Sessions 17 To 20 - Strategy Implementation, Evaluation and Control (11 Files Merged)

Strategy Implementation
17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 1

A good strategy without proper implementation is like a poor strategy or no
strategy at all.
However having a good strategic plan is half the battle won, and the other half
is won through effective strategy implementation.

Most Strategy Implementations Fail
Fewer than 15 percent of organizations around the world report that they are successful at
strategy implementation.
Various studies have reported strategy implementation failure rates at 60 to 90 percent.
The majority of strategies fail in the strategy implementation phase.
Many organizations have a fundamental disconnect between the formulation of their strategy
and the implementation of that strategy into useful action.

Perform External Analysis
Develop Establish Generate,
Implementation
Vision and Long-term Objectives Evaluate, and
Strategy
Mission Select Strategies
Statements
Perform Internal Analysis

Strategy implementation is the translation of chosen strategy into organizational action so as

to achieve strategic goals and objectives.
Strategy implementation is also defined as the manner in which an organization should

develop, utilize, and amalgamate organizational structure, control systems, and culture to follow
strategies that lead to competitive advantage and a better performance.

Strategy implementation is "the process of allocating resources to support the chosen

strategies".
This process includes the various management activities that are necessary to put strategy in
motion, institute strategic controls that monitor progress, and ultimately achieve organizational
goals.

Strategy Formulation Vs Strategy Implementation

Organization Structure
The structure determines how the work efforts of individuals and teams are orchestrated and
how resources are distributed.
It defines how job and tasks are divided and integrated, delineates the reporting relationships
up and down the hierarchy, defines formal communication channels, and prescribes how
individuals and team coordinate their work efforts.
The key building blocks of an organization structure are:
 Specialization
 Formalization
 Centralization
 Hierarchy

Specialization
 Describes the degree to which a task is divided into separate jobs- that is, division of labor
Formalization
 Captures the extent to which employee behavior is steered by explicit and codified rules and
procedures.
 Formalized structures are characterized by detailed written rules and policies of what to do in specific
situations.
 Codified in employee handbook.

Centralization
 Refers to the degree to which decision making is concentrated at the top of the organization.
 Often correlates with slop response time and reduced customer satisfaction.
Hierarchy
 Determines the formal, position-based reporting lines and thus stipulates who reports to whom

Organizational Structure-Types
Functional Structure
 Groups employees into distinct functional areas based on domain expertise.
 These functional areas respond to distinct stages in the value chain.
 The departmental head of each functional area reports to the CEO, who coordinates and integrates the
work of each function.
Divisional Structure
 Here, the employees are divided into various segments of a particular product, service or market.
 Every divisional unit has a functional structure comprising sales, marketing, human resources, etc.

Organizational Structure-Types
Horizontal Structure
 In this, the levels of leadership are relatively lesser.
 Since most levels of middle management are eliminated, employees are able to take decisions in a
faster and more efficient manner.
 It also makes them feel a lot more involved in the business as their inputs and ideas are encouraged and
often considered, which in turn boosts productivity and fosters a healthy work environment.
Matrix Structure
 It is a hybrid hierarchical structure wherein the employee has to report to a functional manager as well
as a project manager. The lines of communication flow both horizontally as well as vertically.

Strategic Leadership
Strategic leadership focuses on the people who have overall responsibility for the organization
and includes not only the titular head of the organization but also members of what is referred
to as the top management team or dominant coalition (Cyert & March, 1963).
Activities often associated with strategic leadership include
 making strategic decisions;
 creating and communicating a vision of the future;
 developing key competencies and capabilities;
 developing organizational structures, processes, and controls;
 managing multiple constituencies;
 selecting and developing the next generation of leaders;
 sustaining an effective organizational culture; and
 infusing ethical value systems into an organization’s culture.

Corporate Governance
Corporate governance deals with mechanisms by which stakeholders of a corporation exercise
control over corporate insiders and management such that their interests are protected.
The stakeholders of a corporation include equity holders, creditors and other claimants who
supply capital, as well as other stakeholders such as employees, consumers, suppliers, and the
government.
The professional managers, the entrepreneur, and other corporate insiders (we will refer to
them collectively as ``managers''), control the key decisions of the corporation.
Given the separation of ownership and control (or stakeholding and management) that is
endemic to a market economy, how the stakeholders control management is the subject of
corporate governance.

Strategy Formulation Strategy Implementation
It is positioning forces before action. It is managing forces during action.
It focuses on effectiveness It focuses on efficiency,
It is an intellectual process It is primarily and operational process.
It requires special motivational and leadership

It requires good intuitive and analytical skills.
skills.
It requires coordination among few

It requires combination of many individuals.
individuals.
Concepts and tools do not differ greatly for Concepts and tools varies substantially among
small, large, profit or non profit organization. small, large, profit or non profit organization.

Steps In Strategy Implementation
Step #1: Evaluation and communication of the Strategic Plan
Step #2: Development of an implementation structure
Step #3: Development of implementation-support policies and programs
Step #4: Budgeting and allocation of resources
Step #5: Discharge of functions and activities

Issues in Strategy Implementation
Projects creates need for infrastructure for day to day operations in organization. Resource
allocation is key to successful projects
Sequence in which strategy implementation issues are to be considered:
1. Project Implementation
2. Procedural Implementation
3. Resource Allocation
4. Structural Implementation
5. Functional Implementation
6. Behavioral Implementation
 These activities are not performed in the same order (can be performed simultaneously, can
be repeated etc.).

Strategy Implementation Frameworks

McKinsey 7-S Framework
The McKinsey 7-S Framework for effective implementation of strategy (key
success factors/ pre-requisites)
1. Strategy
2. Structure
3. Systems
4. Style
5. Shared Values
6. Staff
7. Skills

Model 7 S
One comprehensive approach used to implementation of the strategy was developed by Peterson &
Waterman at McKinsey & Company in the early 80th. The model is based on 7 internal company
factors that must be aligned together for successful implementation of the strategy in the company.
Model, 7S consists of hard and soft factors. Hard elements are easier to define and management can
directly influence them.

Strategy – express how the company achieves its vision and how responds to opportunities and
threats from environment, means awareness of the strategy, its explanation to external subjects
not only to internal,
Structure – the way how the company is structured, inferiority and superiority relations,
organizational structure supports the implementation of the strategy,
Systems – formal and informal everyday activities and procedures carried out by employees, it is
about systems of planning, control and information that support the implementation of the
strategy. The processes, procedures, tasks, and flow of work make up the systems of the
organization.

On the other hand soft elements of the model are more difficult to define, they are less specific
and influenced by company´s culture. Despite the soft elements are as important as hard if the
company wants to achieve success. Soft elements of the model are (Papula & Papulová, 2012):
Style – style of leadership and choice of the appropriate style of leadership of the company
belong to important factors affecting the implementation of the strategy, defining and
describing the interactions among the leaders in the organization and, to some extent, how they
are perceived by those that they lead or manage.
Staff – employees and their basic skills are key factors of the success, companies should have
right people on the right place.

Skills – actual skills and abilities of company´s employees, companies should focus on the
development of the skills in the future, extension of knowledge and acquisition of experiences.
Shared values – values enforced in the strategy are based on shared interests and are included
in the mission of the company, they are a key element that influences the effectiveness of all
other factors, it is an important feature of company´s culture that supports the creation and
implementation of the strategy.

7 S Framework of TATA Steel
ELEMENTS DESCRIPTION
Strategy • Strengthen Indian operations
• Seek and maintain control over raw material
• Focus on high growth in emerging markets and pricing stability

in developed markets
• Increasing focus on High value added steel products

Systems
• Simplified and easy application one window concept (high
customer focus)
• Timely payment
• Evaluate performance, Personal feedback

7 S Framework - TATA Steel
Skills • Leveraging digital technology
• Process technology- utilization of high gangue iron ore in

sinister making process.
• Encourage employees to be innovative

Shared Values • Excellence
• Understanding
• Responsibility
• Integrity
• Unity

7 S Framework- TATA Steel
Staff • Preparation of mind and attitudinal attuning
• Creation of excitement and motivation through intense counseling

and information sharing
• Making employees aware of business
• Communicate policies, rules, procedures and modify or redefine

the rules/procedures, if needed
Style • Open and collaborative leadership.
• Develop climate of trust and openness
• Empowerment of leaders at all levels to take quick decisions -- act

on idea/issue relating to success of ESS immediately

7 S Framework - TATA Steel
Structure • Hierarchical & Matrix
• The Composition of the Board and the board

of Directors

Balance Scorecard-Where it started
Introduced in 1992, by Robert Kaplan and David Norton, the balance Scorecard is the most
commonly used framework for ensuring that agencies execute their strategies. Today about 70%
of the fortune 1000 Companies utilize the balance scorecard to help manage performance.
Robert Kaplan and David Norton first publicized the balanced scorecard in a series of journal
articles and published this concept in their book, The Balanced Scorecard.

What is BSC
BSC translates an organizational mission and strategy into comprehensive set of performance
measures that provides the frame work for strategic measurement and Management system.
The starting points of the balanced scorecard are the vision and the strategy that are viewed
from four perspectives: the financial perspective, the customer perspective, the internal
business processes and learning & growth.

What is BSC
Balanced Scorecard translates mission and strategy of the company into a comprehensive set
of performance indicators that provide a framework for assessing company´s strategy and
management system.
 It represents a multidimensional system that is used to define and implement organizational

and management strategies at all organizational levels of the company to maximize the process
of value creation.
Balanced Scorecard is a management system used in companies which provides efficient

utilization of resources for shareholders.

Four perspectives of Balance Scorecard and their derivation from vision and strategy
Source: Wagner, J. (2009)

The balanced scorecard is centered on four performance metrics or perspectives:
◦ Customers
◦ Internal processes
◦ Financial
◦ Learning and growth
When implemented properly, each one of these perspectives contains four subparts consisting
of
◦ Objectives
◦ Measures
◦ Targets
◦ Initiatives

Balance Scorecard Perspectives

Objectives, Measures, Targets and Initiatives
Objectives : what the strategy is to achieve in that perspective
Measures : how progress for that particular objective will be measured
Targets : refer to the target value that the company seeks to obtain for each measure
Initiatives : what will be done to facilitate the reaching of the target

Financial Perspective
The financial performance perspective of the balanced scorecard addresses the question of
how shareholders view the firm and which financial goals are desired from the shareholder’s
perspective.
In private companies, the financial perspective is the main objective (ultimate goal) – without
having to sacrifice the interests of other relevant stakeholders (community, environment,
government, etc.)
In the financial perspective, the strategic goal is the long-term shareholder value. This goal is
driven by two factors, namely : revenue growth and cost efficiency.
It answers the question: “How attractive must we appear to our shareholders and financial
backers?”.

Customer Perspective
Customer perspective identifies targeted customer and market segments and measures the
organization’s success in these segments.
It measure the level of customer satisfaction, customer retention and market share held by the
organization
This perspective answers the question: “How attractive should we appear to our customers?”

Internal Business Process Perspective
Metrics based on this prospective allow the managers to know how well their business is
running and whether its products and services conform to customer requirements
This perspective answers the question: “What must we excel at to satisfy our customers and
shareholders/ financial backers?”
From the perspective of internal processes the question should be asked what internal
processes have actually added value within the organizations and what activities need to be
carried out within these processes.

LEARNING AND GROWTH PERSPECTIVE
It identifies the infrastructure that the organization must build to create long term growth and
improvement.
This perspective answers the question: “How can we sustain our ability to achieve our chosen
strategy?”.
An organization’s learning ability and innovation indicate whether an organization is capable of
continuous improvement and/or growth in a dynamic environment.
This dynamic environment is subject to change on a daily basis due to new legislation and
regulations, economic changes or even increasing competition

Balanced Scorecard Measurements
Perspective Generic Measurements
Financial Return of Capital Employed, Economic Value Added, Sales Growth, Cash Flow
Customer Customer Satisfaction, Retention, Acquisition, Profitability, Market Share
Internal Business Includes measurement along the internal value chain for:
Processes
Innovation- measures of how well the company identifies the customers’
future needs.
Operations- measures of quality, cycle time, and costs.
Post Sales Service- Measures for warranty, repair and treatment of defects
and returns.
Learning and Growth Includes measurements for:
People- employee retention, training, skills, morale
Systems- measure of availability of critical real time information needed for

front line employees.

BSC- Jet Airways
Perspectives Objective Measurement Target Initiative
1. Profitability 1. Market Value A. 30 % CAGR
Financial 2. Grow Revenues 2. Seat Revenue B. 20% CAGR
3. Fewer Planes 3. Plane Lease Cost C. 5 % CAGR
1. FAA On-time arrival A. No. 1

1. Flight is on time rating
B. No. 1
2. Lowest Prices 2. Customer Ranking Customer Loyalty
Customer
1. Repeat C. 70% Program
3. Attract and Retain Customers increase
more customers 2. Customers
D. 12 % annual

Perspectives Objectives Measurements Target Initiatives
1. On Ground Time
Internal 1. 30 Minutes 1. On Ground Cycle
Fast Ground
Business Time
Turnaround 2. On- Time
Process 2. 90% Optimization
Departure
1. % Ground Crew
1. 100%
1. Ground crew Stockholders
aligned with
2. 100% 1. ESOP
strategy 2. Strategic
Awareness
Learning & 3. Years 2. Ground Crew
2. Develop the
Growth I. Yr 1- 0% Training
necessary skills 3. Strategic Job
II. Yr 3- 90%
Readiness
III. Yr 5- 100% 3. CRM System
3. Develop the
support system 4. Info system
4. 100%
Availability

Advantages of Balance Scorecard
Strategic Initiatives that follow “best practices” methodologies cascade through the entire
organization
Increased creativity and unexpected ideas.
The Balance Scorecard helps align key performance measures with strategy at all levels of an
organization.
The Balance Scorecard provides management with a comprehensive picture of business
operations.
The methodology facilitates communication and understanding of business goals and strategies
at all level of an organization.

Disadvantages of Balance Scorecard
Cost and Time- This is a costly and time consuming tool. Correct use of tool requires thorough
understanding of the process.
Incomplete information- The usefulness of the balanced scorecard approach is dependent on

the value of the information that is driving the process- garbage in, garbage out.
Measuring Intangible Assets Performance
Measuring Intellectual Resource (HR)
Formulation of appropriate strategies

Strategic Evaluation and
Control

Strategy Evaluation
“Evaluation of strategy is the phase in which the top managers determine

whether their strategic choice as implemented is meeting the objective of the
enterprise.”
William F. Glueck & Lawrence R. Jauceh

Strategic Evaluation
Strategic Evaluation is defined as the process of determining the effectiveness of

a given strategy in achieving the organizational objectives and taking corrective
action wherever required.

Benefits of Strategic Evaluation and
Control
They provide direction
They provide guidance
They inspire confidence.

Strategy Evaluation
Rumelt suggested four basic criteria for evaluating strategies:
1. Consistency: The strategy must not present mutually inconsistent goals and policies.
2. Consonance: The strategy must represent an adaptive response to the external
environment and to the critical changes occurring within it.
3. Advantage: The strategy must provide for the creation and/or maintenance of a
competitive advantage in the selected area of activity.
4. Feasibility: The strategy must neither overtax available resources nor create unsolvable
sub problems.

The Strategy Making
Professors Gerry Johnson, Kevan Scholes and Richard Whittington presented a Model about
Corporate Strategy and in which strategic options were evaluated against three main criteria:
◦ Suitability: Does it work out? Does it make sense?
◦ Feasibility: Can it be applied and implemented within company’s resources? (e.g. funding,
people, budget and time)?
◦ Acceptability: Can it meet stakeholders’ expectations?

The SAFe criteria and techniques of
evaluation
Suitability • Does a proposed strategy address the key • Tools include: - ranking strategic options,
opportunities and constraints an organization faces? decision tree, etc.
Acceptability • Does a proposed strategy meet the expectations of • Tools include: - cost‐benefit/ break‐even
stakeholders? analysis, forecasting, workforce analysis,
• Is the level of risk acceptable? etc.
• Is the likely return acceptable?
• Will stakeholders accept the strategy?
Feasibility • Would a proposed strategy work in practice? • Tools include: - risk factors, customer
• Can the strategy be financed? satisfaction, return on investment, etc.
• Do people and their skill exist or can they be
obtained?
• Can the required resources be obtained and
integrated?

Strategy Evaluation
Strategy evaluation is essential to ensure that stated objectives are being

achieved. It consists of three basic activities:
a) Examining the underlying bases of a firm’s strategy.
b) Comparing expected results with actual results.
c) Taking corrective actions to ensure that performance conforms to plans.

