Introduction to STRATEGIC MANAGEMENT:

The word strategy is derived from the Greek word stratgos; stratus (meaning army) and
ago (meaning leading/moving).
Strategy is an action that managers take to attain one or more of the organizations goals.
Strategy can also be defined as A general direction set for the company and its various
components to achieve a desired state in the future. Strategy results from the detailed
strategic planning process.

Strategy is the direction and scope of an organisation over the long term: ideally, which
matches its resources to its changing environment, and particular its markets, consumers or
clients so as to meet stakeholder expectations.

Strategic management involves the formulation and implementation of the major goals and
initiatives taken by a company's top management on behalf of owners, based on consideration
of resources and an assessment of the internal and external environments in which the
organization competes

Task of strategy management:

Strategy formulation Strategy Implementation Strategy Evaluation

STRATEGIC MANAGEMENT The art and science of formulating, implementing, and

evaluating cross-functional decisions that enable an organization to achieve its objectives

Strategic Management - An Introduction

Strategic Management is all about identification and description of the strategies that
managers can carry so as to achieve better performance and a competitive advantage for their
organization. An organization is said to have competitive advantage if its profitability is
higher than the average profitability for all companies in its industry.
Strategic management can also be defined as a bundle of decisions and acts which a manager
undertakes and which decides the result of the firms performance. The manager must have a
thorough knowledge and analysis of the general and competitive organizational environment
so as to take right decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses,
Opportunities, and Threats), i.e., they should make best possible utilization of strengths,
minimize the organizational weaknesses, make use of arising opportunities from the business
environment and shouldnt ignore the threats. Strategic management is nothing but planning
for both predictable as well as unfeasible contingencies. It is applicable to both small as well
as large organizations as even the smallest organization face competition and, by formulating
and implementing appropriate strategies, they can attain sustainable competitive advantage.
It is a way in which strategists set the objectives and proceed about attaining them. It deals
with making and implementing decisions about future direction of an organization. It helps us
to identify the direction in which an organization is moving.
Strategic management is a continuous process that evaluates and controls the business and the
industries in which an organization is involved; evaluates its competitors and sets goals and
strategies to meet all existing and potential competitors; and then reevaluates strategies on a
regular basis to determine how it has been implemented and whether it was successful or
does it needs replacement.
Strategic Management gives a broader perspective to the employees of an organization
and they can better understand how their job fits into the entire organizational plan and
how it is co-related to other organizational members. It is nothing but the art of managing
employees in a manner which maximizes the ability of achieving business objectives. The
employees become more trustworthy, more committed and more satisfied as they can corelate themselves very well with each organizational task. They can understand the reaction
of environmental changes on the organization and the probable response of the organization
with the help of strategic management. Thus the employees can judge the impact of such
changes on their own job and can effectively face the changes. The managers and employees
must do appropriate things in appropriate manner. They need to be both effective as well as
efficient.
One of the major role of strategic management is to incorporate various functional areas of
the organization completely, as well as, to ensure these functional areas harmonize and get
together well. Another role of strategic management is to keep a continuous eye on the goals
and objectives of the organization.

Strategic business unit:

In business, a (SBU) is a profit center which focuses on product offering and market segment.
SBUs typically have a discrete marketing plan, analysis of competition,
and marketing campaign, even though they may be part of a larger business entity.
An SBU may be a business unit within a larger corporation, or it may be a business into itself
or a branch. Corporations may be composed of multiple SBUs, each of which is responsible
for its own profitability. General Electric is an example of a company with this sort of
business organization. SBUs are able to affect most factors which influence their
performance. Managed as separate businesses, they are responsible to a parent corporation.
General Electric has 49 SBUs.[citation needed]
Companies today often use the word segmentation or division when referring to SBUs or an
aggregation of SBUs that share such commonalities.

Definition
A strategic business unit is a fully functional and distinct unit of the business that develops
their own strategic vision and direction. Within large companies there are smaller specialized
divisions that work towards specific projects and goals, and we see this organizational setup
frequently in global companies. The strategic business unit, often referred to as an SBU,
remains an important component of the company and must report back through headquarters
about their operational status. Typically they will operate as an independent organization with
a specific focus on target markets and are large enough to maintain internal divisions such as
finance, HR, and so forth.
There are many great examples of SBU's that we can relate to. For instance, AP Moller has a
lengthy list of SBU's, such as marine shipping, marine terminals, trucking, 3rd party logistics,
energy, and oil exploration. Another widely recognized company is General Electric, which
has 49 SBU's in such markets as appliances, aerospace, electronics, and so on. LG operates

along the same lines with SBU's competing in electronics and appliances among others. So
why do each of these SBU's differentiate from each other and still belong to the same
organization? The answer is that profitability of your company and appeal within the industry
are directly tied together. In the case of AP Moller, the company has separated each industry
into a strategic business unit to maximize potential.

