STRATEGIC MANAGEMENT – 12BA32 – CONCEPTUAL NOTES

12BA32- STRATEGIC MANAGEMENT

Unit-1: Strategy and Process

Conceptual framework for strategic management, the concept of strategy and the
strategy formation process- Stakeholders in business- Vision Mission and purpose-
Business definition, objectives and goals- corporate Governance and social
responsibility- case study
Unit-II: Competitive Advantage
External Environment- porter’s five forces Model- strategic Groups competitive changes
during Industry Evolution- Globalization and Industry Structure- National context and
competitive advantage Resources- capabilities and competencies- core competencies-
Low cost and differentiation, Generic Building Blocks of competitive Advantage-
Distinctive Competencies-Resources and capabilities- durability of competitive
Advantage- Avoiding failures and sustaining competitive advantage- case study
Unit-III Strategies
The generic strategic alternatives- stability, Expansion, Retrenchment and combination
strategies- Business level strategy- Strategy in the Global Environment- Corporate
strategy-Vertical Integration- Diversification and strategic Alliances- Building and
Restructuring the corporation- Strategic analysis and choice- Environmental Threat and
opportunity profile (ETOP)- Organizational Capability profile- Strategic Advantage
profile- corporate portfolio Analysis- SWOT Analysis- Gap Analysis- Mc Kinsey’s 7s
Framework- GE 9 cell Model-Distinctive Competitiveness- Selection of matrix- Balance
Score Card- case study
UNIT-IV Strategy Implementation & Evaluation
The Implementation process, Resource allocation, Designing organizational Structure-
Designing Strategic control systems- Matching structure and control to strategy –
Implementing strategic change- politics- power and conflict- Techniques of strategic
evaluation& control- case study
UNIT-V Other Strategic Issues
Managing Technology and Innovation- Strategic issues for Non profit
organizations New Business Models and strategies for Internet Economy
Text Books
1. Thomas L. Wheelen, J.David Hunger and Krish Rangarajan, Strategic
Management and Business policy, Pearson Education, 2006
2. Charless W.L. Hill & Gareth R.Jones, Strategic Management Theory, An
Integrated Approach, Biztantra, Wiley India, 2007
3. Azhar Kazmi, Strategic Management & Business Policy, Tata McGraw Hill

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Unit-I

Strategy and process

Concept of strategy:
The term strategy is derived from a Greek word strategos which means generalship. A
plan or course of action or a set of decision rules making a pattern or creating a
common thread.

Definition for strategic management:

Strategic Management is defined as the dynamic process of formulation,
implementation, evaluation and control of strategies to realize the organizations
strategic intent.

Conceptual framework for the development of strategic management:

 Strategic Advantage
 Organizational capability
 Competencies
 Synergistic Effects
 Strengths and weaknesses
 Organizational Resources
 organizational behavior

Meaning for Goal:

Goal denotes what an organization hopes to accomplish in a future period of time
.
Meaning for Objectives:
Objectives are the ends that state specifically how the goals shall be achieved. They are
concrete and specific in contrast to goals that are generalized.

Role of Objectives:
 Objectives define the organizations relationship with its environment.
 Objectives help an organization pursue its vision and mission.
 Objectives provide the basis for strategic decision making.
 Objectives provide the standards for performance Appraisal.

Characteristics of Objectives:
 Objectives should be understandable.
 Objectives should be concrete and specific.
 Objectives should be related to a time frame.
 Objectives should be measurable and controllable.
 Objectives should be challenging.

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Meaning of vision:

A vision statement is sometimes called a picture of your company in the future. Vision
statement is your inspiration; it is the dream of what you want your company to
accomplish.

Meaning for mission:

A mission statement is a brief description of a company’s fundamental purpose. The
mission statement articulates the company’s purpose both for those in the
organizations and for the public.

Corporate Governance:
Corporate Governance involves a set of relationships amongst the company’s
management its board of directors, shareholders and other stakeholders. These
relationships which various rules and incentives provide the structure through which
the objectives of the company are set and the means of attaining the objectives and
monitoring performance are determined.

Definition for Business:

A company should define its business in terms of three dimensions:
1. Who is being satisfied (what customer groups)
2. What is being satisfied (what customer needs)
3. How customer needs are being satisfied (by what skills, knowledge or distinctive
competencies)

Stake holders in Business:

Stake holders are the individuals and groups who can affect by the strategic outcomes
achieved and who have enforceable claims on a firm’s performance. Stake holders can
support the effective strategic management of an organization.

Stake holder’s relationship management

Stake holders can be divided into:
1. Internal Stakeholders
Shareholders
Employees
Managers
Directors
2. External Stakeholders
 Customers
 Suppliers
 Government
 Banks/creditors
 Trade unions
 Mass Media

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Stake holder’s Analysis:

 Identify the stake holders.
 Identify the stake holders expectations interests and concerns
 Identify the claims stakeholders are likely to make on the
organization
 Identify the stakeholders who are most important from the
organizations perspective.
 Identify the strategic challenges involved in managing the
stakeholder relationship.
Key aspects of Good Corporate Governance
 Transparency of corporate structures and operations
 Corporate responsibility towards employees, creditors, suppliers
and local communities where the corporation operates.
Corporate Governance Mechanisms:
 Ownership concentration
 Board of Directors
 Top management compensation
 Threat of takeover

Relating corporate Governance to strategic management:

 Corporate Governance and strategic intent
 Corporate Governance and strategy formulation
 Corporate Governance and strategy implementation
 Corporate governance and strategy Evaluation

Social Responsibility of Business:

Meaning:
Social Responsibility of business refers to all such duties and obligations of
business directed towards the welfare of society. The obligation of any business
to protect and serve public interest is known as social responsibility of business.
Why should business be socially responsible?
 Public image
 Government Regulation
 Survival and growth
 Employee satisfaction
 Consumer Awareness
Social Responsibility towards different Interest groups: 1. Responsibility towards
owners:
Owners are the persons who own the business. They contribute capital and bear
the business.
 Run the business efficiently
 Proper utilization of capital and other resources.
 Regular and fair return on capital invested.

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Responsibility towards Investors:

Investors are those who provide finance by way of investment in shares,
bonds, etc. Banks, financial institutions and investing public are all included in
this category.
Ensuring safety of their investment
Regular payment of interest.

Responsibility towards employees:

Business needs employees or workers to work for it. If
the employees are satisfied and efficient, then the business can be successful.
 Timely and regular payment of wages and salaries.
 Opportunity for better career prospects.
 Proper working conditions
 Timely training and development
 Better living conditions like housing, transport, canteen and crèches.
Responsibility towards customers:
No business can survive without the support of
customers.
 Products and services must be able to take care of the needs of the
customers.
 There must be regularity in supply of goods and services.
 Price of the goods and services should be reasonable and affordable
 There must be proper after sales-service
 Grievances of the consumers if any must be settled quickly.
Responsibility towards competitors:
Competitors are the other businessmen or
organization involved in a similar type of business.
 Not to offer to customers heavy/discounts and or free products in
every sale.
 Not to defame competitors through false advertisements.
Responsibility towards suppliers:
Suppliers are businessmen who supply raw materials
and other items required by manufacturers and traders.
 Giving regular orders for purchase of goods
 Availing reasonable credit period
 Timely payment of dues.
Responsibility towards Government:
Business activities are governed by the rules and
regulations framed by the government. Payment of fees, duties and taxes
regularly as well as honestly Conforming to pollution control norms set up by
government Not to indulge in restrictive trade practices.

