow and process i.e. the strengths of such patterns are included in the future strategies.
there is a consistent positive behavior of employees and internal teams is displayed towards
these patterns and are well accepted.
4) Strategy as Position
● "Position" is another way to define strategy – that is, how you decide to position
yourself in the marketplace, i.e how the organization wants to portray itself in the
market and will gain a competitive advantage.
● What will be the core values, unique selling propositions, nature and attributes of
the offerings of products and services, and the overall brand strength and value
proposition? Working on all these factors in a detailed manner will help the
organization carve a distinctive position in the market with an edge over others.
● The aspect of position in formulating the organizational strategy needs to be
carefully understood, designed, planned, and executed as it will define the overall
position of the organization in the market considering all the internal and external
factors.
● For example, Being the cheapest, having the most features, world- beating customer
service. your strategy might include developing a niche product to avoid
competition, or choosing to position yourself amongst a variety of competitors,
while looking for ways to differentiate your product and services.
5) Strategy as Perspective
● Perspective is about the bigger picture for a company. It incorporates the views
of employees, customers, suppliers, competitors, and is used to establish how
the company is perceived.
● While an organization may have a clear idea about what they represent, it’s
important to also know how your target audience perceives you. Similarly, how
do your employees and stakeholders see you?
● This brand perception and overall culture feeds into your strategic decisions and
helps you understand if you can effectively execute your chosen objectives. It is
about understanding the profile of your business, being realistic about the type of
organization you are, to ensure your strategy is in line with your capabilities and
appropriate to your situation.
External Environment Analysis
An external environment is composed of all the outside factors or influences that impact the operation
of business. The business must act or react to keep up its flow of operations. The external environment
can be broken down into two types: the micro environment and the macro environment.
Types of External Environments
● Micro Environment, Micro environment refers to the environment which is in direct contact
with company and affects the routine activities of business straight away. It is a collection of
forces or factors that are close to the organization and can influence the performance as well as
the day to day activities of the firm. The micro environment consists of the factors that directly
impact the operation of a company. The factors or elements in a firm's immediate environment
which affect its performance and decision-making; it include the firm's suppliers, competitors,
marketing intermediaries, customers and publics.
● The macro environment consists of general factors that a business typically has no control over.
The success of the company depends on its ability to adapt. It includes major uncontrollable
external forces (economic, demographic, technological, natural, social and cultural, legal and
political) which influence a firm's decision making and have an impact upon its performance.
Environmental Analysis or scanning
The purpose of the scan is the identification of opportunities and threats affecting the business for
making strategic business decisions. As a part of the environmental scanning process, the
organization collects information regarding its environment and analyzes it to forecast the impact
of changes in the environment. This eventually helps the management team to make informed
decisions.
● Environmental scanning is a constant and careful analysis of the internal and external environment
of an organization in order to detect opportunities, threats, trends, important lessons, and
weaknesses which can impact the current and future strategies of the organization.
● Environmental scanning is an important part of the business process as it is the responsibility of an
organization to keep a check on things which can put negative impacts on their business and their
consumers.
● Identifying these factors allows you to respond appropriately by creating strategies to combat
potential threats before they affect the company, make optimal decisions based on changing
market landscapes and develop strategies that meet the marketplace demands in your industry.
● Environmental scanning helps companies of every size from small, locally-owned shops to
multinational corporations.
Micro Environment
Microenvironment refers to the environment which is in direct contact with the business organization
and can affect the routine activities of business straight away. It is associated with a small area in
which the firm functions. The microenvironment is a collection of all the forces that are close to the firm.
These forces are very particular for the said business only. They can influence the performance and
day to day operations of the company.
Micro Environment
1. Customers
The customers are the central part of any business as they tend to attract and retain
most of the customers to generate revenue. Therefore, organizations must adopt a
strategy that attracts the potential customers and retains the existing customers by
taking into consideration the wants and needs of customers and by providing the
after sales services and value-added services. Customers are people who buy an
organization’s products/services. In simple words, an organization cannot survive
without customers.
2. Competitors
The competitors of an organization can have a direct impact on business strategies.
The organization must know how to do a competitive analysis of competitors and have
a competitive advantage. An organization must understand, what value added
services their competitor is providing or the unique selling point of their competitors.
How they can differentiate from their competitors. What benefits a company can offer
to the customers which competitors does not offer.
Micro Environment
2. Competitors
Every business has competition. Competitors are other organizations that compete with each
other for both resources and markets. Hence, it is important that an organization is aware of its
competitors and in a position to analyze threats from its competition. A business must be aware of
its competitors, their strengths and weaknesses, and the most aggressive and powerful
competitors at all times.
Further, an organization can have direct or indirect competitors. When organizations are
involved in the same business activity, they compete for both resources and markets. This is
Direct Competition.
For example, Pantene and Sunsilk shampoo companies are direct competitors. On the other
hand, a five-star holiday resort and a luxury car company are Indirect competitors since they
offer different products but vie for the same market.
Micro Environment
3. Organization
One of the most important aspects of the micro environment of an organization is the
self-analysis of the organization itself. It must understand its own strengths and
weaknesses, objectives and goals of the business, and resource availability. The following
elements of an organization can affect its performance:
● Owners – People who have a major shareholding in the organization and have
vested interests in the well-being of the company.
● Board of Directors – The board of directors is elected by the shareholders for
overseeing the general management of the business and ensuring that the
shareholder’s interests are met.
● Employees – People who work in the organization are major contributors to its
success. It is important that all employees embrace the organization’s goals and
objectives.
Micro Environment
4. Suppliers
Actions of a supplier can influence the business strategy, as they provide the materials for production.
For instance, if their services will not reasonable and timely that will affect the production time and the
sales due to delayed process of production. Suppliers are another important component of the micro
environment. Organizations depend on many suppliers for equipment, raw material, etc. to maintain
their production. Suppliers can influence the cost structure of the industry and are hence a major
force.
Example
If the supplier increases the prices of raw material they provide to the company, it will impact strategy of
an organization, which will end-up with the increase in price of finished goods. Therefore keeping a
strong relation with supplier can help a company in getting an edge over competitors
Micro Environment
5. Marketing Intermediaries:
Market intermediaries are either individuals or business houses who come to the aid of
the company in promoting, selling and distributing the goods to the ultimate
consumers. They are Middlemen (wholesalers, retailers and agents), distributing
agencies, market service agencies and financial institutions. Most of the companies find,
it is too difficult to reach the consumers. In such a cases the agents and distribution
firms help to reach the product to the consumer.
Macro Environment
When a firm operates in an economy and a society, there are factors in its environment that it has
no control over. These are elements of its macro environment or its general external environment.
Macro environment is the remote environment of the firm, i.e the external environment in which it
exists. As a rule this environment is not controllable by the firm, it is to huge and to
unpredictable to control.
Macro Environment
1. Political factors include tax policy, environmental regulations, trade restrictions and
reform, tariffs, and also political stability. These factors determine the extent to which a
government may influence an industry or a company. For example, the government may
bring new tax reforms that might change the whole revenue-generating system of a company.
2. Economic factors include economic growth/decline, interest, exchange, inflation and wage
rates, minimum wage, unemployment (local and national), credit availability, and cost of
living. These factors are determinants to an economy’s performance that directly impacts a
company and also have long term effects. For example, a rise in the inflation rate of any
economy would affect the way companies price their products and services. Besides, it
would also affect the purchasing power of a consumer and may result in a change in
demand/supply models for that economy
3. Social factors include cultural norms and expectations, religion, brand preferences, health
consciousness, demographics, age distribution, career attitudes, health, and safety.
Macro Environment
4. Technological factors mean the innovations and developments in technologies. These factors impact an
organization’s operations. Several new developments like Artificial Intelligence, Machine Learning, Deep
Learning, are being made in the technology field and if a company fails to match up the trend it may lose its
position in the market.
5. Legal factors: Legal factors may affect both the internal and external environment of a company. The
legal and regulatory environment can affect the policies and procedures of an industry, and can control
employment, safety and regulations.Legal factors can include: Employment laws, consumer protection,
industry specific resolution, regulatory bodies and environmental regulation
6. Environmental factors: These factors are mainly concerned with the effect of the surrounding
environment and the influence of ecological aspects. These include waste disposal laws, environmental
protection laws, energy consumption regulation.
Macro Environment
Porter’s Five Forces
Porter’s five forces model: It is an analysis tool that uses five industry forces to determine
the intensity of competition in an industry and its profitability level.
Five forces model was created by M. Porter in 1979 to understand how five key competitive forces
are affecting an industry. Michael Porter (Harvard Business School Management Researcher)
designed various vital frameworks for developing an organization’s strategy. One of the most renowned
among managers making strategic decisions is the five competitive forces model that determines
industry structure.
These forces determine an industry structure and the level of competition in that industry. The
stronger competitive forces in the industry are the less profitable it is. An industry with low
barriers to enter, having few buyers and suppliers but many substitute products and competitors will
be seen as very competitive and thus, not so attractive due to its low profitability. According to Porter,
the nature of competition in any industry is personified in the following five forces:
The application of Porter’s model is quite straightforward it requires you to answer 5 simple questions to determine
the strength of your position within the market you are analyzing. These questions relate to the five forces that are
applied in the model.
● Force 1 – What is the threat of new entry to this market?

