Chapter 1: Introduction to Strategic

Management (7.5 – 12.5 Marks)

Introduction This chapter focuses on the importance of strategic management in today's competitive business
environment.

Chartered Accountants need to understand strategic management concepts well in order to

effectively contribute to business growth.

Q: What are the Learning Outcomes?

1. Meaning and Nature of Management

2. Concept Of Strategy
3. Strategic Management
a. Importance of Strategic
b. Limitations of Strategic Management
4. Strategic Intent (Vision, Mission, Goal and Objectives & Values)
5. Strategic Levels in Organisation
a. Network Of relationship between the three levels

Management Q: What are the two ways to view the term "management"?

1st Viewpoint:
• Management refers to the key group responsible for overseeing an organisation's affairs.
• The primary role of management is to transform the organisation into a purposeful and
productive entity.
• This is achieved by:
• Integrating disorganised resources such as manpower, money, material, and technology.
• Combining these resources into a functioning whole.
• An organisation becomes a unified system through the efficient and effective mobilisation and
utilisation of its diverse resources by management.
• The survival and success of an organisation significantly depend on the competence and character
of its management.
• Management is also tasked with facilitating organisational change and adaptation to ensure
effective interaction with the environment.

2nd Viewpoint:
• Management refers to a set of interrelated functions and processes executed by an organization's
management team to achieve its objectives.
• The key functions of management include:
• Planning
• Organising
• Directing
• Staffing
• Control
• These functions are wide-ranging yet closely interrelated, covering everything from goal setting
and organizational design to resource mobilization, task allocation, and the establishment of
control systems to ensure achievement of set goals.
 • Management is described as an influence process aimed at making things happen, gaining
command over phenomena, and directing events and people in a specific manner.
• The influence in management is supported by:
• Power
• Competence
• Knowledge
• Resources
Strategy Q: What is Strategy?

A strategy’ as a long-range blueprint of an organization’s desired image, direction and destination

defining what it wants to be, what it wants to do, and where it wants to go.

Q: How did Igor H. Ansoff and William F. Glueck define strategy?

According to Igor H. Ansoff, strategy is the common thread among the organization’s activities and
product-markets that defines the essential nature of business that the organization has or planned to
be in future.

According to William F. Glueck, strategy is a unified, comprehensive and integrated plan designed to
assure that the basic objectives of the enterprise are achieved.

Q: Are business strategies proactive or reactive, or both?

Business strategies are both proactive and reactive.

Proactive strategies involve planned actions to improve the company's market position and financial
performance,

while Reactive strategies involve responses to unexpected developments. These strategies are
continually updated based on the company's experiences and changes in the business environment.

Crafting a strategy thus involves stitching together a proactive/intended strategy based on prior
successful experience and then adapting pieces of successful reactions as circumstances surrounding
the company’s situation change or better options emerge - a reactive/adaptive strategy

Q: What does strategy refer to in the context of business?

Strategy in business refers to the comprehensive plan that a company adopts to achieve its goals and
objectives while dealing with unpredictable and often challenging external forces. It's about aligning
the company's objectives with the means to achieve them, thereby serving as a roadmap for
navigating uncertainty and complexity.

Strategic Q: What is the strategic management?

Management
Strategic management refers to the managerial process of developing a strategic vision, setting
objectives, crafting a strategy, implementing and evaluating the strategy, and initiating corrective
adjustments were deemed appropriate.

Q: What are the distinct activities involved in strategic management?

Strategic management is a cyclical and ongoing process of several activities, including:

• Developing the firm’s vision and mission.

• Conducting strategic analysis.
• Setting objectives.
• Creating, choosing, and implementing strategies.
• Measuring and evaluating performance
 Q: What are the primary objectives of strategic management?

• To create a competitive advantage: This means providing something unique and valuable to
customers, which enables the company to outperform its competitors.

• To navigate changes in the environment: Companies must be able to react appropriately to

changes, whether they're external (like market trends or regulatory shifts) or internal (like
operational adjustments).

Q: Why is strategic management increasingly crucial for survival in today's dynamic business
environment?

Strategic management has become indispensable in the current business landscape due to the
accelerating rate of change. Factors such as technology, deregulation, and globalization have
introduced rapid shifts, often blurring the boundaries of industries and firms. This demands
businesses to be agile and adaptive. The principle of "survival of the fittest" in this context means that
the "fittest" are those organizations that can adeptly navigate these changes. Historical examples
underscore this point, as the inability to strategically manage these changes led to the downfall of
once-prominent business giants like Bajaj Scooters, LML Scooters, Murphy Radio, BPL Television,
Videocon, Nokia, and Kodak. Thus, understanding and implementing strategic management is not just
beneficial, but essential for longevity and success in the modern business world.

Q: Does strategic management always focus solely on competitive advantage and financial
performance?

While strategic management is essential for delivering superior organizational performance,

organizations may also undertake actions that may not be "strategic" in a competitive sense but are
beneficial in other ways, like promoting diversity, inclusion, equity, improving product/service
availability, affordability, and accessibility to deprived sections, and fostering greater workplace
democracy.

Importance of Q: What are the benefits of strategic management?

Strategic
Management Here are some key benefits of strategic management:

• It provides direction (Goals and Mission): Strategic management helps define the company's goals
and mission in alignment with the company's vision.

• It promotes proactivity: Strategic management allows organizations to shape their future by

enabling them to analyze and take action, leading to better control over their destiny.

• It serves as a decision-making framework: Strategic management guides significant enterprise

decisions on products, markets, facilities, investments, and organizational structure, ensuring the
organization knows what it's trying to achieve.

• It prepares for the future: Strategic management identifies business opportunities and charts
paths to reach them.

• It acts as a defense mechanism: Strategic management helps avoid costly mistakes in product
market choices or investments.

• It enhances business longevity: Strategic management helps organizations sustain in the long run
by taking clear stands in their industry, not just surviving on luck.
 • It develops core competencies: Strategic management helps the organization develop key
competencies and competitive advantages, facilitating survival and growth.
Limitations of Q: What are some challenges faced in strategic management?
Strategic
Management Here are a few challenges that are often faced in strategic management:

• Environmental unpredictability: With a complex and turbulent business environment, predicting

future changes accurately can be challenging. If an organization's estimates about future
environmental shifts are incorrect, their strategic plans may fail.

• Time-consuming process: Strategic management is a lengthy process that involves planning,

communication, and implementation of strategies. This process could impede day-to-day
operations. Spending excessive time on planning can diminish the time and energy for
implementation, potentially negatively impacting the business.

• Costly process: Strategic management can be an expensive process, involving hiring expert
strategic planners, analyzing external and internal environments, devising strategies, and
implementing them. These costs can be prohibitive for organizations with limited resources,
particularly small and medium-sized ones.

• Uncertain competitive responses: In a competitive scenario, estimating competitors' responses

to a firm's strategies can be challenging. Strategic decisions are usually taken behind closed doors
by top management, making it hard to anticipate them.

Strategic Q: What is strategic intent in the context of strategic management?

Intent
Strategic intent refers to the purposes that an organization strives for. It's what senior managers
define as "what they want to do" and "why they want to do it."

Strategic intent can be understood as the philosophical base of strategic management.

Strategic intent provides the framework within which the firm would adopt a predetermined direction
and would operate to achieve strategic objectives.

Strategic intent can could be in the form of the organization's vision and mission statements, goals,
objectives, and value system.

Vision Q: What does a strategic vision mean in the context of strategic management?

A strategic vision refers to top management's views about the company's direction and its product-
customer-market-technology focus. It delineates management's aspirations for the business,
providing a panoramic view of "where we want to go" and a convincing rationale for why this direction
makes good business sense for the company. In other words, the strategic vision points out a specific
direction, charts a strategic path for the future, and molds the organization's identity.

Q: How does a strategic vision influence a company?

A clearly articulated strategic vision communicates management's aspirations to stakeholders and

helps steer the energies of company personnel in a common direction. It captures the imagination of
others, aids internal efforts to mobilize the company’s resources, and serves as a reference point for
gauging the merits of the company’s strategic actions. For instance, Henry Ford’s vision of a car in
every garage had power because it captured the imagination of others and aided internal efforts to
mobilize the Ford Motor Company’s resources.
 Q: What role does a strategic vision play in the strategy-making process?

In the strategy-making process, the company's senior managers consider the directional path the
company should take and what changes in the company’s product-market-customer-technology focus
would improve its current market position and future prospects. This process helps to decide and
commit the company to one path versus another, pushing managers to draw carefully reasoned
conclusions about how to modify the company’s business makeup and the market position it should
stake out. This decision forms the strategic vision for the company.

Q: What are the key elements of a strategic vision?

Key elements of a strategic vision include:

• A strategic vision requires entrepreneurial thinking to prepare a company for the future.

• Formulating a strategic vision is a process of intelligent entrepreneurship.

• A well-articulated vision energizes the organization's members.

• A well-worded vision statement vividly outlines the organization's future direction.

Mission Q: What is a mission in the context of strategic management?

A mission, in the context of strategic management, is a fundamental statement that defines what a
business does and its purpose. It's a clear articulation of the business's core objectives and aims,
outlining the company's abilities, focus on customers, activities, and business structure. A mission
statement essentially describes what the organization does currently, answering the question "who
we are and what we do".

Q: Why should an organisation have a mission?

• It gives everyone in the organization a shared purpose.
• It helps guide decisions about where to spend resources
• It motivates people to put their efforts towards the organization's goals.
• It sets a professional tone and overall work environment.
• It allows people to feel connected to the organization's purpose and direction.
• It aids in structuring work assignments within the organization.
• It helps set measurable goals and assess performance, cost, and timelines.

Q: What are some key characteristics of a good mission statement?

A good mission statement should be concise, clear, feasible, distinctive and motivating. Following
points are useful while writing a mission of a company:
• A good mission statement should provide the organization with a unique identity, emphasizing its
business focus and future growth trajectory, distinguishing it from similar companies.
• It should clarify the needs the company aims to fulfill, who its target customers are, and what
technologies, skills, and activities it uses and carries out.
• It should be unique to the organization, reflecting its distinct values and goals.

Q: What are Peter Drucker and Theodore Levitt parameter for setting a mission?

They emphasised that as the first step in the business planning endeavour, every business firm must
clarifythe corporate mission and define accurately the business the firm is engaged in.
They also explained that towards facilitating this task, the firm should raise and answer certain basic
questions concerning its business, such as:
 • What is our mission?
• What is our ultimate goal?
• What do we aspire to become?
• What type of growth are we aiming for?
• What business are we in?
• Do we fully understand and accurately define our business in the broadest terms?
• Who are we aiming to serve?
• What human needs are we aiming to fulfill with our services or products?
• What motivates us to be in this particular business?
• How do we envision the future of this business?
• What business do we aspire to be in, in the future?

Q: What is Drucker's view on defining a business's mission?

Management expert Peter Drucker emphasized the importance of clarifying an organization's mission
and accurately defining its business. According to Drucker, every organization should ask the question
"What business are we in?" and find a meaningful, correct answer. This answer should reflect the
company's market or external perspective rather than simply focusing on its production or generic
business activities. This approach helps to articulate a clear mission that reflects the company's real
purpose and drives its strategic planning process.

Goals and Q: What are goals and objectives in a strategic management context?
Objectives
• Goals: are open-ended attributes that denote the future states or outcomes., and often not
quantifiable. They reflect the overarching outcomes an organization aims to achieve and provide
direction for the company's strategic initiatives. For instance, a company's goal could be to
become the market leader in its industry.

• Objectives: Objectives are close-ended attributes which are precise and expressed in specific
terms that an organization strives to achieve within a set timeframe. They provide a clear
direction and steps to fulfill the company's goals. For example, to achieve the goal of becoming a
market leader, an objective could be to increase the company's market share by 10% within two
years.

Q: What role do objectives play in an organization?

Objectives serve as performance benchmarks and provide direction to an organization's activities.

They are tied to both its short-term and long-term perspectives and guide the allocation of resources
and structuring of operations. They also serve as criteria for evaluating organizational performance.

Q: What characteristics should effective objectives have?

• Define the organization's interaction with its environment.

• Facilitate the achievement of the organization's mission and purpose.
• Inform strategic decision-making.
 • Provide measurable performance standards.
• Be specific and concrete.
• Be linked to a timeframe.
• Be measurable and controllable.
• Be challenging.
• Correlate with each other.
• Consider organizational resources and external environment constraints.

Q: What is the importance of having a balance of short-term and long-term objectives?

A balance of short-term and long-term objectives is needed. Short-term objectives focus on

immediate performance improvements, whereas long-term objectives guide the organization's
current actions towards future targets. This balance ensures continuous progress while keeping the
long-term vision in sight.

Q: What are the typical areas around which long-term objectives revolve?

• Profitability
• Productivity
• Competitive Position
• Employee Development
• Employee Relations
• Technological Leadership
• Public Responsibility

Q: What benefits do clearly defined objectives offer?

Clearly defined objectives provide direction, foster synergy, assist in performance evaluation,
establish priorities, reduce uncertainty, minimize conflicts, stimulate effort, and help in resource
allocation and job design.

Values Q: What are values in a strategic management context?

Values in the context of strategic management are the fundamental beliefs, principles, and norms
that guide the behavior, decision-making, and operations of an organization. These values serve as
the underlying basis for the organization's culture and strategic direction, shaping how it interacts
with its stakeholders, including employees, customers, shareholders, and the community at large.

Q: How do values affect employees internally?

Internally, values create a shared purpose among employees, contributing to the company's long-
term success. Employees often prefer to work for companies whose values align with their own, as
this promotes engagement and job satisfaction.

Q: How do values influence the company's relationship with its consumers Externally?

Many consumers choose to support businesses whose values mirror their own beliefs. They prefer to
purchase products or services from companies demonstrating ethical behavior and a clear purpose
beyond profit-making.

Q: How are intent and values interconnected?

Intent and values, while different, are interconnected concepts in business. Intent refers to the
purpose of doing business, while values are the guiding principles informing the business's decision-
making. Often, the intent is driven by these underlying values, demonstrating that values provide a
broader framework within which business intentions are defined and pursued
 The above graphic represents the interconnection of Intent, Vision, Mission, Goals and Values; Values
remain the center/core of Vision, Mission, Goals and putting all them to action. Vision is followed by
Mission, followed by Goals and finally executing via real actions

Strategic Q: What are the three main management levels at large organization?
Levels In
Organisations These organizations typically have three main management levels:

• Corporate level: The topmost level, dealing with the overall company strategy.
• Business level: Deals with strategies for each separate business or division.
• Functional level: Deals with specific operations within each business or division.

Q: What is the role of the corporate level of management?

The corporate level of management consists of the Chief Executive Officer (CEO), other senior
executives, the board of directors, and corporate staff. They oversee the development of strategies
for the whole organization, including defining the mission and goals of the organization, determining
what businesses it should be in, allocating resources among the different businesses, formulating and
implementing strategies that span individual businesses, and providing leadership for the organization
as a whole.

Corporate-level managers also serve as a link between the people overseeing the strategic
development and the company's owners (the shareholders). They are responsible for ensuring that
the company's strategies align with maximizing shareholders' wealth.

For example, the Adani Group, which operates in various sectors like mining, power generation, and
cement. The Chairman's strategic responsibilities include setting overall objectives, managing
 resource allocation, deciding on divestments and acquisitions, and developing strategies that span
multiple businesses. However, the development of strategies specific to each business is the
responsibility of business-level managers.

Q: What is the Role of General Managers or business level management?

The principal general manager at the business level, or the business-level manager, is the head of the
SBU. Their strategic role is to translate the general statements of direction and intent that come from
the corporate level into concrete strategies for individual businesses.

Note: A Strategic Business Unit (SBU) is a self-contained division that provides a product or service for
a particular market.

Q: What is the role of functional-level managers?

Functional-level managers are responsible for specific business functions or operations within a
company or one of its divisions. Their major strategic role is to develop functional strategies in their
area that help fulfill the strategic objectives set by business- and corporate-level managers. They are
also responsible for strategy implementation, or the execution of corporate and business-level plans.

Q: Which is better - Top Down Approach or Bottom-Up Approach?

A top-down approach to decision making is when decisions are made solely by leadership at the top,
i.e., the corporate level of management, while the bottom-up approach gives all teams across the
levels a voice in decision making.

Network of Q: How do the different levels of management interconnect in a business organization?

relationship
between the In a business organization, the different levels of management (corporate, business, and functional)
three levels are interconnected in various ways. The corporate level sets the goals, the business level creates the
plans to reach those goals, and the functional level executes those plans to achieve results.

Q: What are the three main types of relationships between different levels of management?

The three major types of relationships are:

• Functional and Divisional Relationship: In this type, each function or division operates
independently under a manager who reports to the business head. Functions can be areas like
Finance, Human Resources, and Marketing, while divisions may be based on products.
• Horizontal Relationship: In this flat structure, all positions, from top management to staff-level
employees, are at the same hierarchical level. This promotes a culture of openness, transparency,
idea sharing, and innovation, making it more suitable for startups.

• Matrix Relationship: This structure creates a grid of levels within the organization, forming teams
from different departments for temporary projects. It helps manage large conglomerates, where
tracking every single team independently can be challenging. In this setup, each functional team
might have more than one manager at the business level. While complex for smaller
organizations, it is beneficial for larger ones.
 Multiple Choice Questions
1. Strategy is a game plan used for which of the following?
(a) To take market position
(b) To attract and satisfy customers
(c) To respond to dynamic and hostile environment
(d) All of the above

2. Which of the following is correct?

(a) Strategy is always pragmatic and not flexible
(b) Strategy is not always perfect, flawless and optimal
(c) Strategy is always perfect, flawless and optimal
(d) Strategy is always flexible but not pragmatic

3. Strategy is-
(a) Proactive in action
(b) Reactive in action
(c) A blend of proactive and reactive actions
(d) None of the above

4. Reactive strategy can also be termed as-

(a) Planned strategy
(b) Adaptive strategy
(c) Sound strategy
(d) Dynamic strategy

5. Formulation of strategies and their implementation in a strategic management process is undertaken by-
(a) Top level executives
(b) Middle level executives
(c) Lower level executives
(d) All of the above

6. Which of the following are responsible for formulating and developing realistic and attainable strategies?
(a) Corporate level and business level managers
(b) Corporate level and functional level managers
(c) Functional managers and business level managers
(d) Corporate level managers, business level managers and functional level managers

7. Which of the following managers’ role is to translate the general statements/ strategies into concrete
strategies of their individual businesses-
(a) Supervisor
(b) Functional Manager
(c) CEO of the company
(d) All of the above

8. Which statement should be created first and foremost?

(a) Strategy
(b) Vision
(c) Objectives
(d) Mission
9. Strategic management enables an organization to __________, instead of companies just responding to
threats in their business environment.
(a) be proactive
(b) determine when the threat will subside
(c) avoid the threats
(d) defeat their competitors

10. Read the following three statements:

(i) Strategies have short-range implications.
(ii) Strategies are action oriented.
(iii) Strategies are rigidly defined.
From the combinations given below select an alternative that represents statements that are true:
(a) (i) and (ii)
(b) (i) and (iii)
(c) (ii) and (iii)
(d) (i), (ii) and (iii)

11. What involves formulating, implementing, and evaluating cross-functional

decisions that enable an organization to achieve its objectives?
(a) Strategy formulation
(b) Strategy evaluation
(c) Strategy implementation
(d) Strategic management

12. Strategic management allows an organization to be more

(a) Authoritative
(b) Participative
(c) Commanding
(d) Proactive

Scenario Based Questions

1. Mr. Raj has been hired as a CEO by XYZ ltd a FMCG company that has diversified into affordable cosmetics.
The company intends to launch Feelgood brand of cosmetics. XYZ wishes to enrich the lives of people with its
products that are good for skin and are produced in ecologically beneficial manner using herbal ingredients.
Draft vision and mission statement that may be formulated by Raj.

2. Yummy Foods and Tasty Foods are successfully competing in the business of ready to eat snacks in Patna.
Yummy has been pioneer in introducing innovative products. These products will give them good sale.
However, Tasty Foods will introduce similar products in reaction to the products introduced by the Yummy
Foods taking away the advantage gained by the former.
Discuss the strategic approach of the two companies. Which is superior?

3. Ramesh Sharma has fifteen stores selling consumer durables in Delhi Region.Four of these stores were
opened in last three years. He believes in managing strategically and enjoyed significant sales of refrigerator,
televisions, washing machines, air conditioners and like till four years back. With shift to the purchases to
online stores, the sales of his stores came down to about seventy per cent in last four years.
Analyse the position of Ramesh Sharma in light of limitations of strategic management.
4. Dharam Singh, the procurement department head of Cyclix, a mountain biking equipment company, was
recently promoted to look after sales department along with procurement department. His seniors at the
corporate level have always liked his way of leadership and are assured that he would ensure the
implementation of policies and strategies to the best of his capacity but have never involved him in decision
making for the company.
Do you think this is the right approach? Validate your answer with logical reasoning around management levels
and decision making.

5. ABC Limited is in a wide range of businesses which include apparels, lifestyle products, furniture, real estate
and electrical products. The company is looking to hire a suitable Chief Executive Officer. Consider yourself
as the HR consultant for ABC limited. You have been assigned the task to enlist the activities involved with the
role of the Chief Executive Officer. Name the strategic level that this role belongs to and enlist the activities
associated with it.

Descriptive Questions
1. What is Strategic Management? What benefits accrue by following a strategic approach to managing?

2. Are there any limitations attached to strategic management in organizations? Discuss.

3. Explain the difference between three levels of strategy formulation.

4. “Strategy is partly proactive and partly reactive.” Discuss.

 Chapter 2: Strategic Analysis: External
Environment (7.5 – 12.5 Marks)
Introduction This chapter will discuss the process of strategic analysis, a step in strategic planning where
information about the company's internal and external environments is gathered. This helps in
setting strategic goals and planning appropriate actions. We'll specifically look at factors in the
external environment and how they affect strategy. We'll also explore ways to identify and
adapt to challenging and changing external conditions.

Q: What are the Learning Outcomes?

1. Strategic Analysis
a. Issues to consider for Strategic Analysis
2. Business Environment
a. Micro and Marco Environment
i. Elements of Macro Environmental
ii. PESTLE-a tool to analyse Macro Environment
b. International Environment
i. Internationalization of Business
3. Understanding Market & Customer
a. Customer
b. Customer Analysis
c. Customer Behaviour
4. Understanding Product
a. Product Life Cycle
b. Value Creation
c. Value Chain Analysis
5. Understanding Industry & Competition
a. Competitive Landscape
b. Attractiveness of Industry
c. Porter’s Five Forces Model
d. Experience Curve
e. Key Factors for Competitive Success

Strategic Analysis Q: What is Strategic analysis and why is it important?

Strategic analysis or Environmental scanning is a continuous systematic activity that involves

collecting and analyzing information about a firm's external environment, (such as political-
legal, socio-cultural, economic, demographic, ecological, and technological factors), as well as
the internal environment (resources and capabilities of a firm). It can be done informally or
through a formal structure. This process is crucial because it helps identify potential
opportunities and risks, thereby enabling the firm to manage uncertainty and make strategic
decisions.

Q: What are the two main situational considerations in strategic analysis?

The two main considerations are:

1. Industry and competitive conditions.

2. The organization’s capabilities, resources, strengths, weaknesses, and market position.

Q: What are the limitations of strategic analysis?

The two main limitations:

1. It provides numerous options without clarity on which one to choose, leading to

potential overlaps or challenges in implementation.

2. It can be time-consuming, potentially affecting organizational efficiency and diverting

focus from other innovations.

Q: What are the Issues to Consider for Strategic Analysis?

Strategy evolves over a period of time: Strategies develop gradually, shaped by daily decisions
and influenced by various factors. The current strategy reflects numerous small choices made
over an extended period. While experience informs strategy, it needs updating as outcomes
emerge. Sometimes, to accelerate growth, management might make significant strategic shifts.
Thus, strategy is dynamic and evolves over time.

Balance of external and internal factors: Strategic analysis requires finding a balance between
various challenges since a perfect alignment is rare. When making strategic decisions,
management needs to weigh opportunities against constraints. For instance, while the desire to
enter a new market might drive a decision, the presence of a dominant competitor could limit
options. Some of these challenges can be managed, but others might be beyond the
organization's control.

Risk: While balancing various factors is crucial in strategic analysis, the intricate mix of
environmental variables can disrupt this balance. Factors like competitive markets,
globalization, economic fluctuations, technological changes, and international relations
introduce varying levels of risk. A key component of strategic analysis is recognizing these risks
and evaluating their potential impact.

There are two main types:

1. External risk: Arises from mismatches between strategies and environmental forces.

2. Internal risk: Results from forces within the organization or those interacting with it
regularly.

The below given broad list of analysis that a business undertakes to plan a strategy covers both
aspects of external analysis and internal analysis. An analysis helps identify opportunities,
threats, strengths and weaknesses
Strategy and Q: What does strategic management provide for a business?
Business
Environment Strategic management provides a framework for adapting to the unpredictable demands of an
external environment and an uncertain future. It involves making decisions about a long-term
direction in relation to resources and opportunities.