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Responsibility towards society:

A society consists of individuals, groups, organizations, families etc. They all are the
members of the society.
 To help the weaker and backward sections of the society.
 To generate employment.
 To protect the environment.
 To provide assistance in the field of research on education, medical
science, technology etc.

Steps
 in strategy formation process:
Strategy formulation:

Existing business model

Mission,Vision, Values and goals

External Analysis, opportunities and threats

Internal Analysis, Strengths and weaknesses

SWOT Strategic choice

Functional level strategies

Business level strategies

Global strategies

Corporate level strategies
Strategy Implementation
 Governance and ethics
 Designing Organization structure
 Designing organization culture
 Designing organization controls
 Feedback

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Unit-2

Competitive Advantage

External Environment

Concept of Environment:
Environment literally means the surroundings, external objects, influences or
circumstances under which someone or something exists. The environment of any
organization is the aggregate of all conditions events and influences that surround and
affect it.
Characteristics of Environment:

o Environment is complex
o Environment is Dynamic
o Environment is Multi-faceted
o Environment has a far- reaching impact

Macro Environmental Factors:

 Demographic Environment
 Technological Environment
 Socio-cultural Environment
 Economic Environment
 Political Environment
 Regulatory Environment
 International Environment
 Supplier Environment
 Task Environment
Environmental Scanning:
Environmental scanning plays a key role in strategy formulation by analyzing
the strengths and weaknesses and opportunities and threats in the environment.
Environmental scanning is defined as „monitoring, evaluating, and disseminating of
information from external and internal environments to managers in organizations so
that long term health of the organization will be ensured and strategic shocks can be
avoided.
Porter’s five forces model:
 Risk of entry by potential competitors
 Bargaining power of suppliers
 Bargaining power of buyers
 Intensity of Rivalry among established firms
 Threat of substitutes

His model focuses on five forces that shape competition within an Industry.
Porter argues that the stronger each of these forces is the more limited is the ability of
established companies to raise prices and earn greater profits. Within porter’s
framework, a strong competitive force can be regarded as a threat because it depresses

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profits. A weak competitive force can be viewed as an opportunity because it allows a

company to earn greater profits. The task facing managers is to recognize how changes
in the five forces give rise to new opportunities and threats and to formulate
appropriate strategic responses.

Strategic groups within Industries

Meaning:
Companies in an industry often differ significantly from each other with respect to
the way they strategically position their products in the market in terms of such factors
as the distribution channels they use, the market segments they serve, the quality of
their products, technological leadership, customer service, pricing policy, advertising
policy, and promotions. As a result of these differences, within most industries it is
possible to observe groups of companies in which each company follows a business
model that is similar to that pursued by other companies in the group. These different
groups of companies are known as strategic groups.
Proprietary group:
The companies in this proprietary strategic group are pursuing a high risk high
return strategy. It is a high risk strategy because basic drug research is difficult and
expensive. The risks are high because the failure rate in new drug development is very
high.
Generic group:
Low R&D spending, Production efficiency, as an emphasis on low prices
characterizes the business models of companies in this strategic group. They are
pursuing a low risk, low return strategy. It is low risk because they are investing
millions of dollars in R&D. It is low return because they cannot charge high prices.

Competitive changes during Industry Evolution

Industry:
An industry can be defined as a group pf companies offering products services
that are close substitutes for each other that is product or services that satisfy the
same basic customer needs. A company’s closest competitors its rivals are those that
serve the same basic customer needs.
Industry and sector:
An important distinction that needs to be made is between an industry and a
sector. A sector is a group of closely related industries.
Industry and market segments:
Market segments are distinct groups of customers within a market that can be
differentiated from each other on the basis of their distinct attributes and specific
demands.

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Industry life cycle Analysis

The task facing managers is to anticipate how the strength of competitive

forces will change as the industry environment evolves and to formulate strategies
that take advantage of opportunities arise and that counter emerging threats.

Stages in Industry life cycle Analysis:

 Embryonic Stage
 Growth Stage
 Industry shakeout
 Maturity stage
 Declining stage
Globalization and Industry Structure

In conventional economic system, national markets are separate entities

separated by trade barriers and barriers of distance, time and culture. With
globalization, markets are moving towards a huge global market place. The tastes
and preferences of customers of different countries are converging on common
global norm. Products like coco-cola, Pepsi, Sony walkman and McDonald
hamburgers are globally accepted.
The intense rivalry forces all firms to maximize their efficiency, quality,
innovative power and customer satisfaction. With hyper competition, the rate of
innovation has increased significantly. Companies try to outperform their competitors
by pioneering new products, processes and new ways of doing business. Previously
protected national markets face the threat of new entrants and intense rivalry. After
regulation of Indian economy the industrial sector has witnesses’ enormous changes.
The banking sector reforms also contributed to changes in the economic conditions of
India. Merger, acquisition and joint venture with MNCs take place in large number.
Ultimately intense competition is felt in the industrial scene. A vibrant stock market
has emerged.

National Context and Competitive advantage:

In spite of globalization of markets and production successful companies in certain
industries are found in specific countries
 Japan has most successful consumer electronics companies in the world
 Germany has many successful chemical and engineering companies in the world
 United states has many of the world’s successful companies in computer and
biotechnology
 It shows that national context has an important bearing on the competitive position
of the companies in the global market
 Economists consider the cost and quality of factors of production as the major
reason for the competitive advantage of some countries with respect to certain
industries.
 Factors of production include basic factors such as labor, capital, raw material, land
and advanced factors such as technological know-how, managerial talent and

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physical infrastructure
 The competitive advantages U.S enjoys in bio-technology due to technological
know-how, low venture capital to fund risky start-ups in industries.
 According to Michael porter the nation’s competitive position in an industry
depends on factor conditions, Industry rivalry, demand conditions, and related and
supporting industries.
The determinants of national competitive advantage:
 Intensity of Rivalry
 Factor conditions
 Local Demand conditions
 Competitiveness of related and supporting industries

Strategic Types:
Miles and snow have classified the strategic types into:
 Defenders:
The defender strategic type companies have a limited product line and
they focus on efficiency of existing operations.
 Prospectors:
These firms with broad product items focus on product innovation
and market opportunities. They are pre-occupied with creativity at the expense of
efficiency.
Analyzers:
Analyzers are firms which operate in both stable and variable markets. In
stable markets the companies emphasize efficiency and in variable markets they
emphasize innovation, creativity and differentiation.
 Reactors:
The firms, which do not have a consistent strategy to pursue, are called reactors. There
is an absence of well-integrated strategy structure culture relationship. Their strategic
moves are not integrated but piecemeal approach to environmental change makes them
ineffective.

