Strategic

Management
AATM PRAKASH RAI
INTRODUCTION
BUSINESS? POLICY?

TACTICS?
 Refers to the ideas, plans, and support that
firms employ to compete successfully against
its rivals.

Strategy is designed to help firms achieve

competitive advantage .
What is a
Strategy? How to get edge over rivals?

Being followed from the olden days (example-

King Akbar).
Definitions of STRATEGY
Acc to Chandler: “ Strategy
determines the basic long-term goals
of an enterprise, and the adoption
of courses of action and the
allocation of resources necessary for
carrying out these goals.”

Acc to Mintzberg: “ Strategy is a

mediating force between the
organization and its environment:
consistent patterns in streams of
organization decisions to deal with
the environment”
 The decisions are Strategic decisions are
concerned with or effect normally about trying to
the Long term direction of achieve some advantage
an organization. for the organization.

Matching the activities The decision has

of an organization to the
environment in which it
major financial and
operates. resource implications.

Major impact The decision entails

outside the significant risks to
organization. the business.

Characteristics
of Strategy
 Distinctive Competence:-The special skills,
capabilities, or resources that enable a firm
to stand out from its competitors; what a
firm can do especially well to compete or
serve its customers. Example- McDonald’s
core business is hamburger (quality food and
reasonable price).
Strategy
concepts
Terrain:- The environment in which
competition occurs. In a military sense,
terrain is the type of environment or ground
on which a battle takes place. From a
business sense, terrain refers to markets,
segments, and products used to win over
customers.
Strategy vs tactics
Aspects Strategy Tactics
Scale of Objectives Grand Limited
Scope of Action Broad and General Narrowly Focused
Guidance Provided General and Ongoing Specific and Situational
Degree of Flexibility Adaptable, but not hastily Fluid, quick to adjust and
changed adapt in minor or major
ways.

Timing in Relation to Before Action During Action

Action

Focus of Resource Deployment Employment

Utilization
 Definition:- “Strategic management is a
What is stream of decisions and actions that lead to
strategic the development of an effective strategy or
strategies to help achieve corporate
management? objectives.” – By Glueck.
Strategic management
Where we are today (current position)?

Where we want to go (Vision)?

What actions should we take to go there ( develop a plan or strategy)?

How can we bring out these actions ( Implement strategy)?

Six Ingredients of Strategy
Vision

Value Creation Planning and

administration

Strategy

Global Stakeholders
Awareness
Leveraging
Technology
Value Creation
Value Proposition The products and services that meet customer
needs at a price that generates a positive economic return.

Customer Focus right customer + right product/services= Economic

return.

Competitor focus Understanding the competitors.

Planning and Administration
Activity Fit Do we have all resources to perform activities?

Corporate Fit How to make our all business units to work together?

Alliance Fit Are we have right partners and whether their strategies are
compatible with us?

People Fit Are our people are trained and skilled?

Communication Fit Do we promote clear and honest communication among

our people?
Strategic management model
Goal Setting

Strategy
monitoring Analysis

Strategy
Strategy Formulation
Implementation
Strategic Management Process
The steps by which management converts a firm’s values, mission, and
goals/objectives into a workable strategy.

It consists of FOUR stages: analysis, formulation, implementation, and

adjustment/evaluation.
Strategy Management Process
External Environment Opportunities, Threats
Analysis
Internal Environment Strengths, Weakness

Mission Customers to be served

Formulation Capabilities to be
developed.

Policies Goals, guidelines for

major activities.

Organization structure,
Implementation systems, culture, etc.

Adjustment/ Evaluation (Cycle to earlier steps)

VMGS
VISION provides clear view of what firm is trying to achieve for its customers.
It provides a direction of what the organization seeks to do or acquire.

MISSION who we are and what we do.

GOALS are high level statements that provide overall context for what the
project is trying to achieve and should align to business goals. This is non-
measurable.

OBJECTIVES What is to be accomplish? Time in which to accomplish it.

Quantified when possible.
Nature of Strategic
Management
SM related to formal and organized sector, especially in corporate sectors.

Very comprehensive and covers all the areas of the corporate business.

It is not specific but a holistic in nature.

Provides guidelines to all other functional areas.

Focuses into long-term goals, relatively broad.

SM is concerned to whole organization whereas operation management is related to any

specific functional area.
Importance of SM approach
Asks the manager about the goals of the organization and the strategy to fulfill it.

Future cannot be controlled but it can be anticipated.

Each of the external environment shall either constrain or facilitate an organization

as it seeks to implement policy.

Managers must be sensitive to the needs and respond to demands of constituents

over whom they have little or no control.

Concentrates on assuring a good fit between the environment and the organization.
Strategy Levels In
organization
Corporate Strategy Market definition Diversification into new
product of geographic markets.

Business Strategy Market Navigation Attempts to secure

competitive advantage in existing product of geographic markets.

Functional Strategy Support of Corporate strategy and Business

Strategy Information systems, human resource practices and
production processes that facilitate achievement of corporate and
business strategy.
Different types of Strategies
Corporate Strategy Business Strategy Functional Strategy
Comes within ambit of Comes within ambit of Comes within the ambit
Multibusiness single-business of Concerned
Environment environment. department
What set of business or How do we build How to manage
industries should the competitive advantage departmental resources
organization operate? for this particular in an effective way.
business?
PepsiCo owned KFC, HP joint venture with Advertisement and
Taco Bell, Pizza Hut. Compaq Promotion, Right Sizing,
PepsiCo’s allocation of IPO’s, Employee Benefit,
resources and etc
management of the
restaurant chain
Tata Motors acquiring
Land Rover
Business and Corporate
strategy
Multibusiness firm or Diversified firm General Electric in power
generation, medical equipment, plastic, lighting, water treatment,
financial services, home appliances, and transportation industries, etc.

Single-business firm or undiversified firm A firm that operates only

one business in one industry or market. Example is Domino’s Pizza and
Papa John’s International.
CORPORATE STRATEGY and ENVIRONMENTAL ANALYSIS