Q: What is the "business environment"?

The "business environment" refers to all external factors, influences, or situations that affect
business decisions, plans, and operations. The success of an organization largely depends on its
business environment and its relationship with it.

Q: How does the interaction between a business and its environment benefit the business?

i. Opportunities and Threats Identification: It reveals consumer needs, legal changes, societal
behaviors, and competitor product launches.

ii. Direction for Growth: By understanding external changes, businesses can strategize and plan
for successful expansion.

iii. Role in Continuous Learning: It motivates managers to consistently update their knowledge
and skills to adapt to business changes.

iv. Image Building: It showcases the business's responsiveness and awareness to environmental
needs, creating a positive impression.

v. Meeting Competition: It enables businesses to analyze competitor strategies and develop

their own to outperform them.

Q: Why are strategic decisions crucial for business management?

To flourish, a business must be aware of, assess, and respond to the many opportunities and
threats present in its environment. In order to succeed, the business must not only be aware of
the numerous aspects of its surroundings but also be able to handle and adapt to them. The
business must continuously evaluate its environment and modify its operations in order to
thrive and expand.

Strategic decisions are significant aspects of business management as they are essential for the
success and continued existence of a business. They involve the functions of top management
and the methods of formulating strategic decisions. In a dynamic and unpredictable
environment, the improvement of strategic decision-making becomes a constant endeavor.
Micro and Macro Q: What does the external environment of an organization consist of?
Environment
The external environment of an organization consists of the opportunities and threats operating
externally, apart from the strengths and weaknesses existing internally.
This external environment can be divided into two major categories
- Micro environment and
- Macro environment

Q: What is a micro environment in a business context?

The micro environment in a business context refers to the immediate surroundings that directly
influence an organization on a regular basis. This includes suppliers, consumers, marketing
intermediaries, and competitors. These factors are specific to the business and have a direct and
regular impact on its operations.

Within the micro or the immediate environment in which a firm operates we need to address
the following issues:
o The employees of the firm, their characteristics and how they are organised.
o The existing customer base on which the firm relies for business.
o The ways in which the firm can raise its finance.
o Who are the firm suppliers and how are the links between the two being developed?
o The local community within which the firm operates.
o The direct competition and their comparative performance

Q: What is a macro environment in a business context?

The macro environment in a business context refers to the larger, external factors that
significantly affect how an organization operates but are typically beyond its direct control and
influence. It's the wider context within which a firm operates, including aspects such as
economic conditions, societal trends, technological changes, and legislative environment. The
factors in the macro environment often influence the way a firm reacts in the marketplace.

Q: What elements make up the macro environment?

The macro environment is made up of several key elements:

1. Demographic Environment: This involves the characteristics of a population, such as age,

gender, income, education, race, etc. These qualities are essential for businesses and
economists, as they affect the market size and opportunities.

2. Socio-Cultural Environment: This represents a complex group of factors such as social

traditions, values, beliefs, level of literacy, ethical standards, social stratification, conflict,
cohesiveness, etc. These factors relate to human relationships and societal attitudes that have
a bearing on an organization's operations.

3. Economic Environment: This refers to the overall economic conditions around the business,
including regional, national, and global levels. It encompasses conditions in the markets for
resources, the supply of inputs and outputs of the business, their costs, and the dependability,
quality, and availability.

4. Political-Legal Environment: This takes into account elements like the general level of political
development, the degree of political morality, the state of law and order, political stability, the
political ideology and practices of the ruling party, the effectiveness of governmental agencies,
and the scope and type of governmental intervention in the economy and industry.

5. Technological Environment: Technology is a crucial factor in the modern age, as it has greatly
influenced how people communicate, do things, and how businesses operate. Technology also
 leads to many new business opportunities and can also make some existing business products
and services obsolete.

Each of these elements has the potential to offer opportunities or pose threats to a firm,
depending on how they evolve and how the firm responds to them. It is crucial for businesses
to monitor these macro environmental factors regularly and adjust their strategies accordingly.

PESTLE Q: What does PESTLE stand for?

PESTLE stands for Political, Economic, Socio-cultural, Technological, Legal, and Environmental.

Q: What is PESTLE analysis?

PESTLE analysis is a framework or tool used to identify and analyze macro-environmental factors
such as political, economic, socio-cultural, technological, legal, and environmental influences on
an organization. It helps in scanning the environmental factors that may affect an organization
or its policy.

Q: Why is PESTLE analysis important?

PESTLE analysis encourages proactive and structured thinking in decision-making. It's a simple
and quick tool to implement that assists in scanning the environmental factors influencing an
organization. PESTLE analysis assists organizations in making meaningful decisions that consider
all relevant external factors.

Q: What are the key factors of PESTLE analysis?

Political factors: These involve government intervention in the economy and can influence
goods and services, as well as areas like health, education, and infrastructure.

Economic factors: These include interest rates, exchange rates, inflation, and growth rates that
affect how businesses operate and make decisions.

Socio-cultural factors: These affect the demand for a company's products and the way it
operates.

Technological factors: These determine barriers to entry and influence costs, quality, innovation,
and outsourcing decisions.

Legal factors: These affect a company's operations, costs, and demand for products, as well as
ease of business.

Environmental factors: These impact various industries by creating new markets or diminishing
existing ones due to growing awareness of climate change.
Internationalization Q: What is Internationalization?
of Business
Internationalization is the process by which a business expands into new global markets for
greater earnings, cheaper resources, and achieving greater economies of scale. It helps extend
the lifespan of products and has become prominent due to the benefits of reaching a larger
audience and leveraging global resources.

Q: How does the strategic-management process differ for global firms compared to domestic
firms?

The fundamental process remains the same, but international strategies are more complex due
to additional variables and linkages. International strategy planning is essential for systemically
approaching the global market and identifying opportunities and threats.

Q: What are the characteristics of a global business?

A global business typically has three characteristics:

• It consists of multiple units in different parts of the world, linked by common ownership.

• These units draw on a shared pool of resources, such as money, information, patents, and
control systems.

• The units follow a common strategy, and its managers and shareholders may be based in
different nations.

Q: What are the steps in developing internationally?

International development is expensive and challenging. A thorough and structured approach

includes the following steps:

• Evaluate global opportunities and threats and rate them with the internal capabilities
• Describe the scope of the firm's global commercial operations
 • Create the firm's global business objectives.
• Develop distinct corporate strategies for the global business and whole organisation.

Q: Why do businesses choose to go global?

Businesses go global for several interconnected reasons:

• Need for Growth: Organizations seek expansion and often find opportunities in
international markets, which leads to globalization of their operations.

• Shrinking Time and Distance: Faster communication, speedier transportation, growing

financial flows, and rapid technological changes make international operations more
accessible.

• Inadequate Domestic Markets: Some businesses find that domestic markets don't offer
enough opportunities or face less competition in international markets.

• Access to Resources: Going global can provide access to reliable or cheaper raw materials,
cheap labor, and a vast pool of talent.

• Reduction in Transportation Costs: By setting up plants closer to the market, companies can
reduce time and costs involved in transportation.

• Generating Higher Sales and Cash Flow: Exporting organizations may look at overseas
manufacturing and sales branches to increase sales and improve cash flow.

• Rise of Services and Regional Economic Integration: The growing service sector and
economic integration between regions provide opportunities for international expansion.

• Lowering of Trade Barriers: Reduction in trade tariffs and customs barriers, increased
privatization, and less government interference in business lead to an easier flow of
international business.

• Strategic Alliances: Globalization encourages companies in different countries to form

alliances to combat economic and technological threats, and to leverage their respective
comparative and competitive advantages.

Q: How have technological developments influenced the globalization of businesses?

Technological advances have simplified the internationalization process. Improvements in

worldwide communication and transportation have increased the mobility of money, people,
raw materials, and finished goods. These developments have made it easier to define and
implement global strategies by linking corporate headquarters with operations abroad.

Q: What impact has the changing political landscape had on businesses going global?

Evolving political views have led to the collapse of international trade barriers, redefining the
roles of state and industry. Trends towards increased privatization and less government
interference have opened up opportunities for businesses to expand globally, making
international markets more accessible and attractive.

International Q: Why is the assessment of the international environment essential for an organization
Environment looking to expand globally?

Assessing the international environment is crucial as it helps organizations discover

opportunities in the global market and evaluate the feasibility of capitalizing on these
 opportunities. The process enables a firm to understand various global aspects like political risks,
cultural differences, exchange rate fluctuations, legal compliances, and taxation issues, all of
which play a vital role in decision-making and successful internationalization.

Q: What are the different levels of international environmental analysis, and what do they
entail?

International environmental analysis can be conducted at three levels:

Multinational Environmental Analysis: This involves identifying, anticipating, and monitoring

significant global factors on a large scale. It includes understanding global economic
developments and governments' tendencies, either free or interventionist, in economies.

Regional Environmental Analysis: This is a more specific evaluation of critical factors in a

particular geographical area, with a focus on discovering market opportunities for goods,
services, or innovations in that location.

Country Environmental Analysis: This requires an in-depth study of vital environmental factors
in individual countries, including economic, legal, political, and cultural dimensions. Customized
analysis for each country is necessary to develop effective market entrance strategies.

Q: How have international factors become an integral part of strategic management?

International factors are inherent in strategic management for businesses with global interests.
They encompass various complex elements, ranging from political to cultural, that affect
international operations. The proper understanding and management of these factors are
essential for navigating the challenges and complexities of the global marketplace, thus
becoming vital components of the strategic management process.

Customer Q: How is a customer defined, and why are customers important for businesses?

A customer is defined as a person or business that buys products or services from another
organization. Customers are crucial for businesses because they provide revenue, and without
customers, organizations cannot exist. Businesses often compete for customers by marketing
their products aggressively or lowering their prices to increase their customer bases.

Q: What is the difference between a customer and a consumer?

Though the terms are often used interchangeably, there is a subtle difference between a
customer and a consumer. A customer is the purchaser of products and services, while a
consumer is an individual or business that actually consumes or utilizes the products and
services. For example, a parent may buy groceries (customer), while all family members
consume them (consumers).

Customer Analysis Q: What is customer analysis, and why is it essential in a strategic business plan?

Customer analysis is the examination and evaluation of consumer needs, desires, and wants. It
identifies target clients and determines what they want, defining how a product or service can
meet those needs. Customer analysis is essential in a strategic business plan because it guides
the development of products and services that resonate with the target market, enabling better
alignment with customer expectations and preferences.

Q: What are the key components and activities involved in customer analysis?

Customer analysis includes several key components and activities, such as:
 • Administering customer surveys to gather insights.
• Studying consumer data to understand behavior and preferences.
• Evaluating market positioning strategies to align with customer expectations.
• Developing customer profiles that reveal demographic information.
• Selecting the best market segmentation techniques to target specific groups.
• Gathering information from various parties like buyers, sellers, distributors, salespeople,
managers, wholesalers, retailers, suppliers, and creditors to comprehensively assess
customer needs and desires.

Q: How do successful businesses utilize customer analysis?

Successful businesses use customer analysis to continuously monitor the behavior of existing
and prospective customers. They utilize the insights gained from this analysis to develop
products and services that are closely aligned with customer needs, desires, and wants. This
targeted approach helps them to build stronger relationships with customers, enhance
customer satisfaction, and ultimately drive growth and profitability.

Q: How do businesses typically categorize customers, and why do they do this?

Businesses typically categorize customers based on demographics such as age, race, gender,
ethnicity, economic level, and geographic region. By understanding these factors, they can
develop a profile of an ideal customer, fine-tune their marketing strategies, and adjust their
inventory. This helps businesses to attract more customers and better tailor their products and
services to meet specific needs and preferences

Customer Q: What is customer behaviour, and why is it important for businesses to understand it?
Behaviour
Customer behaviour is the study of how customers purchase products, including their shopping
frequency, product preferences, and perceptions of marketing, sales, and service offerings.
Understanding customer behaviour is vital for businesses because it allows them to
communicate effectively with customers, create targeted marketing campaigns, provide
products and services that meet customer needs, and retain customers for repeat sales. By
aligning offerings with customer preferences and behaviours, businesses can enhance customer
satisfaction and loyalty.

Q: What are the three conceptual domains that influence consumer behaviour?

Consumer behaviour is influenced by three main conceptual domains:

External Influences: These include advertisements, peer recommendations, social norms,

marketing efforts, and various environmental factors that impact customer decisions.

Internal Influences: These are psychological factors internal to the customer, such as motivation
and attitudes, which affect decision-making.

Decision Making: This domain includes the rational process by which consumers seek
information, evaluate options, weigh pros and cons, and make final choices. This process may
vary in complexity depending on the significance of the purchase.

Q: Describe the stages of the decision-making process in consumer behaviour.

The stages of the decision-making process in consumer behaviour include:

Problem Recognition: Identifying an unfulfilled need or desire.

 Search for Alternatives: Listing desirable alternatives to fulfil the need or desire.

Seeking Information: Gathering information on available alternatives and weighing their pros
and cons.

Making a Final Choice: Selecting the best option based on the evaluation.

This process may be more elaborate and rational for significant purchases like cars or appliances,
and more impulsive for smaller purchases like snacks or soft drinks.

Q: How do post-decision processes influence consumer behaviour?

Post-decision processes occur after a customer has made a decision and purchased a product.
This stage involves evaluating the outcome and reacting based on satisfaction. A satisfied
customer may make repeat purchases and recommend the product to others, while a
dissatisfied customer may experience dissonance and may avoid repurchasing or recommending
the product. Post-decision evaluation, therefore, plays a critical role in future buying behavior
and influences a company’s reputation and customer retention.

Market Q: What is a market, and what are the different forms it can take?

A market is a place where buyers and sellers engage in the exchange of goods and services for
a price. It can be physical, like a departmental store, or virtual, like an online market. The term
"market" can also refer to specific contexts like the stock exchange, a particular commodity
market like grain or vegetables, or even a global industry like the oil market.

Q: What is marketing, and what are the four Ps of marketing?

Marketing encompasses a wide range of operations, including research, designing, pricing,

promotion, transportation, and distribution. It aims to identify customer needs to meet
demands and deliver satisfaction. The four Ps of marketing – product, place, pricing, and
promotion – are categories that help marketers in these efforts.

Q: How do the goals of marketing focus on the customer experience and relationships?

The main goals of marketing are delivering the best customer experience and establishing,
maintaining, and growing relationships with customers. By understanding and meeting
customer needs, businesses aim to create value and satisfaction, fostering loyalty and long-term
relationships.

Q: What are the different orientations in product marketing, and how have they evolved?

Product marketing orientations have evolved around different dimensions:

Product Orientation: Focuses on quality, performance, design, or features, believing that buyers
choose the best products.

Production-Oriented: Emphasizes low price, assuming customers choose affordable products.

Sales-Oriented: Relies on advertisement, sales, and promotion to persuade customers to

purchase.

Customer or Market-Oriented: Prioritizes efforts on customers, gathering and using

information to create better value propositions. These orientations reflect different beliefs and
strategies in approaching the market and customers.
 Q: What is a customer-centric business, and why is it significant in modern times?

A customer-centric business continuously learns from its customers' needs and market
dynamics. It prioritizes efforts on customers, focusing on creating better value propositions. In
modern times, success for many businesses lies in customer-centric approaches, as they align
products and services closely with customer preferences and expectations, enhancing
satisfaction and loyalty.

Product Q: What is a product and what are the characteristics of products?

In business, a product can be either a tangible good or an intangible service or experience.

Business products have certain characteristics as follows:

Products are either tangible or intangible: Businesses offer products that can be categorized as
tangible or intangible. Tangible products, like cars or books, can be physically handled and seen.
In contrast, intangible products, such as telecom services or insurance, do not have a physical
presence.

Product has a price: The pricing of a product is influenced by various factors, including supply
and demand dynamics, market conditions, the product's quality, marketing strategies, and the
target audience. In competitive markets, businesses often focus on cost reduction to ensure
profitability, given the prevailing market price

Products have certain features that deliver satisfaction: Features are specific components of a
product designed to satisfy consumer needs. They play a pivotal role in determining the
product's price and are often adjusted during its development to enhance the user experience.
These features, which can range from functional attributes to design elements, contribute to
the overall experience a customer has from the point of purchase to the end of the product's
useful life.

Product is pivotal for business: Products are central to business operations. They drive various
processes, including production, sales, marketing, and logistics, making them the cornerstone
around which businesses strategize and operate.

A product has a useful life: Every product has a defined usable life, post which it might require
replacement. Additionally, products undergo a life cycle, transitioning through stages like
introduction, growth, maturity, and decline. As products reach the end of their life cycle, they
might need reinvention or might become obsolete, as seen with fixed-line telephones being
replaced by mobile phones.

Product Life Cycle Q: What is the Product Life Cycle (PLC)?

(PLC)
The Product Life Cycle is an S-shaped curve that illustrates the relationship between sales and
time for a product. It consists of four stages: introduction, growth, maturity, and decline. This
concept can be applied to both products and businesses, providing a roadmap for strategic
decision-making.

Q: What are the four stages of the PLC, and what characterizes each stage?

Introduction Stage: This is marked by slow sales growth, almost negligible competition, relatively
high prices, and limited markets. The growth in sales is slow due to lack of customer awareness.

Growth Stage: During this phase, demand expands rapidly, prices fall, competition increases,
and the market expands. Customers become aware of the product and show interest in
purchasing it.
 Maturity Stage: This stage experiences a slowdown in the growth rate, with tough competition
and market stabilization. Profits may decrease due to competition, and organizations focus on
maintaining stability.

Decline Stage: This final stage witnesses a sharp downward drift in sales and profits, often
because a new product replaces the existing one. Strategies may include diversification or
retrenchment to remain in the market.

Q: How can businesses use the PLC concept strategically?

The PLC approach allows businesses to diagnose the stages of various products or businesses
within their portfolio. By identifying the specific stage, companies can make strategic choices
tailored to each stage. For example:

Introduction and Growth Stages: Expansion may be feasible.

Maturity Stage: These businesses can be used as sources of cash for investment in other areas
needing resources.

Decline Stage: Strategies like selective harvesting or retrenchment may be adopted.

By utilizing the PLC concept, a balanced portfolio of businesses can be developed, enabling
companies to allocate resources and strategies more effectively based on each product's or
business's stage in its life cycle.

Value Creation Q: What is value creation, and how does it relate to products and services?

Value creation is the process by which a company increases the worth of goods, services, or
even the entire business system. It's measured by various attributes like quality, availability,
durability, performance, and services that customers are willing to pay for. The concept
emphasizes providing more worth to customers and has expanded to include value creation for
stakeholders.

Q: How does value creation give a competitive advantage to a business?

Value creation gives businesses a competitive advantage by influencing the value customers
place on products, the price charged, and the costs of creating those products. By enhancing the
perceived value and utility of products or services, businesses can demand higher prices,
differentiate themselves from competitors, and earn above-average profits or returns.

Q: What are the strategies for achieving competitive advantage through value creation, as
described by Michael Porter?
 Michael Porter argues that competitive advantage can be generated through differentiation or
cost advantage. Differentiation means providing superior value through special product
features, quality, or after-sales customer service, allowing a company to demand higher prices.
Cost advantage focuses on achieving lower production costs while maintaining comparable
quality. These strategies influence a company's ability to succeed in the long run.

Q: What is the relationship between value creation and consumer perception?

Value creation is closely tied to consumer perception. The value consumers place on a product
reflects the utility or satisfaction they gain from it, which may be more than its actual cost. This
excess amount, where consumers value the product or service more than it costs them, is
referred to as value creation. It emphasizes the importance of understanding customer needs
and preferences in shaping products and services that resonate with the target audience.

Value Chain Q: What is Value Chain Analysis (VCA) and Who introduced the concept of Value Chain
Analysis (VCA) Analysis?

VCA is a method used by strategists to break down the processes a business employs, aiming to
understand how each step adds or subtracts value from the end product or service. It is used to
evaluate and optimize processes, enhancing efficiency, and creating a competitive advantage.

The concept of Value Chain Analysis was linked to an analysis of an organization's competitive
advantage by Michael Porter.

Q: How does value chain analysis help in understanding value creation?

Value chain analysis is a tool used to examine the origin of competitive advantage. It divides
organizations into two strategically important groups of activities: primary activities and
supporting activities. By analyzing these activities, businesses can comprehend potential
sources for differentiation and understand the organization's cost behavior. It provides insights
into how value is added at each stage of production and helps in identifying areas where value
can be maximized.

Q: Why is Value Chain Analysis important?

Companies that generate more value are more likely to profit than those that generate less
value.

VCA helps businesses identify areas for improvements within their processes. It allows
companies to see where cost improvements can be made, where value creation can be
improved, and how to organize resources and activities into systems that create value for
consumers.
Q: What are the primary activities in the value chain?

The primary activities include:

1. Inbound Logistics: Activities related to receiving, storing, and distributing the inputs, such
as transportation and warehousing.

2. Operations: Transformation of inputs into the final product or service, such as machining,
packaging, assembly, testing, etc

3. Outbound Logistics: Collecting, storing, and distributing the product to customers.

For tangible products this would be warehousing, materials handling, transport, etc.
In the case of services, it may be more concerned with arrangements for bringing customers
to the service, if it is a fixed location (e.g. sports events).

4. Marketing and Sales: Activities that make consumers aware of and able to purchase the
product/service.

5. Service: Activities that enhance or maintain the value of a product/service. such as

installation, repair, training and spares.

Q: What are the support activities in the value chain?

Each of these groups of primary activities are linked to support activities include:

1. Procurement: Processes for acquiring the various resource inputs.

2. Technology Development: Technologies concerned directly with the product or with

processes.

3. Human Resource Management: Activities involved in recruiting, managing, training, and

rewarding people within the organization.
 4. Infrastructure: Systems like planning, finance, quality control, and information
management that are crucial to an organization's performance. Infrastructure also consists
of the structures and routines of the organization which sustain its culture.

Q: How can organizations of different sizes benefit from VCA?

Value Chain Analysis can be used by businesses of all sizes, from sole proprietorships to
multinational organizations. By examining each activity in the value chain, organizations can
identify and implement improvements that align with their unique processes and needs, thereby
gaining a competitive edge in the market.

Industry Q: What is Industry Environment Analysis ?

Environment
Analysis Industry Environment Analysis is a vital part of strategic planning, where businesses assess the
key characteristics of the industry they operate in. It involves analyzing the competitive
landscape, identifying rival firms, understanding change drivers, evaluating competitive success,
and projecting profits. This analysis enables businesses to understand the state of the industry
and to make informed decisions regarding their strategic approach.

Q: What is the primary goal of Industry Environment Analysis?

The main goal of Industry Environment Analysis is to estimate the competitive pressures a
business is facing and anticipate future pressures. This helps in determining whether the
industry is attractive, profitable and assists in aligning strategies with the changing industry
conditions.

Attractiveness of Q: What factors are considered when assessing the attractiveness or unattractiveness of an
Industry industry, and why is this assessment important?

Assessing the attractiveness of an industry is vital for understanding growth and profit
prospects, and for making informed investment decisions. Factors considered include:

The industry's growth potential: Is it viable for the future?

Current competition and profitability: Will competitive forces become stronger or weaker?

Industry profitability: How will prevailing driving forces affect it?

The competitive position of an organization: Will it grow stronger or weaker?

Potential to capitalize on weaker rivals: Can vulnerabilities be exploited?

Ability to defend against factors making the industry unattractive: Can challenges be
counteracted?

Degrees of risk and uncertainty: What are the future risks?

Severity of industry-wide problems: What challenges are faced?

Impact on success in other industries: How does participation affect other business interests?

Understanding these factors helps companies decide whether an industry presents an attractive
business opportunity or if its prospects are gloomy.

Q: How do assessments of industry attractiveness influence strategic decisions, and what

actions might companies take based on these assessments?
 Assessments of industry attractiveness guide strategic decisions, influencing investment,
growth, and competitive strategies. If an industry is deemed attractive, participants may
strengthen long-term positions, expand sales efforts, and invest in facilities and equipment. If
unattractive, strong companies may invest cautiously, protect long-term competitiveness,
acquire smaller firms at the right price, or consider diversification. Weak companies might
consider merging with rivals or look for diversification opportunities outside the industry.
Attractiveness is relative, and what may be unattractive to weak competitors may be attractive
to strong ones. The assessment helps in shaping the strategic direction and decisions of the firms
within the industry.

Q: Is the attractiveness of an industry the same for all firms within it?

No, attractiveness is relative, not absolute. An industry environment that may be unattractive
to weak competitors might be attractive to strong competitors.

Competitive Q: What is a competitive landscape, and why is it crucial for a business?