Internal Analysis: Distinctive Competencies, Competitive advantage, and

Profitability
Internal Analysis is a three step process:
Manager must understand process by which companies create value for
customers and profit for themselves and they need to understand the role of resources,
capabilities and distinctive competencies in this process.
They need to understand how important superior efficiency, innovation, quality
and responsiveness to customers are in creating value and generating high profitability.
They must be able to identify how the strengths of the enterprise boost its profitability
and how any weaknesses lead to lower profitability.

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Competencies, Resources and Competitive advantage

Meaning of Competitive advantage:

A company has a competitive advantage over its rivals when its profitability is
greater than the average profitability of all companies in its industry. It has a
sustained competitive advantage when it is able to maintain above average
profitability over a number of years.
Distinctive Competencies:
Distinctive competencies are firm specific strengths that allow a company to
differentiate its product and achieve substantially lower costs than its rivals and
thus gain a competitive advantage.
Resources:
Resources are financial, physical, social or human, technological and
organizational factors that allow a company to create value for its customers.
Capabilities:
Capabilities refer to a company’s skills at co-coordinating its resources and
putting them to productive use.

A critical distinction between Resources and capabilities:

The distinction between resources and capabilities is critical to understanding

what generates a distinctive competency. A company may have valuable resources,
but unless it has the capability to use those resources effectively, it may not be able to
create a distinctive competency.
For Example:
The steel mini-mill operator Nucor is widely acknowledged to be the most cost
efficient steel maker in the United States. Its distinctive competency in low cost steel
making does not come from any firm specific and valuable resources. Nucor has the
same resources as many other mini-mill operators. What distinguishes Nucor is its
unique capability to manage its resources in a highly productive way. Specifically
Nucor’s structure, control systems and culture promote efficiency at all levels within
the company.
Strategy, Resources, Capabilities and competencies

The relationship of a company’s strategies distinctive competencies and

competitive advantage.
Distinctive competencies shape the strategies that the company pursues which
lead to competitive advantage and superior profitability. However, it is also very
important to realize that the strategies a company adopts can build new resources and
capabilities or strengthen the existing resources and capabilities thereby enhancing the
distinctive competencies of the enterprise. Thus the relationship between distinctive
competencies and strategies is not a linear one, rather it is a reciprocal one in which
distinctive competencies shape strategies and strategies help to build and create
distinctive competencies.

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Competitive advantage of a company becomes depends on three factors:

 The value customers place on the company’s products
 The price that a company charges for its products
 The costs of creating those products.
 The value customers place on a product reflects the utility they get from a product,
the happiness or satisfaction gained from consuming or owning the product utility
must be distinguished from price.
 Utility is something that customers get from a product. It is a function of the
attributes of the product such as its performance, design, quality, and point of sale
and after-sale service.

Differentiation and cost structure

Toyota has differentiated itself from General motors by its superior quality,
which allows it to charge higher prices, and its superior productivity translates into a
lower cost structure. Thus its competitive advantage over GM is the result of strategies
that have led to distinctive competencies resulting in greater differentiation and a
lower cost structure.
Consider the automobile Industry, In 2003 Toyota made 2402 dollar in profit on
every vehicle it manufactured in North America. GM in contrast, made only 178 dollar
profit per vehicle. What accounts for the difference? First has the best reputation for
quality in the industry. The higher quality translates into a higher utility and allows
Toyota to charge 5 to 10 percent higher prices than GM. Second Toyota has a lower
cost per vehicle than GM in part because of its superior labor productivity.

Generic Building Blocks of Competitive advantage:

 Superior Quality
 Superior Efficiency
 Superior Customer responsiveness
 Superior Innovation
 Competitive advantage
 Low cost
 Differentiation
1. Superior Efficiency:
A business is simply a device for transforming inputs into outputs.
Inputs are basic factors of production such as labor, land, capital, management,
and technological know-how. Outputs are the goods and services that the
business produces. The simplest measure of efficiency is the quantity of inputs
that it takes to produce a given output. That is efficiency outputs/Inputs.
Two important components of efficiency:
 Employee productivity
 Capital productivity.

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2. Superior quality:
A product can be thought of as a bundle of attributes. The attributes of
many physical products include their form, features, performance,
durability, reliability, style and design.
3. Superior Innovation:
Innovation refers to the act of creating new products or processes.
Product innovation is the development of products that are new to the world
or have superior attributes to existing products. Process innovation is the
development of a new process for producing products and delivering them to
customers.

Superior customer Responsiveness:

To achieve superior responsiveness to customers a company must be able
to do a better job than competitors of identifying and satisfying its customer
needs. Customers will then attribute more utility to its products and creating a
differentiation based on competitive advantage.
Core competencies:
Core competence is a fundamental enduring strength which is a key to
competitive advantage. Core competence may be a competency in technology,
process, engineering capability or expertise which is difficult for competitors to
imitate. One core competence gives rise to several products. Honda’s core
competence in designing and manufacturing engines had led to several products
and business such as cars, motorcycles, lawnmowers, generators etc.

The durability of competitive advantage

 Barriers to Imitation
 Capability of competitors
 General dynamism of the Industry environment

Avoiding failures and sustaining competitive advantage

When a company loses its competitive advantage, its profitability falls. The
company does not necessarily fail; it may just have average or below average
profitability and can remain in this mode for considerable time although its resource
and capital base is shrinking. A failing company is one whose profitability is new
substantially lower than the average profitability of its competitors, it has lost the
ability to attract and generate resources so that its profit margins and invested capital
are shrinking rapidly.

Reasons for failure:

 Inertia
 Prior strategic commitments
 The Icarus Paradox

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Steps to Avoid failure:

 Focus on the building blocks of competitive advantage
 Institute continuous improvement and learning
 Track Best Industrial Practice and Benchmarking
 Overcome Inertia

Evaluation of key resources :( VRIO)

Barney has evolved VRIO framework of analysis to evaluate the firm’s key
resources.
The following questions are asked to assess the nature of resources.
 Value- Does it provides competitive advantage?
 Rareness- Do other competitors possess it?
 Imitability- Is it costly for others to imitate?
 Organization- Does the firm exploit the resources

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Unit-3
Strategies
Generic Strategic Alternatives

Meaning of Corporate Strategy:

