Syllabus: MBA: BPSM: Semester III

• (301) BUSINESS POLICY & STRATEGIC MANAGEMENT 1. Strategy and the Quest for Competitive Advantage: • Military origins of strategy – • Evolution – • Concept and Characteristics of strategic management – • Defining strategy – • Mintzberg‘s 5 ‗P‘s of strategy – • Corporate, Business Levels of strategy – • Strategic Management Process. (4) • -------------------------------------------------------------Ulhas D. Wadivkar. B.E. (Elect), PGDIM, MBA (Finance) Management Consultant, Retired Vice President (Works), Graphite India Limited. Nashik & Bangalore. 1st August 2011

Ulhas D Wadivkar


Business Policy and Strategic Management
• ―Without Business Policy and Strategy, an organisation is like a ship without rudder, going around in circles. It‘s like a tramp; who has no place to go‖ – Joel Ross and Michael Kami.

Business Policy definition by Christensen :

• ―Business Policy is the study of the function and responsibilities of Senior Management, the crucial problems that affect success in the total enterprise, and the decisions that determine the directions of the organisation and shape of its future.‖ The problems of policy in the business, like those of policy in public affairs, have to do with choice of purposes, the moulding of organisational identity and character, the continuous definition of what needs to be done, and the mobilisation of resources for the attainment of organisational Goals in the face of competition or adverse circumstance.
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Evolution of Business Policy as discipline.
• Origin – 1911- Harvard Business School – Integrated Course in Management aimed at providing general management capability. • Hofer: Strategic Management – A Casebook in Policy and Planning: The Business Policy evolution has undergone four Paradigm Shifts. This transition is of overlapping nature. • Development of subject of Business Policy has always followed the demands of real life business. • 1930 -1960: Environment change: New Products: Continuously changing market: Ford Foundation recommended report, by Gordon and Howell, suggested a “Capstone” course of Business Policy which would give the students an opportunity to pull together what they have learned in the separate business fields and utilise this knowledge in the analysis of complex business problems.

Ulhas D Wadivkar


Evolution of Business Policy as discipline.
• 1969: The course was made mandatory by American Assembly of Collegiate School of Business (AACSB) • 1990: The course has become an integral part of management education curriculum. Evolution of Business Policy has undergone four Paradigms • Paradigm One: Ad-hoc Policy – making. • 1900 -1930: Era of Mass Production – Maximising output, Normally a Single Product, Standardised and low cost product, catering to unique set of customers servicing limited geographical area – Informal control and co-ordination. The Strategic planning was centred on maximising output.
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Evolution of Business Policy has undergone four Paradigms • Paradigm Two – Integrated Policy Formulation. • 1930 - 1940: Changes in Technology, Turbulence in Political environment, Emergence of new industries, Demand for novelty products even at higher costs, Product Differentiation, Market segmentation in increasingly competitive and changing markets. These all made investment decisions increasingly difficult. This was era of integrating all functional areas and framing policies to guide managerial actions. • Paradigm Three – The Concept of Strategy. • 1940 - 1960: Planned policy became irrelevant due to increasingly complex and accelerating changes. Firms had to anticipate environmental changes. A strategy needed to be formed with critical look at basic concept of Business and its relationship to the existing environment then. Ulhas D Wadivkar


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Paradigm Four – The Strategic Management. 1980 & onwards: The focus of Strategic Management is on the strategic process of business firms and responsibilities of general management. Everything out side the four walls is changing rapidly and this phenomenon is called as “Discontinuity” by Mr. Peter Drucker. Past experiences are no guarantee for future, as science and technology is moving faster. The future is no more extension of the past or the present. The world is substantially compressed and managing the External & Internal environment becomes crucial function. What to produce, where to market, which new business to enter, which one to quit and how to get internally stronger and resourceful are the new stakes. Strategic Planning is required to be done to endow the enterprise with certain fundamental competencies / distinctive strengths which could take care of eventualities resulting from unexpected environmental changes.
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The Indian Scenario:
• However, the evolution of this fourth phase is still continuing and is yet not formed into a theory of how to manage an enterprise. But Strategic Management is a very important tool for and way of thinking to resolve strategic issues. • The Indian Scenario: • IIMs and Administrative Staff College of India formed in early sixties were based on American Model. IIM-A is based on Harvard Model. The All India Council of technical Education (AICTE), The Association of Indian Management Schools (AIMS) have recommended a standard curriculum including ―Business Policy and Strategic Management‖ as a compulsory course. Business Policy is the preferred nomenclature but Strategic Management is being progressively adapted.
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Evolution of Strategic Management in India is divided in three periods.

Till 1980 : Pre-liberalisation Stage: • Strategic management on Government fringes. • Entwining enterprise objectives into the national Planning framework. • Grabbing opportunities, high diversification, noncompetitive scales, and weak technology. • Secretive & one man Strategic Management Process. 1980 - 2000 : Liberalisation Stage: • ‗Foreign Complex‘ governed strategy. • Strategy of focus on rationalisation and operations improvement. • Strategy of growth through acquisitions, internationalisation and product market expansion. • Employing international consulting firms in Strategic Management.
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Onwards: Post Liberalisation Stage: • ‗Global maverick‘ mindset & Acquire professional skills in Strategic Management and synergise entrepreneurial flair. • Portfolio rationalisation. develop institutionalised control mechanism. entry into emerging sectors. 2000. • Development of Technology capabilities • Decentralise organisations.Evolution of Strategic Management in India is divided in three periods. • Mobilise resources and ensure adequate growth through existing business. • De-merge businesses as independent companies and improve market capabilities. Ulhas D Wadivkar 9 .

It seems sensible to begin our examination of strategy with the military view. • Military Origins of Strategy: Strategy is a term that comes from the Greek Strategia. the employment of troops is central. grow the business. • Military origins of strategy are century old. • Substitute "resources" for troops and the transfer of the concept to the business world begins to take form. Here.Core concept of Strategy: • A company‘s concept of Strategy consists of the competitive moves and business approaches that managers employ to attract and please customers. meaning "Generalship“. • Strategy also refers to the means by which policy is effected. attention shifts to tactics. strategy refers to the deployment of troops. In the military. In this sense. conduct operations and achieve targeted objectives. strategy often refers to manoeuvring troops into position before the enemy is actually engaged. compete successfully. Once the enemy has been engaged. . As per ―Clauswitz‖ the war is the continuation of Ulhas D Wadivkar 10 political relations via other means.

H." Thus. He concludes that Clausewitz‘ definition of strategy as "the art of the employment of battles as a means to gain the object of war" is seriously flawed in that this view of strategy intrudes upon policy and makes battle the only means of achieving strategic ends. Liddell Hart examines wars and battles from the time of the ancient Greeks through World War II. strategy and tactics. Liddell Hart • In his book." Ulhas D Wadivkar 11 . • Wiser definition of strategy could be "the practical adaptation of the means placed at a General‘s disposal to the attainment of the object in view. policy. military strategy is clearly a means to political ends. Liddell Hart arrives at this short definition of strategy: "The art of distributing and applying military means to fulfil the ends of policy.• Strategy According to B. Strategy. • Concluding his review of wars.

a professor of management and one of the founders of The California Management Review. Strategic Planning.• Strategy According to George Steiner • George Steiner. • Some of the definitions in use to which Steiner pointed include the following: • Strategy is that which top management does that is of great importance to the organization. to purposes and missions. • Strategy refers to basic directional decisions. • Strategy answers the question: What should the organization be doing? • Strategy answers the question: What are the ends we seek and how should we achieve them? Ulhas D Wadivkar 12 . that is. Steiner points out in his notes that there is very little agreement as to the meaning of strategy in the business world. His book. • Strategy consists of the important actions necessary to realize these directions. is close to being a bible on the subject.

and plans that may be required for guiding the company from its existing position to where it desires to be‖. a strategy is a set of decisions-making rules for the guidance of organisational behaviour‖ • Kenneth Andrews(1965) : ―The pattern of objectives.Defining Strategy and Concept of Strategic Management • Alfred D Chandler(1962) : ―The determination of basic longterm goals and the adoption of courses or the courses of action and the allocation of resources necessary for carrying out these goals‖ • Alfred D Chandler(1984) : ―Basically. purpose. goals. and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of company it is or to be • ‖Kenneth Andrews (1965) : ―Business Strategy is a method of describing the future position of the company. goals. purposes. Ulhas D Wadivkar 13 . policies. its objectives.

• Michael E Porter(1996) : ―Creation of a unique and valued position involving a different set of activities.Defining Strategy and Concept of Strategic Management • Igor Ansoff(1965) : ―The common thread among the organisation‘s activities and product-markets…that defines the essential nature of business that the organisation was or planned to be in future‖ • William F Gleueck(1972) : ―A unified. comprehensive and integrated plan that relates the Strategic advantage of the firm to the challenges of the environment and is designed to ensure that the basic objectives of the enterprise are achieved through proper implementation process‖ • Henry Mintzberg(1987) : ―Strategy is Organisation‘s pattern of response to its environment over a period of time to achieve its goals and mission. The company that is strategically positioned performs different activities from rivals or performs similar activities in different ways‖ Ulhas D Wadivkar 14 .

then Strategy is : • A plan or course of action or a set of decisions rules forming pattern or creating a common thread. • Enterprise knows its strengths & weaknesses compared with those of its competitors. and creating a fit among these activities. Ulhas D Wadivkar 15 . • Connected to the strategic positioning of a firm. • The pattern or common thread related to the organisation‘s activities which move an organisation from its current position to a desired to a desired future stage • Concerned with the resources necessary for implementing a plan or following a course of action and.If we sum up all the above definitions. • Set a clear direction to the organisation. making trade-offs between its different activities.

Sales Ulhas D Wadivkar 16 Growth Rate. Synergy can happen due to Competitive Advantages and Growth Vector. Series of actions are to be taken & they should have same direction for whole organisation. Competitive Advantages: The external environment is continuously monitored & Strategy is made to have the firm a continuous Competitive Advantage. These Objectives give direction for implementing Strategy. 4. Vector: is a Direction with Force. Four important aspects of Strategy are: 1. there will be synergy. 3. Long Term Objectives: It emphasises on long term growth and development. .Essence Of Strategy • Strategy includes the determination and evaluation of alternative paths to an already established Mission and Objectives of enterprise and choosing the alternative to be adapted. Synergy: Once a series of decisions are taken to accomplish the objectives in same direction. 2. The Objectives need be measurable and could be : ROI.

• Therefore.Strategy as Action & Nature of Strategy Three types of actions are involved in Strategy: 1. Face opportunities & threats provided by external factors. Determination of Long Term Goals & Objectives. Thus Nature of Strategy is: • Strategy is a major course of action through which organisation relates itself to its environment. (External) • Strategy is blend of internal & external factors. 17 internal . Strategy is ―Creation of unique & valued position involving a different set of activities. Ulhas D Wadivkarfactors are matched with them. Allocation of resources. Adoption of courses of action. 2. 3. The Company that is strategically positioned performs different activities from rivals or performs similar activities in different ways‖ – Michael Porter.

• Strategy is future oriented. Strategy is combination of actions to solve a certain problem to achieve a desirable end. • Strategy provides overall framework for guiding enterprise thinking and action. • Strategy requires some systems and norms for its efficient adoption in any organisation.Nature of Strategy – contd… • Strategic actions are different for different situations. New situations. • Strategy may involve contradictory actions simultaneously or with a gap of time like closing down some operations and expanding some at same time. Ulhas D Wadivkar 18 . which have not arisen in past will require revised Strategic Actions.

• Policy is guideline for decisions & actions to be taken by subordinates for the fulfilment of the set of objectives. • Strategy is rule for making decision and Policy is contingent decision. • Strategy and policies both are the means directed towards meeting organisational objectives. • Policies have to be integrated so that Strategy is implemented successfully and effectively. • Policies are commonly accepted understanding of decision making.Strategy v/s Policies • Strategy & Policy are not synonymous. • Strategies are specific actions suggested to achieve objectives. • Strategy is action oriented and empowers concerned to implement them. 19 . • Policies are thought oriented. Ulhas D Wadivkar • Strategies are concerned with the direction in which human and physical resources are deployed to maximise the chances of achieving organisational objectives in face of variable environment. • Strategy cannot be delegated downwards.

• Tactical decisions are less important than Strategic decisions. • Tactics are determined on a periodic basis with some fixed timetable. • Goal of Tactics is to achieve success in a given action. • Goal of Strategy is to gain competitive advantage. It can be continuous or irregular. Ulhas D Wadivkar • Tactics is means by which previously determined plans are executed. • Strategy has a long term perspective & have a high element of uncertainty. • Tactical decision implementation is impersonal. break the opponent. 20 . • Strategy formulation is dynamic. • Strategy formulation is affected by the personal values of person involved in the process. • Strategic decisions cannot be delegated downwards. • Tactical decisions are more certain as they work upon framework set by Strategy. responding to environment. • Tactics decisions can be delegated to all levels of organisation.Strategy v/s Tactics • Strategy determines the major plans to be undertaken.

• Definition – ―Strategic Management is concerned with making decisions about an organisation‘s future direction and implementing those decisions‖.Strategic Management : • Definition – ―Strategic management is the process of systematically analysing various opportunities and threats vis-à-vis organisational strengths and weaknesses. formulating.By Lloyd L Byras. and arriving at strategic choices through critical evaluation of alternatives and implementing them to meet the set objectives of the organisation‖. . Ulhas D Wadivkar 21 .

its internal culture. based on budgets. creating a control mechanism and Data generation for selecting future course of action. • Company Profile. outlining action plan and tasks. • Selecting long term objectives and deciding corresponding strategies. strengths and capabilities. defining corresponding strategies in tune with Mission and Vision Statements. • Implementing chosen strategies in planned way.Aspects of Strategic Management • Vision Statement • Mission Statement indicating methodology for achieving the objectives. • Critical study of external environmental factors. • Finding out way and deciding the desirable course of actions for accomplishing the Mission statement. allocating resources. • Installation of a continuous review system. purposes and Philosophy of organisation as reflected in vision statement. threats and opportunities. • Evolving short term objectives. Ulhas D Wadivkar 22 .

changing conditions. Objectives. Strategy in light of actual experience. Implementing & Executing chosen strategy efficiently and effectively.) Setting objectives: converting Strategic vision into specific measurable performance outcomes. Evaluating performance & initiating corrective adjustment in Vision.Five Tasks of Strategic Management • Forming a strategic Vision of what the company‘s future business make up will be and where the organisation is headed. 23 • • • • Ulhas D Wadivkar . new ideas & new opportunities. (A long term vision to infuse the organisation with a sense of purposeful action. Long term directions. Crafting a Strategy to achieve desired outcome.

district offices have leading and supporting roles in company‘s strategic game plan. Doers should be strategy makers. • Managers of operating plants: Strategy making is a job for all the line managers. Staff. Marketing. It is an integrated team effort. HR etc have responsibilities to deliver measurable performance as per Strategic Planning. Strategic Planning is not a stand alone function. • Functional Heads & Departmental heads with direct responsibility over a major business areas. • All major organisational units. Ulhas D Wadivkar 24 . divisions. business units. It should not be left to staff of Planners. • Vice Presidents of various functions have role to play in strategy making and implementing. Plant support groups. He performs various roles such as.Who performs these five tasks of Strategic Management? • CEO is most important Strategy Manager. Chief strategy maker. Finance. Chief objective setter. • Managers with Profit & Loss responsibilities for individual business units or divisions. who is most visible also. Functional heads like Production. Chief Strategy implementer. Chief direction setter. • CEO & Senior Corporate executives have responsibility & personal authority for major strategic decisions.

investments. • Strategic Planning provides the frame work for all major business decisions. It lends a framework which can ensure that decisions concerning future are taken in a systematic and purposeful way. Ulhas D Wadivkar 25 . • Strategic Planning helps in understanding trends in a better way and generates a reference frame for investment decisions. against totally unexpected developments. • Strategic Planning provides a hedge against uncertainty. It is a path finder for business opportunities and it is also a defence mechanism to avoid costly mistakes in choice of product market or investments.Aspects of Strategic Planning . decisions on business. products.1 • Strategic Planning provides the route map for the enterprise. manufacturing facilities. markets. and organisational structure.

2 • The more intense the environmental uncertainty. • Strategic Planning is a management task concerned with growth and future of the business enterprise. • Considerable thought and effort must go in vision. • All vital aspects of corporate governance are perfected through strategic planning. more critical is the need for strategic planning. experience. • The success of the efforts and activities of the enterprise depends heavily on the quality of strategic planning. quality of judgement and the perfection of methods and measures. insight. starting from corporate mission. knowledge and vision of top people in Management. Strategic Planning utilises both intuition and logic.Aspects of Strategic Planning . philosophy and core values. Logic is through Planning and information process and intuition is through experience. down to choice of businesses Ulhas Wadivkar 26 andDstrategies. . • As a management tool.

Growth. • Main aspects of Strategic Planning are Future. B) Product Market scope. development or diversification. formulate steps to bridge them. basket of businesses of the firm for additions and deletions. Strategy and not day to day routine matters. It views the organisation / business in its totality and not a particular function. strength obtained from new product-market selections. E) Synergy. pinpoints the gaps. creation of core competency and competitiveness and finally integration. • Strategic Planning differs from other operative and administrative functions of management. C) Growth Vector – Product Market posture. corporation understands where its core competencies are. involved in Strategic Planning. identifies the competitive advantages.• Through analytical process aspect. Strategic Planning provides objective – strategy design: A) Growth Objective – Performance levels. Profitability target. Ulhas D Wadivkar 27 Aspects of Strategic Planning . Environment. its penetration. Thus Strategic Planning is Corporate Strategy.3 . D) Competitive Advantages.

a "how. 3. 4. that is." a means of getting from here to there. the most common being these five: Strategy is a Plan. vision and direction. 2. that is. a company that regularly markets very expensive products is using a "high end" strategy. 5. Strategy is Perspective.Mintzberg‟s 5Ps of strategy – • Henry Mintzberg. in his 1994 book. points out that people use "Strategy" in several different ways. A strategy can be a Ploy too. Strategy is Position. The Rise and Fall of Strategic Planning. 28 1. Ulhas D Wadivkar . it reflects decisions to offer particular products or services in particular markets. Strategy is a Pattern in actions over time. for example. really just a specific manoeuvre intended to outwit an opponent or competitor.

which is to be achieved by way of a carefully crafted plan. one might start with a perspective and conclude that it calls for a certain position. • Thus. Ulhas D Wadivkar 29 . • This pattern in decisions and actions defines what Mintzberg called "realized" or emergent strategy. with the eventual outcome and strategy reflected in a pattern evident in decisions and actions over time.• Mintzberg argues that strategy emerges over time as intentions collide with and accommodate a changing reality.

present 5 "P's" as a way to define strategy. Ulhas D Wadivkar 30 . Each "P" shines a spotlight on what strategy is / means / encompasses from a different angle. to provide a comprehensive overview that is probably more useful than definitions that try to fit all into a couple of sentences.Henry Mintzberg (pictured above.) Bruce Ahlstrand and Joseph Lampell. in their 2005 book ―Strategy Bites Back‖.

strategies have two essential characteristics: they are developed consciously and purposefully. a guideline (or set of guidelines) to deal with a situation. Strategy is a PLAN To almost anyone you care to ask." adjusted where necessary to fit into the professional services / Industrial firms. a firm has one to dominate a market for a particular service or practice area. By this definition.Mintzberg‟s 5Ps of strategy – The 5 "P's. are as follows: 1.some sort of consciously intended course of action. A kid has a "strategy" to get over a fence. strategy is a plan . Ulhas D Wadivkar 31 .

Strategy is a PATTERN: Strategy (whether as general plans or specific ploys) is pointless if it cannot be realized. Thus. defining strategy as a plan or ploy is not sufficient. not the new practice area itself. which is really just a specific "manoeuvre" intended to outwit an opponent or competitor. Here the real strategy (as plan. In other words. The kid may use the fence as a ploy to draw a bully into his yard. where his Doberman Pincher awaits intruders. Ulhas D Wadivkar 32 . Threatened litigation often falls into this category. strategy is also a pattern specifically. we also need a definition that encompasses the resulting behaviour. Strategy as a PLOY: Strategy can be a ploy. strategy is consistent in behaviour. a pattern in a stream of actions. • 3. that is. whether or not intended. a firm may threaten to establish a new practice area in order to discourage a competitor from trying to do the same. and as such is a ploy. the real intention) is the threat. By this definition. or plan. but from the action that is taken as a result. too. The outcome of strategy does not derive from the design. Likewise.• 2.

Strategy is a POSITION: Strategy is also a position. clients and markets.• 4. yet all are staffed Ulhas D Wadivkar 33 by professionals. Almost every profession has about it unique perspectives." In management terms: a "domain" consisting of a particular combination of services. A law firm's view of their business is fundamentally different to that of an accounting firm. where it becomes the site of a battle. that indelibly flavour the strategies that firms practicing those professions craft for themselves. Strategy in terms of this definition becomes an ingrained way of perceiving the world. . even into the heads of the strategists themselves. and engineering firm or a graphic design studio. Some firms are aggressive pacesetters. Position is often defined competitively (literally so in the military. Strategy is a PERSPECTIVE: While position is outwardly focused. specifically a means of locating a firm in its environment.) • 5. others build protective shells around themselves. In ecological terms: strategy becomes that firm's "niche. perspective looks inward into the firm.

towards its goal. Finally Perspective provides an insight onto how the firm and its strategists are informed by their own professions. Ploys add a dimension of feint and manoeuvre. Position adds that different firms have different mixes of markets. clients and services that they provide to those clients. and the Ulhas D Wadivkar 34 unique characteristics of each firms own "world. their perceptions of business. where one firm's gain is another's loss and competitive advantage is critical.• The Plan provides the roadmap by which the firm intends to achieve its goals. over time. Pattern emphasizes that strategy is not a once-off event but a constant stream of decisions and resultant actions that drive the firm forward." .

then. is strategy? Is it a plan? Does it refer to how we will obtain the ends we seek? Is it a position taken? Just as military forces might take the high ground prior to engaging the enemy. Strategy and tactics together straddle the gap between ends means. does repeatedly copying a competitor‘s new product offerings signal a "me too" strategy? Just what is strategy? Strategy is all these—it is perspective. plan. ploy and pattern. does strategy refer to a pattern in our decisions and actions? For example. position.1 What. to the view one takes of matters. decisions and actions stemming from this view? Lastly. and to the purposes. directions. Ulhasand D Wadivkar 35 .What Is Strategy? . might a business take the position of low-cost provider? Or does strategy refer to perspective. Strategy is the bridge between policy or high-order goals on the one hand and tactics or concrete actions on the other.

insights.2 • In short. It is a general framework that provides guidance for actions to be taken and. • Strategy. perceptions. Ulhas D Wadivkar 36 . experiences. at the same time. and expectations that provides general guidance for specific actions in pursuit of particular ends. A SWOT analysis (an assessment of Strengths. ideas. memories. • The ends to be obtained are determined through discussions and debates regarding the company's future in light of its current situation. expertise. has no existence apart from the ends sought. goals. Opportunities and Threats) is conducted based on current perceptions. then. Weaknesses. is shaped by the actions taken.What Is Strategy? . strategy is a term that refers to a complex web of thoughts.

Technological. Weaknesses & Threats. Socio-cultural. Economical. Adopt / Abandon Strategy features New Initiatives & Ongoing Strategy Features continued from prior periods Company‘s Strategy Adoptive reactions to Changing circumstances Ulhas D Wadivkar 37 .A Company‘s Situation External Factors: •Industry & Competitive conditions. •Buyer Preferences •―PESTEL‖ – Political. Environmental & legal factors •Internal Factors like Resources. Competitive strengths & Capabilities.

Strategy • It is a simple and undeniably relevant matter for managers to periodically ask the following questions of the employees reporting to them: • • • • • What have you done to improve customer service? What have you done to improve customer satisfaction? What have you done to reduce costs? What have you done to increase productivity? What have you done to increase revenues from new products and services? • Some Fundamental Questions • Regardless of the definition of strategy. These include the following: Ulhas D Wadivkar 38 . there are some fundamental questions to be asked and answered. or the many factors affecting the choice of corporate or competitive strategy.

In which geographic areas? Ulhas D Wadivkar 39 . implicit or explicit? 2.In which businesses? 7.Who are we? 2. size. social and educational environments? 4.What is happening in the larger.What do we do? 3.What assumptions have to hold for the current strategy to be viable? 3.What is the current strategy.Why are we here? 4.In which markets will we compete? 6.What kind of company are we? 5. and profitability goals? 5.What kind of company must we become? Related to Corporate Strategy 1.What kind of company do we want to become? 6.Related to Mission & Vision 1.What are our growth.

and what will we acquire through alliance? 13.What is happening in the industry.What capabilities and capacities will we require? 11.What are our options? 14. and profitability goals? 5.Related to Competitive Strategy Ulhas D Wadivkar 1. with our competitors. size. and in general? 3.On what basis will we compete? 40 .What technologies will we employ? 10.What are our growth.How will we distribute our products and services? 9. what will we buy.Which ones are core competencies? 12.What is the current strategy.What will we make. implicit or explicit? 4.What assumptions have to hold for the current strategy to be viable? 2.To what customers or users? 7.What products and services will we offer? 6.How will the selling/buying decisions be made? 8.

part structure. . Strategy is one element in a four. Strategy has been borrowed from the military and adapted for business use. In truth.Some Concluding Remarks -1 1. Thus it is that strategy and tactics bridge the gap between ends and Ulhas D Wadivkar 41 means. 2. It is about the attainment of ends. not their specification. very little adaptation is required. not with what those aims are or ought to be. or how they are established. First are the ends to be obtained. the ways in which resources that have been deployed are actually used or employed. Strategy is concerned with how you will achieve your aims. Third are tactics. 4. Strategy is about means. If strategy has any meaning at all. Fourth and last are the resources themselves. the means at our disposal. 3. The specification of ends is a matter of stating those future conditions and circumstances toward which effort is to be devoted until such time as those ends are obtained. it is only in relation to some aim or end in view. the ways in which resources will be deployed. Second are the strategies for obtaining them.

Determining the ends of an enterprise is mainly a matter of governance not management and. ethical and that they benefit the enterprise and its members. conversely.Some Concluding Remarks -2 5. Ulhas D Wadivkar 42 . 6. Those who govern are responsible for seeing to it that the ends of the enterprise are clear to the people who manages that enterprise and that these ends are legitimate. Establishing the aims or ends of an enterprise is a matter of policy and the root words there are both Greek: politeia and polites—the state and the people. achieving them is mostly a matter of management not governance.

Ulhas D Wadivkar 43 . Strategy is the joint province of those who govern and those who manage. in light of intended results. Tactics belong to those who manage. And thus it is that strategy is an adaptive.3 7. Those who manage are responsible for the employment of those resources—but always in the context of the ends sought and the strategy for their achievement. shape the future deployment of resources. evolving view of what is required to obtain the ends in view. the employment of resources yields actual results and these. Those who govern and manage are jointly responsible for the deployment of resources.Some Concluding Remarks . 8 Over the time. Means or resources are jointly controlled. Thus it is that "realized" strategy emerges from the pattern of actions and decisions.

E) F) Coordinated and committed leadership. measurable objectives. G) Security: the organisation should secure & develop resources required. D) Flexibility must be built in use of resources.Criteria for Effective Strategy A) B) Clear. C) Concentration on what will make the enterprise superior in power. Surprise the opponent by use of speed. decisive. Maintaining the initiative proactively. manoeuvrability and repositioning. reserved capabilities. securely maintain all vital operating points for the enterprise. secrecy and intelligence. Ulhas D Wadivkar 44 . buffers. an effective intelligence system to prevent effects of surprise by the competitors.

• We can see some companies like Jessops. • The basic factor responsible is not the Government or infrastructure or labour relations. 3. 1. Companies must have clear Strategies & must implement them effectively so as to survive. Efficient strategy formation and implementation result into financial benefits to the organisation in the form of Ulhas D Wadivkar 45 increased profits. Infosys have become market leaders. Martin Burn have become extinct and some companies like Reliance. management develops capacity to be flexible to meet unanticipated changes. 4. It allows the firm to deal with a new trend and meet competition in the effective manner. but the Strategic thinking that different companies have shown in conducting the business. . With the help of strategy. 2.Importance of Strategy • Modern era witnesses the tremendous increase in the External Threats. Strategy helps an organisation to take decisions on long range forecasts.

It gets managers into habit of thinking. 8. 9. Strategy formulation & implementation gives opportunity to the management to involve different of management in the process. It provides motivation to employees as they can shape their work in the context of shared corporate goals and make them work for achieving these goals. 7. allocation 46 .Importance of Strategy -2 5. 6. makes them proactive and more conscious of their environment. Strategy provides focus in terms of organisational objectives and provides clarity of direction for achieving the objectives. coordination and Ulhas D Wadivkarof resources. It improves Corporate communication. 10. Strategy contributes towards organisational effectiveness by providing satisfaction to the personnel.

Actions to diversify the Company’s revenue & earnings by entering into new business Actions to respond changing market conditions and other external circumstances Actions to strengthen competitive capabilities & correct competitive weaknesses The Pattern of Actions & Business Approaches that define a Company’s Strategy Actions to enter new geographic or product markets or exit existing market Actions & approaches that define how the company manages. wider production selection etc. research & development. more performance features. more appealing design. better quality or customer service. finance & other key activities Ulhas D Wadivkar Efforts to pursue new market opportunities & defend against threats to the Company’s well-being Actions to form Strategic alliances & collaborative partnerships Actions to merge with or acquire rival companies. sales & marketing.Identifying a Company’s Strategy – What to look For: Actions to gain sales & Market share via lower prices. production. 47 .

and corporate missions.C Business level Functional Finance Marketing Operations Functional Level Ulhas D Wadivkar Personnel Information 48 . It gives direction to corporate values. Strategic management is the highest in the sense that it is the broadest. corporate culture. applying to all parts of the firm.B SBU .A SBU .The Strategy Hierarchy • In most (large) corporations there are several levels of strategy. corporate goals. Under this broad corporate strategy there are often functional or business unit strategies Different Levels of Strategy Levels Corporate Structure Strategy Corporate Level Corporate Office SBU SBU .

hiring decisions. Each SBU is responsible for developing its business strategies. as well as the competitive advantage of the corporation as a whole • Business Strategy for Strategic Business Units: One for each business. • Business & Corporate Strategy • Business strategy. The levels involved are CEO and other Senior Executives. the company has diversified into. It is usually responsible for its own budgeting. • Corporate strategy. strategies that must be in tune with broader corporate Ulhas D Wadivkar 49 strategies . Such corporate strategy answers the questions of "in which businesses should we compete?" and "how does being in one business add to the competitive advantage of another portfolio firm. Executed by General Mangers. An SBU is treated as an internal profit centre by corporate headquarters. A Strategic Business Unit is a semi-autonomous unit within an organization. refers to the way in which a firm competes in its chosen arenas. which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation. • Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have re –engineered according to processes or strategic business units (called SBUs). Division heads of each business with inputs from Corporate and Functional levels.• Corporate Strategy: The companywide game plan for managing a set of businesses. new product decisions. then. refers to the overarching strategy of the diversified firm. Plant Heads. Actions to build competitive capabilities and strengthen market position. and price setting.

and hence to some extent their strategies are derived from broader Corporate & Business strategies. ‗Operating Managers‘. Legal strategies. are informed to corporate level strategies. • Operational Strategy • The ―lowest‖ level of strategy is operational strategy. At this level. Human resource strategies. The emphasis is on short and medium term plans and is limited to the domain of each department‘s functional responsibility and is executed by Functional heads. ‗Plant managers‘. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. and Information technology management strategies. Ulhas D Wadivkar 50 . Operational level strategy was encouraged by Peter Drucker in his theory of Management By Objectives (MBO). Each functional department attempts to do its part in meeting overall corporate objectives. Web site operations. Financial strategies. Important activities like Advertising. New product development strategies.• Functional Strategies • Functional strategies include Marketing Strategies. Operational level strategies are informed to business level strategies which. distributions are involved at this level. Supply-chain strategies. It must operate within a budget but is not at liberty to adjust or create that budget. These strategies are executed by ‗Brand Managers‘. in turn. detailing is done to add completeness to Business & Functional Strategies.