● Force 2 – How much power do buyers have within the market?
● Force 3 – What is the threat of a substitute product in the market?
● Force 4 – What power do suppliers have within the market?
● Force 5 – What competitive rivalries and alliances exist within the market?
1. Threat of new entrants: If a market is particularly profitable and there is a higher
demand than supply, it is more likely to attract new entrants. This increases the competition
and decreases the level of profitability for companies already in the market. This threat can be
managed in various ways, including; patents, brand persona, government policy and
regulation.
This force determines how easy (or not) it is to enter a particular industry. If an industry is
profitable and there are few barriers to enter, rivalry soon intensifies. In other words,
Industry seems attractive, the likelihood of new entrants entering into it is high. And if a
large number of new entrants step in, it will lower profitability across the industry and the
attractiveness will decline. The position of existing businesses is higher if there are
significant barriers to entering the market. If an industry has low entry-barriers, the threat
of new entrants will be high resulting in the industry being less attractive. When more
organizations compete for the same market share, profits start to fall.
1. Threat of new entrants:
It is essential for existing organizations to create high barriers to enter to deter new
entrants. Threat of new entrants is high when:
● Low amount of capital is required to enter a market;

● Existing firms do not possess patents, trademarks or do not have
established brand reputation;
● There is no government regulation;
● Customer switching costs are low (it doesn’t cost a lot of money for a
firm to switch to other industries);
● There is low customer loyalty;
● Products are nearly identical;
● Economies of scale can be easily achieved.
3. Bargaining power of buyers: Buyers refer to the customers who finally consume the product or
the firms who distribute the industry’s product to the final consumers. Buyers have the power to
demand lower price or higher product quality from industry producers when their bargaining
power is strong. Lower price means lower revenues for the producer, while higher quality products
usually raise production costs. Both scenarios result in lower profits for producers. Buyers exert
strong bargaining power when:
● They purchase large volumes making a concentration of buyers,

● Only few buyers exist;
● Switching costs to other supplier are low;
● There are many substitutes i.e. the product is undistinguishable and can be
replaced by substitutes,
● Customers could produce the product themselves,
● Buyers are price sensitive.
2. Bargaining power of suppliers: Suppliers refer to the firms that provide inputs to the
industry. Bargaining power of the suppliers refer to the potential of the suppliers to increase
the prices of inputs( labour, raw materials, services, etc) or the costs of industry in other ways.
Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to
their buyers. This directly affects the buying firms’ profits because it has to pay more for
materials. Suppliers have strong bargaining power when:
● The market is controlled by a few large suppliers and not a fragmented

source of supply or there are few suppliers but many buyers;
● There are no or few substitute for the raw materials exist,
● Suppliers are large and threaten to forward integrate;
● Suppliers hold scarce resources;
● Cost of switching from one supplier to another for raw materials is
especially high.
4. Threat of substitutes: Porter’s threat of substitutes definition is the availability of a product that the
consumer can purchase instead of the industry’s product. A substitute product is a product from another
industry that offers similar benefits to the consumer as the product produced by the firms within the
industry.
The availability of a substitution threat affects the profitability of an industry because consumers can
choose to purchase the substitute instead of the industry’s product. The availability of close substitute
products can make an industry more competitive and decrease profit potential for the firms in the industry.
On the other hand, the lack of close substitute products makes an industry less competitive and increases
profit potential for the firms in the industry. A threat of substitutes example is the beverage industry due to a
market with many competitors.
This force is especially threatening when buyers can easily find substitute products with attractive prices
or better quality and when buyers can switch from one product or service to another with little cost.
For example, to switch from coffee to tea doesn’t cost anything, unlike switching from car to bicycle. If
there are alternative options available in your market or other markets that could meet the same needs
as your products or services.
5. Rivalry among existing competitors: Rivalry refers to the competitive struggle for
market share between firms in an industry. Extreme rivalry among established firms poses a
strong threat to profitability. This force is the major determinant on how competitive and
profitable an industry is. In competitive industry, firms have to compete aggressively for a
market share, which results in low profits. Rivalry among competitors is intense when:
● There are many competitors i.e. there are many number of players of almost the
same size,
● Exit barriers are high;
● Industry of growth is slow or negative;
● Products are not differentiated and can be easily substituted;
● Low customer loyalty.
Porter's generic strategies
Porter's generic strategies: The strategies developed by Michael Porter describe how the
company achieves the competitive advantage in a chosen market scope. The company focuses on
one type of competitive advantage, either via low prices or by distinguishing itself from the
other companies through specific characteristics that are valuable for the customers. The
company also chooses the area of focus, either providing the services to the selected market
segments or focusing on the industry-wide scale.
It describe how a company pursues competitive advantage across its chosen market
scope. Porter's generic strategies are ways of gaining competitive advantage – in other
words, developing the "edge" that gets you the sale and takes it away from your
competitors.
The generic strategy reflects the choices made regarding both the type of competitive
advantage and the scope. A competitive advantage is an advantage over competitors
gained by offering consumers greater value, either by means of lower prices or by
providing greater benefits and services that justifies higher prices.
.
Porter’s strategy targets the three main dimensions: cost leadership, differentiation, and
focus. It is essential to pay attention to one direction to prevent the waste of the company’s
resources. According to the cost leadership strategy, the company offers low prices targeting
all industry segments. The differentiation strategy implies targeting customers in quality,
service, or characteristics other than the price. If the company follows the focus strategy,
it concentrates its efforts on one or several narrow market segments. The company either
offers lower costs within the chosen segment or differentiates itself through product and
service features.
Porter's generic strategies-Cost Leadership
1. Cost leadership strategy: It means that a company decreases its costs and is, therefore,
able to establish lower prices than its competitors. Cost Leadership is the mechanism of
establishing a competitive advantage by having the lowest cost of operation in the
industry. The goal is to be the low-cost producer in the industry. In other words, it refers to
the strategy that an organization uses to project itself as the cheapest provider of a given
product. It’s a marketing strategy highly effective in improving market share and
capturing the attention of customers.
This strategy is especially beneficial in a market where the price is an important factor. The
primary objective of a firm aiming to attain cost leadership is to become the lowest cost
producer in comparison to the competitors. This is usually achieved by large scale production
which enables the firm to attain economies of scale or by innovating the production process.
Here are a few cost leadership strategies through which one can establish and maintain an upper
hand: High level of productivity (economies of scale), high capacity utilization, use of
bargaining power to negotiate the lowest prices for production inputs, Lean production (JIT).
Porter's generic strategies-Cost Leadership
A company pursuing a Cost Leadership strategy aims to establish a competitive advantage
by achieving the lowest operational costs in their sector. When a business provides the same
products and services as its competitors, at a lesser cost than its competitors.
A low-cost position also means that a company can undercut competitors’ prices through for
example penetration pricing and can still offer comparable quality against reasonable profits.
Low-cost producers typically sell standard no-frills products or services.
Some cost leadership examples include McDonald’s, Walmart, Primark and IKEA.
Cost Leadership is a type of competitive strategy with which a company aggressively seeks
efficient large-scale production facilities, cuts costs, uses economies of scale, gains production
experience and employs tight cost controls to be more efficient in the production of products or
the offering of services than competitors..
Porter's generic strategies-Differentiation Strategy
2. Differentiation leadership advantage: Differentiation strategy is a type of

strategy aimed at distinguishing a product or service from similar products on the
market offered by competitors. This strategy is developed by businesses to provide
something unique and distinct from the other offerings to ensure a competitive edge.
Differentiation is a type of competitive strategy with which a company seeks to
distinguish its products or services from that of competitors: the goal is to be
unique. A company may use creative advertising, distinctive product features, higher
quality, better performance, exceptional service or new technology to achieve a
product being perceived as unique. Examples of such companies are BMW and
Apple, Starbucks, Nike, Nespresso. These brands focus on developing innovative
products for the broad market. Consumers purchase their products at premium prices
because of their unique characteristics - the driver’s experience for BMW or the
elegant design and user experience for Apple.
Porter's generic strategies-Differentiation Strategy
A differentiation strategy can reduce rivalry with competitors if buyers

are loyal to a company’s brand. In other words, companies with a
differentiation strategy therefore rely largely on customer loyalty. Because of
the uniqueness, companies with this type of strategy usually price their
products higher than competitors. For example: Superiors product quality
(features, benefits, durability, reliability), Branding (strong customer
recognition and desire, brand loyalty).
Porter's generic strategies-Focus Strategy
3. Focus Strategy: Focus is a type of competitive strategy that emphasizes

concentration on a specific regional market or buyer group: a niche. Focus
strategy or niche strategy, in the simplest term, means focusing on a narrow and specific
segment in the market. The idea behind the focus strategy is to develop, market, and sell a
specific product to a specific group of customers.
The company will either use a differentiation or cost leadership strategy, but only for a
narrow target market rather than offering it industry-wide. The company first selects
a segment or group of segments in an industry and then tailors its strategy to
serve those segments best to the exclusion of others. Like mentioned, the focus
strategy has two variants: Differentiation Focus and Cost Focus.
Focus strategies (focus differentiation and focus cost leadership) required companies
to only sell their products and services to a narrowly-defined market niche.
Examples of Focus Strategy

