CORPORATE

. STRATEGY

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Sun Tzu’s The Art of War
(5th century BC)

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Corporate Strategy
Course code: MB 302
Credit: 4
Semester: 3rd
AY: 2021-2022
Hours Allocation: 40

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 Course Outcomes
After completion of the course, students shall be able to:

1. CO1: Develop fundamental concepts in competitive

strategy. (Strategic management process, Environmental
analysis) - Application
2. CO2: Analyze the planning and formulation of
strategies at various levels. (Corporate, Business and
Functional level) - Analysis
3. CO3: Identify the implementation and evaluation of
strategies planned. - Application

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Terms to be familiar with…
Mission, Vision
Core Competency
BEVUCA (Business excellence in a volatile, uncertain,
complex and ambiguous environment)
Environmental Turbulence
Blue Ocean
Bottom of the Pyramid
Neurostrategy

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Value addition
Implanting strategic management (IH Ansoff and E
McDonnell)
What is Strategy (M. Porter)
Crafting Strategy (H. Mintzberg)
Neurostrategy (TC Powell)
BEVUCA (Saleh, Watson)
The Competitive Advantage of Corporate Philanthropy
(Porter and Kramer)

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Supporting case studies..
1. Aravind Eye Hospitals
2. Anupam PVR
3. DeBeers
4. Indraprastha Apollo Hospital
5. Nokia

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Text Book
Kazmi, Azhar and Adela Kazmi (2015): Strategic
Management, Mc Graw Hill Education, New Delhi, India.

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Reference Book
David, Fred R and Forrest R David (2018): Strategic
Management – Concept and Cases, Pearson India, New
Delhi

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Strategic Positioning (Porter)

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Analyzing the Environment

External Opportunity, Threat

Internal Strength, Weakness

External Opportunity, Threat

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 Analyzing the Environment
Supplier’s bargaining
power increases if: Threat of substitutes
Few suppliers, sell unique increases if:
products, buyer buys in Product is not
small quantities differentiated

Competition
increases with:
Fragmented market
(low Herfindahl-
Hirschman Index) Buyer’s bargaining
Threat of new power increases if:
entrants increases Few buyers, presence
with: of alternative suppliers;
Low entry barriers (sunk buyer buys in bulk
cost, access to distribution
channel, Govt. policies)
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 Porter’s five forces model

HHI= 0.30 HHI= 0.27

 Quest for Competitive Advantage
Resource Based View of Barney (1991) argued
that the firm is a collection of unique resources
Organizational
resources
and capabilities which helps it to have
competitive advantage.
Strengths & Weaknesses Synergy
Systems,
leadership

Strategic
Advantage
(quantifiable Organizational capabilities (Financial,
outcome of Marketing, Operations, Core Competency
capabilities – HR, Gen. Mgmt.) (unique ability)
profits, mkt.
share)

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 Resource based model

Organization is a collection of
unique resources and capabilities
which helps the firm to
1. Have competitive adv.
2. & garner above-average
returns.

SS/MBA/STRATEGIC/'11 16
Industrial organization model
This model strategy keeps the pool of
competition small, creates entry
barriers and helps a firm reduce
competition.

The model allows firms to get a better

gauge on a competitor's actions with
the use of game theory.

SS/MBA/STRATEGIC/'11 17
Comparison of two models

SS/MBA/STRATEGIC/'11 18
 Analyzing the Environment
After scanning is over the high/ low priority areas
need to be identified and dealt with separately. The
following matrix is then developed.
Impact on business
High Medium Low
High Critical High Low
Probability
of impact Medium High High Low
Low Skeptical Low Low

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 Quest for Competitive Advantage

Core competency (Prahalad and Hamel) must have three

characteristics:

1. Gives significant value addition for stakeholders

2. Can be leveraged to other markets/products

3. Is difficult to imitate for the competitors.

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 Quest for Competitive Advantage

Organizational capabilities:
1. Financial –LIC has centralized payment but decentralized
collection.
2. Marketing –HUL’s distribution channel
3. Operations –R&D of Eli Lilly.
4. HR– low attrition rates in Tata Steel
5. General Mgmt. –Decentralization @ Sri Mahila Griha Udyog