UNIT 3
In the half-century after the Second World War, the business corporation
has brilliantly proved itself as an economic organization, i.e. a creator of
wealth and jobs. In the next society, the biggest challenge for the large
company – especially the multinational – will be its social legitimacy; its
values, its mission, its vision.
—PETER DRUCKER
CONTENT
FORMULATION OF STRATEGY
CORPORATE STRATEGY
FACTORS RESPONSIBLE FOR SHAPING THE STRATEGY
DIFFERENT TYPES OF STRATEGIES
ENVIRONMENTAL ANALYSIS
INTERNAL AND EXTERNAL ENVIRONMENT
TECHNIQUES FOR ENVIRONMENTAL ANALYSIS
ENVIRONMENTAL THREATS AND OPPORTUNITY PROFILE.
Formulation of Strategy
1. Evaluate current Performance Results. Examine and Evaluate the
Current :Mission, Objectives, Strategies, Policies.
2. Review Corporate Governance
3. Scan the external environment. Analyze External factors:
opportunities and threats.
4. Scan Internal environment. Analyze Internal factors: strengths,
weakness.
5. Select strategic factors in light of current situation. Review and
revise as necessary.
6. Generate and evaluate strategic alternatives. Select and recommend
best alternatives.
Environment
All external forces, factors, or conditions that exert some degree of
impact on the strategies, decisions, and actions taken by the firm.
Types of Environment
•Macro or External environment :- The broad collection of forces or
conditions that affect every firm or organization in every industry (also
known as general environment).
•Micro or Internal Environment:- Pricing Competition, Demand and
supply scenario. Deals with a particular business and Corporate
Governance.
Macro Environment
Aging Workforce
Health Consciousness
Changing cost of Capital or Interest rates
Technological Advancement
Declining Birthrates
Impact of Terrorism
Foreign Competition
Types of Macro Environment
The Demographic Environment
Endowment Factors
The Political Environment
Gujrat and China political willingness
The Social/ Cultural Environment
Heterogeneous Workforce Management
Anapoorna and Sandwich Generations in US.
Types of Macro Environment
The Technological Environment
3G vs 4G
IT revolution
IBM using ocean current to operate Data Center.
The Global Environment
DuPont
UN conventions CTBT, Nuclear disarmament
 Environmental Analysis
External or Macro Environment Analysis
PESTEL Analysis
Porter’s Diamond Model for Analysis
Industries and Sectors Analysis (Internal or micro environment)
Porter’s 5 forces Analysis
Competitors and Markets analysis
Strategic Groups
Market Segments
Strategic Customers
Critical Success factors
PESTEL Analysis or STEEP
analysis
Political Economic
Factors
Legal

The
Organization
Socio-
Cultural
Factors

Ecological
Technological
 Some Important variables in
the Societal Environment
Economic Technological Political-Legal Sociocultural
GDP trends Govt. R&D Antitrust Lifestyle changes
spending regulations.
Interest rates Total industry Environmental Career
spending protection laws expectations
Money supply Focus of Global warming Consumer
technological legislation activism
efforts

Inflation rates Patent protection Immigration laws Rate of family

formulation
Unemployment New products Tax laws Growth rate of
levels population
Wage/price New technology Foreign trade Level of
control development regulation education.
from lab

Disposable and Tecomm. Stability of Govt Birthrates.

Porter’s Diamond Model
Given by Michael Porter in his book “The Competitive Advantage of
Nations”.

Suggests that there are inherent reasons why some nations are more
competitive than others, and why some industries within nations are
more competitive than others.
Porter’s Diamond Model
Firm
Strategy,
Structure
and Rivalry

Factor Demand
Conditions Conditions

Related and
Supporting
Industries
Porter’s Diamond Model
Factor Condition:-Endowment factors: Manpower, inputs,
transportation, etc
Demand Conditions:- Global demand available.
Related and Supporting Industries:- Plenty software and IT cos existing
in India.
Firm Strategy, Industry Structure and Rivalry:- Rivalry from Infosys, TCS
etc.
Scenario:-detailed and plausible view for future.
Porters’ 5 force Analysis
Porter's Five Forces is a model that identifies and analyzes five
competitive forces that shape every industry and helps determine an
industry's weaknesses and strengths. Five Forces analysis is frequently
used to identify an industry's structure to determine corporate strategy.
Porter's model can be applied to any segment of the economy to
understand the level of competition within the industry and enhance a
company's long-term profitability. The Five Forces model is named after
Harvard Business School professor, Michael E. Porter.
Porters’ 5 force Analysis
Corporate strategy
Plans and actions that firms need to formulate and implement when
managing a portfolio of businesses; an especially critical issue when
firms seek to diversify from their initial activities or operations into new
areas. Corporate strategy issues are key to extending the firm’s
competitive advantage from one business to another.
Characteristics of
Environment
Complexity (relatively easier to understand in parts but difficult to grasp
in its totality).

Dynamic

Multi-faceted

Far-reaching Impact
Techniques to Monitor the
Environment
Environment Scanning (Porters’ model, SWOT, etc.)

Competitor intelligence gathering- how the services differ, managers

visiting competitors hotels to assess the difference in services provides
to the customer.
CORPORATE
APPRAISAL
UNIT 4
CORPORATE APPRAISAL
To Identify opportunities and to neutralize threats in the external
environment, mangers must thoroughly evaluate their firm’s potential
capability to compete.
We need to identify the firms capabilities and internal analysis of
strength and weakness.
Value Chain Analysis, Capability Drivers analysis and financial analysis.
Value Chain Analysis

Value chain analysis (VCA) is a process where a firm identifies its

primary and support activities that add value to its final product and
then analyze these activities to reduce costs or increase differentiation.

Value chain represents the internal activities a firm engages in when

transforming inputs into outputs.
 Value Chain Analysis
1. Value chain analysis is a strategy tool used to analyze internal firm activities.
2. Its goal is to recognize, which activities are the most valuable (i.e. are the source of
cost or differentiation advantage) to the firm and which ones could be improved to
provide competitive advantage.
3. In other words, by looking into internal activities, the analysis reveals where a firm’s
competitive advantages or disadvantages are.
4. The firm that competes through differentiation advantage will try to perform its
activities better than competitors would do.
5. If it competes through cost advantage, it will try to perform internal activities at
lower costs than competitors would do. When a company is capable of producing
goods at lower costs than the market price or to provide superior products, it earns
profits.
6. M. Porter introduced the generic value chain model in 1985.
7. Value chain represents all the internal activities a firm engages in to produce goods
and services. VC is formed of primary activities that add value to the final product
directly and support activities that add value indirectly.
VCA…..
1. Primary activities add value directly to the production process, they
are not necessarily more important than support activities.
2. Nowadays, competitive advantage mainly derives from technological
improvements or innovations in business models or processes.
3. Therefore, such support activities as ‘information systems’, ‘R&D’ or
‘general management’ are usually the most important source of
differentiation advantage.
4. On the other hand, primary activities are usually the source of cost
advantage, where costs can be easily identified for each activity and
properly managed.
Firm VC vs Industry VC

