INTRODUCTION TO STRATEGIC MANAGEMENT

MANAGEMENT STRATEGY

 key group in an  Long range blueprint of and organisation’s desired image, direction and destination of What it wants to be,
organisation in-charge of What it wants to do & Where it wants to go
its affairs.  is the game plan
 Set of inter related  Unified design and action for achieving goals, gaining command over situation & securing advantageous
functions & processes position
 Facilitates changes &  Integrated framework for the top management (SWOT)
adoption of new  No Substitute for sound, alert and responsible management
environment  It is partly proactive (Planned Strategy) & partly reactive (Adaptive Reaction)
 Responsible for making i) proactive actions on the part of manager to improve the company’s market position and financial
the organisation performance
purposeful & productive ii) Reactions to unanticipated developments & fresh market conditions.
 Co. uses both to cope up the uncertain business environment.

STRATEGIC MANAGEMENT

Definition: Managerial Objectives: Importance: Limitations:

Process of i) create i) Gives direction / define goals and mission, i) Highly complex & turbulent environment
i) developing a strategic competitive realistic objective ii) Time consuming process
vision advantage ii) Proactive iii) costly process
ii) setting objectives ii) To guide iii) Framework for decisions iv) Difficult to predict competitive
iii) crafting a strategy the company iv) Face the future/business opportunities response
iv) implementing & successfully v) Corporate defense mechanism
evaluating the strategy through all the vi) Longevity
v) and initiating changes in the vii) Core Competencies & Competitive
correcting adjustments environment Advantage
where deemed
appropriate
 STRATEGIC LEVELS IN AN ORGANISATION NETWORK OF RELATIONSHIP

Corporate Level: Consists of CEO, Senior Executives, BOD & Corporate Functional & Divisional Relationship:
staff. * Independent relationship, each function/division is run
i) define mission, vision and goals of the organisation independently headed by function/division head, who is a
ii) what business it should be in business level manager, reporting directly to business
iii) allocating resources among various businesses head, who is a corporate level manager
iv) formulating & implementing strategies * Functions – Finance, Human Resource, Marketing etc.
v) providing leadership
Horizontal Relationship:
vi) participate in strategic decision making within organisation
* All positions, from top management to staff level
Business Level: Consists of divisional managers & staff employees, are in the same hierarchical position. It is a
i) Head of the division flat structure where everyone is considered at same level.
ii) Translate the general statements into specific one * This is more suitable for startups where the need to
iii) Concerned with strategies specific to a particular business. share ideas with speed is more desirable

Functional Level: Consists of functional managers Matrix Relationship:

i) responsible for the particular business functions or operations * It features a grid like structure of levels in an
ii) responsibility is generally confined to one organizational activity organisation, with teams formed with people from various
iii) develop functional strategies in their area that help fulfil the departments that are built for temporary task based
strategic objectives set by business and corporate-level general managers projects.
iv) provide most of the information that makes it possible for business- * It helps manage huge conglomerates with ease where it
and corporate-level general managers to formulate realistic and is nearly impossible to track and manage every single team
attainable strategies independently
 STRATEGIC INTENT

It refers to purposes of what the organisation strives for senior managers must define “what they want to do” and “why they want to do”

VISION MISSION

 Blueprint of co.’s future position  Answer to the basic question ‘what business are we in and what we do’
 Strategic vision delineates  Mission delineates the firm’s business, its goals and ways to reach the goals
management’s aspirations for the  It defines present capabilities, activities, customer focus and role in society
business, providing a panoramic view of
the “where we are to go” Why Mission? Checklist for
 depicts the organisation’s aspirations  ensuring unanimity of purpose Mission Statement
 develop a basis/std for allocating organisational resources *Give its own special
Essentials of Strategic Vision:  provide a basis for motivating the use of the organisation’s identity, business
resources emphasis and path
1. To think creatively about how to prepare a
 establish a general tone or organisational climate, to suggest for development
company for the future.
a business like operation * Which Customer
2.Forming a strategic vision is an exercise in
 serve as a focal point for those who can identify with the groups it is
intelligent entrepreneurship organisation’s purpose and direction targeting and the
3. Well-articulated strategic vision creates  facilitate the translation of objective & goals into a work technologies and
enthusiasm among the members of the structure competencies
Organisation  To specify organisational purposes and the translation of * Unique to the
4. Clearly illuminates the direction in which these purposes into goals in such a way that cost, time, and organisation
organisation is headed performance parameters can be assessed and controlled

 Deep-Rooted principles which guide an organisation’s decisions and actions.

 they can never be compromised, either for convenience or short-term economic gain

VALUES Why Values? * company’s value sets the tone for how the people of think and behave, especially in situations of dilemma
* It creates a sense of shared purpose to build a strong foundation and focus on longevity of the company’s success
* Employees prefer to work with employers whose values resonate with them - the ones they can relate to in their daily
work and personal life
 GOALS & OBJECTIVES

Goals :
* End results, that the organisation attempts to achieve * Goals are open-ended attributes that denote the future states or outcomes
Objectives :
* Close-ended attributes which are precise and expressed in specific terms * Organisation’s performance targets – the results and
outcomes it wants to achieve * The pursuit of objectives is an unending process such that organisations sustain themselves * Objectives are
more specific & translate goals into short term and long term objectives