Landscape
The competitive landscape refers to the business environment in which a company operates,
characterized by the presence of competitors, both direct and indirect. It encompasses
understanding competitors' vision, mission, core values, niche market, strengths, weaknesses,
and market share.

Analyzing the competitive landscape is crucial for a business as it allows for:

- Identifying Competitive Threats and Opportunities: By understanding the strengths,

weaknesses, and strategies of competitors, a company can identify areas where it can compete
effectively or exploit competitors' weaknesses.

- Strategic Planning: It informs strategic decision-making, guiding a company in developing and

implementing strategies that will enhance its competitive advantage.

- Adapting to Market Changes: Constant monitoring helps in quickly adapting to changes in

market trends and competitors' actions, keeping the company ahead or at least in line with the
industry.

Q: What are the steps to understand the competitive landscape?

Understanding the competitive landscape involves a systematic process that includes the
following steps:

1. Identify the Competitor: Recognize who the competitors are in the industry, and gather data
about their market share.

2.Understand the Competitors: Investigate the products and services offered by the competitors
using various sources like market research reports, social media, and industry insights.

3. Determine the Strengths of the Competitors: Analyze what the competitors do well, their
financial positions, cost and price advantages, likely future actions, distribution network, and
human resource strengths.

4. Determine the Weaknesses of the Competitors: Identify areas where competitors are lacking
or weak through consumer reports, reviews, and financial analysis.

5. Put all of the Information Together: Compile all the information to infer what the competitors
are not offering and identify gaps that the firm can fill. Analyze the information to understand
the improvements needed and how to exploit the weaknesses of competitors.
Competitive Q: What is competitive strategy, and why is it vital for a business?
Strategy
Competitive strategy refers to the plan and actions that a business takes to compete effectively
in its industry and achieve a competitive advantage over its rivals. It encompasses the ways a
company seeks to create and sustain a unique and valuable position by offering distinct
products, services, or customer experiences. A well-designed competitive strategy is vital for a
business because it helps the organization to stand out in the market, draw customers, build
long-term profitability, and safeguard its competitive edge against competitors.

Q: How does the competitive strategy of a firm involve both creation and protection of
competitive advantage?

The competitive strategy of a firm involves both the creation and protection of competitive
advantage:

- Creation of Competitive Advantage: It involves identifying and leveraging unique capabilities,

resources, or positioning that allow the company to outperform competitors. This could be
through cost leadership, differentiation, innovation, customer relationships, etc.

- Protection of Competitive Advantage: Once created, the competitive advantage must be

protected and sustained. This may involve constant innovation, intellectual property protection,
maintaining quality and performance, and building barriers to entry for competitors. Without
protection, rivals may replicate the advantage, making it less unique and valuable.

Porter's Five Forces Q: What is Porter's Five Forces Model, and how is it used in understanding competition?
Model
Porter's Five Forces Model is a framework used to analyze the competitive forces within an
industry that affect its attractiveness and profitability. It consists of five forces that examine
competition, suppliers, buyers, the threat of substitutes, and the threat of new entrants. By
analyzing these factors, businesses can understand the competitive landscape and make
strategic decisions.

Q: What are the five forces in Porter's model?

The five forces are:

1. Competitive rivalry within the industry.

2. Threat of new entrants coming into the market.

3. Threat of substitutes or alternative products.

4. Bargaining power of suppliers who provide raw materials.

5. Bargaining power of buyers who purchase the products.

Q: How can the five-forces model be used to analyze competition in an industry?

The five-forces model, developed by Michael E. Porter, is a powerful tool used by strategists to
analyze the competitive forces within an industry by undertaking the following steps

Step 1: Identify the Specific Competitive Pressures Associated with Each of the Five Forces
The five forces include:

Threat of New Entrants: Examine barriers to entry like capital requirements, brand loyalty,
government regulations, etc.

Bargaining Power of Buyers: Look at the influence customers have over prices and terms.

Bargaining Power of Suppliers: Consider the power suppliers have over prices and supply
conditions.

Threat of Substitute Products or Services: Evaluate the availability of alternatives that might
attract customers away from the industry's products.

Rivalry Among Existing Competitors: Analyze the degree of competition within the industry.

Step 2: Evaluate How Strong the Pressures Comprising Each of the Five Forces Are

For each of the forces, analyze how fierce, strong, moderate to normal, or weak the pressures
are. This requires qualitative and quantitative analysis. It's not a simple process, and strategists
must use data, research, market trends, and expert judgment to classify each force. The five
forces are not static and might change as the industry evolves, so continuous monitoring and
evaluation are required.

Step 3: Determine Whether the Collective Strength of the Five Competitive Forces is Conducive
to Earning Attractive Profits

After assessing each force, one can analyze the combined effect to gauge the overall
attractiveness of the industry. If the forces are generally weak, there may be potential for high
profit. If they are strong, profit potential might be low.

In conclusion, by undertaking these three steps, a strategist can gain valuable insights into the
competition in a given industry, helping inform decisions and strategy. It's a complex process
that requires careful analysis and continuous evaluation as markets and conditions change.
Q: What is the threat of new entrants, and how does it impact the existing firms in an industry?

The threat of new entrants refers to the potential for new competitors to enter an industry. This
can reduce profitability for existing firms by increasing supply and competition, even at lower
prices. New entrants can erode existing firms' market share, place a limit on prices, and affect
the overall profitability of existing players. The bigger the new entrant, the more severe the
competitive effect.

Q: What are the common barriers to entry that existing firms can use to discourage new
entrants, and how do they work?

Common barriers to entry include:

Capital Requirements: Entering an industry may require a large amount of capital for things like
manufacturing, marketing, and distribution. Firms lacking these funds are effectively barred,
enhancing the profitability of existing firms.

Economies of Scale: In industries where economies of scale are prevalent, larger firms can
produce high volumes of goods at successively lower costs. This can discourage new entrants
who may not have the capacity to produce at the same volume and cost.

Product Differentiation: Existing firms may have unique products that are physically or
perceptually different. Creating such differences may be too costly for new entrants, especially
in industries like personal care products and cosmetics.

Switching Costs: If buyers incur substantial financial or psychological costs in switching between
firms, they may be reluctant to change. This includes costs like testing a new product,
negotiating new contracts, or modifying facilities for product use.

Brand Identity: Building a recognizable brand takes substantial resources over a long period.
New entrants may find it difficult to build brand identity, especially for high-cost products.

Access to Distribution Channels: Existing firms may have control over physical distribution
channels, and they can impede their use by new firms. Even with the growth of the internet,
control over distribution channels can sustain a barrier to entry.

Possibility of Aggressive Retaliation: The mere threat of aggressive actions like reducing prices
or increasing advertising budgets by existing firms can deter new entrants. For example, the
introduction of products by a new firm may lead incumbent firms to reduce their product prices
and increase their advertising.

These barriers collectively work to slow down or impede the entry of new firms, protecting the
market share and profitability of existing companies. They are strategic tools that can be used
to maintain a competitive edge in the market.

Q: What is the bargaining power of buyers, and how does it influence the competitive
condition of an industry?

The bargaining power of buyers refers to the ability of customers to negotiate with producers
for lower prices or better services. This force can become significant depending on the
possibilities of buyers forming groups or cartels, especially in the industrial products sector. The
bargaining power of buyers can influence not only the prices that a producer can charge but also
the costs and investments required to meet the demands of powerful buyers.

Q: Under what conditions is the leverage of buyers particularly evident, and how does it affect
the industry?
The leverage of buyers is particularly evident when:

Buyers have full knowledge of the products and their substitutes: When buyers are well-
informed about the products, their sources, and available alternatives, they can negotiate more
effectively.

They are big buyers: If buyers spend a significant amount on the industry's products, they can
exert more pressure on producers to secure favorable terms.

The industry's product is not critical to the buyer's needs: If the product is not essential to the
buyer, and there are more buyers than suppliers, they can easily switch to substitutes. This
ability to switch enhances their negotiating power.

These conditions can affect pricing strategies, cost structures, and the level of investment
required to meet customer demands. It shapes the competitive landscape of an industry, and
existing firms must strategize accordingly to maintain profitability and competitive positioning.

Q: What is the bargaining power of suppliers, and how does it influence an industry?

The bargaining power of suppliers refers to the ability of suppliers to negotiate terms with
companies. This power can be considerable, especially if the supplier's offering is specialized or
if the suppliers are limited in number. The bargaining power of suppliers determines the cost of
raw materials and other inputs, influencing the attractiveness and profitability of the industry.
When suppliers have significant bargaining power, they can affect the cost structure and
competitive dynamics within the industry.

Q: Under what conditions can suppliers command significant bargaining power, and how does
this affect the industry?

Suppliers can command significant bargaining power over a firm when:

Their products are crucial to the buyer, and substitutes are not available: This gives suppliers
leverage as buyers have limited alternatives.

They can erect high switching costs: If it's expensive or difficult for buyers to switch to a different
supplier, the existing suppliers have more negotiating power.

They are more concentrated than their buyers: If there are fewer suppliers than buyers,
suppliers can exert more influence over terms and pricing.

These conditions can influence the profitability of an industry by affecting the cost of raw
materials and other inputs. Firms must be aware of and strategize around these factors to
maintain competitive positioning and profitability.

Q: What is the nature of rivalry among existing players in an industry, and how does it impact
the industry's attractiveness and profitability?

The rivalry among existing players is the competition that most people understand as the core
of business competition. It influences strategic decisions at various levels, including pricing,
advertising, and cost pressures. The intensity of rivalry can directly affect profitability by
influencing the costs of suppliers, distribution, and attracting customers. The more intense the
rivalry, the less attractive the industry becomes, often leading to cutthroat competition and low
profitability.

Q: What are the specific conditions that influence the intensity of rivalry, and how do they
affect industry profitability?
Several conditions can shape the intensity of rivalry in an industry, each having unique effects
on profitability:

Industry Leader: A strong industry leader with significant financial resources can discourage
price wars by threatening or engaging in aggressive price-cutting. Smaller rivals often avoid
initiating such contests, knowing the leader can outlast them. This leadership can stabilize
pricing but becomes less effective with more competitors.

Number of Competitors: The more rivals in the industry, the harder it is for a leader to exert
pricing discipline. More players mean more complexity in communicating expectations and
maintaining pricing stability, often leading to more aggressive competition.

Fixed Costs: Industries with high fixed costs create motivation for firms to utilize their capacity
fully. When there is excess capacity, firms may cut prices to increase sales volume, leading to
lower profitability for all industry participants.

Exit Barriers: If it's challenging for firms to leave the industry due to specialized assets or other
factors, rivalry may remain intense as competitors continue to exert pressure on pricing and
profitability. Lower exit barriers often lead to higher profitability as less competitive firms can
exit more easily.

Product Differentiation: Opportunities for differentiation allow firms to insulate themselves

from price wars. By offering unique products or features, firms can command higher prices and
enjoy greater profitability. In contrast, industries with undifferentiated commodities often face
more intense rivalry and lower profitability.

Slow Growth: In industries experiencing slow growth, competition for existing market share
becomes more fierce. Firms may fight harder to grow or even maintain their positions, leading
to increased rivalry and often reduced profitability.

Q: What is the threat of substitutes, and how can it become a major constituent of
competition in an industry?

The threat of substitutes refers to the potential for alternative products to replace existing ones
in an industry. Substitute products that offer a price advantage or performance improvement
can drastically alter the competitive landscape. For example, synthetic fiber became a substitute
for coir. In industries with substantial investment in R&D, threats from substitutes can be
expected. Substitutes can limit prices and profits in an industry, sometimes suddenly changing
the competitive character.

Q: How does the availability of substitutes influence industry profitability, and can you
provide examples of such substitutes?

The availability of substitutes can significantly influence industry profitability by offering

alternatives that perform the same or nearly the same function as existing products. This can
put pressure on prices and profits as consumers may choose the substitute over the existing
product. Examples include real estate, insurance, bonds, and bank deposits, which are clear
substitutes for common stocks, as they represent alternative ways to invest funds.
Understanding and monitoring potential substitutes is vital for firms to maintain
competitiveness and profitability in their industry.

Q: How can the five forces together determine industry attractiveness and profitability?

The collective strength of these forces influences factors like cost, investment, and more that
decide industry profitability. Understanding these forces allows a business to gauge its
 strengths, weaknesses, and future opportunities within the industry, helping them adapt their
strategies to remain competitive.

Experience Curve Q: What is the experience curve, and what are its key features and implications in an industry?

The experience curve, akin to a learning curve, explains the efficiency increase gained by
workers through repetitive productive work. It's based on the concept "we learn as we grow,"
meaning unit costs decline as a firm accumulates experience in cumulative volume production.

Key features include:

Growth and Experience: As business organizations grow, they gain experience.

Competitive Advantage: Experience may provide an advantage over competition and act as a
key barrier to entry.

Stronger "Experience Effect": Large and successful organizations possess a stronger experience
effect, leading to lower unit costs and a competitive cost advantage. The implications are that
larger firms tend to have lower unit costs compared to smaller companies, benefiting from
factors like learning effects, economies of scale, product redesign, and technological
improvements.

Q: How is the concept of the experience curve relevant in strategic management, and can you
provide an example?

The concept of the experience curve is relevant in strategic management as it influences

competitive positioning and market entry. It's considered a barrier for new firms contemplating
entry into an industry and is used to build market share and discourage competition. The
experience curve can guide strategies like market niche approaches or segmentation based on
demography or geography. An example of the experience curve phenomenon working is in the
Indian automobile industry with Maruti Suzuki. Their accumulated experience has likely
contributed to their competitive positioning and influenced the strategic choices of competitors.

Key Success Factors Q: What are Key Success Factors (KSFs), and why are they vital for a business?
(KSFs)
Key Success Factors (KSFs) are specific elements that are essential for a company's ability to
compete and succeed in the marketplace. They are critical attributes, resources, competencies,
or business outcomes that spell the difference between success or failure in a particular
industry.
Example: In apparel manufacturing, the KSFs are appealing designs and colour combinations (to
create buyer interest) and low-cost manufacturing efficiency (to permit attractive retail pricing
and ample profit margins).

Q: How can businesses identify Key Success Factors for their industry?

Identifying Key Success Factors requires in-depth analysis and understanding of the industry and
competitive environment. The answers to the following questions can help in identifying KSFs:

• Customer Preferences: What are the critical product attributes or service aspects that
influence customers' choices among competing brands? What do customers value most?

• Required Competencies and Resources: What resources, capabilities, or competencies does

a company need to be successful in the industry, such as quality of product, cost of service,
human capital, etc.?

• Sustainable Competitive Advantage: What does it take for companies to achieve and
maintain a long-term competitive edge in the industry?

These questions require detailed market research, competitor analysis, customer insights, and
evaluation of internal capabilities to answer effectively.

Q: Why is determining the industry's key success factors (KSFs) crucial, and how can it
influence a company's competitive strategy?

Determining the industry's KSFs is essential for understanding what's vital for competitive
success. Managers need to discern which resources are competitively valuable and which
factors are pivotal to success. Misunderstanding these factors can lead to a misguided strategy.
However, with a clear grasp, organizations can focus on these KSFs to outperform rivals and
achieve a sustainable competitive advantage.

Q: How do KSFs vary across industries and time, and why is it essential for managers to
prioritize them correctly?

KSFs differ across industries and can change within the same industry due to evolving driving
forces and competitive conditions. Typically, an industry has three or four KSFs at any time, with
one or two being paramount. Managers should prioritize these factors to ensure long-term
success and avoid diluting focus by listing minor factors.
 Multiple Choice Questions
1. KSFs stand for:
(a) Key strategic factors
(b) Key supervisory factors
(c) Key success factors
(d) Key sufficient factors

2. Competitive landscape requires the application of-

(a) Competitive advantage
(b) Competitive strategy
(c) Competitive acumen
(d) Competitive intelligence

3. The term PESTLE analysis is used to describe a framework for analyzing:

(a) Macro Environment
(b) Micro Environment
(c) Both Macro and Micro Environment
(d) None of above

4. ‘Attractiveness of firms’ while conducting industry analysis should be seen in-

(a) Relative terms
(b) Absolute terms
(c) Comparative terms
(d) All of the above

5. What is not one of Michael Porter’s five competitive forces?

(a) New entrants
(b) Rivalry among existing firms
(c) Bargaining power of unions
(d) Bargaining power of suppliers

6. Which of the following constitute Demographic Environment?

(a) Nature of economy i.e. capitalism, socialism, Mixed
(b) Size, composition, distribution of population, sex ratio
(c) Foreign trade policy of Government
(d) Economic policy i.e. fiscal and monetary policy of Government

7. All are elements of Macro environment except:

(a) Society
(b) Government
(c) Competitors
(d) Technology

8. The emphasis on product design is very high, the intensity of competition is low, and the market
growth rate is low in the ______ stage of the industry life cycle.
(a) Maturity
(b) Introduction
(c) Growth
(d) Decline
 Scenario Based Questions
1. Suresh Singhania is the owner of an agri-based private company in Sangrur, Punjab. His unit is
producing puree, ketchups and sauces. While its products have significant market share in the
northern part of country, the sales are on decline in last couple of years. He seeks help of a
management expert who advises him to first understand the competitive landscape.

Explain the steps to be followed by Suresh Singhania to understand competitive landscape.

2. Eco-carry bags Ltd., a recyclable plastic bags manufacturing, and trading company has seen a
potential in the ever-growing awareness around hazards of plastics and the positive outlook of the
society towards recycling and reusing plastics.
A major concern for Eco-carry bags Ltd. are paper bags and old cloth bags. Even though they are
costlier than recyclable plastic bags, irrespective, they are being welcomed positively by the
consumers.

Identify and explain that competition from paper bags and old cloth bags fall under which category of
Porter’s Five Forces Model for Competitive Analysis?

3. Baby Turtle is a children's clothing brand that has been created a new age demand for washable
diapers. The major benefit for the brand has been that not many companies have shown interest in
the product, thinking it is not viable, however, customers, majorly working mothers are loving their
product. The core material needed for production is also used in many other water proofing products
in various industries. Baby Turtle sources this material from a renowned supplier at comparatively low
prices. Which of the five forces of competitive pressure would Baby Turtle experience due to above
setup and what are major factors that create such pressure for a product? Do you think Baby Shark
has an advantage in some way to fight off this pressure?

Descriptive Questions
1. Explain the concept of Experience Curve and highlight its relevance in strategic management.

2. Write a short note on Product Life Cycle (PLC) and its significance in portfolio diagnosis.

3. Explain Porter’s five forces model as to how businesses can deal with the competition.
 Chapter 3: Strategic Analysis: Internal Environment
Introduction This chapter will discuss the process of strategic analysis, a step in strategic planning where
information about the company's internal and external environments is gathered. This helps in
setting strategic goals and planning appropriate actions. We'll specifically look at factors in the
Internal environment and how they affect strategy. We'll also explore ways to identify and
adapt to challenging and changing Internal conditions.

Q: What are the Learning Outcomes?

1. Understanding Key Stakeholders

a. Mendelow’s Matrix
2. Strategic Drivers
a. Industry and Markets
b. Customers
c. Product/Services
d. Channels
3. Role of Resources and Capabilities: Building Core Competency
a. Criteria for building a Core Competencies (CC)?
4. Combining External and Internal Analysis (SWOT Analysis)
5. Competitive Advantage: Using Michael Porter’s Generic Strategies
a. Sustainability of Competitive Advantage
b. Michael Porter’s Generic Strategies

Internal Q: What is the internal environment of an organization ?

environment
The internal environment refers to the sum total of people – individuals and groups,
stakeholders, processes- input-throughput-output, physical infrastructure- space, equipment
and physical conditions of work, administrative apparatus- lines of authority & power,
responsibility, accountability and organizational culture intangible aspects of working-
relationships, philosophy, values, ethics- that shape an organization’s identity.

Q: Who are the stakeholders in the internal environment and why is understanding this
environment crucial?

Internal environment is specific to each organisation. It is based on its structure and business
model and includes all stakeholders like top management, investors, employees, board of
directors, investors, etc.

Internal environment also involves understanding of the ethics, principles, work environment,
employee friendliness, confidence of investors and other philosophical and cultural aspects of
business, which aim for the success of the organisation.

Thus, it is even more important to understand the internal environment from a strategic analysis
perspective.
Key Stakeholders Q: Who are stakeholders?

Any person/group of individuals or entities, internal or external, that have an interest in, or
impact on, the business or corporate strategy of an organization. They possess the power to
influence the strategy or performance of that organization.

Stakeholders include management, employees, shareholders, customers, and vendors.

Depending on the organization and its context, governments, labor unions, local groups, and
other entities might also be considered stakeholders.

Q: Why is it important to identify key stakeholders and how stakeholder interests might
influence an organization's strategy?

It is important to first identify the key stakeholders. Each stakeholder exerts a different level of
influence and can have differing levels of interest in the organisation.

For Example: In the healthcare innovation sector, there's often a long gap between initial
investment in research and achieving a commercial outcome. Shareholders, primarily focused
on quick profits, might be hesitant to support long-term research investments, fearing they
won't see returns in the near future. This clash of objectives between long-term innovation and
short-term profitability can influence the organization's strategic decisions.

Since the expectations of key stakeholders can influence the organisation’s strategy, a clash of
objectives may have unfavourable consequences for the organisation.

Mendelow’s Matrix Q: What is the Mendelow Stakeholder matrix?

The Mendelow Stakeholder matrix, also known as the Stakeholder Analysis matrix or the Power-
Interest matrix, is a framework designed to help manage and prioritize key stakeholders based
on their power (the ability to influence organisation strategy or resources) and interest (how
interested they are in the organisation succeeding) in a organization.

Q: How does Mendelow suggest analyzing stakeholders?

Mendelow recommends analyzing stakeholders based on two main criteria:

1. Power: The ability to influence the organization's strategy or resources.

2. Interest: how interested they are in the organisation succeeding

For Example: A big shareholder is likely to have high power and high interest in the organisation,
whereas a big competitor would have high power to impact strategy, but potentially less
Interest in success of organisation.

Based on Power and Interest, stakeholders are on categorised into four groups by Mendelow’s
Matrix;

1. Keep Satisfied Stakeholders (High Power, Less Interest):

• Why they matter: Even though these stakeholders might not have a high level of
interest in the company's day-to-day operations, they have significant power. If they
become dissatisfied, they can create obstacles.

• Strategy: Regular updates and communications should be provided to ensure their

needs are met and any concerns addressed. However, they don't necessarily need in-
depth details about everything.

• Examples: Banks (wanting financial stability), regulators (who ensure compliance but
might not be interested in the specifics of business strategy) and Customers.

2. Key Players Stakeholders (High Power, High Interest):

• Why they matter: Their high power and interest make them central to the
organization's success. Keeping them engaged and informed is crucial.

• Strategy: Maintain open lines of communication, frequently engage them in decision-

making processes, and address their feedback and concerns proactively.

• Examples: Board of Directors (overseeing and guiding strategy), major shareholders

(who have invested significantly and want good returns), and CEOs (who guide the
company's strategy and execution).
3. Low Priority Stakeholders (Low Power, Less Interest):

• Why they matter: While they have minimal direct influence or interest, it's still essential
to monitor them as their interest or power can change over time.

• Strategy: Maintain a passive relationship. Monitor their activities and sentiments but
don't invest extensive resources.

• Examples: General media outlets (who may not have a particular interest unless a major
event occurs) or industry researchers (who analyze broad trends rather than specific
company details).

4. Keep Informed Stakeholders (Low Power, High Interest):

• Why they matter: Their high interest means they're tuned into the company's actions
and can provide feedback, even though they might not have the power to enforce
change.

• Strategy: Regular communication to keep them in the loop, ensuring their concerns are
heard and addressed, even if they don’t directly impact decision-making.

• Examples: Frontline employees (who implement decisions but don't make them),
suppliers (who might be highly interested in the company’s operations but don’t have
significant power over its strategy), and local community groups (who are affected by
the company's actions but might not have significant influence).

Q: Why is managing stakeholders crucial in an Organisation?

He suggests identifying which stakeholders are incredibly important. Managing stakeholders is

vital because a business often involves balancing the competing interests of various
stakeholders. Determining who needs information, who should provide feedback, and who has
the final say can be complex. Properly managing these interests is critical to the success of an
Organisation.

So Metrics to define the importance being High Power and High Interest which management
would need to manage closely, while investing a lot of time and resources.

For Example:

- CEO is likely to have more Power to influence the work and also high interest in it being
successful. Keeping them informed almost daily should be a priority.
- research institutes is likely to have low power and low interest seeking an organisation data
should be monitored rarely and minimum effort expended on them in terms of time and
money.

Q: Why is it essential to be aware of the dynamic nature of the stakeholder environment?

The stakeholder environment is highly dynamic, meaning stakeholders can shift between
categories based on changes in the external environment or organizational actions. For
instance, if an organization breaches a regulation like GST compliance, the regulatory body
might move from being a "KEEP SATISFIED" stakeholder to a "KEY PLAYER." Similarly, media
houses might shift from "LOW PRIORITY" to "KEEP INFORMED."

