SNEHAL TRIVEDI

PIMR,MBA(MM)
I SEM
FOM(UNIT IV)
UNIT-IV

◦Strategies And
Policies
Concept of Corporate Strategy
◦ Corporate strategy is a unique plan or framework that is long-term in
nature, designed with an objective to gain a competitive advantage
over other market participants while delivering both on customer/client
and stakeholder promises (i.e. shareholder value).
◦ Corporate strategy at its core concerns itself with the entirety of a business,
where decisions are made in regard to its overall growth and direction.
Ultimately, corporate strategy strives to create value, develop a unique
marketing advantage, and seize maximum market share.
What are the key components of corporate
strategy?
◦1. Visioning
◦ Visioning for your company’s future has become an increasingly important
element of corporate leadership. Companies should plan 3 to 5 years into the
future and involve as many key personnel in the visioning process to foster a
higher level of commitment and teamwork. In creating a corporate vision
statement, the primary goal should be to respond to how leadership sees the
company evolving in the future.
◦2. Objective Setting
◦ Strategic objectives are the big-picture goals for the company: they
describe what the company will do to try to fulfill its mission.
Having strategic objectives in place allows a company to measure
its progress. Clearly communicating these objectives to personnel
ensures that everyone is focused on the highest-priority tasks and
is operating under the same assumptions about the company's
future.
◦3. Resource Allocation
◦Resource allocation involves planning, managing and
assigning resources in a form that helps to reach a
company’s strategic goals.
◦This corporate strategy component concern the most
efficient allocation of human and capital resources in the
context of stated goals and objectives.
◦ 4. Prioritization or Strategic Tradeoffs
◦ It is one of the most challenging aspects of corporate strategy.
it’s not always possible to take advantage of all feasible
opportunities because business decisions almost always entail
a degree of risk, companies need to take these factors into
account. It’s important for companies to balance the strategic
tradeoffs between risk and return and ensure that the desired
levels of risk management and return generation are being
pursued.
Strategy Formulation

◦ Strategy Formulation is an analytical process of selection of the best suitable

course of action to meet the organizational objectives and vision.
◦ The strategic plan allows an organization to examine its resources, provides a
financial plan and establishes the most appropriate action plan for increasing
profits.
◦ It is examined through SWOT analysis. SWOT is an acronym for strength,
weakness, opportunity and threat. The strategic plan should be informed to all
the employees so that they know the company’s objectives, mission and
vision. It provides direction and focus to the employees.
Steps of Strategy Formulation
◦ Establishing Organizational Objectives: This involves establishing long-term goals of an organization.
Strategic decisions can be taken once the organizational objectives are determined.
◦ Analysis of Organizational Environment: This involves SWOT analysis, meaning identifying the
company’s strengths and weaknesses and keeping vigilance over competitors’ actions to understand
opportunities and threats. Strengths and weaknesses are internal factors which the company has
control over. Opportunities and threats, on the other hand, are external factors over which the company
has no control.
◦ Forming quantitative goals: Defining targets so as to meet the company’s short-term and long-term
objectives. Example, 30% increase in revenue this year of a company.
◦ Objectives in context with divisional plans: This involves setting up targets for every department so that
they work in coherence with the organization as a whole.
◦ Performance Analysis: This is done to estimate the degree of variation between the actual and the
standard performance of an organization.

◦ Selection of Strategy: This is the final step of strategy formulation. It involves evaluation of the
alternatives and selection of the best strategy amongst them to be the strategy of the organization.
Levels of strategy formulation

