Strategic Management

Origin
The study of business policy was originated in 1911 when it was introduced in Harvard
Business School (USA) as a part of its curriculum aimed for improving competencies on
general management. After the effectiveness evaluation of this course by Ford
Foundation in 1959 and recommended this course to pull together what students have
learned in separate business field and utilize this knowledge in the analysis of complex
business problems1. Following its recommendation, this course was made mandatory for
all business schools of USA and introduced as integral part of management education all
over the world.
2

The evolution and development of business policy and strategic management can be
traced through management practices. The development is never ending process and more
refined strategic management may be introduced to the days to come. Followings are the
glance of the evolution of strategic management.
Table. .....
Dimensions
Time period
1960s
1970s
1980s
1990s
2000s
2010s
Main focus

Definition ConceptualiziEconomics Resource New

of strategy ng strategicview
ofbased viewparadigm of
management strategy
of strategy strategic
managemen
t
Dominant
Corporate Strategic
Competitive Resource Learning
themes
strategy, management advantage
and
knowledge
planning content anddevelopment capability and
and growth process
developmen innovation
t
Strategic
SWOT
Values chainFive
forcesCore
Integrated
tools
andanalysis, analysis
model,
competencie information
techniques experience
Diamond
s,
valuetechnology
curve,
model,
system
system
growth
Strategic
share
choice
matrix
Main
Chandler Andrew
Porter (1980),Wernerfelt Hamel
contributors (1962),
(1971),
(1986)
(1984),
(2000),
Ansoff
Rumelt
Ghoshal
Pfeffer
(1965),
(1974),
(1986),
(2000),
Learned etMintzberg
Prahald andHerrmann
al. (1965). (1978),
Hamel
(2005), Kim
Ansoff
(1990),
and
(1979)
Barney
Mouborgne
(1991)
(2005)

......................................
According to Harrison and John, Strategic management is the process through which
organizations analyze and learn from their internal and external environments, establish
strategic direction, create strategies that are intended to help achieve established goals
and executive these strategies to satisfy key organizational stakeholders.
Mission
The strategic management process begins when a firm defines its mission. A firms
mission, often written down in the form of mission statement, is a long term purpose that
a firm aspires to be in the long run. It is not guarantee that every mission statement itself
contributes for performance. Obviously, some visionary firms whose mission is central to
all they do can improve firm performance3, like: Boeing, Ford, IBM, Sony, Wal-Mart.
But, all missions may not affect firm performance because of many contains of common
elements kept in mission statement that have questioned whether it creates value for
firms. Even a mission statement does say something unique about a company, if that
mission statement does not influence behavior through out an organization, it is unlikely
to have much impact on firms performance 4. For example, see the mission statement of
Enron: we work with customers and prospects openly, honesty, and sincerely. When we
say we will do something, we will do it; when we say we cannot or will not do something,
then we wont do it. This statement was published at exactly the same time that senior
management at Enron was engaging in activities that ultimately defrauded investors,
partners, and Enrons own employees, and that landed some Enron executives in jail 5.
Interestingly, some missions can hurt firm performance. For example, some times a
firms mission will be very inwardly focused and defined only with reference to the
personal values and priorities of its founders, or top mangers which is questioned that
those values and priorities of mission are consistent with the economic realities facing a
firm. Strategies derived from such mission are not likely to be a source of competitive
advantages. In a nutshell, we can reach into the conclusion that a firms mission can help,
hurt, or have no impact on its performance, missions by themselves do not necessarily
lead a firm to choose and implement strategies that generate competitive advantages.
Indeed it is one of the important steps, the first step in strategic management process and
play a visionary role to entire organization for competitive advantages.
.............
Vision
Vision statement answers the questions what so we want to become, where as mission statement
answers the questions, what is our business.
Vision statement Example: Davids e book page 44
Tyson Foods vision is to be the worlds first choice for protein solutions while maximizing
shareholder value. (Author comment: Good statement, unless Tyson provides nonprotein products)
General Motors vision is to be the world leader in transportation products and related services.
(Author comment: Good statement)

PepsiCos responsibility is to continually improve all aspects of the world in which we operate
environment, social, economic creating a better tomorrow than today. (Author comment: Statement
is too vague; it should reveal beverage and food business)
Dells vision is to create a company culture where environmental excellence is second nature. (Author
comment: Statement is too vague; it should reveal computer business in some manner; the word
environmental is generally used to refer to natural environment so is unclear in its use here)
The vision of First Reliance Bank is to be recognized as the largest and most profitable bank in South
Carolina. (Author comment: This is a very small new bank headquartered in Florence, South Carolina,
so this goal is not achievable in five years; the statement is too futuristic)
Samsonites vision is to provide innovative solutions for the traveling world. (Author comment:
Statement needs to be more specific, perhaps mention luggage; statement as is could refer to air
carriers or cruise lines, which is not good)
Royal Caribbeans vision is to empower and enable our employees to deliver the best vacation
experience for our guests, thereby generating superior returns for our shareholders and enhancing the
well-being of our communities. (Author comment: Statement is good but could end after the word
guests)
Procter & Gambles vision is to be, and be recognized as, the best consumer products company in the
world. (Author comment: Statement is too vague and readability is not that good)..........
.............................
Mission statement: example David e book. 46
Fleetwood Enterprises will lead the recreational vehicle and manufactured housing industries (2, 7) in
providing quality products, with a passion for customer-driven innovation (1). We will emphasize
training, embrace diversity and provide growth opportunities for our associates and our dealers (9).
We will lead our industries in the application of appropriate technologies (4). We will operate at the
highest levels of ethics and compliance with a focus on exemplary corporate governance (6). We will
deliver value to our shareholders, positive operating results and industry-leading earnings (5). (Author
comment: Statement lacks two components: Markets and Concern for Public Image)
We aspire to make PepsiCo the worlds (3) premier consumer products company, focused on
convenient foods and beverages (2). We seek to produce healthy financial rewards for investors (5) as
we provide opportunities for growth and enrichment to our employees (9), our business partners and
the communities (8) in which we operate. And in everything we do, we strive to act with honesty,
openness, fairness and integrity (6). (Author comment: Statement lacks three components: Customers,
Technology, and Self-Concept)
We are loyal to Royal Caribbean and Celebrity and strive for continuous improvement in everything
we do. We always provide service with a friendly greeting and a smile (7). We anticipate the needs of
our customers and make all efforts to exceed our customers expectations (1). We take ownership of
any problem that is brought to our attention. We engage in conduct that enhances our corporate
reputation and employee morale (9). We are committed to act in the highest ethical manner and respect
the rights and dignity of others (6). (Author comment: Statement lacks five components:
Products/Services, Markets, Technology, Concern for Survival/Growth/Profits, Concern for Public
Image)
Dells mission is to be the most successful computer company (2) in the world (3) at delivering the

best customer experience in markets we serve (1). In doing so, Dell will meet customer expectations
of highest quality; leading technology (4); competitive pricing; individual and company accountability
(6); best-in-class service and support (7); flexible customization capability (7); superior corporate
citizenship (8); financial stability (5). (Author comment: Statement lacks only one component:
Concern for Employees)
Procter & Gamble will provide branded products and services of superior quality and value (7) that
improve the lives of the worlds (3) consumers. As a result, consumers (1) will reward us with industry
leadership in sales, profit (5), and value creation, allowing our people (9), our shareholders, and the
communities (8) in which we live and work to prosper. (Author comment: Statement lacks three
components: Products/Services, Technology, and Philosophy)
At LOreal, we believe that lasting business success is built upon ethical (6) standards which guide
growth and on a genuine sense of responsibility to our employees (9), our consumers, our environment
and to the communities in which we operate (8). (Author comment: Statement lacks six components:
Customers, Products/Services, Markets, Technology, Concern for Survival/Growth/Profits, Concern
for Public Image)

1. CustomersWho are the firms customers?

2. Products or servicesWhat are the firms major products or services?
3. MarketsGeographically, where does the firm compete?
4. TechnologyIs the firm technologically current?
5. Concern for survival, growth, and profitabilityIs the firm committed to growth and financial
soundness?
6. PhilosophyWhat are the basic beliefs, values, aspirations, and ethical priorities of the firm?
7. Self-conceptWhat is the firms distinctive competence or major competitive advantage?
8. Concern for public imageIs the firm responsive to social, community, and environmental
concerns?
9. Concern for employeesAre employees a valuable asset of the firm?
.........................................
Mission statement
According to Vern McGinnis6, a good mission statement should (i) define what the organization is and
what the organization aspires to be, (ii) distinguish a given organization from all others, (iii) serve as a
framework for evaluating both current and prospective activities, (iv) limited enough to exclude some
ventures and broad enough to allow for creative growth, and (v) clearly stated terms to be widely
understood throughout the organization. Followings are the major benefits having clear vision and
mission of an organizations.
Clarity of purpose among all managers and employees
Base for strategy formulation, strategy selection , resource allocation
Promote a sense of shared expectation among the employees, and establishment of
organizational culture
Provide clear direction, motivation, and sense of intent to all stakeholders
Achieve synergy among all employees for higher organizational performance
Resolve divergent views among mangers
Therefore, academicians of strategic management feel that an effective mission statement should have
many components to make visible mission statement. Some of these components are: customers,
products or services, market, technology, employees, society or community, distinct competencies,
and philosophy- the value aspiration.

Even though, there is no hard and fast rules, an effective mission statement should not be too lengthy,
recommended length is less than 250 words. An effective mission statement should arouse positive
feelings and emotions about the organization and motivate for actions. It should generate the
impression that a firm is successful, has direction, and is worthy from all socioeconomic group of
people. Therefore, making a fine balance between specificity and generality in mission statement is
difficult. So, George Steiner7 rightly said, most business statement of mission are high levels of
abstractions. Vagueness nevertheless has its virtues. Mission statement are not designed to express
concrete ends, but rather to provide motivation, general direction, an image, a tons of philosophy to
guide the enterprise. An excess of detail could prove counterproductive since concrete specification
could be the base for rallying opposition.

.
The term strategic management is used to refer to strategy formulation, implementation, and
evaluation while strategic planning refers only to strategic formulation. The term- strategic planning is
more often used in business world, the term strategic management is mostly used in academia. The
purpose of both- strategic planning and strategic management is to create new and different
opportunities, integrate management functions to achieve organizational objectives.
...............
The strategic management process consists of three stages 8: strategy formulation, strategy
implementation, and strategy evaluation.
Strategy formulation: it includes developing vision and mission, determining strengths and
weaknesses, identifying opportunities and threats, establishing long-term objectives, and
choosing particular strategies to pursue its objectives. Before selecting particular strategies, it is
essential to identify and formulate alternative strategies, evaluating each alternative strategies,
and selection of best among to complete the choosing process of best course of action. Some of
the issues of strategy formulation include a bundle of decisions for new business to enter,
expansion of business, inter into international market, creation of new products or new market,
inter into mergers, acquisition and alliance to gain competitive advantages.
Strategic implementation: in order to implement strategies formulated in the first steps of
strategic management, it is essential to establish annual objectives, policies, programs, and
allocation of resources so that formulated strategies can be executed. Therefore, strategy
implementation includes developing strategic supportive culture, structure, marketing efforts,
information system and employee utilization program for better performance. This is a action
stage of strategic management, often called most difficult state, requires personal discipline,
commitment and sacrifice9.
Strategy evaluation: When strategies are implemented, the top management need to know the
contribution of particular strategies they choose for the overall performance of organization.
Further, all strategies are subject to future modification because of internal and external factors
that are constantly changing over the period of time. The main activities of strategy evaluation
are: reviewing internal and external factors; measuring performance, and initiation for corrective
actions.
...................................
The term competitive advantages can be defined advantages a firm gained because of especially
formulated and implemented strategies than rival firms. When a firm can do something that rival
firms can not do, or owns something that rival firms desire, the position can be said as competitive
advantages achieved. A firms must strive to achieve sustained competitive advantage by (i)
continually adapting to changes in external trends and events and internal capabilities, competencies,
and resources, and by10 (ii) effectively formulating, implementing and evaluating strategies that
capitalize upon those factors.
...............

Vision: vision answers the question related to organization, what do we want to become? crafting
vision statement is considered the first step of strategic planning which preceding the development of
mission statement. Generally, vision statement is crafted on single sentence.
..................
Mission: the mission statement answers the question related to organization, what is our business?
It explore the scopes of a firms operation in terms of product and market, and describes the values
and priorities of an organization.
...........
Opportunities and threats: opportunities and threats are significant benefits or harms and organization
faced or likely to be faced because of economic, social, cultural, technological, political, legal, and
competitive factors, trends and events. These factors are largely beyond the control of that particular
organization. Thus, these factors are called external factors. Few examples of external factors that lead
to opportunities or threats to any firms are: global economic recession, oil price fluctuation, Stock
market crash, unemployment trend, new acts, rules and regulations, changes on test and preferences of
customers, etc.
...............
Strengths and weaknesses: strengths and weaknesses are relative superiority or deficiency generated
by internal factors which are controllable to some extent that leads well or poor performance. This
situation arises because of management functions like: marketing, finance, accounting, production,
operation, research and development, management information system and other activities of
business. Strengths and weaknesses can be determined by assessing organizations objectives, policies,
culture, leadership, and management functions. The assessing of these internal factors done by number
of ways including ratios, trend analysis, performance measurement, efficiency measurement,
productivity measurement, and creating and analyzing profile.
...................

