Module 1

Strategic Management- Concept of Strategy- Meaning – Definition-Features of Strategic

Management- Synergy- Dysergy-Strategic Management Process

According to William .F. Glueck, Strategy is defined as a unified, comprehensive and integrated
plan designed to assure that the basic objectives of the enterprise ae achieved.

The term strategy is defined as a long range blueprint of an organisation’s desired image, direction
and destination, ie., what it wants to be, what it wants to do and where it wants to go.

Strategy is the game plan that the management of a business uses to take market position, conduct
its operations, compete successfully and achieve its objectives.

Features of Strategy

1. Strategy deals with long term developments rather than routine operations, i.e. it
deals with probability of innovations or new products, new methods of productions,
or new markets to be developed in future.
2. Strategy is created to take into account the probable behavior of customers and
competitors. Strategies dealing with employees will predict the employee behaviour.
3. Strategy is a well-defined roadmap of an organization.
4. It defines the overall mission, vision and direction of an organization.
5. The objective of a strategy is to maximize an organization’s strengths and to
minimize the strengths of the competitors.
6. Strategy, in short, bridges the gap between “where we are” and “where we want to
be”.
7. Strategy is partly proactive and partly reactive.

Strategic Management

Strategic management is the management of an organization’s resources to achieve its goals and
objectives.

Strategic management refers to a managerial process of developing vision, setting objectives,

analysing the competitive environment, analyzing the internal organization, evaluating strategies,
and ensuring that management rolls out the strategies across the organization.

The Characteristics of Strategic Management are as follows:

1. Top management involvement

2. Requirement of large amounts of resources
3. Affect the firms long-term prosperity
4. Future-oriented
5. Multi-functional or multi-business consequences
6. Non-self-generative decisions

Importance/Benefits of Strategic Management

1. Strategic management gives a direction to the company to move ahead. It helps to define
goals and mission.
 2. Strategic management helps organisations to be proactive instead of reactive in shaping
its future.
3. Strategic management provides framework for all major decisions of an enterprise such
as decisions on business, products, markets, manufacturing facilities, investments and
organisational structure.
4. It seeks to prepare the organisation to face the future and act as pathfinder to various
business opportunities.
5. It serves as a corporate defence mechanism againt mistakes and pitfalls.
6. It helps to enhance the longevity of the business.
7. Strategic management helps the organisation to develop certain core competencies and
competitive advantages that would facilitate assist in its fight for survival and growth.

Limitation of strategic management

1. Since environment is highly complex and dynamic, it is difficult to understand the
complex environment and exactly pinpoint how it will shape-up the future.
2. Strategic management is a time-consuming process.
3. Strategic management is a costly process. It requires expert strategic planners.
4. Competition analysis is a challenging task. In a competitive scenario, where all
organisations are trying to move strategically, it is difficult to clearly estimate the
competitive responses to ta firm’s strategies.

Strategic levels in Organisations.

Corporate level
Business level
Functional level

Corporate level strategy:-

• It is formulated at the top level management which is meant to cope with the competitive
and complex settings.
• Corporate level strategies include identifying the overall vision, mission and goals of the
corporation, the type of business your organisation should be involved in, and the way in
which business need to be integrated and managed.
• It includes managing activities and business interrelationships.
• It is action oriented and is more specific than its objectives.
• It helps managers to handle environmental uncertainities and complexities.
Business level strategy:
• Business level strategy is applicable to all SBUs (Strategic Business Units) were
independent strategic plans can be made which is different from other business units of
the company.
• At business unit level, strategies are mainly about sustain a competitive advantage for its
specific product and services that are produced.
Functional level strategy:
• Functional level strategy relates to a single functional operation and the activities
involved there in.
• Decision at his level are within the organisation and are often described as tactical.
• Functional strategy deals with relatively restricted plans providing objective for specific
operations within the functional area which is coordinated for optimal contribution to the
achievement of business level and corporate level strategies.
• Functional level strategies include, marketing strategy, financial strategy, production
strategy, HR strategy.
Strategic Management Process

The strategic management process means defining the organization’s strategy. It is also defined
as the process by which managers make a choice of a set of strategies for the organization that
will enable it to achieve better performance.

Strategic management is a continuous process that appraises the business and industries in
which the organization is involved; appraises it’s competitors; and fixes goals to meet all the
present and future competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of collecting,

scrutinizing and providing information for strategic purposes. It helps in analyzing the internal
and external factors influencing an organization. After executing the environmental analysis
process, management should evaluate it on a continuous basis and strive to improve it.
SWOT analysis is a method used for environmental scanning.
2. Strategic Intent- strategic Intent gives an idea of what the organisation desires to attain in
future. It indicates the long term market position which the organisation desires to create or
occupy and the opportunity for exploring new possibilities. Elements of strategic intent are
vision, mission, business definition, business model, goals and objectives.
3. Strategy Formulation- Strategy formulation is the process of deciding best course of action
for accomplishing organizational objectives and hence achieving organizational purpose.
After conducting environment scanning, managers formulate corporate, business and
functional strategies.
4. Strategy Implementation- Strategy implementation implies making the strategy work as
intended or putting the organization’s chosen strategy into action. Strategy implementation
includes designing the organization’s structure, distributing resources, developing decision
making process, and managing human resources.
5. Strategy Evaluation- Strategy evaluation is the final step of strategy management process.
The key strategy evaluation activities are: appraising internal and external factors that are the
root of present strategies, measuring performance, and taking remedial/corrective actions.
Evaluation makes sure that the organizational strategy as well as it’s implementation meets
the organizational objectives.

Synergy – originated from Greek word- Sunergoes-meaning -Working together or Joint

together

Synergy is a strategy where individuals or entities combine their efforts and resources to
accomplish anything more, collectively than they could individually. It eventually results in
increased productivity, efficacy, and performance.

Synergy is a method in which individuals or organizations pool their resources and efforts to
enhance value, productivity, efficacy, and performance more than they could individually.

Synergy is also known as positive synergy

To express it plainly, this is a situation where 2 + 2 = 5.

The meaning of synergy in strategic management contexts is the additional benefits which are
gained due to complementary activities and resources that reinforce and enhance the effect of
each other.

Types of Synergy
1.Corporate synergy

Corporate synergy refers to a financial benefit that a corporation expects to realize when it merges
with or acquires another corporation. Corporate synergy occurs when corporations interact
congruently with one another, creating additional value. Synergies are divided into two groups:
operational and financial.

2.Strategic fit synergy

This is one of the most important types of synergies expected in mergers and acquisition. The
company, which is being acquired, or the companies that are merging together must be able to ‘fit’
together to give rise to synergy of strategies. A perfect fit situation would be when each company is
able to improve the other through reciprocal synergies.

3.Resource synergy

This is when companies gain a positive result through interlinking of resources and capabilities either
internally, or with other companies. Resource synergy can be obtained from intangible resources
such as brand recognition and technology or physical resources, like plant and machinery.
Interlinking of intangible resources like knowledge and human resources is better achieved through
an alliance between companies. On the other hand, mergers and acquisitions might be more suited
when combining tangible resources as plant, machinery, or finance.

4.Product synergy

This is when the product range of a company or multiple companies within a group complement
each other. The result is a synergy in product offerings which fulfill the overall needs of customers
more effectively. By expanding product ranges to meet end-to-end requirements, companies can
keep customers within their own sales funnel. Naturally, this increases the revenue potential for the
company. The biggest example of this is Apple. The different products in Apple’s line-up reinforce
the need for each other through the push for a shared ‘Apple ecosystem’. For a consumer looking to
use a phone, laptop, and smartwatch, buying all of these from Apple would provide a much better
overall experience than buying only one of them from Apple and the rest from competitors.

5.Process synergy

This happens when value-adding processes of separate companies or business units are integrated
and interlinked to enhance or optimize performance. This results in operational efficiencies which
benefit both the individual entities and the overall group performance as well. One of the common
examples of this kind of process synergy is the creation of overlapping or common business
processes across different business units.

An example of this is the concept of vendor-managed inventory. Allowing suppliers some level of
control over the management of inventory allows a more streamlined and efficient process. This
benefits both parties as they achieve higher levels of combined performance through process
optimization.

6.Sequential synergy
This is a specific type of process synergy where a task or project needs to be completed by one of
the collaborative partners before passing to others. This is seen in the case of companies which use
collaborative partners for after-sales services.

An example of this is retail companies which used third-party logistics providers to distribute their
products, or handle product returns. Since these service providers have strong capabilities in these
functions, the retailing company can focus on sales while leaving these functions in the hands of
reliable channel partners.

8.Modular synergy

In contrast to the above scenario, modular synergy is when companies manage their resources or
capabilities independently and then combine only the results for better overall results. An example
of this is companies in the hospitality sector which synergize with each other through cross-selling of
one another’s services. As an example, airline booking websites often cross-sell rent a car or hotel
booking options. Similarly, hotel concierge services often have a tie-up with local tour operators and
limousine service providers to make suitable recommendations to their guests.

9.Synergy of skills and expertise

This refers to the synergies that arise from a transfer of skills or sharing of knowledge and expertise.
For example, Gillette and Olay, which are both brands under Proctor & Gamble benefit from this
kind of synergy. It has been reported that Gillette coordinated closely with Olay to benefit from their
skincare expertise and use that to design better razors for women.

10.Financial synergy

Financial synergy is often a key main basis or justification for mergers and acquisitions. Companies
expect to be able to drive down their wage bills by eliminating overlapping positions and
departments. This is particularly expected at the management level where the redundancy of top-
level positions can lead to significant cost savings. There could also be cost savings through sharing
of office space, warehousing and distribution. Additionally, when companies merge together, a key
financial synergy they gain is the ability to negotiate better prices with their suppliers. In mergers
and acquisitions, this is even more straightforward as the working capital of the companies can be
combined together. This allows greater flexibility to make moves in these market, which further
enhances the market position of the companies.

11.Technology synergy

Synergy of technologies is a key source of competitive advantage in today’s business landscape

which is continuously impacted by cutting-edge technological advancements. The sharing of
patented technology and other important intellectual property enables creation of products which
are superior to the competition. This is not limited to only product technologies though. Even
innovative process capabilities can be shared to achieve greater operational efficiencies.

We can look at Microsoft’s acquisition strategy to understand this easily. It continues to add
synergistic companies to its portfolio, helping it consolidate its position as a provider for office
solutions. For example, it acquired Skype Technologies in 2011 and this enabled it to enhance its
video chat service technology. This allowed the company to push the Teams application.
12.Market synergy

When two companies which have different geographies and customers merge or collaborate, they
can each take advantage of the access to a greater geographic area or customer demographics. This
would produce higher revenue for each of them.