◦ There are three levels of strategy formulation used in an organization:-

◦ Corporate level strategy: This level outlines what you want to achieve: growth, stability, acquisition or
retrenchment. It focuses on what business you are going to enter the market.
◦ Business level strategy: This level answers the question of how you are going
to compete. It plays a role in those organization which have smaller units of
business and each is considered as the strategic business unit (SBU).
◦ Functional level strategy: This level concentrates on how an organization is
going to grow. It defines daily actions including allocation of resources to
deliver corporate and business level strategies.
TOWS MATRIX
◦ TOWS Matrix can be interpreted as a framework to assess, create, compare, and
finally decide upon the business strategies. It is a modified version of a SWOT
analysis .
◦ It was invented by an American business professor called Heinz Weirich in 1982 to
examine businesses from a practical approach in reference to administration and
marketing. The evaluation is done by amalgamating the external opportunities and
threats with a company’s internal strengths and weaknesses.
◦ TOWS Matrix begins with an audit of external threats and opportunities. Such scrutiny
gives a clear insight and helps to adopt long term strategies. Thereafter, the internal
strengths and weaknesses of a company are taken into consideration. In the next
stage, the internal analysis gets intertwined with external analysis to devise a
strategy.
◦ Now, we will move on to the discussion where we will discuss the four potential
strategies of the TOWS Matrix. The four TOWS strategies are :
◦ Strength/Opportunity (SO)
◦ Weakness/Opportunity (WO)
◦ Strength/Threat (ST)
◦ Weakness/Threat (WT)
Advantages of TOWS Matrix

◦ helps to stumble upon strategic ideas by interconnecting the

internal and external factors for the organizations.
◦ user-friendly
◦ Cost effective
◦ TOWS Analysis can be applied to any company irrespective of
the industries and economies.
◦ helps organizations to upgrade their strategies with changing
dynamics.
Disadvantages of TOWS Matrix

◦ becomes tough to handle if we are overloaded with

information.
◦ On many occasions, TWOS Matrix doesn’t take the ever-
changing competitive environment into consideration and can
affect the main agenda of finding out strategies
BCG Matrix

◦ Boston Consulting Group’s (BCG’s) growth-share matrix is commonly

used for analyzing portfolios. The BCG made this matrix in the
1970s. This technique is used for the portfolio management of
different business units. Large companies whose business
organization is in SBUs face a major problem of distributing
resources between these units.
◦ The BCG matrix is made up of different business units of a
company. These are plotted on a graph of market growth vs market
share relative to the company’s rivals. Resources are given to
business units on the basis of their position on the graph.
BCG Matrix – Diagram
◦ Stars
◦ Stars are business units that have a large market share in a fast-growing industry.
◦ Stars may generate cash, but due to the rapidly growing market, these business units
require continuous investments.

◦ Cash Cows
◦ Cash cows are business units with a large market share in
a mature and slow-growing industry.
◦ Cash cows require little investment and generate cash that
can be used to invest in other business units.
◦ Question Marks
◦ This type of business unit is also known as the problem
child.
◦ Question marks are business units with a low market
share in a high-growth market.
◦ The company needs to invest in these businesses to grow
its market share
◦ Dogs
◦ These business units have a small market share in a
mature industry.
◦ A dog may not require substantial cash, but it ties up
capital that could be invested elsewhere.
◦ Unless a dog has some special strategic purpose, it should
be liquidated if there is little potential to increase its
market share.
GE Matrix
◦ GE multifactoral analysis is a technique used in brand marketing and
product management to help a company decide what products to add
to its portfolio and which opportunities in the market they should
continue to invest in. It is conceptually similar to BCG analysis, but
somewhat more complicated.
◦ The GE McKinsey Matrix, also know as the McKinsey Nine Box Matrix is
a strategic tool used for business portfolio planning. .
◦ The GE / McKinsey matrix is a model used to assess the strength of a
strategic business unit (SBU) of a corporation. It analyzes market
attractiveness and competitive strength to determine the overall
strength of a SBU. The GE Matrix is plotted in a two-dimensional, 3 x 3
grid.
◦ The GE matrix was developed by Mckinsey and Company consultancy group
in the 1970s. The nine cell grid measures business unit strength against
industry attractiveness and this is the key difference.
 H M
L

L
Industry Attractiveness:
◦ Factors you could choose to base this on include:
◦ Market size
◦ Market growth
◦ Pestel factors
◦ Political
◦ Economical
◦ Social
◦ Technological
◦ Environmental
◦ Legal
◦ Porters five forces
◦ Competitive rivalry
◦ Buyer power
◦ Supplier power
◦ Threat of new entrants
◦ Threat of substitution
Business Unit Strength:

