CORPORATE GOVERNANCE

Deals with laws, procedures, practices rules etc. relating to corporate functioning:

Companies Act 1956 Monopolies and restrictive trade practices Act 1969 Foreign Exchange regulation Act 1973 Sick industries companies Act 1985

Security and Exchange Board of India 5/12/12 Act 1992

CORPORATE GOVERNANCE

Security Contract Regulation Act 1956 Listing Agreement of Stock Exchange The depository Act Consumer Forum Arbitration and Conciliation Act Codes prescribed by Chambers SEBI Code on Corporate governance 5/12/12

SEBI CODE (CLAUSE 49 LISTING CONDITIONS) CORPORATE GOVERNACE

Board of directors to have optimum combination of executive and non executive directors. In case company has non executive chairman fifty percent of the directors to be non executive Non executive chairman has an office and paid allowances so that she/ he can perform the duties
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SEBI CODE (CLAUSE 49 LISTING CONDITIONS) CORPORATE GOVERNACE

A qualified empowered audit committee to be set up Remuneration committee to be set up for deciding on the compensations Board meeting at least four time in a year A director can not be a member in more than ten companies

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SEBI CODE (CLAUSE 49 LISTING CONDITIONS) CORPORATE GOVERNACE A management discussion and analysis report should form part of the annual report Disclosures on all personal interests and conflicts of interests by the directors Brief Resume, nature of expertise , and other directorships must be provided to the share holders while 5/12/12 appointing a director

SEBI CODE (CLAUSE 49 LISTING CONDITIONS) CORPORATE GOVERNACE

Board committee under the chairmanship of non executive director to be formed to look into the complaints of all the shareholders Power of share transfer should be delegated to an officer or a committee or to registrar and transfer agents Should obtain certificates from the 5/12/12 auditors on adherence to the tenets

Independent( Non Executive Director)

Apart from receiving directors remuneration does not have any material pecuniary relation ship or transactions, its promoters its senior management , holding companies, its subsidiaries and associated companies Is not related to promoters or management at the board level or at one level below the board 5/12/12

Independent( Non Executive Director)

Is not a partner or an executive of the statuary audit firm or internal audit firm that is associated with the company Is not a material supplier or service provider to the company Is not a substantial share holder ( more than two percent)
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Corporate Governance. No longer a fashion statement

2002 The Year of the Apology

Since the collapse of Enron in 2001 a spate of corporate misdoings has been exposed. Dennis Kozlowski, the then CEO of Tyco International, apologized to investors for a $1.9 billion loss and layoffs of 7,100. Soon after his 5/12/12 apology he was indicted for alleged

Hank Paulson, chairman of Goldman Sachs, gave a speech in which he said recent criticisms of the business community were deserved and then went on to suggest ways companies like his could help restore investor confidence. Citigroups former CEO Sandy Weill apologized for certain activities "that do not reflect the way we believe 5/12/12

James Rohr, chairman and CEO of PNC Financial Services Group, apologized for accounting irregularities that happened during his tenure. Finally, McDonalds apologized to Hindus, vegetarians and others for mislabeling French fries and hash browns as vegetarian. The fast food
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What has really brought Corporate Governance center stage?

The passion of the Sarbanes-Oxley Act (The SOX Act as it is known), makes it a mandatory requirement for CEOs/CFOs of knowledge no report contained a material untrue statement or omitted a material fact necessary to make the report not misleading.
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The Real Issue

The real issue:

Directors and Officers Liability Insurance (D&O)

D&O is professional liability coverage for legal expenses and liability to shareholders, bondholders, creditors or others due to actions or omissions by a director or officer of a corporation or a nonprofit organization. In the U.S Average D&O 5/12/12

What is Corporate Governance?

is an art of managing companies ethically and efficiently for enhancing stakeholders value. the entire gamut of corporate governance system could be referred to as corporate ethical and values system
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What is Corporate Governance?

Shleifer and Vishny (1997) state that Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment Blsot (1995) argues that corporate governance implicates the whole set of legal, cultural, and institutional arrangements that determine what 5/12/12 publicly traded corporations can do,

Corporate Governance
A nations system of corporate governance can be seen, (according to North, 1991) as an institutional matrix that structures the relations among owners, boards, and top managers, and determines the goals pursued by the corporation.