• In a limited sense. Strategic divisions are thought to hamper this process.Their Roles & Levels: • Strategists are individuals or groups who are primarily involved in the formulation. and evaluation of Strategy. there has been a tendency in some firms to revert to a simpler strategic structure. But we may have outside agencies involved in various aspects of Strategic Management. as necessarily embracing ongoing strategic change. and the seamless integration of strategy formulation and implementation. all managers are Strategists. Such change and implementation are usually built into the strategy through the staging and pacing facets. Most recently. This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy. implementation. both business and corporate. D Wadivkar 51 also . It is felt that Knowledge Management Systems should be used to share information and create common goals.• Dynamic Strategy • Since the turn of the millennium. This is being driven by information technology. popularized by the strategic management textbook authored by Carpenter and Sanders. • Strategists . this notion of strategy has been captured under the rubric of Dynamic Strategy. who are Ulhas Strategists.

CEO plays a pivotal role in setting mission. establishing objectives & strategy. He is different from formal system and plays all strategic roles simultaneously. monitoring and reviewing achievement. He has to play a proactive role to provide sense of direction.Board is an ultimate legal authority of an organisation. and appointing senior executives. objectives and goals. Board is involved in setting strategic direction. He formulates and implements strategy and ensures that organisation does not deviate from a predetermined path. business and organisational implications. government. is a venture capitalist. Board is requires to direct and is involved in reviewing and screening executive decisions in light of their environmental. and financial the person who starts a new business. They get elected and appointed by holding or parent company. Role of Board of Directors is to guide the senior management in setting and accomplishing objectives. Chief Executive Officer:. CEO is primarily responsible for strategic management of the organisation Entrepreneur:.• • • Board of Directors:. set objectives and formulate strategies. share holders. reviewing and evaluating organisational responsible for all aspects of strategic management from the formulation to evaluation of strategy. Board is responsible to owners. Ulhas D Wadivkar 52 . controlling agencies.

provides administrative support and plays a measurement and controlling absence of a Corporate planning many organisation take an outside help in the form of a consultants or consulting companies. Ulhas D Wadivkar 53 . task forces. outsider. SBU level Executives:. unbiased and provide objective evaluation. work groups. Besides providing corporate strategy and strategic planning. Mckinsey etc. They do not from strategy and do not initiate a process on their own. they are specialist.SBUs are formed with each business having a clearly defined product – market segment and a unique strategy. think tanks and play a very important role in Strategic management. knowledgeable.• • • • Senior management:. E. AF Ferguson. They are responsible for implementing the strategies and plans and for a periodic evaluation of their performance. KPMG. Corporate Planning:. Billimoria. implementation and evaluation. Consultants:. They are CEOs for their SBUs and hence SBU level strategy formulation and implementation is their main role. Organisationally they come together in the form of committees.consists of higher management level starting from CEO to functional managers and profit centre or SBU heads.g.It assists management in all aspects of strategy formulation. They are responsible for preparation and communication of strategic plans. PWC.

He is a corporate planner for CEO. he orients from finance background ensuring and opining on ROI and strategic positioning of the organisation. followers of guide lines. They are implementers. receivers of communication about strategic plans. Ulhas D Wadivkar 54 • . goals and objective statements of the organisation. and projects.• Middle Level Managers:. They form departmental / functional plan in light of broad objectives and goals of organisation provided in vision. He coordinates activities with the internal staff and outsiders.An executive assistant is a person who assists the chief executive in the performance of his duties like data collection and analysis. They are basically involved in in the implementation of functional strategies. Generally. suggesting alternatives. He prepares brief for various plans.They relate to operational matters and are seldom play active role in Strategic Management. proposals. He helps in public relations and liaison functions. Executive Assistant:. mission.

Strategy focuses efforts. but defining it too sharply results in the rich complexity of the system being lost. Strategy provides consistency. Strategy defines the organization. It is described in a series of tests: Consistency: The strategy must not present mutually inconsistent goals and policies.• • • • • We will now look at a framework developed by Richard Rumlet for evaluating alternative strategies. but could hinder creativity. Feasibility: The strategy must neither overtax available resources nor create unsolvable sub-problems We shall now look into the advantages and disadvantages of the strategy: • • • • Strategy sets direction. but can also serve as a set of blinders to hide potential dangers. there may be no peripheral vision and can become heavily embedded into the fabric of the organization. Advantage: The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity. Ulhas D Wadivkar 55 . Consonance: The strategy must represent an adaptive response to the external environment and to the critical changes occurring within it.

Joint Ventures.1) Concentration.1) No Change Strategy. a. b. Global Strategy. Trans-national Strategy. b) Expansion Strategy: Main aim is here High Growth.2) Integration. International Strategy. b. a.5) Internationalisation.3) Pause / Proceed with caution Strategy. Ulhas D Wadivkar 56 . Mergers. b.3) Diversification. Strategic Alliances. Multi-domestic Strategy. b. a.2) Profit Strategy. b. Takeovers.Kinds of Corporate Strategy -1 • There are four Grand Strategic alternatives: a) Stability Strategy: Main aim here is Stabilising and improving Functional Performance.4) Cooperation.

c.1) Compulsory winding up.2) Voluntary winding up. c. It is done through Turnaround.Kinds of Corporate Strategy . divestment and liquidation in modes like c.3) Winding up under supervision of Court. ii) TT industries and Textiles Ltd.. iv) TTK maps and publications into the general publishing business after a turn-around. d) Combination Strategies: It is combination of all above three policies simultaneously in different businesses or at different times.2 c) Retrenchment Strategy: Main aim here is contraction of its activities. Ulhas D Wadivkar 57 . diversified into cooking utensils. iii) TTK Ltd.: i) Merger of TTK Chemicals with TTK pharma. expanded through JV. e.g.

3.Schools of Thought on Strategy Formation-1 • The fourth paradigm (1980 onwards) says that subject of Strategic Management is still under evolution. Strategic decision making is at the core of Managerial activity. Design School-(Sleznic & Andrews): Strategy is unique. . Planning School-(Ansoff): Strategy is seen as a plan divided into sub-strategies and programmes. The Positioning School-(Schendel –Hatten & Porter): Under this school Strategy is seen as set of planned generic positions chosen by a firm on the basis of an analysis of the competition Ulhas D Wadivkar 58 and the industry in which they operate. The lead role in Strategy formation is played by Strategy Planners. The process of Strategy formation is based on Judgement and Thinking. • Mintzberg and other doyens in field of Strategy have formed various perspectives called as Schools of Thought: The Perspective Schools: 1. their Strategic behaviour is outcome of Formation of Strategy. 2.

Cognitive School -(Simon & March): Strategy formation is mental process.Schools of Thought on Strategy Formation-2 The Descriptive Schools: 4. 5. Entrepreneurial School -(Schumpeter & Cole): Strategy formation is mainly intuitive. Power School . 6. The process of Strategy formation is messy. .(Allison & Astley): Strategy is seen as political & cooperative process or pattern. visionary & deliberate. The process is informal and messy and lead role is played by the learner. Strategy is an outcome of a personal & unique perspective to create a niche. Learning School -(Weick. The lead role is played by thinker philosopher. emergent & Ulhas D Wadivkar 59 deliberate. 7. Senge & Lindblom): This school perceives Strategy formation as an emergent process. This school perceives Strategy formation as negotiation process. Quinn.

The process of Strategy formation is ideological. Environmental School -( Hanan. episodic & sequential. The Strategy is viewed in relation to a specific context and any of the nine schools mentioned above can be used to form the Process.Schools of Thought on Strategy Formation-3 8. constrained & deliberate. 9. passive & imposed and hence deliberate. The process of Strategy formation is reactive. Cultural School . Ulhas D Wadivkar 60 .(Rhenman & Normann): Strategy is seen as collective perspective. Miles & Snow): 10. Freeman & Pugh): The lead role in strategy formation is played by environment as an entity. The Strategy formation process is integrative. The Integrative School: -(Chandler.

Strategic Management is a Overview Definition of Strategic Management: Strategic management is defined as the dynamic process of formulation. iterative process. evolving. It is repeated over time as situation demands.Strategic Management Process . It is not rigid. implementation. evaluation and control of strategies to realise the Organisation’s Strategic intent. stepwise activities arranged in a sequential order. Establish Strategic Intent Formulation of Strategies Implementation of Strategies Strategic Evaluation Ulhas D Wadivkar Strategic Control 61 .

5. 2. Exercising Strategic Choice. Formulating the Corporate strategies. 7. 9. 8. SWOT Analysis. . Internal Appraisal of the firm. Setting Corporate Objectives. Creating & Communicating the Vision.Strategic Management Process-1 Strategic Intent: 1. 4. Preparing a Strategic Plan. Clarifying the business mission. Ulhas D Wadivkar 62 12. Designing a Mission Statement. Defining the Business. Adopting the Business Model. 3. External Environment Survey. 11. purpose & setting broad Objectives and Goals. Formulating the Corporate objectives. Formulation of Strategies: 6. 10.

Reformulating Strategies. 16. Ulhas D Wadivkar 63 . Performing Strategic evaluation & Control: 18. Exercising Strategic Control. Activating Strategies. 14. Managing Behavioural Implementation. Systems and processes. Managing Functional Implementations. 17. Operationalising Strategies. Designing Structure.Strategic Management Process-2 Implementation of Strategies: 13. Performing Strategic evaluation. 20. 19. 15.

objectives and goals – Stakeholders in business and their roles in strategic management – Corporate Social Responsibility. Strategic Intent & Strategy Formulation: Vision. mission and purpose – Business definition.Syllabus 2. Ethical and Social considerations in Strategy (4) -------------------------------------------------------------- Ulhas D Wadivkar 64 .

• Strategic Intent refers to the purposes the Organisation strives for.Strategic Intent • Strategic Intent is combination of four levels in the Management. The intent encourages individual and team contributions and attempts sustaining enthusiasm by providing new operational definitions. The Strategic Intent guides the organisation through changing circumstances and guides use of resource allocations. it encompasses active Management Process that includes focussing the organisation‟s attention on winning. • Strategic Intent envisions a desired leadership positioning and establishes the criterion the Organisation will use for charting its progress. adopt a predetermined direction. It covers motivating the people by communicating the values. targets. Business Definition & Goals and Objectives. Ulhas D Wadivkar 65 . Mission. and attempt to achieve the Goals. • Strategic Intent lays down the frame work within which firms would operate. It involves discussions of Vision. • Hamel & Prahalad considered Strategic Intent as an obsession with an Organisation. In addition to ambitions of the Organisation.

an activity) in future‖.Strategy FormulationVision. (an organisation. corporate culture. • Kotter(1990) defines Vision as ― a description of an enterprise. or an organisation. Vision Statement is permanent statement of a company. a business. The essence of a vision is forward looking view of what an organisation wishes to become. Vision is future aspirations that lead to an inspiration. • El-namaki(1992) defines vision as a ―mental perception of the kind of environment an individual. aspires to create within a broad time horizon and underlying conditions for the actualisation of this perception‖ • Miller and Dess(1996) defines vision as ―category of intentions that are broad. • The vision of a company is a direction for action for employees. all inclusive. It defines the very purpose of existence of a company. Mission and Purpose. and forward thinking‖ Ulhas D Wadivkar 66 . a technology. • A vision is more dreamt of than it is.

67 Ulhas D Wadivkar .Characteristics of a Vision Statement • • Inspiring and exhilarating. It represents. excited. A vision should stretch the organization‘s capabilities and image of itself. a discontinuity. original and unique and practical. Foster long term thinking. a jump ahead to dream what it is to be. It should resonate with all members of the organization and help them feel proud. Visions range in length from a couple of words to several pages. Creation of common identity and share sense of purpose. and part of something much bigger than themselves. Foster risk taking and experimentation. a step. • • • • • • • • • A vision is a statement about what your organization wants to become. Competitive. Shorter vision statements is recommended because people will tend to remember their shorter organizational vision. It gives shape and direction to the organization‘s future.

knowledge based and happy organisation. We will establish ourselves as a supplier of choice by delighting our customers with our service and products." (HR Association of Greater Detroit) • Vision Statement of “TATA STEEL” ―TATA Steel enters the new millennium with the confidence of learning. • Vision Statement of Farm Fresh Produce • “We help the families of Main Town live happier and healthier lives by providing the freshest.Vision Statement • Vision Statement Samples: • "Year after year.” Ulhas D Wadivkar 68 ." (Westin Hotels) • "To be recognized and respected as one of the premier associations of HR Professionals. Westin and its people will be regarded as the best and most sought after hotel and resort management group in North America. tastiest and most nutritious local produce: From local farms to your table in under 24 hours. we will become the most cost competitive steel plant and so serve the community and the nation‖. In the coming decade.

the vision has become more of a motivational tool. divergent experiences around daydreams.. Developing a vision statement can be quick culture-specific. a very attractive image toward which the organization was attracted and guided by the strategic plan..Developing a Vision Statement • • The vision statement includes vivid description of the organization as it effectively carries out its operations. visit with the participants how they might like to arrive at description of their organizational vision. focused discussions. participants may use methods ranging from highly analytical and rational to highly creative and divergent. etc.g. i. i. but the part where time easily gets away from you Note that originally.. 69 • • Ulhas D Wadivkar . too often including highly idealistic phrasing and activities which the organization cannot realistically aspire. Developing the vision can be the most enjoyable part of planning. sharing stories.e.e. e. Recently. the vision was a compelling description of the state and function of the organization once it had implemented the strategic plan. Therefore.

the customer groups and market segments it is endeavouring to serve. It culminates in to a Mission Statement. Ulhas D Wadivkar 70 . Strategic Vision points an Organisation in a particular direction. and the resources and technologies that it is deploying in trying to please customers and achieve a Market and Industry position. charts a strategic path to follow for future and moulds the organisation‘s identity. It defines Company‘s destination and provides rational for going there. • A company Mission is guided by the buyer‘s needs it seeks to satisfy. where as Mission Statement deals with Company‘s present business scope and purpose.Strategic Vision • Strategic Vision is a road map showing the route a company intends to take in developing and strengthening the business. • Strategic Vision is different from Mission Statement: Strategic Vision deals with where we are going.

• ―DELIVER‖ an award-winning level of journalistic excellence." Ulhas D Wadivkar 71 . building public interest. • ―PROVIDE‖ vigorous community leadership and support. • ―EMPOWER‖ and recognize each employee's unique contribution. • ―ACHIEVE‖ the highest standards of quality.Example of Strategic Vision • ―The San Antonio Express News‖ developed this Strategic Vision. • ―IMPROVE‖ financial strength and profitability. • "EXPAND‖ our customer base and enhance the franchise by pursuing multimedia opportunities. • ―INSTILL‖ an environment of internal and external excellence in customer service. trust and pride.

why it is in existence.Mission • Thompson(1997) defines Mission as ―the essential purpose of the organisation. • Mission of organisation is what it is and why it exists. It represents common purpose which the entire organisation shares and pursues. It is a guiding principle. the nature of businesses it is in. • A business mission helps to evolve an executive action. concerning particularly. Ulhas D Wadivkar 72 . and the customers it seeks to serve and satisfy‖ • Hunger and Wheelen(1999) say that ―mission is the purpose and reason for the organisation‘s existence‖ • Mission statements could be formulated on the basis of vision that an entrepreneur decides on in the initial stages.

It includes a methodology of attaining the desired goal in vision. It defines the competitive strength of a company and it emanates from corporate vision and strategic posture of a company. • Mission is statement which defines the role of organisation plays in a society. • The corporate mission is growth ambition of the firm.Mission Statement • Mission of a company is expressed it terms of products and geographical scope. a build-up philosophy of its current and future expected position with regards to its products. market leadership. • Thus the mission of a business is a statement. Ulhas D Wadivkar 73 .

3. It should focus Market Rather than Product. 7. 5. 6. It should be clear & It should be distinctive. It should be feasible. It should be indicative of how objectives are to be accomplished. It should be indicative of major component of strategy & Objectives. It should be motivating. achievable & It should be precise. Ulhas D Wadivkar 74 . 2. 4.Mission Characteristics of a Mission Statement 1. It should be indicative of how Policies will be achieved.

measures and desired result. This is the idea or approach that will make your organization stand out from its competitors. which expresses your ideas. • Next identify the key measures of your success. and is the reason that customers will come to you and not your competitors.Mission Statement Creation • To create your mission statement. Ulhas D Wadivkar 75 . Make sure you choose the most important measures (and not too many of them!) • Combine your winning idea and success measures into a tangible and measurable goal. first identify your organization‘s ―winning idea‖. • Refine the words until you have a concise and precise statement of your mission.

visit with the participants how they might like to arrive at description of their organizational mission. Developing a mission statement can be quick culturespecific. consider the organization's products.g. If the organization elects to develop a vision statement before developing the mission statement. etc.Developing a Mission Statement 1. Ulhas D Wadivkar . e. and concern for public image. and maybe priorities of activities for survival.. sharing stories. Therefore. ask ―Why does the image.e. services.what is it‘s purpose?‖ This purpose is often the same as the mission.. At is most basic. markets. divergent experiences around daydreams. 2. the mission statement describes the overall purpose of the organization. 76 3. participants may use methods ranging from highly analytical and rational to highly creative and divergent. focused discussions. values. i. When wording the mission statement. 4. the vision exist -.

Does the mission statement include sufficient description that the statement clearly separates the mission of the organization from other organizations? 77 6. Ulhas D Wadivkar .Mission Statements 5. a useful exercise is to add or delete a word from the mission to realize the change in scope of the mission statement and assess how concise is its wording. 8. Ensure that wording of the mission is to the extent that management and employees can infer some order of priorities in how products and services are delivered. 7. Consider any changes that may be needed in wording of the mission statement because of any new suggested strategies during a recent strategic planning process. When refining the mission.

from farm to customer in under 24 hours on 75% of our range and with 98% customer satisfaction." (IBM) • "To give ordinary folk the chance to buy the same thing as rich people. We want to be the best service organization in the world.• Mission Statement of Ranabaxy ―To become a $ 1 Billion research based global (International) pharmaceutical company‖ • Mission Statement of Graphite India Limited ―To be within top three companies in the world by achieving 1.” • "Our goal is simply stated." (Wal-Mart) Ulhas D Wadivkar 78 .000 MT Production of Graphite Electrodes before 2012‖ • The mission statement of Farm Fresh Produce is: “To become the number one produce store in Main Street by selling the highest quality. freshest farm produce.00.

partners." (Federal Express) • "Our mission is to earn the loyalty of Saturn owners and grow our family by developing and marketing U. cost. quality and growth Ulhas D Wadivkar 79 goals are met. our Mission must be to exceed the expectations of our customers. and customer enthusiasm through the integration of people." (Saturn) • "In order to realize our Vision. competitively superior. (strategy) In this way we will ensure that our profit. technology. and business systems. whom we define as guests.Mission Statements • "FedEx is committed to our People-Service-Profit Philosophy." (Westin Hotels and Resorts) . global. with extraordinary emphasis on the creation of value. time-certain delivery. We will produce outstanding financial returns by providing totally reliable. (mission) We will accomplish this by committing to our shared values and by achieving the highest levels of customer satisfaction. air-ground transportation of high-priority goods and documents that require rapid.S.-manufactured vehicles that are world leaders in quality. and fellow employees.

) • Value statements are grounded in values and define how people want to behave with each other in the organization. they represent an individual‘s highest priorities and deeply held driving forces. They are statements about how the organization will value customers. and the internal community. (Values are also known as core values and as governing values. Value statements describe actions which are the living enactment of the fundamental values held by most individuals within the organization. Ulhas D Wadivkar 80 . suppliers.Values • Values are traits or qualities that are considered worthwhile. they all refer to the same sentiment.

Ulhas D Wadivkar 81 . along with their experience. It is necessary to take the time to identify what is most important to you and to your organization. if you are truly living your values. and so on. These leaders have a lot of power in your organization to set the course and environment and they have selected the staff for your workplace. • If you think about your own life.Values • The values of each of the individuals in your workplace. The values of your senior leaders are especially important in the development of your culture. upbringing. They define where you spend your time. your values form the cornerstones for all you do and accomplish. held together to form your corporate culture. Each of you makes choices in life according to your most important top ‗ten‘ values.

• Developing a Values Statement Values represent the core priorities in the organization‘s culture. Consider values of customers. Ulhas D Wadivkar 82 . divergent experiences around daydreams. visit with the participants how they might like to arrive at description of their organizational values. participants may use methods ranging from highly analytical and rational to highly creative and divergent. employees and the community.g. Developing a values statement can be quick culturespecific. including what drives members‘ priorities and how they truly act in the organization. shareholders... etc. sharing stories. • • Establish four to six core values from which the organization would like to operate. e. i. They often drive the intent and direction for ―organic‖ planners. etc. Values are increasingly important in strategic planning. Therefore. focused discussions.e.

Ulhas D Wadivkar 83 . actions to align actual behaviours with preferred behaviours. but hardly enacted (ranked with a 1). • Incorporate into the strategic plan. Record each preferred value on a flash card. Then address discrepancies where a value is highly preferred (ranked with a 3). then have each member ―rank‖ the values with 1. Then go through the cards again to rank how people think the values are actually being enacted in the organization with 3 indicating the values are fully enacted and 1 indicating the value is hardly reflected at all.Developing a Values Statement • Notice any differences between the organization‘s preferred values and its true values (the values actually reflected by members‘ behaviours in the organization). 2. or 3 in terms of the priority needed by the organization with 3 indicating the value is very important to the organization and 1 is least important.

motivation and performance of our Ulhas D Wadivkarare the key factors in achieving our success. In discharging our responsibilities. • "At Merck." • Patriot Ledger (SouthofBoston.Samples of Values and Value Statements • "To preserve and improve human life. We are responsible to our customers.. • We recognize that the quality. Every Merck employee is responsible for adhering to business practices that are in accordance with the letter and spirit of the applicable laws and with ethical principles that reflect the highest standards of corporate and individual behaviour. we are committed to the highest standards of ethics and integrity. • Our employees are the most valued assets of our company. "corporate conduct is inseparable from the conduct of individual employees in the performance of their work. and to the societies we serve "We have a total commitment to these values. essential participants with a shared responsibility in fulfilling our mission." (Merck) At Merck. our customers and our company. to Merck employees and their families. we do not take professional or ethical shortcuts. to the environments we inhibit. Our interactions with all segments of society must reflect the high standards we profess. 84 employees .. shaping the way we do business for our employees.

and so forth. Make action plans as detailed as you need them to be and integrate the individual steps into your planning system. Plan advertising strategies. Select topics based on member needs assessment. Goals should be S M A R T : Specific. Determine budget. Objectives and Action Plans After you have developed the key strategies. a paper and pen system. Measurable. Realistic and Time-based. you will want to develop action plans to accomplish each goal.• • • • • • • Goals. will keep your goals and action plans on track and on target. Once you have enabled strategy accomplishment through setting SMART Goals. whether it uses a personal computer. You will need to follow an action plan: Establish a cross section of professionals as a committee and meet to plan the sessions. Achievable. a handheld computer or a Palm. An effective planning system. Ulhas D Wadivkar 85 . turn your attention to developing several goals that will enable you to accomplish each of your strategies.

. • : Customer Service 86 • Ulhas D Wadivkar : Social Responsibility. Objectives could be • : Profitability • : Markets • : Productivity • : Innovation • : Product • : Financial Resources • : Physical facilities • : Organisation Structure & Activities • : Manager Performance & Development • : Employee performance & Activities.Areas of Objectives • Objectives represent managerial commitment to achieve specific results in specific period of time.

―Customer Groups‖ and ―Alternative technologies‖. Mission Statement provides the basic inputs for Business definition and provides a broad frame work. • Defining Customer functions and Customer groups provides Blue Print and a reference point for Product-market strategy. • Business Definition sets and limits the contours of the business.Defining the business • A clear-cut statement of the business. • What is our business? What will it be? What should it be? • Defining business involves three dimensions. It clarifies the opportunities business can pursue and the areas in which these opportunities are to be looked for. the firm is engaged in or planning to enter. It clarifies to the firm the various sources from which threats and competition will come for. Ulhas D Wadivkar 87 . It is elaboration of the business arena and the boundaries in which it will play. namely ―Customer Functions‖.

Strategy.Objectives of Business Policy: • Understand various concepts. • Development of analytical ability to understand situation. Ulhas D Wadivkar 88 . weakness. opportunities and threats to organisation. like. policies. • Knowledge of internal and external environment and how it affects the functioning of the organisation. • Application of generalised approach to deal with wide variety of situations. Identify factors relevant to decision making. Analyse strength. programmes. plans. Development of attitude of generalist and asses a situation from all angles.

We will pursue ideas that would generate products enhancing beauty and youthfulness of men and women. Customer Function: Availability of spares. marketing services of maintenance and per copy price. Drums. Customer focus: Office Communication with high priced and low priced equipments. Intel: We are in the business of computing technology and to consistently develop the artifice/building blocks of computing technology for the entire computer industry of the world is our business. Toner. good after sales service. Ulhas D Wadivkar 89 . Technology: Collaboration with ―Rank Zerox‖ Helen Curtice: We are in beauty enriching business.Some Business definitions: Modi Zerox : Focus as a service organisation rather than vendor of zerox machines.

beyond the immediate competitors. Business boundaries keep changing and defining Business is a dynamic situation and becomes an exacting exercise and it needs to be re-casted over time again and again. A wrong and or narrow concept could reduce the life span of organisation. It must encompass in its fold. beyond the immediate market boundaries. It must go beyond the immediate product. substitute products. as many related function / benefits as possible. It must be related to the functions performed by the product and not limited to just the product. 90 Ulhas D Wadivkar . It must be wide enough to embrace new opportunities. It must be related to basic benefits the product offers. It must be wide enough to give a vision of latent sources of competition from say. It should not be narrow.• • • • • • • • • Attributes of a good business definition: It must be related to human needs which the product seeks to satisfy and should not be limited to just the product.

Ulhas D Wadivkar 91 . Managers understand the impact of policy shifts on the status of one‘s department and on the positions one occupies. Business Policy cuts across the narrow functional boundaries.Benefits of Business Policy • Business Policy seeks to integrate the knowledge and experience gained in various functional areas of Management. • Understanding Business Policy provides a basic framework for understanding strategic decision making and Improvement in Job Performance. • Managers become more receptive to the ideas and suggestions of senior Management. Normally functional areas are aloof of complexities of real life business situations. Managers feel themselves to be a part of a greater design. • Study of business policy leads to personal development. Business Policy helps us to create an understanding of how policies are formulated. • Understanding Business Policy enables manger to avail the an opportunity or avoid a risk to career planning and development • Understand senior management‘s view point.

However. others boast around it.Social Responsibility & Strategic Management • Social Responsibility along with ethics becomes a stated or un-stated requirement. • Presently. sports etc. • Social Responsibility extends beyond the workforce and stakeholders and many business houses take up activities for community welfare. while some do not want it to be considered in business operations. rural development. it has become a necessity to address the mode and means of delivering social responsibility. Ulhas D Wadivkar 92 . It gets attended in Strategic Planning through environmental appraisals. It has differing views. with ISO:14001:2004 which concerns Environment Management Systems. most business houses observe a balance and undertake to deliver social responsibility and business objectives without contradicting each other.

and breadth of activity.Social Responsibility • Scope of Social Responsibility is defined in terms of Social concern. nation. • Like any other strategic functions. local community. for successful implementation. size. create Organisations Structure and evaluate its effectiveness. could extend social responsiveness to the problems of the whole world. the society in large remains a major stake holder and we cannot escape our dues to society and towards social responsibility. industry and to itself. Business organisation depending on its nature. Business organisations could also classify Social Responsibilities in terms of relatedness to its own activities. Organisations need to allocate resources. But all said and done. Ulhas D Wadivkar 93 .

Business owes responsibility towards society.Corporate Governance : Social Responsibility • Business provides goods & services to Society for which it receives the price. •Society provides goods and services to Business for which it receives the price. Society Business Ulhas D Wadivkar 94 . A firm carrying very positive image in society has very strong probability of lasting growth. •Business rewards to society for its inputs by paying wages/profits/dividends •Society and Business are interdependent. Their growth & welfare is dependent on this mutuality.

reasonable prices is minimum requirement. employees. etc. Industrial Corporate Citizens are trustees and should utilise their wealth for the welfare of the society / community. Every business unit of the country must aim at becoming good corporate citizen of the country and the world as whole. government.• • • • Corporate Governance : Social Responsibility ―Sole aim of a business is and should be maximisation of Shareholders‘ value‖. Birlas. Bajaj. L&T. Trusteeship invokes code of discipline. Indian examples are Tatas. All modern large corporate have attained their present size due to support of society in terms of shareholders. lenders. ethical behaviour and strong principle of accountability. as stated by Milton Friedman. country and world. local community and society at large. Reddy Laboratories. Reliance. Capital and Labour have to have mutual. suppliers. With this companies would enjoy excellent image within area. does not hold good anymore. peaceful co-existence. TCS. Hero Honda. Ulhas D Wadivkar 95 . HDFC. Dr. World Class Quality of goods and services.

Ulhas D Wadivkar 96 . Many of them provide non-core social activities for benefit of society in quest of their becoming good Corporate Citizens.Corporate Governance : Social Responsibility • Common feature they all posses is their image not only as value creator but more as Top Class Corporate citizen of India and of the world. men and skills. society as a market for their outputs and realise that they cannot exist without unreserved support from Society. the better it is able to solve its own problem of growth and prosperity. They are asset to the share holders. The more closely a company concentrates on solving societal problems. • They realise their dependence on Society for their needed inputs like money. country and society at large by creating world class products at competitive prices and price and providing these products to society at desired time and space.

