CA-INTER

100%
ICAI

SM
CHALISA
Handwritten Notes

SUMMARISE WITHOUT COMPROMISE

NOV 21 / MAY 22 100% ICAI Based

CA KISHAN KUMAR
(CA Rank Holder, ex PwC , Chief Minister Awarded)
 DEDICATED TO

My Mummy and Papa

who encouraged me to fly towards my dream.

who encouraged me to fly towards my dream.

 SM चालीसा - Preface

P REFACE TO S ECOND E DITION

I am delighted to present before you the FULLY REVISED AND UPDATED Second Edition of
“Strategic Management - Chalisa” that for young & dynamic students of CA Inter course.
This book has been specially designed following the principle of ‘Summarise Without
Compromise’.
It has been my humble endeavour to make this book most student friendly, concise and
exam oriented while holistically covering the entire syllabus to enable the students to face
the exams with utmost confidence as per ICAI expectation and requirement.
I am absolutely certain that this book will help you to score maximum marks in the exam
and also develop an interest in the wonderful subject of Strategic Management.
Salient features of the Book are: -

Based on ICAI Study Material;

Simplified and concise presentation of complex SM concepts;

Full of colourful Charts & Tables;

Complete coverage of the syllabus;

Student friendly layout enabling comfortable reading.

A book is a combined effort of a number of people. Special mention is due for my wife
Neha, Officer Personnel Radhika & Mahesh and my dear students, without whose constant
support and love this Book would not be a reality.

Finally, I would request student community to bring to my notice any error, omission and
suggestions for further improvement of this book which will be thankfully acknowledged and
incorporated in next edition.

Happy Learning!!

CA Kishan Kumar

Note: This is a Summary Book & Must be Read along with our Fast-Track Lectures or Marathon
Lectures. To ensure completeness, it must be used along with our Question Bank – SM Divyastra.

Start !!
 SM चालीसा - Handwritten Notes

INDEX
S No. Topics Page No.
1. Introduction to Strategic Management 1–6
2. Dynamic of Competitive Strategy 7 – 22
3. Strategic Management Process 23 – 28

4. Corporate Level Strategies 29 – 36

5. Business Level Strategies 37 – 44

6. Functional Level Strategies 45 – 56

7. Organization & Strategic Leadership 57 – 68

8. Strategy Implementation & Control 69 – 80

If you are insecure, guess what?

The rest of the world is, too. Do not
overestimate the competition and
underestimate yourself. You are
better than you think.

Start!!
 Introduction to Strategic Management

C HAPTER 1

I NTRODUCTION TO S TRATEGIC M ANAGEMENT

1. BUSINESS POLICY

▪ Business policy is defined as study of

➢ functions and responsibilities of Senior Management;
➢ crucial problems affecting success of Entity; and
➢ decisions that determine the direction of Organization and shapes its future.
▪ Business Policy tends to emphasize on rational-analytical aspects of strategic management.
▪ Examples
a) No exchange, no refund
b) COD allowed
c) Return allowed within 7 days
d) KYC documents must for opening Bank A/c

1.1. Evolution of Business policy

1911 1959 1969

Harvard Business School introduced
interactive course in Management with
objective of creation of general
management capabilities among
business executives.
BP formally introduced in It was made mandatory to include
Academics. course in BP in all US business
management institutes.

As per “William F. Gluek”

“Business policy evolved further as managers started using long term planning and strategic planning from
short term and medium-term planning.
Phase I Phase II Phase III
Business used to be Concept of B.P. arises and B.P. was replaced by strategic
conducted on ad-hoc basis Entities started using short management as managers started using
with little or no formal term, medium term and finally strategic planning.
planning. long-term planning. Long term + short term+ Growth +
competition

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 Introduction to Strategic Management

2. S T R A T E G I C M A N A G EM EN T

Strategy Management

3. S T R A T E G Y

▪ Refers to long term blueprint of Organization’s

➢ desired image i.e., what it wants to be
➢ desired direction i.e., what it wants to do
➢ desired destination i.e. where it wants to go.
▪ It is flexibly designed and provides integrated framework for Top Management to
➢ search, evaluate and exploit opportunities External
➢ perceive threats and meet it
➢ make full use of strength/ resources; and Internal
➢ offset corporate weaknesses.
▪ In large organizations, strategies are formulated at corporate, divisional and functional leveḷ.