Market synergy is often used as a basis for cross-selling efforts as well. This can be when companies
which have their own branding, marketing, and sales networks collaborate to achieve better overall
sales. Co-branding is another form of market synergy in which companies collaborate to improve
their combined sales of certain products or services. The Apple Watch Nike+ is an example of this.

Negative synergy/ Dysergy

Negative synergy also called Dysergy, is simply one where the overall results of combining resources
or capabilities leads a result that is less than what would be achieved individually. This is often used
as a driver for pursing diversification strategies. It is the situation where 2+2=3.

When Dysergy occurs, a marketing inefficiency is resulted which reduces the production efficiency
resulting in an overall negative impact to the organisation

Benefits of Synergy in Business

Opens the possibility of backward or forward integration

Many companies would like to increase their profit margins by expanding vertically, either through
backward or forward integration. However, this is often a difficult and expensive task to accomplish
without having some strong synergies to rely on.

Helps achieve economies of scale

Synergy between businesses can also lead to better economies of scale. This refers to a situation in
which companies are able to acquire resources at a much lower cost due to higher purchasing power
and volume.

Enables low-cost strategies

On the other hand, it could be the case that some of the organizations in the merger have a low-cost
approach. In this case, the new merged company can pursue low-cost strategies that synergize
between this low-cost footprint and the expertise of the other companies.

Disadvantages of Synergy in Business

Difficulty in identifying and capitalizing on synergies

Synergies are usually hard to identify in real-life situations. Even when identified correctly, taking the
necessary steps to utilizing these synergies may not always be feasible.

Unpredictability in achieving the expected benefits

There is also the risk that potential synergies which appear to exist on paper or in theory, may not
actually work out in practical application.

Possibility of expected costs exceeding expected benefits

When looking at expected synergies from integration, we should not neglect a proper cost benefit
analysis. Undertaking integration activities with the aim of achieving synergies often requires
investment of time, money and efforts. It is not a straightforward task to manage synergistic
relationships.

Competition between the players involved

. If the managers of different business units have an incentive to achieve higher results for their
department over others, they may not be willing to sacrifice this for ‘the greater good’ of the
company.
 SM-Module 2
Hierarchy of Strategic Intent - vision – Mission – Business Definition- Goals – Objectives-
Environmental Appraisal- Organizational Appraisal- SWOT-Strategic Decision Making.

Strategic intent refers to the pre-defined future state that the organisation is planning to
reach within a stipulated period of time.

The term strategic intent was popularised by Gary Hamel and C.K Prahalad.
They defined strategic intent as the reason of existence of an organisation and the ends it
wants to achieve. It shows the beliefs and values of an organisation.
According to Lovas and Ghoshal :
"Strategic intent is long-term goals that reflect the preferred future position of the firm, as
articulated by its top management".
Strategic intent has the following attributes :
1) Sense of Direction :
The sense of direction defines where the organisation wants to go in the future and why.
Every organisation requires a significant, steady, and common end. These ends should be
valuable and necessary for the organisation. A proper set direction helps organisation to
achieve its long-term strategic intent.

2) Sense of Discovery :
The sense of discovery refers to the ability of inspiring the employees for innovation and
creativity. This is necessary because the employees feel less enthusiastic when the strategic
intent is not inspiring.
3) Sense of Destiny :
The sense of density refers to the ability of the strategic intent to provide meaning to the
existence of the organisation. It should be able to create a sense of respect among the
organisational members. Strategic intent should be meaningful and significant so that it can
direct the organisation and motivate its employees.

Hierarchy of Strategic Intent

The Strategic Intent Elements (Strategic intent vision, mission and
objectives) serve to unify the ideas and resources towards a certain direction.
These elements are not only beginning points but also the milestones at various
levels. These elements act as a foundation for planning and directing activities
1. VISION :
Vision statement can be referred as the statement defining company's long term goals. A
vision statement can exceed from one line to a few paragraphs highlighting what the
organisation want to achieve in future.
An effective vision statement motivate the employees and provide them a sense of direction
for carrying out day to day business activities and also help in taking strategic decisions.
FEATURES OF A GOOD VISION :
An effective vision statement must have following features-
1. Vision statement must be unambiguous.
2. It must be clear.
3. It must harmonize with organization’s culture and values.
4. The dreams and aspirations must be rational/realistic
5. .Vision statements should be shorter so that they are easier to memorize
6. Should be realistic and idealistic.
7. Clarifies direction for the organization.
8. Inspires organization members and encourages commitment.
9. Reflects the uniqueness of the organization, its distinctive competence.
10. Appropriate for the organization, consistent with its values and culture.
11. Well articulated and easily understood.

2. MISSION
Mission Statement:-Mission statement embodies an organization’s purpose of existence.
Mission statement is the statement of the role by which an organization intends to serve it’s
stakeholders.
It describes why an organization is operating and thus provides a framework within which
strategies are formulated.
It highlights the current position and future scenario of an organisation in terms of product,
market, pricing, customer service etc.
Features of a Mission
1. Mission must be feasible and attainable. It should be possible to achieve it.
2. Mission should be clear enough so that any action can be taken.
3. It should be inspiring for the management, staff and society at large.
4. It should be precise enough, i.e., it should be neither too broad nor too narrow.
5. It should be unique and distinctive to leave an impact in everyone’s mind.
6. It should be analytical, .ie., it should analyze the key components of the
strategy.
7. It should be credible, i.e., all stakeholders should be able to believe it.
8. It indicates major components of strategy.
Contribution of Mission to Strategic Management
1. It provides direction to corporate planning.
2. It clarifies the firm’s aspirations.
3. It communicates to employees at various levels the direction in which they should move.
4. It focuses on business purpose and long-term objective of the firm.
5. Mission defined as the fundamental, unique purpose that sets a business apart from other
firms of its type and identifies the scope of its operations in product and market terms.
6. It is a statement of attitude, outlook and orientation.
7. It communicates what the firm wants to be.
8. It indicates the businesses the firm will pursue and the customer needs it will seek to satisfy.
9. Shaped by the vision of the corporation's leaders.

3.Business Definition
Business definition refers to the description of products, services, activities, functions, and markets in
which an organisation deals. It is a component of mission statement which forms the foundation for
all the strategic planning processes and shows the organisation a way to achieve success. It also helps
the organisation in estimating the changes as well as their effects.

4.Goals :
Organisational goals refer to the ideal situations to be achieved in undefined time-duration in future.
These goals direct the daily activities and decisions.
Goals can be followed for day-to-day operational activities and decisions, not essentially tied up with
quantifiable results.
Organisational goals provide the standards to measure the performances for achieving the wide-
ranging objectives. These are the targets that convert the vision and mission into reality. Goals help in
portraying a positive image of the organisation in the industry. It plays an important role in
maintaining public relations and encourages support from various groups.

Features of Goals :
The goals of an organisation are characterised as follows :
1) Specific :
The goals should clearly specify targets to be achieved and the tasks to be fulfilled. This
would help the managers in evaluating the performance at regular intervals. An ideal goal
should address major issues that are critical for success of the organisation.
2) Realistic and Challenging :
An organisational goal should be realistic as well as challenging. If the goal is unrealistic, the
employees may find it unachievable and may get demotivated. But, the goal should also not
be too easy. It should be challenging enough so that it can encourage the employees to
improve their performances by searching new and creative ways of carrying-out the
organisational activities.
3) Time Constraint :
Another important characteristic of an organisational goal is that there should be a time-
period associated within which it has to be completed. It provides a deadline to the employees
and managers so that they are motivated to improve performance for achieving success
within the time constraint.
4) Measurable :
The goals should be quantifiable. It implies that the goals should be measurable so that the
outcome could be evaluated and the progress can be estimated. Measurable goals act as a
yardstick for the managers and their team members to evaluate their performance.
5) Level-Oriented Goals :
A goal should be set to address important issues only. The top and middle level managers are
accountable for such long-term goals. On the other hand, the short-term goals should be
addressed by lower-level managers.
6) Commitment :
The members of the organisation should be committed for the achievement of set goals.

5. OBJECTIVE
Objective is the end, which the organisation tries to achieve through its operations.
Objectives indicate the organisational performance to be realized and expected over a period
of time.
Strategic objectives are those aims that are formulated to bring major changes in response to
the changes, competition, and issues in the environment. These objectives are formulated to
address various internal and external issues such as target customers, target markets, product,
and changes in technology, etc.
Precisely, these objectives are the ultimate aim that an organisation needs to attain to remain
competitive in the market and for its long-term survival.
Features of Objectives
Objective setting a complex process. M well-formulated objective possess
certain characteristics like:
1. Specific
2. Time bound
3. Measurable
4. Challenging
5. Verifiable
SMART objective is an acronym that stands for:
• S – Specific
• M – Measurable
• A – Achievable
• R – Relevant
• T- Time-based
One of the most widely used words today, in this modern, technology-driven world is
“SMART”.

Environmental Analysis
The environmental analysis is a strategic tool that helps you to recognize the internal and
external factors that could impact the performance of your business. The analysis helps you
to evaluate potential opportunities and threats present in the market. These indicators would
further help you in the decision-making process. The analysis helps the company to align its
strategies relevant to the business environment.

Environmental analysis is the process of monitoring an organisational environment to

identify both present and future threats and opportunities that may influence the firm’s ability
to reach its goals.

Purpose of environmental analysis/ environmental scanning

Environmental Analysis can help ensure organisational success in many ways:

1. It helps firms to adjust to environmental change at a right time, that is, encashing
opportunities as they arise and eliminating the negative impacts of environmental
threats through proactive planning.
2. It helps an organisation to come out with an early warning system to ward off threats
from competitive forces and develop suitable strategies to turn problems into
opportunities.
3. It tries to improve organizational performance by making managers and divisional
managers aware of issues that arise in the firm’s environment, by having a direct
 impact on planning and by linking corporate and divisional planning (Certo and
Peter).
4. It helps strategists to focus on alternatives that help achieve predetermined goals and
eliminate those options that are not in line with anticipated opportunities or threats.
5. The basic purpose of environmental scanning/diagnosis is to help a firm decide its
strategic direction in future.

Environmental Scanning simply involves reviewing and evaluating whatever information

about internal and external environments can be gleaned from several distinct sources.

Formal environmental scanning process:

1. “Identify the environmental scanning needs of the organization.” Before launching the
scanning process, a few items must be determined – purpose of scanning, participants, and
time and resources allocation.

2. “Gather the information.” Translate the needs of the organization into specific
information and a list of questions, select the information sources and collect the information.