Diet Coke-Coca Cola
A very common and probably a global example of the focus strategy is “diet coke” by the
coca-cola company. The company made this product specifically for people having diabetes or
similar issues. Moreover, diet coke was an excellent addition for those who prefer low-sugar
beverages.
Cost Focus
When the organization is implementing the cost focus strategy, they are aiming a niche market
with a little competition. This is more a focused market segment and the product will be
provided to the market with the lowest possible price. It is importance for the organization to
choose the niche market correctly and provide to the market. That will create repeat customers and
the products cost will remain low.
Differentiation Focus
When an organization is providing its product to the market using the differentiation focus,
they select a niche market and provide a unique product to that market. This involves a
powerful brand loyalty of the customers to the product. It is highly important to make sure the
product features remain unique as the customer loyalty is based on the uniqueness of the product.
Example: Porsche, Rolls Royce.
Grand Strategies
The grand strategies are concerned with the decisions about the allocation and
transfer of resources from one business to the other and managing the business
portfolio efficiently, such that the overall objective of the organization is achieved. In
doing so, a set of alternatives are available to the firm and to decide which one to
choose, the grand strategies help to find an answer to it.
These are the corporate level strategies designed to identify the firm’s choice with
respect to the direction it follows to accomplish its set objectives. Simply, it involves
the decision of choosing the long term plans from the set of available alternatives. The
Grand Strategies are also called as Master Strategies or Corporate Strategies.
Grand Strategies
Grand Strategies: Stability Strategies
1. The Stability Strategy: It implies continuing the current activities of the firm without any
significant change in direction. If the environment is unstable and the firm is doing well, then
it may believe that it is better to make no changes. A firm is said to be following a stability
strategy if it is satisfied with the same consumer groups and maintaining the same market
share, satisfied with incremental improvements of functional performance and the management
does not want to take any risks that might be associated with expansion or growth.
Generally, the stability strategy is adopted by the firms that are risk averse, usually
the small scale businesses or if the market conditions are not favorable, and the
firm is satisfied with its performance, then it will not make any significant changes in its
business operations. Also, the firms, which are slow and reluctant to change finds the stability strategy
safe and do not look for any other options.
It is adopted when the organization attempts to maintain its current position and
focuses only on the incremental improvement by merely changing one or more of its business
operations in the perspective of customer groups, customer functions and technology alternatives, either
individually or collectively.
a. The No-Change Strategy, as the name itself suggests, is the stability
strategy followed when an organization aims at maintaining the
present business. Simply, the decision of not doing anything new and
continuing with the existing business operations and the practices referred
to as a no-change strategy.
Generally, the small or mid-sized firms catering to the needs of a niche
market, which is limited in scope, rely on the no-change strategy. This
stability strategy is suitable till no new threats emerge in the market, and the
firm feels the need to alter its present position.
There should be a clear distinction between the firms which are inactive and
do not want to make changes in their strategies and the ones which
consciously decides to continue with their present business by scrutinizing
both the internal and external conditions.
b.The Profit Strategy: It is followed when an organization aims to maintain the
profit by whatever means possible. Due to lower profitability, the firm may cut
costs, reduce investments, raise prices, increase productivity or adopt any methods to
overcome the temporary difficulties.
C. The Pause/Proceed with Caution Strategy: Some organizations pursue stability
strategy for a temporary period of time until the particular environmental situation
changes. Sometimes, firms that wish to test the ground before moving ahead with a
full-fledged grand strategy employ stability strategy first. It is well understood by the
name itself, is a stability strategy followed when an organization wait and look at
the market conditions before launching the full-fledged grand strategy. The
pause/proceed with caution strategy is often followed by the manufacturing
companies who study the market conditions thoroughly and then launch their
new products into the market.
Grand Strategies: Expansion Strategies
2.The Expansion Strategy is adopted by an organization when it attempts to achieve a
high growth as compared to its past achievements. In other words, when a firm aims to
grow considerably by broadening the scope of one of its business operations in the
perspective of customer groups, customer functions and technology alternatives, either
individually or jointly, then it follows the Expansion Strategy. The reasons for the
expansion could be survival, higher profits, increased prestige, economies of scale,
larger market share, social benefits, etc.
An expansion strategy is synonymous with a growth strategy. A firm seeks to achieve
faster growth, compete, achieve higher profits, grow a brand, capitalize on economies
of scale, have greater impact, or occupy a larger market share. This may entail
acquiring more market share through traditional competitive strategies, entering new
markets, targeting new market segments, offering new product or services, expanding or
improving current operations.
a. Expansion through Concentration: This involves focusing resource allocation and
operational efficiency on one or a select group of business units or core business
functions. Concentration might include: penetrating an existing market with an existing
value proposition; developing a new market by attracting new customers to an existing
value proposition; developing a new value proposition to introduce in the existing market.
The benefits of expansion through concentration is that it allows the firm to focus on
areas where it already has operations and a level of competency. It is comfortable
to avoid major changes in operations while employing existing knowledge. This type of
strategy can be risky from the standpoint of putting too many eggs in one basket.
Changes in the market (price fluctuations, customer sentiment, new value propositions,
etc.) may cause the strategy to be unsuccessful.
Expansion through Concentration: This is also known as focus or intensification
strategy, implying that an organization would like to concentrate more on the business
that it is already doing.
The expansion can be followed by adopting the following means:
i. Market Penetration – Implies selling more products in the same market.
ii. Market Development – Involves identifying the new markets for selling the
existing products.
iii. Product Development – Refers to selling new products in the existing markets.
b. The Expansion through Diversification is followed when an organization aims at changing the
business definition, i.e. either developing a new product or expanding into a new market, either
individually or jointly. A firm adopts the expansion through diversification strategy, to prepare itself
to overcome the economic downturns. In simple words, it means diversification into related or
unrelated businesses. Under the diversification strategies, an organization launches new products,
serves new markets, or does both simultaneously.
a. Concentric Diversification: When an organization acquires or develops a new product
or service that are closely related to the organization’s existing range of products and
services is called as a concentric diversification. A growth strategy in which a
company seeks to grow and develop by adding new products to its existing product
lines to attract new customers; also called convergent diversification.For example, the
shoe manufacturing company may acquire the leather manufacturing company with a view
to entering into the new consumer markets and escalate sales. For instance, an organization
in the business of household electrical equipment diversifies itself into kitchenware
appliances to serve the same set of consumers.
b. A conglomerate is a type of diversification strategy whereby a company enters one or
more unrelated industries. Companies often choose to grow as a conglomerate when they
believe other industries offer more opportunities for growth than their existing industry
Diversifying as a conglomerate is also called unrelated diversification. To become a
conglomerate, a company diversifies into an industry that bears no relationship to the
industry in which it currently operates. For example, ITC is into numerous unrelated
businesses, such as agri-business, hotels, paperboards, and packaging.
c. Expansion through Integration: Expansion through integration is performed
through value chain, which ensures the integration of an organization’s
interlinked activities. For example, an organization can integrate the activity of
procuring raw material with the activity of producing finished product. In other
words, Integration involves the consolidation of operational units anywhere along
the value chain to create greater efficiency and produce economies of scale. The
value chain comprises of interlinked activities performed by an organization right
from the procurement of raw materials to the marketing of finished goods. Thus, a
firm may move up or down the value chain to focus more comprehensively on
the needs of the existing customers.
The expansion through integration widens the scope of the business and thus
considered as the grand expansion strategy. There are two primary types of
integration:
Vertical integration: It implies an activity that is carried out with the purpose of
supplying inputs, such as raw materials; or distributing the final product to customers.
Backward and forward integration are two types of vertical integration. In backward
integration, the organizations become their own suppliers; whereas, in forward
integration, the organizations take control of product distribution.
In other words, When an organization moves close to the ultimate customers, i.e. facilitate
the sale of the finished goods is said to have made a forward integration. Example, the
manufacturing firm open up its retail outlet. Whereas, if the organization retreats to the
source of raw materials, is said to have made a backward integration. Example, the
shoe company manufactures its own raw material such as leather through its subsidiary
firm.
For example, if an automobile organization buys its supplier organization, which sells
tyres for its cars, it is known as backward integration. However, if a wholesaler
purchases a retailing outlet to directly sell products to end customers, it is known as
forward integration.
Horizontal Integration: A firm is said to have made a horizontal