The Evaluation Process
Determine the types

1. Set Objectives and sources of
information required.
2. Evaluate actual performance
against objectives.
Collect Data
3. Based on the evaluation, take

the necessary action. If
performance is OK, continue
monitoring if not, take corrective
action.

1. Set Objective
The exercise should answer two basic issues:
◦ What specific things must be done to ensure the success of the strategic plan?
◦ Of these, which are the most important?
Benchmarking : it can be quantitatively and qualitatively
Quantitative criteria
◦ Quantity: Volume of work completed (number of tasks completed, number of units sold, volume of
money spent etc.)
◦ Quality: How well a task was done (number of satisfied customers, number of rejects/repeats or things
that had to be redone, etc.)
◦ Dependability: Doing a task according to expectation (completed work on time and when needed,
reduced number of sick days, etc.)

Qualitative factors are subjective:
◦ Cooperation: Working well with others, providing support where needed (interdepartmental sharing of
resources and personnel, trading information, etc.)
◦ Creativity: Finding new or better ways of doing things (coming up with new ideas on how to increase
revenue, reduce cost or complete a task, etc.)

2. Evaluate Actual Performance against
Objectives
It involves:
a) Determining what are the types and sources of information that are required to compare actual
performances against the standard
b) Collecting the required information, and
c) Based on the information collected, doing a comparative analysis.
When a deviation from objectives is determined, there are two options

a) Correct the actual performance
b) Revise the criteria of performance or the objective set.

3. Taking Corrective Action
•Any deviations requires either a correction or a conclusion that should identify the root causes.
•If the performance is consistently less than the desired performance, you need to carry out a detailed
analysis of the factors responsible for the poor performance.
•If you discover that the standards are too high or that the organizational potential does not match
with the performance requirements, then revisions become necessary.
•The ultimate corrective action is to reformulate the strategy.

Conclusions
Issue
No
No Were strategies poorly Yes Were requirements communicated Poor Communication
Were desired results executed? properly?
produced by existing
Strategy? No Yes
No No Weak commitment of
Underlying assumptions Did management commit to and follow operating management
Yes and premises if valid? through strategy?
Yes Yes No
Failure to establish proper
Were alternate options No Was there a failure to monitor results and feedback system
discussed and assessed ? modify strategies?
Strategy Yes
Evaluation No Yes Invalid planning bases
Were current trends and Was the strategy formulation adversely
Process incorrect formulation
situation rightly diagnosed? affected ?
No
No Inconsistent functional
Yes
Were functional strategies supportive? plans
Yes
No Incorrect assumption of
Was resource allocation consistent with resource requirements?
strategies requirements
Successful strategy and
results

Strategic Control
•Strategic control assesses the question if the strategy chosen by the organization is valid.
•Managers determine whether the strategy chosen is achieving the organization’s objectives.
•In this manner, strategic controls are early warning systems and differ from post-action controls
which evaluate only after the implementation has been completed

Strategic Control
Types of Strategic Control
Premise Control Strategic Surveillance Special Alert Control
• Environmental Factors
• Strategic Thrust • Unforeseen Events
external to the
organization Assessment
• Industry factors • Milestone Reviews

external to
organization

Premise Control
◦ It involves the checking of environmental conditions. Premises are primarily concerned with two types
of factors:
a) Environmental factors (for example, inflation, technology, interest rates, regulation, and
demographic/social changes).
b) Industry factors (for example, competitors, suppliers, substitutes, and barriers to entry)
◦ All premises may not require the same amount of control. Therefore, managers must select those
premises and variables that (a)are likely to change and (b) would a major impact on the company and its
strategy if the did

Strategic Surveillance
•Strategic surveillance can be done through a broad-based, general monitoring on the basis of
selected information sources to uncover events that are likely to affect the strategy of an
organization.
•Strategic surveillance is concerned with observing a wide range of events within and outside your
organization that are likely to affect the track of your organization’s strategy.
•It’s
based on the idea that you can uncover/identify important unanticipated information by
monitoring multiple information sources.
•Such sources include trade magazines, journals such as The Wall Street Journal, trade conferences,
conversations and observations.

Special Alert
• A special alert control is the rigorous and rapid reassessment of an organization’s strategy
because of the occurrence of an immediate, unforeseen event, such as natural disasters,
product recalls or market spikes.
•Specialalert control is based on trigger mechanism for rapid response and immediate
reassessment of strategy in the light of sudden and unexpected events called crises.
•Organization Form crisis teams to handle your company's initial response to the unforeseen
events. they also prepare how they will handle these special alerts with procedures to be
followed, priorities to keep and tools to be used.

Control Models
Merchant and Van der Stede’s Model defines four types of management control:
1. Results Controls : Results control influence the behavior of employee by using information
from measures for the outcomes of their work.
2. Action Controls : Action controls describe the action to be taken by the employees.
3. Personnel Controls: Personnel controls build on the employees’ natural tendencies to control
and/or motivate themselves.
4. Culture Controls: Cultural controls, “are designed to encourage mutual monitoring : a
powerful form of group pressure on individuals who deviates from group norms and values.”

Merchant and Ver der Stede’s Model for Management Control
Systems
- The actions taken ACTION CONTROLS
- The results produced RESULTS CONTROLS
- The type of people

employed and their PEOPLE CONTTROLS
shared values and
norms.
Or any combination of those
Source: Merchant and Van der Stede, Pearson, 2007

Simon’s Four Levers of Control
Belief Core Risks to be Boundary

Systems Values Avoided Systems
Strategic
Plan
Diagnostic Critical Strategic Interactive

Control Performance Uncertainties Control
Systems Variables Systems
Source: Robert Simons, Strategic Management Journal (1994)

Belief System Boundary System Diagnostic Control Interactive Control
Nature of System Explicit set of shared Formally stated limits and Feedback systems used to Systems that managers use
beliefs that define basic rules that must be monitor outcomes and regularly and personally involve
values, purpose and respected. correct deviations from themselves in the decision
direction preset standards of activities of subordinates.
performance.
Purpose Provide momentum and Allow individual creativity Provide motivational Focus organizational attention on
guidance to opportunity within defined limits of resources and information strategic uncertainties and
seeking behaviors freedom. to ensure important thereby provoke the emergence
strategies and goals will be of new initiatives and strategies.
achieved.
Key Design Core Values: Risks to be avoided. Clear Critical Performance Strategic Uncertainties and
Variables • Mission rules, limits and Variables: managerial behavior:
• Vision proscriptions in: • Profit plan and Budget • Recurring discussions on
• Credos • Codes of business • Goals and Objectives agenda with subordinates
• Statement of Purpose conduct systems • Regular focus of attention
• Strategic Planning • Project monitoring • Participation with face to face
Systems systems meetings with subordinates.
• Capital Budgeting • Brand revenue • Continually challenging and
Systems monitoring systems. debating data, assumptions
and action plans.

Other Methods
1. BSC
2. Six Sigma
3. MBO

Six Sigma
There are five stage processes in Six Sigma practice. These are called DMAIC.
1. Define- defining the problem

2. Measure- Measuring the processes at issue.
3. Analyze- Once data are collected, they are analyzed to determine the key variables and relate them to
improvement goals.
4. Improve- at this stage, ideas based on the Analysis Stage are generated, selected and verified.
5. Control- If the process is found to be performing at a desired and predictable level, it is
‘institutionalized’, i.e. where the change becomes part of the organization’s normal behavior patterns
through monitoring and control.

Six Sigma
Sigma Defects per Percent Good
•Every time the organization moves up a sigma, Score Million
Opportunities
it can easily mean a 20% increase in profit
margin for each sigma level. 2 308.537 58 %
3 66.807 93 %
4 6.210 99 %
•SixSigma helps to raise the quality by
5 233 99.77 %
reducing the defects to 3.4 defects per million
opportunities (that’s a yield of 99.99966%). 6 3.4 99.997 %

MBO- Management by Objectives (MBO)
•Management By Objectives (MBO) is a performance management approach in which a balance
is sought between the objectives of employees and the objectives of an organization.
•The essence of Peter Drucker ’s basic principle: Management By Objectives is to determine joint
objectives and to provide feedback on the results.

MBO Involves…
1. Establishing the organization’s objectives
2. Communicating the organization's objectives
3. Setting individual objectives through supervisor-subordinate interaction
4. Development of action plans to achieve objectives
5. Periodical review of performance

Business Ethics and Corporate Social
Responsibility

Business Ethics
•Ethics are codes of values and principles that govern the action of a person, or a group of
people regarding what is right versus what is wrong (Levine, 2011; Sexty, 2011).
•Therefore, ethics set standards as to what is good or bad in organizational conduct and decision
making (Sexty, 2011). It deals with internal values that are a part of corporate culture and
shapes decisions concerning social responsibility with respect to the external environment.
•The terms ethics and values are not interchangeable (Mitchell, 2001). Whereas ethics is
concerned with how a moral person should behave; values are the inner judgments that
determine how a person actually behaves. Values concern ethics when they pertain to beliefs
about what is right and wrong.

Business Ethics
•Business ethics is defined as the rules, standards, codes, or principles that provide guidance for
morally appropriate behavior in managerial decisions relating to the operations of the
corporation, and business relationship with the society (Sexty, 2011).
•It applies to all aspects of business conduct and is relevant to the conduct of individuals and the
entire organization(Mitchell, 2001).
•Furthermore, business ethics is the behavior that a business adheres to in its daily dealings with
its stakeholders (e.g., employees, customers, suppliers, immediate community and society in
general) (Dombin, 2012).

Advantages of Ethical Behavior in
Business
Build customer loyalty
• A company’s reputation for ethical behavior can help it create a more positive image in the marketplace,
which can bring in new customers through word-of-mouth referrals.
• Dissatisfied customers can quickly disseminate information about their negative experiences with the
company.
Retain good employees

• Talented individuals at all levels of an organization want to be compensated fairly for work and
dedication.
• Companies who are fair and open in their dealings with employees have a better chance of retaining
the most talented people

Advantages of Ethical Behavior in
Business
Positive work environment
• Employees have a responsibility to be ethical. They must be honest about their capabilities and
experience.
• Ethical employees are perceived as team players rather than as individuals.
• They develop positive relationships with coworkers. Their supervisors trust them with confidential
information.
Avoid legal problems
• It can be tempting for a company’s management to cut corners in pursuit of profit, such as not fully
complying with environmental regulations or labour laws, ignoring worker safety hazards or using sub-
standard materials in their products.
• The penalties if caught can be severe, including legal fees and fines or sanctions by governmental
agencies.
• The resulting negative publicity can cause long-range damage to the company’s reputation that can
even be more costly than the legal fees or fines.

Corporate Social Responsibility (CSR)
•Corporate Social Responsibility (CSR) can be understood as an integrative management concept,
which establishes responsible behavior within a company, its objectives, values and
competencies, and the interests of stakeholders (Meffert & Münstermann, 2005).
•CSR refers to the responsibility of enterprises for their impacts on society; and the
consequences for the integration of social, environmental, ethical, human rights, and as well
consumer concerns into business operations and core strategy, in close collaboration with
stakeholders (European Commission, 2011).

Corporate Social Responsibility (CSR)
•CSR refers to the selection of institutional objectives and evaluation of results, not only by the
criteria of profitability and welfare organization, but by the ethical standards or judgments of
social desirability. In this view, the exercise of social responsibility must be consistent with the
corporate goal of earning satisfactory level of benefits, but also implies a willingness to
relinquish some degree of benefit, in order to achieve non-economic objective (John, 2003).
•Carroll and Buchholtz (2000), “Corporate social responsibility encompasses the economic, legal,
ethical, and philanthropic expectations placed on organizations by society at a given point in
time.”

Advantages of CSR for Organization
1. It helps to avoid excessive exploitation of labor, bribery and corruption;
2. Companies would know what is expected of them, thereby promoting a level playing field;
3. Many aspects of CSR behavior are good for business (e.g., reputation, human resources,
branding, and legislation) which can help to improve profitability, growth and sustainability;
4. In some areas, such as downsizing, it could help to redress the balance between companies
and their employees; and
5. Potential “rogue” companies would find it more difficult to compete through lower
standards

Corporate Social Responsibility in India
•India is the first country in the world to make corporate social responsibility (CSR) mandatory,
following an amendment to the Companies Act, 2013 in April 2014.
•Businesses can invest their profits in areas such as education, poverty, gender equality, and
hunger as part of any CSR compliance.
•The amendment notified in the Companies Act, 2013 requires companies with a net worth of
INR 500 crore (US $70 million) or more, or an annual turnover of INR 1000 crore (US $140
million) or more, or net profit of INR 5 crore (US $699,125) or more, to spend 2 percent of their
average net profits of three years on CSR.
•Prior to that, the CSR clause was voluntary for companies, though it was mandatory to disclose
their CSR spending to shareholders.

Corporate Social Responsibility in India
CSR includes but is not limited to the following:
• Projects related to activities specified in the Companies Act; or
• Projects related to activities taken by the company board as recommended by the CSR Committee,
provided those activities cover items listed in the Companies Act.
• Businesses must note that the expenses towards CSR are not eligible for deduction in the computation
of taxable income. The government, however, is considering a re-evaluation of this provision, as well as
other CSR provisions recently introduced under the Companies (Amendment) Act, 2019 (“the Act”).

CSR Trends in India
•Since the applicability of mandatory CSR provision in 2014, CSR spending by corporate India has
increased significantly.
•In2018, companies spent 47 percent higher as compared to the amount in 2014-15,
contributing INR 7,536 crores (US $1 billion) to CSR initiatives, according to a survey.
•Listed companies in India spent INR 10,000 crore (US$1.4 billion) in various programs ranging
from educational programs, skill development, social welfare, healthcare, and environment
conservation, while the Prime Minister’s Relief Fund saw an increase of 139 percent in CSR
contribution over last one year.
•The education sector received the maximum funding (38 percent of the total) followed by
hunger, poverty, and healthcare (25 percent), environmental sustainability (12 percent), rural
development (11 percent).

ITC Ltd.
ITC Limited has spent more than the prescribed CSR budget in
last three financial years. In FY 2018-19, ITC Limited spent INR
306.95 Crores.
The Company partnered with BAIF Development Research
Foundation, Pratham Education Foundation, Ramakrishna
Mission, Bandhan Konnagar, SEWA Bharat, Foundation for
Ecological Security, ITC Sangeet Research Academy (ITC SRA), ITC
Rural Development Trust and CII–ITC Centre of Excellence for
Sustainable Development to implement CSR programmes.

Ambuja Cement Ltd.
Ambuja Cement Foundation (ACF) aims to ‘Energize, Involve
and Enable Communities to Realize their Potential’ through
its initiatives.
ACF is functional across 12 states covering 22 locations in
India and has succeeded in bringing about change in the
lives of 1.5 million people.
It plans to spend Rs 125 crore, including Rs 40 crore in
Rajasthan, towards corporate social responsibility in the
current fiscal. Pearl Tiwari, Director and CEO, ACF also
informed that the annual increase in the CSR budget was
around 10-15 per cent!

TATA Motors Ltd.
Tata Motors Limited spent INR 22 crores
(standalone) towards various schemes of CSR.
The CSR spend amount excludes INR 2.99
crore donated to Tata Community Initiative
Trust (TCIT) for repair of infrastructure which
was affected during the flood in Kerala
(August 2018).
Health, Education Employability and
Environment are major area of works where
most of CSR amount has been invested.

Hindalco Industries Ltd.
Hindalco Industries Limited is the metals flagship company of
the Aditya Birla Group.
Hindalco Industries went beyond compliance and spent INR
34.14 Cr, which is a higher figure than the prescribed INR
29.97 Cr.
The Company supports education, healthcare, sustainable
livelihood, infrastructure development and social reformation
under Corporate Social Responsibility (CSR) with 12 Lakh
beneficiaries in more than 730 villages across 11 states in
India. Hindalco has spent the highest amount of INR 10.99
crore on education sector among all its CSR initiatives.