External environment audit

Vision and mission of business

Objectives setup and strategies
formulation
Strategies
evaluation andImplementations
choice
Strategy evaluation and control
of strategies

Internal environment audit

Strategy formulation

Strategy implementation

Strategy evaluation

.................
Benefit of strategic management: strategic management helps organizations to be more

proactive than reactive in shaping its future formulating better strategies through the use
of more systematic, logical and rationale approach. Similarly, employees become more
creative and innovative when they understand and support the firms mission, objectives
and strategies.
Financial benefits: empirical research findings carried out by eminent scholars of
strategic management indicates that organizations using strategic management practices
are more profitable and successful than those that do not 11. Strategic management
concepts and practices show significant involvement in sales, profitability, compared to
firms which do not have these practices. Because systematic planning prepares
organizations to cope up for internal and external environments that leads to build high
performing firms. In contrast, firms that perform poorly engaged in activities that are
shortsighted, often preoccupied with solving internal problems and underestimate
competitors strengths.
Nonfinancial benefits: Strategic management offers other benefits, such as enhanced
awareness of external threats, improved understanding of competitors, increased
employees productivity, reduced resistance to change and clear understanding of
performance- reward relationships12. It enhances the problem prevention capabilities
because of interactions among managers in division and functional level. In addition, it
brings discipline and confidence in the current business strategy.
Followings are the some of the benefits of strategic management:
i.
It supports to identify opportunities and prioritization to them
ii.
It helps to develop framework for improved coordination and control activities
iii.
It minimizes adverse condition, change reaction and management problems,.
iv.
It allows effective allocation of resources and time to identify opportunities
v.
It creates framework for internal communication, and favorable attitude among
staff
vi.
It provides basis for individual responsibility, degree of discipline, and integrates
individual behavior
.
Mission: a good mission should answer the question of what is our business. It is a
reason of organization being existence. The mission statement of one organization
distinguishes from other similar organization and guides for formulation of appropriate
objectives and strategies. It reveals what an organization wants to be and what it wants to
serve. Sometimes creed statement is used to define mission statement. Similar to mission
statement, creed statement is a statement of purpose, a statement of philosophy, a
statement of beliefs, a statement of business principles, and a statement of business
definition. Drucker13 has defined mission statement as:
A business mission is the foundation for priorities, strategies, plans and work
assignment. It is the starting point for the design of managerial jobs and, above all, for the
design of managerial structure. Nothing may seem simpler or more obvious than to know
what a companys business is.
..
Economic forces:

When interest rates rise, funds needed for capital expansion become more costly
When interest rates rise, discretionary income declines, and the demand of
discretionary goods falls
When stock price increases, the desirability of equity as source of capital for
market development increases
When the market rises, consumer and business wealth expands

Key socio cultural variables

Special interest groups
Immigration and emigration rates
Social security programs
Life expectancy rates
Per capital income
Attitudes towards business
Trust in government
Attitudes towards government
Attitudes towards work
Buying habits
Ethical concern
Attitudes towards saving
Attitudes towards investing
level of education
population changes by race, age, sex
number of women and minority workers

Key political legal variables
i.
Changes in tax laws
ii.
Special tariff
iii.
Environmental protection law
iv.
Level of government subsidies
v.
Antitrust legislation
vi.
Government fiscal and monitory policy
vii.
Political condition in foreign and neighboring countries
viii.
Special local, state, and federal laws
ix.
Size of government budget
x.
World oil, currency, and labor market
xi.
Location and severity of terrorist activities
xii.

Technology influences business

Consider these points;
i. Many airlines offer ticket booking through wire less
ii. Many banks sends text message alerts after transactions through
debit/credit card
iii.
Patients use mobile devices to monitor their own health, such as calories

consumed
iv.
Many hotels send daily special and coupons to hotel guests via text
message
v.
Many leaders won the election by mobilizing Facebook and MySpace
users
vi. Many book publishers are publishing eBook.

Conditions that cause high rivalry among competing firms

1. High number of competing firms with similar size and capacity
2. Falling demand for the industrys products
3. Falling product/service prices in the industry
4. Easy switch on consumer brands
5. Low barrier to inter and high barrier to exit
6. High fixed costs among competing firms
7. Product is perishable in nature
8. Rivals have excess capacity, excess inventory, and sell similar products/services

Check your organizational cultures

Cultural dimensions
1
Work culture: arrive early, leave late, motivate for work,
performance based pay, participatory management,
Ethical cultures: clear code of business, rule based system ,
diversity cultural sensitivity,
Power culture: clear hierarchy in job, status oriented, power
and authority oriented mentality, no question to supervisors
Entrepreneur culture: motivates for risk bearing, encourage
creativity, innovation, openmindness, socially responsible,
Individualism culture: focus for self, individual growth,
promotion, and recognition than group, individual incentives,
Flexible work culture: work from home, flexi time work,
informal dress, task accomplishment than time paid at office

Finance and accounting checklist

Following finance and accounting questions should be examined to identify
strengths and weakness.
i. Can the financial analysis indicator indicate financially strong?
ii. Can the firm raise short term and long term capital
iii.
Does the firm have sufficient working capital?
iv.
Are capital budgeting procedures effective?
v.
Are dividend payout policies reasonable?
vi. Doe the firm have good relation with its investors and stockholders/
vii. Is the firms debt situation excellent?
..

14

Decision areas
1. Process

2. Capacity
3 inventory
4 workforce
5 Quality

Basic functions of production and operation

Examples of decisions related activities
Decisions related to choice of technology, location choice and
layout, process flow analysis, process control, transportation
analysis, distance analysis for raw material to production sites, line
balancing
Decisions include forecasting, facilities planning, aggregate
planning, scheduling, capacity planning and queuing analysis, and
capacity utilization...
Decisions related to manage the level of raw materials, work in
progress, and finished goods, economic order quantity, and materials
handling
Decisions include managing the skilled, unskilled, clerical, and
managerial employees by caring for job design, work measurement,
job enrichment, work standards, and motivational techniques
All decisions that are aimed to ensure high quality goods and
services. The decisions related to caring for quality control,
sampling, testing, quality assurance, and cost control

Research and development audit

Following functions should be asked to while performing R&D audit
Does the firm have R&d Facilities and are they adequate?
Does outside R&D firms are used and are they cost effective?
Are the organizations R&D Personnel well qualified?
Are R&D resource allocated effectively?
Are management information system and computer system adequate?
Is communication between R&D and other organization units effective?
Are present products technologically competitive?

15

Alternative
strategies
Strategy
Forward
integration
Backward
integration
Horizontal
integration

Definition
Examples
Gaining ownership or increasedPepsiCo takeovers Pepsi Bottling
control over distributors or retailers Group
Seeking ownership or increasedChinese
carmaker
Geely
control of a firms suppliers
automobile purchased Australian
car parts makers Drivetrain system
international.
Seeking ownership or increasedPfizer acquires Wyeth; both are
control over competitors
huge drug companies

Market
penetration
Market
development
Product
development
Related
diversification
Unrelated
diversification
Retrenchment

Divestiture
Liquidation

Seeking increased market share forCoke spending millions on its new

present products or services inslogan open happiness
present market through greater
marketing efforts
Introducing present products orTime warner purchased 31% of
services into new geographic area central European media enterprises
in order to expand into Czech,
Ukrain, and Bulgaria
Seeking
increased
sales
byBook publisher- Harper Collins
improving present products orbegan producing audio books for
developing new products/services download
Adding new but related products orSprint Nextel diversified from the
services
cell phone business by partnering
with Garmin ltd to deliver wireless
internet service into GPS machine
Adding new unrelated products orCisco system entered the camcorder
services
business by acquiring Pure Digital
technology
Regrouping through cost and assetWorld largest steel maker- Arcelor
reduction to reverse declining salesMittal shut down half of its plants
and profit
and laid off thousands of
employees.
Selling a division or part of anThe British airport firm BAA ltd.
organization
Divested three UK airport
Selling all of a companys assets, in Nepal bikash bank liquidated
parts, for their tangible worth

Forward integration: it involves gaining ownership or increased control over

distributors or retailers. Many organizations now a days are pursuing a forward
integration strategy by establishing web sites to directly sell products to customers. For
example, Microsoft is opening its own retail stores, a forward integration strategy similar
to rival Apple Inc., which currently has more than 200 stores around the world.
Backward integration: backward integration is a strategy of seeking ownership or
increased control of a firms suppliers. This strategy is appropriate when firs current
suppliers are unreliable, too costly, or cannot meet the demand of the firm.

Horizontal integration: horizontal integration refers to the strategy of seeking ownership

of or increased control over a firms competitors. This strategy is used increasingly in
business practices, normally discussed in mergers, acquisitions, and takeovers among
competitors.
.
Related diversification;
Six guidelines16 when a related diversification may be an effective strategy are as follows:
When an organization competes in a no-growth or a slow growth industry
When adding new, but related products would significantly enhance the sales of
current products

When new but related products could be offered at highly competitive prices
When new but related products have seasonal sales levels t ha counterbalance an
organizations existing peaks and valleys.
When an organizations products are currently in the declining stage of products
life cycle
When an organization has a strong management team.
..
Unrelated diversification
Unrelated diversification strategy may be effective especially in the following 17
situations.
When revenue derived from an organizations current products or services would
increase significantly by adding the new unrelated products.
When an organization competes in a highly competitive and /or a go-growth
industry, as indicated by low industry profit margins and returns.
When an organizations present channels of distribution can be used to market the
new products to new customers.
When an organizations basic industry is experiencing declining annual sales and
profit.
When an organization has the capital and managerial talent needed to compete
successfully in a new industry.
When an organization has the opportunity to purchase an unrelated business that
is an attractive investment opportunity.
When there exists financial synergy between the acquired and acquiring firms
When existing markets for an organizations present products are saturated.
..
Guidelines for when retrenchment strategy may be an effective steps18:
When an organization has a clearly distinctive competences but has failed
consistently to meet its objectives and goals over time.
When an organization is one of the weaker competitor in a give industry.
When an organization is plagued by inefficiency, low profitability, poor
employee morale, and pressure from stockholders to improve
performance.
When an organization has failed to capitalize on external opportunities,
minimize external threats, take advantages of internal strengths and
overcome internal weaknesses over time.

Divestiture is used to raise capital by selling a division or a part of an organization

for further investment. It can be done to rid an organization of business that are
unprofitable, that requires too much capital, or that do not fit well with the firms
other activities. The firms which focus on core business activities and less interest
on diversified generally followed divestiture strategy. Followings 19 are some of
the guidelines that helps to make divestiture strategy more effective.
When an organization has pursued a retrenchment strategy and failed to

accomplish needed improvements.

When a division needs more resources to be competitive than the
company can provide.
When a division is responsible for an organizations overall poor
performance.
When a division is misfit with the rest of an organization; this can result
from radically different markets, customers, managers, employees,
values, or needs.
When a large amount of cash is needed quickly and cannot be obtained
reasonably from other sources.

Liquidation strategy is selling all of a companys assets, or in parts for their tangible
worth. Some of the guidelines indicate when liquidation may; be an especially effective
strategy to pursue:
When an organization has pursued both a retrenchment strategy and a divestiture
strategy, and neither has been successful.
When an organizations only alternative is bankruptcy.
When the stockholders of a firm can minimize their losses by selling the
organizations assets.
..
Historical perspectives of strategy
The Chinese military strategist Sun Tzu the art of war is said to have influenced the
thinking of many modern Japanese businesses, and has led to a number of thoughts about
how the art can be applied to modern business. The work influences by art of war can
be read in the publications of Wee20 and Ho21 as two different examples.
.
Below the figure of triangle shape of strategic management
Johnson and Scholes22 argued that
Strategic management is concerned with deciding on strategy and
planning how that strategy is to be put into effect. It can be thought of an having
three main elements within itthere is strategic analysis, in which the strategist
seeks to understand the strategic position of the organization. There is strategic
choice stage which is to do with formulation of possible course of actions, their
evaluation, and the choice between them. Finally, there is strategic
implementation stage which is to do with planning how the choice of strategy can
be put into effect.

Contingency approach to strategic management

Why do each of the methods suggested by the experts work well in some organizations
and badly in others? Experts began to research whether the processes by which strategies
were identified and determined were not in some way contingent on the circumstances in
which the organization operated. Obviously, there are many variables that will affect the
quality of strategy, not because of judgment of people who make it. These variables are
emerged because of external circumstances in which the organization operated. The
research23 undertaken in different countries in different industries showed that the highest

profitability firms were those that had a good match between the level of turbulence on
external environment and the appropriate approach to strategic management. Different
strategic approach have been proposed24 for firms which operate in condition of hyper
competition. Hyper competition is the condition of uncertainty, turbulence, diversity of
competitors, and hostility. Competing firms make many major, rapid, and unexpected
strategic moves, that can be said as hurricane a faster version of a strong wind.

Benefit of strategic management

Research into strategic management and its benefits has become more complex because
of all the differences in which they operated. It seems beyond doubt that strategic
management can be beneficial, but common sense tells us that it will not be beneficial in
every situation. Even when the hurdle of fitting the approach to the situation has been
overcome, strategic management is not likely to be successful if it is applied badly.
Therefore, we can look at organizations on a case-by-case basis and can conclude the
contribution of strategic management for that particular organization.
..
Inflation:
Inflation is worldwide problem, but one which varies in intensity between countries.
Many South American countries have an inflation rate of between 20 and 50 percent,
many south Asian countries have an inflation rate of between 10 and 20 percent, but the
USA has tended to regard 5 to 6 percent as norms. See the example of Indonesia, which
considered a national inflation rate in 1968 of 85 percent a great improvement over
previous figure of 360 percent has dramatically improved as 13 percent in 2014. It is
general expectation that profit should increase at least as much as the inflation if the real
return to shareholders is not to decrease. Like other economic factors, inflation will not
affect all companies the same way. All other things being equal, a labor intensive industry
will feel the effect of inflation much more violently than a capital intensive industry with
modern plant and adequate capacity.
.
Government policies:
Government policies have a direct effect both on the economy at large and the individual
company. Government economic policies play a key part in the encouragement of new
industry, particularly in underdeveloped, and developing countries like Nepal: for
example protection to local industries, protective customs duties. Mostly, at the time of
economic pressure, policies are introduced which have an impact on business. For
example, changes in hire purchase legislation may be made for economic rather than
legal reasons.