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 Quest for Competitive Advantage

Strategic Advantage Profile – indicates what a company is doing

w.r.t its competitors to generate competitive advantage.
1. Identify the relevant capability factors.
2. Measure it against competitors, whether it is advantage/
disadvantage.
3. Study whether the advantages are sustainable.
Capability Factor Strengths/ Weakness
Financial High cost of capital
Marketing Mkt. share at par
Operations High production, parts available
Personnel HR at par with competition
General Mgmt. High quality tested systems

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Bottom of the pyramid strategy
Elements of a Strategy
Statement
Three critical components of a good strategy
statement:-

Objective,
Scope (Customer, offering, geographic location)
Advantage - sustainable competitive advantage.

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A Hierarchy of Company
Statements

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 Balanced Scorecard

Developed by Kaplan & Norton

Objectives are to be set in all those areas which are strategically important to
the organization, i.e. market share, productivity, profitability, innovation, etc.

Financial perspective (how do we look at our shareholders? - ROI, EVA, cash flow)

Customer perspective (how do Business perspective

customers look at us? - customer (what we must excel at? –
satisfaction, customer loyalty) Objective setting Productivity, safety,
Innovation)

Learning & Growth perspective (how can we continue to improve? - adaptation to

change, assimilation of knowledge)
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 Process
Strategic intent (Vision, Mission)

Strategy formulation (env. & org. appraisal; levels of

strategy; strategic choice)

Strategy implementation

Strategic evaluation and Control

Environmental Turbulence
stages

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 LEVELS
Corporate level strategy – what businesses should the
firm be in?; what functions are to be performed by those
businesses?; coordination of business & allocation of
resources, etc.
Business level strategy – Eg: which markets to enter,
what needs to target.
Functional level strategy – how the various functions
of the organization contribute to achieving the above two
strategies?

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Types

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 STABILITY STRATEGIES
These strategies are either a reaction to the harsh realities of
business cycle or taken as a consolidation option after expansion/
cooperation phases.
Types of stability strategies:
1. No-change strategy –doing nothing new, because no significant
O/T are there in the ext. env. & the firm sees no new S/W in its
int. env.
2. Profit strategy –firms increase profitability by reducing costs,
increasing price.
3. Pause/ Proceed-with-caution strategy –deliberate rather than
forced.
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Expansion strategies-concentration
Concentration strategies: converging the resources.
Product Existing New

Market
Existing Market penetration Product
(increasing market share in development
current business)
New Market development (new Diversification
markets may be demographic
as well as geographic)

Ansoff’s product-market grid

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Expansion strategies-integration
Integration strategies: industry-dependent.
Integration is combining the present activities of the firm. Thus it
is a strategy for the value chain (from procurement of raw
materials to marketing of finished products).

Before arriving at an integration strategy firms evaluate the

‘make or buy’ decision in both upward (supplier) & downward
(resellers) direction.

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Expansion strategies-integration
Types:
1. Horizontal integration – taking over businesses having the same
type of products. The Indian banking industry has seen many
horizontal integrations.
Benefits of horizontal integration –
a. Economies of scale (with spreading of fixed cost)
b. Increased market power (over suppliers & customers)
c. Reduction in rivalry (as competition lessens).

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Expansion strategies-integration
2. Vertical integration – organization starts making new
products that serve its own needs. May be backward
integration (to the source of raw materials) or forward
integration (taking the organization ahead). Eg: Microsoft’s
acquisition of Nokia.
Disadvantages of vertical integration are –
1. Higher managerial cost of coordinating integration.
2. Dependence on the integrated parts. If they fail or become
obsolete then there is great risk.

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Expansion strategies-
diversification

Diversification strategies: Involves substantial change in business

definition. In this new products are made for new markets.
These new products may be related products (industrial ACs to
household ACs) or unrelated products (retail to educational
institutions).