CHARACTERISTICS: OBJECTIVES LONG-TERM OBJECTIVES

 define the organisation’s relationship with its environment To achieve long-term prosperity, need to
 facilitative towards achievement of mission and purpose establish long term objectives in seven
 provide the basis for strategic decision-making areas:
 provide standards for performance appraisal 1. Employee Development
 concrete and specific 2. Employee Relations
 related to a time frame 3. Competitive Position
 measurable and controllable 4. Profitability
 challenging 5. Productivity
 Different objectives should correlate with each other 6. Public Responsibility
 Should be set within the constraints of organisational resources and external environment 7. Technological Leadership
 STRATEGIC ANALYSIS: EXTERNAL ENVIRONMENT
STRATEGIC ANALYSIS STRATEGIC RISK

Definition: The strategic analysis is a component of Time

business planning that has a methodical approach, Short Time Long Time
makes the right resources investments, and may Errors in interpreting the Changes in the environment lead
assist business in acheieving its objective. It environment cause strategic to obsolescence of strategy
External

Strategic Risks
forces to think about the rivals and aids in the failure
evaluation of business plans to stay ahead of the
competition. Organizational capacity is Inconsistencies with the
Issues: unable to cope up with strategy are developed on
1. Strategy evolves over a period of time Internal strategic demands account of changes in internal
2. Balance of external and internal factors capacities and preferences
3. Risk (Diagram on Right Side)

FRAMEWORK OF STRATEGIC ANALYSIS

External Analysis Internal Analysis Strategic strengths, weaknesses,

Customer analysis Performance analysis problems, constraints and
Competitor analysis Determinants analysis uncertainities
Market analysis
Environment analysis

Strategy Identification & Selection

i. Identify Strategic Alternatives
Opportunities, threats, trends ii. Select strategy
and iii. Implement the operating plan
Strategic uncertainities iv. Review strategies
 STRATEGY & BUSINESS ENVIRONMENT

Strategic Management helps business in following ways:

1. Determine opportunities and threats 2. Give direction for growth 3. Continuous Learning 4. Image Building 5. Meeting Competition

External Environment: Divided into Demographic: characteristics of a population * What demographic trends will affect the market size of
1. Macro Environment: (Refer Right the industry? * What demographic trends represent opportunities or threats?
Side) Technological: Changes in technology influence how a business runs its operations. The
* Broader Dimension * helps technological advancements might require a business to drastically alter its operational,
organisation to cope with its production and marketing strategies.
complexity Political-Legal: general level of political development, the state of law & order, political stability the
2. Micro Environment: political ideology and practises of the ruling party etc
* Related to small area * Influence Economic: overall economic situation around the business and include conditions at the regional, national
organisation regularly & directly and global levels
Socio-Cultural: human relationships and the impact of social attitudes and cultural values
INTERNATIONAL
ENVIRONMENT INTERNALIZATION OF BUSINESS PESTLE – Tool to analyse Macro Environment
 Political - how and to what extent the
1. Multinational : Characteristics of Global Business Developing government intervenes in the economy and the
identifying,  Conglomerate of multiple units Internationally activities of business firms
anticipating, and  Common pool of resources  Evaluate global  Economic - The money supply, inflation,
monitoring  Common Strategy opportunities & credit flow, per capita income, growth rates
significant threats  Social - affect the demand for a company's
Why do business go global? products and how that company operates
components of the  Describe the scope
*rapid shrinking of time and distance  Technological - can determine barriers to
global environment of firm’s global
across the globe entry, minimum efficient production level and
2. Regional : specific operations
*domestic markets are no longer adequate influence outsourcing decisions
geographical area
*need for reliable or cheaper source of  Create firm’s global
3. Country: analysis  Legal - how a company operates, its costs, &
raw materials, cheap labour, etc business objectives the demand for its products, ease of business
must be customised
* reduce high transportation costs  Develop distinct  Environmental - Growing awareness to climate
for each of the
*foreign markets to open up or grow big corporate strategies change is affecting how companies operate and
countries to develop
*collapse of international trade barriers for global business & the products they offer-it is both creating new
effective market
*to form strategic alliances whole organisation markets and diminishing or destroying existing
entrance strategies
* rise of services ones
 UNDERSTANDING PRODUCT & INDUSTRY

Product Life Cycle Characteristics of Business Products :

PLC is an S-shaped curve which exhibits the relationship of sales  Products are either tangible or intangible
with respect of time for a product. Stages are :  Product has a price
 Products have certain features that deliver satisfaction
Introduction: Growth:  Product is pivotal for business
*Slow Sales Growth *Rapid Market Acceptance  Product has a useful life
*Competition Negligible *Demand expands rapidly
*Price High, Market *Price falls, competition increases,
Limited Value chain analysis
Market Expands
*Growth in Sales – Low  Method of examining each activity in value chain of a business in order to
*Customer has Knowledge about
Rate identify areas for improvements.
product, interest in purchasing
 Need to analyse how each stage in the process adds or subtracts value
from the end product or service.
Maturity: Decline:
*Slowdown in growth rate *Sharp downward drift in sales Primary Activities Secondary Activities
*Competition - tough *Sales & Profit – falls down – new 1. Inbound logistics 1.Procurement
*Market – stabilised product replaces the existing one
2. Operation Linked 2. Technology Development
*Profit – decreases – due * New strategies to stay in
3. Outbound logistics 3. HR Management
to stiff competition market – diversification or
4. Marketing & Sales 4. Infrastructure
*Organisation – Maintain retrenchment
5. Service
Stability