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Definition of Corporate

Governance
q

OECD and the Cadbury Committee, UK, defined corporate governance as: A system by which business corporations are directed and controlled

CII Desirable Corporate Governance Code defines thus: Corporate Governance deals with laws, procedures, practices and 5/12/12

Creating an ethical culture means instilling and maintaining a commitment to doing the right thing, this time and every time-so much so that it becomes entwined in the essential DNA of the firm -- Wimmiam H Donaldson Chairman, US Securities and Exchange Commission (Remarks before the Bond Market Association, New 5/12/12 York; April 20, 2005)

The Outside Forces: Active Players in Corporate Governance

Media Professional Activists Regulators > Market Players Analysts > > External
Organization Organizations Investment - SEBI - Institutional Auditors Institute of Centre for Exchange investors Directors(IOD) Corporate - Small investors Brokerage House - Stock - RBI

Governance Grievance Association > Share holders 5/12/12

Creditiors

- Government - National

Active Players The Force Within

Employees (-Whistle Blower Protection
Board of Directors (Independence -Qualification) Internal Auditirs Top Management (- Audit Team Committee CEO -Independence (- Dual role -Rotation) -Evaluation --Succession

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INFORMATION TO BE PLACED BEFORE THE BOARD OF DIRECTORS Annual operative plans, budgets and updates Capital budgets and updates Quarterly results Minutes of meetings of audit committees and other committees of the board Information on recruitments and remunerations of senior officers ( one 5/12/12

Show cause, demand and penalty notices Fatal or serious accidents Material default in financial obligations

INFORMATION TO BE PLACED BEFORE THE BOARD OF DIRECTORS

Any issue, which involves possible public or product liability claims of substantial nature
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Details of any joint venture or

INFORMATION TO BE PLACED BEFORE THE BOARD OF DIRECTORS

Significant labour problems and their proposed solutions Sale of material nature , of investment subsidiaries assets which is not in normal course of business Quarterly details of foreign exchange exposures Non compliance of any regulatory, statutory nature or listing 5/12/12 requirements and share holders

Mintzbergs 5Ps Strategy

Plan :Consciously intended course of action. Two essential characteristics first made in advance second developed consciously. Ploy : A maneuver to out-wit the other. Pattern: This is a resulting behavior. Consistent at times it can be independent of plan the pattern may appear without preconception. Position: Locating an organization in an
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A Comprehensive Strategic Management Model

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THE FIRMS EXTERNAL ENVIRONMENT

Remote Environme nt .Economic .Social .Political . Technolog ical . Ecological

Industry .Entry Barriers .Supplier Power .Buyer Power .Substitute Availability

Operating Environment .Competitors .Creditors .Customers .Labour .Suppliers

The Firm

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The Process Of Performing An External Audit

Involve as many managers and employees as possible. Gather competitive intelligence and information about economic , social , cultural , demographic , environmental , political , governmental , legal , and technological trends. Should be assimilated and 5/12/12 evaluated.

KEY EXTERNAL FACTORS

v

Important to achieve in long term and annual objectives . Measurable . Applicable to all competitive firms.

v v

Hierarchical in the sense that some will pertain to the overall company and others will be more narrowly focused on functional 5/12/12 or divisional areas.

Economic forces

Import / export factors Demand shifts for different categories of goods and services Income differences by region and consumer groups Price fluctuations Export of labor and capital Monetary policies Fiscal policies
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Example of Economic changes

Green Revolution in Agriculture Industrial setup in rural and backward regions Opening up of new markets for the marketing and supply of goods and services Opening of new market for foreign investment
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Social , Cultural , Demographic , and Environmental Forces

Population Age groups Literacy Joint or nuclear family Eating habits Caste system Population movement Reaction to terrorism

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Social , Cultural , Demographic , and Environmental Forces

Childbearing Attitude toward rates retirement Number of Attitude toward special-time leisure interest groups Attitude toward

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Attitudes Lifestyle toward authorities Population changes Traffic congestion by city , country , state , and region Inner city environments