Therefore, it's crucial to re-analyze the Mendelow's grid regularly or when there's a significant
change in the environment to manage stakeholders effectively.
Internal analysis Q: What is the way to assess the internal performance of a business?

An important aspect of internal analysis is assessing the current performance of the business.

There can be varied ways to assess the current performance of a business and it is highly
subjective based on the managements metrics and ways of doing business. It can either be profit
driven, purpose driven or any other metrics that the management seems to fit in.

But in general, the strategic drivers consider what differentiates an organisation from its
competitors which include:

1. Industry and markets

2. Customers

3. Products/services

4. Channels

It involves analysis of the key markets in which the organisation operates, as well as its key
customers, the products and services it provides, the channels in which the products or services
are delivered, and the organisation’s competitive advantage. Some of these components are
interlinked, such as markets and products/services, and channels and key customers in each
channel.

Industry and Q: How are companies grouped together?

Markets
Companies are typically grouped together into industries based on their primary product or
service. This grouping allows for easier comparison and benchmarking against similar
businesses.

Example: Companies like Maruti, Mahindra, Tata Motors, TVS, and Bajaj Auto primarily sell
automobiles, so they are categorized under the Automotive Industry. Similarly, brands like Zara,
H&M, Marks & Spencer, Pantaloons, Westside, and Uniqlo, which primarily sell apparels and
accessories, are grouped under the apparels industry.

Q: What is the purpose of analyzing industries and markets and what is "Strategic Group
Mapping ?

The purpose of analyzing industries and markets is to determine an organization's position

relative to its competitors, which can vary in size, value, and market tenure. This knowledge aids
in strategic decision-making, identifying competitive advantages, and spotting areas of
improvement.

A tool used for industry and market analysis is "Strategic Group Mapping," which visually
represents organizations in a particular industry based on key strategic dimensions, allowing for
a clearer comparison and understanding of competitive landscapes.

Q: How is a strategic group defined and what is the procedure for constructing its map?

A strategic group comprises rival firms that have similar competitive approaches and market
positions. These firms can share various similarities, such as product-line breadth, price/quality
range, distribution channels, technological approaches, or services offered to buyers.

To construct a strategic group map:

1. Identify the competitive characteristics that differentiate firms in the industry typical
variables are price/quality range (high, medium, low); geographic coverage (local,
regional, national, global); degree of vertical integration (none, partial, full); product-
 line breadth (wide, narrow); use of distribution channels (one, some, all); and degree of
service offered (no-frills, limited, full)
2. Plot the firms on a two-variable map using pairs of these differentiating characteristics.
3. Assign firms that fall in about the same strategy space to the same strategic group.
4. Draw circles around each strategic group making the circles proportional to the size of
the group’s respective share of total industry sales revenues.

Q: Can you provide an example of how strategic group mapping works?

Certainly. Let's consider companies ABC, DEF, GHI, XYZ, and PQR, all selling laptops. On a
strategic group map:
• The Y-Axis represents the company's reputation.
• The X-Axis represents the range of their products.
• The size of each company's bubble indicates its proportional to the size of the each
company respective share of total industry sales revenues,
• The position on the X-Axis shows the breadth of their product range.
From the map, we can deduce that ABC, despite having fewer models, enjoys a strong
reputation. GHI, with a broad product range, is the most reputed. XYZ and GHI offer a similar
number of models, but GHI has a significantly better reputation.

Q: Why is strategic group mapping beneficial for strategists?

Strategic group mapping provides a visual representation that helps strategists understand their
competition concerning multiple factors simultaneously. This aids in making informed decisions
and crafting effective strategies.
Customers Q: Why is understanding different types of customers crucial for an organization and how
can they be categorized?

Understanding the various types of customers is essential because it helps organizations tailor
their products or services to meet specific needs. Different customers have different
requirements and may necessitate distinct sales models or distribution channels.

For Example: Headphones brand: Customers can be segmented based on their spending
capacity into high value buyers, medium value buyers, and low value buyers. But beyond just
spending capacity, they can also be categorized based on usage patterns (e.g., professional
musicians, casual listeners, or fitness enthusiasts), preferred features (e.g., noise-cancelling,
wireless, or with a microphone), or even demographics (e.g., age, gender, or location). Such

categorization not only helps businesses identify their primary target segments but also
pinpoints areas of potential growth or improvement.

As customers are often responsible for the generation of profits obtained by an organisation, it
is important to be able to collect and display data in order to show customer trends and
profitability. Issues with customers can be identified, and target areas for growth can be
pursued based on the findings.

Product/Services Q: What is the significance of analyzing products and services in relation to markets?

A product is a combination of goods and services offered to a target market. It encompasses

various aspects, including branding, packaging, warranties, and other features.

Analyzing products and services in relation to markets helps businesses identify their offerings'
performance and determine their competitive stance. It addresses the fundamental question:
What business are we in, and how can we outperform competitors in each product or service
category?

It requires strategies for managing its lifecycle, branding, packaging, and other features like
warranties. Strategies are crucial for managing existing products over time, introducing new
ones, and discontinuing unsuccessful products. As products and markets are dynamic, capturing
these dynamics through policies and strategies ensures that the business remains competitive
and relevant.

Products can be categorized based on various criteria, such as industrial or consumer products,
essentials or luxury items, and durables or perishables. They can also differ in size, shape, color,
packaging, brand names, after-sales service, and more.

Q: What is product differentiation, and why is it important?

Product differentiation is the process by which organizations distinguish their products from
those of competitors. This differentiation can be real or psychological. The goal is to persuade
customers to believe that a particular product is unique or superior, regardless of whether the
differentiation is tangible or merely perceived.

Example: shampoos like Head & Shoulders, Olay, Old Spice, and Pantene have different
branding but are all produced by the same company, P&G. The differentiation here is primarily
in branding and marketing, even if the core product might have similar attributes.

Q: How do organizations formalize product differentiation and why are brands significant in
the business world?

Organizations formalize product differentiation by assigning brand names to their products.

These brand names are often legally protected and serve as a unique identifier for the product
and the company behind it.

Brands play a pivotal role in building a product's and even a company's image. Through
advertising and other promotional strategies, customers become familiar with and loyal to
specific brands over time. This brand loyalty can lead to repeat purchases and a strong customer
base.

Q: What are the primary objectives to consider when designing pricing strategies for a new
product entering the market?

The three main objectives are:

1. Adopting a customer-centric approach in product creation.
2. Ensuring a reasonable margin over cost to produce sufficient returns.
3. Aiming to increase market share.

Q: Can you list and briefly explain various marketing strategies?

1. Social Marketing: Social Marketing refers to programs designed to increase the

acceptability of social ideas or practices among a target group. An example is the
campaign against smoking in Delhi, which educates about smoking zones and health
hazards.

2. Augmented Marketing: Augmented Marketing offers additional customer services and

benefits beyond the core product. Examples include movies on demand or online
computer repair services, which elevate customer service levels.

3. Direct Marketing: Direct Marketing uses advertising media that directly interacts with
consumers, prompting a direct response. This includes methods like catalogue selling,
e-mail, and TV shopping.

4. Relationship Marketing: Relationship Marketing focuses on creating, maintaining, and

enhancing strong relationships with customers. For instance, airlines might offer special
lounges for frequent flyers to strengthen bonds.

5. Services Marketing: Services Marketing applies marketing concepts to services, which

are intangible activities or benefits. It requires unique strategies due to characteristics
like inseparability and variability.

6. Person Marketing: Person Marketing promotes individuals, such as politicians or

celebrities, to influence attitudes and behaviors towards them.

7. Organization Marketing: Organization Marketing aims to influence attitudes and

behaviors towards an organization, practiced by both profit and non-profit entities.
 8. Place Marketing: Place Marketing promotes specific locations, like business sites or
tourist destinations, to influence attitudes and behaviors towards them

9. Enlightened Marketing: Enlightened Marketing supports best long-run performance of

the marketing system that is beyond the prevailing mindset; its five principles include
customer-oriented marketing, innovative marketing, value marketing, sense-of-mission
marketing, and societal marketing.

10. Differential Marketing: Differential Marketing targets multiple market segments with
separate offers for each. For Example: Hindustan Unilever Limited has Lifebuoy, Lux and
Rexona in popular segment and Dove and Pears in premium segment.

11. Synchro-marketing: Synchro-marketing adjusts When the demand for a product is

irregular due to season, some parts of the day, or on hour basis, causing idle capacity or
overworked capacities, synchro-marketing can be used to find ways to alter the pattern
of demand through flexible pricing, promotion, and other incentives. For Example:
offering discounted movie tickets on weekdays.

12. Concentrated Marketing: Concentrated Marketing targets a large share of one or a few
sub-markets, often taking the form of Niche marketing.

13. Demarketing: Demarketing uses strategies to reduce or shift demand, either

temporarily or permanently, especially when there's overfull demand. For instance,
regulating demand for zoological parks on crowded days.

Channels Q: In the context of business, what are channels and can you provide examples of how
different companies use them?

Channels refer to the distribution systems through which organizations distribute their products
or provide their services to customers. For instance:

Lakme - Distributes its products through retail stores, intermediary stores like Nykaa and
Westside, online platforms like Amazon, Flipkart, and its own website.

Boat Headphones - Primarily sells online via e-commerce platforms like Flipkart and Amazon.

Coca Cola - Available at retail shops nationwide and online platforms like Dunzo and Blinkit.

Q: Why are channels important for businesses?

Channels are vital because they determine a business's reach to its customers. A robust and
wide channel network can give a business a competitive edge, act as barriers to entry for new
players, and facilitate growth into new markets.

Q: What are the typical channels to consider?

There are three primary channels:

1. Sales Channel - The sales channel involves intermediaries responsible for selling the
product to the end user. It answers the question: Who sells to whom for the product to
reach the end user? An example is fashion designers using agencies to sell to retail
organizations.

2. Product Channel - The product channel concerns the intermediaries who physically
handle and transport the product from the producer to the end user. For instance,
Australia Post delivers and distributes online purchases from platforms like eBay.
 3. Service Channel - The service channel relates to entities providing necessary services to
support the product as it moves through the sales channel and post-purchase. For
products requiring installation or customer assistance, this channel is vital. An example
is a Bosch dishwasher sold in a showroom and installed by a Bosch-contracted plumber.

Q: Why is channel analysis crucial?

Channel analysis is essential for businesses aiming to scale up and expand into new geographies
and markets. It helps in understanding the best channels to reach new customers and ensures
alignment with the business's growth strategy.

Q: Can you provide examples illustrating the importance of channels?

• For a healthcare brand targeting elderly customers, offline channels where agents physically
reach out might be more effective since many elderly individuals may not use smartphones.

• A new drink brand aiming for market penetration would benefit from using multiple
channels, from physical stores to online campaigns, to maximize visibility and customer
reach.

• Brands like Coca Cola, HUL, Patanjali, Asian Paints, and Ola have created competitive
advantages through strong distribution channels. For instance, the widespread availability
of Coca Cola even in remote locations is a testament to its robust distribution network.

Capabilities or Core Q: What is a core competency?

Competency
A core competency is the collective learning in the organization, especially coordinating diverse
production skills and integrating multiple streams of technologies.

It represents a combination of technological and managerial know-how, wisdom, and

experience that can give an organization a competitive advantage over its competitors.

Note: Competency is a combination of skills and techniques rather than an individual skill or
separate technique. For core competencies, it involves integrating many resources, making the
whole organization utilize these individual capabilities.

For Example:

- Hindustan Unilever Limited (HUL): Marketing and Sales is a core competence, allowing HUL
to launch new brands successfully.

- Wal-Mart: Its core competency lies in lowering its operating costs, enabling it to price goods
lower than most competitors due to its large sales volume.

According to C.K. Prahalad and Gary Hamel, major core competencies are identified in three
areas -
- Competitor differentiation,
- Customer value, and
- Application to other markets

Q: What are the three main areas of core competencies as identified by C.K. Prahalad and
Gary Hamel?

The three main areas are:

1. Competitor differentiation: A company can consider having a core competency if it is

unique and difficult for competitors to imitate, giving the company a competitive edge.
 Although all companies operating in the same market would have the equal skills and
resources, if one company can perform this significantly better; the company has obtained
a core competence. For instance, Tesla's patented innovations in electric vehicles make it
hard for competitors to replicate.

2. Customer value: For a product or service to be considered a core competency, it must

deliver a fundamental benefit to the end customer. The service or the product has to have
real impact on the customer as the reason to choose to purchase them. If customer has
chosen the company without this impact, then competence is not a core competence, and
it will not affect the company’s market position. The essence is that the consumer should
value the differentiation offered.

3. Application to other markets: A core competency must be applicable across the

organization and not just in a specific area. Therefore, although some special capability
would be essential or crucial for the success of business activity, it will not be considered as
core competence if it is not fundamental from the whole organization’s point of view. Thus,
a core competence is a unique set of skills and expertise, which will be used throughout the
organisation to open up potential markets to be exploited.

If the three above-mentioned conditions are met, then the company can regard it competence
as core competency.

Q: Why are core competencies important for businesses?

Core Competence-based diversification reduces risk and investment and increases the
opportunities for transferring learning and best practice across business units. Core
technological competencies are also corporate assets; and as assets, they facilitate corporate
access to a variety of markets and businesses. For competitive advantage, a core technological
competence should be difficult for the competitors to imitate.

Criteria for building Q: What are the four criteria for building core competencies that lead to sustainable
Core Competencies competitive advantage?

Four specific criteria of sustainable competitive advantage that firms can use to determine those
capabilities that are core competencies. Capabilities that are:

1. Valuable: A capability is valuable when it allows a firm to exploit opportunities or avert

threats in its external environment. It creates value for customers by effectively capitalizing
on these opportunities.

For Example: Finance companies build a valuable competence in financial services. In

addition, to make such competencies as financial services highly successful require placing
the right people in the right jobs. Human capital is important in creating value for customers.

2. Rare: A capability is rare when very few competitors possess it. If many rivals have the same
capability, it's unlikely to provide a competitive advantage to any specific firm. Competitive
advantage results only when firms develop and exploit valuable capabilities that differ from
those shared with competitors.

3. Costly to Imitate: A capability that is challenging and expensive for competitors to replicate
provides a more sustainable competitive advantage. For example, while Intel's products
could eventually be imitated, its rapid R&D cycle time capability, which allowed it to bring
products to market ahead of competitors, was much harder to copy.
 4. Non-substitutable: Capabilities that do not have strategic equivalents are called non-
substitutable capabilities. This final criterion for a capability to be a source of competitive
advantage is that there must be no strategically equivalent valuable resources that are
themselves either not rare or imitable.

For Example: While many firms tried to emulate Tata's low-cost strategy, they couldn't
replicate the unique culture and top-tier talent that Tata possessed, making these
capabilities non-substitutable.

Example: Apple's operating system, iOS, fit into these criteria

Apple's iOS is valuable, rare, costly to imitate, and non-substitutable. Competitors recognize its
success, but none have been able to replicate Apple’s capabilities, which are also protected by
copyrights.

SWOT Analysis Q: What is SWOT analysis?

SWOT analysis is a analysis of a business’s strengths, weaknesses, opportunities and threats.

The primary objective of a SWOT analysis is to help organizations develop a full awareness of all
the factors (external as well as internal), involved in making a business decision.

The components are:

1. Strengths: Internal attributes that are advantageous to the business.

2. Weaknesses: Internal attributes that are disadvantageous or need improvement.

3. Opportunities: External factors that the business could capitalize on.

4. Threats: External factors that could harm the business.

Q: When should a company use it?

SWOT analysis shall be implemented before all company actions, whether it is exploring new
initiatives, revamping internal policies, considering opportunities to grow or alter a plan
midway. One shall also us SWOT analysis to discover recommendations and strategies, with a
focus on leveraging strengths andopportunities to overcome weaknesses and threats.
 Perform SWOT analysis just to check on the current landscape of your business to improve
business operations as needed. The analysis can show areas where an organization is
performing well, as well as areas that need improvement.

The benefit of this analysis is that it identifies the complex issues for an organisation and puts
them into a simple framework. While on the other hand, one of the major criticisms of this tool
is that it does not generally provide for evaluation of strengths, weaknesses, opportunities and
threats in the competitive context.

Therefore, an organsition while using this tool, SWOT analysis, should consider relative
competitors, and external factors affecting the organisation.

Q: SWOT Analysis is for Internal or External Environment?

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Internal analysis is more
focused on understanding the existing structure and competencies of the business, thus
highlighting the Strengths and Weaknesses, while External Analysis is about identifying and
preparing for uncontrollable which can either be Opportunities or threats.

Therefore, SWOT Analysis is a tool which is used for both Internal and External Analysis.

For Example: SWOT for a law firm

Competitive Q: What you mean by competitive advantage?

Advantage
It is a set of unique features of a company and its products that are perceived by the target
market as significant and superior to the competition.

Competitive advantage allows a firm to gain an edge over rivals when competing.

The competitive advantage is the achieved advantage over rivals when a company’s profitability
is greater than the average profitability of firms in its industry. It is achieved when the firm
successfully formulates and implements the value creation strategy and other firms are unable
to duplicate it or find it too costly to imitate.
Sustainability of Q: What determines the sustainability of a firm's competitive advantage and its ability to earn
Competitive profits from it?
Advantage
The sustainability of competitive advantage is determined by four major characteristics of
resources and capabilities:

1. Durability: This refers to the longevity of a competitive advantage. The sustainability of

an advantage depends on how quickly a firm's resources and capabilities deteriorate.
For instance, in fast-paced industries, product patents can quickly become obsolete.
However, some assets, like well-established consumer brand names, can have lasting
appeal.

2. Transferability: This pertains to the ease with which resources and capabilities can be
transferred between companies. If resources and capabilities are easily transferable,
the competitive advantage based on them is less sustainable. This is because rivals can
easily acquire the same resources and capabilities, eroding the firm's advantage.

3. Imitability: This is about how easily competitors can replicate the resources and
capabilities that give a firm its competitive advantage. If these resources and
capabilities cannot be purchased, they must be developed from scratch. The ease and
speed with which competitors can do this determine the sustainability of the
advantage. In some sectors, like financial services, innovations can be easily copied due
to a lack of legal protection. However, complex organizational capabilities that are
deeply embedded in a company's culture can be challenging to imitate.

4. Appropriability: This refers to the ability of a firm's owners to capture the returns from
its resources. It's not just about having a competitive advantage but also ensuring that
the returns from this advantage go to the rightful owners or investors. This ensures that
the rewards are channelled back to those who invested capital, rather than allowing
others to benefit without contributing.

In essence, for a firm to maintain a sustainable competitive advantage, it must ensure that its
resources and capabilities are durable, non-transferable, hard to imitate, and that the returns
from these resources are appropriately directed back to the firm.

Michael Porter’s Q: Who introduced the concept of generic strategies for competitive advantage and what are
Generic Strategies they?

Michael Porter introduced three generic (because they can be applied by any type or size of
business, including not-for-profit organizations) strategies for gaining competitive advantage:

1. Cost leadership - emphasizes on producing standardized products at a very low per-unit

cost for consumers who are price-sensitive

2. Differentiation - offering unique products and services for consumers who are less
price-sensitive.

3. Focus - catering to niche groups with specific tastes.

 Q: What does Porter emphasize regarding organizational resources and skills?

Porter stresses the importance of firms sharing resources and activities to enhance competitive
advantage by reducing costs or increasing differentiation. Additionally, he highlights the need
for firms to transfer skills and expertise among their business units effectively.

Cost Leadership Q: What is the Cost Leadership Strategy?

Strategy
Cost Leadership Strategy is a competitive approach where a company aims at producing goods
or services at the lowest cost in its industry, targeting a broad market. This strategy is often
associated with large-scale businesses offering standard products with little differentiation.

Example: McDonald’s fast-food restaurants have successfully followed low-cost leadership

strategy. Decathlon Group’s mega sports stores have been following low-cost leadership
strategy to gain international recognition and also beat competition.

Q: What are the cost elements that influence the choice of generic strategies?

Several cost elements affect the attractiveness of generic strategies:

• Economies or diseconomies of scale.
• Learning and experience curve effects.
• Percentage of capacity utilization achieved.
• Linkages with suppliers and distributors.
• Potential for sharing costs and knowledge within the organization.
• R&D costs for new product development or modification.
• Labour costs.
• Tax rates.
• Energy costs.
• Shipping costs.

Q: When should a Cost Leadership strategy be pursued?

A Cost Leadership strategy should be considered

• When the market has a large segment of price-sensitive buyers.
• When there are limited avenues to differentiate products significantly.
• When brand distinctions are not a major concern for buyers.
• When the market consists of numerous buyers with substantial bargaining power.

Q: How does a company achieve cost leadership?

To achieve cost leadership, following actions could be taken:

• Prompt forecasting of demand of a product or service.
 • Optimum utilization of the resources to achieve cost advantages.
• Achieving economies of scale; thus, lower per unit cost of product/service.
• Standardisation of products for mass production to yield lower cost per unit.
• (Example of McDonald’s)
• Invest in cost saving technologies and using advance technology for smart
• efficient working.
• Resistance to differentiation till it becomes essential.

Q: What are the advantages of the Cost Leadership Strategy?

A cost leadership strategy may help to remain profitable even with rivalry, new entrants,
suppliers’ power, substitute products, and buyers’ power.

1. Rivalry – Competitors are likely to avoid a price war, since the low-cost firm will continue to
earn profits even after competitors compete away their profits.

2. Buyers – Powerful buyers/customers would not be able to exploit the cost leader firm and
will continue to buy its product.

3. Suppliers – Cost leaders are able to absorb greater price increases from suppliers before they
need to raise prices for customers.

4. Entrants – Low-cost leaders create barriers to market entry through their continuous focus
on efficiency and cost reduction.

5. Substitutes – Low-cost leaders are more likely to lower the costs to induce existing customers
to stay with their products, invest in developing substitutes, and even purchase patents.

Q: Are there any risks or disadvantages associated with this strategy?

Some risks and disadvantages are:

1. Cost advantage may not last long as competitors may imitate cost reduction techniques.

2. Cost leadership can succeed only if the firm can achieve higher sales volume.

3. Cost leaders tend to keep their costs low by minimizing cost of advertising, market research,
and research and development, but this approach can prove to be expensive in the long run.

4. Technological advancement areas a great threat to cost leaders.

Q: What is the synergy benefit in the context of strategic management?

The synergy benefit refers to the advantage gained when different parts of an organization
cooperate and share resources, leading to outcomes that wouldn't be achievable by each part
working independently. This internal strategy of pooling and sharing resources can lead to a
competitive advantage, enhancing both efficiency and effectiveness.

Differentiation Q: What is a Differentiation Strategy?

Strategy
A differentiation strategy involves creating a product or service that is perceived by customers
as unique. This uniqueness can be related to product design, brand image, features, technology,
dealer network, or customer service. Due to differentiation, businesses can charge a premium
for their product.
Example: Domino’s Pizza offering home delivery within 30 minutes or the order is free is a
unique selling point that differentiates it from its rivals.

Q: When should a differentiation strategy be pursued?

A differentiation strategy should be considered after a thorough analysis of buyers' needs and
preferences. This ensures that the differentiating features align with what customers value and
desire.

Q: What are the bases of differentiation?

The major bases of differentiation are:

1. Product: Product differentiation focuses on innovative products that cater to customer

needs. This often involves significant investment in research and development, production, and
marketing. A successful product differentiation strategy can attract customers eager to try the
latest offerings. An example is Apple's iPhone, where the company's significant R&D
investments lead to products that customers eagerly anticipate.

2. Pricing: Pricing differentiation is based on fluctuating supply and demand and can also be
influenced by the perceived value of a product to the customer. Companies can either opt to
offer the lowest price or establish superiority through higher pricing. For instance, Apple's
iPhone commands higher prices in the smartphone segment, reflecting its perceived value and
brand positioning.

3. Organization: Organizational differentiation focuses on leveraging the unique attributes or

strengths of an organization. This can include the power of a brand, specific organizational
advantages, location benefits, name recognition, and building customer loyalty. A company can
stand out from its competitors by capitalizing on these organizational strengths. Apple, for
example, has cultivated a loyal fanbase over the years, often referred to as "Apple
Fanboys/Fangirls", which differentiates it from other tech companies.

Q: How can an organisation achieve differentiation?

To achieve differentiation, following strategies could be adopted by an organisation:

1. Offer utility to the customers and match products with their tastes and preferences.

2. Elevate/Improve performance of the product.

3. Offer the high-quality product/service for buyer satisfaction.

4. Rapid product innovation to keep up with dynamic environment.

5. Taking steps for enhancing brand image and brand value.

6. Fixing product prices based on the unique features of product and buying capacity of the
customer.

Q: What are the advantages of a differentiation strategy?

A differentiation strategy may help an organisation to remain profitable even with rivalry, new
entrants, suppliers’ power, substitute products, and buyers’ power.