Value Creation
Value creation is an activity or performance by the firm to create value that increases the worth of goods, services,
business processes or even the whole business system. The value customers place on a product reflects the utility they get
INDUSTRY from a product.
ENVIRONMENT Competitive advantage leads to superior profitability. At the most basic level, how profitable a company becomes depends
ANALYSIS on three factors:
 the value customers place on the company’s products;
 the price that a company charges for its products;
 and the costs of creating those products.
 Porter’s Five Forces Model
Threat of new entrants Bargaining power of Bargaining power of Nature of rivalry Threat of substitutes
Profit is high when other buyers suppliers Rivalry is high when : 1.To predict profit
firms are blocked. This is when : This is when: 1. no clear leader pressure from this
Common barriers are : 1. Buyers have full 1. Products crucial to 2. Numerous source, firms must
1. Capital requirements knowledge of the sources buyers, substitutes not competitors search for products
2. Economies of scale of products and their available 3. high fixed costs to that perform the
3. Switching costs substitutes. 2. High switching costs operate same, or nearly the
4. Brand identity 2. They spend a lot of 3. More concentrated 4. high exit barriers same, function as their
5. Product differentiation money on the industry’s than buyers 5. little opportunity to existing products.
6. Access to distribution products differentiate products 2. Commonly seen in
channels 3. The industry’s product 6. slow or diminished high tech industries
7. Possibility of aggressive is not perceived as critical industry growth
retaliation to the buyer’s needs.

Attractiveness of the Industry Experience Curve

1. Is industry’s growth potential futuristically viable? A learning curve which explains the efficiency increase gained by workers
2. Whether competition currently permits adequate through repetitive productive work.
profitability and whether competitive forces will become Features :
stronger or weaker?  As business organisation grow, they gain experience.
3. Whether industry profitability will be favourably or
 Experience may provide an advantage over the competition.
unfavourably affected by the prevailing driving forces?
 Experience is a key barrier to entry.
4. The competitive position & whether its position is likely to
 Large and successful organisation possess stronger “experience
grow stronger or weaker.
effect”
5. The potential to capitalize on the vulnerabilities of weaker
rivals Market: place for interested parties, buyers and sellers,
6. Whether the company is able to defend against or counteract where items and services can be exchanged for a price.
The term "marketing" encompasses a wide range of
CUSTOMER

the factors that make the industry unattractive?

MARKET

7. The degrees of risk and uncertainty in the industry’s future. operations, including research, designing, pricing, promotion,
&

8. The severity of problems confronting the industry as a whole. transportation, and distribution.
9. Whether continued participation in this industry adds Market activities: Product, place, pricing, and promotion.
importantly to the firm’s ability to be successful in other Customer: A person or business that buys products or
industries in which it may have business interests? services from another organisation.
Customer Analysis Customer Behaviour
 It identifies target clients, determines their wants, and then It examines elements like shopping frequency, product preferences,
defines how the product meets those needs. Thus, it involves the and the perception of your marketing, sales, and service offerings.
examination and evaluation of consumer needs, desires, and wants. The elements that influence the customer behaviour are :
 It includes the administration of customer surveys, the study of  External influences
consumer data, the evaluation of market positioning strategies,  Internal influences
development of customer profiles, and the selection of the best  Decision making
market segmentation techniques.  Post decision processes

COMPETITIVE STRATEGY

It is the strategy to beat the competitor. It defines how a firm expects to create and sustain a competitive advantage over competitors.
The competitive strategy of a firm within a certain business field is analysed using two criteria: the creation of competitive advantage and
the protection of competitive advantage.

Competitive landscape Key factors for competitive success

Competitive landscape is a business analysis that identifies and are those things that most affect industry members’ ability to
understands competitors, their vision, mission, core values, niche market, prosper in the marketplace
strengths, and weaknesses, requiring competitive intelligence application. Key success factors are the prerequisites for industry success
Steps to understand competitive landscape or, to put it another way, KSFs are the factors that shape
 Identify the competitor: Understand who are the competitors &
whether a company will be financially and competitively
their market share
successful.
 Understand the competitors: What are their product and Service
 On what basis do customers choose between the
 Determine the strengths of the competitors: Financial Position,
competing brands of sellers?
Cost & Price Advantage, Next Move, Distribution Network, Human
Resource Strength  What product attributes are crucial to sales?
 Determine the weaknesses of the competitors: Where are they  What resources and competitive capabilities does a
lacking seller need to have to be competitively successful,
 Put all the information together: Draw inferences about what is better human capital, quality of product or quantity of
not offered by Competitor, Fill the gap and areas to be strengthen. product, cost of service, etc.?
○What will the business do with this information?  What does it take for sellers to achieve a sustainable
○ What improvements does the firm need to make? competitive advantage, something that can be sustained
○ How can the firm exploit the weaknesses of competitors? for long term?
 STRATEGIC ANALYSIS: INTERNAL ENVIRONMENT
UNDERSTANDING KEY STAKEHOLDERS
Who Are stakeholders? Mendelow’s matrix
All those individuals and entities that have It is based on power & interest. It suggests to identify which stakeholders are incredibly
a stake in its success and can impact it important.
as well.Generally, stakeholders include 1. Keep Satisfied: High Power, Less Interested
management, employees, shareholders, Consult often, increase their interest, can be a hindrance to new ideas or strategic choices
customers & vendors. Additionally, other 2. Key Player: High Power, Highly Interested
individuals & groups, such as governments, Manage closely, involve in decision making, engage regularly and build strong relationship
labour unions and local groups, which are 3. Low priority: Low Power, Less Interested
often considered as stakeholders Monitor only no engagement, general occasional communication
depending on their impact on the particular 4. Keep informed: Low Power, Highly Interested
organization. Utilise the high interest by engaging in decisions, consult in their areas of expertise & interest