Corporate strategy helps to exercise the choice of direction that an organization
adopts. There could be a small business firm involved in a single business or a large,
complex and diversified conglomerate with several different businesses. The corporate
strategy in both these cases would be about the basic direction of the firm as a whole.
According to Gluek, there are four strategic alternatives:
 Expansion strategies
 Stability strategies
 Retrenchment Strategies
 Combination strategies
1. Expansion strategies:
The corporate strategy of expansion is followed when an
organization aims at high growth by substantially broadening the scope of one or
more of its businesses in terms of their respective customer groups, customer
functions and alternative technologies singly or jointly in order to improve its
overall performance.
2. Stability strategies:
The corporate strategy of stability is adopted by an organization
when it attempts an incremental improvement of its performance by marginally
changing one or more of its businesses in terms of their respective customer
groups, customer functions and alternative technologies respectively.
3. Retrenchment strategies:
The corporate strategy of retrenchment is followed when an
organization aims at contraction of its activities through a substantial reduction or
elimination of the scope of one or more of its businesses in terms of their respective
customer groups, customer functions or alternative technologies either singly or
jointly in order to improve its overall performance.
4. Combination strategies:
The combination strategy is followed when an organization adopts a mixture of
stability, expansion and retrenchment strategies either at the same time in its
different businesses or at different times in one of its businesses with the aim of
improving its performance
5. Growth strategy:
Growth strategy is a corporate level strategy, designed to achieve
increase in sales, assets and profits.
Growth strategies may be classified as follows:
 Vertical growth
 Horizontal growth
Vertical growth occurs when one function previously carried over by a supplier or a

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distributor is being taken over by the company in order to reduce costs, to maintain
quality of input and to gain control over scarce resources. Vertical growth results in
vertical integration.

1. Horizontal integration:
A firm is said to follow horizontal integration if it acquires
another firm that produces the same type of products the same type products with
similar production process/marketing practices.
2. Vertical integration:
Vertical integration means the degree to which a firm operates
vertically in multiple locations on an industry’s value chain from extracting raw
materials to manufacturing and retailing. Vertical integration occurs when a
company produces its own inputs or disposes of its own outputs.
3. Backward Integration:
Backward integration refers to performing a function previously provided by a
supplier.
4. Forward integration:
Forward integration means performing a function previously provided by a retailer.
Diversification:
Diversification is considered to be a complex one because it involves
a simultaneous departure from current business, familiar products and familiar
markets. Firms choose diversification when the growth objectives are very high and
it could not be achieved within the existing product/market scope.

Types of diversification:
 Related diversification:
In related diversification the firm enters into a new business
activity, which is linked in a company’s existing business activity by
commonality between one or more components of each activity’s value chain.
 Unrelated diversification:
In unrelated diversification, the firm enters into new business
area that has no obvious connection with any of the existing business. It is suitable,
if the company’s core functional skills are highly specialized and have few
applications outside the company’s core business.
 Concentric diversification:
Concentric diversification is similar to related diversification as there are benefits of
synergy when the new business is related to existing business through process,
technology and marketing.

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Strategic Alliance
Meaning:
A strategic alliance is a formal relationship between two or more parties to
pursue a set of agreed upon goals or to meet a critical business need while
remaining independent organizations.
Types of Strategic Alliances:
 Joint Venture
 Equity Strategic Alliance
 Non-equity Strategic Alliance
 Global Strategic Alliance
Stages of Alliance operation:
 Strategy Development
 Partner Assessment
 Contract Negotiation
 Alliance Operation
 Alliance Termination
Advantages of Strategic alliance:
 Allowing each partner to concentrate on activities that best match their capabilities
 Learning from partners developing competences that may be more widely
exploited elsewhere.
 Adequacy a suitability of the resources competencies of an organization for it to
survive
Disadvantages of strategic Alliance:
 Alliances are costly
 Alliances can create indirect costs by blocking the possibility of cooperating with
competing companies, thus possibly even denying the company various financing
options.
Joint ventures also expose the company to its partners and the unique technologies
that it has are sometimes revealed to its partner company.

McKinsey’s 7S Model

This was created by the consulting company McKinsey and company in the
early 1980s. Since then it has been widely used by practitioners and academics alike
in analyzing hundreds of organizations. The Paper explains each of the seven
components of the model and the links between them. It also includes practical
guidance and advice for the students to analyze organizations using this model. At
the end, some sources for further information on the model and case studies
available.
The McKinsey 7S model was named after a consulting company, McKinsey and
company, which has conducted applied research in business and industry. All of the
authors worked as consultants at McKinsey and company, in the 1980s, they used the
model to analyze over 70 large organizations. The McKinsey 7S Framework was

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created as a recognizable and easily remembered model in business. The seven

variables, which the authors terms “levers”, all begin with the letter “S”.
Description of 7Ss:
Strategy: Strategy is the plan of action an organization prepares in response to, or
anticipation of changes in its external environment.
Structure: Business needs to be organized in a specific form of shape that is generally
referred to as organizational structure. Organizations are structured in a variety of
ways, dependent on their objectives and culture.
Systems: Every organization has some systems or internal processes to support and
implement the strategy and run day-to-day affairs. For example, a company may
follow a particular process for recruitment.
Style/culture: All organizations have their own distinct culture and management
style. It includes the dominant values, beliefs and norms which develop over
time and become relatively enduring features of the organizational life.
Staff: Organizations are made up of humans and it’s the people who make the real
difference to the success of the organization in the increasingly knowledge-based
society. The importance of human resources has thus got the central position in the
strategy of the organization, away from the traditional model of capital and land.
Shared Values/super ordinate Goals: All members of the organization share some
common fundamental ideas or guiding concepts around which the business is
built. This may be to make money or to achieve excellence in a particular field.
The seven components described above are normally categorized as soft and hard
components:
 Hard components
 Soft components
Hard components are:
 Strategy
 Structure
 Systems
Soft components are:
 Shared values
 Style
 Staff
 Skills
Distinctive Competitiveness
Meaning:
Distinctive Competence is a set of unique capabilities that certain firms
possess allowing them to make inroads into desired markets and to gain
advantage over the competition; generally, it is an activity that a firm performs
better than its competition. To define a firm’s distinctive competence,
management must complete an assessment of both internal and external
corporate environments. When management finds an internal strength and both
meets market needs and gives the firm a comparative advantage in the market
place, that strength is the firm’s distinctive competence.

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Defining and Building Distinctive Competence:

To define a company’s distinctive competence, managers often follow a
particular process.
1.
2. They identify
analyze the
Theythey
that strengths
specific andneeds
market weaknesses in the
and look forgiven marketplace.
comparative advantages
have over the competition.
Balanced Scorecard:
The balanced scorecard is a strategic performance management
tool- a semi- standard structured report supported by proven design
methods and automation tools that can be used by managers to keep track of
the execution of activities by staff within their control and monitor the
consequences arising from these actions.
History:
The first balanced scorecard was created by Art Schneider man (an
independent consultant on the management of processes) in 1987 at Analog
Devices, a mid-sized semi-conductor company. Art Schniederman participated
in an unrelated research study in 1990 led by Dr.Robert S.Kaplan in conjunction
with US management consultancy Nolan-Norton, and during this study
described his work on balanced Scorecard. Subsequently, Kaplan and David
P.Norton included anonymous details of this use of balanced Scorecard in their
1992 article on Balanced Scorecard. Kaplan & Norton’s article wasn’t the only
paper on the topic published in early 1992. But the 1992 Kaplan & Norton paper
was a popular success, and was quickly followed by a second in 1993. In 1996,
they published the book The Balanced Scorecard. These articles and the first
book spread knowledge of the concept of Balanced Scorecard widely, but
perhaps wrongly have led to Kaplan & Norton being seen as the creators of the
Balanced Scorecard concept.
Four Perspectives:
1. Financial: Encourages the identification of a few relevant high-level
financial measures.
2. Customer: Encourages the identification of measures that answer the
question “How do customers see us?”
3. Internal Business Process: encourages the identification of measures that
answer the question “What must we excel at?”
4. Learning and Growth: encourages the identification of measures that
answer the question “Can we continue to improve and create value?”

