1

Chapter Outline

▸ Long-term objectives: nature

▸ Financial versus strategic objectives
▸ Why to avoid not managing by objectives
▸ The balanced scorecard
▸ Types of strategies: integration strategies, intensive strategies,
diversification strategies, defensive strategies
▸ Michael Porter’s five generic strategies
▸ Means for achieving strategies: joint venturing/partnering,
mergers/acquisitions, first mover’s advantage, outsourcing
▸ Strategic management in non-profit and governmental organizations
▸ Strategic management in small firms
▸ Strategies for international businesses.
2

STRATEGIC OPTIONS

▸ Before selecting the particular strategy, an organization

develops a number of alternatives strategies to deal with the
future environment, such a number of alternatives strategies
are called strategic options.

▸ Garry Johnson and Kelvin Scholes: “Strategic options are the

alternative directions and methods available for formulating
the organization's strategy."
3

STRATEGIC OPTIONS CONTINUE…

 The determination of these options

involves a thorough study of the
organization’s strengths,
weaknesses, opportunities, and
threats from the internal as well
as the external environment.
 Hence SWOT analysis remains as
the foundation for developing
strategic options.
 4
STRATEGIC OPTIONS THROUGH SWOT ANALYSIS:
Strength and Opportunity Strength and Threat
Issue: Issue:
How can strength be used to take advantage of How can strength be used to avoid current and
the opportunities? potential threats?
Possible Strategies: Possible Strategies:
 Expansion  Diversification
 Product development  Consolidation
 Market Development  Market Penetration

Weakness and Opportunity Weakness and Threat:

Issue: Issue:
How can opportunities be used to overcome the How can weakness be minimized to avoid
weakness you are experiencing? threats?
Possible Strategies: Possible strategies:
 Strategic alliance  Downsize
 Collaboration  Divestiture
5

Long term Objectives

▸ Organizational goal, which intended to be achieved over a

period of time.
▸ It represent the results expected from business strategies.
▸ Long term objectives are needed at the corporate, divisional,
and functional levels of an organization.
▸ All the strategies of the business organization are formulated
and implemented in the guidance of the long term objectives.
6

NATURE OF LONG TERM OBJECTIVES

1. Profitability
2. Productivity
3. Competitive Position
4. Employee Development
5. Employee Relations
6. Technological Leadership
7. Public Responsibility
7

PROFITABILTY

 More applicable for

the new companies.
 For example: 5%
margin in the year of
launch to be increased
over next 5/10 years.
8

PRODUCTIVITY

 More applicable for

the capital-intensive
companies.
 More applicable in
maturity phase to
handle cost.
9

COMPETITIVE POSITION
 Strongest Company in the
market.
 Reliance Retail to be
among top 20 retailers in
world in next 5 years.
 Adani group to become
world’s largest solar power
company by 2025 and
largest renewable power
company by 2030.
10

EMPLOYEE DEVELOPMENT
Very interesting and very challenging objective as only very
few companies have successfully achieved this objective. For
example: TATA Group:
 Russi MODI: Tata Steel
 Moolgaokar: Tata motors
 F C Kohli: Tata consultancy services
 Ajit Kelkar: India hotels
 Tobaccowala: Voltas (machines like AC)
 Darbari seth: Tata tea
11

EMPLOYEE DEVELOPMENT
 All the six people mentioned here were the employees
of the Tata Group when J.R.D Tata was the
chairman of the company.
 So J.R.D Tata identified these employees and import
them and allow them to create the empire in their
own field giving them 100% freedom.
 That’s what you see today all large conglomerates of
TATA groups are created by these individuals.
12

EMPLOYEE RELATIONS
 The relationship between employers and employees. Example of Good
employee relations:
 Sundram Fasteners Limited is a Part of The TVS Group.
 Objective: To have zero IR (Industrial Relations) in 5 years SFL.
 Tamilnadu Petroproducts Limited:
 Objective: To have a union free work force in TPL.
 At one point of time voluntarily work force decided to take away all the
unions away and finally they were able to bring a union free work force.
 All these concepts requires tremendous understanding trust between the
workers and their management. THEN only it is possible.
13

TECHNOLOGICAL LEADERSHIP
 Technological leadership is where a firm seeks to be
the first to introduce a technological change in the
industry. 
 Hyperloop transport by Tesla.