Legal factors:
There are numerous aspects of the legal factors in which the company operates and which
must be taken into account in the formulation of strategy. Generally, the legal
environment may be considered as having three parts: the existing pattern of laws under
which every company operates; areas where changes are made; and unannounced
introduction of new regulation or suspended clauses of existing laws.
..
Technological factors:

Today, the company which ignores technology in its plants is very shortsighted. For most
of the companies, technological change has at least two dimensions. The first is the
change brought involving the creation of entirely new products or new uses for existing
products, for example, paper bags replaced by polythene bags. The second dimension is
change in process and production methods.
..
Sociological factors:
Society is in a continue process of change. Attitudes rarely alter overnight, but the time
span during withy they do changes is usually relevant to the strategic planning. See the
example of UK smoking attitudes: in 1960s smoking was the norms, and non-smoker
who complained about the fumes in an office was seen as abnormal. By the 1980s, the
non-smokers were in the majority, and non-smoking offices becoming common. By
1990s it was the person who wished to smoke at a business meeting who was atypical,
and smoking was increasingly becoming prohibited on public transportation. The smoker
is now seen as anti-social, where a decade or so previously the non-smoker bore this
level25.
There are at least three ways in which social trends are important for strategic planning.
Markets are directly affected by social changes, in the design of products, the
trends in market size, and the way people make their buying decisions.
Social changes often lead to legal changes. Thus, there is an increasing
amount of social and employment legislation in most developed countries.
Expectations which people hold are important for human resource planning.
Some of the important attitudes for human resource planning includes work
ethics, willingness to accept authority, equal career opportunities, work
design, performance based reward etc.
..
Environmental scanning/ auditing
Facing up to change is a approach of environmental scanning developed by the Harbridge
consulting group has been used widely over a long period 26. The heart of the approach is
presented in the figure below. The categories of auditing are listed on the left-hand side,
and under each heading there are sub headings showing the type of factors that may be
important to the particular firm. It is not the intention to show the heading and
subheadings in the figure that all items are relevant to a particular organization, nor that
only items on the list should be considered. The analysis begins with column 1, where
issues are appear as important. To identify important issues, an effective method is to
have the questionnaires completed individually by a number of managers, preferably
including line managers who know the business well, and other who may have access to
environmental information. Collecting these primary information, all individual come
together in group to agree what is important for headings and subheadings.
Category

Checklist of possible changes (External 1

2
only)
Possible
Impact
changes for
your
company
Demographic Ageing population
Minorities
Women

3
4
5
6
7
8
Probabi Overall Prepar Who
isWhose Is
lity
importan ation aware ofresponsib effective
ce
the change ility
action
likely?

9
Are
the
resource
available?

Social
Economic

political

Graduate availability
Consumer attitudes
Employee attitudes
National culuters
Inflation
Employment level
International trade
Balance of payment
Changes of government
Privatization/liberalization
Ideology of ruling parties

Ecological

Pollution
Waste
Climate
TechnologicalPatents
Information technology
Production methods and process
Machine replacement
Legal
Equal opportunity legislation
Health/safety/welfare laws
Taxation
Information disclose
Infrastructure Transport system
Communication system

Columns 2 to 4 requires respondents to reach a view on the importance of each identified

factors/issues to the organizations. This is achieved through a scoring method which
converts opinions into numbers. The rule to column 2 (impact) is:
Wheat impact would it have?
Score
Extremely high impact
6
High impact
5
Impact
4
Minor impact
3
low impact
2
Relatively low impact
1
Dont know
7
Column 3- the probability of happening can be calculated based on following criteria by
respondents
What is the probability of happing Percentage
score
of the factors/issues?
A certainty
100
6
Very likely
84
5
Quite possible
67
4
As likely as not
50
3
Probable not
33
2
Highly unlikely
16
1
Dont know
7
The overall importance is calculated by multiplying the impact score by the probability
score. Dont know scores high so that something important is not overlooked through
ignorance. Attention is focused on those factors which have the highest overall score
ignoring dont know. Column 5: preparation is the response to another questions. How
ready are you for the important changes? The word you refers to the unit for which the

strategies are being considered, and could be a total company, a business unit, a
department or a product. The numerical score is calculated based on:
How ready are you for the important changes?
score
Completely prepared, including implementation plan
6
Fairly well prepared, with tentative plans
5
Have decided a general approach
4
Not well prepared, with only a general ideas of response
3
Vague awareness
2
Not at all prepared
1
Column number 6 and 7 begin to explore the possibilities for actions. First who is aware
of the threats and opportunities represented by the changes? These would be a
superfluous question if all the decision makers were working on the questionnaire, but
become important if the group is of planners or middle managers. The next column pins
down responsibility for dealing with the change. Complex issue may lead to multiple
responsibilities. Column 8 and 9 both use numerical scales, varying from 6 (the best) to 1
(the worst). Column 8 probes perception of whether effective action will in fact be taken
and column 9 assesses whether the organization can make the appropriate resources
available to deal the situation.

Core competencies:
The concept of core competencies become well know in 1990, with the publication of an
article in the Harvard Business Review by C. K. Prahalad and G. Hamel27. They state:
A core competence is a bundle of skills and technologies that enables a company to
provide a particular benefit to customers. At Sony that benefit is pocketability and the
core competence is miniaturization. At Federal Express the benefit is on-time delivery,
the core competence, at a very high level, is logistics management. Logistics are also
central to Wal Marts ability to provide customers with the benefits of choice,
availability, and value.competencies are the glue that binds existing business. They are
also the engine for new business development, patterns of diversification and market
entry may be guided by them.
An organization can develop core competencies in all areas of organization management.
For example, marketing department can develop core competencies in any or all areas of
customer care, channels distribution, servicing, promotional skills, export skills, selling
skills etc. similarly, in a area of production, it can develop competencies on process skills,
assembly skills, batch/mass/ process skills, quality control, cost control skills,
transportation skills and others. Finance department can develop through investment
skills, consumer financing skills, credit control, fund raising skills, working capital
management, international financing skills.
Hamel28 says: a competence is a bundle of constituent skills and technologies, rather
than a single, discrete skill or technology. Therefore, a core competence must give access
to wide variety of markets, deliver a clear benefit to customers, and be hard for
competitors to copy, so that it provides a clear basis for differentiation. A core
competence is not a single sills, a competence that all competitors have, and something
possessed by only one small areas of organization.


Competitive analysis of an industry:
Entry barrier/ exit barrier
Economics of scale
Product differentiation
Capital
Access to distribution channel
Government policies
Market growth
Experience
Fixed / variable costs

buyers
demands for quality
playing off competition
large buyers
product contains significant elements in buyers costs
low profit earners
potential for backward integration
quality of purchase, eg safety equipment, medical..
power of supplying firms relative to buyers
profitability
growth of business

Suppliers
Few or many companies supplying customer firms
Profitability of supplying firms
Do they fight with substitutes to customer firms
Capacity and utilization
Are customer firms significant for suppliers
Can suppliers integrate forward

Substitutes
Products which offer better price/
performance than firms offering
above which come from high profit
industries.

Firms
Number
Relative size
Market share
Profitability
Margins
Added value
Significant to key suppliers
Forward/backwards integration

Exit barriers

Objectives:

A number of factors should be taken into consideration when a chief executive sets profit
target.
Trends over previous years ( these provide a baseline for growth)
Progress by other companies of a similar size and in the same industry
The performance of leading companies quoted on the stock exchange
Opportunities for more profitable investment elsewhere
The vision of the chief executive, and intention to give the shareholders more than
they have had in the past
The strategic need for growth to reach a size which enables the company to at
least maintain its position of influence in its trade, and to provide a cash flow to
generate future growth and the replacement of assets
Rates of inflation. There should be an improvement in real terms

Acceptable level of risk.

.

Goals
Many different types of goals may be defined, and the possibility suggested are the way
of example rather than recommendation. Only the company itself can know what is
relevant and important to it. Followings are the example of some goals:
Percentage market share ( by product and/or country)
A ratio, such as return on sales
An absolute figure for sales
A minimum figure for customer complaints
A maximum figure for hours lost in industry dispute
A labour productivity ration
A cost reduction target
A date by which a particular event must take place (eg. New product lunch)
.
Levels of strategic management: corporate level, business level, and functional level
Corporate level managers: the corporate level of management consists of the chief
executive officer (CEO), other senior executives, the board of directors, and corporate
staff. These individuals occupy the apex of decision making within the organization. In
consultation with senior executives, the role of corporate level managers is to oversee the
development of strategies for the whole organization. This role includes defining the
goals of organization, determining what business is should be in, allocating resources
among the different businesses, formulating and implementing strategies that span
individual businesses. Corporate level managers, and particularly the CEO, can be
viewed as the agents of shareholders29. It is their responsibility to ensure that the
corporate and business strategies that the company pursues are consistent with
maximizing profitability and profit growth.
Business level managers: a business unit of an organization is a self contained division
with its own functions like: production, marketing, finance, that provides products or
services for a particular market. The business level manager is the head of the division
whose strategic role is to translate the general statement of direction that come from the
corporate level into concrete strategies for individual businesses. Thus, business level
general manager are concerned with strategies that are specific to a particular business.
Functional level managers: functional level managers are responsible for the specific
business functions or operations like: human resources, purchasing, product development,
customer services and so on that constitute of a strategic business unit. Thus, a functional
managers sphere of responsibility is generally confirmed to one organizational activity.
For example, manufacturing managers are responsible for developing manufacturing
strategies consistent with the corporate objectives. Moreover, functional managers
provide most of the information that makes it possible for business and corporate level
general managers to formulate realistic and attainable strategies.


Steps of strategic management
Mission statement: the first components of strategic management process is crafting the
organizations mission statement, which provides the framework within which strategies
are formulated.
External analysis: the second components of the strategic management process is an
analysis of the organizations external environment. The essential purpose of the analysis
of external environment is to identify strategic opportunities and threats in the
organizations operation that will affect to pursues its mission. Broadly, three interrelated
external environment should be examined, they are: macro environmental related
socioeconomic factors, national environment related political and legislative factors, and
industry environment such as competitive factors.
Internal analysis: internal analysis, the third component of the strategic management
process, serve to pinpoint the strengths and weaknesses of the organization. Company
strengths lead to superior performance whereas company weaknesses translate into
inferior performance. Issues related to internal environment are the factors located within
organization like: company resources, capabilities, core competencies, organizational
culture and others and lead to achieve superior efficiency, quality, innovation, and
responsiveness to customer.
SWOT analysis: SWOT analysis is the measurement of strengths and weaknesses of an
organization and identify of opportunities and threats to the organization so that
appropriate strategy matching is possible. Its central purpose is to identify the strategies
that will create a company-specific business model which will best fit a companys
resources and capabilities to the demands of the environment. At this stage, managers
compare and contrast the various alternative possible strategies against each other with
respect to their ability to achieve competitive advantages.
Strategy formulation and choice: .
.
.
Strategy implementation: when strategies are selected, managers much put those
strategies into action: strategy has to be implemented. Strategy implementation involves
taking actions at the functional, business, and corporate level to execute a strategic plan.
Strategic implementation entails designing the best organization structure, culture, and
control system to put a chosen strategy into action.
Feedback: the feedback indicates that strategic planning and management is ongoing; it
never ends. Once a strategy has been implemented, it is essential to determine the extent
to which strategic goals are actually being achieved and to what degree competitive
advantage is being created and sustained. This knowledge is passed back up to the
different stages of strategic management process which are become the inputs for the
next round of strategy formulation and implementation. Then top managers can decide
whether to reaffirm existing strategies or suggest changes for future.
..
Emergent and Deliberate strategies:
Henry Mintzberg30 and his colleague have proposed a model of strategy development that

provides a more encompassing view of what strategy actually is. According to this model,
a companys realized strategy is the product of whatever planned strategies are actually
put into actions (the companys deliberate strategies), and of any unplanned or emergent
strategies.
Fig: Put the figure of planned, realized, deliberate, unrealized, and emergent strategy, fig.
page 13 of Charles hill
According to Mintzberg, many planned strategies are not implemented owing to
unpredicted change in the environment and are unrealized. Emergent strategies are the
unplanned responses to unforeseen circumstances. They arises from autonomous action
by top managers and middle level managers. They are not the product of formal topdown planning mechanism. In practice, the strategies of most organization are probably a
combination of the planned (intended) and the emergent.
.
Resources:
Resources are financial, physical, social or human, technological and organizational
factors that allow a company t create value for its customers.
Company resources can be divided into two types: tangible and intangible resources.
Tangible resources are something physical, such as land, building, plant, equipment,
inventory, and money. Intangible resources are nonphysical entities that are the creation
of managers and other employees, such as brand names, the reputation of the company,
the knowledge that employees have gained through experience, and the intellectual
property of the company, including that protected through patents, copyrights, and
trademark.
..
Capabilities:
Capabilities refer to a companys skills at coordinating its resources and putting them to
productive use. These skills reside in an organizations rules, routines, and procedures
through which a company makes decisions and manages its internal processes to achieve
organizational goals. More generally, a companys capabilities are the product of its
organization structure, processes and control systems. Capabilities are intangible. The
distinction between resources and capabilities is critical to understanding what generates
a distinctive competencies. A company may have firm- specific and valuable resources,
but unless it has the capability to use those resources effectively, it may not be able to
create a distinctive competence.
For a company to h have a distinctive competence, it must have at a minimum of either
(i) a firm specific and valuable resources and capabilities (skills) necessary to take
advantage of that resources, or (ii) a firm specific capability to manage resources. A
companys distinctive competencies is strongest when it possesses both firm-specific and
valuable resources and firm specific capabilities to manage those resources.
Fig. of page 102, fig 4.6 of Hill

