Syllabus:MBA:BPSM:Semester III

• (301) BUSINESS POLICY & STRATEGIC MANAGEMENT 1. Strategy and the Quest for Competitive Advantage: • Military origins of strategy – • Evolution – • Concept and Characteristics of strategic management – • Defining strategy – • Mintzerbg‘s 5Ps of strategy – • Corporate, Business Levels of strategy – • Strategic Management Process. (4) • -------------------------------------------------------------Ulhas D. Wadivkar. B.E. (Elect), PGDBM, PGDIM, Management Consultant, Retired Vice President (Works), Graphite India Limited. Nashik & Bangalore. 2nd August 2010


Business Policy and Strategic Management
• ―Without Business Policy and Strategy, an organisation is like a ship without rudder, going around in circles. It‘s like a tramp; it has no place to go‖ – Joel Ross and Michael Kami.

Business Policy definition by Christensen :

• ―Business Policy is the study of the function and responsibilities of Senior Management, the crucial problems that affect success in the total enterprise, and the decisions that determine the directions of the organisation and shape of its future.‖ The problems of policy in the business, like those of policy in public affairs, have to do with choice of purposes, the moulding of organisational identity and character, the continuous definition of what needs to be done, and the mobilisation of resources for the attainment of organisational Goals in the face of competition or adverse circumstance.

Evolution of Business Policy as discipline.
• Origin – 1911- Harvard Business School – Integrated Course in Management aimed at providing general management capability. • Hofer: Strategic Management – A Casebook in Policy and Planning: The Business Policy evolution has undergone four Paradigm Shifts. This transition is of overlapping nature. • Development of subject of Business Policy has always followed the demands of real life business. • 1930 -1960: Environment change: New Products: Continuously changing market: Ford Foundation recommended report, by Gordon and Howell, suggested a “Capstone” course of Business Policy which would give the students an opportunity to pull together what they have learned in the separate business fields and utilise this knowledge in the analysis of complex business problems.


Evolution of Business Policy as discipline.
• 1969: The course was made mandatory by American Assembly of Collegiate School of Business (AACSB) • 1990: The course has become an integral part of management education curriculum. Evolution of Business Policy has undergone four Paradigms • Paradigm One: Ad-hoc Policy – making. • 1900 -1930: Era of Mass Production – Maximising output, Normally a Single Product, Standardised and low cost product, catering to unique set of customers servicing limited geographical area – Informal control and co-ordination. The Strategic planning was centred on maximising output.

Evolution of Business Policy has undergone four Paradigms • Paradigm Two – Integrated Policy Formulation. • 1930-1940: Changes in Technology, Turbulence in Political environment, Emergence of new industries, Demand for novelty products even at higher costs, Product Differentiation, Market segmentation in increasingly competitive and changing markets. These all made investment decisions increasingly difficult. This was era of integrating all functional areas and framing policies to guide managerial actions. • Paradigm Three – The Concept of Strategy. • 1940- 1960: Planned policy became irrelevant due to increasingly complex and accelerating changes. Firms had to anticipate environmental changes. A strategy needed to be formed with critical look at basic concept of Business and its relationship to the existing environment then.


• • •

Paradigm Four – The Strategic Management. 1980 & onwards: The focus of Strategic Management is on the strategic process of business firms and responsibilities of general management. Everything out side the four walls is changing rapidly and this phenomenon is called as “Discontinuity” by Mr. Peter Drucker. Past experiences are no guarantee as science and technology is moving faster. The future is no more extension of the past or the present. The world is substantially compressed and managing the External & Internal environment becomes crucial function. What to produce, where to market, which new business to enter, which one to quit and how to get internally stronger and resourceful are the new stakes. Strategic Planning is required to be done to endow the enterprise with certain fundamental competencies / distinctive strengths which could take care of eventualities resulting from unexpected environmental changes.

The Indian Scenario:
• However, the evolution of this fourth phase is still continuing and is yet not formed into a theory of how to manage an enterprise. But Strategic Management is a very important tool for and way of thinking to resolve strategic issues. • The Indian Scenario: • IIMs and Administrative Staff College of India formed in early sixties were based on American Model. IIM-A is based on Harvard Model. The All India Council of technical Education (AICTE), The Association of Indian Management Schools (AIMS) have recommended a standard curriculum including ―Business Policy and Strategic Management‖ as a compulsory course. Business Policy is the preferred nomenclature but Strategic management is being progressively adapted.

Evolution of Strategic Management in India is divided in three periods.

Till 1980 : Pre-liberalisation Stage: • Strategic management on Government fringes. • Entwining enterprise objectives into the national Planning framework. • Grabbing opportunities, high diversification, noncompetitive scales, and weak technology. • Secretive & one man Strategic Management Process. Till 2000 : Liberalisation Stage: • ‗Foreign Complex‘ governed strategy. • Strategy of focus on rationalisation and operations improvement. • Strategy of growth through acquisitions, internationalisation and product market expansion. • Employing international consulting firms in Strategic Management.

• Development of Technology capabilities • Decentralise organisations. • De-merge businesses as independent companies and improve market capabilities. entry into emerging sectors. • Portfolio rationalisation. • Mobilise resources and ensure adequate growth through existing business. develop institutionalised control mechanism. 2000-2010 :Post Liberalisation Stage: • ‗Global maverick‘ mindset & Acquire professional skills in Strategic Management and synergise entrepreneurial flair. 9 .Evolution of Strategic Management in India is divided in three periods.

conduct operations and achieve targeted objectives. attention shifts to tactics. It seems sensible to begin our examination of strategy with the military view. • Military Origins of Strategy: Strategy is a term that comes from the Greek Strategia. Once the enemy has been engaged. • Substitute "resources" for troops and the transfer of the concept to the business world begins to take form. In this sense. compete successfully. . • Strategy also refers to the means by which policy is effected. grow the business. meaning "Generalship. strategy often refers to manoeuvring troops into position before the enemy is actually engaged. the employment of troops is central." In the military.Core concept of Strategy: • A company‘s concept of Strategy consists of the competitive moves and business approaches that managers employ to attract and please customers. Here. As per ―Clauswitz‖ the war is the continuation of 10 political relations via other means. strategy refers to the deployment of troops. • Military origins of strategy are century old.

Liddell Hart • In his book. Liddell Hart examines wars and battles from the time of the ancient Greeks through World War II. He concludes that Clausewitz‘ definition of strategy as "the art of the employment of battles as a means to gain the object of war" is seriously flawed in that this view of strategy intrudes upon policy and makes battle the only means of achieving strategic ends. Strategy. • Concluding his review of wars. H. policy. military strategy is clearly a means to political ends. Liddell Hart arrives at this short definition of strategy: "The art of distributing and applying military means to fulfil the ends of policy." Thus.• Strategy According to B." 11 . • Wiser definition of strategy could be "the practical adaptation of the means placed at a General‘s disposal to the attainment of the object in view. strategy and tactics.

a professor of management and one of the founders of The California Management Review. Strategic Planning. • Strategy answers the question: What should the organization be doing? • Strategy answers the question: What are the ends we seek and how should we achieve them? 12 . • Strategy refers to basic directional decisions. is close to being a bible on the subject. His book. to purposes and missions.• Strategy According to George Steiner • George Steiner. Steiner points out in his notes that there is very little agreement as to the meaning of strategy in the business world. that is. • Strategy consists of the important actions necessary to realize these directions. • Some of the definitions in use to which Steiner pointed include the following: • Strategy is that which top management does that is of great importance to the organization.

goals. a strategy is a set of decisions-making rules for the guidance of organisational behaviour‖ • Kenneth Andrews(1965) : ―The pattern of objectives. purpose. and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of company it is or to be • ‖Kenneth Andrews (1965) : ―Business Strategy is a method of describing the future position of the company.Defining Strategy and Concept of Strategic Management • Alfred D Chandler(1962) : ―The determination of basic longterm goals and the adoption of courses of the courses of action and the allocation of resources necessary for carrying out these goals‖ • Alfred D Chandler(1984) : ―Basically. purposes. its objectives. goals. policies. and plans that may be required for guiding the company from its existing position to where it desires to be‖. 13 .

Defining Strategy and Concept of Strategic Management • Igor Ansoff(1965) : ―The common thread among the organisation‘s activities and product-markets…that defines the essential nature of business that the organisation was or planned to be in future‖ • William F Gleueck(1972) : ―A unified. making trade-offs. and forging fit among activities‖ 14 . comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved‖ • Henry Mintzberg(1987) : ―A pattern in a stream of decisions and actions‖ • Michael E Porter(1996) : ―…developing and communicating the company‘s unique position.

• Concerned with the resources necessary for implementing a plan or following a course of action and. and creating a fit among these activities. • The pattern or common thread related to the organisation‘s activities which move an organisation from its current position to a desired to a desired future stage • Related to pursuing those activities which move an organisation from its current position to a desired future state. • Connected to the strategic positioning of a firm. 15 . making trade-offs between its different activities.If we sum up all the above definitions. then Strategy is : • A plan or course of action or a set of decisions rules forming pattern or creating a common thread.

Core Concept of Strategy • A company‘s Strategy consists of the competitive moves and business approaches that managers employ to attract and please customers. conduct operations and achieve targeted objectives. compete successfully. comprehensive & integrated Plan that relates the Strategic advantages of the firm to the Challenges of the environment and is designed to ensure that basic objectives of the enterprise are achieved through proper implementation process. 16 .‖ • Another Definition: Strategy is Organisation‘s pattern of response to its environment over a period of time to achieve it‘s goals. objectives and Mission. • Definition by Glueck: ―Strategy is unified. grow the business.

Essence Of Strategy • 1. Series of actions are to be taken & they should have same direction for whole organisation. 2. Synergy can happen due to Competitive Advantages and Growth Vector. 4. The Objectives need be measurable and could be : ROI. . These Objectives give direction for implementing Strategy. Strategy includes the determination and evaluation of alternative paths to an already established Mission and Objectives of enterprise and choosing the alternative to be adapted. Sales 17 Growth Rate. there will be synergy. Synergy: Once a series of decisions are taken to accomplish the objectives in same direction. 3. Four important aspects of Strategy are: Long Term Objectives: It emphasises on long term growth and development. Competitive Advantages: The external environment is continuously monitored & Strategy is made to have the firm a continuous Competitive Advantage. Vector: is a Direction with Force.

Adoption of courses of action. Determination of Long Term Goals & Objectives. 2. Allocation of resources. Strategy is ―Creation of unique & valued position involving a different set of activities. • Therefore. Thus Nature of Strategy is: • Strategy is a major course of action through which organisation relates itself to its environment. The Company that is strategically positioned performs different activities from rivals or performs similar activities in different ways‖ – Michael Porter. . 3.Strategy as Action & Nature of Strategy Three types of actions are involved in Strategy: 1. 18 internal factors are matched with them. (External) • Strategy is blend of internal & external factors. Face opportunities & threats provided by external factors.

• Strategy provides overall framework for guiding enterprise thinking and action. • Strategy requires some systems and norms for its efficient adoption in any organisation. which have not arisen in past will require revised Strategic Actions.Nature of Strategy – contd… • Strategic actions are different for different situations. 19 . New situations. • Strategy may involve contradictory actions simultaneously or with a gap of time like closing down some operations and expanding some at same time. • Strategy is future oriented. Strategy is combination of actions to solve a certain problem to achieve a desirable end.

20 . • Strategy is rule for making decision and Policy is contingent decision. • Strategy cannot be delegated downwards. • Strategy is action oriented and empowers concerned to implement them. • Strategies are specific actions suggested to achieve objectives. • Policies are thought oriented. • Policies are commonly accepted understanding of decision making. • Strategies are concerned with the direction in which human and physical resources are deployed to maximise the chances of achieving organisational objectives in face of variable environment. • Strategy and policies both are the means directed towards meeting organisational objectives. • Policies have to be integrated so that Strategy is implemented successfully and effectively. • Policy is guideline for decisions & actions to be taken by subordinates for the fulfilment of the set of objectives.Strategy v/s Policies • Strategy & Policy are not synonymous.

• Strategy formulation is dynamic. • Tactical decision implementation is impersonal. break the opponent. • Tactics decisions can be delegated to all levels of organisation. • Tactical decisions are more certain as they work upon framework set by Strategy. • Goal of Strategy is to gain competitive advantage. • Tactics are determined on a periodic basis with some fixed timetable. • Tactical decisions are less important than Strategic decisions. • Strategy has a long term perspective & have a high element of uncertainty. responding to environment.Strategy v/s Tactics • Strategy determines the major plans to be undertaken. 21 . • Strategy formulation is affected by the personal values of person involved in the process. • Goal of Tactics is to achieve success in a given action. It can be continuous or irregular. • Tactics is means by which previously determined plans are executed. • Strategic decisions cannot be delegated downwards.

22 . .Strategic Management : • Definition – ―Strategic management is the process of systematically analysing various opportunities and threats vis-à-vis organisational strengths and weaknesses. formulating. and arriving at strategic choices through critical evaluation of alternatives and implementing them to meet the set objectives of the organisation‖. • Definition – ―Strategic Management is concerned with making decisions about an organisation‘s future direction and implementing those decisions‖.By Lloyd L Byras.

threats and opportunities. allocating resources. based on budgets. outlining action plan and tasks. strengths and capabilities. Evolving short term objectives. • Finding out way and deciding the desirable course of actions for accomplishing the Mission statement. • • • • Selecting long term objectives and deciding corresponding strategies. 23 . creating a control mechanism and Data generation for selecting future course of action.Aspects of Strategic Management • Vision Statement • Mission Statement indicating methodology for achieving the objectives. Implementing chosen strategies in planned way. defining corresponding strategies in tune with Mission and Vision Statements. • Critical study of external environmental factors. Installation of a continuous review system. purposes and Philosophy of organisation as reflected in vision statement. its internal culture. • Company Profile.

Strategy in light of actual experience. 24 • • • • . new ideas & new opportunities. Long term directions. (A long term vision to infuse the organisation with a sense of purposeful action. Evaluating performance & initiating corrective adjustment in Vision. Implementing & Executing chosen strategy efficiently and effectively.) Setting objectives: converting Strategic vision into specific measurable performance outcomes. Objectives.Five Tasks of Strategic Management • Forming a strategic Vision of what the company‘s future business make up will be and where the organisation is headed. changing conditions. Crafting a Strategy to achieve desired outcome.

