STRATEGY

• A Unified, comprehensive and integrated plan designed to

assure that the basic objectives of the enterprise are achieved.
• The common thread among the organizations activities and
product markets that define the essential nature of business
that the organization has or planned to be in future.
• It is consciously considered and flexibly designed scheme of
CORPORATE INTENT & ACTIONS to mobilize resources, to direct
human behavior & efforts, to handle events and problems, to
perceive and utilize opportunities, and to met challenges and
threats for corporate survival and success.
• Strategy is meant to fill in the need of organizations for a sense
of dynamic direction, focus and cohesiveness. It provides
integrated framework for the top management to search for,
evaluate and exploit beneficial opportunities to perceive and
meet potential threats and crises.
 STRATEGY

• In large organizations, strategies are

formulated at the corporate, divisional and
functional levels.
• At the corporate level strategies include the
determination of the pans for expansion and
growth, vertical & horizontal integration,
diversification, takeover and mergers etc.
• The corporate wide strategies need to be
operationalized by divisional and functional
strategies regarding product lines, production
volumes, quality ranges, prices, product
promotion, market penetration etc.
 STRATEGY
• STRATEGY IS PARTLY PROACTIVE AND PARTLY REACTIVE
• Proactive strategy is planned strategy whereas reactive strategy is
adaptive reaction to changing circumstances.
 STRATEGIC MANAGEMENT
• It refers to managerial process of developing a strategic vision,
setting objectives, crafting a strategy, implementing and
evaluating the strategy and initiating corrective adjustments
where deemed appropriate.
• It emphasizes the monitoring and evaluation of external
opportunities and threats in light of a company strength and
weaknesses and designing strategies for the survival and
growth of the company.
• It gives a direction to the company to move ahead, it helps to
define realistic objectives and goals which are in line with the
vision of the company.
• It helps to be proactive instead of reactive in shaping the
future.
• It serves as a corporate defense mechanism against mistakes
and pitfalls to avoid costly mistakes in product market choices
or investments.
 STRATEGIC MANAGEMENT

• It helps to enhance the longevity of the

business. With the state of competition and
dynamic environment.
• To develop certain core competencies and
competitive advantage that would facilitate
assist in its fight for survival & growth.
• It is the process of determining the objectives
of the firm, resources required to attain these
objectives and formulation of policies to
govern the acquisition, use and disposition of
resources.
STRATEGIC MANAGEMENT MODEL
 STRATEGIC MANAGEMENT PROCESS

1. Developing a strategic vision and

formulation of statement of mission,
goals and objectives.
2. Environmental & organizational
analysis.
3. Formulation of strategy.
4. Implementation of strategy
5. Strategic evaluation and control.
 Developing a strategic vision and formulation of statement of mission,
goals and objectives.
• Company must determine what directional path the company should
take and what changes in the PRODUCT – MARKET –CUSTOMER –
TECHNOLOGY focus would improve its current market position and
its future prospect.
• Concern over here is overall strategic direction.
• Corporate goals & objectives flow from mission – it represents the
quantum of growth the firm seeks to achieve in given time frame.
• Goal is to convert the strategic vision into specific performance
targets.
• Objectives need to be broken down into performance targets for
each separate business, product line, functional department,
individual work unit.
 Environmental & organizational analysis.

•External environment consist of economic,

social, technological, market and other
forces which affects its functioning. Its
dynamic and uncertain.
•Organisational analysis involves a review of
financial resources, technological
resources, productive capacity, marketing
and distribution effectiveness, R&D, HR
skills etc.
 Strategy formulation

• Strategy formulation is developing strategic

alternatives in the light of organisation SWOT in the
environment.
A company may be confronted with several
alternatives:-
• Should the company continue in the same business
carrying on the same volume of activities?
• It should grow by expanding the existing units or by
establishing new units or by acquiring other units in
the industry.
• Should it diversify into related or unrelated areas.
• Should it get out of an existing business fully or
partially?
 STRATEGY IMPLEMENATION

• Implementation & Execution is operations-oriented

activity aimed at shaping the performance of core
business activities in a strategy-supportive manner.
• Developing budgets,
• staffing with needed skills and expertise, building
competencies and capabilities
• Creating a company culture and work climate
conducive to successful strategy.
• Good strategy execution involves creating strong FIT
between strategy and organisational capabilities,
between strategy and reward system, between
strategy and internal operating systems, between
strategy and the organisations work climate and
culture.
 STRATEGY EVALUATION & CONTROL

•Evaluating company's
progress, assessing the
impact of new external
developments, making
corrective adjustments
Strategic Intent:- it refers to purposes of what they want
to do and why they want to do. It gives an idea of what
the organization desires to attain in future.
It indicates the long term position which the organization
desires.
 STRATEGIC INTENT

• VISION:- It implies the blue print of the company future position. It describes
where the organization wants to land. It depicts the aspirations and provides a
glimpse of what the organization would like to become in future. Every sub
system of the organization is required to follow its vision.
• MISSION:- A company's mission statement is typically focused on its present
business scope- “who we are and what we do”. It broadly describe an
organizations present capabilities, customer focus, activities and business
makeup.
• Business definition:- it seeks to explain the business undertaken by the firm,
with respect to the customer needs, target markets, alternate technologies.
• Business Model:- Strategy for the effective operation of the business,
ascertaining sources of income. Desired customer base, financial details. Rival
firms, operating in the same industry rely on different business models.
• Goals and objectives:- these are the base of measurement. Goals are the end
result, that an organization attempts to achieve. Objectives are time-based
measureable targets, which help in accomplishment of goals.
 Environmental Scanning

• Environmental scanning can be defined as the process by which

organizations monitor their relevant environment to identify
opportunities and threat affecting their business for the purpose
of taking strategic decisions.
• It is the process of GATHERING information regarding company's
environment, ANALYSING it and FORECASTING the impact of all
predictable environmental changes.

• Macro environment:- it is largely external to the enterprise and

thus beyond the direct influence and control of the organization,
but which exerts powerful influence over its functioning.
• Micro environment:- also known as task environment, which
affects the business in the daily operating level. Organizations
have to closely monitor the elements in order to stay competitive.
 Environmental Analysis

INTERNAL EXTERNAL

MACRO MICRO
•Organizational structure •Demographic
•Policies, procedures, rules •Consumers
•Economic •Competitors
•Corporate culture
•Government •Organization
•Financial resources
•Quality of Human resources
•Legal •Market
•Plant and machinery •Political •Suppliers
•Labour management •Cultural •Intermediaries
relationship •Technological
•Global
 SWOT ANALYSIS

• STRENGTH: - It is an inherent capacity which an organization can use

to gain strategic advantage. (superior R&D skills new product
development)

• WEAKNESS:- It is an inherent limitation or constraint which creates

strategic disadvantage. (Overdependence on a single product line)

• OPPORTUNITY :- It is a favorable condition in the organizations

environment which enables it to consolidate and strengthen its
position.

• THREATS:- It is an unfavorable condition in the organizations

environment which creates a risk for or causes damage to the
organization.
 Strength
• Strong financial condition
• Strong brand image, company
reputation
• Widely recognized market leader and
an attractive customer base
• Ability to take advantage of
economies of scale
• Proprietary technology / superior
technological skills/ important
patents.
• Cost advantage
• Strong advertising and promotion
• Product innovation skills
• Superior supply chain management
• Wide geographic coverage
Weakness
• No clear strategic direction
• Obsolete facilities
• A weak balance sheet,
burdened with debt
• Plagued with internal
operating problems
• Underutilized plant capacity.
• Deficiency of intellectual
capital
• Low technological know how
 Opportunity Threats
Expanding the product line to
meet broader range of customer • Shift in buyers needs and
needs. preferences.
• Integrating forward or • Likely entry of potent new
backward competitors.
• Acquisition of rival firms or • Mounting competition.
companies with attractive • Slowdowns in market growth.
technological expertise
• Growing bargaining power of
• Utilizing existing company skills customers or suppliers
or technical know - how to
• Technological changes.
entre new product lines or new
business.
• Alliances or joint ventures that
expand the firms market
coverage or boost its
competitive capability.
INDUSTRY ANALYSIS
RESOURCE BASED VIEW
 Resources – competence - capabilities

• Resources:- The stocks of tangible and intangible assets that are

available to the organization.