..
Cost leadership strategy: the goal of cost-leadership strategy is to outperform
competitors by doing everything the company can to produce goods or services at a cost
lower than those of competitors. Two advantages accrue from a cost leadership strategy 31.
First, because of its lower costs, the cost leader is able to charge a lower price than its
competitors and yet make the same level of profit. If the companies in the industry charge
similar prices for their products, the cost leader still makes a higher profit than its
competitors because of its lower costs. Second, if rivalry within the industry increases
and companies start to compete on price, the cost leader will be able to withstand
competition better than the other companies because of its lower costs. For both of these
reasons, cost leaders are likely to earn above-average profits.
Cost leadership
Differentiation
Focus
Product differentiationLow (particularly byHigh (particularly byLow to high (price or
price)
uniqueness)
uniqueness)
Market segmentation Low ( mass market) High (many marketLow (one or few
segmentation)
segmentation)
Distinctive
Manufacturing
andResearch
andAny
kind
of
competencies
material management development,
salesdistinctive
and marketing
competencies
The cost leader chooses a low level of product differentiation, because differentiation is
expensive, if the company expands resources to make its products unique, than its cost
rise32. The cost leader does not try to be the industry leader in differentiation, and
normally engages in only a limited amount of market segmentation. Even though no
customer may be totally happy with the products, the fact that the company normally
charges a lower price than its competitors attracts customers to its products.
.
Differentiation strategy: the objective of the generic strategy is to achieve a competitive
advantage by creating a product that is perceived by customers to be unique in some
important way and ready to pay premium price- a price considerably above the industry
average. The ability to increase revenues by charging premium prices allows the
differentiator to outperform its competitors and gain above average profit. The premium
price is usually substantially above the price charged by the cost leader, and customers
pay it because they believe the products differentiated qualities are worth the
difference33. For example, Cars made by Mercedes-Benz, and Lexus; watches made by
Rolex; jewelry Tiffany; airplane Learjet command premium price because customers
perceived differentiated features (like: luxury and prestige) of owning these products and
services are something worth paying for. Product differentiation can be achieved in three
principal ways: quality, innovation, and responsiveness to customers.
..
Focus:
Focus strategy is directed towards serving the need of a limited customers or segment. It

concentrates on serving a particular market niche, which can be defined geographically,

by type of customers, or by a segment of the product line 34. For example, selecting a
niche by type of customer might mean serving only the very rich, the very young, or the
very adventurous. Selecting a product line may focus only on vegetarian foods, on very
fast cars, or on designer clothes or sunglass. Once, it has chosen its market segment, a
company pursues a focus strategy through either a differentiation or a low cost approach.
Fig see page 118 of Hill
Offers products to only oneOffers products to many kinds
group of customers
of customers
Offers low priced products toFocused
cost
leadershipCost leadership strategy
customers
strategy
Offers unique or distinctiveFocused
differentiationDifferentiation strategy
products to customers
strategy
A focused company is a specialized differentiator or a cost leader. If a company uses a
focused low cost approach, it competes against the cost leader in the market segments in
which it has no cost disadvantage. If a company focused differentiation approach, than all
the means of differentiation that are open to the differentiator are available to the focused
company. The point is that the focused company competes with the differentiator in only
on or a few segments.
.
Global Strategy:
It may not be possible to serve the global marketplace from a single low-cost location. In
practice, the need to customize the products offering for local conditions may work
against the implementation of such strategy. For example, automobile firms have found
that Japanese, American, and European customers demand different kinds of cars, and
this necessitates producing products that are customized for local markets. In response,
firms like Honda, Ford, and Toyota are pursuing a strategy of establishing top-to-bottom
design and production facilities in each of these regions so that they can better serve local
demands35. Realizing these facts, companies typically made a choice among four main
strategic postures when competing internationally: a global standardization strategy, a
localization strategy, a transnational strategy, and an international strategy 36. The
appropriateness of each strategy varies with the extent of pressures for cost reductions
and local responsiveness.
Fig. page 148. Of Hill
Pressure for cost reduction

High
low

Global
standardization
strategy
International

Trans
strate

Loca

strategy

strate

Low
High
Pressure for local responsiveness
1. Global standardization Strategy:
Companies that pursue a global standardization strategy focus on increasing
profitability by reaping the cost reductions that come from scale economies and
location economies. This is a strategy aimed to pursue a low-cost on a global
scale. The production, marketing, and R&D activities of companies are
concentrated in a few favorable locations, and they prefer to market a
standardized products worldwide so that they can reap the maximum benefits
from economies of scale. They also tend to sue their cost advantage to support
aggressive pricing in world market37. Companies pursuing this strategy try not to
customize their product offering and marketing strategy to local conditions
because customization involves shorter production runs and the duplication of
functions can raise costs.
The global standardization strategy makes more sense when there are strong
pressure for cost reduction and demand for local responsiveness is minimal. This
condition is prevailing in many industrial goods industries, whose products often
serve universal needs. For example, companies such as Intel, Texas Instruments,
and Motorola all pursue this strategy. But, this is not always found good in
consumer goods market where demand of local responsiveness often remains
high.
2. Localization strategy
A localization strategy focuses on increasing profitability by customizing the
companys goods or services so that they provide a good match to taste and
preferences in different national market. Localization is most appropriate where
there are substantial differences across nations with regard to consumer tastes and
preferences and where cost pressures are not too intense 38. By customizing the
product offering to local demands, the company increases the value of that
product in the local market, but it limits the ability of the company to capture the
cost reduction associated with mass producing a standardized product for global
consumption. For example, many automobile companies have found that they
have to customize some of their product offerings to local market demands.
Similarly, MTV is good example which had varied its programming to match the
demands of viewers in different nations. If it had not done this, it would have lost
market share to local competitors, its advertising revenues would have fallen, and
its profitability would have declined.
3. Transnational strategy:
In this 21st century, global environment and competitiveness are so intense that to
survive, companies must do all they can to respond pressures for cost reductions
and local responsiveness. They must try to realize location economies and scale
economies from global volume, transfer distinctive competencies and skills

within the company, and simultaneously pay attention to pressure for local
responsiveness39. Thus, the flow of skills and product offerings should not be all
one way, from home country to foreign subsidiaries, the transnational companies
must also focus on leveraging subsidiary skills.
Companies that pursue a transnational strategy are trying to simultaneously
achieve low costs, differentiate the product offerings across geographic markets,
and foster a flow of skills among different subsidiaries in their global network of
operations40. In essence, when a company simultaneously faces both strong cost
pressure and strong pressures for local responsiveness, the answer is to pursue a
transnational strategy.
4. International strategy:
Multinational companies, sometimes become fortunate position of being
confronted with low cost pressures and low pressures for local responsiveness.
These companies are selling a product that serves universal needs, but they do not
face significant competitors and thus are not confronted with pressures to reduce
their cost structure. Companies pursuing an international strategy tend to
centralize product development functions such as R&D at home. However, they
also tend to establish manufacturing and marketing functions in each major
country or geographic region in which they do business. Ultimately, companies
pursuing international strategy retains tight control over marketing and product
strategy from their head office.
A good example of international strategy is practiced by Xerox in 1960s to 1970s
after its invention of the photocopier. The technology underlying the photocopier
was protected by strong patents, so for several years Xerox did not face
competitors-it has a monopoly. The product was highly valued in most developed
nations, so Xerox was able to sell the same basic product the world over and
charge a relatively high price for that product. Because it did not face direct
competitors, the company did not have to deal with strong pressures to minimize
its costs. next example is Procter & Gamble, which historically always developed
innovative new products in Cincinnati, USA and then transferred them wholesale
to local markets. Another company that has followed a similar strategy is
Microsoft. The bulk of Microsofts product development work takes place in
Washington, where the company is headquartered.

Choice of entry mode of Global strategy

There are five main choices of entry mode to inter into global market: exporting,
licensing, franchising, joint venture, and wholly owned subsidiaries. Each mode
has its advantages and disadvantages, and managers must weigh these carefully
when deciding which mode to use41.
1. Exporting:
most manufacturing companies begin their global expansion as exporters and
later switch to one of the other modes for serving a foreign market. By
manufacturing the product in a centralized location and then exporting it to

other national markets, a company may be able to realize substantial scale

economies form its global sales volume. It has two distinct advantages: it
avoids the cost of establishing manufacturing operations in the host country,
and it may be consistent with scale economies and location economies 42. For
example, Sony came to dominate the global television market, and Matsushita
came to dominate the VCR market. A serious drawback of this strategy is that
high transport costs can make exporting uneconomical, particularly in the case
of bulk products. Similarly, tariff barriers and governments threats to impose
tariff barriers can make the strategy very risky.
2. Licensing:
Licensing is an arrangement whereby a foreign licensee buys the rights to
produce a companys product in the licensees country for a negotiated fee,
formally royalty payment on the number of units sold. The licensee then puts
up most of the capital necessary to get the overseas operation going 43. The
advantage of licensing is that the company does not have to bear the
development costs and risks associated with opening up a foreign market.
Therefore, licensing can be a very attractive option for companies that lack the
capital to develop operations overseas. It can also be an attractive option for
companies that are unwilling to commit substantial financial resources to an
unfamiliar or politically volatile foreign market where political risks are
particularly high44. However, licensing strategy has three serious drawbacks.
First, it does not give a company the tight control over manufacturing,
marketing, and strategic functions in foreign countries that it needs to have in
order to realize scale economies and location economies. When these
economies are important, licensing may not be the best way of expanding
overseas. Second, competing in a global marketplace may make it necessary
for a company to coordinate strategic moves across countries so that the profit
earned in one country can be used to support competitive attacks in another. A
licensee is unlikely to let a multinational company take its profit. The third
drawback with licensing is the risk associated with licensing technological
know-how to foreign companies.
3. Franchising:
Franchising is a specialized form of licensing in which the franchiser not only
sells to the franchisee intangible property, normally trademark, but also insists
by strict rules as to how it does business. The franchiser will also assist the
franchisee in running the business on an ongoing basis. Therefore, franchising
tends to involve longer-term commitments than licensing, though it looks
similar to licensing. A good example of franchising is the practice of
McDonalds. McDonalds has set down strict rules as to how franchisees
should operate a restaurant. These rules extend to control over the menu,
cooking methods, staffing policies, and restaurant design and location.
McDonalds also organizes the supply chain for its franchisees and provides
management training and financial assistance45. The advantages of franchising
are similar to those of licensing. Specially, the franchiser does not have to bear
the development costs and risks of opening up a foreign market on its own.

The disadvantages are less pronounced than the case of licensing, besides
disadvantage is lack of quality control.
4. Joint ventures:
A joint venture is a separate corporate entity in which two or more companies
have an ownership stake. It is the most favored mode of strategy entering in a
new market. For example, one of the most famous long term joint ventures is
the Fuji-Xerox joint venture to produce photocopiers for the Japanese market.
The most typical form of joint venture is a fifty-fifty venture, in which each
party takes a 50% ownership stake and operating control is shared by a team
of managers from both the parent companies. Some companies have sought
joint ventures in which they have a majority shareholding for example 51 to
49 % ownership split, which permits tighter control by the dominant partner 46.
Joint venture have a number of advantages. Firs, a company many feel that it
can benefit from a local partners knowledge, culture, language, political
system, and business systems. Second, when the development costs and risk of
opening up a foreign market are high, a company might gain by sharing
theses costs and risk with local partners. Third, in some countries, political
considerations make joint ventures the only feasible entry mode47.
5. Wholly owned subsidiaries:
A wholly owned subsidiaries is one in which 100% of the subsidiarys stock is
owned by the parent company. To establish a wholly owned subsidiary in a
foreign market, a company can either set up a completely new operation in the
country or acquire an established host country company and use it to promote
its products in the host market. A wholly owned subsidiaries offer there
advantages: control of technological competencies, tight control over
operations in different countries to get relaxation by taking profit from one
country to support competitive attacks in another, and to get benefit of
location economies and scale economies.
Entry mode
Advantages
Disadvantages
Exporting
Ability to realize location andHigh transportation costs; trade
scale economies
barriers; problems with local
marketing agents.
Licensing
Low development costs and risks Inability to realize location and
scale economies; inability to
engage in global strategic
coordination; and lack of
control over technology.
Franchising
Low development costs and risks Inability to engage in global
strategic coordination; and lack
of control over quality.
Joint venture
Access to local partnersInability to engage in global
knowledge; shared developmentstrategic coordination; inability
of costs and risks; and politicalto realize location and scale

dependency

Wholly
subsidiaries

economies; and lack of control

over technology.
ownedProtection of technology; abilityHigh costs and risks.
to engage in global strategic
coordination; and ability to
realize location and scale
economies.

.
Geographic structure: see page 226 of Hill.fig.

Multidivisional structure: see page 227 of Hill..fig..

.
Tangible resources can be seen, touched, and/or quantified. Examples include land,
buildings, materials, and money. These resources tend to be easy to imitate. But,
some of the most important resources and capabilities are intangible , such as the
brand, employee trust, knowledge, and reputation of the firm. These intangibles are
more difficult to quantify and the most difficult resources and capabilities to imitate.
For example, knowledge about how to innovate is much more difficult to imitate than
any particular architectural design. Organizational reputations cannot be fully
imitated, even in the long term. Other intangibles include good relationships with
external stakeholders, a high performing culture, and a well - known corporate
brand.
.

Functional level strategies:

Translating corporate and business strategies into specific actions is the responsibility
of managers in the various functional areas of an organization. The collective pattern
of day - to day decisions made and actions taken by managers and employees who
are responsible for value -creating activities in a particular functional area are called
functional - level strategies . Functional -level strategies, by being more specific and
short - term, help employees understand what they are to do to accomplish the
broader long - term aspirations of the corporation.

Marketing strategies:
One of the most critical responsibilities of marketing employees is to span the
boundary of the organization and interact with external stakeholders, such as
customers and competitors. Marketing is responsible for bringing essential
stakeholder information about new customer needs, projected future demand,
competitor actions, and new business opportunities into the organization as an input
to plans for continuous improvements, expansions, new technologies, and new
products and services.