STRATEGIC DRIVERS

An important aspect of internal analysis is assessing the current performance of the business. Strategic drivers are the factors affecting the
business. The key strategic drivers of an organisation include:
Industry & Market Customers Product/Service Channels
Is market same for all business? Customer: one who buys Product stands for the combination of Distribution
Market refers to all the buyers and sellers of a a pdt/service. “goods-and-services” that the company system by which
particular product/service. Each business has its Consumer: one who offers to the target market. an organisation
own set of customers i.e. market & more so, each finally uses or consumes Objectives for pricing strategies of distributes its
product within a business has its own market. the bought product or New pdt pdt or provides
Strategic Group Mapping: Tool for analysis service.  customer-centric approach its service.
Procedure: *Identify competitive characteristics From a pricing view- the  sufficient returns - reasonable margin There are
that differentiates firms *Plot the firms on 2 customer is of more  Increasing market share typically 3
variable map *Assign firms that fall in strategy importance & from value Marketing Strategies : Social, channels that
space to same strategy group *Draw circles creation & design/ Augmented, Direct, Relationship, should be
around each strategic group making the circles usability, consumer Services, Person, Organisation, Place, considered:
proportional to the size of the group’s respective needs to be considered Enlightened, Differential, Synchro, sales, product &
share of total industry sales revenues. for decision making. Concentrated, Demarketing service channel.
 ROLE OF RESOURCES & CAPABILITIES: COMBINING EXTERNAL & INTERNAL ANALYSIS: SWOT ANALYSIS
BUILDING CORE COMPETENCIES
It is the analysis of a business’s strengths, weaknesses, opportunities and threats.
Competency is a combination of skills and The primary objective of a SWOT analysis is to help organizations develop a full awareness
techniques, not individual skills, or techniques. of all the factors (external as well as internal), involved in making a business decision.
Core competencies are the integration of
many resources, not built on one capability or Helpful to achieving the Harmful to achieving the
single technological know-how. objective objective
Internal origin (Attributes to
Major core competencies are identified Strengths Weaknesses
the organisation)
in three areas:
External origin (Attributes to
1. competitor differentiation, Oppurtunities Threats
the environment)
2. customer value, and
3. application to other markets Benefit: identifies the complex issues for an organisation & puts them into a simple framework
Limitation: it does not generally provide for evaluation of SWOT in the competitive context
Criteria for building core competencies SWOT Analysis for Internal or External Environment ? Internal Analysis : more focused
1. Valuable on understanding the existing structure and competencies of the business, thus highlighting
2. Rare the Strengths and Weaknesses, while External Analysis: is about identifying and preparing
3. Costly to imitate for uncontrollable which can either be Opportunities or threats.
4. Non-Substitutable Therefore, SWOT Analysis is a tool which is used for both Internal and External Analysis.

COMPETITIVE ADVANTAGE USING MICHAEL PORTER’S GENERIC STRATEGIES

Target Target
Strategies allow organizations to gain competitive advantage

COMPETITIVE

Narrow Broad
Cost Leadership Diffentiation
from three different bases: Cost leadership,

SCOPE
differentiation, and focus
Porter called these base generic strategies. Focused Cost Focused
Leadership Diffentiation

Sustainability of competitive advantage Low-cost Differentiated

Durability, Transferability, Imitability & Appropriability products/services products/services
COMPETITIVE ADVANTAGE
 Cost Leadership Differentiation
*Low cost competitive strategy that aims at broad mass market. *Aimed at broad mass market & involves creation of a pdt/service
that is perceived by customers as unique.
Risks : Actions to achieve cost leadership:
1. Imitate 1. Prompt demand forecasting Risks Action to achieve differentiation
strategy & 2. Optimum utilisation of resources 1. Not valued 1.Offer utility & match taste and preference
2.Technological 3. Achieving economies of scale high enough 2. Elevate the performance
breakthrough 4. Standardisation of products 2. Copying by 3. Offer high quality products
5. Invest in cost saving technology competitors 4. Rapid product innovation
6. Resistance to differentiation 5. Enhancing image & brand value
Advantages: Advantages 6. Pricing on unique features & buying capacity
1. Rivalry Disadvantages: 1. Rivalry
2. Buyers 1. Advantage may not remain for long 2. Buyers Disadvantages
3. Suppliers 2. Successful – Only if higher sales volume 3. Suppliers 1. Uniqueness is difficult to sustain
4. Entrants 3. Expensive in long run 4. Entrants 2. High price- switch to other alternative
5. Substitutes 4. Technological changes – Big Threats 5.Substitutes 3. Fails if not valued by customer

Focus Strategy Best-cost provider strategy

A successful focus strategy depends on an industry segment that is of sufficient size, has good growth It is directed towards giving
potential, and is not crucial to the success of other major competitors. customers more value for the
Focused cost leadership: requires competing Focused differentiation: requires offering unique money by emphasizing both low
based on price to target a narrow market. It features that fulfill the demands of a narrow cost and upscale differences.
charges low prices relative to other firms that market. It concentrates efforts on a particular Best-cost provider strategy
compete within the target. sales channel. involves providing customers
more value for the money by
Actions to achieve focus Advantages: Disadvantages: emphasizing low cost and
1. Select specific niches not covered by 1. Premium prices can 1. Firms lacking distinctive better-quality difference.
others be charged competencies – not able to It can be done by:
2. creating superior skills for catering 2. due to high pursue 1. Lower price with comparable
such niche expertise, rivals & 2. Costs are high due to limited quality & features
3. Generating high efficiencies new entrants may demand 2. Similar price with much
4. Developing innovative ways to manage find difficult to 3. Long run, no niche or taken higher quality & better
value chain compete over by large competitor features
 STRATEGIC CHOICES
Strategic choices

Corporate Strategies Strategic Exits Strategic Options

CORPORATE STRATEGIES

Corporate Strategies

Stability Strategy Growth/Expansion Strategy Retrenchment Strategy Combination Strategy

Stability Strategy
It involves keeping track of new developments to ensure that the strategy continues to make sense. This strategy is typical for those firms
whose product have reached the maturity stage of PLC.