• Tangible resources:-
Intangible Resources
Conditions Affecting Managerial Decisions about Resources,
Capabilities, and Core Competencies
Components of Internal Analysis Leading to Competitive
Advantage and Value Creation
 Benchmarking

• It is strategy tool used to compare the

performance of the business processes and
products with the best performance of other
companies inside and outside the industry.
• It is the search for industry best practices that
lead to superior performances.
• Strategic benchmarking.  To identify the best
way to compete in the market. During the
process, the companies identify the winning
strategies (usually outside their own industry)
that successful companies use and apply them to
their own strategic process.
 Benchmarking

• Performance benchmarking. It is
concerned with comparing your company’s
products and services. The tool mainly
focuses on product and service quality,
features, price, speed, reliability, design
and customer satisfaction, but it can
measure anything that has the measurable
metrics, including processes.
• Performance benchmarking determines
how strong our products and services are
compared to our competition.
 Benchmarking

• Process benchmarking:- It requires to look

at other companies that engage in similar
activities and to identify the best practices
that can be applied to your own processes
in order to improve them
• It usually derives from performance
benchmarking because companies first
identify the weak competing points of
their products or services and then focus
on the key processes to eliminate those
weaknesses.
 Value Chain Analysis

• Value chain analysis is a strategy tool used to analyse internal

firm activities. 
• Its goal is to recognize, which activities are the most valuable
• By looking into internal activities, the analysis reveals where a
firm’s competitive advantages or disadvantages are.
• A tool that helps in identifying strength and weakness towards
the competitors.
• How to deliver satisfaction to customers as quickly.
• Divided in two parts Primary Activities and Secondary
Activities.
• VC is formed of primary activities that add value to the final
product directly and support activities that add value
indirectly.
Primary Activities
(Task that firm performs to deliver the product to customer)

• Inbound Logistics : Activities like material handling, warehousing

and inventory control that disseminate a product of raw material.
• Operations: Activities like Machining, packaging, assembling and
maintenance.
• Outbound Logistics: Activities like collecting, storing, physical
distribution of final products to customers.
• Marketing and Sales: Activities to attract customer to buy the
product like advertising and promotional campaigns, distribution
channel and select develop the sales force.
• Service: Activities designed to maintain product’s value. Service
related activities like installation, repair, training and
adjustments.
 Supportive activities

• Firm Infrastructure: Activities such as general management,

planning, finance, accounting, legal support that are required to
support work of the entire value chain.
• Human Resource Management: Activities such as recruiting, hiring,
training, development and compensating all personnel.
• Technological Development: Activities to improve the firm’s product
and method to manufacture it like basic research, product design and
service procedure.
• Procurement: Activities which are needed to produce firm product.
Purchased Input which are consumed at the time of manufacturing
like raw material and supplies. Fixed Assets like machinery, office
equipment and building.
 Competitive advantage types
Cost advantage Differentiation advantage
This approach is used when organizations try The firms that strive to create superior products or
to compete on costs and want to understand services use differentiation advantage approach.
the sources of their cost advantage or (good examples: Apple, Google, Samsung
disadvantage and what factors drive those Electronics, Starbucks
costs.(good examples: Amazon, Wal-
Mart, McDonald's, Ford, Toyota

•Step 1. Identify the firm’s primary and support
activities.
•Step 2. Establish the relative importance of
each activity in the total cost of the product.
•Step 3. Identify cost drivers for each activity.
•Step 4. Identify links between activities.
•Step 5. Identify opportunities for reducing
costs.
•Step 1. Identify the customers’ value-creating
activities.
•Step 2. Evaluate the differentiation strategies for
improving customer value.
•Step 3. Identify the best sustainable differentiation.
STRATEGIC ANALYSIS & CHOICE
BCG GROWTH – SHARE matrix is the simplest way to portray a firms
portfolio of investments.
•The vertical axis represents market growth rate and provides a
measure of market attractiveness.
•The horizontal axis represents relative market share and serves as a
measure of company strength in the market.
• Stars – are products that are growing rapidly. They also need
heavy investment to maintain their position and finance their
rapid growth potential.
• They are closely to the growth stage of PLC.
• They represent best opportunities for expansion.
• E.g.. Electronics, telecommunication, fast foods.

• Cash cows :- are low growth, high market share businesses or

products.
• Which generate large amount of cash but their rate of growth is slow.
• They are established, successful, and needs less investment to
maintain their market share.
• In long run when the growth rate slows down, stars become
cash cow
• In term of PLC, these are generally mature businesses which are reaping
the benefits of experience curve.
• The business can adopt mainly stability strategies.
• The cash generated by cash cows is reinvested in stars and
question marks.
• As they loose their attractiveness and tends towards a decline, a
phased retrenchment may be feasible.
Question marks:- called problem child or wildcats, are low market
share business in high-growth markets.
• They require a lot of cash to hold their share. Requires Heavy
Investment with low potential to generate cash.
• They may become stars if enough investment is made, or may
become dog if ignored.
• Dogs:- Low Growth, Low Share business. Do not have much
future in market. They might need cash for future to survive.
• They neither generate nor require large amount of cash.
• In PLC dogs are usually products in late maturity or a declining
stage.
 BCG MATRIX – SAMSUNG
1. CASH COWS: Samsung Home appliances which include
Samsung AC’s, Refrigerators, Washing Machines and Cooking
Appliances are the Cash Cows for the company.
• Over the years, Samsung Home Appliances have become a
household name and stand for quality and trust. Samsung has
been able to attain a good market share across different industry
segments and still holds a good potential to grow in the coming
future.
2. STARS: The products or business units that have a high market
share in high growth industry are the stars of the organization.
 Mobile phones, Tab, and TV business fall in the Star Category of
the BCG Matrix of Samsung.
• Mobile phones: Samsung Galaxy and Note Series are quite a hit
among customers and have their own base of loyal customers. In
order to maintain its market share and ward off the competition,
Samsung launches new smartphones with new features and
design.
• Samsung TV:  LED and OLED TV from Samsung are gaining good
traction from the global market and can be considered as the
Stars of the company. The company is experimenting with new
technologies and it coming up with new TV’s with
technologically advanced features to gain customers.
3. QUESTION MARK:- There are products that formulate a part of
the industry that is still in the phase of development, yet the
organization has not been able to create a significant position in
that industry. The small market share obtained by the organization
makes the future outlook for the product uncertain, therefore
investing in such domains is seen as a high-risk decision.
• Considering the performance of all the products that Samsung to
offer, Samsung Printer is one such product which can be placed
in the Question Mark quadrant of the BCG Matrix of Samsung.
• High competition and small market share of the product in the
industry is what makes it place in this quadrant.
4. DOGS:
• Dogs are those products that were perceived to have the
potential to grow but however failed to create magic due to the
slow market growth.
• Failure to deliver the expected results makes the product a
source of loss for the organization, propelling the management to
withdraw future investment in the venture. Since the product is
not expected to bring in any significant capital, future investment
is seen as a wastage of company resources, which could be
invested in a Question mark or Star category instead.
• With an aim to cater to the growing need of the digital world,
Samsung launched it’s Samsung Smartwatch but the product
failed to achieve the success that it was expected to achieve.
• Samsung Smartwatch: Tough competition from competitors like
Apple watch led to the downfall of the product.
• Hence Samsung Smartwatch can easily be placed in the Dog
quadrant of the BCG Matrix.
Ansoff’s Matrix
• A tool that helps business decide the product and market growth
strategy.
 Market Penetration
• A growth strategy where the
business focuses on existing
product on existing market.
• More sales to present customer
without many changes in the
existing product.
• It is the least risky since it leverages
many of the firms existing
resources and capabilities.
• However it has limits, and once the
market approaches saturation
another strategy must be pursued
if the firm is to continue to grow.
• Aggressive promotional campaign
where more spending on
advertising or personal selling.
• Pricing strategy designed to make
market unattractive for competitor
• Develop a new marketing strategy
  to encourage more people to
choose your product, or to use
more of it.
• Introduce a loyalty scheme.
• Launch price or other special offer
promotions.
• Increase your sales force's
activities.
• Use the Boston Matrix  to decide
which products warrant further
investment, and which should be
disregarded.
 Market Development
• A growth strategy where
business seeks to sell existing
product in new market.
• Achieved through new
geographical market, new
product dimension, packaging,
new distribution channel or
pricing policies to attract new
customer or new market
segment.
• Develop related products or
services
• Target different geographical
markets at home or abroad.
Conduct a PEST Analysis
• Use different sales channels, such
as online or direct sales, if you are
currently selling through agents or
intermediaries.
• Use Market Segmentation  to
target different groups of people,
perhaps with different age, gender
or demographic profiles from your
usual customers.
• Use the marketing mix  to
understand how to reposition your
product.
 Product Development
• A growth strategy where business
aims to introduce new product in
existing market
• It requires development of new
competencies and require the
business to develop modified
products which can be sold in
existing market.
• Extend your product by producing
different variants, or repackage
existing products.
• Develop related products or
services.
 Diversification
• A growth strategy where business • Beyond the opportunity to
focuses on new products in new expand your business, the main
market. advantage of diversification  is
• A strategy of acquiring business that, should one business suffer
outside company’s current from adverse circumstances,
products and markets. another may not be affected.
• Due to new product and new
market it is a risky strategy to
establish its position.
• There's often little scope for using
existing expertise or for achieving
economies of scale, because you
are trying to sell completely
different products or services to
different customers
 • Zara, a multinational fashion brand is the most exciting retailer
according to the Forbes, here is why.
• Zara considers the customers to be at the heart of their unique
business model, which includes design, production, distribution,
and sales through our extensive retail network. Hence, the
growth strategies instated by Zara makes them the most exciting
retailer today.

