INTRODUCTION TO

STRATEGY

Dr. Shiv S Tripathi

Assistant Professor
Strategic Management Area
MDI Gurgaon
sstripathi@mdi.ac.in
What is Strategy?
 Strategy reflects strong military roots
The origins of the word “Strategy” can be traced
back to Strategos(Greek word) where Stratos means
‘The Army’ and Ago means ‘To lead’

• Know the enemy and know yourself, in a

hundred battles you will never be defeated.
• When you are ignorant of the enemy, but
know yourself, your chances of winning or
losing are equal.
• If ignorant both of your enemy and yourself,
you are sure to be defeated in every battle
-Sun Tzu, Art of War, c.400 BC
 ‘The Art of War’ by Sun Tzu
• Laying Plans • Variation in tactics
• Waging War • The Army on the
• Attack by Stratagem March
• Tactical Dispositions • Terrain
• Energy • The attack by fire
• Weak Points and • The Use of Spies
Strong
• Maneuvering
 The Concept of Strategy
• Strategy is all about winning
• Strategy offers broad guidelines
• Strategy is forward looking often a long-term plan
• Strategy is all about gaining and maintaining
competitive advantage
• Strategy is generally a product of top management
thinking
• Strategy is a dynamic and flexible program of
action
• Strategy is an inherently creative process
• Strategy is possible only against a competitor
 Elements of Strategy
• Goals: that are simple, consistent and long-term
towards which all efforts are directed
• Scope: A strategy defines the scope of the firm in
terms of Product, Market and Activities
• Competitive Advantage: A strategy contains a
clear statement of what competitive advantages the
firm will pursue and sustain
• Objective appraisal of resources: it is the most
important element and the core of the strategy
 Strategic Fit
For a strategy to be successful, it must be
consistent with the firm’s external
environment, and with its internal
environment – its goals and values, resources
and capabilities, and structure and systems.
 Strategy defined
• It is the determination of the long-term goals and
objectives of an enterprise, and the adoption of courses of
action and the allocation of resources necessary for
carrying out these goals. – Alfred Chandler
• Strategy is the pattern of objectives, purposes, or goals and
the major policies and plans for achieving these goals,
stated in such a way as to define what business the
company is in or is to be in and the kind of company it is
or is to be. – Kenneth Andrews
Therefore, in its broadest sense, strategy is the means by
which individuals or organisations achieve their objectives.
Video: https://www.youtube.com/watch?v=TD7WSLeQtVw
 Dimensions of Strategic Decisions

• Top management Involvement

• Allocation of Large amounts of Resources
• Effect on Long-term Prosperity of the firm
• Future-oriented
• Multi-functional or multi-business
Consequences
• Focus on External Groups
 STRATEGIES versus TACTICS
• Developed by • Employed and related to
Management lower levels of
• Generally the focus is on management
long term • Focus is on short-term
• The uncertainty level is • Decisions are more
quite high-lots of certain and are taken
information to be obtained within the framework of
• Affect various parts of an strategies
organization in a • The reach is limited to
significant way only specific segments
 The 10 Schools of thought in Strategy:
Henry Mintzberg (Source: Strategy Safari)
Mintzberg’s 5 Ps of Strategy
Video: https://www.youtube.com/watch?v=adu5ujrg59E
 Approaches to Strategy

• The Design Approach

Alfred Chandler (1962)
• The Analytical Approach
Igor Ansoff (1965)
• The Positioning Approach
Porter (1980)
 The Design Approach
• Strategy determines organizational tasks

• Strategy influences the choice of technology and

people appropriate for those tasks- and these, in
turn, influence the appropriate structure

• Strategy determines the specific environment

within which the organization will operate
 The Analytical Approach
• Corporate level What businesses should we be in ?
• Business level How to function in a business once
selected
• Functional level How to manage internal operations
such as manufacturing, marketing, finance, R&D etc.
• Operational level The direct execution part of
Strategy where often people do not realise that they are
part of the larger game.
 The Positioning Approach
Michael Porter (1980): The Competitive Forces
model
 Aspects of Strategy
• Strategy as a statement of ends, purpose and
intent
• Strategy as a high level plan
• Strategy as the means of beating the competition
• Strategy as an element of leadership
• Strategy as positioning for the future
• Strategy as building capability
 Aspects of Strategy(continued)
• Strategy as fit between capabilities and
opportunities
• Strategy as the result of deep involvement with the
business
• Strategy as a pattern of behavior resulting from
embedded culture
• Strategy as an emerging pattern of successful
behavior
Corporate Strategy & Business Strategy
Corporate Strategy defines the scope of the firm in terms of
the industries and markets in which it competes. Corporate
strategy decisions include investment in diversification,
vertical integration, acquisitions, new ventures; the allocation
of resources between different businesses of the firm; and
divestments.