Concentrating areas of marketing strategies

Target customers few vs. many, what groups, what regions
Product positioning premium commodity, multiuse, specialty use
Product line mix a mix of complementary products
Product line breadth a full - line offering of products
Pricing strategies discount, moderate, premium prices
Promotion practices direct sales, advertising, direct mail, Internet
Distribution channels few or many, sole contract responsibilities
Customer service policies flexibility, responsiveness, quality
Product/service image premium quality, good price, reliable
Market research accuracy, frequency, and methods for obtaining marketing
information
Marketing strategy evolves from the cumulative pattern of decisions made by the
employees who interact with customers and perform marketing activities. To support
growth strategies, marketing identifies new customer opportunities, suggests product
opportunities, creates advertising and promotional programs, arranges distribution
channels, and creates pricing and customer service policies that help position the
company s products for the proper customer groups. If a company pursues a
stability or turnaround strategy within one of its businesses, the demands placed on
marketing will change. Instead of pursuing growth, marketing may manage a
reduction in the number of customer groups, distribution channels, and products in
the product line all in an attempt to focus on the more profitable and promising
aspects of the business.
The competitive strategy of the firm also influences marketing decisions 48. Low cost
competitive strategies require low - cost channels of distribution and low - risk
product and market development activities. If demand can be influenced by
advertising or price discounts, then marketing may pursue aggressive advertising
and promotion programs or deep price discounts to get demand to a level that will
support full - capacity utilization and economies of scale within operations, as when
the soft drink companies advertise and discount their products. Differentiation
strategies require that marketing (1) identify the attributes of products and services
that customers will value; (2) price and distribute the product or service in ways that
capitalize on the differentiation; and (3) advertise and promote the image of
difference.
.
Operations strategy:
Operations strategy emerges from the pattern of decisions made within the firm
about production or service operations. The task of operations managers is to design
and manage the operation so that it can create the products and services the firm
must have to compete in the marketplace. An effective operation strives for
consistency between its capabilities and the competitive advantage being sought.
Operations managers, like marketing managers, must manage multiple stakeholder
interests in their daily decision making. According to Michael Porter, It s gone from
a game of resources to a game of rate - of - progress. Competition today is a race to
improve49. Speed is often the result of rethinking processes and procedures. While
small entrepreneurial organizations may be at a disadvantage relative to larger
organizations in developing some of the other competitive weapons, they actually
have an advantage when it comes to speed and flexibility 50. Smaller firms are
typically less constrained by large investments in capital equipment. In addition, less
bureaucracy often means that changes that are required as a result of new
technology can be made in a shorter period of time. This also means that managers
are typically closer to their customers and have fewer customers, thus allowing them
to really get to know customers and understand their needs. Consequently, many

operations managers in larger companies are struggling to be competitive with

regard to speed.
The interdependencies among stakeholders can also create difficulties for operations
managers. Employees want good wages and benefits, reasonable work schedules,
and a safe and pleasant work environment. Communities want industries that will
provide stable employment for citizens of the community and add to the tax base.
Suppliers want predictable demand for their products and services, and a fair price.
Customers want excellent service, quality products, and reasonable prices. However,
a change in customer demand can upset schedules with workers and suppliers. A
problem with a supplier can create havoc with the quality levels that are intended to
serve the needs of customers. A new labor contract or labor shortages can cause
cost structures and then prices to go up. In managing these interdependencies,
operations managers
must be guided by an understanding of business - level strategies.

Concentrating areas of operation strategies

Capacity planning lead demand to ensure availability or lag demand to achieve
capacity utilization
Facility location near suppliers, customers, labor, natural resources, or transportation
Facility layout floor plans, integration of service activities, grounds, and external
services
Technology and equipment choices degree of automation, use of computers and
information
technology
Sourcing arrangements cooperative arrangements with a few vs. competitive bid
Planning and scheduling standard services or custom, flexibility to customer requests
Quality assurance process control, standards, feedback gathering processes
Workforce policies training levels, cross - training, rewards, use of teams

.....
Human resource Strategy:
Even though, human resources (HR) activities are considered to be more
administrative, however, a shift has been taken place towards strategic one. As
theories of strategic management turn toward resource - based and knowledge based views of the firm, where competitive advantage increasingly resides in a firms
ability to learn, innovate, and change, the human element becomes increasingly
important in generating economic value51. James Brian Quinn reinforced this idea by
stating that, with rare exceptions, the economic and producing power of the firm
lies more in its intellectual and service capabilities than in its hard assets land,
plant and equipment52. HR managers serve a coordinating role between the
organization s management and employees, and between the organization and
external stakeholder groups, including labor unions and government regulators of
labor and safety practices. HR management can play an important role in the
implementation of a firm s strategies53. Disney is an
example of a company that uses training to create a competitive advantage. The
pattern of decisions about selection, training, rewards, and benefits creates a human
resources strategy . Mature or cost - oriented businesses usually hire employees at
the entry level and promote from within to fill higher - level positions. They are more
likely to focus rewards on short - range performance goals and to include seniority
issues in compensation systems54.

Concentrating areas of human resource strategies

Recruitment entry - level vs. experienced employees, colleges, technical schools, job
services

 Selection selection criteria and methods

Nature of work part - time, full - time, or a combination; on - site or off - site,
domestic or foreign
Performance appraisal appraisal methods and frequency, link to rewards
Salary and wages hourly, piece rate, commission, fixed, relationship to performance,
competitiveness
Other compensation stock ownership programs, bonuses
Management compensation stock awards, stock options, bonuses linked to
performance,
perquisites, low - interest loans
Benefits medical, dental and life insurance, paid leave, vacations, child care, health
club
Personnel actions disciplinary plans, outplacement, early retirements
Training types of training, availability of training to employees, tuition reimbursement

..
Organizational Structure:
One of the most important activities associated with strategy implementation is
designing a strategy - supportive organization. Because people who have not been
involved in the strategy formulation process perform so many activities that take
place within organizations, it is essential that their work be designed to deliver on the
strategy. That is, managers need to carefully design the operating systems to enable
effective action and to modify those systems as an organization grows or shifts its
strategic focus. Designing an organization involves defining organizational roles,
determining reporting relationships, establishing how to group individuals, and
creating ways to coordinate employees efforts. One element of design is the formal
structure of how work is organized. The activities and people within corporations are
usually subdivided into departments and groups so that employees may specialize in
a limited number of activities and focus on a limited set of responsibilities. The
formal structure specifies the number and types of departments or groups and
provides the formal reporting relationships and lines of communication among
internal stakeholders. The purpose of these structures is to coordinate, communicate,
and control individual
actions to support the strategy, and to facilitate workflow, permit management
control, and create doable jobs.
Alfred Chandler was the first researcher to recognize the importance of the structure
strategy relationship55. According to Chandler, an organization s structure should
be designed to support the intended strategy of the firm56. An organization can
choose from a variety of structural forms when implementing a chosen strategy. The
underlying assumption is that a fit between the strategy and the structure will lead to
superior organizational performance, which seems logical but has not been proved
conclusively.
Several principles or dimensions may be used to characterize an organization s
structure. The dimensions, described in Table ????, capture the formal arrangements
of people, activities, and decision - making authority. Each of these dimensions
represents an organizational design decision, and these decisions have ramifications
with regard to organizational behavior. Conscious decisions are made regarding the
degree of specialization, formalization, centralization , and levels of authority
necessary to operate an organization.

Dimensions of Organizational Structure

Dimensions
Descriptions
Hierarchy of authority Formal reporting relationships among levels and across
functions and departments. A tall, narrow structure means
that there are multiple levels between the CEO and the
customer. A fl at, wide structure means fewer levels and a
wider span of control for managers (more people report to
them). A fl at structure may be associated with more use of
cross-functional, self-managed teams.
Degree of
Refers to where in the structure the decision-making
centralization
authority lies. A highly centralized structure means that
high-level managers make most of the critical decisions. A
decentralized structure puts more decision-making authority
in the hands of lower-level managers and teams.
Complexity
Describes the number of levels in the hierarchy, the number
of units such as departments or teams, number of markets
served, and communication system.
Specialization
The degree to which the tasks of the organization are
divided into separate jobs. Some organizations have a highly
specialized structure, with people focusing on one particular
task or function. The advantage is that people can get very
good at what they do. Other organizations expect people to
be skilled in a number of tasks, which improves scheduling
flexibility and teamwork.
Formalization
This might also be called bureaucracy. It describes the extent
to which formalized rules, policies, and procedures exist
within the organization and the extent to which people
actually follow them. A high level of formalization can lead
to efficiency but may reduce the flexibility that is sometimes
required to satisfy customers.
Professionalism
Refers to the amount of formal education and training
possessed by employees and managers. High-technology
firms tend to have more professionalism, while firms engaged
in agriculture or basic assembly tend to have less-well
educated
employees.
Source: Daft, R. L. (2001). Organization Theory and Design, Cincinnati, OH: South-Western
College Publishing.

Value chain:
A firms value chain is a set of business activities in which it engages to develop,
produce, and market its products or services. It is one of way to identify potentially
valuable resources and capabilities controlled by a firm. Each step in a firms value chain
requires the application and integration of different resources and capabilities. Because
different firms may make different choices about which value chain activities they will
engage in, they can end up developing different sets of resources and capabilities. This
choice can have implications for a firms strategies57. Value chain analysis, the first
proposed by the management consulting firm McKinsey and Company, relatively a
simple model suggests that the creation of value almost always six distinct activities:
technology development, product design, manufacturing, marketing, distribution, and

services58. Firms can develop distinctive capabilities in any one or any combination of
these activities.

Technology development

Product design

Manufacturing

Source
Sophistication
Patents
Product / process Choices

Functions
Physical characteristics
Aesthetics
Quality

Integration / Assembly
Raw materials / Capacity
Location
Procurement
Parts production

Marketing

Distribution

Services

Prices
Advertising / promotion
Sales force
Package
Brand

Channels
Integration
Inventory
Warehousing
Transport

Warranty
Speed
After sale facilities

Fig.
Technology development product designSources
Sophistication
Patents
Products/process
choices

Functions
Physical
characteristics
Aesthetics
quality

manufacturingIntegration
Raw materials
Capacity
Location
Procurement
Parts production
Assembly

marketingPrices
Advertising/
promotion
Sales forces
Package
brand

distribution-

services

Channels
Integration
Inventory
Warehousing
transport

Warranty speed
Captive/
independent
Prices

Michael E. Porter has developed a second generic value chain 59. This value chain divides
value crating activities into tow two large categories: primary activities and support
activities.

60

Firms can differentiate their products

Focus directly on the attributes of its products or services:
Product features
Product complexity
Timing of product introduction
location
Focus directly on relationship between itself and its customers
product customization
consumer marketing
product reputation
Focus directly on linkages within or between firms
linkage among functions within a firm
linkage with other firms
product mix
distribution channels
service and support
Organizational requirements for implementing cost leadership and product differentiation
strategies61
Cost leadership
Product differentiation
Organizational structure:
Organizational structure:
few layers in the reporting structure
cross divisional/ cross-functional
product development teams
simple reporting relationships
willingness to explore new structure
small corporate staff
to exploit new opportunities
focus on narrow range of business

intense creative efforts.

functions
Management control system;
Management control system:
tight cost control system
broad decision making guidelines
quantitative cost goals
managerial freedom within guidelines
close supervision of labor, raw
policy of experimentation

materials, inventory and other costs

a cost leadership philosophy
Compensation policy:
Compensation policy:
reward for cost reduction
rewards for risk taking, not
punishment for failures
incentives for all employees to be
rewards for creative flair
involved in cost reduction
multidimensional
performance
measurement

Objectives:
Objectives are the desired ends or continuing results. They are defined in the present but
exist in the future. An objective is what you want the firm become, what you want it to
achieve, or what state of progress you want to reach at some point in time. Profitability,
for example, is a continue objective for the firm, just as national security is for the nation.
A specific level of profitability can be an objective for a particular time of period.
Significant objectives of the firm can be illustrated as survival, profitability,
independence, growth, market position, human satisfaction, public responsibility,
technological advancement, innovation and the like. It has been suggested that there is a
hierarchy of corporate needs analogous to Maslows classification of human needs62.
level Human
Needs
classification)
1
Physiological
2
safety
3
Social/ Love
4
Esteem
5
Self actualization

(MaslowsCorporate Needs (Pearsons classification

Resources, customers
Survival, cash flow, profit
Approval of employees
Approval of external constituencies
Leadership in chosen field

.
Environment
The environment can be described as the sum of factors over which general management
does not have control, at least in the short run, such as market share. The variables or
factors that management can control is defined as resources in the next chapter. The
environment is often described as external to the firm, beyond the immediate control of
management, for example, attitudes and beliefs of consumer.

Strategic options
Strategic options are possible course of action an organization can take to achieve more
favorable position in its competitive environment. Strategic options can represent
anything from a total change in the strategic direction to minor improvement in the
existing strategy. In other words, the scope of strategic options is unlimited and the
dynamism of strategy development process stems from the fact that an organization can
consider at any movement in time a wide range of strategic options. Such a process will
therefore, apply at different levels of an organization including the development of

corporate, business, and functional strategies. This is shown diagrammatically in figure

where strategic options are evaluated at regular intervals and if any of the assumptions
which form the basis of a selected strategy changes then a different strategic option is
selected and the necessary changes are made in the implementation process63.
Keep figure of strategic options (cutting)
.
Levels of strategy and decisions
In large, multi-business organizations, three levels of strategic decision making may be
identified: Corporate, business, and functional. For the single business organizations,
corporate and business level strategies become synonymous. However, for multi-business
organizations it is important to differentiate between organization wide (corporate)
strategy and business unit wise (competitive) strategy. Corporate, business, and
functional strategy represents different level of strategic decision making in an
organization. Each level involves decisions which are strategic in nature. But, decisions at
higher level, such as those at corporate or business level, will guide subsequent decisions
on functional strategy64. Purcell65 emphasizes this point by differentiating between
upstream and downstream strategic decisions. Upstream or first order decisions
concern the long-term directions and the nature of the organization. Downstream
decisions deal with the implications of first order decisions for organization structure.