Firm’s VC is a part of a larger

industry's VC. The more activities a
company undertakes compared to
industry's VC, the more vertically
integrated it is.
Competitive advantage types
Cost Advantage
This approach is used when
organizations try to compete on
costs and want to understand the
sources of their cost advantage or
disadvantage and what factors
drive those costs.
(examples: Amazon.com, Wal-
Mart, McDonald's, Ford, Toyota)
Differentiation Advantage
The firms that strive to create
superior products or services use
differentiation advantage
approach. (good
examples: Apple, Google, Samsung
Electronics, Starbucks)
Steps
Cost Advantage Differentiation Advantage
Step 1. Identify the firm’s primary Step 1. Identify the customers’
and support activities. value-creating activities.
Step 2. Establish the relative Step 2. Evaluate the differentiation
importance of each activity in the
strategies for improving customer
total cost of the product.
value.
Step 3. Identify cost drivers for each
activity. Step 3. Identify the best
sustainable differentiation.
Step 4. Identify links between
activities.
Step 5. Identify opportunities for
reducing costs.
Internal Analysis
1. VRIO framework
2. Value Chain Analysis
The Value Chain
Primary Activities
Inbound Logistics : SCM major source to direct cost. (warehousing,
storage, and control of raw materials).
A reduction in inventory and storage costs over time can have a major
positive impact on a firm’s cost position.
Ex: Hospitals, Restaurants, etc. need timely supply of inputs.
Internet based software to coordinate the supply of inputs as to reduce
cost to inventory.
Operations
The activities and procedure that transform raw materials, components
and other inputs into finished end products.
Specific task activities include stamping, machining, testing, fabrication,
and assembling in manufacturing based settings.
In telecomm firms operations are managing network of routers,
switches, and other gear that is break down of communication and the
internet. USX’s US steel unit and AK steel , Nucor built up a significant
competitive position in steel industry by focusing on minimills- less cost
and better quality.
Outbound Logistics
Transfer of finished end products to the distribution channels.
Activities include Inventory control, Warehouse, storage, and transport
of finished products.
P&G has accelerated the timely delivery of goods that the retailers have
trouble stocking- use of bar coding they balance the flow of inventory
and checks the demand of the product.(RFID is also advantageous.)
Marketing and Sales
Include advertising, promotion, product mix, pricing, specific
distribution channels, working with wholesalers, and sales force issues.
Example:- Coca-cola, McDonald’s, PepsiCo have effective marketing
activities.
Service
Value is more often defined in the eyes of the customer rather than by
what the firm thinks it has created.
Warranty, repair, installation, customers support, products adjustment
and modification, and immediate response to customer needs.
FedEx and UPS allow customers to track the status of their package
online.
Telecos providing customer care number.
Support Activities
Procurement: Economies of Scale, Bargaining power over suppliers.
Technology Development: Product and Process Development
HRM: Training, job satisfaction, efficiency and quality. Hotel industry
employee are trained to be customer sensitive.
Firm Infrastructure: Finance ,legal, location etc.
Starbucks’ Primary Activities

Inbound Logistics
The inbound logistics for Starbucks refer to company-appointed coffee
buyers selecting the finest quality coffee beans from producers in Latin
America, Africa, and Asia. In the case of Starbucks, the green or
unroasted beans are procured directly from the farms by the Starbucks
buyers. These are transported to storage sites, after which the beans are
roasted and packaged.
Value is added to the beans through Starbucks’ proprietary roasting and
packaging, which helps to increase their selling value. The beans are
then sent to distribution centers, a few of which are company-owned
and some of which are operated by other logistic companies. The
company does not outsource its procurement, ensuring high-quality
standards right from the point of selection of coffee beans.
Operations

Starbucks operates in more than 80 markets, either in the form of direct

company-owned stores or licensed stores. (Starbucks does not follow
the traditional franchising terms.) The company has more than 32,000
stores globally. It is also the owner of several brands, including Teavana,
Seattle’s Best Coffee, and Evolution Fresh.
According to its financial reports, the company generated 81% of its
total net revenue during the first half of its 2020 fiscal year from its
company-operated stores while the licensed stores accounted for 11%. 
Outbound Logistics
There is very little or no presence of intermediaries in product selling for
Starbucks. The majority of the products are sold in stores. However, storage and
distribution to retail locations are important.
Marketing and Sales
Starbucks invests more in superior quality products and a high level of customer
service than in aggressive marketing. However, need-based marketing activities
are carried out by the company during new product launches in the form of
sampling in areas around the stores.
Service
Starbucks aims at building customer loyalty through its in-store customer service.
A signature retail objective of Starbucks has always been to provide customers
with a unique Starbucks Experience.
Starbuck’s support Activities
Infrastructure
This includes departments like management, finance, legal, etc., which are
required to keep the company’s stores operational. Starbucks employs business
managers in its corporate offices. It also has store managers on-site that help to
oversee well-designed and pleasing stores complemented with good customer
service provided by the dedicated team of employees in green aprons.
Human Resource Management
The committed workforce is considered a key attribute in the company’s success
and growth over the years. Starbucks employees are motivated through
generous benefits and incentives. The company is known for taking care of its
workforce, a key reason for a low turnover of employees, which indicates great
human resource management. There are many training programs conducted for
employees in a setting of a work culture, which keeps its staff motivated and
efficient.
Technology Development
Starbucks is very well-known for the use of technology, not only for
coffee-related processes (to ensure consistency in taste and quality
along with cost savings) but to connect to its customers. Many
customers use Starbucks stores as a makeshift office or meeting place
because of free and unlimited Wi-Fi.
Starbucks has launched several platforms where customers can ask
questions, give suggestions, openly express opinions, and share
experiences. Technology helps to implement this feedback, especially in
the area of its rewards program.
Starbucks also uses Apple’s iBeacon system, wherein customers can
order a drink through the Starbucks phone app and get a
notification of its readiness when they walk in the store.
Procurement

Procurement is integrated across various aspects of the supply chain.

Porter discusses procurement as a support activity. Many companies
will establish broad terms, requirements, and standards for all of their
procurement dealings. However, procurement relationships typically
vary widely. Starbucks handles all of the procurement for its own coffee
beans, which it sees as one of its competitive advantages.
VRIO Analysis
The VRIO framework is a strategic analysis tool designed to help
organizations uncover and protect the resources and capabilities that
give them a long-term competitive advantage. The framework should
be put into play after the creation of a vision statement, but before the
strategic planning process.
VRIO framework is the tool used to analyze firm’s internal resources and
capabilities to find out if they can be a source of sustained competitive
advantage.
The tool was originally developed by Barney, J. B. (1991) in his work
‘Firm Resources and Sustained Competitive Advantage’, where the
author identified four attributes that firm’s resources must possess in
order to become a source of sustained competitive advantage.
Adopted from Rothaermel’s (2013) ‘Strategic Management’, p.91
 Using the tool

