CONCEPT OF STRETCH,LEVERAGE

& FIT
Strategic Decisions: Characteristics
• Strategy is a search for fit with the business
environment
• Strategy can be seen as creating opportunities
by building on an organization’s resources and
competences
 Concept of Strategic Fit
• Strategic fit is the degree to which an organization is matching
its resources and competences with the needs of the external
environment
• It is an attempt to identify the opportunities in the
environment in which the organization works and then
tailoring the strategy of the organization to capitalize on these
• However, the strategic intent (or vision) of the organization
may not be limited to the extent of the external environment
or the available opportunities.
 A small organization shall always remain small if it only tries to
match its resources to the available external environment
 Concept of Strategic Stretch
• Strategic Stretch is the process of innovation and
development involved in finding new opportunities
and creating a competitive advantage from an
organization’s resources and competences
• The difference between the strategic intent and the
available resources is called strategic stretch
Google could beat Microsoft in search and categorization
of networked information
• The key to strategic stretch is leveraging resources
 Leveraging Resources
• Resources can be leveraged, both financial
and non financial, in five basic ways:
Concentrating them strategically
Accumulating them efficiently
Complementing one resource with another
Conserving them
Recovering them from the market place in the
shortest possible time
Environment Appraisal: Concept and
Environmental Sector; PEST Analysis
 Environmental Appraisal
• The environment of any organization is “the
sum of all conditions, events and influences
that surround and affect it”
• It is therefore crucial for any organization to
understand the environmental influences on
its business.
• Internal and External
 Characteristics of Environment.
• It is complex – No. of factors, events, conditions.

• It is dynamic – Constantly changing.

• It is multi-faceted – Perception of observer –

Different as per different observer.

• It has a far-reaching impact – Affect directly and

Indirectly.
 PEST FACTORS

POLITICAL TECHNOLOGICAL

ECONOMIC SOCIAL
 PESTLE MATRIX
POLITICAL
CURRENT/FUTURE LEGISLATION
REGULATORY BODIES
GOVT. POLICIES
GOVT. TERM & CHANGE
SOCIAL
LIFESTYLE TRENDS
DEMOGAPHICS
COMPANY ATTITUDES & OPINIONS
BRAND,COMPANY ,TECHNOLOGYIMAGE
CONSUMER BUYING PATTERNS
ETHNIC/RELIGIOUS FACTORS
LEGAL
INTERNATIONAL LAW
EMPLOYMENT LAW
COMPETITION LAW
HEALTH & SAFETY LAW
REGIONAL LEGISLATION
ECONOMIC
ECONOMY SITUATION & TRENDS
TAXATION
INTEREST & EXCHANGE RATES
MARKET & TRADE CYCLE
TECHNOLOGICAL
TECHNOLOGY ACCESS,LICENSING,PATENTS
MATURITY OF TECHNOLOGY
REPLACEMENT TECHNOLOGY / SOLUTIONS
INNOVATION POTENTIAL
MANUFACTURING MATURITY & CAPACITY
ENVIRONMENTAL
ENVIRONMENTAL IMPACT
ENVIRONMENTAL LEGISLATION
ENERGY CONSUMPTION
WASTE DISPOSAL
 Various environmental components.
1) Market environment: Client’s needs,
preferences, perceptions, attitudes, values,
buying behavior, satisfaction.
Product factors like demand, image, features,
utility, design, life cycle, price, promotion,
distribution, differentiation etc
Competitor factors like different types of
competitors, nature of competition.
 Components contd..
2) Technological Environment:
• Rate of change of technology , easy
technology Transfer.
• Technological development, R&D, cost of
technology.
• Effects of technology on environment, human
beings.
• LED and 3d TV’s – change in strategy by TV
manufacturers
 Components contd..
3) Supplier environment:
• Cost, availability, and continuity of supply of
raw material, components, parts.
• Infrastructural support and ease of availability
of the different factors of production.
 Components contd..
4) Economic environment:
• Business Cycle
• GDP, Interest rate, exchange rate, Inflation etc.
• Economic policies, industrial, fiscal, monetary.
• Per capita income, balance of payments,
Exports imports etc.
• Infra-Structural Investments
 Components contd..
5) Regulatory environment:
• Policies related licensing, monopolies, FDI,
• Policies related to distribution and pricing.
• Policies related to sick industries, public
sector, backward areas, consumer protection
etc.
• Regulation and laws
 Components contd..
6) Political environment:
• The political system and its features,
ideological forces, coalition compulsions.
• Political stability.
• Political funding of elections.
• Government’s role in business.
• Government Attitude
• Subsidies & Protection
 Components contd..
7) Socio-cultural environment:
• Demographics like population, its density
and distribution, age composition, inter state
migration, income distribution etc.
• Socio-cultural concerns like environmental
pollution, corruption etc.
• Society expectations, beliefs, rituals and
attitude, lifestyle etc.
• Literacy Levels
 Components contd..
8) International environment:
• Globalization process.
• Global economic forces.
• Global trade and commerce.
• Global financial system.
• Global markets and competitiveness.
• Global communication
• Global technology and quality systems.
 Environmental scanning
• Monitoring relevant environment to identify
opportunities and threat affecting business for
strategic decision making.
• General environment (Overall Env. )
• Relevant environment (Directly Impacting)
 Environmental scanning
• Sources of Information
- Documents, Mass media, Internal, External
agencies, Formal studies, spying etc.
• Factor affecting environmental appraisal
- Strategist related (Age, exp., qual. Etc.)
- Organization related (Age, size, nature of
business etc.)
- Environment itself – A constraint
 Organization Appraisal: Concept and
Capability Factors; Porter’s Value Chain Model
 Organizational Appraisal
• It deals with the internal environment of the
organization.
• Internal environment constitutes of behavior,
strengths, weaknesses, synergy and
competencies, all these put together
determine the “ Organizational capability”
 Organizational appraisal
• Organizational Resources
Physical
Financial
Human
Tangible and intangible
 Organizational behavior
• It is the manifestation of various forces and
influences operating in the internal
environment of an organization that create
the ability for, or place constraints in the usage
of resources.
• It leads to the development of a special
identity and character of an organization.
 Factors influencing Org.Beh.
• Quality of leadership.
• Management philosophy.
• Shared values.
• Culture
• Quality of work environment.
• Organizational politics.
 Synergistic effects
• Synergy is the idea that the whole is greater or
lesser than the sum of its parts.