Old New
Product Development
Market Penetration
Stylish Clothes for differently abled
Bow Ties and other accessories
(handicaps)

Market Development Diversification

Virtual trials and online store Zara Home – the décor store.
• Market Penetration:  Zara’s new business plan focuses on designing
and promoting the accessories. Zara has only introduced CVH for
their accessories and their business plan includes opening exclusive
stores for accessories.
• Product Development:  Zara’s ‘diffable’ project is the most talked
about lately. It is targeting a new customer segment of differently
abled people. Zara’s clothes collection for this has been specially
designed which focuses on convenience of wearing, style and
comfort. Therefore, this growth strategy of Zara can be successful
because it is cost efficient and can also be considered ethical adding
on the brand reputation of Zara can also help market the new
product range,
• Market Development: Virtual Trials technology has been instated in
the trials rooms of Zara in US which are the first of its kind in the
world. This expansion policy of may not be successful because the
installation of the virtual trial technology would be very costly with
no revenue generating from them, though they would enhance the
shopping experience and increase the speed of the purchase
process.  But they would not be profitable in the long term.
• Diversification: Zara has been planning to diversify its business in
the new market of Home Décor with its new product range of the
décor items, this may be profitable because home décor is a
business which has a lot of potential and with Zara’s Brand
reputation and economies of scale this would be a feasible and
profitable option.
GE NINE CELL MATRIX
• It is a strategy tool that offers a systematic approach for the multi
business corporation to prioritize its investments among its
business units.
• In the business world, much like anywhere else, the problem of
resource scarcity is affecting the decisions the companies make. 
• With limited resources, but many opportunities of using them, the
businesses need to choose how to use their cash best.
• The fight for investments takes place in every level of the company:
between teams, functional departments, divisions or business
units.
 Industry Attractiveness
• 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.
• Industry attractiveness consists of many factors that collectively
determine the competition level in it.
• Long run growth rate
• Industry size
• Industry profitability: entry barriers, exit barriers, supplier power,
buyer power, threat of substitutes and available complements
• Industry structure
• Product life cycle changes
• Changes in demand
• Trend of prices
• Macro environment factors
• Seasonality
• Availability of labor
• Market segmentation
 Competitive strength of a business unit or a product

• Along the X axis, the matrix measures how strong, in terms of

competition, a particular business unit is against its rivals.
• Try to determine whether a business unit has a sustainable
competitive advantage or not.
• The following factors determine the competitive strength of a
business unit:
• Total market share
• Market share growth compared to rivals
• Brand strength
• Profitability of the company
• Customer loyalty
• Your business unit strength in meeting industry’s critical success
factors Level of product differentiation
• Production flexibility
Invest/Grow box. 
• Companies should invest into the business units that fall into these boxes
as they promise the highest returns in the future.
• These business units will require a lot of cash because they’ll be operating
in growing industries and will have to maintain or grow their market
share.
• It is essential to provide as much resources as possible for BUs so there
would be no constraints for them to grow. The investments should be
provided for R&D, advertising, acquisitions and to increase the
production capacity to meet the demand in the future.

Selectivity/Earnings box. 
• Should invest into these BUs only if you have the money leftover the
investments in invest/grow business units group and if you believe that
BUs will generate cash in the future.
• These business units are often considered last as there’s a lot of
uncertainty with them.
• The general rule should be to invest in business units which operate in
huge markets and there are not many dominant players in the market, so
the investments would help to easily win larger market share.
• Harvest/Divest box. The business units that are operating in
unattractive industries, don’t have sustainable competitive
advantages or are incapable of achieving it and are performing
relatively poorly fall into harvest/divest boxes.
• Step 1. Determine industry attractiveness of each business unit
Make a list of factors
• Assign weights - Weights indicate how important a factor is to
industry’s attractiveness. A number from 0.01 (not important) to
1.0 (very important)
• Rate the factors. The next thing you need to do is to rate each
factor for each of your product or business unit. Choose the
values between ‘1-5’ or ‘1-10’, where ‘1’ indicates the low
industry attractiveness and ‘5’ or ‘10’ high industry
attractiveness.
• Calculate the total scores. Total score is the sum of all weighted
scores for each business unit. Weighted scores are calculated by
multiplying weights and ratings. Total scores allow comparing
industry attractiveness for each business unit
• Step 2. Determine the competitive strength of each business
unit
 Industry Attractiveness

Business Unit 1 Business Unit 2

Factor Weight Rating Weighted Score Rating Weighted Score

Industry growth rate 0.25 3 0.75 4 1

Industry size 0.22 3 0.66 3 0.66

Industry profitability 0.18 5 0.90 1 0.18

Industry structure 0.17 4 0.68 4 0.68

Trend of prices 0.09 3 0.27 3 0.27

Market segmentation 0.09 1 0.09 3 0.27

Total score 1.00 - 3.35 - 3.06

Unit 3
 Generic business strategies can be classified into three types
1. Cost leadership
2. Differentiation
3. Focus
Cost Leadership
• Competitive advantage of a firm lies in lower cost of product
relative to what the competitors have to offer, is termed as cost
leadership
• Customers prefers a low cost product particularly if it offers the
same utility.

