CORPORATE EVOLUTION AND STRATEGIC MANAGEMENT

Unit 1 Evolution of Corporate Strategic Management – concept of Strategic Manage

ment and its importance – Strategic Management Model: Stages of strategic Manage
ment – Strategy Formulation, Strategy Execution and strategy
Evaluation and Control Top Management (CEO and Board of Directors)
functions – Long term objectives, their setting and criteria Corporate Social
Responsibility (CSR) – corporate Governance.
UNITII Strategic option models for resource allocation – concept of Strategic Bu
siness Units (SBUs) –BCG Growth – Share Matrix GE/ Mckinsey Multifactor
Portfolio planning Matrix Bodnet Market Evolution Matrix.
UNITIII Corporate level (or Grand) strategies: Stability, Expansion, Divestment
and coordination strategies Types of Expansion strategies – I) Intensification
strategies: Market penetration, Market Development and Product Development –
ii) Diversification strategies: vertically integrated, concentric and conglomera
te
diversification strategies and their importance.
UNITIV
Strategies for Growth: startups, Mergers, Acquisitions, Takeover, Joint Ventures
and Strategic Alliances – Some recent case studies of Growth strategies –
Turnaround Management Strategies.
UNITV Strategy Execution (or implementation) : Strategy and Structure Strategy
and Leadership Strategy and Culture Organisational performance – 7s framework:
strategy, structure, system, skills, styles and shared values The concept of B
alanced Score Card – Triple Bottomline approach Strategy Evaluation and Control
– purpose of strategic control strategic, budgetary and
operational control Strategic control process Strategic Audit.