Chief objective setter. • CEO & Senior Corporate executives have responsibility & personal authority for major strategic decisions. Chief Strategy implementer. divisions. Staff. HR etc have responsibilities to deliver measurable performance as per Strategic Planning.Who performs these five tasks of Strategic Management? • CEO is most important Strategy Manager. • Managers of operating plants: Strategy making is a job for all the line managers. He performs various roles such as. • Functional Heads & Departmental heads with direct responsibility over a major business areas. Functional heads like Production. who is most visible also. • Managers with Profit & Loss responsibilities for individual business units or divisions. Doers should be strategy makers. Chief direction setter. business units. • Vice Presidents of various functions have role to play in strategy making and implementing. Strategic Planning is not a stand alone function. Finance. Marketing. Chief strategy maker. district offices have leading and supporting roles in company‘s strategic game plan. It should not be left to staff of Planners. It is an integrated team effort. • All major organisational units. Plant support groups. 25 .

26 . insight. more critical is the need for strategic planning. investments. • The success of the efforts and activities of the enterprise depends heavily on the quality of strategic planning. • Strategic Planning provides the frame work for all major business decisions. quality of judgement and the perfection of methods and measures. markets. • Strategic Planning provides a hedge against uncertainty. • The more intense the environmental uncertainty. decisions on business. experience. products. • Considerable thought and effort must go in vision. It lends a framework which can ensure that decisions concerning future are taken in a systematic and purposeful way. It is a path finder for business opportunities and it is also a defence mechanism to avoid costly mistakes in choice of product market or investments. • Strategic Planning is a management task concerned with growth and future of the business enterprise. • Strategic Planning helps in understanding trends in a better way and generates a reference frame for investment decisions. manufacturing facilities.1 • Strategic Planning provides the route map for the enterprise. against totally unexpected developments. and organisational structure.Aspects of Strategic Planning .

corporation understands where its core competencies are. its penetration. down to choice of businesses and strategies. Thus Strategic Planning is Corporate Strategy. strength obtained from new product-market27 selections. involved in Strategic Planning. pinpoints the gaps. D) Competitive Advantages. E) Synergy. Aspects of Strategic Planning . Growth. Strategy and not day to day routine matters. It views the organisation / business in its totality and not a particular function. • Through analytical process aspect. basket of businesses of the firm for additions and deletions. Strategic Planning utilises both intuition and logic. Strategic Planning provides objective – strategy design: A) Growth Objective –Performance levels. Logic is through Planning and information process and intuition is through experience. identifies the competitive advantages. C) Growth Vector – Product Market posture. formulate steps to bridge them. • All vital aspects of corporate governance are perfected through strategic planning. philosophy and core values. creation of core competency and competitiveness and finally integration.2 . B) Product Market scope. Environment. starting from corporate mission. knowledge and vision of top people in Management. • Strategic Planning differs from other operative and administrative functions of management. • Main aspects of Strategic Planning are Future. development or diversification. Profitability target.• As a management tool.

in his 1994 book." a means of getting from here to there. it reflects decisions to offer particular products or services in particular markets. 2. A strategy can be a Ploy too. 5. a company that regularly markets very expensive products is using a "high end" strategy. the most common being these five: Strategy is a Plan. that is. Strategy is a Pattern in actions over time. points out that people use "Strategy" in several different ways. 28 1. for example. 4. really just a specific manoeuvre intended to outwit an opponent or competitor. . a "how. that is.Mintzerbg‟s 5Ps of strategy – • Henry Mintzberg. vision and direction. Strategy is Perspective. The Rise and Fall of Strategic Planning. Strategy is Position. 3.

29 . with the eventual outcome and strategy reflected in a pattern evident in decisions and actions over time. • Thus. • This pattern in decisions and actions defines what Mintzberg called "realized" or emergent strategy. which is to be achieved by way of a carefully crafted plan.• Mintzberg argues that strategy emerges over time as intentions collide with and accommodate a changing reality. one might start with a perspective and conclude that it calls for a certain position.

to provide a comprehensive overview that is probably more useful than definitions that try to fit all into a couple of sentences. 30 .) Bruce Ahlstrand and Joseph Lampell.Henry Mintzberg (pictured above. Each "P" shines a spotlight on what strategy is / means / encompasses from a different angle. present 5 "P's" as a way to define strategy. in their 2005 book ―Strategy Bites Back‖.

31 . A kid has a "strategy" to get over a fence." adjusted where necessary to fit into the professional services / Industrial firms. strategy is a plan . a firm has one to dominate a market for a particular service or practice area. are as follows: 1. a guideline (or set of guidelines) to deal with a situation. Strategy is a PLAN To almost anyone you care to ask.some sort of consciously intended course of action.Mintzerbg‟s 5Ps of strategy – The 5 "P's. By this definition. strategies have two essential characteristics: they are developed consciously and purposefully.

but from the action that is taken as a result. Likewise.• 2. a firm may threaten to establish a new practice area in order to discourage a competitor from trying to do the same. we also need a definition that encompasses the resulting behaviour. The kid may use the fence as a ploy to draw a bully into his yard. and as such is a ploy. a pattern in a stream of actions. strategy is also a pattern specifically. too. whether or not intended. defining strategy as a plan or ploy is not sufficient. 32 . By this definition. Threatened litigation often falls into this category. The outcome of strategy does not derive from the design. Thus. where his Doberman Pincher awaits intruders. Strategy as a PLOY: Strategy can be a ploy. strategy is consistent in behaviour. • 3. Strategy is a PATTERN: Strategy (whether as general plans or specific ploys) is pointless if it cannot be realized. Here the real strategy (as plan. which is really just a specific "manoeuvre" intended to outwit an opponent or competitor. that is. or plan. In other words. the real intention) is the threat. not the new practice area itself.

even into the heads of the strategists themselves. perspective looks inward into the firm. and engineering firm or a graphic design studio.• 4. In ecological terms: strategy becomes that firm's "niche. Strategy in terms of this definition becomes an ingrained way of perceiving the world. Almost every profession has about it unique perspectives. specifically a means of locating a firm in its environment. where it becomes the site of a battle. Strategy is a PERSPECTIVE: While position is outwardly focused. Strategy is a POSITION: Strategy is also a position. clients and markets. A law firm's view of their business is fundamentally different to that of an accounting firm. yet all are staffed 33 by professionals. Some firms are aggressive pacesetters. Position is often defined competitively (literally so in the military.) • 5." In management terms: a "domain" consisting of a particular combination of services. . that indelibly flavour the strategies that firms practicing those professions craft for themselves. others build protective shells around themselves.

Position adds that different firms have different mixes of markets. clients and services that they provide to those clients. Ploys add a dimension of feint and manoeuvre.• The Plan provides the roadmap by which the firm intends to achieve its goals. Finally Perspective provides an insight onto how the firm and its strategists are informed by their own professions. towards its goal. and the unique characteristics of each firms own "world. where one firm's gain is another's loss and competitive advantage is critical. Pattern emphasizes that strategy is not a once-off event but a constant stream of decisions and resultant actions that drive the firm forward. over time." 34 . their perceptions of business.

insights. and expectations that provides general guidance for specific actions in pursuit of particular ends. does repeatedly copying a competitor‘s new product offerings signal a "me too" strategy? Just what is strategy? Strategy is all these—it is perspective. Strategy and tactics together straddle the gap between ends and means. . and to the purposes. plan. expertise. then. is shaped by the actions taken. does strategy refer to a pattern in our decisions and actions? For example. then. goals. memories. It is a general framework that provides guidance for actions to be taken and. at the same 35 time. In short. strategy is a term that refers to a complex web of thoughts. ideas. directions. has no existence apart from the ends sought. Strategy. might a business take the position of low-cost provider? Or does strategy refer to perspective. to the view one takes of matters. Strategy is the bridge between policy or high-order goals on the one hand and tactics or concrete actions on the other. experiences. position. perceptions. is strategy? Is it a plan? Does it refer to how we will obtain the ends we seek? Is it a position taken? Just as military forces might take the high ground prior to engaging the enemy. ploy and pattern. decisions and actions stemming from this view? Lastly.What Is Strategy? What.

A SWOT analysis (an assessment of Strengths. Abandoned Strategy features New Initiatives & Ongoing Strategy Features continued from prior periods Company‘s Strategy Adoptive reactions to Changing circumstances 36 . Technological. A Company‘s Situation External Factors: •Industry & Competitive conditions.The ends to be obtained are determined through discussions and debates regarding the company's future in light of its current situation. Socio-cultural. Opportunities and Threats) is conducted based on current perceptions. Environmental & legal factors •Internal Factors like Resources. Economical. •Buyer Preferences •―PESTEL‖ – Political. Weaknesses. Weaknesses & Threats. Competitive strengths & Capabilities.

These include the following: 37 .Strategy • It is a simple and undeniably relevant matter for managers to periodically ask the following questions of the employees reporting to them: • • • • • What have you done to improve customer service? What have you done to improve customer satisfaction? What have you done to reduce costs? What have you done to increase productivity? What have you done to increase revenues from new products and services? • Some Fundamental Questions • Regardless of the definition of strategy. there are some fundamental questions to be asked and answered. or the many factors affecting the choice of corporate or competitive strategy.

and profitability goals? 5.What do we do? 3. implicit or explicit? 2.What kind of company are we? 5.What is the current strategy. social and educational environments? 4. size.What are our growth.Related to Mission & Vision 1.What kind of company must we become? Related to Corporate Strategy 1.Why are we here? 4.What assumptions have to hold for the current strategy to be viable? 3.In which geographic areas? 38 .In which markets will we compete? 6.In which businesses? 7.Who are we? 2.What kind of company do we want to become? 6.What is happening in the larger.

What will we make. size.What is happening in the industry. and in general? 3.What are our growth.To what customers or users? 7.What capabilities and capacities will we require? 11.On what basis will we compete? 39 .What is the current strategy.How will the selling/buying decisions be made? 8.What products and services will we offer? 6.Which ones are core competencies? 12. implicit or explicit? 4.What assumptions have to hold for the current strategy to be viable? 2.Related to Competitive Strategy 1.What technologies will we employ? 10.How will we distribute our products and services? 9. and profitability goals? 5. and what will we acquire through alliance? 13. what will we buy. with our competitors.What are our options? 14.

In truth. Establishing the aims or ends of an enterprise is a matter of policy and the root words there are both Greek: politeia and polites—the state and the people. conversely. 5.part structure. It is about the attainment of ends. very little adaptation is required. . Second are the strategies for obtaining them. First are the ends to be obtained. Strategy is about means. 3. Strategy is concerned with how you will achieve your aims. not with what those aims are or ought to be. it is only in relation to some aim or end in view. achieving them is mostly a 40 matter of management not governance. 4. 2. Thus it is that strategy and tactics bridge the gap between ends and means. the means at our disposal. Third are tactics. not their specification. If strategy has any meaning at all. Fourth and last are the resources themselves. the ways in which resources that have been deployed are actually used or employed.1. The specification of ends is a matter of stating those future conditions and circumstances toward which effort is to be devoted until such time as those ends are obtained. or how they are established. Determining the ends of an enterprise is mainly a matter of governance not management and. the ways in which resources will be deployed. Strategy is one element in a four. Some Concluding Remarks -1 Strategy has been borrowed from the military and adapted for business use.

Thus it is that "realized" strategy emerges from the pattern of actions and decisions. Means or resources are jointly controlled. evolving view of what is required to obtain the ends in view. 8 Over the time. Strategy is the joint province of those who govern and those who manage.Some Concluding Remarks -2 6. Those who govern and manage are jointly responsible for the deployment of resources. Those who manage are responsible for the employment of those resources—but always in the context of the ends sought and the strategy for their achievement. ethical and that they benefit the enterprise and its members. in light of intended results. 41 . Tactics belong to those who manage. shape the future deployment of resources. And thus it is that strategy is an adaptive. Those who govern are responsible for seeing to it that the ends of the enterprise are clear to the people who manages that enterprise and that these ends are legitimate. the employment of resources yields actual results and these. 7.

research & development.Identifying a Company’s Strategy – What to look For: Actions to gain sales & Market share via lower prices. wider production selection etc. more appealing design. finance & other key activities Efforts to pursue new market opportunities & defend against threats to the Company’s well-being Actions to form Strategic alliances & collaborative partnerships Actions to merge with or acquire rival companies. more performance features. sales & marketing. 42 . Actions to diversify the Company’s revenue & earnings by entering into new business Actions to respond changing market conditions and other external circumstances Actions to strengthen competitive capabilities & correct competitive weaknesses The Pattern of Actions & Business Approaches that define a Company’s Strategy Actions to enter new geographic or product markets or exit existing market Actions & approaches that define how the company manages. production. better quality or customer service.

Under this broad corporate strategy there are often functional or business unit strategies Different Levels of Strategy Levels Corporate Structure Strategy Corporate Level Corporate Office SBU SBU .B SBU . corporate culture.The Strategy Hierarchy In most (large) corporations there are several levels of strategy. and corporate missions. Strategic management is the highest in the sense that it is the broadest. corporate goals.C Business level Functional Finance Marketing Operations Functional Level Personnel Information 43 . It gives direction to corporate values.A SBU . applying to all parts of the firm.

Division heads of each business with inputs from Corporate and Functional levels. Actions to build competitive capabilities and strengthen market position.Corporate Strategy: The companywide game plan for managing a set of businesses. Business & Corporate Strategy • Business strategy. which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation. hiring decisions. strategies that must be in tune with broader corporate strategies . the company has diversified into. Such corporate strategy answers the questions of "in which businesses should we compete?" and "how does being in one business add to the competitive advantage of another portfolio firm. The levels involved are CEO and other Senior Executives. refers to the overarching strategy of the diversified firm. then. as well as the competitive advantage of the corporation as a whole Business Strategy for Strategic Business Units: One for each business. An SBU is treated as an internal profit centre by corporate headquarters. A Strategic Business Unit is a semi-autonomous unit within an organization. Each SBU is responsible for developing its business 44 strategies. • Corporate strategy. refers to the way in which a firm competes in its chosen arenas. new product decisions. Plant Heads. Executed by General Mangers. Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have re –engineered according to processes or strategic business units (called SBUs). and price setting. It is usually responsible for its own budgeting.

human resource strategies.Functional Strategies Functional strategies include Marketing Strategies. and information technology management strategies. financial strategies. Operational Strategy The ―lowest‖ level of strategy is operational strategy. Each functional department attempts to do its part in meeting overall corporate objectives. ‗Plant managers‘. Operational level strategy was encouraged by Peter Drucker in his theory of Management By Objectives (MBO). and hence to some extent their strategies are derived from broader Corporate & Business strategies. It must operate within a budget but is not at liberty to adjust or create that budget. new product development strategies. These strategies are executed by ‗Brand Managers‘. Web site operations. The emphasis is on short and medium term plans and is limited to the domain of each department‘s functional responsibility and is executed by Functional heads. detailing is done to add completeness to Business & Functional Strategies. . legal strategies. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. ‗Operating Managers‘. At this level. supply-chain strategies. in turn. Operational level strategies are informed to business level strategies which. distributions are 45 involved at this level. Important activities like Advertising. are informed to corporate level strategies.