Business Strategy is concerned with how the firm competes

within a particular industry or market. If the firm has to
prosper within an industry, it must establish a competitive
advantage over its rivals. Hence this area of strategy is also
referred to as Competitive Strategy.
What is an SBU?
 Strategic Business Unit

• A uniquely identified segment or business of a

large corporation
• An independent cost centre
• An independent profit centre
• A unit that requires a different set of policies

SBUs of BEL
Ghaziabad, Pachkula, Kotdwara, Hyderabad,
Military Communication, Electronics Warfare &
Avionics, Export Manufacturing
 Strategic Management
Strategic management can be defined as the art
and science of formulating, implementing, and
evaluating cross-functional decisions that
enable an organization to achieve its objectives.
 Evolution of Strategic Management:
Dominant Themes

1950s 1960s 1970-80 1990s 2000s 2006 2009

FINANCIAL
STRATEGY QUEST FOR STRATEGY STRATEGY IN onwards
CORPORATE AS COMPETITIVE THE NEW
BUDGETING PLANNING FOR THE SUSTAINABILITY
POSITIONING ADVANTAGE NEW MILLENIUM OF BUSINESS
ECONOMY
 Strategic Management Process
• Strategy • Developing a vision
Formulation and mission
• Strategy • Identifying an
organization’s external
Implementation
opportunities and threats,
• Strategy Evaluation • Determining internal
strengths and weaknesses
• Establishing long-term
objectives, generating
alternative strategies, and
choosing particular
strategies to pursue.
 Strategic Management Process
• Establish annual objectives
• Strategy Formulation • Devise policies
• Motivate employees
• Strategy • Allocate resources so that
Implementation formulated strategies can be
executed
• Strategy Evaluation • It includes developing a strategy-
supportive culture
• Creating an effective organizational
structure redirecting marketing
efforts
• Preparing budgets
• Developing and utilizing
information systems
• Linking employee compensation to
organizational performance.
 Strategic Management Process
• Strategy Formulation • Reviewing external and
internal factors that are the
• Strategy bases for current strategies
Implementation
• Measuring performance
• Strategy Evaluation • Taking corrective actions
A Comprehensive Strategic Management Model
Benefits of Strategic
Management
 A. Vision
A vision statement answers the question:
“What do we want to become?”

Vision statement of BEL

“To be a world-class enterprise in professional
electronics”.
 B. Mission
Mission statements address one main question:
“What is our business?”
Mission of BEL
“To be a customer focussed, globally
competitive company in defence electronics
and in other chosen areas of professional
electronics, through quality, technology and
innovation”.
 Objectives of BEL
• To be a customer focussed company providing state-of-the-art products
& solutions at competitive prices, meeting the demands of quality,
delivery & service.
• To generate internal resources for profitable growth.
• To attain technological leadership in defence electronics through in-
house R&D, partnership with defence/research laboratories & academic
institutions.
• To give thrust to exports.
• To create a facilitating environment for people to realise their full
potential through continuous learning & team work.
• To give value for money to customers & create wealth for shareholders.
• To constantly benchmark company's performance with best-in-class
internationally.
• To raise marketing abilities to global standards.
• To strive for self-reliance through indigenisation.
 C. External Environment
"It is not the strongest of the species that survive, nor the
most intelligent, but the one most responsive to change."
- Charles Darwin
"Organizations pursue strategies that will disrupt the normal
course of industry events and forge new industry conditions
to the disadvantage of competitors."
- Ian C. Macmillan
 External Audit / External environment
analysis
The purpose of an external audit is to develop a finite list of
opportunities that could benefit a firm and threats that should
be avoided. As the term finite suggests, the external audit is
not aimed at developing an exhaustive list of every possible
factor that could influence the business; rather, it is aimed at
identifying key variables that offer actionable responses.
Forces of External environment
 How to evaluate External
environment?
• Porter’s Five Forces Model
• External Factor Evaluation (EFE) Matrix
• Competitive Profile Matrix (CPM)
 External Factor Evaluation (EFE) Matrix
An External Factor Evaluation (EFE) Matrix allows strategists to
summarize and evaluate economic, social, cultural, demographic,
environmental, political, governmental, legal, technological, and
competitive information.
Steps
• List key external factors as identified in the external-audit process. Include a
total of 15 to 20 factors, including both opportunities and threats, that affect
the firm and its industry.
• Assign to each factor a weight that ranges from 0.0 (not important) to 1.0 (very
important). The weight indicates the relative importance of that factor to being
successful in the firm’s industry.
• Assign a rating between 1 and 4 to each key external factor to indicate how
effectively the firm’s current strategies respond to the factor, where 4 = the
response is superior, 3 = the response is above average, 2 = the response is
average, and 1 = the response is poor. Ratings are based on effectiveness of
the firm’s strategies.
• Multiply each factor’s weight by its rating to determine a weighted score.
• Sum the weighted scores for each variable to determine the total weighted
score for the organization.
Competitive Profile Matrix (CPM)
 D. Internal Analysis
• Resource Based View (RBV) of the firm
• Integrating Strategy & Culture
• Functions of Management
• Marketing – Customer analysis, Sales, Product & Service
Planning, pricing, Distribution, Marketing Research
• Finance – Trends and Ratio analysis
• Production and Operations
• Research & Development
• Management Information Systems
• Value Chain Analysis - Benchmarking
• Internal Factor Evaluation (IFE) Matrix
Value Chain Analysis: Porter’s
Generic Value Chain
Value-Chain
 Value Chain Analysis
To determine whether a firm’s value chain
activities are competitive compared to rivals
and thus conducive to winning in the
marketplace
 SWOT Analysis
• SWOT Analysis • TOWS Analysis