• E.g. In marketing dept. synergistic effect can

be achieved when product, promotion,
distribution, advertising support each other.
 Competencies
• Competencies are special qualities possessed
by an organization that make them withstand
pressures of competition in the market place.
• When a specific ability is possessed by a
particular organization exclusively or in a large
measure it is called as distinctive competence.
 Organizational capability
• It is the inherent capacity or potential of an
organization to use its strengths and overcome
its weaknesses in order to exploit
opportunities and face threats in an external
environment.
 Strategic advantage
• These are the outcome of organizational
capabilities. They are the result of
organizational activities leading to rewards in
terms of financial parameters.
 Financial capabilities.
Strengths supporting Financial capability.
• Access to financial resources.
• Good relationship with financial institutions.
• High level of credit- worthiness.
• Low cost of capital compared to rivals.
• High level of share holder’s confidence.
 Marketing capabilities
• Wide variety of products.
• Better quality of products.
• Sharply-focused positioning.
• Effective distribution system.
• Effective sales promotion.
• Effective MKIS.
 Operations capabilities
• High level of capacity utilization.
• Favorable plant location.
• Reliable sources of supply.
• Effective control of operational costs.
• Good inventory control system.
• High caliber R&D people.
• Technical collaborations.
 General management capability.
• Effective system for corporate planning.
• Reward and incentives for top managers.
• Risk taking.
• Favorable corporate image.
• Effective management of organizational
change.
Porter’s Value Chain Model
 Support Activities
• Do not directly add value, but are still
necessary in providing the services or
products
• Close to universal for every agency
 Support Activities (continued)
• Porter’s Breakdown of Support Activities
– Firm Infrastructure: organizational structure,
control systems, company culture, ect.
– Human Resource Management: employee
recruiting, hiring, training, development, and
compensation.
– Technology Development: technologies to support
value-creating activities.
– Procurement: purchasing inputs such as
materials, supplies, and equipment.
 Primary Activities
• The links in the value chain are the “strategic
relevant activities” that add value to the
services or products you are providing.
• Every agency is going to have unique “strategic
relevant activities”
– Some may be similar
 Primary Activities (continued)
• Porter’s Breakdown of Primary Activities
– Inbound logistics: the receiving and warehousing of raw
materials, and their distribution to manufacturing as they
are required.
– Operations: the process of transforming inputs in finished
products and services
– Outbound logistics: the warehousing and distribution of
finished goods
– Marketing and Sales: the identification of customer needs
and the generation of sales.
– Service: the support of the customers after the products
and services are sold to them.
Thank
You
Presented by:-
Pankaj Asnani
Atul Pandey
Guneet Singh
Sandeep Bhardwaj
Amit Dahiya