Unit 1:
1. Explain the evolution, role and importance of business policy and strate
gic management. What would be the role of manager in this age?
Introduction: The term strategic management has been traditionally used. New tit
le such as business policy, corporate strategy and policy, corporate policies is
essentially and extensively used which means more less the same concept.
Evolution of Strategic Management:
1) In early 1920’s and 1930’s the managers used day-to-day planning method
s to perform any task.
2) To anticipate the future, they tried using tools like preparation of bud
gets and control systems like capital budgeting and management by objectives.
3) The techniques were unable to emphasize the future adequately.
4) The next step was they tried using long range planning which was replace
d by strategic planning and later by strategic management.
5) In mid 1930’s, according to the nature of business the planning was done
 during Adhoc policy making.
6) As many businesses had just started operations and were mostly in a sing
le product line, there arose a need for policy making.
7) As companies grew they expanded their products and they catered to more
customer and which in turn increased their geographical coverage.
8) The expansion brought in complexity and lot of changes in the external e
nvironment. Hence there was a need to integrate functional areas.
9) This integration was brought about by framing policies to guide manageri
al action.
10) Policies helped to have pre-defined set of actions, which helped people
to make decision.
11) Policymaking was the owner’s prime responsibility.
12) Due to increase in the environment changes, in 1930’s and 40’s policy fo
rmulation replaced ad-hoc policy making, which led to emphasis shifted to the in
tegration of functional areas in this rapidly changing environment.
13) Especially after II World War there was more complexity and significant
changes in the environment.
14) Competition increased with many companies entering into the market.
15) Policy making and functional area integration was not sufficient for the
complex needs of a business.
ROLE OF STRATEGIC MANAGEMENT: -
1) Due to increase in the competition, in 1960’s there was a demand for cri
tical look at the bane corrupt of business.
2) The environment played an important role in the business.
3) The relationship of business with the environment lead to the concept of
strategy.
4) In early sixties, this helped the management to manage between the busin
ess and the environment.
5) In early eighties, as many companies were globalised which lead to the c
ompetition of the rivals access the world.
6) Japanese companies along with other Asian companies unleashed a force ac
ross the world and posed a threat for the US and European companies, which led t
o the current thinking.
7) Strategic management focused on 2 aspects: -
• Strategic process of business.
• Responsibilities of strategic management.
8) Unlike others, in this phase the role of senior management is vital and
of utmost importance. Their role was important in decision-making like -
a) Whether a company promotes a joint venture/new decision.
b) Decides to go for an expansion.
c) Takes other important actions.
8) All these actions and decision had a long-term impact on the company and
its future operations, which was the result of senior management decision-makin
g.
9) Strategic management is both about the present and future course of acti
on, which was the prime responsibility senior management.
Strategic Management is
I. The study of function and responsibilities of senior management
II. A crucial problem that affects success in total enterprise.
III. The decision that determine the direction of the organization and shape
of its future
IV. Identity and molding of its character
V. Mobilisation and their allocation of the resources.
Hence as managers had variety of choices, decisions were based on the circumstan
ces, which would take the company in specified directions.
IMPORTANCE AND ROLE OF MANAGERS IN STRATEGIC MANAGEMENT: -
I. Strategic management integrates the knowledge and experience gained in v
arious functional areas.
II. It helps to understand and make sense of complex interaction in various
areas of management.
III. It helps in understanding how policies are formulated and in creating ap
preciation of complexities of environment that the senior management faces in po
licy formulation.
IV. Managers need to begin by gaining an understanding of the business envir
onment and to in control.
Here are few steps Indian managers need to do.
a) They should know to manage and understand information technology, which
is changing the face of business.
b) As public and common investors own and more companies managers need to a
cquire skills to maximize shareholder value.
c) To have/take a strategic perspective, managers should foresee the future
and track changes in customer expectation. Intuitive, logic reasoning is requir
ed for proper decision-making.
d) Successful companies depend on people. For people, management managers s
hould create capability for imitating and manage things through leadership and s
hould possess qualities like patience, commitment and perseverance.
e) Managers need to provide speed responses to environmental changes throug
h informational systems and organizational process.
f) As corporates are becoming more integrated with the public life, corpora
te governance is becoming important which manager may have to practice.
g) Managers should learn to deal with confused and complex situations. They
should know to deal with global managers, business protocols and market conditi
ons.
h) In complex and certain situations, managers should have the courage in d
ecision-making to make unconventional decisions.
i) Managers should possess high ethical standards in business and focus on
social responsibility.
Conclusion
Thus we can say the purpose of strategic management is manifold. To be s
uccessful in the business one should possess/have holistic approach and should k
now to integrate the knowledge gained in various functional area of management.
By having generalistic approach, a senior manager can understand the complex int
er linkages operating within the organisation and should have systematic approac
h in decision-making in relation with the changes which takes place in the envir
onment.
2. Strategic management model
Ans Strategic management is an ongoing process that evaluates and controls the b
usiness and the industries in which the company is involved; assesses its compet
itors and sets goals and strategies to meet all existing and potential competito
rs; and then reassesses each strategy annually or quarterly [i.e. regularly] to
determine how it has been implemented and whether it has succeeded or needs repl
acement by a new strategy to meet changed circumstances, new technology, new com
petitors, a new economic environment., or a new social, financial, or political
environment.
Strategy formulation
Strategic formulation is a combination of three main processes which are as foll
ows:
• Performing a situation analysis, self-evaluation and competitor analysis
: both internal and external; both micro-environmental and macro-environmental.
• Concurrent with this assessment, objectives are set. These objectives sh
ould be parallel to a time-line; some are in the short-term and others on the lo
ng-term. This involves crafting vision statements (long term view of a possible
future), mission statements (the role that the organization gives itself in soci
ety), overall corporate objectives (both financial and strategic), strategic bus
iness unit objectives (both financial and strategic), and tactical objectives.
• These objectives should, in the light of the situation analysis, suggest
a strategic plan. The plan provides the details of how to achieve these objecti
ves.
Marketing action plan
• Placement and execution of required resources are financial, manpower, o
perational support, time, technology support
• Operating with a change in methods or with alteration in structure
• Distributing the specific tasks with responsibility or moulding specific
jobs to individuals or teams.
• The process should be managed by a responsible team. This is to keep dir
ect watch on result,comparison for betterment and best practices, cultivating th
e effectiveness of processes, calibrating and reducing the variations and settin
g the process as required.
• Introducing certain programs involves acquiring the requisition of resou
rces: a necessity for developing the process, training documentation,process tes
ting, and imalgation with (and/or conversion from) difficult processes.
As and when the strategy implementation processes, there have been so many probl
ems arising such as human relations, the employee-communication. Such a time , m
arketing strategy is the biggest implementation problem usually involves , with
emphasis on the appropriate timing of new products. An organization, with an eff
ective management, should try to implement its plans without signaling this fact
to its competitors.[3]
In order for a policy to work, there must be a level of consistency from every p
erson in an organization, specially management. This is what needs to occur on b
oth the tactical and strategic levels of management.
Strategy evaluation
• Measuring the effectiveness of the organizational strategy, it s extreme
ly important to conduct a SWOT analysis to figure out the strengths, weaknesses,
opportunities and threats (both internal and external) of the entity in questio
n. This may require to take certain precautionary measures or even to change the
entire strategy.
In corporate strategy, Johnson and Scholes present a model in which strategic op
tions are evaluated against three key success criteria:
• Suitability (would it work?)
• Feasibility (can it be made to work?)
• Acceptability (will they work it?)
Suitability deals with the overall rationale of the strategy. The key point to c
onsider is whether the strategy would address the key strategic issues underline
d by the organization’s strategic position.
• Does it make economic sense?
• Would the organization obtain economies of scale, economies of scope or
experience economy?
• Would it be suitable in terms of environment and capabilities?
Tools that can be used to evaluate suitability include:
• Ranking strategic options
• Decision trees
• What-if analysis
Feasibility
Feasibility is concerned with whether the resources required to implement the st
rategy are available, can be developed or obtained. Resources include funding, p
eople, time and information.
Tools that can be used to evaluate feasibility include:
• cash flow analysis and forecasting
• break-even analysis
• resource deployment analysis
Acceptability
Acceptability is concerned with the expectations of the identified stakeholders
(mainly shareholders, employees and customers) with the expected performance out
comes, which can be return, risk and stakeholder reactions.
• Return deals with the benefits expected by the stakeholders (financial a
nd non-financial). For example, shareholders would expect the increase of their
wealth, employees would expect improvement in their careers and customers would
expect better value for money.
• Risk deals with the probability and consequences of failure of a strateg
y (financial and non-financial).
• Stakeholder reactions deals with anticipating the likely reaction of sta
keholders. Shareholders could oppose the issuing of new shares, employees and un
ions could oppose outsourcing for fear of losing their jobs, customers could hav
e concerns over a merger with regards to quality and support.