STRENGTHS WEAKNESSES THREATS OPPORTUNITIES

OPPORTUNITIES THREATS WEAKNESSES STRENGTHS

 TOWS Analysis

THREATS OPPORTUNITIES

WEAKNESSES STRENGTHS
 The Strategic Position and
Action Evaluation Matrix
The Strategic Position & Action Evaluation Framework indicates whether
aggressive, conservative, defensive or competitive strategies are more
appropriate for a given organisation. The axes of SPACE matrix represent
the following dimensions:

Internal Dimensions
• Financial Position (FP) (values +1 to +6)
• Competitive Position (CP) (values -1 to -6)
External Dimensions
• Stability (environmental) Position (SP) (values -1 to -6)
• Industry Position (IP) (values +1 to +6)

Plot the average scores of CP & IP on X-Axis

Plot the average scores of FP & SP on Y-Axis to get the strategy
Example of a typical SPACE Matrix
Indicative factors making up the SPACE
Matrix
The BCG Matrix
The Internal External (IE) Matrix / GE Matrix
 Grand Strategy Matrix for
formulating Alternative strategies
The Quantitative Strategic Planning
Matrix (QSPM)
 Strategy Implementation
• Strategy formulation is positioning forces before the action.
• Strategy implementation is managing forces during the action.
• Strategy formulation focuses on effectiveness.
• Strategy implementation focuses on efficiency.
• Strategy formulation is primarily an intellectual process.
• Strategy implementation is primarily an operational process.
• Strategy formulation requires good intuitive and analytical skills.
• Strategy implementation requires special motivation and leadership
skills.
• Strategy formulation requires coordination among a few individuals.
• Strategy implementation requires coordination among many
individuals.
A. Establish long-term objectives
B. Strategy & Structure
Symptoms of an ineffective
organisational Structure
F. Generate, Evaluate & Select
Strategies
Integration Intensive strategies
Forward Integration Market Penetration
Backward Integration Market Development
Horizontal Integration Product Development

Diversification Defensive Strategies

Related diversification Retrenchment
Unrelated Divestiture
diversification Liquidation
 G. Implement Strategies in
your functional area
E.g. Finance Issues
1. To raise capital with short-term debt, long-term debt,
preferred stock, or common stock
2. To lease or buy fixed assets
3. To determine an appropriate dividend payout ratio
4. To use LIFO (Last-in, First-out), FIFO (First-in, First-out),
or a market-value accounting approach
5. To extend the time of accounts receivable
6. To establish a certain percentage discount on accounts
within a specified period of time
7. To determine the amount of cash that should be kept on
hand
 E.g. R&D Issues
1. Emphasize product or process improvements.
2. Stress basic or applied research.
3. Be leaders or followers in R&D.
4. Develop robotics or manual-type processes.
5. Spend a high, average, or low amount of money
on R&D.
6. Perform R&D within the firm or to contract R&D
to outside firms.
7. Use university researchers or private-sector
researchers.
 H. Measure & Evaluate
Performance
Measuring Organisational Performance
• Against its own past performance
• Against competition
• Against industry

Strategy Evaluation
Strategy Evaluation includes the following three steps:
• Examining the underlying bases of a firm’s strategy
• Comparing expected results with actual results &
• Taking corrective action to ensure that performance conforms to plans
 Intended, Deliberate, Emergent &
Realized Strategy
When a deliberate strategy is realized, the result matches the intended
course of action.
An emergent strategy develops when an organization takes a series of
actions that with time turn into a consistent pattern of behavior,
regardless of specific intentions.
 Sample corrective actions for
strategy
1. Alter the firm’s structure
2. Replace one or more key individuals
3. Divest a division
4. Alter the firm’s vision and/or mission
5. Revise objectives
6. Alter strategies
7. Devise new policies
8. Install new performance incentives
9. Raise capital with stock or debt
10. Add or terminate salespersons, employees, or managers
11. Allocate resources differently
12. Outsource (or rein in) business functions
 Global Issues

• Can we identify new markets/clients?

• Can we open sourcing from the best
suppliers in the world?
• In how many products we have a
competitive advantage?
• What are the non-strategic products we can
sell in the global market?
• Does global changes like FDI norms affect
our business?