Unit No.

1.1 Strategic Management - An Introduction

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 firm’s performance. The manager must have a thorough
knowledge and analysis of the general and competitive organizational environment so as to take right
decisions.

Definition:

The term ‘strategic management’ is used to denote a branch of management that is concerned with the
development of strategic vision, setting out objectives, formulating and implementing strategies and
introducing corrective measures for the deviations (if any) to reach the organization’s strategic intent.

Importance:

 It guides the company to move in a specific direction. It defines organization’s goals and fixes
realistic objectives, which are in alignment with the company’s vision.
 It assists the firm in becoming proactive, rather than reactive, to make it analyse the actions of
the competitors and take necessary steps to compete in the market, instead of becoming
spectators.
 It acts as a foundation for all key decisions of the firm.
 It attempts to prepare the organization for future challenges and play the role of pioneer in
exploring opportunities and also helps in identifying ways to reach those opportunities.
 It ensures the long-term survival of the firm while coping with competition and surviving the
dynamic environment.
 It assists in the development of core competencies and competitive advantage, that helps in the
business survival and growth.

1.1.1 Attributes of Strategic Management:

 First, strategic Management is directed toward overall organizational goals and objectives.
 Second, strategic management includes multiple stakeholders in decision making.
 Third, Strategic management requires incorporating both short-term and long-term perspective.
 Fourth, strategic management involves the recognition of trade-offs between effectiveness and
efficiency. Closely related to the third point above, this recognition means being aware of the
need for organizations to strive to act effectively and efficiently.

1.1.3 Strategic Management Process:

Definition: Strategic Management Process

Strategic Management Process is an ongoing process of five steps which defines the way an organization
makes its strategy to achieve its goals.

Steps in Strategic Management Process:

1. Goal Setting:

The vision and goals of the organization are clearly stated. The short-term and long-term goals are
defined, processes to achieve the objectives are identified and current staff is evaluated to choose
capable people to work on the processes. This can be done through proper environmental scanning.

2. Analysis:

Data relevant to achieve the goals of the organization is gathered, potential internal and external factors
that can affect the sustainable growth of the organization are examined and SWOT analysis is also
performed.

3. Strategy Formulation:

Once the analysis is done, the organization moves to the Strategy Formulation stage where the plan to
acquire the required resources is designed, prioritization of the issues facing the business is done and
finally the strategy is formulated accordingly

4. Implementation:

After formulation of the strategy, the employees of the organization are clearly made aware of their
roles and responsibilities. It is ensured that funds would be available all the time. Then the
implementation begins.

5. Strategy Evaluation:

In this process, the strategies being implemented are evaluated regularly to check whether they are on
track and are providing the desired results. In case of deviations, the corrective actions are taken.

As shown in the figure, the five stages are not stand-alone and constantly interact with each other in
order to ensure better management of the business.

1.1.4 Development of Vision and Mission:

Vision Statement:

A vision is a picture of what your organization’s future makeup will be and where you are headed. Vision
provides a clear mental picture of what your organization will look like in 5 to 10 years from now.

A mission statement is a declaration of your organization’s purpose and spotlights the business you are
presently in and the customer/constituent needs you are presently endeavoring to meet.

HOW DO YOU CREATE VISION AND MISSION STATEMENTS:

 LEARN WHAT IS IMPORTANT TO PEOPLE IN YOUR COMMUNITY

 DECIDE WHAT TO ASK
 DECIDE ON THE GENERAL FOCUS OF YOUR ORGANIZATION

DEVELOP YOUR VISION AND MISSION STATEMENTS:

Vision Statements

First of all, remind members of your organization that it often takes several vision statements to fully
capture the dreams of those involved in a community improvement effort. You don't need - or even
want - to have just one "perfect" phrase. Encourage people to suggest all of their ideas, and write them
down - possibly on poster paper at the front of the room, so people can be further inspired by the ideas
of others. As you do this, help everyone keep in mind:

 What you have learned from your discussions with community members
 What your organization has decided will be your focus
 What you learned about vision statements at the beginning of this section
Mission Statements

The process of writing your mission statement is much like that for developing your vision statements.
The same brainstorming process can help you develop possibilities for your mission statement.
Remember, though, that unlike with vision statements, you will want to develop a single mission
statement for your work. After having brainstormed for possible statements, you will want to ask of
each one:

 Does it describe what your organization will do and why it will do it?
 Is it concise (one sentence)?
 Is it outcome oriented?
 Is it inclusive of the goals and people who may become involved in the organization?

1.1.6 Strategy Hierarchy:

The strategy hierarchy is often taught in business and marketing schools today, stating that a strategy
can be formulated at three different levels: corporate level, strategic business unit level (SBU), and
functional (or departmental) level. It is important concept to understand because at these different
levels, different strategic issues are addressed. Therefore, it will give you some guidance about what
sort of strategy decisions are made at different levels.

Hierarchy structure

Because it is framed as a “hierarchy", this implies that the decisions of strategy and are made at the top
(corporate) level and then binding on the lower levels. In many ways, the strategic business unit will be
responsible for implementing key aspects of the corporate strategy, likewise functional areas will be
charged with the responsibility of executing key components of the strategic business unit level strategy.