3. “Analyze the information.” Information gathered should be analyzed for trends and
issues that may affect the organization.

4. “Communicate the results.” Potential effects should be communicated to decision-

makers in a concise format and manner that fit their preference.

5. “Make informed decisions.” Based on the information provided, decision-makers can

take corresponding steps to equip the organization to be responsive to potential opportunities
or threats.

Benefits of Environmental Analysis

1- Helps in Forecasting

Environmental analysis helps businesses understand where they stand and where they can be.
This helps in forecasting future trends and market conditions. By doing this, businesses can
make decisions that benefit them in the long term.

2- Enables Achieving Business Objectives

When a business adjusts its strategies based on environmental analysis, it moves closer to
success. They can attain their goals by formulating strategies based on the analysis.

3- Makes Business Aware of the Market

With environmental analysis, businesses are in constant touch with the market. This helps
businesses understand what is happening in the industry, allowing them to react and adjust to
market demands and achieve corporate objectives. Additionally, businesses change their
stages based on market requirements.
4- Anticipate Opportunities and Threats

The environmental analysis makes organizations aware of business opportunities and threats.
Companies can then respond to the opportunities and manage threats. This helps the firms
gain a competitive advantage in the market.

5- Understand the Causes of Disequilibrium

With the fast-changing environment and dynamic industry, a business can witness
disequilibrium. Environmental analysis helps firms to identify the reasons behind this
disequilibrium. Thereof, analysts can devise solutions to bring the business back into
equilibrium.

Limitations of Environmental Analysis

1- Does Not Warn Against Unforeseen Events

The environmental analysis does not warn businesses against unforeseen or adverse events. It
does help businesses forecast future trends. However, it does not help eliminate the
uncertainty. Through this analysis, businesses cannot avoid unexpected events that occur
during analysis. Though, it does decrease the frequency of such shocks to occur.

2- Does Not Follow a Strategic Approach

Businesses can build strategies based on environmental analysis. However, the analysis itself
does not follow a strategic risk-taking approach. This means it leads the businesses to operate
cautiously and has no rigid strategy.

3- Not Independently Reliable

The environmental analysis provides businesses with solutions but is not independently
reliable. This means that businesses must conduct other analyses as well to confirm solutions.
If an analyst only decides based on environmental analysis, it may or may not work in the
business’s favor. However, when an environmental analysis is combined with other strategic
approaches and analyses, the results are more reliable.

4- Does Not Guarantee Effectiveness

Environmental analysis is conducted to improve business effectiveness and operations.

However, it does not guarantee the same. The analysis acts as an input in the strategy to
develop an output. Hence, it is not advised to trust a single study to build organizational
effectiveness critically. The data’s verifiability and accuracy must be confirmed to ensure
ideal outcomes. If the data is not accurate, reliable, and verified, it may lead businesses to
make wrong decisions.

5- Creates Confusion

The environmental analysis focuses on too much business information at once. It considers
both the advantages and disadvantages of a business. This may lead to confusion amongst
analysts. The more information on hand, the more challenging to derive a solution. Hence,
the abundance of information acts as a hindrance to solving issues.

Techniques of Environmental Scanning

1.PESTLE Analysis

2.PEST Analysis
Pestle’s analysis studies the macro factor that could possibly impact the company from
operating its business. The company’s management used a pestle to know the overall market,
and where the company would be in the future. However, pestle analysis consists of various
macro factors like political, economic, social, technological, legal, and environmental. The
details of every element of the pestle are as follows;

Political Factors

Political factors deal with the political environment of the country in which the company
operates its business. It also studies international relations and global politics of different
countries and how it impacts the country in which the company is operating its business.
Therefore, it’s significant to study the regulation and government policies relevant to the
industry. The political environment studies the following elements;

▪ Entry Mode Regulations

▪ Government Stability

▪ Tariff & Tax Laws

▪ Government Policies

When you’re launching or expanding your business in a certain country, then you should
study the political factors of the country. The association and attachment of politicians to the
company could be risky because their one political statement would push people away from
the company.

Economical Factors

Economical factors are critical to the business of the company because they give direction to
the businesses wherever the economy leads them. Companies should carefully analyze the
economic factors of the country where they launching or expanding their business. It would
help them to align their strategies relevant to the economic changes. Some of the economic
factors that you should study are as follows;

▪ Foreign Currency Exchange Rate

 ▪ Fiscal and Monetary Policies

▪ Unemployment Rate

▪ Credit Accessibility

▪ Disposable Income of Potential Customers

▪ Interest Rate

▪ Inflation Rate

It’s important to mention it here that powerful economies promote business with flexible
policies, and the weak economies discourage them with stiff regulations.

Social Factors

Countries and their geographies and people are different because of many social factors like
norms, beliefs, values, culture, tradition, and mindset of the people. They have got a great
impact on the businesses that are running their operations in a specific society. Ultimately, it
would impact the sale of the product or services. Some of the main social factors are as
follows;

▪ Wealth Distribution

▪ Education Level of Customers

▪ Domestic Structure

▪ Social Lifestyle of People

▪ Demographics

▪ Gender

▪ Cultural Implications

The social factor would have a great impact in terms of the popularity of the product and how
it aligns itself with the country’s cultural norms and social setup. The company should keep
in mind such factors while marketing and promoting its product and service.

Technological Factors

The development in technology is excellent and the rate at which things are changing is great.
The advancement in technology is also influencing businesses greatly, and they have to keep
up with the changing technology. They should integrate with the latest technology to
improve the efficiency of their operations. Some of the technological factors are as follows;
 ▪ Innovative tech platform

▪ Tech development rate

▪ Tech obsolescence rate

▪ Latest Discoveries

Companies should conduct a tech environment analysis before implementing any technology
into their operations.

Legal Factors

Country’s regulations and legalities keep on changing over time, and their changes would
impact the business environment. If the government regulation sets boundaries for the
businesses and companies have to operate within the limits of those boundaries. However,
some of the legal factors are as follows;

▪ Safety and health regulations

▪ Patent infringements

▪ Regulations for competition

▪ Employment Regulations

▪ Regulations of Product/services

The country’s laws and regulations have the power to shut down the business temporarily or
permanently if the company isn’t following it.

Environmental Factors

The environmental factors comprise climate change and usage of scarce natural. Often,
impacts the agricultural businesses, and how the company is conducting its operations. If the
side effect of using a certain product or operation is impacting the environment, the
company’s stakeholders would be in question. Some of the main environmental factors are as
follows;

▪ The attitude and reaction of people towards the environment

▪ Regulations on Energy Consumption

▪ Waste Disposal Laws

▪ Weather and Climate

▪ Geographical Location
Caring and protecting the environment should be an essential part of every business plan and
organization. Companies should limit the production of emissions of toxic waste that could
jeopardize the natural environment.

2. SWOT Analysis
SWOT is an acronym for the internal Strengths and Weaknesses of a firm and the
external Opportunities and Threats facing that firm. SWOT analysis helps managers
to have a quick overview of the firm’s strategic situation and assess whether there is a
sound fit between internal resources, values and external environment.

Strength is the inherent capability of the organisationwhich it can use to gain strategic
advantage.
Weakness is the inherent incapability or constraints of the organisation which creates
strategic disadvantage.
Opportunity is the favourable conditions in the organisation’s environment which
enabl3s it to strengthen its position.
Threat is the unfavourable conditions in the organisation’s environment which causes
risk or damage to the organisation’s position.

Key reasons for SWOT ana;ysis are.

1. It provides a legal framework.
2. It prsents a comparative market.
3. It guides the strategists in strategic identifications.

3. TOWS Matrix
The TOWS matrix is used for strategic planning and helps marketers identify
opportunities and threats and measure them against internal strengths and weaknesses.
It is actually a variant of the SWOT analysis which focuses attention on external
 opportunities and threats and compares them to a company’s internal strengths and
weaknesses.
TOWS matrix was developed by Heinz Weihrich.
The incremental benefit of TOWS matrix lies in systematically identify relationship
between the factors and selecting strategies on their basis.

TOWS, basically, tries to answer the following four questions:

1. Strengths and Opportunities (SO)- How can your current strengths help you to
capitalize on your opportunities?
2. Strengths and Threats (ST)- How can your current strengths help you identify and
avoid current and potential threats?
3. Weaknesses and Opportunities (WO)- How can you overcome your current
weaknesses by using your opportunities?
4. Weaknesses and Threats (WT)- How can you best diminish your weaknesses and
avoid current and potential threats?

Internal Organisational Strength(S) Organisational Weakness(W)

element
External element
Environmental Maxi-Max (SO) Mini-Max (WO)
Opportunities(O) Strength can be used to The strategies develop need to
capitalize or build upon existing overcome organizational
or emerging opportunities. weakness if existing or emerging
opportunities are to be explored.
(Aggressive Strategies) (Competitive Strategies)
Environmental Maxi-Min (ST) Mini-Min (WT)
Threats(T) Strengths in the organisation The strategies pursued must
can be used to minimize minimize or overcome weakness
existing or emerging threats. and as fast as possible, cope with
threats existing or emerging
threats.
(Conservative Strategies)
(Defensive Strategies)

4. QUEST Analysis

ORGANISATIONAL ANALYSIS

1.Value Chain Analysis

The concept of value chain analysis has been polarized by Michael Porter (his most
popular five forces model). He has termed it a useful tool for analyzing a business unit and
assessing the unit’s competencies.

Michael Porter’s Value chain analysis is a methodical way of inspecting the sequence of
activities a firm performs to provide a product to its customers. It helps to understand the
roles played by different functionsin order to achieve superior efficiency, quality, innovation
and customer responsiveness.

The value chain of a firm consists of the firm’s primary and support activities. A firm’s value
chain identities the primary activities that create value for customers and the related support
activities that enhance primary activities’ performance.

Primary Activities in Value Chain Analysis:

The value chain analysis’s primary activities are involved in the physical creation of a
product, its distribution and marketing, and the after-sales service related to the product. The
primary activities are inbound logistics, operations/production, outbound logistics, marketing,
and services. Such as:-

• Inbound logistics are those that are associated with receiving, storing, and handling
inputs to the production process. These include material handling, storing products in
the warehouse, scheduling vehicles for the transport of materials/products, and returns
to suppliers.

• Operations comprise packaging, machining, testing, equipment maintenance,

assembly, and other activities associated with transforming inputs into the ultimate
products. This is the physical process of making, testing, and packaging the product.
 • Outbound logistics are those performed to collect, store, and physically distribute
products to customers. Material handling, delivery vehicles, order processing, and
scheduling are included in outbound logistics.