Achieving cost leadership

• High levels of productivity
• High capacity utilization
• Use of bargaining power to negotiate the lowest prices for
production inputs
• Lean production methods (e.g. JIT)
• Effective use of technology in the production process
• Gujarat cooperative milk marketing federation.
• Differentiation :-
• When the competitive advantage of a firm lies in special features
incorporated into the product/services, which are demanded by
the customers who are willing to pay for those, then the strategy
adopted is the differentiation business strategy.
• A differentiated product stands apart in the market for its special
features and attributes.
• The value added by the uniqueness of the product may allow the
firm to charge premium price for it.
Achieving Differentiation
• Access to leading R&D
• Highly skilled and creative product development team
• Strong sales team with the ability to successfully communicate
the perceived strengths of the product.
• Corporate reputation for quality and innovation.
Focus
• The focus business strategy rely on a either a cost leadership or
differentiation but to cater a narrow segment of the total market.
• Focus strategies are niche strategies.
• The premise is that the needs of the group can be better serviced
by focusing entirely on it.
• A firm using focus strategy often enjoys high degree of customer
loyalty.
• cost-minimization within a focused market
• Differentiation Focus means pursuing strategic
differentiation within a focused market.
Corporate level strategies

• Corporate level strategies are basically about the choice of direction

that a firm adopts in order to achieves its objectives.
• They are basically about the decisions related to allocating resources
among the different businesses of the firm, transferring resources
from one set of businesses to others, and managing and nurturing a
portfolio of businesses in such a way that overall corporate objectives
are achieved.
• The Stability Strategy
• 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.
• Generally, it is adopted by the firms that are risk averse, usually
the small scale businesses.
• The firm is satisfied with its performance, then it will not make
any significant changes in its business operations.
• The firms, which are slow and reluctant to change finds the
stability strategy safe and do not look for any other options
 stability

Pause & proceed

No change Profit strategy
with cautiion

1. When an organization aims at maintaining the present business

definition. 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.
2. The Profit Strategy 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.
• The profit strategy focuses on capitalizing the situation .
• The profit strategy can be followed when the problems are
temporary or short-lived and will go away with time. The
problems could be the economic recession or inflation, industry
downturn, worst market conditions, competitive pressure,
government policies .
• the firm adopts the artificial measures to tackle these problems
and sustain the profitability of the firm.
• Pause/Proceed with caution strategy
•  A stability strategy followed when an organization wait and look
at the market conditions before launching the full-fledged grand
strategy.
• is a deliberate action taken by the firm to postpone the strategic
action till the best opportunity knocks at the door. Thus, waiting
for the right strategy for the right time.
• 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.
 Expansion strategies
• 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.

Expansion

Concentration Diversification Integration Cooperation Internationalization

 Expansion through Concentration
• It involves the investment of resources in the product line,
catering to the needs of the identified market with the help of
proven and tested technology.
• The firms prefer expansion through concentration because they
are required to do things what they are already doing.
• Due to the familiarity with the industry the firm likes to invest in
the known businesses rather than a new one.
 Expansion through Integration 
• It means combining one or more present operation of the
business with no change in the customer groups. This
combination can be done through a value chain.
• 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.
• Integration is also a subset of diversification as it involves doing
something different from what the firm has been doing
previously.
Vertical integration:
• When an organization starts making new products that serves its
own needs.
• Any new activity undertaken with the purpose of either supplying
inputs (raw material) or serving as a customer for outputs
(marketing firms products) is vertical integration.
• Forward integration :-  the manufacturing firm open up its retail
outlet.
• Backward integration:- the shoe company open up or starts
manufacturing of its own raw material.
• Horizontal Integration: When it takes over the same kind of
product with similar marketing and production levels. Example,
the pharmaceutical company takes over its rival pharmaceutical
company.
• It is adopted with a view to expand geographically by buying
competitors business, to increase the market share or to benefit
from economies of scale.
 Expansion through Diversification 
• It 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.

Diversification 

Concentric Conglomerate
• 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
• 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.
• Conglomerate Diversification: When an organization expands
itself into different areas, unrelated to its core business is called
as a conglomerate diversification. ITC. A cigarette company
diversifying into hotel industry.
Expansion through Cooperation 
• It 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.
• It expresses the idea of simultaneous competition and
cooperation among rival firms for mutual benefits.
• It is based on the assumption that companies compete in the
market for a limited market share.
• Merger: The merger is the combination of two or more firms
wherein one acquires the assets and liabilities of the other in the
exchange of cash or shares, or both the organizations get
dissolved, and a new organization came into the existence.
• The firm that acquires another is said to have made an
acquisition, whereas, for the other firm that gets acquired, it is a
merger.
• 1. Horizontal merger
• A merger occurring between companies in the same industry. It is
a business consolidation that occurs between firms who operate
in the same space, often as competitors offering the same good
or service.
2. Vertical Merger:-
• A merger between two companies producing different goods or
services for one specific finished product.
• A vertical merger occurs when two or more firms, operating at
different levels within an industry's supply chain, merge
operations.
• Most often the logic behind the merger is to increase synergies
created by merging firms that would be more efficient operating
as one.
• An automobile company joining with a parts supplier.
• Such a deal would allow the automobile division to obtain better
pricing on parts and have better control over the manufacturing
process. The parts division, in turn, would be guaranteed a
steady stream of business
3. Concentric merger:
• It refers to combination of two or more firms which are related
to each other in terms of customer groups, functions or
technology.
• Combination of a computer system manufacturer with a UPS
manufacturer.
4. Conglomerate merger:
• It refers to the combination of two firms operating in industries
unrelated to each other. In this case, the business of the target
company is entirely different from those of the acquiring
company.
• Takeover: Takeover strategy is the other method of expansion
through cooperation. In this, one firm acquires the other in such a
way, that it becomes responsible for all the acquired firm’s
operations.
• Tender offer :- It is a public bid made by the acquiring company
for a large segment of the target company’s stocks at a fixed
price.
• The price quoted is usually higher than the market value of the
stock.
• The premium price is offered so as to convince the shareholders
to sell their shares.
• The bid holds a specific time limit and may have conditions
which the target company must follow if the offer gets approval.
• The acquiring company must file required documents with the
regulatory body and should disclose their plans for the acquired
company.
• PROXY FIGHT
The buyer tries to influence the shareholders to vote out the
current management in favour of the team who will support the
takeover.

Usually, managers and displeased shareholders within the

company attempt to change the ownership by getting the
confidence of the remaining shareholders.

Hewlett-Packard’s hostile takeover of Compaq was conducted by

the proxy fight method.
• Emami and Zandu
• This hostile takeover triggered in May 2008 when the Emami
acquired 24% stake of Zandu from Vaidyas (co-founders) @ Rs.
6900 per share. Open offer for 20% followed along with Parikh’s
(co-founders) giving in their 18% after 4 months of futility to save
the company. Rs.750 crores were the consideration paid by
Emami for a 72% stake in the company. Parikh’s tried creeping
acquisition but we guess the offer by Emami (Rs.16500 per share
– Rs.15000 + Rs.1500 as non – complete fee) was the one that
couldn’t be refused.
• Joint Venture:
• Both the firms agree to combine and carry out the business
operations jointly.. The joint ventures are usually temporary; that
lasts till the particular task is accomplished.
• It is a business entity created by two or more parties, generally
characterized by shared ownership, shared returns and risks and
shared governance.

• Companies typically pursue joint ventures for :-

to access a new market, particularly emerging markets;
to gain scale efficiencies by combining assets and operations;
to share risk for major investments or projects;
to access skills and capabilities.
to capitalize the strengths of both the firms
To surmounting hurdles such as tariffs, quotas, national-political
interest cultural roadblocks

• Absorption:- it takes place where the company acquires another

company
• Consolidation:- where two or more companies combine to form a
new company to form a temporary partnership (consortium) for a
specific purpose.
 Strategic alliance
• Two or more firms unite to peruse a set of agreed goals but remain
independent subsequent to the formation of the alliance.
• the partner firms share the benefits of the alliance & control over
the performances of the assigned task.
• Cartels: Big companies can cooperate unofficially, to control
production and/or prices within a certain market segment or
business area and constrain their competition
• Franchising: a franchiser gives the right to use a brand-name and
corporate concept to a franchisee who has to pay a fixed amount
of money. The franchiser keeps the control over pricing, marketing
and corporate decisions in general.
• Licensing: A company pays for the right to use another companies´
technology or production processes.
• Industry standard groups: These are groups of normally large
enterprises, that try to enforce technical standards according to
their own production processes.
• Outsourcing: Production steps that do not belong to the core
competencies of a firm are likely to be outsourced, which means
that another company is paid to accomplish these tasks.
 MERGER JOINT VENTURE