1. Rivalry - Brand loyalty acts as a safeguard against competitors. It means that customers will
be less sensitive to price increases, as long as the firm can satisfy the needs of its customers.
 2. Buyers – They do not negotiate for price as they get special features and they have fewer
options in the market.

3. Suppliers – Because differentiators charge a premium price, they can afford to absorb higher
costs of supplies as the customers are willing to pay extra too.

4. Entrants – Innovative features are an expensive offer. So, new entrants generally avoid these
features because it is tough for them to provide the same product with special features at a
comparable price.

5. Substitutes – Substitute products can’t replace differentiated products which have high brand
value and enjoy customer loyalty.

Q: Are there any disadvantages to pursuing a differentiation strategy?

1. In the long term, uniqueness is difficult to sustain.

2. Charging too high a price for differentiated features may cause the customer to switch-off to
another alternative. As we see a shift of iPhone users to other android flagship smart phones.

3. Differentiation fails to work if its basis is something that is not valued by the customers. Home
delivery of packed snacks in 30 minutes would not even be a differentiator as the consumer
wouldn’t value such an offer

Focus Strategies Q: What is focus strategies?

Focus strategies involve targeting a specific, well-defined segment of the market while ignoring
the broader market. Organizations adopting this strategy aim to serve a narrow market segment
better than competitors who target a more extensive market.

The two main types are focused cost leadership and focused differentiation.

Example: Ferrari. They target a niche market of luxury sports car enthusiasts and produce high-
performance, high-end cars. They don't aim to cater to the broader automobile market but
focus on consumers who value exclusivity, performance, and luxury.

Q: What is a focused cost leadership strategy?

A focused cost leadership strategy is a competitive approach where a company targets a

specific, narrow part of the market and competes based on price. Unlike a broad cost leadership
strategy, which targets the entire market, this strategy focuses on a specific segment. The
company doesn't necessarily offer the lowest prices in the entire industry but offers lower prices
compared to competitors within that targeted segment.

Q: How does focused cost leadership differ from broad cost leadership?

A: While broad cost leadership aims to have the lowest cost across the entire industry, focused
cost leadership narrows its aim to have the lowest cost within a specific niche or segment of the
market.

Q: What is a focused differentiation strategy?

A: Focused differentiation is a strategy where a company offers unique features or attributes

targeting a specific, narrow segment of the market. This strategy aims to attract customers in
that segment who are willing to pay a premium for the unique features or attributes the
company offers.
 Q: How do companies implement a focused differentiation strategy?

Companies implementing this strategy might:

• Concentrate on a specific sales channel, like selling exclusively online.
• Target particular demographic groups with unique needs or preferences.
• Offer specialized products or services tailored to the niche they are targeting.

Q: When are focus strategies most effective?

A: Focus strategies are most effective when:

1. Consumers in the segment have unique preferences or specific requirements that are
different from the broader market.
2. Rival firms are not targeting or specializing in the same narrow segment.

Q: How can an organization achieve a successful focused strategy?

To achieve focused cost leadership/differentiation, following strategies could be adopted by an

organization:

1. Selecting specific niches which are not covered by cost leaders and differentiators.

2. Creating superior skills for catering such niche markets.

3. Generating high efficiencies for serving such niche markets.

4. Developing innovative ways in managing the value chain.

Q: What are the advantages of a focused strategy?

Advantages include:

1. Premium prices can be charged by the organisations for their focused product/services.

2. Due to the tremendous expertise in the goods and services that the organisations following
focus strategy offer, rivals and new entrants may find it difficult to compete.

Q: Are there any disadvantages to pursuing a focused strategy?

Disadvantages include:

1. The firms lacking in distinctive competencies may not be able to pursue focus strategy.

2. Due to the limited demand of product/services, costs are high, which can cause problems.

3. In the long run, the niche could disappear or be taken over by larger competitors by acquiring
the same distinctive competencies.

Best-Cost Provider Q: What is the best-cost provider strategy?

Strategy
The best-cost provider strategy is a competitive approach that aims to give customers more
value for their money by emphasizing both low cost and upscale differentiation. This strategy
seeks to offer products or services at a lower cost than competitors while still providing features
or quality comparable to more expensive offerings.

Q: How does the best-cost provider strategy differ from other generic strategies?
Unlike the cost leadership strategy, which focuses solely on achieving the lowest cost, or the
differentiation strategy, which focuses on offering unique features regardless of cost, the best-
cost provider strategy aims to strike a balance between cost and features. It seeks to offer
products or services that are perceived as high-value when considering both cost and quality.

Q: How can companies implement a best-cost provider strategy?

Companies can implement this strategy in two main ways:

(a) By offering products or services at a lower price than competitors for similar quality and
features.

(b) By charging a similar price as competitors but offering superior quality or additional features.

Q: Can you provide an example of a company that uses a best-cost provider strategy?

Yes, companies like OnePlus, Xiaomi, Oppo, and Vivo in the smartphone industry are good
examples. These companies offer high-quality smartphones with features comparable to
premium brands but at a significantly lower price. They aim to provide consumers with high
value by combining both quality and affordability.
 Multiple Choice Questions
1. The goal of SWOT analysis is to ________ the organization's opportunities and strengths while ________ its
threats and ________ its weaknesses.
(a) avoid; neutralizing; correcting
(b) exploit; neutralizing; correcting
(c) avoid; capitalizing; neutralizing
(d) exploit; avoiding; ignoring

2. SWOT analysis is an evaluation of the organization's ________ strengths and weaknesses and its ________
opportunities and threats.
(a) external; internal
(b) internal; internal
(c) external; external
(d) internal; external

3. External opportunities and threats are usually:

(a) the minor cause of organizational demise or success
(b) least important for CEOs and the board of directors
(c) not as important as internal strengths and weaknesses
(d) largely uncontrollable activities outside the organization

4. The sustainability of competitive advantage and a firm’s ability to earn profits from its competitive advantage
depends upon:
(a) Durability, reliability, transferability, approximately
(b) Appropriability, durability, transferability, imitability
(c) Transferability, imitability, reliability, approximately
(d) Imitability, durability, reliability, appropriability

5. Internal __________ are activities in an organization that are performed especially well.
(a) Opportunities
(b) Competencies
(c) Strengths
(d) Management

6. ‘Strategic group mapping’ helps in-

(a) Identifying the strongest rival companies
(b) Identifying weakest rival companies
(c) Identifying weakest and strongest rival companies
(d) None of the above

7. In Michael Porter’s generic strategy _____________ emphasizes producing standardized products at a very
low per unit-cost for consumers who are price sensitive.
(a) Cheap leadership
(b) Inferior product leadership
(c) Cost leadership
(d) Cost benefit
8. Differentiation Strategy can be achieved by following measures:
1. Match products with tastes and preferences of customers.
2. Elevate the performance of the product.
3. Rapid product innovation
Which of the above is true:
(a) (1) and (2)
(b) (1) and (3)
(c) (2) and (3)
(d) (1), (2) and (3)

9. What are the three different bases given by Michael Porter’s Generic Strategies to gain competitive
advantage?
(a) differentiation, integration and compensation
(b) integration, focus and differentiation
(c) compensation, integration and focus
(d) cost leadership, differentiation and focus

10. A firm successfully implementing a differentiation strategy would expect:

(a) Customers to be sensitive to price increases.
(b) To charge premium prices.
(c) Customers to perceive the product as standard.
(d) To automatically have high levels of power over suppliers.

Scenario Based Questions

1. Rohit Sodhi runs a charitable organisation for promotion of sports in the country. His organisation conducts
regular free training camps for youths interested in playing cricket, football, hockey, badminton and so on.
Many of his trainees have reached national level contests. Rohit noticed that with success of IPL (Cricket)
tournament there is an increasing trend to extend similar format in other sports as well. He wishes to know
how the development is going help sports and to which industries it will offer opportunities and threats.

2. Mr. Banerjee is head of marketing department of a manufacturing company. His company is in direct
competition with thirteen companies at national level. He wishes to study the market positions of rival
companies by grouping them into like positions. Name the tool that may be used by Mr. Banerjee? Explain the
procedure that may be used to implement the technique.

3. Mohan has joined as the new CEO of XYZ Corporation and aims to make it a dominant technology company
in the next five years. He aims to develop competencies for managers for achieving better performance and a
competitive advantage for XYZ Corporation. Mohan is well aware of the importance of resources and
capabilities in generating competitive advantage.
Discuss the four major characteristics of resources and capabilities required by XYZ Corporation to sustain
the competitive advantage and its ability to earn profits from it.

4. Airlines industry in India is highly competitive with several players. Businesses face severe competition and
aggressively market themselves with each other. Luxury Jet is a private Delhi based company with a fleet size
of 9 small aircrafts with seating capacity ranging between 6 seats to 9 seats. There aircrafts are chartered by
big business houses and high net worth individuals for their personalised use. With customised tourism
packages their aircrafts are also often hired by foreigners. Identify and explain the Michael Porter’s Generic
Strategy followed by Luxury Jet.

5. Gennex is a company that designs, manufactures and sells computer hardware and software. Gennex is
well known for its innovative products that has helped the company to have advantage over its competitors. It
also spends on research and development and concerned with innovative softwares. Often the unique
features of their product, that are not available with their competitors helps them to gain competitive
advantage. Gennex using the strategy is consistently gaining its position in the industry over its competitors.
Identify and explain the Porter’s generic strategy which Gennex has opted to gain the competitive advantage.

6. Sohan and Ramesh are two friends who are partners in their business of making biscuits. Sohan believe in
making profits through selling more volume of products. Hence, he believes in charging lesser price to the
customers. Ramesh, however, of the opinion that higher price should be charged to create an image of
exclusivity and for this, he proposes that the product to undergo some change. Analyse the nature of generic
strategy used by Sohan and Ramesh.

7. Infant care is a successful store chain that caters products for expectant mothers and new moms. They
offer everything from nursing classes to strollers, toys, infant clothes, diapers and baby furniture. Due to a
one-stop shop for infants, they are charging a premium for its products. Identify and explain how the strategy
adopted by infant care.

8. A century-old footwear company “Mota Shoes” had an image of being the footwear choice for formal
occasions. In an attempt to reinvent its brand, it tied up with a foreign footwear giant “Buffrine” to manufacture
and sell its Hideseek brand in the country. Putting its best foot forward, it launched extra soft, casual and
relaxed footwear for young. Aiming at a brand and image makeover the “Mota Shoes” decided to price the Hide
Seek products at premium. What kind of Michael Porter business level strategy is being used by “Mota Shoe
company”? State its advantages.

9. Rohit Patel is having a small chemist shop in the central part of Ahmedabad. What kind of competencies
Rohit can build to gain competitive advantage over online medicine sellers?

10. ‘Value for Money’ is a leading retail chain, on account of its ability to operate its business at low costs. The
retail chain aims to further strengthen its top position in the retail industry. Marshal, the CEO of the retail chain
is of the view that to achieve the goals they should focus on lowering the costs of procurement of products.
Highlight and explain the core competence of the ‘Value for Money’ retail chain.

Descriptive Questions
1. What is the purpose of SWOT analysis? Why is it necessary to do a SWOT analysis before selecting a
particular strategy for a business organization?
 Chapter 4: Strategic Choices (7.5 – 12.5 Marks)
Introduction This chapter focuses on the corporate-level strategies.

Q: What are the Learning Outcomes?

♦ Describe and discriminate between strategic choices such as strategic intensification, strategic
diversification and strategic exits.

♦ Formulate strategic options.

♦ Explain the reasons for- relative costs & risks and benefits of the adoption of various types of
corporate strategies.

♦ Describe the circumstances necessitating pursuit of combination strategies and strategic alliances.

Q: What are the Learning Outcomes?

1. Strategic Choices
a. Stability Strategy
b. Growth/Expansion Strategy
c. Exit Strategy

2. Strategic Options
a. Ansoff’s Product Market Growth Matrix
b. ADL Matrix
c. Boston Consulting Group (BCG) Growth-Share Matrix
d. General Electric Matrix [“Stop-Light” Strategy Model]

Strategic Q: What is strategy formulation?

Choices
Strategy formulation involves making well-thought-out decisions related to the objectives of the
firm, shareholders, and the allocation of resources.

Q: What is the purpose of strategic choices in businesses?

Strategic choices allow businesses to enter, remain relevant, and grow in the market. They provide
a direction and framework for decision-making in various market scenarios.

Q: What are Different types of strategies on the basis of their classification?

Q: What are the typical strategies an organization might adopt?

Organizations can adopt either a competitive strategy, where they enter a market with numerous
rivals, or a collaborative strategy, involving joint ventures with established companies.

For start-ups, the primary focus is often on penetrating the market, reaching the breakeven stage
quickly, and subsequently pursuing a growth strategy.

For Business conglomerates formulate strategies at different levels: corporate, business unit, and
functional. Big corporates follow an elaborate system of strategy formulation, implementation and
control at different levels in the company to survive and grow in the turbulent business environment.
Stability Q: What is stability strategy?
Strategy
The firm stays with its current businesses and product markets; maintains the existing level of effort;
and is satisfied with incremental growth.

Q: What is the main objective of the stability strategy in business?

The primary goal of the stability strategy is to stabilize. This strategy is adopted to safeguard existing
interests and strengths, pursue well-established objectives, maintain operational efficiency
consistently, consolidate achieved positions, and optimize returns on invested resources.

Q: When is it typically pursued by a firm?

A stability strategy is pursued by a firm when:

• It continues to serve in the same or similar markets and deals in the same or similar products
and services.

• This strategy is typical for those firms whose product have reached the maturity stage of product
life cycle or those who have a sufficient market share but need to retain that.

Q: How does the stability strategy differ from the 'do nothing' strategy?

A stability strategy actively involves preserving and strengthening the current position in the market,
while a 'do nothing' strategy implies complete inaction and lack of responsiveness to market changes.
Therefore, a stability strategy is proactive in nature.
Q: Can smaller organizations adopt a stability strategy?

Yes, small organizations might adopt a stability strategy to consolidate their market position, after
which they may prepare to implement growth strategies.

Q: What are the characteristics of a stability strategy in business?

The characteristics of a stability strategy in business are as follows:

• A firm opting for stability strategy stays with the same business, same product-market posture
and functions, maintaining same level of effort as at present.

• The primary focus is on incremental enhancements in functional efficiencies through better

deployment and utilization of existing resources.

• Stability strategy does not involve a redefinition of the business of the corporation

• It is a safe strategy that maintains status quo.

• It does not warrant much of fresh investments.

• Less risk involved in this strategy.

• While opting for this strategy, the organization can concentrate on its resources and existing
businesses/products and markets, thus leading to building of core competencies.

• The firms with modest growth objective choose this strategy.

Q: What are the major reasons a company might choose to adopt a stability strategy?

Companies opt for a stability strategy due to several reasons, including:

• A product has reached the maturity stage of the product life cycle.

• The staff feels comfortable with the status quo as it involves less changes and less risks.

• It is opted when the environment in which an organisation is operating is relatively stable.

• Where it is not advisable to expand as it may be perceived as threatening.

• After rapid expansion, a firm might want to stabilize and consolidate itself.
Growth/ Q: What is Growth/Expansion strategy ?
Expansion
Strategy The firm seeks significant growth-maybe within the current businesses; maybe by entering new
business that are related to existing businesses; or by entering new businesses that are unrelated to
existing businesses.

Q: What is the main objective of the Growth/Expansion strategy in business?

The Growth/Expansion strategy involves redefining the business by significantly broadening its scope
and making substantial investments. This strategy can be associated with traits such as dynamism,
vigor, promise, and success. It often requires a significant reformulation of an organization's goals
and directions.

Q: What are the characteristics of the Growth/Expansion Strategy ?

The Growth/Expansion Strategy is defined by the following characteristics:

• Expansion strategy involves a redefinition of the business of the corporation.

• Expansion strategy is the opposite of stability strategy. While in stability strategy, rewards are
limited, in expansion strategy they are very high. In the matter of risks, too, the two are the
opposites of each other.

• Expansion strategy leads to business growth. A firm with a mammoth growth ambition can meet
its objective only through the expansion strategy.

• The process of renewal of the firm through fresh investments and new
businesses/products/markets is facilitated only by expansion strategy.

• Expansion strategy is a highly versatile strategy; it offers several permutations and combinations
for growth. A firm opting for the expansion strategy can generate many alternatives within the
strategy by altering its propositions regarding products, markets and functions and pick the one
that suits it most.

• Expansion strategy holds within its fold two major strategy routes: Intensification or
Diversification. Both of them are growth strategies; the difference lies in the way in which the
firm actually pursues the growth.

Q: What are the primary reasons a company might choose to adopt a Growth/Expansion Strategy?

Companies opt for the Growth/Expansion Strategy due to various motivations:

• It may become imperative when environment demands increase in pace of activity.

• Strategists may feel more satisfied with the prospects of growth from expansion; chief executives
may take pride in presiding over organizations perceived to be growth-oriented.

• Expansion may lead to greater control over the market vis-a-vis competitors.

• Advantages from the experience curve and scale of operations may accrue.

• Expansion also includes intensifying, diversifying, acquiring and merging businesses.

Q: How are growth strategies classified?

Growth strategies are primarily classified into two main types:

 1. Internal Growth Strategies

2. External Growth Strategies

A. Internal Growth Strategies

Internal growth strategies leverage a company's own resources and capabilities for expansion,
without resorting to external partnerships or acquisitions. They can be further bifurcated into:

I. Expansion through Intensification

Growth through intensification means a company focuses on internal growth by enhancing its
current operations. This can be achieved through:

1. Market Penetration: Concentrating on selling current products in existing markets. This involves
pushing the same product to the same audience, often by increasing advertising or offering
promotions.

2. Market Development: Introducing current products to new market segments. This might mean
selling in new regions, targeting new customer groups, or using different distribution channels.

3. Product Development: Modifying current products or creating related new products for existing
customers. Instead of finding a new audience, this approach innovates the product itself for the
current audience.

Igor H. Ansoff created a framework that illustrates these intensification strategies for companies.

I. Expansion or Growth through Diversification

Growth through diversification means that a company expands by venturing into different products
or sectors. It's a way for a company to use its internal resources to tap into new opportunities and
often promises more growth than just intensifying current operations.

These strategies are primarily internal growth strategies and can be categorized into:

1. Concentric Diversification: Concentric diversification occurs when a company expands into a

related business area. This new area is connected to the existing business through shared
technology, processes, or marketing methods. This type of diversification benefits from the
existing operations. For instance, a clothing company starting to make shoes is an example of
concentric diversification.
 a) Vertically Integrated Diversification: This involves a firm entering businesses related to its
existing operations but at different stages of the production or distribution process. It stays
within the same industry but moves forward or backward in the chain.

There are two main types:

1. Backward Integration: A company moves backward in the value chai, takes over its suppliers
to have better control over its supplies and reduce cost, its control over its input sources. For
instance, a supermarket chain buying farms to ensure a consistent supply of fresh produce.

2. Forward Integration: A company moves ahead in the value chain and expands into
businesses that use its products. typically towards the customer end. An example is a coffee
bean producer merging with a cafe.

b) Horizontal Integrated Diversification: In this approach, a company merges or acquires

businesses that operate at the same level of the production-marketing chain. For example, a
textile mill (Textile Mill 1) buys two other textile mills (Textile Mill 2 and 3). This can also be done
by integrating with firms that produce complementary products or taking over a competitor's
products.

2. Conglomerate Diversification: In this approach, a company enters into completely unrelated

businesses, meaning there's no connection in terms of product, market, or technology between
the new and existing operations. Essentially, the new venture doesn't share any commonality
with the company's current activities. An example would be a cement manufacturer branching
out into making steel and rubber products.
3. Innovation: Innovation is central to driving upgrades in existing products or processes, leading
to greater market share, increased revenues, and customer satisfaction. Innovation offers the
following;

• Solves Complex Problems: Businesses can find opportunities in current societal challenges
through guided innovation, resulting in sustainable solutions tailored to customer needs. For
example, addressing environmental concerns by shifting to renewable energy sources.

• Increases Productivity: By simplifying and often automating tasks, innovation can lead to
improved productivity. Tools like MS Excel, which automates numerous financial tasks,
exemplify such digital innovations that significantly impact productivity across industries.

• Provides Competitive Advantage: Innovating faster than competitors can set a business
apart, giving it a unique edge in the marketplace. Innovative products often need less
marketing since they inherently offer more value to consumers. This not only retains existing
customers but also attracts new ones.
B. External Growth Strategies

When the organization instead of growing internally thinks of diversifying by making alliances with
external organisations, it is called external growth diversification. It can be classified in two ways

Mergers Or acquisitions (M&A) are strategies used by organizations to expand and grow their
operations. An acquisition or merger with an existing business can be an instantaneous route to
expansion. This approach can be attractive because it bypasses the time, risks, and expertise required
for internally-driven growth.

Merger: This is when two or more companies come together to expand their business operations. In
a merger, the transaction is usually amicable, and both companies come together to share profits in
the newly formed entity. This collaborative approach aims to combine strengths, financial gains, and
overcome trade barriers. In essence, two organizations voluntarily integrate to enhance their
capacities and market presence.

Acquisition: This occurs when one organization takes control of another organization, thereby
assuming authority over all its business operations. Typically, in an acquisition, a financially strong
entity overpowers a weaker one. Acquisitions are more prevalent during economic downturns or
when companies face declining profit margins. The process usually sees the dominant firm
overtaking the weaker one, and the merged entities operate under the name of the more powerful
organization. Acquisitions can sometimes be perceived as unfriendly or forced, especially when the
weaker company is compelled to sell its operations to a more powerful entity.

Q: Why do organizations consider M&A, and what role does synergy play in these decisions?

Organizations often consider M&A proposals systematically to ensure mutual benefits. One of the
driving factors behind these strategies is the potential for synergy between the merging entities.
Synergy can emerge from various aspects like physical facilities, managerial skills, distribution
channels, R&D, and more. A positive synergy implies that the combined resources post-merger or
acquisition produce effects that are greater than the sum of their individual effects before the merger
or acquisition.

Q: What are the different types of mergers?

Mergers come in various forms, depending on the nature and objective of the combination. Here are
the main types of mergers:

Horizontal Merger: This type of merger involves companies operating in the same industry,
effectively merging with a direct competitor. The primary motive behind such mergers is to realize
economies of scale by eliminating redundant installations and functions, broadening the product
range, reducing working capital and fixed assets investments, eliminating competition, and so on. An
example of a horizontal merger is the formation of Brook Bond Lipton India Ltd. through the union
of Lipton India and Brook Bond.

Vertical Merger: This merger involves two organizations in the same industry but at distinct stages
of the production or distribution system. Vertical mergers aim to achieve increased synergies. When
an organization merges with its raw material supplier, it's termed as backward integration. In
contrast, forward integration refers to when a firm merges with its buyer organizations or
distribution channels. Such mergers allow companies to gain a competitive edge, possibly by limiting
supply of inputs to competitors or by securing inputs at favorable rates. Examples include instances
of backward and forward integration.

Co-generic Merger: In a co-generic merger, the merging firms are related in some manner, be it in
terms of production processes, business markets, or fundamental technologies. This type of merger
allows businesses to diversify around shared resources and strategic needs. An example could be a
company specializing in refrigerators merging with another that deals in kitchen appliances.
Conglomerate Merger: This merger entails the union of companies that are completely unrelated to
each other, with no significant commonalities concerning customer groups, functions, or
technologies. In practice, however, some degree of overlap in these factors might be present even
in a conglomerate merger.

Q: What is strategic alliance, and what are its advantages?

A strategic alliance is a collaboration between two or more businesses to achieve mutual goals.
These businesses remain independent, share the benefits and responsibilities of the alliance, and
often work together especially in the global marketplace.

Advantages of Strategic Alliance:

1. Organizational Benefits:
• Gain new skills and capabilities from partners.
• Enhance productive capacity and supply chain reach.
• Achieve synergy by offering complementary products or services.
• Boost legitimacy and credibility, especially in new ventures, by partnering with respected
entities.

2. Economic Benefits:
• Distribute costs and risks among alliance members.
• Achieve economies of scale leading to reduced unit costs.
• Co-specialize and co-create value; for instance, a computer company bundling its product with a
top-tier monitor brand.

3. Strategic Benefits:
• Collaborate with rivals instead of competing.
• Achieve vertical integration by collaborating along the supply chain.
• Pool resources and skills to create competitive advantages.
• Access new technologies and conduct joint R&D.

4. Political Benefits:
• Navigate entry barriers in foreign markets by partnering with local firms.
• Enhance influence and position by forming alliances with politically influential entities.

Q: What are the disadvantages of a strategic alliance?

Strategic alliances, while offering benefits, also come with drawbacks. The primary disadvantage
revolves around the necessity to share. This involves:

1. Resource and Profit Sharing: Companies in an alliance often have to split profits and pool
resources, which might not always be favorable.