Such change and implementation are usually built into the strategy through the staging and pacing facets. both business and corporate. who are also Strategists. Strategic divisions are thought to hamper this process. But we may have outside agencies involved in various aspects of Strategic Management. implementation. It is felt that Knowledge Management Systems should be used to share information and create common goals. as necessarily embracing ongoing strategic change. Most recently.Dynamic Strategy Since the turn of the millennium. This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy. popularized by the strategic management textbook authored by Carpenter and Sanders. this notion of strategy has been captured under the rubric of Dynamic Strategy. Strategists .Their Roles & Levels: • Strategists are individuals or groups who are primarily involved in the formulation. and evaluation of Strategy. and the seamless integration of strategy formulation and implementation. This is being driven by information technology. all managers are Strategists. there has been a tendency in some firms to revert to a simpler strategic structure. 46 . • In a limited sense.

set objectives and formulate strategies. reviewing and evaluating organisational performance. and appointing senior executives. share holders. Board is requires to direct and is involved in reviewing and screening executive decisions in light of their environmental. controlling agencies. He is different from formal 47 system and plays all strategic roles simultaneously. and financial institutes. establishing objectives & strategy. is a venture capitalist. Board is responsible to owners. . Board is involved in setting strategic direction. Board of Directors:. He formulates and implements strategy and ensures that organisation does not deviate from a predetermined path. business and organisational implications. Role of Board of Directors is to guide the senior management in setting and accomplishing objectives. 2.1. Chief Executive the person who starts a new business. objectives and goals. He has to play a proactive role to provide sense of direction. responsible for all aspects of strategic management from the formulation to evaluation of strategy. CEO plays a pivotal role in setting mission.Board is an ultimate legal authority of an organisation. Entrepreneur:. monitoring and reviewing achievement. CEO is primarily responsible for strategic management of the organisation 3. They get elected and appointed by holding or parent company.

KPMG. . 5. They are responsible for implementing the strategies and plans and for a periodic evaluation of their performance. 6. provides administrative support and plays a measurement and controlling role. Corporate Planning:. implementation and evaluation. Senior management:.consists of higher management level starting from CEO to functional managers and profit centre or SBU heads.4. Besides providing corporate strategy and strategic planning. task absence of a Corporate planning many organisation take an outside help in the form of a consultants or consulting companies. outsider.g. Consultants:. They are CEOs for their SBUs and hence SBU level strategy formulation and implementation is their main role. SBU level Executives:. Billimoria. They are responsible for preparation and communication of strategic plans. AF Ferguson. work groups. PWC. 48 Mckinsey etc. unbiased and provide objective evaluation. think tanks and play a very important role in Strategic management. E. Organisationally they come together in the form of committees.SBUs are formed with each business having a clearly defined product – market segment and a unique strategy.It assists management in all aspects of strategy formulation. They do not from strategy and do not initiate a process on their own. they are specialist. knowledgeable. 7.

Executive Assistant:. and projects. He helps in public relations and liaison functions. he orients from finance background ensuring and opining on ROI and strategic positioning of the organisation. They are basically involved in in the implementation of functional strategies.An executive assistant is a person who assists the chief executive in the performance of his duties like data collection and analysis. Middle Level Managers:. receivers of communication about strategic plans. 9.8.They relate to operational matters and are seldom play active role in Strategic Management. He coordinates activities with the internal staff and outsiders. followers of guide lines. He prepares brief for various plans. They form departmental / functional plan in light of broad objectives and goals of organisation provided in vision. They are implementers. Generally. suggesting alternatives. 49 . He is a corporate planner for CEO. mission. goals and objective statements of the organisation. proposals.

Strategy defines the organization. Strategy focuses efforts. Advantage: The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity. but could hinder creativity. 50 4. 2. It is described in a series of tests: Consistency: The strategy must not present mutually inconsistent goals and policies. . Consonance: The strategy must represent an adaptive response to the external environment and to the critical changes occurring within it. 3. there may be no peripheral vision and can become heavily embedded into the fabric of the organization. Strategy sets direction. Feasibility: The strategy must neither overtax available resources nor create unsolvable sub-problems We shall now look into the advantages and disadvantages of the strategy: 1. Strategy provides consistency. but can also serve as a set of blinders to hide potential dangers. but defining it too sharply results in the rich complexity of the system being lost.We will now look at a framework developed by Richard Rumlet for evaluating alternative strategies.

b.3) Pause / Proceed with caution Strategy.2) Integration.2) Profit Strategy. Strategic Alliances.Kinds of Corporate Strategy -1 • There are four Grand Strategic alternatives: a) Stability Strategy: Main aim here is Stabilising and improving Functional Performance. Multi-domestic Strategy. Global Strategy. Mergers. a. a. 51 . b) Expansion Strategy: Main aim is here High Growth.3) Diversification. Trans-national Strategy. b.5) Internationalisation. b. b.1) No Change Strategy. Takeovers. International Strategy.1) Concentration. b. a.4) Cooperation. Joint Ventures.

c. d) Combination Strategies: It is combination of all above three policies simultaneously in different businesses or at different times. divestment and liquidation in modes like c.2 c) Retrenchment Strategy: Main aim here is contraction of its activities.: i) Merger of TTK Chemicals with TTK pharma.1) Compulsory winding up.g. ii) TT industries and Textiles Ltd.Kinds of Corporate Strategy .. c. 52 .3) Winding up under supervision of Court. iii) TTK Ltd. It is done through Turnaround. e.2) Voluntary winding up. expanded through JV. iv) TTK maps and publications into the general publishing business after a turn-around. diversified into cooking utensils.

. • Mintzberg and other doyens in field of Strategy have formed various perspectives called as Schools of Thought: The Perspective Schools: 1. The process of Strategy formation is based on Judgement and Thinking.Schools of Thought on Strategy Formation-1 • The fourth paradigm (1980 onwards) says that subject of Strategic Management is still under evolution. The Positioning School-(Schendel –Hatten & Porter): Under this school Strategy is seen as set of planned generic positions chosen by a firm on the basis of an analysis of the competition 53 and the industry in which they operate. Design School-(Sleznic & Andrews): Strategy is unique. Strategic decision making is at the core of Managerial activity. Planning School-(Ansoff): Strategy is seen as a plan divided into sub-strategies and programmes. The lead role in Strategy formation is played by Strategy Planners. 3. their Strategic behaviour is outcome of Formation of Strategy. 2.

Cognitive School -(Simon & March): Strategy formation is mental process. . emergent & 54 deliberate.Schools of Thought on Strategy Formation-2 The Descriptive Schools: 4. The lead role is played by thinker philosopher. Strategy is an outcome of a personal & unique perspective to create a niche. The process of Strategy formation is messy. visionary & deliberate. 7. Senge & Lindblom): This school perceives Strategy formation as an emergent process. 5. Entrepreneurial School -(Schumpeter & Cole): Strategy formation is mainly intuitive.(Allison & Astley): Strategy is seen as political & cooperative process or pattern. The process is informal and messy and lead role is played by the learner. Quinn. Learning School -(Weick. 6. Power School . This school perceives Strategy formation as negotiation process.

(Rhenman & Normann): Strategy is seen as collective perspective. The process of Strategy formation is reactive. constrained & deliberate. The Integrative School: -(Chandler. passive & imposed and hence deliberate.Schools of Thought on Strategy Formation-3 8. Freeman & Pugh): The lead role in strategy formation is played by environment as an entity. The process of Strategy formation is ideological. 9. 55 . Miles & Snow): 10. episodic & sequential. Environmental School -( Hanan. Cultural School . The Strategy formation process is integrative. The Strategy is viewed in relation to a specific context and any of the nine schools mentioned above can be used to form the Process.

evolving. stepwise activities arranged in a sequential order.Strategic Management Process . evaluation and control of strategies to realise the Organisation’s Strategic intent. It is repeated over time as situation demands. Strategic Management is a continual. Overview Definition of Strategic Management: Strategic management is defined as the dynamic process of formulation. It is not rigid. iterative process. Establish Strategic Intent Formulation of Strategies Implementation of Strategies Strategic Evaluation Strategic Control 56 .

Formulation of Strategies: 6. 9. Preparing a Strategic Plan. 57 12. • Designing a Mission Statement. SWOT Analysis. 7. 11. Internal Appraisal of the firm. . purpose & setting broad Objectives and Goals. 10. • Adopting the Business Model. 8. Formulating the Corporate objectives. Setting Corporate Objectives. External Environment Survey. Formulating the Corporate strategies. Exercising Strategic Choice. • Clarifying the business mission.Strategic Management Process-1 Strategic Intent: • Creating & Communicating the Vision. • Defining the Business.

Reformulating Strategies. Activating Strategies. 19. Performing Strategic evaluation & Control: 18. 17. Managing Functional Implementations. Performing Strategic evaluation. Managing Behavioural Implementation. 20. 14. 58 . Operationalising Strategies. 16. Designing Structure. Exercising Strategic Control.Strategic Management Process-2 Implementation of Strategies: 13. Systems and processes. 15.

A clear-cut statement of the business. • What is our business? What will it be? What should it be? • Defining business involves three dimensions. It clarifies the opportunities business can pursue and the areas in which these opportunities are to be looked for. • Business Definition sets and limits the contours of the business.Defining the business • :. the firm is engaged in or planning to enter. ―Customer Groups‖ and ―Alternative technologies‖. It clarifies to the firm the various sources from which threats and competition will come for. Mission Statement provides the basic inputs for Business definition and provides a broad frame work. 59 . • Defining Customer functions and Customer groups provides Blue Print and a reference point for Product-market strategy. namely ―Customer Functions‖. It is elaboration of the business arena and the boundaries in which it will play.

Toner. We will pursue ideas that would generate products enhancing beauty and youthfulness of men and women. good after sales service. marketing services of maintenance and per copy price. 60 . Customer Function: Availability of spares.Some Business definitions: Modi Zerox : Focus as a service organisation rather than vendor of zerox machines. Intel: We are in the business of computing technology and to consistently develop the artifice/building blocks of computing technology for the entire computer industry of the world is our business. Technology: Collaboration with ―Rank Zerox‖ Helen Curtice: We are in beauty enriching business. Customer focus: Office Communication with high priced and low priced equipments. Drums.

2. It must be related to human needs which the product seeks to satisfy and should not be limited to just the product. 5. A wrong and or narrow concept could reduce the life span of organisation. 6. It should not be narrow. 7. beyond the immediate market boundaries. It must be related to the functions performed by the product and not limited to just the product. It must go beyond the immediate product. as many related function / benefits as possible. 9. 61 . beyond the immediate competitors. It must encompass in its fold. It must be wide enough to give a vision of latent sources of competition from say. 4.Attributes of a good business definition: 1. Business boundaries keep changing and defining Business is a dynamic situation and becomes an exacting exercise and it needs to be re-casted over time again and again. 3. substitute products. It must be wide enough to embrace new opportunities. 8. It must be related to basic benefits the product offers.

mission and purpose – Business definition. Strategic Intent & Strategy Formulation: Vision.Syllabus 2. Ethical and Social considerations in Strategy (4) -------------------------------------------------------------- 62 . objectives and goals – Stakeholders in business and their roles in strategic management – Corporate Social Responsibility.

• Strategic Intent refers to the purposes the Organisation strives for. 63 . and attempt to achieve the Goals. The intent encourages individual and team contributions and attempts sustaining enthusiasm by providing new operational definitions.Strategic Intent • Strategic Intent is combination of four levels in the Management. In addition to ambitions of the Organisation. Business Definition & Goals and Objectives. It covers motivating the people by communicating the values. adopt a predetermined direction. it encompasses active Management Process that includes focussing the organisation‟s attention on winning. Mission. • Hamel & Prahalad considered Strategic Intent as an obsession with an Organisation. • Strategic Intent envisions a desired leadership positioning and establishes the criterion the Organisation will use for charting its progress. targets. The Strategic Intent guides the organisation through changing circumstances and guides use of resource allocations. • Strategic Intent lays down the frame work within which firms would operate. It involves discussions of Vision.

a business. corporate culture. an activity) in future‖. • El-namaki(1992) defines vision as a ―mental perception of the kind of environment an individual. • The vision of a company is a direction for action for employees. Vision Statement is permanent statement of a company. aspires to create within a broad time horizon and underlying conditions for the actualisation of this perception‖ • Miller and Dess(1996) defines vision as ―category of intentions that are broad. (an organisation. • Kotter(1990) defines Vision as ― a description of an enterprise. • A vision is more dreamt of than it is. all inclusive. It defines the very purpose of existence of a company. Vision is future aspirations that lead to an inspiration. Mission and Purpose. a technology. and forward thinking‖ 64 . The essence of a vision is forward looking view of what an organisation wishes to become.Strategy FormulationVision. or an organisation.

Foster long term thinking. a step. It gives shape and direction to the organization‘s future. A vision should stretch the organization‘s capabilities and image of itself. Foster risk taking and experimentation. It represents. Competitive. Creation of common identity and share sense of purpose. a discontinuity. a jump ahead to dream what it is to be. excited. Visions range in length from a couple of words to several pages. 65 . and part of something much bigger than themselves. original and unique and practical. • • • • • • • • • A vision is a statement about what your organization wants to become.Characteristics of a Vision Statement • • Inspiring and exhilarating. Shorter vision statements is recommended because people will tend to remember their shorter organizational vision. It should resonate with all members of the organization and help them feel proud.