• In a merger, two or more • In a joint venture, two or more

companies combine forces and companies combine and share
become a new, separate entity. their resources for the purpose
The end result is a third of pursuing a specific goal. The
company with a different name, original companies remain as
a new board of directors and separate entities and share
separate stocks and ownership. joint ownership in a newly
The original companies no formed company, which exists
longer exist.   solely to fulfill its function as
specified by the joint venture
 Expansion through Internationalization 
• It is the strategy followed by an organization when it aims to expand
beyond the national market.
• International Strategy: The firms adopt an international strategy to
create value by offering those products and services to the foreign
markets where these are not available. This can be done, by
practicing a tight control over the operations in the overseas and
providing the standardized products with little or no differentiation.
E.g.. Coca cola, IBM, Kellogs

• Multi-domestic Strategy: when they try to achieve a high level of

local responsiveness by matching their product and service offering
to the national condition operating in the country they operate in.
The firm attempts to extensively customize their products according
to local condition operating in different countries.
• Global Strategy: The global firms rely on low-cost structure and offer
those products and services to the selected foreign markets in which
they have the expertise. Thus, a standardized product or service is
offered to the selected countries around the world.

• Transnational Strategy: Under this strategy, the firms adopt the

combined approach of multi-domestic and global strategy. The firms
rely on both the low-cost structure and the local responsiveness i.e.
according to the local conditions. Thus, a firm offers its standardized
products and services and at the same time makes sure that it is in
line with the local conditions prevailing in the country, where it is
operating.
Retrenchment Strategy

• It is followed when an organization substantially reduces the scope of

its activity.
• External development such as government policy, demand
saturation, emergence of substitute product or changing customer
needs and preferences , poor management, wrong strategy, poor
quality of management leads to company failure.
• Turn Around, Divestment and Liquidation are three types of
Retrenchment Strategy.
Turn Around Strategy:
•  It is backing out or retreating from the decision wrongly made
earlier and transforming from a loss making company to a profit
making company.
• Continuous losses
• Poor management
• Wrong corporate strategies
• Persistent negative cash flows
• High employee attrition rate
• Poor quality of functional management
Divestment Strategy
• Divestment ( also called as divestiture or cutback) strategy
involves sales or liquidation or proportion of a business or major
division, profit centre or SBU.
• It is part of Rehabilitation or restructuring plan and is adopted
when a turn around has been attempted but has been
unsuccessful.
Liquidation Strategy
• It involves closing down of a firm and selling its assets.
• It is considered ass the last resort because it leads to serious
consequences.
 Combination Strategy

• It is followed when an organization adopts a mixture of stability

strategies, expansion, retrenchment either simultaneously (at the
same time in its different businesses) , or sequential (at different
times in the same business) with the aim of improving its
performance.
 FUNCTIONAL STRATEGIES

• Functional strategies describe the means or methods to be used by each

functional area of the organization in carrying out the corporate-level or
business unit strategy
• The functional areas of organizations include: product & operations,
marketing, finance, human resources, research and development, and
information systems management.
1. Production/operations management (POM) is the basic function in the
business firm. This function of a business consists of all those activities
that transform inputs into goods and services. POM must guide decisions
regarding:
• the technical core,
• quality,
• capacity,
• facilities,
• technology and
• production planning and control.
2. Marketing can be described as the process of defining, anticipating, creating,
and fulfilling customers' needs and wants for products and services. The major
decisions in marketing strategy concern the
• product/service,
• price,
• place/distribution,
• and promotion/advertising.
3. Financial management is primarily concerned with two functions:
1. acquiring funds to meet the organization's current and future needs;
2. recording, monitoring, and controlling the financial results of an
organization's operations.
Therefore, the major decisions in financial strategy concern
• liquidity and cash management,
• leverage and capital management,
• asset management,
• investment ratios, and
• financial planning and control
.4. Human resource strategies concern
• human resource planning,
• recruitment and selection,
• training and development,
• compensation and rewards,
• employment security, and labor relations.

5. Research and development has two basic components:

product/service R&D and process R&D..
Unit 4 – implementation of strategy
MCKINSEY 7S MODEL
• Strategy: the plan devised to maintain and build competitive advantage
over the competition.
• Structure represents the way business divisions and units are organized
and includes the information of who is accountable to whom. In other
words, structure is the organizational chart of the firm. It is also one of
the most visible and easy to change elements of the framework.
• Systems are the processes and procedures of the company, which reveal
business’ daily activities and how decisions are made. Systems are the
area of the firm that determines how business is done and it should be
the main focus for managers during organizational change.
• Skills are the abilities, capabilities and competences of the firm’s
employees perform. During organizational change, the question often
arises of what skills the company will really need to reinforce its new
strategy or new structure.
• Staff element is concerned with what type and how many employees an
organization will need and how they will be recruited, trained, motivated
and rewarded.
• Style represents the way the company is managed by top-level
managers, how they interact, what actions do they take and their
symbolic value. In other words, it is the management style of company’s
leaders.
• Shared Values are at the core of McKinsey 7s model. They are the norms
and standards that guide employee behavior and company actions and
thus, are the foundation of every organization.
• The model was developed in 1980s by McKinsey consultants Tom
Peters, Robert Waterman and Julien Philips with a help from Richard
Pascale and Anthony G. Athos. 
• The goal of the model was to show how 7 elements of the company:
Structure, Strategy, Skills, Staff, Style, Systems, and Shared values,
can be aligned together to achieve effectiveness in a company.
• The key point of the model is that all the seven areas are
interconnected and a change in one area requires change in the rest
of a firm for it to function effectively.
• The seven areas of organization are divided into the ‘soft’ and ‘hard’
areas.
• Strategy, structure and systems are hard elements that are much
easier to identify and manage when compared to soft elements.
• On the other hand, soft areas, although harder to manage, are the
foundation of the organization and are more likely to create the
sustained competitive advantage.
• Placing Shared Values in the middle of the model emphasizes that
these values are central to the development of all the other critical
elements.
• Whatever the type of change – restructuring, new processes, organizational
merger, new systems, change of leadership, and so on – the model can be used
to understand how the organizational elements are interrelated, and so ensure
that the wider impact of changes made in one area is taken into consideration.
• 7-S model to help analyze the
current situation,
a proposed future situation
and to identify gaps and inconsistencies between them.
It's then a question of adjusting and tuning the elements of the 7-S model to
ensure that your organization works effectively and well once you reach the
desired endpoint.
The McKinsey 7-S model is one that can be applied to almost any
organizational or team effectiveness issue.
 If something within your organization or team isn't working, chances are there
is inconsistency between some of the elements identified by this classic model.
Once these inconsistencies are revealed, you can work to align the internal
elements to make sure they are all contributing to the shared goals and values.
 STRATEGY FORMULATION
• It is a positioning forces before
action.
• It focuses on effectiveness
• It is primarily an intellectual
process
• It requires good intuitive and
analytical skills
• Requires coordination among
few individuals.
• It is primarily an
entrepreneurial activity based
on strategic decision making.
STRATEGY IMPLEMENTATION
• It is managing forces during
action.
• It focuses on efficiency.
• It is primarily an operational
process.
• Requires special motivation &
Leadership skills
• Requires combination among
many individuals
• It is mainly administrative task
based operational decision
making.
 Strategy implementation
• It is the translation of chosen strategy into organizational action
so as to achieve strategic goals and objectives.
• It is the manner in which an organization should develop, utilize,
and amalgamate organizational structure, control systems, and
culture to follow strategies that lead to competitive advantage
and a better performance.
• Organizational structure allocates special value developing tasks
and roles to the employees and states how these tasks and roles
can be correlated so as maximize efficiency, quality, and
customer satisfaction-the pillars of competitive advantage
• An organization structure is the way in which the task and
subtask required to implement the strategy are arranged.
• Forward linkage:- with the formulation of new strategies, or
reformulation leading to modified strategies, many changes have to
be effected within the organization. Organizational structure has to
undergo a change in light of the requirements of modified or new
strategy.
The strategies formulated provide the direction to implementation.
In this way formulation of strategies has FORWARD LINKAGE with
their implementation
• Backward Linkage:- formation process is also affected by factors
related with implementation.
Past strategic actions also determine the choice of strategy.
Organizations tend to adopt those strategies which can be
implemented with the help of present structure of resources
combined with some additional efforts.
 Structure MECHANISM
1. Defining the major task required to implement a strategy.
2. Grouping task on the basis of common skills requirement.
3. Subdivision of responsibility and delegation of authority to perform
task.
4. Coordination of divided responsibility.
5. Design the administration of the information system.
6. Design the administration of control system.
7. Design the administration of appraisal system.
8. Design the administration of motivational system.
9. Design the administration of development system.
10. Design the administration of planning system.
• The first four of these mechanism will lead to the creation of
structure. The other six are devised to hold and sustain the
structure.
 STRATEGY STRUCTURE RELATIONSHIP
• There is a close relationship between an organization's strategy and its
structure. For the organization to deliver its plans, the strategy and the
structure must be woven together seamlessly
• The understanding of this relationship is important so that in implementing
the strategy, the organization structure is designed according to the needs of
the strategy.
• An organization's strategy is its plan for the whole business that sets out how
the organization will use its major resources. An organization's structure is
the way the pieces of the organization fit together internally.
• Without coordination or Relationship between strategy and structure, the
most likely outcomes are confusion, misdirection, and splintered efforts
within the organization
• Changes in organizations strategy bring about new administrate
problems which, in turn, require a newly refashioned structure if the
new strategy is to be successfully implemented.
• Organizational structures need to be designed to meet aims. They involve
combining flexibility of decision making, and the sharing of best ideas across
the organization, with appropriate levels of management and control from
the centre.
• Environmental forces constitute a big driver to change in
organizations. Once strategy has been directed by the environmental
forces, then strategists identify a structure to match with the
strategy
• This is referred to as the strategic alignment‘- aligning the strategy
and the structure to the environment.
• Structure is the design of the organization through which strategy is
administered. Changes in an organization‘s strategy can lead to new
administrative problems which will require a new structure for the
successful implementation of the new strategy.
• The structural design describes roles, responsibilities and lines of
reporting in organizations and can deeply influence the sources of
organization‘s advantage. Thus, failure to adjust structures appropriately
can totally undermine implementation.
• This structure must be totally integrated with strategy for the
organization to achieve its mission and goals. - Structure supports
strategy.
 STRATEGY STRUCTURE