Narayan Murthy are paving the way towards social responsibilities. • Social Responsibilities have foundation of Business Ethics. Capital being trustees should look after welfare of labour not only material but also moral welfare. The trick is to put your-self in shoes of those. the moral principles of good & bad. which is known as empathy. Capital should look after the workers and workers should look after productivity and profit of the organisation. Presently.Corporate Governance : Social Responsibility • Capital and labour should supplement and assist each other. . right & wrong or Just & unjust. Peter Drucker has stated that there are no separate ethics of business. The concept of Business ethics is global phenomenon and is recognised 97 Ulhas D Wadivkar throughout the world. capital has been replaced by knowledge in newer industries like IT & Pharma. Principle of mutually cherishing each other should be developed. Corporate ethics refers to set of rules. code of conduct acceptable to society at large without any reservations. What is unethical and immoral in society is also applicable to business. against whom a particular action is being planned / taken. Knowledge workers (professionals) like Bill Gates.

c) Treat all stakeholders fairly and with respect d) Protect and promote the Environment and Community interests Ulhas D Wadivkar 98 . • Business should be conducted in a manner that earns the goodwill of all concerned through Quality.Corporate Governance : Social Responsibility • Code of Ethics for Indian Business (by PHD Chambers) • It is believed that the best way to promote high standards of business practice is through self regulation. efficiency. b) Be responsive to customer need and concerns. transparency & good values with objectives as under: • a) Be faithful and realistic in stating claims.

For example. A corporate stakeholder is a party that affects or can be affected by the actions of the business as a whole. Shareholders. Customers. Although stake-holding is usually self-legitimizing (those who Judge themselves to be stakeholders are de facto so). Suppliers. all stakeholders are not equal and different stakeholders are entitled to different Considerations. and Policies. Objectives.• • • • • • Stakeholder Definition Stakeholders are defined as "those groups without whose support the organization would cease to exist. or Organization that has direct or indirect Stake in an organization because it can affect or be affected by the Organisation‘s actions. Government (and its Agencies) Owners. Unions. Ulhas D Wadivkar 99 . and the Community from which the business draws its Resources. Directors. Employees. a firm's customers are entitled to fair trading practices but they are not entitled to the same consideration as the firm's employees. Key stakeholders in a Business Organization include Creditors. Group. Person.

Ulhas D Wadivkar 100 .

suppliers.External Stakeholder : Definition: • Entities such as Customers. Lenders. bondholders. • "The stakeholders in a corporation are the individuals and constituencies that contribute. Suppliers. or the wider society which influence and are influenced by an Organisation but are not its 'internal part' • Stakeholder: Any party that has an interest in an organization. either voluntarily or involuntarily. employees." Ulhas D Wadivkar 101 . customers. and that are therefore its beneficiaries and/or risk bearers. Stakeholders of a company include stockholders. to its potential wealth-creating capacity and activities. and so forth.

A Stakeholder usually stands to gain or lose depending on the decisions taken or policies implemented.Stakeholders • Any individual. such as a community development project or the delivery of local health services. a Stakeholder may also be concerned with the outcome of a specific project. a Stakeholder can be one of two types: internal (from within an organization) or external (outside of an organization). In general. employee. partner and/or supplier. Investor. customer. Ulhas D Wadivkar 102 . Other than traditional business. A Stakeholder may contribute directly or indirectly to an organization‘s business activities. among others. effort or activity. Shareholder. manager. Examples of a Stakeholder are an owner. A Stakeholder is typically concerned with an organization delivering intended results and meeting its financial objectives. group or business with a vested interest (a stake) in the success of an organization is considered to be a Stakeholder.

contractors. suppliers. owners. • A participant in a community mobilization effort.*People who are (or might be) affected by any action taken by an organization or group. and religious leaders are all examples of local stakeholders Ulhas D Wadivkar 103 . • An individual or group with an interest in a group's or an organization's success in delivering intended results and in maintaining the viability of the group or the organization's product and/or service. customers. pollution prevention. associates. governmental entity. chamber of commerce representatives. etc. neighbourhood advisory council members. Examples are parents. energy conservation. and services. or individual that has a stake in or may be impacted by a given approach to environmental regulation. elected officials. Stakeholders influence programs. In the Private Sector. partners. children. • Any organization. environmental organizations. people that are related or located near by. School board members. employees. products. Any group or individual who can affect or who is affected by achievement of a group's objectives. representing a particular segment of society.Types of stakeholders • People who will be affected by an endeavour and can influence it but who are not directly involved with doing the work.

VAT. Low unemployment Performance. Environmental issues. Growth Rates of pay. Legislation. Quality. Shares 104 Trade Unions Customers Creditors Local Community Ulhas D Wadivkar . Legal requirements Value. Involvement. New contracts. Job Security Working conditions. Minimum Wages. Targets. Ethical products Credit score. Performance. Liquidity Jobs. Direction Taxation.Examples of a company stakeholders Stakeholder Owners private/shareholders Government Senior Management staff Non-Managerial staff Examples of interests Profit. Customer Care.

(4) Ulhas D Wadivkar 105 . Strategic analysis: • Analyzing Company‘s Resources and Competitive Position• Organizational Capability Profile – • Strategic Advantage Profile – • Core Competence – Distinctive competitiveness.Syllabus: 3.

Porter argues that competitive strategy is "about being different. • In his earlier book. "It means deliberately choosing a different set of activities to deliver a unique mix of value―.) Ulhas D Wadivkar 106 . • In short. Porter argues that strategy is about competitive position. about adding value through a mix of activities different from those used by competitors. Porter defines competitive strategy as "a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there. not about strategy in general. about differentiating yourself in the eyes of the customer." He adds." Thus.Competitive Strategy According to Michael Porter • In a 1996 Harvard Business Review article and in an earlier book. Porter seems to embrace strategy as both plan and position. (It should be noted that Porter writes about competitive strategy.

Identification and Assessment of firm‟s Competitive Edge & Core Competencies
• A Competence is something an Organisation is good at doing. It results out of accumulated learning and built-up proficiencies. Examples are Proficiency in Merchandising, Working with Customers, Proficiency in specific technology, Proven capabilities. • A Core Competence is a proficiently performed activity that is central to the Organisation Strategy. These are important activities in which Company is better than other internal activities. Examples are : Good after sale service, Skills in Manufacturing, High quality product at low Cost. • A Core Competence is knowledge & skill based residing in people, and in Company‘s intellectual capital. (Does not appear in Balance Sheet)
Ulhas D Wadivkar 107

Distinctive Competence
• A Distinctive Competence is a competitively valuable activity that Company performs better than its rivals. It is Competitive superiority in performing Core activity generating competitively superior resource strength. • A strength that is superior / distinctive to competition is competitive advantage. • Competitive advantage is a back-up for strategy without which strategy will not work. • Competitive advantage finally results in either cost advantage or differentiation advantage. • Creating entry barrier is also a way to built up competitive advantage. • Building Competitive advantage is a conscious and long term process. • Preparing Competitive Advantage Profile for the organisation is based on internal appraisal and industrycompetition.
Ulhas D Wadivkar 108

Core Competency
An enduring competency that cannot be easily duplicated by imitation is Core Competency. Core Competency lies at the root of products. Techniques used are • • • •
Ulhas D Wadivkar

: SWOT Analysis : Bench marking : Value chain analysis : Value to customers – Competitive approach : Competitive strength assessment.

Internal Appraisal of the firm:
Purpose: 1. To know one‘s organisational capabilities, Strengths and Weaknesses. 2. To select the most suitable Opportunities as per already appraised capabilities. 3. To assess the ―Capability GAP‖ for the opportunity in hand and also for the Objectives and Goals. 4. To take steps to elevate the capability to achieve Objectives and Goals. 5. To select the Product / business in which organisation can grow as per potentials appraised. Factors considered for Internal Appraisal: • Assessment of the Strengths-Weaknesses in different functions/areas • Identification and assessment of firm‘s Competitive Edge and Core Competencies. • Appraisal of the individual business, product lines of the Ulhas D Wadivkar 110 firm and firm‘s know-how status.

Assessing strengths and weaknesses:
– 1. How well is the company‘s present Strategy working? Evaluate company‘s competitive approach. Compare cost effectiveness of the Company products with its rivals. Are we low cost? Or does our product have distinctive features? What value for money is offered to the customers? What is the perception of Customers about our Product and the Company. Core competencies, distinctive competencies are building blocks of Strategy. They give the strength. Similarly resource weaknesses make company vulnerable and need to be corrected. Strength allows Company to take advantage of opportunities and guard against threats. Check Value Chain analysis. Do we competitively manage value additions in Value chain? Are we competitively stronger or weaker than our key rivals?



Ulhas D Wadivkar

Main Functions:
• Check what strategic issues need managerial attention. Find out gaps and take remedial actions. Conduct Industry analysis and competitive situation analysis and prepare a ―worry list‖. Good company situation analysis, good industry & competitive analysis are valuable precondition for good strategy making.

• Marketing: Market growth, market share of the firm and its competitors, Production capacity and GAP between market potential, brand equity, Product‘s life cycle and estimating safe period. Customer‘s perception for the product and level of satisfaction there of. Synergy of the product-mix, Prices, margins, new product capability, Advertising, Sales promotion,
Ulhas D Wadivkar 112

Main Functions:
• Marketing audit: Market share analysis, Price-volume relationship, Cost analysis, Product line wise profits, Consumer satisfaction index, Brand monitoring surveys. • Finance: Level of financial performance – profitability and productivity, analysis of Assets & Costs, DSCR (debt service coverage ratio), analysis & efficiency of Cash flow, liquidity, Appreciation of long term financial plans as per Cost of capital, adequacy of Capital Expenditures, Tax administration, dynamism in Tax planning, payback, IRR & BE analysis, earning ratios like EPS, etc. • Manufacturing/Operations: Appropriateness of manufacturing processes, skills, facilities for future requirements of product trend. Management in planning and manufacturing controls. Operating efficiency w.r.t industry standards, Industrial Engineering capability for improving product and methods. Value engineering to simplify the product. Analysis of capacity utilisation, maintenance, breakdowns, inventory analysis, cost of Ulhas D Wadivkar analysis. 113 product

Main Functions:
• R & D: Commitment to R&D, nature & depth of R & D outfit, Allocation of resources, Speed of R & D, New product development-its records and adequacy, R & D and market needs, Analysis of patents generated, new product commercialisation, R & D expenses v/s new product launch. • Allocation of resources and Corporate Functions: chief characteristics of Top Management – Image as dynamic? Confident? Aggressive? Timid? Reticent? Change-stability oriented? Future oriented? Coping up with future challenges? Creative? Realistic? Innovation record? • Organisation Culture & Structure – Traditional? Modern? Rigid? Centralised? Flexible? Flat? Use of information Technology? • Quality of strategic planning? • Executive turnover? • Directors Ulhas D Wadivkar – Dummy? Active? Effective Policy makers? 114

entrepreneurially alert management. • Above average market visibility. • Above average technological and innovative Capability. Ulhas D Wadivkar 115 . • Strong or leading market Share. • Strong Differentiated product. • Growing customer base & Customer Loyalty. • In position to capitalise on available opportunities. • A creative. • Concentrating on fastest growing Market Segments. • In a favourably situated strategic group. • A pacesetting or distinctive strategy.Signs of Strength in Company‟s Competitive Position • Important Core Competencies. • Cost advantages & above average Profit margins.

Not in good position to deal with emerging threats. Weak product quality. Too small to be a major market force or in marketplace. A higher cost producer. Trailing in product development. A slipping reputation with customers. In a strategic group destined to lose ground. Losing ground to rival firms. Below average growth in revenues. Weak in areas where there is most market potential. Lacking skills and capabilities in key areas.Signs of Weaknesses in Company‟s Competitive Position • • • • • • • • • • • • • Confronted with competitive dis-advantages. Short on financial resources. Ulhas D Wadivkar 116 .

will eventually. ―Costly to Imitate‖ and ‗Non-Substitutable‖. Human resources. Capabilities. Work Environment. (like. Organisational processes. Non-tangible. Plant & Equipments. use of Power) • OB affects ability of organisation to use its resources. Information. Quality of Leadership.g. Shared value. Politics.Organizational Capability Profile & Strategic Advantage Profile: Organisational Resources • OR includes tangible. assets. ―Rare‖. Organisational Behaviour • OB is manifestation of forces and influence of Internal Environment. Knowledge. • OR is Hardware & OB is software 117 . Management Philosophy. etc • Four Types of Resources e. Climate. Culture. lead to Strategic Ulhas D Wadivkar Advantage. ―Valuable‖. Technology. Quality of Work.

Organisational Resources Strength & Weaknesses Synergistic Effects Organisational Behaviour Competencies Organisational Capabilities Strategic Advantages Ulhas D Wadivkar 118 .

OCP & SAP Strength & Weaknesses OR & OB creates S & W. when product. pricing. do not add up mathematically but combine to produce an dramatic. Strength is an inherent capability of organisation used to gain Strategic Advantage. enhanced or reduced effect. Obsolete machinery. Layout. It could be Plant Location. e. promotion support each other a synergistic effect will occur on marketing Ulhas D Wadivkar 119 .g. Technology etc. distribution. Synergistic Effects Two or more attributes of S & W. A Weakness on other hand is inherent limitation or constraint creating Strategic Disadvantage. It could be finance. This is Synergy or Dysergy. Uneconomical operations etc.

Ulhas D Wadivkar 120 . Without capability. even though valuable & unique. remains a subjective attribute. though measurable. Organisational Capability Organisational Capability is inherent capacity or potential of an organisation to use its Strengths and overcome Weaknesses to exploit Opportunities & face Threats. resources. which when combined with Synergistic Effects manifest themselves in terms of Competencies. Organisational Capability. It is a skill for coordinating resources and putting them to productive use. will be worthless. This is ability to compete with rivals. This helps Organisations to withstand pressures of competition.Competencies OR & OB develop S & W.

Negative results indicate Strategic Disadvantages. the Strategic Advantage is also known as Competitive Advantage.Strategic Advantage • Strategic Advantage is result of Organisational Capabilities. In an abundantly profit making company. The advantages can be measured in terms of Profit. Competitive Advantage is used as stimulus. Market Share. When compared with known identified rivals. Ulhas D Wadivkar 121 . Growth etc.

Location. Layout. Information and General Management. Automation. Operations. Marketing. Inventory. Material Supply. • Operations & Control: Production Planning. Standards etc.Organisation Capability Profile (OCP): 1 • Organisation capability is nothing but sum total of capabilities of various functional areas. These could be different for different types of organisations. Technology. Procedures. Maintenance System. Use of material resources. Work systems. some factors are: • Production System: Capacity. • Operations Capability: includes Production of Products and Services. Product Design. etc. Collaboration. etc. Cost control. Patent rights. Largely accepted main functional areas could be named as Finance. Personnel. • R&D or Design: Facilities. Quality control. Ulhas D Wadivkar 122 . Product development.

Organisation Capability Profile (OCP): 2 • Financial Capability: is basically. availability. • Management of funds:. Dividend distributions. controllership. Relations with Share Holders. sourcing. • Organisational Strength & Weaknesses related to above factors is a measure of Financial Capability. Ulhas D Wadivkar 123 . It depends upon various factors for example: • Sources of funds:. usage and management of Funds. Cost reduction & Control. working capital availability. State of Financial health. Tax planning. financing pattern. audit authorities. reserves & surpluses. Fixed asset acquisition. Loans & advances. Current assets.Capital Investment.Financial Accounting & Budgeting Systems. • Usage of funds:.Capital Structure. Cash inflation. Credit & Risk management. borrowings. Capital procurement. relations with banks. Management control systems.

promotion. Logistics. Differentiation. Sales Promotion. penetration and distribution of Product or Service. Marketing Capability Factors are: 4 ‗P‘s of Marketing: • Product: Quality. marketing System. Positioning. Variety. • Systemic: Marketing Mix. • Place: Distribution. Advertising. • Promotion: Tools used for promotion. Ulhas D Wadivkar 124 . marketing intermediaries etc. Marketing Channels. Company Image. Transportation. Changes. Market Standings. Protection etc. Marketing Management Information System etc. Packaging etc.Organisation Capability Profile (OCP): 3 • Marketing Capability: is basically. • Price: Pricing objectives & policies. Public Relations etc. pricing. Product Mix.

Collective bargaining. Working conditions.Organisation Capability Profile (OCP): 4 • Personnel Capability: is related to use of Human resources & skills. in organisation. appraisal. Welfare. Position of Personnel Dept. Staff & workers. Employee satisfaction and moral. compensation. • Organisational Characteristics: Corporate Image & Image as Employer. development. etc. communication. Ulhas D Wadivkar 125 . Developmental opportunities. Quality of Managers. etc. etc. Safety. aspects about ability to implement strategies. Some of the Factors are: • Personnel System: Manpower planning. • Industrial Relations: Union-Management Relations. selection.

Up-gradation. etc. Quality. depth of coverage. • Transmission & Dissemination: Speed. • Processing of Information: Database Management.Organisation Capability Profile (OCP): 5 • Information Management Capability: relate to design & management of flow of information for decision making. Computer Systems. Timeliness. its relevance & compatibility to organisational needs. • Integrative. Software Capability. Quantity. Top management Support. Computer Professionals. retention. etc Ulhas D Wadivkar 126 . Width. Ability to synthesise. Supportive factors: IT infrastructure. Systemic. Some factors are: • Acquisition and retention of information: Sources. security. Scope.

Organisational Structure & Control. etc. Corporate planning. values. Risk-propensity. Financial institutions. norms. co-ordination and direction of the functional capabilities. Strategy implementation machinery. Strategy formulation.Organisation Capability Profile (OCP): 6 • General Management Capability: relates to integration. competence. track records.. etc. Some factors are: • General Management System: Strategic management system. balance of vested interests. Rewards. • General Managers: Orientation. • Organisational Climate: Organisational cultures. political processes. Acceptance of management of change. Incentives. social responsibilities. • External Relationship: Influence & rapport with Govt. Ulhas D Wadivkar 127 . MIS. etc.

Strategists can assess Weaknesses and Strengths of the organisation in each of the six functional areas. • Capability Factor Rating • --------------. Ulhas D Wadivkar 128 .Organisation capability Profile (OCP) : 7 • The Organisation capability Profile (OCP) can be prepared by systematically assessing the various Functional areas and subjectively assign values to the different functional capability factors and sub-factors along a scale ranging from the values -5 to +5.-----------------------------------------------Factor Weakness Normal Strength -5 0 +5 ----------------------------------------------------------------• Sources of Funds -5-4-3-2-1-0+1+2+3+4+5 = +3 • After completion of charts for all the factors and subfactors mentioned above.

• A ‗SAP‘ provides ‗a picture of the more critical areas. which can have a relationship to the Strategic posture of the Firm‘. High Rate of Profit Credit worthiness is favourable for raising Loans Low rate of Dividend Ulhas D Wadivkar -2 -3 +4 +2 -1 129 . Capability Factor Strength & Weaknesses • Finance: High cost of capital. • Strategic Advantage or Disadvantages in each of the main functional areas can be summarised and presented. Reserves & Surplus position is unsatisfactory.Preparing the Strategic Advantage Profile (SAP): • OCP capability Factor Rating chart becomes a base for SAP.

+1 Excellent Technology +4 Poor Quality Control -3 • Marketing: Excellent Pre & Post Sales service +5 Complete understanding of Customer‘s changing preferences to Sales Rep. +3 Close Competition -2 • Human Resources: Capable & Competent Employees +5 Managers without HRM skills -2 Favourable compensation package +3 • General Management: Top Management with Progressive ideas +4 Outdated Management Style -2 Ulhas D Wadivkar 130 .Preparing the Strategic Advantage Profile (SAP)-2: • Operations: Plant & Machinery is in excellent +4 Condition. +2 Captive sources for raw material & spare parts are available. Vendors are available.

Analyzing Company‟s External Environment: • Environmental appraisal – • Scenario Planning – • Preparing an Environmental Threat and Opportunity Profile . (4) Ulhas D Wadivkar 131 .Syllabus 4.(ETOP) – • Industry Analysis – Porter‘s Five Forces Model of competition.

Socio-Cultural. BusinessDefinition Strategy Systems Structures Targets Processes Planning Manufacturing Inspection Packing Feedback Input Resources : 5 Ms Outputs Sales. Transport of goods Profits Ulhas D Wadivkar 132 . Technological. Goals. Objectives. Corrective Action Visions Missions. Economical. Service. Environmental. Legal.Company and Environment External Environment: PESTEL: Political.

• Compare the assumptions underlying the scenarios with these financial statements and ratios to determine the feasibility of the scenarios. • Construct detailed proforma financial statements for each strategic alternatives. This should be done for every product and for every country. • Develop common size financial statements for the company‘s or business unit‘s previous years which are basis for the trend analysis projections of proforma financial statements. Ulhas D Wadivkar 133 .Corporate Scenario Planning • Corporate Scenarios are proforma balance sheets and income statements that forecast the effect of alternative strategy and its various programs will likely to have on division and on corporate return on investment. • Recommended scenarios are simply extension of the Industry Scenarios developed earlier.

Factor Last Historical Trends Year average 2 0 07 2 0 09 2 0 11 Comments O P ML O P ML O P ML GDP CPI SALES FOREX PLR Expnsn Div.Scenario Box for use in Generating Financial Pro Forma Statements. Profits EPS ROI ROE Others Ulhas D Wadivkar 134 .

the threats & opportunities of future. built around carefully constructed plots. adapt and Ulhas Wadivkar 135 act D effectively. scenarios provide a common vocabulary giving effective basis for communicating complex conditions and options. • By recognising the warning signals. Scenarios present alternative future images. The stories express multiple view points.Scenario Planning • Scenarios are tools for strategists to express their views about alternative future environment for which today‘s decisions are framed. one can avoid surprises. paradigms on complex events taking place in world. instead of extrapolating current trends. . • Creating scenarios requires decision makers to question their broadest assumptions about the way the world works to foresee a decision. which could have been missed or denied • For an organisation. • Scenarios resemble a set of stories.

Implementation of Scenario Planning • A cross function team is constituted for identifying and monitoring issues. B. Then determine the uncertainty and kind of impact of these issues. Step – 3 : Analysing and Problem Solving as per A. Ulhas D Wadivkar 136 . IT integration). These can be ―Technology driven‖ (New Product. boom). Employees are encouraged to participate by offering some incentives. ―Competitive positioning‖ ( moves of Competitors) Step -2 :Classification of issues by the supportive record or documents. or ―Political‖ (Deregulation. C & D categories as per given figure. or ―Economic‖ ( Sudden downturn. Step – 1: Understand effects of external factor on the business. instability).

Keep a close watch UnCertainty C. Are of Highest Concern Impact High 137 . Can be Discarded B.High A. Can be used for Long term Planning Low Low Ulhas D Wadivkar D.

need to be observed closely and monitored strictly because of high uncertainty involved. All ideas / analysis should then be submitted to the cross functional strategic teams for further analysis and strategy making. • A Category : Because of High Uncertainty and Low impact to the organisation is involved. these issues can be discarded for time being.Analysing Scenarios & Problem Solving • D Category : High Impact and Low Uncertainty. All employees must first focus on these issues. need to be addressed immediately and more cautiously. The analysis and problem solution can be done by an individual or by a team depending upon coverage and importance. • C Category : Low impact – Low uncertainty: These issues can be used for Long term Planning. Ulhas D Wadivkar 138 . Highest priority issues. • B Category : High Risk issues.

ETOP helps organisation to face the weaknesses and capture the Threats. Ulhas D Wadivkar 139 . The External environment appraisal leads to the ―Opportunities & Threats‖ and Internal environment appraisal will lead to find out ―Strengths & Weaknesses‖ of the organisation.“ETOP” – Environmental Threat and Opportunity Profile • Managers must be prepared to steer the Company to a new direction or alter the Strategy as per the Environment.

“ETOP” – Environment Threat and Opportunity Profile” Thinking strategically about a Company‘s External environment Thinking strategically about a Company‘s Internal Environment Form a Strategic vision of where the Company need to head Identify promising strategic options for the Company Select the best Strategy & Business Model for the Company Ulhas D Wadivkar 140 .

To draw up the opportunity-threat profile. To learn about events and trends in the environment and project the future of the environment. 2. Ulhas D Wadivkar . To formulate strategy in line with opportunities. 6. To figure out the opportunities and threats hidden in environmental events and trends. 141 5. 4. To assess the scope of various opportunities and find out the ones having potential of becoming promising businesses and pursue them. 3.Environment Survey : Purpose: 1. To identify the favourable and unfavourable factors in the environment from standpoint of the firm.

purchasing power. household patterns.environmental factors • Demographic Environment – Size of population. skill. values. pressure groups-lobbies. • Economic Environment – General Economic conditions and conditions for the targeted population segment. traditions. age distribution. stability of the government. lifestyle. population shifts. Environment – Culture-languageeducation. interest rates.Scope of Survey . beliefs. Ulhas D Wadivkar 142 . • Political Environment –Regulating legislation. price of materials and energy. rate of growth of economy and the growth of economy of targeted sector. religious composition. tax rates.1 • Macro. media. rate of inflation. literacy levels. composition of workforce. • Socio-cultural. social class. regional characteristics. labour scene – cost. social and religious organisations. availability. consumer spending pattern.

Govt. policies while setting and operating units. Regulation on products.Scope of Survey . technology selection. • Technology Environment – Technology options available. controls on trade practices.Business legislation – Corporate affairs. climate. • Legal. Corporate protection. raw material. energy. many MNCs prefer India over China due to India‘s legal environment. especially MNCs who operate in various countries. Consumer protection.2 • Natural Environment – ecology. Employee protection. For example. protecting national firms. approach in respect of technology. • Government Policies – Organisations have to understand govt. their cost effectiveness. endowment of natural resources. technology at International level. Ulhas D Wadivkar 143 .

Environmental factors specific to the business concerned -1 • The Market / Demand – Nature of Demand whether it is seasonal. A perpetual analysis of customer analysis is required. Demand Potential. Changes in demand. related to specific event. Who is the customer. nearest competitor. 144 • Ulhas D Wadivkar . consumption pattern. brand Awareness.. The Consumer .Consumer tastes and preferences keep fluctuating and need to be monitored. what needs are served by product and what needs are envisaged by customer is to be analysed. brand loyalty. customer‘s reaction to upcoming new products. buying habits. Attitudes. Other factors are – Purchasing power. invasion of substitute products. repetitive etc. lifestyle. buying Habits. buying motive. Current level of Demand.

Supplier becoming manufacturer is always a threat. policies have a great effect on socio-economic conditions. Scarcity of raw materials can affect output and deliveries. The study of demand. ban fresh entry. itself is large supplier and regulates the market. consumer. • Government Policies – More important in regulated economies but even in free economy.• The Industry & competition – Knowledge of Industry and competition is a fundamental requirement in developing strategy and industry analysis. ban products. • The Supplier related factors – Suppliers as a group have their own bargaining power and can influence cost. Monitoring supplier environment helps in making aDdecision of integrating or outsourcing. protect home producers. Ulhas Wadivkar 145 Environmental factors specific to the business concerned -2 . Govt. plays role as large purchaser. industry and competition is normally a ongoing activity. Govt. Some time Govt. offers subsidies.

Competitive Strategies -1985 Potential Entrants Threat of new Entrants Suppliers Bargaining Power of Suppliers Industry Competitors Rivalry among existing firms Buyers Bargaining Power of Buyers Threat of substitute products or suppliers Substitutes Ulhas D Wadivkar 146 . Michael E.Porter‟s Five Forces Model. Source: Porter. .

Rivalry amongst existing firms and jockeying for position . increase profits) over its competitors.i.e.Forces Shaping Competition in an industry . Threat form substitute products and Ulhas D Wadivkar 5. It does this by responding to five primary forces: 1.1 • According to Porter. competition 2.e. Bargaining power of suppliers 147 .. Threat of new entrants 3. a firm develops its business strategies in order to obtain competitive advantage (i. Bargaining power of buyers / customers 4.

2 • These five factors shape competition and determine Attractiveness / Profitability in an industry. how will they affect the firm in particular and how to adjust one‘s position to defend or overcome or take advantage of these forces. We should know which of these forces are strong and how they work in its industry. • Sizing up competition within factory is not enough. • The company positions itself so as to be least vulnerable to competitive forces while exploiting its unique advantage (say .cost leadership). A company can also achieve competitive advantage by altering the competitive forces. Ulhas D Wadivkar 148 .Forces Shaping Competition in an industry . all forces shaping competition and survival of industry must be sized up.

In fact the strategy should be formed in such a way to influence all these forces in favour of the firm. Porter (2001) reemphasized the importance of analyzing the five competitive forces in developing strategies for competitive advantage: • Analyzing the forces illuminates an industry‘s fundamental attractiveness.3 • These five forces of competition influence the firm‘s strategy. Ulhas D Wadivkar 149 . The five competitive forces model provides a solid base for developing business strategies that generate strategic opportunities. and provides insight into how profitability will evolve in the future.Forces Shaping Competition in an industry . • In his recent study. exposes the underlying drivers of average industry profitability. Strategy should be formed to build defence against these forces and finding a position in industry where the influence of these forces is weakest.

Rivalry increases as products of rival competitor becomes more standardised giving good reliability. Rivalry increases as competitors play a price war and other competitive weapons to boost their market share. This makes rivalry stronger. Rivalry is strong when nos. Industry members undertake more aggressive and more frequent actions to boost their market standing & performance. Ulhas D Wadivkar 150 . competition 1. More nos. 4.i.e.Rivalry amongst existing firms and jockeying for position . 6. Rivalry increases as it becomes less costly for buyers to switch the brand. Rivalry is stronger in slow growing markets. 3. 7. 2. 5. of competitors are less than five. of competitors and competitors who are equal in size and capability makes rivalry stronger.

Ulhas D Wadivkar 151 . Lower Prices. 5. 10.8. Better Customer service capabilities. Better product performance with higher Quality. 3. 7. 2. Typical weapons to combat rivalry are: 1. 4. there are so many rivals. More or different features. Rivalry is weak in fast growing markets. 6. aggressive moves to transform the acquired company in to a major contender. Rivalry is weak when. Stronger Brand image & appeal. Better & bigger dealer network. Rivalry increases when strong companies outside the industry acquire weak firm in the industry and launch well-funded. Wider selection to customers to choose from Models & styles. 9. that impact of one‘s action is thin on spread over span.

• Existing industry members strongly contest and does not allow new comer to settle. • Buyer demand is growing rapidly.2. • Industry outlook is uncertain and risky. • Buyer demand is stagnant or slow. • Industry is unwilling / unable to stop new entrants. • Entry barriers are high. • Existing industry is itself struggling for profits. Ulhas D Wadivkar 152 . • Newcomers can expect good returns. • Entry barriers are low. Entry Threats are weaker when: • Entry candidates are small in nos. Threat of new entrants Entry threats are stronger when: • Candidates have resources that make them a formidable contender.