1. Corporate level strategy:

Corporate level strategy is long-range, action-oriented, integrated and comprehensive plan formulated
by the top management. It is used to ascertain business lines, expansion and growth, takeovers and
mergers, diversification, integration, new areas for investment and divestment and so forth.

2. Business level strategy:

The strategies that relate to a particular business are known as business level strategies. It is developed
by the general managers, who convert mission and vision into concrete strategies. It is like a blueprint of
the entire business.

3. Functional level strategy:

Developed by the first line managers or supervisors, functional level strategy involves decision making at
the operational level concerning particular functional areas like marketing, production, human resource,
research and development, finance and so on.

1.1.7 Strategy Triggering Events:

What, exactly, is a trigger event?

Trigger events are the silver bullets in sales, because they allow you to get in front of the right person at
exactly the right time. There are three types of trigger events: executive changes, new funding, and
product launches. Each trigger signals a high probability that the company will eventually purchase new
goods and services.

A triggering event is a tangible or intangible barrier or occurrence which, once breached or met, causes
another event to occur. Triggering events include job loss, retirement, or death and are typical for many
types of contracts. These triggers help to prevent, or ensure, that in the case of a catastrophic change,
the terms of an original contract may also change.
1.1.8 Strategic Management in Different Context:

Strategic management in Manufacturing Organization:

Strategic management in the manufacturing industry requires planners to focus on a wide range of
departments and company operations. The workforce, the technology, risks and environmental
concerns all must be addressed in any management plans. Supply chain management, marketing and
sales executives also must be included in the overall scheme of the company’s final strategic plans.

 Plan Workforce Duties

 Fit Technology in Strategic Plans
 Lay out All the Risks
 Include Sustainable Processes

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Unit No.2

2.1 Importance of Understanding the Environment:

It is important to have sound understanding about the environments companies are facing as the
external environment has an overwhelming impact on management uncertainly.

2.2 The General Environment:

General Environment and task Environment

The general environment is the larger environment within which the task environment is embedded. It
includes political and legal forces, macroeconomic forces, demographic forces, socio-cultural forces,
technological forces, and international forces. Elements in the general environment impact the
organization through the medium of the task environment.

What is the General Environment?

The general environment helps shape the task environment, thus determining the magnitude of the
opportunities and threats confronting the organization. The general environment is remote and less
easy to shape than the task environment, but it is no less important.

2.3 The macro Environmental Analysis:

What is Macro Environment Analysis?

The macro environment affects every business. It consists of many factors that, if left unchecked, can
destroy a business.

To reduce the effects of negative factors, you must first understand what macro environment analysis is
and how to do it yourself.

2.3.1 PESTEL Analysis:

Political:

They consist of legislative bills, tax policies, health and safety laws, and government stability. The
average businessman can’t lower taxes or introduce new legislation that’ll affect the entire economy.
They must instead understand these factors on a grand level and ensure their business aligns to laws,
regulations, and policies.

Economic Trends:

The macro economic environment analysis will identify trends such as changes in personal disposable
income, interest rates, inflation, exchange rates and unemployment rates.
Social/Cultural Trends:

The macro social/cultural environment analysis will identify trends in societies beliefs, behaviours,
values and norms. Such as the number of part time workers, attitudes towards global warming, make up
of the family structure as well as trends in population growth at relevant ages for your industry. The
population may also shift from rural to cities or visa versa.

Technological Trends:

The macro technological environment analysis will identify changes in the application of technology and
uptake of technology. A current example is a shift towards online transactions and in some areas a shift
away from online transactions.

Legal Trends:

The macro legal environment analysis is closely linked to the political environment (politicians tend to
make the laws), but also includes trends in court decisions such as liability compensation. Most
organisations need to be constantly aware of changes in labour laws.

Environmental:

The macro environment analysis will identify how changes in the environment will impact on your
industry.

2.3.2 Structural Drivers for Change:

In economics, structural change is a shift or change in the basic ways a market or economy functions or
operates.

Such change can be caused by such factors as economic development, global shifts in capital and labor,
changes in resource availability due to war or natural disaster or discovery or depletion of natural
resources, or a change in political system. A current driver of structural change in the world economy is
“globalization” and “Innovation”.

2.4 Competitive Environment:

Definition

A competitive environment is the dynamic external system in which a business competes and functions.
The more sellers of a similar product or service, the more competitive the environment in which you
compete. Look at fast food restaurants - there are so many to choose from; the competition is high.
However, if you look at airlines servicing Hawaii, very few actually fly to the islands.

Direct competitors are businesses that are selling the same type of product or service as you. For
example, McDonalds is a direct competitor with Burger King. Indirect competitors are businesses that
still compete even though they sell a different service or product. The products or services offered by
indirect competitors tend to be those that can be substituted for one another. Again, considering travel,
you have the option to travel by plane, train, or car. Therefore, airlines are also competing with train
lines and buses (assuming the travel does not go overseas).

Porter’s five competitive forces:

One method of competitive analysis is Porter's concept of five competitive forces. According to Porter
the company's position in the market and the attractiveness of the market is determined by five factors:

 Threat of new competitors

 Bargaining power of suppliers
 Bargaining power of buyers
 Availability of substitutes
 The intensity of competition in the industry
2.8 Value Chain Analysis:

Value chain analysis (VCA) is a process where a firm identifies its primary and support activities that add
value to its final product and then analyze these activities to reduce costs or increase differentiation.