3. Top Management (CEO and Board of Directors) functions – Long term obj
ectives.
Basic functions of management
Management operates through various functions, often classified as planning, org
anizing, leading/directing, and controlling/monitoring.
• Planning: Deciding what needs to happen in the future (today, next week,
next month, next year, over the next 5 years, etc.) and generating plans for ac
tion.
• Organizing: (Implementation) making optimum use of the resources require
d to enable the successful carrying out of plans.
• Staffing: Job Analyzing, recruitment, and hiring individuals for appropr
iate jobs.
• Leading/directing: Determining what needs to be done in a situation and
getting people to do it.
• Controlling/Monitoring, checking progress against plans, which may need
modification based on feedback.
Formation of the business policy
• The mission of the business is its most obvious purpose -- which may be,
for example, to make soap.
• The vision of the business reflects its aspirations and specifies its in
tended direction or future destination.
• The objectives of the business refers to the ends or activity at which a
certain task is aimed.
• The business s policy is a guide that stipulates rules, regulations and
objectives, and may be used in the managers decision-making. It must be flexibl
e and easily interpreted and understood by all employees.
• The business s strategy refers to the coordinated plan of action that it
is going to take, as well as the resources that it will use, to realize its vis
ion and long-term objectives. It is a guideline to managers, stipulating how the
y ought to allocate and utilize the factors of production to the business s adva
ntage. Initially, it could help the managers decide on what type of business the
y want to form.
Where policies and strategies fit into the planning process
• They give mid- and lower-level managers a good idea of the future plans
for each department in an organization.
• A framework is created whereby plans and decisions are made.
• Mid- and lower-level management may add their own plans to the business
s strategic ones.
multi-divisional management hierarchy
The management of a large organization may have three levels:
1. Senior management (or "top management" or "upper management")
2. Middle management
3. Low-level management, such as supervisors or team-leaders
4. Foreman
5. Rank and File
Top-level management
• Require an extensive knowledge of management roles and skills.
• They have to be very aware of external factors such as markets.
• Their decisions are generally of a long-term nature
• Their decisions are made using analytic, directive, conceptual and/or be
havioral/participative processes
• They are responsible for strategic decisions.
• They have to chalk out the plan and see that plan may be effective in th
e future.
• They are executive in nature.
Middle management
• Mid-level managers have a specialized understanding of certain manageria
l tasks.
• They are responsible for carrying out the decisions made by top-level ma
nagement.
Lower management
• This level of management ensures that the decisions and plans taken by t
he other two are carried out.
• Lower-level managers decisions are generally short-term ones.
Foreman / lead hand
• They are people who have direct supervision over the working force in of
fice factory, sales field or other workgroup or areas of activity.
Rank and File
• The responsibilities of the persons belonging to this group are even mor
e restricted and more specific than those of the foreman.
4. corporate Governance.
Ans what is corporate Governance.
A system of structuring, controlling a company with a view to achieve goal to
satisfy stakeholders, and complying with legal & regulatory requirements apart f
rom meeting environmental & local needs

Principles of Corporate Governance

Rights and equitable treatment of shareholders
Interests of other stakeholders
Role and responsibilities of the board
Integrity and ethical behavior
Disclosure and transparency

Mechanisms & controls of Corporate governance

Internal corporate governance controls
Monitoring by the board of directors
Balance of power
Remuneration
External corporate governance controls
Competition
Government regulations
Media pressure
Investing in Corporate Governance
Companies need to invest in good governance
Corporate governance has a direct bearing on business performance and th
ereby ROI
On average, businesses with superior governance practices generate 20 percent gr
eater profits than other companies
A study based on 256 companies conducted at the MIT Sloan School of Mana
gement
Corporate Governance in Organizations
The Motorola Code of Business Conduct sets the standards for Motorola s commitme
nt to uncompromising integrity. Since its original establishment in the 1970s, t
he Code has provided Motorola employees guidance for their business activities,
placing a priority on establishing trust with its stakeholders- MOTOROLA