When nos. When buyer is capable of backward integrating and making product by themselves. of buyers is small and when a buyer is particularly important to seller. When buyers have discretion in whether & when to purchase the product & when buyer is large and can demand concessions. When cost of switching brand is low to buyer. prices & costs. 6. • It is a seller‘s market & Brand reputation is important to Ulhas D Wadivkar 153 buyer. When buyer demand is low and sellers are many 4. 3. When buyers are well informed about product. 5. 2. • Buyers cost of switching to other brands is high. Bargaining power of buyer is low when: • Infrequent and small purchases. Bargaining power of buyers / customers 1.3. .

4. • When costs are low to end users to switch to substitutes. performance & other attributes. • When buyer view substitute products at par in terms of quality. Ulhas D Wadivkar 154 . Threat form substitute products • When substitutes are readily available & attractively priced.

• When certain supplier supplies item has possibilities of cost savings to industry members on account of its added quality feature or service. (Suppliers can have a cartel) • When it is costly or difficult for buyer to switch to new brand or alternate items. Ulhas D Wadivkar 155 . • When needed items are in short supply. which enhances performance of final product. when buyer is a major customer.5. • Item supplied is a commodity that is not readily available from other suppliers in market. when there are many suppliers available. • When supplied item has a differentiation. • Bargaining Power of Supplier is weak when: backward integration is possible. Bargaining power of suppliers • Major suppliers can have sufficient bargaining power to influence the terms & conditions in their favour. • When few large suppliers are primary suppliers of a particular item.

• Rank all factors from exceptionally weak to exceptional strong scale and find out business attractiveness. Identify Company Resource Weaknesses and Competitive deficiencies. Identify External Threats to the Company‘s future well being. • Next step will be to draw conclusions concerning the Company‘s overall business situation.SWOT Analysis: Identify Company Resource Strengths and Competitive capabilities. Identify Company‘s Market Opportunities. Ulhas D Wadivkar 156 . • Identify attractive and non-attractive aspects of the Company‘s situation.

• Pursue those opportunities that are suitable to Company‘s Strengths and Competitiveness. Ulhas D Wadivkar 157 . • Use Company‘s Strengths & Capabilities to overcome weaknesses.SWOT Analysis: • Third step will be to plan actions to improve Company Strategy. • Use Company‘s Strengths & Capabilities to lessen the impacts of important external threats. • Correct weaknesses that affect our abilities to take advantage of market Opportunities.

# Cost advantage. Ulhas D Wadivkar 158 . # Distinctive Competence.Factors to look for in SWOT analysis: • Potential Resource Strengths & Capabilities # A powerful Strategy. # Superior Technological skills / Product Quality/ Patents / intellectual Capital / Innovation capabilities. # Strong brand image # An attractive Customer base. # Core competencies. # A strongly differentiated Product. # Competencies & Capabilities matching with Key Success Factors of Industry. # A strong financial condition providing ample resources. # Customer service capabilities. # Strong advertising & Promotion. # Wide geographical coverage / strong Global distribution capabilities. # Alliances / joint ventures / collaborations. # Supply Chain Management Capabilities.

Internal operation problems / obsolete facilities. Low product Quality. Lack of Management depth. Resources not matching KSFs Lack of Core & Distinctive competencies. Weak Brand image. • • • • • • • • • • • • • No clear Strategic Direction. Weak balance Sheet / heavy debt / low resources. lack of R&D and Technological know-how. Too narrow product line compared to rivals. Weaker dealer network. Loosing market share because……… Behind rivals in e-commerce capabilities. Underutilised Plant capacity. 159 Ulhas D Wadivkar .Potential Resource Weaknesses & Competitive Deficiencies.

Overcoming Trade barriers and capturing new foreign markets. Exploit new technologies. Serving new market segments / new set of customers. Expanding product line & range of products to meet market demand. 160 Ulhas D Wadivkar . Enter into alliances. e-business. Forward or backward integration.Potential Market Opportunities • • • • • • • • • • Sharply rising buyer demand. Expanding to new geographic markets. Acquire rival firms. Online sales.

• Restrictive trade policies on the part of foreign Governments. • Growing bargaining power of Customers / Suppliers. • Adverse demographic change curtailing demand.Potential External Threats • Increasing intensity of competition among rivals. • A shift in buyer needs and tastes. • Costly new regulatory requirements. • Loss of sales to substitute products. • Slowdown of market. • Entry of new potent rivals. Ulhas D Wadivkar 161 .

Internal Factors Strengths Technological Skills Leading Brands Distribution Channels Consumer Loyalty Production Quality Scale Management Weaknesses Absence of important skills Weak Brands Peer access to distribution Low Customer retention Unreliable Product / Service Sub-scale Management Threats Changing customer tastes Geographical Closures Technological advances Government Policies changes Lower personal Taxes Population age structure New Distribution Channels 162 External Factors Ulhas D Wadivkar Opportunities Changing customer tastes Geographical Liberalisation Technological advances Government Policies changes Lower personal Taxes Population age structure New Distribution Channels Positive Negative .

Corporate Portfolio Analysis: • Business Portfolio Analysis – Synergy and Dysergy – • BCG Matrix – • GE 9 Cell Model – • Concept of Stretch. Leverage and fit (3) Ulhas D Wadivkar 163 .Syllabus • 5.

and resources and behaviour in the Organisation are directed properly. This effect is known as Synergy. In any organisation. • In such an atmosphere. 1 + 1 could be 2 or 11 or 111. Similarly. then a Synergistic Effect could be seen. This is Synergy. This is Dysergy.Synergy v/s Dysergy -1 • • • • The whole is greater or lesser than sum of its parts. The Organisation should cultivate ―Win-Win‖ and open communication with philosophy of ―Seek to understand first and then to be understood‖. two or more weaknesses acting in tandem can damage more than its arithmetic sum. If these strengths. two or more strong points add up to something more than its arithmetic sum. Strengths. behaviours do not exist independently but they act together. Resources. Ulhas D Wadivkar 164 . Weaknesses.

Similarly. Marketing inefficiencies could result in reduction of operating efficiency as dysergistic effect. Distribution and Promotion.Synergy v/s Dysergy -2 • In practice if functions like Product. Pricing. These effects will only lead the organisations to develop competencies and ward off external threats. • Synergistic Effects are results of quality and type of internal environment existing within organisation. then synergistic effect could be seen in Operating Efficiency. synergistic effect could be seen in Marketing. if Marketing and Production areas support each other. then. work in harmony and support each other. Ulhas D Wadivkar 165 .

• ―The strategic units that make up the company and the attempts to evaluate current effectiveness and vulnerabilities‖ (McDonald et al. 1985) Ulhas D Wadivkar 166 . 1992) • ―Business Portfolio Management‖ enable strategic planners to select the optimal strategies for the individual products whilst achieving overall corporate objectives‖ (McNamee.Business Portfolio Analysis • Definition : Analyzing ―Elements‖ of a firm's ―Product Mix‖ to determine the “ Optimum Allocation” of its “Resources”. Two most “Common Measures” used in a “Portfolio Analysis” are “Market Growth” and ―Relative Market Share”.

Vanaspati.• When a Business Portfolio comprises of Multi-business Units and / or operating at multi-location. nappies. music stores. Biscuits . mobiles • Wipro : Computers. Soaps. then the Strategist often ask two questions to take a decision on Business Strategy. most of which could never be successful? • Examples of Portfolios: • Unilever: ice cream. Soaps. planes. • Proctor & Gamble: Detergents. Shaving products • Virgin : trains. • Gillette: batteries. Veg. – How much of our time and money should we spend on our best products to ensure that they continue to be successful? – How much of our time and money should we spend developing new costly products. 167 • Ulhas D Wadivkar ITC : Tobacco. spreads. cola. Oils. tea.

so that overall portfolio balance is maintained or improved. • All businesses have to balance. Net Cash Flow. 2. analysing future implications of presents resource allocation and continuously deciding. It involves. adding.• Portfolio Analysis is an analysis of the Corporation as a portfolio of different businesses with the objective of managing it for optimum return on its resources. • Portfolio analysis takes into considerations aspects such as ― Companies Competitive Strength‖. • Portfolio analysis looks at the corporate investments in different products or industries under common corporate jurisdiction. Ulhas D Wadivkar Risk. curtailing or disposing. 168 3. ―Resource Allocation Pattern‖ & ―Industry Characteristics‖. State of Development. operations or products. three basic aspects of running the business : 1. Business Portfolio Analysis .

Boston Consulting Group – BCG‟s Growth – Share Matrix Ulhas D Wadivkar 169 .

BCG‟s Growth – Share Matrix


2. •

Different businesses which forms the Business Portfolio can be characterised by two parameters: Company‘s Relative Market share for the business, representing the firm‘s competitive position and The overall growth rate of the business. For each activity in the portfolio, a separate strategy must be developed depending upon its position in 2 X 2 matrix. Higher Market share will mean, higher profits and higher cash flows. Relative market share is defined as the market share of the relevant business divided by the market share of its largest competitor. i.e. A = 10%, B = 20% & C = 60%, then, ‗A‘s relative market share is 1/6 & ‗C‘s share is 3. Higher Growth rate will mean profitable investment / expansion opportunities and easier to increase market share. Earned Cash can be ploughed back to enhance ROI.
Ulhas D Wadivkar 170

BCG‟s Growth – Share Matrix - Methodology

1. 2. 3.

4. 5.

Step-by-step procedure to develop the business portfolio matrix and identify appropriate strategies for different businesses: Classify various activities of the Company into different business segments or SBUs. (Strategic Business Units) For each business segment, determine the growth rate of the market. Plot it on linear scale. Compile assets employed for each business segment and determine the relative size of the business within the company. Estimate the relative market shares for the different business segments. This is done on logarithmic scale. Plot the position of each business on a matrix of business growth rate and relative market share.
Ulhas D Wadivkar 171

BCG‟s Growth – Share Matrix - illustration
Relative market Share 20 STARS 18 16 Business Growth rate % QUESTION MARKS


6 4 2 2 0.1 X

Ulhas D Wadivkar

10 X


1.5 X


0.5 X

Product Life Cycle

Ulhas D Wadivkar


Strategies as per Product Life Cycle-1 • Expansion Strategy : Stars – are the businesses
which have high growth rate & high market share. At times they are not self sufficient in cash flow, but need to be supported in view of their potential. This is ‗Growth‘ phase of ―Product Life Cycle‖ (PLC). Such businesses generate as well as use large amount of cash. The Star generate high profits and represent the best investment opportunities for growth. We need to reaffirm the Company‘s Competitive Edge at this phase by sufficient doses of resources for expansion. The best strategy regarding stars is to make necessary investments and consolidate the company‘s high relative competitive position. e.g. Tiles, Electronics & Communications, Pharmaceuticals, Ulhas D Wadivkar 174 are ―Star‖ industries.

Strategies as per Product Life Cycle-2
• Hold Strategy - Cash Cows are the businesses with low growth rate and high market share. High market share leads to high generation of cash and profits. Cash Cow is a business that generates cash flows over & above its internal needs. Cows can be milked to provide a corporate parent with funds for investing in star / Question Mark businesses, financing new acquisitions or paying dividends. Cash cows provide the financial base for the company. A strong cash flow resulting out of relatively high market share / low market growth rate ‗Cash Cow‘ opportunities should be able to maintain market share at or around existing levels. In this state of business, Corporate can adopt mainly Stability Strategies. Expansions & investments can be thought only if the long term prospects are exceptionally bright. These are generally mature businesses reaping benefits of experience and expertise. Funds generated are to be used for ―Question Mark‖ or ―Star‖ businesses as ―Cash Cow's are destined to slow down. A phased retirement need to be 175 Ulhas D Wadivkar planned.

Strategies as per Product Life Cycle- 3

Build Strategy – Question Mark : The Businesses with high industry growth but low market share are ―Question Marks‖. In the business. These ‗Question Mark‘ opportunities need investment in order to grow and gain market share. Because of their high growth, the cash requirement is high, but due to their low market share cash generation is low. These are sometimes known as “Problem Child” as someone with huge potential, but not clicking. Here, a large amount of Cash inflow is required to stabilise and enter into ―Star‖ phase. Companies must obtain early lead to strengthen the business and capture growth opportunities. A question Mark business can either become a Star or can go to Dogs depending upon funds & competitive edge.

Ulhas D Wadivkar

Strategies as per Product Life Cycle - 4 The business is called Dogs, if business growth rate is low and the company‘s relative market share is also low. The lower market share means poor profits and as market growth is low, any investment is prohibitive as cash demanded will exceed the cash generation, causing negative cash flow. Under such circumstances, the Strategic solution is to either liquidate, or if possible harvest or divest the DOG business. Harvest Strategy : To develop short term cash flow irrespective of the long term damaging effect to the product or business. This strategy is appropriate for any weak products where disposal in the form of a sale is unavailable or not preferred due to high exit barriers Divest Strategy : To change the capital of the business and allow resources to be used elsewhere of industries that have a very slow or negative market growth rate and where a company has low market share. These are products in late maturity or declining stage as mostly substitute‘s start taking over these products. They stop generating large amount of Cash and face a cost disadvantage owing to low market share. Sometimes to reduce the high costs involved, a Ulhas D Wadivkar 177 Retrenchment Strategy is also adopted.

Funds needed to invest selectively to improve competitive position. so milk and deploy Build competitive position and grow DOG Less More More Divest and re-deploy proceeds.Cash Positions of Various Businesses Business Type COW STAR Cash Cash Source Use More More Less More Net Cash Balance Funds available. QUESTION Less MARK Ulhas D Wadivkar 178 .

This may not be 100% true.Limitation of BCG Matrix • Predicting Profitability from Growth and Market Share:.BCG does not recognise human aspect of business.In BCG each quadrant is viewed independently.BCG assumes that profit depends on growth & market share. Strategic options given by BCG may not Ulhas D Wadivkar 179 be easy to implement. Cash Cow unit may be reluctant to part away with its cash to other businesses in the house. . Low costs due to expertise of employees can prolong Dog. Industry attractiveness may be different from simple growth rate and the firm‘s competitive position may not be reflected in its market share. • Disregard for Human aspect:. star or cash cow stages. • No consideration for experience curve synergy :. what is total market.BCG has heavy dependence on market Share as indicator of its competitive strength. The calculation of market share depends upon how we decide. • Difficulty in determining Market Share:. Cash generated in one business in one business get associated with the power of concerned manager. we may have to consider ―niche‘ market for analysis. Sometimes.

180 . growth rate. the current size of industry.General Electric‟s ( or McKinsey) 9 point Multifactor Portfolio Planning Matrix • Different businesses in the organisation as SBUs can be rated for purpose of strategic planning. Company business strength: Company business strengths is a product of several factors like company‘s current market share.e. • 2. It is a product of several factors like Industry potential. corporate image. • Two parameters are considered based on internal appraisal of all the SBUs done individually. where firm would like to deploy best of everything. Industry Attractiveness: How attractive is the industry? The attractiveness index depends upon business strengths. • 1. the rate of growth of industry. This is generally highly profitable. for divestment. Ulhas D Wadivkar brand image. differentiation strength. productive arena. Similarly least attractive business is kept with little attention or is for grabs i. structure and profitability of the industry.

GE‟s 9 Point Model. • The weighted factors for both these areas are plotted in Company business Strength/Industry attractiveness Company Business Strength A t I n t d r High a u s c Medium t t r i Low y v e n e s Ulhas s D Wadivkar Strong ********** Medium ********** Weak ********** ######## ######## ######## Invest / Grow Selectivity Harvest / /Earnings Divest 181 .

.General Electric‟s Business Screen I n d u s t r y A t t r a c ti v e n e s s Winners A Winners B C High Question Marks D Winners E Average Businesses F Medium Losers Losers G H Low Profit Producers Strong Average Losers Weak Business Strength / Competitive position Circle denotes the size of Industry . while blue colour portion corresponds to Market Ulhas D Wadivkar 182 Share.

These factors are: 1. Size of Market 10% 2. Susceptibility to Technological obsolesce 5% 8. Economics of Scale. Seasonality. Rate of Growth of Sales & Cyclicality 10% 3. Entry conditions. 5% 6.General Electric‟s Business Screen • The vertical axis represents Industry Attractiveness. Industry Profit Margin. 15% 5. the concerned business is rated on a scale of 1 to 10 and then the weighted score is determined from maximum of 10. Social. 5% 7. This is weighted composite rating based on eight different factors. Competitive intensity including vulnerability to foreign competition. 40% 4. environmental & human impacts. legal. . This gives the Industry Ulhas D Wadivkar 183 Attractiveness Index. 10% Against each of these factors.

5. Relative market Share. • The two composite values for ‗Industry Attractiveness‘ and ‗Business Strength‘ are plotted for each business in a Company‘s Portfolio. Ability to compete on Price & Quality. 6. This is a weighted composite rating based on eight factors. 2. Competitive Strengths & Weaknesses. Calibre of Management. Knowledge of Customer & Market.General Electric‟s Business Screen • The horizontal axis represents business strength competitive position. 184 . 4. These factors are: 1. 3. 7. Relative cost position. The pie charts denote the proportional size of the industry – white colour & blue segment represent company Ulhas D Wadivkar share. Profit margins relative to competitors. Technological Capability 8.

6 0.5 0.9 1.4 185 6.9 .4 0.General Electric‟s Business Screen • The horizontal axis represents business strength competitive position. This is a weighted composite rating based on seven factors.4 1. A typical scoring of Company‟s Competitive position Factor Weightage Rating Score (1 to 10) Market Share and Capacity Growth Rate Location and Distribution Management Skill Work force Harmony Technical Excellence including Product and Process Engineering Company Image Ulhas D Wadivkar 20% 10% 10% 15% 20% 20% 5% 100% 7 7 5 6 7 8 8 1.7 0.

Steady investments to protect and maintain their industry position. Harvest or Divest Strategy may be employed. Ulhas D Wadivkar 186 . • The three diagonal cells from lower left to upper right gets medium priority. Top investment priority to be given to businesses in these cells. where as BCG Matrix is based on only two considerations – Industry Growth & Relative Market Share. • Strengths: GE Nine Cell allows intermediate ranking between high & low and between Strong and weak. • The businesses in lower right corner do not receive any investment decisions.Corporate Strategy Implications – GE Nine Cells • ―Grow & Build‖ Strategy for upper left three cells as Industry Attractiveness & Competitive Position are high. i.e. Stability / Hold Strategy. • It incorporates much wider variety of strategically relevant variables.

• Strengths: GE Nine cell stresses channelling Corporate resources to businesses with greatest probability of achieving competitive advantage and superior performance. The matrix suggests general strategy like – Aggressive Expansion. Ulhas D Wadivkar 187 . These strategies do not address the issue of strategic coordination between businesses. specific competitive approaches and Strategies to be adapted at business level. Fortify and Defend or Harvest – Divest. • Weakness: The GE Nine Cells method tend to obscure business that are about to become winners because their industries are entering the take off stage. • Weaknesses: The nine cell matrix provides no real guidance on the specific business strategy.

Gap Analysis Desired Performance Gap Performance Achieved Performance Time -1 Ulhas D Wadivkar Time -2 188 .

policy is to stabilise the strategies. which is also expected in future. Ulhas D Wadivkar 189 . • What is the result of the present strategy? • What should be new strategy? • What should be methodology of implementation? • If the gap is narrow. then retrenchment / withdrawal strategies may be more suitable.Gap analysis -2 • Gap analysis is done for focussing on strategic alternatives. • If the gap is due to consistent past bad performance. • On dimension of time various alternatives are evaluated in different phases to get a clear picture for selection of strategies.

Companies find it difficult to change their strategies because strategic thinking is not the core competency of managers. This hypothesis must be tested to developing clear understanding of the forces that actually work.3 • First step is to identify alternatives. Hence lot of brain storming. • Prioritise the strategies and a plan for the projects to implement strategies on time scale is created for future guidance and analysis. • A correct definition of the problem is the Second step. Ulhas D Wadivkar 190 .Gap Analysis . A hypothesis is developed after brain storming and situation analysis. Find the 80:20 Pareto Principle and attack the most important one. situational analysis need to be done. • Next step is to formulate the strategy and address the driving forces in a ―cause and effect‖ relationship.

HRD. and Information Management etc. then it is a congruence of all functional strategies and coordination between functions operating at different levels in Organisation. Finance. This is ―Horizontal Fit‖. • Horizontal Fit: Along with Vertical Fit. • When all functional areas like Marketing. Operations. a need is there to have congruence and co-ordination amongst all the different activities taking place at same level.From Fit to Stretch: • Vertical Fit: If a Business house has a strategy to be ―Cost Effective Leader‖ in the business. then resources and activities in all functional areas are to be focussed on adopting low cost structures and reducing costs. contribute to this objective to create a low cost structure. Such congruence is the ―Vertical Fit‖. toward a common Objective. Ulhas D Wadivkar 191 .

You set realistic goals based on what you think you can achieve with the resources at hand and then construct strategies and tactics to achieve them.g. • Strategy & Structure for Generating Results in Organizations : The traditional strategic planning seeks a “fit” between resources and aspirations. Ulhas D Wadivkar 192 . For e. It could be a compromise formula with regards to Firm‘s objectives and Competitive posture of the Company. It is an approach adopted by organisation to achieve operational effectiveness. Procurement Department is placed along with Operations department. • ―Fit‖ means positioning the firm by matching its resources to its environments as per SWOT analysis. To support value chain activities various staff function departments are involved and put along operations. This is also a value chain. • Horizontal fit means integration of all operational activities undertaken to provide a product or service to customer. All functions operate optimally by performing value creating activities.• Horizontal Fit is operational implementation.

conserving and recovering resources in such a manner that the meagre resources (Gap or Stretch) stretched to meet the aspirations that organisation has envisaged. ―Stretch‖ is diametrically opposite to ―Fit‖. Hamel and Prahalad added duel concept of ―Stretch‖ and ―Leverage‖ to Strategic Intent. . accumulating.• • • • Strategy as Stretch and Leverage Hamel and Prahalad‘s (1993) assertion that ‗competitiveness is born in the gap between a company‘s resources and its managers‘ goals‘ has entered the mainstream of strategy thinking. Hamel and Prahalad began their deconstruction of conventional wisdom by challenging common understandings of the meaning of strategy. This is one of the concepts of Stretch. Since ―Fit‖ means positioning the firm to match its resources to its environment. complementing. Capabilities are not seen as constraints to achieving. The concept of ―Leverage‖ is concentrating. Stretch is a gap between resources and aspirations. Environment is not seen as given but something Ulhas D Wadivkar 193 which can be created and moulded. The idea of ―Stretch‖ & ―Leverage‖ belongs to ―Learning School of Strategy‖.

Strategic intent would seem more realistic. They stressed that ‗being strategic‘ implies a willingness to take the long view. and a long-term perspective in which ‗resource money‘ figures prominently. and Consistency of effort feature. In both cases it is essentially a desired aim to be achieved. Creating stretch. and ‗strategic‘ investments mean … betting bigger and betting earlier.Strategy as Stretch and Leverage • Hamel and Prahalad considered that many managers understood strategy to mean: "… fit.― • This view obscures the merits of alternatives in which the ideas of Stretch. Leverage. the allocation of resources among competing investment opportunities. under ―Stretch‖ & ―Leverage‖ Strategic Intent is more idealistic. Ulhas D Wadivkar 194 . "… a misfit between resources and aspirations is the single most important task Senior Manager.‖ or the relationship between the company and its competitive environment. • Under ―Fit‖.

for three reasons: 1. involving a different set of activities. "Without trade-offs there would be no need for choice. To eliminate or minimise inconsistencies. 3." • But choosing a unique position is not enough to guarantee a sustainable advantage. To recognise and accept the limits of coordination and control. 2.Porter on Strategy • . • The essence of strategy is choosing what not to do. Sustainability requires trade-offs with other possible positions . he wrote "… the creation of a unique and valuable position. To maximise and concentrate the benefits of a chosen position."What is strategy? It is. and thus no need for strategy." Ulhas D Wadivkar 195 .

Porter‟s Three Types of Fit: • Porter considers „Strategic Fit‟. or activities which optimise organisational effort • In all three. and is a more potent. In this context ‗Fit‘ locks out imitators by creating a value chain that is as strong as its strongest link. Competitive advantage grows out of the entire system of tightly linked activities. as the way various components of a strategy interlink.First order or simple consistency between activities • Stretch:.Third order. or fit together. • Porter recognised three types of fit: • Fit:. the whole is more than any individual part. and central. or reinforcing activities • Leverage:. Ulhas D Wadivkar 196 . strategic concept.Second order.

Ulhas D Wadivkar 197 . The strategic agenda demands discipline and continuity. making clear trade-offs.and third-order fit. • The strategic agenda is defining a unique position. the more sustainable its advantage will be.• Thus defined. strategic fit is fundamental not only to competitive advantage." • The success of a strategy depends on doing many things and integrating them. and tightening fit. and the more an organisation‘s positioning rests on activity systems with second. but also to the sustainability of that advantage. The definition of strategy then becomes “Creating fit among a company‟s activities.

top management has to: • A) Create a sense of urgency. • D) Give the organisation time to digest one challenge before launching another. • E) Establish clear milestones and review mechanisms.• For challenges of this sort to be effective. • B) Develop a competitor focus at every level through widespread use of competitor intelligence. • C) Provide employees with the skills they need to work effectively. Ulhas D Wadivkar 198 .

• Differentiation. • Focus (3) • --------------------------------------------------------Ulhas D Wadivkar 199 .• --------------------------------------------------------• Syllabus 6. Generic Competitive Strategies: • Low cost.

Competitive Strategy • Competitive Strategy is about being different. McMillan & Rita Gunther Mcgrath. • The essence of Competitive Strategy lies in creating tomorrow‘s competitive advantages faster than the competitors mimic the one you posses today. • A Competitive Strategy concerns the specifics of management game plan for competing successfully and achieving a competitive edge over rivals. • Competitive Strategy is about analysing and then experimenting. trying. Ulhas D Wadivkar 200 . – Gary Hammel & C K Prahalad. and experimenting some more. learning. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver unique mix of value – Michael F Porter. – Ian C.

2. A low-cost provider Strategy : Appealing to a broad spectrum of customers by being the overall Low Cost Provider of a Product or Service. A focussed or market niche strategy based on Lower Cost : Concentrating on Narrow buyer segment and out competing rivals by offering at lowest cost than rivals 5.Generic Competitive Strategies 1. 3. A focussed or market niche strategy based on differentiation : Concentrating on Narrow buyer segment and out competing rivals by offering customised attributes to niche member at lowest cost than rivals – The basis of competitive strategy lies in Low-cost or Differentiation and finding out our own focus on market niche. 4. 201 Ulhas D Wadivkar . A best-cost provider strategy : Giving customers more value for money by incorporating good to excellent product attributes at lower cost than rivals. A broad-differentiation strategy : Seeking to differentiate the company‘s Product/service by offering different from Rivals to broad spectrum of Customers.

Simplifying product design. (Waste elimination) – Re-vamping the value Chain: 1. flexible technologies. Using simpler. 8. Re–vamping of ―Value Chain‖ is aimed at increasing efficiencies to out-manage rivals on costs. 2. 5. Re-vamping of value Chain is also done by examining the elements of value chain eliminating or bypassing the activities which are adding costs but not value to the product.Revamp Value Chain A Low-cost advantage can be achieved by re-vamping the ―Value Chain‖ activities and controlling all factors that drive the costs. 6. Ulhas 202 – . Dropping the dead weight. less capital intensive. Using CADs. Use of internet Technology applications. Substituting high cost/imported raw materials with indigenous ones (Value Engineering) 7. Purchasing directly from manufacturer.D Wadivkar Relocation of facilities. 3. 4. Approaching direct to end user in Sales & Marketing.

Competitive Advantage (1980). The 'margin' depicted in the diagram is the same as added value. Porter in his book. The chain consists of a series of activities that create and build value.The value chain • The value chain is a systematic approach to examining the development of competitive advantage.' Ulhas D Wadivkar 203 . It was created by M. The organisation is split into 'primary activities' and 'support activities. They culminate in the total value delivered by an organisation. E.

Ulhas D Wadivkar 204 .

• Inbound Logistics: Here goods are received from a company's suppliers. • Service: This includes all areas of service such as installation. • Outbound Logistics: The goods are now finished. training and so on. Goods are moved around the organisation. They are stored until they are needed on the production/assembly line. Individual operations could include room service in a hotel. after-sales service. • Marketing and Sales: In true customer orientated fashion. and they need to be sent along the supply chain to wholesalers. retailers or the final consumer. This area focuses strongly upon marketing communications and the promotions mix. packing of books/videos/games by an online retailer. Ulhas D Wadivkar 205 . • Operations: This is where goods are manufactured or assembled.Primary Activities. at this stage the organisation prepares the offering to meet the needs of targeted customers. complaints handling. or the final tune for a new car's engine.

• Procurement: This function is responsible for all purchasing of goods. services and materials. and many other technological developments. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. • Technology Development: Technology is an important source of competitive advantage. Internet marketing activities. Customer Relationship Management (CRM).Support Activities -1. Ulhas D Wadivkar 206 . They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organisations). lean manufacturing. and e-Purchasing (using IT and webbased technologies to achieve procurement aims). This could include production technology. The aim is to secure the lowest possible price for purchases of the highest possible quality.

and other mechanisms for planning and control such as the accounting department. training and development. Firm Infrastructure.Support Activities -2. Human Resource Management (HRM). Ulhas D Wadivkar 207 . • This activity includes and is driven by corporate or strategic planning. The mission and objectives of the organisation would be driving force behind the HRM strategy. It includes the Management Information System (MIS). An organisation would manage recruitment and selection. • Employees are an expensive and vital resource. and rewards and remuneration.