Multi-business
Single business (SBU)
Business functions

Corporate strategy
(what business should we be in)
Business/ competitive strategy
(how to establish competitive advantage)
Functional strategy
(Role of the part of business like: production,
marketing, finance, HRM)

The ideal practices of strategy formulation and implementation is governed by a strategic

management team. The team consists of decision makers at all three levels: corporate,
business and functional in the corporation. Strategic decisions which require commitment
of company requirement and regular support for implementation can only be formed by
top management in the organizational hierarchy. But, while formulating short term
strategy and policies, functional manager plays the significant role collaborating with
business level managers. The following table shows the significant role of decision
makers in strategic decisions.
Strategic decision makers
Ends:
Means:
Board
ofCorporate Business
Functional
What is to beHow is it to bedirectors
managers
managers
managers
received?
received?
Mission
00
00
0

Long
termCorporate
00
00
0
objectives/corporate strategy
objectives
Strategic
businessBusiness
/0
00
00
0
unit objectives
Competitive
strategy
Annual objectives
Functional
0
00
00
strategy
Short term objectives Tactics
0
00
Note: double 0 indicates a principal responsibility and single 0 indicates a secondary
responsibility.
..
Tangible and intangible
A firms tangible assets generally are well understood: they are readily visible, rigorously
quantified, form an integral part of the balance sheet, can be easily duplicated, and
depreciated with use. In contrast, intangible assets are less well understood. Intangible
assets are invisible, difficult to quantify, not tracked through accounting, have to be
developed in a path-dependent way over the time. They cannot be obtained
instantaneously, brought, or imitated. Examples of intangible assets include technological
know-how, customer loyalty, branding, and business process. Tangible assets are
necessary, but not sufficient, for gaining a competitive advantages because most tangible
assets can be imitated or obtained through the market. Therefore, Saint-Onge 66 rightly
stated that strategic capability is the capacity to create value based on intangible assets of
the firm.
.
Tools of strategic analysis
(keep in first chapter)
A discussion of the domain of strategy would not be complete without examining the
tools used in strategic analysis, which are often used as framework to enhance policy
dialogue about appropriate strategies in competition 67. Followings are some of the
important tools used in strategic analysis over the past several years 68. These frameworks
are useful in identifying the relevant variables and the questions which the manager must
answer in order to develop conclusions.
SWOT (1960s)
The SWOT framework, the earliest tool of strategic management, suggests that firms
obtain sustained competitive advantages by implementing strategies that exploit their
internal strengths, through responding to environmental opportunities, while neutralizing
external threat and avoiding internal weaknesses69.
BCG: Growth Share matrix (1970s)
Portfolio models provided a convenient method to evaluate available investment
opportunities as well as factors associated with superior long-term performance.
Competitive portfolio analysis, which was developed by the Boston Consulting Group

(BCG) is based on the close relationship between market share and cash generation 70.
Based on its cash flow characteristics and relative market share, each product could be
positioned in a product portfolio matrix.
GE Matrix: Market attractiveness-Business strength (1970s)
The market attractiveness-business strength matrix was developed by General Electric
(GE) and McKinsey. GE corporate planners felt it was simplistic to make investment
decisions based on only two factors- market growth and relative market share (BCG).
The basis of GE matrix is that the long-term profitability of an investment alternative is a
function of the attractiveness of the market in which the business operates 71. This and the
business position relative to other competitors positions were assessed using multiple
factors.
Scenario Analysis (1970s)
Scenario analysis provided decision-makers with the ability to address uncertainty by
representing future states through a limited set of internally consistent scenarios.
Scenarios could be applied in testing the viability of alternative strategies or as
background information in strategy formulation to evaluate specific capital investment
projects. Scenarios tended to be used when conventional analytical/ statistical forecasting
techniques proved inadequate for environmental assessment72. Increases in environmental
uncertainty and the growing importance of political and social issues in corporate
decision-making tended to foster scenario use.
PIMS Analysis (1970s, early 1980s)
The profit impact of market strategy (PIMS) project was organized in early 1972 by the
marketing science institute at the Harvard Business School. A large data base containing
information on more than 600 business was established and used to develop different
PIMS profit model73. These model were designed to answer the following questions: what
factors influence profitability in a business, and how much influence does each one have?
How does ROI change in response to changes in strategy and in market conditions?
Industry Analysis- Five forces (early 1980s)
Industry analysis was introduced by Michael Porter to the field in the early 1980s. five
attributes of industry structure- barrier to entry, the intensity of rivalry, barriers to
substitutes, and the relative power to suppliers, and buyers- could influence the ability of
firm to either maintain or above normal returns. This tool shows a way to provide
substantially greater sharpness to the analysis of the environment involved in SWOT
analysis.
Value chain analysis (mid 1980s)
Most of goods or services were recognized to be produced by a series of vertical business
activities- acquiring supplies of raw materials, manufacturing intermediate products,
manufacturing of final products, sales, distribution and services. Porter developed value
chain analysis classifying manufacturing activities into two: primary activities and
secondary activities. The use of value chain analysis involved an examination of the rentgenerating potential of each line in the chain. This analysis served as a guide to action on

investment in various links, and possible recommendations on outsourcing or expansion

of particular activities.
Seven S framework (1980s)
The 7-s framework developed by McKinsey and company, stated that it was not enough
to think about strategy implementation as a matter only of strategy and structure. In this
context, the 7-s framework indicated that effective strategic management is at least a
function of seven variables. They are: strategy, structure, system, style, staff, skills, and
shared values. The overall consistency and fit between these seven variables were
presumed to result in a successful strategy74.
Capability analysis (1990s)
Capability analysis is based on four basic principles: (i) building blocks of corporate
strategy are not products and markets but business processes, (ii) competitive success
depends on transforming a companys key processes into strategic capabilities that
consistently provide superior value to the customers, (iii) companies create these
capabilities by making strategic investment in a support infrastructure, and (iv)
capabilities should be cross functional and the champion of capabilities based strategy is
the CEO75.
.
Levels of strategies: figure in NAM paper. Keep in appropriate place.
.
Differentiation strategy:
To enhance the performance differentiating features on product or services, a company
can incorporate attributes76 that (i) provide buyers greater reliability, durability,
convenience, or ease of use, (ii) make the companys product or services cleaner, safer,
quieter, or more maintenance-free than rival brands, (iii) exceed environmental or
regulatory standards, (iv) meet the buyers needs and requirements more completely,
compared to competitors offerings, (v) give buyers the option to add on or to upgrade
later as new versions come on the market, (vi) do the better job of meeting the buyers
future growth and expansion requirements.
..
Types of differentiation strategy themes:
The most important element of differentiation strategy is that it is hard or much expensive
for rivals to duplicate. A differentiators basis for competitive advantage is either a
product/ service offering whose attributes differ significantly from the offerings of rivals
and a set of capabilities for delivering customers value that rivals dont have or cant
quite match. Therefore, companies can pursue differentiation from many angles. They
are77:
Creating unique taste ( for example: Dr Pepper, Listerine)
Adding multiple features ( for example: Microsoft Windows, Microsoft Office)
Wide selection and one stop shopping facilities (for example: Amazon.com)
Offering superior services ( for example: FedEx in next day delivery)

Supporting spare parts availability ( for example: Caterpillar- guarantee of 48 hours

availability)
Offering more for the money ( for example: McDonalds, Wal-Mart)
Engineering design and performance (for example: Mercedes)
Prestige and distinctiveness ( for example: Rolex in watches)
Product reliability ( for example: Johnson and Johnson in baby products)
Quality manufacturing ( for example: Honda in automobiles)

..
Fig. fifteen potential strategy implementation problems78
1. Took more time than originally allocated
2. Major problems surfaced which had not been identified earlier
3. Coordination of implementation activities was not effective enough
4. Competing activities distracted attention from implementing this decision
5. Capabilities of employees involved were insufficient
6. Training and instruction given to lower level employees were inadequate
7. Uncontrollable factors in the external environment had an adverse impact on implementation
8. Leadership and direction provided by departmental managers were inadequate
9. Key implementation tasks and activities were not sufficiently defined
10. Information systems used to monitor implementation were inadequate
11. Advocates and supporters of the strategic decision left the firm during implementation
12. Overall goals were not sufficiently well understood by employees
13. Changes in responsibilities of key employees were not clearly defined
14. Key formulators of the strategic decision did not play an active role in implementation
15. Problems requiring top management involvement were not communicated early enough

.
Drawing from the masters79,80, 81 strategic management:
. is both art and science, accommodating intuition, experience and expertise;

is value based, committed to human, organizational and environmental

sustainability;
. focuses on achievement of objectives, both long- and short-term, and
provides the basis for resource allocation;
. integrates organizational effort, and creates a whole system framework for
improvement;
. identifies opportunities, is responsive to changing environments, minimizes
adverse conditions while maximizing strengths;
. engages employees and identifies individual and group effort, encouraging
cooperation and strategic management;
. enhances leadership at all levels through communication, engagement and
dialogue;
. provides formality and accountability; . supports transparent, effective
governance;
. creates value through integrating environmental, social and financial
performance; and
. demonstrates cross cultural and productive diversity management
.

..

Risks of overall cost leadership

Cost leadership imposes severe burdens on the firm to keep up its position, which means

reinvesting in modern equipment, ruthlessly scrapping obsolete assets, avoiding product

lines creation and being alert for technological improvements. Cost declines with
cumulative volume are by no means automatic, nor is reaping all available economies of
scales achievable without significant attention. So, cost leadership is vulnerable to some
risks82 as:
Technological change that nullifies past investments or learning;
Low cost learning by industry newcomers or followers through imitation or their
ability to invest in state-of-art facilities;
Inability to see required product or marketing change because of the attention
placed on cost;
Inflation in costs that narrow the firms ability to maintain enough of a price
differential to offset competitors brand images or other approaches to
differentiation.
..
Risk sof differentiation
A firm may achieve differentiation, yet this differentiation will usually sustain only so
much of price differential. Thus, if a differentiated firm gets too far behind in cost due to
technological changes or simply inattention, the low cost firm may be in a position to
make major inroads. So, differentiation involves a series of risks83:
The cost of differential between low cost competitors and the differentiated firm
becomes too great for differentiation to hold brand loyalty. Buyers thus sacrifice
some of the features, services, or image possessed by the differentiated firm for
large cost savings;
Buyers need for the differentiating factor falls. This can occur as buyers become
more sophisticated;
Imitation narrows perceived differentiation, a common occurrence as industries
mature.
..
LEARNING OUTCOMES
After reading this chapter you should be able to:
Understand the characteristics of strategic decisions and what is meant by
strategy and strategic management, distinguishing them from operational
management.
Understand how strategic priorities vary by level: corporate, business and
operational.
Understand the basic vocabulary of strategy, as used in different contexts.
Understand the three key elements of the Exploring Corporate Strategy
strategic management model.
Understand the kinds of people involved in strategy managers, in-house
specialists and strategy consultants and the work they do
..
The vocabulary of strategy84
Term
Definition
Vision or strategic Desired future state: the aspiration of the
Intent
organisation
Mission
Overriding purpose in line with the values

A personal example
To run and be the winner in
London Marathon
Be healthy and fit

Goal

or expectations of stakeholders
General statement of aim or purpose

Objective

Quantification (if possible) or more

precise statement of the goal
Strategic capability Resources, activities and processes.
Some will be unique and provide
competitive advantage
Strategies
Long-term direction
Business model
Control

How product, service and information

flow between participating parties
The monitoring of action steps to:
assess effectiveness of strategies and
actions
modify as necessary strategies and/or
actions

Lose weight and strengthen

muscles
Lose 5 kilos by 1 September and
run themarathon next year
Proximity to a fitness centre, a
successfuldiet
Exercise regularly, compete in
marathonslocally,
stick
to
appropriate diet
Associate with a collaborative
network(e.g. join running club)
Monitor weight, kilometres run
andmeasure times: if progress
satisfactory,do nothing; if not,
consider otherstrategies and actions

..
LEARNING OUTCOMES
After reading this chapter you should be able to:
Analyse the broad macro-environment of organisations in terms of political,
economic, social, technological, environmental (green) and legal factors
(PESTEL).
Identify key drivers in this macro-environment and use these key drivers to
construct alternative scenarios with regard to environmental change.
Use five forces analysis in order to define the attractiveness of industries and
sectors for investment and to identify their potential for change.
Identify strategic groups, market segments and critical success factors, and
use them in order to recognise strategic gaps and opportunities in the market.
..
LEARNING OUTCOMES
After reading this chapter you should be able to:
Distinguish elements of strategic capability in organisations: resources,
competences, core competences and dynamic capabilities.
Recognise the role of continual improvement in cost efficiency as a strategic
capability.
Analyse how strategic capabilities might provide sustainable competitive
advantage on the basis of their value, rarity, inimitability and nonsubstitutability.
Diagnose strategic capability by means of value chain analysis, activity
mapping, benchmarking and SWOT analysis.
Consider how managers can develop strategic capabilities of organisations.
.
Integrative assignment
Prepare a SWOT analysis for an organisation of your choice and in relation to competitors
(see Illustration 3.5). Explain why you have chosen each of the factors you have included in the
analysis, in particular their relationship to other analyses you have undertaken in Chapters 2 and 3.
What are the conclusions you arrive at from your analysis?


LEARNING OUTCOMES
After reading this chapter you should be able to:
Identify the components of the governance chain of an organisation.
Understand differences in governance structures across the world and the
advantages and disadvantages of these.
Identify differences in the corporate social responsibility stances taken by
organisations and how ethical issues relate to strategic purpose.
Undertake stakeholder analysis as a means of identifying the influence of
different stakeholder groups in terms of their power and interest.
Consider appropriate ways to express the strategic purpose of an organisation
in terms of statements of values, vision, mission or objectives.
.
This part explains strategic choices in terms of:
How an organisation positions itself in relation to competitors in terms of its overall
competitive strategy.
The scope and diversity of an organisations products and therefore the nature of its
corporate portfolio and how that portfolio is managed.
The geographic scope of the organisation and the bases of its international strategy.
The extent to which and how it seeks to foster innovation and entrepreneurial endeavour.
Ways in which it might pursue strategic options in terms of organic development,
acquisitions or joint ventures.
The criteria and tools by which these choices might be evaluated.
.
LEARNING OUTCOMES
After reading this chapter you should be able to:
Identify strategic business units (SBUs) in organisations.
Explain bases of achieving competitive advantage in terms of routes on the
strategy clock.
Assess the extent to which these are likely to provide sustainable competitive
advantage.
Identify strategies suited to hypercompetitive conditions.
Explain the relationship between competition and collaboration.
Employ principles of game theory in relation to competitive strategy
..
LEARNING OUTCOMES
After reading this chapter you should be able to:
Identify alternative directions for strategy, including market penetration or
consolidation, product development, market development and diversification.
Recognise when diversification is an effective strategy for growth.
Distinguish between different diversification strategies (related and unrelated)
and identify conditions under which they work best.
Analyse the ways in which a corporate parent can add or destroy value for its
portfolio of business units.
Analyse portfolios of business units and judge which to invest in and
which to divest.