3.1. IS STRATEGY PROACTIVE OR REACTIVE?

▪ Proactive strategy is Planned strategy. It involves

➢ Previously initiated business approach that are working well enough to continue it; and
➢ Newly launched business approach to strengthen Co’s overall position and performance.
▪ Reactive strategy is adaptive strategy.
▪ Strategy is formulated on based on business environment. As business environment is dynamic, it can’t
be predicted with absolute certainty.
▪ Hence, when market and competitive conditions take unexpected change or some aspect of Co’s strategy
hit a stonewall, entity has to take strategic reaction known as reactive strategy.
▪ Further there is a need to adapt strategy to new beginning and ideas.
▪ Thus, strategy is a mix of both proactive strategy and reactive strategy. Ideally, strategy should be more
proactive and less reactive.

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 Introduction to Strategic Management

3.2. P O L I C Y & S T R A T E G Y

▪ Policy and Strategy are quite interrelated, but the interesting thing to study is how they differ.
▪ Policy is a thought process, it talks about what should be done in a particular situation, or what should
be the reaction to a given circumstance.
▪ Strategy part of it explains the real actions. Strategy talks about how the policy would be followed.
▪ For example, the policy of an organisation could be to not drop their prices to fight competition. The
strategy could be to give more quantity for the same price, or give some other product as a freebie to
attract customers without dropping their price.

4. M A N A G E M E N T

It is an influence backed by power, knowledge, competence & resources

➢ to make things happen;
➢ to gain command over situation/ phenomena; and
➢ to direct person and events in particular manner.
Management is used in two senses:
a) With reference to key group in Organization in- b) With reference to set of inter related functions
charge of its affairs like BOD, CEO, CFO, etc. and processes carried out by Management to
Survival & success of an Organization depends on achieve objectives.
competence and character of its management. Functions include Planning, Organizing, Staffing,
Directing & Control.
Is strategy substitute for management?
No, strategy is not substitute for sound and responsible management.
Due to dynamic and changing environment, strategy can never be perfect, flawless and optimal.
In sound strategy, allowances are made for possible miscalculations and unexpected events.

5. STRATEGIC MANAGEMENT

• It refers to managerial process of

➢ Developing strategic vision,
➢ Setting objectives,
➢ Crafting strategy,
➢ Implementing and evaluating strategy, and
➢ Initiating corrective adjustments, where deemed appropriate.
• It involves
➢ Strategy formulation
➢ Strategy implementation and
➢ Strategy evaluation.
Originally called business policy, it monitors and evaluates external threats and opportunities in light of
Company’s strengths and weaknesses for survival and growth of Company.

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 Introduction to Strategic Management

Objectives of strategic Management

a) To create competitive advantage so that Company can outperform its competitors.
b) To guide the Company successfully through changes in environment.

5.1. I M P O R T A N C E / B E N E F I T S / A D V A N T A G E S O F S TR A T EG I C M A N A G EM EN T

Darwin propagated “Survival of the fittest”. It is the only principle of survival of organization.
Fittest is not the largest or strongest but one which can change and adapt to changing business conditions.
Business follows the war principle of “Win or lose’. Only in rare cases, win–win situation arises. Hence, each
organization needs to build competitive edge over rivals.
a) Direction to company It gives direction to Company to move ahead. It defines objectives & goals
which are in line with Company’s vision.
b) Proactive instead of It helps company to adopt proactive strategies instead of reactive strategies.
reactive Organizations are able to analyse and take decisions in advance.
c) Future ready It prepares organization to face the future, seize business opportunities and
deal with threats.
d) Develop core It helps Organization to develop core competencies and competitive
competencies & advantages.
competitive advantage This facilitates its fight for growth and survival.
e) Corporate Defence It acts as corporate defence mechanism against mistakes and pitfalls.
mechanism Helps organization to avoid costly mistakes.
f) Framework for decision It provides framework to management for major decision making.
making
g) Enhance Longevity of It helps Organisation to face competition and dynamic market. It makes sure
Business that it is not just surviving on luck.

5.2. L I M I T A T I O N S O F S T R A T E G I C M A N A G E M EN T

SM cannot counter all hindrances/ obstacles/ roadblocks/ bottlenecks/ problems and ensure success.
a) Environment is highly Organization’s estimate about future may drastically go wrong & jeopardize/
complex and turbulent endanger all strategic plans.
b) Time consuming Organizations spend a lot of time in preparing and communicating strategies
that may affect daily routine operations.
c) Costly It adds lot of expenses to Org as expert strategic planners needs to be engaged.
d) Response to Since all Organizations are trying to move strategically, it is difficult to
competitors estimate competitive response to Firm’s strategy.