Five Generic Competitive Strategies Type of Competitive Advantage Desired Lower Cost Differentiation M a r k e t A Broad Cross Section of Buyers Overall Low Cost Provider Strategy Best Cost Provider Strategy Focussed Low Cost Strategy Broad Differentiation Strategy S h a r e A narrow Buyer segment for Market Niche Focussed Differentiation Strategy 208 Ulhas D Wadivkar .

longer production runs. improve design. standardising designs and using common parts. Aggressively managed companies who capture benefits of learning are the one who can offer low costs. Ulhas D Wadivkar 209 . new plant is full of innumerable problems. Manufacturing economies can be achieved by simplifying product line. improve plant layout & work flow. Faster we de-bug. will bring economies of learning curve. b) Learning Curve effects: A new product. use of modular designs etc.Drivers for Low-Cost Strategy -1 Low-Cost Strategy makers generally attend to following cost drivers: a) Economies or diseconomies of scale: .Larger volumes can reduce the costs as fixed costs get spread over large volume. At the same time larger volume means larger inventories and higher inventory carrying costs. reducing varieties of models. master the technology.

variables due to locations. out sourcing. Also warranty claims can be linked with suppliers. Low cost leader has to find ways to operate at close to full capacity year Ulhas Dround. f) Capacity utilisation has direct relation on spread of fixed costs in the product cost. Wadivkar 210 .Drivers for Low-Cost Strategy -2 c) Cost of key resource inputs: use of innovative incentive schemes for unionised labour. use of non – unionised labours. e) Using vertical integration v/s outsourcing: backward or forward integration can reduce the reliance on outsourcing and can reduce the costs. sharing opportunities with other businesses in the organisations. large scale purchasing with effective use of bargaining power. Effective ―Supply chain Management‖ d) Use of industry value Chain by linking other activities for other products in the company. there by diverting the warranty costs.

incentives & fringe benefits to motivate employees. • • Rising / Lowering the specifications for purchased materials. Increasing / decreasing distribution channels. Incorporating more / fewer performance & quality features into product.Drivers for Low-Cost Strategy -3 g) Strategic Choices & Operating decisions such as: • • • • • Adding / Cutting services offered to Buyers.The Low Cost Leader : 211 Ulhas D Wadivkar .. Lengthening / Shortening delivery times to customers. Example : Wall Mart. Putting more emphasis on wages.

Buyers are large and have power to bargain. Product differentiation is low & cannot be achieved. Products are identical and are easily available. is not appealing to buyers. However. Low price by itself. Ulhas D Wadivkar 212 . Newcomers can come with low price and attract buyers. Most buyers use the product in the same way. Cost of switching brand is low for customer.Factors for Low Cost Strategy • • • • • • • Price competition is very high. a Low Cost provider must always contain enough attributes to be attractive to prospective buyers.

Differentiation yields a longer lasting effect and more profitable competitive edge. 8. Product quality with superior manufacturing abilities. 1. when it is based on: 2. Ulhas D Wadivkar 213 . Reliability. and at the same it should be noted that • • Easy to copy differentiators cannot provide sustainable competitive advantages. As a rule. 6.Aspects of industry for Differentiation Strategy-1 • The essence of broad differentiation strategy is to be unique in ways that are valuable to a wide range of customers. Technical superiority. Unique competitive capability 7. 5. Product innovation by R&D. 4. 3. Superior supply-chain activities. Comprehensive customer service. Maintaining the cost of differentiation in line.

reliability. Incorporate product attributes & user Features that lowers the buyers overall costs of using the company‘s product. Incorporate features that enhance buyer satisfaction in non-economic or intangible ways. Incorporate features that raise product performance like quality. Ulhas D Wadivkar 214 . To deliver value to customers via competitive capabilities that rivals do not have or cannot afford to match. 3.Aspects of industry for Differentiation Strategy-2 Such differentiation should result into: • Perceived & actual delivered value for customers • Command a premium price for its products • Increase unit sales & Gain buyer Brand loyalty Approaches for achieving Cost Differentiation 1. durability etc. 4. 2.

There is less head to head competition. Buyers needs and uses are diverse. Technological change is fast paced and competition revolves around evolving product features. Over differentiating increasing service needs or usage constraints is a mistake. Being timid & not striving to open up about competitors defect and differentiating that is not visible to buyers is a pitfall. 215 Ulhas D Wadivkar . Differentiating something that does not lower buyer‘s cost or improves perceived value is a mistake. Few rival firms are following differentiation approach. Any differentiation that works well gets imitated and there is need for constant up gradation. Trying to charge a too high a premium price.• • • • • • • • • Factors of Differentiation Strategy The Product can be differentiated in many ways and buyers perceive these differences as having value.

Best Cost Strategy must offer.Best Cost Provider Strategies • Best Cost Provider Strategies are for giving customer ‗more value for money'. • It is middle path between pursuing a low cost advantage and differentiation strategy. • Best Cost Provider Strategies are ‗hybrid‘ Strategies balancing emphasis on Low Cost & Differentiation. buyers significantly better product attributes. • Target market is Price & Value conscious buyer. where differentiation is a norm. • To be successful. Ulhas D Wadivkar 216 . so that they can justify higher price above Low – Cost leaders and with sufficient differentiation can win over high-end Differentiation Leaders. with diversity of products.

Rolls Royce. • e. Focussed Low Cost Strategy: • Serving buyers in the target market niche at lower cost & lower price than rivals. Kesari Tours Ulhas D Wadivkar 217 . Porsche for sports cars. • By offering niche members a product perceive as well suited for their own unique tastes & preferences and be at top of Market pyramid due to their strength of differentiation. Armani. • Producing ‗Private-Label‘ imitating Brand name merchandise & selling directly to retail chains.a status symbol.g. e. e-Bay for e-auctions. Focussed Differentiation Strategy: • Serving a buyer segment that is looking for special product attributes or seller capabilities. Rolex. Reliance Fresh.g. Gucci. Rolls Royce.Focussed or Market Niche Strategies Focussed Strategies have concentrated attention on a narrow piece of the total Market. Target market segment is called as ‗niche‘.

good value. A good basic product with acceptable quality & few frills.Low Cost Provider Strategic Target Basis of competitive advantage Product Line A broad cross section of the market Lower overall costs than competitors. 218 . Production emphasis Continuous cost reduction without sacrificing attributes Marketing emphasis Keys to sustain strategy Ulhas D Wadivkar Make virtue of product features with low cost Economical prices. low cost year after year.

Many Product. 219 . charge a premium for differentiation Constant innovation to stay ahead. with differentiating features.Broad Differentiation Strategic Target Basis of competitive advantage Product Line A broad cross section of the market Ability to offer something attractively different. wide selection. Few key differentiators. Production emphasis Production superiority with differentiating features buyers are willing to pay Marketing emphasis Keys to sustain strategy Ulhas D Wadivkar Advertise features.

220 . Unique expertise in managing costs while offering upscale features & attributes.Best Cost Provider Strategic Target Basis of competitive advantage Product Line Value oriented buyers More value for money Items with appealing & assorted upscale attributes. Production emphasis Items with appealing & assorted upscale attributes with lower costs Marketing emphasis Keys to sustain strategy Ulhas D Wadivkar Advertise best value. comparable features with lower value.

Continuous cost reduction without sacrificing attributes Communicate budget priced product features that fits niche market requirements. A product tailored to tastes & requirements of niche market. Do not loose 221 focus by entering other markets.Focussed Low Cost Provider Strategic Target Narrow market niche satisfying distinctively different buyers needs & preferences. Basis of competitive advantage Product Line Production emphasis Marketing emphasis Lower overall costs than competitors in niche market. Stay committed to serving niche at lowest over all cost .. Keys to sustain strategy Ulhas D Wadivkar .

Focussed Differentiation Provider Narrow market niche satisfying Strategic Target distinctively different buyers needs & preferences. Communicate how product features does the best of meeting niche market requirements. Do not loose focus by entering other markets Economical prices. Keys to sustain strategy Ulhas D Wadivkar . Basis of competitive advantage Product Line Production emphasis Marketing emphasis Attributes that appeal specifically to niche members. Custom made products that match the tastes & requirements of niche market. 222 good value. A product tailored to tastes & requirements of niche market. low cost year after year. Stay committed to serving niche market at better differentiation.

Vertical Integration Strategies. Outsourcing Strategies.7. Grand Strategies: • Stability. • Mergers. Strategic Alliances & Collaborative Partnerships). Syllabus ----------------------------------------------------------------7. Growth. ----------------------------------------------------------------(8) Ulhas D Wadivkar 223 . Acquisition & Takeover Strategies. • Retrenchment. (Diversification Strategies.

Integrate backward or Foreword? 4. Strategic Alliances & Collaborative Partnerships ? 2. Initiate offensive Strategies? 6. Using Internet as Distribution Channel. b) Fast Mover? And/or c) Late Mover. Outsourcing? 5. 4. if so. 3. Finance Timing the Company‟s Strategic move in marketplace: a) First Mover. Human Resources. Marketing & Sales. Engineering. 2. 5. Defensive Strategic moves? 7.Strategic Option Menu Overall Low Cost Provider STABILITY Broad Differentiation Best Cost Provider Focussed Low Cost Provider Focussed Differentiation EXPANSION / GOWTH RETRENCHMENT COMBINITION Complimentary Strategic options: 1. R & D. Production. Ulhas D Wadivkar 224 . to what extent? Functional Strategies to support above Strategic Choices: 1. Merge with or acquire other companies? 3.

diversified several different businesses. • Corporate Strategies are basic decisions about allocating & transferring resources among different businesses and managing & nurturing portfolios to achieve overall corporate objectives. we now need to decide on other Strategic Actions to complement on the choice basic Competitive Strategy chosen.Grand Strategies • Having settled on one of the Competitive Generic Strategy. • Grand Strategies are Corporate Level Strategies. Setting a choice of Direction that a firm should adopt. The Corporate Strategy in both cases is about setting the basic direction of the firm as a whole. It could be a small entrepreneur firm with single location and single business or a corporate conglomerate with multi-location. Ulhas D Wadivkar 225 .

many mixed ―strategies‘ do take place.Business Dimensions • Any Business is defined along three dimensions and combinations thereof. • Expansion Strategies. These three dimensions are: – Customer Group – Customer Functions and – Alternative Technologies. • As the organisations becomes large & diversified. • These Strategies are pure and depending upon various dimensions of the businesses. such as: Ulhas D Wadivkar 226 . These Strategies are: • Stability Strategies. • Retrenchment Strategies. According to Glueck. • Combination Strategies. the business definition also becomes complex. there are four Grand Strategies. which are used as alternatives and in a combined way. Glueck has described four dimensions.

the unrelated dimension operates. a) b) Internal / External Dimensions: When the Organisation is an independent entity. Related / unrelated Dimensions: When organisation adopts a Strategy related to its existing Business Definition. it is operating under Internal Dimensions and When the Organisation adopts a strategy in association with another entity. Ulhas D Wadivkar 227 2. it operates under External Dimension. Customer functions or alternative Technology. a) b) . the Related Dimension operates and When organisation adopts a Strategy that is un-related to its existing business either in terms of Customer Groups.Business Dimensions 1 & 2 1.

Active / Passive Dimensions: The active dimension operates when an organisation adopts an offensive strategy in anticipation of environmental threats and opportunities.3. The passive dimension operates when an organisation adopts a defensive strategy as a reaction to environmental threats and opportunities. a) b) 4. The vertical dimension operates when an organisation adopts a strategy which results in the expansion or contraction of the existing business definition of one or more businesses in terms of the utilisation of alternative technologies. Ulhas D Wadivkar 228 . a) b) Business Dimensions 3 & 4 Horizontal / Vertical Dimensions: The horizontal dimensions operates when an organisation adopts a strategy which results in serving additional customer groups and/or satisfying other customer functions in such a way that they compliment the existing business definition of one or more of its business.

four Dimensions and two types in each dimension give rise to 32 possible mixed Strategies and if we consider three dimensions of Business Definition. these possibilities should be 32 x 3 = 96 and if we consider weight-ages for each factor the Strategic alternatives could be mind boggling. all alternatives are not feasible or possible and we narrow down the choice of few major strategic alternatives.Thus combination of Four Grand Strategies. However. Ulhas D Wadivkar 229 .

No new threat of substitutes and new entrants. industry downturn. govt. When environment is stable and predictable with no new significant threats & opportunities in the environment. Stability Strategies: 1. However. It is dangerous to be complacent. competitive pressures are Ulhas D Wadivkar 230 temporary and will turn favourable after some time.1. rules.b) Profit Strategy: No change policy cannot sustain for long and situations keep changing. this should be a conscious decision and should not arise out of in-activity and owing to inertia. Also no new strengths have been generated and no new weaknesses have been developed. . However if company believes that the changes like economic recession. it may not be worthwhile to alter strategy in present situation. 1.a) No-Change Policy: It is a conscious decision of not doing anything new and continue with present business definition.

Pause / Proceed – with – caution Strategy is a temporary strategy like profit strategy and is used for consolidation. Sometimes after a major expansion firms need to stabilise. if the problems are not temporary. However. It is also used to bide the time for more opportune time and move on with rapid strides again. the company position deteriorates. raise prices. allow strategic change to percolate through organisation structure and allowing existing systems to adopt the strategy and the move for further expansions. hold investments / replacements.then firm opts for maintain profit policy by artificial measures like cut costs. increase productivity and some such measures to tide over the difficult days. It is used to test the ground before going ahead with fullfledged Grand Strategy. Ulhas D Wadivkar 231 .

c) Expansion through Diversification: 2. globalisation. liberalisation. If organisation is not moving ahead. 2.e) Expansion through Internationalisation: 232 Ulhas D Wadivkar .b) Expansion through Integration: 2. 2.2. Companies aim for substantial growth to take advantage of Growing economy.d) Expansion through Co-operation: 2.a) Expansion through Concentration: 2. Emerging technologies etc. Expansion Strategies 1. – – – – – Expansion Strategies are of 5 types. it is actually going backwards. burgeoning markets.

improves competitive advantage due to in depth knowledge & expertise. Concentration Strategy involves investment of resources in a product line for an identified market. Maruti) • Concentration strategy involves minimal organisation changes. Ulhas D Wadivkar 233 .a) Expansion through Concentration: Firms tend to rely on doing what they know they are best at doing. This is a first preference strategy of firm doing what they are doing already and would like to invest more in known business. The firm has proven technology.• 2. The firm should also have financial strength to sustain expansion. market has high potential for growth and industry is sufficiently attractive for concentration to take place. (Bajaj.

Product obsolescence is another threat for the heavy investment. it is industry dependent and adverse condition in industry can affect. There are two types of Integrations. expansion through Integration takes place. Ulhas D Wadivkar 234 . Alternative technologies are used for backward or forward integration. • 2. In the Recession time. Expansions are pivoted around present base of customers. This is exploring Vertical and Horizontal dimensions of Business. It is also one type of ‗Make or Buy‘ decision.• The limitations of Concentration Strategies are putting all resources at one project.b) Expansion through Integration: When firms use their existing base to expand in the direction of their raw material or the ultimate consumer or acquire adjacent businesses. The firm moves up or down the value chain. Scope of business definition is widened. it is too difficult for concentrated firms to withdraw. All integration strategies require Trade-offs. The firm aims at cost economics.

• Backward Integration means retreating to source of raw materials while Forward integration moves the organisation to its ultimate customers.c) Expansion through Diversification: Several firms diversify to reduce the risk of dependence on product and same set of customers. . It changes business definition. It could be internal or external. • Integration strategy gives more control on Value chain but carry a risk as industry is set to serve same customer group and in case product fails or becomes obsolete. Many a times Horizontal Integration is a merger of like industries. Ulhas D Wadivkar 235 technological etc. related or unrelated. Diversification involves all dimensions of Strategic Alternatives. • 2. horizontal or vertical. • Horizontal Integration: When an organisation takes up the same type of products at the same level for production or for marketing.• Vertical Integration: When an organisation start making new products that serve its own need or is for self consumption.

• Conglomerate diversification: Diversification in activities which are totally unrelated to existing business definition of one or more of its businesses. customer groups & functions and /or alternative technology. It could be market related concentric diversification as different products for same set of customers or Technology related Diversification as related technology to the present business or combination of Market & Technology related diversification. Shriram – Nylon Fibre & Ball bearings. etc.• Concentric Diversification: The activity is related to existing business definition either in businesses.) Ulhas D Wadivkar 236 . (ITC – Tobacco & Hotel. Essar – Shipping & Steel.

4.d) Expansion through Co-operation: 1. Joint Ventures Strategy. 3. Multi-domestic Strategy.e) Expansion through Internationalisation: 1. Global Strategy. Strategic Alliances Strategy 2. Trans-national Strategy.2. Mergers Strategy 2. Takeovers or Acquisitions Strategy. 3. 4. Ulhas D Wadivkar 237 . 2. International Strategy.

Changing Customer needs. increasing debt. Obsolete Products. The organisation need to find out problem areas and diagnose the causes of the Problems. • Symptoms are noticed in poor performance. Shrinking markets. various types of Retrenchment Strategies are adopted. Government Policies. falling sales. declining profits. Retrenchment Strategies. • The organisation with proper monitoring controls can sense impending danger and position itself to find alternatives.3. Shrinking market share. accordingly. • Retrenchment Strategy is followed when an organisation substantially reduces scope of its activities. Ulhas D Wadivkar 238 . • External Developments. Substitute Products. dwindling Cash flow. could be reasons for decline. Wrong Strategies.

Therefore.239 Ulhas D Wadivkar . revenue generation is possible. Temporary recovery situation but no sustained turn-around: Possible product re-positioning. Company with cost dis-advantage.. Sustained survival situation but no potential for future growth: Turnaround is possible but Industry is in slow decline. new forms of Competitive advantage. Industry has attractiveness is still available and decline was caused more by internal factors. a very little potential for growth is possible. where organisation can be a leader. which cannot be revived. Divestment is possible or Turn-around is possible by finding ‗niche‘ market. cost reduction. Products or Services are in terminal decline.Retrenchment Strategy Situations for Recovery • Slatter has described four types of Retrenchment Strategy situations for recovery Realistically non recoverable situation with little chance of Survival : Not competitive company. Low potential for Improvement. Sustained recovery situation with genuine possibility of Turnaround: A possible new developed product. Possible market development or a possible market re-positioning.

then management team handles the entire turn-around strategy with support of advisory specialist external consultant.a. • 3. market. • 3. Turnaround specialist is employed to do the job and existing team is temporarily withdrawn. The person could be deputed by banks. market segment positioning. • Possible actions could be: Analysis of Product. Target setting. production processes. remedial actions.1.a.: If CEO has credibility with Banks and Financial Institutions and if a qualified Consultant is available.3.a) Retrenchment Strategies: Turnaround Strategies: • 3. especially CEO and / or merging sick unit with a healthy one. feedback. Ulhas D Wadivkar 240 . production logic.a.2: In another situation.3: Replacement of existing team. competition.

3. Selling a part of company for survival of organisation.b. severe competition. mismatch of business with the company. • Divestment is done in two ways : A part of company is divested or firm may sell a unit outright to a buyer. project feared to be non-viable in long range. Divestment as a part of merger plan of mutual exchange. Ulhas D Wadivkar 241 .b) Retrenchment Strategies : Divestment Strategies: • 3.1: Divestment is done due to negative cash flows. a better alternative is available for investment. Technological up-gradation asking for funds which are not available. who finds the purchase as a strategic fit.

3. In case of Textile Mills of Mumbai. in view of prices of real estate in Mumbai. It is a last resort. Secondly. Ulhas D Wadivkar 242 • . where company shuts down and tries to sell its assets. writing was on wall as Mills did not invest in to new technology for more than 50 years. The neglect may have been deliberate. Liquidation is difficult due to various legal constraints and protection given to employees in labour law. it could be a planned liquidation. Some times liquidation can happen through court order for compulsory winding up and sometimes winding up can be voluntary. Liquidation may be inevitable in spite of best efforts of the entrepreneur.c) Retrenchment Strategies : Liquidation Strategies: • This is most un-attractive strategy.

• As an example. Addition of new variety of ‗Decorative paint‘ for widening customer base. (Stability). and Adding an entirely new product like ‗Automotive Paint‘ with new set of customers & functions (Expansion). which used to take Painting Contracts (Retrenchment). They are either followed simultaneously or in a sequential way. Expansion and Retrenchment strategies. while eliminating or closing the contract division. It is very difficult in the business environment to follow a single pure Strategy.Combination Strategies • Combination Strategies are mixture of Stability. Ulhas D Wadivkar 243 . Situation is Complex and business demands different strategies to suit the situational demands made upon the organisation. we observe ―Asian Paints Ltd‖ company following three strategies together.

Strategic Alliances & Collaborative Partnerships? 2. Ulhas D Wadivkar 244 . Initiate offensive Strategies? 6. Integrate backward or Foreword? 4. Merge with or acquire other companies? 3. • b) Fast Mover? And/or • c) Late Mover. to what extent? Timing Tactics the Company‟s Strategic move in marketplace: • a) First Mover. Defensive Strategic moves? 7. Using Internet as Distribution Channel. Outsourcing? 5. if so.Complimentary Strategic options: • • • • • • • 1.

245 Ulhas D Wadivkar . • First mover risks obsolescence due to technological advancements. • First time consumers are likely to remain loyal. • ―When‖ is often as important as ―what‖. • Late mover can come up with superior product by imitating & has fewer risks as market is already developed. Sometime fence sitter moves in by fine tuning on mistakes of first mover. A specific operating plan how & when a Strategy to be implemented.Timing Tactics the Company‟s Strategic move in marketplace: • A Tactic is a sub Strategy. • Disadvantage: could be costlier to be first. creating awareness in consumers is also costly. • Can capture raw material suppliers. They can be successful if they have staying power. • 1st mover has advantage of taking inroads and establishing in market as leader– being remembered (Bisleri). Apart from cost of technique. distribution channels. creating image as pioneer. smart late mover can turn apple cart & beat first mover.

These alliances are more than company to company give & take dealings but fall short of Merger or JV. These alliances are mainly for bridging gap of resources and technology.1. free economy. The fastest & surest way to fill up the gap is Alliances with enterprises having desired strengths. Ulhas D Wadivkar 246 . Strategic Alliances & Collaborative Partnerships? • In the present era of Privatisation & Globalisation. and invasion of foreign companies are forcing Industries to enter into race of building Global presence and into race of adopting new technologies. resources. Industries have to face altogether different challenges not faced hitherto. • Industries also find that they do not have expertise for running the race of Global leadership. The global environment requires diverse & expensive skills. technological skills. • Strategic Alliances are collaborative partnerships where two or more companies join forces to achieve mutually beneficial strategic outcomes. new markets in developed & under developed countries. Rapid advances in technology.

in-side information & knowledge about unknown / unfamiliar markets & cultures. e. distributors. • Gain. distributors as partners by many big business houses. IBM & DELL. These alliances are mostly done with Value chain contributors. • Master new technology. • It is now common for companies to pursue their strategies in collaboration with suppliers. • Access valuable skills & competencies. but alliances are also done with suppliers. build new expertise & competencies faster.Advantages of Alliance: • Alliance is basically between equals. . Ulhas D Wadivkar 247 • Open up broader opportunities. Advantages of Alliance: • Get into critical country markets quickly.g. makers of complimentary product and some select companies. • Get a handle to participate in target technology or industry.

resources and contributions and respect each other. • Alliances to be successful should have partners working together. They should have co-operative arrangements working for win-win solutions. inability to work together.Stability of Alliances: • Alliances have a very high rate of divorce. Over a period the partners must learn skills and technology. changing conditions which make initial reason for alliance as obsolete. Ulhas D Wadivkar 248 . In US only about 39% of Alliances are found to be stable. more attractive technologies and / or rivalry at marketplace. real collaboration and not merely arm length exchange of ideas. Others are either outright failures or are limping along. • Alliance partners should guard themselves from undue dependence. Stability of alliances depend upon their success in adopting to changing internal & external conditions. Each partner must bring in high value allied skills. diverging objectives and priorities. To be a market leader companies must develop their own capabilities or alliance will ultimately lead to Merger or Acquisition. willingness to bargain on issues. • Causes for failures of alliances could be.

Merger & Acquisition Strategies: • The phrase Mergers and Acquisitions (abbreviated M&A) refers to the aspect of corporate strategy. a Merger happens when two firms. For example. both Daimler-Benz and Chrysler ceased to exist when the two firms merged. agree to go forward as a single new company rather than remain separately owned and operated. or help a growing company in a given industry to grow rapidly without having to create another business entity. finance. DaimlerChrysler. was created. corporate finance and Management dealing with the buying. Ulhas D Wadivkar 249 . This kind of action is more precisely referred to as a “Merger of equals. often of about the same size. • In the pure sense of the term. and a new company. selling and combining of different Companies that can aid." Both companies' stocks are surrendered and new company stock is issued in its place.

where existing Management resists and opposition is expected. employees and Shareholders. the real difference lies in how the purchase is communicated to and received by the target company's Board of Directors.Merger & Acquisition Strategies-2: • When one company takes over another and clearly established itself as the new owner. the buyer "swallows" the business and the buyer's stock continues to be traded. Bidder sometimes takes help of FI or majority share holder to enter Company‘s board and gain control. • Hostile Takeovers are takeovers. Ulhas D Wadivkar 250 . the purchase is called an Acquisition. From a legal point of view. • Whether a purchase is considered a Merger or an Acquisition really depends on whether the purchase is friendly or hostile and how it is announced. The bidder picks up shares from Market and obtains controlling interests. the Target Company ceases to exist. Examples are NEPC bidding for Modiluft or Starlite Industries bid for Indian Aluminium. In other words.

7) affects cultural integration. in takeovers. 2) offer easy growth. 6) reduces employments. 1) money power takes over professionalism. Conflicts of management styles and difference in Corporate Cultures create problems in integration.• M & A have not produced hoped-for results on many instances. 7) increase market share & 8) decrease competition. • Pros & Cons of M & A: 1) M&A ensures management accountability. 3) are detrimental to national economy. Cost savings. 2) Takeovers do not create any real assets for Society. • As against. 4) avoid gestation period & hurdles involved in new projects. Ulhas D Wadivkar 251 . 5) offers a chance to sick units to revive. Resistance of rank and file employees of two large companies is some times too formidable to resolve. oligopolistic tendencies. 5) facilitate monopolistic. have possible selective divestment. 4) reduces competition. 3) create mobility of resources. and enhanced competitive capabilities take substantially long time to materialise in view of above problems. expertise sharing. 6) venture into new business & markets.

To try to invent new industry and lead the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities To fill resource gaps 252 2. To pave the way for the acquiring company to gain more market share and. To expand companies geographic coverage. 3. To gain quick access to new technologies and avoid the need for a time consuming R & D effort. Ulhas D Wadivkar . further. 5.Strategic objectives of Mergers & Acquisitions: 1. 6. To extend company‘s business into new product categories or international markets. 4. create a more efficient operation out of combined companies by closing high cost plants and eliminating surplus capacity industrywise.

outsourcing is narrowing boundaries of the business. Integration has problems of mismatch of capacities.Outsourcing Strategies: • Unlike Integration. • A company should generally not perform any value chain activity internally that can be performed more efficiently or effectively by its outside business partners – the exception is when an activity is strategically crucial and internal control over the activity is deemed essential. as economic size for individual items in value chain could be different and hence such specialised skilled processes or items in value chain could be outsourced to specialists. Ulhas D Wadivkar 253 .

4. 3. 6. Outsourcing allows the company to concentrate on strengthening and leveraging its core competencies. 5. 2. Cost reduction – An activity can be performed more cheaply by outside specialists.Advantages of Outsourcing: 1. Outsourcing streamlines the Company operations in ways that cut time it takes to get the newly developed product in to the market. A particular skilled activity can be performed better by outside specialist. Outsourcing reduces company‘s risk due to changes in technology and/ or change in buyer preferences. Ulhas D Wadivkar 254 . The activity not connected with core competence and not crucial to firm‘s ability to achieve sustainable competitive advantage and will not affect the technical ‗Know-how‘ can be outsourced to advantage.

when used with initiative are termed as Offensive Strategy giving Competitive advantage to the initiator. a differentiation advantage. resourceful rivals won‘t take lightly and exert pressure to overcome the disadvantage they are facing because of initiative taken by one of their associates. These advantages. competent. • However. Ulhas D Wadivkar 255 .Offensive Strategy • Offensive Strategic moves include yielding a cost advantage. a resource advantage. • The initiator of the Offensive Strategy has to come up follow-up offensive & defensive moves to sustain the initially won competitive advantage.

AMD & Intel. One of the options is to offer equally good product at lower price.Types of Offensive Strategies-1 1. running Comparison ads. then firms are forced to take an initiative and take an offensive stand to whittle away from pressure. Adding new features.g. Initiatives to match or exceed the competitor strengths: When rivals have strong competitive advantage. e. an offensive strategy to offer alternate products at faster pace and at cheaper price sometimes works and afterwards people get used to alternate product. Other option could be to outsmart competitor by bringing in latest version of product in market before him and making his product obsolete. 256 Ulhas D Wadivkar . superior customer service capability are some other options. having plant in backyard of rival. In second instance. when competitor is very strong and established.

where rival has weak presence in market. Ulhas D Wadivkar 257 . or Win away customers with your strong brand appeal over his weak brand. Initiatives to capitalise on weaknesses of the competitor: This option has better chance than challenging strengths of competitor. Service camps where rival lacks in service department. or take advantage of geographic reasons. or making special sales campaign. or paying special attention to market segment which your rival is neglecting.Types of Offensive Strategies-2 2. Options could be going after rival whose product lag in quality & features.

such an offensive measure has more chances of success Ulhas D Wadivkar 258 . customer service thrust & improvements. rebates. etc. Such offensive may include. in store displays. increased advertising. new models & styles. coupons. price cuts. When a product has sufficient Brand image & when a new specifically attractive product or service is being launched. free samples. Simultaneous initiatives on many fronts: Company may launch a Grand Offensive on many fronts simultaneously and compel rivals to take defensive actions.Types of Offensive Strategies-3 • 3. additional performance features.

digital camera. This may include.g.Types of Offensive Strategies. It could also include launching initiative in geographic area where competitors have not yet reached or introduce products in new market segments for selected buyers with different attributes & performance features. Ulhas D Wadivkar End-run offensives: involves going around competitors instead of taking them head on and change rules of game & competition. wireless communication. e.leapfrogging by using next generation technology. Taking a jump ahead. i-phone. sport-utility-vehicles of Honda Accura or ford Lexus. blackberries.g.4 4. LCD screens 259 . which support existing business & technology such as 3 G hand sets. e. introducing new products that redefine the market & terms of competition.

prompt technical support when clients are frustrated with leaders. Guerrilla offensives: This is adopted by small challenger companies.Types of Offensive Strategies. who do not have resources or market visibility to challenge the leaders. when leaders have some quality problems or having a big discount sale week. This is hit & run technique. a short offensive and win away selected client account.5 5. Offering quality. etc. Challenger Companies attack in areas neglected by biggies or where they have become vulnerable. or offering products at shortest & confirmed deliveries when leaders are facing delivery problems. 260 Ulhas D Wadivkar .

New geographic area. otherwise chance of success are dim.6 Pre-emptive strikes: This is one of a kind offensive move. new shopping mall.6. Whosoever is first gains maximum competitive advantage! Pre-emptive strategies involve being first to secure an advantageous position. It could be leaders. The pre-emptive strikes are done on the basis of core competency of challenger. Struggling enterprises who are on the verge of going under. where rivals are kept away and cannot duplicate and then strike competitors by May be securing a big renowned distributor. here the challenger must be strong to strike weak company. a) b) c) d) e) f) g) Types of Offensive Strategies . Choose which rivals to attack. Small local & regional firms with limited capabilities. who are always vulnerable or Second run firm with weaknesses. Good location for to cheap transportation & raw materials. Ulhas D Wadivkar 261 . etc. where they are best in areas like Resource strengths and competitive capabilities.

