Module 2

Strategy Formulation,
Implementation and
Evaluation
Dr. Kanchan
Fulmali
 2 Strategy Formulation, Implementation and Evaluation
∙ Strategic Formulation: Stages and Importance, Formulation
of Alternative Strategies: Mergers, Acquisitions, Takeovers,
Joint Ventures, Diversification, Turnaround, Divestment and
Liquidation.
∙ Strategic Analysis and Choice: Issues and Structures,
Corporate Portfolio Analysis- SWOT Analysis, BCG Matrix,
GE Nine Cell Matrix, Hofer’s Matrix,
 
∙ ETOP- Environmental Threat and Opportunity Profile,
Strategic Choice- Factors and Importance.
∙ Strategic Implementation: Steps, Importance and Problems,
Resource Allocation- Importance & Challenges
∙ Strategic Evaluation and Control: Importance, Limitations
and Techniques
∙ Budgetary Control: Advantages, Limitations
Strategic Formulation: Stages and Importance:
Strategy formulation is the process of establishing,
deciding and nurturing the organization's mission,
objectives, and selecting between the alternative
strategies. Sometimes strategy formulation is called
"strategic planning”. It includes:
• Developing a business mission,
• Deciding both long term and short term objectives
• It is concerned with resource allocation,
• Participate in joint ventures
• Decision about mergers and diversifications,
• Entry into international markets,
 Identify
organisation

Define
Vision/ External Set
Review
Mission env startegies

Scan Buget &

Define Implement
Internal Resource
Objectives startegies
env Allocation
Importance of Strategic Formulation/Planning:
Key Player:
Setting goals:
Dignified road map:
It provides a sense of direction:
It is a management tool:
Assembling resources:
Evaluation of profitability:
Overall growth:
Evaluating Progress:
Formulation of Alternative Strategies
1. Tata Steel- Corus
2. The Oil and Natural Gas Corp- Imperial Energy
Plc:
3. Flipkart- Myntra:
4. RIL- Network 18 Media and Investments:
5. Kotak Bank acquired ING Vysya Bank:
6. Sun Pharma Acquired Ranbaxy:
Advantages of Mergers and Acquisitions:
Economies of scale:
Improve the company’s performance:.
Tax benefits:
Financial resources:
Entry in global markets: Disadvantages:
Growth and expansion: • Loss of experienced
workers:
Enable to face competition:
• More skill from
Increase in market share: employees
Remove Excess capacity: • Retrenchment:
Increases goodwill: • Increase internal
Research and development: competition:
Acquire skills and technology: • Increase in costs:
• Increase uncertainty:
Roll-up strategies:
Miscellaneous advantages:
Process of Merger and Acquisition:

Business Proposal Structuring

Stage of Operating
Valuation Phase Planning Exit Business Review
Integration the Venture
Deal
• Short-term collaborations:
• Limited-function joint
ventures:
• Full-function joint ventures:
• Full-scale worldwide mergers
(Fully owned):
 Diversification
Strategies

Related Unrelated

Horizontal Vertical Concentric Conglomerate Corporate

Backward Forward
Advantages:
More Profit:
Risk Reduction:
Market Share:
To face competition:
Easy expansion/ Growth: Disadvantages:
  Deliberate Income:
Slow growth:
Overextension:
Mismanagement:
Lack of Expertise:
Increases cost:
Reduced
Innovation:
Indicators
✔ Continuous losses
✔ High rate of downsizing
✔ Poor management
✔ Unfavourable govt. policy
✔ Incorrect corporate strategies
✔ Persistent negative cash flows
✔ Poor sales
✔ Poor quality of functional
management
✔ Declining market share
✔ Uncompetitive products and services
Reasons for
divestment:
Limited market share:.
Unmanageable unit:.
Suitable Alternatives:
Investment need:
Lack of strategies:
Legal Pressure:
Introduction:
Meaning:
Process:
Followers:
Liquidation and
bankrupt:
Problems:
Reasons:
Reasons: The following are the indicators or reasons
that necessitate a firm to follow this strategy:
❑ Day by day increasing debt and inability to pay it.
❑ Failure of corporate strategy
❑ Problem of resources
❑ Involvement of company in fraudulent activities
❑ Obsolete technology
❑ Outdated products/processes
❑ Absence of profit planning control and continuity of losses for several
years therefore business becoming unprofitable
❑ Unnecessary fictitious assets raising in accounts
❑ High level competition or new competitors in the market
❑ Poor management or No visionary management
❑ Lack of integration between the divisions and departments
❑ Exploitation of minority shareholders
❑ Frequent change in the government policies
Strategic Analysis and Choice: Issues and
Structures
Factors /issues Taken into Consideration for Strategic Analysis and Choice

