MODULE – I

INTRODUCTION TO STRATEGIC MANAGEMENT

Strategy: Plan of action we make to achieve a goal. Example: HUL – segmentation by socio-
economic class (Surf, Rin, Sunlight) to compete with Nirma.

Levels of Strategy:
• Goal setting and strategy formation is a top-down approach.
• Goal achievement and strategy achievement is a bottom-up approach.
• In case an organization does not have any SBUs, corporate will do both SBU and
corporate level strategies.
• In case of a complex business with multiple SBUs, the corporate will do the
corporate level strategy. However, the SBUs will also make corporate level as well as
SBU level strategies.

1. Societal Level:
• It refers to the way the organization wants to be seen in the society and the
needs it aims to fulfil.
• Normally made by founders/top management based on their philosophies,
therefore, it is subjective.
• Made to give direction to the company.

2. Corporate Level:
• Based on the direction you get from the societal level strategy- to form goals
(vision & mission).

3. SBU Level:
• First, make goals based in corporate level goals.

4. Functional Level:
• Set targets for the functions.
• Give direction to operations and resources.
• Make them coordinate and achieve goals.

5. Operational Level:
• Make own targets.
• Make strategies to achieve their own targets.
• Implement these strategies to achieve targets/goals.

Strategic Management: It is a dynamic process of formulation, implementation, evaluation

and control of strategies to realize the organization’s strategic intent.
Strategic Management Process:
1. Establishment of Strategic Intent (Goal)
2. Strategy Formulation
3. Strategy Implementation
4. Strategy Evaluation
Red Ocean Strategy:
• Growth maturity stage.
• Compete in existing market space.
• Beat the competition.
• Exploit existing demand.

Blue Ocean Strategy:

• Create uncontested market space.
• Make the competition irrelevant.
• Create and capture new demand.
• Example- Super Cub is a blue ocean strategy (Honda).

Benefits of Strategic Management:

1. Helps you make better decision
2. Optimal usage of resources.
3. Identify direction.
4. Increasing market share and profitability.
5. Better future.
6. Longevity of business
7. Avoid competitive …

Limitations of Strategic Management:

1. Time taking process.
2. Complex process.
3. It can be expensive.
4. Tough implementation.
5. Proper planning.
6. Future doesn’t unfold as anticipated.
 MODULE – II
HEIRARCHY OF STRATEGIC INTENT

Strategic Intent: Intention behind the strategy to achieve the goal or “Strategic Intent
envisions a desired leadership position & establishes the criterion the organization will use to
charter its progress”

Vision: What a firm/person wants to become in the future. Long-term goal.

Vision Statement is Description of something (an organization/corporate

culture/business/technology/activity) …

• Usually made at corporate level.

• May or may not be made at SBU level.
• Qualitative in nature.
• Long term (normally 5-7 years).
• Changes in 5-7 years.
• Vision changes when you achieve the vision.

Vision should be: Vision should not be:

An organization’s charter of core values and Advertising slogan.
principles.
The ultimate source of priorities, plans and A strategy and a view from the top.
goals.
A puller into the future. A history of organization’s proud past.
Makes your organization proactive, rather A business issue.
than reactive.
A determination of what makes the Passionless.
organization unique.

Benefits of a Good Vision Statement:

1. Gives direction to the company.
2. Helps make strategy to achieve the goal.
3. Promotes innovation/risk taking.
4. Motivates/inspires people- brings people together as they have a sense of common
purpose.
5. Foster long-term thinking.
6. Represent integrity.

Mission:
• Purpose/reason for the organization’s existence today (present).
• What are you and why you exist?
• Normally made at corporate level by the top management.
• Can be made at the SBU level in line with the corporate level.
• Qualitative.
• Long-term in nature.
 • Mission doesn’t change when you achieve the mission. Changes when you change
your ‘purpose’.

Characteristics of Mission Statement:

• Feasible
• Precise
• Clear
• Motivating
• Distinctive
• Indicate how objectives are to be accomplished
• Indicate the major component of strategy

Business Definition: How the business is defined:

1. Alternative Technologies: How is the need being satisfied?
2. Consumer Groups: Who is being satisfied?
3. Consumer Function: What need is being satisfied?

• Made at the business level. As many businesses that a company has, it’ll have that
many business definitions. Can only be made at the corporate level if only one
business.
• Qualitative in nature.
• Flexible in the short-term.