 Nanobots: Future surgeons inside the body by 2030.

Not every company will have the technological
leadership as these companies.
14
PUBLIC RESPONSIBILITY

As a part of CSR, many organizations are working in

this public responsibility as long-term objective. For
example:
 To adopt 20 villages in next 5 years.

 To set up 100 schools in the next 5 years.

15

QUALITIES OF LONG-TERM OBJECTIVES

 There are five criteria that should be used in

preparing long-term objectives:
 Flexible
 Measurable
 Motivating
 Suitable
 Understandable
16 QUALITIES OF LONG-TERM OBJECTIVES
CONTINUE…

 Flexible: Ability of the company to change their operation

plan according to the situation and demand of the customer.
 For example: Online Business during the corona period
also must be able to operate their business after the
corona.
 Measurable: It includes profit, market share, % share of
business etc.
 Example: Unilever plans to achieve 50% sales from
food products only.
17
QUALITIES OF LONG-TERM OBJECTIVE
CONTINUE…
 Motivating: Must be motivating to the employees.
 Example: 30% of the revenue from the products that are less
than 1 year old are expected by the big companies like google.
 Suitable: Objective must be suitable to the culture of the
organization.
 For example: Commodity traders and they make the objective
to go on innovative businesses then it is not suitable.
 Understandable: Must be understandable by all in the organization.
 For example: AMUL aims to become largest dairy form 9th
company in the world.
18
FINANCIAL VERSUS STRATEGIC
OBJECTIVE

▸ In spite of their conceptual distinction, financial objectives

and strategic objective are mutually inclusive. An
organization seeking more financial growth needs sound
strategies. Similarly, whole strategic management requires
large amount of financial resources in all the stages of
strategic management process
19

FINANCIAL OBJECTIVE

 Financial objective: Financial goals that an organization plan for the future.
 In simple words it means to set a target how to achieve profit and make
more money.

 But sometimes it also includes the amount of money that is required for a
specific goal, the timeframe in which that task must be finished and how
to spend the money.

 Are focused internally.

20

FINANCIAL OBJECTIVE

▸ A goal, requirement or target pursued by the finance department

within an organization for the future. Likely that it will contain a
specific numerical element and also a timescale within which it is to
be achieved. In simple words it means to set a target how to achieve
profit, make more money and improve financial performance.
▸ Some of the examples of financial objectives are:
 X% increase in annual revenues,
 X % increase annually in after-tax profits.
 X % increase annually in earnings per share,
 Annual dividend increases of X %,
 Profit margins of X%
 X % return on capital employed (ROCE) etc.
21

STRATEGIC OBJECTIVE

 Strategic objectives are concerned with outcomes focused on

improving long-term competitive business position of a firm.
The main focus of strategic objective is to gain competitive
advantage by considering competitors.
 Strategic objectives are always formulated for a longer period
of time, not less than three or five years.
 Also focused externally like competitors.
22

Examples of strategic objectives are

 Becoming the top company in the industry,
 Winning an X % market share,
 Achieving lower overall costs than rivals,
 Overtaking key competitors on product, performance or quality or
customer service,
 Deriving X % of revenues from sale of new products introduced in
past 5 years etc.
23
FINANCIAL VERSUS STRATEGIC OBJECTIVE
CONTINUE…

 Financial Objective:  Strategic Objective

 Growth Income  Positioning the brand
 Profit Margins
 Sustainability  Diversifying supply
 Return of Investment  Promote a work environment
 Use the appropriate human resources
 Give customer benefits for choosing
our brand
 Consolidate good relations to retain
customers
24

MANAGEMENT BY OBJECTIVES

 MBO: Strategic business

model designed to improve
the performance of an
organization.