6. S T R A T E G I C L E V E L S I N A N O R G A N I Z A T I O N

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 Introduction to Strategic Management

1) Corporate They participate in strategic decision making like Merger/acquisition, new product
Level launch etc.
They oversee development of strategies for whole organization. For this his task includes:
a) Defining vision, mission and objectives of Organization
b) Determining what businesses it should be in
c) Allocating resources among different divisions
d) Providing leadership for Organization
e) Acts as a linkage between Management and Shareholders i.e., owner of business.
[CEO is viewed as guardian of shareholder welfare and must make strategies to
maximize the wealth of shareholders]
2) Strategic It is self-contained Division with its own business functions like HR, CRM, Sale and
Business level Marketing, R&D etc.
(SBU) Principle General Manager or Business level manager is head of a division.
They are responsible for working of Division and overseeing all functions of the Division.
They are responsible to translate general statements of direction of Corporate Level into
concrete business plans.
3) Functional Responsible for specific business functions in a division or company like marketing,
level R&D, HR etc.
Functional managers are also responsible for
a) developing functional strategies in their area to fulfill strategic objectives set by
corporate level managers; and
b) implementing/ executing strategies of corporate level and business level managers.
They are closer to customers and provide most of information that enable corporate
level and business level managers to formulate realistic and attainable strategies.
General Managers are found at first two levels but their strategic roles differ.

7. S T R A T E G I C M A N A G E M E N T I N G O V E R N M E N T D E P A R TM EN TS A N D N O T - F O R -P R O F I T O R G A N I Z A T I O N S

▪ Organizations can be classified, on the basis of interest they have, into

a) Commercial organization - Where profit is main objective.
b) Non-commercial organization - Where Profit is not the main objective. It exists for charitable, social
or educational purposes. Main objective is to provide service to members or public at large.
▪ Eg:- ICAI, NGOs ,Hospital, Educational Institutions etc.
▪ While an Organization may have social or charitable existence, still it has to generate revenue and use

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 Introduction to Strategic Management

them wisely to meet their expenses and attain their objectives.

▪ Organization needs to be managed strategically irrespective of whether they are profit motive or not.
▪ SM process is being used by countless non-profit and Government Organizations & many NGOs & Govt.
organizations outperform commercial firms on innovation, productivity & human relations.
▪ These organization often function as a monopoly and are dependent on outside financing. For such
Organizations, SM provides excellent reasons for justifying the request for needed financial support.

7.1. E D U C A T I O N A L I N S T I T U T I O N S

▪ Educational Institutions are using strategic management techniques for

a) Creating better name and recognition
b) Attracting talented students
c) Designing better curriculum; and
d) Appointing & retaining good faculties.
▪ They have joined hands with Industries to deliver education to make Graduates more employable.
▪ Education delivery system has also changed due to computer internet and technology.
▪ Educational Institutions are now providing online classes and online degrees. This represents threat to
traditional schools and colleges.

7.2 . M E D I C A L O R G A N I Z A T I O N S

▪ Modern hospitals are creating new strategies that include

a. Deep collaboration with physicians and doctors
b. Backward integration strategies like acquiring ambulance services, diagnostics services, waste
disposal services etc.
c. Online delivery of secured medical services using internet.
▪ Others successful hospital strategies are
a) Home health services like collecting blood samples by pathological labs.
b) Outpatient surgery
c) Psychiatric services
d) Women’s medical services.

7.3. G O V E R N M E N T A G E N C I E S A N D D E P A R T M E N T

▪ They use tax payer’s money to provide services to general public. Hence, they need to formulate,
implement and evaluate strategies that enable them to be more effective and efficient.
▪ They are also using SM to develop and substantiate formal request for additional funding.
▪ However, strategists in Government Organizations operate with less autonomy. They cannot diversify or
merge with other company.
▪ Politician have direct or indirect control over major decisions.
▪ Strategy gets debated in parliament and Media resulting in fewer strategic alternatives.

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 Dynamics of Competitive Strategy

C HAPTER 2

D YNAMICS OF C OMPETITIVE S TRATEGY

1. CO MPETITIVE STRATEG Y

▪ Competitive Strategy consists of long-term plan and moves to

a) attract customers and deliver value,
b) withstand competitive pressure, and
c) strengthen market share.