" (Westin Hotels) • "To be recognized and respected as one of the premier associations of HR Professionals. knowledge based and happy organisation.” 66 . • Vision Statement of Farm Fresh Produce • “We help the families of Main Town live happier and healthier lives by providing the freshest. tastiest and most nutritious local produce: From local farms to your table in under 24 hours.Vision Statement • Vision Statement Samples: • "Year after year. Westin and its people will be regarded as the best and most sought after hotel and resort management group in North America. we will become the most cost competitive steel plant and so serve the community and the nation‖." (HR Association of Greater Detroit) • Vision Statement of “TATA STEEL” ―TATA Steel enters the new millennium with the confidence of learning. In the coming decade. We will establish ourselves as a supplier of choice by delighting our customers with our service and products.

e. focused discussions. the vision has become more of a motivational tool. Therefore..Developing a Vision Statement • • The vision statement includes vivid description of the organization as it effectively carries out its operations. Developing a vision statement can be quick culture-specific. a very attractive image toward which the organization was attracted and guided by the strategic plan.. but the part where time easily gets away from you Note that originally. e.e. sharing stories. too often including highly idealistic phrasing and activities which the organization cannot realistically aspire. etc. i. 67 • • . visit with the participants how they might like to arrive at description of their organizational vision. divergent experiences around daydreams.. Developing the vision can be the most enjoyable part of planning. participants may use methods ranging from highly analytical and rational to highly creative and divergent. Recently. the vision was a compelling description of the state and function of the organization once it had implemented the strategic plan. i.g.

It culminates in to a Mission Statement. the customer groups and market segments it is endeavouring to serve. Strategic Vision points an Organisation in a particular direction. and the resources and technologies that it is deploying in trying to please customers and achieve a Market and Industry position. • Strategic Vision is different from Mission Statement: Strategic Vision deals with where we are going.Strategic Vision • Strategic Vision is a road map showing the route a company intends to take in developing and strengthening the business. 68 . • A company Mission is guided by the buyer‘s needs it seeks to satisfy. charts a strategic path to follow for future and moulds the organisation‘s identity. where as Mission Statement deals with Company‘s present business scope and purpose. It defines Company‘s destination and provides rational for going there.

Example of Strategic Vision • ―The San Antonio Express News‖ developed this Strategic Vision." 69 . • ―IMPROVE‖ financial strength and profitability. • ―DELIVER‖ an award-winning level of journalistic excellence. • ―INSTILL‖ an environment of internal and external excellence in customer service. • "EXPAND‖ our customer base and enhance the franchise by pursuing multimedia opportunities. building public interest. • ―PROVIDE‖ vigorous community leadership and support. • ―EMPOWER‖ and recognize each employee's unique contribution. • ―ACHIEVE‖ the highest standards of quality. trust and pride.

It represents common purpose which the entire organisation shares and pursues. It is a guiding principle.Mission • Thompson(1997) defines Mission as ―the essential purpose of the organisation. and the customers it seeks to serve and satisfy‖ • Hunger and Wheelen(1999) say that ―mission is the purpose and reason for the organisation‘s existence‖ • Mission statements could be formulated on the basis of vision that an entrepreneur decides on in the initial stages. • Mission of organisation is what it is and why it exists. • A business mission helps to evolve an executive action. the nature of businesses it is in. why it is in existence. 70 . concerning particularly.

• Thus the mission of a business is a statement. • The corporate mission is growth ambition of the firm. It defines the competitive strength of a company and it emanates from corporate vision and strategic posture of a company. market leadership.Mission Statement • Mission of a company is expressed it terms of products and geographical scope. • Mission is statement which defines the role of organisation plays in a society. a build-up philosophy of its current and future expected position with regards to its products. 71 . It includes a methodology of attaining the desired goal in vision.

Mission Characteristics of a Mission Statement • It should be feasible & It should be precise. 72 . • It should be motivating. • It should be clear & It should be distinctive. • It should be indicative of major component of strategy • It should be indicative of how objectives are to be accomplished.

73 .Mission Statement Creation • To create your mission statement. Make sure you choose the most important measures (and not too many of them!) • Combine your winning idea and success measures into a tangible and measurable goal. which expresses your ideas. measures and desired result. • Next identify the key measures of your success. and is the reason that customers will come to you and not your competitors. first identify your organization‘s ―winning idea‖. • Refine the words until you have a concise and precise statement of your mission. This is the idea or approach that will make your organization stand out from its competitors.

ask ―Why does the image.what is it‘s purpose?‖ This purpose is often the same as the mission. services. At is most basic. When wording the mission statement. . the mission statement describes the overall purpose of the organization. and maybe priorities of 74 activities for survival. 2. and concern for public image. focused discussions.Developing a Mission Statement 1. etc. sharing stories. the vision exist -.e. Developing a mission statement can be quick culturespecific.g. If the organization elects to develop a vision statement before developing the mission statement.. e. 4. Therefore. consider the organization's products. values. markets.. 3. participants may use methods ranging from highly analytical and rational to highly creative and divergent. visit with the participants how they might like to arrive at description of their organizational mission. i. divergent experiences around daydreams.

Mission Statements 5. When refining the mission. 7. . 8. a useful exercise is to add or delete a word from the mission to realize the change in scope of the mission statement and assess how concise is its wording. Does the mission statement include sufficient description that the statement clearly separates the mission of the organization from other organizations? 75 6. Ensure that wording of the mission is to the extent that management and employees can infer some order of priorities in how products and services are delivered. Consider any changes that may be needed in wording of the mission statement because of any new suggested strategies during a recent strategic planning process.

00.000 MT Production of Graphite Electrodes before 2012‖ • The mission statement of Farm Fresh Produce is: “To become the number one produce store in Main Street by selling the highest quality. from farm to customer in under 24 hours on 75% of our range and with 98% customer satisfaction." (Wal-Mart) 76 .” • "Our goal is simply stated.• Mission Statement of Ranabaxy ―To become a $ 1 Billion research based global (International) company pharmaceutical company‖ • Mission Statement of Graphite India Limited ―To be within top three companies in the world by achieving 1. We want to be the best service organization in the world." (IBM) • "To give ordinary folk the chance to buy the same thing as rich people. freshest farm produce.

We will produce outstanding financial returns by providing totally reliable. and customer enthusiasm through the integration of people. time-certain delivery. whom we define as guests.Mission Statements • "FedEx is committed to our People-Service-Profit Philosophy. (strategy) In this way we will ensure that our profit. technology. competitively superior. quality and growth 77 goals are met. and fellow employees. and business systems. (mission) We will accomplish this by committing to our shared values and by achieving the highest levels of customer satisfaction." (Federal Express) • "Our mission is to earn the loyalty of Saturn owners and grow our family by developing and marketing U.S. our Mission must be to exceed the expectations of our customers." (Saturn) • "In order to realize our Vision." (Westin Hotels and Resorts) . partners.-manufactured vehicles that are world leaders in quality. global. cost. air-ground transportation of high-priority goods and documents that require rapid. with extraordinary emphasis on the creation of value.

(Values are also known as core values and as governing values. Value statements describe actions which are the living enactment of the fundamental values held by most individuals within the organization. they all refer to the same sentiment.) • Value statements are grounded in values and define how people want to behave with each other in the organization. and the internal community.Values • Values are traits or qualities that are considered worthwhile. They are statements about how the organization will value customers. they represent an individual‘s highest priorities and deeply held driving forces. suppliers. 78 .

79 . along with their experience. Each of you makes choices in life according to your most important four – ten values. your values form the cornerstones for all you do and accomplish. These leaders have a lot of power in your organization to set the course and environment and they have selected the staff for your workplace. The values of your senior leaders are especially important in the development of your culture. and so on. upbringing. held together to form your corporate culture. • If you think about your own life. They define where you spend your time.Values • The values of each of the individuals in your workplace. It is necessary to take the time to identify what is most important to you and to your organization. if you are truly living your values.

visit with the participants how they might like to arrive at description of their organizational values. focused discussions. They often drive the intent and direction for ―organic‖ planners. etc. employees and the community.. Establish four to six core values from which the organization would like to operate. e. shareholders.e. Therefore. sharing stories. participants may use methods ranging from highly analytical and rational to highly creative and divergent. divergent experiences around daydreams.. Values are increasingly important in strategic planning. etc. • • 80 .g. Consider values of customers. i. Developing a values statement can be quick culturespecific.Developing a Values Statement • Values represent the core priorities in the organization‘s culture. including what drives members‘ priorities and how they truly act in the organization.

Incorporate into the strategic plan. Then address discrepancies where a value is highly preferred (ranked with a 3).Developing a Values Statement • Notice any differences between the organization‘s preferred values and its true values (the values actually reflected by members‘ behaviours in the organization). or 3 in terms of the priority needed by the organization with 3 indicating the value is very important to the organization and 1 is least important. 81 • . Record each preferred value on a flash card. actions to align actual behaviours with preferred behaviours. then have each member ―rank‖ the values with 1. Then go through the cards again to rank how people think the values are actually being enacted in the organization with 3 indicating the values are fully enacted and 1 indicating the value is hardly reflected at all. but hardly enacted (ranked with a 1). 2.

we do not take professional or ethical shortcuts. • "At Merck. and to the societies we serve worldwide. In discharging our responsibilities. . to the environments we inhabit. Every Merck employee is responsible for adhering to business practices that are in accordance with the letter and spirit of the applicable laws and with ethical principles that reflect the highest standards of corporate and individual behaviour. • We recognize that the quality. • Our employees are the most valued assets of our company.Samples of Values and Value Statements • "To preserve and improve human "We have a total commitment to these values. motivation and performance of our 82 employees are the key factors in achieving our success.. Our interactions with all segments of society must reflect the high standards we profess. We are responsible to our customers. shaping the way we do business for our employees. "corporate conduct is inseparable from the conduct of individual employees in the performance of their work." (Merck) • At Merck. we are committed to the highest standards of ethics and integrity." • Patriot Ledger (SouthofBoston. essential participants with a shared responsibility in fulfilling our mission. our customers and our company.. to Merck employees and their families.

An effective planning system. will keep your goals and action plans on track and on target. Select topics based on member needs assessment. Determine budget. Measurable. you will want to develop action plans to accomplish each goal. a handheld computer or 83 a Palm. Once you have enabled strategy accomplishment through setting SMART goals. Realistic and Time-based. whether it uses a personal computer. Goals should be SMART: Specific. turn your attention to developing several goals that will enable you to accomplish each of your strategies. Achievable. and so forth. You will need to follow an action plan: Establish a cross section of professionals as a committee and meet to plan the sessions. Plan advertising strategies. . Make action plans as detailed as you need them to be and integrate the individual steps into your planning system. a paper and pen system.• • • • • • • Goals and Action Plans After you have developed the key strategies.

• Development of analytical ability to understand situation. plans. Strategy. like. Identify factors relevant to decision making. programmes. weakness. policies. 84 . opportunities and threats to organisation. Development of attitude of generalist and asses a situation from all angles. • Application of generalised approach to deal with wide variety of situations.Objectives of Business Policy: • Understand various concepts. Analyse strength. • Knowledge of internal and external environment and how it affects the functioning of the organisation.

Benefits of Business Policy • Business Policy seeks to integrate the knowledge and experience gained in various functional areas of Management. Business Policy helps us to create an understanding of how policies are formulated. • Understanding Business Policy enables manger to avail the an opportunity or avoid a risk to career planning and development • Understand senior management‘s view point. Managers feel themselves to be a part of a greater design. • Understanding Business Policy provides a basic framework for understanding strategic decision making and Improvement in Job Performance. Normally functional areas are aloof of complexities of real life business situations. • Managers become more receptive to the ideas and suggestions of senior Management. Managers understand the impact of policy shifts on the status of one‘s department and on the positions one occupies. • Study of business policy leads to personal development. 85 . Business Policy cuts across the narrow functional boundaries.

it has become a necessity to address the mode and means of delivering social responsibility. rural development. 86 . • Presently. while some do not want it to be considered in business operations. others boast around it. most business houses observe a balance and undertake to deliver social responsibility and business objectives without contradicting each other. It gets attended in Strategic Planning through environmental appraisals. However.Social Responsibility & Strategic Management • Social Responsibility along with ethics becomes a stated or un-stated requirement. It has differing views. sports etc. with ISO:14001:2004 which concerns Environment Management Systems. • Social Responsibility extends beyond the workforce and stakeholders and many business houses take up activities for community welfare.

Social Responsibility • Scope of Social Responsibility is defined in terms of Social concern. industry and to itself. the society in large remains a major stake holder and we cannot escape our dues to society and towards social responsibility. create Organisations Structure and evaluate its effectiveness. Business organisation depending on its nature. Organisations need to allocate resources. could extend social responsiveness to the problems of the whole world. • Like any other strategic functions. Business organisations could also classify Social Responsibilities in terms of relatedness to its own activities. 87 . and breadth of activity. local community. But all said and done. size. for successful implementation. nation.

•Society provides goods and services to Business for which it pays the prices. Society Business 88 . •Business rewards inputs to society by paying wages/profits/dividends etc.Corporate Governance : Social Responsibility •Business provides goods & services to Society for which it pays the price. A firm carrying very positive image in society has very strong probability of lasting growth. Business owes responsibility towards society. Their growth & welfare is dependent on this mutuality. •Society and Business are interdependent.

as stated by Milton Friedman. suppliers. does not hold good anymore. Reddy Laboratories. • Every business unit of the country must aim at becoming good corporate citizen of the country and the world as whole. . peaceful co-existence.Corporate Governance : Social Responsibility • ―Sole aim of a business is and should be maximisation of Shareholders‘ value‖. ethical behaviour and strong principle of accountability. With this companies would enjoy excellent image within area. Trusteeship invokes code of discipline. HDFC. reasonable prices is minimum requirement. Indian examples are Tatas. country and world. employees. All modern large corporate have attained their present size due to support of society in terms of shareholders. Dr. Capital and Labour have89 to have mutual. World Class Quality of goods and services. TCS. local community and society at large. Bajaj. Hero Honda. Birlas. L&T. government. etc. lenders. • Industrial Corporate Citizens are trustees and should utilise their wealth for the welfare of the society / community. Reliance.

Many of them provide non-core social activities for benefit of society in quest of their becoming good Corporate Citizens. country and society at large by creating world class products at competitive prices and price and providing these products to society at desired time and space. • They realise their dependence on Society for their needed inputs like money. The more closely a company concentrates on solving societal problems. society as a market for their outputs and realise that they cannot exist without unreserved support from Society. men and skills. the better it is able to solve its own problem of growth and prosperity. They are asset to the share holders. 90 .Corporate Governance : Social Responsibility • Common feature they all posses is their image not only as value creator but more as Top Class Corporate citizen of India and of the world.