Value chain represents the internal activities a firm engages in when transforming inputs into outputs.

Understanding the tool

Value chain analysis is a strategy tool used to analyze internal firm activities. Its goal is to recognize,
which activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the
firm and which ones could be improved to provide competitive advantage. In other words, by looking
into internal activities, the analysis reveals where a firm’s competitive advantages or disadvantages are.

M. Porter’s Value Chain Model:

M. Porter introduced the generic value chain model in 1985. Value chain represents all the internal
activities a firm engages in to produce goods and services. VC is formed of primary activities that add
value to the final product directly and support activities that add value indirectly.

In his book, Porter splits a business's activities into two categories: primary and support.

Primary activities include the following:

 Inbound logistics are the receiving, storing and distributing of raw materials used in the
production process.
 Operations is the stage at which the raw materials are turned into the final product.
 Outbound logistics are the distribution of the final product to consumers.
 Marketing and sales involve advertising, promotions, sales-force organization, distribution
channels, pricing and managing the final product to ensure it is targeted to the appropriate
consumer groups.
 Service refers to the activities needed to maintain the product's performance after it has been
produced, including installation, training, maintenance, repair, warranty and after-sale services.

The support activities help the primary functions and comprise the following:

 Procurement is how the raw materials for the product are obtained.
 Technology development can be used in the research and development stage, in how new
products are developed and designed, and in process automation.
 Human resource management includes the activities involved in hiring and retaining the proper
employees to help design, build and market the product.
 Firm infrastructure refers to an organization's structure and its management, planning,
accounting, finance and quality-control mechanisms.

Conducting the analysis

There are two approaches to the value chain analysis: cost and differentiation advantage.

Cost advantage:

After identifying the primary and support activities, businesses should identify the cost drivers for each
activity. For a more labor-intensive activity, cost drivers could include how fast work is completed, work
hours, wage rates, etc. Businesses should then identify links between activities, knowing that if costs are
reduced in one area, they can be reduced in another. Businesses can then identify opportunities to
reduce costs.

Differentiation advantage:

Identifying the activities that create the most value to customers is the priority. These can include using
relative marketing strategies, knowing about products and systems, answering phones faster, and
meeting customer expectations. The next step is evaluating these strategies to improve the value.
Focusing on customer service, increasing options to customize products or services, offering incentives,
and adding product features are some of the ways to improve activity value. Lastly, businesses should
identify differentiation that can be maintained and adds the most value.

2.9 SWOT Anlaysis:

SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a
company's competitive position and to develop strategic planning. SWOT analysis assesses internal and
external factors, as well as current and future potential.

What Is Strategic Gap?

A strategy gap refers to the gap between the current performance of an organisation and its desired
performance as expressed in its mission, objectives, goals and the strategy for achieving them.

Often unseen, the strategy gap is a threat to the future performance—and even survival—of an
organisation and is guaranteed to impact upon the efficiency and effectiveness of senior executives and
their management teams. The strategy gap is considered to be real and exists within most organisations.

What Is Strategic Gap Analysis?

Strategic gap analysis is a business management technique that requires an evaluation of the difference
between a business endeavor's best possible outcome and the actual outcome. It includes
recommendations on steps that can be taken to close the gap.

Strategic gap analysis aims to determine what specific steps a company can take to achieve a particular
goal. A range of factors including the time frame, management performance, and budget constraints are
looked at critically in order to identify shortcomings.

The analysis should be followed by an implementation plan.

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Unit No.3

3.1 What Is Strategic Capability?

You can have the best business strategy in the world, but without the ability to put that strategy into
action, you won't succeed. You have to know whether you possess the capability to do what you want to
do. To determine whether you have that strategic capability, you can conduct a strategic analysis. While
this analysis includes considerations like identifying customer needs and setting goals, part of it focuses
on your business's capabilities.

Manufacturing, Product Purchasing or Service Delivery

When you set a strategy, it can involve getting your products or services to more customers, or creating
a better price. You must evaluate whether you have the manufacturing ability to create those products
at a price you can afford. If you do not manufacture, you must analyze your cash reserves or projected
income to see whether you will have the money to purchase inventory. For a service business, you need
to evaluate equipment and personnel needed to deliver your service in the way your strategy calls for.

Supply Chain

Your capability to execute a strategy might depend on suppliers. You need a strong supply chain that
includes providers of raw materials or products for resale, shipping companies to deliver those goods,
warehouse processing and distribution within your company to ensure that you receive what you need
and get it to the people who will use it. Without this capability, a new strategy can get bogged down in
flawed logistics.
Time to Market

Your ability to get your products or services to the market in a timely manner can help you successfully
implement your strategy. Conversely, if you can't deliver your offerings on time, the competition might
beat you to it or customers might lose faith in your ability to make good on your promises.

Research and Development

Your strategy can depend on your ability to develop new products. This means you must have the
capacity to conduct research and development. Otherwise, you can't come up with the unique offerings
your strategy calls for.

What is Capability Analysis:

Capability analysis is a set of calculations used to assess whether a system is statistically able to meet a
set of specifications or requirements. To complete the calculations, a set of data is required, usually
generated by a control chart; however, data can be collected specifically for this purpose.

Specifications or requirements are the numerical values within which the system is expected to operate,
that is, the minimum and maximum acceptable values. Occasionally there is only one limit, a maximum
or minimum. Customers, engineers, or managers usually set specifications. Specifications are numerical
requirements, goals, aims, or standards.