▪ Objective of competitive strategy

It helps to
➢ create competitive Advantage
➢ increase market share
➢ beat competition.
▪ Examples: Cost leadership, Differentiation, Focus.
▪ Competitive advantage is necessary for a Firm to compete in market but competitive advantage should
be sustainable (not easily copied).
▪ Competitive strategy of a Firm is a based on several external factors like economic & technical
components.
▪ By knowing if it is a leader, challenger or follower, Firm can adopt appropriate competitive strategy.

2. C O M P E T I T I V E L A N D S C A P E

▪ Competitive landscape is a business analysis which identifies competitors, either direct or indirect.
▪ Competitive landscape is about
➢ identifying and understanding competitors and
➢ comprehension of their vision, mission, values, niche market, strengths & weaknesses.
▪ This enables a Firm to develop competitive strategy to give competitive advantage.
▪ Understanding of competitive landscape requires an application of “competitive intelligence”
Steps to understand competitive landscape:

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 Dynamics of Competitive Strategy

a) Identifying the Need to find out who are the competitors, their actual market shares etc.
competitors This answers the question “Who are competitors and how big they are?”
b) Understanding the through market research, reports, newspapers, social media.
competition This answers the question “What are their products and services”?
c) Determine strength This answers the questions
of competition
➢ What are their financial positions?
➢ What gives them cost & price advantage?
➢ How strong is their distribution network?
➢ What are their human resource strengths?
d) Determine the through consumer reports and reviews appearing in various media.
weakness of This answers the question ‘Where are they lacking’?
competition
e) Put all information Strategist puts all information together to draw conclusion/inference about what
together competitor is not offering and how they can fill the gap.
This answers the questions
➢ What improvements does Firm needs to make.
➢ How can Firm exploit weaknesses of the competitors?

3. S T R A T E G I C A N A L Y S I S

▪ Refers to analysis of both internal as well as external environment of business based on which strategic
plans can be developed.
▪ Strategic analysis gives detailed view of industry, competition, organization’s strength and weakness.
▪ Strategic analysis helps in evaluation of alternatives to choose sound winning strategy.
Issues considered for strategic analysis
a) Strategy evolves over Strategy of a Firm is a result of series of small decisions taken over a period of
a period of time time.
b) Balancing of internal Strategy formulation involves matching internal strengths and weaknesses
and external factors with external opportunities and threats.
In reality, perfect match between them is not possible. Hence, strategic
analysis uses workable balance.

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 Dynamics of Competitive Strategy
c) Risks Competitive market, globalization, Booms and recessions, technology
advancement, etc. affect businesses and pose risk.
Various strategic risks are as given below:
Short Term Long Term
External Error in interpreting the Changes in environment leads to
environment that causes obsolescence of strategy
strategic failure
Internal Organizational capacity is Inconsistent strategy is
unable to cope up with developed on account of change
demand in internal capacities

4. INDUSTRY AND COMPETITIVE ANALYSIS

▪ Industry: Group of Firms who provide similar type of products and services to customers and strive to
acquire the customers.
▪ Industry and competitive analysis helps in getting clear picture of
➢ key industry features,

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 Dynamics of Competitive Strategy

➢ intensity of competition,
➢ drivers of change, and
➢ market position and strategies of rival companies.
Issues covered in Industry and Competitive Analysis
i) Dominant economic Industries differ significantly in their character. Factors to be considered are:
features of Industry a) Size and nature of market
b) Market growth rate and potential
c) Market profitability
d) No. of rivals and their market share
e) Capital requirement
f) Types of distribution channel
g) Impact of technology on Industry

ii) Nature and It involves analysis of Industry’s competitive pressures to decide

strengthen of
➢ main source of competitive pressure and
competition
➢ how strong each competitive force is.
Porter’s Five Forces model is useful for competition analysis. (Ch 5)
iii) Triggers of change Refers to forces that results in change in Industry and environment.
Most dominant forces are known as driving forces. Common driving forces are:
a) Internet and technological advancement
b) Increasing globalization
c) Entry/exit of major Firms
d) Product innovation
e) Marketing innovation