Project Presentation Topics
1. Internal Analysis of the company- 5. Innovation as strategy
2. External Analysis for the organization 6. Unicorn (Indian start-up)
3. Business Strategy of the organization
a) Differentiation
b) Cost Leadership
4. Corporate Strategy (Growth)

a) Mergers
b) Acquisitions
c) Strategic Alliance
d) Vertical Integration strategy

Project Presentation
Time of presentation- 12 minutes
Critical Analysis- 5 minutes
Q&A- 5 minutes
Analysis with respective to competition in the market
Indian multinationals will be preferred. Each group has to select different organization.
Group has to ensure equal participation by all team members
In one slide explain why this topic
In one slide explain why this organization
Recommendations/takeaways for the organization
Zero tolerance for plagiarism. Wherever needed kindly mention the source of information
No repetition of company and topic

1
Dr. Nivisha Singh IMT Ghaziabad 03-03-2022

 Innovation described as a successful introduction of a new product, process, or
business model- is a powerful driver in the competitive process.
 The initial innovations such as the car, airplane, telephone, and the use of
electricity explain increasingly rapid technological diffusion and adoption.
 The speed of technology diffusion has accelerated further with the emergence of
the internet, social networking sites, and viral messaging.
Dr. Nivisha Singh IMT Ghaziabad 03-03-2022 2

Innovation Process
Imitation
Innovation
Invention
Idea

 Idea- abstract concepts or as finding derived from basic research.
 Invention- transformation of an idea into a new product or process, or the

modification and recombination of existing ones.
 Patent
 Trade secret

 Innovation- commercialization of any new product or process, or the modification
and recombination of existing ones.
 First-mover advantage
 Imitation- if an innovation is successful in the marketplace, competitors will

attempt to imitate it.

 Entrepreneurship- describes the process through which change agents
(entrepreneurs) undertake economic risk to innovate- to create new products,
processes, and sometimes new organizations.
 Entrepreneurs innovate by commercializing ideas and inventions
 Are agents who introduce change into the competitive system.

 Figure out how to use inventions, introduce new products or services, production
processes, and new forms of organization.
 Entrepreneurs can introduce change by starting new ventures or they can be found
within existing firms (intrapreneurs).
 This requires skill, commitment, and risk taking intensity.

 Strategic entrepreneurship involve the exhibition of organizationally consequential
innovations that are adopted in the pursuit of competitive advantage.
 It can take one of five forms-
1. Strategic renewal
2. Sustained regeneration
3. Domain redefinition
4. Organizational rejuvenation, and
5. Business Model reconstruction
 Social entrepreneurship describes the pursuit of social goals while creating profitable
business. They evaluate the performance of their ventures not only by financial metrics
but also by ecological and social contribution (profits, planet, and people).

10
Dr. Nivisha Singh IMT Ghaziabad 03-03-2022

How they are innovative?

 How Innovation create value for potential
customers?
 How company will capture value from its

innovation?
 What type of innovation will allow company

to create and capture value and, how
resource allocation can be understood?

 Radical Innovation
• Provide significant technological breakthrough and create new knowledge
• Are revolutionary and nonlinear in nature, typically use new technologies to serve newly
created markets.
• Radical innovations have strong potential to lead significant growth in revenue and profits.
These are rare because of the difficulty and risks involved in developing them.
• Examples: Personal computers

Airplanes
TV

 Incremental Innovation
• Refers to simple changes or adjustments in existing products, services or processes.

• There is growing evidence that companies seeking to increase the payoff from innovation
investments best do so by focusing on incremental innovations.
• A major drive of incremental innovation in many companies has come from programs
aimed at continuous improvement, cost reduction, and quality management.
• Example: Gillette
Diet Coke
Toyota- Process innovation

 Architectural Innovation
 A new product in which known components, based on existing technologies, are
reconfigured in a novel way to attack new market.
 The core components of the product remain the same, but the relationship
between these components and how they link to one another, changes
 Examples: Canon and Xerox
Smart Watch- existing cell phone technology repackaged into a watch

 Disruptive Innovation
•A disruptive innovation creates substantial growth by offering a new performance

trajectory that, even if initially inferior to the performance of existing technologies, has
the potential to become markedly superior.
• This superior performance can produce spectacular growth, either by creating new sets
of customers or by undercutting the cost base of rival business models.
• Example: Cassettes to CDs

LED bulbs
Amazon’s online book store

1. Continue to innovate in order to stay ahead of the competition
2. Guard against disruptive innovation by protecting the low end of the market
3. Disrupt yourself, rather than wait for other to disrupt you

 Open Innovation
 “Open Innovation is the use of purposive inflows and outflows of knowledge to
accelerate internal innovation, and expand the markets for external use of innovation,
respectively”
-(Chesbrough, 2006: p. 1).
 Lego - Creating new products from community ideas
 The mini-Big Bang Theory Lego set is a community-based product that originated in the Lego
Ideas.
 GE- Connecting with young talents
 GE is famous for their open innovation challenges and initiatives on their open innovation
page. These challenges aim for external open innovation and new ideas.
 P&G - Being open about the innovation needs
 P&G’s open innovation with external partners culminates in their Connect+Develop website.

 Reverse Innovation
 An innovation is reverse when it is first developed for and adopted in the
developing world (or emerging world) before “spreading” to the industrial world.
-(Govindarajan & Ramamurti, 2011).
 Procter and Gamble (P&G) – Vicks Honey Cough – Honey-based cold remedy
 P&G’s (Vicks Honey Cough) honey-based cold remedy developed in Mexico found
success in European and the United States market.
 Nestle – Low-cost, low-fat dried noodles
 Nestle’s Maggi brand – Low-cost, low-fat dried noodles developed for rural India and
Pakistan found a market in Australia and New Zealand as a healthy and budget-friendly
alternative.

 4Ps Framework
• It classifies innovation into four different types. It stems from the classical
classification of innovation proposed by Peter Schumpeter. Schumpeter
distinguished between five different types of innovations.
1. New Product
2. New methods of production
3. New sources of supply
4. The exploitation of new markets and
5. New ways to organize business

 The 4Ps model limits the
classification to four categories.
The different categories in the
model are:
 Product
 Process
 Position
 Paradigm

 Product Innovation: Changes in the products or services that an organization
offers. It could be either radical or incremental.
 Example: Hybrid Engines –radical innovation
 Improved performance of incandescent light bulbs- incremental
innovation
 Process Innovation: Changes in the ways in which products/services are created

and delivered.
 Example: Toyota Production System and other lean approaches
 Mobile Banking

Position Innovation: Changes in the context in which the products/services are
introduced.
Example: Low-cost airlines- Incremental Innovation
Addressing under-served market is a radical innovation. (Amazon.com)
Paradigm Innovation: Changes in the underlying mental models, which frame what
the organization does.
Example: IBM moving from being machine maker to a service and solution company-
incremental innovation
Grameen Bank’s microfinance model- radical innovation

LIFE CYCLE STAGES
Introduction Growth Shakeout Maturity Decline
Core • R&D, • R&D, • Manufacturing • Manufacturing • Manufacturing
Competency • some • some • process • process • process
Marketing manufacturing engineering engineering, engineering,
marketing • marketing • marketing,
service
Type and • Product • Product After emergence • Product Product & process
level of innovation of a innovation of standard: innovation at a innovation ceased
Innovation maximum; decreasing; • product minimum;
• process • process innovation • process
innovation at a innovation decreasing innovation at a
minimum increasing rapidly; maximum
• process
innovation
increasing
rapidly
Market Slow High Moderate and None to moderate Negative
Growth slowing down
Market Size Small Moderate Large Largest Small to moderate
26
Price High Falling Moderate Low Low to high
LIFE CYCLE STAGES
Introduction Growth Shakeout Maturity Decline
Number of Few, if any Many Fewer Moderate, but Few, if any
Competitors large
Mode of Non-price Non-price Shifting from Price Price or non-
Competition competition competition non-price to price
price competition
competition
Type of Buyers Technology Early adopters Early majority Late majority Laggards
enthusiasts
Business-level Differentiation Differentiation Differentiation, or Cost-leadership Cost-leadership,
Strategy integration or integration differentiation, or
strategy strategy integration
strategy
Strategic Achieving Staking out a Surviving by Maintaining Exit, harvest,

Objective market strong strategic drawing on strong strategic maintain, or
acceptance position: “deep pockets” position consolidate
generating
“deep pockets” 27
Strategic Alliances

Strategic Alliances
•A strategic alliance is an intention of two or more institutions to cooperate at a strategic level,
to share information, and to work together in a way that may go beyond a clear contractual
arrangement.
•It is a cooperative arrangement between two or more companies where:

• A common strategy is developed in unison and a win-win attitude is adopted by all parties.
• The relationship is reciprocal, with each partner prepared to share specific strengths with each other,
thus lending power to the enterprise
• A pooling of resources, investments, and risks occur for mutual (rather than individual) gain

Type of Strategic Alliances
Equity Alliances
◦ This alliance is created when one company purchases a certain equity percentage of the
other company.
◦ Example: An example of an equity strategic alliance is Tesla’s relationship with Panasonic.
Their relationship began with a $30 million investment from Panasonic to accelerate battery
technology for electric vehicles and grew to include building a lithium-ion battery plant in
Nevada.
◦ A consortium alliance involves several partners setting up a venture together.

◦ Example: IBM, Hewlett Packard, Toshiba and Samsung are partners in the Sematech
research consortium, working together on the latest semiconductor technologies.

Non-equity alliances
• Is an alliance in which two or more firms develop a contractual-relationship to
share some of their resources and capabilities to create a competitive
advantage.
• One common form of contractual alliance is franchising, where one

organization (the franchisor) gives another organization (the franchisee) the
right to sell the franchisor’s products or services in a particular location in
return for a fee or royalty
• Example: McDonald’s restaurants and Subway

Non-equity alliance
•Licensing is a similar kind of contractual alliance, allowing partners to
use intellectual property such as patents or brands in return for a fee
•Another example is long-term subcontracting.

•Example: Galvani Bioelectronics, there are many non-equity strategic
alliances that have grown out of the original joint venture through
Project Baseline. This is a connected ecosystem of organizations all
working together to create “a more comprehensive, precise map of
human health.

Strategic Alliances Motives

Motives for alliances
1. Scale Alliances:
a) Economies of scale in the production of output (products or services) and in terms of input.
b) Sharing of risks
2. Access Alliances:
a) Access to capabilities of another organization
b) Access to tangible resources such as distribution channels or products and intangible such as
knowledge and social/political connections

3. Complementary Alliances:
a) By partnering two organizations can bring together complementary strengths in order to
overcome their individual weaknesses.
b) Example: General Motors-Toyota NUMMI alliance
4. Collusive Alliances:
a) Organizations secretly collude together into cartels
b) Reduce competition, extract higher prices from customers or lower prices from suppliers
c) Such cartels among for-profit businesses are generally illegal, so there is no public agreement
between them

Strategic Alliance Processes- Alliance Evolution
Source: Adapted
from E. Murray
and J. Mahon
(1993)

Capturing the benefits of Strategic Alliances
Being
sensitive to
cultural
differences
Recognizing
that the
Picking a good
alliance must
partner
benefit both
sides
Strategic
Alliance
Factors
Adjusting the
Ensuring both
agreement
parties keep
over time to
their
fit new
commitments
circumstances
Structuring
the decision-
making
process for
swift actions

Drawbacks of Strategic Alliances
•Culture clash and integration problems due to different management styles and business
practices.
•Anticipated gains do not materialize due to an overly optimistic view of the synergies or a poor
fit of partners’ resources and capabilities.
•Risk of becoming dependent on partner firms for essential expertise ad capabilities.
•Protection of proprietary technologies, knowledge bases, or trade secrets from partners who
are rivals.

Examples of Strategic Alliances
1. ICICI Bank and Vodafone India: A strategic alliance example in India is of ICICI Bank, India’s
largest private sector bank and Vodafone India, one of India’s largest telecom service
providers, entered into a strategic alliance to launch a unique mobile money transfer and
payment service called ‘m-pesa’.
2. Etihad and Jet Airways: Etihad Airways, based in Abu Dhabi, has completed an investment in
India’s Jet Airways. This alliance will provide considerable benefits for both carriers, as it
opens Etihad to 23 cities in India, and offers Jet Airways passengers connection possibilities
to the US, Europe, Middle East and Africa that were previously unavailable.

3. Spotify and Uber strategic alliance: The power to enter a hired car welcomed by your
favorite playlist provides extra value, significant competitive advantage and exclusivity for
Uber cars. For Spotify, it offers an incentive for users to upgrade to the premium level.
4. Microsoft India and TCS: Microsoft India and Tata Consultancy Services (TCS) entered into a
strategic alliance to launch Microsoft-TCS virtualization Center of Excellence (CoE). It is
designed to help customers experience the right approach to applying and managing
virtualization across IT architectural layers
5. Tata Consultancy Services (TCS) and ANSYS Inc, a global innovator of simulation software
and product development technology, entered into a partnership which will help their clients
accelerate product development dramatically and simultaneously boost the quality and
reliability of their designs through integrated digital prototyping.

Franchising
•It involves the right to use the business format, usually a brand name, in an overseas market.
•Franchising is another form of contractual arrangement and is commonest in retailing. Some of

the well-known franchises in India are Pizza Hut, UPS India, McDonald’s, Yum Brands, Baskin
Robbins, Subway etc.
•The franchisee pays the franchiser a fee for services and royalties, typically for the use of the
company name, business approaches, and advertising. The franchisee risk is determined by the
success of the brand name and by the support and advice provided by the franchiser.

•The franchise is usually for a fixed period and for a specific ‘territory’.
•In return for this, the franchisor receives some form of payment, which is normally in two parts.
The first part is a royalty for the use of trade-mark, and second is for the training and advisory
services given to the franchisee.
•Very often, the two fees are combined into a single ‘management’ fee. In addition, there is a
‘Disclosure’ fee, which is separate and is always a ‘front-end fee’.

Advantages of Franchising
1. Low investment and low risk
2. Franchisor can get the information regarding the market culture, customs and environment
of the host country
3. Franchisor learns more from the experience of the franchisees
4. Franchisee escapes from the risk of product failure.

Disadvantages of Franchising
1. It is difficult to control the international franchisee
2. Both the parties have the responsibilities to maintain product quality and product promotion
3. There is a problem of leakage of trade secrets

900 centers across 330 cities across India. 853 exclusive branded stores across 23 states in India,

Licensing
•A licensing agreement is an arrangement whereby a licensor grants the rights to intangible
property to another entity (the licensee) for a specified time period, and in return, the licensor
receives a royalty fee from the licensee.
•Intangible property includes patents, inventions, formulas, processes, designs, copyrights, and
trademarks.
•Licensing is more frequent in high technology businesses, particularly in foreign countries or

specialized markets where the volumes of business may be too low to justify a permanent
presence. Such contracts normally have a defined duration.

Key Licensing elements
A valid license agreement must also include:
◦ a list of the licensed merchandise and how it can be sold or distributed;
◦ the term and territory of the license;
◦ the frequency and amount of royalties payable by the licensee, as well as tax issues;
◦ each party’s termination rights, as well as their rights and obligations after termination;
◦ the parties’ respective rights and obligations should they discover third-party infringement of the mark;
◦ establishment of a local website, domain registration and the right to sell through local e-commerce
portals;
◦ the means for handling consumer complaints and product-related regulatory issues; and
◦ each party’s indemnification and obligations – the licensor may want recognition of its exclusive rights
in the brand name and trade dress, while the licensee may not be allowed to deal with competitor
products or to sub-license.

Advantages of Licensing
1. The firm does not have to bear the development costs and risks associated with opening a
foreign market.
2. The firms avoids barriers to investment
3. It allows a firm with intangible property that might have business applications, but which
doesn’t want to develop those applications itself, to capitalize on market opportunities.

Disadvantages of Licensing
1. The firm doesn’t have the tight control over manufacturing, marketing, and strategy required
for realizing experience curve and location economies
2. It limits a firm’s ability to coordinate strategic moves across countries by using profits earned
in one country to support competitive attacks in another
3. Proprietary (or intangible) assets could be lost
One way of reducing this risk is through the use of cross-licensing agreements where a firm
might license intangible property to a foreign partner, but requests that the foreign partner
license some of its valuable know-how to the firm in addition to a royalty payment.