 A strategy with clearly

defined objectives that are
agreed upon by both the
management and the
employees.
25
MANAGEMENT BY OBJECTIVES
CONTINUE…
26

PROCESS OF MBO

1. Defining Organization Goals

2. Setting Common Goals
3. Continuous Monitoring of the Performance
4. Performance Evaluation
5. Providing Feedback
27

ADVANTAGES
 Forces the managers not simply to plan activities but
plan for results.
 Enables the managers to concentrate on really important
and profit influencing tasks. 
 Makes clear organizational goals and structures.
 Clarity in roles and responsibilities.
 Helps to develop effective control.
28

ADVANTAGES CONTINUE…
 Helps the management to formulate better management
training programs on the basis of performance reviews.
 Direct involvement in setting goals: Greater
commitment on their part for performance.
 Helps in more effective planning.
 Aids in developing effective controls.
 Provides more confidence to the management in
managing its task.
 DISADVANTAGES
 Not understanding the philosophy of MBO: M.B.O. fails.
 GOAL must be SMART.
 Setting up of verifiable goals: is not an easy task, lot of time, study, effort
and work.

 M.B.O. lay emphasis on short-term goals and neglect the long range goals.

 Effective interactions between the superiors and subordinates may not be
possible due to differences in their status.
30

Why to avoid not managing by objectives

Strategists should avoid the following alternative ways of “not

managing by objectives”.
▸ Managing by extrapolation
▹ management of the organization should perform its functions in the
same ways continuously because everything is well & right.
▸ Managing by crises
▸ Managing by subjective actions
▹ Built on the idea that there is no general plan for which way to go and
what to do; just do the best you can accomplish what you think should
be done.
▸ Managing by hope
31

BALANCED SCOORECARD CONCEPT

 The concept of balanced scorecard was developed by Kalpan and

David P Norton.
 The concept is related to business performance and is a strategic
performance management tool.
 Normally Business performance are measured in financial terms or
perspective.
 But Concept of Balanced Scorecard: Organization have to survive
in long run, then they must not only focus on financial parameters
but also focus in other 3 parameters.
32
BALANCED SCOORECARD CONCEPT
CONTINUE…
 Financial + Non financial both aspects are equally
important for survival and growth.
 Should be done at least annually, semi annually, or
quarterly is even better.
 Done shortly after end of fiscal Year.
33
WHO USES THE BALANCED SCORECARD
(BSC)?
 BSCs are used extensively in business and industry, government,
and non-profit organizations worldwide.
 More than half of major companies in the US, Europe, and Asia
are using the BSC, with use growing in those areas as well as in the
Middle East and Africa.
 A recent global study by Bain & Co listed balanced scorecard fifth
on its top ten most widely used management tools around the
world.
 BSC has also been selected by the editors of Harvard Business
Review as one of the most influential business ideas of the past
75 years.
 FOUR PERSPECTIVE OF BALANCED
SCORECARD

FINANCIAL CUSTOMER
How the company How do customers
looks to shareholder? see to company?
VISION,
GOALS &
STRATEGY LEARNING AND
INTERNAL BUSINESS
GROWTH
What should the How can the company
company be best at? improve and create value?
 FOUR PERSPECTIVE OF BALANCED
SCORECARD
Learning and
FINANCE CUSTOMERS PROCESSES Growth
Customer Employee Skills
Revenue Satisfaction Prodcutivity Employee
Expenses Customer Efficiency Training
ROI Retention Quality Employee
Net Income Market Share Inventory Retention
etc. Employee
etc. Satisfaction
36
BALANCED SCORECARD EXAMPLE…
FINANCIAL TARGET ACHIEVED TO LIKELIHOOD OF
OBJECTIVES TARGET REACHING
TARGET