Definition

A separately managed division or unit of an enterprise with strategic objectives that is both
distinct from the parent unit and integral to the overall performance of the enterprise. An SBU
is typically created to target a specific market or business concern which requires a
production or management specialty not contained within the parent organization.

Corporate strategy:
The corporate strategy was developed to communicated the vision, mission, and goals as well
as the strategy.

Corporate Strategy
Developing a strategic direction, supported by the necessary reallocation of resources and
coordinated business unit plans, and designing a sustainable strategy development process
Definition

The overarching strategy of a company developed by its leadership that reflects its mission
and core values in its goals and underlying business strategies for achieving them. The
corporate strategy provides clear direction for all the business units working
in concert to meet shareholder expectations while providing value to their customers and
employees.
According to William Glueck and Lawrence Jauch, strategic alternatives can be considered in
four generic ways. These are :
1.STABILITY STRATEGY: One of the important goals of a business enterprise is stability
to safeguard its existing interests and strengths, to pursue well established objectives, to
continue in the chosen business path, to maintain operational efficiency on a sustained basis,
to consolidate the commanding position already reached, and to optimise returns on the
resources committed in the business.
2. EXPANSION or growth STRATEGY:
Expansion is a promising and popular strategy that tends to be equated with dynamism,
vigour, promise and success. It is often characterised by significant reformulation of goals,
major initiatives and moves involving investments, exploration into new products, new
technology and new markets, action programmes and so on. Expansion also includes
diversifying, acquiring and merging businesses.

3. RETRENCHMENT STRATEGY: A business organization can redefine its business by

divesting a major product line or market. Retrenchment or retreat becomes necessary for
coping with particularly hostile situations in the environment. Retreat is not always a bad
proposition to save the enterprise's vital interests, to minimise the adverse effects of
advancing forces, or even to regroup and recoup the resources before a fresh assault and
ascent on the growth ladder is launched.
4 COMBINATION STRATEGIES: The above strategies are not mutually exclusive. It is
possible mix the above strategies based on situations. An enterprise may seek stability in
some areas of activity, expansion in some and retrenchment in the others. Retrenchment of
ailing products followed by stability and capped by expansion in some situations may be
thought of.
5.integration strategies:
Integration is the act of bringing together smaller components into a single system that
functions as one.

Integration strategies as means of expansion strategies

Tour wholesaler or tour operator can strengthen their market position by integration.
Integration takes place when companies merge or one company buys another. As it was
outlined in Chapter 1 already, there are two main forms of integration:
1. Vertical integration
It takes place when two companies of different levels on the distribution chain merge.
Examples could be, when a supplier merges with a wholesaler/tour operator or a tour
wholesaler merges with a retail agent.
We speak of backward vertical integration, when a wholesaler merges with or buys an airline
or with a hotel. With this move a greater control over the source of supply is desired.
We speak of forward vertical integration, when a tour wholesaler merges or buys a travel
agency. In this case greater control over the distribution network is wanted.
(Lubbe 2000)
2. Horizontal integration
It means that tour wholesalers/ tour operator merges on the same level of distribution. For
example a tour wholesaler buys another tour wholesaler to improve their market share and
reduce competition. In general, horizontal integration always leads to economics of scale, in
functions such as human resources, purchasing, and thus to cost savings and price reductions.
Through cost savings an organisation may become more cost effective, allowing them to
develop a better range of products and to achieve better quality control.
(Lubbe 2000)

6.internationalization strategy:
1. An international strategy means that internationally scattered subsidiaries act
independently and operate as if they were local companies, with minimum
coordination from the parent company. Globalstrategy leads to a wide variety of
business strategies, and a high level of adaptation to the local business environment.

Bcg:

What Is a BCG Matrix?