Step 1. Identify valuable, rare and costly to imitate resources

1. two types of resources: tangible and intangible.
2. Tangible assets are physical things like land, buildings and machinery.
Companies can easily buy them in the market so tangible assets are rarely the
source of competitive advantage.
3. intangible assets, such as brand reputation, trademarks, intellectual property,
unique training system or unique way of performing tasks, can’t be acquired so
easily and offer the benefits of sustained competitive advantage.
4. to find valuable, rare and costly to imitate resources, you should first look at
company’s intangible assets. An easy way to identify such resources is to look at
the value chain and SWOT analyses.
5. Value chain analysis identifies the most valuable activities, which are the source
of cost or differentiation advantage.
Finding rare resources
1. How many other companies own a resource or can perform
capability in the same way in your industry?
2. Can a resource be easily bought in the market by rivals?
3. Can competitors obtain the resource or capability in the near
future?
Finding costly to imitate
resources
1. Do other companies can easily duplicate a resource?
2. Can competitors easily develop a substitute resource?
3. Do patents protect it?
4. Is a resource or capability socially complex?
5. Is it hard to identify the particular processes, tasks, or other factors
that form the resource?
Step 2. Find out if your company is organized
to exploit these resources
1. Does your company has an effective strategic management
process in organization?
2. Are there effective motivation and reward systems in place?
3. Does your company’s culture reward innovative ideas?
4. Is an organizational structure designed to use a resource?
5. Are there excellent management and control systems?
Step 3. Protect the resources
1. When you identified a resource or capability that has all 4 VRIO
attributes, you should protect it using all possible means.
2. After all, it is the source of your sustained competitive advantage.
The first thing you should do is to make the top management aware
of such resource and suggest how it can be used to lower the costs
or to differentiate the products and services.
3. Then you should think of ideas how to make it more costly to
imitate. If other companies won’t be able to imitate a resource at
reasonable prices, it will stay rare for much longer.
Step 4. Constantly review
VRIO resources and
capabilities
1. The value of the resources changes over time and they must be
reviewed constantly to find out if they are as valuable as they once
were.
2. Competitors are also keen to achieve the same competitive
advantages so they’ll be keen to replicate the resources, which
means that they will no longer be rare.
3. Often, new VRIO resources or capabilities are developed inside an
organization and by identifying them you can protect you sources of
competitive advantage more easily.
Competitors Profile Matrix
Competitive profile matrix is an essential strategic management tool to
compare the firm with the major players of the industry. Competitive
profile matrix show the clear picture to the firm about their strong
points and weak points relative to their competitors.
CPM:Concepts
1. Critical Success Factors: are the key areas that determine a company’s
success in the industry. To succeed in its industry, a company must
perform at the highest possible level of excellence. These factors vary
among industries or even strategic groups. CSF should include both
internal and external factors for analysis. Therefore, if you want a more
robust and accurate analysis, include more, relevant factors.
2. Weight:Assign a weight ranging from 0.0 (low importance) to 1.0 (high
importance) to each critical success factor. The weight indicates the
importance of that factor in the company’s success. If you don’t assign
weights, then all factors would be equally important. This is an
impossible scenario in the real world. The sum of all the weights must
equal 1.0. You should not emphasise separate factors too much by
assigning a weight of 0.3 or more. This is because a company’s success
is rarely determined by just one or few factors.
 CPM concepts
3. The ratings in CPM refer to how well companies are doing in each area. They range
from 4 to 1:
4 - means a major strength
3 – minor strength
2 – minor weakness, and
1 – major weakness.
Subjectively assign the ratings and weights to each company. However, this process can
be done easier through benchmarking. Benchmarking reveals how well companies are
doing compared to each other or industry’s average. Note that firms can have equal
ratings for the same factor.

4. Score: The score is the result of weight multiplied by rating. Each company receives a
score on each factor. Total score is simply the sum of all individual score for the
company. The firm that receives the highest total score is relatively stronger than its
competitors.
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
Customer satisfaction Low cost structure Effective social media
management
Financial position Variety of products Experience and skills
in e-commerce
Cash reserves Complementary products Management qualification
and experience
Profit margin Level of product integration Innovation in products and
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
New patents per year Effective planning and budgeting Effective corporate social
responsibility programs
 Android OS iOS Windows Phone
Critical Success
Factor Weight Rating Score Rating Score Rating Score
Market share 0.13 4 0.52 2 0.26 2 0.26
Number of apps
in store 0.1 4 0.4 4 0.4 2 0.2
Frequency of
updates 0.06 3 0.18 4 0.24 2 0.12
Design 0.07 3 0.21 3 0.21 3 0.21
Product brand
reputation 0.05 3 0.15 3 0.15 2 0.1
Distribution
channels 0.11 4 0.44 2 0.22 3 0.33
Usability 0.11 3 0.33 3 0.33 3 0.33
Customization
features 0.04 4 0.16 2 0.08 2 0.08
Marketing
capabilities 0.04 2 0.08 4 0.16 2 0.08
Company brand
reputation 0.1 4 0.4 4 0.4 3 0.3
Openness 0.02 4 0.08 2 0.04 2 0.04

Cloud integration 0.12 4 0.48 2 0.24 2 0.24

Rate of OS
crashes 0.08 1 0.08 4 0.32 3 0.24
Total 1 - 3.51 - 3.05 - 2.53
Capability Drivers
The basic economic and strategic means by which a firm builds an
underlying source of competitive advantage.
1. First-moves Advantage
2. Economies of Scale
3. Interrelationships (Pepsi and Lays advertisement )
First Mover Advantage
Patents: Xerox corporation
License: Walt Disney, McDonald’s provide for the toy manufacturing.
Location: New movie theatre near an existing college.
Channel access: Canned foods, beverages, breakfast cereal, diapers are
distributed through supermarkets which in turn give priorities to well
known or first come brands.
Supply Access: Kellogg, Pillsbury are large purchaser of wheat and corn.
Reputation : Brand Image
Economies of Scale
Greater volume allows to take cost advantage.
a) Specialization
b) Fixed-cost Spreading: more units, declining per unit cost.
c) Purchase discount
d) Vertical Integration
Interrelationships
Resource Transfer: Personnel in soft drink and other beverages
businesses are highly skilled in activities such as market research,
market segmentation, consumer promotion, and TV advertising can be
used for snack food unit.
Activity Sharing: Multiple product with same advertisement
Strategy and Competitive
Advantage
Low-cost leadership strategy: A competitive strategy based on the
firm’s ability to provide products or services at lower cost than its rivals.
Example: Whirlpool in washers and dyers, Wal-Mart in retailing, Gillette
in razor blades.
Cost Drivers : An economical or technological factors that determines
the cost of performing some activity. Cost drivers which shape low cost
leadership strategy are 1. Economies of Scale 2. Experience in the field
3. degree of Vertical Integration 4. location of activity performed.
Strategy and Competitive
Advantage
Differentiation: Competitive strategy based on providing buyers with
something special or unique that makes the firm’s product or service
distinctive. It is based on providing buyers with something that is
different or unique, that makes the company’s product or service
distinct from that of its competitors.
Example: BMW and Mercedes in automobiles, Sony in Consumer
electronics.
Resource Based View

Excellent Leadership
Brand portfolios
Partnership
Team works
Strong Financial positions
Global presence
Well managed processes
Innovative ideas
Definition

The resource-based view (RBV) is a model that sees resources as key to

superior firm performance. If a resource exhibits VRIO attributes, the
resource enables the firm to gain and sustain competitive advantage.
What is a resource based view?