◦ Factors to determine how strong a unit is compared to others in its

industry include:
◦ Market share
◦ Growth in market share
◦ Brand equity
◦ Profit margins compared to competition
◦ Distribution channel process – the strength of
HOW TO APPLY THE GE MATRIX TO YOUR
BUSINESS
◦ Step 1: Determine Industry Attractiveness of Different Business Units.
...
◦ Step 2: Determine the Competitive Strength of each Business Unit. ...
◦ Step 3: Plot the business units on a matrix. ...
◦ Step 4: Analysis of Information. ...
◦ Step 5: Identify future direction of each unit.
◦ Now you have the measurements you can plot your business units on the GE matrix
and depending on where they are plotted will determine your strategy from one of the
following:
◦ Grow/Invest:
◦ Units that land in this section of the grid generally have high market share
and promise high returns in the future so should be invested in.
◦ Hold/Selectivity:
◦ Units that land in this section of the grid can be ambiguous and should only
be invested in if there is money left over after investing in the profitable
units.
◦ Harvest/Divest:
◦ Poor performing units in an unattractive industry end up in this section of
the grid. This should only be invested in if they can make more money than
is put into them. Otherwise they should be liquidated.
The Porter’s 4 Generic Strategies are:

◦ Cost Leadership.
◦ Differentiation.
◦ Cost Focus.
◦ Differentiation Focus.
1. Cost Leadership Strategy:-
◦ A Company should follow a Cost Leadership Strategy when:-
◦ Its Competitive Advantage is, or can be, its Cost-efficiency.
◦ If it has a competitive Manufacturing process, or Cheap raw materials, for example.
◦ It targets an entire Market.
◦ If its Competitive Advantage can, and will be applied to all its products on the Market.
◦ Cost Leadership strategy Example
◦
◦ BiC is the perfect example of a Cost Leadership Strategy.
◦ They don’t just make cheap (and very good) pens.
◦ Differentiation Strategy:-

◦ A Company should follow a Differentiation Strategy when:

◦ Its Competitive Advantage is its Uniqueness.
◦ Due to the Quality of its products or the character of the Company.
◦ It targets an entire Market.
◦ This Uniqueness is present in all its products.
◦
◦ Differentiation strategy Example
◦ Why people buy luxury products?
◦ Most of the time, because they want to show how well they are doing.

◦ Louis Vuitton is a good example of a company that has followed a Differentiation Strategy:
◦ They have differentiated almost all their products with their famous ” LV monogram”.
◦ Cost Focus Strategy:-

◦ A Company should follow a Cost Focus Strategy when:

◦ It is very Competitive in Cost in a certain Product or Market Niche.
◦ Perhaps this company markets this product in large packages,
for example.
◦ It targets a Niche or a “small” Market segment.
◦ Rather than large or entire Markets.
◦ Cost Focus strategy Example
◦ Today, the energy drink Market has become a big attractive Market.
◦ But, not long ago, Red-Bull was pretty much the only energy drink.
◦
◦ Then, “Monster” appeared and…
◦ What Strategy did they follow?
◦
◦ While Red Bull was selling 250 ml cans for $2.5, Monster was offering 500 ml cans for $2.
◦ Red Bull: $10 per liter.
◦ Monster: $4 per liter.
◦ Monster focused on their Costs and Pricing, and this Strategy made them the great profitable
company it is today.
◦ Remember: Monster was a relatively small company that was targeting a small segment of a
niche market (at the time).
◦ Differentiation Focus Strategy:-

◦ A Company should follow a Differentiation Focus Strategy when:

◦ It has a very Unique product or Niche.
◦ Only in one product (or few); The rest of its products may be ordinary
◦ That product is targeting a small Market segment.
◦ The segment in which the product is Unique.
◦ Differentiation Focus strategy Example
◦ Following with the energy drink Market, once Monster succeeded with its low prices, many other
companies tried to replicate its success.
◦ But none of them were as successful as Monster.
What do you mean by a policy
Principles of Policy Making:
1. The policy statement should be definite, positive clear and
understandable to every in the organisation.
2. Policy statement should be reasonable, permanent and stable.
Otherwise, they create uncertainty and indecision in the minds of
those who seek guidance from them.
3. Policies should be flexible.
4. Policies should be based on fact and sound judgment and should
not constitute merely personal reflections.
5. Since policies are intended to be general principles to guide future
actions, they should not prescribe detailed procedures.
6. Policies should be communicated
◦ 7. Policies should reflect the objectives prescribed.
◦ 8. Policies should be subject to evaluation
◦ 9. Policies should as far as possible be stated in writing.