Value placed on lager time Average disposal income Regional changes in taste and Trust in government preferences Attitude toward work Number of women and minority Buying habits workers 5/12/12 Ethical concernsschool and Number of high

Social , Cultural , Demographic , and

Political , Governmental , and Legal , Forces

Sino-American relationships Government regulations or deregulations Russian - American relationships Change in American European tax law relationships Special tariffs African American relationships Political- action committees Import export regulation Voter participation rates Government fiscal and location Number ,severity , and monetary policy change. of government protests
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COMPETITIVE INTELLIGENCE PROGRAMS

q

To provide a general understanding of an industry To indentify areas in which competitors are vulnerable To identify potential moves that a competitor might make that would endanger a firms position in the market

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ORGANISATION ENVIRONMENT
The environment of business is the aggregate of conditions, events and influences that surround and affect it. Since the organization is a part of a broader social system, it has to work within the framework provided by the society and its innumerable constituents 5/12/12

ENVIRONMENT FORCES CLASSIFIED AS

External Environment Internal Environment

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EXTERNAL ENVIRONMENT

Everything outside an organization that might affect it is external environment It is much more difficult to understand than internal environment because the external forces are large in number, difficult to assess and predict
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COMPONENTS OF EXTERNAL ENVIRONMENT

Economic Environment Social and Cultural Environment Political Environment Legal Environment Technological Environment Natural Environment 5/12/12 International Environment

ECONOMICAL ENVIRONMENT

The economic state and the business cycle of the organization at present GDP rate and per capita income Savings and investment rates Payment balances and changes in foreign exchanges reserves Money supply and inflation rate Industrial and agricultural production trend Differences in the distribution of the 5/12/12 income and wealth

POLITICAL ENVIRONMENT

Government instability Interference of international power Internal conflict with in the ruling party Strength of parliamentary opposition party Political principles

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LEGAL ENVIRONMENT
Market condition in India is much more inclined towards the central, state and local governments. The government rules and policies must to be followed for existing in the market

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LEGAL ENVIRONMENT INCLUDES

Antitrust regulation Protection Laws Environment Laws Tax Laws Foreign trade regulations Price control Wage fixation Managerial remuneration
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LEGAL ENVIRONMENT INCLUDES.

Location of plants Entry of multinationals Safety and health at work

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TECHNOLGICAL ENVIRONMENT
It determine the development of an organization by increasing the efficiency, production, and competitiveness

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THE ADAPTATION TO NEW TECHNOLOGY CAN BE IN THREE WAYS

Inventing or creating a new product Introducing the products and processes in use Diffusing the technology that cannot be used first
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TECHNOLOGICAL ENVIRONMENT THAT HAVE IMPACT IN AN ORGANIZATION INCLUDE

Effectiveness of infrastructure (roads, ports, airport, rolling stock, hospitals, education, healthcare and communication) Productivity of the organization New manufacturing processes
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TECHNOLOGICAL ENVIRONMENT THAT HAVE IMPACT IN AN ORGANIZATION INCLUDE New technology that could impact the company

New products and services of supply chain partners Cost and accessibility of resources such as electrical power, water supply, fuel etc

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External Factor Evaluation

List key external factors( 10 to 20) Include opportunities and threats that affect the firm Opportunities first then threats. Be specific( quantify) Assign weight to each factor ( 0.0 to 1.0). This indicates relative importance of this factor 5/12/12 for the firm for being successful

External Factor Evaluation( Contd)

Assign a rating between 1 to 4 to each key external factor to indicate how effectively the firms current strategies respond to the factor. Multiply each factors weight by its rating to determine weighted score Sum the weighted scores for 5/12/12 each variable to determine the

External Factor Evaluation(Contd)

A total less than 2.5 indicates that the organization is not responding to the existing opportunities and threats of the external environment The assessment may not be very accurate since some of the data is subjective.
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EFE MATRIX- Haldiram in New Delhi