RBV is an approach to achieving competitive advantage that emerged in

1980s and 1990s, after the major works published by Wernerfelt, B.
(“The Resource-Based View of the Firm”), Prahalad and Hamel (“The
Core Competence of The Corporation”), Barney, J. (“Firm resources and
sustained competitive advantage”) and others. The supporters of this
view argue that organizations should look inside the company to find
the sources of competitive advantage instead of looking at competitive
environment for it.
The following model explains RBV
and emphasizes the key points of it.
Corporate
Strategy and
Types
Corporate Strategy
Corporate strategy is hierarchically the highest strategic plan of
the organization, which defines the corporate overall goals and
directions and the way in which will be achieved
within strategic management activities. It is a long-term, clearly
defined vision of the direction of a company or organization.
Components
of Corporate
Strategy
Allocation of Resources

The allocation of resources at a firm focuses mostly on two resources:

people and capital.
•People
• Identifying core competencies and ensuring they are well distributed
across the firm
• Moving leaders to the places they are needed most and add the most
value (changes over time, based on priorities)
• Ensuring an appropriate supply of talent is available to all businesses

•Capital
•Allocating capital across businesses so it earns the highest risk-adjusted
return
•Analyzing external opportunities (mergers and acquisitions) and
allocating capital between internal (projects) and external opportunities
 Organizational Design
Organizational design involves ensuring the firm has the necessary corporate
structure and related systems in place to create the maximum amount of value.  
•Head office (centralized vs decentralized)
•Determining how much autonomy to give business units
•Deciding whether decisions are made top-down or bottom-up
•Influence on the strategy of business units
•Organizational structure (reporting)Determine how large initiatives and
commitments will be divided into smaller projects
•Integrating business units and business functions such that there are no
redundancies
•Allowing for the balance between risk and return to exist by separating
responsibilities
•Developing centers of excellence
•Determining the appropriate delegation of authority
•Setting governance structures
•Setting reporting structures (military / top-down, matrix reporting)
Portfolio Management

Portfolio management looks at the way business units complement

each other, their correlations, and decides where the firm will “play”
(i.e. what businesses it will or won’t enter).
Corporate Strategy related to portfolio management includes:
•Deciding what business to be in or to be out of
•Determining the extent of vertical integration the firm should have
•Managing risk through diversification and reducing the correlation of
results across businesses
•Creating strategic options by seeding new opportunities that could be
heavily invested in if appropriate
•Monitoring the competitive landscape and ensuring the portfolio is
well balanced relative to trends in the market.
Strategic Tradeoffs
One of the most challenging aspects of corporate strategy is balancing the
tradeoffs between risk and return across the firm.  It’s important to have a
holistic view of all the businesses combined and ensure that the desired
levels of risk management and return generation are being pursued.
Managing risk
•It’s important to be fully aware of strategies and associated risks across the
firm
•Some areas might require true differentiation (or cost leadership) but
other areas might be better suited to copycat strategies that rely on
incremental improvements
•The degree of autonomy business units have is important in managing this
risk
Generating returns
Higher risk strategies create the possibility of higher rates of return. The
examples above of true product differentiation or cost leadership could
provide the most return in the long run if they are well executed.
Stability Strategy
Stability Strategy is a corporate strategy where a company concentrates
on maintaining its current market position. A company that adopts such
an approach focuses on its existing product and market.
Examples:
1. A packaged tea company provides special service to its institutional
buyers, apart from its consumer sales through market intermediaries, in
order to encourage bulk buying and thus improve its marketing efficiency.
2. A copier machine company provides better after-sales service to its
existing customers to improve its company and product image and
increase sales of accessories and consumables .
3. A steel company modernizes its plant to improve efficiency and
productivity.
Reason for adopting Stability
Strategy
1. It is less risky, involves less changes and people feel comfortable
with things as they are.
2. The environment faced is relatively stable.
3. Expansion may be perceived as being threatening.
4. Consolidation is sought through stabilising after a period of rapid
expansion.
Types of stability strategy
1. No change Strategy:-to do nothing new i.e to continue with the
present business definition.

2. Profit Strategy:- to reduce investment , cut costs , raise prices,

increase productivity.

3.Pause/proceed with caution strategy:-In the Indian shoe market

dominated by Bata and Liberty with increasing presence of global
brands such as Adidas, Nike, or Reebok. HUL, known for soap and
detergents, produced shoes and shoe uppers for the export market. In
late 2000s it sold few thousands to gauge consumers reactions.
Expansion or Growth Strategy
Expansion Strategy is adopted by an organization when it attempts to
achieve a high growth as compared to its past achievements. In other
words, 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.
Examples:
1. A chocolate manufacturer expands its customer group to include
middle-aged and old persons to its existing customers comprising
children and adolescents.
2. A printing firm changes from traditional letter press printing to
desktop publishing in order to increase its production and efficiency.
Types of Expansion Strategy
Reasons for adopting
Expansion strategy
1. It may become imperative when environment demands increase in
pace of activity.
2. Increasing size may lead to more control over the market.
3. Advantages from the experience curve and scale of operations may
accrue.
Concentration strategy
1. It involves converging resources in one or more of a firm’s
businesses in terms of their respective customer needs, customer
functions , or alternative technologies-either singly or jointly-in such
a manner that expansion results.
2. Also know as intensification, focus, specialization or organic growth
strategies.
3. ‘Stick to the knitting ‘ strategy as per Peters and Waterman (1982)
Ansoff’ Product-Market
Matrix
Market Penetration
Selling more products in same market

Example: Bajaj Auto selling more in urban centres

Market Development
Selling same product to new market.