..
This part explains:
How strategies develop in organisations; in particular, the organisational processes that may
give rise to intended strategies or to emergent strategies.
The way in which organisational structures, organisational processes and the management
of relationships is important in organising for strategic success.
The relationship between an organisations overall strategy and the resource areas of
people, information, finance and technology.
How strategic change might be managed and the importance of understanding
organisational context and in managing change.
Who strategists are and what they do in practice

Substitutes are products or services that offer a similar benefit to an industrys products
or services, but by a different process. For example, aluminium is a substitute for steel in
automobiles; trains are a substitute for cars; films and theatre are substitutes for each
other. Substitutes can reduce demand for a particular class of products as customers
switch to alternatives even to the extent that this class of products or services becomes
obsolete.
..

Read the case of ABC Battery company 85 carefully and answer the questions
accordingly.

(Keep in resource analysis chapter or strategy choice chapter)

ABC Battery Company of Nepal
ABC Battery Company Pvt. Ltd. was established in Kathmandu about 20 years
ago. In order to nurture full production capacity, among the diversity policy in
product range, the range of main products are: Sun Battery, Moon Battery, Light
Battery, and Long Battery in an international brand. Initially, the total investment
made was Rs.230 million out of which 79 percent was foreign direct investment
of Indian Battery Company (IBC) and 21 percent was of local shareholders of
Nepal. Definitely, the investment from both the partner group has been increased.
In due course of time. The average annual turnover was Rs. 180 million in 2013,
and Rs. 260 million in 2014, and expected to reach 330 million in 2015. It was
making 30% profit on investment in 2014 and trend showed the gradual
increment of profit since last 10 years. It was paying good corporate and other
taxes to the government of Nepal also. Currently 300 operation level staffs are
working in the organization and recognized as a reputed manufacturing firm of
Nepal. The technology and management was handled by the foreign investors as
they were main promoters as major shareholders. However, participation policy
while formulating major decisions is common practices in the firm without being
bias of foreign staff and local staff.
In order to excel the company in this bottle necked competition, (competition
especially with Chinese Products available in cheap rate), the top management of
the company after portfolio analysis, decided to extend its product and market so

that per unit product can be lowered and large share market can be covered.
Consolidation, product development, and market penetration strategies are passed
by top management and initiated to implement immediately.
In order to implement this strategy, the company hired nearly 50 new staffs in
operation level for manufacturing new brand of Batteries: Young Battery, Brave
Battery, and Sun light Battery. Now the company has altogether seven different
ranges of products and need aggressive marketing in order to materialize the
dream into reality. Realizing the need of following the tradition of excellent
management, ABC co. published the vacancies into daily national news paper: the
Kathmandu Post and the Himalayan Times for young and dynamic CEO for
effective strategy formulation and implementation. The company expects that the
new CEO would craft the proper strategy to gain its competitive advantage and be
leader in the industry.
In light of this scenario, attempt the following questions.

a) What are the major strengths and weakness of this firm? Discuss.
b) What short of strategy should newly appoint CEO craft to achieve
strategic advantages? Suggest the best strategy to this form with
sufficient logics.

2. Read the case of Mr. Ram Krishna86 carefully and answer the questions accordingly
(Keep in resource chapter)
Mr. Ram Krishna
There was a vacancy of Industrial Relation Officer in one of the industry located
Balaju Industrial Estate-Kathmandu. The industry advertised for the post in
Kantipur Daily. Mr. Ram Krishna, working as a public relation officer in a private
company at Birjung also applied for the post. Ram Krishna was very much
interested in to do the job in Kathmandu and wants to continue the career of
public relations. In order to be selected in that company, he put influences on
management of the company through some high- ups of political parties and even
bureaucrats.
Mr. Ram Krishna was selected for the post out of several serious contenders. Even
some of the candidates were the children of some of the existing employees of the
factory. They were very much annoyed over Ram Krishnas selection in the
company. Mr. Ram Krishna joined company despite resentment among the staff.
The company of Janakpur, in which he was working, was highly impressed with
Mr. Ram Krishna. In order to retain him in the company, he was offered an
increment in salaries and high allowances, he declined this offer. When asked,
even he did not disclose the name of the company where he is to join to his
previous employer.

In the present factory- Balaju, some of the employees come to know that Mr. Ram
Krishna had used the influence of some high- ups to get the job in the company.
The message spread down the level. The employees started testing his abilities
and even some of them planned to harass him. The management had put him incharge of the workers canteen. It was the most challenging responsibility in the
company. Though, Mr. Ram Krishna was working from morning to evening, the
workers started finding fault with the work of Mr. Ram Krishna. In one July
afternoon before the new shift was to start, the workers were gathered in the
canteen and were shouting slogans against the management and Mr. Ram Krishna.
It was due to the dead lizard which was found in one workers meal and
immediately some people who had taken their meals had started vomiting and
become unconscious.
Though some employees were doubtful and considered Ram Krishna to be
innocent in this incident, before a mob no one could raise their voice. The union
leader of the company arrived in the scene and started blaming the management
for its inefficiency and selecting inefficient person for such responsible position.
The ;management constituted an inquiry against the incident and immediately
suspended Mr. Ram Krishna without giving chance to listen his side of the story.
Ram Krishna was in probation period. The inquiry continued for some months
and finally, the management terminated the services of Ram Krishna within a year
of his joining the organization.
On the basis of these information, attempt the following questions
a)
b)
c)
d)

What are the problems in this case?

Is Ram Krishna an innocent person? Justify.
What do you do if you are the chief of the company to deal the problem?
Mere resource do not lead to strategic advantages. In favor to this
argument, explain how would you utilize the resources of this company
being as chief of the organization?

3. Read the case of Himalayan Tea87 carefully and answer the questions accordingly
(Keep in strategic options)
Himalayan Tea
Mr. Manoj Agrawal, 35 from Birgunj graduated in Business Administration with
specialization on entrepreneurship from Management Development Institute is
planning to establish a venture on tea processing business. He search internet,
consult many business experts, brainstorm ideas with his colleagues and explore
the potential markets nationally and internationally. At the time of incubation of
business, he visited India, China, Thailand and Australia to consolidate the ideas
and established a firm in 1995 in the name of Himalayan Tea. Pvt. Ltd.

Since its inception, Himalayan Tea earns profit and currently it has 250 staffs in
the garden, 52 staffs in the operation and processing department, 16 staffs in
marketing besides others in different duties. It is a well known firm and builds a
good image not only in the mind of people of Himalayan country but also
different parts of the world.
However, in recent days, because of globalization, liberalization, emergence of
multinational companies, quite transformation in information technology, and
WTO, Nepal welcomes tea from all over the world. Tea manufactured in China,
which is very famous in low price and instant services become intense
competitors for Himalayan tea. It is great challenge to Himalayan Tea to compete
with Chinese Tea because of high cost, manual task, poor technology, and
services. Regular strikes in factory by labor demanding high salaries, decent work
in the work place, Nepal Bandha by many political parties adversely influence to
the Himalayan Tea. But, people who already tested Himalayan tea continue the
demand and placing their order to the manager. Sometimes, manager excuse for
unable to fulfill the demand especially demeaned from International business
community. The audit report of this last year shows that the company is neither in
profit nor in loss.
Questions:
a) What are the problems in this case?
b) Suggest the suitable strategy to the company to develop its
competitiveness.
c) Should the manager of the company, Mr. Manoj Agrawal, adopt
retrenchment strategy or go through the strategic alliance? Give your
advice with sufficient logics.
..
1.
4. Read the case of Himalayan Bread Limited 88 carefully and answer the questions
accordingly

2. Himalayan Bread Pvt. Ltd

3. (Keep in strategy options)
Himalayan Bread Pvt. Ltd, a highly reputed bread manufacturer of Kathmandu
established in the year 2000 entered into the business of bread manufacturing in all the
regions of Nepal- Eastern, Central, Western, Mid Western, and far Western by acquiring
brand name Delicious from a local baker Krishna Bread. Delicious brand of Krishna
Bread was selected to acquire its brand name because of it quality recognition among the
people of Kathmandu city. Now, Himalayan Bread kept on preparing and selling breads
changing with the different names and different ranges of products in different region like
super in Eastern, Delicious in Central, Healthy in Western, Swadilo in Mid
Western, and Khaja in Far Western region, under the Delicious from Krishna Bread
logo and recognition. Even though, different products designed into different regions, all
types of product are spread all over the Nepal.

Himalayan Bread Ltd invested heavily in the machinery and equipment. In fact, it
invested a sum of rupees thirty-five crores over a period five years. It got immediate
acceptance from the market as Delicious, a household name, was well known for its
quality and recognition. Gradually, it captured major markets in adjoining cities of
Biratnagar, Pokhara and Nepalgunj. In the year 2013 its total turnover was 100 crores per
annum with 40% market share in Kathmandu. Meantime, Healthy also got some
recognition and was able to grow. Some of his loyal customers also shifted back realizing
that the baker has changed the name of the product. Its market share, in 2013 stood at
25% in Pokhara city. Inspired by the success of Delicious the baker joined with his two
rich friends to form a partnership by the name of Himalayan Healthy Foods in the year
2013. They acquired an automatic modern plant to manufacture breads. The plant was
better than that of Himalayan Bread Ltd. They were able to reduce their costs and started
selling breads at one rupee cheaper than the competitors. They also introduced new
products such as whole wheat bread, breads enriched with vitamins, bread for kids in
chocolate flavour. Within one year their market share grew to 45% in Kathmandu. In the
year 2014 their turnover was 120 crores . Now they plan to enter into business of cakes
and biscuits on a large scale.
Answer the following questions:
(a) Do you think that Himalayan Bread Ltd has missed something while acquiring the
brand name with krishna?
(b) Discuss the strategy adopted by Himalayan Bread Ltd and intended strategy of
Himalayan Healthy Bread Ltd.
(c) Do the SWOT analysis for Himalayan Bread Ltd.

5. Read the case of Himalayan Bread Limited 89 carefully and answer the questions
accordingly

Changes in Kathmandu Municipality

(Keep in Organizational Change)
30 employees in Kathmandu Municipality are engaged for recording and filing
information, writing complaints, receiving and sending mails. There are increasing
complaints from different stakeholders that the Municipality has failed in its service to
them. Especially, complaints are noticed in the areas of poor information and
communication system within the organization and from different wards of the
Municipality.
A reputed Development Agency based in Nepal is interested to offer 100 computers in the
first phase of organizational change programme to ensure a smooth information
management of the municipality. But this offer is not shared by the employees working as
the service providers. Upon hearing such news many employees believe that computer
will eat their jobs so they will be nowhere in the future. They arranged a few meetings
with the Executive Officer and threatened to stop their work if he decides to bring the

computers to replace their jobs. The situation became very tense and this information was
also shared by the develop agency. In a joint meeting with representatives of employees,
municipality and Development Agency, a long discussion was made. The Agency is
convinced that there is a need to computerize the information system of the Municipality
and the Executive is prepared to implement the goal of the Development Agency.
However, employees are still scared of the possibility of unemployment. However, they
postponed their meetings for the next week.
In a sunny morning of Sunday, the three parties again sat to resolve the crises. After
hearing the discussion between municipality authority and employees, Development
Agency understood the issues and promises to offer some more things for employees.
The employee became more satisfied and started to work without any fear about future.
Questions
a. Assuming you as a chief of the Municipality, describe the main issues in this
case and the forces behind the change in the Municipality?
b. If you are offered to make the above change, what process would you follow
to change the Municipality?
c. What might be the promises to offer some more things for employees by the
Development Agency? Discuss.

6. Read the case of Himalayan Bread Limited 90 carefully and answer the questions
accordingly

Himalayan Hospitality and Health (3H)

Himalayan Hospitality and Health (3H) company is a leading Nepalese family business
group operating in different segment of consumers: skin care services targeting to urban
young stars and Ayurvedic products for aged and health sensitive population. It has four
business ranges: Health Diet- domestic FMCG product; Skin care for skin solution,
Sundari Spa , and hospital home for treatment and research. It occupies the leading
position in most of its brands and brand extensions is increasing. For domestic FMCG,
manufacturing takes place in its four plants at different places: Banepa, Tadi, Doodharas,
and Vasi and sourcing is done from sub contractors from different parts of the country.
Consumption products takes place mainly in the urban and semi-urban areas . As an
FMCG company, it has plan to implement supply chain planning and management
systems. Throughout the country and abroad.
3Hs strengths lie in factors such as well established distribution net work and low
operation costs. Externally, all factors helping it are intense competition between
organized and unorganized segments and wide availability of raw materials. it attempts
to leverage its national competitive advantage and recently craft the strategy to expand
business operating in SAARC countries under its regionalization strategies. Franchising
and acquisitions will be the main drivers of its regional and international expansion.

3H company consciously tries to avoid head-on competition with formidable MNCs such
as the Hindustan Unilever by differentiating on the basis of unique ethnic Indian products
and services. Its business model is based on focused growth across all its brands and
territories, driven by offering better value propositions to consumers, market expansion,
and widening of distribution network. It lays emphasis on sales volume and growth rather
than sales value, thus adopting a long term perspective. Its domestic FMCG has well
known brands in consumer market and perceived as differentiation platforms of branded,
quality, and reliable products with moderately high prices.
The skin solution sector adopt s focused differentiation strategy by seeking to provide
dermatological services for high quality, premium skin care through its clinics. It aims to
provide high end solution to the innumerable beauty salons that have mushroomed in
India and Nepal. This business is a take off stage. Sundari embarked in the Korea by
acquisition and spread to North East Asian Region as a specialty range of skins products,
capitalizing on the increasingly popular ayurvedic solution for skin care. Its Hospital
business is in infant stage, passed way of its five year of life focused to capture the health
tourist and aimed develop a destination of health tourism in Kathmandu.
Questions:
a. Explain the business definition of 3H company. What business model it is
following to accomplish its strategic objectives?
b. Explain the business level strategies adopted by 3M company.
c. Recommend the appropriate strategy for Sundari Spa.
d. Identify the opportunities and threats to the Hospital business of 3H to accomplish
its objectives- Health tourism.