integration when it takes over the same kind of product with
similar marketing and production levels. An example of
horizontal integration can be a pizza restaurant expanding its
product range by acquiring a hamburger chain.
d. The Expansion through Internationalization is the strategy
followed by an organization when it aims to expand beyond
the national market. The need for the Expansion through
Internationalization arises when an organization has
explored all the potential to expand domestically and look
for the expansion opportunities beyond the national
boundaries.
e. The Expansion through Cooperation is a strategy followed when an organization enters into a
mutual agreement with the competitor to carry out the business operations and compete with one
another at the same time, with the objective to expand the market potential. Expansion through
cooperation refers to the mutual cooperation between organizations belonging to the same
industry to achieve a shared objective. For example, if an organization works in cooperation with
other organizations, it can establish a favorable position in the industry relative to its competitors.
e. The Expansion through Cooperation
Mergers and acquisitions have become popular strategies in the last two decades to expand the scope
of business for an organization. A merger can be defined as the combination of two or more
organizations, in which both the organizations are dissolved and their assets and liabilities are
combined to form a new business entity. An acquisition refers to the process of gaining partial or
full control of one organization by another.
Joint venture can be defined as a creation of an entity by combining two or more organizations
that want to attain similar objectives for a specific time period. In other words, it is a cooperative
business agreement between two organizations to fulfil their mutual needs. The joint venture
strategy allows organizations to share their technological skills and specific knowledge; and
represents a potential source for the growth of organizations. In addition, it is very useful for
organizations entering the international market.
A strategic alliance is a partnership between two or more organizations that unite to pursue a set of
agreed upon goals but remain independent subsequent to the formation of the alliance to
contribute and to share benefits on a continuing basis in one or more key strategic areas.”
Grand Strategies: Retrenchment Strategies
3. The Retrenchment Strategy is adopted when an organization aims at reducing
its one or more business operations with the view to cut expenses and reach to a
more stable financial position. In other words, Retrenchment is a corporate
strategy that aims to decrease the scale of operations of the company. It can also
involve cutting down the expenditure of the company so that it becomes
financially viable. It can involve reducing the number of product lines or
businesses, withdrawing from certain geographical markets so that the
company becomes financially sustainable.
The firm can either restructure its business operations or discontinue it, so as to
revitalize its financial position. There are three types of Retrenchment Strategies:
a. Turnaround Strategy is a retrenchment strategy followed by an organization when it feels that the
decision made earlier is wrong and needs to be undone before it damages the profitability of the
company. Turnaround as the name suggests means reversing an adverse trend. The basic goal of turnaround
is to change a company from a loss making and under performing enterprise into one with acceptable
levels of profitability, liquidity and cash flow.
Now the question arises, when the firm should adopt the turnaround strategy? Following are certain
indicators which make it mandatory for a firm to adopt this strategy for its survival. These are:
● Continuous losses
● Poor management
● Wrong corporate strategies
● Persistent negative cash flows
● High employee attrition rate
● Poor quality of functional management
● Declining market share
● Uncompetitive products and services
b. Divestment Strategy is another form of retrenchment that includes the downsizing of the scope
of the business. The firm is said to have followed the divestment strategy, when it sells or
liquidates a portion of a business or one or more of its strategic business units or a major
division, with the objective to revive its financial position. An organization adopts the divestment
strategy only when company has a very weak industry position and cannot turnaround its
performance. The divestment is the opposite of investment; wherein the firm sells the portion of the
business to realize cash and pay off its debt. Also, the firms follow the divestment strategy to shut
down its less profitable division and allocate its resources to a more profitable one.
Following are the indicators that mandate the firm to adopt this strategy:
● Continuous negative cash flows from a particular division
● Unable to meet the competition
● Huge divisional losses
● Difficulty in integrating the business within the company
● Better alternatives of investment
● Lack of integration between the divisions
● Lack of technological upgradations due to non-affordability
● Market share is too small
● Legal pressures
c. The Liquidation Strategy is the most unpleasant strategy adopted by the organization that
includes selling off its assets and the final closure or winding up of the business operations. It is
the most crucial and the last resort to retrenchment since it involves serious consequences such as
a sense of failure, loss of future opportunities, spoiled market image, loss of employment for
employees, etc. In divestment, assets are sold to make strategic investments elsewhere or to pay
off debt. In liquidation, a company sells off all of its assets and closes its doors. Liquidation
most frequently occurs when companies are insolvent — unable to pay their obligations when
they’re due and potentially unable to refinance or restructure their debt.
The firm adopting the liquidation strategy may find it difficult to sell its assets because of the
non-availability of buyers and also may not get adequate compensation for most of its assets.
The following are the indicators that necessitate a firm to follow this strategy:
● Failure of corporate strategy

● Continuous losses
● Obsolete technology
● Outdated products/processes
● Business becoming unprofitable
● Poor management
● Lack of integration between the divisions
Grand Strategies: Combination Strategies
4. The Combination Strategy means making the use of other grand strategies
(stability, expansion or retrenchment). Simply, the combination of any grand
strategy used by an organization in different businesses at the same time or in
the same business at different times with an aim to improve its efficiency is
called as a combination strategy.
A combination strategy employ any simultaneous combination of other master
strategies. It includes use by a firm of a different strategy in individual business
units or by use of multiple strategies in a single business unit at the same or
different times. This is most popular in large, complex organizations (various
industries and business units).
Need for Corporate Governance- Case Study of Satyam Scam
● Satyam Scam was one of the biggest corporate scams that occurred in
2009 in India. It is regarded as “Debacle of the Indian Financial
System“. It was a fraud of $1.47 billion (or Rs. 7800 crores).
● Ramalinga Raju formed the IT company Satyam Computer Limited in
1987 in Hyderabad. The company began with 20 employees and rapidly
grew as a global business.
● Satyam Computers was listed on the Bombay Stock Exchange in 1991
& it was listed on the New York Stock Exchange in 2001. Satyam
Computers became one of the fastest-growing company of India and
hence Ramalinga Raju & Satyam Computers won many awards during
its growth years.
● Real estate sector was on a boom at that time & hence Raju started buying the land
properties in Hyderabad and nearby areas. He was in short of funds due to
aggressive buying of properties.
● So he started manipulating financial statements of Satyam Computers to generate
more funds. For example, If the actual profit of Satyam was Rs 60 crores then in
financial statements, Raju shows the profit of Rs 600 crores to show that Satyam is
growing very rapidly.
● Share prices of Satyam were growing rapidly due to this fake growth. Raju opened
365 new companies to buy properties. He made his farmworkers director of these
companies & purchased the properties under their name.
● Raju thought that the property rates would grow in multiples after some time then
he will sell these properties & fill the gap that he has created in Satyam’s financial
statements. Because of manipulation in the financial statements of Satyam for years,
there is a huge gap between the actual figures & fake figures in financial statements.
● Rates of properties decreased drastically due to the recession in 2008,

and Raju’s plan of selling properties at high rates failed.
● He made a new plan to balance the actual figures & fake figures.
According to his new plan, he will buy two companies that are Maytas
Properties and Maytas Infra on paper but in reality, there will be no
cash transaction.
● On 16 December 2008 Satyam’s board of directors approved the
founder’s plan, and Raju sanctioned the deal without taking approval of
the Shareholders.
● Investors of Satyam were not happy from this decision, and one U.S
investor filed a Lawsuit on Satyam due to which the share prices of
Satyam were decreased by almost 55% on New York Stock Exchange
(NYSE).
● Raju cancelled the plan of buying Maytas Infra and Maytas properties
due to increasing pressure of investors. This was the last chance for Raju
to fill the gap between actual and fake figures of Satyam and stop this
scam from revealing.
● On 7 January 2009, Raju confessed to Securities and Exchange Board of
India (SEBI) & Board Members that he has been manipulating the
financial statements of Satyam.
● In April 2009 Tech Mahindra bought the 51% shares of Satyam
Computers and named it Mahindra Satyam. In June 2013, Mahindra
Satyam legally merged in Tech Mahindra & Satyam is once again on its
way toward a bright future as part of Tech Mahindra.
Good Governance
Corporate Governance
● Corporate governance is the combination of rules, processes or laws by which
businesses are operated, regulated or controlled. The term encompasses the
internal and external factors that affect the interests of a company’s
stakeholders, including shareholders, customers, suppliers, government
regulators and management.
● Corporate governance essentially involves balancing the interests of a
company's many stakeholders, such as shareholders, senior management
executives, customers, suppliers, financiers, the government, and the
community.
● Good corporate governance helps companies build trust with investors and the
community. As a result, corporate governance helps promote financial viability
by creating a long-term investment opportunity for market participants.
● The basic principles of corporate governance are accountability, transparency,
fairness, and responsibility.
● Corporate governance is the structure of rules, practices, and processes used
to direct and manage a company.
● A company's board of directors is the primary force influencing corporate
governance.
● Bad corporate governance can cast doubt on a company's operations and its
ultimate profitability.
● Corporate governance is important because it creates a system of rules and
practices that determine how a company operates and how it aligns the interest
of all its stakeholders. Good corporate governance leads to ethical business
practices, which leads to financial viability.
● A strong, transparent corporate governance leads a company to make ethical
decisions that benefit all of its stakeholders, allowing the company to place
itself as an attractive option to investors. Bad corporate governance leads to a
breakdown of a company, often resulting in scandals and bankruptcy.
A good corporate governance system:
■ Ensures that the management of a company considers the best
interests of everyone;
■ Helps companies deliver long-term corporate success and
economic growth;
■ Maintains the confidence of investors and as consequence
companies raise capital efficiently and effectively;
■ Has a positive impact on the price of shares as it improves the trust
in the market;
■ Gives guidance to the owners and managers about what are the goals
strategy of the company;
■ Minimizes wastages, corruption, risks, and mismanagement;
■ Helps to create a strong brand reputation;
■ Most importantly – it makes companies more resilient.
Principles of Corporate Governance
1. Accountability: Corporate accountability refers to the
obligation and responsibility to give an explanation or
reason for the company’s actions and conduct.
2. Fairness: It refers to equal treatment, for example, all
shareholders should receive equal consideration for
whatever shareholdings they hold. In addition to
shareholders, there should also be fairness in the
treatment of all stakeholders including employees,
communities and public officials. The fairer the entity
appears to stakeholders, the more likely it is that it can
survive the pressure of interested parties.
3. Responsibility: The Board of Directors are given authority to act
on behalf of the company. They should therefore accept full
responsibility for the powers that it is given and the authority that it
exercises. The Board of Directors are responsible for overseeing the
management of the business, affairs of the company, appointing
the chief executive and monitoring the performance of the
company. In doing so, it is required to act in the best interests of the
company. Accountability goes hand in hand with responsibility. The
Board of Directors should be made accountable to the shareholders for
the way in which the company has carried out its responsibilities.
4. Transparency: A principle of good governance is that stakeholders should be
informed about the company’s activities, what it plans to do in the future and any
risks involved in its business strategies. Transparency means openness, a
willingness by the company to provide clear information to shareholders and
other stakeholders. For example, transparency refers to the openness and
willingness to disclose financial performance figures which are truthful and
accurate.
Disclosure of material matters concerning the organisation’s performance and