Examples:-Selling bajaj scooters to upwardly mobile customers in rural

market
Product development
Selling new product to same market

Example: Selling state of art motorcycles

Matching Strategies

Corporate Business
Strategy Strategy

Functional Operational
Strategy Strategy
Functional Strategy
Is an approach a functional area takes to achieve corporate and
business unit objective or SBU objective.
Strategic Business Unit (SBU): A division or group of divisions composed
of independent product-market segments that are given primary
authority for the management of their own functions.
Functional Strategy
Marketing Strategy
•Market Development: Capturing larger share market through market
saturation/Penetration. Example: IDBI, Corporation Bank, IOB looking
for MOU with TVS, L&T as to stop rural customers from taking loan from
the money lenders.
•Line Extension
• Push and Pull Strategy
Functional Strategy
Financial Strategy: Financial implications of corporate and business
level strategic options. It attempts to maximize the financial value of the
firm and aims to get competitive advantage through lower cost.
•Buyback: By Reliance Energy Ltd.(REL) in 2007 for Rs 2000cr valued
share @ Rs1600 per share.
•Leveraged Buyout
•Debt-to-Equity ratio and Reverse Stock Splits
Functional Strategy
R&D strategy: Deals with product and process innovation and
improvement.
•Technological Leader: focuses on new technology, options open for
lower cost. Example: NIKE spends more than most of the company in
the industry on R&D to differentiate the performance of its athletic
shoes.
•Technological Follower: Same standard produced but at lower cost.
Functional Strategy
HR strategy: Whether to hire large no. of low skilled employees who
receive low pay, perform repetitive jobs, and most likely quit after short
time (McDonald’s restaurant strategy).
Satyam’s Rs 200000 bonds from the freshers.
STRATEGY
IMPLEMENTATI
ON
UNIT 5
STRATEGY
IMPLEMENTATION
The sum total activities and choices required for the execution of a
strategic plan.
It is the process by which objectives, strategies, and policies are put into
action through the development of programs, budgets, and procedures.
Poor implementation has been blamed for a number of strategic
failure.
STRATEGY
IMPLEMENTATION
To begin the implementation process, strategy makers must consider
these questions:
WHO
WHAT
HOW
Implementation Vs Formulation
Strategy Formulation
Deals with locating the forces before
the action takes place
Based on Effectiveness
Intellectual Process
Requires good intuitive and analytical
skills.
Coordination among a few individuals.
Strategy Implementation
Deals with the management of forces
during the action.
Based on Efficiency
Operational Process
Requires special motivation and
leadership skills
Coordination with many persons.
Prerequisite FOR STRATEGIC
IMPLEMENTATION
Developing Programs, Budgets, And Procedures
Program: To make a strategy action oriented. Example: Six Sigma
introduced by Motorola. One Sigma= 690000 defects per million. 6
sigma reduces to 3.4 per million.
Budgets
Procedures
Organizational structure and
strategy implementation
Structure follow strategy (Structure Influence Strategy)
New strategy created
New administrative problems emerge
Economic performance declines
New appropriate structure is invented
Profit returns to its previous level.
Example: In 1920 GM was restructured as “Centralized policy
determination coupled with decentralized operation management (max.
freedom for product development)
Stages to organizational
structure
Simple Structure: Little formal structure; the entrepreneur directly
supervise the activities of every employee; flexibility and dynamism are
its greatest strength. Example Co-founder Lawrence Ellision of Oracle
Functional Structure : Delegation of authority required, specialized
managers needed.
Divisional structure: Corporation using diverse product need this
structure. Central Headquarters and decentralized operating divisions.
Includes SBU. Example: GE and GM
Stages to organizational
structure
Beyond SBUs:
Matrix Structure: Used by Philips, Boeing
Network Structure: Many activities are outsourced. Nike, Reebok are
example of Network structure.
Cellular / Modular Structure: Is composed of cells(self-managing teams,
autonomous business units, etc.)
Strategy implementation
through staffing
Selection and use of employees to meet the organizational goals.
Implementation of new strategies and policies calls for new HRM
priorities and a different use of personnel.
When a corporate follows a growth through acquisition strategy, it may
find that it needs to replace several managers in the acquired company.
In a study of 40 mergers, 90% of the acquiring cos in the 15 successful
mergers identified key employees and targeted them for retention
within 30 days after the announcement. In contrast, this task was
carried out in one-third of the acquisitions.
Leading the strategy
implementation
Implementation also involves leading through coaching people to use
their abilities and skills most effectively to achieve organizational
objectives. Without direction, people tend to do their work according to
their personal view of what task should be done, how, and in what
order.
Managing the corporate culture(Integration, Assimilation, Seperation,
Deculturation)
Strategy implementyation and
culture
‘Culture is most commonly used in three basic senses
          1) The set of shared attitudes, values goals and practices that
characterizes an institution, Organization or group.
          2) An integrated patterns of human knowledge, beliefs and
behavious that depends up on the capacity for Symbolic thought and
social learning.
          3) Excellence of taste in the fine arts and humanities.
“An ordered system of meaning and of symbols in terms of which social
interaction take place” (Clifford Geertz 1973).
Strategy implementation and
organizational culture
In today’s dynamic business world, strategies are dynamic. Hence, it is
but logical that your organizational culture has to be dynamic too.
It needs to adapt to the demands of business. In such cultures, all
employees have confidence in the teams ability to meet any challenge.
Portfolio Analysis
The business portfolio is the collection of businesses and products that
make up the company. The best business portfolio is one that fits the
company's strengths and helps exploit the most attractive
opportunities.
The company must:
(1) Analyse its current business portfolio and decide which businesses
should receive more or less investment, and
(2) Develop growth strategies for adding new products and businesses to
the portfolio, whilst at the same time deciding when products and
businesses should no longer be retained.
Portfolio Analysis
The two best-known portfolio planning methods are the 
Boston Consulting Group Portfolio Matrix and the McKinsey / General
Electric Matrix . In both methods, the first step is to identify the various
Strategic Business Units ("SBU's") in a company portfolio. An SBU is a
unit of the company that has a separate mission and objectives and that
can be planned independently from the other businesses. An SBU can
be a company division, a product line or even individual brands - it all
depends on how the company is organised.
 Business Mix of ITC Ltd.
FMCG
• Cigar ettes
• Foods
•Lifestyle Retailing
• Greeting, Gifting &Stationery
•Safety Matches
• Agar battis

Paperboards & Packaging

•Paperboards &Specialty Papers
•Packaging
Agri - Business
• Agri-Exports
• e- Choupal
•Leaf Tobacco
Hotels
Group Companies
• ITC Infotech; etc.
Vision & Mission statements
Vision: Sustain ITC’s position as one of India’s most valuable
corporations through world class performance, creating growing value
for the Indian economy and the Company’s stakeholders.

Mission: To enhance the wealth generating capability of the enterprise

in a globalizing environment, delivering superior and sustainable
stakeholder
Cagr during 2005-2008
Category CAGR Growth Parameters
Cigarettes 10.9% Pricing Power
Hotel 22.7% Inward traffic,
Occupancy
Paper 17.2% Capacity Utilization,
Value Added Products
Agri-business 34.3% E-choupal, Choupal sugar
FMCG 60.2% Fast track, decent share
Market share of itc ltd.
Outstanding market leaderCigarettes, Hotels, Paperboards,
Packaging and Agri-Exports.
Gaining market share Nascent businesses of Packaged Foods &
Confectionery, Branded Apparel and Greeting Cards
Segment Dominance Revenue % PBIT %
Cigarettes 70% share 77.0% 87.7%
Hotels Rank no.2 4.3% 5.4%
Papers Packaging board 7.3% 10.7%
no.1 in Asia
Agri-Business 1 among the 7% 3.7%
largest exporters
in India
FMCG Aashirvaad Atta 4.4% -7.5%
no.1 in branded
segment
BCG matrix-itc ltd.
•Hotels •FMCG
•Paper & Packaging
•Agri-Business