Why Startups don’t aim for stability Major reasons for stability Characteristics
strategy? strategy  stays with the same business, same product market posture &
A startup is an entrepreneurial venture in * Product – Maturity stage functions
the early stages of ideation and of PLC  endeavour: enhance functional efficiencies in an incremental
development, generally created for solving * Less risky – less changes, way
real-life problems through technology. For staff comfortable  It does not involve a redefinition of the business
it, the most important factors are speed * Environment – relatively  It is a safety-oriented, status quo oriented strategy
and agility, because of it being in a nascent stable  It does not warrant much of fresh investments
stage of operations. Stability on the other * Expansion – Perceived  Risk – Less
hand is more meaningful strategy when the threatening  It involves minor improvements in the product & its packaging
size of operations is expanded to full * Consolidation: through  It has the benefit of concentrating its resources and
capacity and business is at a mature stage. stabilizing after a period of attention on the existing businesses
Thereby, we rarely see startups aiming for rapid expansion  Growth objective - modest
stability.
Growth/Expansion Strategy
It is implemented by redefining the business by enlarging the scope of business and substantially increasing investment in the business. It is a
strategy that can be equated with dynamism, vigour, promise and success.

Characteristics Major Reasons

1. redefinition of the business 2. opposite of stability strategy 1. environment demands increase in pace of activity
3. rewards are very high 4. risk is opposite to that of stability strategy 2. Strategists may feel more satisfied with the prospects of
5. A firm with a mammoth growth ambition can meet its objective only growth from expansion
through the expansion strategy 6. fresh investment is required 7. highly 3. may lead to greater control over the market vis-a-vis
versatile 8. generate many alternatives within the strategy 9. Two competitors
major strategy routes: Intensification & Diversification 4. Advantages from the experience curve and scale of operation

Growth/Expansion Strategy Internal growth strategies

Expansion/growth through intensification
Internal External It means that the organisation tries to grow internally
by intensifying its operations either by:
Intensification Diversification
market penetration/ market development/ product
Market
Concentric Conglomerate Innovation development.
Penetration
It tries to cash on its internal capabilities and internal
Market Vertical Horizontal resources.
Development
Forward
Product Backward
Development Internal growth strategies
Expansion/growth through diversification
An entry into new products or product lines, new
Market Penetration Product Development
services or new markets, involving substantially
Increase market share Add product features,
different skills, technology and knowledge.
Increase product usage product refinement
Increase the frequency used Develop a new-generation product It is a means of utilising their existing facilities and
Increase the quantity used Develop new product for the same capabilities in a more effective and efficient
Find new application for current users market manner.
Reasons for diversification
Market Development Diversification
 excess capacity or capability
Expand geographically target new segments Involving new products & new markets
 synergistic advantage
Same Product, New Market Related / Unrelated
Concentric diversification Conglomerate diversification
The new business is linked to the existing businesses through process, *No Linkage *disjointed *unrelated *PTM No Connection
technology, or marketing. *no common thread eg :- A cement manufacturer
diversifies into the manufacture of steel and rubber
Vertically Integrated Diversification Horizontal Integrated
products.
The firm remains in the vertically linked Diversification
product-process chain. Through the acquisition of Expansion through innovation
1.Backward Integration: Creation of one or more similar It drives upgradation of existing product lines or
effective supply by entering business of input business operating at the processes, leading to increased market share, revenues,
providers. Eg, large supermarket chain profitability and most important, customer satisfaction.
same stage of the
considers to purchase a number of farms Advantages:
production-marketing chain.
2. Forward integration: Entering business  Helps to solve complex problems
Eg: Shoe company acquiring
lines that use existing products. Eg, coffee  Increases Productivity
shoe polish company
bean manufacture - merge with a coffee cafe.  Gives Competitive Advantage

External Growth Mergers: process when two or more companies come together to expand their business operations,
Strategy the deal gets finalized on friendly terms.
Strategic 1.Horizontal: merger with a direct competitor. It is to achieve economies of scale, widening the line
Mergers & Acquisitions
Alliance of products, decrease in WC & FA investment, getting rid of competition
Horizontal 2.Vertical: same industry but, at different stages of production or distribution system. It gives
Vertical increased synergies. There can be forward & backward integration.
Cogeneric 3.Co Generic: two or more merging organizations are associated in some way or the other related to
the production processes, business markets, or basic required technologies. include the extension of
Conglomerate
the product line.
4. Conglomerate: combination of organizations that are unrelated to each other. There are no
Strategic alliance: A relationship linkages.
between two or more businesses that Acquisitions: one organization takes over the other organization and controls all its business
enables each to achieve certain Operations. one financially strong organization overpowers the weaker one.
strategic objectives which neither
would be able to achieve on its own. Why Strategic alliance? : To create Synergy, to avoid barriers to entry, To gain access to new
Strategic partners maintain their market, To reduce/share risk, To gain/access raw material, To undertake big development projects
status as independent and separate for a single company to fund
entities.
Advantages Strategic Alliance: Disdvantages Strategic Alliance:
1. Organisational: helps to learn necessary skills and obtain certain capabilities from 1. Sharing knowledge and skills that otherwise
strategic partners organisations may not like to share
2. Economic: There can be reduction in costs and risks by distributing them across the 2. Sharing knowledge and skills can be problematic
members of the alliance if they involve trade secrets
3. Strategic: Rivals can join together to cooperate instead of competing with each other 3. An ally may become a competitor future when in
4. Political: to gain entry into a foreign market it decides to separate out.