activities should be timely and accurate to ensure that all investors have
access to clear, factual information which accurately reflects the financial, social
and environmental position of the organisation. Organisations should clarify and
make publicly known the roles and responsibilities of the board and management
to provide shareholders with a level of accountability. Transparency ensures that
stakeholders can have confidence in the decision-making and management
processes of a company.
Strategy analysis and choice
Strategy analysis and choice focuses on generating and
evaluating alternative strategies, as well as on selecting
strategies to pursue. Strategy analysis and choice seeks to
determine alternative courses of action that would best enable
the firm to achieve its mission and objectives.
The firm’s present strategies, objective, mission together with
the external and internal audit information, provides a basis for
generating and evaluating feasible alternative strategies.
Strategy analysis and choice
● Establishment of long term goals

● Producing strategy options
● Choosing strategies to act on
● Selecting the best option and accomplishing mission and goal.
At the time of performing strategic analysis and arriving at strategic

choices, long term goals are fixed and different types of strategies
are chosen that are most appropriate for the company.
BCG Matrix: The Boston Consulting Group Matrix
BCG Matrix or Growth share matrix is a portfolio management
framework that helps companies decide how to prioritize their different
businesses or products. It helps the business make investment decisions
(invest, cash out, divest) between its existing products on the corporate
level. It is basically 2*2 (four quadrants) dividend into two
dimensions-Market growth and Market Share.
The BCG matrix is a tool that can be used to determine what priorities
should be given in the product portfolio of a business unit. It has 2
dimensions; market share and market growth. The basic idea behind it is
that the bigger the market share a product has or the faster the
product’s market grows the better it is for the company. Placing
products in the BCG matrix results in 4 categories in a portfolio of a
BCG Matrix
Market growth rate refers to the projected rate of sales growth for the
market that a particular business caters to. It is usually measured as the
percentage increase in sales in a market or unit volume over the two most
recent years.
Market Share (Relative competitive position) means the ratio of a

business’s market share divided by the market share of the largest
competitor in that market and provides a basis for comparing the relative
strengths of different businesses in the portfolio.
BCG Matrix
Question marks: Products with high market growth but a low market
share.
Stars: Products with high market growth and a high market share.
Dogs: Products with low market growth and a low market share.
Cash cows: Products with low market growth but a high market share.
BCG Matrix
BCG Matrix
1. Stars (High Growth, High Market Share)- Stars represent business
units having large market share in a fast growing industry.
Stars are businesses that have high market share in a high growth
environment. They are growing rapidly and are the best long-run
opportunities in terms of growth and profitability in the firm’s
portfolio. They are leaders in their business and generate large
amount of cash. They require substantial investment to maintain
and expand their dominant position in a growing market. SBU’s
located in this cell are attractive as they are located in a robust
industry and these business units are highly competitive in the
industry. If successful, a star will become a cash cow when the
industry matures.
BCG Matrix
2. Cash Cows (Low Growth, High Market Share)- Cash Cows represents
business units having a large market share in a mature, slow growing
industry. A cash cow is a market leader that generates more cash than it
consumes. Cash cows are low-growth, high market-share products or divisions.
Because of their high market share, they have low costs and generate cash.
Since growth is slow, reinvestment costs are low.
Cash cows require little investment and generate cash that can be utilized for
investment in other business units. These SBU’s are the corporation’s key
source of cash, and are specifically the core business. They are the base of an
organization. These businesses usually follow stability strategies. When
cash cows lose their appeal and move towards deterioration, then a
retrenchment policy may be pursued.
BCG Matrix
3. Question Marks (High Growth, Low Market Share)- Question

marks represent business units having low relative market share and
located in a high growth industry. They require huge amount of cash
to maintain or gain market share. Question marks are generally new
goods and services which have a good commercial prospective. There
is no specific strategy which can be adopted. If the firm thinks it has
dominant market share, then it can adopt expansion strategy, else
retrenchment strategy can be adopted. Most businesses start as
question marks as the company tries to enter a high growth market in
which there is already a market-share. If ignored, then question marks
may become dogs, while if huge investment is made, then they have
potential of becoming stars.
BCG Matrix
4. Dogs (Low Growth, Low Market Share)- Dogs represent

businesses having weak market shares in low-growth markets.
They neither generate cash nor require huge amount of cash. Due to
low market share, these business units face cost disadvantages.
Generally retrenchment strategies are adopted because these firms
can gain market share only at the expense of competitor’s/rival firms.
These business firms have weak market share because of high
costs, poor quality, ineffective marketing, etc. Unless a dog has
some other strategic aim, it should be liquidated if there is fewer
prospects for it to gain market share. Number of dogs should be
avoided and minimized in an organization.
BCG Matrix-Example
BCG Matrix-Example
GE nine-box matrix: General Electric Matrix or GE McKinsey Matrix
GE nine-box matrix is a strategy tool that offers a systematic approach for

the multi business enterprises to prioritize their investments among the
various business units. It is a framework that evaluates business portfolio
and provides further strategic implications.
Each business is appraised in terms of two major dimensions – Industry

Attractiveness and Business Strength. If one of these factors is missing,
then the business will not produce desired results. Neither a strong
company operating in an unattractive market, nor a weak company
operating in an attractive market will do very well.
GE nine-box matrix
The vertical axis denotes: Industry attractiveness indicates how hard or easy it will be
for a company to compete in the market and earn profits. The more profitable the
industry is the more attractive it becomes. When evaluating the industry attractiveness,
analysts should look how an industry will change in the long run rather than in the near
future, because the investments needed for the product usually require long lasting
commitment. The most common factors to look at are:
● The Growth rate in the long run
● Size of industry
● The Profitability of industry: This includes both entry and exit barriers,
power of supplier and buyer, the threat of available complements and
substitutes
● Structure of industry
● Changes in the Product life cycle
● Demand changes
● Price trend
● Macro environment factors
● Labor availability
● Market segmentation
● Seasonality
GE nine-box matrix
Horizontal axis represent (Competitive Strength): Along the X axis, the matrix
measures how strong, in terms of competition, a particular business unit is against
its rivals. In other words, managers try to determine whether a business unit has a
sustainable competitive advantage (or at least temporary competitive advantage) or
not. The most common factors to look at are:
● Profitability
● Market share
● Business growth
● Brand equity
● Level of differentiation
● Firm resources
● Efficiency and effectiveness of internal linkages (use the Value Chain
Analysis)
● Customer loyalty
GE nine-box matrix
GE nine-box matrix
Green zone (Grow): Suggests you to ‘go ahead’, to grow and build,
pushing you through expansion strategies. Businesses in the green zone
attract major investment. This category includes those business units in which corporate prefer to invest
because of their strong position to generate high returns in the long-run.
Yellow zone (Selectivity): Cautions you to ‘wait and see’ indicating
hold and maintain type of strategies aimed at stability.
Red zone (Harvest or Divest): Indicates that you have to adopt
turnover strategies of divestment and liquidation or rebuilding
approach. This category of investment strategy includes poor performing
business units that are in less attractive markets and industries. If these business
units contribute to revenue generation equivalent to the investment; then only
investment will be made into these. In the absence of this, the possibility may
arise to liquidate these. Harvesting means that the business unit gets just enough
investments to keep it operational.
Value chain analysis
Value chain analysis (VCA) is a process where a firm identifies its primary and
support activities that add value to its final product and then analyze these activities
to reduce costs or increase differentiation. Value chain represents the internal
activities a firm engages in when transforming inputs into outputs.
Conducting a value chain analysis prompts you to consider how each step adds or
subtracts value from your final product or service. This, in turn, can help you realize
some form of competitive advantage, such as:
● Cost reduction, by making each activity in the value chain more efficient and,
therefore, less expensive
● Product differentiation, by investing more time and resources into activities like
research and development, design, or marketing that can help your product stand
out.
Value chain analysis
The term value chain refers to the various business activities and processes involved in
creating a product or performing a service. A value chain can consist of multiple stages of a
product or service’s lifecycle, including research and development, sales, and everything in
between. The concept was conceived by Harvard Business School Professor Michael Porter.
According to Porter’s definition, all of the activities that make up a firm's value chain can be
split into two categories that contribute to its margin: primary activities and support activities.
Value chain analysis is a strategy tool used to analyze internal firm activities. Its goal is to
recognize, which activities are the most valuable (i.e. are the source of cost or differentiation
advantage) to the firm and which ones could be improved to provide competitive advantage. In
other words, by looking into internal activities, the analysis reveals where a firm’s competitive
advantages or disadvantages are.
The firm that competes through differentiation advantage will try to perform its activities
better than competitors would do. If it competes through cost advantage, it will try to
perform internal activities at lower costs than competitors would do. When a company is
capable of producing goods at lower costs than the market price or to provide superior products,
it earns profits.
Value chain analysis: Primary Activities
Primary activities are those that go directly into the creation of a product or
the execution of a service, including:
● Inbound logistics: Activities related to receiving, warehousing, and
inventory management of source materials and components.
● Operations: Activities related to turning raw materials and
components into a finished product.
● Outbound logistics: Activities related to distribution, including
packaging, sorting, and shipping.
● Marketing and sales: Activities related to the marketing and sale of a
product or service, including promotion, advertising, and pricing strategy.
● After-sales services: Activities that take place after a sale has been
finalized, including installation, training, quality assurance, repair, and
customer service.
The value chain analysis’s primary activities are involved in the physical
creation of a product, its distribution and marketing, and the after-sales
service related to the product. The primary activities are inbound logistics,
operations/production, outbound logistics, marketing, and services. Such
as:-
● Inbound logistics are those that are associated with receiving, storing, and
handling inputs to the production process. These include material handling,
storing products in the warehouse, scheduling vehicles for the transport of
materials/products, and returns to suppliers.
● Operations comprise packaging, machining, testing, equipment maintenance,
assembly, and other activities associated with transforming inputs into the
ultimate products. This is the physical process of making, testing, and packaging
the product.
● Outbound logistics are those performed to collect, store, and physically
distribute products to customers. Material handling, delivery vehicles, order
processing, and scheduling are included in outbound logistics.
● Marketing is an element of primary activities in value chain analysis.
It is concerned with providing the buyer with information, inducement,
and opportunities to buy the product. It includes promotional activities
such as advertising, sales promotion, public relations, personal selling,
salesforce, selection of distribution channel, pricing of products, and
other activities related to providing a means by which customers can
buy the products.
● Service concerns itself with activities associated with enhancing and
maintaining the products’ value to customers, such as repair of
machines, installation of machinery, training to customer’s supply of
parts, prompt response to customer’s query, etc. All these primary
activities are present in varying degrees in each firm and, therefore,
deserve attention in the firm’s internal analysis.
Value chain analysis: Secondary Activities
Secondary activities help primary activities become more efficient—effectively
creating a competitive advantage—and are broken down into:
● Procurement: Activities related to the sourcing of raw materials,