UNIT II
1 Strategic Business Unit
Strategic Business Unit or SBU is understood as a business unit within the overa
ll corporate identity which is distinguishable from other business because it se
rves a defined external market where management can conduct strategic planning i
n relation to products and markets. The unique small business unit benefits that
a firm aggressively promotes in a consistent manner. When companies become real
ly large, they are best thought of as being composed of a number of businesses (
or SBUs).
In the broader domain of strategic management, the phrase "Strategic Business Un
it" came into use in the 1960s, largely as a result of General Electric s many u
nits.
These organizational entities are large enough and homogeneous enough to exercis
e control over most strategic factors affecting their performance. They are mana
ged as self contained planning units for which discrete business strategies can
be developed. A Strategic Business Unit can encompass an entire company, or can
simply be a smaller part of a company set up to perform a specific task. The SBU
has its own business strategy, objectives and competitors and these will often
be different from those of the parent company. Research conducted in this includ
e the BCG Matrix.
This approach entails the creation of business units to address each market in w
hich the company is operating. The organization of the business unit is determin
ed by the needs of the market.
An SBU is an operating unit or planning focus that groups a distinct set of prod
ucts or services, which are sold to a uniform set of customers, facing a well-de
fined set of competitors. The external (market) dimension of a business is the r
elevant perspective for the proper identification of an SBU. (See Industry infor
mation and Porter five forces analysis.) Therefore, an SBU should have a set of
external customers and not just an internal supplier.[1]
Companies today often use the word “Segment” or “Division” when referring to SBU
’s, or an aggregation of SBU’s that share such commonalities.
2. BCG GROWTH MATRIX
 It is the simplest way to portray a corporation’s portfolio of investmen
ts.
Each of the corporation’s product lines or business units is plotted on
the matrix according to
• The growth rate of the industry
• Its relative market share

Stars
Stars are market leaders
They at the peak of their PLC
Maintain high share of the market
When market rate slows down, stars become cash cows
Cash cows
They bring in far more cash than is needed to maintain their market shar
e.
As these products move along the decline stage of their life cycle, they
are milked for cash that will be invested in new question mark products
Question marks
Also called as problem child or wild cats.
Are new products with the potential for success that need a lot of cash
for development.
If one of these products is to become a star, money must be taken from m
ore mature products and spend on question marks.
Dogs
Those products with low market share that do not have the potential to b
ring in much cash.
Dogs should be either sold off or managed carefully for the small amount
of cash they can generate
Key points
• After the current positions of a company’s product lines or business uni
ts have been ploted, a projection can be made of their future positions, assumin
g there is no change in strategy.
• The goal of any company is to maintain a balanced portfolio
• Always try to harvest mature products in declining industries to support
new ones in the growing industries.
• Dogs should be promptly harvested or liquidated.
• A product with a low share can be very profitable if the product has a n
iche in the market.
• Some firms may also keep a dog because its presence creates an entry bar
rier for potential competitors.
• BCG matrix is popular because it is quantifiable and easy to use.
• It has been criticised because it is too simple.
• IT puts too much emphasis on market share and on being the market leader
.
3. GE Planning Grid
Ans GE developed a matrix with the assistance of McKinsey.
It includes nine cells
It is based on
Long-term industry attractiveness
Business strength and competitive position.
GE industry attractiveness includes market growth rate, industry profita
bility, size and pricing practices among other possible opportunities and threat
s.
Business strength or competitive position includes market share as well
as technological position, profitability and size among other possible strengths
and weaknesses.
 The individual product lines or business units are identified by a lette
r and are plotted as circles on the GE Planning Grid.
The area of each circle is in proportion to the size of the industry in
terms of sales.
The pie slices within the circles depict the market share of each produc
t line or business unit.

The following four steps have to be taken to draw product lines or busin
ess units
Assess overall industry attractiveness for each product line or business
unit on a scale from 1(very unattractive) to 5 ( very attractive).
Assess business strength and competitive position for each product line
on a scale of 1(very weak) to 5 (very strong)
Plot the business unit ‘s current position on the grid.
Plot the firm’s future portfolio. Compare and study whether there is a p
erformance gap between projected and desired portfolios.
The nine-cell GE planning grid is an improvement over the BCG.
It considers more variables than the BCG.
However it is quite complicated and cumbersome.
The numerical estimates of industry attractiveness or business strength is subje
ctive.
Difficult to depict new and developing products.