• Marketing is an element of primary activities in value chain analysis. It is concerned

with providing the buyer with information, inducement, and opportunities to buy the
product. It includes promotional activities such as advertising, sales promotion, public
relations, personal selling, salesforce, selection of distribution channel, pricing of
products, and other activities related to providing a means by which customers can
buy the products.

• Service concerns itself with activities associated with enhancing and maintaining the
products’ value to customers, such as repair of machines, installation of machinery,
training to customer’s supply of parts, prompt response to customer’s query, etc. All
these primary activities are present in varying degrees in each firm and, therefore,
deserve attention in the firm’s internal analysis.

Supportive Activities in Value Chain Analysis:

The support activities in the value chain analysis are necessary for supporting the primary
activities to take place. The support activities in the value chain analysis have indicators.
Such as:-

• Firm’s infrastructure

• Human resource management

• Technological development

• Procurement of resources, finance, inventory, etc.

Collectively, all these support activities and primary activities create the value chain. The
chain comprises an earnings margin because a markup over the cost of perming value-
creating activities is customarily part of the price borne by buyers.

BCG Matrix
The BCG Matrix was developed by The Boston Consulting Group, a strategic management
consulting firm, to analyze the performance of products. The BCG Matrix compares various
businesses in an organization’s portfolio on the basis of relative market share and market
growth rate.
It is a two-by-two graph, with market growth shown on the vertical axis and market share
charted on the horizontal axis. The quadrants are then labelled as four business categories:
cash cows, dogs, question marks and stars.
i. Stars:
(High share, high growth) SBU that are stars have a high share of a high-growth market and
typically require large amounts of cash to support their rapid and significant growth. They
have additional growth potential and so profits should be ploughed back into this business for
future growth and profits.
For example software, entertainment, electronics and telecommunications are some of the
industries which have a very high growth rate. The appropriate strategy for stars is to
maintain the market share through large closes of investment (both internal as well as
external).
ii. Cash Cows:
(High share, low growth) SBUs that are ‘cash cows’ (provide lot of cash for the firm) have a
high market share in a slowly growing market. As a result, they tend to generate more cash
than is necessary to maintain their market position. Cash cows are often former stars and can
be valuable in a portfolio because they can be ‘milked’ to provide cash for other riskier and
struggling businesses.
iii. Question Marks:
(Problem child or wild cat—low share, high growth) SBUs that are ‘question marks’ have a
small share of a high growth market. The question mark business is risky, since there is
already a leader in that business.
As such it requires lot of funds to invest in plant, equipment and personnel in order to keep
pace with the fast-growing market. The term question mark is well conceived, because at
every stage the organization has to think hard about whether to keep investing funds in the
business (to turn it into a star) or to get out.
iv. Dogs:
(Low share, low growth) SBUs that are ‘dogs’ have a relatively small share of a low-growth
market. They may barely support themselves, or they may even drain cash resources that
other SBUs have generated. Usually dogs are harvested, divested or liquidated (if turnaround
is not possible).

After the SBUs of an organization are plotted on the growth-share matrix, the next step is to
evaluate whether the portfolio is healthy and well-balanced. A balanced portfolio; obviously,
has a number of stars and cash cows and not too many question marks or dogs.
Depending on the position of each SBU, four basic strategies can be formulated while
building a balanced portfolio:
1. Build- Heavily invest in Stars. High market share and high industry growth mean higher
probability of future success.
2. Hold- Maintain cash cows because they provide resources for future growth-investment in
wild cats and stars. Here the company invests just enough to keep the SUB in its present
condition.
3. Harvest- Here the company reduces the amount of investment with a view to maximize the
short terms cash flows and profits from the SBU. It is a strategy best suited to cash cows that
are weak or which are in a market with bleak prospects.
It also used on occasions when the first in need of cash and is willing to forgo the future of
the product in the interest of short term requirements. Harvesting is also used for question
marks when there seem to be few real opportunities to turn them into stars and for dogs.
4. Divest- Here the attempt is to get rid of the dogs and use the capital the firm gets to invest
in stars and question marks.
As time passes, SBUs change their position in the growth-share matrix. Successful SBUs
have a life cycle. They start as question marks, become stars, then cash cows, and finally
dogs towards the end of their life cycle. Therefore, companies should keep on eye not only on
the current positions of their businesses but also on their moving positions.
Each business should be examined as to where it was in past years and where it will probably
move in the years ahead. If the expected journey of a business is going to be a tough one,
alternative plans must be kept ready.
The growth-share matrix, thus, becomes a useful planning framework for strategists. They
can use it to try to assess each SBU and assign the most reasonable objective in the light of
past experiences, current situation and future trends.

PORTER'S FIVE FORCES MODEL

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape
every industry and helps determine an industry's weaknesses and strengths. Five Forces
analysis is frequently used to identify an industry's structure to determine corporate strategy.
Porter's model can be applied to any segment of the economy to understand the level of
competition within the industry and enhance a company's long-term profitability. The Five
Forces model is named after Harvard Business School professor, Michael E. Porter.
Porter's 5 forces are:
1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products•

1. Competition in the Industry

The first of the Five Forces refers to the number of competitors and their ability to undercut a
company.
• The larger the number of competitors, along with the number of equivalent products
and services they offer, the lesser is the power of a company, and lesser will be their
profit margin.
• Conversely, when competitive rivalry is low, a company has greater power to charge
higher prices and set the terms of deals to achieve higher sales and profits.
• The intensity of rivalry among established players is mainly due to,
o Competitive structure
o Demand conditions
o The height of exit barriers in the industry.

2. Potential Threat of New Entrants Into an Industry

The power and profitability of established players is also affected by the force of new
entrants into its market. The new entrants may bring in new capacities, substantial resources
and aggressiveness to gain market share.
An industry with strong barriers to entry is ideal for existing companies within that industry.
The established companies try to discourage potential new competitors from entering into the
industry by raising the heights of barriers and this obstruction makes it difficult for the new
companies to enter the industry.
The possible barriers include;
• Maintaining economies of scale
• Bringing product differentiation
• Acquire cost advantage due to their access to raw materials, cheaper funds,
superior technology, etc.
• Massive capital investments.
• Access to distribution channels.
• Government policy with strict licensing requirements.
• Buiding brand identity.
3. Bargaining Power of Suppliers
The bargaining power of suppliers is considered a threat to new entrants.
Suppliers enjoy bargaining power by increasing the the price or reducing the quality of
purchased goods and services.
The threat from suppliers affects when:
• The supplier industry is dominated by few companies.
• The product or service is unique and switching over is possible.
• Conditions where substitutes are not easily available
• Suppliers can threaten with forward integration.
4. Bargaining Power of Buyers
Buyers are viewed as a threat when they force the companies to charge low prices or demand
higher quality and better service with their bargaining power.
According to Porter, the buyers are powerful under following circumstances.
• When the suppliers are more in number but buyers are few.
• The buyers buy in large quantity.
• More number of alternative suppliers and their products are not standardized and
undifferentiated.
• The cost of changing suppliers is not much.
• More dependence of suppliers on the buyers.
• The buyer has the power to integrate backward by producing itself.
• The buyer can use the threat of vertical interation as amewasure for forcing down
prices.
5. Threat of Substitutes
The last of the Five Forces focuses on the treat of substitute products.. Substitute goods or
services are those which satisfy similar needs though they appear to be different. They can be
used in place of a company's products or services which pose a threat. Tea is a substitute for
coffee,
According to Porter, substitute products limit the potential returns of any industry by placing
a ceiling on price, the firms in industry can charge. The existence of close substitutes can
pose threat by limiting their price.
Availability of few substitutes provides opportunity for the ompany to raise the price and get
higher profit.

Understanding Porter's Five Forces and how they apply to an industry, can enable a company
to adjust its business strategy to better use its resources to generate higher earnings for its
investors.

Ansoff’s Growth Matrix

The Ansoff Matrix, often called the Product/Market Expansion Grid, is a two-by-two
framework used by management teams and the analyst community to help plan and evaluate
growth initiatives.
The matrix was developed by applied mathematician and business manager H. Igor Ansoff
and was published in the Harvard Business Review in 1957. The Ansoff Matrix is often used
in conjunction with other business and industry analysis tools, such as the PESTEL, SWOT,
and Porter’s 5 Forces frameworks, to support more robust assessments of drivers of business
growth.
It features Products on the X-axis and Markets on the Y-axis.
The Matrix is used to evaluate the relative attractiveness of growth strategies that leverage
both existing products and markets vs. new ones, as well as the level of risk associated with
each.
Each box of the Matrix corresponds to a specific growth strategy. They are:
• Market Penetration – The concept of increasing sales of existing products into an
existing market
• Market Development – Focuses on selling existing products into new markets
• Product Development – Focuses on introducing new products to an existing market
• Diversification – The concept of entering a new market with altogether new products
1.Market Penetration
Market penetration refers to the growth strategy where the business focusses on selling the
existing products into existing market. Market penetration requires greater spending on
promotional activities.
When employing a market penetration strategy, management seeks to sell more of its
existing products into markets that they’re familiar with and where they have existing
relationships.
Typical execution strategies include:
• Increasing marketing efforts or streamlining distribution processes
• Decreasing prices to attract new customers within the market segment
• Acquiring a competitor in the same market
2.Market Development
Market development refers to the growth strategy where the business seeks to sell its existing
product into new market. A market development strategy is the next least risky because it
does not require significant investment in R&D or product development. Rather, it allows a
management team to leverage existing products and take them to a different market.
Approaches include:
• Catering to a different customer segment/target demographic/new geographical areas
• Entering a new domestic market (regional expansion)
• Entering into a foreign market (international expansion)
3.Product Development
Product development refers to the growth strategy whre business aims to introduce new
product into the existing market. The company brings out modified products or new products
or new variants which appeals to the existing market. Product development strategies may be
achieved in a variety of ways, including:
• Investing in R&D to develop an altogether new product(s).
• Acquiring the rights to produce and sell another firm’s product(s).
• Creating a new offering by branding a white-label product that’s actually produced by
a third party.
4.Diversification
Diversification refers to the growth strategy where a business markets new product in a new
market. It is a strategy by starting up or acquiring businesses outside the company’s current
product and market.
While it is the highest risk strategy, it can reap huge rewards – either by achieving altogether
new revenue opportunities or by reducing a firm’s reliance on a single product/market fit (for
whatever reason).
There are generally two types of diversification strategies that a management team might
consider:
1. Related Diversification – Where there are potential synergies that can be realized between
the existing business and the new product/market.
2. Unrelated Diversification – Where it’s unlikely that any real synergies will be realized
between the existing business and the new product/market.