3.3 Human and Social Capital:

"Social capital" and "Human capital" are terms representing complexes of ideas, attitudes, and
assumptions about human beings and about economics. In a nutshell, Social Capital focuses on the
Social and the Human, while Human Capital emphasizes the Capital.

The main difference is one of perspective:

 Social capital is a term from Sociology, and focuses on the complex and often intangible values
associated with human social relationships, and
 Human capital is a term from Economics, and focuses on the nature of human labor as a
commodity and resource within the transactions of an economic system.

3.5 Critical Success Factor:

Critical success factor (CSF) is a management term for an element that is necessary for an organization
or project to achieve its mission. Alternative terms are key result area (KRA) and key success factor
(KSF).

Critical success factors (CSFs) define key areas of performance that are essential for an organization to
accomplish its mission, whether that mission is to implement new software, complete a project or
define an organizational mission statement. When correctly targeted, CSFs allow stakeholders to track
the success of the mission. They vary based on the type of project, industry, product and overall
business model or strategy under which the project operates.

Types of Critical Success Factors – CSF

There are four basic types of Critical Success Factors CSF’s

 Industry Critical Success Factors (CSF’s) resulting from specific industry characteristics;
 Strategy Critical Success Factors (CSF’s) resulting from the chosen competitive strategy of the
business;
 Environmental Critical Success Factors (CSF’s) resulting from economic or technological
changes; and
 Temporal Critical Success Factors (CSF’s) resulting from internal organizational needs and
changes.
Developing Key Success Indicators (CSIs)

After careful identification of CSFs, the manager or professional works to identify measures that
translate actions into meaningful measures or proxies of the CSFs. If you reference the CSI
examples above, you can envision the indicators the marathon runner must monitor, including
training time and effectiveness, dietary management and sleep.

Effective managers measure and monitor and strive to correlate their measures with their CSFs over
time. The process of developing Key Success Indicators or CSIs is an ongoing, iterative process
where frequent adjustments and refinements are required based on actual experience.

Available Resources:

Resources assigned to an incident, checked in, and available for a mission assignment, normally
located in a Staging Area.

Threshold Resources:

Unique Resources:

3.6 Competencies and Core Competencies:

Competence is the ability to perform at a competitive level in a particular industry, market,

profession, process, practice or activity.

Core competency is an ability that is important to your competitive advantage as a firm or

professional. The term is used to differentiate between things that you're good at and things that you
need to be good at in order to thrive in a particular industry or profession.

Competence vs Core Competency

Competence is any area in which a firm or individual performs at a competitive level. A firm may
have a competence in logistics or a professional may have a competence at coding.

A core competency is any area that is essential to success in an industry or profession. For a
software developer, public speaking is considered a competence and coding is considered a core
competency. A software developer may thrive in their profession even if they are terrible at public
speaking. It is unlikely they will thrive as a software developer if they are terrible at coding.

3.7 Cost Efficiency:

The goal of every organization is to minimize the expenses incurred in advertising campaign
developed in order to increase the awareness & do publicity of their product. The advertising
campaign is aimed at maximizing the number of exposures at minimum cost to all the target
audience. It is desirable for all firms to maximize their cost efficiency in order to achieve greatest
product exposure for the least amount of money invested.

The firm can retain competitiveness by regular cost optimization & ensure continuous growth &
innovation. Continuous control implementation is also a key success factor in projects for increasing
the overall efficiency.

5 Sources of Cost Efficiency:

1. Economies of scale – these are traditionally an important source of cost advantage, typically
within manufacturing organisations. In other industries similar economies of scale can be found in
distribution or marketing costs. You should focus then on trying to secure your competition
advantage in areas that you are good at which maintain scale advantages.

2. Supply costs influence an organisations overall cost position. Location may influence your
supply costs which is why many organisations which rely on the supply of goods or people locate
themselves close to these resources. It is important then to focus on what goods or people your
business will require now and in the future and seek to reduce the costs where possible.

3. Product / process design also influences the cost position. Efficiency gains in production
processes have been achieved by many businesses over a number of years. Equally important
though are improvements in efficiency for service businesses. Improvements in service processes
can have dramatic effects on the cost efficiencies of a service business, particularly in the efficiency
of your most valuable resource – your staff.

4. Experience can be a key source of cost advantage. In any segment of an industry, price levels
tend to be very similar for similar products. Therefore, what makes one company more profitable
than the next must be the next level of costs. Any organisation undertaking any activity learns to do
it more efficiently over time.

5.Value proposition is the often forgotten element of cost efficiency. The issue here is
understanding really what your customer value and to provide them with just that. Providing them
with added extras which they do not value simply creates cost inefficiencies for the organisation
without adding any real benefits. One important caveat to this though is that what customers value
will vary over time and will vary dependent upon the customer themselves.

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Unit No.4

4.1 Strategy Lenses:

Strategic lenses are a concept of strategic management. They are the four angles from which strategy
can be viewed and implemented on a corporate level. Overall, strategy is likely to come from a variety of
sources and a combination of the above techniques. Johnson and Scholes talk about 'strategic lenses',
which are three ways of viewing what can be meant by the term 'strategy.