components, equipment, and services.
● Technological development: Activities related to research and
development, including product design, market research, and process
development
● Human resources management: Activities related to the recruitment,
hiring, training, development, retention, and compensation of employees.
● Infrastructure: Activities related to the company’s overhead and
management, including financing and planning.
The Growth of the Firm: Internal Development
Businesses can grow through the implementation of several different strategies.
Usually, however, growth occurs either internally or externally.
Internal growth: Internal growth is the organic development of an
organization through strategic decision-making designed to increase a
company's size, usually in a specific arena, like production, customer base or
region. Internal growth is a singular undertaking — the company uses its
own resources and strengths to grow rather than relying on external forces.
External growth: External growth, sometimes called inorganic growth,
occurs when the company desiring to grow partners with another organization
to achieve its goals. Most commonly, this type of growth happens through
mergers or acquisitions.
Internal growth, also known as organic growth, occurs when a company
uses its own tools and resources to expand. In most cases, this involves
increasing production, developing new products or services or other
developmental strategies. Internal growth can take time since the company
must evaluate its growth potential, determine a strategy and then
implement the growth plan. However, internal growth is usually
sustainable and can help improve the company's overall success.
1. Increasing production: One strategy for internal business growth is
increasing the production of your company's current product or
products. This is particularly useful if there's a wide demand for your
product, and you know that increasing production will increase sales. Take
the time to vet (carefully examine) your sales numbers before increasing
production, since this strategy is one of the most costly and
time-consuming. However, if effective, it can result in some of the highest
levels of internal growth.
Example: Shorty's Shoes wants to grow its business through
internal means. It decides to increase the production of its toddler
shoe line to meet growing demand and maximize the growth
opportunity.
2. Developing new products: Another internal growth strategy is adding a new
product or products to the sales line. Introducing a new product to the
marketplace can attract a new customer demographic to your company and
increase the overall size and company value. New product development is usually a
high cost, but a high reward internal growth strategy. Ensure your company properly
researches the earning potential of a new product before committing to development.
3. Establishing new markets: Establishing a new market is another internal
growth strategy many companies use when trying to develop their company. A
new market is a region or demographic with which your company does not yet work.
Depending on your product or service, this could be a different state, region or
country or simply shifting your marketing efforts to include a new group of people
in your current geographic reach. Establishing new markets is one of the most
cost-effective ways of stimulating internal growth.
4. Increasing current market share: Another internal
growth strategy is to increase your company's current
market share. Most organizations do this by evaluating
their brand recognition, performing intensive market
research and increasing their marketing efforts. To
reach more customers in your company's current market,
it's best to take the time to establish a thorough marketing
strategy that uses both digital and traditional means of
customer connection. Usually, developing outreach in a
current market is one of the quicker strategies for internal
growth.
5. Creating a new business: An additional internal

growth strategy is to create an entirely new business in
conjunction with your current business. This method is
often one of the most costly and time-intensive, but it
offers enormous potential for overall growth and
continued profitability. Example: Brittany's Bakery sells
homemade breads and pastries. It decides to grow its
business by introducing an associated restaurant that uses
the baked goods from its bakery on the restaurant's menu.
Mergers and Acquisitions
A horizontal merger occurs when companies operating in the same or similar industry
combine together. The purpose of a horizontal merger is to more efficiently utilize economies of
scale, increase market power, and exploit cost-based and revenue-based synergies.
Reasons for merging horizontally:
● Increase market share and reduce competition in the industry

● Further utilize economies of scale (thus reducing costs)
● Increase diversification
● Reshape the company’s competitive scope by reducing intense rivalry
● Realize economies of scope
● Share complementary skills and resources
● Integration of Facebook, Whatsapp, Instagram & Messenger: This is one of the best
examples of horizontal mergers of present times. All of these were independent
social media platforms started by different companies and one after another,
over the years, these were integrated into one big social media company.
● Consider a famous horizontal merger: HP (Hewlett-Packard) and Compaq in
2011. The structure was a stock-for-stock merger with an exchange ratio of
0.63 HP share per Compaq share, valued at approximately US$25 billion. The
new company would be held 64% by HP and 36% by Compaq shareholders.
A vertical merger is a union between two companies in the same industry but at different stages of the
production process. In other words, a vertical merger is the combination and integration of two or more
companies that are involved in different stages of the supply chain in the production of goods or services.
A vertical merger integration creates value in that the businesses merging together should be worth more than
they would be under independent ownership.
The following are the common reasons for a vertical merger:
● Reduce operating costs

● Realize higher profits
● Ensure tighter quality control
● Better flow and control of information along the supply chain
● Synergies: operating synergy, financial synergy, managerial synergy, etc.
A vertical merger integration can integrate backward or forward:
Backward integration involves merging with upstream companies (such as suppliers and
producers).
Forward integration involves merging with downstream companies (such as distributors or

retailers).
Consider the diagram above with producers, suppliers, manufacturers, wholesalers, and
retailers.
● If Manufacturer A merges with Supplier A, it would be considered a backward merger –

Manufacturer A is integrating with an upstream company. Backward integration would
weaken supplier power.
● If Manufacturer A merges with Wholesaler A, it would be considered a forward merger –
Manufacturer A is integrating with a downstream company. Forward integration would
weaken buyer power.
Assuming Clothing Store A, B, and C are competitors. If Clothing Store A merges with Clothing
Store B or Clothing Store C, it is a horizontal merger.
The production process: Textile Producer A → Shirt Manufacturer A → Clothing Store A. If