Key External Factor GDP Growth Rate more than 7% Population growth in the area 10% Major restaurants in the area closing down Demand for vegetarian food on the increase12% Increase in the disposable income in the city 15% Preference for ordering food at home on the increase 5/12/12 Wt Rating Weighted Score .26 3 .25 4 .25 3 .06 3 .05 3 .03 4 .78 .75 .75 .18 .15 .12 .06

People avoiding eating out on weak days .02 3

COMPETITIVE PROFILE MATRIX

IN RELATION TO MAJOR COMPETITORS Click to edit Master subtitle style

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COMPETITIVE PROFILE MATRIX

Critical Success Factor
Advertising Quality Price Management Financial Position Cust Loyalty Market Share

Wt Rating Score

.20 1 .10 4 .10 3 .10 4 .15 4 .10 4 .05 4

.20 .40 .30 .40 .60 .40 .20

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PORTERS FIVE FORCE , MODEL

Determinant Of Buyer Power Concentration (Buyer / Firms) Volume Switching Costs Information Ability To Backward Integrate Substitute Product Pull Through

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ENVIRONMENTAL APPRAISAL
INTERNAL Master subtitle style Click to editENVIRONMENT

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APPRAISAL PROCESS

Gather, assimilate and evaluate information on firms operations. Identify Critical Success Factors. Prioritize Critical Success Factors List 10 to 20 factors in order of priority. Involve Maximum membersshared view. Coordinate for inter department

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BASIC QUESTIONS

How well the current strategy working? What use made of our resources? Are all departments working to optimum levels? Are all activities

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TECHNIQUES OF INTERNAL APPRAISAL

SWOT Analysis. Resource based view. Value chain analysis Organizational analysis

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SWOT Analysis

Quick Overview of a companys strategic situation. Internal strengths and weaknesses with external opportunities and threats. Strength a resource or capabilityadvantage relative to the competitors in meeting customers needs Weaknesses. Limitations.. Opportunities. Favorable situation in firms environment
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THE PROCESS OF CONDUCTING SWOT ANALYSIS

Formulate SWOT framework Generate shared view Workout strategies

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Opportunities Cell 1: Aggressive Strategy Strength s Cell 2. Diversificat ion Strategy Threats
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Cell 3. Turn around Strategy

Weakness es

Cell 4. Defensive Strategy

Strategic Options after SWOT Analysis

Aggressive. Growth orientation. Diversification. Redeploy for long term objectives. Turnaround. Eliminate internal weaknesses. Defensive. Reduce resources in areas identified by SWOT.

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LIMITATIONS OF SWOT ANALYSIS

Can over emphasize internal strengths and downplay external threats Can be static, ignore changes with time. Can over emphasize single strength or element of strategy

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VALUE CHAIN ANALYSIS

Business is seen as a chain of activities, departmental demarcations are ignored The chain of activities transforms input in to out put that customers value. The customer value is derived from:

Product differentiation

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VCA

Divide companys activities in to specific business processes. Group these in to primary and support activities.

The primary activities include: 5/12/12

Inbound logistics Operations Outbound logistics Marketing and sales Services

PRIMARY ACTVITIES

Inbound logistics. Fuel, energy, raw materials, parts/components, merchandise and consumable items from the vendors. Receiving , storing and disseminating inputs from suppliers, inspection and inventory management Operations. Converting input in to final products- production, 5/12/12

PRIMARY ACTVITIES

Outbound logistics. Distributing, warehousing, order processing, order picking, packing shipping delivery vehicle operation. Marketing and sales. Sales force effort, advertising and promotion, market research and planning, dealer distributor support Service. Assistance to

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SUPPORT ACTIVITIES

General Administration. Accounting and finance, legal and regulatory affairs, safety and security, MIS and other overhead functions HRM. Development of knowledge based skills, recruitment, compensation management, training and development Research, technology and

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ALLOCATE COSTS

Each activity in the value chain incurs cost and ties up time and assets Traditional cost accounting of purchase department, would include:

Wages and salaries Employees benefits Supplies

Travel 5/12/12

ALLOCATE COSTS

Activity based cost accountancy(purchase department) would include

Evaluate suppliers capabilities Process purchase orders Expedite suppliers delivery Expedite internal processing Check quality of items purchased problems

Resolve 5/12/12

DIFFICULTY IN ALLOCATING COSTS

The existing financial management and accounting systems in most firms is not geared to provide activity based costs. This can also create redundant work Financial reporting requirements do not match with the activity 5/12/12 based costs accounting

IDENTIFY ACTIVITIES THAT DIFFERENTIATE THE FIRM

Examining the vale chain brings out several sources of differentiation advantage relative to competitors. The firm can concentrate on these sources of differentiation advantages to gain competitive advantages. Alternatively the firm can 5/12/12 analyse the entire value chain.