Principle of mutually cherishing each other should be developed. Pharma. Capital should look after the workers and workers should look after productivity and profit of the organisation. which is known as empathy. What is unethical and immoral in society is also applicable to business.Corporate Governance : Social Responsibility • Capital and labour should supplement and assist each other. code of conduct acceptable to society at large without any reservations. right & wrong or Just & unjust. the moral principles of good & bad. Capital being trustees should look after welfare of labour not only material but also moral welfare. Peter Drucker has stated that there are no separate ethics of business. The concept of Business ethics is global phenomenon and is recognised 91 throughout the world. . Knowledge workers (professionals) like Bill Gates. Corporate ethics refers to set of rules. The trick is to put your-self in shoes of those. capital has been replaced by knowledge in newer industries like IT. Presently. • Social Responsibilities have foundation of Business Ethics. against whom a particular action is being planned / taken. Narayan Murthy are paving the way towards social responsibilities.

b) Be responsive to customer need and concerns.Corporate Governance : Social Responsibility • Code of Ethics for Indian Business (by PHD Chambers) • It is believed that the best way to promote high standards of business practice is through self regulation. transparency & good values with objectives as under: • a) Be faithful and realistic in stating claims. • Business should be conducted in a manner that earns the goodwill of all concerned through Quality. c) Treat all stakeholders fairly and with respect d) Protect and promote the Environment and Community interests 92 . efficiency.

93 . Objectives. Unions. Government (and its Agencies) Owners. A corporate stakeholder is a party that affects or can be affected by the actions of the business as a whole. Although stake-holding is usually self-legitimizing (those who Judge themselves to be stakeholders are de facto so). Person.• • • • • • Stakeholder Definition Stakeholders are defined as "those groups without whose support the organization would cease to exist. a firm's customers are entitled to fair trading practices but they are not entitled to the same consideration as the firm's employees. For example. Directors. Group. and Policies. all stakeholders are not equal and different stakeholders are entitled to different Considerations. Customers. and the Community from which the business draws its Resources. Shareholders. Key stakeholders in a Business Organization include Creditors. Suppliers. Employees. or organization that has direct or indirect Stake in an organization because it can affect or be affected by the Organisation‘s actions.

94 .

lenders. suppliers." 95 . bondholders. Stakeholders of a company include stockholders. • "The stakeholders in a corporation are the individuals and constituencies that contribute. to its wealth-creating capacity and activities. suppliers. or the wider society which influence and are influenced by an organization but are not its 'internal part' • Stakeholder: Any party that has an interest in an organization. either voluntarily or involuntarily. employees.External Stakeholder : Definition: • Entities such as customers. customers. and so forth. and that are therefore its potential beneficiaries and/or risk bearers.

partner and/or supplier. shareholder. A stakeholder is typically concerned with an organization delivering intended results and meeting its financial objectives. among others. 96 . a stakeholder may also be concerned with the outcome of a specific project. A stakeholder may contribute directly or indirectly to an organization‘s business activities. a stakeholder can be one of two types: internal (from within an organization) or external (outside of an organization). effort or activity. Other than traditional business. employee. A stakeholder usually stands to gain or lose depending on the decisions taken or policies implemented. manager. customer. group or business with a vested interest (a stake) in the success of an organization is considered to be a stakeholder.Stakeholders • Any individual. In general. investor. such as a community development project or the delivery of local health services. Examples of a stakeholder are an owner.

etc. products. contractors. customers. representing a particular segment of society. Any group or individual who can affect or who is affected by achievement of a group's objectives. • An individual or group with an interest in a group's or an organization's success in delivering intended results and in maintaining the viability of the group or the organization's product and/or service. employees. governmental entity. owners. elected officials. pollution prevention. children. or individual that has a stake in or may be impacted by a given approach to environmental regulation. environmental organizations. and religious leaders are all examples of local stakeholders 97 . energy conservation.*People who are (or might be) affected by any action taken by an organization or group. associates. people that are related or located near by. • Any organization. neighbourhood advisory council members. suppliers.Types of stakeholders • People who will be affected by an endeavour and can influence it but who are not directly involved with doing the work. School board members. chamber of commerce representatives. Examples are parents. Stakeholders influence programs. partners. • A participant in a community mobilization effort. In the private sector. and services.

Growth Rates of pay. Minimum wage. Environmental issues. Ethical products Credit score.Examples of a company stakeholders Stakeholder Owners private/shareholders Government Senior Management staff Non-Managerial staff Examples of interests Profit. Performance. Targets. Involvement. Low unemployment Performance. Job security Working conditions. Direction Taxation. New contracts. Shares 98 Trade Unions Customers Creditors Local Community . Quality. Liquidity Jobs. Legislation. Customer Care. Legal requirements Value. VAT.

Strategic analysis: • Analyzing Company‘s Resources and Competitive Position• Organizational Capability Profile – • Strategic Advantage Profile – • Core Competence – Distinctive competitiveness. (4) 99 .Syllabus: 3.

" Thus. not about strategy in general. Porter argues that strategy is about competitive position. about adding value through a mix of activities different from those used by competitors." He adds.) 100 . Porter defines competitive strategy as "a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there. "It means deliberately choosing a different set of activities to deliver a unique mix of value―. • In his earlier book. (It should be noted that Porter writes about competitive strategy.Competitive Strategy According to Michael Porter • In a 1996 Harvard Business Review article and in an earlier book. about differentiating yourself in the eyes of the customer. Porter seems to embrace strategy as both plan and position. • In short. Porter argues that competitive strategy is "about being different.

• A Core Competence is a proficiently performed activity that is central to the Organisation Strategy. • A Core Competence is knowledge & skill based residing in people. It results out of accumulated learning and built-up proficiencies. Working with Customers. (Does not appear in Balance Sheet) 101 . Skills in Manufacturing. Proficiency in specific technology.Identification and Assessment of firm‟s Competitive Edge & Core Competencies • A Competence is something an Organisation is good at doing. Examples are Proficiency in Merchandising. High quality product at low Cost. Examples are Good after sale service. and in Company‘s intellectual capital. These are important activities in which Company is better than other internal activities. Proven capabilities.

• Competitive advantage finally results in either cost advantage or differentiation advantage. • A strength that is superior / distinctive to competition is competitive advantage. • Preparing Competitive Advantage Profile for the organisation is based on internal appraisal and industrycompetition.Distinctive Competence • A Distinctive Competence is a competitively valuable activity that Company performs better than its rivals. It is Competitive superiority in performing Core activity generating competitively superior resource strength. 102 . • Competitive advantage is a back-up for strategy without which strategy will not work. • Building Competitive advantage is a conscious and long term process. • Creating entry barrier is also a way to built up competitive advantage.

Techniques: SWOT Analysis Bench marking Value chain analysis Value to customers – Competitive approach Competitive strength assessment. 103 . Core Competency lies at the root of products.Core Competency An enduring competency that cannot be easily duplicated by imitation is Core Competency.

5. . To take steps to elevate the capability to achieve Objectives and Goals. Strengths and Weaknesses. product lines of the 104 firm and firm‘s know-how status. To know one‘s organisational capabilities. To select the most suitable Opportunities as per already appraised capabilities. Factors considered for Internal Appraisal: • Assessment of the Strengths-Weaknesses in different functions/areas • Identification and assessment of firm‘s Competitive Edge and Core Competencies. To select the Product / business in which organisation can grow as per potentials appraised. • Appraisal of the individual business. 2.Internal Appraisal of the firm: Purpose: 1. 4. To assess the capability GAP for the opportunity in hand and also for the Objectives and Goals. 3.

.Assessing strengths and weaknesses: – 1. They give the strength. Strength allows Company to take advantage of opportunities and guard against threats. Do we competitively manage value additions in Value chain? Are we competitively stronger or weaker than our key rivals? 105 2. distinctive competencies are building blocks of Strategy. 3. Similarly resource weaknesses make company vulnerable and need to be corrected. How well is the company‘s present Strategy working? Evaluate company‘s competitive approach. Check Value Chain analysis. Core competencies. Are we low cost? Or does our product have distinctive features? What value for money is offered to the customers? Perception of customers about our Product and the Company. Compare cost effectiveness of the Company products with its rivals.

market share of the firm and its competitors. • Marketing: Market growth.Main Functions: • Check what strategic issues need managerial attention. margins. Conduct Industry analysis and competitive situation analysis and prepare a ―worry list‖. Customer‘s perception for the product and level of satisfaction there of. Synergy of the product-mix. Prices. Product‘s life cycle and estimating safe period. 106 . good industry & competitive analysis are valuable precondition for good strategy making. Advertising. Find out gaps and take remedial actions. brand equity. Sales promotion. new product capability. Good company situation analysis. Production capacity and GAP between market potential.

earning ratios like EPS. liquidity.r. facilities for future requirements of product trend. inventory analysis. adequacy of Capital Expenditures. Analysis of capacity utilisation. Price-volume relationship. payback. maintenance. Operating efficiency w. Brand monitoring surveys. cost of 107 product analysis. Industrial Engineering capability for improving product and methods. etc. Cost analysis. Value engineering to simplify the product. • Manufacturing/Operations: Appropriateness of manufacturing processes.t industry standards. . Product line wise profits. IRR & BE analysis. Management in planning and manufacturing controls. Tax administration.Main Functions: • Marketing audit: Market share analysis. • Finance: Level of financial performance – profitability and productivity. skills. Consumer satisfaction index. analysis & efficiency of Cash flow. breakdowns. DSCR (debt service coverage ratio). Appreciation of long term financial plans as per Cost of capital. analysis of Assets & Costs. dynamism in Tax planning.

Speed of R & D. Allocation of resources. • Allocation of resources and Corporate Functions: chief characteristics of Top Management – Image as dynamic? Confident? Aggressive? Timid? Reticent? Change-stability oriented? Future oriented? Coping up with future challenges? Creative? Realistic? Innovation record? • Organisation Culture & Structure – Traditional? Modern? Rigid? Centralised? Flexible? Flat? Use of information Technology? • Quality of strategic planning? • Executive turnover? • Directors – Dummy? Active? Effective Policy makers? 108 . R & D expenses v/s new product launch. New product development-its records and adequacy.Main Functions: • R & D: Commitment to R&D. nature & depth of R & D outfit. Analysis of patents generated. R & D and market needs. new product commercialisation.

Politics. assets. ―Rare‖. Knowledge. etc • Four Types of Resources e. • OR is Hardware & OB is software 109 . ―Costly to Imitate‖ and ‗Non-Substitutable‖. Shared value. Organisational Behaviour • OB is manifestation of forces and influence of Internal Environment. ―Valuable‖. Human resources. Information. Technology.g. capabilities. Climate. (like. will eventually. Culture. Management Philosophy.Organizational Capability Profile & Strategic Advantage Profile: Organisational Resources • OR includes tangible. Quality of Work. organisational processes. lead to Strategic Advantage. Quality of Leadership. Work Environment. Non-tangible. Plant & Equipments. use of Power) • OB affects ability of organisation to use its resources.

Organisational Resources Strength & Weaknesses Synergistic Effects Organisational Behaviour Competencies Organisational Capabilities Strategic Advantages 110 .

g. This is Synergy or Dysergy. It could be finance.OCP & SAP Strength & Weaknesses OR & OB creates S&W. do not add up mathematically but combine to produce an dramatic. Synergistic Effects Two or more attributes of S & W. Strength is an inherent capability of organisation used to gain Strategic Advantage. enhanced or reduced effect. Layout. Obsolete machinery. when product. pricing. Technology etc. Uneconomical operations etc. promotion support each other a synergistic effect will occur on marketing 111 . e. distribution. A Weakness on other hand is inherent limitation or constraint creating Strategic Disadvantage. It could be Plant Location.

Organisational Capability Organisational Capability is inherent capacity or potential of an organisation to use its Strengths and overcome Weaknesses to exploit Opportunities & face Threats. This is ability to compete with rivals. 112 . It is a skill for coordinating resources and putting them to productive use. though measurable. even though valuable & unique. will be worthless.Competencies OR & OB develop S & W. This helps Organisations to withstand pressures of competition. Organisational Capability. Without capability. resources. remains a subjective attribute. which when combined with Synergistic Effects manifest themselves in terms of Competencies.

Growth etc. When compared with known identified rivals. the Strategic Advantage is also known as Competitive Advantage. Competitive Advantage is used as stimulus. Market Share. Negative results indicate Strategic Disadvantages. 113 . The advantages can be measured in terms of Profit. In an abundantly profit making company.Strategic Advantage • Strategic Advantage is result of Organisational Capabilities.

Marketing. some factors are: • Production System: Capacity. Information and General Management. Largely accepted main functional areas could be named as Finance. etc. Cost control. Inventory. Material Supply. Personnel. • Operations & Control: Production Planning. Product development. Operations. Standards etc. etc. Maintenance System. Layout. These could be different for different types of organisations. Work systems. • R&D or Design: Facilities. Collaboration. Procedures.Organisation Capability Profile (OCP): 1 • Organisation capability is nothing but sum total of capabilities of various functional areas. Patent rights. Automation. Technology. Use of material resources. Product Design. Quality control. • Operations Capability: includes Production of Products and Services. 114 . Location.

• Organisational Strength & Weaknesses related to above factors is a measure of Financial Capability. usage and management of Funds. availability. • Management of funds:. Tax planning. • Usage of funds:.Capital Structure. Current assets. 115 . Capital procurement. Relations with Share Holders. Cash inflation.Organisation Capability Profile (OCP): 2 • Financial Capability: is basically.Capital Investment.Financial Accounting & Budgeting Systems. controllership. borrowings. It depends upon various factors for example: • Sources of funds:. working capital availability. Dividend distributions. relations with banks. reserves & surpluses. financing pattern. Cost reduction & Control. audit authorities. Management control systems. Fixed asset acquisition. Credit & Risk management. Loans & advances. State of Financial health.

Advertising. Marketing Channels. pricing. marketing System. Marketing Management Information System etc. Changes. Positioning.Organisation Capability Profile (OCP): 3 • Marketing Capability: is basically. Market Standings. Sales Promotion. • Systemic: Marketing Mix. Marketing Capability Factors are: • Product: Quality. marketing intermediaries etc. penetration and distribution of Product or Service. 116 . Differentiation. • Place: Distribution. • Promotion: Tools used for promotion. Company Image. promotion. Logistics. Variety. Transportation. Product Mix. Protection etc. • Price: Pricing objectives & policies. Public Relations etc. Packaging etc.

• Industrial Relations: Union-Management Relations. aspects about ability to implement strategies. Collective bargaining. Safety. etc. selection. Welfare. Position of Personnel Dept. Developmental opportunities. compensation. Staff & workers. communication. in organisation. Employee satisfaction and moral.Organisation Capability Profile (OCP): 4 • Personnel Capability: is related to use of Human resources & skills. appraisal. 117 . Some of the Factors are: • Personnel System: Manpower planning. etc. etc. Working conditions. development. • Organisational Characteristics: Corporate Image & Image as Employer. Quality of Managers.