• What is our strategy? • How is the company/team

• How do we intend to achieve divided?
our objectives? • What is the hierarchy?
• How do we deal with • How do the various
competitive pressure? departments coordinate
• How are changes in customer activities?
demands dealt with? • How do the team members
• How is strategy adjusted for organize and align themselves?
environmental issues? • Is decision making and
controlling centralized or
decentralized? Is this as it
should be, given what we're
doing?
• Where are the lines of
communication? Explicit and
implicit?
 Organizational Structure

Functional Divisional SBU Matrix

 FUNCTIONAL ORGANIZATION STRUCTURE

This is based on the primary activities that have to be undertaken by an organization

such as production, finance and accounting, marketing, human resources and R&D.
Such a structure divides responsibilities according to the organizations primary roles.
Functional structures are found in firms with a single or narrow product focus and
such firms require well-defined skills and area of specialization to acquire competitive
advantages in providing products and services.
The strategic challenge is thus effective co-ordination of the functional units
 PRODUCT/DIVISIONAL ORGANIZATION STRUCTURE

A Divisional Organizational Structure/Multi-Divisions is adopted by firms undertaking a

product diversification strategy or utilizes unrelated market channels or begins to serve
heterogeneous customer groups. In this case, a functional structure becomes
inadequate and a divisional structure is used.

The new structure is necessary to meet the increased co-ordination and decision making
requirements that result from increased diversity and size. This allows decision-making
in response to varied competitive environments and enables corporate management to
concentrate on corporate-level strategic decisions
 SBU

It is an additional layer of management due to the need to improve strategy

implementation, to promote synergy and to gain greater control over the firm‘s
diverse business units.

The adoption of this type of structure by management is as a result of firms

encountering difficulty in evaluating and controlling the operations of their
divisions as the diversity, size and number of these units continues to increase.

Therefore the change in organization strategy triggers the need to adopt a new
structure for effective implementation of the strategy. It provides a way for the
largest companies to regain focus in different parts of their business.
 strategic business unit (SBU)
• SBU, is a fully-functional unit of a business that has its own vision and
direction. Typically, it operates as a separate unit, but it is also an
important part of the company.
• It is a profit center which focuses on product offering and market segment.
• SBUs typically have a discrete marketing plan, analysis of competition,
and marketing campaign.
• This principle works best for organizations which have multiple product
structure.
Features:-
• They are present in the organizational structure,
• They are small businesses with a high functional and decision-
making autonomy. 
• They are organizational units without separate legal personality,
• They utilize "product-market" strategy,
• SBU has divisional structure, which is determined by the size of
production, technology and research activities financial and
accounting processes, and marketing activities.
• E.g. Proctor and Gamble, LG. These companies have different
product categories under one roof. LG as a company makes
consumer durables. 
• It makes refrigerators, washing machines, air-conditioners as well as
televisions. These small units are formed as separate SBUs so that
revenues, costs as well as profits can be tracked independently.
• Once a unit is given an SBU status, it can make its own decisions,
investments, budgets etc. It will be quick to react when the product
market takes a shift or changes start happening before the shift
happens.
 MATRIX

It is a two directional structure where individual works under both vertical and
horizontal lines of command.
It is a combination of structures which could take the form of product and
geographical divisions or functional and divisional structures operating together.
Such structures are used in large companies where there is increased diversity that
leads to numerous products and project efforts of major strategic significance.

It will allow effective knowledge management since separate areas of skills and
resources will be integrated across organizational boundaries.
Thus, the matrix structure simplifies and increases the focus of resources on a
narrow but strategically important product, project or market
 RESOURCE ALLOCATION

• It deals with the procurement and commitment of financial, physical &

Human resources to strategic tasks for achievement of organizational
objectives.
• Organisational resources in tandem with organisational behaviour
constitute the foundation for the creation of strengths & weakness,
synergistic advantages, core competencies and capability leading to
competitive advantage.

Approaches to Resource Allocation

1. BCG based Budgeting:- BCG product portfolio matrix is one of the
tools that strategists can use to link resource allocation decisions to
choice of strategy. Investment & cash flow decision can be made on
the basis of type of SBU.
2. PLC based budgeting:- RA could be linked to different stages in a PLC. A
product in the introduction and growth stage may attract more resources.

3. Zero based Budgeting:- each strategist have to justify the resource

allocation demand, not on the previous year budget, but on ground zero.
(which is based on fresh calculation of cost each time a plan is
implemented.

4. Strategic budgeting:- it is the process of creating long –range budget that

spans a period of more than one year. The intent behind is to develop a
plan that supports long range vision for the future position of an entity.
• Restructuring: A significant change to the existing business model
of a firm. Changes may include divestment of non-core businesses,
mergers, replacement, cost cutting, streamlining product portfolio.