Strategic Decision Making

Strategic Management – Strategic Decision Making
Strategic decision making, or strategic planning, describes the process of creating a
company’s mission and objectives and choosing the course of action a company should
pursue to achieve those goals. Strategic decisions are different in nature from all other
decisions which are taken at various levels of the organization during their day-to-day
working.
The major dimensions of strategic decisions are given below:
i. Strategic issues require top-management decisions.
ii. Strategic issues involve the allocation of large amounts of company resources.
iii. Strategic issues are likely to have a significant impact on the long term prosperity of
the firm.
iv. Strategic issues are future-oriented.
v. Strategic issues usually have major multi-functional or multi-business consequences.
vi. Strategic issues necessitate consideration of factors in the firm’s external
environment.

Strategic Decision Making Process

Strategic decision making process requires you to work through five stages.
1. Define the problem
2. Gather information
3. Develop options.
4. Evaluate the options
5. Choose the best option
6. Take action
7. Review the action.
 SM-Module 3
Strategy Formulation –Stability- Growth Strategies-Diversification Strategies-Turnaround –
Divestment –Liquidation-Functional –Operational Strategies- SBU’s-Gap Analysis-BCG
Matrix.

Strategy Formulation

Definition: Strategy Formulation is an analytical process of selection of the best suitable course of
action to meet the organizational objectives and vision. It is one of the steps of the strategic
management process. The strategic plan allows an organization to examine its resources, provides a
financial plan and establishes the most appropriate action plan for increasing profits.

Steps of Strategy Formulation

The steps of strategy formulation include the following:

1. Establishing Organizational Objectives: This involves establishing long-term goals of

an organization. Strategic decisions can be taken once the organizational objectives are
determined.
2. Analysis of Organizational Environment: This involves SWOT analysis, meaning
identifying the company’s strengths and weaknesses and keeping vigilance over competitors’
actions to understand opportunities and threats.
Strengths and weaknesses are internal factors which the company has control over.
Opportunities and threats, on the other hand, are external factors over which the company has
 no control. A successful organization builds on its strengths, overcomes its weakness, identifies
new opportunities and protects against external threats.

3. Forming quantitative goals: Defining targets so as to meet the company’s short-term and
long-term objectives. Example, 30% increase in revenue this year of a company.
4. Objectives in context with divisional plans: This involves setting up targets for every
department so that they work in coherence with the organization as a whole.
5. Performance Analysis: This is done to estimate the degree of variation between the actual and
the standard performance of an organization.
6. Selection of Strategy: This is the final step of strategy formulation. It involves evaluation of
the alternatives and selection of the best strategy amongst them to be the strategy of the
organization.
Strategy formulation process is an integral part of strategic management, as it helps in framing effective
strategies for the organization, to survive and grow in the dynamic business environment.

Levels of strategy formulation

There are three levels of strategy formulation used in an organization:

• Corporate level strategy: Corporate level strategy refers to the strategy that the top level
management formulates for the overall organisation.This level outlines what you want to
achieve: growth, stability, acquisition or retrenchment.
• Business level strategy: This level answers the question of how you are going to compete. It
plays a role in those organization which have smaller units of business and each is considered
as the strategic business unit (SBU).
• Functional level strategy: This level concentrates on how an organization is going to grow. It
defines daily actions including allocation of resources to deliver corporate and business level
strategies.

Strategy formulation : Corporate level strategy

Corporate strategies constitute the Generic /Grand Strategies which consists of
1. Growth Strategies
2. Stability Strategies
3. Retrenchment Strategies
4. Combination Strategies

1. Growth Strategies/E1xpansion
Growth strategy is a corporate strategy designed to achieve growth by bringing up increase in
sales, assets, and profits. Companies that do business in expanding market must grow in order
to survive. Continuing growth means increasing sales, reducing per unit cost and therby
increasing profit.
Growth strategies can be categorised into two. They are
1. Internal
1) Concentration strategies
2) Diversification strategies
2. External
1) Merger & Acquisition
2) Strategic Alliance
1. Concentration : it is form of growth strategy which rsuls in concentration of resources on those
products lines which have growth potential. Concentration strategy is adopted by growing
firms in growing industry. There are two basic concentration strategies:
a. Market Penetration, Market Development, Product Penetration
b. Vertical growth/Vertical Integration
c. Horizontal growth/Horizontal Integration
2. Diversification
a. Related Diversification
i. Vertical
1. Forward and 2. Backward
ii. Horizontal
iii. Concentric
b. Unrelated Diversification -Conglomerate diversification
External Grwoth Strategies
1.Merger:- Mergers refers to the growth strategy which involves combining 2 or more
organisations together to expand their business operations----
Here the deals gets finalized in a friendly terms and both the organisations share profit in the
newly created firm---
Organisations combine to increase their strength and financial gain along with breaking the
trade barriers.

2. Acquisition:- When an organisation takes over the other organisation and controls all the
business, it is called acquisition—
One financially strong organisation overpowers the weaker one….
Acquisition often happen during recession or during the declining stage of their profit margins
and business.
\Acquisition can be both friendly acquisition and hostile/unfriendly which is more or less a
forced association.
 Types of merger
i.Horizontal merger:- is the combination of firms in the same industry---principle objective is
to achieve economies of scale in the production process, widening of the product line, getting
rid of competitors, decreasing working capital and fixed asset investment etc..
ii. Vertical merger:- ----merger of two organisation in the same industry but at different stages
of their production or manufacturing process or marketing process.---this often leads to increase
in synergies----if an organisation merges with its suppliers/producers of raw material, it is
backward merger….if the merger/ integration happens when an organisations takes over its
buying organisation or distribution channel, it leads to forward mergers.----vertical merger
leads to restricting the bargaining power of other players in the vertical levels, achieve
operational and financial efficiency, etc..
iii. Co-Generic Merger:---two or more organisations are associated in some way or other
related to the production process, business market or basic technology----such merger include
extension of the product lines---refrigerators merging with kitchen appliences
iv. Conglomerate merger:---combination of organisations that are unrelated to each other----
there is no important common factor like similar type of product, marketing, R&D or
technology---

3. Strategic Alliance
SA ----is a relationship between 2 or more organisations that enables each to achieve certain
strategic objective which neither of them would be able to achieve alone----strategic partners
may maintain their status as independent and separate entity, share the profit, continue to make
contributions to the alliance until it is terminated-
Advantages:
i.Strategic alliance helps to earn more necessary capabilities to enhance their production capacity,
distribution system or extend supply chain of the organisation.
ii. Greater economies of scale can be achieved, resulting in cost reduction.
iii. strategic alliances may also crates competitive advantage by pooling in resources and skills.
iv. forming strategic alliances with politically influential partners may also help improve your own
influence and position
Disadvantage:- --sharing of resources and knowledge happens which may pose threat while alliances
is terminated….trade secrets will be opened…

II. Stability Strategy

1.Pause/proceed with caution strategy
2. No change strategy
3. Profit Strategy

III. Retrenchment Strategy ---is a type of strategy where the company tries to reduce the scope of its
activities
 1.Turnaround Strategy:----where the organisation choose to focus the ways and means to
reverse the process of decline….it is a strategy
2.Divestment/Disinvestment
3.Liquidation
IV. Combination Strategy
Divestiture:- divestiture is a partial or full disposal of a business unit through sale, exchange, closure or
bankruptsy----divestiture may also occur ifa business unit is deemed to be redundant ofter merger or
acquisition, or if the disposal of unit increase the sale value of the firm or if the court requires the sale
of a business unit to improve market competition.
Type of Divestiture
a) Sell offs/Liquidation:---is the most basic type---- sells out units—parent company
gets the cash for the divested asset.
b) Carve outs:---involves IPO of a piece of the company’s core operations where the
parent company and subsidiary becomes 2 separate legal entities, but usually the
parent organisation retains some equity
c) Spin offs;- the company sells a specific business unit which then becomes a new
entity in which the existing share holders are given shares
d) Split ups:- is a break up of the company into 2 or more separate companies---the
key shar will be either with the parent company or the newly formed subsidiary

Strategy formulation in the Business Unit Level

---Generic strategy
Competitive scope Broad target Cost Leadership Differentiation
Narrow target Focussed cost Focussed
leadership differentiation
Low-cost Differentiated
product/service product/service
Competitive advantage

Michael Porter’s Generic strategies

A business level strategy can be classified into

1. Cost leadership
2. Differentiation
3. Focus Strategy
a. Focussed cost leadership
b. Focussed differentiation
1.Cost leadership----
 o Cost leadership is a business level strategy where organisations try to produce
products or services at a lower cost for a larger market than other players and try to
out perform competitors.
o The strategy emphasizes on producing standardised product at a very low price for
customers who are price sensitive.
o When rivalry increases in the industry with price competition, the cost leader uses
the strategy to withstand the competition and make above average profit.
o A cost leader goes for lower level of product differentiation and always focus on
average customer and position their product accordingly.
Advantages:
1.Competitors are likely to avoid a price war, since the low cost firm will
continue to earn profit.
2.Powerful customers and suppliers will not be able to exploit the cost leaders.
3.Low cost leaders creates market entry barriers for new entrants.
Disadvantages:
1.Cost advantage may not last for long year 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 cost low by minimising their expenses but this
approach may not last long.
4.Technological advancement are a great threat to cost leaders.
2.Differentiation strategy;- this is a business level strategy where large business
organisation produces the product to the broad mass market that are readily differentiated
from that of the competitors.
o Companies which pursue differentiated strategy creats product which are perceived
as unique by customers and they charge premium price for the product/service.
o When the differentiation is based on customer responsiveness , a company offers
comprehensive after sales service and warranty.
o A differentiator often divides the market into segments or niche.
Advantages:
1.Differntiation develops brand loyalty in the minds of customers which is an asset.
2.Powerful buyers or supliers rarely put a threat as the diffferntiator provides with unique
products.
3.sometimes competitors may not be able to imitate and copy the product /service as they arise
from the creditworthiness and quality.
4.Success of differentiation is based on a competitive advantage.
Disadvantages:
1.In long term, uniqueness may be difficult to sustain.
2.Charging too high a price fro a differentiated product feature may cause the customer to
switch -off the brand to another alternative.
3. Differentiation fails if the basis of differentiation is not valued by the customer.
III. Focus Strategy: This ia a type of generic strategy which is pursued to serve the needs of a
limited customer group or segment.A focussed company pays attention to serve a particular
niche market – which may be defined geographically by a type of customer(children), or by
segment of product line(fast food). Focus strategies are most effective when consumers have
distinctive preferences or requirement. Focus strategists are specialized differentiator or cost
leader.
i).Focused Cost Leadership:- A focussed low cost leadership strategy requires competing
based on price to target a narrow market. It charges a price relative to the other firms price
that compete within the targer market.
ii).Focussed differentiation:-In a focussed differentiation strategy, the firms offer products
or services with unique features that fulfils the demand of a narrow market.
Advantages:
1.Premium prices can be charged for their focussed product/service.eg. price of Roles
Royes car, High end luxury items, etc.
2.Rival firms may not find it difficult to compete with the premium product/service. Hence
threat from rivals won’t be there.
Disadvantages:
1.Due to limited demand, the cost may be very high which can cause problems.
2.In the long run, thes niche could be overtaken by large competitors.