Outsourcing
•Outsourcing involves transferring some of the tasks to the outside company, consists of a contract
which is agreed by both the companies.
•Types:
• Business Process Outsourcing
• Knowledge Process Outsourcing
•Reasons:
◦ Focus on core activities
◦ Improve quality
◦ Reduce costs
◦ Conserve capital
◦ Faster renovation
◦ Increase speed to market

Joint Venture
•In a joint venture, two or more organizations form a separate legal undertaking, which is an
independent organization for strategic purposes.
•The partnership is usually focused on a specific market objective. It may last from a few months
to a few years, and often involves a cross-border relationship. One organization may purchase a
percentage of the stock in the other partner, but not a controlling share.
•Entering into a joint venture agreement is extremely advantageous when it is contracted
between a company with technology and a company with market access. It normally takes the
form of a new company, with each of the partners owning shares in the company.
• For example, General Motors came into India through a joint venture with Hindustan Motors
and set-up its manufacturing facilities at Halol, in Gujarat

Joint ventures are often entered into for a single purpose - a production or research activity. But
they may also be formed for a continuing purpose.
Joint ventures are, basically:
◦ Separate companies with a shared interest and goals
◦ Both companies have some proprietary (ownership) basis for in this shared interest. For example, two
companies with online patents for accounting apps might form a joint venture.
◦ They agree to share income and expenses.
Both companies in a joint venture maintain their separate identities for all purposes except
those of the joint venture.
Example: In 2016, Google’s parent company Alphabet announced a joint venture with
GlaxoSmithKline to research treating diseases with electrical signals. The joint venture, Galvani
Bioelectronics, has continued to grow, bringing on more partners to build devices and further
research in the emerging field of bioelectronics

Planning Stage
1. Specify the goals and objectives
2. Determination of the product and market
3. Market Analysis
4. Technology Decisions
5. Financial Requirements
6. Foreign Exchange Analysis
7. Human Resource and Skill Requirements
8. Revenue Predictions
9. Cost Benefit Analysis

Partner Selection
Following considerations have to be made while selecting partners for JV
1. Financial resources of the prospective partners
2. Technological know how and capabilities
3. Presence in the target market
4. Organizational culture and management style
5. Type of organizational structure adopted
6. Credibility study
7. Ranking of the prospective partners based on above mentioned criteria
8. Selection of partners for the feasibility study

Feasibility
1. Prediction of the culture and structure of JV
2. Analysis of partners comfort with and adaptability to the new technology and culture of JV
3. Analysis of the authority, responsibility and financial gains and loss sharing among the
partners
4. Market analysis and viability of the JV
5. Analysis of the sustainability of the JV in times of uncertain
6. Environment Analysis of the JV in the market
7. Growth predictions

Incorporation
A JV can be brought about in the following ways:
1. Foreign investor buying an interest in a local company
2. Local firm acquiring an interest in an existing foreign firm
3. Both the foreign and local entrepreneurs jointly forming a new enterprise

Dissolution of JV
The JV is not a permanent structure. It can be dissolved when:
1. Aims of original venture met
2. Aims of original venture not met
3. Either or both parties develop new goals
4. Either or both parties no longer agree with joint venture aims
5. Time agreed for joint venture has expired
6. Legal or financial issues
7. Evolving market conditions mean that joint venture is no longer appropriate or relevant
8. One party acquires the other

Advantages of Joint Venture
1. Risk diversification and allocation of risks between the partners
2. Sharing of resources
3. Can be a means of reducing political and other investment risks
4. Access to the distribution network

Disadvantages of Joint Venture
1. Lack of management control
2. Joint venture’s negotiations are time consuming, requires a lot of contractual framework and
long period of due-diligence
3. Lack of trust
4. Risk of conflict as a result of cultural differences

Examples of JVs in India
1. Vistara- Brand name of Tata SIA Airlines Ltd.
• JV between India’s corporate giant TATA sons and Singapore Airlines. Tata Sons hold 51% and SIA
49% in the airline.
2. BrahMos Aerospace
• The name BrahMos is derived from names of Brahmaputra river of India and Moskva, Russian
river. India’s entry into supersonic missile club was led by BrahMos Aerospace, a JV between
India’s Defense Research and Development Organization (DRDO) and Russia’s NOP
Mashinostoryenia.
3. Bharti-AXA General Insurance Co Ltd

• Bharti AXA General Insurance Co Ltd is a JV between India’s leading business group Bharti
Enterprises and insurance major from France, AXA. This leading insurer in India began operations
in August 2008.

4. Mahindra-Renault Ltd.
◦ Mahindra-Renault, founded in 2007 brings together India’s largest automobile
manufacturer Mahindra & Mahindra and world-renowned vehicle maker, Renault SA of
France. The Indian firm owns 51 percent of this venture while 49 percent stake is held by
Renault.
5. ApoKos Rehab Pvt. Ltd

◦ ApoKos Rehab Pvt. Ltd is a joint venture between Apollo Group of hospitals and clinics,
Asia’s largest caregiver, and KOS Group, Italy, which specializes in social health and
advanced healthcare support system.

6. Aviva India Life Insurance:
◦ Aviva India Life Insurance is the first example of an Ayurvedic company of India diversifying
into insurance sector.
◦ AILI is a JV between among Dabur India Ltd, one of the oldest Ayurvedic medicines and
cosmetics company of India and Aviva plc, one of the oldest and highly respected British
finance and insurance provider.
◦ Dabur holds stake in this JV through its subsidiary, Dabur Invest Corp. This JV was formed in
2002. Dabur Invest Corp holds 74 percent state in Aviva India Life Insurance while Aviva
Group holds 26 percent.

7. GATI-KWE
◦ GATI-Kintetsu Express Private Limited (GATI-KWE) is a joint venture company between GATI– India’s
leading logistics, distribution and supply chain provider and Japan’s Kintetsu World Express.
◦ The JV allows GATI-KWE to offer customers in India, a high-quality logistics service using various
modes of transportation across different terrain.
8. Network18 Media & Investments

◦ Network18 is a renowned electronic media company owned by India’s corporate giant Reliance
Industries Ltd. Network18 has two successful JVs in India.
◦ Network18-CNN: This JV between Network18 and America’s Cable News Network or CNN, a Time-
Warner company operates satellite TV channels CNN-News18, CNBC-News18, CNBZ Awaaz and IBN7.
◦ Network18 –Viacom: This JV between Network18 and Viacom operates popular satellite TV channels,
Colours, Colours HD, Rishtey and MTV, among others.

9. ICICI Bank (Insurance & Investments)
◦ India’s private banking giant, ICICI Bank has two successful JVs to offer insurance products.
◦ ICICI Prudential Life Insurance Company Ltd: is a joint venture between ICICI Bank and UK-based
Prudential Corporation Holdings Limited.
◦ ICICI Lombard: is a JV between ICICI Bank and Fairfax Financial Holdings Ltd of Canada.
◦ Through these JVs, ICICI Bank offers a variety of insurance and investment products to clients in India
and Indian citizens residing in various parts of the world.

Source: Business Standard

Greenfield Ventures
Greenfield venture is a form of market entry strategy with establishment of a new wholly owned subsidiary
in a foreign country by constructing its facilities from start.
A Greenfield venture may be better when the firm needs to transfer organizationally embedded
competencies, skills, routines, and culture.
Through Greenfield Venture, a business enters a new market without the help of another business which is
already present there. Although the process of setting up a Greenfield Venture, in most cases, is complex
and more expensive, yet it provides maximum control to the firm. This is because the firm develops the
project from the beginning thereby building its own culture and structure.
For example: Nissan’s Canton plant in Mississippi, the first auto factory built in Mississippi had to rely on
inexperienced workforce to set up the plant. They had to face great logistical and cultural difficulties as
well high risks.
Example: Bangalore International Airport, Hyderabad international Airport

Greenfield
Advantages Disadvantages
It gives the firm a greater ability to build the kind of Slower to establish
subsidiary company that it wants.
Opportunity to build organization culture from scratch Very Risky
Costly
Uncertainty associated with revenue

Brownfield
A former industrial or commercial site where future use is affected by real or perceived
environmental contamination.
Real property, the expansion, redevelopment, or reuse of which may be complicated by the
presence or potential presence of a hazardous substance, pollutant, or contaminant.
Example: Delhi International Airport, Mumbai Airport, Chennai Airport

Greenfield Vs Brownfield
Greenfield Brownfield
Maximum Flexibility Constraints in modification and expansion
Tax breaks or other incentives (subsidies) No tax breaks
High cost of establishment Higher cleaning up costs and liabilities
Lower maintenance High maintenance
Greater control over project & Business Work with constraints (interference from partners)
Take all approvals and permissions Most approvals are already in place
Land acquisitions and environmental concerns e.g.: Issues of contamination and pollution from existing
Posco steel plant in Orissa delayed by 10 years facilities

Greenfield Project- Bengaluru
International Airport

Brownfield Project- Mumbai Airport

Further Readings
Journals
Strategic Alliances
1. Berger, R., Barnes, B. R., Konwar, Z., & Singh, R. (2020). Doing business in Indian: The role of
jaan-pehchaan. Industrial Marketing Management.
2. Chaharbaghi, K., Adcroft, A., Willis, R., Todeva, E., & Knoke, D. (2005). Strategic alliances and
models of collaboration. Management decision.
3. Whipple, J. M., & Frankel, R. (2000). Strategic alliance success factors. Journal of supply chain
management, 36(2), 21-28.
4. Lorange, P., & Roos, J. (1991). Why some strategic alliances succeed and others fail. The
Journal of Business Strategy, 12(1), 25.

Further Readings
Joint Venture
9. Inkpen, A. C., & Li, K. Q. (1999). Joint venture formation: Planning and knowledge-gathering
for success. Organizational Dynamics, 27(4), 33-47.
10. Robson, M. J., Leonidou, L. C., & Katsikeas, C. S. (2002). Factors influencing international joint
venture performance: Theoretical perspectives, assessment, and future directions. MIR:
Management International Review, 385-418.

Mergers & Acquisitions

Mergers and Acquisitions Activity in India
in 2021
Mergers and acquisitions (M&As) reached an all-time high in India in 2021 .
According to a recent report by Bain & Company titled “India M&A: Acquiring to Transform”,
merger and acquisition (M&A) activity in India was at an all time high in 2021, driven mainly by
first-time buyers.
The Bain study reports that in 2021, India saw the finalization of 85 strategic deals valued over
US$75 million, out of which first-time buyers accounted for 80 percent of the volume.
Major sectors that have emerged as lucrative hotspots for acquisition activity include renewable
energy, electric vehicles, consumer durables, EdTech, and Fintech.
Favorable policy support as well as falling prices have made India an attractive destination for
renewable investments.

Organic Development
•Organic development is where a strategy is pursued by building on and developing an
organization’s own capabilities. This is essentially the ‘do it yourself’ method.
•Example: Amazon’s entry into the e-books market with its Kindle product was principally
organic.
•Example: easyGroup’s creation of a new subsidiary easyFoodstore

•Other companies which follow this are Dominos, Apple, Costa Coffee

Advantages of Organic Development
1. Knowledge and Learning can be enhanced
2. Spreading investment over time- easier to finance
3. No availability constraints- no need to search for suitable partners or acquisition targets.
4. Strategic independence- less need to make compromises or accept strategic constraints.
5. Culture Management- reduces risk of culture clash

Disadvantages of Organic Development
•Can be slow, expensive, risky
•Difficult to use existing capabilities as the platform for major leaps in terms of innovation,
diversification or internationalization.

Acquisition
•An acquisition is a strategy through which one firm buys a controlling, or 100%, interest in another
firm with the intent of making the acquired firm a subsidiary business within its portfolio.
•After completing the transaction, the management of the acquired firm reports to the management
of the acquiring firm.
•Example:
• Company A + Company B= Company A (will be the major owner)
• TATA Digital acquired BigBasket
• PharmEasy acquires Thyrocare

Acquisition- why is it important?
1. Increased market power – P&G acquisition of Gillette
2. Overcome entry barriers- Apollo Tyres acquired Dunlop Africa
3. Cost of new product development- Apple bought Siri in 2010 and Beats Electronic in 2014
4. Increased speed to market- Tata’s takeover of Corus Steel in 2006
5. Lower risk compared to developing new products- Pharmaceutical company acquired
another pharmaceutical company Wyeth.
6. Increased diversification- Reliance acquired Hamleys
7. Avoid excess competition- Google acquired Android in 2005.

Acquisition: Problem with acquisition
•Inadequate valuation of target
•Inability to achieve synergy
•Finance by taking huge debt

Types of Acquisition
1. Horizontal Acquisition
2. Vertical Acquisition
3. Conglomerate Acquisition
4. Concentric

1. Horizontal Acquisition
This is when a company acquires another company in the same business, or industry or sector,
that is, a competitor.
Example: Facebook acquired WhatsApp. WhatsApp still exists with its brand name, however, it is
now owned by Facebook.

2. Vertical Acquisition
When a company acquires either a supplier of inputs or a distributor of its products or the
company to which it sells its products.
This is mostly done to have higher control over the supply chain and therefore impacting the
receipt of raw material and delivery of products and in turn, impacting the turn-around time of
the sourcing of input and delivery of the product to the end-user.
For example, a garment company acquiring the source of cotton such as a farm.

3. Conglomerate Acquisition
This is when a company acquires a company in a completely different kind of business,
industry or sector. This is mostly done for diversification.
An example of this would be a food industry company acquiring a company in the clothing
industry.
Example: Reliance Industries recently took over Hamley’s, a toy products company. Reliance is
a giant conglomerate, which wanted to diversify into the toy industry and therefore undertook
the acquisition by getting the 100% ownership transferred to itself.

•Marking its first international foray, billionaire
Mukesh Ambani-led Reliance Brands has
announced to buy out iconic British toy-maker
Hamleys in a GBP 67.96 million deal or around
Rs 620 crore.
•Interestingly, Hamleys, founded in 1760, is more
than 250 years old and has 167 stores across 18
countries.
•Reliance Lifestyle Holdings Limited, a subsidiary
of Reliance Brands is the Indian franchise of the
Hamleys brand and has 88 stores in India.
•With this acquisition, the Mukesh Ambani-led
firm will catapult to be a major player in the
global toy retail industry.
4. Concentric Acquisition
Similar audience with different but related products
Example- Coke & Vitamin Water - When Coke announced its plan to buy Vitamin Water in 2007,
it gave the company an even stronger foothold in the Beverage industry

Types of Takeovers
1. Reverse Takeovers
2. Back Flip Takeovers
3. Hostile Takeovers
4. Bail-out Takeover

Reverse Takeovers
•A private company takes over a public company; an already-listed company.
•A reverse takeover (reverse IPO) is the acquisition of a public company by a private company so
that the private company can bypass the lengthy and complex process of going public

Advantages of Reverse Takeover
•Reverse takeovers can allow a private company to come public for lower cost, and quicker, than
an IPO.
•Reverse takeovers can get companies to the public market in less than a month.
•As well, unlike conventional IPOs that can be canceled if the equity markets are performing
poorly, reverse takeovers aren’t generally put on hold.

Disadvantages of Reverse Takeover
•Reverse acquisition can reveal weaknesses in the private company’s management experience
and record keeping.
•As well, many reverse acquisitions “fail,” in that they end up not leading up to the promised
expectations.

Back Flip Takeover
•The purchasing company becomes a subsidiary of the purchased company. The combined entity
retains the name of the acquired company. The reason behind this is to take benefit of the brand
value of the taken over company.
•While the acquired company's assets are subsumed into the acquiring company, control of the
combined entity is generally in the hands of the acquirer.
•Example: AT&T was taken over by SBC but AT&T name was continued.

Hostile Takeover
•Here, the entire process is done by force.
•Hostile takeover occurs, when one company purchase other against the wishes of the target
company's management and board of directors. It is the opposite of friendly takeover.

Strategies of Hostile Takeover
When the purchaser is planning to carry out the hostile takeover it is highly recommended to
draw the information from external sources such as:
• merchant banks (that have the required experience in these transactions),

• lawyers,
• public relations specialists,
• stockbrokers.

There are two main strategies for carrying out the hostile takeover:
• When the company is publicly-traded then the purchaser may buy-out the assets by using
the stock-exchange. However, according to the law when a certain threshold of owning the
company assets is exceeded then acquiring company needs to announce it, which often make
it impossible to buy-out more of the stocks.
• The second strategy lies in sending the offer directly to shareholders of target company. Such
tender offer (or takeover bid) defines the terms of takeover. This method is used when there
is no possibility to reach an agreement with the management of purchased company.

Bail-out Takeover
•When a financially sick company is taken over by a profit earning company in order to bail out
the former, it is called a bail-out takeover.