• Re-engineering: Optimizing business processes to secure improve

efficiency, productivity and/or effectiveness. i.e. Improving my on
time delivery rate, lowering my cost per unit transportation cost,
reduce labour hours on mature products thru automation, etc. The
current dominant methodologies are Six Sigma. These are tactical
level changes.
 Theory X Theory Y
Theory X managers tend to take a pessimistic view of their people,
and assume that they are naturally unmotivated and dislike
work. They think that team members need to promoted, rewarded
or punished constantly to make sure they complete their task.
• Dislike their work.
• Avoid responsibility and need constant direction.
• Have to be controlled, forced and threatened to deliver work.
• Need to be supervised at every step.
• Have no incentive to work or ambition, and therefore need to be
enticed by rewards to achieve goals.
Organizations with a Theory X approach tend to have several tiers
of managers and supervisors to oversee and direct workers.
Authority is rarely delegated, and control remains firmly
centralized. Managers are more authoritarian and actively
intervene to get things done.
Theory Y managers have an optimistic, positive opinion of their
people, and they use a decentralized, participative management
style. This encourages a more collaborative and trust based
relationship between managers and their team members.
People have greater responsibility, and managers encourage them to
develop their skills and suggest improvements. Appraisals are
regular, also give employees frequent opportunities for promotion.

This style of management assumes that workers are:

• Happy to work on their own initiative.

• More involved in decision making.
• Self-motivated to complete their tasks.
• Enjoy ownership of their work
• Seek and accept responsibility, and need little direction.
• View work as fulfilling and challenging.
• Solve problems creatively and imaginatively.
 Vroom expectancy motivation theory

Expectancy: effort → performance (E→P)

Instrumentality: performance → outcome (P→O)
Valence: V(R) outcome → reward
Expectancy theory is about the mental processes regarding
choice, or choosing. It explains the processes that an
individual undergoes to make choices.

This theory emphasizes the needs for organizations to relate

rewards directly to performance and to ensure that the
rewards provided are those rewards deserved and wanted.

The individual makes choices based on estimates of how well

the expected results of a given behavior are going to match
up with or eventually lead to the desired results.

Motivation is a product of the individual's expectancy that a

certain effort will lead to the intended performance, the
instrumentality of this performance to achieving a certain
result, and the desirability of this result for the individual,
known as valence
Expectancy is the belief that increased effort will lead to increased performance
i.e. if I work harder then this will be better. This is affected by:-

• Having the right resources available (e.g. raw materials, time)

• Having the right skills to do the job
• Having the necessary support to get the job done (e.g. supervisor support, or
correct information on the job)

 Instrumentality is the belief that if you perform well that a valued outcome will
be received. The degree to which a first level outcome will lead to the second level
outcome. i.e. if I do a good job, there is something in it for me. This is affected by:-

• Clear understanding of the relationship between performance and outcomes –

e.g. the rules of the reward 'game'
• Trust in the people who will take the decisions on who gets what outcome
• Transparency of the process that decides who gets what outcome

Valence is the importance that the individual places upon the expected outcome.
For the valence to be positive, the person must prefer attaining the outcome to
not attaining it. For example, if someone is mainly motivated by money, he or she
might not value offers of additional time off.
Unit 6

o A business model is nothing more than a model, holistic

description of the logical contexts how a company generates value
for its customers and itself.
• The business model of a company is thus an analytical unit to
systematically identify the starting point for innovation, which
means that companies can change parts of their business model
and thus create an advantage over their competitors.
• A business model innovation is thus the conscious change of an
existing business model or the creation of a new business model
that better satisfies the needs of the customer than existing
business models.
• For companies in all industries, innovation is immensely important.
• In many cases, however, innovation is only associated with new,
innovative products or technical renewals.

• However, business model innovations are significantly more

profitable. Changes in customer behaviour, globalization and
technological innovations are currently creating a "window of
opportunity" for new business models.

• It is one of the most effective ways for companies to stand out from
the competition and thus secure the existence of the company,
especially in instable times.

• Ultimately, it is a matter of breaking down a company into its

building blocks, analysing it and evaluating it, re-inventing them,
and, in combination with other, new building blocks, to set them
back together systematically.
Disruptive Innovation refers to a technology whose application
significantly affects the way a market or industry functions.
An example of a modern disruptive innovation is the internet, which
significantly altered the way companies did business and which
negatively impacted companies that were unwilling to adopt it.
• Identify “white space” growth opportunities—tapping into an entirely
new customer opportunity with a completely new business model that
changes the competitive landscape.
• Generate valuable, new ideas for engaging with customers, designing
new or transformed business models that fulfil the jobs customers
need to get done more effectively, efficiently and profitably.
• Successfully enter emerging markets, re-conceiving business models
that recognize the unique unmet needs of consumers in these
markets, profitably and efficiently.
• Create new systems, rules, and metrics that enable companies to
organize for and implement new businesses successfully.
• The theory goes that a smaller company with fewer resources can
unseat an established, successful business by targeting segments of the
market that have been neglected by the incumbent, typically because it
is focusing on more profitable areas.
• As the larger business concentrates on improving products and services
for its most demanding customers, the small company is gaining a
foothold at the bottom end of the market, or tapping a new market the
incumbent had failed to notice.
• This type of start-up usually enters the market with new or innovative
technologies that it uses to deliver products or services better suited to
the incumbent’s overlooked customers – at a lower price.
• Then it moves steadily upmarket until it is delivering the performance
that the established business’s mainstream customers expect, while
keeping intact the advantages that drove its early success.
• Disruption happens when the incumbent’s mainstream customers start
taking up the start-up’s products or services in volume. Think Netflix.
• IT is becoming more and more a game changer in the industry.
The IT trends for 2018 are dominated by artificial intelligence,
followed by the cloud and innovative digital platforms such as fog
computing, server less Paa and block chain. 5G is also becoming
increasingly important as a key technology for the
implementation of Industry.
 Blue Ocean Strategy

• Blue ocean strategy is the simultaneous pursuit of differentiation

and low cost to open up a new market space and create new
demand.
• It is about creating and capturing uncontested market space,
thereby making the competition irrelevant.
• It is based on the view that market boundaries and industry
structure are not a given and can be reconstructed by the actions
and beliefs of industry players.
• Red oceans are all the industries • Blue oceans, in contrast, denote
in existence today – the known all the industries not in
market space. existence today – the unknown
• In red oceans, industry market space, untainted by
boundaries are defined and competition.
accepted, and the competitive • In blue oceans, demand is
rules of the game are known. created rather than fought over.
• Here, companies try to There is ample opportunity for
outperform their rivals to grab a growth that is both profitable
greater share of existing and rapid.
demand. • In blue oceans, competition is
• As the market space gets irrelevant because the rules of
crowded, profits and growth are the game are waiting to be set.
reduced. Products become • A blue ocean is an analogy to
commodities, leading to describe the wider, deeper
cutthroat or ‘bloody’ potential to be found in
competition. Hence the term unexplored market space.
red oceans. • A blue ocean is vast, deep, and
powerful in terms of profitable
growth.
 Strategic Control
• Strategic controls take into account the changing assumptions that
determine a strategy, continually evaluate the strategy as it is being
implemented, and take the necessary steps to adjust the strategy to
the new requirements.
• In this manner, strategic controls are early warning systems and
differ from post-action controls which evaluate only after the
implementation has been completed.
1. Premise Control: Every strategy is based on certain
assumptions about environmental and organisational factors.
Some of these factors are highly significant and any change in
them can affect strategy to a large extent.
• Premise control is necessary to identify the key assumptions, and
keep track of any change in them so as to assess their impact on
strategy and its implementation.
• Premise control serves the purpose of continually testing the
assumptions to find out whether they are still valid or not.
• This enables the strategists to take corrective action at the right
time rather than continuing with a strategy which is based on
erroneous assumptions.
2. Implementation Control: 
• Implementation of strategy results in series of plans, programmes
& projects, it is aimed at evaluating whether PPP are actually
guiding the organisation towards its predetermined objectives or
not.
• Implementation control may be put into practice through the
identification and monitoring of strategic thrusts such as:-
 An assessment of the marketing success of a new product after
pre-testing – (company may evaluate whether new product
launch will be advantageous or it should be abandoned in favour
of other.
 Checking the feasibility of a diversification programme after
making initial attempts at seeking technological collaboration.
• Strategic Surveillance: it is designed to monitor a broad range of
events inside and outside the company that are likely to threaten
the course of a firms strategy.
• Special Alert Control: Special alert control is based on trigger
mechanism for rapid response and immediate reassessment of
strategy in the light of sudden and unexpected events called
crises. Crises are critical situations that occur unexpectedly and
threaten the course of a strategy.
 Strategic momentum control
• These types of evaluation techniques are aimed at finding out
what needs to be done in order to allow the organization to
maintain its existing strategic momentum.
• There are three techniques , which could be used to achieve
these aims:
1. Responsibility control centres
2. Critical success factors
3. Generic strategies
• Responsibility controls form the core of management control
systems and are of four types: revenue, expense, profit, and
investment centres.
• CSFs form the bases for strategists to continually evaluate the
strategies to assess whether or not these are helping the
organization to achieve the objective.
 Critical Success Factors