2. Knowledge Sharing Concerns: Sharing skills and knowledge might risk exposing trade secrets.
Even with agreements to protect these secrets, their safety depends on partners'
trustworthiness and the legal system's efficacy.

3. Potential Future Competition: An alliance partner today might become a competitor tomorrow,
especially if they choose to exit the alliance and operate independently using the knowledge
gained.
Strategic Exits Q: What is meant by Strategic Exit?

Strategic Exits refer to the approach an organization takes when it substantially reduces the scope of
its activity. This is done by identifying problem areas, diagnosing the root causes of those problems,
and then taking steps to address them.

Q: How are the problems within an organization identified and addressed through Strategic Exits?

Problems within an organization are identified through thorough analysis and diagnosis. To address
these problems, various retrenchment strategies are considered:

1. Turnaround Strategy: Adopted to reverse a declining trajectory, aiming to revitalize the business
and restore growth and profitability.

2. Divestment or Divestiture Strategy: Involves cutting off loss-making units, divisions, or SBUs,
curtailing product lines, or reducing functions. The aim is to eliminate non-performing elements
and focus on core areas.

3. Liquidation Strategy: Chosen when other strategies do not yield desired outcomes, leading the
organization to completely cease its operations.

Turnaround Q: What is a turnaround strategy?

Strategy
An internal retrenchment emphasizes improving internal efficiency, known as a turnaround strategy.

Q: What are the danger signals indicating that a company may need a turnaround to survive?

The indicators are:

• Persistent negative cash flow from business(es)
• Uncompetitive products or services
• Declining market share
• Deterioration in physical facilities
• Over-staffing, high employee turnover, and low morale
• Mismanagement

Q: What is the turnaround strategy action plan, its stages, and their objectives for ensuring a
company's recovery and success?

The turnaround strategy action plan focuses on both short and long-term financing needs and
strategic issues and unfolds in five stages:

Stage 1 - Assessment of current problems: This involves identifying the root causes of present issues,
and gauging the damage. Once the problems are identified, directing resources towards areas of
concern.

Stage 2 - Analysis and strategic planning and develop a strategic plan: Before making substantial
changes, the company's chances of survival are determined. This entails examining viable core
businesses, ensuring adequate financing, and studying strengths and weaknesses in competitive
positioning.

Stage 3 - Emergency action implementation: If the organization is in a dire state, a crucial plan is
formulated to stop further decline. Actions encompass debt restructuring, improving working capital,
cost-cutting, refining budgetary practices, pruning product lines, and ensuring adequate funding for
the turnaround.
Stage 4 - Business restructuring: The focus here is on the financial health of the organization's core
operations. Key actions include cash forecasts, asset and debt analysis, and profit reviews.
Repositioning may involve altering the product mix, focusing on neglected core products, or even
exiting certain markets.

Stage 5 - Returning to normal: In this concluding stage, the company should exhibit profitability and
improved ROI. Key strategies include product additions, improved customer service, forming
alliances, and expanding market share. Morale boosting, particularly through reward and
compensation systems, is integral to ensuring employee dedication and a focus on profitability.

In essence, this plan ensures that a struggling company can analyze, react, restructure, and return to
a state of growth and profitability.

Q: What are the crucial elements of a turnaround strategy?

The essential elements include:

• Changes in the top management
• Initial credibility-building actions
• Neutralizing external pressures
• Identifying quick payoff activities
• Quick cost reductions
• Revenue generation
• Asset liquidation for generating cash
• Better internal coordination

Q: What are the major reasons for Retrenchment/Turnaround Strategy?

• The management no longer wishes to remain in business either partly or wholly due to
continuous losses and unviability.

• The management feels that business could be made viable by divesting some of the activities or
liquidation of unprofitable activities.

• A business that had been acquired proves to be a mismatch and cannot be integrated within the
company.

• Persistent negative cash flows from a particular business create financial problems for the whole
company, creating the need for divestment of that business.

• Severity of competition and the inability of a firm to cope with it may cause it to divest.

• Technological upgradation is required if the business is to survive but where it is not possible for
the firm to invest in it, a preferable option would be to divest.

• A better alternative may be available for investment, causing a firm to divest a part of its
unprofitable businesses.
Divestment Q: What is the essence of a divestment strategy?
Strategy
Divestment strategy involves the sale or liquidation of a part of the business, such as a major division,
profit center, or Strategic Business Unit (SBU). It's often a part of a rehabilitation or restructuring
plan, particularly used when a turnaround strategy has failed or isn't considered feasible.

Q: When might a company consider adopting a divestment strategy?

A divestment strategy may be chosen for several reasons:

• A business that had been acquired proves to be a mismatch and cannot be integrated within the
company.

• Persistent negative cash flows from a particular business create financial problems for the whole
company, creating the need for divestment of that business.

• Severity of competition and the inability of a firm to cope with it may cause it to divest.

• It is not possible for the business to do Technological upgradation that is required for the
business to survive, a preferable option would be to divest.

• A better alternative may be available for investment, causing a firm to divest a part of its
unprofitable business.

In essence, divestment serves as a strategic tool for companies to manage their portfolio of
businesses, optimizing for profitability and growth.

Q: What are the characteristics of the divestment strategy?

• This strategy involves divestment of some of the activities in a given business of the firm or sell-
out of some of the businesses as such.

• Divestment is to be viewed as an integral part of corporate strategy without any stigma attached.

Strategic Q: What are strategic options in the context of corporate strategy?

Options
Strategic options refer to the potential pathways or decisions that a company can take based on their
existing products, market conditions, and emerging innovations in the industry. These options help
in guiding a company's direction and in making informed choices that align with their overarching
goals.

Q: How can strategic models be applied in a multi-product or multi-business firm?

Strategic models are tools that assist strategists in evaluating and deciding upon the best courses of
action for individual products or entire business units within a diversified company. These models
are especially valuable for competitive analysis and corporate strategic planning in firms with varied
product lines or multiple business segments. Even less-diversified firms can benefit if they have a
primary business complemented by smaller interests.

Ansoff’s Q: What is the Ansoff’s product market growth matrix?

Product
Market Ansoff’s matrix is a portfolio-planning tool for identifying growth opportunities for a company. It
Growth Matrix helps businesses decide their growth strategies based on whether they are marketing new or existing
products in new or existing markets.
 Q: What are the four strategies in the product/market growth matrix?
The four strategies are:

1. Market Penetration: Market penetration refers to a growth strategy where the business focuses
on selling existing products into existing markets. The goal is to make more sales to current
customers without significantly altering the products. This could involve increased advertising,
aggressive promotional campaigns, or efforts to boost usage by current customers. For instance,
Gucci introducing new designs for its luxury clothing in European markets exemplifies market
penetration.

2. Market Development: Market development is a growth strategy where the business aims to sell
its existing products in new markets. This can be achieved by entering new geographical
territories, altering product packaging, utilizing different distribution channels, or adopting
distinct pricing strategies to attract a new segment of customers. An example is Gucci selling its
luxury clothing in the Chinese market.

3. Product Development: Product development is a growth strategy focusing on introducing new

or modified products to existing markets. This strategy might necessitate new competencies and
involves offering modified products that cater to the tastes of current markets. An example is
Gucci selling casual clothing in its established European markets.

4. Diversification: Diversification is a strategy where a business markets entirely new products in

new markets. It often involves starting or acquiring businesses outside of the company’s existing
product lines and markets, making it relatively riskier due to the unfamiliar territory. An example
is Gucci selling casual clothing in new markets like China.

Q: Can companies change their product-market growth strategies over time?

Yes, as market conditions evolve, companies may need to adapt or shift their product-market growth
strategies. When a company's current market becomes saturated, it may need to explore new
markets or employ different strategies for growth.

ADL Matrix Q: What is the ADL matrix?

The ADL matrix, named after Arthur D. Little, is a portfolio analysis technique based on the product
life cycle. The ADL matrix revolves around two primary components:

1. Stage of industry maturity: This represents where the industry stands in its life cycle.
2. Competitive position: This categorizes products or Strategic Business Units (SBUs) based on their
strength in the market.

Q: How are products or SBUs categorized in terms of their competitive position in the ADL matrix?

The competitive position categories are:

1. Dominant
2. Strong
3. Favourable
4. Tenable
5. Weak

Q: Can you describe what each competitive position signifies?

Dominant: A rare position, often resulting from a monopoly or strong technological leadership.

Strong: A position where the firm has significant freedom in strategy choices without facing major
threats from competitors.

Favourable: Attained when no single competitor dominates the fragmented industry, allowing
market leaders some freedom.

Tenable: Firms here perform satisfactorily but are susceptible to competition from stronger
companies.
 Weak: These firms generally underperform, although they still have potential for improvement.

Q: Why is the competitive position crucial in the ADL matrix?

The competitive position provides insights into the firm's standing and strength in the market. It
helps businesses assess their freedom in strategic choices and understand their vulnerability to
competitors.

Boston Q: What is the BCG Growth-Share Matrix?

Consulting
Group (BCG) The BCG Growth-Share Matrix is a tool used to represent a company's portfolio of investments and
Growth-Share is widely used for resource allocation in diversified companies. It classifies businesses on a two-
Matrix dimensional matrix based on market growth rate and relative market share.

In the matrix: The vertical axis represents the market growth rate, indicating market attractiveness,
while the horizontal axis represents relative market share, indicating company strength in the
market.

Q: How can businesses be categorized using the matrix?

The matrix identifies four types of products or Strategic Business Units (SBUs):

Stars: Stars are high-growth, high-market share products or SBUs. They have strong potential but
require significant investment to maintain their position and finance their growth. They're seen as
prime opportunities for expansion.

Cash Cows: Cash Cows are products or SBUs with low growth but high market share. They produce
strong cash flow with lower costs and require less investment to sustain their market position. Over
time, as growth slows, Stars often evolve into Cash Cows.

Question Marks: Question Marks, also termed problem children or wildcats, are SBUs with low
market share in high-growth markets. They demand substantial investment but offer limited
potential to generate cash. The aim is to transition them into Stars and eventually into Cash Cows as
growth diminishes.
 Dogs: Dogs are low-growth, low-share products or SBUs. They might generate just enough revenue
to sustain themselves but don't promise a significant future. Often, the strategy for Dogs is
divestment or liquidation.

Q: After categorizing products or SBUs using the BCG Matrix, what should a firm do next?

Once products or SBUs have been classified, a firm should decide on the future role each will play.
There are four primary strategies:

Build: In the "Build" strategy, the goal is to increase market share, often at the cost of short-term
earnings, to establish a strong future position with a substantial market share.

Hold: The "Hold" strategy aims to maintain the current market share

Harvest: With the "Harvest" strategy, the focus is on maximizing short-term cash flows, even if it
might impact the business negatively in the long run.

Divest: In the "Divest" strategy, the objective is to sell or liquidate the business unit, usually because
the firm believes its resources could be better utilized elsewhere.

Q: Is the BCG Matrix truly beneficial for businesses?

The BCG Matrix has been instrumental in aiding strategic planning. However, there are challenges. It
can be complex, time-consuming, and expensive to implement. Defining SBUs, measuring market
share, and gauging growth can be tricky. While it helps classify current businesses, it offers limited
guidance for future planning. Over-reliance on the matrix might lead companies into risky ventures
or cause premature divestment of established units.

General Q: What is the General Electric Matrix?

Electric Matrix
[“Stop-Light” The General Electric Matrix, also known as the Business Planning Matrix, GE Nine-Cell Matrix, or GE
Strategy Model, is a strategic planning tool used by General Electric Company, developed in collaboration with
Model] McKinsey and Company. Inspired by traffic lights, it uses colors: green for "go", amber or yellow for
"caution", and red for "stop" to help make strategic decisions based on Business Strength and Market
Attractiveness.

In the matrix: The vertical axis represents market attractiveness, while the horizontal axis signifies
the business's strength in the industry.
Q: How is market attractiveness measured in this model?

Market attractiveness is gauged by various factors such as:

• Market growth rate.
• Industry profitability.
• Competitive intensity.
• Availability of Technology.
• Pricing trends.
• Overall risk of returns in the industry.
• Opportunity for differentiation of products and services.
• Demand variability. Segmentation.
• Distribution structure (e.g. direct marketing, retail, wholesale) etc.

Q: What factors measure business strength?

Business strength is assessed by factors like

• Market share.
• Market share growth rate.
• Profit margin.
• Distribution efficiency.
• Brand image.
• Ability to compete on price and quality.
• Customer loyalty.
• Production capacity.
• Technological capability.
• Relative cost position.
• Management calibre, etc.

Q: How are the "stop-light" colors used in decision-making?

If a product is in the green zone, it indicates a favorable position, and the strategy could be to expand,
invest, and grow. In the amber or yellow zone, caution is required, and strategic choices need careful
consideration. If a product is in the red zone, it might result in losses, and strategies like
retrenchment, divestment, or liquidation might be appropriate.

Q: How does the GE Matrix differ from the BCG growth-share matrix?
The GE Matrix differs in two primary ways:

First, it uses market attractiveness, which comprises a broader set of factors, instead of just market
growth.

Secondly, it employs competitive strength as a measure, replacing market share.

 Chapter 5: Strategy Implementation and
Evaluation (7.5 – 12.5 Marks)
Introduction This chapter focuses on various implementation and evaluation methods that organizations can
use to assess the success of their strategy implementation and identify areas for improvement.

Q: What are the Learning Outcomes?

1. Strategic Management Process

2. Strategic Change through Digital Transformation
3. Organizational Framework
4. Organization Structure
5. Organization Culture
6. Strategic Leadership
7. Strategic Control
8. Strategic Performance Measures

Strategic Q: Write a note on Strategic Management Process

Management
Process The process of developing an organisation’s strategy is quite methodical. The organisation first
develops a clear vision, mission, values and goals. They then must then discuss and analyse a
number of themes to determine which options are most promising. All these aspects come
together in a strategic plan that details the organisation’s vision, mission, values, goals, strategic
themes, a high-level implementation plan and key performance measures. The key performance
measures are included in the strategic plan and are used to link the themes back to the
organisation’s goals and to measure the success of the strategy after it is implemented.

The strategic management process can best be studied and applied using a model. Every model
represents some kind of process. The model illustrated in the Figure: Strategic Management
Model (Fred R David) is a widely accepted, comprehensive.

Q: Is Strategic Management process is dynamic and continuous process?

Yes, The strategic management process is dynamic and continuous. A change in any one of the
major components in the model can necessitate a change in any or all of the other components.

For instance, a shift in the economy could represent a major opportunity and require a change in
long-term objectives and strategies; a failure to accomplish annual objectives could require a
change in policy; or a major competitor’s change in strategy could require a change in the firm’s
mission.

Therefore, strategy formulation, implementation, and evaluation activities should be performed

on a continual basis, not just at the end of the year or semi-annually. The strategic management
process never really ends.

Q: Can the Strategic Management Model guarantee success for an organization?

While the Strategic Management Model offers a clear and practical approach to strategic
management, it does not guarantee sure-shot success. The model is a tool that guides the strategic
management process but cannot predict all variables affecting organizational success.

In practice, strategists do not follow the Strategic Management Process in a strict, linear fashion.
Instead, the process is iterative, involving much give-and-take among different hierarchical levels
of an organization. There's a significant amount of back-and-forth consideration across the various
stages of the process.

Q: What is involved in developing a strategy and executing it proficiently?

Strategic management involves the following stages:

1. Developing a strategic vision and formulation of statement of mission, goals and objectives.

2. Environmental and organisational analysis.

3. Formulation of strategy.

4. Implementation of strategy.

5. Strategic evaluation and control

Stage 1: Strategic Vision, Mission and Objectives

1. Strategic Vision: A company should define its direction, considering changes in products,
target markets, technology, and customer focus to enhance its position.

Vision should outline Top management's aspirations for the organization, indicating a strategic
direction or path for future preparation and shaping its identity.

A clearly articulated strategic vision communicates management’s aspirations to stakeholders

and helps steer the energies of company personnel in a common direction

2. Mission Statement: Managers must clarify their organization's role, often through a mission
statement.

This clarity is crucial for external stakeholders and other managers to understand the
organization's goals and the broad approach to achieving them.
 At this level, the focus is on overall strategic direction rather than specific details of
competitive strategies or methods for gaining competitive advantage within Strategic Business
Units (SBUs).

3. Corporate Goals & Objective Setting: These are derived from the mission and growth ambition
of the corporation.

Represent the desired growth quantum within a specified timeframe and Bestow the firm with
characteristics necessary for achieving projected growth.

The managerial aim in setting objectives is to transform the strategic vision into specific
performance targets, detailing the results and outcomes management aims to achieve. Utilize
these objectives as benchmarks for monitoring the company’s progress and performance.

Stage 2: Environmental and Organisational Analysis

The strategic analysis phase involves two main analyses:

1. Environmental Scanning: This examines the external factors like economic conditions, social
trends, technology developments, and market dynamics that affect a company. These factors
are constantly changing and unpredictable, so management must regularly assess them to
identify future opportunities and threats.

2. Organisational Analysis: This looks inward, evaluating a company's financial and technological
resources, production capabilities, marketing effectiveness, R&D, employee skills, etc. The
goal is to identify the company's strengths and weaknesses.

Combining insights from both these analyses results in a SWOT analysis (Strengths, Weaknesses,
Opportunities, and Threats). This can be summarized in a table showcasing the company's internal
strengths and weaknesses against the external opportunities and threats.

Stage 3: Strategy Formulation

1. Develop Strategic Alternatives Based on the company's strengths, weaknesses, opportunities,

and threats, create different strategic options.

2. Deeply analysis Strategic Alternatives each option to select the most suitable strategy for the
company.

Possible strategy options might include:

i. Continuing in the same business at the current scale.

ii. Growing within the same business by expanding existing units, creating new ones, or acquiring
competitors.

iii. Diversifying into related or unrelated areas.

iv. Exiting an existing business either fully or partially.

These strategies can be categorized as stability, growth/expansion, and retrenchment. Sometimes,

a combination of these strategies, known as a combination strategy, may be used.

Stage 4: Strategy Implementation

Implementing a strategy is an action-oriented process that requires operational efforts to support

the decided strategy. It's often the most challenging and time-intensive stage of strategic
management. To convert strategic plans into actions and results, a manager must be able to direct
organisational change, motivate people, build and strengthen company competencies and
competitive capabilities, create a strategy supportive work climate, and meet or beat performance
targets.

For effective strategy execution, managers need to:

• Developing budgets that steer ample resources into those activities critical to strategic
success.

• Staffing the organisation with the needed skills and expertise, consciously building and
strengthening strategy-supportive competencies and competitive capabilities and organising
the work effort.

• Ensuring that policies and operating procedures facilitate rather than impede effective
execution.

• Using the best-known practices to perform core business activities and pushing for continuous
improvement.

• Installing information and operating systems that enable company personnel to better carry
out their strategic roles day in and day out.

• Motivating people to pursue the target objectives energetically.

• Creating a company culture and work climate conducive to successful strategy implementation
and execution.

• Exerting the internal leadership needed to drive implementation forward and keep improving
strategy execution. When the organisation encounters stumbling blocks or weaknesses,
management has to see that they are addressed and rectified quickly.

Successful strategy execution requires ensuring that the strategy aligns with the company's
capabilities, reward structures, operating systems, work climate and overall culture.

Stage 5: Strategic Evaluation and Control

The final stage of strategic management process – evaluating the company’s progress, assessing
the impact of new external developments, and making corrective adjustments – is the trigger point
for deciding whether to continue or change the company’s vision, objectives, strategy, and/or
strategy-execution methods.

When company encounters disruptive changes in its external or experiences a downturn in its
market position or shortfalls in performance, then managers are obligated to figure out whether
the causes relate to strategy, execution, or both and then to take timely corrective action.

A company should frequently reassess its strategic direction based on both external and internal
factors as strategies will naturally evolve over time.

Effective strategy execution involves learning from both successes and failures. Assessing areas
that need improvement and making necessary adjustments is a continuous process.

In essence, successful strategy management requires regular evaluations and updates to adapt to
changing circumstances and to ensure consistent progress.
Strategy Q: What are the two main types of planning involved in corporate strategy?
Formulation
"Corporate strategy" is the game plan guiding a company towards its objectives. It sets the
direction and outlines the overall goals the company aims to reach.

Two main types of planning are:

1. Strategic Planning: Senior management develops strategic plans for the entire organisation
after evaluating the company's internal strengths and weaknesses, as well as external
opportunities and threats and the formation of corporate strategy. They involve gathering and
allocating resources in order to achieve organisational goals.
2. Operational Planning: Made by middle and lower-level management, this focuses on how the
resources are to be used effectively to achieve the goals

In essence, while strategic planning outlines the bigger picture, operational planning dives into the
specifics of achieving it.

Q: What is Strategic Planning and its features?

The game plan that really directs the company towards success is called “corporate strategy”. The
success of the company depends on how well this game plan works. Because of this, the core of
the process of strategic planning is the formation of corporate strategy. The formation of
corporate strategy is the result of a process known as strategic planning.

• Strategic planning is the process of determining the objectives of the firm, resources required
to attain these objectives and formulation of policies to govern the acquisition, use and
disposition of resources.

• Strategic planning involves a fact of interactive and overlapping decisions leading to the
development of an effective strategy for the firm.
 • Strategic planning determines where an organisation is going over the next year or more and
the ways for going there.

• The process is organisation-wide or focused on a major function such as a division or other

major function.

Strategic Q: What is strategic uncertainty?

Uncertainty
Strategic uncertainty refers to the unpredictability of future events and circumstances that can
impact an organization's strategy and goals. This uncertainty can be driven by changes in the
market, technology, competition, regulation, and other external factors.
Dealing with strategic uncertainty can be challenging and organizations need to have the flexibility,
resilience, and agility to quickly respond to changes in the environment and minimize its impact

Q: What are the ways organizations can deal with strategic uncertainty?

1. Flexibility: Organizations can build flexibility into their strategies to quickly adapt to changes
in the environment.

2. Diversification: Diversifying the organization's product portfolio, markets, and customer base
can reduce the impact of strategic uncertainty.

3. Monitoring and Scenario Planning: Organizations can regularly monitor key indicators of
change and conduct scenario planning to understand how different future scenarios might
impact their strategies.

4. Building Resilience: Organizations can invest in building internal resilience, such as

strengthening their operational processes, increasing their financial flexibility, and improving
their risk management capabilities.

5. Collaboration and Partnerships: Collaborating with other organizations, suppliers, customers,

and partners can help organizations pool resources, share risk, and gain access to new markets
and technologies.

Q: How does uncertainty impact organizations?

Each element of strategic uncertainty involves potential trends or events that could have an impact
on present, proposed, and even potential businesses.

For instance, a trend toward natural foods might create opportunities for a firm producing aerated
drinks. The effect of strategic uncertainty will vary based on the significance of the impacted
Strategic Business Unit (SBU) to a company. While established SBUs might be evaluated based on
sales, profits, or costs, these metrics may need to be adjusted to account for potential growth, as
current values might not truly reflect future potential.

Strategy Q: What is Strategy Implementation?

Implementation
Strategy implementation is the managerial exercise of putting a new strategy into action. It
involves supervising the strategy as it's carried out, improving the competence with which it is
executed, and showing measurable progress in achieving the targeted results.

Before this step, decisions about the strategy should consider if it's achievable and accepted. To
make the strategy work, resources may need to be allocated differently, the organization might
need structural changes, and staff might require training and new systems.

Q: Explain Strategy formulation and implementation matrix?

Strategy formulation and strategy implementation are distinct processes, each requiring unique
skills. Formulation is about designing a strategy, while implementation is about executing it. A
company thrives when both the strategy is well-planned and its execution is flawless. It's a mistake
to solely blame the strategic plan for a company's failure, as poor execution can be the main issue.
Therefore, organizational success function of both a good strategy and its effective
implementation.

The matrix in the figure below represents various combinations of strategy formulation and
implementation:

The figure classifies companies based on the quality of their strategy formulation and
implementation:

1. Square A: Companies with a good strategy but poor implementation. This might be due to
factors like inexperience, lack of resources, or leadership gaps. Their goal is to move to
Square B by improving their implementation.

2. Square B: The ideal spot. Companies here have a well-designed strategy and also excel at
implementing it.

3. Square D: Companies with a weak strategy but strong implementation. They need to first
revise their strategy and then realign their implementation efforts.

4. Square C: The least desirable spot. Companies here have both a flawed strategy and poor
implementation. Their path to success also goes through business model redesign
and implementation/execution readjustment

In essence, business strategy is a planned set of actions to achieve and maintain a competitive
position relative to other businesses, emphasizing the importance of a strong competitive position.

'Strategy' isn't just a 'long-term plan.' It's about a company aiming for a desired future by adjusting
its position based on changing situations. While companies may plan their strategic moves, they
often have to adjust based on competitors' actions.
Q: Explain the principal combinations of efficiency and effectiveness?