Strategy as design:

This is the viewpoint that strategy development is a logical process that an organization has to follow.
This process includes analysis of external environment (macro and micro), internal environment
(culture), competencies, resources, capabilities, clear direction, stakeholders and structure of the
organization. Strategy as design leads to rational approach for strategy formulation usually formulated
by top level management.

Strategy as experience:

This is the viewpoint that strategy development is based on experiences gained by organization in past.
Organizations or firms have practiced a lot of strategies and these organizations can assess what type of
strategy has provided benefit to the organization. Experience of favorable and unfavorable strategies
will definitely ultimately increase knowledge base of the organization. And on the basis of its knowledge
base (experience) organization may decide its strategy for its future. This viewpoint actually reflects the
emergent approach we have discussed earlier.

Strategy as ideas:

This is the view point that strategy development is based on new and innovative ideas that can be
provided from any individual not only or necessary the top level management in the organization.
Strategy as ideas mean strategy should have a unique idea which is not currently used by any of the
competitor. Apple usually try to make such strategies that contain unique ideas.

4.2 Strategy Development:

Strategy development, also known as strategic planning, is fundamental to creating and running a
business. Simply put, it’s a game plan that sets specific goals and objectives but like a game plan, it is
capable of being changed in response to shifting market dynamics.

Strategy development Process:

Strategic Leadership:

Leadership Identifies and Removes Roadblocks to Creating Value in the Organization.

Strategy Design:

It requires investment in capabilities. Internal organizations may need to be formed, partnerships

developed, policies written, and technology updated.

4.4 Methods of Strategy Development:

Internal Development Mergers/Acquisitions Alliances

Conditions for Internal Development:

Availability of resources/competences Technically complex/sophisticated products Strategically

important markets Financial situation Organization culture Nature of competition Macro
Environment/country culture

Conditions for M/A:

Lack of resources/competences Speed Strong position of incumbents

Deregulation/rules/government incentives/ Strategic motives (extension, consolidation, capabilities)
Financial motives (financial efficiency, tax efficiency, asset stripping) Managerial motives (Personal
ambition, bandwagon effect)

Conditions/Motives for Strategic Alliances:

Scale Alliances Access Alliances Complementary Alliances (complementary core capabilities)

Collusive Alliances (cartels).

Types of Alliances

Permanent Joint Venture Consortium Contractual Subcontracting Licensing Franchising

Temporary Networks Opportunistic Alliances.

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Unit No.5

5.1 Corporate level Strategy:

We can simply say that corporate level strategies are concerned with questions about what business to
compete in. Corporate Strategy involves the careful analysis of the selection of businesses the company
can successful compete in. Corporate level strategies affect the entire organization and are considered
delicate in the strategic planning process.

Types of corporate Strategy:

The three main types of corporate strategies are Growth strategies, stability strategies and
retrenchment.
Growth Strategy

Like the name implies, corporate strategies are those corporate level strategies designed to achieve
growth in key metrics such as sales / revenue, total assets, profits etc. A growth strategy could be
implemented by expanding operations both globally and locally; this is a growth strategy based on
internal factors which can be achieved through internal economies of scale. Aside from the illustration
of internal growth strategies above, an organization can also grow externally through mergers,
acquisitions and strategic alliances.

The two basic growth strategies are concentration strategies and diversification strategies.

Concentration strategy:

This is mostly utilized for company’s producing product lines with real growth potentials. The company
concentrates more resources on the product line to increase its participation in the value chain of the
product. The two main types of concentration strategies are vertical growth strategy and horizontal
growth strategy.

Vertical growth strategy:

As mentioned above, by utilizing this strategy, the company participates in the value chain of the
product by either taking up the job of the supplier or distributor. If the company assumes the function
or the role previously taken up by a supplier, we call it backward integration, while it is called forward
integration if a company assumes the function previously provided by a distributor.

Horizontal growth strategy:

Horizontal growth is achieved by expanding operations into other geographical locations or by

expanding the range of products or services offered in the existing market. Horizontal growth results
into horizontal integration which can be defined as the degree in which a company increases production
of goods or services at the same point on an industry’s value chain.

Diversification Strategy

Companies think about diversification strategies when growth has reached its peak and there is no
opportunity for further growth in the original business of the company. What then is this diversification
strategy we speak of? A company is diversified when it is in two or more lines of business operating in
distinct and diverse market environments.

Two basic types of diversification strategies are concentric and conglomerate.

5.2 Concentric Diversification:

This is also called related diversification. It involves the diversification of a company into a related
industry. This strategy is particularly useful to companies in leadership position as the firm attempts to
secure strategic fit in a new industry where the firm’s product knowledge, manufacturing capability and
marketing skills it used so effectively in the original industry can be used just as well in the new industry
it is diversifying into.

5.3 Conglomerate Diversification:

This is also called unrelated diversification; it involves the diversification of a company into an industry
unrelated to its current industry. This type of diversification strategy is often utilized by companies in
saturated industries believed to be unattractive, and without the knowledge or skill it could transfer to
related products or services in other industries.

Stability Strategy

Stability strategies are mostly utilized by successful organizations operating in a reasonably predictable
environment. It involves maintaining the current strategy that brought it success with little or no
change. There are three basic types of stability strategies, they are:
No change Strategy:

When a company adopts this strategy, it indicates that the company is very much happy with the
current operations, and would like to continue with the present strategy. This strategy is utilized by
companies who are “comfortable” with their competitive position in its industry, and sees little or no
growth opportunities within the said industry.