Acquisition Process
Target Choice Negotiations Integration Results
Due diligence Completion and

change of ownership

Attributes of successful acquisitions
S.N Attributes Results
o.
1 Acquired firm has assets or resources that are High probability of synergy and competitive advantage by
complementary to the acquiring firm’s core business. maintaining strengths
2 Acquisition is friendly Faster and more effective integration and possibly lower
premiums
3 Acquired firm conducts effective due diligence to Firms with strongest complementarities are acquired and
select target firms and evaluate the target firm’s overpayment is avoided
health (financial, cultural, and human resource)
4 Acquiring firm has financial slack (cash or a favorable Financing (debt or equity) is easier and less costly to obtain
debt position)
5 Acquiring firm has sustained and consistent emphasis Maintain long-term competitive advantage in markets
on R&D and innovation
6 Merged firm maintains low to moderate debt position Lower financing cost, lower risk (e.g. of bankruptcy), and
avoidance of trade-offs that are associated with high debt
7 Acquiring firm manages change well and is flexible and Faster and more effective integration facilitates achievement
adaptable of synergy

Acquisition Integration Matrix
Source: Haspeslagh & Jemison (1991)

Aftermaths of acquisitions
1. Restructuring- Wipro, L&T
2. Downsizing- merger of Air India and Indian Airlines
3. Downscoping- Motorola, L&T, TATA Group

Merger
•A merger is a strategy when two firms agree to integrate their operations on a relatively co-
equal basis.
•A merger describes two firms, of approximately the same size, that join forces to move forward
as a single new entity, rather than remain separately owned and operated.
•Example= A+B=AB
•Compaq and HP (2002)

Types of Merger
1. Horizontal Merger
2. Vertical Merger
3. Congeneric Merger
1. Market-extension Merger
2. Product-extension Merger
4. Conglomeration

Horizontal Merger
•It refers to the merger of two companies who are direct competitors of one another. They serve
the same market and sell the same product.
•It provides economies of scale. This is achieved by brining together related business.
•Example
• Brook Bond Lipton India Ltd. (merger of Lipton India and Brook Bond)
• Industrial Credit and Investment Corporation of India (merger of Bank of Mathura and ICICI Bank)

Vertical Merger
•It internalizes transactions to achieve cost efficiencies. It does this by integrating different
types of businesses that may share a supplier-customer relationship.
•This type of merger involves a customer and a company or a supplier and a company merging.
•Example

Congeneric
•Two businesses that serve the same consumer base in different ways, such as TV manufacturer
and a cable company. It is of two types
• Product-extension merger
• Market-extension merger
•Example: TATA-Sky

Product-Extension Merger
• Companies which sell different products of a related category.

Market-extension Merger
•This involves the combination of two companies that sell the same products in different
markets. A market-extension merger allows for the market that can be reached to become
larger and is the basis for the name of the merger.
•Example: Dell’s Alienware Gaming Laptops

Conglomerate
•Firms in dissimilar businesses are brought together to take advantage of different skills in
specific managerial functions or to exploit organizational capital.
•An example of this type of acquisition is IBM’s purchase of Daksh. IBM was not being able to
penetrate the Business Process Outsourcing market, while it saw itself qualified to provide
value. By acquiring Daksh, IBM expects to improve the above average profit of Daksh’s present
operations.

Difference between Mergers &
Acquisitions

Difference between Merger and
Acquisition
MERGER ACQUISITION
Merging of two organization in to one Buying one organization by another
It is a mutual decision It can be friendly takeover or hostile takeover
Through merger shareholders can increase their net Buyers cannot raise their enough capital
worth
It is time consuming and the company has to It is faster and easier transaction
maintain so much legal issues
Dilution of ownership occurs in merger The acquirer does not experience the dilution of
ownership

Ways of Merger
A merger can take place in following ways:
1. By purchasing of assets
• The assets of company Y may be sold to company X. Once this is done company Y is then legally
terminated and company X survives.
2. By purchasing of common shares

• The common share of company Y may be purchased by company X. When company X holds all
the share of company, it is dissolved.

3. By exchanging of shares for assets
• The company X may give their shares to stakeholders of company Y for its net assets. The
company Y terminated by its shareholder who now holds share of company X.
4. By exchanging of shares for shares

• Company X gives its shares to the shareholder of company Y and then company X is terminated.

Motives for Mergers and Acquisitions
STRATEGIC MOTIVES FINANCIAL MOTIVES MANAGERIAL MOTIVES
1. Extension 1. Financial Efficiency 1. Personal Ambition

2. Consolidation 2. Tax Efficiency
3. Capabilities 3. Asset Stripping or Unbundling 2. Bandwagon Effects

Process of Merger & Acquisition
The process of merger & acquisition has the following steps:
1. Approval of Board of Directors
2. Information to the stock exchange
3. Application in the High Court
4. Shareholders and Creditors meetings
5. Sanction by the High Court
6. Filing of the court order
7. Transfer of assets and liabilities
8. Payment by cash and securities

Motives For Mergers & Acquisition
1. Economies of large scale business:
◦ Enjoys both internal and external economies
2. Elimination of competition
◦ It eliminates intense & wasteful expenditure by different competing organization
3. Desire to enjoy monopoly power

◦ M&A leads to monopolistic control in the market
4. Adoption of modern technology

◦ Corporate organization require large resources

Benefits of Mergers & Acquisition
1. Greater value generation
◦ M&A generally succeed in generating cost efficiency through the implementation of economies of scale.
2. Gaining Cost efficiency :

◦ The joint companies benefits in terms of cost efficiency as two firms form new bigger company.
3. Increase in market share:

◦ An increase in market share is one of the possible benefits of M&A.

4. Gain higher competitiveness
a) The new firm is usually more cost-efficient and competitive as compared to its financially weak parent
organization.
5. Economies of scale: This generally refers to a method in which the average cost per unit is
decreased through increased production, since fixed costs are shared over an increased
number of goods. In a layman's language, more the products, more is the bargaining power.
This is possible only when the companies merge/ combine/ acquired, as the same can often
obliterate duplicate departments or operation, thereby lowering the cost of the company
relative to theoretically the same revenue stream, thus increasing profit. It also provides
varied pool of resources of both the combining companies along with a larger share in the
market, wherein the resources can be exercised.

6. Increased revenue /Increased Market Share: This motive assumes that the company will be
absorbing the major competitor and thus increase its power (by capturing increased market
share) to set prices.
7. Corporate Synergy: Better use of complimentary resources. It may take the form of revenue
enhancement (to generate more revenue than its two predecessor standalone companies
would be able to generate) and cost savings (to reduce or eliminate expenses associated
with running a business).

9. Taxes : A profitable can buy a loss maker to use the target's tax right off i.e. wherein a sick
company is bought by giants.
10. Geographical or other diversification: this is designed to smooth the earning results of a
company, which over the long term smoothens the stock price of the company giving
conservative investors more confidence in investing in the company. However, this does not
always deliver value to shareholders.

Benefits of Mergers & Acquisitions
11. Resource transfer: Resources are unevenly distributed across firms and interaction of target
and acquiring firm resources can create value through either overcoming information
asymmetry or by combining scarce resources. E.g.: Laying of employees, reducing taxes etc.
12. Improved market reach and industry visibility - Companies buy companies to reach new
markets and grow revenues and earnings. A merge may expand two companies' marketing
and distribution, giving them new sales opportunities. A merger can also improve a
company's standing in the investment community: bigger firms often have an easier time
raising capital than smaller ones.

Problems of Mergers & Acquisition
1. Integration difficulties
2. Large or extraordinary debt
3. Managers overly focused on acquisition
4. Overly diversified

Legal Issues in Mergers
•InIndia, the provisions relating to mergers and amalgamations, and other schemes, are
contained in Chapter V of The Companies Act, 1956. This chapter is divided into three parts:
Section 390 to 394A and 396A, Section 395, ad Section 396.
•Section 390 deals with the definition of a company arrangement and unsecured creditors.
•Provisions of Sections 391, 392 ad 393 deal with the procedure for obtaining approvals and
powers, information as to compromises or arrangements to enforce these powers, ad
information as to compromises or arrangements with creditors and members.
•Section 394 related to facilitating reconstruction and amalgamation of companies. Section 394A
empowers the central government to become a statutory party to petitions lying before High
Courts.
•Section 395 provides for power and duty to acquire shares of shareholders dissenting from the
scheme of amalgamation or contract approval by majority.

Legal Issues in Mergers
•Section 396 gives power to the central government to enforce amalgamation of companies in
national interest.
•Inaddition, the Securities and Exchange Board of India (SEBI) introduced the Substantial
Acquisition of Shares and Takeovers Regulations, which was revised in 1997, that provides for
hostile takeovers, revision and withdrawal of open offer, and competitive bidding, introducing a
measure of transparency in takeover dealings.
•Another significant regulatory change has been the amendment to the Securities Contracts
Regulations Act for withdrawing the provision of permitting companies to refuse to register
shares lodged by the acquiring firm, making it possible for a hostile takeover to take place.
•Apart from these section 72A (I) of the Income Tax Act are also relevant for amalgamated
companies and provides for carrying forward accumulated losses and unabsorbed depreciation
of the amalgamating company.

Some of India’s largest M&A deals
1. Aditya Birla group company Hindalco’s Novellis acquisition (6 billion dollars)
2. Ranbaxy’s sale to Japan’s Daiichi (4.5 billion dollars)
3. ONGC-Imperial Energy (2.8 billion dollars)
4. NTT DoCoMo-TATA Tele (2.7 billion dollars)
5. HDFC Bank-Centurion Bank of Punjab (2.4 billion dollars)
6. TATA Motors-Jaguar Land Rover (2.3 billion dollars)
7. Suzlon-RePower (1.7 billion dollars)
8. RIL-RPL (1.69 billion dollars)

Conclusion
•Learn from mistake of others
• Example:
•Define your objectives clearly

• Example:
•Acquire Expertise to interpret changes

•SWOT Analysis for the Merged firm-a must

Further Readings
Mergers and Acquisitions
5. Marks, M. L., & Mirvis, P. H. (2001). Making mergers and acquisitions work: Strategic and
psychological preparation. Academy of Management Perspectives, 15(2), 80-92.
6. Erel, I., Liao, R. C., & Weisbach, M. S. (2012). Determinants of cross‐border mergers and
acquisitions. The Journal of finance, 67(3), 1045-1082.
7. Lebedev, S., Peng, M. W., Xie, E., & Stevens, C. E. (2015). Mergers and acquisitions in and out
of emerging economies. Journal of World Business, 50(4), 651-662.
8. Haleblian, J., Devers, C. E., McNamara, G., Carpenter, M. A., & Davison, R. B. (2009). Taking
stock of what we know about mergers and acquisitions: A review and research agenda.
Journal of management, 35(3), 469-502.

Corporate Strategies

Corporate Strategy
It provides answer to key questions of where to compete?
It determines the boundaries of the firm along three dimensions:
Vertical integration along the industry value chain,
Diversification of products and services, and
Geographical scope (regional, national, or global markets).

Corporate Strategy
Corporate level strategies are decisions related to allocation of resources among the different
businesses of a firm, transforming resources from one set of businesses to others and managing
and nurturing a portfolio of businesses.
Corporate strategies help to exercise the choice of direction that an organization adopts.
In small firms, corporate strategy would mean the adoption of courses of action that yield
better profitability for the firm.
In large, multi business, firms the corporate strategy would also be about managing the various
businesses definitions.

Concepts involved
Strategic management concepts that guide a firm through a selection between vertical
integration, diversification and geographic competition are:
1. Core competencies
2. Economies of scale
3. Economies of scope
4. Transaction costs

Transaction Cost
Can guide leaders on what activities to do in-house versus what to obtain from external
market. Explains why do firms exist? Determines the boundaries of the firm.
Transaction costs are all internal and external costs associated with an economic exchange,
whether it takes place within the boundaries of a firm or in market. It involves
External transaction costs (searching cost, negotiation and monitoring cost)
Internal transaction costs (hiring and retaining employees, salaries, setting up infrastructure,
administrative costs)

Organizing internally decision
1. Command-and-control decisions 1. Administrative costs
2. Co-ordination 2. Principal-agent problem
3. Possible to make transaction-specific investments
4. Creation of network of knowledge

Backward and
Forward Vertical
Integration
along an
Industry Value
Chain

Benefits and Risks of Vertical Integration
Benefits Risks
1. Improving quality 1. Increasing costs
2. Facilitating scheduling and planning 2. Reducing flexibility
3. Facilitating investments in specialized assets 3. Legal repercussions
4. Securing critical supplies and distribution channels

Alternatives to vertical integration
1. Taper Integration
2. Strategic Outsourcing

Going to market decision….
1. More specialized good or services 1. High search costs
2. Increased flexibility 2. Opportunism
3. Better focus 3. Incomplete contracting
4. Information asymmetry
5. Legal costs

Alternatives on the Make-or-buy
Continuum

Corporate Diversification
1. Vertical Integration: in what stages of the industry value chain should the firm participate?
2. Product diversification: what range of products and services should the firm offer?
3. Geographic diversification: where should the firm compete in terms of regional national, or
international markets?

Types of Corporate Diversification
1. Single Business
2. Dominant Business
3. Related diversification
4. Unrelated diversification: the conglomerate

Corporate Directional Strategies
Growth Stability Retrenchment
Concentration Pause/Proceed with
• Vertical Growth Sell-out/Divestment
caution
• Horizontal Growth
Diversification No Change strategy

• Concentric Bankruptcy
• Conglomerate
Profit Strategy
• Merger/Acquisition Liquidation
• Strategic Alliance
Stability Strategies make

Retrenchment Strategies
Growth Strategies no change to the
reduce the company’s level
expand the company’s company’s current
of activities Source: Wheelen & Hunger
activities activities
Expansion and Growth Strategies
When an organization aims at high growth by substantially broadening the scope of one or more
of its businesses in term of their respective customer groups, customer functions and alternative
technologies, singly or jointly, in order to improve its overall performance.

Concentration Strategies
Concentrated growth strategies are strategies that center on improving current products and/or
markets without changing any other factors. The firm directs its resources to the profitable growth of
a single product, in a single market, and with a single technology.
A concentration strategy usually has the advantage of low initial risk because the organization
already has much of the knowledge and many of the resources necessary to compete in the
marketplace. This strategy allows the organization to focus its attention on doing a small number of
things extremely well.
The major drawback to a concentration strategy is that it places all or most of the organization's
resources in the same basket. If sudden change occur in the industry, the organization can suffer
significantly.

Integration Strategies
Horizontal Integration: acquisition/merger/internal expansion of business operating at the same

level of the value chain in a similar or different industry.
Vertical Integration: Firm expands into upstream or downstream activities, which are at
different stages of production.

When is horizontal integration attractive for a
business?
A company can think of acquisitions and mergers for horizontal integration in the following
situations:
When the industry is growing

When rivals lack the expertise that the company has already achieved
When economies of scale can be achieved
When the company can manage the operations of the bigger organization efficiently, after the
integration

Horizontal Integration Examples
Arcelor-Mittal is the biggest steel

manufacturer in the world
Two worldwide known hotel
chains
A merger between Chase Manhattan Exxon and Mobil in the oil industry
Bank & JP Morgan Company resulted were two distinct giants
in JP Morgan and Chase bank

When is vertical integration attractive for
a business?
Several factors affect the decision-making that goes into backward and forward integration. A
company may go in for these strategies in the following scenarios:
The current suppliers of the company’s raw materials or components, or the distributors of its
end products, are unreliable
The prices of raw materials are unstable or the distributors charge high fees
The suppliers or distributors earn big margins
The company has the resources to manage the new business that is currently being taken care
of by the suppliers or distributors
The industry is expected to grow significantly

Vertical Integration
Pixar Films
Expansion into businesses that make inputs for or use the
output of-other units within the corporation.
Can occur in 2 directions:
Disney Corporation
Backward or ‘upstream’ integration (e.g. a manufacturing
firm supplies its own raw materials or components)
Forward or ‘downstream’ integration (e.g. a
manufacturing firm moves into marketing/distribution) Disney Stores

Diversification Strategies
Concentric Diversification: A type of diversification in which a company acquires or develops new products
or services (closely related to its core business or technology) to enter one or more new markets.
Example: A detergent manufacturer may get into soap business (Nirma Chemicals)
A scooter manufacturer may enter the field of motor cycles (Bajaj Auto)
Conglomerate Diversification: a firm gets into a new business which is unrelated to its existing business. It
involves adding new products or services that are significantly unrelated and with no technological or
commercial similarities
Example: ITC Limited, traditionally a cigarette manufacturer, entered the field of hotels,

Diversification: substantial change in business definition, singly or jointly, in terms of customer
function, customer groups or alternative technologies of one or more firm’s businesses.
Concentric/Related diversification
Conglomerate/ Unrelated diversification

Stability Strategies
The corporate strategy of stability is adopted by an organization when it attempts at incremental
improvement of its performance by marginally changing one or more of its businesses it terms
of their respective customer functions and alternative technologies.
◦ No Change
◦ Caution
◦ Profit

The corporate strategy of retrenchment is followed when an organization aims at contraction of
its activities through a substantial reduction or elimination of the scope of one or more of its
businesses in terms of their respective customer group, customer fractions or alternative
technologies in order to improve its overall performance.
◦ Divestment
◦ Turnover
◦ Liquidation

GE Matrix

Business Strength/Competitive Position
Industry/ Market Attractiveness

ANSOFF MATRIX
Corporate Parenting
Low
Misfit between key strategic
Ballast Business Heartland Business

factors and Parenting
Characteristics
Alien Business Value Trap Business

High
Low Fit between Parenting Opportunities and High

Parenting Characteristics
Parenting Matrix

Further Readings
O.E. Williamson, ‘Strategy research: governance and competence perspectives’, Strategic
Management Journal, vol. 12 (1998), pp. 75–94.
B. Kogut and U. Zander, ‘What firms do? Coordination, identity and learning’, Organization
Science, vol. 7, no. 5(1996), pp. 502–519.
S. Ghoshal, C. Bartlett and P. Moran, ‘A new manifesto for management’, Sloan Management
Review, Spring (1999),pp. 9–20.