Business level strategy

This chapter examines how a company selects and pursues a business model
that will allow it to complete effectively in an industry and grows its profits and
profitability. A successful business model results from business level strategies that
create a competitive advantage over rivals and achieve superior performance in an
industry. In this chapter we examine that competitive decisions involved in creating a
business model that will attract and retain customers and continue to do so over time
so that a company enjoys growing profits and profitability.

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To create a successful business model, strategic managers must:

1. Formulate business- level strategies that will allow a company to attract
customers away from other companies in the industry.
2. Implement those business level strategies which also involve the use of
functional level strategies to increase responsiveness to customers, efficiency,
innovation and quality.
Competitive positioning and the Business model:
1. To create a successful business model, managers must choose a set of
business-level strategies that work together to give a company competitive
advantage over its rivals
2. To craft a successful model a company must first define its business,
which entails decisions about
a. Customer needs or what is to be satisfied
b. Customer groups or what is to be satisfied
c. Distinctive competencies or how customer needs are to be satisfied.
The decision managers make about these three issues determine which set of
strategies they formulate and implement to put a company’s business model into
action and create value for customers.

Formulating the Business model: Customer needs and product Differentiation

1. Customer needs: are desires, wants that can be satisfies by means of the
attributes or characteristics of a product a good or service.
For Example: A person’s craving for something sweet can be satisfied by
chocolates, ice-cream, spoonful of sugar.
Factors determine which products a customer chooses to satisfy these needs:
 The way a product is differentiated from other products of its type
so that it appeals to customers
 The price of the product
 All companies must differentiate their products to a certain degree
to attract customer
 Some companies however decide to offer customers a low prices
products and do not engage in much product differentiation
Companies that seek to create something unique about their product
differentiation, their products to a much greater degree that others so that they
satisfy customers needs in ways other products cannot.
2. Product differentiation:
It is the process of designing products to satisfy customer’s needs. A company
obtains a competitive advantage when it creates makes and sells a product in a way
that better satisfies customer needs than its rivals do. If managers devise strategies to
differentiate a product by innovation, excellent quality, or responsiveness to customers
they are creating a business model based on offering customers differentiated products.
3. Customer groups:
The second main choice involved in formulating a successful business

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model is to decide which kind of products to offer to which customer groups.

Customer groups are the sets of people who share a similar need for a particular
product. Because a particular product usually satisfies several different kinds of
desires and needs, many different customer groups normally exist in a market.
In the car market, for example some customers want basic transportation and
others want the thrill of driving a sports car. Some want for luxury purpose.
4. Identifying customer groups and market segments:
In the athletic shoe market the two main customer groups are those
people who use them for sporting purposes those who like to wear them because
they are casual and comfort. Within each customer group there are often
subgroups composed of people who have an even more specific need for a
product. Inside the group of people who buy athletic shoes for sporting
purposes, for example are subgroups of people who buy shoes suited to a
specific kind of activity, such
as running, aerobics, walking and tennis.
A company searching for a successful business model has to group
customers according to the similarities or differences in their needs to discover
what kinds of products to develop for different kinds of customers. Once a
group of customers who share similar or specific need for a product has been
identified, this group is treated as a market segment.
Three Approaches to Market Segmentation:
 No Market segmentation: First a company might choose not to recognize
that different market segments exist and make a product targeted at the
average or typical customer. In this case customer responsiveness is at a
minimum and the focus is on price, not differentiation.
 High Market segmentation: Second a company can choose to recognize the
differences between customer groups and make a product targeted toward
most or all of the different market segments. In this case customer
responsiveness is high and products are being customized to meet the
specific needs of customers in each group, so the emphasis is on
differentiation not price.
 Focused Market segmentation: Third a company might choose to target just
one or two market segments and decide its resources to developing products
for customers in just these segments. In this case, it may be highly responsive
to the needs of customers in only these segments, or it may offer a bare-bones
product to undercut the prices charged by companies who do focus on
differentiation.

Generic Business- level strategies:

Cost leadership: A company’s business model in pursuing a cost-leadership strategy is

based on doing everything it can to lower its cost structure so it can make and sell
goods or services at a lower cost than its competitors. In essence a company seeks to
achieve competitive advantage and above average profitability by developing a cost

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leadership. Business model that positions it on the value creation frontier as close as
possible to the lower costs/lower prices axis.
Focused Cost leadership: A cost leader is not always a large national company that
targets the average customer. Sometimes a company can target one or a few market
segments and successfully pursue cost leadership by developing the right strategies
to serve those segments.
Differentiation: A differentiation business model is based on pursuing a set of
generic strategies that allows a company to achieve a competitive advantage by
creating a product that customers perceive as different or distinct in some important
way.
Focused Differentiation:
A in the case of the focused cost leader, a company that pursues a business model
based on focused differentiation chooses to specialize in serving the needs of one or
two market segments of niches. One it has chosen its market segment. A focused
company position itself using differentiation
Gap Analysis

Meaning: In gap Analysis, the strategist examines what the organization wants to
achieve (desired performance) and what it has really achieved (actual performance).
The gap between what is desired and what is achieved widens as the time passes no
strategy adopted.

Corporate portfolio Analysis

Meaning:
Corporate portfolio analysis could be defined as a set of techniques that help
strategists in taking strategic decisions with regard to individual products or
business in a firm’s portfolio. It is primarily used for competitive analysis and
strategic planning in multi-product and multi-business firms. They may also be used
in less diversified firms, if these consist of a main business and other minor
complementary interests. The main advantages in adopting a portfolio approach in a
multi-product multi-business firm is that resources could be targeted at the
corporate level to those businesses that possess the greatest potential for creating
competitive advantage.

Environment Threat and Opportunity Profile (ETOP)

Meaning of Environmental Scanning:

Environmental scanning can be defined as the process by which
organizations monitor their relevant environment to identify opportunities and
threats affecting their business for the purpose of taking strategic decisions.
Appraising the Environment:
In order to draw a clear picture of what opportunities and
threats are faced by the organization at a given time. It is necessary to appraise the

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environment. This is done by being aware of the factors that affect environmental
appraisal identifying the environmental factors and structuring the results of this
environmental appraisal.