STRATEGIC EXITS/RETRENCHMENT STRATEGY

Strategic Exits are followed when an organization substantially reduces the scope of its activity. Divestment
This is done through an attempt to find out the problem areas and diagnose the causes of the It involves the sale or liquidation of a
problems. portion of business, or a major division,
Why Retrenchment?: ✓ Obsolescence of product/process. ✓ High competition ✓ Industry profit center or SBU.
overcapacity ✓ Management non-willingness continue ✓ Continuous losses ✓ Unavailability of Why Divestment?
resources ✓ Unmanageable threats ✓ Reallocation of resources to profitable businesses  The management no longer wishes to
✓ Situation of strategic failure remain in business either partly or
Turnaround Strategy: When emphasis is laid on improving internal efficiency, it is known as wholly due to continuous losses and
turnaround strategy. “This strategy is relevant when a company is experiencing a period of unviability.
poor performance. Poor performance does not always mean losses, it may also mean lower  The management feels that business
than expected growth, no future clarity, or even lesser than target profits.” could be made viable by divesting some
Danger signals are: *Persistent negative cash flow from business *Uncompetitive products or of the activities or liquidation of
services *Declining market share *Deterioration in physical facilities *Over-staffing *high unprofitable activities
turnover of employees *low morale in employees *Mismanagement  A business that had been acquired
Action Plan for Turnaround: proves to be a mismatch and cannot be
Stage One – Assessment of current problems integrated within the company.
Stage Two – Analyze the situation and develop a strategic plan  Persistent negative cash flows from a
Stage Three – Implementing an emergency action plan particular business create financial
Stage Four – Restructuring the business problems for the whole company.
Stage Five – Returning to normal  Severity of competition
Elements of turnaround strategy : *Changes in the top management *Identifying quick payoff  Failure to do Technological upgradation
activities *Quick cost reductions *Revenue generation *Asset liquidation for generating cash  A better alternative may be available
*Mobilization of the organization's resources *Better internal coordination *Neutralising for investment, causing a firm to divest
external pressures *Initial credibility-building actions a part of its unprofitable businesses.
 STRATEGIC OPTIONS

Portfolio models aid strategists in making strategic decisions about individual products or businesses in a firm's portfolio. Primarily used for
competitive analysis and corporate strategic planning in multi-product and multi-business firms. It can also be used in less-diversified firms
with a main business and minor complementary interests.

ANSOFF’S PRODUCT MARKET GROWTH ADL MATRIX

MATRIX
1. Dominant: comparatively rare position, monopoly or a strong and protected technological
leadership
Existing
Market Market

Market Product
Penetration Development 2. Strong: freedom over its choice of strategies, is often able to act without its market
position being unduly threatened by its competitions
Market 3. Favourable: when the industry is fragmented and no one competitor stand out clearly
New

Diversification 4. Tenable: perform satisfactorily, generally vulnerable in the face of increased

Development
competition from stronger and more proactive companies in the market
Existing New
5. Weak: performance is generally unsatisfactory, opportunities for improvement do exist
Products Products
BCG GROWTH SHARE MATRIX
GENERAL ELECTRIC MODEL
Stars Question Marks
products that are Requires lot of cash

MARKET GROWTH RATE

High
growing rapidly, need to hold their share
High

Invest/Expand
ATTRACTIVENESS

heavy investment to
Select/Earn maintain position
MARKET

Medium

Harvest/Divest Cash Cows Dogs

generate cash generate enough
& have low costs cash to maintain

Low
Low

themselves, but do
not have much
Strong Average Weak future
BUSINESS STRENGTH High Low
RELATIVE MARKET SHARE
 STRATEGY IMPLEMENTATION & EVALUATION
STRATEGIC MANAGEMENT PROCESS STRATEGY IMPLEMENTATION

Stages in strategic management Strategy implementation concerns the managerial exercise of putting a freshly
 Developing a strategic vision and formulation of chosen strategy into action. or converting strategic decision into action, Allocation of
statement of mission, goals and objectives resources, Adapting the organisation’s structure, Training personnel and devising
 environmental and organisational analysis appropriate systems.
 formulation of strategy Difference Between Strategy Formulation and Strategy Implementation
 implementing of strategy
 strategic evaluation and control STRATEGY FORMULATION STRATEGY IMPLEMENTATION
Strategy Formulation is placing the Strategy implementation is managing
STRATEGIC & OPERATIONAL PLANNING
Forces before the action forces during the action.
Strategic plans – Senior Management – Gathering & Strategy formulation focuses on Strategy implementation focuses on
Allocating resources in order to achieve effectiveness. efficiency.
organisational goals Strategy formulation is primarily an Strategy implementation is primarily
Characteristics: intellectual process and rational an operational process.
i) Shapes the organisation and its resources process
ii) Assesses the impact of environmental variables An Entrepreneurial Activity based on An Administrative Task based
iii) Takes a holistic view of the organisation strategic decision-making. strategic and operational decisions
iv) Develops overall objectives and strategies Strategy formulation requires good Strategy implementation requires
v) Is concerned with the long-term success of the intuitive and analytical skills, special motivation and leadership
organisation initiative, logical skills skills
vi) Is a senior management responsibility Strategy formulation requires Strategy implementation requires
Operational Plans – Middle & Lower Management – coordination among a few individuals combination among many individuals
How Resources to be used effectively at the top level. at middle and lower level
Characteristics: Strategy Formulation includes Strategy Implementation involves all
i) Deals with current deployment of resources planning and decision-making involved those means related to executing the
ii) Develops tactics rather than strategy in developing organization’s strategic strategic plans.
iii) Projects current operations into the future goals and plans
iv) Makes modifications to the business functions In crude terms, to be effective is to do the right thing, while to be efficient is to do
but not fundamental changes the thing in the right manner. Successful strategy formulation does not guarantee
v) Is the responsibility of functional managers successful strategy implementation
Linkages in strategy implementation Issues in strategy
Forward Linkages: different elements in strategy formulation starting with objective setting through implementation
environmental and organizational appraisal, strategic alternatives and choice to the strategic plan  Project implementation
determine the course that an organization adopts for itself  Procedural implementation
Backward Linkages: dealing with strategic choice, remember that past strategic actions also determine  Resource allocation
the choice of strategy. Organizations tend to adopt those strategies which can be implemented with the  Structural implementation
 Functional implementation
help of the present structure of resources combined with some additional efforts.
 Behavioural implementation