EXAMINING THE VALUE CHAIN

Identify activities that are critical to customer satisfaction and market success

Basic Mission Nature of value chain and the relative importance of activities within them vary by industry.

Relative importance of value activities vary by companys position in broader value system 5/12/12 that include the value chain of its

ORGANIZATIONAL APPRAISAL

The strategic advantage in terms of organizational capabilities depends on a number of organization related factors.

Organizational resources. Organizational Behavior These create weaknesses Synergy Competencies strengths and

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Strategic Advantages Capabilities

Competencie s Synergy

Strengths and weaknesses

Organization al Resources 5/12/12

Behavior

FACTORS OF ORGANIZATIONAL STRATEGIC ADVANTAGE

Resources Behavior Strengths and weaknesses Synergy Competencies Capability Strategic and Competitive advantage 5/12/12

STRENGTHS THAT SUPPORT FINANCIAL CAPABILITIES

Ability to raise short-term capital. Ability to raise long term capital; debt-equity Corporate-level resources(multi business firm) Cost of capital relative to that of Industry and competitors
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Tax considerations

Cost of entry and barriers to entry Price-earnings ratio

STRENGTHS THAT SUPPORT FINANCIAL CAPABILITIES

Working capital; flexibility of capital structure Effective cost control; ability to reduce cost Financial size. Effective and effectiveness of accounting system for cost, 5/12/12

STRENGTHS THAT SUPPORT MARKETING CAPABILITIES line. Firms products-services: breadth of product
Concentration of sales in a few products or to a few customers. Ability to gather needed information about markets . Market share or submarket shares Product-service mix and expansion potential : life cycle of key products; profit-sales balance in production service. Channels of distributions: number, coverage, and control Effective sales organization: knowledge of customer needs
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Internet Usage

STRENGTHS THAT SUPPORT MARKETING CAPABILITIES

Product-service image, reputation and quality Imaginativeness, efficiency, and effectiveness of sales promotion and advertisements. Pricing strategy and pricing flexibility Procedures for digesting market feedback and developing new products, services, or 5/12/12 market

Raw materials cost and availability, supplier relationships.

STRENGTHS THAT SUPPORT OPERATIONS CAPABILITIES

Inventory control systems; inventory turnover Location of facilities, layout and utilization of facilities Economies of scale
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Technical efficiency of facilities

Degree of vertical integration; value added and profit margin Efficiency and cost-benefit of equipment

STRENGTHS THAT SUPPORT OPERATIONS CAPABILITIES

Effectiveness of operation control procedures: design, scheduling, purchasing, quality control, and efficiency Costs and technological 5/12/12 competencies relative to those of

Management personnel

STRENGTHS THAT SUPPORT PERSONNEL CAPABILITIES

Employees skill and morale Labor relations costs compared with those of industry and competitors Efficiency and effectiveness of personnel policies. Effectiveness of incentives used to 5/12/12 motivates performance

STRENGTHS THAT SUPPORT INFORMATION MANAGEMNET CAPABILITIES

Timeliness and accuracy of information about sales, operations , cash, and suppliers Relevance of information for tactical decisions Information to manage quality issues: customer service Ability of people to use the information that is provided.