Two forms of Defensive Strategies are: 1. The defensive strategies are used to lower the risk of being attacked and weakening the impact of attack. new features. Ulhas D Wadivkar 262 . close vacant niches. broaden the product range. Blocking the avenues open to Challengers: Defender can participate in alternative Technology to reduce attack of better Technology which may be offered by rivals. • New Products.Defensive Strategies: In competitive environment every successful company has to face the threat of challenges from rivals and new entrants. protect valuable resources and prevent possibilities of imitation. The defensive strategies do not improve competitive edge but they help to fortify company‘s competitive position.

Publicly announcing management‘s commitment to maintain the firm‘s present share. Publicly committing the company to match competitors‘ terms & prices. Signalling Challengers that retaliation is likely & let challengers know that the battle will cost more than its worth. sponsoring gift hampers. Providing free coupons. free service training or camps.• • • • • 2. Maintaining a war chest & marketable securities. Developing capability to provide spare parts. Lengthening warranty periods. Ulhas D Wadivkar 263 . • • • • Have economy priced product range to ward off price wars. Making an occasional strong reaction on moves of weak competitor to enhance the company‘s image of tough defender. give away samples. Search & appoint creditable distributors & book them with volume discounts & other finance terms so as to discourage them from trying other suppliers.

Direct sale on net will indicate weakening commitment to distributors. Dealers are considered better positioned to deal with ―brick & click‖ Strategy for Company products / services.Strategies for Using Internet as distribution channel • The internet era has brought second wave of Internet entrepreneurship. Company considers that strong support and goodwill of dealer network is essential. Ulhas D Wadivkar 264 . Web is considered in partnership with dealers and not in competition. How much emphasis to be placed for use of internet? Managers must decide how to use the Internet in positioning the company in marketplace? • Using Internet Just to Disseminate Product Information: and use internet to direct customers to distribution channel partners for sales transaction or indicate locations retail stores. This is to avoid conflict with already existing distribution channel partners. Companies need to address how best to make internet as part of the business to use as distribution channel.

g. giving buyers option for colour & features so as to gain more & first hand knowledge about customers‘ choices. getting feed back from web surfers and create sufficient interest about Company‘s Product and Services in web community. the strategy is to use Internet to gain online sale experience.Using Internet as Minor Distribution Channel: Here. testing product. This path will be beneficial to dealers & will not create resistance. e. doing market research. ‗Nike‘ selling some footwear on line. Ulhas D Wadivkar 265 .

On-line sell improves profitability as dealer commission could be up to 35 – 40% of retail price. where direct downloading is more comfortable than going to shop and getting a CD. Also where the technology is more suitable for ‗build to order‘ strategy. e. Ulhas D Wadivkar 266 .• Using “Brick and Click” Strategy: Sell directly to customers on line and at the same time use traditional whole sale & retail channels. though Distribution channels are necessary and customer need to have a physical contact with Product / Services. ―Software Programmes‖. Customers visiting web site are automatic prospective buyers. This policy is beneficial in certain circumstances. Internet has more reach and geographic constraints are taken care of with help of dealers in that area.g.

(Bisleri) • First mover‘s early commitment to new technology. technology requirement. Ulhas D Wadivkar 267 . First mover has many advantages. new distribution channels can give a cost advantage over rivals. • Being first mover is an offensive move of ‗pre-emptive strike‘. Bigger the first mover advantage.First / Fast / Late Mover Strategy • ‗When‘ to make a Strategic move is equally important as ‗what‘ move to make. • First mover builds up reputation & image. Rivals are not ready & this makes imitation difficult. more attractive the move is. new features. but fast & late mover can also be a profitable move. It will depend upon the product life cycle.

competitive capabilities and high quality management. • The first move cannot be for name sake.• First mover‘s customers are likely to retain brand loyalty giving him firm footage in market. However. If the product life cycle is long. Ulhas D Wadivkar 268 • . A follower and late mover assume that first mover to be slow in learning and updating his products. important competencies. It may be cheaper to copy. First mover must time his product entry with precise combination of features. first mover has to have good financial resources. Being the first mover need competency and cost. customer value & sound revenue – cost – profit economics to sustain the edge over rivals and maintain market leadership. the initial advantages of first mover can be nullified over a time and with safety.

They can be successful if they have staying power. It may be easier to copy first mover and improve upon by learning from errors on part of first mover and de-bug the problems.• First mover risks obsolescence due to technological advancements. smart late mover can turn apple cart & beat first mover. Sometime fence sitter moves in by fine tuning on mistakes of first mover • Being a Fast follower and late starter can also be an advantageous move with wait and see policy. • Late mover can come up with superior product by imitating & has fewer risks as market is already developed. Ulhas D Wadivkar 269 .

(4) =============================== Ulhas D Wadivkar 270 . Growing. Mature & Declining Industries. Tailoring strategy to fit specific industry: • Life Cycle Analysis – • Emerging.Syllabus =============================== 8.

• Firms in Stagnant or Declining Industries. • Sustaining Rapid Company Growth. Ulhas D Wadivkar 271 . • Runner-Up Firms. • Industry Leaders. • Competing in Fragmented Industries. • Weak and Crisis-Ridden Businesses.Tailoring strategy to fit specific industry Strategies for: • Competing in Emerging Industries. high-Velocity Markets. • Competing in turbulent. • Competing in Mature Industries.

6. new geographical areas. 8.Strategies for : Competing in Emerging Industries: 1. Ulhas D Wadivkar 272 . and critical material component. Strategy deals with risks & opportunities. 3. merge. Pursue new customer groups. 7. Strategy to go all out for perfecting the Technology. Make it easy & cheap for first time buyers for them to experience industry‘s first generation product. Risk taking entrepreneurship. Try for winning early race to Industry leadership. Form strategic alliance with key suppliers for gaining technological expertise. improved product quality with additional performance features. new user applications. Acquire. 2. 4. specialised skills. Broad or focussed differentiation Strategy with technological superiority. 5. form JVs with companies having complementary technology.

depending upon where you react to change or you lead the change. Initiate fresh actions regularly in every few moths without waiting for situations compelling change. High- Velocity Markets The Strategy could be offensive or defensive.Strategies for: Competing in Turbulent. Ulhas D Wadivkar 273 • • • • • . A middle path is anticipating change. Strategies to invest aggressively in R & D for leading edge of technical know how. thereby keep company‘s product & services fresh & exciting to withstand changing environment. Have strategic partnerships with suppliers making tie in products. Develop quick response capability.

. Ulhas Dimprovement Wadivkar 274 . • Concentrate on product differentiation with quality & innovation. • Build new or more flexible capabilities. • Acquire rival firms. trim costs. & do not allow Fat additions. drive down your costs and strategise to become industry leader as low cost provider. • Concentrate on increased sales to present customers. • Even in declining industry. Strategies for : Firms in Stagnant or Declining Industries: • Concentrate on Value chain. check your portfolio and prune added products & models being in list for name sake. some segments are growing.Strategies for : Competing in Mature Industries: • At matured stage. • Concentrate on Value Chain. Know the needs of buyers in that segment & fulfil them. • Expand Internationally.

Ulhas D Wadivkar 275 . specialised and mange low cost with differentiation. • Become a low cost operator. initial investment can be low to start business. • Have good distributor chain. in view of volume. product is global. • Add differentiators. Entry barriers are low. young product crowded with many aspirants. • Focus on limited geographic area.Strategies for: Competing in Fragmented Industries: There are hundreds of industries co-existing in a very big market without differentiation and there is an absence of clear market leader.

Time span 3 to 5 years • Long Span Strategy: Look at businesses that do not exist today. Time span 1 to 3 years.Strategies for : Sustaining Rapid Company Growth: • Short span strategy could be to expand in present business and obtain increased revenue. some loss expected on new business but strategy is longevity & significant future gains Ulhas D Wadivkar 276 . Use present resources for venture investment. Present cash flow reduces. • Medium span Strategy: use existing resources and capabilities and enter into new business having a growth potential.

Grow faster than the Industry as whole and wrestle marker share from rivals. • Muscle flexing strategy :– Overkill : Quickly matching and exceeding challenges from rivals. Use Promotional campaigns to keep rivals away from gaining. Patenting feasible alternative technologies. Keep prices reasonable. Use arm twisting tactics. Ulhas D Wadivkar 277 . bigger R & D outlay. Keep rivals in reactive mode or scrambling to keep up your pace.• Strategies for : Industry Leaders: • Stay on Offensive Strategy : Strategy is to be first mover and a proactive market leader. Display displeasure on customer for trying others and offer some specific benefits for Brand Loyalty. Add personalised services. • Fortify and defend Strategy: Increased spending on advertisement.

• Strategy to fill up vacant niche. • Pursuing cost reduction. • Strategies for: Weak and Crisis-Ridden Businesses.• Strategies for: Runner-Up Firms: These are second tier companies with lesser market share than the leader. • Revising the existing Strategy. These are also up-coming market challengers. • Ulhas Using a combination of these efforts. or to have superior product or to have a distinct image (Differentiation) • Strategy to be a content follower – no trendsetting moves but steal customers aggressively by copying and with special privileges. D Wadivkar 278 . • Launching efforts to boost revenues. These are Retrenchment & Turn around strategies. • Strategy to grow through acquisition. • Strategy to be a specialist. • Selling off Assets. • Offensive Strategy to build market share.

Crafting a successful Business Strategy: 1 : • • • • • • • Ulhas D Wadivkar Take a long term view for Company‘s Competitive position and take those Strategic moves on top priority. Be alert about unmet customer needs. Avoid Strategies which can be successful only in optimistic circumstances. (if not. Attacking competitive weakness is always safer and profitable than attacking competitive strength. then what?) Do not under-estimate rivals in their reactions or commitment to do better. 279 . which is a very large share of the Market.Wall Mart at 14%) Invest in creating sustainable competitive advantage. emerging technological alternatives and be prompt in adapting to changing market conditions.( e. Be alert needs of non consumers.g. buyer‘s wishes for something better. Do not assume most optimistic circumstances while forming Strategies..

If you have a differentiation Strategy as a base. Best cost provider Strategy is not a compromise. You need to be Low cost provider for winning Price cutting war. Any minor variation in rival‘s product will not be noticed by buyer and will not be important to them. Compromise Strategies are not sustainable. it must be a well thought & well executed. • • Ulhas D Wadivkar 280 . You need to cut costs before cutting prices. then we should really strive meaningful jump in quality / services / performance.Crafting a successful Business Strategy: 2 : • • Check possible cost advantages before cutting prices. Prepare your defences before being aggressive. Be aware that offensive Strategies will always invite retaliation. It should be noted that a middle path strategy and compromise strategy are two different matters. Aggressive moves to capture market share from rivals will invite a price war which will be detrimental to every body.

Syllabus 9. New Business Models and strategies for Internet Economy: • Shaping characteristics of E-Commerce environment – • E-Commerce Business Model and Strategies – • Internet Strategies for Traditional Business – • Key success factors in E-Commerce – • Virtual Value Chain. (6) Ulhas D Wadivkar 281 .

• E-commerce from Interface point of view means information and transaction exchange: Business to Business (B2B). services. Consumer to Consumer (C2C) and Business to Government (B2G). business process like manufacturing and inventory and business to business process like supply chain management are managed by the same networks as business to consumer processes. Business-to-Consumer (B2C). payments via network like internet. for example.What is E-commerce? • E-Commerce from Communication point of view: It is the ability to deliver products. information. Ulhas D Wadivkar 282 .Commerce as Business Process means activities that support commerce electronically by networked connections. • E-Commerce as Online process: E-commerce is an electronic environment that allows sellers to buy and sell products / services and information on the internet. The products may be physical. like cars or services like news or consulting. • E.

and internet desktop video. A local store can open a web storefront and find that the world is at its door step – customers. www. • E-commerce is selling goods and services on the retail level with anyone. text. Every transaction is blocks of information exchanged between E-merchant and a customer via the corporate Web site. Ulhas D Wadivkar 283 .com. • E-Commerce Market: E-commerce is a worldwide web pages. suppliers. and payment services along with advertisement presence.What is E-commerce? • E-Commerce-Structure: E-commerce deals various media: data. anywhere.crutchfield. internet telephony. competitors. via internet. It includes new business opportunities that result in greater efficiency and more effective exchange of good and services. Examples : www.

E-business has various Goals: • Reach new markets. extranets and intranets. • Make the best use of existing and emerging technologies. • Achieve market leadership and competitive advantage. • Build customer loyalty. fulfilment. in supply-chain planning. • Create new products or services. • Example: ―SAP‖: Provider of Business Software used for ERP. invoicing and payment. selling as well as servicing customers and collaborating with business partners. It includes buying. ―Online banking services‖ is one more example.What is E-business? • E-business is conducting critical business systems and constituencies directly via internet. • Enrich human capital. • E-business is the conduct of business on the internet. tracking. Ulhas D Wadivkar 284 .

• B2B are alternative ways of executing transactions between buyers and sellers that are business organisations. transactions. Dealers. Vendors and so on. a network of independent organisations and long term trading partners.E-commerce Business Models:1: • The important generic models are • B2B. • B2C : ―Business to Consumers‖ Commerce is retailing on World Wide Web. supplier sourcing. mails for purchasing goods and services. consulting services. Distributors. product research. Ulhas D Wadivkar 285 . B2B transactions can be EDI. B2B involves only the firm‘s business / trading partners. like Suppliers. buying information. C2C • B2B is ―Business to Business‖ E-commerce is an automated exchange of information between different organisations. post-support sales. This is used for awareness. receiving proposals. B2C and C2B. requesting proposals.

Some service providers provide advertising based access to their service. Website displays products with product information. • Service Provider Model: for Ulhas D Wadivkar 286 . pizza delivery are sold through Storefront Model • Click and Mortar Model is a shop that combines both Website and a physical store. The web business merchant makes money the same way as traditional shop merchant.E-commerce Business Models:2: • Storefront Model: It is an E-commerce site which offers products or goods for a price. Flower delivery service. Typically. cost with a shopping cart and ordering mechanism. Generally Computer vendor adapts this books. • Built to Order Merchant Model is website which offers goods or services with an ability to order customised versions. Movie Ticket delivery service. electronic goods. computers. One of the successful ad-driven sites is www. Goods can be physically examined and returned to store directly. ‗Pizza delivery Service‘.

articles. Typical for accessing database.ebay. they bring buyers and sellers together and facilitate transaction between them by charging fee for every facilitated transaction. www. • Broker Model: Brokers are • Prepaid Access Model: Some services like telephony. pays monthly or annually and access unlimited service. • Advertiser Model: These are free sites which offer free access for something and display advertisements as banners. news. These transactions can be B2B. movies are accessible by offering payment by minute and handled via a is an example. online games. B2C. Movie shows etc.E-commerce Business Models:3: • Subscription based Access model: Visitor registers himself.bharatmatrimony. C2C etc. Ulhas D Wadivkar 287 . One of the Indian example is www. Visitor can click the advertisement and visit the webpage of the advertiser and can order his requirements.

• Infomediary Model: An Infomediary collects. service or • Virtual Community Model is a website that attracts a group of users with a common interest who work together on the site. These sites allow the visitors to personalise the interface and content.facebook. which provides a secure environment for buyer and seller. evaluates and sells information on consumers and their buying behaviour to other parties. message boards. For example Stock information. which allows Infomediary to monitor the visitor‘s online • Free access Model: Provides free web https//: Ulhas D Wadivkar 288 . • Trust Intermediary Model is an entity that creates trust between buyer and the seller.E-commerce Business Models:4: • Portal Site Model: For news. Infomediary offers something free to visitor that requires free registration by visitor.blogspot.cnn. Examples are ‗verisign‘. www. chats Few social networks are www. They offer branded goods and provide escrow services and maintain privacy. ‗cybercash‘.orkut. • Virtual Mall Model: A site that hosts many www. brokers and other businesses.

However. • Many companies doing e-business are still in the investment and brand-building phase and have yet to show a profit. as e-businesses shift their focus from building a customer base to increasing revenue growth and profitability. • McCarthy‘s four marketing mix model and Porter‘s five competitive forces model are used to identify strategies for Internet and achieve a competitive advantage. Ulhas D Wadivkar 289 . it is required for the e-business to re-evaluate their current business strategies. to attract and retain customers by tailoring products and services to their needs. E-commerce forces companies to find new ways to expand the markets in which they compete. • E-commerce is fundamentally changing the economy and the way business is conducted. The development and implementation of e-business strategies will contribute to increased profit.Strategies for Internet Economy. and to restructure their business processes to deliver products and services more efficiently and effectively.

the bargaining power of suppliers. and the bargaining power of buyers) • According to McCarthy (1960) and again McCarthy (1999). Since the Internet has a significant impact on the makeup of this marketing mix. Internet companies should develop strategies that take the unique nature of online marketing into account. price. distribution and delivery functions in the supply chain) designed to enhance sales to the target market. Ulhas D Wadivkar 290 . price. promotion. A particular combination of product. a firm develops its marketing strategies by first identifying the target market for its products or services. and place) and also on Porter‘s 5 competitive forces (the threat of new entrants. the threat of substitutes.. promotion. It then develops a marketing mix. and place (i.McCarthy's Four Marketing Mix Model:1: • Internet Economy has impact on McCarthy‘s four marketing mix (product. rivalry among existing firms. A unique mix of these elements in a given industry allows firms to compete more effectively. thus ensuring profitability and sustainability.e.

com recently started selling personal computers in addition to its existing line of electronic products such as disk drives and memory. • Introduce ‗niche‘ product by understanding need of small segment of customers. Strategy shall be to differentiate the product by adding extra features. This is known as Product Bundling which counteracts the threat of product Substitutes and rivalry. For example. • Internet companies can also expand their product line into areas related to their existing product lines. consumers can easily collect information about products or services without travelling to stores to inspect products and compare prices. Ulhas D Wadivkar 291 . • Use ‗customer centric‘ strategy rather than ‗product centric‘ strategy. Pull information from customers and improve and customize the products.McCarthy‟s Product Strategies • On the Internet.

McCarthy‟s Price Strategies • Employ appropriate pricing strategies for selling products over the charges different prices for different markets by asking customers to enter their zip codes before they can obtain prices. • Sellers can employ a price discrimination strategy that makes it difficult for buyers to compare the prices of alternative product offerings. For instance. • Protect profits by achieving cost leadership in a particular market or industry Ulhas D Wadivkar 292 .staples. www.

To manage ebrands effectively and efficiently. companies have to employ promotion strategies different from those used by traditional marketing • To manage e-brands effectively and efficiently. www. companies have to employ promotion strategies like building a direct link with consumers and enter into a dialogue with them about products (dialogue-based marketing or one-to-one marketing). • A revenue-sharing marketing strategy is an affiliated marketing program with partners based on‟s Promotion Strategies • Mass marketing and sales promotions result in expensive.000 affiliates Ulhas D Wadivkar 293 . • Build a base of loyal and profitable customers by formulating ‗customer-centric promotion strategies‘ and respond to this new customer power. For launched its affiliate program and now has some 400. inefficient brand management.

Amazon. One way for companies to differentiate their products from rival companies is faster and more efficient delivery of products to their customers • Integrate ‗online‘ (Click) and ‗bricks-and-mortar‘ businesses (clicks-and-mortar strategy). distribution centre in leased a new 322. Ulhas D Wadivkar 294 . E-businesses (particularly eretailers) need fully automated distribution warehouses to meet demand from shoppers on the Internet. ft. can compete more effectively with Barnes & Noble.McCarthy‟s Place Strategies • For most companies. By Investing in physical assets such as a warehouse. The place aspects of the marketing mix are closely related to the distribution and delivery of products or services.560 sq. place refers to the supply chain (or value chain). For example. The Internet and its associated application software have significantly changed the way companies‘ products or services are delivered by reducing transaction and distribution costs. Amazon.

Porter's Five Competitive Forces Model
• According to Porter, a firm develops its business strategies in order to obtain competitive advantage (i.e., increase profits) over its competitors. It does this by responding to five primary forces: (1) the threat of new entrants, (2) rivalry among existing firms within an industry, (3) the threat of substitute products/services, (4) the bargaining power of suppliers, and (5) the bargaining power of buyers. • The company positions itself so as to be least vulnerable to competitive forces while exploiting its unique advantage (cost leadership). A company can also achieve competitive advantage by altering the competitive forces. • The five competitive forces model provides a solid base for developing business strategies that generate strategic opportunities. The Internet dramatically affects these competitive forces. Companies should take effect of internet on these forces into account while formulating their strategies. • Analyzing the forces illuminates an industry‘s fundamental attractiveness, exposes the underlying drivers of average industry profitability, and provides insight into how profitability will evolve in the future.
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Impact of the Internet on Marketing Mix and Competitive Forces
• The Internet can dramatically lower entry barriers for new competitors. Entering into e-commerce has become very easy for new entrants. • The number of people with Internet access has reached an estimated 304 million worldwide, an increase of almost 78 percent. The Internet also brings many more companies into competition by expanding geographic markets. • The Internet also changes the balance of power in relationships with buyers and suppliers by increasing or decreasing the switching costs of these buyers and suppliers.
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• By reducing customers' search costs, the Internet makes price comparison easy for customers, and thus increases price competition and shifts bargaining power of customer‘s new promotion venues. The Internet creates new substitution threats by enabling new approaches to meeting customer needs and performing business functions (Porter 2001). World Wide Web (www) technology itself has produced new promotion venues. The Internet also facilitates an electronic integration of the supply chain activities, achieving efficient distribution and delivery. It also facilitates partnerships or strategic alliances by networking partners or allies.
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E-Business Strategies for Competitive Advantage: Product, Price, Promotion, and Place Strategies
Product Price Promotion Place

Threat of Differentiation, Price Customer New Discrimination, centric Entrant Promotion, Innovation or Cost Performance Niche Product leadership, based Appeal, Value added
Products Revenue Sharing

Strategic Alliance, Click & Mortar Strategy

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Threat of Product Substitutes Differentiation like bundling Innovation and or Niche Product Customer centric strategy
Rivalries among Existing firms

Price discrimination Cost leadership. Value added products / services
Customer Centric Promotion Performance based Brand appeal Revenue Sharing

Clicks and Mortar Strategy

Product Price differentiation discrimination Innovation and or Niche Product Cost leadership. Value added products

Outsourc ing Strategic Alliances Clicks and Mortar Strategy

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Product Price Bargaining Power of Suppliers


Place Outsourcing Strategic alliances

Value added Revenue products / Sharing services marketing

Bargaining Power of Buyers

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Value added Customer products / Centric services Promotion Performance based Brand appeal Revenue Sharing

Outsourcing Strategic alliances


Key success factors in E-Commerce.
• Information is a key part of the value chain in all businesses. By providing a vehicle for the delivery of information with unprecedented availability and reach, today's information technology, in particular Internet technology, is dramatically changing the very fundamentals of business. This explosion in connectivity is the latest—and for business strategists, the most important—wave in the information revolution. • Internet technology and its derivative Intranets (connecting employees and internal systems) and Extranets (connecting external partners and systems) are having a profound and far-reaching impact on business. • Information such as pricing, costs, customer lists, supplier relationships, product information, employment statistics, legal proceedings, defect records, and historical statements and plans is now available to all freely. Businesses that do not rethink their fundamental value proposition based on this possibility may lose their competitive edge, or worse. Ulhas D Wadivkar 301

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technology must be maximally leveraged to maintain even modest profits. the four quadrants represent overall characteristics of value propositions—for individual products. In the top left quadrant. In this situation. services or entire companies in any industry. you will need to apply technology and electronic media to improve two basic aspects of your operation. companies successfully differentiate their products and services to capture increased market share.• However. companies are often fighting a multitude of new combatants within a commoditized market. • Enhance your efficiency—a move that will lead to improved profitability • To see how these efforts can lead to greater levels of competitive success. In this graphic. You must: • Differentiate your products and services—and improve your market share. while at the same time leveraging the power of technology to slash the cost of sales and operations and generate market-leading profitability. where price competition is acute. Ulhas D Wadivkar 303 . refer to the following graphic. which in turn finances ongoing reinvestment. In the top right quadrant. if you want to benefit from this new Internet economy.

Moving up and to the right. companies—usually inheriting their market differentiation from their legacy—still enjoy acceptable profit margins but are at extreme risk of new market entrants inventing new ways to leverage technology to deliver the same or superior value to their customers less expensively and more rapidly. and that are generally trailing the pack in leveraging IT. Following strategies are required to be employed to accomplish continual improvement in both market share and profitability. Ulhas D Wadivkar 304 . maintaining market leadership requires a disciplined focus on continual improvement along both dimensions. They lose market share and ultimately risk failure. • The underlying canvas of this diagram—the market itself— is constantly being pulled down and to the left by new competitors with innovative ideas and new technologies that make those ideas less expensive to realize.• In the bottom right quadrant. In the lower left quadrant are usually the enterprises that offer customers products or services that are not differentiated from less expensive options.

1) Customers will only purchase products or services with real.2) Profit is dependent upon differentiated value. • a. distribution and affinity with complementary products and services. • It is absolutely vital that differentiation be achieved and maintained through constant attention to innovation in intrinsic value. understandable value. it has become difficult to differentiate products and services. Market Share: Through Increased Differentiation:1: • Customers from anywhere can reach out to merchants anywhere—and vice versa—they can evaluate their options with a few clicks of a mouse button. If you are to remain competitive. Ulhas D Wadivkar 305 . you will need to set yourself apart from your competition.1. a) Economic and Pricing Models • a. • In this environment. branding.

and you have a strong differentiation strategy to drive profitability and you've constructed a distribution strategy that leverages new intermediaries.3) Distribution channels are more important then ever • a. Market Share: Through Increased Differentiation:2: • a. keep your plans confidential until they're ready to launch and continually improve every aspect of your electronic value proposition and operations. • a.1. evaluate the activities of your competitors.4) Make sure your value proposition. Then continually improve all of the above. as expressed on the Internet. Ulhas D Wadivkar 306 . And move quickly. is real and understandable.5) Understand the information dynamics of your marketplace as it changes with the Internet. try to develop breakthrough ideas.

" The disintermediation process is on. Large percentage of retail stock market transactions are now conducted on line rather than through human brokers. news and community Web sites.2) New intermediaries known as "aggregators" such as search. Ulhas D Wadivkar 307 .1) "Distributors are dead on the Internet. develop a strategy to grapple with it as aggressively as possible. In many fundamental respects. Yahoo is perhaps the best known new intermediary. • b. so also is America Online (AOL) • b.3) Understand what's happening to intermediation within your industry.b) Distribution Channel Reengineering • b. and ensure that it works through measurement of results. This has happened barely within 24 months since the first large-scale launch of Internet trading services.

the process of managing publicity—both good and bad—is as important as ever. Brand gets embodied through set of thoughts and emotions. the stronger the brand—in a positive or negative direction. Greater the depth of these impressions.1) Customer support is one of the most powerful differentiators in the online world. Assess where selfservice Web sites can be implemented. integrate them with your existing support knowledge systems. d.c) Customer Service Re-engineering and Optimization c. therefore.2) In the online world. Recognize the power of online opinion. build communities among customers and adapt the systems to the patterns of customer behaviour d) Brand Strategy and Development : d. impressions can be transmitted in seconds to millions of people. a material market advantage might get lost and a new and an undesirable brand attribute might get attached Ulhas D Wadivkar 308 .1) Brand loyalty has become one of the most powerful differentiators in e-commerce.

d. e) Audience Development e. Ulhas D Wadivkar 309 . However. in many cases. it's much harder for your message to be heard. that it must be developed within a disciplined and planned program.2) To succeed in any marketing endeavour.1) On the Internet. Create an Audience Development. Successful online marketing program boils down to the same objective as in the physical world: developing an audience or "Audience Development" is preferred phrase for online marketing. it is easier than ever to actually communicate a message to large numbers of people. e. you must have an audience.3) Understand that your online brand must be differentiated from competitors.

f.f. interactivity and efficiency.1) Users expect a Web site. These factors should be integrated into a user experience plan aligned with brand. User Experience Design f. the purpose of the interaction. the ease of comprehension and the speed of the results. This is part of the process of creating a powerful user experience.2) Optimal user experience blends several common objectives into a seamless visual and interactive experience: the personality of the brand. and leverage the interactivity of computing. and then measured for optimization Ulhas D Wadivkar 310 . Intranet or Extranet to present information in an intuitive. compelling and efficient manner. f. audience and purpose.3) Critical success factors for any Internet application are usability.

It should employ self-teaching content and make it readily accessible and understandable. Multi-tiered architecture. 8. It should comply with standard networking protocols 6. 5. It should support any type of user device.2 . 7. which is the basis for client/server systems. as well as authentication and security systems. It should support multi-tiered architecture. It should support self-service access to the information infrastructure. enabling nomadic users to access application systems and databases from any access point. 3. 4. 2. It should permit any type of device or system to act as a server. Applications should operate from within a single Internet browser standard. .Profitability: Through Increased Efficiency • The first step to leverage Internet technology within business processes across your company is to establish an Internet Architecture. An Internet Architecture is defined as an IT infrastructure model with the following attributes: 1. It should be structured within a standard network and resource Ulhas D Wadivkar 311 management infrastructure. including user profiles. All databases should be server-based.

recruiting and stock administration. analysis and EIS. D Wadivkar 312 . • Knowledge management. • Inventory and configuration management. • Value chain integration. • Document management and workflow. • Customer support. conference and broadcast communication. • Sales force automation.• Once the IT infrastructure model is ready as above. • Distribution and service channel automation. •Ulhas Point-to-point. both business-to-business and business-toconsumer. • Financial reporting. • E-commerce. • Human resources benefits administration. following business processes are to be used.

and projects that ultimately 100 percent of its business will be conducted Ulhas D Wadivkar on line 313 .Profiles of Success in the Internet Economy • Successful profile in Internet Economy occurs by tapping the increased efficiencies of Internet Architecture and by adopting new differentiation strategies through the Internet. Because its products are highly commoditized. Dell now conducts a considerable portion of its total business on line. Examples are given of the businesses finding they can provide better products and services—and even new products and services—faster and at a lower cost.3 . the Web offered Dell an excellent avenue for reaching new customers and re-establishing itself as an innovator and market leader. Some are expanding their market by making the Internet the integral core of their businesses • Dell Computers was one of the first PC makers to recognize the tremendous market potential for e-commerce on the Internet.

the company has quickly created a large and growing Internet-based business.• Manheim Auctions recognized that selling used cars is a difficult. "dog-eat-dog" business that makes many potential customers uncomfortable. This company found a way to propel the used-car business into the '90s with new and innovative ways of selling that eliminated the need for high-pressure sales tactics on a car lot. As a result of its early innovation. The company reports that it has generated sales from more than 4. • Amazon. Amazon. Ulhas D Wadivkar 314 .000 dealers subscribing to its online used-car auction saw a huge market of people who prefer to browse the Web rather than browse through bookshelves in a retail realizes all its revenues from the Internet.