Increase Total Rs. 5 lakh Rs. 6 Lakh +20% Very Likely

Revenue

Increase Net Profit Rs. 1.5 Rs 1.4 Lakh -6.67% Likely

Lakh

Increase Profit Per Rs. 1000 Rs 950 -5% Very Likely

Customer
37
BALANCED SCORECARD EXAMPLE…
CUSTOMER TARGET ACHIEVED TO LIKELIHOOD OF
OBJECTIVES TARGET REACHING
TARGET

Increase Active 5300 4993 -5.8% Indeterminable

Customers

Increase Customer 876 819 -6.5% Unlikely

Signups

Improve Customer 85% 73% -14.1% Very Unlikely

Satisfaction
38
BALANCED SCORECARD EXAMPLE…
INTERNAL TARGET ACHIEVED TO LIKELIHOOD OF
OBJECTIVES TARGET REACHING
TARGET

Opening new sales 4 4 0 Very Likely

Regions

Reduce Operating Rs 30,000 Rs. 26000 -13% Very Unlikely

Costs

Develop new products 2 3 +1 Very Likely

per year
39
BALANCED SCORECARD EXAMPLE…
LEARNING & TARGET ACHIEVED TO LIKELIHOOD OF
GROWTH TARGET REACHING
TARGET

Reduce Average 6 Days 3 Days -3 Days Very Unlikely

Absenteeism

Maximize Overall 87% 76% -12.6% Very Unlikely

Labour Effectiveness

Internally Fill 30 29 -1 Likely

Vacancies
 Types of strategies

Integration

Diversification Strategies Intensive

Defensive
 1. Integration strategy

▸ Integration means combining activities related to present activities of a firm.

▸ Integration strategies are processes that businesses can use to enhance their
competitiveness, efficiency or market share by expanding their influence
into new areas

▸ Integration strategies are important tool in building a competitive business.

Businesses can use various integration strategies to increase their influence
in supply and distribution or lessen competition
 Types of Integration

Forward
Vertical
Backward
Integration

Horizontal
 A. Vertical Integration Strategy

▸ It is the process in which several steps in the production/distribution of a product or service are
controlled by a single company/entity, in order to increase the company’s/entity’s power in the
market place.

▸ When a firm’s grand strategy is to acquire firms that supply it with inputs (such as raw materials)
or are customers for its outputs (such as warehouses for finished products), vertical integration
is involved.

▸ The main reason for backward integration is the desire to increase the dependability of the supply
or quality of the raw materials used as production inputs

▸ E.g. Steel company owned mills where the steel was manufactured, mines where the iron ore was
extracted, coal mines that supplied the coal, ships and railroads that transported the material, etc.
Forward

Vertical

Backward
Forward and Backward
Forward
 A business takes over/ mergers with a business at the next stage of
production
 E.g. table maker joins with a furniture shop

Backward
 A business takes over/ mergers with a business at the previous stage of
production.
 E.g. a table maker joins with a tree cutter
B. Horizontal Integration Strategy

 Horizontal integration is another competitive strategy that businesses use to increase

their power in the market. Such acquisitions eliminate competitors and provide the
acquiring firm with access to new markets

 Unlike vertical integration, horizontal integration involves gaining control over

other businesses that provide similar products or services .

 E.g.

 Two table maker join together

 A radio station that also owns a newspaper and magazine.

 2. Intensive strategy
▸ Intensive strategies are those strategies, which demand furthermore intensive
efforts to improve the performance of existing products in the market
▸ We may also say that when an organization struggles to improve its
competitive position with the current products then different types of
intensive strategies should be considered.
Types of Intensive Strategy
a. Market Penetration
b. Market Development
c. Product Development
A. Market Penetration

 A market penetration strategy seeks to increase market share for present

products or services in present markets through greater marketing efforts.

 It includes increasing the number of salespersons, increasing advertising

expenditure, offering extensive sales promotion items, or increasing
publicity efforts.
B. Market Development

▸ Market development strategy is the kind of intensive strategy in which

the Business Organization launches its existing products in the new
markets or geographical areas.

▸ E.g. Walmart stores

C. Product Development

▸ In this strategy, the organization tries to improve its competitive position

& sales through improvement & modification in its existing products.

