Strategic Management

M.Karunakaran – Lecturer

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 Overview of last class

UNIT 2

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 Today's topic

The Balance Score Card

Grand Strategies – Growth, Expansion, Stability, Retrenchment, Combination

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 The Balance Score Card
Grand Strategies – Growth, Expansion, Stability, Retrenchment,
Combination

Business Policy and Strategic Management – Mr.M.Jeyarathnam, VSP Rao, Upendra Kachru

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 The Balance Score Card
- Rs. Kaplan and DP Norton

Balance score card :

Linking corporate goals with strategic actions
undertaken at Business unit

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 Why - The Balance Score Card

 To give superior returns to stakeholders

 To give superior value to customers

 To develop operations with necessary capability

 To develop operations capability employee should have skills, creativity,

diversity and motivations

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 Grand Strategies

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 Grand Strategy

 Grand Strategy is a general plan of major action by which a firm intends to

achieve its long term goals
 Provides basic directions of a firm

 Example:
McDonalds ----More products line ----low cost ----food business----
overtime customers fall---profit fall ----Diversification

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 Meanings
• Concentric – Sharing the same circle

• Conglomerate – A Large corporation formed by merging of separate firms

• Divestment – Deprive something(remove)

• Liquidation – Easily converted in to cash

• Bankrupt – officially declared not to have the money to pay your debt

• Joint Venture – Legal entity formed between two or more partied to undertake an economic
activity together

• Strategic Alliance – Formal relationship between two or more parties to pursue a set of agreed
upon goals or to meet a critical business need while remaining independent organisation

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 Growth/ Expansion

Increase sales, market shares

Growth is more they expand the business
Expand to related or unrelated products

Internal growth External growth

Intensification Mergers
Diversification Takeovers
Joint ventures

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 When to adopt growth?

• Organization achieves stability, then go for strategies

• Should look for environmental demands

• If government offers benefit

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 Why to Pursue Growth?

 To ensure survival E.g. : Ambassador car

 To obtain scale of economics

 To stimulate talent E.g. : Hero Honda, Wipro

 To reach commanding heights E.g. : ITC, Britannia (Low price—high quality)

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 Problems created by Growth?

 Essar Group  Mr.Ravi Ruia & Mr. Shashi Ruia

 Raised fund  $ 4000 m

 Loan  $ 13,000 m

 Diversified in all markets

 Cash flow became less

(Business today, Feb, 16,2003: Essar group erased from the Industrial map)

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 How to manage growth?
According to peter drucker

Minimum Growth
Economic objectives is more important than the volume objectives

Internal Preparation
Opportunity knocks the door once, if we don’t open it knocks the next door

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 Diversification

E.g. : Colgate Close up is the competitor

Diversification in to related or unrelated business

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 Examples

Forward – : To set up selling units (TITAN)

Backward – : To manufacture raw material phallic anhydride (ASIAN PAINTS)

Concentric - : Related products – computers, terminals, communication (IBM)

Conglomerate -: Unrelated products – Oil, hotel, financial services (ITC)

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 Retrenchment
Defensive strategy

E.g. Xerox  face bankruptcy 2 times because of Japanese competitors like

canon and sharp

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 Combination

Large, diversified organization generally use a mixture of stability, expansion or

retrenchment strategies

In recent times, three more strategies have gained popularity namely,

1. Joint ventures - A joint venture is a legal entity formed between two or more parties to
undertake an economic activity together.

2. Strategic alliance - A Strategic Alliance is a formal relationship between two or more parties to
pursue a set of agreed upon goals or to meet a critical business need while remaining
independent organizations.

3. Consortia - An association or a combination, as of businesses, financial institutions, or investors,

for the purpose of engaging in a joint venture.

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 Overview of today's class

The Balance Score Card

Grand Strategies – Growth, Expansion, Stability, Retrenchment, Combination

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 Questions

1. What is Balance score card?

2. Explain different types of grand strategies?
3. What is grand strategy?

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