If you're the owner of an established company, you may wonder how best
to deploy resources to enhance your prospects. Since 1968, the BCG
matrix, also known as the Boston or growth-share matrix, has helped
companies answer that question by providing them a way to analyze
product lines in search of growth opportunities.
Named for its creator, the

Boston Consulting

Group, the BCG matrix aims to identify high-growth prospects by

categorizing the company's products according to growth rate and market
share. By optimizing positive cash flows in high-potential products, a
company can capitalize on market-share growth opportunities.
Reeves Martin, senior partner and managing director of Boston Consulting
Group, said that nearly 50 years after its inception, the BCG matrix
remains a valuable tool for helping companies understand their potential.
"The concept of BCG's growth-share matrix, central nowadays to business
schools' curriculum on strategy ... provided companies with a disciplined
and systematic tool for portfolio management," Martin told Business News
Daily. "Recently, Harvard Business Review named BCG's matrix one of five
'frameworks that changed the world.'"

Understanding the matrix

To create a BCG matrix, businesses gather market-share and growth-rate
data on their business units or products. One large square is drawn and is
divided into four equal quadrants. Along the top of the box, a market
share or cash generation is written, and a growth rate or cash use is
written down the left side. On the top left is high market share, and low
market share is on the left. On the left-hand side, high cash use is at the
top and low cash use or growth rate is at the bottom.
upper-right square. At the bottom, "cash cows" go on the left, and "dogs"
are placed on the right. The diagram visually shows that stars have high
market share and a high growth rate, while question marks have low

market share and a high growth rate. On the bottom, cash cows Within the
diagram, "stars" go in the upper-left quadrant, and "question marks" are
put in the have a low growth rate but a high market share, and dogs have
a low market share and a low growth rate.

The following ideas apply to each quadrant of the matrix:

Stars:

The business units or products that have the best market

share and generate the most cash are considered stars. Monopolies and
first-to-market products are frequently termed stars. However, because of
their high growth rate, stars also consume large amounts of cash. This
generally results in the same amount of money coming in that is going
out. Stars can eventually become cash cows if they sustain their success
until a time when the market growth rate declines. Companies are advised
to invest in stars.

Cash cows:

Cash cows are the leaders in the marketplace

and generate more cash than they consume. These are business units or
products that have a high market share, but low growth prospects.
According to

NetMBA, cash cows provide the cash required to turn

question marks into market leaders, to cover the administrative costs of

the company, to fund research and development, to service the corporate
debt, and to pay dividends to shareholders. Companies are advised to
invest in cash cows to maintain the current level of productivity, or to
"milk" the gains passively.

Dogs:

Also known as pets, dogs are units or products that have

both a low market share and a low growth rate.They frequently break
even, neither earning nor consuming a great deal of cash. Dogs are
generally considered cash traps because businesses have money tied up
in them, even though they are bringing back basically nothing in return.
These business units are prime candidates for divestiture.

Question marks:

These parts of a business have

high growth prospects but a low market share. They are consuming a lot
of cash but are bringing little in return. In the end, question marks, also

known as problem children, lose money. However, since these business

units are growing rapidly, they do have the potential to turn into stars.
Companies are advised to invest in question marks if the product has
potential for growth, or to sell if it does not.
As BCG founder Bruce Henderson

wrote in 1968, "all products

eventually become either cash cows or pets [dogs]. The value of a product
is completely dependent upon obtaining a leading share of its market
before the growth slows."

What Is a BCG Matrix?

Katherine Arline, Business News Daily

Contributor February 3, 2015 01:14 pm EST
By

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If you're the owner of an established company, you may wonder how best
to deploy resources to enhance your prospects. Since 1968, the BCG
matrix, also known as the Boston or growth-share matrix, has helped
companies answer that question by providing them a way to analyze
product lines in search of growth opportunities.
Named for its creator, the

Boston Consulting

Group, the BCG matrix aims to identify high-growth prospects by

categorizing the company's products according to growth rate and market

share. By optimizing positive cash flows in high-potential products, a
company can capitalize on market-share growth opportunities.
Reeves Martin, senior partner and managing director of Boston Consulting
Group, said that nearly 50 years after its inception, the BCG matrix
remains a valuable tool for helping companies understand their potential.
"The concept of BCG's growth-share matrix, central nowadays to business
schools' curriculum on strategy ... provided companies with a disciplined
and systematic tool for portfolio management," Martin told Business News
Daily. "Recently, Harvard Business Review named BCG's matrix one of five
'frameworks that changed the world.'"