iv) Identifying Strategic group consists of those rivals who have similar competitive approach
Strongest and and position in market (comparable product, price, quality etc.)
Weakest Companies There may be one or more strategic groups in an Industry.
/ Strategic Group
Mapping Procedure for constructing strategic group:
a) Identify competitive characteristics that differentiate Firms in the industry.
➢ Price/ Quality (High, Medium, low)
➢ Geographic coverage (Local, National, Global)
➢ Degree of services offered (No-frills, Limited, full)
b) Plot Firms on two variable map.
c) Draw circle around each group where each group represents their market
share.
v) Likely Strategic In order to out-do competitors and survive in long run, it is essential to gain
Moves of Rivals competitive intelligence.
Competitive intelligence about strategies that rivals are deploying and their
strength and weakness is essential to anticipate next moves and its impact on
Co’s own strategy.

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 Dynamics of Competitive Strategy
Competitive intelligence helps company to determine whether
a) it needs to defend itself against specific move taken by rival; or
b) adopt offensive approach.

vi) Key Factors for Key Success factors in an industry are things like product attributes,
Competitive competencies, resources etc. that affect industry member’s ability to succeed.
Success Key factors vary from industry to industry. Key success factors in
➢ Retail Industry → Location , product range, price
➢ Apparel Industry → Appealing design, colour, price
➢ IT Industry → Technology, Efficiency, price
Generally, there are 3 to 4 key success factors in an Industry.
Identifying KSFs - Answer to 3 question helps identify an Org’s KSF:
a) On what basis customers choose between competitive sellers?
b) What a seller needs to do to be competitive successful?
c) What does it take to achieve sustainable competitive advantage?

vii) Prospects and Final step of Industry and competitive analysis is to use result of analysis of
financial previous six issues to draw conclusion about attractiveness or unattractiveness of
attractiveness of Industry.
Industry Important factors on which conclusion is based includes:
a) Industry’s growth potential.
b) Impact of competition on Industry’s profitability.
c) Impact of driving forces i.e, triggers of change on Industry’s profitability.
d) Competitive position of Firm in the Industry and whether it is likely to
become stronger or weaker.
e) Severity of problems faced by Industry as a whole.

5. C O R E C O M P E T E N C Y

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 Dynamics of Competitive Strategy

▪ Competency refers to combination of skills and techniques.

▪ Core competency refers to capabilities that is a source of competitive advantage. It simply means
whatever a Firm does best.
▪ Core competency involves utilization of several individual skills and techniques.
▪ Therefore, core competencies can’t be built on one capability or single know-how technique. Instead, it
has to be integration of many resources.
▪ Optimal way to define core competence is to consider it as sum of 5 to 15 developed expertise.

5.1. A R E A S W H E R E M A J O R C O R E C O M P E T E N C I E S A R E I D E N T I F I E D – A S PE R CK P R A H LA D & G A R Y H A M E L

Competitor Differentiation Customer value Application to other markets

A co. is said to have core It includes all the skills needed Core competency must be
competency if its’s competency is to provide fundamental benefits applicable to whole
unique & difficult for others to copy. to a customer. organization and not only to a
Company should keep on improving Service or product has to have particular area.
those skills to sustain competitive real impact on customers as the A skill is considered core
position. reason to purchase them. competency only if it is
Unique skills & resources doesn’t If the customer chooses the fundamental to whole
mean that it has to be possessed by product without this, it is not organization.
one company only. core competency. Core competency should be
If many companies have similar used throughout organization
skills and one company is able to to open up potential new
perform it significantly better, that markets.
Co. has core competency.
If above three conditions are met, the Company can regard a competence as core competence.

5.2. W H Y T O I D E N T I F Y A N D D E V E L O P C O R E C O M P E T E N C Y

Core competencies distinguish a company competitively and reflect its personality.

It is important to identify core competencies because it is difficult to retain those competencies in a price
war and cost-cutting environment.
Failing to identify core competencies is a kind of opportunity loss for a company.
A Core competency fulfills three criteria:
i) It should provide potential access to a wide variety of markets.
ii) It should make a significant contribution to the perceived customer benefits of the end product.
iii) It should be difficult to imitate for competitors/rivals.

Examples
Small retail shops have CC in
the areas of
Big retail stores & super
markets have CC in areas of
Supermarkets compete with
one another with CC as to
Personal service to customers, Extended working hours, Easy credit, Free
home deliveries, Amicable style of the owner and Proximity.
Merchandising, Securing supplies at lower cost, In-house activity
management, Computerized stock ordering, Billing systems and own
brand labels.
Locational advantage, Quality assurance, Customer convenience in
shopping, etc.