• Businesses must understand the complex technologies that have come together on the Internet. and Internet technologies have taken a giant leap in making information universally and economically available. • Internet has created a wave that is engulfing just about every business and changing its fundamentals. • The customers themselves are driving much of this change. Customers are demanding that businesses deliver these services through the Internet. and the availability of timely news and updates. the ability to check product availability and track their accounts or portfolios. they also must understand how to integrate their Internet strategy with their overall business strategy. • They expect companies to make it as easy as possible for them to purchase products and services—without the need to go from store to store in search of the items and services they need. Ulhas D Wadivkar 315 . • Internet technology to be used to deconstruct and reconstruct the value chain in just about every industry.Characteristics of Internet Economy • Information is a key part of the value chain in business. They are demanding online services such as e-commerce. 24-hour service and support information.

experience and resources necessary for developing new strategies and improving business processes using Internet-based technologies.Getting There from Here • But many are taking a haphazard approach. you can ride the Internet Ulhas D Wadivkar 316 wave to new levels of success. using it to their advantage. lost opportunity. more significantly. many companies have not yet developed the necessary skills and technology expertise in-house to create solutions that tap the full potential of the Internet.. Companies must rethink their business strategies and plans in light of the oncoming Internet wave. effort. • Internet is a relatively new arena that will have a far-reaching impact. • That's why it is important to partner with companies such as Dynamic Net. resulting in wasted time. . Forrester Research found that one of the most common mistakes companies make when implementing an Internet project is not having a clear vision or purpose for the solution. PWC. • By partnering with a strategic firm such as Dynamic Net Inc. Inc. • Integrating Internet technology successfully into a business involves fundamental considerations. to help you accomplish these objectives. that have the breadth of expertise. money and. • For example.

Ulhas D Wadivkar 317 .

This value chain begins with the content supplied by the provider. created by John Sviokla and Jeffrey Rayport. the linkage between the two is critical for effective Ulhas D Wadivkarsupply chain management. It supports the physical value chain of procurement. • Nonetheless. manufacturing. distribution and sales of traditional companies. which is then distributed and supported by the information infrastructure.The virtual value chain:1: • The virtual value chain. 318 . thereupon the context provider supplies actual customer interaction. is a business model describing the dissemination of value-generating information services throughout an Extended Enterprise. • There are many businesses that employ both value chains including banks which provide services to customers in the physical world at their branch offices and virtually online. The value chain is separated into two separate chains because both the marketplace (physical) and the marketspace (virtual) need to be managed in different ways to be effective and efficient (Samuelson 1981).

In the VVC the creation of knowledge/added value involves a series of five events: gathering. Ulhas D Wadivkar 319 . The completion of these five events. selection. • In the virtual value chain the ‗virtual‘ indicates that the value adding steps are performed with information. information has become a dynamic element in the formation of a business‘ competitive advantage. The transfer of information between all events and among all members is a fundamental component in using this model. synthesize and distribution of information. how they can make the transition to the information based model. and if they are not currently offering services that are information based (i. organization.The virtual value chain:2: • In the virtual value chain (VVC). Internet services). allows businesses to generate new markets and new relationships within existing markets. This translates to a new value for the consumer. An examination of the VVC model informs the business to what function they have in the chain. The process of a business refining raw material into something of value and the sequence of events involved is similar to that of business collecting information and adding value through its cycle of events.e. The information collected is utilized to generate innovative concepts and ‗new knowledge‘.

The new relationship between business and customer is strongly based on using IT. With the assistance of IT. the business moves the value adding activities from the marketplace to the marketspace. by producing a parallel value chain in the marketspace. This implies that products and services are presented by IT in the form of bits. In other words. • New Customer Relationships – Businesses present value to the customer by new means and in new fashions. • Mirroring Capability – Businesses duplicate their once physical activities for virtual. IT creates value in the marketspace. and assess events with greater precision and speed. implement. Ulhas D Wadivkar 320 .Stages of the value adding information process • Businesses implement value-adding information by using the three stages of the Rayport and Sviokla model: • Visibility – By using information businesses learn the ability to view physical operations more effectively. it is then fully possible to plan. The virtual value chain is used to co-ordinate the activities of the physical value chain.

and customer relations. Ulhas D Wadivkar 321 . The VVC model does not indicate any shifts in the market.Relevance to the business world:1: • The Virtual Value Chain has the benefit of having a view that encompasses the entire network along with its strong employment of IT. or how and when the customer‘s needs will change. This trend has led to a different approach to value chain thinking. Using this approach Mary Cronin separates the VVC into three elements: inputs from supplier. The VVC model has a strong relationship to the supply chain and the goal of that relationship is to produce materials. • New technological developments in IT are drastically changing the way businesses operate. internal operations. information and knowledge for the market. Each business‘ internal and external relationships are managed by IT and value adding and generation of ideas are relying more and more on IT. IT maintains the relationship among the members of the chain.

Relevance to the business world:2: • The inputs from supplier element are focused on the Internet and how it can add value to the business‘s acquisition activities. The internet is also used to distribute information about the products and services to the market (i. business‘ with use of the Internet have the capability to find different suppliers quickly (effective) and for different purposes (efficient). With use of the Internet. In other words. It is essential that businesses can emulate this model because of the increasing large role information plays in the business world. Following the distribution. • The customer relations element concentrates on applying the information directly from the customers‘ needs and attitudes about the product or service to add value. • The internal operations element is in regards to the business‘ value adding events which are based on the effective procurement and distribution of the information within the business. The internet is a useful tool in acquiring the direct information about the customer‘s needs and attitudes.e. forums and discussion groups collect the necessary information about the products and Ulhas D Wadivkar 322 services that the business provides . the business can procure and distribute information globally with relative ease and low cost. electronic catalogues).

1996) To properly use the information. managers must explore the marketspace." Sviokla and Rayport comment. in turn. "executives may be able to create valuable digital assets that. could change the competitive dynamics of industries. The processes for transferring raw information to products and services are unique to the information world. managers can more clearly visualize the strategic issues facing the business." (Rayport et al. Ulhas D Wadivkar 323 . Although the value chain or the marketspace is similar to that of the marketplace. there is an increased dynamic involved. "By thinking boldly about the integration of place and space. By careful interpretation of the differences and interactions among the value adding events of the physical and virtual worlds. • Managers must learn to utilize and value the virtual world of information. However. that is to create value from it. the methods for creating value are different in these worlds.The Management of Virtual Value Chain:1: • Today managers need to concentrate on how their business creates value in both the physical and virtual world.

Productivity. quality. Ulhas D Wadivkar 324 . • This study establishes that the strategy of IT is an important issue for a business.The Management of Virtual Value Chain:2: • The conventional value chain model uses information for solely support. cost structure and profitability are all characteristics that are directly affected by IT. not as a source of value itself. both users and businesses need to realize the potential that IT has for their business. It is essential for businesses to use IT in the most effective way and to have knowledge to implement IT systems. allowing businesses to use information for the creation of innovative products and services that are exclusive to the marketspace. However. with the arrival of the Internet the virtual value chain has been enabled. Lastly.

The Management of Virtual Value Chain:3: • An example of using the VVC to create such services includes the Federal Express Corporation which recently created a customer designed website to track packages by using their air bill number. In this increasingly information based economy managers must extract value from both the physical and virtual value chains to succeed. Ulhas D Wadivkar 325 . FedEx has been able to capitalize using the VVC by adding value for the customer (for free) and in turn has increased customer loyalty in an intensely competitive market.

Syllabus 10. Strategy Implementation: • Project Implementation – • Procedural Implementation – • Resource Allocation – • Organization Structure – • Matching structure and strategy. (3) Ulhas D Wadivkar 326 .

• Behavioural Implementation. • Procedural Implementation. • Structural Implementation.Issues in implementation: • Project Implementation. • Resource Allocation. • Functional & Operational Implementation. Ulhas D Wadivkar 327 .

Strategy Implementation • Strategy Implementation is managerial exercise of putting freshly chosen Strategy into place. it is putting formulated Strategies into action through the management processes. skills. • Strategist must have somebody with a wide range of knowledge. Each task performed is related to other and thus create an interconnected network. Along with CEO every employee is involved in Strategy implementation. It includes everything that is included in the discipline of management studies. attitudes and Attributes for Implementation. • The various tasks in strategy cannot stand alone. Ulhas D Wadivkar 328 . • Action orientation: Strategy implementation entails action. • Strategy Implementation is comprehensive in scope. They are interrelated. Actual Implementation demands varied Skills • Wide range of involvement.

how various elements are interconnected. • The outcome of Strategy Implementation is to ―Achieve Effectiveness‖ through Functional and Operational Implementation. (Structural Implementation. preparing ground for managerial tasks & activities. • Strategy Implementation is ―Activating Strategies‖. It involves Degree of change. Leadership Implementation and Behavioural Implementation). Resource – based Model. leadership style changes. Procedural Implementation & Resource Allocation) • The core of strategy implementation is ― Managing Change‖. Clear Responsibilities & Accountabilities. Timing of change & Activity areas of the change. ( Project implementation.• Adopting a clear model of Strategy Implementation: A Clear unambiguous Strategy. Internal process Model and the Conflicting Values Model. • Effective management of change in complex situations: Behavioural changes. Goal Model. Comprehending. (Attempt to consolidate different view points & using diverse indicators of performance) Ulhas D Wadivkar 329 .

Formulated Strategy Mintzberg’s Conception of the Type of Strategies Implemented Strategy Intended Strategy Deliberate Strategy Realised Strategy Unrealised Strategy Ulhas D Wadivkar Emergent Strategy 330 .

Strategies Plans Program Projects Budgets Policies. Rules & Regulations Ulhas D Wadivkar 331 . Procedures.

prioritised and measurable objectives. consistent. ROI. ROE.Strategies F u n c t io n al Pl a n B r o a d O bj e ct I v e s Corporate Corporate Plan A n n u al O p e r a t I o n B u d g e ts Sector Plan Business sector Divisional Plan Division Product / technology Plan Product Level Long Term / Medium Term Objectives : Market Share. New Markets. Long Term (5-10 years) Ulhas D Wadivkar Medium Term (3 Yrs) Short Term (1 Year) 332 . These are integrated and coordinated.

Motivate employees. Mobilise people and enable them to participate in direction of growth. – – Provide challenges for functional groups Tool to Operationalising strategies. – – – Unifying all groups in one direction. Focus on Growth.Advantages of Annual Objectives: – – Tangible Growth targets. Basis for strategic control. – – Role clarity to managers and sub-ordinates. 333 Ulhas D Wadivkar .

1. Project Implementation: Strategic Management Process Strategy Implementation Strategy Evaluation & Control Project Objectives Control Measures Initiating Planning Executing Controlling Closing Ulhas D Wadivkar Project Management Process 334 .

financial (eligible for scrutiny by financial institutes. • Project promoters & Financial details of the company. • Marketing arrangements Ulhas D Wadivkar 335 . feasibility study. Detailed Cost of project. whether new or Modernisation or expansion or diversification. Project Implementation: • Conception Phase: Extension of Strategy Formulation Phase. technical. Prioritising projects conceived. Profitability and cash flow. nature of products. • Organisation. location. backward integration. • Means of financing. • Project details. economic and ecological aspects).1. • Definition Phase: Preparation of Detailed Project Report considering marketing. nature of Industry.

ancillaries etc. finance. technical collaboration permission etc. manpower. consents like licence. • Clean up phase : disbanding the project set up and handing over of the facility to operation. • Environment aspect • Govt. • Implementation Phase : detailed engineering. Ulhas D Wadivkar 336 . • Planning and organising phase: Designs. testing. order placement. contribution to development. systems and procedures. budgets. schedules. economic benefits to country or region. capital goods. foreign Exchange. trial and commissioning of the project.• Economic considerations like competition.

337 • • Ulhas D Wadivkar .2. Procedural Implementation • • • • • • • • • • Formation of the company Licensing procedures SEBI requirements MRTP requirements Foreign collaborations procedures FEMA requirements Import and Export Licences / requirements Patenting and trade mark requirement Labour legislation requirement Environmental requirement and Pollution board requirements Consumer protection requirements Procedures for availing Incentives and facilities to get benefits.

hire purchase debt. depreciation provisions. However Strategic Budgeting is a mix of both and is dynamic. • Finance is primary resource. It is required for creation and maintenance of other resources. Also money market resources such as bank credits. Resource Allocation • Resource allocation deals with procurement and commitment of financial. physical and human resources to strategic tasks. instalment credit and fixed deposits. Long term resources are required for creation of capital assets and short term finance is required for working capital. In a bottom up scenario budgets are drawn by operation group as required. Internal resources are retained earnings. • Resource allocation : This could be top down where resources are allocated by top level to all other levels of organisation based on budgets. • External resources are equity and long term loans. Ulhas D Wadivkar 338 . other reserves etc.3. • Project related resources are generally one time requirements and for on-going concern the resources are required on continuous basis. • Resources could be internal or external. It involves to and fro communications and actions between all levels of management based on strategic decisions.

Environment.Resources availability Top management Corporate Policy Guidelines Goals Short & Long Approvals & sanctions Strategic budget Minimising gaps P R O P O S A L S Executive Management Core Competencies. culture Operating Management Ulhas D Wadivkar Targets / Operation Budgets Implementa tion 339 . Marketing & past Performance.

Low 340 Ulhas D Wadivkar .Types of Strategic Budgets High I n d u st r y G r o w t h R a t e 20% BCG Matrix for Strategic Decisions Stars 15% Question Marks SBUs / Multidivisions / Multidepartments are identified for Resource allocations for Investment. 10% Cash Cows 5% Low High Relative Market Share Dogs Cash flows are based on their strengths in BCG Matrix.

Types of Strategic Budgets • PLC Based Budget: Product / SBU Life Cycle: Resources are allocated based on different stages Product / SBU Life Cycle. • Zero based Budgeting: ZSB is based on present evaluation and not based on past performance. This system is based on daily net cash flow (before tax and dividend) statement. In other words the resource allocation demand is based on ―ground zero‖ • Parta System: This system is mainly used by conservative business houses where CEO is basically a financial wizard. This is a daily budgeting and reporting 341 Ulhas D Wadivkar system. Each requirement is to be justified by operation group on the basis of fresh calculation of costs and targets. In case of capital sources fund raising are different. • Capital Budgeting: A separate budget is drawn for Capital requirement in case of new SBU or new product or expansion or modernisation. The net cash flow is pre determined and agreed figure between SBU In-charge / Operating Management and the Chairperson / owner / major stock holder of the company. .

• Internal Politics – Resource allocation is construed a Power Statement and SBU In-charges. Government Policies with regards to raw materials and Technology. physical and human resources.Factors affecting Resource Allocation: • Objectives of the Organisation – Realisation of Strategic Intent. • It is a role for CEO for managing resources. Community. departmental heads strive for grabbing more resources for their departments. • Dominant Strategists – Powerful Lobbying. • Credit-worthiness of organisation– ability to raise funds. Share holders. CEO preferences etc. cost of capital and that of cash credits. influential departmental heads. He need to have a Strategic Plan and communicate the same to all executives and Ulhas D Wadivkar 342 ensure that resource allocation decisions are taken amicably. necessity of Pollution control and safety equipments. • Overstatement of needs – Bottom up or democratic ways of resource allocation gets developed in to every one grabbing his share of pie by overstating and dramatising their needs. • External Influences – Government policies. demands from financial institutes. . • Scarcity of Resources – Financial. statutory requirements.

. Operations. A Gen. B Marktg. Personnel Legal Divisional / Product Corporate Finance CEO Legal / PR Division Gen. Marktg. Pers. Pers.4.DIV.. Operations.Manager Employees Functional Production CEO Public Relations Finance Marktg. Structural Implementation Entrepreneurial: Owner .Div.. Ulhas D Wadivkar 343 . Manager. Manager..

F Div.H.K Ulhas D Wadivkar 344 . D.C Div.E. G.• SBU Based CEO Head SBU 1 Head SBU 2 Head SBU 3 Div. A.B.

Matrix Corporate Finance CEO Operations Personnel Marketing Head – A Location / Product / Plant Head – B Location / Product / Plant Head – C Location / Product / Plant Ulhas D Wadivkar 345 .

Network Region A Project M Function X Corporate HQ Region B Project N Function Y Ulhas D Wadivkar 346 .

• Product based Structures: In large volume scenario it makes a sense to have a separate organisation dedicated to a product. It needs a very good top level coordination and communication amongst all locations and corporate office. It helps in fair degree of decentralisation. It helps in creating specialised skills and timely response to changing needs of the customers. It also offers advantage of nearness to raw materials or to markets / customers. Ulhas D Wadivkar 347 . • Customer based Structures: Assuming that sales volume justifies the need of separate setup. This enables optimum use of specialised skills. • Geographic Structures: Set ups at different sites sometimes evolve due to expansions and mergers. it enables organisation to concentrate on specific customer group and provide exclusive attention required for that particular product / services. Product separation helps organisation in addition /deletion decisions.

It encourages entrepreneurial abilities of its employees. • There are also ―Horizontal Organisations‖ and ―Delaminated matrices. The firm employs both process oriented horizontal teams and functional departments. Employees as entrepreneurs with support of parent organisation can apply its full attention to his part of business for development of new ideas for products and services. • Delaminated Matrices are combination of Horizontal organisations with a Functional structure.‖ • In horizontal type. finance etc. These two layers of matrix organisation are separated providing depth of expertise and capabilities to the Ulhas organisation. D Wadivkar 348 .• Intrapreneurial Structure: This is a cluster of various owner driven set-ups. Executives have to be multifunctional in such a case as the core process is managed by cross functional teams. the structure corresponds to process of providing products or services directly served to customer thereby eliminating special corporate functions like marketing.

Procedures. Clerical Ratio. Culture. • Hierarchy of Authority: Span of Control of Managers. Ulhas D Wadivkar 349 . Regulations & Policy Manuals. of Sub-ordinates. Indirect v/s Direct labour Ratio. Reporting structure. Technology and size of Organisation are factors that influence the shape the structural dimensions.Organisational Design: Structural Dimensions: • Formalisation: Written Documents. • Centralisation: Decision making process. Nos. • Professionalism: Formal Education & Training requirements. Job Descriptions. Administrative Ratio. Goals & Strategy. Delegation of decision making authority. • Personnel Ratios: Deployment of people to various functions & Departments. Contextual Dimensions: Environment. • Specialisation: Specialised tasks are subdivided into separate groups.

Design establishes an interrelationship between these different departments for the purpose of coordination and communications. All functions and activities that are critical from strategy view point are required to be considered. Different groups of activities are accommodated in the structure. Creation of Departments. Identification of key activities necessary to be performed for achieving Objectives and realising the Mission through the formulated strategy. Thus key activities performed to achieve Objectives and realise the Mission are required to be considered in Organisational design. Regions and so on to which the group of activities are assigned.• Organisations are structured to implement strategic plan in best possible way. Divisions. Ulhas D Wadivkar 350 • • • • • . The activities which are similar in nature and skills are grouped together.

Traditional Organisations Emerging Organisations One large firm Vertical Communication Small business units with Cooperative relationship. Horizontal Communication Centralised and Top-down decision Making Vertical Integration Work / Quality based Teams Functional Work teams Minimum Training Individual-focussed specialised Ulhas D Wadivkar Job Design Decentralised and participative decision making Outsourcing and virtual organisations Autonomous work teams Functional Work teams Extensive Training value chain team-focussed Job 351 Design .

Organisational Systems • Control Systems – The measurement and correction of the performance of activities of all the people in structure in order to make sure that enterprise objectives and plan devised to achieve the same is accomplished. Establish Standards Determine corrective performance Measure Performance Evaluate Performance against Standards Ulhas D Wadivkar 352 .

incentives. • Motivation Systems – to enforce desirable behaviour. etc. Bonus. Appraisals are used for salary fixation. Rewards and non monetary such as recognition. designation. This is also known as MIS • Appraisal Systems – Evaluating managerial performance. awards. Motivation can be monetary such as Salary.Organisational Systems • Information Systems – The Organisational Arrangements that provides information to managers to perform their tasks and relate their works to others. management development. perks Ulhas D Wadivkar 353 .

Plans are provided as packaged plan for implementation in centralised planning by planning committee. who in turn does planning taking environment into consideration.Organisational Systems • Planning Systems – Planning is basically formulating strategy. In decentralised planning corporate strategy performs a directive role for divisions. Planning can be centralised or decentralised depending upon Organisational Character. Ulhas D Wadivkar 354 .

• Development systems – is a process of gradual. The process of management Development Organisational Characteristics Training & Education. skills and performance of mangers to enable them to perform their duties. systematic improvement in knowledge. New Experiences Individual Characteristics Managerial behaviour Performance Experience Learning Management Development Ulhas D Wadivkar 355 .

• Use of Power. Implementation of strategy has thus many behavioural issues. • Behaviour of the strategist has a huge impact on implementing the chosen strategy. Ulhas D Wadivkar 356 . • Corporate Politics.5. Behavioural Implementation. • Personal Values and Business Ethics. • Leadership. • Corporate Culture.

Leaders Influence relationship between individuals. Ulhas D Wadivkar 357 . It is one of the most important elements affecting Organisational performance. Leadership thrives on entire organisational Culture. Situation in which leader has to operate decides the mettle of a leader. This is required at times depending on the strategy which involves high returns. Leader with absence of a real concepts provides anti leadership. Leader transacts with sub-ordinates and indicates Role differentiation. Leader uses his influence and creates intrinsic motivation and bring about Transformation of the organisation Risk Taking Leader: Willingness to take high risks. Subordinates and situation at times show dependence on a leader. This generates Contingency behaviour within the leader. Behaviour of leader lead to actions around.• • • • • • • • • • • Leadership in Implementation:1: Leadership plays a critical role in the success and failure of an enterprise. Leaders have Personality traits and Qualities.

is useful for moral of the organisation.Leadership in Implementation:2: • Technocracy: Optimum decisions based on technical needs • Organicity: The flexibility and adaptability in changing requirements is required to satisfy an agile operating staffs. Their career planning and establish a succession plans. • Participation: Inviting participation at all levels in the decision-making. He remains accountable for success or failures. Process and strategy implementation. Normally a promotion within. He should have interpersonal skills and creativity to Mobilise people. authoritarianism by top management complied with wishes given in Mission and adjectives. • Coercion involves domination. Ulhas D Wadivkar 358 . • CEO should develop and choose future strategists. He should identify changes in environment and should operate a trigger. • Key role of Leaders: CEO: Identifying Strategy and implement.

• Strategists have four approaches to create a strategy related supportive culture. shared actions like service oriented approach. Something like ―people at top do not understand‖ or ―Whether you work or don‘t work. Shared sayings. Ulhas D Wadivkar 359 . This depends on strategyculture relationship.‖ • Thus shared things like uniforms. you will get salary‖. ―there is stagnation at Top‖ or ―Turnover is important. shared feelings like ―hard work is not rewarded here‖ creates a Corporate culture.Corporate Culture • Corporate Culture is a set of important assumptionsoften un-stated but most members share in common.

Ignore corporate culture: Changes required are very high and compatibility of change is low. then To adapt strategy implementation to suit corporate culture. then Ulhas D Wadivkar 360 . Changes required are very high and compatibility of change is also high. then To change corporate culture to suit strategic requirements :Changes required are very low and compatibility of change is high. then To change strategy to fit corporate culture Changes required are very low and compatibility of change is also low.

‗Coercive Power‘ – Ability to penalise negative results. Referent Power is Managers to create liking among subordinates due to charisma or knowledge. • Sources of Power : ‗Reward Power‘ – ability of Manager to reward people of his choice. knowledge and experience of Managers. Expert Power is due to competence. • Corporate politics is not good or bad but it creates divisiveness which is not good. Ulhas D Wadivkar 361 .• Corporate Politics and Power: Power is an ability to influence others and politics is carrying out activities though not prescribed by any Policy to gain advantages and influence distribution. ‗Legitimate Power‘ Ability of Mangers to influence behaviour of sub ordinates.

trust. • Top management to set examples. respect & fairness. • Communicate Values & Ethics through wide publicity. To inculcate these value and ethics: • Consider Values & Ethics of a person during recruitment. Business ethics are traditionally been considered as core values like honesty. • Incorporate in new comer trainees and in training programme. These views forms personality of a leader and creates a group‘s morale. • Consistently monitor and nurture values and build ethics.Personal Values and Business Ethics • Value is a view of life and a judgement of what is desirable and what is correct. Ulhas D Wadivkar 362 .

the society in large remains a major stake holder and we cannot escape our dues to society and towards social responsibility. for successful implementation. But all said and done. • Social Responsibility extends beyond the workforce and stakeholders and many business houses take up activities for community welfare. with ISO:14001:2004 which concerns Environment Management Systems. Ulhas D Wadivkar 363 . • Presently. sports etc. However. while some do not want it to be considered in business operations. rural development. Organisations need to allocate resources. It gets attended in Strategic Planning through environmental appraisals. • Like any other strategic functions. create Organisation Structure and evaluate its effectiveness. most business houses observe a balance and undertake to deliver social responsibility and business objectives without contradicting each other. it has become a necessity to address the mode and means of delivering social responsibility. others boast around it. It has differing views.Social Responsibility and Strategic Management • Social Responsibility along with ethics becomes a stated or un-stated requirement.

Operation. • Various functions like Marketing. Mission. • Functional Strategy deals with limited restricted plan which provides objectives for a specific function. • Functional Plans and Policies are developed. • Enterprise Vision.Functional and Operational Implementation. Ulhas D Wadivkar 364 . HRD etc. are created for effective implementation of the Strategic Plans. • Resources are allocated function wise for their optimal contribution to the achievement of Business and Corporate level Objectives. Objectives and Goals are of generic nature. Finance.

Functional Strategies are implemented through defined plans and policies for various functions. 2. A basis is created for controlling activities of all different functional areas of business. Thus functional mangers do not spend time groping in dark. 365 4. 5. 3. Ulhas D Wadivkar . Plans are laid down clearly for all functional departments and Policies provide discretionary framework.Functional Plans and Policies: • 1. Co-ordination across the different functions takes place where necessary. Functional mangers can handle similar situations effectively. The strategic decisions are implemented by all the functions of the organisations.

Strategy Formulation Nature of Product / Services Nature of market Manner in which Market is to be served Operational System Objective Operational System Structure Operational Policies and plans Ulhas D Wadivkar 366 .

Syllabus 11. Behavioural issues in implementation: • Corporate culture – • Mc Kinsey‘s 7s Framework – • Concepts of Learning Organization (3) Ulhas D Wadivkar 367 .

Description of the 7-S Frame work of MC Kinsey Ulhas D Wadivkar 368 .

holding. . • Skill: Distinctive capabilities of personnel or of the organization369 as Ulhas D Wadivkar a whole.Description of the 7-S Frame work of MC Kinsey • The 7-S framework of McKinsey is a Value Based Management (VBM) model. (Core Competencies). These are Central beliefs and attitudes. decentralized (the trend in larger organizations). • Strategy: Strategy is a Plan for the allocation of a firm‘s scarce resources. • Staff: Numbers and types of personnel within the organization. • Structure: The way the organization's units relate to each other: centralized. promotion and performance appraisal systems. network. information systems. processes and routines that characterize how important work are to be done: financial systems. Together these factors determine the way in which a corporation operates. • System: The procedures. hiring. over a time to reach identified goals. • Shared Value: The interconnecting centre of McKinsey's model is: Shared Values. matrix. Strategy considers Environment. functional divisions (top-down). etc. What does the organization stands for and what it believes in. Competition and Customers. • Style: Cultural style of the organization and how key managers behave in achieving the organization‘s goals.

for example: • Improve the performance of a company. one that has persisted is the McKinsey 7S framework. • Examine the likely effects of future changes within a company. Developed in the early 1980s by Tom Peters and Robert Waterman. • Align departments and processes during a merger or acquisition. regardless of how you decide to define the scope of the areas you study * The 7S model can be used in a wide variety of situations where an alignment perspective is useful. two consultants working at the McKinsey & Company consulting firm. The alignment issues apply.The McKinsey 7S Framework • Ensuring that all parts of your organization work in harmony • While some models of organizational effectiveness go in and out of fashion. the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful. Ulhas D Wadivkar 370 . • The McKinsey 7S model can be applied to elements of a team or a project as well.

on the other hand.The Seven Elements Hard Elements Strategy Structure Systems Soft Elements Shared Values Skills Style Staff •"Hard" elements are easier to define or identify and management can directly influence them: These are strategy statements. •"Soft" elements. these soft elements are as important as the hard elements if the organization is going to be successful. Ulhas D Wadivkar 371 . can be more difficult to describe. However. and are less tangible and more influenced by culture. and formal processes and IT systems. organization charts and reporting lines.

so do all the other elements Ulhas D Wadivkar 372 . As the values change. The company's structure. • Placing Shared Values in the middle of the model emphasizes that these values are central to the development of all the other critical elements. style. staff and skills all stem from why the organization was originally created. strategy. The original vision of the company was formed from the values of the creators. and what it stands for.• The way the model is presented in Figure depicts the interdependency of the elements and indicates how a change in one affects all the others. systems.

and so ensure that the wider impact of changes made in one area is taken into consideration.How to Use the Model • The model is based on the theory that. and so on . Ulhas D Wadivkar 373 . or to maintain alignment (and performance) during other types of change. • You can use the 7S model to help analyze the current situation (Point A). new processes.the model can be used to understand how the organizational elements are interrelated.restructuring. It's then a question of adjusting and tuning the elements of the 7S model to ensure that your organization works effectively and well once you reach the desired endpoint. these seven elements need to be aligned and mutually reinforcing. a proposed future situation (Point B) and to identify gaps and inconsistencies between them. the model can be used to help identify what needs to be realigned to improve performance. So. new systems. • Whatever the type of change . organizational merger. for an organization to perform well. change of leadership.

it is not simple. Supplement these with your own questions. improving performance and managing change. For that you'll need to bring together the right knowledge. we've developed a Mind Tools checklist and a matrix to keep track of how the seven elements align with each other. • When it comes to asking the right questions.but it won't give you all the answers. based on your organization's specific circumstances and accumulated wisdom. skills and experience.• However. Changing your organization probably will not be simple at all! Whole books and methodologies are dedicated to analyzing organizational strategy. The 7S model is a good framework to help you ask the right questions . Ulhas D Wadivkar 374 .