Clothing Store A merges with Shirt Manufacturer A or Textile Producer A, it is a vertical merger.
Imagine you’re an organization that operates in a specific market. Now,
there’s another organization that offers the same product or service, but in a
different market. You’re looking for a way into that market in an effort to
increase your market share and client base. A market extension merger is
the way to go about this.
A market-extension merger is a merger between companies that sell the
same products or services but that operate in different markets. The
goal of a market-extension merger is to gain access to a larger market
and thus a bigger client/customer base.
A product-extension merger is a merger between companies that sell related products
or services and that operate in the same market. By employing a product-extension
merger, the merged company is able to group their products together and gain access to
more consumers. It is important to note that the products and services of both companies
are not the same, but they are related. The key is that they utilize similar distribution
channels and common, or related, production processions or supply chains.
For example, the merger between Mobilink Telecom Inc. and Broadcom is a
product-extension merger. The two companies both operate in the electronics industry and
the resulting merger allowed the companies to combine technologies. The merger enabled
the combination of Mobilink’s 2G and 2.5G technologies with Broadcom’s 802.11,
Bluetooth, and DSP products. Therefore, the two companies are able to sell products that
complement each other.
Conglomerate is a merger or acquisition that takes place between organizations
that have totally unrelated business activities.
It might seem counterintuitive, but mergers like these are beneficial. A merger like
this can increase market share, diversify a service, asset and stock portfolio and also
offer the opportunity to cross-sell products.
A Conglomerate Merger is a union between companies that operate in different
industries and are involved in distinct, unrelated business activities.
Balanced Scorecard
A balanced scorecard is a strategic management performance metric that helps
companies identify and improve their internal operations to help their external
outcomes. It measures past performance data and provides organizations with
feedback on how to make better decisions in the future.
A balanced scorecard is a strategic planning framework that companies use to
assign priority to their products, projects, and services; communicate about their
targets or goals; and plan their routine activities. The scorecard enables
companies to monitor and measure the success of their strategies to determine
how well they have performed.
● A balanced scorecard is used to help in the strategic management of
organizations.
● The balanced scorecard is anchored on four perspectives, which include
financial, business process, customer, and organizational capacity.
● It enables entities to discover their shortcomings and come up with
strategies to overcome them.
Balanced Scorecard
Four Perspectives of the Balanced Scorecard
1. Financial (or Stewardship): views an organization’s
financial performance and the use of financial
resources. Example: “What financial goals do we
have that will impact our organization?”
2. Customer/Stakeholder: views organizational
performance from the perspective of the customer or
key stakeholders the organization is designed to serve.
What things are important to our customers, which
will in turn impact our financial standing?
3. Internal Process: views the quality and efficiency of an
organization’s performance related to the product, services, or other
key business processes. “What do we need to do well internally, in
order to meet our customer goals, that will impact our financial
standing?”
4. Organizational Capacity (or Learning & Growth): views human
capital, infrastructure, technology, culture, and other capacities that are
key to breakthrough performance. Example: What skills, culture, and
capabilities do we need to have in our organization in order to
execute on the process that would make our customers happy
and ultimately impact our financial standing?”
Four Perspectives of the Balanced Scorecard-Example:
Apple Company
● From the financial perspective of the scorecard, Apple
emphasized shareholder value.
● For the customer perspective, it emphasized market
share and customer satisfaction.
● For internal processes, it emphasized core competencies.
● For the innovation and improvement category, it
emphasized employee commitment and alignment with
the strategic goals.
1. Financial perspective
Under the financial perspective, the goal of a company is to ensure that it earns
a return on the investments made and manages key risks involved in
running the business. The goals can be achieved by satisfying the needs of all
players involved with the business, such as the shareholders, customers, and
suppliers.
The shareholders are an integral part of the business since they are the providers
of capital; they should be happy when the company achieves financial success.
They want to be sure that the company is continually generating revenues and
that the organization meets goals such as improving profitability and developing
new revenue sources. Steps taken to achieve such goals may include
introducing new products and services, improving the company’s value
proposition, and cutting down on the costs of doing business.
2. Customer perspective
The customer perspective monitors how the entity is providing value to its customers
and determines the level of customer satisfaction with the company’s products or
services. Customer satisfaction is an indicator of the company’s success. How well a
company treats its customers can obviously affect its profitability.
The balanced scorecard considers the company’s reputation versus its competitors. How
do customers see your company vis-à-vis your competitors? It enables the
organization to step out of its comfort zone to view itself from the customer’s point of
view rather than just from an internal perspective.
Some of the strategies that a company can focus on to improve its reputation among
customers include improving product quality, enhancing the customer shopping
experience, and adjusting the prices of its main products and services.
3. Internal business processes perspective
A business’ internal processes determine how well the entity runs. A
balanced scorecard puts into perspective the measures and objectives
that can help the business run more effectively. Also, the scorecard
helps evaluate the company’s products or services and determine whether
they conform to the standards that customers desire. A key part of this
perspective is aiming to answer the question, “What are we good at?”
The answer to that question can help the company formulate marketing
strategies and pursue innovations that lead to the creation of new and
improved ways of meeting the needs of customers.
4. Organizational capacity perspective
Organizational capacity is important in optimizing goals and
objectives with favorable results. The personnel in the
organization’s departments are required to demonstrate high
performance in terms of leadership, the entity’s culture,
application of knowledge, and skill sets.
Proper infrastructure is required for the organization to deliver
according to the expectations of management. For example, the
organization should use the latest technology to automate activities
and ensure a smooth flow of activities.
Strategic and operational control
Strategic evaluation and control can be defined as the process of determining
the effectiveness of a given strategy in achieving the organizational objectives
and taking corrective action wherever required. Operational control or task
control is the process of assuring that specific tasks are carried out effectively
and efficiently. The focus of operational control is on individual tasks or
operations.
1. Strategic control involves monitoring a strategy as it is being

implemented, evaluating deviations, and making necessary
adjustments. Strategic control may involve the reassessment of a
strategy due to an immediate, unforeseen event. For example, if a
company’s main product is becoming obsolete, the company must
immediately reassess its strategy. Strategic control also involves
monitoring internal and external events.
2. Operational control involves control over intermediate-term
operations and processes but not business strategies. In contrast, an
operational control system is designed in a manner that confirms –
the day-to-day activities of the business are directed towards the
achievement of predetermined goals and objectives.
Strategic control
● Definition: Strategic control is the process of continually evaluating the strategy

as it is being implemented, and take necessary corrective actions it required.
● Basic question: Are we moving in the right direction?
● Main concern: Steering the organization’s future direction.
● Focus: External environment.
● Time horizon: Long-term.
● An exercise of control: Exclusively by top management. They may take the
lower-level support.
● Main techniques: Environmental scanning, information gathering,
questioning, and review.
Operational control
● Definition: Operational control is the process of evaluating and

correcting the performance of various organizational units to assess
their contribution to the achievement of organizational objectives.
● Basic question: How are we performing?
● Main concern: Action control.
● Focus: Internal organization.
● Time horizon: Short-term.
● An exercise of control: Mainly by mid-level management on the
direction of the top management.
● Main techniques: Budgets, schedules and MBO.
Corporate Culture
Corporate culture
Corporate culture refers to the values, behaviour and working style of a
company. It indicates how a company treats its employees, customers and
community. In other words, Corporate culture refers to the company’s ideology,
practice, beliefs and behaviors that determine how a company's employees and
management interact. For example, one company may give more importance
to the environment than profitability, while another one may be more
concerned about increasing its bottom line (profitability) even if its
operations negatively impact the environment. Similarly, one company may
want to get the most out of its employees, even at the cost of their health and
personal life, while another one may be more generous towards its
workforce.
.
Corporate culture
Corporate culture is important because it influences a company's policies, operations and
working style. Following are some reasons and examples that underline the importance
of corporate culture:
● Employees often get attracted to companies with a culture they identify with.
● Corporate culture impacts the way a company treats its employees, which in turn
impacts employee retention, turnover and productivity.
● Corporate culture impacts the way a company deals with its customers.
● Corporate culture can help build a strong brand identity as it creates a certain
image and perception in the minds of the customers.
● Good corporate culture can promote a healthy team environment.
● Culture can shape and influence almost all aspects of an organization, including
organizational effectiveness, overall success and the bottom line.
● Business partners, customers and the general public also often react to companies
that are considered to have positive corporate cultures, which in turn helps
organizations succeed over time.
Corporate Culture- Examples
● Google, which attributes its focus on a fun, collaborative environment as having
helped it grow into the technology giant it is today.
● Ikea, the Swedish furniture and home goods retailer, has a corporate culture based on
equality and inclusiveness, which has helped it build a similar reputation among its
customers who often say they value the company and its products for those reasons.
● Zappos, with its taglines "powered by service" and "delivering happiness," has
become well-known for both. It's also known for its use of an open management
philosophy called Holacracy. Holacracy is an open management philosophy that, among
other traits, eliminates job titles and other such traditional hierarchies. Employees have
flexible roles and self-organization, and collaboration is highly valued.
In top companies of the 21st century, such as Google, Apple Inc. (AAPL), and Netflix Inc. (NFLX), less traditional
management strategies such as fostering creativity, collective problem solving, and greater employee freedom have
been the norm and thought to contribute to their business success.
Types of Corporate Culture
1. Clan: which exhibits a family-like atmosphere with a focus on mentoring,
nurturing and togetherness;
2. Adhocracy: with a dynamic and entrepreneurial approach that values
risk-taking and innovation;
3. Market: with a results-oriented bent that values competition and
achievement; and
4. Hierarchy: with its structures and controls to ensure efficiency and stability.
Types of Corporate Culture- Clan Culture
Primary Focus: Mentorship and teamwork.
Motto: “We’re all in this together.”
A clan culture is people-focused in the sense that the company feels family-like. This is a highly
collaborative work environment where every individual is valued and communication is a top
priority. Clan cultures boast high rates of employee engagement, and happy employees make for
happy customers. Because of its highly adaptable environment, there’s a great possibility for
market growth within a clan culture. In this type of culture, relationships, participation, and
company morale are at the forefront. Managers are looked at as advisors and guides to
employees, as opposed to an authoritarian “boss” who gives instructions without context or
assistance and disciplines those who make mistakes.
● The team enjoys working together.
● Communication between team members is open and effective.
● Employees are likely to be highly engaged at work.
● High possibility for market growth.
Types of Corporate Culture- Adhocracy Culture
Primary Focus: Risk-taking and innovation.
Motto: “Risk it to get the biscuit.”
Adhocracy culture is primarily focused on innovation and risk-taking. Many