STRATEGIC CHANGE THROUGH HOW DOES DIGITAL TRANFORMATION WORK

DIGITAL TRANFORMATION
Digital Transformation - It is the use of digital A properly implemented change strategy
technologies to develop fresh, improved, or entirely can help an organisation to :
Strategic Change
new company procedures, goods, or services.  Specify the parameters and goals of the
Changing the existing strategies
Change management is a process or set of tools and digital transformation
and bringing out new strategies
best practices used to manage changes in an  Determine which procedures and tools
because of environmental
organization. It assists in making changes in a safe and needs to be modified
changes
regulated manner, reducing the possibility of  Make a plan for implementing the
detrimental effects on the company. improvements
Issues in strategic change The five best practices for managing change in small  Involve staff members and parties
 Recognize the need for and medium-sized businesses are: involved in the transformation process
change 1. Begin at the top  Track progress and make required
 Create a shared vision to 2. Ensure that the change is both necessary and course corrections
manage change desired Change management in the digital transition
 Institutionalize the change 3. Reduce disruption consists of 4 essential elements:
4. Encourage communication 1. Defining the goals and objectives of the
Kurt Lewin’s model of change 5. Recognize that change is the norm, not the transformation
 Unfreezing the situation exception 2. Assessing the current state of the
 Changing to new situation How to manage change? organization and identifying gaps
 Compliance  Specify the aims and objectives 3. Creating a roadmap for change that
 Identification  Always, always, always communicate outlines the steps needed to reach the
 Internalization  Be ready for resistance desired state
 Refreezing  Implement changes gradually 4. Implementing and managing the change at
 Offer assistance and training every level of the organisation
 ORGANISATIONAL FRAMEWORK

MCKINSEY 7S MODEL
It is a tool that analyzes 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. It 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: Soft Elements: They Limitations

They are directly are difficult to define *Ignores the importance of the external environment & depicts only the most crucial
controlled by the as they are more elements within the organization.
management. governed by the *It does not clearly explain the concept of organizational effectiveness or performance.
Elements are : culture. Elements are: *It is considered to be more static and less flexible for decision making.
Strategy, Structure Shared values, *It is generally criticized for missing out the reals gaps in conceptualization and
& Systems styles, staff & skills execution of strategy.

ORGANISATIONAL STRUCTURE

An organisational Structure defines how activities such as Task allocation, Coordination & Supervision are directed towards the achievement of
organisational aims.
Simple structure Functional structure Divisional structure
*Appropriate for single A functional structure groups tasks and It is necessary for managing diverse products and
business strategy in a single activities by business function. services in different markets. It can be organized by
geographical market Advantages: geographic area, product/service, customer, or process
*Appropriate for FC/FD *Simple and low cost *Encourages efficiency Advantages: *Accountability is clear *managers can be
*O-M makes all the decisions *Promotes Specialization *Rapid Decision held responsible for sales and profit levels *managers and
* Little specialisation making *Minimises need of elaborate control employees can easily see the results of their good or bad
* Little formalisation system * enables the company to overcome the performances *employee morale is generally higher
* Few rules growth-related constraints of the simple *Creates career development opportunities for managers
*Communication- Frequent & structure *facilitating communication and *Allows local control *Leads to a competitive climate
Direct coordination *Allows new businesses and products in be added easily.
*New products can be Disadvantages: Disadvantages: *Costly * duplication of staff services,
introduced quickly-result in *Accountability to top * Less career facilities, and personnel
CA development opportunities *Narrow perspective
 Multi Divisional structure Matrix structure Hourglass structure
It is composed of operating divisions where each  It is the most complex of all designs. It consists of three layers with constricted
division is a separate business to which top  It depends upon both vertical and middle layer. The structure has a short and
corporate officer delegates responsibility for horizontal flows of authority and narrow middle-management level.
day-to-day operations & business unit strategy communication (hence the term matrix). Information technology links the top and
to division managers.  It can result in higher overhead bottom levels in the organization taking away
Multidivisional structure calls for : Phases for development of matrix many tasks that are performed by the middle
 Creating separate divisions, each representing a structure level managers.
distinct business 1. cross-functional task forces The managers in the hourglass structure are
 Each division would house its functional 2. Product/brand management generalists and perform wide variety of
hierarchy; 3. mature matrix tasks.
 Division managers would be given responsibility
Network structure
for managing day-to-day operations;
*It is termed a "non-structure" by its elimination of in house business functions.
 A small corporate office that would determine
*It is useful when firm is unstable & is expected to remain so.
the long-term strategic direction of the
*It provides more flexibility & adaptability to cope with rapid technological change &
firm and exercise overall financial control over
shifting patterns of international trade & competition
the semi-autonomous divisions