Use them to analyze your current (Point A) situation first. given what we're doing? Ulhas D Wadivkar • Where are the lines of communication? Explicit and implicit?375 .7S Checklist Questions • Here are some of the questions that you'll need to explore to help you understand your situation in terms of the 7S framework. and then repeat the exercise for your proposed situation (Point B). • Strategy: • What is our strategy? • How to we intend to achieve our objectives? • How do we deal with competitive pressure? • How are changes in customer demands dealt with? • How is strategy adjusted for environmental issues? • Structure: • How is the company/team divided? • What is the hierarchy? • How do the various departments coordinate activities? • How do the team members organize and align themselves? • Is decision making and controlling centralized or decentralized? Is this as it should be.

• Systems: • What are the main systems that run the organization? Consider financial and HR systems as well as communications and document storage. • Where are the controls and how are they monitored and evaluated? • What internal rules and processes does the team use to keep on track? • Shared Values: • What are the core values? • What is the corporate/team culture? • How strong are the values? • What are the fundamental values that the company/team was built on? • Style: • How participative is the management/leadership style? • How effective is that leadership? • Do employees/team members tend to be competitive or cooperative? D Wadivkar 376 • Ulhas Are there real teams functioning within the organization or are they just nominal groups? .

• Staff: • What positions or specializations are represented within the team? • What positions need to be filled? • Are there gaps in required competencies? • Skills: • What are the strongest skills represented within the company / team? • Are there any skills gaps? • What is the company / team known for doing well? • Do the current employees/team members have the ability to do the job? • How are skills monitored and assessed? Ulhas D Wadivkar 377 .

you'll need to use an iterative (and often time consuming) process of making adjustments. • Check off alignment between each of the elements as you go through the following steps: • Start with your Shared Values: Are they consistent with your structure. Remember you can use this to look at either your current or your desired organization. and then re-analyzing how that impacts other elements and their alignment. what needs to change? • As you adjust and align the elements. .7S Matrix questions • Using the information you have gathered. now examine where there are gaps and inconsistencies between elements. The end result of better Ulhas D Wadivkar 378 performance will be worth it. • Next look at the other soft elements. How well does each one support the others? Identify where changes need to be made. strategy. Do they support the desired hard elements? Do they support one another? If not. what needs to change? • Then look at the hard elements. and systems? If not.

you can work to align the internal elements to make sure they are all contributing to the shared goals and values. • Once these inconsistencies are revealed. Ulhas D Wadivkar 379 .• Key points: • The McKinsey 7Ss model is one that can be applied to almost any organizational or team effectiveness issue. • The process of analyzing where you are right now in terms of these elements is worthwhile in and of itself. chances are there is inconsistency between some of the elements identified by this classic model. • But by taking this analysis to the next level and determining the ultimate state for each of the factors. • If something within your organization or team isn't working. you can really move your organization or team forward.

Concepts of Learning Organization • Organisational Learning vs. Senge further remarks that "the rate at which organizations learn may become the only sustainable source of competitive advantage". Ulhas D Wadivkar 380 . • A Learning Organisation is an Organisation that learns and encourages learning among its people in an effort to create a more knowledgeable and flexible workforce capable to adapt to cultural changes. Argyris (1977) defines Organisational Learning as the process of "detection and correction of errors" • while Senge (1990) defines Learning Organisation as "a group of people continually enhancing their capacity to create what they want to create". Learning Organisation • There is a difference between Organisational Learning and Learning Organisation. • Organisational Learning is a Process and Learning Organisation is a Structure.

that is to say. personal mastery. A Learning Organization has five main features. guide. We cannot expect new stable states that will endure for our own lifetimes. Learning Organizations develop as a result of the pressures facing modern organizations and enables them to remain competitive in the business environment. • The loss of the stable state means that our society and all of its institutions are in continuous processes of transformation. mental models. • We must. influence and manage these transformations. We must learn to understand. systems thinking. systems capable of bringing about their own continuing transformation. become adept at learning. Ulhas D Wadivkar 381 (Schon 1973: 28) . in response to changing situations and requirements. we must invent and develop institutions which are ‗learning systems‘. • Donald Schon. shared vision and team learning. He provided a theoretical framework linking the experience of living in a situation of an increasing change with the need for learning. We must make the capacity for undertaking them integral to ourselves and to our institutions. We must become able not only to transform our institutions. in other words.• A Learning Organization is the term given to a company that facilitates the learning of its members and continuously transforms itself.

Organizations need to be good at knowledge generation. or chosen time. (Castells 2001: 52) • A failure to attend to the learning of groups and individuals in the organization spells disaster in this context. companies need to invest not just in new machinery to make production more efficient. As Leadbeater (2000: 70) has argued. management and distribution. we have seen very significant changes in the nature and organization of production and services. Companies.• Subsequently. on a planetary scale. but in the flow of knowhow that will sustain their business. • Productivity and competitiveness are. by and large. Firms and Territories are organized in networks of production. a function of knowledge generation and information processing. The core economic activities are global – that is they have the capacity to work as a unit in real time. appropriation and exploitation Ulhas D Wadivkar 382 . organizations and governments and we have to operate in a global environment and that has altered its character in significant ways.

Why do Learning Organizations develop? • Organizations do not organically develop into Learning Organizations. understand what is happening in the outside environment and produce creative solutions using the knowledge and skills of all employed within the organization. and a culture of trust. This means those who remain need to work more effectively. • It has been found that as organizations grow. there are usually factors prompting their change. companies need to be able to learn faster than their competitors and also develop a customer responsive culture. • To remain competitive. • This requires co-operation between individuals and groups. • To create a competitive advantage. the solutions that are proposed often turn out to be only short term (single loop learning) and re-emerge in the future. free and reliable communication. These needs Ulhas be D Wadivkar 383 can met through embracing the tenets of the Learning Organization. they lose their natural capacity to learn as company structures and individual thinking becomes rigid. • When problems arise in the company. • Modern organizations need to maintain knowledge about new products and processes. which has resulted in fewer people in the company. many organizations have restructured. .

1990). 384 . reflecting the fact that change should not happen just for the sake of change. but should be well thought out. later redefined this concept to “an organization that facilitates the learning of all its members and consciously transforms itself and its context”. where collective aspiration is set free. al. continuous. (Watkins and Marsick 1992: 118) • According to Sandra Kerka (1995) most conceptualisations of the learning organisations seem to work on the assumption that ‗learning is valuable. (Pedler et. • "Organisations where people continually expand their capacity to create the results they truly desire. and most effective when Ulhas D Wadivkar shared and that every experience is an opportunity to learn‘. and where people are continually learning to learn together" (Peter Senge. It is not brought about simply by training individuals. • Learning organizations are characterized by total employee involvement in a process of collaboratively conducted. it can only happen as a result of learning at the whole organization level. 1991: 1) Pedler et al. where new and expansive patterns of thinking are nurtured.Learning Organisation : Definitions • The Learning Company is a vision of what might be possible. collectively accountable change directed towards shared values or principles.

Ulhas D Wadivkar 385 . Systems thinking. a Shared vision and Team learning. If any of these characteristics is missing. • Learning Organizations employ the method of thinking when assessing their company and develops information systems that measures the performance of the organization as a whole and of its various components. • Systems thinking • This is a conceptual framework that allows people to study businesses as bounded objects. Mental models. Personal mastery. rather than developed simultaneously. • However O‘Keeffee believes that the characteristics of a Learning Organization are factors that are gradually acquired.Characteristics of a Learning Organization-1 • Learning Organization exhibits five main characteristics. • Systems thinking also state that all the characteristics listed must be apparent at once in an organization for it to be a Learning Organization. then the organization will fall short of its goal.

therefore it is important to develop a culture where personal mastery is practiced in daily life.Characteristics of a Learning Organization-2 • Personal Mastery • Personal mastery is the commitment by an individual to the process of learning. • Individual learning is acquired through staff training and development. • A Learning Organisation has been described as the sum of individual learning. There is a Competitive Advantage for an organisation whose workforce can learn quicker than the workforce of other organisations. Ulhas D Wadivkar 386 . but it is important for there to be mechanisms by which individual learning is transferred into Organisational Learning. • Research has shown that most learning in the workplace is incidental. rather than the product of formal training. However learning cannot be forced upon an individual if he or she is not receptive to learning.

these need to be discarded in a process called ‗unlearning‘ Wang and Ahmed refer to this as ‗triple loop learning. • Similarly. • To become a Learning Organisation. • Individuals tend to espouse theories. In the creation of a learning environment it is important to replace confrontational attitudes with an open culture that promotes inquiry and trust. which is what they actually do. norms and values. which they intend to follow.‘ Ulhas D Wadivkar 387 . If there are unwanted values held by the organisation.Characteristics of a Learning Organization-3 • Mental models • Mental Models are the terms given to ingrained assumptions held by individuals and organisations. organisations tend to have ‗memories‘ which preserve certain behaviours. • To achieve this. these mental models must be challenged. the Learning Organisation will have mechanisms for locating and assessing organisational theories of action. and theories-in-use.

Characteristics of a Learning Organization-4 • Shared vision The development of a shared vision is importantly provides incentive to the workforce to learn as it creates a common identity that can provide focus and energy for learning. The topic of shared vision is often to succeed against a competitor. however Senge states that these are transitory goals and suggests that there should also be long term goals thatDare intrinsic within the company. Ulhas Wadivkar 388 • • • • . Therefore… Learning Organisations tend to have flat. The most successful visions are built on the individual visions of the employees at all levels of the organisation The creation of a shared vision is likely to be hindered by traditional structures where a company vision is imposed from above. decentralised organisational structures.

shared meaning and understanding. dissemination. • Learning Organisations also have excellent knowledge management structures. • The benefit of sharing individual learning is that employees grow more quickly and the problem solving capacity of the organisation is improved through better access to knowledge and expertise. • Learning Organisations have structures that facilitate team learning with features such as boundary crossing and openness. acquisition. which allow creation. therefore it is important that team members develop open communication.Characteristics of a Learning Organization-5 • Team learning is the accumulation of individual learning. and implementation of this knowledge throughout Ulhas D Wadivkar the organisation. 389 . • Team learning requires individuals to engage in dialogue and discussion.

1990) • And that ―the pressure of change in the external environments of organisations. is such that they need to learn more consciously. it is argued that organisations need to ‗discover how to tap people‘s commitment and capacity to learn at all levels‘ (Peter Senge. adaptive and productive will excel..Characteristics of a Learning Organization-6 • The basic rationale for such organisations is that in situations of rapid change. • They must learn not only in order to survive but also to thrive in a world of ever increasing change‖ (Pearn. . more systematically. • For this to happen.. • The key ingredient of the Learning Organisation is in how organisations process their experiences and how they learn from their experiences rather than being bound by their past Ulhas D Wadivkar 390 experiences. only those that are flexible... 1997). and more quickly than they did in the past.

but organisational learning is not simply the collectively of individual learning processes. ―Culture‖ and ―Innovation and Creativity‖. Ulhas D Wadivkar 391 . but it engages interaction between: • Individuals in the organisation • Interaction between organisations as an entity • Interaction between the organisation and its environment • The major Learning Organisational concepts focus on ―Continuous Improvement‖.Learning Organisation Concepts • The concept of organisational learning evolved from the individual learning process.

1991) ―A learning organisation should be viewed as a metaphor rather than a distinct type of structure. employee empowerment and involvement. process and system. The concept of Learning Organisation ―A learning organisation should consciously and intentionally devote to the facilitation of individual learning in order to continuously transform the entire organisation and its context ― (Pedler et al. Innovation and Creativity Organisation learning is the process by which the organisation constantly questions existing product. 2. and achieve sustained competitive advantage Facilitation of learning and knowledge creation. Culture 3. etc. identify strategic position. whose employees learn conscious communal processes for continually generating. retaining and leveraging individual and collective learning to improve performance of the organisational system in ways important to all stakeholders and by monitoring and improving performance‖ (Drew & Smith. focus on creative quality and value innovation 392 Ulhas D Wadivkar . apply various modes of learning.Focus 1. 1995) Practices Continuous Improvement The adoption of Total Quality Management practices Creation and maintenance of learning culture: adopting to cultural change. collaborati ve team working.

as Senge points out. • If these problems can be identified. • Most of the problems arise from an Organisation not fully embracing all the facets outlined above that are necessary in a Learning Organisation. Additionally. Organisational barriers to learning: • Some organisations can find it hard to embrace personal mastery because as a concept it is intangible and the benefits cannot be quantified. problems may be encountered that stall the process of learning or cause it to regress.Problems / issues that may be encountered in a Learning Organisation: • Even within a Learning Organisation. Ulhas D Wadivkar 393 . that ―to empower people in an unaligned organisation can be counterproductive‖. work can begin on improving them. • This threat can be real. personal mastery can be seen as a threat to the organisation.

personal mastery could be used to advance their own vision. These are a barrier to the development of shared vision and to the sharing of knowledge.) • In other words. Ulhas D Wadivkar 394 . if individuals do not engage with a shared vision. • It is important that an environment is created where individuals can share learning without it being devalued and ignored. • In some organisations a lack of a pro-learning culture can be a barrier to learning. • A Learning Organisation needs to fully embrace the removal of traditional hierarchical structures. • So more people can benefit from their knowledge and the individual becomes empowered.Organisational barriers to learning: (Contd.

Individual barriers to learning • Resistance to learning can occur within a Learning Organisation if there is not sufficient ―buy in‖ at an individual level. • This is often encountered by people who feel threatened by change or believe that they have the most to lose. • Learning and the pursuit of personal mastery needs to be an individual choice. therefore enforced take up will not work. • Unless implemented coherently across the whole organisation. • If this is the case. learning will not be viewed as a shared vision. Ulhas D Wadivkar 395 . rather than a form of personal development. • If training and development is compulsory. • The same people who feel threatened by change are likely to have closed mind sets are not willing to embrace engagement with mental models. learning can be viewed as elitist and restricted to more senior levels within the organisation. it can be viewed as a form of control.

Ideas on the "Why Learning Organisation?" • Because we want superior performance and competitive advantage • For customer relations • To avoid decline • To improve quality • To understand risks and diversity more deeply • For innovation • For our personal and spiritual well being • To increase our ability to manage change • For understanding • For energized committed work force • To expand boundaries • To engage in community • For independence and liberty • For awareness of the critical nature of interdependence Ulhas D Wadivkar the times demand 396 • Because .

• Personnel. • IT.Syllabus • ===================================== • 12. (2) ====================================== Ulhas D Wadivkar 397 . Functional issues: • Functional plans and policies – • Financial. • Marketing. • Operations.

allocation of resources for that functional area and coordination among different functional operations to achieve Functional Objectives. 3. The Strategic decisions are implemented by all parts of an Organisation. 4. Plans are laid down for what is to be done and Policies provide guideline for discretions and Functional Manager‘s time in decision making is reduced. 2. • Functional Strategies deal with limited plan designed to achieve Objectives in a specific Functional area. Required Coordination amongst different functions takes place. There is a basis available for controlling activities in different functional areas of Operation. • Functional Plans & Policies are developed for: 1.Functional Plans & Policies: • Functional Strategies are derived from Business & Corporate Strategies and are implemented through Functional & operational Implementation. Ulhas D Wadivkar 398 .

3. Loans & Advances. 2. Ulhas Current Assets. . Fixed Asset acquisitions. Capital Mix Decisions. Working Capital Borrowings. Capital Structure. Banks & FIs. Procurement of Capital. 4. Capital Investments. 5. 6. 2. 3. Reserves & Surpluses as source of Funds. Investment or Asset mix decisions. Plans & Policies related to sources of funds determine how financial resources will be made available for implementation of Strategies. Usage of Funds: 1. Relationships with Lenders. D Wadivkar 399 4.Financial Plans & Policies Sources of Funds: 1.

Aiming at Conservation and Optimum utilisation of Funds. Good management of funds often creates the difference Between strategically successful or unsuccessful Company. 5. Relationship with Shareholders. 2. Dividend decisions. Cash. Organisations which implement business strategies of Cost leadership must practice proper management of Funds.5. Management of Funds: 1. 3. 6. Usage of Funds relates to efficiencies & effectiveness of resource utilisation in the process of Strategy Implementation. System of Finance. Ulhas D Wadivkar 400 . Cost control. cost reduction and Tax planning 6. Accounting & Budgeting. Management Control Systems. 4. Credit and Risk Management.

Payment period. Personal Selling.. logistics. Allowances. Features. (Transportation. (Discounts. (Choice of Models. Mode of payment.) Pricing : Money that Customers pay in exchange of Goods & Services. (Advertising. Credit terms) Promotion: Marketing communications intended to convey the company and product or service image to prospective buyers.Marketing Plans & Policies • These are 4Ps of Marketing Product: Goods & Services offered by Organisation to its Target market. etc. coverage of markets. Quality. Packaging etc.) Ulhas D Wadivkar 401 . Brand names. Sales Promotion and Publicity) Place: Distribution process by which goods or services are made available to the customers. inventory storage management.

Market Standing. Marketing Organisation. Cost. Ulhas D Wadivkar 402 Research & Development . Work systems. Degree of Automation. extent of vertical integration. Operation Plans & Policies deals with vital issue affecting the capability of the Organisation to achieve objectives. Location. inventory. Layout. Segmentation. Quality Management. Targeting. Company Image. Marketing System. Operational Planning & Control – Production Planning. Positioning. Marketing Management Information System) Operations Plans & Policies: Production System – Capacity. Materials supply. (Marketing mix.Integrative & Systematic Factors: • This part of the plans & policies related to Marketing Management. Maintenance of Plant and Equipment. Product or Service design.

. Selection. 403 information . Image of Organisation as an Employer. Communication and Appraisal Organisational & Employee Characteristics: Corporate image. working conditions etc. Employee satisfaction & morale. Quality of Managers. Collective bargaining. Compensation. Information management Plans & Policies: Information capability factors relate to design & management of the flow of information within and from outside. Development. Industrial Relations: Union – Management relationship.Personnel Plans & Policies: • HRM Plans & Policies relate to providing & maintaining human resources: Personnel System: Manpower Planning. Staff & Workers. Safety & Security. The value of Ulhas D Wadivkar is source of Strategic Advantage. availability of Development opportunities for employees.

Ulhas D Wadivkar 404 . retention capacity and security of information. Quantity. and timeliness of Information. compatibility to organisational needs. • Integrative. Computer Systems. Software capability and ability to synthesise information. • Retrieval & Usage of Information: Availability and appropriateness of Information formats and the capacity to assimilate and use information. • Transmission & Dissemination of Information: speed. up gradation facilities. width & depth of coverage of information with willingness to accept the information. top management support. Systematic and Supportive Factors: availability of IT infrastructure and its relevance. investing in state of art systems.• Acquisition and Retention of Information: Sources. scope. • Processing and Synthesis of Information: Database management. Computer professionals. Quality.


13. Strategy Evaluation: • • • Operations Control and Strategic Control Symptoms of malfunctioning of strategy Balanced Scorecard. (2)

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Balanced Score Card (BSC)
• The Balanced scorecard (BSC) is a strategic Performance Management tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy. • Balance Card focuses not only on financial outcomes but also on the operational, marketing and developmental inputs to these. Organizations measure, those factors which influenced the financial outputs. For example, process performance, market share / penetration, long term learning and skills development, and so on. • The Balanced Scorecard helped organizations achieve a degree of ―Balance" in selection of performance measures Balanced Scorecard helps provide a more comprehensive view of a business • This tool is also being used to address business response to Environmental Changes.
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• Organizations must also control those factors which influences the financial outputs, such as, process performance, market share / penetration, long term learning and skills development, and so on. • Organisations cannot directly influence Financial Outcomes as they relate to past. There is a "lag" between actions and Financial Outcome. Also to use of financial measures alone for the strategic control of the firm is unwise. Organizations should also measure those areas where direct management intervention is possible. • Balanced Scorecard helps organizations achieve a degree of "balance" in selection of performance measures. Scorecards achieve this balance by selecting measures from three additional categories or perspectives: "Customer," "Internal Business Processes" and "Learning and Growth." • Phrase ―Balanced Scorecard" was coined in the early 1990s. In 1992, by Dr. Robert Kaplan and David P Norton. They added another innovation, the Strategy Map. This new tool, which provided a visual way to craft business strategies.
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• 1. 2.

3. 4.

Balanced Score Cards helps managers, in focussing their attention on strategic issues and the management of the implementation of strategy, it is important to remember that the balanced scorecard itself has no role in the formation of strategy. In fact, balanced scorecards comfortably co-exist with strategic planning systems and other tools. Implementing Balanced Scorecards typically includes four processes: Translating the vision into operational goals; Communicating the vision and link it to individual performance; Business planning; index setting; Feedback and Learning, and adjusting the Strategy accordingly

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• Measures are selected based on a set of "strategic objectives" plotted on a "strategic linkage model" or ―Strategy Map". • The strategic objectives are distributed across the four measurement perspectives, so as to "connect the dots" to form a visual presentation of strategy and measures. • To develop a ‖Strategy Map‖, managers select a few strategic objectives within each of the perspectives, and then define the cause-effect chain among these objectives by drawing links between them. • A balanced scorecard of strategic performance measures is then derived directly from the strategic objectives. This type of approach provides greater contextual justification for the measures chosen, and is generally easier for managers to work through. • Strategy Mapping:A strategy map is a visual representation of the strategy of an organization. It illustrates how the organization plans to achieve its mission and vision by means of a linked chain of continuous Ulhas D Wadivkar 410 improvements.

Methodology of Strategy Mapping

Strategy Mapping
• For a commercial business, the strategy map illustrates the long-term game plan or competitive strategy to achieve increased profitability. For a non-profit or governmental organization, it illustrates the plan by which the organization intends to improve performance of its mission. In either case it illustrates the cause-and-effect relationships between different strategic objectives and their measures, or Key Performance Indicators (KPIs) that are included in a Balanced Score Card. • Strategy maps are communication tools used to tell a story of how value is created for the organization. They show a logical, step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-andeffect chain. Generally speaking, improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up), which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top Ulhas Wadivkar 411 twoDrows).

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• Align the organization with strategy. • Conduct periodic strategic performance reviews to learn about and improve strategy. • Identify and align strategic initiatives. • Innovation and learning perspective. • Internal process perspective. • Link budget with strategy. Ulhas D Wadivkar 413 . • Clarify strategy and make strategy operational. The four perspectives • Financial perspective. • Customer perspective.• Kaplan and Norton found that companies are using Balanced Scorecards to: • Drive strategy execution.

Residual Income. Return On Capital Employed. Acquisition of new customers. Net Operating Income • Financial KPIs : Cash Flow. • The three possible measurements as described by Kaplan and Norton (1996) are: • Rapid growth: Increased sales volumes. Return on Investments. Return on Equity. Growth in revenues etc • Sustain: Operations and Costs. Return on Capital Employed. Profit Margins. Ulhas D Wadivkar 414 . EVA. Economic Value Addition. The Financial Perspective • The company‘s implementation and execution of its strategy must contribute to the bottom-line improvement of the company. It represents the long-term strategic objectives of the organization and thus it incorporates the tangible outcomes of the strategy in traditional financial terms. etc • and Harvest: Cash Flow analysis with measures such as Payback Periods and Revenue Volume. etc.1. by calculating the Return On Investment. Financial Results.

The Customer Perspective • The Customer Perspective defines the value proposition that the organization will apply to satisfy customers and thus generate more sales to the most desired (i. the most profitable) customer groups. Ulhas D Wadivkar 415 . • Cost: Delivery Time.e. Performance – Customer Complaint Record – Claims.g. Quality. Performance and Service. Customer Intimacy.2. CSI – Customer Satisfaction Index. • The measures are value that is delivered to the customer (value proposition) and Cost • Value proposition: (e. • KPIs could be : Cost Leadership. • The value proposition can be centred on one of the three: operational excellence. Quality Parameters – Six Sigma initiatives. market share). or product leadership. customer satisfaction..

It focuses on all the activities and key processes required in order for the company to excel at providing the value expected by the customers both productively and efficiently. Accident Ratios. Environment Ulhas D Wadivkar 416 Compatibility.(by establishing good relations with the external stakeholders). Operational Equipment Effectiveness – OEE.KPI and • Regulatory & Social .(by new products and services) • Continual Improvement . supply chain management. Internal Process Perspective • The Internal Process Perspective is concerned with the processes that create and deliver the customer value proposition. • These can include both short-term and long-term objectives as well as incorporating innovative process development in order to stimulate improvement.(by improving asset utilization. etc).CSI).(by expanding and deepening relations . • Operations management . . • Innovation . • Customer management .3. • KPIs – Opportunity Success rate.

Innovation and Learning Perspective • The innovation and learning perspective is the foundation of any strategy and focuses on the Intangible Assets of an organization. Gender Ratios Ulhas D Wadivkar 417 . (Succession Plan). Illness Rate. • The Innovation & Learning Perspective is concerned with the jobs (human capital). • These three factors relate to the infrastructure that is needed in order to enable ambitious objectives in the other three perspectives to be achieved. and the climate (organisation capital) of the enterprise. mainly on the internal skills and capabilities that are required to support the value-creating internal processes. Internal Promotions. whilst contributing to long-term success. the systems (information capital). • This of course will be in the long term. since an improvement in the learning and growth perspective will require certain expenditures that may decrease short-term financial results. Employee Turnover.4. • Learning and growth: KPIs: Investment Rate.

Late deliveries. Customer Complaints and Claims. Backorders-Backlog. (Sold Time for Consultants. Field service Expenses. Rework Percentage. Ulhas D Wadivkar 418 . • Throughput Cycle Time = Processing Time (Value Adding) + Storage Time + Movement Time + Inspection Time (Non Value adding times). Products Returned. Inventory Turnover. • Internal Business Processes: Capacity Utilisation. Occupancy rates for Hotels etc. CSI – Customer Satisfaction Index. On time Delivery. Scrap.Key Success factors – Non Financial • Customer Related : Bookings. Customer Retention. Machine Breakdowns. Key Account orders.). Yields. Market Share. JIT Index = Process Time / Total Cycle Time • Quality –Defective units. Customer loyalty.

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Ulhas D Wadivkar 421 .

Ulhas D Wadivkar 422 . 2002): 1.Symptoms of Mal-Functioning of Strategy -1 • The strategic Symptoms frequently include one or more of the following (Grant. • Poor Financial Results and / or. Strategic change is often „lumpy‟ as firms lurch from strategy to strategy to combat low growth. • Missing targets too often. Low growth exposes ‗strategic sloppiness‘ and ‗strategic errors‘ 2. Poor Organisational Results: • Unsustainable Business Results. • Poor Operational results. Low employee Morale: • High Employee Turnover. • Missing Commitments. • Whilst some policy appears proactive. 4. much is reactive • Contains elements of „hasty opportunism‟ 3.

Ulhas D Wadivkar 423 Resulting into decreased Quality in all spheres of Operation. Delayed deliveries. Poor Work Climate in Organisation: Organisation developing unsustainable work practices. Customer Dissatisfaction: Customer Complaints non-specific to Quality. Unable to sustain market competition.Symptoms of Mal-Functioning of Strategy-2 • • • • • • • • • • • • • • 5. missing commitments. Very few repeat orders. Unable to manage competition. 7. Loss of Market Share: Lack of Innovation. Repeated Customer complaints for same cause. Loss of key account Customers or loss of customers in general. Lack of Up-Gradation. Quality taking second place lagging behind practice prevailing over law. . 6.

Are your incentives disproportionately dependent on the share price? 7. Do you learn about things only after they‘ve already happened? 4. Are you attending too many meetings. activities which are not connected to the company? All these personal behaviours are symptoms of a corporate disease . if any. Are you unclear about where you stand with your boss or bosses? 6.Symptoms of Mal-functioning for a CEO: 1.and that illness is as common as the cold. Do subordinates consult you too often before taking action? 3. All seven of the symptoms show that you and others in the corporation are being hampered in managing effectively by faults which manifests to failure or poor Ulhas D Wadivkar 424 performance.and forming ‗their‘ opinions accordingly? 5. and ones which are discussing the wrong things? 2. . The disease is chronic mismanagement. Do you have few. Are your subordinates apparently trying to anticipate your likes and dislikes .

The CEO has no trouble in turning the other directors into acquiescent poodles. the share price) 7.. Each of these seven items puts the company and its stakeholders at risk. The CEO controls all events and is the source of all important information. He or she does so. CEOs place pleasing shareholders above all else. 6. primarily by boosting ‗shareholder value‘ (i.CEO Cult in Organisations This happens due to a CEO Cult :The Cult holds these seven Beliefs: 1.e. on the basis of order-and obey. 5. They are expected to deploy superhuman qualities in order to live up to the previous six postulates. 4. His or her authority is enhanced by the exercise of personality .even charisma. 3. Ulhas D Wadivkar 425 . The Cult is fallacious and dangerous. The CEO runs the company. 2.

not the share price. .. advise-and-consent basis (avoiding order-and-obey) in relations with superiors and subordinates • Work out the vital metrics of the business. and concentrate on them. • Delegate ample authority and autonomy to subordinates so that they can take decisions and actions on their own initiative. collaborative processes that make excellent decisions and effective execution far more likely. • Limit the number of meetings you attend to those whose purpose are clearly defined and demand your presence. CEO should. top-down and lateral so that everybody. • Operate on a mutual. has the fullest possible picture of what‘s going on everywhere.What a CEO should do? • Generate collective. including you. For example.. D Wadivkar 426 • Ulhas Stop the business taking over the whole of your life. • Listen to full and frank discussion with subordinates before guiding people to the best consensus. • Establish communications bottom-up.

Prepare ETOP & SAP in your notes. 1. Think of Strategic Alternatives & suggest best options.Case Study Method . analyse and suggest remedies and practical workable solutions. Evaluate the situation described in Case. Ulhas D Wadivkar 427 . 4.Comments • Case Method is quite old & method of learning from real life situations. First introduced by Harward Law School in 1871. issues and role of individuals in the case. Through these events & conditions. make notes. Support your proposal with facts. reasons & arguments. reader of a case gets to know the situation prevailed in that organisation for him to dwell on. jot down important points. Read case once for familiarity. an organisation. Attempt to understand objectives. • A case is narration of events in. get a feel of the situation. understand. & Conditions of. problems & their causes. strategies. grasp the facts. 5. discuss. 2. Guidelines for systematic approach to prepare a case for Discussions. 3. policies. Read case again.

6. Present whole written structure to be in one logical & integrated way. 7. Topic issues. Provide supporting evidence and benchmarks used for evaluation. SAP. Propose comprehensive plan for Strategy Implementation considering resources and manageability of implementation. Specifically state you assumptions when making recommendations. Include analysis based on techniques like ETOP. Use headings. Provide a summary. in a page. SWOT. 10. 8. competitive analysis. Adopt nice style of writing. Industry analysis. Labels. 9. 12. Ulhas D Wadivkar 428 . State quantitative & qualitative criteria. Value Chain. Keep the written analysis simple. but do not overlook major issues.. Evaluate you proposal. you assumptions for arriving at your conclusion. for major issues and recommendations made by you. 11. Do not copy word to word from Case.

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