Corporate Strategies

Corporate Strategy
It provides answer to key questions of where to compete?
It determines the boundaries of the firm along three dimensions:
Vertical integration along the industry value chain,
Diversification of products and services, and
Geographical scope (regional, national, or global markets).

Corporate Strategy
Corporate level strategies are decisions related to allocation of resources among the different
businesses of a firm, transforming resources from one set of businesses to others and managing
and nurturing a portfolio of businesses.
Corporate strategies help to exercise the choice of direction that an organization adopts.
In small firms, corporate strategy would mean the adoption of courses of action that yield
better profitability for the firm.
In large, multi business, firms the corporate strategy would also be about managing the various
businesses definitions.

Concepts involved
Strategic management concepts that guide a firm through a selection between vertical
integration, diversification and geographic competition are:
1. Core competencies
3. Economies of scope
4. Transaction costs

Transaction Cost
Can guide leaders on what activities to do in-house versus what to obtain from external
market. Explains why do firms exist? Determines the boundaries of the firm.
Transaction costs are all internal and external costs associated with an economic exchange,
whether it takes place within the boundaries of a firm or in market. It involves
External transaction costs (searching cost, negotiation and monitoring cost)
Internal transaction costs (hiring and retaining employees, salaries, setting up infrastructure,
administrative costs)

Organizing internally decision
1. Command-and-control decisions 1. Administrative costs
2. Co-ordination 2. Principal-agent problem
3. Possible to make transaction-specific investments
4. Creation of network of knowledge

Backward and
Forward Vertical
Integration
along an
Industry Value
Chain

Benefits and Risks of Vertical Integration
Benefits Risks
1. Improving quality 1. Increasing costs
2. Facilitating scheduling and planning 2. Reducing flexibility
3. Facilitating investments in specialized assets 3. Legal repercussions
4. Securing critical supplies and distribution channels

Alternatives to vertical integration
1. Taper Integration
2. Strategic Outsourcing

Going to market decision….
1. More specialized good or services 1. High search costs
2. Increased flexibility 2. Opportunism
3. Better focus 3. Incomplete contracting
4. Information asymmetry
5. Legal costs

Alternatives on the Make-or-buy
Continuum

Corporate Diversification
1. Vertical Integration: in what stages of the industry value chain should the firm participate?
2. Product diversification: what range of products and services should the firm offer?
3. Geographic diversification: where should the firm compete in terms of regional national, or
international markets?

Types of Corporate Diversification
1. Single Business
2. Dominant Business
3. Related diversification
4. Unrelated diversification: the conglomerate

Corporate Directional Strategies
Growth Stability Retrenchment
Concentration Pause/Proceed with
• Vertical Growth Sell-out/Divestment
caution
• Horizontal Growth
Diversification No Change strategy

• Concentric Bankruptcy
• Conglomerate
Profit Strategy
• Merger/Acquisition Liquidation
• Strategic Alliance
Stability Strategies make

Growth Strategies no change to the
reduce the company’s level
expand the company’s company’s current
of activities Source: Wheelen & Hunger
activities activities
Expansion and Growth Strategies
When an organization aims at high growth by substantially broadening the scope of one or more
of its businesses in term of their respective customer groups, customer functions and alternative
technologies, singly or jointly, in order to improve its overall performance.

Concentration Strategies
Concentrated growth strategies are strategies that center on improving current products and/or
markets without changing any other factors. The firm directs its resources to the profitable growth of
a single product, in a single market, and with a single technology.
A concentration strategy usually has the advantage of low initial risk because the organization
already has much of the knowledge and many of the resources necessary to compete in the
marketplace. This strategy allows the organization to focus its attention on doing a small number of
things extremely well.
The major drawback to a concentration strategy is that it places all or most of the organization's
resources in the same basket. If sudden change occur in the industry, the organization can suffer
significantly.

Integration Strategies
Horizontal Integration: acquisition/merger/internal expansion of business operating at the same

level of the value chain in a similar or different industry.
Vertical Integration: Firm expands into upstream or downstream activities, which are at
different stages of production.

When is horizontal integration attractive for a
business?
A company can think of acquisitions and mergers for horizontal integration in the following
situations:
When the industry is growing

When rivals lack the expertise that the company has already achieved
When economies of scale can be achieved
When the company can manage the operations of the bigger organization efficiently, after the
integration

Horizontal Integration Examples
Arcelor-Mittal is the biggest steel

manufacturer in the world
Two worldwide known hotel
chains
A merger between Chase Manhattan Exxon and Mobil in the oil industry
Bank & JP Morgan Company resulted were two distinct giants
in JP Morgan and Chase bank

When is vertical integration attractive for
a business?
Several factors affect the decision-making that goes into backward and forward integration. A
company may go in for these strategies in the following scenarios:
The current suppliers of the company’s raw materials or components, or the distributors of its
end products, are unreliable
The prices of raw materials are unstable or the distributors charge high fees
The suppliers or distributors earn big margins
The company has the resources to manage the new business that is currently being taken care
of by the suppliers or distributors
The industry is expected to grow significantly

Vertical Integration
Pixar Films
Expansion into businesses that make inputs for or use the
output of-other units within the corporation.
Can occur in 2 directions:
Disney Corporation
Backward or ‘upstream’ integration (e.g. a manufacturing
firm supplies its own raw materials or components)
Forward or ‘downstream’ integration (e.g. a
manufacturing firm moves into marketing/distribution) Disney Stores

Diversification Strategies
Concentric Diversification: A type of diversification in which a company acquires or develops new products
or services (closely related to its core business or technology) to enter one or more new markets.
Example: A detergent manufacturer may get into soap business (Nirma Chemicals)
A scooter manufacturer may enter the field of motor cycles (Bajaj Auto)
Conglomerate Diversification: a firm gets into a new business which is unrelated to its existing business. It
involves adding new products or services that are significantly unrelated and with no technological or
commercial similarities
Example: ITC Limited, traditionally a cigarette manufacturer, entered the field of hotels,

Diversification: substantial change in business definition, singly or jointly, in terms of customer
function, customer groups or alternative technologies of one or more firm’s businesses.
Concentric/Related diversification
Conglomerate/ Unrelated diversification

Stability Strategies
The corporate strategy of stability is adopted by an organization when it attempts at incremental
improvement of its performance by marginally changing one or more of its businesses it terms
of their respective customer functions and alternative technologies.
◦ No Change
◦ Caution
◦ Profit

The corporate strategy of retrenchment is followed when an organization aims at contraction of
its activities through a substantial reduction or elimination of the scope of one or more of its
businesses in terms of their respective customer group, customer fractions or alternative
technologies in order to improve its overall performance.
◦ Divestment
◦ Turnover
◦ Liquidation

GE Matrix

Business Strength/Competitive Position
Industry/ Market Attractiveness

ANSOFF MATRIX
Corporate Parenting
Low
Misfit between key strategic
Ballast Business Heartland Business

factors and Parenting
Characteristics
Alien Business Value Trap Business

High
Low Fit between Parenting Opportunities and High

Parenting Characteristics
Parenting Matrix

Further Readings
O.E. Williamson, ‘Strategy research: governance and competence perspectives’, Strategic
Management Journal, vol. 12 (1998), pp. 75–94.
B. Kogut and U. Zander, ‘What firms do? Coordination, identity and learning’, Organization
Science, vol. 7, no. 5(1996), pp. 502–519.
S. Ghoshal, C. Bartlett and P. Moran, ‘A new manifesto for management’, Sloan Management
Review, Spring (1999),pp. 9–20.

BUSINESS LEVEL
STRATEGIES

Business Unit Strategy:
◦ What are the drivers of industry profitability?
◦ How can a firm create competitive advantage?

Business Level Strategy
Goal-directed actions managers take in their quest from competitive advantage when
competing in a single product market. It may involve a single product or a group of similar
products that use the same distribution channel.
To formulate an appropriate business-level strategy, managers must answer following

questions:
Who- which customer segments will serve?
What- customer needs, wishes, and desires will we satisfy?
Why do we want to satisfy them?
How will we satisfy our customers’ needs?

Strategic Position
A firm’s business-level strategy determines its strategic position-its strategic profile based on
value creation and cost-in a specific product market.
A firm attempts to create a unique and valuable position that meet customer needs.
Simultaneously, creating a large gap between the value a firm’s product creates and the cost
required to produce.
To achieve desired strategic position, a manger must make a strategic trade-offs-choices
between a cost or value position.

Generic Business Strategies
They can be used by any organization in the quest of competitive advantage, independent of
industry context.
Types
Differentiation strategy
Cost-leadership strategy
Focused
Managers must also define the scope of competition- pursue a specific, narrow part of the
market or go after the broader market.

Competitive Advantage
Low cost Differentiation
Broad
Market Scope
Narrow Cost Leadership Differentiation
Focus Focus
(Low cost) (Differentiation)
Michael E. Porter’s Five Generic Strategy Model

Differentiation
A differentiation strategy calls for the development of a product or service that offers unique
attributes that are valued by customers and that customers perceive to be better than or
different from the products of the competition.
It selects one or more attributes that many buyers in an industry perceive as important, and
uniquely positions itself to meet those needs.
The value added by the uniqueness of the product may allow the firm to charge a premium
price for it. The firm hopes that the higher price will more than cover the extra costs incurred in
offering the unique product.

Differentiation opportunities can be developed anywhere in the firm’s value chain such as
supply chain activities, product R&D activities, production and technological activities,
manufacturing activities, human resource management activities, distribution activities, or
marketing activities.
Product can be many degrees of differentiation. They can be
◦ Different in design
◦ Features
◦ Customer Service
◦ Ease of use
◦ Access to leading scientific research.
◦ Highly skilled and creative product development team.

Differentiation Strategy
The goal of differentiation strategy is to add unique features that will increase the perceived
value of goods and services in the minds of the consumers so they are willing to pay a higher
price.
A firm following a differentiation strategy aims to achieve in the minds of the consumers a level
of value creation that its competitors cannot easily match.
The focus of competition in the differentiation strategy tends to be on the unique product
features, services, and new-product launches, or on marketing and promotion rather than price.

Differentiation Strategy
Although increased value creation is a defining feature, managers must also control costs.
If cost rises too much, firm’s value gap shrinks, negating any differentiation strategy.
Economies of scope- producing two or more outputs at less cost than producing each output
individually, even though using the same resources and technology.

Differentiation Strategy- Value Drivers
Value drivers are related to a firm’s expertise in, and organization of, different internal value
chain activities.
Different value drivers contribute to competitive advantage only if their increase in value
creation exceeds the increase in costs.
Some of the most prominent value drivers are

Product Features
Customer Service
Complements

Product Differentiation

Service Differentiation

Strategy Diamond Model
A Strategy Diamond is a crisp way to analyze, visualize, summarize, and share your strategy for
your product or your business.
Donald Hambrick and James Fredrickson created the Strategy Diamond as a way to show what
the actual bits and pieces of a strategy are and how they fit together.
Strategy is about making important choices, and the real power of a Strategy Diamond is that it
integrates important choices into a bigger picture, instead of as a piecemeal approach

It can be effective under following
conditions
The differentiation strategy can be effective in the following conditions:
1. Buyer needs and uses are diverse.
2. Few rival firms are following a similar differentiation approach
3. Technological change is fast.

Risks Involved
1. Involves higher costs.
2. Customers might become price sensitive and choose on price rather than uniqueness.
3. Customers may no longer need the differentiation factor.
4. Imitation by competitors and changes in customer tastes.
5. Rivals pursuing a focus strategy may be able to achieve even greater differentiation in their
market segment.

Cost-Leadership Strategy
The goal of cost leadership is to reduce the firm’s cost below that of its competitors while
offering adequate value.
The cost leader focuses on reducing the cost to manufacture a product or on lowering the
operating cost to deliver a service in order to offer lower prices to its customers.
Cost leader attempts to optimize all of its value chain activities to achieve a low-cost position.
Though lowest cost-position in the industry is the overriding strategic objective, a cost leader
still needs to offer products and services of acceptable value.

Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry.
The sources of cost advantage are varied and depend on the structure of the industry. They
may include the pursuit of
economies of scale,
proprietary technology,
preferential access to raw materials and other factors.
high level of expertise in manufacturing process engineering.
efficient distribution channels.
A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve
and sustain overall cost leadership, then it will be an above average performer in its industry,
provided it can command prices at or near the industry average

Cost Drivers
1. Cost of input factors
3. Learning-curve effects
4. Experience-curve effects

Learning Curve and Experience Curve Effects

Learning Curve
The steeper the learning curve, the more leaning has happen
As cumulative output increases, firms move down the leaning curve, reaching lower per unit
costs.
It is important to note that the leaning curve effect is driven by increasing cumulative output
within the existing technology over time.

Experience Curve
In learning curve, we assumed the underlying technology remained constant, while only
cumulative output increased. In the experience curve, in contrast, we now change the
technology while holding cumulative output constant.
Technology and production processes do not stay constant.
Process innovation, a new method or technology to produce an existing product- may initiate a
new and steeper curve.

It can be effective under following
conditions
1. Price competition among rivals is especially powerful
2. Products/services of rivals are identical
3. Few ways to achieve product differentiation
4. Most customers use the product/service in the same ways
5. Low switching costs
6. A lot of customers with bargaining power
7. Newcomers use low prices to attract buyers

Risks Involved…
1. Other firms may be able to lower their costs as well.
2. As technology improves, the competition may be able to leapfrog the production
capabilities, thus eliminating the competitive advantage.
3. It could lead to a damaging price wars.
4. There might be difficulty in sustaining cost leadership in the long run.
5. A firm following a focus strategy might be able to achieve even lower cost within their
segment.

FOCUS
The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others.
The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation
focus a firm seeks differentiation in its target segment.
Cost focus exploits differences in cost behavior in some segments, while differentiation focus
exploits the special needs of buyers in certain segments

The focus strategy concentrates on a narrow segment and within that segment attempts to
achieve either a cost advantage or differentiation.
The premise is that the needs of the group can be better serviced by focusing entirely on it.
A firm using a focus strategy often enjoys a high degree of customer loyalty, and this
entrenched loyalty discourages other firms from competing directly.
Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and
therefore less bargaining power with their suppliers.
However, firms pursuing a differentiation focused strategy may be able to pass higher costs on
to customers since close substitute products do not exist.

Focused Cost Leadership

Focused Differentiation

Risk Involved
1. Limited opportunities for growth.
2. Danger of decline in the chosen segment or niche.
3. Risk of imitation.
4. A reputation for specialization inhibits move into new sector.

Low-Cost Provider Broad Differentiation Focused Low-Cost Focused
Provider Differentiation
Strategic A broad cross section of A broad cross-section of A narrow market niche A narrow market niche
Target the market. the market. where buyer needs and where buyer needs and
preferences are preferences are
distinctively different. distinctively different.
Basis of Lower overall costs than Ability to offer buyers Lower overall cost than Attributes that appeal
competitive competitors. something attractively rivals in serving niche specifically to niche
strategy different from competitors’ members. members.
offerings.
Product Line A good basic product with Many product variations Features and attributes Features and attributes
few frills (acceptable wide selection; emphasis tailored to the tastes and tailored to the tastes
quality and limited on differentiating features. requirements of niche and requirements of
selection) members. niche members.
Production A continuous search for Build in whatever A continuous search for Small-scale production
Emphasis cost reduction without differentiating features cost reduction for or custom-made
sacrificing acceptable buyers are willing to pay products that meet basic products that match the
quality and essential for; strive for product needs of niche members. tastes and requirements
features. superiority. of niche members.

Low-Cost Provider Broad Differentiation Focused Low-Cost Focused Differentiation
Provider
Keys to Economical prices, goods value. Stress constant innovation Stay committed to Stay committed to serving
maintaining the to stay ahead of imitative serving the niche at the the niche better than rivals;
strategy Strive to manage costs down, competitors. lowest overall cost; don’t don’t blur the firm’s image
year after year, in every area of blur the firm’s image by by entering other market
the business. Concentrate on a few key entering other market segments or adding other
differentiating features. segments or adding other products to widen market
products to widen market appeal.
appeal.