• Critical success factors (CSF) are the key areas, which must be
performed at the highest possible level of excellence if
organizations want succeed in the particular industry.
• They vary between different industries or even strategic groups
and include both internal and external factors.
• The more critical success factors are included the more robust and
accurate the analysis is.
Market Share Union relations Power over suppliers

Product Quality Skilled workforce Access to key suppliers

Clear strategic direction Location of facilities Efficient supply chain

Customer service Production capacity Supply chain integration

Customer loyalty Added product features On time delivery

Brand reputation Price competitiveness Strong online presence

Effective social media

Customer satisfaction Low cost structure
management

Experience and skills

Financial position Variety of products
in e-commerce

Management qualification
Cash reserves Complementary products
and experience

Innovation in products and

Profit margin Level of product integration
services
Inventory turnover Successful product promotions Innovative culture

Employee retention Superior marketing capabilities Efficient production

Income per employee Superior advertising capabilities Lean production system

Innovations per employee Superior IT capabilities Strong supplier network

Cost per employee Size of advertising budget Strong distribution network

R&D spending Effectiveness of sales distribution Product design

Strong patent portfolio Employee satisfaction Level of vertical integration

Effective corporate social

New patents per year Effective planning and budgeting
responsibility programs

Revenue per new product Variety of distribution channels Sales per outlet

Successful new introductions Power over distributors Parent company support

• The generic strategies approach to strategic control is based on
the assumption that the strategies adopted by a firm similar to
another firm are comparable.
• Based on such a comparison, a firm can study why and how
other firms are implementing strategies and assess whether or
not its own strategy is following a similar path.
• A strategic group is a group of firms that adopts similar strategies
with similar resources. Firms within a strategic group, often
within the same industry and sometimes in other industries too,
tend to adopt similar strategies.
 Strategic Leap Control
• Organisational environment may be dynamic. Firms operating in
dynamic environment probably have major shifts in strategies
and their assumptions may require more drastic changes.
• Developing and maintaining control in such an environment need
new strategic rules and to cope with emerging environmental
realities.
• Therefore, the strategies, under dynamic environments should
redefine the rules for developing and operationalising strategies.
There are four forms of strategic leap control:-
1. Strategic issue management
2. strategic field analysis
3. systems modelling
4. scenarios.
Strategic Issue Management: It involves the identification of one
or a few key issues that are perceived as crucial to an
organisation to achieve its performance objectives.
• It is designed to reduce the chances of an organisation being
caught unaware by a major environmental change.
• These control techniques encourage the company to remain
sensitive to potential environmental changes, plan appropriate
actions for changes and avoid becoming locked into a particular
course of action.

Strategic Field Analysis: It is a way of examining the nature and

extent of synergies that exist or are lacking between/among
components of an organisation.
• This examination allows the managers to exploit the
opportunities provided by the environment.
Systems Modelling: Systems models are typically computer-
based models trying to capture the administrative realities of an
organisation and how it interfaces with its environment.

Scenarios: It focuses on qualitative aspects of the organisation

broad trends, describing alternative major scenarios and
developing an assessment of which scenario is most likely.
 Portfolio analysis
•  It involves identification and evaluation of all products or service
groups offered by company on the market (so called product mix)
and preparing specific strategies for every group according to its
relative market share and actual or projected sales growth rate.
• It allows to answer key questions how to shape the present and
future business portfolio (of product or services) in order to
reduce the risk of functioning in a changing environment, and
increase the effects of the implemented strategy.
PROCESS OF STRATEGIC CONTROL
 Step 1: Key Areas to be Monitored
• Macro-environment: The external environmental forces must be
continuously monitored as the changes in the environment
influence the strategic implementation process of the company.
• Strategic Monitoring and Control Includes: Modifying any one or
more of the areas like company’s mission, objectives, goals,
strategy formulation and strategy implementation.
• Industry Environment: The purpose is to modify the company’s
strategy goals and operations in order to capitalise the new
opportunities and defend against the new threats effectively.
• Internal Operations: The strategist has to evaluate the internal
operations continuously
in view of the changes in the macro-environment and industry
environment.
 Step 2: Establishing Standards
• The standards may include:
 Quality of Products/Services.
 Quantity of Products to be Produced.
 Quality of Management.
 Innovativeness/Creativity.
 Long term investment value.
 Volume of sales and/or market share.
 Production targets, rate of capacity utilisation,  Ability to attract,
develop and retain competent and skilled people.
 Use of company’s assets.
 Corporate image among the customers and general public.
Step 3: Measuring Performance

• The strategist has to measure the performance through Strategic

audits and strategic audit measurement methods.
• Strategic Audit
A strategic audit is an execution and evaluation of organisation’s
operations affected by the strategy implementation. Strategic audit
may be very comprehensive, emphasising all facets of a strategic
management process.
• Strategic Audit Measurement Methods
Qualitative Methods
Quantitative Methods
Qualitative Methods
• Qualitative measurements are in the form of non-numerical data that
are subjectively summarised.
• Critical questions are designed to reflect important facts of
organisational operations. Answers to these questions form as the
basis for measurements.
• Qualitative measurement methods are efficient and are useful. But
applying them relies mostly on human judgement. Conclusion based
on such methods should be drawn carefully due to the subjectivity of
the judgement.

• Is organisational strategy appropriate, given organisational resources?

Quantitative Methods
• Under quantitative organisational measurements of the
performance of strategy implementation is taken place in the
form of numerical data.

• Quantitative measurements can be used to evaluate:

(i) Number of units produced per time period,
(ii) Cost of production, cost of marketing,
(iii) Productivity and production efficiency levels,
(iv) Employee turnover, absenteeism levels,
(v) Sales and sales growth market shares,
(vi) Profit-gross, net, earning per share, dividend rate, return on
equity, market price of
the share,
(vii) Cost of production,
(viii) Cost of marketing, etc.
 Step 4: Compare Performance with Standards

1. Profitability Standards: These standards include how much gross profit, net
profit, return on investment, earning per share, percentage of profit to sales the
company should
earn in a given time period.

2. Market Position Standards: These standards include total sales, sales-region

wise and product-wise, market share, marketing costs, customer service,
customer satisfaction, price, customer loyalty shifts from other organisations’
products etc.

3. Productivity Standards: These standards indicate the performance of the

organisation in terms of conversion of inputs into outputs. These standards
include capital
productivity, labour productivity, material productivity.

4. Product Leadership Standards: These standards include the innovations and

modifications in products to increase the new uses of the existing product,
developing new products with new uses.
Step 5: Take No Action if Performance is in
Harmony with Standards

• If the performance of various organisational areas match with the

standards, the
strategist need not take any action. The strategy should just allow the
process to continue. However, can try to improve the performance
above the standards, if it would be possible, without having any
negative impact on the existing process.
 Step 6: Take Corrective Action, if necessary

• The strategists compare the performance with standards. If they find any
deviation
between the standards and performance, they should take corrective action.
• Causes of Deviations:
 Was the cause of deviation internal or external?
 Was the cause random, or should it have been anticipated?
 Is the change temporary or permanent?
 Are the present strategies still appropriate?
• Corrective Action:
Strategies that do not achieve standards produce three possible
responses.
To revise strategies
 To change standards
To take corrective action in the existing process without
changing standards and strategies.