Structuring Environmental Appraisal:

The identification of environmental issues is helpful in structuring the
environmental appraisal so that the strategists have a good idea of where the
environmental opportunities and threats lie. There are many techniques to structure
the environmental appraisal. One such technique suggested by Gluek is that preparing
an ETOP for an organization.
The preparation of an ETOP involves dividing the environment into different
sectors and then analyzing the impact of each sector on the organization. The
preparation of an ETOP provides a clear picture to the strategists about which sectors
and the different factors in each sector have a favorable impact on the organization. By
the means of an ETOP, the organization knows where it stands with respect to its
environment. Obviously, such an understanding can be of a great help to an
organization in formulating appropriate strategies to take advantage of the
opportunities and counter the threats in its environment.

Meaning of organizational Appraisal:

The purpose of organizational appraisal is to determine the
organizational capability in terms of strengths and weaknesses that lie in
different functional areas. This is necessary since the strengths and
weaknesses have to be matched with the environmental opportunities and
threats for strategy formulation to take place.
Strategic Advantage Profile (SAP):
A SAP can also be prepared directly when students analyses cases
during classroom learning, without making a detailed OCP. An SAP provides
a picture of the more critical areas which can have a relationship with the
strategic picture of the firm in the future.
Organizational Capability Profile (OCP)
Meaning:
The organizational capability profile is drawn in the form of a chart. The
strategists are required to systematically assess the various functional areas and
subjectively assign values to the different functional capability factors and sub factors
along a scale ranging from values of -5 to +5
Summarized form of OCP

Capability Factors Weakness Normal Strength

Financial Capability -5 0 +5
Factors
Sources of funds
Usage of funds
Management of funds

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SWOT Analysis

Meaning:
Every organization is a part of an industry. Almost all organizations face
competition either directly or indirectly. Thus the industry and competition are vital
considerations in making a strategic choice. It is quite obvious that any strategic choice
made by an organization cannot be made unless the industry and competition have
been analyzed. The environmental as well organizational appraisal dealt with the
opportunities, threats, strengths and weaknesses relevant for an organization.
Consolidated SWOT profile for a bicycle company

ETOP Sector Impact SAP Impact factor

Economic Up Arrow Finance Down Arrow
Market Horizontal Arrow Marketing Horizontal Arrow
International Down Arrow Operations Up Arrow
Political Horizontal Arrow Personnel Horizontal Arrow
Regulatory Horizontal Arrow Information Up Arrow
management
Social Up Arrow General Up Arrow
Management

Building and Re-structuring the corporation

There are various methods for the firms to enter into a new business and restructure
the existing one.
Firms use following methods for building:
 Start-up route: In this route, the business is started from the scratch by
building facilities, purchasing equipments, recruiting employees, opening
up distribution outlet and so on.
 Acquisition: Acquisition involves purchasing an established company,
complete with all facilities, equipment and personnel.
 Joint Venture: Joint venture involves starting a new venture with the help of

a partner.
 Merger: Merger involves fusion of two or more companies into one
company.
 Takeover: A company which is in financial distress can undergo the process
of takeover. A takeover can be voluntary when the company requests
another company
to takeover the assets and liabilities and save it from becoming bankrupt.
Re-structuring:
Re-structuring involves strategies for reducing the scope of the firm
by exiting from unprofitable business. Restructuring is a popular strategy during
post liberalization era where diversified organizations divested to concentrate on
core business.

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Re-structuring strategies:
 Retrenchment: Retrenchment strategies are adopted when the firm’s
performance is poor and its competitive position is weak.
 Divestment Strategy: Divestment strategy requires dropping of some of the
businesses or part of the business of the firm, which arises from conscious
corporate judgement in order to reverse a negative trend.
 Spin-off: Selling of a business unit to independent investors is known as spin-
off. It is the best way to recover the initial investment as much as possible. The
highest bidder gets the divested unit.
 Management-buyout: selling off the divested unit to its management is
known as management buyout.
 Harvest strategy: A harvest strategy involves halting investment in a unit in
order to maximize short- to- medium term cash flow from that unit before
liquidating it.
Liquidation: Liquidation is considered to be an unattractive strategy because the
industry is unattractive and the firm is in a weak competitive position. It is
pursued as a last step because the employees lose jobs and it is considered to be
a sign of failure of the top management.

Strategy in Global Environment

Introduction:
In international business operations business enterprises pursue global
expansion to support generic business level strategies such as cost leadership and
differentiation. Companies expand their operations globally in order to increase
their profitability. They perform the following activities towards this end.
 Transferring their distinctive competencies
 Dispersing various value creation activities to favorable locations
 Exploiting experience curve effects.
Global Strategies:
 International Strategy
 Multi-domestic strategy
 Global Strategy
 Transnational Strategy

Entry Mode:
Global companies have five options to enter into a foreign market
 Exporting
 Licensing
 Franchising
 Subsidiary
 Joint venture
 Wholly owned subsidiaries

Global Strategic Alliance:

A strategic alliance is a cooperative agreement between
companies who are competitors from different companies. It may take the form of

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formal joint venture or short-term contractual agreement with equity participation or

issue-based participation.
 To gain access to foreign market
 To reduce financial risk
 To bring complementary skills
 To reduce political risks
 To achieve competitive advantage
 To set technological standards

GE Nine-cell Matrix
This corporate portfolio analysis technique is based on the pioneering efforts of
the General Electric Company of the United States, supported by the consulting firm of
McKinsey& company. The vertical axis represents industry attractiveness, which is a
weighted composite rating based on eight different factors. These factors are: market
size and growth rate, Industry profit margin, competitive intensity, seasonality,
cyclicality, economies of scale, technology and social, environmental, legal and human
impacts. The horizontal axis represents business strength competitive position, which
is again a weighted composite rating based on seven factors. These factors are: relative
market share, profit margins, ability to compete on price and quality, knowledge of
customer and market, competitive strengths and weaknesses, technological capability
and calibre of management.
Strategic Analysis and choice
Meaning of strategic choice:
Choice of a strategy involves an understanding of choice mechanism and issues
involved in it.
Definition:
Gleuek has defined strategic choice as the process of selecting the best
strategy out of all available strategies.
Steps in strategic choice:
Focusing on strategic alternatives
Evaluating strategic alternatives
Considering Decision factors
Choice of strategy

Objective factors are grouped into two categories:

Environmental factors: It includes volatility of environment, input supply from
environment and powerful stakeholders.
Organizational factors: It includes organization’s mission, the strategic intent, its
business definition and its strengths and weaknesses.
Subjective factors:
Various subjective factors may be classified as:
 Organization’s past strategies
 Personal factors
 Attitude to risks

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 Internal political consideration

 Pressure from stakeholders

Process of Strategic choice:

Strategic choice involves evaluation of the pros and cons of
each strategic alternative and selection of the best alternative. Three techniques are
used in the process of selection of a strategy.
 Devil’s Advocate
 Dialectical Enquiry
 Strategic shadow Committee

1. Devil’s Advocate in strategic decision making is responsible for identifying

potential pitfalls and problems in a proposed strategic alternative by making a
formal presentation.
2. Dialectical inquiry involves making two proposals with contrasting assumptions
for each strategic alternative. The merits and demerits of the proposal will be
argued by advocates before the key decision makers. Finally one alternative will
emerge viable for implementation.
A strategic shadow committee consists of members drawn below executive level.
They serve the committee for two years. They inspect all materials and attend all
meetings of executive strategy. The members generate views regarding constraints
faced by management. Their report is submitted to Board of Directors.