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Expansion strategies-
diversification
Concentric (Related) – relatedness may be:
1. Marketing related – similar product where the distribution
channel (wholesaler/retailer) remains common. Eg: company
ventures into personal care from cosmetics.
2. Technology related – new type of product for new market with
related technology. AC example.
3. Marketing & Technology related – combination of above two. Eg:
marketing of antibiotics to marketing of speciality medicines.

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Expansion strategies-
diversification
Conglomerate (Unrelated) – new product manufactured through
unfamiliar tech. & marketed to a new set of customers.

Taken up when there is surplus generated which cant be invested

into existing business due to its unattractiveness. Eg: ITC, Godrej,
Tata.

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Expansion strategies-diversification
Reasons for diversification:
a. Concentric – Synergy attained (through same marketing channels
or technology or human resources, more business can be done).
b. Conglomerate –
1. Business risk is scattered/ spread over many industries.
2. Can invest capital in whatever offers the best profit prospects.

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EXPANSION STRATEGIES -
internationalization
1. Cost pressures– to minimize costs firms look at single low-cost location
for producing globally standardized product. Eg: steel, chemicals,
durables.
2. Pressure of local responsiveness – tastes & preferences differ from
country to country & products/services have to be tailor made for them.
Eg: cars, food.
Global strategy Transnational
strategy
Pressure
for cost International Multinational
reduction strategy strategy

Pressure for local responsiveness

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 EXPANSION STRATEGIES - internationalization
International entry modes:
1. Export entry mode – a firm produces in home country & markets
in overseas markets.
2. Contractual entry mode - Can be:
a. Licensing (Intellectual Property) – international firm transfers
knowledge, technology, patent for a limited period of time to the
overseas firm for some payment. Eg: Arvind Mills (Arrow,
Wrangler), Murjani Gr. (Calvin Klein, FCUK)
b. Franchising (Operational Knowhow)– international firm allows
to use its brand name in the overseas market for some payment.
Eg: McD, KFC, Pizza Hut, Dominos.
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EXPANSION STRATEGIES - internationalization

International entry modes:

3. Investment entry mode – ownership of production unit in
overseas market. May be:
a. Joint Venture/Strategic Alliances – cooperative strategies. Eg:
Maruti Suzuki, Hero Honda, Bharti Walmart.
b. Wholly owned subsidiaries – where parent firm owns 100%
stake. May be through greenfield project or takeover. Eg: Lafarge
India/HUL.
Advantages – economies of scale, expansion of markets

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 Expansion strategies - cooperation
Cooperation is the mutual agreement between competing firms
Merger & Acquisition – the assets & liabilities are exchanged for
shares & cash. Thus buyer ‘acquires’ and seller gets ‘merged’. Eg:
Vodafone-Hutch, HDFC Bank-Centurion Bank of Punjab.
Two or more firms combine in :
1. The same business - Horizontal merger
2. The value chain either upwards (supplier) or downwards (retailer)
- Vertical merger
3. Related businesses - Concentric merger
4. Unrelated businesses - Conglomerate merger
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Expansion strategies - Cooperation
Joint Venture – an entity resulting from long-term
contractual agreement of two or more firms to undertake
mutually beneficial economic activities. The new entity thus
formed has one party in majority & other in minority
shareholding. (VI, 45%-26%)

JVs generally take place when a foreign firm brings high

class technology & Indian firm shares the understanding of
the local market.

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Expansion strategies - cooperation
Strategic Alliance – two or more firms unite to pursue a set of
agreed upon goals and share the performance benefits &
management control & contribute regularly to technology, products
but remain independent entities throughout.
ICICI Bank-Vodafone (mobile money transfer).
Types:
1. Procompetitive alliance – interindustry, within the value chain.
2. Noncompetitive alliance – between two firms in same industry
which do not see each other as rivals.

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 Retrenchment strategies
Reducing the scope of the business.
1. Turnaround strategies – reversing a negative trend. Can be done
either by replacing the CEO & the top mgmt., merging it with a
healthy organization or hiring a consultant.
The new CEO may adopt a surgical or non-surgical approach.
Surgical approach is followed by centralization, firing of
employees, new products, new machinery, control on finances,
etc.
Non-surgical approach involves understanding problems,
improving work culture & other behavioural issues.

