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Lecture 1

STRATEGIC MANAGEMENT

RAKESH KUMAR

Strategic Management Definition & Basics

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Strategic Management is all about identification and description of the

strategies that managers can carry so as to achieve better
performance and a competitive advantage for their organization.
- An organization is said to have competitive advantage if its
profitability is higher than the average profitability for all companies
in its industry
- Strategic management can also be defined as a bundle of
decisions and acts which a manager undertakes and which decides
the result of the firms performance.

RAKESH KUMAR

STRATEGY-IN-PRACTICE

RAKESH KUMAR

REALITY OF THE NEW BUSINESS CONTEXT

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Customers are not just demanding but they also have

infinite options
Competition is not just intensifying but there are also new
sources of competition
Resources are not just limited but they are also migrating
all the time
Investors are not just dissatisfied with the level of returns
they got in the past but they are also becoming impatient
Both huge opportunities and risks are existing
simultaneously
RAKESH KUMAR

WE NEED TO HAVE A STRATEGIC PERSPECTIVE

IN EVERYTHING WE DO
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We and our organization must think and act

DIFFERENTLY AND SMARTLY in order to face
the NEW ENVIRONMENTAL CONTEXT
Strategy makes our business and organization look
and perform DIFFERENTLY

RAKESH KUMAR

CHARACTERISTICS OF STRATEGIC
DECISIONS
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CONTEXT-SPECIFIC
INDICATES LONG TERM DIRECTION OF AN
ORGANIZATION
DEFINES CONTEXT
SPECIFIC COMPETITIVE
ADVANTAGE
DETERMINES SCOPE OF THE ORGANIZATION
STRATEGIC FIT BETWEEN RESOURCES AND
ACTIVITIES
AND
ENVIRONMENTAL
CONTINGENCIES

RAKESH KUMAR

CHARACTERISTICS OF STRATEGIC
DECISIONS[Contd]
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EXPLOITS
EXISTING
RESOURCES
AND
CAPABILITIES OR EXPLORES NEW OPPORTUNITIES
USING COMPETENCIES
MAJOR RESOURCE COMMITMENT, IRREVERSIBLE IN
THE SHORT RUN
AFFECTS ORGANIZATIONAL DECISIONS
SHAPED BY VALUES AND EXPECTATIONS OF KEY
STAKEHOLDERS
RAKESH KUMAR

Key implications of strategic decisions

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They are complex in nature

Requires a Point of View on the FUTURE since
future is uncertain and has not yet happened
Demands integrated approach to managing an
organization
Requires management of relationships and
networks outside the organization
Involves change within the organization
RAKESH KUMAR

DIFFERENT TYPES OF STRATEGY

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Corporate:
Portfolio selection, considering synergy and risk-return criterion
Resource Allocation organizational, financial and people across businesses
Core capability development used by more than one business
Business
Core business Strategy
Growth strategy
Internationalization strategy
Functional
Strategies and programs at functional level to operationalize the overall
strategy [corporate or business as relevant], aligned to each other
Operational
Actions plans and programs at the frontline where strategy gets operational
RAKESH KUMAR

DIFFERENT TYPES OF STRATEGY

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CORPORATE STRATEGY dealing with CONTEXT-SPECIFIC strategic

choices ref
Portfolio of distinct businesses [distinct in terms of market mission,
customer segments and competition and capabilities]
Portfolio of geographical markets [more relevant for global cos.]
Role of the corporate office to support value creation at business
level [corporate parenting role]
Resource allocation
Development of enterprise wide capabilities
Talent scouting and development
BUSINESS STRATEGY dealing with CONTEXT-SPECIFIC strategic
choices for achieving sustainable competitive advantages at business
level
RAKESH KUMAR

DIFFERENT TYPES OF STRATEGY

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FUNCTIONAL STRATEGY dealing with CONTEXT-SPECIFIC

strategic choices made at individual functional level
[manufacturing, R&D, marketing , sales , Finance, HR, SCM
etc] thereby contributing to business level strategies for
achieving sustainable competitive advantages
OPERATIONAL STRATEGY dealing with CONTEXT-SPECIFIC
[at branch, department or unit level] actions and programs
under each functional areas and their cross functional
alignments for achieving sustainable competitive advantage
at the business level.
NOTE: There must be a clear LINE OF SIGHT among all 4
levels of strategies and POV the firm has
RAKESH KUMAR

CORPORATE STRATEGY
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Portfolio

of distinct businesses [distinct in terms of market

mission, customer segments and competition and
capabilities]
Portfolio of geographical markets [more relevant for global
cos.]
Role of the corporate office to support value creation at
business level [corporate parenting role]
Resource allocation
Development of enterprise wide capabilities
Talent scouting and development