Cash Flow maximizing
Competitive Advantage
Cost Leadership Low cost Differentiation

Market
• Price
• Image
Broad
General • Support
Market Scope
Cost Strategies Differentiation

• Design
Innovation • Quality
Narrow
Focus Focus
(Low cost) (Differentiation)
Customer Product Geographic Locale
Michael E. Porter’s Five Generic Strategy Model

Miles and Snow Strategy
1. Prospectors
2. Defenders
3. Analyzers
4. Reactors

Strategic Groups
Strategic Groups refers to a group of companies who follow the same strategy within a
particular industry. A company which operates in an industry can have different business
segments catering to different markets.
Michael S. Hunt (1972) coined the term strategic groups to describe a group of firms within the
industry that are highly symmetric with respect to
 cost structure,
 the degree of vertical integration, and
 the degree of product differentiation,
 formal organization,
 control systems,
 management rewards/punishments, and
 the personal views and preferences for various possible outcomes

Blue Ocean Strategy
Blue ocean denote all the industries not in existence today-the unknown market space,
untainted by competition.
In blue oceans, demand is created rather than fought over. There is ample opportunity for
growth that is both profitable and rapid.
There are two ways to create blue ocean:
In a few cases, companies can give rise to completely new industries, as eBay did with the online
auction industry.
In most cases, a blue ocean is created from within a red ocean when a company alters the boundaries
of an existing industry.

Red Ocean Strategy
Red oceans represent all the industries in existence today- the known market space.
In red oceans, industry boundaries are defined and accepted, and the competitive rules of the
games are well understood.
Here, companies try to outperform their rivals in order to grab a greater share of existing
demand.
As the space gets more and more crowded, prospects for profits and growth are reduced.
Products turn into commodities, ad increasing competition turns the water bloody.

Strategy Canvas
The horizontal axis on the strategy canvas captures the range of factors that an
industry competes on and invests in, while the vertical axis captures the offering level
that buyers receive across all of these key competing factors.
A value curve or strategic profile is the graphic depiction of a company’s relative performance
across its industry’s factors of competition.
Allows organization to see in one simple picture all the factors an industry competes on and
invests in, what buyers receive, and what the strategic profiles of the major players are.
It exposes just how similar the players’ strategies look to buyers and reveals how they drive the
industry toward the red ocean.

Strategy Canvas
It propels users to action by reorienting their focus from competitors to alternatives and from
customers to noncustomers of the industry and allows you to visualize how a blue ocean
strategic move breaks away from the existing red ocean reality.
The strategy canvas crisply communicates the four key elements of strategy: the factors of
competition, the offering level buyers receive across these factors, and your own and your
competitors’ strategic profiles and cost structures.

VALUE INNOVATION MODEL

Readings
Article “Jumpstarting the recovery collection” a brief of how different industries are thinking to
cope with COVID-19.

Woodland
Hand stitched shoes
Woodland differentiated itself early on being a rugged, outdoor leather shoe brand, the kind
usually preferred by adventurists. Being a new category, it picked up as a fashion trend among
the youth. Woodland grew; it also entered the apparel category; and in the next couple of years
it became a well-known brand, first in North India and then across the country.
Today, with over 300 company-owned stores, it has a retail space of around 600,000 square feet.
Its shoes and apparel are also retailed through about 3,000 distributors across the country. The
company says it has revenue per square feet of Rs 5,000 and has been growing consistently at 20
to 25 per cent over the last few years.

Environmental
Scanning- Internal

Types of Environmental Scanning
Environmental Scanning
Resources/Capabilities
External Analysis Internal Analysis
Strength
Weaknesses
Macro Environment Micro Environment
PEST Analysis Five Force Analysis

INTERNAL ENVIRONMENTAL SCANNING

Sustainable
Components of Internal Analysis Competitive

Advantage
Competitive
Advantage
Discovering
Core
Competencies
Core Competencies
Capabilities Four Criteria of Value

Sustainable Chain
Advantages Analysis
Resources
• Tangible Valuable
• Intangible Rare Outsource
Costly to imitate
Non-substitutable

Definition
“An enterprise has a competitive advantage if it is able to create more economic
value than the marginal (breakeven) competitor in its product market” (Peteraf and
Barney, 2003, p. 314).
Peteraf and Barney (2003, p. 314) define economic value as the value “created by an
enterprise in the course of providing a good or service (that) is the difference between
the perceived benefits gained by the purchasers of the good and the economic cost
to the enterprise.

Theories of Competitive Advantage
Industry and
competitive position
COMPETITIVE
ADVANTAGE
routines
Capabilities learnings
Core- Innovation
Resource-based Dynamic Evolutionary
competence Path-
view Capability Theory Economics
dependence

Competencies
The special qualities possessed by an organization that make them
withstand pressures of competition in the marketplace.
When an organization uses its competencies exceedingly well, over a
period of time, it turns them into core competencies
Examples
◦ Good technology
◦ Skilled Sales Force
◦ Research and Development

Core Competencies
A core competency should:
◦ Contribute significantly to perceived customer benefits of the end product
◦ Be difficult for competitors to imitate
◦ Provide potential access to a wide variety of markets.
Core competencies of a firm, in addition to its analysis of its general,

industry, and competitor environments, should drive its selection of
strategies

Resources
Tangible Resources Intangible Resources
Financial resources Human resources
Physical resources Innovation resources
Technological resources Reputation resources

A Resource-based Approach to Strategy Analysis
Select a Strategy which best exploits the firm’s
resources and capabilities relative to external Strategy
opportunities.
Appraise the rent generating potential of resources

and capabilities in terms of: i) their potential for Competitive
sustainable competitive advantage, and ii) the Advantage
Identify resource gaps
appropriability of their returns. which need to be filled.
Invest in replenishing,
Identify the firm’s capabilities: What can the firm do augmenting and upgrading
more effectively than its rivals? Identify the Capabilities the firm’s resources base
resources inputs to each capability, and the
complexity of each capability.
Identify and classify the firm’s resources. Appraise

strengths and weaknesses relative to competitors. Resources
Identify opportunities for better utilization of
resources.

VRIO Framework
Barney proposes 4 questions to evaluate firm’s key resources:
Value- Does it provide customer value and competitive advantage?
Rareness- Do competitors possess it?
Imitability- Is it costly for others to imitate?
Organization- Is the firm organized to exploit the resources?

Amazon

Capabilities
The foundation of many capabilities lies in:
◦ The unique skills and knowledge of a firm’s employees
◦ The functional expertise of those employees.
Capabilities are often developed in specific functional areas or as

part of a functional area.

Examples of Firms’ Capabilities
Functional Areas Capabilities
Distribution Effective use of Logistics Management Techniques
Human Resources Motivating, empowering and retaining employees
Management Information Effective and efficient control of inventories through point of
System purchase data collection methods
Marketing Effective promotion of brand name products, effective customer
service
Management Effective organizational structure
Manufacturing Miniaturization of components and products
Design and product quality
Low-cost manufacturing
Research & Development Rapid transformation of technology into new products and processes
Continuous innovation

Dynamic Capabilities
To sustain a competitive advantage, any fit between a firm’s internal strengths and the external
environment must be dynamic.
Dynamic capabilities allow a firm to create, deploy, modify, reconfigure, or upgrade its resource
base to gain and sustain competitive advantage in a constantly changing environment.
Dynamic capabilities allow firms not only to adapt to changing market conditions but also
enable firms to create market changes that can strengthen their strategic position.
The goal should be to develop resources, capabilities, and competencies that create a strategic
fit with the firm’s environment.
Competitive advantage is not derived from static resource or market advantages, but from a
dynamic reconfiguration of a firm’s resource base.

Dynamic
Capabilities
and the
Bathtub

SWOT ANALYSIS
Internal Assessment of the Organization
What are our strengths? What are our weaknesses?

• Manufacturing Efficiency • Outdated facilities
• Skilled workforce • Inadequate R & D
• Good market share • Obsolete technologies
• Strong financing • Weak management
• Superior reputation • Past planning failures
SWOT
What are our opportunities? ANALYSIS
What are our threats?
• Possible new markets
• New competitors
• Strong economy
• Shortage of resources
• Weak market rivals
• Changing market tastes
• Emerging technologies
• New regulations
• Growth of existing market
• Substitute products
External Assessment of the Environment

Value Chain Analysis
The chain consists of a series of activities that create and build value.
They culminate in the total value delivered by an organization.
A systematic approach to examining the development of competitive advantage.
VCA disaggregates a business into set of activities
◦ Primary activities
◦ Support activities

How to do a Value Chain Analysis?
Identify key activities
Allocate costs to each activity
Identify the activities that differentiate the firm
Examine the Value Chain

 Different activities may be important- industry and strategy
 Importance of activities can vary based on a company position in a larger scheme of activities.

Assessing the Extent of Competitive
Advantage
1. Inadequate
2. Adequate
3. Attractive
4. Potential
5. Competitive
6. Distinctive

Strategic Leadership
To gain and sustain competitive advantage, strategic leaders may
 Add new activities,
 Remove activities that are no longer relevant, and
 Upgrade activities that have become stale or somewhat obsolete
Each of above changes would require changes to the resources and capabilities involved.

Strategic Group
A ‘strategic group’ continues to be commonly defined as a group of firms within the same
industry making similar decisions in the key areas.
-(Reger & Huff, 1993)
Set of firms within the industry pursuing similar a similar combination of strategies or having
similar business models.

EXTERNAL
ENVIRONMENTAL
SCANNING

Types of Environmental Scanning
Environmental Scanning
Resources/Capabilities
External Analysis Internal Analysis
Strength
Weaknesses
Macro Environment Micro Environment
PEST Analysis Five Force Analysis

External Analysis
While in external analysis, three correlated environment should be studied and analyzed —
• immediate / industry environment

• national environment
• broader socio-economic environment / macro-environment

The organization's environment consists of three components:
1. General Environment
2. Industry Environment
3. Competitor/Competitive Environment

To understand the business environment of a particular firm, we need to analyze both
the general environment and firm’s industry and competitive environment.
Generally, firms compete with other firms in the same industry.
An industry is composed of a set of firms that produce similar products or services, sell
to similar customers, and use similar methods of production.
Gathering industry information and understanding competitive dynamics among the

different companies in your industry is key to successful strategic management.

General Environment
General environment is composed of factors that an have dramatic effects on firms strategy.
Consists of elements in the broader society that can indirectly influence an industry and the
firms within the industry. The general environment has an indirect effect on strategic
competitiveness and firm profitability. Consists of six segments:
1. Demographic
2. Economic.
3. Political/Legal
4. Sociocultural
5. Technological
6. Global

PESTEL FRAMEWORK
P E S T E L
Political Economic Social Technological Environmental Legal
• Tax Policy • Interest Rates • Population • New discoveries • Waste disposal • Employment
demographics and innovations laws regulations
• Entry mode • Inflation Rate (e.g. aging
regulations population) • Rate of • Environmental • Competitive
• Disposable technological protection laws regulations
• Political Stability income of • Distribution of advances and
consumers wealth innovations • Energy • Health and
• Social Policies consumption safety
(e.g. social • Credit • Changes in • Rate of regulation regulations
welfare) accessibility lifestyles and technological
trends obsolescence • Popular attitude • Product
• Trade • Unemployment towards the regulations
Regulations (e.g. rates • Educational • New environment
the EU & levels technological • Antitrust laws
NAFTA) platforms (e.g.
VHS and DVD) • Patent
infringements

Situation Analysis

Industry Environment
Consists of the factors that directly influences a firm and its competitive decisions and actions.
The IE directly affects strategic competitiveness and firm profitability. Michael Porter's Five
Forces Model of Competition illustrates the IE.
1. Threat of New Entrants
2. Threat of Substitute Products
3. Bargaining Power of Buyers (Customers)
4. Bargaining Power of Suppliers
5. Rivalry Among Competing Firms in an Industry

SWOT Analysis
The general idea of SWOT analysis is that a firm’s strategy must:
 Build on its strengths
Remedy the weaknesses or work around them
Take advantage of the opportunities presented by the environment.
Protect the firm from the threats.

SWOT ANALYSIS
Internal Assessment of the Organization
What are our strengths? What are our weaknesses?

• Manufacturing Efficiency • Outdated facilities
• Skilled workforce • Inadequate R & D
• Good market share • Obsolete technologies
• Strong financing • Weak management
• Superior reputation • Past planning failures
SWOT
What are our opportunities? ANALYSIS
What are our threats?
• Possible new markets
• New competitors
• Strong economy
• Shortage of resources
• Weak market rivals
• Changing market tastes
• Emerging technologies
• New regulations
• Growth of existing market
• Substitute products
External Assessment of the Environment

Strengths
SWOT forces managers to consider both internal and external factors simultaneously.
Its emphasis on identifying opportunities and threats makes firms act proactively rather than
reactively.
It raises awareness about the role of strategy in creating a match between the environmental
conditions and the firm’s internal strengths and weaknesses.

Limitations
Strengths may not lead to an advantage
SWOT’s focus on the external environment is too narrow
SWOT gives a one-shot view of a moving target
SWOT overemphasizes a single dimension of strategy

PORTER’S FIVE FORCES MODEL

Rivalry Among Existing Competitors Threat of New Entrants
• Number of Competitors
• Barriers to entry
• Diversity of competitors
Threat of • Economies of scale
• Industry concentration
new • Brand Loyalty
• Industry growth
entrants • Capital requirements
• Quality differences
• Government Policies
• Brand Loyalty
• Access to distribution channels
• Barriers to exit
• Switching costs
• Switching Costs
• Fixed Costs/value added
• Information complexity
Bargaining Rivalry Bargaining
among Power of
Power of
Bargaining Power of Suppliers existing Customers/
Suppliers
• Number and Size of Suppliers competitors Buyers
• Uniqueness of each supplier’s product
• Focal company’s ability to substitute
Bargaining Power of Buyers
• Threat of forward integration
• Number of customers
• Size of each customer order
Threat of Substitute Products • Differences between competitors
• Number of substitute products available Threat of • Price sensitivity
• Buyer propensity to substitute Substitutes • Buyer’s ability to substitute
• Relative price performance of substitute • Buyer’s information availability
• Perceived level of product differentiation • Switching costs
• Switching costs
Source: The I/O (Industrial organization) model (adapted from Hitt et al. and Global reporting Initiative

The Competitive Environment
Competitor/Competitive Environment: The competitor analysis provides an understanding of
the organization's current competitors and is a follow-up to an industry analysis.
1. Future Objectives - Seeks to answer "What drives the Competitor?" Comparing goals, emphasis, and
attitudes toward risk.
2. Current Strategy - Seeks to answer "What is/can the competition do?" How are we competing and
does our strategy support changes in the competitive structure?
3. Assumptions - Seeks to answer "What does the competitor believe about itself and the industry?"
Volatile future or stable competitive conditions?
4. Capabilities - Seeks to answer "What are the competitors capabilities?" Competitor's
strengths/weaknesses and comparison of yours to theirs.

The nature of competition in an industry, as well as the profitability of a firm, is often directly
influenced by developments in the competitive environment.
The competitive environment consists of many factors that are particularly relevant to a firm’s
strategy. These include competitors (existing or potential), customers, and suppliers.

GAP ANALYSIS
•Gap planning is also referred to as a “Need-
Gap Analysis,” “Need Assessment,” or “the
Strategic-Planning Gap.”
•It is used to compare where an organization is

now, where it wants to be, and how to bridge
the gap between.
•It is primarily used to identify specific internal

deficiencies.
•It needs to think about Areas of concern,

current state, target state, difference, action
plan, priority (high, medium or low)

Gap Analysis Template
Focus Areas Desired Focus Areas
(What are you (Where would you like to
Current State
(Where are you now?)
Identified Gap
(Difference
Action Plan
(Projects you will
focused at?) be?) between desired undertake to bridge
state and current this gap)
state)
Innovation To be recognized as one of We are currently not known for Hire an additional 4
the most innovation SaaS innovation. However, our developers.
platform in the industry software does contain a couple
of unique features. Implement an
Measured by: “innovation
Measured by: checkpoint” for all new
At least 50% of our features requests.
developers working on new Only 10% of our developers are
features. working on new features 40%
Innovation score over 80% Our innovation score on

on a customer review customer.com is only 60% 20%
website.

Framework for Manufacturing in Post-Covid-19 World Order: An Indian Perspective

VISION AND MISSION
SESSION 4

VISION
A vision statement answers the question,
“What will success look like?”
A vision must be
 Resilient: A vision withstand cultural, political and technological change. It has to be
durable
 Inclusive: anybody irrespective of the job they do can believe they can contribute.
 Service-oriented: primary benefit goes to those other than contributor.
A vision is not where you are now, it’s where you want to be in future.