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5.3. H O W T O B U I L D C O R E C O M P E T E N C I E S / F O U R C R I T E R I A T O D E T E R M I N E S U S T A I N A B L E C O R E C O M P E T E N C Y

Valuable Rare Costly to Imitate Non-substitutable

Valuable capabilities are Core competencies are It means such capabilities It means there must not
those which allow Firms rare capabilities which is not easy to copy be strategic equivalent
to exploit opportunities possessed by very few or develop. which is easily available
or tackle threats. competitors. or imitable.
When a capability is ‘valuable NCR’, it is core competency.

5. 4. V A L U E C H A I N A N A L Y S I S F O R D E V E L O P I N G C O R E C O M P E T E N C Y

▪ It is analysis of value added by separate steps in complex process.

▪ Value chain analysis involves two basic steps:
➢ Identifying separate activities and
➢ Assessing value added by each activity.
▪ It was originally introduced as accounting analysis.
▪ There are 9 activities classified in two groups as follows (Michael Porter):
Primary Activities
Inbound Logistics Operations Outward logistics Marketing Service
Concerned with Concerned with Concerned with Process by which Activities which
receiving, storing transforming inputs collecting, storing consumers are enhance or maintain
and distributing into finished goods or and distributing made aware of value of product/
inputs. service. final product to goods or services. service.
Includes material Includes customers. Including Includes Installation,
handling, stock, manufacturing, Includes material promotion, Repairs, After sale
transport etc. packaging, assembly, handling, stock, Advertising, selling support etc.
testing etc. transport etc. etc.

Support Activities – Each of Primary activities are linked to following support activities:
Procurement Technology Development HR Management Infrastructure
Refers to process of It may be in relation to Involves recruitment, It supports Org. in
acquiring various training, developing executing primary
➢ Product (R&D product design)
inputs to primary and rewarding people. functions.
activities. ➢ Process i.e., process
development or
➢ Particular resource ( Raw
material improvement)

5. 4.1. U S I N G V A L U E C H A I N A N A L Y S I S F O R I D E N T I F Y I N G C O R E C O M P E T E N C Y

▪ V.C. helps in analyzing separate activities performed by an Org. to achieve its goals by framing strategies.
▪ Although a threshold competence is required in all activities to succeed, it is also important to identify
those competencies which are critically important to Organization’s competitive advantage.
▪ V.C. differs from organization to organization depending on how it is positioned and what strategy it is

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 Dynamics of Competitive Strategy

following.
▪ Example: In US, GM & Ford focused on dealer network and overseas production plants while in Japan, Toyota
focused on defect free manufacturing.

5. 4.2. S U S T A I N A B L E C C/ D I F F E R E N T B A S E S A S T O H O W C C C A N B E A N A L Y S E D A N D U N D E R S T O O D

a) Managing Linkages
Core competencies in various activities may provide competitive advantage but it can be easily copied by
competitors.
Core competencies are more robust and difficult to imitate if there is linkage between various processes.
Management between these linkages and ability to co-ordinate activities of different processes provide level
of performance which is difficult to imitate. This leads to sustainable core competencies.
Management of internal linkage may create competitive advantage in number of ways:
Linkage b/w Primary Activities Linkage b/w Primary & Secondary Acti. Linkage b/w Supporting Acti.
E.g. Decision to hold high level of E.g. Organisation using technology to E.g. Extent to which HR is
F.G. eases burden of production. sell Goods and services (Ola & Uber). comfortable with new tech.
b) Ability to complement/co-ordinate own activities with those of suppliers and customers etc. also gives
rise to competitive advantage.
Example: Total quality management which seeks to improve performance through closer relationship
between specialists in value chain.
E.g. Many manufacturers involve suppliers and distributors at design stage of product.
c) Vertical integration through ownership of more parts of value chain.
Example: Apple making its own hardware and software.

6. COMPETITIVE ADVANTAGE

▪ It is a set of unique features of a Company and its products

➢ that are perceived by target market and customers
➢ as significant and superior to competitors.
▪ Competitive advantage provides edge over rivals.
An organization is said to have competitive advantage if its profitability is higher than average profitability
of Industry.
▪ Competitive advantage is said to be achieved if other Firm’s efforts to imitate it has failed.
Resource Capabilities
It includes It exists when resources are purposefully integrated
a. tangible resources that can be seen and quantified. / used to achieve a particular task.
E.g. plant & machinery, factory E.g. Effective customer service, product innovation,
b. intangible resources like goodwill, capacity for digital technology.
innovation, HR skills, patents, copyrights etc.
It is developed over a period of time & difficult to imitate.