It’s a management approach in some organizations, when facing challenges, become inward-
focused, prioritizing cost-cutting and letting go of less profitable sectors. This emphasis is on
efficiency (getting the best outputs from inputs in a short term) instead of effectiveness (achieving
organizational goals, like a desired competitive position).

While efficiency is inward and concerns operational managers, effectiveness considers the
organization's relation to its external environment and is primarily the responsibility of top
management.

1. Cell 1: Organizations are thriving, meeting their goals effectively and efficiently.

2. Cell 2 & 4: Organizations are at risk without a clear strategic direction. Being in cell 2 is
even more precarious than cell 3 because cell 3, despite being inefficient, at least has a
strategic direction, ensuring they're on the right path.

3. Effectiveness vs. Efficiency:

• Being effective means doing the right thing, ensuring the organization survives
and meets its goals.
• Being efficient means doing things right, optimizing resources. While it's good, it's
not enough on its own for survival.
• An emphasis on efficiency over effectiveness is misguided.

4. Determining Effectiveness: Organizations consist of various stakeholders, like

shareholders, employees, suppliers, consumers, government, and others. Each group has
its own interests and gains from the organization. Effectiveness is measured against the
satisfaction of these groups.

5. Implementation over Perfection: A perfect strategy is useless if not implemented. It's

more crucial to execute even an imperfect plan well than to dwell on perfecting a plan that
never gets realized.

6. Formulation vs. Implementation: While setting up a strategy is essential, implementing it

is always more challenging. Actions speak louder than words.
 In essence, while strategic planning is vital, the real change and success come from putting those
plans into action. And, it's better to act effectively (even if not perfectly) than to merely plan
efficiently.

Difference
between Strategy
Formulation and
Implementation

Note:
While we might study strategy formulation and implementation as separate phases for clarity, in
the real world, they're closely linked and often overlap. There are:

• Forward Linkages: How the formulation impacts the implementation.

• Backward Linkages: How feedback from the implementation phase can influence and alter
the formulated strategy.

Q: What are the linkages between strategy formulation and implementation?

1. Forward Linkages: When a strategy is formulated, it sets the direction for the organization.
For instance, the organizational structure has to undergo a change in the light of the
requirements of the modified or new strategy. The style of leadership has to be adapted to
the needs of the modified or new strategies. So, the act of creating a strategy directly
influences how it will be implemented.
2. Backward Linkages: The process of formulating a strategy isn't just influenced by new ideas
but also by how past strategies were implemented. Organizations tend to choose strategies
they believe they can execute based on their current resources and capabilities. Over time,
these incremental adjustments guide the organization from its current state to its desired
future state. So, feedback from the implementation phase can influence and alter the
formulated strategy.

Q: What are the different parts in strategy implementation?

1. Strategic Plans: While strategies outline the organization's intentions, they don't result in
action by themselves. They need to be activated through proper implementation. The strategic
plan devised by the organization proposes the manner in which the strategies could be put
into action.

2. Programmes: To execute a strategy, different programmes are formulated. A programme is a

broad term, which includes goals, policies, procedures, rules, and steps to be taken in putting
a plan into action.

3. Projects: Programmes further break down into projects. Projects are specific plans with a set
budget, predetermined timelines, and clear objectives. For instance, a research programme
may consist of multiple projects, each targeting a specific goal, having its budget, and a
completion deadline.

Implementing strategies goes beyond just making plans or projects. It demands resources, proper
organizational structure, suitable systems, specific functional policies, and appropriate behavior.

Q: What is the sequence of issues to be considered in strategy implementation?

The sequence of issues to be considered in strategy implementation:

1. Project Implementation: Initiating and executing projects.

2. Procedural Implementation: Establishing the steps to be followed.

3. Resource Allocation: Distributing necessary resources where they're needed.

4. Structural Implementation: Organizing the structure to support the strategy.

5. Functional Implementation: Ensuring each function (e.g., marketing, finance) aligns with the
strategy.

6. Behavioural Implementation: Guiding employee behaviors to support strategy.

These activities don't necessarily follow a strict sequence. Some may overlap or recur over time,
while others might only happen once.

Q: How can an organization effectively transition from the strategy formulation stage to the
implementation stage?

Transitioning from strategy formulation to its implementation involves shifting responsibility from
top strategists to divisional and functional managers. This shift can create issues, especially if these
managers are caught off-guard by strategic decisions.

Managers and employees are motivated more by perceived self-interests than by organizational
interests, unless the two coincide.

Therefore, it is essential
 • Involvement: It's essential that lower-level managers are involved in formulating strategy and
that strategists are engaged in implementation.

• Key Managerial Tasks: Include setting annual goals, crafting policies, resource allocation,
revising structures and incentives, managing resistance to change, nurturing a strategy-
supportive culture, and making necessary human resource adjustments.

• Communication: Clear communication from top to bottom is crucial to ensure everyone

understands the objectives and strategies.

• Competitive Focus: Firms should maintain an awareness of competitors' actions and

performance. All employees should understand how their work compares to top industry
standards, making the drive for excellence personal.

• Training: Employees at all levels need training to ensure they possess and maintain skills to be
top performers.

In essence, for successful strategy implementation, an organization needs clear communication,

involvement at all levels, and continuous learning and benchmarking against competitors.

Strategic Change Strategic Change

What are the steps to initiate strategic change ?

For initiating strategic change, three steps can be identified as under:

1. Recognize the need for change: The first step involves diagnosing which aspects of the current
corporate culture are strategy-supportive and which are not. This involves environmental
scanning and possibly a SWOT analysis to identify gaps and areas for change.

2. Create a shared vision to manage change: Objectives for both the organization and its
members must align, avoiding any conflict. Senior managers must consistently communicate
this vision and demonstrate their commitment to the new strategic initiatives. They have to
convince all those concerned that the change in business culture is not superficial or cosmetic.

3. Institutionalise the change: This action stage requires implementing the new strategy. A new
culture that supports change must be created and maintained and Change process must be
regularly monitored and reviewed to analyse the after-effects of change. Any discrepancy or
deviation should be brought to the notice of persons concerned so that the necessary
corrective actions are taken. It takes time for the changed culture to prevail.

Q: Explain Kurt Lewin’s Model of Change?

To make the change lasting, Kurt Lewin proposed three phases model for effective organizational
change, consisting of 'unfreezing,' 'changing,' and 'refreezing.'

1. Unfreezing the situation: The 'unfreezing' phase is the first step in preparing an organization
for change. It involves making employees aware that change is necessary. The goal is to avoid
surprising employees with sudden changes, as that can be harmful to morale. Unfreezing is
the process of breaking down the old attitudes and behaviours,customs and traditions so that
they start with a clean slate. by communicating the upcoming changes through
announcements and meetings. This helps prepare everyone to be more open and ready for
the new changes.

2. Changing to the new situation: The 'changing' phase comes after 'unfreezing' and is the stage
where organizational members are prepared to accept new ways of doing things.
 Their behavior patterns are redefined through one of three methods proposed by H.C. Kellman:

• Compliance: This involves using a reward and punishment system to encourage desired
behaviors. People change because they want to avoid punishment or receive rewards.

• Identification: In this approach, members are encouraged to identify with role models in
the organization whose behaviors they'd like to emulate.

• Internalization: Here, individuals undergo an internal change in their thought processes.

They are given the freedom to learn and adopt new behaviors to succeed under the new
circumstances.

3. Refreezing: The 'refreezing' phase is the final stage where the new behavior becomes the
standard practice within the organization. For the change to be successful and lasting, this new
behavior must fully replace the old one. Continuous reinforcement is crucial to ensure that the
new behavior remains permanent and doesn't revert back to old ways.

Importantly, Lewin's model acknowledges that change is not a one-off event but a continuous
cycle. The environment is ever-changing, and organizations must regularly go through the cycle of
'unfreezing,' 'changing,' and 'refreezing' to adapt and thrive. This makes 'refreezing' not a final
endpoint but part of an ongoing process of change management.-

Strategic Change Q: How does digital transformation work in organizations and what role does change
Through Digital management play in it?
Transformation
Digital transformation involves use of digital technologies to create new or improved business
processes, products, or services. It's a fundamental adjustment that can be challenging to identify
and even more challenging to implement.

Change management enters into the picture here. Organizations can plan, prepare for, and carry
out changes to their operations, including digital transformations, with the aid of the discipline of
change management. When implemented correctly, change management may assist firms in
overcoming the obstacles posed by the digital transition and reaping the full rewards of their
investment.

Q: How does change management appear when applied to digital transformation?

Change management in the digital transition consists of four essential elements:

1. Defining the goals and objectives of the transformation

2. Assessing the current state of the organization and identifying gaps

3. Creating a roadmap for change that outlines the steps needed to reach the desired state

4. Implementing and managing the change at every level of the organization

Each of these elements is critical for a successful digital transformation. However, the key to
success lies in how these elements collaborate to help the organization reach its goals.

Q: How does change management work?

Change management is a process or set of tools and best practices used to manage changes in an
organization. It assists in making changes in a safe and regulated manner, reducing the possibility
of detrimental effects on the company. Any sort of organisation, including enterprises,
organisations, governmental bodies, and even families, can utilise change management to manage
changes.
Change management models and methods come in a wide variety, but they all have key things in
common. These include creating a clear vision for the change, involving stakeholders in the
process, coming up with a plan for putting the change into action, and keeping an eye on the
results.

Q: What is the role of change management in digital transformation?

Digital transformation is a process of organizational change that enables an organization to use

technology to create new value for customers, employees, and other stakeholders. A good change
management strategy is necessary for a successful digital transformation.

Change management is the process of planning, implementing, and monitoring changes in an

organization. It provides organizations in achieving their objectives while reducing risks and
disruptions. For any organisation undergoing a digital transition, change management is crucial.

A properly implemented change management strategy can help an organization to:

• Specify the parameters and goals of the digital transformation

• Determine which procedures and tools need to be modified.
• Make a plan for implementing the improvements.
• Involve staff members and parties involved in the transformation process.
• Track progress and make required course corrections

Q: What are the strategies or practices in change management ?

The five best practices for managing change in small and medium-sized businesses are:

1. Begin at the top: A focused, invested, united leadership that is on the same page about the
company's future is reflected in change that begins at the top. The culture that will motivate
the rest of the organisation to accept change can only be generated and promoted in this way.

2. Ensure that the change is both necessary and desired: The fact that decision-makers are
unaware of how to properly handle a digital transformation and the effects it will have on their
firm is one of the main causes of this. If a corporation doesn’t have a sound strategy in place,
introducing too much too fast can frequently become a major issue down the road.

3. Reduce disruption: Employee perceptions of what is required or desirable change can differ
by department, rank, or performance history. It's crucial to lessen how changes affect staff.
The introduction of new tactics or technologies intended to improve management and
corporate operations causes employee concern about change. It is possible to reduce
workplace disruption by:
a. Getting the word out early and preparing for some interruption.
b. Giving staff members the knowledge and tools, they need to adjust to change.
c. Creating an environment that encourages transformation or change.
d. Empowering change agents to provide context and clarity for changes, such as project
managers or team leaders.
e. Ensuring that IT department is informed of changes in technology or infrastructure and is
prepared to support them.

4. Encourage communication: Create channels so that workers may contact you with queries or
complaints. Encourage departmental collaboration to propagate ideas and innovations as new
procedures take root. Communication promotes efficiency and has the power to influence
culture, just like your vision. The people who will be affected the most by these changes are
 reassured that they are not in danger through effective communication, which keeps everyone
on the same page.

5. Recognize that change is the norm, not the exception: Change readiness may be defined as
“the ability to continuously initiate and respond to change in ways that create advantage,
minimize risk, and sustain performance.” In order to keep up with the customers, businesses
must also adapt their operations. They must prepare for change in advance and expect them.
It may run into difficulties because change is not a project but rather an ongoing process.

Q: How to manage change during digital transformation?

Any organisation may find the work of digital transformation challenging and overwhelming. To
ensure that a digital transition is effective, change management is essential. Here are some
pointers for navigating change during the digital transformation:

1. Specify the digital transformation’s aims and objectives: What is the intended outcome? What
are the precise objectives that must be accomplished? It will be easier to make sure that
everyone is on the same page and pursuing the same aims if everyone has a clear grasp of the
goals.

2. 2. Always, always, always communicate: It might be challenging for people to accept change
and adjust to it. Ensure that you routinely and honestly discuss the objectives of the digital
transformation and how they will affect stakeholders, including employees, clients, and other
parties.

3. Be ready for resistance: Even when a change is for the better, it can be challenging for people
to embrace it. Have a strategy in place for dealing with any resistance that may arise.

4. Implement changes gradually: Changes should ideally be implemented gradually rather than
all at once. In order to avoid overwhelming individuals with too much change at once, this will
give people time to become used to the new way of doing things.

5. Offer assistance and training: Workers will need guidance in the new procedures, software
applications, etc
Orgranisational Q: Explain McKinsey 7S Model?
Framework
The McKinsey 7S Model is a tool designed to analyze a company's organizational design.

The goal of the model is to depict how effectiveness can be achieved in an organization through
the interactions of hard and soft elements.

The McKinsey 7s Model focuses on how the "Soft Ss" and "Hard Ss" elements are interrelated,
suggesting that modifying one aspect might have a ripple effect on the other elements in order to
maintain an effective balance.

Hard Elements (Directly managed by management):

• Strategy: the direction of the organization, a blueprint to build on a core competency and
achieve competitive advantage to drive margins and lead the industry
• Structure: depending on the availability of resources and the degree of centralisation or
decentralization that the management desires, it choses from the available alternatives of
organizational structures.
• Systems: the development of daily tasks, operations and teams to execute the goals and
objectives in the most efficient and effective manner.

Soft Elements (Governed by the Culture, Difficult to define):

• Shared Values: The core values which get reflected within the organizational culture or
influence the code of ethics of the management
• Style: This depicts the leadership style and how it influences the strategic decisions of the
organisation. It also revolves around people motivation and organizational delivery of goals
• Staff: Refers to the company's talent pool.
• Skills: The core competencies or the key skills of the employees play a vital role in defining the
organizational success.

Q: What are the limitation of McKinsey 7S Model?

• It ignores the importance of the external environment and depicts only the most crucial
elements within the organization.
• The model does not clearly explain the concept of organizational effectiveness or
performance.
• The model is considered to be more static and less flexible for decision making.
• It is generally criticized for missing out the reals gaps in conceptualization and execution of
strategy
 In summary, while the McKinsey 7S Model provides a comprehensive framework for evaluating
the internal dynamics of an organization, it's essential to consider its limitations, especially when
used as the sole tool for organizational analysis.

Organization Changes in a company's strategy often lead to changes in its structure for two main reasons:
Structure
1. The structure determines how goals and guidelines are set based on the strategy. For
instance, a company organized by location will have location-based goals, while one
organized by product will focus on product-specific objectives.

2. The structure dictates where resources go. If a company is organized around customer
types, resources are divided based on those groups. If it's organized by function, resources
are assigned to specific functions.

Chandler stated that when a company's strategy changes, its structure should also change. The
structure needs to support the strategy for the company to succeed. While there's no one-size-
fits-all structure, successful companies in the same industry often have similar setups. For
instance:

• Small companies usually have a centralized structure.

• Medium companies typically have a decentralized, division-based structure.
• Large companies often adopt a strategic business unit (SBU) or matrix structure.

As companies grow, they often shift from a simpler to a more complex structure to accommodate
different strategies. Firms face many internal and external pressures, but they can't alter their
structure for every pressure without causing disorder. When a company changes its strategy, the
existing structure might not work well. Signs of this can be too many management levels, excessive
meetings, interdepartmental conflicts, and unmet goals.

While changing the structure can help implement a strategy, it can't fix a poor strategy or bad
management. The structure itself can also impact the choice of strategy. For instance, a strategy
that needs drastic structural changes may not be preferred.
 The key is to determine the structural adjustments necessary for new strategies. There are several
basic organizational structures to consider:
1. Functional
2. Divisional by geographic area
3. Divisional by product
4. Divisional by customer
5. Divisional process
6. Strategic Business Unit (SBU)
7. Matrix

Every company requires an organizational structure to execute and oversee its strategies. As firms
devise new strategies, grow, or diversify, they may need to adapt or change their structural
framework.

Types of Q: What is organizational structure?

Organization
Structure Organizational structure is the formal configuration that a company adopts, outlining its intended
roles, procedures, governance mechanisms, authority, and decision-making processes.

Q: What role does the organizational structure play within a company and what are the different
types of Org Structure?

The organizational structure acts as a framework that guides how tasks are completed and
decisions are made within the company. It reflects the managers' determination of the company's
activities and how they align with the chosen strategy.

Simple Structure

• Suited for companies with a single-business strategy, offering products in one geographic area.
• Also fits companies with focused cost leadership or differentiation strategies.
• In this setup, the owner-manager decides and oversees everything. The staff carries out tasks
as directed.

Characteristics:
• Minimal task specialization
• Few rules and little formalization
• Basic information systems
• Direct involvement of the owner-manager in day-to-day operations

Advantages:
• Regular, direct communication
• Quick product market introduction, potentially offering a competitive edge.
• Fewer coordination issues compared to larger organizations.
• Openness to innovation
• Structural flexibility
• Swift response to environmental changes.
Potential Drawbacks:
However, if these smaller companies succeed and grow, they can outgrow the simple structure.
More relevant competitive information can overwhelm the owner-managers, leading to
inefficiencies.

Companies eventually need to transition from a simple structure to a functional one, especially as
they grow larger or when they diversify minimally. This functional structure is better equipped to
handle more complicated organizational functions.

Functional Structure
The functional structure is a common organizational model in businesses due to its simplicity and
cost-effectiveness.

Characteristics:
• Tasks are grouped by business function, such as marketing, finance, production, R&D, and
more.
• Led by a CEO or managing director, supported by corporate staff and managers heading each
function like production, marketing, finance, etc.
• Promotes labor specialization, leading to enhanced efficiency.
• Simplifies the control system and supports faster decision-making.

Advantages:
• Overcomes the growth limitations found in the simple structure.
• Aids in communication and coordination between different departments.

Potential Drawbacks:
• Functional specializations can lead to communication barriers between departments.
• The CEO has to ensure all functions align with the business's broader objectives.
• Professionals within a function might become too focused on their specific roles, potentially
losing sight of the company's broader mission and vision.

When such drawbacks become prominent, companies may transition to a multidivisional structure
to alleviate the challenges of the functional structure.

Divisional Structure

As companies grow and diversify, managing various products and services across different markets
becomes a challenge. To address this, many adopt a divisional structure, which can be based on
various criteria:

1. Geographic Area: Tailors strategies to regional customer needs and characteristics. Enhances
local decision-making and coordination.

2. Product/Service: Ideal for businesses offering a few distinct products or services. Focuses
attention on product lines.
3. Customer: Best for companies where specific customer groups are pivotal. It caters to distinct
customer requirements. For instance, some airlines and banks are organized by customer
groups.

4. Process: Similar to functional structures but with profit or revenue accountability. Organized
based on workflow.

Characteristics:
• Functional activities happen both centrally and in each division.
• Clear accountability: Divisional managers oversee sales and profit.
• Promotes delegation of authority.

Advantages:
• Clear performance outcomes enhance employee morale.
• Provides career growth opportunities for managers.
• Allows local control, fostering adaptability.
• Encourages healthy internal competition.
• Facilitates addition of new businesses or products.

Potential Drawbacks:
• Expensive due to:
• Requirement of functional specialists in each division.
• Duplication of resources and roles.
• Higher salaries for qualified managers.
• Need for a complex control system at the headquarters.
• Difficulty in maintaining consistent practices across the company.

Despite its potential limitations, for many large and even smaller organizations, the divisional
structure's benefits outweigh the drawbacks. The structure's type is determined by factors like the
company’s products, services, markets, and strategic focus. For instance, General Motors and
Procter & Gamble use product-based divisional structures, while some banks and airlines use
customer-based divisions.

Multidivisional (M-form) Structure

The multidivisional structure, commonly referred to as the M-form, is characterized by multiple
operating divisions, each representing a distinct business or profit center. These divisions function
semi-autonomously while the overarching corporate office sets broad strategic directions and
exercises financial control.

The M-form structure evolved in the 1920s as large corporations grappled with coordination and
control issues inherent to expanding product lines and markets. Under previous functional
structures, departments often struggled to manage multiple products, leading to inefficiencies and
suboptimal resource allocations. This structure aims to alleviate these challenges.

Characteristics:
• Separate Divisions: Each division operates as its distinct business entity with its own functional
departments (e.g., marketing, finance, operations).

• Operational Autonomy: Divisional managers are entrusted with daily operational

responsibilities, ensuring responsiveness and flexibility.

• Corporate Oversight: A lean corporate office focuses on long-term strategy, ensuring

alignment with the broader company vision, and exercises financial control over divisions.

• Performance Monitoring: The structure facilitates a clear view of each division's performance,
aiding in better resource allocation and fostering healthy competition.

• Strategic vs. Financial Controls:

• Strategic Controls: When the firm has fewer divisions or is less diversified, the
corporate office exercises strategic controls, implying a deep understanding of each
division's business strategy.

• Financial Controls: As diversification increases, it becomes challenging for the

corporate office to intimately understand every division. Instead, the focus shifts to
financial metrics like cash flow, revenue, and profits.

Advantages:
• Focused Accountability: Divisions can be held accountable for their financial performance.
• Flexibility: Allows companies to adapt to varying market conditions in different business units.
• Resource Allocation: Facilitates optimal resource distribution based on the performance and
potential of each division.
• Stimulates Improvement: Underperforming divisions have clear metrics to guide their
improvement efforts

Potential Drawbacks:
• Potential for Duplication: Multiple divisions may have overlapping roles and resources, leading
to inefficiencies.
• Interdivisional Competition: Divisions might compete for the same corporate resources or
market segments.
• Complexity: Managing multiple divisions can be intricate, especially when they operate in
vastly different industries or markets.

Strategic Business Units (SBUs) Structure

As firms grow even larger and more diversified, the very nature of their divisions might change.
Divisions might not just be separate business entities but could evolve into Strategic Business Units
(SBUs). SBUs are more than just divisions; they represent standalone businesses with their
strategies, resources, and competitive dynamics. They are typically based on market
segmentation, and their performance is often interdependent.

An SBU is a clustering of related businesses within a multi-business enterprise. The main goal of
creating SBUs is to facilitate more efficient and effective strategic planning by grouping related
products or services together, simplifying management, and assigning resources more optimally.

Characteristics:
• Independence: Each SBU operates as a separate business or a collection of related businesses.
This autonomy enables focused strategic planning and accountability.
• Unique Competitors: Each SBU faces its distinct competitive landscape.
• Leadership Structure: An SBU has a manager responsible for strategic planning, profit
performance, and managing factors affecting profits.

Advantages:
• Enhanced Strategic Planning: Grouping similar products or services into SBUs ensures that
strategic planning is coherent and aligned.
• Facilitates Coordination: Encourages synergies among related divisions or products, enhancing
the overall performance.
• Clarified Accountability: Each SBU's performance can be distinctly assessed, leading to clear
responsibility.
• Adaptability: Individual SBUs can quickly respond to environmental changes or market shifts.
• Focused Resource Allocation: Resources are channeled efficiently based on each SBU's
performance and needs.

Practical Implications: Historically, businesses were organized territorially. This method posed
challenges as products received varied strategic attention across territories, and unrelated
products often got identical treatments. The SBU structure offers a solution, ensuring that related
products receive consistent strategic attention.
Example: Sony restructured its operations to fit the SBU model, grouping products that benefited
from shared software and content. This integration aimed to enhance profitability by leveraging
synergies across products.

SBU Identification:
• Functional Standpoint: Products that are related in function are grouped under an SBU.
• Avoiding Unrelated Products: Unrelated products within an SBU are isolated and, if possible,
assigned to other SBUs based on functional relations.
• Strategic Differentiation: Each SBU will have its distinct mission, objectives, competition, and
strategy.
Determining SBU Relatedness:
• Technology: SBUs might share technological foundations.
• Markets: Even if products differ, they might serve the same market segment.
• Competencies: Different SBUs might be built on similar competencies, like marketing skills in
the Unilever example, which spans different products but shares marketing strategies.

The concept of SBUs is pivotal for multi-business corporations, offering a streamlined approach to
manage varied portfolios. By focusing on functional relationships and ensuring each unit has a
clear strategic direction, corporations can more effectively allocate resources and foster growth.

Matrix Structure

The matrix structure is a unique organizational design that attempts to balance the benefits of two
other prominent structures: the functional structure (based on departments or functions) and the
divisional structure (based on products, services, or markets).

Characteristics
• Dual Reporting: In this structure, an employee typically reports to two superiors: a functional
manager and a product or project manager.
• Complexity: Due to dual reporting, there's a violation of the "unity of command" principle,
which can lead to potential conflicts and confusion.
• Communication: The structure relies on both vertical (hierarchical) and horizontal (across
functions or products) flows of authority and communication.
• Higher Overhead: There's often increased management overhead, as the structure requires
more managerial roles to facilitate coordination.