▸ There are large portions of expenditures that are associated with the New
Product Development Strategy as it requires detailed research &
development activities to modify or improve the products.
 3. Defensive Strategies

▸ Defensive strategy is an management approach designed to reduce the

risk of loss.

▸ It is mainly used by market leaders in strategic management.

▸ It is defined as a marketing tool that helps companies to retain valuable

customers that can be taken away by competitors
 Types of defensive strategies

▸ Retrenchment :Retrenchment is also an aggressive strategy where you

take a bold decision of reducing businesses’ operations and expenses. The
retrenchment strategy helps businesses and companies in the defensive
strategy in terms of cutting down the price and offering discounts and
incentives to the customers.
▸ Divestiture :Divestiture is a type of retrenchment strategy where you re-
examine the asset of your business and company. If the assets aren’t
serving anymore, then you sell them off. It helps businesses to reduce
their expenses.
▸ Liquidation: When liquidation is the grand strategy, the firm typically is
sold in parts, only occasionally as a whole—but for its tangible asset
value and not as a going concern. Planned liquidation can be worthwhile
 4. Diversification strategies

▸ Diversification is a strategy used to expand market share or enter new

markets by launching or acquiring new products (perhaps through
licensing, merger, or acquisition)

▸ The main purpose of these strategies are to allow the company to enter
lines of business that are different from current operations.
 Types of diversification strategies

Related/Concentric Unrelated/Conglomerate

Diversification
A. Related Diversification

 A process that takes place when a business expands its activities into product lines that are similar
to those it currently others.

 With this grand strategy, the selected new businesses possess a high degree of compatibility with the
firm’s current businesses

 The ideal concentric diversification occurs when the combined company profits increase the
strengths and opportunities and decrease the weaknesses and exposure to risk

 E.g. a manufacturer of computers might begin making calculators as a form of related diversification
of its existing business.
▹ Diversifying into a different industry but one that’s
related in some ways to the organization’s current
operations
▹ Search for strategic “synergy”, which is the
performance of the sum of the parts is better than the
whole
▹ The idea that 2 + 2 = 5
▹ Synergy happens because of the interactions and the
interrelatedness of the combined operations and the
sharing of resources, capabilities, & distinctive
competencies
▸ Builds shareholder value by capturing cross-business
“strategic fits”
▹ Transferring skills & capabilities from one business to another
▹ Sharing facilities or resources to reduce costs
▹ Leveraging the use of common brand name
▹ Combining resources to create new competitive strengths and
capabilities
B. Unrelated Diversification

▸ A term which refers to the manufacturer of diverse products which have no relation to
each other.
▸ Occasionally a firm, particularly a very large one, plans acquire a business because it
represents the most promising investment opportunity available. This grand strategy
is commonly known as conglomerate diversification.
▸ The principal concern of the acquiring firm is the profit pattern of the venture
▸ Unlike concentric diversification, conglomerate diversification gives little concern to
creating product-market synergy with existing businesses
▸ E.g. a toy manufacturer that is also manufacturing industrial wiring for the
construction industry.
▸ Diversifying into completely different industry from the
firm’s current operations
▸ Firm move into industries where there is
▹ No strategic fit to be exploited
▹ No meaningful value chain relationships
▹ No unifying strategic theme
▸ E.g.: GE; Walt Disney; Sara Lee
▸ Approach is venture into any business with good
profitability prospects
Why Do Firms Diversify?