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STRENGTHS THAT SUPPORT GENERAL MANAGEMENT CAPABILITIES Organizational structure

Firms image and prestige Firms record in achieving objectives Organization of communication systems Overall organizational control system(effectiveness and utilization) 5/12/12

Liquidity Ratios

Current Ratio The extent to which a firm can meet its shortterm obligations Quick Ratio- The extent to which a firm can meet its short-term obligations without relying upon the sale of its inventories
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Leverage Ratios

Debt-to-Total-Assets Ratio- The percentage of total funds that are provided by creditors Debt-to-Equity Ratio- The percentage of total funds provided by creditors versus by owners Long-term

Debt-to-Equity Ratio- The balance 5/12/12 between debt and equity in a

Activity Ratios

Inventory Turnover- Whether a firm holds excessive stocks of inventories and whether a firm is slowly selling its inventories compared to the industry average. Fixed Assets Turnover- Sales productivity and plant and equipment utilization Total Assets Turnover- Whether a

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Profitability Ratios

Gross Profit Margin- The total margin available to cover operating expenses and yield a profit Operating Profit MarginProfitability without concern for taxes and interest. Net Profit Margin- After-tax profits per euro of sales
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Profitability Ratios

Return on Total Assets-(ROA)After-tax profit per dollar of assets; this ratio is also called return on investment(ROI) Return on Stockholders Equity(ROE)- After-tax profits per dollar of stockholders investment in the firm. Earnings per Share(EPS)5/12/12 Earnings available to the owners

Growth Ratios

Sales- Firms growth rate in sales Net Income- Firms growth rate in profits Earnings per share- Firms growth rate in EPS Dividends Per Share- Firms growth rate in dividends per

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NON FINANCIAL QUANTITATIVE METHODS Aspects such as employees turnover, absenteeism, market ranking, rate of advertising recall, total cycle time of production, inventory units used per period, service call rate, number of patents, registered per period are some of the examples. These nonfinancial aspects at times 5/12/12

GROWTH OF A FIRM

Survival, Growth and profitability are primary concerns of a firm Growth orientation needs to be over long term The profits that are generated from operations are ultimate source of funds for growth Growth is multidimensional: profitability, number of markets served, variety of products and 5/12/12

NATURE OF GROWTH

Growth can be through concentration ( vertical and horizontal integration) or through diversification ( concentric or conglomerate diversification) Related diversifications are considered to be better options than pure concentration strategies 5/12/12

NATURE OF GROWTH

Relationship between Relatedness and performance. If a new business is very similar to that of the acquiring firm very little value is added to the corporation as compared to acquisition of new resources and capabilities in a different but similar business.
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Firms growing internally perform

NATURE OF GROWTH

A combination of internal and external growth can be adopted. While considering external growth through acquisitions a suitable candidate for take over:

Must be relatively small Must be comparable in organizational culture

Must be physically close to one of the affiliates 5/12/12

Types of Benchmarking

Performance Benchmarking Process Benchmarking Strategic Benchmarking Internal Benchmarking:

Competitive Benchmarking Functional Benchmarking Generic Benchmarking

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BCG MATRIX

Firms with number of divisions competing in different industries need separate strategy for business. This multi division firm need to formulate strategies for each division based on

Relative market share

Industry growth rate in terms of 5/12/12 sales

BCG MATRIX
Relative Market Share

B,F,H Integration Market Penetration Market, product development Divestiture Cash Cows

Stars.

Question Marks Market Penetration Market, product development Divestiture

Dogs Retrenchment Divestiture, Liquidation

Product Development Diversification Retrenchment Divestiture

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Indust ry Sales Growt h Rate

BCG MATRIX

Question marks. Low market share, competing in high growth industries. Pump heavy investment or sell off Stars. High relative market share and high industry growth. Increase investment. Cash Cows. High relative market share, low industry growth. Maintain position, re investment 5/12/12 cash else where

THE GRAND STRATEGY

This matrix is based on two evaluative dimension. These include competitive position and market growth . With competitive position on the X Axis and marked growth on the Y axis four quadrants emerge.
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GRAND STRATEGY MATRIX

Rapid Market Growth Quadrant 2 Quadrant 1 Market Development Market Development Market Penetration Market Penetration Product Development Product Development Horizontal integrations All integrations Divestiture Related Diversification Liquidation Quadrant 3 Retrenchment Related Diversification Un related diversification Divestiture Liquidation Quadrant 4 Related Diversification Un related diversification Joint venture

Weak Competit ive Position

Strong Competiti ve Position

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Slow Market Growth

QUARDRANT-1

Rapid growth, strong competitive advantage. When in possession of excessive resources should go for backward, forward and horizontal integration. If too heavily committed to single product then diversification should be the 5/12/12 strategy.