Key Internal Key External

Factors Factors

Vision/Mission Political/Governmental
Marketing Legal
Management Economy
Operations/Production Technological
Accounting/Finance Social
Computer Information Demographic
Systems Cultural
R&D Environmental
Competitive
Manpower
 SWOT Analysis:

• Strenght • Weaknesses

S W

O T

• Opportunities • Threats
Corporate Portfolio Analysis:
A Comprehensive Strategy-Formulation Framework
Important strategy-formulation techniques can be
integrated into a three-stage decision-making
framework. Included
Stage 1: The Input Stage
Stage 2: The Matching Stage
Stage 3: The Decision Stage
 Market
High share Low

 
Low Rate High
Growth

BC
G
 GE Nine Cell Matrix:

Industry Competitive strength of Business Unit

Attractiv
eness Strong Average Weak

High GGGGGG GGGGGGG WWWWW

GGGGGG GGGGG WWWWW

Medium GGGGGG WWWWWW DDDDDDD

GGGGGG WWWW DDDDDDD

Low WWWWW DDDDDDDD DDDDDDD

WWWWW DDDDDD DDDDDDD
Multiple Reasons for an ETOP
It helps the organization to identify
opportunities and threats
Consolidates and strengthens an organization’s
position
Provides strategists information on which
sectors have a favourable impact on the
organization
The organization gains knowledge of its
standing with respect to its environment
Helps formulate strategies.
Strategic Choice- Factors and Importance
Objective factors: Subjective factors:

-Strategies adopted in the previous

- Environmental factors period;
–          Volatility of environment –    Personal preferences of decision-
makers;
–          Input supply from environment
- Management’s attitude toward
–          Powerful stakeholders risk;
¨       Organizational factors –    Pressure from stakeholders;
–          Organization’s mission –    Pressure from corporate culture;
–          Strategic intent and
–          Business definition –    Needs and desires of key
–          Strengths and weaknesses managers.
Importance:
❑ Achieve goals:
❑ Avoid wastage
❑ Bring prosperity
❑ Risk management
❑ Motivate employees
❑ Good relations
❑ Help to implementation
❑ Optimum use of resources
Strategic Implementation: Steps, Importance
and Problems,
Strategy implementation is the translation of chosen
strategy into organizational action so as to achieve
strategic goals and objectives.
Strategy implementation is also defined as 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.
Evaluate Select
Alterna
the Create team Reward Progress
tive Schedule Review
strategic a vision member system reports
plan
plan: s

Problems:
Importance: Strategy is formulated on
Achievement of objectives:  assumptions –Vision, value
Development of organisations: statements and trust 
Utilization of money and efforts: . Hubris (or overconfidence) in
Motivation to employees: leaders –
Evaluation of the strategy:  Organizational trap –
Clear Priorities: The status quo bias –
Identify problems and measures: Strategy before people –
Increased Cooperation: Strategy and structure not being in
Measuring Management’s sync. –
Efficiency:  Effective leadership –
Increasing Competitive High emotional intelligence in
Capabilities:  leaders –
The sunk cost effect –
In simple word, resource allocation in strategic planning is a plan
for using available resources, such as human resources, natural
resources, financial resources especially in the near term, to
achieve goals for the future. It is the process
of allocating scarce resources among the various projects or
business units.

Strategic evaluation is the assessment process that

provides executives and managers performance
information about programs, projects and activities
designed to meet business goals and objectives
 Strategic Evaluation Techniques

Startegic Control Operational Control

Startegic
Startegic Leap Internal Comparative Comprehensive
Momentum
Control Analysis Analysis Analysis
Control

Responsibility
control centers. Strategic issue Value chain The balanced
management analysis Historical
The underlying analysis scorecard 
success factors Strategic field Quantitative Key Factor
analysis analysis Industry norm 
Generic Rating
Systems modelin Qualitative Benchmarking
strategies.
g Scenarios analysis
 • Personal • ROI • ABC
Traditional Methods

Modern Methods

Recent Methods
observation • Mamangement • ERM
• Budgeting Audit • Corporate
• Break even • MIS Performance
analysis • MBO • EVA
• Financial • PERT/CPM • MVA
statement • Strategic Audit • Balanced
• Statasticle data • Responsibility Scorecard
and report Accounting • JIT
• Setting • TQM
Example
• Standard
costing
• Written
instructions
Budgetary control is defined by the Institute of
Cost and Management Accountants (CIMA) as:
"The establishment of budgets relating the
responsibilities of executives to the
requirements of a policy, and the continuous
comparison of actual with budgeted results,
either to secure by individual action the
objective of that policy, or to provide a basis
for its revision".