Example-
Brands Customer Group Customer
Need
Sonata Lower-Middle Utility
Fastrack Youth (Middle) Look
Rolex Elite Status
Apple Upper-Middle, Tech Savvy Added Utility
Diesel Male Upper Outdoor
Utility
Casio (G-Shock) Sporty/ Gym/Outdoor Outdoor
Utility
Swarovski Female Upper-Middle Jewelry Piece

Business Model/Revenue Model: It refers to how the organization will make money?
• Made at the business level. As many businesses that a company has, it’ll have that
many business definitions. Can only be made at the corporate level if only one
business.
• Qualitative in nature.
• An organization can have more than one business model.
• Flexible in the short-term.
Objectives: Short-term (1-3 years) goals made by the organization.
• More specific & quantitative in nature so that performance appraisal can be easily
done.
• Made at the functional and operational level by the lower-level management.
• It guides the strategies being made in the organization, which in turn will help them
achieve the long-term goals i.e., vision and mission.
• Role of Objectives:
1. Helps pursue the vision and mission.
2. Helps in making strategies.
3. Helps in performance appraisal.
4. Defines organization’s relationship with the environment.
• Characteristics of a Good Objective:
1. Understandable
2. Realistic / Feasible / Set within constraints
3. Challenging
4. Quantifiable- measurable and controllable
5. Should relate to / within a good time-frame
6. Specific and concrete
7. Different objectives should correlate
 MODULE – III
ENVIRONMENTAL ANALYSIS

Business Environment is the aggregate of all the factors (conditions, events and influences)
that surround and affect an organization.

Characteristics:
1. Complex
2. Dynamic
3. Multi-faceted: what can be seen as an opportunity for one, may actually be a threat
for another.
4. Has a far-reaching impact

Elements of an Environment:
Internal External
All the factors within the organization. All the factors outside the organization.
Under the control of the organization. Not under the control of the organization.
Helps us identify their strengths and Give rise to threats and opportunities.
weaknesses.
Will only affect you. Will affect the industry.
• Threats are negative factors in the environment that can negatively impact an organization.
• Opportunities are favorable factors that positively impact an organization.

External Environment:

1. Economic Factors: Economic condition prevailing in the country.

(i) Economic Stage:
• Under-developed: Essential items, agricultural, primary education,
pharma sector.
• Developing: Financial, infrastructural, agricultural sectors.
• Developed: Service industries, technologically-developed brands etc.
(ii) Economic Structure:
• Capitalist:
-> Resources are in the hands of the private sector; government
intervention is very less.
-> Free entry and exit in trade.
-> Opportunities for new business to thrive / start-ups promoted.
-> Dirty competition.
• Socialist:
-> Government runs the business; private sector intervention is very
less.
-> Very little competition.
-> Government regulation & intervention is very strong.
• Mixed:
-> Opportunity to enter and exit easily.
-> Government support is also there.
-> Government intervention is also not too much.
 -> Problem of bureaucracy and corruption.
(iii) Economic Policies:
• Monetary: Focuses on money supply.
• Fiscal: Focuses on taxes.
(iv) Economic Indices: GDP, GNP, Per Capita Income etc.
(v) Infrastructure Factors: Electricity, roads, transportation, warehousing,
banking, internet connectivity etc. These can make or break any businesses.

2. Political Factors:
(i) Political System: Where / with who the power lies in a country.
• Democracy
• Dictatorship
• Monarchy
(ii) Political Structure, its goals and stability: Political hierarchy in a country.
(iii) Political Processes: How political parties run in a country, how are elections
conducted etc.
(iv) Political Philosophy: What does the government think of businesses? How
much are they promoting business? How much do they interfere in
businesses?

3. Market Environment:
(i) Customer Factors: Customer needs, values, preferences, likes and dislikes
etc.
(ii) Product Factors
(iii) Marketing Intermediary: Any middle man that helps you take the product to
the market or consumer.
(iv) Competitor Based Factors: How many competitors? How aggressive the
competitors are? How easy it is to enter and exit in a market?

4. Socio-Cultural Factors:
(i) Demographic Factors: Age, size, gender ratio, urban to rural ratio,
demographic dividend, growth and death rates, level of urbanization, etc. of
the population.
Benefits of having a young population:
• Have the purchasing power.
• Market for a longer time.
• Population which is going to work for you.
(ii) Socio-Cultural Concern: How much does your population worry about
corruption, consumerism, environment, etc.?
(iii) Family Structures
(iv) Role & Position of Men, Women, Children, Aged in Family and Society
(v) Education Levels, Awareness of Rights, etc.

5. Supplier Factors:
(i) Cost, availability and continuity of supply of raw materials, parts and
components.
(ii) Cost and availability of finance for implementing projects.
 (iii) Cost, availability and reliability of energy.
(iv) Cost, availability and reliability of human resource.
(v) Cost, availability and reliability of machinery after sale.