Understanding the matrix

To create a BCG matrix, businesses gather market-share and growth-rate
data on their business units or products. One large square is drawn and is
divided into four equal quadrants. Along the top of the box, a market
share or cash generation is written, and a growth rate or cash use is
written down the left side. On the top left is high market share, and low
market share is on the left. On the left-hand side, high cash use is at the
top and low cash use or growth rate is at the bottom.
Within the diagram, "stars" go in the upper-left quadrant, and "question
marks" are put in the upper-right square. At the bottom, "cash cows" go
on the left, and "dogs" are placed on the right. The diagram visually shows
that stars have high market share and a high growth rate, while question
marks have low market share and a high growth rate. On the bottom, cash
cows have a low growth rate but a high market share, and dogs have a
low market share and a low growth rate.

The following ideas apply to each quadrant of the matrix:

Stars:

The business units or products that have the best market

share and generate the most cash are considered stars. Monopolies and
first-to-market products are frequently termed stars. However, because of
their high growth rate, stars also consume large amounts of cash. This
generally results in the same amount of money coming in that is going

out. Stars can eventually become cash cows if they sustain their success
until a time when the market growth rate declines. Companies are advised
to invest in stars.

Cash cows:

Cash cows are the leaders in the marketplace

and generate more cash than they consume. These are business units or
products that have a high market share, but low growth prospects.
According to

NetMBA, cash cows provide the cash required to turn

question marks into market leaders, to cover the administrative costs of

the company, to fund research and development, to service the corporate
debt, and to pay dividends to shareholders. Companies are advised to
invest in cash cows to maintain the current level of productivity, or to
"milk" the gains passively.

Dogs:

Also known as pets, dogs are units or products that have

both a low market share and a low growth rate.They frequently break
even, neither earning nor consuming a great deal of cash. Dogs are
generally considered cash traps because businesses have money tied up
in them, even though they are bringing back basically nothing in return.
These business units are prime candidates for divestiture.

Question marks:

These parts of a business have

high growth prospects but a low market share. They are consuming a lot
of cash but are bringing little in return. In the end, question marks, also
known as problem children, lose money. However, since these business
units are growing rapidly, they do have the potential to turn into stars.
Companies are advised to invest in question marks if the product has
potential for growth, or to sell if it does not.
As BCG founder Bruce Henderson

wrote in 1968, "all products

eventually become either cash cows or pets [dogs]. The value of a product
is completely dependent upon obtaining a leading share of its market
before the growth slows."

Ge matrix:

This matrix was developed in 1970s by the General ElectricCompany with the assistance of
the consulting firm, McKinsey &Co, USA. This is also called GE multifactor portfolio
matrix.The GE matrix has been developed to overcome the obviouslimitations
of
BCG
matrix. This matrix consists of nine cells (3X3) based on two key
variables:i)business strengthii)industry attractiveness
The horizontal axis represents business strength and the verticalaxis represent industry
attractivenessThe business strength is measured by considering such factors as:

relative market share

profit margins

ability to compete on price and quality

knowledge of customer and market

competitive strengths and weaknesses

technological capacity

caliber of managementIndustry attractiveness is measured considering such factors as :

market size and growth rate

industry profit margin

competitive intensity

economies of scale


technology

social, environmental, legal and human aspects

The industry product-lines or business units are plotted as circles.The area of each circle is
proportionate to industry sales. The piewithin the circles represents the market share of the
product
line
or business
unit.The nine cells of the GE matrix represent various degrees of industry attractiveness (high
, medium or low) and businessstrength (strong, average and weak). After plotting each
productline or business unit on the nine cell matrix, strategic choices aremade depending on
their position in the matrix.Spotlight StrategyGE matrix is also called Stoplight strategy
matrix because thethree zones are like green, yellow and red of traffic lights.

1)
Green
indicates
invest/expand

if
the
product
falls
in
greenzone, the business strength is strong and industry is at leastmedium in attractiveness, the
strategic decision should be toexpand, to invest and to grow.
2)
Yellow indicates select/earn if the product falls in yellowzone, the business strength is low
but industry attractiveness is high, it needscaution and managerial discretion for making the
strategic choice
3)
Red indicates harvest/divest if the product falls in the red zone,the business strength is
average or weak and attractiveness is alsolow or medium, the appropriate strategy should be
divestment