▸ To Grow
▸ To more fully utilize existing resources and capabilities
▸ Synergy
▸ Risk reduction and/or spreading
▸ To make use of surplus cash flows
▸ To build shareholder value
62

PORTER'S GENERIC
STRATEGIES
 PORTER'S GENERIC STRATEGIES
▸ Michael E. Porter, a well renowned strategist proposed this strategic
typology in 1980. According to Porter, these strategies are called as
generic because they can be pursued by any type or size of business
firm and even by non-profit organizations
▸ Michael Porter advocated generic strategies based on cost,
differentiation and focus.
▸ Generic strategies provide strategic options.
▸ They are based on strategic advantage and market target.
▸ Strategic advantage can be linked to lower costs and product
differentiation.
▸ Market target can be broad or narrow.
▸ A long-term or grand strategy must be based on a core idea
about how the firm can best compete in the marketplace.
The popular term for this core idea is generic strategy.
▸ 3 Generic Strategies:
1. Striving for overall low-cost leadership in the industry.
2. Striving to create and market unique products for varied
customer groups through differentiation.
3. Striving to have special appeal to one or more groups of
consumers or industrial buyers, focusing on their cost or
differentiation concerns.
▸ Companies pursuing an overall cost leadership
strategy
▹ McDonalds
▹ Wal-Mart
▸ Companies pursuing a differentiation strategy
▹ Harley Davison
▹ Apple
▸ Companies pursuing a focus strategy
▹ Rolex
▹ Lamborghini
Best-cost
provider
strategy
1.Cost Leadership Strategy

▸ An organization can reduce cost by applying following

strategies:
a. Economies of Scale
b. Capacity Utilization
c. Experience
d. Resource Sharing
e. Direct Marketing
f. Low cost Materials
Conditions for success of Cost leadership Strategy

▸ High Price Competition

▸ Standardized Products
▸ Price Sensitive Customers
▸ Similar Products
▸ Low switching cost
▸ High Bargaining Power of Buyer.
▸ Pitfalls to avoid while pursuing cost-
leadership
▹ Aggressive price cutting and ending with lower
profitability
▹ Relatively easy to imitate by competitors
▹ Too fixated on cost reduction ignoring quality/buyer
preferences
2.Differentiation Strategy

▸ An integrated set of actions designed by a firm

to produce or deliver goods or services that
customers perceive as adding value.
▸ Bases for differentiation
▹ Unique product performance
▹ Unique product features
▹ Unique services
Condition for success of differentiation strategy

• Many way of differentiation

• Diversification in product use.
• Few rivals
• Dynamic technological environment
• Quality sensitive buyer .
• Extensive research
3. FOCUS STRATEGY

▸ An integrated set of actions designed by a firm to

produce or deliver goods or services that serve the
needs of a particular market segment that are
either low cost or differentiation
▸ Where;
• isolating a particular buyer group
• isolating a unique segment of a product line
• concentrating on a particular geographic
market
• finding their “niche”
▸ There are two types of focus strategy
▸ 1. Focus Low-Cost: Focus low-cost is a strategy pursue by
business organization to achieve competitive advantages through
cost in a focuses market segment.
▸ 2.Focus Differentiation: Focus differentiation is a strategy
pursue by business organization to achieve competitive
advantages through differentiation in goods and services in a
focuses market segment.
When a Market Niche Strategy Is Viable

A focused strategy aimed at securing a competitive edge based either on low cost
or differentiation becomes increasingly attractive as more of the following
conditions are met:
▸ The target market niche is big enough to be profitable and offers good
growth potential.
▸ Industry leaders have chosen not to compete in the niche—focusers can
avoid battling head-to-head against the industry’s biggest and strongest
competitors.
▸ It is costly or difficult for multi-segment competitors to meet the specialized
needs of niche buyers and at the same time satisfy the expectations of
mainstream customers.
▸ The industry has many different niches and segments, thereby allowing a
focuser to pick a niche suited to its resource strengths and capabilities.
▸ Few, if any, rivals are attempting to specialize in the same target segment.
Best cost provider strategy
▸ Best-cost provider strategies are a hybrid of low-cost provider
and differentiation strategies that aim at satisfying buyer
expectations on key quality/features/performance/service
attributes and beating customer expectations on price. 
▸ Giving customers more value for the money by satisfying
buyers’ expectations on key product attributes (e.g., quality,
features, performance, or service) while beating their price
expectations.
▸ Alternatively, it may provide a product with better attributes as
a comparable price to competitors. This option is a hybrid
strategy that blends elements of low-cost provider and
differentiation strategies.