6. International Factors:
(i) Globalization:
• Global Economic Organizations, Blocks and Forces.
• Global Demographic Patterns.
• Global Human Resource.
• Global Information System.
• Global Technology & Quality Systems.
(ii) Global Competitiveness: Competition is more intense as you start going
international:
• Two-faced competition in your own country from other players in
your country or any other international brand coming into your
country.
• Three-faced competition in international markets.
(iii) Global Trade and Commerce Trends and Process

7. Technological Factors:
(i) Technological Development:
• Rate of technology
• State of technology with development
• How fast is the technology changing
(ii) Source of Technology:
• Where is the technology coming from (internal/in-house or
external/which market)
• Cost of this technology
(iii) Communication & Infrastructural Technology in Management
(iv) Impact of Technology on Human Beings

8. Regulatory Environment:
(i) Constitutional Framework
• Licensing, Monopolizing, Foreign Investment Policies
• Distribution, Pricing and their Control Policy
• Export and Import Policy
• Small Scale Industries, Sick Industries, Development of Backward
Areas, Environment Protection, Consumer Protection Policy

Internal Environment

1. Financial Capabilities:
(i) Factors related to source of funds.
(ii) Factors related to usage of funds.
(iii) Factors related to management of funds: Budgeting, accounting, tax
planning, credit management, risk management, hedging, etc.
2. Marketing Capabilities:
(i) Product related factors:
• Better variety
• Better differentiation
• Stronger positioning
• Stronger strategy
(ii) Price related factors.
(iii) Place related factors/distribution network:
• Distributors
• Wholesalers
• Retailer
• Logistics companies
• Warehouse companies
(iv) Promotion related factors: Factors that create awareness about the project.
• Advertisement
• Sales promotion
• Publicity
• Digital marketing
(v) Integrative and Systematic Factors.

3. Operational Capabilities:
(i) Factors Connected to Production System: Factory location, capacity, layout.
(ii) Factors Related to Operations and Control Management: Quality control,
crisis management etc.
(iii) Factors Related to R&D: E.g.: Pfizer and Cipla.

4. Information Management Capabilities:

(i) Factors Related to Acquisition: Source, quality, quantity and frequency of
information.
(ii) Factors Related to Processing of Information: Converting data into a better
format so that further analysis and decisions can be made with the data.
(iii) Factors Related to Retrieval and Usage of Data: Speed at which you can
retrieve, quantity you can retrieve.
(iv) Factors Related to Transmission and Dissimilation of Data: How fast can you
share the data, with who all can it be shared, how fast can it be accepted.
(v) Integrative, Systemic & Supportive Factors: Do you have the right
applications, software, tech people etc.

5. Personnel Capabilities:
(i) Factors Related to Personnel Systems: Recruitment, training, HR functions
etc.
(ii) Factors Related to Organizational & Employee Characteristics
(iii) Factors related to Industrial Relations
 6. General Management Capabilities:
(i) Factors related to General Management Systems: Systems in place to
perform these management capabilities. Two main types: Centralized and
Decentralized. It is a strength if you have a combination of both.
(ii) Factors related to General Managers: Qualification, knowledge, experience,
skill set, value system, etc.
(iii) Factors related to External Relations: Maintaining relations with the
stakeholders.
(iv) Factors related to Organization Climate

SWOT Analysis:
 MODULE IV
CORPORATE LEVEL STRATEGIES

Overview of Corporate Level Strategies

Deals with decision regarding:
1. Objectives of the organization.
2. Allocation of resources among the SBUs.
3. Transferring resources among the SBUs.
4. Coordinating/managing the portfolio of business.
Should play with the business definition (group/need/technology).

Corporate Level Strategies:

1. Expansion
2. Stability
3. Retrenchment
4. Combination

Expansion Strategies: Growth comes from either selling something to a new group or start
selling something new. (Broadening business definition/scope of business)

1. Expansion by Concentration:
• By default, the first strategy any company will do.
• Converge your resources in existing business in terms of customer group,
customer function and alternative technologies- singly or jointly- in order
to improve overall performance.
• Growth strategies proposed by Ansoff: Ansoff Product Market Matrix.
Market/Product Existing New
Present Market Penetration: Product Development:
Only expansion strategy which New product for the
doesn’t add to any customer existing market. However,
group/need/technology. the technology required to
same product, same market, make the new product
increase sales by: should be integrated with
(i) TG not buying from you, you the existing technology.
try to get them to buy from you Adds to customer needs.
(by highlighting your USP).
(ii) TG already buying from you,
get them to buy more from you.
New Market Development: Diversification
Taking existing products to a
new market.
(i) Geographically new market
(E.g.: Ikea)
(ii) Demographically new
market (E.g.: Fiama)
Adds to customer group.
 E.g., even though P&G makes both Head & Shoulders and Herbal
Essences, the technology required to make new product has not changed.
Only because it is new product AND new market, it doesn’t mean its
diversification. It is a combination strategy of both: market development
and product development.