SBU Structure
An SBU is a grouping of related businesses. In this, a multi-business enterprise groups its multitude of businesses into a few distinct business
units in a scientific way.
Characteristics
Attributes & benefits *Single or related
 A scientific method of grouping the businesses of corporation which helps the firm in strategic planning businesses offering
 Improvement over the territorial grouping of business & strategic planning based on territorial units
independent planning
 Grouping of related business- strategic planning distinct from rest of the business
*Has its Own set of
 Analysing & segregating the assortment of businesses and regrouping based on function
competitors
 Unrelated products/businesses in any group are separated.
*Manager
 helps the firm in strategic planning by removing the vagueness and confusion generally seen in grouping businesses
 Each SBU is a separate business, Each SBU has its own competitors, Each SBU has a CEO responsible for
 SBU might build on similar technologies strategic planning
 SBU might be serving similar or different markets or might be other competencies on which competitive and profit
advantage of different SBU are built performance.
 ORGANIZATION CULTURE STRATEGIC LEADERSHIP

Corporate Culture Strategic leadership sets the firms direction by developing and communicating - vision of
It includes a company’s values, beliefs, future, formulate strategies - in the light of internal and external environment, brings about
business principles, traditions, ways of changes required to implement strategies and inspire the staff to contribute to
operating, and internal work environment. strategy execution.
Where Does Corporate Culture Come From? Managers have five leadership roles to play in pushing for good strategy execution
Management practices, Ethical standards, 1. Staying on top of what is happening, closely monitoring progress, solving out issues, and
Official policies, Dealings and relationships learning what obstacles lie in the path of good execution.
with Employees, Unions, Stockholders, 2. Promoting a culture of esprit de corps that mobilizes and energizes organizational members
Vendors, Communities in which it operates, to execute strategy in a competent fashion and perform at a high level.
Traditions the organization maintains, 3. Keeping the organization responsive to changing conditions, alert for new opportunities,
Employees’ attitudes and behavior, Peer bubbling with innovative ideas, and ahead of rivals in developing competitively valuable
pressures that exist, in organization’s politics competencies and capabilities.
Culture: An ally or obstacle to strategy 4. Exercising ethical leadership and insisting that the company conduct its affairs like a
execution? model corporate citizen.
The beliefs, vision, objectives, and business 5. Pushing corrective actions to improve strategy execution and overall strategic performance.
approaches and practices underpinning a
Approaches to leadership style
company’s strategy may or may not be Responsibilities of Strategic Leader
1.Transformational: They uses
compatible with its culture. • Making strategic decisions
charisma and enthusiasm to
 If the company’s strategy is compatible with • Formulating policies and action plans
inspire them for the good of the
its culture, the culture becomes a valuable • Ensuring effective organizational communication
organization. They offer
ally in strategy implementation and execution. • Managing human capital
excitement, vision, intellectual
 But, when the culture is in conflict with some • Managing organizational change
stimulation and personal
aspects of the company’s direction, • Creating and sustaining a strong corporate culture
satisfaction
performance targets or strategy, the culture • Sustaining high performance over time
2.Transactional: They uses the
becomes a big obstacles in strategy and
authority of its office to
execution
exchange rewards, such as pay &
Role of culture in strategy execution
status & have more formalized
 Creating a strong fit between strategy
approach to motivation, setting
and culture
clear goals with explicit rewards
 Perils of Strategy-Culture Conflict
or penalties for achievement or
 Changing a problem culture
non-achievement
 STRATEGIC It is the unpredictability of future events and circumstances that can impact an organization's strategy and goals. To
UNCERTAINITY be manageable, they need to be grouped into logical clusters or themes
* Flexibility * Diversification * Monitoring & scenario planning * Building resilience * Collaboration & Partnerships

STRATEGIC PERFORMANCE STRATEGIC CONTROL

MEASURES
It is a function intended to ensure the performance of planned activities and to achieve the predetermined
goals and results.
Strategic performance
Elements of Organizational Control
measures are key indicators  Objectives of the business system which could be operationalized into measurable &
that organizations use to
controllable standards.
track the effectiveness of
 Mechanism for monitoring and measuring the performance of the system.
their strategies and make  Mechanism for comparing the actual results with reference to the standards for detecting deviations from
informed decisions about
standards and for learning new insights on standards themselves.
resource allocation.
 Mechanism for feeding back corrective and adaptive information and instructions to the system, for
Types of SPM
effecting the desired changes to set right the system to keep it on course
 Financial Measures
Types of Organizational Control
 Customer Satisfaction
Measures Operational Control Management Strategic Control
 Market Measures It is on individual tasks or Control It focuses on the dual questions of whether :
 Employee Measures transactions as against total It is more  The strategy is being implemented as
 Innovation measures or more aggregative management inclusive and more planned
 Environmental functions. aggregative.  The results produced by the strategy are
Measures One of the tests that can be The basic purpose those intended.
Importance of SPM applied to identify operational of management It is process of evaluating strategy as it is
 Goal alignment control areas is that there control is the formulated & implemented
 Resource allocation should be a clear-cut and achievement of Types of Strategic Control:
 Continous improvement somewhat measurable enterprise goals –  Premise Control
 External accountability relationship between inputs and short range and  Strategic Surveillance
Choosing the right SPM outputs which could be long range in a  Special Alert Control
 Relevance predetermined or estimated most effective  Implementation Control
 Data availability with least uncertainty. and efficient  Monitoring Strategic thrusts
 Data quality manner.  Milestone Reviews
 Data timeliness