Profit Strategy:

In using this strategy, the company tries to sustain its profitability through artificial means which may
include aggressive cost cutting and raising sales prices, selling of investments or assets, and removing
non-core businesses.

Pause/ Proceed with caution Strategy:

This strategy is used to test the waters before continuing with a full fledged strategy. It could be an
intermediate strategy before proceeding with a growth strategy or retrenchment strategy. The pause or
proceed with caution strategy is seen as a temporary strategy to be used until the environment
becomes more hospitable or consolidate resources after prolonged rapid growth.

Retrenchment Strategies

Retrenchment strategies are pursued when a company’s product lines are performing poorly as a result
of finding itself in a weak competitive position or a general decline in industry or markets. The strategy
seeks to improve the performance of the company by eliminating the weakness pulling the company
back. Examples of retrenchment strategies are:

Turnaround Strategy:

This strategy is adopted for the purpose of reversing the process of decline. This strategy emphasizes
operational efficiency and is most appropriate at the beginning of the decline rather than the critical
stage of the decline.

Divestment Strategy:

Divestment also known as divestiture is the selling off of assets for the different goals a company seeks
to attain. This strategy involves the cutting off of loss making units, divisions or Strategic Business Units
(“SBU”).

Liquidation Strategy:

Liquidation strategy is considered a last resort strategy, it is adopted by company’s when all their efforts
to bringing the company to profitability is futile. The company chooses to abandon all activities totally,
sell off its assets and see to the final close and winding up of the business.

5.6 BCG Matrix:

Definition:

BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s brand
portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of market
growth (vertical axis) axis. BCG matrix is a framework created by Boston Consulting Group to evaluate
the strategic position of the business brand portfolio and its potential. It classifies business portfolio into
four categories based on industry attractiveness (growth rate of that industry) and competitive position
(relative market share).

Growth-Share Matrix is a business tool, which uses relative market share and industry growth rate
factors to evaluate the potential of business brand portfolio and suggest further investment strategies.
Relative Market Share:

One of the dimensions used to evaluate business portfolio is relative market share. Higher corporate’s
market share results in higher cash returns. This is because a firm that produces more, benefits from
higher economies of scale and experience curve, which results in higher profits. Nonetheless, it is worth
to note that some firms may experience the same benefits with lower production outputs and lower
market share.

Market Growth Rate:

High market growth rate means higher earnings and sometimes profits but it also consumes lots of cash,
which is used as investment to stimulate further growth. Therefore, business units that operate in rapid
growth industries are cash users and are worth investing in only when they are expected to grow or
maintain market share in the future.

There are four quadrants into which firms brands are classified:

Dogs:

Dogs hold low market share compared to competitors and operate in a slowly growing market. In
general, they are not worth investing in because they generate low or negative cash returns. But this is
not always the truth. Some dogs may be profitable for long period of time, they may provide synergies
for other brands or SBUs or simple act as a defense to counter competitors moves.

Cash Cows:

Cash cows are the most profitable brands and should be “milked” to provide as much cash as possible.
The cash gained from “cows” should be invested into stars to support their further growth.

Stars:

Stars operate in high growth industries and maintain high market share. Stars are both cash generators
and cash users. They are the primary units in which the company should invest its money, because stars
are expected to become cash cows and generate positive cash flows. Yet, not all stars become cash
flows. This is especially true in rapidly changing industries, where new innovative products can soon be
outcompeted by new technological advancements, so a star instead of becoming a cash cow, becomes a
dog.

Question marks:

Question marks are the brands that require much closer consideration. They hold low market share in
fast growing markets consuming large amount of cash and incurring losses. It has potential to gain
market share and become a star, which would later become cash cow. Question marks do not always
succeed and even after large amount of investments they struggle to gain market share and eventually
become dogs.

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Unit No.06

6.1 Business Level Strategy:

An organization's core competencies should be focused on satisfying customer needs or preferences in

order to achieve above average returns. This is done through Business-level strategies. Business level
strategies detail actions taken to provide value to customers and gain a competitive advantage by
exploiting core competencies in specific, individual product or service markets. Business-level strategy is
concerned with a firm's position in an industry, relative to competitors and to the five forces of
competition.

Customers are the foundation or essence of a organization's business-level strategies. Who will be
served, what needs have to be met, and how those needs will be satisfied are determined by the senior
management.
Types:

1. Cost Leadership –

Organizations compete for a wide customer based on price. Price is based on internal efficiency in order
to have a margin that will sustain above average returns and cost to the customer so that customers will
purchase your product/service. Works well when product/service is standardized, can have generic
goods that are acceptable to many customers, and can offer the lowest price. Continuous efforts to
lower costs relative to competitors is necessary in order to successfully be a cost leader.

2. Differentiation –

Value is provided to customers through unique features and characteristics of an organization's

products rather than by the lowest price. This is done through high quality, features, high customer
service, rapid product innovation, advanced technological features, image management, etc. (Some
companies that follow this strategy: Rolex, Intel, Ralph Lauren)

Create Value by:

 Lowering Buyers' Costs – Higher quality means less breakdowns, quicker response to problems.
 Raising Buyers' Performance – Buyer may improve performance, have higher level of enjoyment.
 Sustainability – Creating barriers by perceptions of uniqueness and reputation, creating high
switching costs through differentiation and uniqueness.