Ability to synthesise. Width. its relevance & compatibility to organisational needs. • Processing of Information: Database Management. Quality. • Transmission & Dissemination: Speed. Timeliness. • Integrative. etc. Top management Support. etc 118 . Scope. Systemic. Computer Professionals. Up-gradation. retention. depth of coverage. Software Capability.Organisation Capability Profile (OCP): 5 • Information Management Capability: relate to design & management of flow of information for decision making. Quantity. Supportive factors: IT infrastructure. Computer Systems. security. Some factors are: • Acquisition and retention of information: Sources.

etc.. Financial institutions. Acceptance of management of change. • Organisational Climate: Organisational cultures. Some factors are: • General Management System: Strategic management system. • External Relationship: Influence & rapport with Govt. etc. 119 . Incentives. Rewards. Organisational Structure & Control. co-ordination and direction of the functional capabilities. balance of vested interests. MIS. social responsibilities. norms. Strategy formulation. Corporate planning. competence. etc.Organisation Capability Profile (OCP): 6 • General Management Capability: relates to integration. Risk-propensity. political processes. • General Managers: Orientation. Strategy implementation machinery. track records. values.

120 . • Capability Factor Rating • --------------. Strategists can assess Weaknesses and Strengths of the organisation in each of the six functional areas.Organisation capability Profile (OCP) : 7 • The Organisation capability Profile (OCP) can be prepared by systematically assessing the various Functional areas and subjectively assign values to the different functional capability factors and sub-factors along a scale ranging from the values -5 to +5.-----------------------------------------------Factor Weakness Normal Strength -5 0 +5 ----------------------------------------------------------------• Sources of Funds -5-4-3-2-1-0+1+2+3+4+5 = +3 • After completion of charts for all the factors and subfactors mentioned above.

Capability Factor • Finance Strength & Weaknesses High cost of capital. • A ‗SAP‘ provides ‗a picture of the more critical areas. Vendors are available. -2 Reserves & Surplus position is -3 unsatisfactory. which can have a relationship to the Strategic posture of the Firm‘. • Strategic Advantage or Disadvantages in each of the main functional areas can be summarised and presented. +4 +2 +1 121 .Preparing the Strategic Advantage Profile (SAP): • OCP capability Factor Rating chart becomes a base for SAP. Captive sources for raw material & spare parts are available. Or • Operations Plant & Machinery is in excellent Condition.

Syllabus 4.(ETOP) – • Industry Analysis – Porter‘s Five Forces Model of competition. Analyzing Company‟s External Environment: • Environmental appraisal – • Scenario Planning – • Preparing an Environmental Threat and Opportunity Profile . (4) 122 .

Legal. Environmental. Technological. Goals. Service. Economical. Objectives. Corrective Action Visions Missions. Transport of goods Profits 123 . Socio-Cultural. Systems Structures Targets Feedback Input Resources : 5 Ms Processes Planning Manufacturing Inspection Packing Outputs Sales.Company and Environment External Environment: PESTEL: Political.

• Develop common size financial statements for the company‘s or business unit‘s previous years which are basis for the trend analysis projections of pro forma financial statements. • Recommended scenarios are simply extension of the Industry Scenarios developed earlier. • Compare the assumptions underlying the scenarios with these financial statements and ratios to determine the feasibility of the scenarios.Corporate Scenario Planning • Corporate Scenarios are pro forma balance sheets and income statements that forecast the effect alternative strategy and its various programs will likely to have on division and on corporate return on investment. • Construct detailed pro forma financial statements for each strategic alternatives. 124 . This should be done for every product and for every country.

Scenario Box for use in Generating Financial Pro Forma Statements. Factor Last Historical Trends Year average 2 0 07 2 0 09 2 0 11 Comments O P ML O P ML O P ML GDP CPI SALES FOREX PLR Expnsn Div. Profits EPS ROI ROE Others 125 .

paradigms on complex events taking place in world. adapt and 126 act effectively.Scenario Planning • Scenarios are tools for strategists to express their views about alternative future environment for which today‘s decisions are framed. one can avoid surprises. • Scenarios resemble a set of stories. • Creating scenarios requires decision makers to question their broadest assumptions about the way the world works to foresee a decision. . • By recognising the warning signals. instead of extrapolating current trends. scenarios provide a common vocabulary giving effective basis for communicating complex conditions and options. built around carefully constructed plots. The stories express multiple view points. Scenarios present alternative future images. which could have been missed or denied • For an organisation. the threats & opportunities of future.

These can be ―Technology driven‖ (New Product. Step – 3 : Analysing and Problem Solving as per A. Then determine the uncertainty and kind of impact of these issues. Step – 1: Understand effects of external factor on the business. 127 . B. boom). instability). Employees are encouraged to participate by offering some incentives. or ―Economic‖ ( Sudden downturn. C & D categories as per given figure. IT integration).Implementation of Scenario Planning • A cross function team is constituted for identifying and monitoring issues. or ―Political‖ (Deregulation. ―Competitive positioning‖ ( moves of Competitors) Step -2 :Classification of issues by the supportive record or documents.

Keep a close watch UnCertainty C. Are of Highest Concern High 128 . Can be Discarded B. Can be used for Long term Planning Low Low Impact D.High A.

All employees must first focus on these issues. these issues can be discarded for time being.Analysing Scenarios & Problem Solving • D Category : High Impact and Low Uncertainty. 129 . • A Category : Because of High Uncertainty and Low impact to the organisation is involved. All ideas / analysis should then be submitted to the cross functional strategic teams for further analysis and strategy making. need to be addressed immediately and more cautiously. • C Category : Low impact – Low uncertainty: These issues can be used for Long term Planning. Highest priority issues. need to be observed closely and monitored strictly because of high uncertainty involved. • B Category : High Risk issues. The analysis and problem solution can be done by an individual or by a team depending upon coverage and importance.

The External environment appraisal leads to the ―Opportunities & Threats‖ and Internal environment appraisal will lead to find out ―Strengths & Weaknesses‖ of the organisation to face the weaknesses and capture the Threats.“ETOP” – Environmental Threat and Opportunity Profile • Managers must be prepared to steer the Company to a new direction or alter the Strategy as per the Environment. 130 .

“ETOP” – Environment Threat and Opportunity Profile” Thinking strategically about a Company‘s External environment Thinking strategically about a Company‘s Internal Environment Form a Strategic vision of where the Company need to head Identify promising strategic options for the Company Select the best Strategy & Business Model for the Company 131 .

To identify the favourable and unfavourable factors in the environment from standpoint of the firm. To figure out the opportunities and threats hidden in environmental events and trends. 3. 4. To learn about events and trends in the environment and project the future of the environment. 132 5. To assess the scope of various opportunities and find out the ones having potential of becoming promising businesses and pursue them. To formulate strategy in line with opportunities. 6. 2. .Environment Survey : Purpose: 1. To draw up the opportunity-threat profile.

composition of workforce. literacy levels. 133 . social and religious organisations. consumer spending pattern.1 • Macro. stability of the government. • Economic Environment – General Economic conditions and conditions for the targeted population segment. labour scene – cost. purchasing power. social class. • Political Environment –Regulating legislation. rate of growth of economy and the growth of economy of targeted sector. media. interest rates. beliefs.Scope of Survey . religious composition. pressure groups-lobbies. regional characteristics. population shifts. tax rates. rate of inflation. age distribution. household patterns. traditions. • Socio-cultural. values. skill. availability. lifestyle. Environment – Culture-languageeducation.environmental factors • Demographic Environment – Size of population. price of materials and energy.

Regulation on products. Corporate protection. their cost effectiveness. Many MNCs prefer India over China due to India‘s legal environment. Consumer protection. technology at International level. protecting national firms. endowment of natural resources. approach in respect of technology. controls on trade practices. • Technology Environment – Technology options available. 134 .Scope of Survey .Business legislation – Corporate affairs. energy. Govt. policies while setting and operating units. technology selection. For example. Employee protection. especially MNCs who operate in various countries. • Legal. climate.2 • Natural Environment – ecology. raw material. • Government Policies – Organisations have to understand govt.

consumption pattern. buying motive. Other factors are – Purchasing power. Current level of Demand.Consumer tastes and preferences keep fluctuating and need to be monitored. lifestyle. buying habits. what needs are served by product and what needs are envisaged by customer is to be analysed. customer‘s reaction to upcoming new products. 135 • . repetitive etc. A perpetual analysis of customer analysis is required. nearest competitor. The Consumer . brand loyalty. related to specific event. brand Awareness. Who is the customer. Attitudes. Changes in demand. Demand Potential..Environmental factors specific to the business concerned -1 • The Market / Demand – Nature of Demand whether it is seasonal. invasion of substitute products. buying Habits.

Some time Govt. protect home producers. • Government Policies – More important in regulated economies but even in free economy. offers subsidies. ban products. Scarcity of raw materials can affect output and deliveries. Govt. Monitoring supplier environment helps in making 136 a decision of integrating or outsourcing. . The study of demand. consumer. policies have a great effect on socio-economic conditions. plays role as large purchaser. Supplier becoming manufacturer is always a threat. • The Supplier related factors – Suppliers as a group have their own bargaining power and can influence cost. ban fresh entry.Environmental factors specific to the business concerned -2 • The Industry & competition – Knowledge of Industry and competition is fundamental requirement in developing strategy and industry analysis. itself is large supplier and regulates the market. industry and competition is normally a ongoing activity. Govt.

.Competitive Strategies -1985 Potential Entrants Threat of new Entrants Suppliers Bargaining Power of Suppliers Industry Competitors Rivalry among existing firms Buyers Bargaining Power of Buyers Threat of substitute products or suppliers Substitutes 137 . Michael E. Source: Porter.Porter‟s Five Forces Model.

Rivalry amongst existing firms and jockeying for position .e.i.e. Bargaining power of suppliers 138 . competition 2..Forces Shaping Competition in an industry . increase profits) over its competitors. Threat form substitute products and 5. Threat of new entrants 3. It does this by responding to five primary forces: 1.1 • According to Porter. a firm develops its business strategies in order to obtain competitive advantage (i. Bargaining power of buyers / customers 4.

all forces shaping competition and survival of industry must be sized up.Forces Shaping Competition in an industry . 139 . A company can also achieve competitive advantage by altering the competitive forces. We should know which of these forces are strong and how they work in its industry. • The company positions itself so as to be least vulnerable to competitive forces while exploiting its unique advantage (cost leadership).2 • These five factors shape competition and determine Attractiveness / Profitability in an industry. how will they affect the firm in particular and how to adjust one‘s position to defend or overcome or take advantage of these forces. • Sizing up competition within factory is not enough.

3 • These five forces of competition influence the firm‘s strategy. Porter (2001) reemphasized the importance of analyzing the five competitive forces in developing strategies for competitive advantage: • Analyzing the forces illuminates an industry‘s fundamental attractiveness. • In his recent study. and provides insight into how profitability will evolve in the future. exposes the underlying drivers of average industry profitability. The five competitive forces model provides a solid base for developing business strategies that generate strategic opportunities In fact the strategy should be formed in such a way to influence all these forces in favour of the firm. 140 . Strategy should be formed to build defence against these forces and finding a position in industry where the influence of these forces is weakest.Forces Shaping Competition in an industry .

This makes rivalry stronger. . – Rivalry increases as products of rival competitor becomes more standardised giving good reliability. – Rivalry is stronger in slow growing markets.e. competition – Industry members undertake more aggressive and more frequent actions to boost their market standing & performance.Rivalry amongst existing firms and jockeying for position . – Rivalry increases as it becomes less costly for buyers to switch the brand.i. of competitors and competitors who are equal in size and capability makes rivalry stronger. – Rivalry is strong when nos. of competitors are less 141 than five. – Rivalry increases as competitors play a price war and other competitive weapons to boost their market share. – More nos.

– 4. Typical weapons to combat rivalry are: – 1. Better product performance with higher Quality. – Rivalry is weak when. – 5.– Rivalry increases when strong companies outside the industry acquire weak firm in the industry and launch well-funded. – 3. Better & bigger dealer network. – Rivalry is weak in fast growing markets. More or different features. – 7. that impact of one‘s action is thin on spread over span. – 2. Stronger Brand image & appeal. – 6. there are so many rivals. Better Customer service capabilities. aggressive moves to transform the acquired company in to a major contender. 142 . Wider selection to customers to choose from Models & styles. Lower Prices.

143 . • Buyer demand is stagnant or slow. • Existing industry is itself struggling for profits. • Entry barriers are high. Entry Threats are weaker when: • Entry candidates are small in nos. • Industry outlook is uncertain and risky.2. Threat of new entrants Entry threats are stronger when: • Candidates have resources that make them a formidable contender. • Newcomers can expect good returns. • Industry is unwilling / unable to stop new entrants. • Existing industry members strong contest and does not allow new comer to settle. • Entry barriers are low. • Buyer demand is growing rapidly.

When buyer demand is low and sellers are many 4. When nos. When cost of switching brand is low to buyer. • Buyers cost of switching to other brands is high. 3. 5. 6. When buyers have discretion in whether & when to purchase the product. . 2. of buyers is small and when a buyer is particularly important to seller. Bargaining power of buyers / customers 1. prices & costs.3. When buyers are well informed about product.& When buyer is large and can demand concessions. • It is a seller‘s market & Brand reputation is important to 144 buyer. Bargaining power of buyer is low when: • Infrequent and small purchases. When buyer is capable of backward integrating and making product by themselves.

145 . Threat form substitute products • When substitutes are readily available & attractively priced.4. • When costs are low to end users to switch to substitutes. • When buyer view substitute products at par in terms of quality. performance & other attributes.

when there are many suppliers available. • Item supplied is a commodity that is not readily available from other suppliers in market. which enhances performance of final product. • When certain supplier supplies item has possibilities of cost savings to industry members on account of its added quality feature or service. • When supplied item has a differentiation. 146 . Bargaining power of suppliers • Major suppliers can have sufficient bargaining power to influence the terms & conditions in their favour. when buyer is a major customer.5. • Bargaining Power of Supplier is weak when: backward integration is possible. • When need items are in short supply. • When few large suppliers are primary suppliers of a particular item. (Suppliers can have a cartel) • When it is costly or difficult for buyer to switch to new brand or alternate items.