Vision statement questions look like:
 What are our hopes and dreams?
 What problem are we solving for the greater good?
 Who and what are we inspiring to change?

Collins and Porras. They conceptualize vision as having two major components: a
Guiding Philosophy, and a Tangible Image.
They define the guiding philosophy as “a system of fundamental motivating

assumptions, principles, values and tenets.
The guiding philosophy stems from the organization’s core beliefs and values and its
purpose.

Articulating a Vision

CORE BELIEFS AND VALUES
Three shared values:
 Respect for their Employees
 Responsiveness to their customers
 Results for their Shareholders, skilfully linking their core values to their key
constituencies and also saying something about what is important to the organization.

TANGIBLE IMAGE
The second major component of vision is tangible image:
This is composed of a BHAG and vivid description.

VIVID DESCRIPTION
Paint a picture of what it will be like to achieve the BHAGs—that is, a vibrant, engaging, and
specific description of what it will be like to achieve the BHAG.
 They make the goals vibrant, engaging---and tangible

 What it will be like to achieve the goal.

MISSION
(Collins and Porras) Mission is “a clear and compelling goal that serve to unify an organization’s
effort. An effective mission must stretch and challenge the organization, yet achievable.”

Formulating Mission
1. What is the basic purpose of your organization?

2. What is unique about your organization?
3. What is in your company that will make it stand out in a crowd?
4. Who are, and who should be, your principal customers?
5. What are the basic beliefs, values and philosophical priorities of your firm?

Components of Mission Statement
1. Product or Service
2. Customers
3. Technology
4. Survival, growth & profitability
5. Company philosophy
6. Public image
7. Employees

Mission statement questions look like:
1. What do we do?
2. Whom do we serve?
3. How do we serve them?

Mission Vs. Vision
Mission Statement Vision Statement
About It describes HOW to get to where you want to be. It summarizes WHERE you want to be.
Objectives and major purpose of the organization Communicates both the purpose and values of
related to customer needs and team values are your business.
explained.
Answer It answers the question, “What do we do? What It answers the question, “Where do we aim to
makes us different?” be?”
Time A mission statement talks about the present It talks about your future.
leading to its future.
Function It outlines broad goals for the establishment of the It outlines where organization will see itself
organization. Its prime function is internal; that some years from now. It inspires the firm to put
explains the salient organization's success measure in its best. It gives an understanding of the
or measures and its prime audience is the reason for the existence of the organization.
leadership, team and stockholders.

Change It can change, but it must still be tied back to the As your organization evolves, it might be
core values, customer needs and vision of the firm. tempted to change the vision. However,
mission or vision statements explain the
organization's foundation, therefore, there
should be a reduction in change to the
minimum.
Developing a What are we doing today? For whom? Of what Where are we going? When are we getting to
statement benefit? In other words, Why we do what we do? that stage? How are we going to do it?
What, For Whom and Why?
Features of an Purpose and values of the organization: Who are Clear, concise and unambiguous. Describing a
effective the organization's primary "clients" (stakeholders)? happy future (hope); remarkable and
statement What are the responsibilities of the organization interesting expression; accurate aspirations,
towards them? achievable; alignment with organizational
values and culture.

EXAMPLES
Vision: To be Earth’s most customer-centric company, where customers can find and discover
anything they might want to buy online.
Mission: We strive to offer our customers the lowest possible prices, the best available
selection, and the utmost convenience.

Vision: To create economic opportunity for every member of the global workforce.
Mission: To connect the world’s professionals to make them more productive and successful.

Vision: To provide access to the world’s information in one click.
Mission: To organize the world’s information and make it universally accessible and useful.

Vision: To become the world’s most loved, most flown, and most profitable airline.
Mission: Dedication to the highest quality of customer service delivered with a sense of warmth,
friendliness, individual pride, and company spirit.

Vision: Inspire the world. Create the future.
Mission: Inspire the world with our innovative technologies, products and design that enrich
people’s lives and contribute to social prosperity by creating a new future.

Vision: Bring inspiration and joy to people, everywhere, everyday.
Mission: To create a world where our consumers have access to a finely curated, authentic
assortment of products and services that delight and elevate the human spirit.

Vision: To create better everyday life for the many people
Mission: Our business idea supports the vision by offering a wide range of well-designed,
functional home furnishing products at prices so low that as many people as possible will be
able to afford them.

Vision: Be the bank of choice for a Transforming India.
Mission: Committed to providing simple, responsive and innovative financial solutions.

Vision: To be a leading, competitive, Nutrition, Health and Wellness Company delivering
improved shareholder value by being a preferred corporate citizen, preferred employer,
preferred supplier selling preferred products.
Mission: …. the world's leading nutrition, health and wellness company. Our mission of "Good
Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a wide
range of food and beverage categories and eating occasions, from morning to night.

Vision: Sustain position as one of India's most valuable corporations through world class
performance, creating growing value for the Indian economy and the Company's stakeholders
Mission: To enhance the wealth generating capability of the enterprise in a globalising

environment, delivering superior and sustainable stakeholder value

Vision: Our vision is to enrich the lives of our customers. Our obsession is to win customers for
life through an exceptional experience.
Mission: Hunger to win customers for life.

Vision: Keeping Nationalism, Ayurved and Yog as our pillars, we are committed to create a
healthier society and country. To raise the pride and glory of the world, we are geared up to
serve people by bringing the blessings of nature into their lives. With sheer dedication, scientific
approach, astute planning and realism, we are poised to write a new success story for the world.
Mission: Making India an ideal place for the growth and development of Ayurveda and a
prototype for the rest of the world.

Vision: The go-getters. The kind of people who are relentless about our mission to help people
go anywhere and get anything. Movement is what we do. It’s our lifeblood. It runs through our
veins. It’s what gets us out of bed each morning. It pushes us to constantly reimagine how we
can move better. For you. For all the places you want to go. For all the things you want to get.
For all the ways you want to earn. Across the entire world. In real-time. At the incredible speed
of now.
We welcome people from all backgrounds who seek the opportunity to help build a future
where everyone and everything can move independently. If you have the curiosity, passion, and
collaborative spirit, work with us, and let’s move the world forward, together.
Mission: We reimagine the way the world moves for the better.

GOALS
Goals are an expected or desired outcome of a planning process. Goals are usually broad, general
expressions of the guiding principles and aspirations of a community.
1. S- Specific, significant, stretchable
2. M- Measurable, meaningful, motivational
3. A- attainable, achievable, acceptable, action-oriented
4. R- realistic, relevant, result- oriented , rewarding , reasonable
5. T- time-based, time-bound

There are two type of goals:
1. Financial Goals: These goals focus on achieving a certain level of financial performance,
measured in terms of return on investment or growth of revenues.
2. Strategic Goals: The goals focus on achieving strategic or competitive advantages within the
industry, like technology leadership, creativity and innovation and superior customer service.
Characteristics of Goal
1. Specific (precise and measurable, would assist management in monitoring the progress
towards achievement of goals at each specific point of time)
2. Should be well constructed, realistic, and challenging
3. Specification of time period.

OBJECTIVES
Objectives are precise targets that are necessary to achieve goals. Objectives are detailed
statements of quantitatively or qualitatively measurable results the plan hopes to accomplish.

Characteristics of a good Objective
1. Specific and Unambiguous

2. Time Horizon
3. Flexible
4. Attainable
5. Measurable
6. Multiple objectives

Area of Objectives
1. Market Share
2. Leadership in innovation and technology
3. Product quality and productivity
4. Resource level
5. Customer satisfaction
6. Performance level
7. Social responsiveness

Classification of a business objectives
1. Organic Objectives: Survival, Growth & Prestige

2. Economic Objectives: Profit, Innovation, Better utilization of resources, increase in market
share, expansion of markets, product introduction & wealth, etc.
3. Social Objectives: Employees, Shareholders, Customers, Government, Dealers, Media and
Competitors etc.
4. Human Objectives: Wages, Working conditions, Labor participation in Management, Human
Resource development, Job Satisfaction & Welfare facilities, etc.
5. National Objectives: Self-sufficiency, Development of backward areas, Employment & Social
Welfare, et.

Areas where corporate objectives have to be
set.
1. Continuity of profits
2. Growth in assets
3. Increase in market share or market leadership.
4. Service to customers, or clients.
5. Employees satisfaction and well-being.
6. Productivity or efficiency improvement.
7. Product innovations and development.
8. Maximization of shareholders wealth
9. Enhancement of corporate image.
10. Social responsibility.

GOALS Vs. OBJECTIVES
GOALS OBJECTIVES
The purpose toward which an endeavour is Something that one’s efforts or actions are
Meaning directed. intended to attain accomplish; purpose; target.
I want to achieve success in the field of genetic I want to complete this thesis on genetic
Example research and do what no one has ever done. research by the end of this month.
Generic action, or better still, an outcome Specific action-the objective supports attainment
Action towards which we strive. of the associated goals.
Goals may not be strictly measurable or

Measure tangible.
Must be measurable and tangible.
Time Frame Longer term Mid or shorter term

BUSINESS MODEL

SM I- Session 1

EVOLUTION OF STRATEGIC MANAGEMENT

Period 1950s 1960s 1970s 1980s 1990 Now
Dominant Budgetary Long term Environment Strategic The Quest for Strategic
Theme Planning & planning & Scanning & Planning Competitive Innovation
Control Environment Strategic Systems Advantage
Scanning Planning Approach
Main Issues Financial Control Financial Control Portfolio Positioning Competitive Concept of
through annual through medium Planning Approach with Advantages Stretch, Strategic
budgets term projections focus on Value Benchmarking & & Organizational
Chain Analysis Resource Based Advantages
Approach
Principal Budgeting, Forecasting, Portfolio Organizational Resource Dynamic Sources
Concepts & Investment Investment, Planning, Synergy, Industry Analysis & of Competitive
Techniques Planning & Planning models Experience Structure & Analysis of Core Advantage,
Project Appraisal Curves Competitor Competencies Knowledge &
Analysis Learning
Organizational Strategic Strategic Financial Control Strategic Control Structures, IT Virtual
Implications Planning, Planning Organizations, Organizational controls Organization
Structures, Structures, e.g. SBUs, Structures e.g. Alliances and
Functional Multi-divisional Portfolio Matrix, Networks &
Designs Organization Restructuring Horizontal Knowledge
Based Firms

BASIC MODEL OF STRATEGIC
MANAGEMENT

WHAT IS STRATEGY?

Some authors have analyzed multiple definitions provided by other authors. For example,
 Xavier (1993) stated that strategy can be used in four different ways – to achieve long-term objectives
of the organization (Chandler, 1962);
 finding a match between organizational resources and opportunities in the external environment
(Mintzberg, 1979);
 as a vehicle for achieving competitive advantage (Porter, 1985);
 or a mechanism for coping with turbulent environment

Strategies have two essential characteristics:
1. They are made in advance of the actions to which they apply, and
2. They are developed consciously and purposefully.

Strategy- An Introduction
Determine how organizational resources, skills, and competencies should be combined to create
competitive advantage.
General Management Core Strategy is:
1. Identify a unique position (Indigo Airways; low fare and on time )
2. Make trade offs to prioritize initiatives (no meals, no frills, & less TAT)
3. Forge Fits (combining) among activities to produce a unique blend (same aircrafts, leased
aircrafts, smart sale of tickets, overall parsimony)
- Michael E. Porter

What Strategy is not
A goal and aspiration
An action plan
Operational Efficiency

Levels of Strategy
Corporate Strategy
Where to compete? What businesses shall Corporate Strategies
we be in?
Business Strategy
How shall we compete in each business?
Business Unit 1 Business Unit 1 Business Unit 1
Functional Strategy
Maximize Resource Productivity R&D Finance Marketing Supply Chain
Achieve Strategic Objectives set at higher Strategies Strategies Strategies Strategies
level of organization

KEY TERMS IN STRATEGIC
MANAGEMENT
MISSION
VISION
TACTICS
STRATEGY
GOALS
OBJECTIVES
POLICY

Strategists
A strategist is a person with responsibility for the formulation and implementation of a strategy.
Strategy generally involves setting goals, determining actions to achieve the goals, and mobilizing
resources to execute the actions.
Who can be strategist?
◦ Board of director
◦ Chief Executive Officer
◦ Entrepreneurs
◦ Senior Management
◦ SBU level executives
◦ Corporate planning staff
◦ Consultants
◦ Middle level managers
◦ Executive Assistant

Role of Strategist
1. Architect
2. Mobilizer
3. Visionary
4. Surveyor
5. Fund Manager

Why is Strategy Important ?
1. Planning: Creating and tracking progress against an annual operating plan is an essential management tool
for any company. What is often missing is the relationship these plans have to the future. However, without a
clear picture of what you want the future to look like, it will always be more reactive than proactive.
2. Strengths and Weaknesses: How to leverage strengths (competitive advantages) and make plans to
close capability gaps in your organization (weaknesses)? Strategy creates a higher level of awareness and
provides greater focus on activities that will make the organization more successful.
3. Skills & Knowledge: If you know where you want to take your business over the long term, you will have a
much better idea of the kinds of capabilities you will need to achieve your goals. Strategy defines and drives
decisions in organizational design.

4. Resource Allocation: Strategy is about making choices. What products, services and markets
will be a part of the future and what we should not do?
5. Environment Scan: Too many CEOs don’t take the time to truly know the external
environment that can have a positive or negative impact on performance. Being aware and
prepared for potential shifts in your market or industry provides the opportunity to take
action before it happens.

Cons of Strategic Management
1. Complex process: SM includes various types of continuous process which checks all type of
major critical components such as the internal and external environments, long term and
short term goals, strategic control of the company’s resources and the organizational
structure. This is a lengthy process because a change in one component can affect all the
factors.
2. Time-consuming process: For implementation, the top management needs to spend quality
time to get the process right. A lot of time is spend in researching, preparing and informing
the employees about this new management. This type of long term and time-consuming
training and orientation would hamper the regular activities of the company.

3. Tough Implementation: To implement SM active participation and accountability of
employees across the hierarchy are needed. The experts mention that implementation is
difficult because they have to continuously strive to make the employees aware about the
process and benefits of this system.
4. Proper Planning: Management systems calls for perfect planning and is a team effort.
To implement these processes one needs to sideline various regular decision-making activities which
might adversely affect the business in the long run.

Strategic Fit
The appropriateness of a firm’s strategy can be defined in terms of its fit, match, or congruence
with the environmental or organizational contingencies facing the firm (Andrews,1971; Hofer
and Schendel, 1978).


Sessions 17 To 20 - Strategy Implementation, Evaluation and Control (11 Files Merged)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Sessions 17 To 20 - Strategy Implementation, Evaluation and Control (11 Files Merged)

Uploaded by

Copyright:

Available Formats

Strategy Implementation

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 1

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 3

Various studies have reported strategy implementation failure rates at 60 to 90 percent.

The majority of strategies fail in the strategy implementation phase.

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 4

Develop Establish Generate,

Perform Internal Analysis

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 5

Strategy implementation is the translation of chosen strategy into organizational action so as

Strategy implementation is also defined as the manner in which an organization should

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 6

Strategy implementation is "the process of allocating resources to support the chosen

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 7

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 8

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 9

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 10

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 11

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 12

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 13

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 14

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 15

It is positioning forces before action. It is managing forces during action.

It focuses on effectiveness It focuses on efficiency,

It is an intellectual process It is primarily and operational process.

It requires special motivational and leadership

It requires coordination among few

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 16

Step #2: Development of an implementation structure

Step #3: Development of implementation-support policies and programs

Step #4: Budgeting and allocation of resources

Step #5: Discharge of functions and activities

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 17

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 18

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 19

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 20

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 21

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 22

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 23

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 24

• Seek and maintain control over raw material

• Focus on high growth in emerging markets and pricing stability

• Increasing focus on High value added steel products

• Evaluate performance, Personal feedback

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 26

• Process technology- utilization of high gangue iron ore in

• Encourage employees to be innovative

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 27

• Creation of excitement and motivation through intense counseling

• Making employees aware of business

• Communicate policies, rules, procedures and modify or redefine

• Develop climate of trust and openness

• Empowerment of leaders at all levels to take quick decisions -- act

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 28

• The Composition of the Board and the board

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 29

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 30

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 31

 It represents a multidimensional system that is used to define and implement organizational

Balanced Scorecard is a management system used in companies which provides efficient

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 32

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 33

17-03-2022 DR. NIVISHA SINGH IMT GHAZIABAD 34