• Business strategy can be defined as long-term organizational

policies that a company forms in order to do business.

• To succeed, different business organizations formulate and
adopt various business policies.

Basis of Policies Formulations:

• type of industry, choice of product, expansion or contraction of
production from one line of product to another line, adoption of
new technology, launching of new products, managing
employees with new type of employment contract.
 Two Approaches to Business Strategy
a) Market Driven Strategy,
b) Resource Driven Strategy.
A) MARKET DRIVEN STRATEGY: it suggests that much of the
differences in performance between 2 firms in on account of their
doing business in different industries.

- each industries have their own characteristics; like…

 Industry with high entry barrier & low dependency on monopoly
supplier or on few large customer are likely to provide more ROI.
 Low entry barrier with superior profit will attract more new players.
How Barriers can be created by an organisation?
 On other hand with few supplier & more buyer decrease
Profitability of an org.
 A business org. always face competition from their competitors.

BUSINESS COMPETES IN 2 MARKETS:

A) Product Market,
B) Factor Market

 All organizations keep their watch on their competitors move and on the basis of
it they make their reactive strategies.
 At conceptual level, strategic planning may be considered as a series of decisions
with respect to –
- what goods to produce inside, what goods to buy from outside, which market to
choose to sale its manufactured goods???
 Organization will have many alternatives for each of these decisions.

Ex: Entrepreneur who want to do start business of Cycle.

Organization strategy is also affected by many industrial & environmental factors.

 As we have seen the different factors influencing business org.

 When a company goes by Market Driven Strategy it takes these

environmental forces as given & tries to adopt a policy to maximize its
business goal.

 This approach assumes that one single player cannot change

environmental set up.

 These environmental forces provides 100’s of opportunities, it should

choose its business product line in such a way that their effects are
minimal.

 1st Task organization has to do is Carry out their SWOT ANALYSIS

1. Understanding company Vision, Mission, and
objectives.
2. Analyzing the environmental factors.
3. Identifying company competitiveness positions.
4. Assessing company capabilities.
5. Examining the strategic options available.
 Organizational VISION express the company’s
Long-Term Goal.
 Company’s MISSION Statements provides the
purpose for which it exists & what it would like to
do in future.
 it will also give the restrictive criteria of their
operations.
 It also reflects Short & Long term objectives in both
quantitative & qualitative terms, and sometime it
also highlights Philosophy & Value System.
 Company’s OBJETIVES sets a general guidelines
to its managers & other employees as to how they
should work & what they should work for to reach
 AMAZON: Our vision is to be earth’s most customer-centric company; to build a
place where people can come to find and discover anything they might want to
buy online.

DISNEY: To make people happy.
 GOOGLE: To organize the world’s information and make it universally accessible
and useful.
 INSTAGRAM: Capture and Share the World’s Moments.
 MICROSOFT: Empower people through great software anytime, anyplace, and
on any device.
 Your mission is the everyday extension of your
vision. What can you and what will you do today and every
day to make your vision a reality?

 MICROSOFT: To help people around the world realize their

full potential.

 TARBUCKS: To inspire and nurture the human spirit — one

person, one cup and one neighborhood at a time.
 Environmental Scanning is most critical stage in strategic planning
process of an orgn.

 There are many agents / environ. Factors which affect company.

 How this changes occurred in these factors can not be judged & No
orgn. has much control over the environmental factors.

 Due to lack of Control, most of business considered them as

opportunity or threats.

 It require knowledge about it & provide to allocate org. resources.

a. Auditing of Environmental Influences: Listing out forces & their
strengths / degree that affects business.

b. Identify & Understand dynamism or volatility of the forces.

c. Mapping the Structure of Industry: position of competitors in industry.

 There are 4 institutional forces of environment but they may be sub
categories.
 But all these factors will not equally import ants for all companies.

EX: A bicycle manufacturing company, regulatory forces not that much critical,
but it will be more critical to chemical & Pharmaceutical industry.

 So as an business you have to identify important environmental forces

which affects business org.

HOW BUSINESS CAN IDENTIFY THOSE FACTORS?????

 Orgn. Can identify by way of relates/interaction with such factors.

EX: if company regularly high low-skilled worker from the market, it may be quite
vulnerable to any change in government regulation regarding minimum
wages for such worker.
 Profit based as well as NGOs, relates with its environment through various
interaction & exchange processes.
 This exchange may happen by way of manpower, goods, and service.
 Through exchange process which give indication of company’s
dependency on particular set of environment influences.
 Due to compositions, some forces may change quickly & some may change
slowly.
EX: change in societal expectation on orgn will change the way of hiring,
voluntary turnover, or firing process.
EX: an org. which has strong link with capital market is likely to sensitive to any
change in gov. policy of money supply & interest rates.
 To understand dynamism of the forces, one should list out the linkage
between org. & its environment along with their time dependency.

 Another Important to understand it is that….

- a strategy of “Doing Nothing” may run strategy than a costly strategic

exercise.

- Unstable Environment may get lot of information which are useful for
short period only..
 Apart from institutional factors, competitors and collaborators are to be
considered as a force that company should think when formulating any
strategic plan.

 Thus, the structure of an industry & nature of the competitors be

considered when making strategic plans.

 Immediate environmental factors have direct & strong effect on

profitability & long run growth of a firm.