Identify attractive and non-attractive aspects of the Company‘s situation.SWOT Analysis: Identify Company Resource Strengths and Competitive capabilities. Identify Company‘s Market Opportunities. • • • Next step will be to draw conclusions concerning the Company‘s overall business situation. Identify Company Resource Weaknesses and Competitive deficiencies. Rank all factors from exceptionally weak to exceptional strong scale and find out business attractiveness. 147 . Identify External Threats to the Company‘s future well being.

• Use Company‘s Strengths & Capabilities to lessen the impacts of important external threats. 148 . • Correct weaknesses that affect our abilities to take advantage of market Opportunities. • Pursue those opportunities that are suitable to Company‘s Strengths and Competitiveness.SWOT Analysis: • Third step will be to plan actions to improve Company Strategy. • Use Company‘s Strengths & Capabilities to overcome weaknesses.

$ Strong advertising & Promotion. $ A strong financial condition providing ample resources. $ Alliances / joint ventures / collaborations. $ Superior Technological skills / Product Quality/ Patents / intellectual Capital / Innovation capabilities. 149 . $ Strong brand image $ An attractive Customer base. $ Wide geographical coverage / strong Global distribution capabilities. $ A strongly differentiated Product. $ Distinctive Competence. $ Customer service capabilities. $ Competencies & Capabilities matching with Key Success Factors of Industry. $ Supply Chain Management Capabilities. $ Cost advantage. $ Core competencies.Factors to look for in SWOT analysis: • Potential Resource Strengths & Capabilities $ A powerful Strategy.

• • • • • • • • • • • • • No clear Strategic Direction. Loosing market share because……… Behind rivals in e-commerce capabilities. Internal operation problems / obsolete facilities. Weaker dealer network.Potential Resource Weaknesses & Competitive Deficiencies. Weak balance Sheet / heavy debt / low resources. Weak Brand image. lack of R&D and Technological know-how. 150 . Lack of Management depth. Resources not matching KSFs Lack of Core & Distinctive competencies. Too narrow product line compared to rivals. Underutilised Plant capacity. Low product Quality.

e-business. Forward or backward integration. Expanding product line & range of products to meet market demand. Acquire rival firms.Potential Market Opportunities • • • • • • • • • • Sharply rising buyer demand. 151 . Exploit new technologies. Expanding to new geographic markets. Online sales. Enter into alliances. Overcoming Trade barriers and capturing new foreign markets. Serving new market segments / new set of customers.

• Growing bargaining power of Customers / Suppliers. • Loss of sales to substitute products. • Adverse demographic change curtailing demand. • Restrictive trade policies on the part of foreign Governments. • A shift in buyer needs and tastes. • Slowdown of market. • Costly new regulatory requirements. • Entry of new potent rivals.Potential External Threats • Increasing intensity of competition among rivals. 152 .

Internal Factors Strengths Technological Skills Leading Brands Distribution Channels Consumer Loyalty Production Quality Scale Management Weaknesses Absence of important skills Weak Brands Peer access to distribution Low Customer retention Unreliable Product / Service Sub-scale Management Threats Changing customer tastes Geographical Closures Technological advances Government Policies changes Lower personal Taxes Population age structure New Distribution Channels 153 External Factors Opportunities Changing customer tastes Geographical Liberalisation Technological advances Government Policies changes Lower personal Taxes Population age structure New Distribution Channels Positive Negative .

Corporate Portfolio Analysis: • Business Portfolio Analysis – Synergy and Dysergy – • BCG Matrix – • GE 9 Cell Model – • Concept of Stretch. Leverage and fit (3) 154 .Syllabus • 5.

• ―The strategic units that make up the company and the attempts to evaluate current effectiveness and vulnerabilities‖ (McDonald et al. 1985) 155 .Business Portfolio Analysis • Definition : Analyzing ―Elements‖ of a firm's ―Product Mix‖ to determine the “ Optimum Allocation” of its “Resources”. 1992) • ―Business Portfolio Management‖ enable strategic planners to select the optimal strategies for the individual products whilst achieving overall corporate objectives‖ (McNamee. Two most “Common Measures” used in a “Portfolio Analysis” are “Market Growth” and ―Relative Market Share”.

music stores • Wipro : Computers.• When a Business Portfolio comprises of Multi-business Units and / or operating at multi-location. spreads. Vanaspati. • Gillette: batteries. then the Strategist often ask two questions to take a decision on Business Strategy. 156 • ITC : Tobacco. • Proctor & Gamble: Detergents. Veg. Soaps. cola. Shaving products • Virgin : trains.Oils. nappies. planes. Soaps. tea. most of which will never be successful • Examples of Portfolios: • Unilever: ice cream. Biscuits . – How much of our time and money should we spend on our best products to ensure that they continue to be successful? – How much of our time and money should we spend developing new costly products.

Portfolio analysis takes into considerations aspects such as ― Companies Competitive Strength‖. ―Resource Allocation Pattern‖ & ―Industry Characteristics‖. 2. Portfolio analysis looks at the corporate investments in different products or industries under common corporate jurisdiction. 3. 157 Risk. Business Portfolio Analysis . adding. State of Development. three basic aspects of running the business : Net Cash Flow. curtailing or disposing. It involves. so that overall portfolio balance is maintained or improved. analysing future implications of presents resource allocation and continuously deciding. All businesses have to balance.• • • • 1. operations or products. Portfolio Analysis is an analysis of the Corporation as a portfolio of different businesses with the objective of managing it for return on its resources.

Boston Consulting Group – BCG‟s Growth – Share Matrix 158 .

B = 20% & C = 60%. then. • • • Different businesses which forms the Business Portfolio can be characterised by two parameters: Company‘s Market share for the business. higher profits and higher cash flows. ‗A‘s relative market share is 1/6 & ‗C‘s share is 3. 159 .e. a separate strategy must be developed depending upon its position in 2 X 2 matrix.BCG‟s Growth – Share Matrix • 1. i. Higher Growth rate will mean profitable investment / expansion opportunities and easier to increase market share. representing the firm‘s competitive position and The overall growth rate of the business. A = 10%. Earned Cash can be ploughed back to enhance ROI. For each activity in the portfolio. Higher Market share will mean. Relative market share is defined as the market share of the relevant business divided by the market share of its largest competitor. 2.

5. Step-by-step procedure to develop the business portfolio matrix and identify appropriate strategies for different businesses: Classify various activities of the Company into different business segments or SBUs. Compile assets employed for each business segment and determine the relative size of the business within the company. (Strategic Business Units) For each business segment. determine the growth rate of the market. Plot the position of each business on a matrix of business growth rate and relative market share. 3. 4.Methodology • 1. 2. Plot it on linear scale. 160 . Estimate the relative market shares for the different business segments. This is done on logarithmic scale.BCG‟s Growth – Share Matrix .

5 X 1X 0.5 X .BCG‟s Growth – Share Matrix .illustration Relative market Share 20 STARS 18 16 Business Growth rate % QUESTION MARKS 14 12 10 CASH COWS DOGS 8 6 4 2 2 0.1 X 161 10 X 4X 1.

Product Life Cycle 162 .

The Star generate high profits and represent the best investment opportunities for growth. 163 are ―Star‖ industries. Pharmaceuticals. but need to be supported in view of their potential. At times they are not self sufficient in cash flow.Strategies as per Product Life Cycle-1 • Expansion Strategy : Stars – are the businesses which have high growth rate & high market share. We need to reaffirm the Company‘s Competitive Edge at this phase by sufficient doses of resources for expansion.g. . Such businesses generate as well as use large amount of cash. Electronics & Communications. Tiles. This is ‗Growth‘ phase of ―Product Life Cycle‖ (PLC). The best strategy regarding stars is to make necessary investments and consolidate the company‘s high relative competitive position. e.

. In this state of business. Cows can be milked to provide a corporate parent with funds for investing in star / cash dog businesses. financing new acquisitions or paying dividends.Strategies as per Product Life Cycle-2 • Hold Strategy . A strong cash flow resulting out of relatively high market share / low market growth rate ‗Cash Cow‘ opportunities should be able to maintain market share at or around existing levels. Expansions & investments can be thought only if the long term prospects are exceptionally bright. Cash cows provide the financial base for the company. Funds generated are to be used for ―Question Mark‖ or ―Star‖ businesses as ―Cash Cow's are destined to slow down. High market share leads to high generation of cash and profits. These are generally mature businesses reaping benefits of experience and expertise. Cash Cow is a business that generates cash flows over & above its internal needs. Corporate can adopt mainly Stability Strategies.Cash Cows are the businesses with low growth rate and high market share. A phased retirement need to be 164 planned.

3 • Build Strategy – Question Mark : The Businesses with high industry growth but low market share are ―Question Marks‖. a large amount of Cash inflow is required to stabilise and enter into ―Star‖ phase. the cash requirement is high. Companies must obtain early lead to strengthen the business and capture growth opportunities. 165 . These ‗Question Mark‘ opportunities need investment in order to grow and gain market share. but due to their low market share cash generation is low. In the business. Here. Because of their high growth.Strategies as per Product Life Cycle. A question Mark business can either become a Star or can go to Dogs depending upon funds & competitive edge. These are sometimes known as “Problem Child” as someone with huge potential. but not clicking.

if business growth rate is low and the company‘s relative market share is also low. Sometimes to reduce the high costs involved. This strategy is appropriate for any weak products where disposal in the form of a sale is unavailable or not preferred due to high exit barriers Divest Strategy : To change the capital of the business and allow resources to be used elsewhere of industries that have a very slow or negative market growth rate and where a company has low market share. a 166 Retrenchment Strategy is also adopted. These are products in late maturity or declining stage as mostly substitute‘s start taking over these products.4 The business is called Dogs. The lower market share means poor profits and as market growth is low. Harvest Strategy : To develop short term cash flow irrespective of the long term damaging effect to the product or business. causing negative cash flow. . Under such circumstances. the Strategic solution is to either liquidate. They stop generating large amount of Cash and face a cost disadvantage owing to low market share. or if possible harvest or divest the DOG business.• • • • • Strategies as per Product Life Cycle . any investment is prohibitive as cash demanded will exceed the cash generation.

Cash Positions of Various Businesses Business Type COW STAR Cash Cash Source Use More More Less More Net Cash Balance Funds available. so milk and deploy Build competitive position and grow DOG Less More More Divest and re-deploy proceeds. QUESTION Less 167 . Funds needed to invest selectively to improve competitive position.

• Difficulty in determining Market Share:. The calculation of market share depends upon how we decide. • Disregard for Human aspect:. what is total market. • No consideration for experience curve synergy :. we may have to consider ―niche‘ market for analysis.BCG does not recognise human aspect of business. Industry attractiveness may be different from simple growth rate and the firm‘s competitive position may not be reflected in its market share.Limitation of BCG Matrix • Predicting Profitability from Growth and Market Share:.In BCG each quadrant is viewed independently.BCG assumes that profit depends on growth & market share. This may not be 100% true. Cash generated in one business in one business get associated with the power of concerned manager. star or cash cow stages. Sometimes.BCG has heavy dependence on market Share as indicator of its competitive strength. Cash Cow unit may be reluctant to part away with its cash to other businesses in the house. Low costs due to expertise of employees can prolong Dog. Strategic options given by BCG may not 168 be easy to implement. .

This is Dysergy. Similarly.Synergy v/s Dysergy -1 • • • • The whole is greater or lesser than sum of its parts. Strengths. This effect is known as Synergy. Resources. 169 . behaviours do not exist independently but they act together. and resources and behaviour in the Organisation are directed properly. This is Synergy. The Organisation should cultivate ―Win-Win‖ and open communication with philosophy of ―Seek to understand first and then to be understood‖. two or more weaknesses acting in tandem can damage more than its arithmetic sum. If these strengths. Weaknesses. two or more strong points add up to something more than its arithmetic sum. 1 + 1 could be 2 or 11 or 111. then a Synergistic Effect could be seen. • In such an atmosphere. In any organisation.

then. work in harmony and support each other. • Synergistic Effects are results of quality and type of internal environment existing within organisation. then synergistic effect could be seen in Operating Efficiency. Similarly. These effects will only lead the organisations to develop competencies and ward off external threats. if Marketing and Production areas support each other. synergistic effect could be seen in Marketing.Synergy v/s Dysergy -2 • In practice if functions like Product. Distribution and Promotion. Marketing inefficiencies could result in reduction of operating efficiency as dysergistic effect. Pricing. 170 .

differentiation strength. • 2. Industry Attractiveness: How attractive is the industry? The attractiveness index depends upon business strengths. brand image. growth rate. This is generally highly profitable. where firm would like to deploy best of everything. • 1. for divestment. It is a product of several factors like Industry potential. • Two parameters are considered based on internal appraisal of all the SBUs done individually.General Electric‟s ( or McKinsey) 9 point Multifactor Portfolio Planning Matrix • Different businesses in the organisation as SBUs can be rated for purpose of strategic planning. the rate of growth of industry. structure and profitability of the industry. corporate image. 171 . the current size of industry. Similarly least attractive business is kept with little attention or is for grabs i.e. productive arena. Company business strength: Company business strengths is a product of several factors like company‘s current market share.

GE‟s 9 Point Model.
• The weighted factors for both these areas are plotted in Company business Strength/Industry attractiveness
Company Business Strength I n d u s t r y A t t r a c t i v e n e s s

Strong High



Low Invest / Grow Selectivity Harvest / /Earnings Divest

General Electric‟s Business Screen
I n d u s t r y A t t r a c ti v e n e s s Winners




Question Marks


Average Businesses






Profit Producers Strong Average

Losers Weak

Business Strength / Competitive position

Circle denotes the size of Industry , while blue colour portion corresponds to Market 173 Share.

General Electric‟s Business Screen
• The vertical axis represents Industry Attractiveness. This is weighted composite rating based on eight different factors. These factors are: 1. Size of Market 10% 2. Rate of Growth of Sales & Cyclicality 10% 3. Industry Profit Margin. 40% 4. Competitive intensity including vulnerability to foreign competition. 15% 5. Seasonality. 5% 6. Economics of Scale. 5% 7. Susceptibility to Technological obsolesce 5% 8. Entry conditions, Social, legal, environmental & human impacts. 10% Against each of these factors, the concerned business is rated on a scale of 1 to 10 and then the weighted score is determined from maximum of 10. This gives the Industry 174 Attractiveness Index.