3. Focused Low Cost-

Organizations not only compete on price, but also select a small segment of the market to provide goods
and services to. For example a company that sells only to the U.S. government.

4. Focused Differentiation –

Organizations not only compete based on differentiation, but also select a small segment of the market
to provide goods and services.

Focused Strategies - Strategies that seek to serve the needs of a particular customer segment (e.g.,
federal gov't).

Companies that use focused strategies may be able serve the smaller segment (e.g. business travelers)
better than competitors who have a wider base of customers. This is especially true when special needs
make it difficult for industry-wide competitors to serve the needs of this group of customers. By serving
a segment that was previously poorly segmented an organization has unique capability to serve niche.

5. Using an Integrated Low-Cost/Differentiation Strategy

This new strategy may become more popular as global competition increases. Firms that use this
strategy may see improvement in their ability to:

 Adaptability to environmental changes.

 Learn new skills and technologies
 More effectively leverage core competencies across business units and products lines which
should enable the firm to produce produces with differentiated features at lower costs.

Thus the customer realizes value based both on product features and a low price. Southwest airlines is
one example of a company that does uses this strategy.

However, organizations that choose this strategy must be careful not to: becoming stuck in the middle
i.e., not being able to manage successfully the five competitive forces and not achieve strategic
competitiveness. Must be capable of consistently reducing costs while adding differentiated features.
Functional Level Strategy

Definition: Functional Level Strategy can be defined as the day to day strategy which is formulated to
assist in the execution of corporate and business level strategies. These strategies are framed as per the
guidelines given by the top level management.

Functional Level Strategy is concerned with operational level decision making, called tactical decisions,
for various functional areas such as production, marketing, research and development, finance,
personnel and so forth.

Functional Areas of Business

There are several functional areas of business which require strategic decision making, discussed as
under:

1. Marketing Strategy:

Marketing involves all the activities concerned with the identification of customer needs and making
efforts to satisfy those needs with the product and services they require, in return for consideration. The
most important part of marketing strategy is the marketing mix, which covers all the steps a firm can
take to increase the demand for its product. It includes product, price, place, promotion, people, process
and physical evidence.

2. Financial Strategy:

All the areas of financial management, i.e. planning, acquiring, utilizing and controlling the financial
resources of the company are covered under financial strategy. This includes raising capital, creating
budgets, sources and application of funds, investments to be made, assets to be acquired, working
capital management, dividend payment, calculating net worth of the business and so forth.

3. Human Resource Strategy:

Human resource strategy covers how an organization works for the development of employees and
provides them with the opportunities and working conditions so that they will contribute to the
organization as well. This also means to select the best employee for performing a particular task or job.

4. Production Strategy:

A firm’s production strategy focuses on the overall manufacturing system, operational planning and
control, logistics and supply chain management. The primary objective of production strategy is to
enhance the quality, increase the quantity and reduce the overall cost of production.

5. Research and Development Strategy:

The research and development strategy focuses on innovating and developing new products and
improving the old one, so as to implement an effective strategy and lead the market.

6.4 What Is Competitive Advantage?

Competitive advantages are conditions that allow a company or country to produce a good or service of
equal value at a lower price or in a more desirable fashion. These conditions allow the productive entity
to generate more sales or superior margins compared to its market rivals. Competitive advantages are
attributed to a variety of factors including cost structure, branding, the quality of product offerings, the
distribution network, intellectual property, and customer service.

Sustainable Competitive Advantages

Sustainable competitive advantages are company assets, attributes, or abilities that are difficult to
duplicate or exceed; and provide a superior or favorable long term position over competitors.

Types:

 Low Cost Provider/ Low pricing

  Market or Pricing Power
 Powerful Brands

6.7 What Is Game Theory?

Game theory is a theoretical framework for conceiving social situations among competing players. In
some respects, game theory is the science of strategy, or at least the optimal decision-making of
independent and competing actors in a strategic setting. The key pioneers of game theory were
mathematicians John von Neumann and John Nash, as well as economist Oskar Morgenstern.

The Basics of Game Theory

The focus of game theory is the game, which serves as a model of an interactive situation among
rational players. The key to game theory is that one player's payoff is contingent on the strategy
implemented by the other player. The game identifies the players' identities, preferences, and available
strategies and how these strategies affect the outcome. Depending on the model, various other
requirements or assumptions may be necessary.

Game Theory Definitions

Any time we have a situation with two or more players that involves known payouts or quantifiable
consequences, we can use game theory to help determine the most likely outcomes. Let's start out by
defining a few terms commonly used in the study of game theory:

Game: Any set of circumstances that has a result dependent on the actions of two or more decision-
makers (players)

Players: A strategic decision-maker within the context of the game

Strategy: A complete plan of action a player will take given the set of circumstances that might arise
within the game

Payoff: The payout a player receives from arriving at a particular outcome (The payout can be in any
quantifiable form, from dollars to utility.)

Information set: The information available at a given point in the game (The term information set is
most usually applied when the game has a sequential component.)

Equilibrium: The point in a game where both players have made their decisions and an outcome is
reached

Types of Game Theory:

Cooperative Game Theory:

Cooperative game theory deals with how coalitions, or cooperative groups, interact when only the
payoffs are known. It is a game between coalitions of players rather than between individuals, and it
questions how groups form and how they allocate the payoff among players.