•Cigarettes ITC infotech

The McKinsey / General
Electric Matrix
The McKinsey/GE Matrix overcomes a number of the disadvantages of
the BCG Box. Firstly, market attractiveness replaces market growth as
the dimension of industry attractiveness, and includes a broader range
of factors other than just the market growth rate.
Secondly, competitive strength replaces market share as the dimension
by which the competitive position of each SBU is assessed.
Factors that Affect Market
Attractiveness

Whilst any assessment of market attractiveness is necessarily

subjective, there are several factors which can help determine
attractiveness. These are listed below:
- Market Size
- Market growth 
- Market profitability 
- Pricing trends 
- Competitive intensity / rivalry 
- Overall risk of returns in the industry 
- Opportunity to differentiate products and services 
- Segmentation 
- Distribution structure (e.g. retail, direct, wholesale
Factors that Affect Competitive
Strength

Factors to consider include:

- Strength of assets and competencies
- Relative brand strength
- Market share
- Customer loyalty
- Relative cost position (cost structure compared with competitors)
- Distribution strength
- Record of technological or other innovation
- Access to financial and other investment resources
Strategic implications
Plot the information-mckinsey
Market size is represented by the size of the circle.
Market share is shown by using the circle as the pie chart
The expected future position is portrayed by the arrow.
Strategic implications
Grow-Strong business unit in attractive industries, average business unit
in attractive industries, and strong business unit in average industries.
Hold-Average business in average industries, strong business in weak
industries and weak business in strong industries.
Harvest-weak business in unattractive industries, average business in
unattractive industries, and weak business unit in average industries.
 Limitation of mckinsey matrix

The valuation of the realization of various factors.

Aggregation of the indicators is difficult
Core competencies are not represented.
Interactions between strategic business units are not considered
.
Advantages of portfolio
analysis
It encourages top management to evaluate each of the corporation’s
businesses individually and to set objectives and allocate resources for
each.
It stimulates the use of externally oriented data to supplement
management’s judgment.
It raises the issue of cash-flow availability for use in expansion and
growth.
It graphic depiction facilitates communications.
Limitations of portfolio
analysis
Defining product/market segments are difficult.
It suggests the use of standard strategies that can miss opportunities or
be impractical.
It provides an illusion of scientific rigor when in reality positions are
based on subjective judgments.
It is not always clear what makes an industry attractive or where a
product is in its life cycle.
Business Unit strategy
Business Unit Strategy focuses on improving the competitive position of
a company’s or business unit’s products or services within the specific
industry or market segment that the company or business unit serves.
Business strategy
Porter’s Competitive Strategy: The firm’s competitive advantage in an
industry is determined by its Competitive Scope- the breadth of the
business unit’s or company’s target market. Before choosing the below
2 strategies the firm must choose the range of product varieties it will
produce.
•Lower Cost strategy
•Differentiation Strategy
Business Unit Strategy
Cooperative Strategy: A company can gain competitive advantage
within an industry by working with other firms. The 2 general types of
Cooperative strategy are :
1. Collusion
2. Strategic Alliance
Collusion
A non-competitive agreement
between rivals that attempts
to disrupt the market's equilibrium.
By collaborating with each other,
rival firms look to alter the price of
a good to their advantage. 
The parties may collectively choose
to restrict the supply of a good,
and/or agree to increase its price in
order to maximize profits. Groups
may also collude by sharing private
information, allowing them to
benefit from insider knowledge.
Collusion…
Indian wholesale grain market is characterized by large numbers of
sellers and relatively small numbers of buyers. This imbalance provide
ample opportunities for manipulation of the otherwise transparent
price formation process.
Collusion are of 2 types: 1.) Explicit Collusion 2.) Tacit Collusion
 Explicit collusion
A formal, usually secret, collusion agreement among competing firms
(mostly oligopolistic firms) in an industry designed to control the
market, raise the market price, and otherwise act like a monopoly. Also
termed overt collusion, the distinguishing feature of explicit collusion is
a formal agreement. This should be contrasted with implicit or tacit
collusion that does not involve a formal, explicit agreement.
 
Strategic Alliance
One of the fastest growing trends for business today is the increasing
number of strategic alliances.
For small businesses, strategic alliances are a way to work together with
others towards a common goal while not losing their individuality.
Alliances are a way of reaping the rewards of team effort - and the gains
from forming strategic alliances appear to be substantial.
Strategic alliance
Mutual Service Consortium- Fairly weak and distance alliance-
appropriate for partners that wish to work together but not share their
core competencies. Example: IBM established a research alliances with
sony Electronics and Toshiba to build ‘cell’ chip, a microprocessor
running at 256 gigaflops. There is little interaction or communication
among the partners.
Strategic Alliance
Joint Venture: An independent business entity is created from the
separate organizations for the strategic purpose. Example: Maruti udyog
ltd and Suzuki Motor Corporation in 1982.
Licensing Arrangements- Yum!brands successfully used franchising and
licensing to establish its KFC, Pizza Hut, Taco Bell, etc.
A value-chain partnership- To improve the quality of parts it purchases,
companies in the U.S auto industry , for example, have decided to work
more closely with fewer suppliers and to involve them more in product
design decisions.
Strategic
Alternative
UNIT 6
Strategic alternative (TOWS
matrix)
Strengths (S) Weakness (W)
Internal List 5-10 internal List 5-10 internal
Factors strengths here weakness here

External factors

Opportunities (o) SO strategies WO strategies

List 5-10 external Generate strategies here Generate strategies here
opportunities here that use Strengths to that take advantage of
take advantage of Opportunities by
Opportunities. overcoming Weakness.
Threats (T) ST strategies WT strategies
List 5-10 external threats Generates strategies Generate strategies here
here here that use Strengths that minimize Weakness
to avoid Threats. and avoid Threats.
Stability strategy
A corporate may choose stability over growth by continuing its current
activities without any significant change in direction.
They are very popular with small business owners who have found a
niche and are happy with their success and the manageable size of the
firms.
It can be very useful in short run, but they can be dangerous if followed
for too long,
Stability strategy
1. A pause/proceed with caution strategy- DELL followed this strategy
after achieving 285% growth in 2 years.

2. No change strategy-a choice to continue current operations and

policies in foreseeable future. The relative stability created by the firm’s
modest competitive position in an industry facing little or no growth
encourages the company to continue on its current course, making only
small adjustments for inflation in its sales and profits objectives.