Where is it Used? The matrix structure is prevalent in sectors like construction, healthcare,
research, and defense. It's particularly favored when:
• The external environment is volatile, especially in technological and market contexts.
• There's a need for cross-fertilization of ideas across various projects or products.
• Resources are scarce.
• There's a pressing need to enhance decision-making and information processing
capabilities.
Advantages:
• Flexibility & Stability: Combines the adaptability of the product form with the steadiness of the
functional structure.
• Clear Objectives: Project goals are clearly delineated.
• Efficient Resource Utilization: Especially when resources are scarce.
• Improved Communication: Facilitates multiple communication channels.
• Visible Results: Workers can directly see the outcomes of their efforts.

Potential Drawbacks:

Conflict: The dual authority can lead to power struggles between functional and product
managers.
Complexity: It's challenging to manage and may require extensive training and communication
systems.
Ambiguity: There might be confusion over roles, responsibilities, and resource allocation.

Development Phases of Matrix Structure (as per Davis & Lawrence):

• Cross-functional Task Forces: Used temporarily for new product lines with a project manager
as the primary link.
• Product/Brand Management: Semi-permanent setup where function remains the primary
structure, but product managers act as integrators.
• Mature Matrix: A full-fledged matrix setup with permanent functional and product structures,
requiring extensive collaboration between managers.

Despite its advantages, the matrix structure is often criticized for its operational complexities and
challenges in implementation. However, for organizations operating in dynamic environments or
those pursuing diversified strategies, the matrix can be an effective structural choice.

Network Structure

The network structure is a revolutionary organizational design that can be seen as a "non-
structure" due to its significant outsourcing of in-house business functions. It diverges from
traditional hierarchical organizational structures and instead operates as a web of connections and
collaborations, making it aptly termed as a virtual organization.

Characteristics
• Outsourcing: Many traditional in-house activities are outsourced to external partners.
• Virtual Organization: Instead of a traditional hierarchy, the organization is a series of project
collaborations interconnected in a non-hierarchical manner.
• Unstable Environments: This structure is suitable for firms in unpredictable environments that
require innovation and a rapid response.
• Contracts Over Employees: Instead of hiring long-term employees, organizations might
contract with individuals for specific projects or durations.
• Geographical Dispersion: The organization's functions might be spread across different
locations, with a small centralized hub acting as a connector or "broker."
• Emphasis on Core Competencies: The organization focuses on its unique strengths while
harnessing the efficiencies of partners who specialize in their areas of expertise.
Examples: A company like Airtel, for instance, leverages the network structure by outsourcing
manufacturing to low-cost producers.

Advantages:
• Flexibility and Adaptability: Can easily adapt to rapid technological changes and shifting
international trade patterns.
• Efficiency: By partnering with specialized firms, a company can harness their expertise without
having to develop it in-house.
• Focus on Core Competencies: Allows organizations to concentrate on what they do best.

Potential Drawbacks:
• Over-reliance on Partners: With so many potential collaborators, it might be challenging to
manage and maintain quality across the network.
• Missed Synergies: By outsourcing various functions, organizations might miss out on potential
efficiencies that arise from integrating multiple activities.
• Risk of Overspecialization: If a firm narrows down too much on a few specific functions, it
might become non-competitive if those functions become obsolete or less critical.

Implications for Employees: The shift towards newer organizational structures like the network
structure brings about several implications for employees:
• Continuous Learning: Employees are expected to be proactive and continually update their
skills.
• Increased Interaction: Flatter structures might require more intensive interactions with both
internal and external stakeholders.
• Potential Stress: The demands of such structures, combined with the need for continuous
learning and increased interaction, might be overwhelming for some employees.

In conclusion, while the network structure offers a contemporary approach to organizing,

especially in the face of rapid technological and market changes, it also brings about its own set of
challenges. Organizations need to weigh the pros and cons before transitioning to or adopting this
structure.

Hourglass Structure

The Hourglass Structure has emerged as a direct result of advancements in information technology
and communications. As technology continues to automate and streamline tasks, the role of
middle management has been redefined and, in many cases, diminished.
Characteristics
• Three Layers: The structure consists of a top layer (senior management), a constricted middle
layer (middle management), and a broad bottom layer (front-line employees and workers).
• Reduced Middle Management: The middle layer is slim and contains fewer managers than
traditional organizational structures.
• Role of Technology: Advanced information technology systems connect the top and bottom
layers, automating many tasks that were traditionally handled by middle management.
• Generalists over Specialists: Unlike traditional middle managers who might specialize in
specific areas like marketing, finance, or production, managers in the hourglass structure
handle a variety of cross-functional issues, making them more of generalists.

Advantages:
• Cost Reduction: With fewer middle managers, there's an obvious benefit in reduced personnel
costs.
• Increased Responsiveness: A slimmed-down middle layer can lead to quicker decision-making
as there are fewer layers to navigate.
• Decentralized Decision Making: By removing some middle management, decisions can be
made closer to where the actual work happens, which can lead to more informed and efficient
choices.

Potential Drawbacks:
• Limited Promotion Opportunities: With a reduced middle layer, there's less room for upward
mobility for those at the bottom, potentially leading to dissatisfaction.
• Risk of Monotony: Employees might face stagnation in their roles due to limited growth
opportunities, leading to monotony and reduced motivation.
• Maintaining Morale: With reduced promotional paths, organizations need to find alternative
ways to motivate and reward their employees, such as offering challenging tasks or lateral
transfers.

Ways Organizations Mitigate Challenges:

• Challenging Tasks: To keep employees engaged, companies might assign complex and diverse
tasks.
• Lateral Transfers: Employees can be transferred between departments or roles to provide
varied experiences and learnings.
• Reward Systems: Establishing proper reward systems can help keep motivation levels high
despite limited upward mobility.
In conclusion, the Hourglass Structure is a reflection of the evolving nature of organizations in the
digital age. While it offers advantages in terms of cost savings and responsiveness, it also presents
challenges in managing employee expectations and career progression. As with any organizational
 structure, its effectiveness will largely depend on how well it's implemented and how companies
manage the associated challenges.

Organization Q: What do you mean by corporate culture?

Culture
Corporate culture refers to a company's values, beliefs, principles, traditions, operating methods,
and work environment.

Q: Where does corporate culture originate?

A company's culture is shaped by many factors:

• Values and principles preached and practiced by management.
• The ethical standards and policies set.
• Relationships with stakeholders, including employees, unions, stockholders, vendors, and local
communities.
• Traditions and stories repeated within the organization.
• How supervisors manage and guide.
• Employee attitudes and behavior.
• Peer pressures and organization politics.

These sociological elements, some subtle, collectively form an organization's culture. The origin
can be anywhere: a single influential person, a department, or from any level in the organizational
hierarchy. Often, stories that are repeatedly told to new members reinforce the company's values
and ways of operating.

Q: Is culture an ally or obstacle to strategy execution?

An organization's culture can either help or hinder its strategy execution. If the culture aligns with
the company's goals and approach, it aids in implementing the strategy. while a conflicting culture
can become a stumbling block to a successful execution.

Q: What is the role of organizational culture in the execution of a company's strategy?

Strong organizational culture directly impacts the execution of a company's strategy. If the culture
aligns with the strategy, it boosts the chances of successful execution.

For instance:
• A culture that values thrift supports a low-cost strategy.
• A culture that encourages creativity aligns with a strategy focused on innovation.
• A culture that emphasizes customer focus and empowers employees matches a strategy
of offering superior customer value.

When culture complements the strategy, it sets informal rules and influences the behavior of
employees. Such alignment positively impacts the energy, collaboration, and customer treatment
within the organization.

A strategy-supportive culture motivates employees, aligns them with the company's vision and
goals, and fosters collaboration. This creates an environment where employees feel connected to
the company's mission, making them more enthusiastic and competent in their roles.

If a company's culture doesn't align with its strategy, it often needs to change the culture quickly.
While sometimes the strategy might need adjustment to fit the culture, it's more common to
modify the culture to support the strategy. The deeper the misalignment between culture and
 strategy, the harder it is to implement the strategy effectively. A prolonged mismatch can
undermine efforts to execute the strategy successfully.

Q: Whose responsibility is it to choose a strategy that aligns with the core aspects of a corporate
culture, and who addresses any cultural aspects that hinder strategy execution?

The strategy maker is responsible for selecting a strategy that matches the unchangeable parts of
the existing corporate culture. Once a strategy is chosen, it's up to the strategy implementer to
adjust any cultural facets that obstruct its effective execution.

Modifying a company's culture to match its strategy is one of the hardest tasks for management.
The deep-rooted values and habits make people resistant to change. It requires persistent
management efforts over time to transition from a problematic culture to one that supports the
strategy effectively.

Q: What are the essential steps to modify a corporate culture so that it aligns with the chosen
strategy?

1. Diagnosis: Identify parts of the current culture that either support or hinder the strategy.

2. Communication: Engage in open discussions with stakeholders about necessary cultural

changes.

3. Action: Promptly introduce clear steps for cultural modification, including:

• Revising policies and procedures.
• Adjusting compensation to incentivize the desired behavior.
• Recognizing those who exemplify the new culture.
• Hiring individuals aligned with the desired culture.
• Replacing executives tied to the old culture.
• Continually communicating the reasons and advantages of the cultural shift.

4. Leadership Commitment: The CEO must be genuinely dedicated to the change, emphasizing
the new culture consistently.

5. Team Effort: Cultivating a strategy-supportive culture is a collective responsibility, with

initiatives from all managerial levels. They should echo company values and translate the
organization's vision into daily operations.

6. Grassroots Support: Engage frontline supervisors and influential employees, highlighting the
importance of adhering to and promoting the new cultural norms.

7. Time Perspective: Cultural change is a long-term process. Depending on the organization's size
and the extent of change needed, it can take anywhere from two to five years. Establishing a
strategy-supportive culture in a new organization is often simpler than changing a deeply
rooted, non-supportive culture in an existing one.

While a strict emphasis on rigid management can lead to steady, linear progress, focusing on the
more flexible aspects can boost performance at a much faster rate. Ideally, organizations should
strike a balance between these two approaches. This is because, in our dynamic world, what seems
appropriate when established might not fit the evolving reality during implementation.

Strategic Leader Q: What is strategic leadership?

Strategic leadership involves guiding a company's direction through vision, strategy development,
and implementation. A manager as a strategic leader has to play many leadership roles to play:
visionary, chief entrepreneur and strategist, chief administrator, culture builder, resource acquirer
and allocator, capabilities builder, process integrator, crisis manager, spokesperson, negotiator,
motivator, arbitrator, policy maker, policy enforcer, and head cheerleader. Sometimes it is useful
to be authoritarian; sometimes it is better to be a perceptive listener and a compromising decision
maker; sometimes a strongly participative, and sometimes being a coach and adviser is the proper
role.

Q: Who is a strategic leader and what are their leadership roles?

A strategic leader is a change agent to initiates strategic changes in the organisations and ensure
that the changes successfully implemented. For the most part, major change efforts have to be
top-down and vision-driven. To lead change, they first assess the situation and then determine the
best approach. Managers championing strategy execution typically embrace five leadership roles:

1. Staying on top of what is happening, closely monitoring progress, solving out issues, and
learning what obstacles lie in the path of good execution.

2. Promoting a culture of esprit de corps that mobilizes and energizes organizational members
to execute strategy in a competent fashion and perform at a high level.

3. Keeping the organization responsive to changing conditions, alert for new opportunities,
bubbling with innovative ideas, and ahead of rivals in developing competitively valuable
competencies and capabilities.

4. Exercising ethical leadership and insisting that the company conduct its affairs like a model
corporate citizen.

5. Pushing corrective actions to improve strategy execution and overall strategic performance.

Example:

N. R. Narayan Murthy, the former CEO of Infosys, is renowned for the values he embedded within
the company. His lasting legacy at Infosys includes a robust management development program
that nurtures leadership with ethical foundations.

Similarly, Dhirubhai Ambani, the founder of Reliance Group, was distinguished for his visionary
strategies and his knack for achieving corporate objectives. His clear company direction and
exceptional people skills motivated employees to work towards the company's strategic goals,
marking him as a standout strategic leader in the business arena.

Q: What is the role of leadership in strategy implementation?

Strategic leaders guide the company in developing and achieving its strategic intent, mission, and
goals. They effectively navigate the strategic management process, from planning to execution,
ensuring everyone works towards achieving strategic objectives.
Q: What does strategic leadership entail?

Strategic leadership involves anticipating challenges, visualizing the future, maintaining

adaptability, and empowering team members to bring about necessary strategic changes in
response to the external environment. Essentially, it's about guiding a company amidst complex
scenarios, managing change, and dealing with uncertainty.

Q: Why is a manager’s frame of reference significant?

In the today’s competitive landscape, strategic leaders are challenged to adapt their frames of
reference so that they can deal with rapid, complex changes. A managerial frame of reference is
the set of assumptions, premises, and accepted wisdom that bounds a manager’s understanding
of the company, the industry in which it competes, and the core competencies that it exploits in
the pursuit of strategic competitiveness (and above-average returns). In other words, a manager’s
frame of reference is the foundation on which a manager’s mindset is built.

The importance of a manager’s frame of reference can be seen if we perceive those competitive
battles are not between companies or products but between mindsets or managerial frames. This
implies that effective strategic leaders must be able to deal with the diverse and cognitively
complex competitive situations that are characteristic of today’s competitive landscape.

Q: What are the main responsibilities of a strategic leader?

1. Making strategic decisions.
2. Crafting policies and action plans to execute those decisions.
3. Ensuring effective communication within the organization.
4. Managing human capital, which is a critical skill for strategic leaders.
5. Overseeing and managing organizational change.
6. Establishing and maintaining a robust corporate culture.
7. Ensuring sustained high performance over time.

Q: How do strategic leadership skills impact a company?

The strategic leadership skills of a company’s managers serve as vital resources that influence
company performance. Developing these skills is crucial for the future success and benefit of the
company.

Q: How does strategic leadership differ from managerial leadership?

While strategic leadership focuses on setting the firm’s direction, developing a future vision, and
inspiring members to follow that direction, managerial leadership is more about the short-term
and deals with day-to-day activities.

Q: What are the two basic approaches to leadership?

The two primary approaches are transformational leadership style and transactional leadership
style.

Q: Can you describe the transformational leadership style?

1. Transformational leaders use charisma and enthusiasm to inspire and motivate people for the
organization's benefit.
2. It's most suitable for turbulent environments, industries at the beginning or end of their life-
cycles, or underperforming organizations that require major changes.
3. Transformational leaders offer excitement, vision, intellectual stimulation, and personal
satisfaction, presenting followers with a vision of a greater purpose.
4. They inspire followers to exceed their initial expectations by enhancing their abilities and
boosting their self-confidence. They also foster innovation throughout the organization.

Q: What about the transactional leadership style?

• Transactional leaders focus on designing systems and controlling organizational activities,

aiming to enhance the existing situation.
• They build on the existing culture and refine current practices.
• Their leadership style is based on the authority of their position, exchanging tangible rewards
like pay and status.
• They employ a formalized approach to motivation by setting clear goals, providing explicit
rewards, or imposing penalties based on performance.
• Transactional leadership is best suited for static environments, mature industries, or well-
performing organizations, focusing on efficient work and smooth operations.
Strategic Control Q: What is the significance of controlling in management?

Controlling is vital in management as it is a function intended to ensure and make possible the
performance of planned activities and to achieve the predetermined goals and results. Control is
intended to regulate and check, i.e., to structure and condition the behaviour of events and
people, to place restraints and curbs on undesirable tendencies, to make people conform to
certain norms and standards, to measure progress to keep the system on track. It is also to ensure
that what is planned is translated into results, to keep a watch on proper use of resources, on
safeguarding of assets and so on.

Q: What does the controlling function involve?

The controlling function involves monitoring the activity and measuring results against pre-
established standards, analysing and correcting deviations as necessary and maintaining/adapting
the system. It is intended to enable the organisation to continuously learn from its experience and
to improve its capability to cope with the demands of organisational growth and development.

Q: What are the elements of the control process?

The process of control has the following elements:

(a) Objectives of the business system which could be operationalized into measurable and
controllable standards.
(b) A mechanism for monitoring and measuring the performance of the system.
(c) A mechanism
(i) for comparing the actual results with reference to the standards
(ii) for detecting deviations from standards and
(iii) for learning new insights on standards themselves.
(d) A mechanism for feeding back corrective and adaptive information and instructions to the
system, for effecting the desired changes to set right the system to keep it on course.

Q: What are the three primary types of organizational control?

The three primary types are:

1. Operational Control: Operational Control focuses on individual tasks or transactions, rather

than broad management functions. For instance, while procuring specific items is about
operational control, managing inventory as a whole isn't. This type of control has a clear
relationship between inputs and outputs that can be predetermined with minimal uncertainty.
The control activity consists of regulating the processes within certain ‘tolerances’, irrespective
of the effects of external conditions on the formulated standards, plans and instructions;
Examples include stock control, production control, quality control, cost control, and
budgetary control.

2. Management Control: Management Control is broader and more encompassing, focusing on

the integrated activities of entire departments, divisions, or the organization. Its core purpose
is achieving both short and long-term organizational goals effectively. Robert Anthony defines
it as the process by which managers ensure resources are used effectively and efficiently to
achieve organizational objectives. It's about influencing events to conform to plans.

3. Strategic Control: Strategic Control answers two main questions:

• Is the strategy being implemented as planned?
• Are the strategy's outcomes the intended ones?

Given the potential gap between strategy formulation and its execution, strategies can be
impacted by internal and external changes. Thus, there's a need for systems that monitor
strategies during implementation. Strategic control evaluates a strategy during its formulation and
implementation, identifying potential issues and changes, and making necessary adjustments. It
aims to ensure that the strategy remains relevant and effective in changing environments.

Q: How many types of strategic controls exist?

There are four primary types of strategic controls:

Premise Control: A strategy is formed on the basis of certain assumptions or premises about
the complex and turbulent organizational environment. Over a period of time these premises
may not remain valid. Premise control is a tool for systematic and continuous monitoring of
the environment to verify the validity and accuracy of the premises on which the strategy has
been built. It primarily involves monitoring two types of factors:
(i) Environmental factors such as economic (inflation, liquidity, interest rates),
technology, social and legal-regulatory.
(ii) Industry factors such as competitors, suppliers, substitutes.

It is neither feasible nor desirable to control all types of premises in the same manner.
Different premises may require different amount of control. Thus, managers are
required to select those premises that are likely to change and would severely impact
the functioning of the organization and its strategy.

Strategic Surveillance: Contrary to the premise control, the strategic surveillance is

unfocussed. It involves general monitoring of various sources of information to uncover
unanticipated information having a bearing on the organizational strategy. It involves casual
environmental browsing. Reading financial and other newspapers, business magazines,
attending meetings, conferences, discussions and so on can help in strategic surveillance.

Strategic surveillance may be loose form of strategic control but is capable of uncovering
information relevant to the strategy.

1. Special Alert Control: At times, unexpected events may force organizations to reconsider their
strategy. Sudden changes in government, natural calamities, terrorist attacks, unexpected
merger/acquisition by competitors, industrial disasters and other such events may trigger an
immediate and intense review of strategy. To cope up with such eventualities, the
organisations form crisis management teams to handle the situation.

Implementation Control: Managers implement strategy by converting major plans into concrete,
sequential actions that form incremental steps. Implementation control is directed towards
assessing the need for changes in the overall strategy in light of unfolding events and results
associated with incremental steps and actions.

Strategic implementation control is not a replacement to operational control. Unlike operational

control, it continuously monitors the basic direction of the strategy. The two basic forms of
implementation control are:

(i) Monitoring strategic thrusts: Monitoring strategic thrusts helps managers to

determine whether the overall strategy is progressing as desired or whether there is
need for readjustments.
(ii) Milestone Reviews: All key activities necessary to implement strategy are segregated
in terms of time, events or major resource allocation. It normally involves a complete
reassessment of the strategy. It also assesses the need to continue or refocus the
direction of an organization

These four strategic controls steer the organisation and its different sub-systems to the right track.
They help the organisation to negotiate through the turbulent and complex environment.

Q: What is the relationship between Milestone Reviews and the overall strategy?
 Milestone Reviews are crucial checkpoints. They break down the strategy implementation into key
activities based on time, events, or major resource allocation. These reviews help in assessing the
need to maintain or adjust the strategic direction of an organization. They provide an opportunity
for a comprehensive reassessment of the strategy's efficacy.

Strategic Q: What is Strategic Performance Measurement (SPM)?

Performance
Measures SPM is a method that increases line executives' understanding of an organization's strategic goals
and offers a continuous system for tracking progress towards these objectives using clear-cut
performance measurements. SPM helps to eliminate silos by establishing a common language
among all divisions of the organisation so they may communicate openly and productively.

Strategic performance measures are key indicators that organizations use to track the
effectiveness of their strategies and make informed decisions about resource allocation. The
measures provide a snapshot of the organization's performance, enabling leaders to assess
whether their strategies are aligned with their goals and objectives and to make necessary
adjustments to improve their performance.

Q: Why are the creation and selection of Key Performance Indicators (KPIs) important?

KPIs are crucial to ensuring strategy implementation results in tangible outcomes. They provide
clear links between actions and strategic outcomes. But, it's essential to choose KPIs wisely, as
they significantly influence organizational behavior.

Two primary considerations are:

1. There must be a clear cause-and-effect relationship between the KPIs and strategic
outcomes.

2. KPIs must be selected thoughtfully since they shape the behavior of individuals within the
organization.

Q: What potential pitfall should managers be wary of when relying on data?

Managers should be cautious of "paralysis by overanalysis," where an excessive focus on metrics

hampers decision-making.
Q: What are the two primary forces affecting people in the strategy planning process?

1. Rational forces which emphasize openness, communication, and self-analysis.

2. Political forces which focus on preserving territories, promoting internal rivalry, and encourage
knowledge retention and selective communication.

When there's a conflict between these forces, the result can be a division in strategy. The aspects
that are politically acceptable get communicated openly, forming the explicit strategy. Meanwhile,
the more sensitive or controversial aspects may remain unspoken, becoming the implicit strategy.

Q: What are the Types of Strategic Performance Measures?

There are various types of strategic performance measures, including:

Financial Measures: Financial measures, such as revenue growth, return on investment (ROI), and
profit margins, provide an understanding of the organization's financial performance and its ability
to generate profit.

Customer Satisfaction Measures: Customer measures, such as customer satisfaction, customer

retention, and customer loyalty, provide insight into the organization's ability to meet customer
needs and provide high-quality products and services.

Market Measures: Market measures, such as market share, customer acquisition, and customer
referrals, provide information about the organization's competitiveness in the marketplace and its
ability to attract and retain customers.

Employee Measures: Employee measures, such as employee satisfaction, turnover rate, and
employee engagement, provide insight into the organization's ability to attract and retain talented
employees and create a positive work environment.

Innovation Measures: Innovation measures, such as research and development (R&D) spending,
patent applications, and new product launches, provide insight into the organization's ability to
innovate and create new products and services that meet customer needs.

Environmental Measures: Environmental measures, such as energy consumption, waste

reduction, and carbon emissions, provide insight into the organization's impact on the
environment and its efforts to operate in a sustainable manner.

Q: Why are strategic performance measures crucial for organizations?

Strategic performance measures are essential for organizations for several reasons:

Goal Alignment: Strategic performance measures help organizations align their strategies with
their goals and objectives, ensuring that they are on track to achieve their desired outcomes.

Resource Allocation: Strategic performance measures provide organizations with the information
they need to make informed decisions about resource allocation, enabling them to prioritize their
efforts and allocate resources to the areas that will have the greatest impact on their performance.

Continuous Improvement: Strategic performance measures provide organizations with a

framework for continuous improvement, enabling them to track their progress and make
adjustments to improve their performance over time.
External Accountability: Strategic performance measures help organizations demonstrate
accountability to stakeholders, including shareholders, customers, and regulatory bodies, by
providing a clear and transparent picture of their performance.

Q: How can organizations select the most suitable strategic performance measures?

For organizations to effectively monitor their strategic progress, it's vital to choose the right
performance measures. Here are key factors organizations should take into account:

Relevance: The measure should be relevant to the organization's goals and objectives and provide
information that is actionable and meaningful.

Data Availability: The measure should be based on data that is readily available and can be
collected and analyzed in a timely manner.

Data Quality: The measure should be based on high-quality data that is accurate and reliable.

Data Timeliness: The measure should be based on data that is current and up-to-date, enabling
organizations to make informed decisions in a timely manner.

These measures provide a way for organizations to assess the success of their strategies, identify
areas for improvement, and make informed decisions about how to allocate resources and adjust
their strategies to achieve their desired outcomes. Effective strategic performance measures
should be relevant, meaningful, and easy to understand and should be regularly reviewed and
updated to ensure their continued alignment with the organization's goals and objectives.