Non-cooperative Game Theory:

Non-cooperative game theory deals with how rational economic agents deal with each other to achieve
their own goals. The most common non-cooperative game is the strategic game, in which only the
available strategies and the outcomes that result from a combination of choices are listed. A simplistic
example of a real-world non-cooperative game is Rock-Paper-Scissors.

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 Unit No.7

7.1 What Is an Organizational Structure?

An organizational structure is a system that outlines how certain activities are directed in order to
achieve the goals of an organization. These activities can include rules, roles, and responsibilities.

The organizational structure also determines how information flows between levels within the
company. For example, in a centralized structure, decisions flow from the top down, while in a
decentralized structure, decision-making power is distributed among various levels of the organization.

7.2 Importance of Organizational Structure in Implementing Strategies:

Strategies do not take place against a characterless background but must take account of the features of
the organization in which they will be implemented. Organizational structures determine what actions
are feasible and most optimal. The importance of organizational structures in the implementation of a
strategy is hard to overemphasize. Good strategy involves taking account of where a company finds
itself in terms of the external market and its internal organizational structure. Strategy and
implementation must cohere.

Centralization

Some organizations have a more centralized structure already in place before a strategy has been
implemented. When this is the case, it makes implementing certain strategies more feasible. Change is
always difficult to implement as a part of strategy; the fewer people involved in decision-making, the
easier it is to gain consensus.

Innate Advantages

The best strategies often seek to take advantage of the innate advantages that an organization already
possesses. Most organizations have certain departments that are particularly effective and certain tasks
that it is already adept at doing. Strategies of this sort seek to rearrange organizational structures so as
to better benefit from innate advantages.

Consensus

Organizational structures are often important in gaining consensus for a strategy. If all the parts of an
organization aren't onboard with a given strategy, it will stand less of a chance of succeeding. The
structure of an organization will have much to do with gaining consensus because it will determine who
has to be appeased in management and how power is aligned.

4.3 Elements of Organizational Structure:

Departmentalization

Departmentalization refers to how the organizational structure groups the company's functions, offices
and teams. Those individual groups are typically referred to as departments. Departments are usually
sorted on the basis of the kinds of tasks the workers in each department perform, but this is not the only
way to create a company’s departmental breakdown.

Chain of Command

Most organizations, from businesses to nonprofits to the military, utilize a chain of command. This helps
eliminate inefficiencies by having each employee report to a single manager, instead of to several
bosses. In the corporate context, this type of chain of command is reflected in the organizational
structure and affects job descriptions as well as office hierarchies.

Span of Control

An organization’s span of control defines how many employees each manager is responsible for within
the company. There is no single type of span of control that’s ideal for all companies or even for all
businesses in a specific industry. The optimal span will depend on a number of factors, including the size
of the workforce, how the company is divided into departments and even the company’s specific
business goals and strategies.

Centralization and Decentralization:

Formalization:

Finally, organizational structures implement some degree of formalization. This element outlines
interorganizational relationships. Formalization is the element that determines the company’s
procedures, rules and guidelines as adopted by management.

7.5 Types of Organizational Structures

Four types of common organizational structures are implemented in the real world.

Functional Structure:

This is also referred to as a bureaucratic organizational structure and breaks up a company based on the
specialization of its workforce. Most small-to-medium sized businesses implement a functional
structure. Dividing the firm into departments consisting of marketing, sales, and operations is the act of
using a bureaucratic organizational structure.

Divisional or Multidivisional Structure:

A company that uses this method structures its leadership team based on the products, projects, or
subsidiaries they operate. A good example of this structure is Johnson & Johnson.

Flatarchy Structure:

As the name alludes, it flattens the hierarchy and chain of command and gives its employees a lot of
autonomy. Companies that use this type of structure have a high speed of implementation.

Matrix Structure:

It is also the most confusing and the least used. This structure matrixes employees across different
superiors, divisions, or departments. An employee working for a matrixed company, for example, may
have duties in both sales and customer service.

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Unit No.9

9.3 Strategy Evaluation process:

Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and
effectiveness of the comprehensive plans in achieving the desired results. The managers can also assess
the appropriateness of the current strategy in todays dynamic world with socio-economic, political and
technological innovations. Strategic Evaluation is the final phase of strategic management.

The process of Strategy Evaluation consists of following steps:

 Fixing benchmark of performance

 Measurement of performance
 Analyzing Variance
 Taking Corrective Action

9.4 Strategy Evaluation Criteria:

Measuring the effectiveness of the organizational strategy, it's extremely important to conduct a SWOT
analysis to figure out the strengths, weaknesses, opportunities and threats (both internal and external)
of the entity in question. This may require to take certain precautionary measures or even to change the
entire strategy.
1. Suitability

Suitability deals with the overall rationale of the strategy. The key point to consider is whether the
strategy would address the key strategic issues underlined by the organisation's strategic position.

2. Feasibility

Feasibility is concerned with the resources required to implement the strategy are available, can be
developed or obtained. Resources include funding, people, time and information.

3. Acceptability

Acceptability is concerned with the expectations of the identified stakeholders (mainly shareholders,
employees and customers) with the expected performance outcomes, which can be return, risk and
stakeholder reactions.