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Unit-4
Strategy Implementation and Evaluation
Introduction:
Organizational structure and culture can have a direct bearing on a
company’s profits. This chapter examines how managers can best implement
their strategies through their organization’s structure and culture to achieve a
competitive advantage and superior performance.
Implementing strategy through organizational design:
Strategy implementation involves the use of organizational design, the process of
deciding how a company should create, use and combine organizational structure
control systems and culture to pursue a business model successfully.
Strategy Implementation through Organizational design:
The implementation of strategy involves three steps:
 Organizational structure
 Organizational culture
 control systems
Basics of designing organization structure:
The following basic aspects which require a strategist’s attention while designing
structure
 Differentiation
 Integration
 Bureaucratic cost
 Allocating Authority and Responsibility
Span of control:
Span of control means the number of subordinate’s manager controls effectively.
The term span of control refers to the number of subordinates who report directly to a
manager.
 Grouping Tasks, functions and Divisions
 Tall and Flat organizations
 Centralization
 Decentralization

Integration and Integrating Mechanisms:

Much coordination takes place among people, functions and divisions through
the hierarchy of authority, often however as a structure becomes complex, this is not
enough and top managers need to use various integrating mechanisms to increase
communication and coordination among functions and divisions. Greater the
complexity of an organizations structure the greater is the need for coordination
among people, functions and divisions to make the organizational structure work
efficiently.
Three kinds of integrating mechanisms:
 Direct contact
 Liaison Role
 Teams

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Designing Strategic Control Systems:

Introduction:
Strategic control systems provide managers with required information to find
out whether strategy and structure move in the same direction. It includes target
setting, monitoring, evaluation and feedback system.
Steps in Strategic Control process:
 Establish standards and Targets
 Create Measuring and monitoring systems Compare Actual with targets
 Evaluate and take corrective actions
Levels of control:
 Corporate level managers
 Divisional level managers
 Functional level managers
 First level managers
Types of control system:
 Personal control
 Output control
 Behavior control
Organizational power and Politics:
Organizational power:
The organizational power is the ability to influence people or things usually
obtained through the control of important resources.
Organizational Politics:
The organizational politics may be viewed as the tactics by which self interested
individuals and groups try to power to influence the goals and objectives of the
organization to further their own interest.
 Sources of power
 Ability to cope with uncertainty
 Centrality
 Control over information
 Non-substitutability
 Control over contingencies
 Control over resources
Organizational Conflict:
Conflict may be defined as a situation when the goal directed behavior of one
group blocks the goal directed behavior of another.
Organizational conflict process:
 Latent conflict
 Perceived conflict
 Felt conflict
 Manifest conflict
 conflict aftermath

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Conflict Resolution strategies:

 Changing task Relationship
 Changing controls
 Implementing strategic change
 Changing Leadership
 Changing the strategy

Managing the organization:

The basic principles for organization change are as follows:
 Unfreezing
 Movement
 Refreezing
Techniques of Strategic Evaluation and control:
Strategic Control:
Strategy formulation is based on assumptions about environmental and
organizational factors which are nebulous and dynamic in nature. The time gap
between strategy formulation and implementation is the major reason for these
assumptions turned out to be invalid.

Types of strategic controls:

 Premise control
 Implementation control
 Strategic Surveillance
 Special Alert control

Techniques of Strategic Evaluation and control:

There are two methods in strategic evaluation and control:

 Strategic momentum control

 Strategic leap control
 Strategic Issue Management
 Strategic field Analysis
 Systems Modeling
 Scenarios

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UNIT-5

Other Strategic Issues

Strategic Issues in Managing Technology and Innovation

The strategic issues in managing technology and innovation and their influence
on environmental scanning, Strategy formulation, Strategy implementation, Strategy
evaluation and control are worth studying from the perspective of strategists in modern
organization.
Research studies have pointed out that innovative companies such as 3M,
Procter Gamble and Rubbermaid are slow in introducing new products and their rate
of success is not encouraging
Role of Management:
The top management should emphasize the importance of technology and
innovation and they should provide proper direction.
 Environmental Scanning:
 External Scanning
 Impact of stakeholders on innovation
 Lead users
 Market Research
 New product Experimentation
 Internal scanning
 Resource allocation issues

Time to Market Issues:

The new product development period is again a crucial issue. Within four years
many new products are imitated. Shorter the period, more beneficial for the company.
Japanese auto manufacturers have gained competitive advantage over their rivals due
to relatively short product development cycle.
Strategy Formulation:
The following crucial questions are raised in strategy formulation
 Is the firm a leader or follower in respect of R&D strategy?
 Should we develop our own technology?
 Or should we go for technology outsourcing?
 What should be the mix of basic and applied research?
Technology sourcing:
There are two methods for acquiring technology. It involves make or buy
decision. In-house R&D capability is one method and tapping the R&D capabilities of
competitors, suppliers and other organizations through contracts is another choice
available for companies.
Strategic R&D alliance involves
 Joint programmes to develop new technology
 Joint ventures establishing a separate company to take a new product to market.

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 Minority investments in innovative firms.

It will be appropriate for companies to buy technology which is commonly
available from others but make technology themselves which is rare, to remain
competitive. Outsourcing of technology will be suitable under the following
conditions.
 The technology is of low significance to competitive advantage
 The supplier has proprietary technology
 The supplier‟ s technology is easy to adopt with the present system
 The technology development needs expertise
 The technology development needs new resources and new people

Technology competence:
In the case of technology outsourcing, the companies should have a minimal
R&D capability in order to judge the value of technology developed by others.

Strategy Implementation:
To develop innovative organizations deployment of sufficient resources and
development of appropriate culture are crucial at all stages of new product
development.

Innovative Culture:
Entrepreneurial culture is a part of innovative culture which presupposes
flexibility and dynamism into the structure. “Diffusion of Innovation” observes
that an innovative organization has the following characteristics.
 Positive Attitude to change
 Decentralized Decision Making
 Informal structure
 Inter connectedness
 Complexity
 Slack resources
 System openness

The employees who are involved in innovative process usually fulfill three
different roles such as:
 Product champion
 Sponsor
 Orchestrator

Corporate entrepreneurship:
Corporate Entrepreneurship is also known as intrapreneurship. According to
Gifford Pinchot an intrapreneur is a person who focuses on innovation and creativity
and who transforms and dreams of an idea into a profitable venture by operating
within the organizational environment. Intrapreneur acts like an entrepreneur but
within the organizational environment.
Evaluation and control:

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The purpose of research is to gain more productivity at a speedy rate. The

effectiveness of research function is evaluated in different ways in various
organizations.