3. The profit strategy is an attempt to artificially support profits when a

company’s sales are declining by reducing investment and short term
discretionary expenditure.
Retrenchment startegy
Retrenchment is a corporate-level strategy that seeks to reduce the size
or diversity of an organization's operations. Retrenchment is also a
reduction of expenditures in order to become financially stable.
Retrenchment is a pullback or a withdrawal from offering some current
products or serving some markets.
Retrenchment is often a strategy employed prior to or as part of a
Turnaround strategy.
The Retrenchment strategies can further be classified into Turnaround
Strategy, Captive Company Strategy, Sell-out/Divestment Strategy and
Bankruptcy/Liquidation strategy.
Turnaround strategy
The overall goal of turnaround strategy is to return an underperforming
or distressed company to normal in terms of acceptable levels of
profitability, solvency, liquidity and cash flow.
To achieve its objectives, turnaround strategy must reverse causes of
distress, resolve the financial crisis, achieve a rapid improvement in
financial performance, regain stakeholder support, and overcome
internal constraints and unfavourable industry characteristics.
Turnaround strategy
Contraction is the initial effort to quickly “stop the bleeding” with a
general, across the board cutback in size and costs. Example : Howard
Stringer, CEO, Sony Corporation in 2005 eliminated 10,000 jobs , closed
11 of 65 plants and divesting many unprofitable businesses.
Consolidation implements a program to stabilize the now-leaner
corporation. Plans are developed to reduce unnecessary overhead and
to make functional activities cost-justified.
Captive Company strategy
Involves giving up independence in exchange for security. A cos with a
weak competitive position may not be able to engage in a full-blown
turnaround strategy.
Example: To become the sole suppliers of an auto part to GM , Simpson
Industries of Birmingham, Michigan, agreed to let a special team from
GM inspect its engine parts facilities and books and interview its
employees . In return, nearly 80% of the company production was sold
to GM through long term contracts.
Sell-out/divestment strategy
Sell-Out strategy- makes sense if management can still obtain a good
price for its shareholders and the employees can keep their jobs by
selling the entire company to another firm. Example : Marginal
performance in a troubled industry was one reason Northwest airlines
was willing to be acquired by Delta Airlines in 2008.
Divestment Strategy – If the corporation has multiple business lines and
it chooses to sell off a division with low growth potential. Example: Ford
sold its Jaguar and Land Rover units to Tata Motors in 2008 for $2b.
Bankruptcy/liquidation
strategy
Bankruptcy involves giving up management of the firm to the courts in
return for some settlement of the corporation’s obligations. Example:
Lehman Brothers filed in 2008.
Liquidation strategy seeks to convert as many saleable assets as
possible to cash, which are distributed to the shareholders after all
obligations are paid.
DIVERSIFICATION
STRATEGIES
According to strategist Richard Rumelt, companies begin thinking about
diversification when their growth has plateaued and opportunities for
growth in the original business have been depleted.
The two basic diversification strategies are:
1. Concentric (Related) diversification
2. Conglomerate(Unrelated) diversification
Concentric diversification
Type of diversification where a firm acquires or develops new products
 or services (closely related to its core business or technology) to enter
one or more new markets.
Example:passengers cars and sports vehicles
Conglomerate diversification
Type of diversification whereby a firm enters (through acquisition or 
merger) an entirely different market that has little or no synergy with its
core business or technology.
Example: Tata Groups
Strategic choice process
Strategic choice is the evaluation of alternative strategies and selection
of the best alternative.
Key reasons for blunders:
1. Speedy actions leads to a rush to judgment.
2. They apply failure prone decision making practices such as adopting
the claim of an influential stakeholders,
3. They make poor use of resources by investigating only one or two
options.
4. Depended on past experience while devising strategic alternatives.
Strategic Choice process….
When an organization is facing a dynamic environment, the best
strategic decisions are not arrived at through consensus.
Two techniques help strategic managers avoid the consensus traps, are:
1. Devil’s Advocate
2. Dialectric Inquiry- requires that two proposals using different
assumptions be generated for each alternative strategy under
consideration. Advocates of each position debate the merits of their
arguments, either one or compromised alternative is selected.
Strategic Intent
Strategic intent refers to the purposes the organization strives for. These
may be expressed in terms of a hierarchy of strategic intent.
The framework within which firms operate, adopt a predetermined
direction and attempt to achieve their goal is provided by a strategic
intent.
The hierarchy of strategic intent covers the vision, mission, business
definition, business model and the goals and objectives.
Strategic choice
What Options
are available?

Options about Options to improve Options of

products, markets resources & method on
and services capabilities how to progress

Choice Criteria Linking into available strategic options

-Assessment
-Intent Theoretical
Frameworks for
Making the Choice making
Who should be
involved in strategic choice
the Choice?

Chosen Strategy
Evaluation and control process
Evaluation and control information consists of performance data and
activity reports.
Performance is the end result of activities and Processes.
Evaluation and control information must be relevant to what is being
monitored.
Performance Evaluation is the basis for the Control.
Performance Indicators
ROI, EPS are appropriate for evaluating a corporation’s or a division’s
ability to achieve a profitability objective. But it can be calculated after
the profits are totaled for a period.
To predict the future profitability, Steering Controls are used. Example:
Airlines calculate cost per passenger mile.
Types of CONTROL
Input Control- emphasize resources, such as knowledge, skills, abilities,
values, and motives of employees.
Behavior Control- specify how something is to be done through
policies, rules, standard operating procedures, and orders from a
superior. Example: Sales call to potential customers.
Output Control- Specify what is to be accomplished by focusing on the
end result of the behaviors through the use of objectives and
performance targets or milestones. Example: Sales Quotas, profit
objectives.
Activity based costing
ABC is a recently developed accounting method for allocating indirect
and fixed costs to individual products or product lines based on the
value-added activities going into that product.
Strategy in Global
environment
UNIT 7
Global strategy
Globalization refers to growth of trade and investment, accompanied
by the growth in international businesses, and the integration of
economies around the world.
Managers must be conscious that markets, supplies, investors,
locations, partners, and competitors can be anywhere in the world.
Successful businesses will take advantage of opportunities wherever
they are and will be prepared for downfalls.
For example, Japanese electronics and automobiles are common in
Asia, Europe, and North America, while U.S. automobiles,
entertainment, and financial services are also common in Asia, Europe,
and North America.
Global strategy
Companies have become transnational or multinational-that is, they are
based in one country but have operations in others.

For example, Japan-based automaker Honda operates the largest

single factory in the United States, while U.S. based Coca-Cola
operates plants in other countries including France and Belgium—with
about 80 percent of that company's profits come from overseas sales.

In developing appropriate global strategies, managers need to take the

benefits and drawbacks of globalization into account. A global strategy
must be in the context of events around the globe, as well as those at
home.
Differences Between Domestic
and International Strategy
Factors Domestic conditions Global conditions
Culture Homogeneous Heterogeneous
Currency Uniform Different exchange rates
Economy Stable and uniform Variable and
unpredictable
Government Stable May be unstable
Labor Skilled workers available May be hard to find
Language Generally single Different languages and
dialectic
Marketing Many media and few May be fewer media and
restrictions more restrictions
Transport Several competitive May be inadequate.
mode