successful startups are considered to have this type of corporate culture. It creates
an entrepreneurial environment in the workplace in which employees are
encouraged to take risks. Adhocracy cultures value individuality in the sense that
employees are encouraged to think creatively and bring their ideas to the table.
● High risk, high reward. Greater potential for growth and breakthroughs.
● Employees are motivated to use their creativity and develop new ideas.
● Employees feel supported when suggesting new ideas.
● More likely to invest in professional development opportunities.
Types of Corporate Culture- Market Culture
Primary Focus: Competition and growth.
Motto: “We’re in it to win it.”
Market culture prioritizes profitability. Everything is gauged with the company’s profitability in
mind. Everything is evaluated with the bottom line in mind; each position has an objective that
aligns with the company’s larger goal. These are results-oriented organizations that focus on
external success rather than internal satisfaction. A market culture stresses the importance of
meeting quotas, reaching targets and getting results. In a market culture, the bottom line is the
main priority. An organization that takes on this type of corporate culture is primarily focused on
results.
● Employees are enthusiastic about their work.

● The competitive atmosphere encourages all workers to work hard and reach company
goals.
● The organization is focused on profitability; this is an objective that employees can get
on board with.
● Companies with market cultures are often successful and profitable.
Types of Corporate Culture- Hierarchy Culture
Primary Focus: Structure and stability.
Motto: “Get it done right.”
A hierarchy culture is one that follows the traditional corporate structure and
has a clear chain of command. It has several management levels separating
executives and employees. This type of company has a specific way of doing
things, which may include traditional norms such as a dress code and rigid work
hours. The company’s focus is on stability and reliability.
● Since this corporate culture is conservative, the company remains stable.

● The company’s processes are clearly defined to meet its objectives.
● Employees know exactly what is expected of them when they go to work.
Strategic Evaluation
Strategy evaluation is the process by which the management
assesses how well a chosen strategy has been implemented
and how successful or otherwise the strategy is. To simply
put, strategy evaluation entails reviewing and appraising the
strategy implementation process and measuring organizational
performance.
In other words, strategic evaluation can be defined as a process of
measuring. if the implemented strategy has successfully met the
objectives of the organisation and what kind of remedial actions
need to be taken by the organisation to address any shortcomings.
Importance of Strategic Evaluation
1) Performance Measurement : The strategic evaluation process provides the
organisation a set of both qualitative and quantitative criteria against which the
performance of both individuals as well as the organisation can be measured. The
qualitative criteria contain soft factors like skills, competencies and flexibility
whereas the quantitative criteria contain more hard factors like the return on
equity, ROI, profitability, etc.
2) Helps in Analysis: The basic premise of strategic evaluation is that the
environment of the organisation is dynamic. Some amount of variability between
the performance and the standard is natural and expected. Regular exercise of
'strategic evaluation helps the organisation to gauge the success of the adopted
strategy and to incorporate any changes where required. A positive difference
between the performance and the standard will show that the strategy is working
and the organisation needs to carry on what it is doing whereas a negative
difference will mean that there is a shortcoming in the strategy and that changes
need to be made.
Importance of Strategic Evaluation
3) Corrective Actions:
The organisation can take remedial action on the points which are identified weak areas
by strategic evaluation. For example, if it emerges that the lack of skills of the
employees is a major hurdle behind the failure of the strategy to meet objectives,
then a massive training program can be initiated by the organisation. Similarly, if it
is found that the organisation has set unrealistic sales targets, then course correction can
be attempted.
4) Reassessing Goals :
The evaluation of the performance of the organisation could also lead to a questioning
of the goals and objectives of the organisation. For example, the under performance of
a team to implement the strategy could be due to factors like lack of team support,
change in market dynamics or faulty strategy definition.
Strategic intent
Strategic intent is the purpose for which an organisation strives for.

These could be in the form of vision and mission statements for the
organisation as a corporate whole.
Strategic intent lays down the framework within which firms would
operate, adopt a predetermined direction and attempt to achieve their
goal.
Stretch, Leverage and Fit
1. Understanding stretch: Now we need to understand the gap between
aspirations and available resource (i.e. stretch). Simple meaning of
Stretch is a misfit between resources and aspirations. In simple
words we can say, this is a gap between available resources and
aspirations or expectations.
2. Leveraging: In this, instead of focusing on scarcity we should focus
on optimization of resources through innovation. This is called
resourcefulness.
3. Strategic Fit: Here we can use techniques like SWOT analysis to
assess and manage organisational capabilities and environmental
opportunities.
.
Stretch, Leverage and Fit
● Stretch is a misfit between resources and aspirations. To achieve
Strategic Intent – you need to Stretch. As of today there is a misfit between
resources and aspirations. So instead of looking at resources, you will look
at resourcefulness. To achieve you will stretch and make innovative use
of your resources.
● Leverage refers to concentrating, accumulating, complementing,
conserving, and recovering resources in such a manner that scarce
resource base is stretched to meet the aspirations that an organisation dares to
have.
● Fit means positioning the firm by matching its organisational resources to
its environment. The strategic fit is central to the strategy school of
positioning where techniques such as SWOT analysis are used to assess
organisational capabilities and environmental opportunities.
Stretch and Fit-Example
A strategic fit is when, for example, a supermarket chain with stores
based in the North, merges with a chain with supermarkets in the
South. The strategy is a good fit. It also includes ensuring that your
resources and capabilities match the environment. Strategic fit can be
used actively to evaluate the current strategic situation of a company as
well as opportunities such as mergers and acquisitions (M&A) and
divestitures of organizational divisions.
Strategic stretch means extending your competences to other areas. For
example, Microsoft has taken over Nokia’s mobile telephone
business to add additional competences to its range.
Strategic Fit
Strategic fit expresses the degree to which an organization is matching its resources
and capabilities with the opportunities in the external environment. The matching takes
place through strategy and it is therefore vital that the company has the actual resources
and capabilities to execute and support the strategy.
Strategic fit relates to the situation in which various resources of organization (human,
financial, material, technology, knowledge) are aligned with strategic goals and
development objectives set by managers in the organization during strategic management
process. Strategic fit can be divided into various sub-fits e.g. financial strategic fit,
market strategic fit, technology strategic fit. By achieving high degree of strategic fit,
managers can exploit opportunities of the organization and reduce negative impact of
threats. Strategic analysis and strategic planning helps to identify optimal degree of
strategic fit needed to achieve long-term competitive advantage.

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Strategic Management

● Create and launch a new product(s)

● Specialized plan to outperform the competitors.

● Strategic management is nothing but planning for both predictable as well as

● What is our organization's purpose? Or What do we do?

● Informs organization’s stakeholders about its plans and goals;

Strategy implementation includes designing the organization’s structure, distributing

● Force 1 – What is the threat of new entry to this market?

● Low amount of capital is required to enter a market;

● They purchase large volumes making a concentration of buyers,

● The market is controlled by a few large suppliers and not a fragmented

2. Differentiation leadership advantage: Differentiation strategy is a type of

A differentiation strategy can reduce rivalry with competitors if buyers

3. Focus Strategy: Focus is a type of competitive strategy that emphasizes

Examples of Focus Strategy

Horizontal Integration: A firm is said to have made a horizontal

● Failure of corporate strategy

● Rates of properties decreased drastically due to the recession in 2008,

Disclosure of material matters concerning the organisation’s performance and

● Establishment of long term goals

At the time of performing strategic analysis and arriving at strategic

Market Share (Relative competitive position) means the ratio of a

3. Question Marks (High Growth, Low Market Share)- Question

4. Dogs (Low Growth, Low Market Share)- Dogs represent

GE nine-box matrix is a strategy tool that offers a systematic approach for

Each business is appraised in terms of two major dimensions – Industry

● Procurement: Activities related to the sourcing of raw materials,

5. Creating a new business: An additional internal

● Increase market share and reduce competition in the industry

The following are the common reasons for a vertical merger:

● Reduce operating costs

Forward integration involves merging with downstream companies (such as distributors or

● If Manufacturer A merges with Supplier A, it would be considered a backward merger –

The production process: Textile Producer A → Shirt Manufacturer A → Clothing Store A. If

1. Strategic control involves monitoring a strategy as it is being

● Definition: Strategic control is the process of continually evaluating the strategy

● Definition: Operational control is the process of evaluating and

Motto: “Risk it to get the biscuit.”

Adhocracy culture is primarily focused on innovation and risk-taking. Many

Motto: “We’re in it to win it.”

● Employees are enthusiastic about their work.

Motto: “Get it done right.”

● Since this corporate culture is conservative, the company remains stable.

Strategic intent is the purpose for which an organisation strives for.

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