CORPORATE - STRATEGY

BY PUNEET SETHI
(FACULTY OF ECONOMICS, BANKING & FINANCE)
(EX BANKER-SBI, PNB & HDFC BANK)
Concept:-

It is overall plan of a firm deploying its resources to establish a favourable position &
compete successfully against its rivals.
It describe and determine an approach for the company that builds on its strength ,
vision & mission.

It has two approaches: top-down; bottom-up

1. Top down strategic planning describes an approach to strategy formulation in which
corporate centre determines mission, strategic intent, objectives & strategies for the
org. as a whole & for parts. Unit managers are seen as implementers of pre-specified
corporate strategies

2. Bottom up strategic planning is the approach where corporate centre doesn’t

conceptualize its strategic role, rather, they prefer to act as a catalyst & facilitator,
keeping things reasonably simple & keeping itself to broader strategic intent
Major determinants of strategy

1. External opportunities , threats & constraints

2. Internal Capabilities , competence & resources
3. Obligations towards society
4. Types of customers
5. Market environment influence
◦ Strategic Management Process
It is a process of formulating , implementing, & evaluating cross functional decisions
that enable a organisation to achieve objective.
THEORIES OF STRATEGIC MANAGEMENT
Strategic Management - Theory by Igor Ansoff
Harry Igor Ansoff (1918–2002) was a Russian American applied mathematician
and business manager.
Market penetration
In market penetration strategy, the organization tries to grow using its existing offerings
(products and services) in existing markets.

Market development
In market development strategy, a firm tries to expand into new markets (geographies,
countries etc.) using its existing offerings and also, with minimal product/services
development.

Product development
In product development strategy, a company tries to create new products and services
targeted at its existing markets to achieve growth. This involves extending the product
range available to the firm's existing markets.

Diversification
In diversification an organization tries to grow its market share by introducing new
offerings in new markets. It is the most risky strategy because both product and market
development is required.
BCG Matrix (Boston Consulting Group)

The Boston Consulting Group Matrix (BCG Matrix), also referred to as the product
portfolio matrix, is a business planning tool used to evaluate the strategic position
of a firm’s brand portfolio.

This model is based on two attributes of business:-

1. Market Share of the firm
2. Growth Rate Of Industry
There are four quadrants in the 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.
◦ Porter’s Generic Strategies

Michael Eugene Porter (born May 23, 1947)is an American academic known for
his theories on economics, business strategy, and social causes.
He studied a number of organisations and proposed that business level
strategies are result of 5 completive forces in a company ‘s environment.

According to him, these forces are

1. Competition in the industry

2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products
Porter’s 3 Generic Strategies
(Trick – CDF)

1. Cost Leadership – It is a strategy that focuses on making an organisation more

competitive by producing its product at cheaper cost than competitors price.
There are 2 options within this cost leaders strategy.
You can opt to keep costs as low as possible; or ensure that you have a larger market share
with average prices.

2. Differentiation – It involves attempting to develop products & services that are viewed as
unique in industry.
There can be different bases for differentiation like:-
Design or brand value ( Rolex, Levis , Pepsi etc)
Advance Technology (Windows , Apple)
Customer Services (City Bank, Dominos)
Quality (Xerox in Copiers , Sony in TV)
3. Focus Strategy:- It is a strategy that emphasizes in making an organisation more
competitive by targeting a specific reginal market product line or buyer group.
◦ The focus strategy has two variants:-
(a) In cost focus a firm seeks a cost advantage in its target segment
(b) differentiation focus a firm seeks differentiation in its target segment.

Competitive Analysis

It is necessary for formulating right strategies and determining the right positioning for the firm
in the industry.
It seeks to find answers to certain basic questions such as :-
1. Who are competitors of firm ?
2. What drives the competitors ?
3. What are the current strategies?
4. How are the competitors likely to respond to strategies of others?
Glueck and Jauch Generic Strategic Alternative Theory

This theory is proposed William F Glueck and Lawrence R Jauch.

There are four generic ways in which strategic alternatives can be considered.

Stability Strategy-
▪ one of the most important goals of org is stability
▪ implemented wherein few functional changes are made in the
products/markets
▪ Not a “do nothing” strategy, but a “do nothing new” strategy
▪ Involves keeping track of new developments to ensure that strategy continues to
make sense
▪ Pursued when firm continue to serve same or similar markets/products & focus is
on incremental improvement of performance.
Expansion Strategy-
▪ Implemented by redefining the business by adding business scope substantially,
which increases the efforts of current business
▪ Promising & popular strategy, which may take enterprise along relatively unknown &
risky paths, full of promises & pitfalls
▪ Also includes diversifying, acquiring & merging businesses
▪ Can be done in 2 ways- through
diversification & mergers/acquisitions

- Expansion through diversification- Diversification means entry into entry into new
product/product lines, new services/new markets involving substantially different skills,
technology & knowledge
- Expansion through acquisitions & mergers
Retrenchment Strategy-
▪ Redefinition of business by divesting a major product line/market
▪ Not always bad proposition as it saves org’s vital interests, minimize certain adverse
effects, regroup resources before launching a rise on growth ladder
▪ Several options are open to act on this strategy
▪ For temporary setbacks, cut on its capital & revenue expenditure, advertising,
executive perks, employee welfare subsidies, community development projects

Combination Strategy-
▪ Above strategies are not mutually exclusive
▪ May adopt a mix of above to suit particular situations
▪ May seek stability in some areas, expansion in some & retrenchment in others.