 We learn Porters Five Force Model to Understand the Structure of Industry

OR Industry analysis.
i) Threats Of Entry:

 How easy is it for a new player to enter my business space?

 If these entry barriers are low, than what consequences???

 Entry barrier is must to for continuous high profitability of an industry.

 Entry Barriers are of various kinds:

- Regulatory forces: Small scale sector & no private player in defense business.

- Large size of Plant & Distribution of orgn.: Automobile & petroleum Refineries.

- Requirement of large financial capital: Tata Nano invest 1500 cores.

- Proprietary right over mineral deposits; technology: Microsoft over MS Office,

Intel.
 Big orgn. Relies on many other org. for supply of raw materials & parts
& components needed to manufacture final products.

 Availability of steady raw materials is essential requirement for long term

success of company. Mere availability of technology will not ensure the
continuous operations.

 When a manufacturer buys a lot its manufacturing requirements from a

single supplier it can be vulnerable to supplier’s strategic moves or
failures.

 So, many org. go for multiple suppliers.

 Knowing buyers dependency, a supplier may raise the cost of raw

materials OR they will start its business by way of forward integration.
 When a large part of a company’s output is sold to only one or a few buyers,
it can be vulnerable to strategic intents of the buyers.

EX: if you build infrastructure & distribution network according to buyer

needs than it can not change.

• Examples:
a) NTPC sells a lot of its power outputs to State Electricity Boards (SEB).
But most SEB’s are poor pay masters. SEB’s sickness was affecting
the health of NTPC quite badly.

b) Burn Standard and Company Ltd, Braithewaite and Co Ltd and

Jessop Construction Ltd were faithful suppliers of wagons to Indian
Railway for many years. After economic liberalization, Indian Railway
went for more diversified suppliers that led to sickness of those loyal
 How easy is it for an existing competitor to come out with a
substitute product that you have just launched as a new
innovation?
Example:
 During the later part of last century Indian pharmaceutical industry had
lots of medicinal formulations with very similar therapeutic values. This
affected serious investment in development of drugs in India.

What will be the prospect Consequences on our

business if you will find the substitute
products for our business?
 How many players are operating in the industry and how keenly are they
watching each other?

 High rivalry among the players will make them to go for excessive
expenditure on product promotion and customer relations raising to
their annual operating cost which ultimately is likely to cut into their
actual profits.

EX: Media war between coke & Pepsi.

Promotional Policy adopted by HUL & PG.

A new Entrepreneur could just stop at this stage to make

its strategic policy.

 Environ. Scanning needs to be done before deciding in which
industry one should do business.
 Environmental Scanning provides static analysis about companies
position in industry.
 2 angles are available to check market position of an organization:
- how total market size of a product is changing with time,
- which group of products it belongs to.
Total market share for product will be different for different
Product Life Cycle Stage…

2nd Way of Doing Analysis is – STRATEGIC GROUP ANALYSIS…

 Knowing competitive position of firm will provide an idea about
kind of opportunities & threats a new entrepreneur is likely to
face.
 These opportunities will only captured only and only when
organization poses certain internal capabilities, functional
strengths, strengths & weakness.
 Organizational Capability Analysis is the assessment of this
internal resource strengths of a company.

3 Techniques are their to do it:

a) Resource Positions

b) Company Internal Value Chain

c) Efficiency in Resource Allocation or product Portfolio Analysis

 It means getting an idea about the stock & verities of resources
available with company.

 These resources are classified in to 2 categories: Tangible

Resources & Intangible Resources of an
organization.
 Intangible Assets can not be quantified as tangible assets.

 Intangible Assets may further classified in : Human and Non-

Human resources.

 Human Resources are: KSAs( Knowledge, Skills, and Abilities)

of Employees, a skilled inventory can be built using the employees
work, academic, training background, and HRIS(human resource
Cost Leadership:
When product from all manufacturers appear same to the customers,

then every manufacturer will try to capture the market by selling at the
lowest cost.

Example: primary education, basic banking or

health care service for common citizens.
– In 2006, there was craze among Indian Cement manufacturers for captive

power plant because power from state grid cost Rs 3.5 to Rs 4.5 per KWH
while that from captive
Differentiation:
 When the product has many special characteristics, a manufacturer
may try to do business with those customers who like those
characteristics more than other characteristics.

Example:
 Maruti, Indica and Honda City are all cars but Maruti is known
for its fuel efficiency, Indica is known for its suspension and
Honda City is known for its looks! And, there are different
people who prefer these characteristics of a car.
Focus:
 Instead of segmenting the total market based on product
characteristics, this strategy is based on segmentation of the
product market based on geography location, customer income,
education, industry etc. A manufacturer will do business in one of
the other market.
Example: Newspapers in Kolkata
 There are English papers The Telegraph, The Statesman, the
Times of India and a few others;

 Then there are Bengali newspapers e.g. Anandabazar Patrika,

Barthaman, Satyayug then there are Hindi news papers e.g.
Sanmarg.
 Key learning
• Product markets are heterogeneous. Different companies choose to do
their businesses in different product markets.

• Different product markets can be broadly classified into different

industries.

• Profitability of an industry depend on presence of entry barrier, power of

suppliers, power of buyers, threat of substitutes and rivalry among the
existing players.

• A business organizations may choose to adopt any one of the three

generic strategies viz. cost leadership, differentiation and focus.