2. Expansion by Integration: Adding activities to the present activities of a firm

(present activity in the value chain).
Value chain refers to set of activities carried out by different organizations from
taking the raw material, converting it into finished goods and services and taking
that closer to the end customer, such that every activity adds value to the product
and hence, a premium can be charged. However, cost is incurred for the purpose of
value addition.
(i) Horizontal Integration: Organization sets up (organic)/takes up (inorganic) companies in
the same industry (if the industry changes, it becomes diversification) at the same level of
production/value chain or marketing processes (if the level changes, it becomes vertical
integration).
• All in organic horizontal integration are mergers and acquisitions but not all mergers
and acquisitions are not horizontal integration
• Does horizontal integration change business definition?
• Business definition doesn’t change considerably -> same industry, customer group,
customer needs and technology.
Types of Horizontal Integration:
(a) Organic: If you start organically, you have more control, lesser in cost, more in effort.
These will not give you immediate returns. Example: ASMSOC new branches organically.
(b) Inorganic: If you start inorganically no efforts in setting up the factory but will have to
compromise according to existing resources, comparatively more expensive. These will give
you immediate returns
Benefits of Horizontal Integration:
• To increase supply – helps you achieve economies of scale – sales/revenue/profit
increases.
• Helps increase market share/power.
• Stronger brand.
• End up getting resources of other company in case of inorganic horizontal
integration.
• Economies of Scope: New products get added in case of organic horizontal
integration.
• Product differentiation.
• Reduction in industry rivalry.
• Replication of a successful business model.
Limitations of Horizontal Integration:
• Expensive – need resources.
• Coordination required.
• Integrating companies can be difficult.
• Little evidence that it adds value to the organization.
• It may not lead to economies of scale and scope.
 • May attract the provisions of monopoly or restrictive trade practices act.

(ii) Vertical Integration: Any new activity undertaken with the purpose of either supplying
inputs (raw material) aka backward integration or serving as a customer for outputs
(marketing firm’s products) aka forward integration. Penetration aims at sales/demand
whereas integration aims at capacity/supply.
• In vertical integration, business definition (customer group/need/technology)
changes more drastically than horizontal integration.
• Vertical Integration is also diversification strategy.
• All vertical integration is diversification but not all diversification is vertical
integration.
Types of Vertical Integration:
(a) Based on movement:
• Forward: Closer to end customer
• Backward: An activity before your activity in your value chain, closer to raw material
(b) Degree/Extent of Vertical Integration:
• Full: All activities of value chain completely.
• Partial: Two ways we can see this: You do a few activities or you made be doing all
the activities but you do them partially. Two types:
(a) Taper Integration: Company makes a part of their requirement and buys the rest
from outside or the company sells a part of their output to their own organizations
and the rest to outsiders.
(b) Quasi Integration: Company purchases/sells most of their requirements from/to
another firm in which they have an ownership stake (minority) to diversify
investment or to learn if you want to open your own factory later.
Benefits of Vertical Integration:
• More control over the value chain.
• Cheaper raw material: Transfer pricing is possible only when the company is
vertically integrated.
• Control the quality of product.
• New products and services.
Limitations of Vertical Integration:
• Increased cost of coordinating integration over multiple stages of the value chain.
• Chances of underutilization of resources because of uneven population across
different value chain activities.
• Lack of information and feedback from suppliers and distributors.

3. Expansion by Diversification:
• Example: Tata entering the aviation sector via Air Asia (technology couldn’t be
integrated with the technology that it already had).
• Substantial change in business definition: Customer need and tech def changes,
customer group sometimes changes.
• Two types:
(i) Unrelated/Conglomerate: New business is no way related to the original
business. Example: Venkateshwara .. buying UK Football Club.
(ii) Related/Concentric: New business is someway related to the original business.
(a) Marketing Related Concentric: New business is related to existing
business in the marketing related aspects. Example: Kim Kardashian: Skims
and KKW Beauty (same TG, same stores, one distribution centre, advantage
of synergy- distribution).
(b) Technology Related Concentric: The technology required to make the
new product is somewhat related to the existing technology. Example:
Companies coming up with electric car (different production line, different
customers, different showrooms, different marketing campaigns one
supplier, advantage of economies of scale and synergy at the backend- supply
chain).
(c) Marketing & Technology Related Concentric: Synergy on both sides,
technology is similar, products being sold to similar customers, distribution
advantage. Example: Samsung.