6.1. SUSTAINABILITY OF COMPETITIVE ADVANTAGE

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Sustainability of competitive advantage depends on 4 major characteristics of resource and capability:

Durability
Period over which
competitive adv. is
sustained depends on
the rate a Firm’s
resources and
capabilities
deteriorate.
If rate of product
innovation is fast,
patents/ tech. are
likely to get obsolete.
Transferability Imitability Appropriability
Competitive advantage If resources and Refers to ability of
also depends on ability of capabilities can’t be Firm’s owner to
rivals to gain access to purchased, rivals need to appropriate the return on
necessary resources and build it from scratch. its resource base.
capabilities. If competitor is able to If resources and
E.g. Android can be build resource and capabilities provide
acquired by Samsung as capabilities easily, competitive advantage,
well as Oneplus competitive advantage is there is issue of who is
not sustainable. receiving return on such
resource & capabilities.
E.g. Music industry

6.2. V A L U E C R E A T I O N

▪ Value is measured by product’s feature, quality, availability, durability and performance for which customer
is willing to pay.
▪ Value creation is an activity by Firm to create value that increases worth of goods, service and business.
▪ Value creation may be in terms of creating better value for
➢ customers as well as
➢ stakeholders who want to see their investment in business appreciate in value.
▪ Value creation gives rise to competitive advantage and helps Firm to earn higher profitability than other
Organization in the industry.
▪ Profitability of a company depends on
➢ cost of creating product
➢ price charged by company
➢ value customer places on company’s product i.e., utility a customer gets from the goods/ services.
▪ The excess amount customer wants to pay, over and above the price that business wants to charge is called
value creation.
▪ According to Michael porter, company can generate competitive advantage in two ways: (Covered in Ch 5)
Cost Advantage Differentiation

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 Dynamics of Competitive Strategy

7. SWOT ANALYSIS

Identification and Analysis of strength, weakness, opportunity & threat of an Org. is called SWOT analysis.
Strength (+) Weakness (-) Opportunity (+) Threat (-)
Inherent capabilities Inherent limitations/ Favourable condition in Unfavourable condition in
of an Organization constraints which organization’s organization’s environment
used to gain strategic creates strategic environment to which causes risk or damage
advantage. disadvantage. strengthen its position. to organization’s position.

7.1. P U R P O S E / O B J E C T I V E O F SW O T A N A L Y S I S

It enables management to
➢ create a firm’s specific business model which
➢ best aligns/ fits/ matches an organization’s capabilities
➢ with demand of market/ environment.
SWOT Analysis provides competitive advantage to an organization.

7.2. S I G N I F I C A N C E O F SW O T A N A L Y S I S

Guide Strategists in strategy

Logical Framework of Analysis Comparative Account
identification
It provides ~ to management to It provides ~ of internal & external It ~ in case there is any
identify all issues which may environment to managers to difficulty in selection of
impact Org. in long or short term. compare O&T with S&W of an Org. appropriate strategy.

8. TO W S M A T R I X

Internal Strengths – S Weakness – W

External List Strength List Weakness
SO strategies WO Strategies
Opportunities – O
Use strengths to take advantage of Overcoming weaknesses by taking
List Opportunities
opportunities advantages of opportunities
Threats – T ST Strategies WT Strategies
List Threats Use strengths to avoid threats Minimize weaknesses and avoid threats

▪ SWOT Analysis is a planning tool.

▪ TOWS is action tool and its scope is wider.
▪ TOWS Matrix is an advancement over SWOT Analysis as
a) In SWOT Analysis, individual factors i.e, S, W, O and T are analyzed whereas in TOWS matrix,
combination of factors i.e., SO, ST, WO and WT are analyzed.
b) Using SWOT Analysis, managers were finding it difficult to identify appropriate strategy whereas in
TOWS, strategy identification is easy as it provides 4 strategic choices i.e, SO, ST, WO and WT.
4 strategic choices provided by TOWS Matrix:
SO (Maxi-Maxi strategy) Aggressive strategy -How can we use our strengths to exploit opportunities.

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