Strategy formulation : ----Functional Strategies

Functional strategy deals with developing and nurturing a distinctive competency in functional
area in order to maximise resource productivity.
Functional strategies will be successful, if it is built around core competence and distinctive
competence. If the company doesnot have distinctive competencies, it may go for
“outsourcing”
Outsourcing: - Outsourcing is a business practice of hiring third party outside a company
to perform services and create goods that traditionally were performed in-house by the
company’s own employees and staff.
The different types of functional strategies are:
1.Marketing Strategy:- It deals with pricing, selling and distribution of product/service.
With market development strategy the company can capture large market share and it can
develop new markets for current products.
The firm can use product development strategy to come up with new product in the existing
market or for a new market.
Through the Advertisement and Sales promotion strategies, the firms opt for a push strategy or
pull strategy for competing in the market.
Push strategy involves spending large amount of money on tradepromotionsuch as discounts,
allowances, special offers, etc. and motivating the customers towards the product.
Pull strategy involves spending more money on advertising to build brand awareness so that
shoppers may ask for the product.
The distribution strategies deals with the use of distributors and dealers to sell product to
intermediaries or to sell thir product to customers.
The pricing strategies deals with the pricing mechanisms for pricing the product/services. The
firm can opt for skimming pricing- where high price are adopted for the specialized product
and the profit are skimmed from the early buyers. Later price are reduced to enable the lower
segments to buy the product and skim the profit each levals step by step.

2.Financial strategy:-Financial strategy aims at maximizing the financial value of a firm.

Financial strategy provides competitive advantage through low cost funds. Financial strategies
deals with the desirable debt equity ratio, the leveraged buy outs, dividend management,
identify the tracking stocks etc.
3. Operations strategy: Operations strategy decides how and where a product/service is to be
produced, which technology needs to be adopted, the level of forward and backward
integration, optimum level of utilisation of rsources, etc..
4.Human Resources Strategy:- HR strategy aims at developing the best fit between
employeesand the organisational needs. The business opts for hiring large number of unskilled
workers to be employed with low pay or dealing with hiring expertise who receive relatively
high pay and made a part of managed team.
5.Research and Development Strategy:- R7D strategy aims at product and process
innovation and improvement. The firms opt for technological leadership or try to be a
technology followership to achieve cost leadership or differentiation strategy.
6.Information systems strategy:- Information system provides business units with
competitive advantage. Firms use information systems to develop closer relationship with
customers and suppliers by using internet and intranets to attain efficiency.

Gap Analysis: Definition

Gap analysis is defined as a method of assessing the differences between the actual
performance and expected performance in an organization or a business.
 The term “gap” refers to the space between “where we are” (the present state) and where “we
want to be” (the target state). A gap analysis can also be referred to as need analysis, need
assessment or need-gap analysis.

Gap analysis can be performed on:

•A Strategic Level- to compare the condition or level of your business with that of the
industry standards
• At an Operational Level – To compare the current state or performance of your
business with what you had desired.

Gap Analysis Tools

1.SWOT Analysis
2.McKinsey 7S Model
The 7s refers to the key interrelated elements of an organization. They are:
• Strategy
• Systems
• Structure
• Shared values
• Skills
 • Staff
• Style
These elements are divided into two distinct groups: hard elements (tangible factors, that can
be controlled) and soft elements (intangible factors, that cannot be controlled)
Hard elements are as follows:
• Strategy – the plan that will help your business gain an advantage over any of
your competitors.
• Structure – the plan or the layout that will define your entire organizational structure.
• Systems – business and technical knowledge your employees already use to complete
their daily tasks.
Soft elements are as follows:
• Shared values – these are the set of beliefs or traits that the organization values.
• Style – A leadership style that defines the organization’s culture.
• Staff – people who are the backbone or the asset of an organization.
• Skills – The tool that the employees have to help your business succeed.

Gap Analysis Method

The following steps can be followed to analyze and identify gaps in your business:

• Step 1: Identify the area to focus on- You need to know where to focus, that will be your
primary requirement. Whether the issue is finances, product quality or marketing etc. Be
specific, so that you can focus better.

• For example, if you want to identify the gaps in your ketchup business, you need to decide
whether to focus on product quality or marketing to identify and eliminate those gaps.

• Step 2: Identify what Goals you want to achieve- Now that you know the area to focus on,
set your target or goals. Set realistic smart goals and make sure to align them with your business
needs.

• For instance, the goal of your ketchup manufacturing business is to produce and sell 162000
units of ketchup in the next year in comparison to 120000 being sold this year.

• Step 3: Know your current state- Before you go any further, know where you stand currently.
By looking into your business reports you will know your current position in the market,
brainstorm and gather as much data as possible on what is your business’s current performance.
 • In this case, your ketchup brand currently sells around 100000 units a month.

• Step 4: Determine where you want to be in future- Define your parameters, remember you
have set smart goals, by achieving those goals you will be able to achieve the desired position
for your business in future.

• For instance, for your ketchup brand, answer the following question at this step:

• Where do you foresee your ketchup manufacturing business in the next year? – The answer can
probably be such as a 35% increase in unit sales per month.

• Step 5: Understand the gaps between two states- Now that you have a clear understanding
of the attributes of where you stand currently (present state) and where you desire to be in future
(desired state), it is now easy for you to identify as to what is stopping you from achieving you
your targets. After you have identified your gaps, make yourself equipped to close those gaps.

When Is a Gap Analysis Necessary?

A gap assessment is a useful tool that helps you identify why certain goals are not being reached. Most
business leaders are good at setting goals. But when goals aren’t achieved, it’s important to understand
why. By digging in with a gap analysis, you can get very specific about problems and come up with
solutions that move you closer to goals.

Types of Gap Analyses

Let’s explore the four types of gap analyses.
1.Market Gap Analysis
This is also called a product gap analysis and looks at the actual sales versus the budgeted sales. This
can be done internally or externally by an analyst. Product gaps look for opportunities where supply is
less than the demand. A company will use a market gap analysis to discover underserved markets that
it can capitalize on.
2.Strategic Gap Analysis
The strategic gap analysis is also called a performance gap analysis. It measures the actual performance
versus the anticipated performance. This analysis often benchmarks the company to competitors to see
what you are doing versus what they are doing, to seek out opportunities to add services or products
that fit the overall mission of your business.
3.Profit Gap Analysis
This is a common gap analysis that looks at the profit goals compared to the actual profits. By analyzing
the gap, the company does a deeper dive into why the goals are not being met rather than just looking
at the numbers on their own. It’s a way for a business to correct its course of action where necessary.
4.Skills Gap Analysis
This is sometimes called an HR gap analysis because it looks at the company’s personnel resources to
determine whether or not it has enough people with the right skills to meet the goals of the company.
The gap would be the makeup of the current workforce versus the workforce needed to succeed.
 SM-Module 4
(Strategy Implementation-Corporate restructuring – Mergers & Acquisition, Joint Venture,
Strategic Alliance- Strategy & Leadership- Behavioural Aspects- Structures for Strategies)

Strategy Implementation refers to the execution of the plans and strategies, so as to accomplish the
long-term goals of the organization. It converts the opted strategy into the moves and actions of the
organisation to achieve the objectives.

Strategy implementation is the technique through which the firm develops, utilises and integrates its
structure, culture, resources, people and control system to follow the strategies to have the edge
over other competitors in the market.

Strategy implementation refers to vari ous activities involved in executing the strategies of an
organization. In simpler words, strategy implementation puts an organization’s strategies into action
through various procedures, plans and programs. Strategy implementation involves actions and tasks
that are needed to be performed after the formulation of strategies.

Strategic implementation process requires introduction of change in the organisation that allow it to
pursue its strategy. Strategy is implemented through right combination of organisational structure
and control.

Your implementation plan is the roadmap to a successful strategy execution and should include the
following steps:

1. Define your goals

2. Conduct proper research

3. Map out any risks

4. Schedule all milestones

5. Assign tasks

6. Allocate helpful resources

Step 1: Set and communicate clear, strategic goals

The first step is where your strategic plan and your strategy implementation overlap.

To implement a new strategy, you first must identify clear and attainable goals. As with all things,
communication is key. Your goals should include your vision and mission statements, long-term
goals, and KPIs.

The clearer the picture, the easier the rest of your strategy implementation will be for your team
and organization—simply because everyone will be working towards the same goals.

Step 2: Engage your team

To implement your strategy both effectively and efficiently, you need to create focus and drive
accountability. There are a few ways in which you can keep your team engaged throughout the
implementation process:

• Determine roles and responsibilities early on. Use a RACI matrix to clarify your teammate’s
roles and ensure that there are no responsibility gaps.
 • Delegate work effectively. While it can be tempting to have your eyes on everything,
micromanagement will only hold you back. Once you’ve defined everyone’s roles and
responsibilities, trust that your team will execute their tasks according to the
implementation plan.

• Communicate with your team and ensure that everyone knows how their individual work
contributes to the project. This will keep everyone motivated and on track.

Step 3: Execute the strategic plan

Allocate necessary resources—like funding for strategic or operational budgets—so your team can
put the strategic plan into action. If you don’t have the right resources you won’t be able to achieve
your strategic plan, so this should be a top priority. Here’s how you can ensure that your team has
the resources they need:

• Start with the end in mind to effectively align your project’s objectives, key deliverables,
milestones, and timeline.

• Identify available resources like your team’s capacity, your available budget, required tools
or skills, and any other unconventional resources

• Define a clear project scope so you know exactly what your project needs when.

• Share your project plan with everyone involved in the implementation process using a work
management tool.

The better built out your strategic plan is, the easier it will be to implement it.

Step 4: Stay agile

You’ll inevitably run into issues as you begin implementing your strategy. When this happens, shift
your goals or your approach to work around them.

Create a schedule so you can frequently update the status of your goals or implementation strategy
changes. Depending on the strategy you’re implementing, you can create weekly, monthly, or
quarterly project status reports. Share these updates with your external stakeholders, as well as
your internal team, to keep everyone in the loop.