RAKESH KUMAR

Business Strategy
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Strategy of a business is its proactive & deliberate move, comprising a

set of integrated cross functional decisions, that helps the business

POSITION itself DISTINCTLY AND UNIQUELY

ensuring

DIFFERENCE
SMARTNESS

in the way the business is proposed to be conducted given the

CONTEXT in which the strategist and his/her business is in and

will be in
RAKESH KUMAR

Business Strategy
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Such a DISTINCT and UNIQUE POSITIONING should be

SUSTAINABLE in the eyes of the CUSTOMERS and vis-vis COMPETITION

WEALTH CREATING for key stakeholders

Business Strategy thus helps in achieving SUSTAINABLE

COMPETITIVE ADVANTAGE and is encapsulated in the
BUSINESS MODEL
RAKESH KUMAR

KEY WORDS
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POSITIONING based on

DIFFERENCE in terms of Competitive Advantage sought

based on market selection [WHERE TO COMPETE?]and
core value propositions (HOW TO COMPETE?] [cost
based and/or product and process based in the areas of
product, solutions and experience] (P+S+E)
SMARTNESS in the design of value delivery model
[optimized resource deployment assets, manning and
network]

SUSTAINABILITY at least in short and medium term till

investments made upfront are recovered and till the
next set of competitive advantages is put in place
WEALTH CREATION for customers, employees and
investors and also society/community at large
BUSINESS MODEL is the business strategy
RAKESH KUMAR

KEY WORDS:BUSINESS MODEL

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BUSINESS MODEL for a product or service are choices

made in respect of :

Revenue Model

market selection [be different]

customer groups being targeted
competition being targeted
core value propositions relative to price and target competition [be different]

Value delivery model [VDM] [be smart]

Success of

a Business Model depends on:

how DISTINCT and UNIQUE is the model vis--vis those of other

leading players along each of the 3 dimensions stated above
quality of execution]
RAKESH KUMAR

CORE VALUE PROPOSITIONS (CVP) AT BUSINESS

LEVEL: VARIOUS TYPES OF DIFFERENCES
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PRICE BASED DIFFERENCES [LOW COST

STRATEGY]

No frills which combines low price, low perceived

product/service benefits and a focus on price sensitive
markets

Products are commodity type

Price sensitive customers
Buyers have high power and/or low switching cost
Competitors have equal market power and imitation is easy
and thus price is a key competitive weapon
Low price segment is an opportunity for smaller players to
avoid the major competitors who concentrate on higher price
points
RAKESH KUMAR

CORE VALUE PROPOSITIONS (CVP) AT BUSINESS

LEVEL: VARIOUS TYPES OF DIFFERENCES
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BENEFIT
BASED
STRATEGY]

DIFFERENCES

[DIFFERENTIATION

Provide products or services that offer benefits different from those

of competition and that are widely valued by customers
Normally a combination of differences in product, solutions [ref
problems faced by target customers in acquiring and consuming
the product/services] and experience
Key requirements for success: market selection [ viz. right
identification of customer and its decision maker and
competitors who are also trying to create differentiation]
Sustainable competitive advantages
will accrue only if the
proposed differences are created through a set of firm-specific
distinctive capabilities that customers value and competition
cannot imitate easily

RAKESH KUMAR

CORE VALUE PROPOSITIONS AT BUSINESS LEVEL:

VARIOUS TYPES OF DIFFERENCES
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HYBRID seeking to achieve simultaneously

DIFFERENTIATION and PRICE based DIFFERENCES
[Hybrid strategy]- particularly useful when;

It is felt that much greater volume can be achieved vs.

competition implying higher margin due to lower per unit
cost structure
the firm is clear about the areas where it has capabilities
to create differentiation and, except those, it is able to
reduce cost in other areas
the firm is intending to enter a new market segments
where there are already established competitors whose
competitive advantage in such segments are not strong
RAKESH KUMAR

CORE VALUE PROPOSITIONS AT BUSINESS LEVEL:

VARIOUS TYPES OF DIFFERENCES
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NICHE STRATEGY - FOCUSSED DIFFERENTIATION for

a select segment that seeks to provide high perceived
product/service benefits justifying a substantial price
premium
which large companies following
differentiation strategy find unattractive to pursue
NICHE STRATEGY - COST/LOW PRICE FOCUSSED for
a select segment that seeks to provide standard
product/services at lowest price
which large
companies following cost leadership strategy find
unattractive to pursue
RAKESH KUMAR

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Thank You

RAKESH KUMAR