Improving R&D:
The following best practices can be considered as benchmark for a
company’s R&D activities.
 Corporate and business goals are well defined and clearly communicated
to R&D department.
 Investments are made in order to develop multinational R&D capabilities to
tap ideas throughout the world.
 Formal, cross functional teams are created for basic, applied and developmental
projects.

New Business models and strategies for the Internet Economy

INTERNET ECONOMY:
The internet economy is an economy is based on electronic goods and services
produced by the electronic business and traded through electronic commerce. The
Internet Economy refers to conducting business through markets whose
infrastructure is based on the internet and world-wide web. An internet economy
differs from a traditional economy in a number of ways, including communication,
market segmentation, distribution costs and price.

Impact of the Internet and E-commerce

1. Impact on external industry environment
2. Changes character of the market and competitive environment
3. Creates new driving forces and key success factors
4. Breeds formation of new strategic groups
5. Impact on internal company environment
6. Having, or not having, an e-commerce capability tilts the scales
7. toward valuable resource strengths or threatening weaknesses
8. Creatively reconfiguring the value chain will affect a firm‟ s
competitiveness rivals.
Characteristics of Internet Market Structure:

Internet is composed of
1. Integrated network of user’s connected computers
2. Banks of servers and high speed computers
3. Digital switches and routers
4. Telecommunications equipment and lines
5. Strategy-shaping characteristics of the E-Commerce Environment
6. Internet makes it feasible for companies everywhere to compete in global
markets.

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 Competition in an industry is greatly intensified by new e-commerce. Strategic

initiatives of existing rivals and by entry of new, enterprising e-commerce rivals.
 Entry barriers into e-commerce world are relatively low
 On-line buyers gain bargaining power
 Internet makes it feasible for firms to reach

Effects of the Internet and E-commerce:

Major groups of internet and e-commerce firms comprising the supply side include
1. Makers of specialized communications components and equipment
2. Providers of communications services
3. Suppliers of computer components and hardware
4. Developers of specialized software
5. E-Commerce enterprises

Overview of E-Commerce Business Models and Strategies:

Business Models: Suppliers of communications Equipment:

1. Traditional business model of a manufacturer is being used by most firms to make

money.
2. Sell products to customers at prices above costs
3. Produce a good return on investment
4. Strategic issues facing equipment makers
5. Several competing technologies for various components of the internet infrastructure
exist
6. Competing technologies may have different performance pluses and
minuses and be compatible

Strategy options for suppliers of communications Equipment:

1. Invest aggressively in R&D to win the technological race against rivals
2. Form strategic alliances to build consensus for favored technological approaches
3. Acquire other companies with complementary technological expertise
4. Hedge firms bets by investing sufficient resources in mastering one or more of the
competing technologies

Business Models: Suppliers of Communication Services:

1. Business models based on profitably selling services for a fee-based on a flat rate
per month or volume of use
2. Firms must invest heavily in extending lines and installing equipment to have
capacity to provide desired point-to- point service and handle traffic load.
3. Investment requirements are particularly heavy for backbone providers, creating
sizable up-front expenditures and heavy fixed costs

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Strategic Options:
1. Provide high speed internet connections using new digital line technology
2. Provide wireless broadband services or cable internet service
3. Bundle local telephone service, long distance service, cable TV service and
Internet access into a single package for a single monthly fee

Business Models: suppliers of Computer Components and Hardware:

Traditional business model is used-Make money by selling products at prices
above costs Strategic approaches
Stay on cutting edge of technology Invest in R&D
Move quickly to imitate technological advances and product innovations of
rivals Key to success- Stay with or ahead of rivals in introducing next-
generation products
Competitive advantage will most likely be based on strategies key to low cost
 Business Models: Developers of Specialized E-Commerce Software
 Business model involves
 Investments in designing and developing specialized software
 Marketing and selling software to other firms
 Profitability hinges on volume
 Strategic approaches: Sell software at a set price per copy
 Collect a fee for every transaction provided by the software.
 Rent or lease the software

Business Models: Media Companies and content providers:

 Using intellectual capital to develop music, games, video, and text, media
firms
 Charge subscription fees or
 Rely on a pay-per-use model
 Business model of content providers involves creating content to attract
users, then selling advertising to firms wanting to deliver a message
 Key success factors for content providers
 Create a sense of community
 Deliver convenience and entertainment value as well as information.
Business Models: E-Commerce Retailers:
 Sell products at or below cost and make money by selling advertising
to other merchandisers
 Use traditional model of purchasing goods from manufacturers and
distributors, marketing items at a web store
 Filling orders from inventory at a warehouse
 Operate website to market and sell product/ service and outsource
manufacturing, distribution and delivery activities
to specialists.

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Strategic Approaches: E-Commerce Retailers:

 Spend heavily on advertising to build widespread
 Add new product offerings to help attract traffic to firm‟ s website.
 Be a first-mover or at worst on early mover
 Pay consideration attention to website attractiveness to generate
“buzz” about the site among surfers
 Keep the web site innovative, fresh, and entertaining

Key Success Factors: Competing in the E-Commerce Environment:

 Employ an innovative business model
 Develop capability to quickly adjust business model and strategy to
respond to changing conditions
 Focus on a limited number of competencies and perform a relatively
specialized number of value chain activities
 Stay on the cutting edge of technology
 Use innovative marketing techniques that are efficient in reaching the
targeted audience and effective in stimulating purchases
 Engineer an electronic value chain that enables differentiation or
lower costs or better value for the money.
Strategic issues for Non-Profit organizations
Meaning:
“A non-profit organizations also known as a not-for- profit organization is an
organization that does not distribute its surplus funds to owners or shareholders, but
instead uses them to help pursue its goals/
Types of non-profit-organizations:
 Private non-profit organizations
 Public governmental units

Two Major Reasons:

Society needs certain goods services
Private not for profit organization are exempted.

Sources of Revenue:
Profit making organization (Sales of goods or services)
Not for profit organization (Sponsor or donations)

Constraints in Not-for-profit organization:

 Service is intangible in nature.
 The clients have very little influence.
 The sponsor mainly donate the fund for not for profit organization
 the professional people is going to join
 Restraints on the use of rewards and punishments.

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Problems in the strategy formulation:

 The main aim is to collect the funds.
 They don’t know how to frame strategy.
 Internal conflict with the sponsor
 Worthless will be rigid.

Problems in Strategy implementation:

 The problem in decentralization
 Links in internal external
 Rewards and punishment.

Popular Strategies for Not-for-profit organizations:


Strategic piggybacking

Mergers

Strategic Alliances

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