Having a central source of truth where you can update your team in real time will help you
streamline this process. Asana’s work management software allows your team to coordinate
projects, tasks, and processes in real time but also gives you the freedom to get work done
asynchronously—providing everyone with the visibility they need to understand who’s doing what.

Step 5: Get closure

Once you implement the strategy, connect with everyone involved to confirm that their work feels
complete. Implementing a strategy isn’t like a puzzle that’s finished when the last piece is set. It’s
like planting a garden that continues to grow and change even when you think you’re done with
your work.

Getting closure from your team will be the second to last milestone of your strategy implementation
and is a crucial step toward completion.
Step 6: Reflect

Conduct a post-mortem or retrospective to reflect on the implemented strategy, as well as evaluate

the success of the implementation process and the strategy itself. This step is a chance to
uncover lessons learned for upcoming projects and strategies which will allow you to avoid potential
pitfalls and embrace new opportunities in the future

Building and Restructuring Business

Various methods for the firms to enter into new business and restructure their existing business
include:

• Start-up route
• Merger
• Acquisition
• Strategic alliance
o Joint-Ventures
• Restructuring

Start-Ups:- Startups are young companies founded to develop a unique product or service, bring it
to market and make it irresistible and irreplaceable for customers.

Rooted in innovation, a startup aims to remedy deficiencies of existing products or create entirely
new categories of goods and services, disrupting entrenched ways of thinking and doing business for
entire industries.

Merger and acquisition (M&A) strategies refer to companies’ approaches and methods to combine
with or acquire other businesses. M&A strategy can be used to achieve a range of objectives,
including expanding market share, increasing profitability, diversifying product lines, entering new
markets, and acquiring new technologies or expertise.

Merger :- Mergers refers to the growth strategy which involves combining 2 or more companies
together into one company inorder to expand their business operations. It is a corporate level strategy
in which a firm combines with another firm through an exchange of stock. Mergers help to pool the
resources and improve efficiency.
Advantages:-
1. Mergers enjoy economies of scale through the larger size and integrated facilities.
2. Mergers help to maintain marketing economies and enhance competitive advantage to
the firm.
3. It helps to diminish competition.
4. Helps to achieve financial economies of scale through maintaining stability of cash flows,
raise more funds from stock markets, etc.
5. Mergers helps in the revival of sick units. Poorly managed units gets merged with healthy
units.
Acquisition:-

Acquisition is a type of merger where one company purchases another, often with a combination
of cash and stock and gains control over that company. The acquiring company becomes the
owner of its target.

Acquisition is a preferred strategy when:

1. Acquisition is a suitable entry mode.

2. When barriers to entry from brand loyalty, economies of scaleand cost advantage are very
intense and strong.
3. When a firms enters to an unrlated new business where it has no experience, expertise,
etc.
4. When companies expect to achieve market presence in a short period.
5. When acquisition reduces uncertainty

Types of Acquisition

Horizontal acquisition

Vertical acquisition

Concgeneric acquisition;- The type of acquisition where the acquiring company and the
acquired company have different products or services, but sell to the same customer. This type of
acquisition helps to increase the company’s market share and expand its product line.

Conglomerate acquisition

Advantages of Acquisition:

1. Obtain additional quality/skilled staff, knowledge and other business intelligence.

2. Better production and distribution facilities are obtained with less expense.
3. Can access a wider customer base and increase market share.
4. Reduce competition.
5. Reduce cost and overhead expenses through shared capabilities.
6. It is a best method to expand internally while underperforming in business.

Takeover:

In a takeover, apportion or a whole firm is acquired by another firm so that the acquiring
firm exercises control over the affairs of the taken over firm. Takeover is used as amethod
for instant expansion.

If the management accept the takeover, it is considered to be friendly or smooth take over.
If the management resists, it is called hostile takeover.

HLL’s takes over TOMCO- smooth takeover.

India cements takeover Raasi Cement- Hostile takeover

Strategic Alliance

A Strategic Alliance is a formal relationship between two or more independent organisations or

parties to pursue a set of agreed upon goals or to meet a critical business need while remaining
independent organizations. Partners may provide the strategic alliance with resources such as
products, distribution channels, manufacturing capability, project funding, capital equipment,
knowledge, expertise or intellectual property.

For example, in a strategic alliance, Company A and Company B combine their respective resources,
capabilities, and core competencies to generate mutual interests in designing, manufacturing, or
distributing goods or services.

Strategic Alliances • The alliance aims for a synergy where each partner hopes that the benefits from
the alliance will be greater than those from individual efforts.

(Affinity marketing strategies and co-branding new products or services are two major examples of
strategic alliances.)

Affinity marketing is a type of marketing that involves a mutually beneficial partnership between two
brands. It is sometimes also called co-marketing, co-branding, or partnership marketing.

In affinity marketing, a business teams up with another related (but non-competing) brand to offer
products, services, or other benefits to both their target audiences. This marketing carries the
branding of both businesses, and puts each one in front of a whole new market. This helps each
business increase brand awareness and grow their customer base. It’s a win-win!

The best strategic alliances are ones that offer clear benefits to the audiences of both brands. When
a partnership appeals to both audiences, then the two businesses are able to expand their reach and
generate more sales. It’s a win-win strategy!

Eg. Uber and Spotify

Uber’s partnership with Spotify lets Uber riders easily stream their Spotify playlists whenever they
take a ride.

Disney and Chevrolet

At Walt Disney World’s EPCOT, Disney and Chevrolet have partnered to create Test Track – not just a
thrilling ride, but a detailed Chevrolet brand experience. In this strategic alliance example,
innovators from both brands collaborated to create a one-of-a-kind ride experience that leveraged
the competencies of both brands.

Types of Strategic Alliances

There are three types of strategic alliances: 1.Joint Venture, 2.Equity Strategic Alliance, and 3.Non-
equity Strategic Alliance.

1 Joint Venture

A joint venture is a business agreement between two or more companies and business entities in
order to achieve a specific goal by sharing resources. It usually results in the form of new business
activity. When businesses share assets, they also divide income and expenses.

A joint venture is established when the parent companies establish a new child company. For
example, Company A and Company B (parent companies) can form a joint venture by creating
Company C (child company).
In addition, if Company A and Company B each own 50% of the child company, it is defined as a 50-
50 Joint Venture. If Company A owns 70% and Company B owns 30%, the joint venture is classified
as a Majority-owned Venture.

Eg:

GE appliances with Godrej

GE capital with HDFC

General Motors with Hindustan Motors.

Ford with Mahindra and Mahindra

Shell with BPCL

TATA with AIG

2. Strategic equity alliance:- A strategy when one company buys a significant amount of equity in
another company/ target company, and this trade will give the aquiring company significant
influence in the target company.

Eg:- Panasonic in collaboration withTesla motors in 2009 for using the batteries in the car.

Walmart invested in Indian e-commerce giant Flipcart

3. Non-equity strategic alliance:- A non-equity strategic alliance is formed when two companies
agree to share resources to result in synergy. Eg:- Maruthi-Suzuki, Starbucks-Kroger

Types of Joint Venture

There are various types of joint ventures for different types of businesses because they all want to
achieve a different goal. Some of the main types are as follows;

Project Joint Venture

As the name implies, this type of venture is limited to a specific project and completion of it. For
instance, a business enters into a new market and partners up with the local distribution network
channels. Both parties create a contract and outline the terms and conditions of the projects that
how the thing would work out.

Functional Joint Venture

It is when different categories of businesses having expertise in different fields make an alliance. It’s
to create a symbiotic environment that would beneficial for both.

For instance, a company has an extra storage space and the other business has a fleet of transport.
Both of them join hands and solve their inventory management issues. It would save the fleeting and
storage cost of both businesses.

Vertical Joint Venture

The vertical joint venture is when two companies need the same supply of raw material. They invest
in the supply chain to avoid the disruption caused by the inconsistent and unavailability of the
supplying raw material. However, businesses also keep the supply chain secret. It’s because the
demand for the finished product is high and limited availability of raw material.
For instance, Mark & Spenser launch their sweet shop and save the external cost. Or the computer
manufacturing companies invest in the development of computer chip technology,

Horizontal Joint Venture

The horizontal joint venture is when two companies are manufacturing the same finished final
product. One company enters into the new geographical region, and partners with the local
company producing the same product. However, the local company has the distribution advantage,
and the foreign has the expertise of economies of scale.

Advantages of Joint Venture

The most important joint venture advantages can help businesses to grow faster, increase their
productivity and generate profits. Benefits of joint ventures include:

• Access to new markets and enlarge their audience.

• Increased the capacity.

• Sharing of risks and costs on a wide surface basis.

• Access to new knowledge and expertise in business which includes specialized staffing
necessity.

• Access to higher resources, for example, the technology and the finance.

• Joint venture partners help in providing a huge pool of resources together.

Disadvantages of Joint Venture

Joint ventures can pose significant risks, the disadvantages are like the follows:

• The communication between partners is not great as they belong to different societal
classes.

• The partners expect different things from the joint venture, their interests may clash.

• The expertise and investment level may not match well.

• Work and Resources are not distributed equally.

• Different cultures and management styles may create barriers to the organization.

• The contractual limitations may pose risk to a partner's core business operations.

Restructuring

Corporate restructuring is the process of reorganizing a company’s management, finance and

operations or re-arranging business of a company to improve the efficiency and effectiveness of the
company.
Restructuring involves strategies for reducing the scope of the firm by exiting from unprofitable
business. Restructuring is a popular strategy where diversified rganisations divested the business to
concentrate on core business. The process of corporate restructuring is considered very
important to eliminate all the financial crisis and enhance the company’s performance.

Tata group restructured their 107 operations in 25 businesses to 30 companies in just 12 business. It
divested Lakme, TISCO’s cement division etc. while strengthening their core business.

SAIL divested their non-core business like stainless steel and alloy steel.

Reasons for restructuring;

1. Change in strategy:- Management of the distressed company attempts to improve its

performance by eliminating certain divisions and subsidiaries which do not align with its
core-business.
2. \lack of profit:- When the undertaking may not be profit-making enough to cover the cost of
capital of the company and result in economic loss.
3. Reverse Synergy:- Where the value of the individual unit is more than the value of
collective/merged units or when the company decides that divesting a division to a theird
party can fetch more value than owning it, then restricting is the option available.
4. Cash flow requirement;- Disposing of unproductive undertaking can provide a considerable
cash inflow to the company.
5. Outsourcing its operations to a more efficient third party.
6. Shifting the operations such as manufacturing to a low-cost locations.
7. Reorganising functions like marketing, sales and distribution etc.