7. Read the case of Himalayan Bread Limited 91 carefully and answer the questions
accordingly

Hamro Luga Company

Hamro Luga company was one of the leading companies in Nepalese Market for School
uniforms. Hamro Lugas success had been based on extremely high levels of employee
productivity. The company attributes its productivity to a strong organizational culture of
respect for the ability of the individual. Its focus was on recruitment of highly skilled and
trained manpower. It had satisfied workers by its incentive scheme based on piece rate
system.
Since the days of attraction to Nepalese people for foreign job, the company faced the
problems of retaining its skilled workers. Newly hired workers were not perfect to the job
or did not matched with person job fittings. Some had little knowledge about the
operation of the machine, other had need of latest machine because they familiar with
latest one. The training and development part of employees remained ignored which
could not correctly motivate employees for better performance. The top level
management of the company is always busy for operational activities and did not think
for strategically. They never pay attention towards success for tomorrow. They did not

believe that business managers should be aware of the need for strategic management.
The company replaced the old machines which need skilled manpower. It creates
dilemma between skilled and unskilled manpower while operating new machine and
divided into two groups informally. To operate latest machine, skilled manpower were
lacking in labour market. The company hired the people by head hunting, but they left the
job within one year. In context to this, the company hired strategist as short term
consultant to overcome the problems setting strategic visions and missions.
Questions:
a. As a consultant identify the major problems of Hamro Luga company?
b. Do you think that environmental analysis is missing while taking decisions?
justify your answer.
c. Suggest the appropriate steps to revamp this company for long run realizing the
wide market of Nepal- school and college uniform.

8. Read the case of Himalayan Bread Limited 92 carefully and answer the questions
accordingly

Educational Publishing House (EPH)

Educational Publishing House (EPH) is one of the leading and big text book as well as
reference book business organization of Nepal. Since the establishment of Tribhuvan
University in Nepal, EPH has been the single supplier of higher education books to
library of all constituent colleges. It has a big show room, reading rooms with capacity of
50 readers at a time and wide networks in Kathmandu and almost all the part of the
country. All faculty members of constituent colleges as well as private colleges can use
the reading rooms where almost all the newly published books of Nepal, India, and
abroad are available. As book purchasing policy of the library in Nepal is books
recommendation by faculties, it cares to all faculties while entrant in the EPH show room.
Realizing the increasing trend of book lovers, it designed the policy of publishing text
books written by highly qualified and recognized authors of the University. Currently, it
is in a position to cover 55 percent of higher education books market. It also developed
close contact with education policy makers of Nepal for its future course development.
Since 1980 Tribhuvan University has changed the policy of establishing constitute
college and started to affiliate private and public colleges all over the Nepal. Then many
affiliated college were established in almost all the city areas, and government started to

establish new universities which slow down the market of EPH. Many colleges have
been opened in districts of the country. Book suppliers form India started to contact
directly to retail books shops and affiliated colleges rather than contacting to EPH. New
entrepreneurs emerged to publish new text books like: Buddha Publication, Asmita
publication, Khanal Publication, Samjhana Publication, Pinnacle Publication, Himal
Publication, Bhudipuran Publication and others. Faculties of the university also fueled to
new publishers providing new text books because of more royalty, high possibilities of
publication at first attempts, and faculty networks to new publishers. The students have
stopped consulting library books, cultivated the habit of buying one book and e-books.
They also expected short notes from faculties for each subjects to pass out easily in the
exam. In context to this, the director of EPH decided to hire a strategist for short term to
recommend for appropriate business decisions.
Questions:
a. As a strategist, do SWOT analysis of EPH.
b. What were the major mistakes of EPH in changing situation of Nepalese Book
Market? Discuss.
c. What elements of strategic management would you suggest for bringing
improvements in book business of EPH?
.

9. Read the case of Ramesh of Kantipur Business 93 carefully and answer the questions
accordingly
Kantipur Business

The Chief Executive Officer (CEO) of Kantipur Business Pvt Ltd- Ramnath has called a
meeting to get your feedback on Ramesh, a department manager. Ramesh is what some
people call from the old school of management. He is gruff, bossy, and often shows an
its my way or the highway attitude. Ramesh is about five years from retirement and
claims that what he does, he does best for the organization. The nature of not disclosing
major data, issues, problems, and prospects, a number of young staff called him show
piece for the organization.
Recent days, Ramesh faced high turnover rate in his department and many of his
colleagues are moving around because of everything he holds rather than sharing among
the friends. Team work, personal networking, and developing successor are never blow in
his heart and mind. There have been several complaints on company surveys about him
from his department and from outside his department. People have commented on the
fact that Ramesh is rude during meetings and doesnt let others contribute. There are
times when he has belittled people in meetings and in the hallway. He also talks about his
staff critically or negatively to other managers.
But Ramesh is a brilliantly talented person who adds a vast amount of needed knowledge
and experience to the company. He is extremely dedicated to the company and lets people

know this by his arrival each day at 9.30 a.m. and his departure at 6:00 p.m. He has been
with the company for 32 years and he reports directly to the CEO. Ramesh has gone to
the many department and complained that the people his seniors hire are not a good fit for
the company. The new employees dont listen and they have a poor work ethic.
Based on above case attempt following questions
a What suggestions do you have for the CEO on how to coach Ramesh and
develop Rameshs improvement plan?
b
The CEO of the organization asks you for your plan to improve the
organization. Now, prepare a brief plan to improve overall organizational
performance.

10. Read the case of Rasuwa Whisky Distillery 94 carefully and answer the questions
accordingly

Rasuwa Whisky Distillery

Rasuwa Whisky Distillery is the oldest in Nepal. It is situated at the border
of Nuwakot and linked by highway. It has established factor in such a
location that it can use water from Betrawati River. The Betrawati water
contains all the necessary properties for distilling purposes. Rasuwa
Distillery uses the traditional methods of fermentation and local
ingredients. Those ingredients are easily available at cheap price in all
seasons. Employees are loyal and productive. But the traditional method
of process is slow. The whisky is strong and smooth with golden color and
unique flavor. Its uniqueness is partly to do with the water, partly it
reflects the quality and purity of the ingredients and partly it reflects the
skills and care that is instrumental in the distilling. Unique flavor and
unique color of Rasuwa whisky is a complete mystery. It is situated at
about three hours drive from Kathmandu. It is one of the major tourist
attractions.
Recently, Krishna Pokhrel, MBA from Tribhuvan University, has been
appointed as Chief Executive Officer. He analyzed the internal factors to
know the competitive strengths and external factors to identify
opportunities to the business. The first point he realized is the missing of

regular research and development. So, he focused to carry out research

related to internal and external environment. He know that company size
is about average for the industry and unable to gain economics of scale.
Profits have been consistent for the years and unable to provide incentives
to the staffs for motivation. Balance sheet shows ability to obtain needed
capital. It is at high working capital position and ideal cash remained
without any entrepreneurial decisions. But, most of the facilities are old
and outdated. Marketing services for those who visit factory and taste
drink is excellent even though company is not surveying for need and taste
of customers. Channels of distribution are weak. Company is not able to
produce different ranges of products and branding is not focused. Variety
of products imported from China with low price create intense
competition.
Questions:
a. Discuss the strengths and weaknesses of Rasuwa Whisky Distillery and
prepare strategic advantage profile (SAP).
b. What options should Krishna Pokhrel take as CEO to improve strategic
management process of the distillery?
c. Suggest the appropriate strategy to the company to overcome from intense
competition .
.
Read the case of Rastriya Banijya Bank (RBB)95 carefully and answer the questions accordingly

Rastriya Banijya Bank (RBB)

After the adoption of liberalization policy by the government of Nepal since 1980, many
banks and financial companies have been established. Till 2015, there are 30 commercial
banks and more than 80 finance companies operating in the country and similar number
to the development banks. A large number of commercial banks, few development banks
and finance companies are in joint venture operations. All commercial banks:
government, private, joint venture have competent and professional human resources.
They have computerized operations in their customer services on one hand and have
worldwide network in the other. They have already introduced debit card, credit cards,
ATM, and e-banking. They have adopted different strategies to compete with both the
local as well as global competitors.
Rastriya Banijya Bank (RBB) is an oldest commercial bank of Nepal initially wholly
owned by government of Nepal. It was established in 1966 and now few portion of its
share become privatized. It provides employment opportunities to nearly 5000 persons
from its 120 branches all over the country. Even though, it plays significant role in
banking and finance sector of Nepal, the bank is characterized by over staffing, weak
management practices, traditional work culture, obsolesces of technology, absence of
committed work force, poor customer services, undue political pressure, corruption etc.

Therefore, the volume of outstanding loan is increasing day by day but the management
of the bank could not pay effective role for collecting its dues particularly from
influential persons and parties.
In order to improve performance and retain its recognition in the market, the management
of the bank is given to foreign party. The new management initiated many reform
measures. But, the efficiency in the operations has shown no substantive improvement.
The bank has already implemented a golden handshakes package to solve the overstaffing
problems. Unfortunately, the competent staffs, particularly managerial and professional
staff left the bank, but incompetent employees continued their services. The contract
period of foreign management is over and new management left the bank as in its
condition, and for further improvement, Nepal Rastra Bank ( central bank of Nepal)
deputed high level management team to manage the day to day operation of the bank.
The new management team is more responsible to central bank of Nepal and only
responsible for day to day operation, which ultimately reduce the initiation to craft long
term vision and strategy. All such step affected the bank negatively including customer
service, market recognition, and its profitability and productivity.
Questions:
a. Identify the major strengths and weaknesses of RBB
b. Who are the principal stakeholders of the bank?
c. What are the external environmental forces that affect the operation of the bank?
d. In context to growing competition of commercial banks of Nepal, which strategies
would you recommend for the RBBs effective performance?

969798

Mission and Strategies in Nepalese Corporations

A survey was carried out in 2014 to explore the reality of missions, business strategies, and HR strategies in
Nepalese corporations and 105 listed companies of Nepal were participated considering a organization as a
unit of analysis . Followings are the realities derived by the author.
In Nepalese business organizations, the explicit form of mission statement in 71 percent organizations
indicates that they are able to define their commercial rationale and target markets (see table). It seems that
top management of most of publicly listed organizations is aware about the formalization of explicit mission
statement. The existence of explicit form of business strategy in commercial banks is much more in
comparison to rest of other sector of business. Nearly 50 percent organizations indicated that they have either
no HR strategy or they do not know.
Existences of mission statement, business strategy and HRM strategy (%)
Main sector of business
Mission statement
Business strategy
Yes, written Yes, unwritten Yes, written Yes,
unwritten
Commercial Banks
93
7
87
7
Manufacturing & Processing
92
8
50
33
Insurance Companies
73
20
60
20
Finance Companies
59
23
39
23

HRM strategy
Yes,
Yes,
written unwritten
67
13
8
33
33
40
14
18

Development Banks
75
25
63
13
38
25
Others
54
9
46
27
18
36
Total
71
17
52
21
26
25
Even though, 71 percent organizations have written mission statement and of these organizations 52 percent
have written business strategy and 26 have written HRM strategy show interesting results of strategic
awareness on functional levels. Formulating the mission statement is not being effective to formulate written
and unwritten business and HRM strategies. In fact 17 percent organizations have unwritten mission
statement and 21 percent have unwritten business strategy and 25 percent organizations have unwritten HRM
strategies shows less concern on functional level of mission execution. In India 35 percent organizations had
an unwritten strategy and 28.5 percent of organizations had a written personnel strategy. In Nepalese
organization where almost 38 percent organizations adopted a cost minimizing strategy. This percentage is a
bit more than Indian public (35.8 percent ) and private (30.4 percent) organizations.
HR mangers in Nepalese organizations are less consult during business strategy formulation in comparison to
Indian organizations. However, still 39 percent organizations are not consulting HR managers at any stage of
strategy formulation. This result shows a poor opportunity for integrating HR issues in different stages of
strategy formulation. In average, only 19 percent organizations had indicated that they have clear set of work
programs for the implementation. But the position of commercial banks is better than organizations in other
sectors. While analyzing comparative figures of different sectors, the position of integration of commercial
banks is better than compared to other sectors in terms of existence of HR department, existence of clear HR
work programs and consulting HR managers from the outset of business strategy preparation.

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85 The earlier version of this case was submitted by this author to ask to the final exam of Chartered Accountancy (CA) of Nepal and Tribhuvan
th

University, MBA Program, and the case appeared in question sets.

86 The earlier version of this case was submitted by this author to ask to the final exam of Chartered Accountancy (CA) of Nepal (2012) and Tribhuvan
University, MBA Program, and the case appeared in question sets.

87 The earlier version of this case was submitted by this author to ask to the final exam of Chartered Accountancy (CA) of Nepal and Tribhuvan
University, MBA Program, and the case appeared in question sets.

88 The earlier version of this case was submitted by this author to ask to the final exam of Chartered Accountancy (CA) of Nepal (2012) and Tribhuvan
University, MBA Program, and the case appeared in question sets.

89 The earlier version of this case was submitted by this author to ask to the final exam of Chartered Accountancy (CA) of Nepal and Tribhuvan
University, MBA Program, and the case appeared in question sets.

90 The earlier version of this case was submitted by this author to ask to the final exam of Chartered Accountancy (CA) of Nepal and Tribhuvan
University, MBA Program, and the case appeared in question sets.

91 The earlier version of this case was asked to the final exam of Chartered Accountancy (CA) of Nepal (2015) .
92 The earlier version of this case was asked to the final exam of Chartered Accountancy (CA) of Nepal (2014) .
93 The earlier version of this case was submitted by this author to ask to the final exam of Tribhuvan University, MBA Program, (2014) and the case
appeared in question sets.

94 The earlier version of this case was asked to the final exam of Chartered Accountancy (CA) of Nepal (2013).
95 The earlier version of this case was asked to the final exam of Chartered Accountancy (CA) of Nepal.
96 The part of this text is already published by the author- Dhruba Kumar Gautam in South Asian Journal of Global Business Research, 4, 1, 110-128.
97 Gautam, D. K. (2015). Strategic integration of HRM for organizational performance: Nepalese reality. South Asian Journal of Global Research, 4, 1,
110-128.

98 Budhwar, P. S. & Sparrow, P. R. (1997). Evaluating Levels of Strategic Integration and Devolvement of Human Resource Management in India. The
International Journal of Human Resource Management, 8, 4, 476-494.