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 Retrenchment strategies
2. Divestment strategies – sale of an SBU. Generally adopted when
turnaround has been unsuccessful. Disinvestment is sale of govt.
holding in PSUs to another company or the public.
3. Liquidation strategies – it is closing down an organization &
selling its assets.

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BLUE OCEAN STRATEGY
Coined by W Chan Kim & Mauborgne.

Traditionally according to Michael Porter, to stay

ahead in competition a company may:
1. Differentiate
2. Reduce cost.

This leads to cut throat competition for market

share & profits fall – red ocean strategy.
BLUE OCEAN STRATEGY
Both can be performed together by value
innovation, i.e. by adding value for both
consumers and company by reducing those
features/services that are less valued.

Thus a new market space devoid of competition

is created by unlocking the untapped demand
through innovative value creation.
Four Actions to create a Blue Ocean
Raise
What factors
should be raised
well beyond the
industry
standard?

Eliminate Create

What factors What factors

should be should be
eliminated created that
that the the industry
industry has has never
taken for offered?
granted?
Reduce
What factors should
be reduced well
below the industry
standard?
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Value Innovation: The
Cornerstone of Blue Ocean Strategy
Value Innovation
◦ Equal emphasis on
value and innovation
◦ Defies value-cost trade-
off of competition-based
strategy
◦ Successful value
innovation:
◦ Drives down costs
while driving up
buyers’ value

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Blue Ocean by Kinepolis

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Blue ocean strategy
Nintendo did away
with the hard disk
and DVD functionality
found in most game
consoles. At the same
time, it introduced a
wireless motion
control stick to
differentiate itself
against the market
offering.
Blue ocean strategy
Cirque du Soleil
reinvented the circus,
finding an uncontested
marketspace that created
new demand and
rendered rivals irrelevant.

Got new audience of

adults and corporate
clients.
What is Strategy Article
I – Operational Effectivess is necessary but not sufficient

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https://www.japantimes.co.jp/opinion/2020/02/06/
commentary/japan-commentary/japans-problem-much-
competition/
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What is Strategy Article
I – Operational Effectivess is necessary but not sufficient

II – Unique Activities are cornerstone to good strategy

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What is Strategy Article
I – Operational Effectivess is necessary but not sufficient

II – Unique Activities are cornerstone to good strategy

III – Sustainability needs Tradeoff

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What is Strategy Article
I – Operational Effectivess is necessary but not sufficient

II – Unique Activities are cornerstone to good strategy

III – Sustainability needs Tradeoff

IV – Sustainable Competitive Advantage needs Strategic

Fit

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Zara needs just one week to develop a new product and get it
to stores, compared to the six-month industry average

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What is Strategy Article
I – Operational Effectivess is necessary but not sufficient

II – Unique Activities are cornerstone to good strategy

III – Sustainability needs Tradeoff

IV – Sustainable Competitive Advantage needs Strategic Fit

V – Excessive diversification leads to failure as focus shifts

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Crafting strategy – HENRY
MINTZBERG.

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 Strategy Implementation
Implemented
Formulated strategy
strategy

Intended
strategy Realized
strategy

Unrealized Emergent
strategy strategy

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Implementation-activating
strategies
Strategy Expansion

Plans Modernization

Programmes R&D

Specific, budget
Projects oriented

Budgets

Policies, procedures, rules & regulations

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 Strategic Budgeting

Resource avail.
Position Goals (long/ Strategic
papers (env., Policy short term) budget
past perf.) guidelines
Minimize gaps
Operational Approval
plans/
targets
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 STRATEGIC CONTROL
Internal & External factors

Formulation of Implementation of
strategy strategy
Time lag, due to which
assumptions
at the start may
become invalid
Strategic controls involve continuous evaluations &
gives warning signals

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 Operational Control
It is the allocation of resources & evaluation of performance of SBUs.

Strategy Setting
reformulation Actual Check
standards performance performance
Check
Analyze variance
Feedback

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Corporate Philanthropy &
Competitive Advantage

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VRIO for Competitive Advantage

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Managing VUCA

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