QUARDRANT-2

Rapid growth weak competitive advantage. Must concentrate on finding reasons as to why the firm lacks the competitive advantage. Prefer horizontal integration. As a last resort divestiture or liquidation should be considered.
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Funds so acquired can be used to

QUARDRANT-3

Slow Market growth, weak competitive position.

Must make some drastic changes quickly to avoid further decline and possible liquidation. Pursue extentive cost and asset reduction. Diversify Liquidate, divestiture.

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QUARDRANT-4

Slow market growth, strong competitive advantage .

Since there is high cash flow level can launch diversified products . Can pursue joint venture
.

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The Quantitative Strategy Planning Matrix(QSPM)

This forms the strange 3 of the strategy formulation analytical frame work. It objectively indicates which alternative strategies are the best. The QSPMMaster subtitle style Click to edit uses results from stage 1 and stage-2 of strategy formulation and matches these to obtain the information for the stage-3 i.e. the QSPM. This 5/12/12 technique requires good intuitive

Rapid Market Growth

Quadrant- II

Quadrant-I

Weak Competitive Position

Strong Competitive Position

Quadrant-III

Quadrant-IV

Slow Market Growth 5/12/12

CORPORATE LEVEL STRATEGIES

Directional- Growth , stability and retrenchment Stability- pause/ proceed with caution, no change, profit. Retrenchment- Turnaround, captive company, sell out divestment, bankruptcy liquidation
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DIRECTIONAL STRATEGIES- GROWTH

Concentration

Vertical growth- forward, backward, transaction cost economy, full integration, taper integration, quasi integration, long term contracts Horizontal growth- horizontal integration, international entry

Diversification

Concentric(related), conglomerate ( unrelated) diversification .

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STABILITY STRATEGY

Pause/ proceed with caution. Typically a temporary strategy adopted as time out till the environment become suitable or consolidate the gains No change. Decision to do nothing since no change in the situation ( opportunity, threat). Future expected to be an extension of the present. 5/12/12

RETRENCHMENT STRATEGIS

Turnaround. Problems pervasive but not critical. Emphasis on improving operational performance Captive Company. Giving up independence and offer to be captive to the needs of one of the big customers. Sell out/ divestment.
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Bankruptcy/ liquidation

STRATEGIES FOR COMPETING IN THE GLOBAL MARKETS

Customize to suit local market or Standardized product Employ same competitive strategy in all countries or modify strategy country by country. Where to locate production, distribution and customer services.
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Transfer of resource strength

WHY ENTER THE FOREIGN MARKET

Expand in Foreign Market Access to new customers Achieve lower cost Capitalize on core competency Spread business risk.

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Strategy options for Entering and competing Foreign Markets

Maintain national production base and export goods to foreign market using either company owned or foreign controlled distribution channel. License foreign firms to use companys technologies or to produce and distribute the companys product. Employ a franchising strategy.

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GRAND STRATEGIES

Concentrated growth Market Development Product Development Turn around Divestiture Liquidation Bankruptcy 5/12/12

GRAND STRATEGIES

Strategic Alliance Consortia Innovation Horizontal Integration Vertical Integration Concentric Diversification Conglomerate Diversification
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Concentrated Growth

Resistant to technology Changes (Industry) Product not sa-------Distinctive Inputs stable in price and quantity Stable markets Efficient production & 5/12/12

Market Development

Additional geographic markets

Attracting Other market 5/12/12 segments

GRAND STRATEGIES (EXPLAINATIONS)

Product Development Substantially modified product to the same market (Brand, enhance product life cycle) Innovation Reap premium margin associated with creation of a customer acceptance service Horizontal Integration Growth 5/12/12 through acquisition of similar

GRAND STRATEGIES (EXPLAINATIONS)

Concentric diversification operation of second business that benefits from access to the first firms Core Competencies. (Marketing, technology). Conglomerate Diversification to exploit promising investment opportunity (focus on profit pattern) Divestiture Sale of a firm or a

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