Types of restructuring

1. Merger
2. Demerger:
3. Reverse Merger
4. Disinvestment
5. Takeover/Acquisition
6. Joint Venture
7. Strategic Alliance
8. Slump Sale:- Under the strategy Slump Sale, an entity transfers one or more undertakings for
lump sum consideration. An undertaking is sold for consideration irrespective of the
individual value of the assests or liabilities of the undertaking.
9. Organisational restructuring:- include reducing the levelof hierarchy, redesigning job
positions, downsizing the employees, changing the reporting relationship, etc.

Strategic Leadership
Strategic leaders must beable to use the strategic management process effectively by
guiding the company in ways that result in the formation of strategic intent and strategic
mission, facilitating the development and implementation of appropriate strategic
plans and providing guidance to the employees for achieving strategic goals.
 Strategic leader has several responsibilities like:
1. Making strategic decision.
2. Formulating policies and action plans to implement strategic decision.
3. Ensuring effective communication in the organisation.
4. Managing human capital.
5. Managing change in the organisation.
6. Crating and sustaining strong corporate culture.
7. Sustaining high performance.
Approaches to strategic leadership
Two basic approaches to strategic leadership are,
1. Transformational leadership:- leadership which uses charisma and enthusiasm to
inspire people to exert them for the good of the organisation. Transformational
leadership offers excitement, vision, intellectual stimulation and personal
satisfaction calling to bring about dramatic changes in organisatioal performance.
This leadership style may be appropriate in turbulent environment, in poorly
performing organisations when there is a need to inspire a company to embrace
major changes. Such leadership motivates followers to do more than their usual
capacity.
2. Transactional leadership:- this leadership focuses more on designing systems and
controlling the organisation’s activities and are more likely to be associated with
improving the current situation. Transactional leaders try to build on the existing
culture and enhance current practices. They prefer a more formalised approach to
motivation, setting clear goals and explicit rewards or penalties for achievments or
non-achievements. Transactional leadership style may be more appropriate to
static enevironment, in mature industries and in organisation’s that are performing
well.
 Module 5
(Strategic Control – Operational Control – Tools & Techniques- Strategies of MNC’s. )

Strategic implementation is not limited to formulation of plans, programmes and projects. After
resources have been provided, it would be essential to see that a proper organisational structure is
designed, systems are installed, functional policies are devised and various behavioural inputs are
provided. The strategy implementation also considers the issues related to

• Project implementation
• Procedural implementation
• Resource implementation
• Structural implementation
• Functional implementation
• Behavioural implementation

Strategic Change

Strategic change is a complex process that involves a corporate atrategy focused on new markets,
products, services and new ways of doing business.

Steps to initiate strategic change.

1. Recognize the need for change

2. Create a shared vision to manage change
3. Institutionalise the change

Kurt Lewin’s Model of Change

Kurt Lewin proposed three phases of the change process for moving the organisation from the
present to the future. These stages are Unfreezing, Changing and Refreezing.

1. Unfreezing the situation:- The process of unfreezing simply makes the individuals aware of
the necessity for change and prepares them for such a change. For an organisation, changes
should not come as a surprise to the members of the organization, because sudden and
announced changes would be socially destructive and reduces the morale.
2. Changing to the new situation;- Once the unfreezing process has been completed and the
members of the organisation recognise the need for change and had been fully prepared to
accept such change, their behaviour patterns need to be redefined.
3. Refreezing:- Refreezing occurs when thw new behaviour becomes a normal way of life.
The new behaviour must replace the old behaviour completely for successful and permanent
change to take place .

Strategic Control
Controlling is one of the most important functions of management and is often regarded as the core
of the management process.

Strategic control is the process of evaluating the strategy as it is formulated and implemented. It is
directed towards identifying problems and changes in premises and making necessary adjustments
Strategic controlling function includes monitoring the activity and measuring results against pre-
established standards, analysing and correcting deviations as necessary and maintaining or adapting
the system accordingly.

Strategic control is intended to enable the organisation to continually learn from its experience and
to improve its capacity to cope with the demands of organisational growth and development.

Elements of strategic control

• Objectives of the business system which are made operational through measurable and
controllable standards,
• It’s a mechanism of monitoring and measuring the performance of the system
• It’s a mechanism of comparing the actual results with reference to the standards.
• A mechanism of feeding back corrective and adaptive information and instructions to the
system, for effecting the desired change to set right the system to keep it on course.

Types of organisational control

1. Operational control:- the thrust of operational control is on individual task or transactions

as against total or more aggressive management function. For example, procuring specific
items for inventory is a matter of operational control. Operational control include stock
control, production control, quality control, budgetary control, etc..
2. Management control:- Management control is more inclusive and aggragative in the sense
that it embraces the integrated activities of a complete department, division or even the
entire organisation than any sub-unit. The basic purpose of management control is the
achievement of enterprise goals both short term and long term, in a most effective and
efficient manner.
3. Strategic control:- The strategic control focuses on the dual questions whether the strategy
isbeing implemented as planned and whether the rsults produced by the strategy ae those
intended. Strategic control is the process of evaluating the strategy as it is formulated and
implemented. It is directed towards identifying problems and changes in premises and
making necessary adjustments.

Steps in Strategic Control

1. Establish standards and Targets

2. Create measuring and monitoring system
3. Compare actual with targets.
4. Evaluate and take corrective actions

Techniques Of Strategic Control

Strategic control serves as early warning system which facilitates continuous evaluation. There are
four types of strategic control.

1. Premise Control
2. Implementation Control
3. Strategic surveillance Control
4. Special Alert Control

1.Premise Control:-- Premise are the expected environment in which the strategy is likely to
operate. If the assumptions are not valid, there is a need to change the strategy to make it effective.
Hence the purpose of premise control is to monitor regularly whether the assumptions underlying a
strategy generated during the implementation.

The assumptions /premise are related to two types of factors such as environmental and industrial.

Environmental Factors:- the business enterprise is usually influenced by environmental factors like
economic, social political, technological, legal, cultural, etc. any change in these factors between the
time of formulation and implementation results in the change of strategy.

Industrial factors:- every firm makes assumptions about industry structure and nature of
competition in it. If there is change in industry structure or competition, changes should be made
with regard to assumptions about industry

For effective premise control different steps are taken by companies.

1. The key premise which are likely to change are selected for close monitoring even at the
level of strategy formulation.
2. Responsibilities are assigned to employees to collect required information regarding the key
premise.
3. Change in strategy are pursued when a trigger is noticed.

2. Implementation control
During the implementation stage, the plans, programmes and projects undergo incremental
changes. Implementation control involves examining whether the overall strategy should be
changed in the light of unfolding certain events and results associated with the incremental steps in
the implementation stage. If the commitment to a plan does not benefit the organisation as
envisaged, they should be revised. The implementation control results in strategic rethinking. Two
methods of implementation control are

1. Monitoring Strategic Thrust:- during implementation stages, several new thrust areas are
identified that represents a part of what needs to be done, if the overall strategy needs to
be implemented. These thrust used as a basis for subsequent actions. Monitoring the
thrust areas helps to decide if they can go ahead with the strategy.
2. Milestone Review:- Milestones are the critical points in strategy implementation in terms of
events in terms of time and cost, during the implementation which need to be assessed to
ensure the completion of activity within the stipulated time and cost. Each project is divided
into several milestones depending on the nature of its dependence on others. A
comprehensive review of implementation is made to ensure the achievement of objectives
while achieving each milestone.

3.Strategic Surveillance
Premise control and implementation control ar specific controls wher as strategic surveillance is
aimed at a generalised and overarching control to monitor a broad range of events inside and
outside the company that are likely to threaten the course of a firms strategy. Strategic surveillance
involves some form of general monitoring of multiple information sources with the objective of
revealing important unanticipated opportunities. It aims to provide an ongoing broad based
surveillance in all daily operations which are vital for strategic control or shaping a new strategy.

4.Strategic Alert Control

Strategic alert control is undertaken to assess the impact of any major environmental events. Such
events may be technological innovation, sudden eruption of war, or sudden increase in price, or
economic slowdown, etc. Such occurrences trigger an immediate and intense reassessment of the
organisation’s strategy.

Strategic formulation Vs Strategic Implementation

Strategic Formulation Strategic Implementation
• Strategy formulation focusses on • Strategy implementation
effectiveness. focusses on efficiency
• Strategy formulation is primarily an • Strategy implementation is
intellectual process primarily an operational process
• Strategy formulation requires • Strategy implementation requires
conceptual intuitive and analytical motivation and leadership skills.
skills.
• Strategy formulation requires • Strategy implementation requires
coordination among the executives coordination among the
at the top level. executives at the middle level
and lower level.

Strategies of MNCs
A firm that has operations in more than one country is known as a multinational
corporation (MNC). The largest MNCs are major players within the international arena.

Multinationals such as Kia and Walmart must choose an international strategy to guide
their efforts in various countries. There are four main international strategies available:
1. International
2. Multi-domestic
3. Global
4. Transnational
International Strategy

Firms pursuing an international strategy are neither concerned about costs nor adapting to the local
cultural conditions. They attempt to sell their products internationally with little to no change.

For example:- When Harley Davidson sells motorcycles abroad, they do not need to lower their
prices or adapt the bike to local motorcycle standards. People in other countries buy a Harley
particularly because it is different from the local motorcycles.

Multi-Domestic Strategy

A firm using a multi-domestic strategy does not focus on cost or efficiency but emphasizes
responsiveness to local requirements within each of its markets.

For example:-Rather than trying to force all of its American-made shows on viewers around the
globe, Netflix customizes the programming that is shown on its channels within dozens of countries,
including New Zealand, Portugal, Pakistan, and India.

Global Strategy

A firm using a global strategy sacrifices responsiveness to local requirements within each of its
markets in favour of emphasizing lower costs and better efficiency. This strategy is the complete
opposite of a multi-domestic strategy. Some minor modifications to products and services may be
made in various markets, but a global strategy stresses the need to gain low costs and economies of
scale by offering essentially the same products or services in each market.

Transnational Strategy

A firm using a transnational strategy seeks a middle ground between a multi-domestic strategy and a
global strategy. Such a firm tries to balance the desire for lower costs and efficiency with the need to
adjust to local preferences within various countries.

For example, large fast-food chains such as McDonald’s and Kentucky Fried Chicken (KFC) rely on the
same brand names and the same core menu items around the world. These firms make some
concessions to local tastes too. In France, for example, wine can be purchased at McDonald’s. This
approach makes sense for McDonald’s because wine is a central element of French diets. In Saudi
Arabia, McDonalds serves a McArabia Chicken sandwich, and its breakfast menu features no pork
products like ham, bacon, or sausage.