General Electric‟s Business Screen
• 1. 2. 3. 4. 5. 6. 7. • The horizontal axis represents business strength competitive position. This is a weighted composite rating based on seven factors. These factors are: Relative market Share. Profit margins. Ability to compete on Price & Quality. Knowledge of Customer & Market. Competitive Strengths & Weaknesses. Technological Capability Calibre of Management. The two composite values for ‗Industry Attractiveness‘ and ‗Business Strength‘ are plotted for each business in a Company‘s Portfolio. The pie charts denote the proportional size of the industry – white colour & blue segment represent company share.

General Electric‟s Business Screen
• The horizontal axis represents business strength competitive position. This is a weighted composite rating based on seven factors. A typical scoring of Company‟s Competitive position
Factor Market Share and Capacity Growth Rate Location and Distribution Management Skill Work force Harmony Technical Excellence including Product and Process Engineering Company Image Weightage Rating Score (1 to 10) 20% 10% 10% 15% 20% 20% 5% 7 7 5 6 7 8 8 1.4 0.7 0.5 0.9 1.4 1.6 0.4 176

Gap Analysis
Desired Performance

Performance Achieved Performance

Time -1

Time -2

Gap analysis -2
• Gap analysis is done for focussing on strategic alternatives. • On dimension of time various alternatives are evaluated in different phases to get a clear picture for selection of strategies. • What is the result of the present strategy? • What should be new strategy? • What should be methodology of implementation? • If the gap is narrow, policy is to stabilise the strategies. • If the gap is due to consistent past bad performance; which is also expected in future, then retrenchment / withdrawal strategies may be more suitable.

Gap Analysis - 3
• First step is to identify alternatives. Companies find it difficult to change their strategies because strategic thinking is not the core competency of managers. Hence lot of brain storming, situational analysis need to be done. • A correct definition of the problem is the Second step. A hypothesis is developed after brain storming and situation analysis. This hypothesis must be tested to developing clear understanding of the forces that actually work. • Next step is to formulate the strategy and address the driving forces in a ―cause and effect‖ relationship. Find the 80:20 Pareto Principle and attack the most important one. • Prioritise the strategies and a plan for the projects to implement strategies on time scale is created for future guidance and analysis.

a need is there to have congruence and co-ordination amongst all the different activities taking place at same level. Finance. Such congruence is the ―Vertical Fit‖. • When all functional areas like Marketing.From Fit to Stretch: • Vertical Fit: If a Business house has a strategy to be ―Cost Effective Leader‖ in the business. then resources and activities in all functional areas are to be focussed on adopting low cost structures and reducing costs. and Information Management etc. toward a common Objective. This is ―Horizontal Fit‖. Operations. HRD. then it is a congruence of all functional strategies and coordination between functions operating at different levels in Organisation. 180 . contribute to this objective to create a low cost structure. • Horrizontal Fit: Along with Vertical Fit.

• Strategy & Structure for Generating Results in Organizations • The traditional strategic planning seeks a “fit” between resources and aspirations. To support value chain activities various staff function departments are involved and put along operations. It is an approach adopted by organisation to achieve operational effectiveness. • ―Fit‖ means positioning the firm by matching its resources to its environments as per SWOT analysis.• Horizontal Fit is operational implementation. All functions operate optimally by performing value creating activities. 181 . For e. This is also a value chain.g. Procurement Department is placed along with Operations department. You set realistic goals based on what you think you can achieve with the resources at hand and then construct strategies and tactics to achieve them. It could be a compromise formula with regards to Firm‘s objectives and Competitive posture of the Company.

Capabilities are not seen as constraints to achieving.• • • • Strategy as Stretch and Leverage Hamel and Prahalad‘s (1993) assertion that ‗competitiveness is born in the gap between a company‘s resources and its managers‘ goals‘ has entered the mainstream of strategy thinking. Hamel and Prahalad began their deconstruction of conventional wisdom by challenging common understandings of the meaning of strategy. Stretch is a gap between resources and aspirations. Environment is not seen as given but something 182 which can be created and moulded. This is one of the concepts of Stretch. . accumulating. The idea of ―Stretch‖ & ―Leverage‖ belongs to ―Learning School of Strategy‖. The concept of ―Leverage‖ is concentrating. conserving and recovering resources in such a manner that the meagre resources (Gap or Stretch) stretched to meet the aspirations that organisation has envisaged. ―Stretch‖ is diametrically opposite to ―Fit‖. complementing. Hamel and Prahalad added duel concept of ―Stretch‖ and ―Leverage‖ to Strategic Intent.

― • This view obscures the merits of alternatives in which the ideas of stretch. under ―Stretch‖ & ―Leverage‖ Strategic Intent is more idealistic. In both cases it is essentially a desired aim to be achieved. and a long-term perspective in which ‗resource money‘ figures prominently. and consistency of effort feature. They stressed that ‗being strategic‘ implies a willingness to take the long view. • Under ―Fit‖. Leverage. Creating stretch. 183 .‖ or the relationship between the company and its competitive environment. and ‗strategic‘ investments mean … betting bigger and betting earlier.Strategy as Stretch and Leverage • Hamel and Prahalad considered that many managers understood strategy to mean: "… fit. "… a misfit between resources and aspirations is the single most important task Senior Manager. Strategic intent would seem more realistic. the allocation of resources among competing investment opportunities.

"Without trade-offs there would be no need for choice. and thus no need for strategy. 2." 184 . • The essence of strategy is choosing what not to do. 3.for three reasons: 1. To eliminate or minimise inconsistencies. Sustainability requires trade-offs with other possible positions . To maximise and concentrate the benefits of a chosen position."What is strategy? It is. involving a different set of activities. To recognise and accept the limits of coordination and control.Porter on Strategy • ." • But choosing a unique position is not enough to guarantee a sustainable advantage. he wrote "… the creation of a unique and valuable position.

185 . Competitive advantage grows out of the entire system of tightly linked activities. In this context ‗fit‘ locks out imitators by creating a value chain that is as strong as its strongest link.Second order. and is a more potent.First order or simple consistency between activities • Stretch:. • Porter recognised three types of fit: • Fit:. or fit together. or activities which optimise organisational effort • In all three. and central. as the way various components of a strategy interlink. or reinforcing activities • Leverage:.Third order. the whole is more than any individual part. strategic concept.Porter‟s Three Types of Fit: • Porter considers ‗strategic fit‘.

and the more an organisation‘s positioning rests on activity systems with second." The success of a strategy depends on doing many things and integrating them. but also to the sustainability of that advantage. the more sustainable its advantage will be.and third-order fit.• Thus defined. The definition of strategy becomes "creating fit among a company‘s activities. The strategic agenda is defining a unique position. 186 . making clear trade-offs. and tightening fit. The strategic agenda demands discipline and continuity. strategic fit is fundamental not only to competitive advantage.

• D) Give the organisation time to digest one challenge before launching another.• For challenges of this sort to be effective. • C) Provide employees with the skills they need to work effectively. top management has to: • A) Create a sense of urgency. • B) Develop a competitor focus at every level through widespread use of competitor intelligence. • E) Establish clear milestones and review mechanisms 187 .

• Differentiation.• --------------------------------------------------------• Syllabus 6. Generic Competitive Strategies: • Low cost. • Focus (3) • --------------------------------------------------------188 .

– Gary Hammel & C K Prahalad. • Competitive Strategy is about analysing and then experimenting. 189 . It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver unique mix of value – Michael F Porter. • A Competitive Strategy concerns the specifics of management game plan for competing successfully and achieving a competitive edge over rivals. McMillan & Rita Gunther Mcgrath.Competitive Strategy • Competitive Strategy is about being different. • The essence of Competitive Strategy lies in creating tomorrow‘s competitive advantages faster than the competitors mimic the one you posses today. – Ian C. learning. and experimenting some more. trying.

– The basis of competitive strategy lies in Low-cost or 190 Differentiation and finding out our own focus on market niche. 5. A focussed or market niche strategy based on Lower Cost : Concentrating on Narrow buyer segment and out competing rivals by offering at lowest cost than rivals A focussed or market niche strategy based on differentiation : Concentrating on Narrow buyer segment and out competing rivals by offering customised attributes to niche member at lowest cost than rivals 2. . 4. A broad-differentiation strategy : Seeking to differentiate the company‘s Product/service by offering different from Rivals to broad spectrum of Customers.Generic Competitive Strategies 1. 3. A low-cost provider Strategy : Appealing to a broad spectrum of customers by being the overall Low Cost Provider of a Product or Service. A best-cost provider strategy : Giving customers more value for money by incorporating good to excellent product attributes at lower cost than rivals.

Substituting high cost/imported raw materials with indigenous ones (Value Engineering) Relocation of facilities. flexible technologies. Using CADs. Using simpler. Approaching direct to end user in Sales & Marketing. 6. 3. Re-vamping of value Chain is also done by examining the elements of value chain eliminating or bypassing the activities which are adding costs but not value to the product. Simplifying product design. Purchasing directly from manufacturer. . 5. 7. Dropping the dead weight. (Waste elimination) Re-vamping the value Chain: Use of internet Technology applications. 191 – 1. 8. 2. Re–vamping of ―Value Chain‖ is aimed at increasing efficiencies to out-manage rivals on costs. less capital intensive. 4.Revamp Value Chain – A Low-cost advantage can be achieved by re-vamping the ―Value Chain‖ activities and controlling all factors that drive the costs.

They culminate in the total value delivered by an organisation. E. It was created by M. The 'margin' depicted in the diagram is the same as added value.' 192 . The chain consists of a series of activities that create and build value. Porter in his book. Competitive Advantage (1980).The value chain • The value chain is a systematic approach to examining the development of competitive advantage. The organisation is split into 'primary activities' and 'support activities.

193 .

They are stored until they are needed on the production/assembly line. at this stage the organisation prepares the offering to meet the needs of targeted customers. training and so on. after-sales service. and they need to be sent along the supply chain to wholesalers. or the final tune for a new car's engine. complaints handling. • Marketing and Sales: In true customer orientated fashion. Goods are moved around the organisation. • Operations: This is where goods are manufactured or assembled. • Inbound Logistics: Here goods are received from a company's suppliers.Primary Activities. Individual operations could include room service in a hotel. packing of books/videos/games by an online retailer. retailers or the final consumer. • Service: This includes all areas of service such as installation. This area focuses strongly upon marketing communications and the promotions mix. 194 . • Outbound Logistics: The goods are now finished.

and e-Purchasing (using IT and webbased technologies to achieve procurement aims). Customer Relationship Management (CRM). They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organisations).Support Activities -1. lean manufacturing. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. 195 . services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. This could include production technology. and many other technological developments. • Technology Development: Technology is an important source of competitive advantage. • Procurement: This function is responsible for all purchasing of goods. Internet marketing activities.

196 . • This activity includes and is driven by corporate or strategic planning. • Employees are an expensive and vital resource. It includes the Management Information System (MIS). and rewards and remuneration. The mission and objectives of the organisation would be driving force behind the HRM strategy. training and development. Human Resource Management (HRM). Firm Infrastructure. An organisation would manage recruitment and selection. and other mechanisms for planning and control such as the accounting department.Support Activities -2.

Five Generic Competitive Strategies Type of Competitive Advantage Desired Lower Cost Differentiation M a r k e t A Broad Cross Section of Buyers Overall Low Cost Provider Strategy Best Cost Provider Strategy Focussed Low Cost Strategy Broad Differentiation Strategy S h a r e A narrow Buyer segment for Market Niche Focussed Differentiation Strategy 197 .

will bring economies of learning curve. 198 . new plant is full of innumerable problems. longer production runs. Faster we de-bug. standardising designs and using common parts. b) Learning Curve effects: A new product.Larger volumes can reduce the costs as fixed costs get spread over large volume. Manufacturing economies can be achieved by simplifying product line. improve design. Aggressively managed companies who capture benefits of learning are the one who can offer low costs. improve plant layout & work flow. reducing varieties of models. use of modular designs etc. master the technology.Drivers for Low-Cost Strategy -1 Low-Cost Strategy makers generally attend to following cost drivers: a) Economies or diseconomies of scale: . At the same time larger volume means larger inventories and higher inventory carrying costs.

Using vertical integration v/s outsourcing: backward or forward integration can reduce the reliance on outsourcing and can reduce the costs. Effective ―Supply chain Management‖ Use of industry value Chain by linking other activities for other products in the company. Low cost leader has to find ways to operate at close to full capacity year round. 199 d) e) f) . sharing opportunities with other businesses in the organisations. use of non – unionised labours. variables due to locations. large scale purchasing with effective use of bargaining power. out sourcing.Drivers for Low-Cost Strategy -2 c) Cost of key resource inputs: use of innovative incentive schemes for unionised labour. Capacity utilisation has direct relation on spread of fixed costs in the product cost. there by diverting the warranty costs. Also warranty claims can be linked with suppliers.

incentives & fringe benefits to motivate employees. • • Rising / Lowering the specifications for purchased materials.The Low Cost Leader : 200 .Drivers for Low-Cost Strategy -3 g) Strategic Choices & Operating decisions such as: • • • • • Adding / Cutting services offered to Buyers. Increasing / decreasing distribution channels.. Incorporating more / fewer performance & quality features into product. Example : Wall Mart. Lengthening / Shortening delivery times to customers. Putting more emphasis on wages.

a Low Cost provider must always contain enough attributes to be attractive to prospective buyers. Cost of switching brand is low for customer. Product differentiation is low & cannot be achieved.Factors for Low Cost Strategy • • • • • • • Price competition is very high. However. 201 . Newcomers can come with low price and attract buyers. Products are identical and are easily available. is not appealing to buyers. Buyers are large and have power to bargain. Low price by itself. Most buyers use the product in the same way.

4. Unique competitive capability 7. 8. 3. Superior supply-chain activities. As a rule. 1. and at the same it should be noted that • • Easy to copy differentiators cannot provide sustainable competitive advantages. when it is based on: 2. 202 . Product quality with superior manufacturing abilities. Maintaining the cost of differentiation in line. 6. 5. Product innovation by R&D. Reliability. Differentiation yields a longer lasting effect and more profitable competitive edge. Comprehensive customer service. Technical superiority.Aspects of industry for Differentiation Strategy-1 • The essence of broad differentiation strategy is to be unique in ways that are valuable to a wide range of customers.

To deliver value to customers via competitive capabilities that rivals do not have or cannot afford to match. 4. Incorporate features that raise product performance like quality. reliability. durability etc. 3. Incorporate features that enhance buyer satisfaction in non-economic or intangible ways. 203 . Incorporate product attributes & user Features that lowers the buyers overall costs of using the company‘s product. 2.Aspects of industry for Differentiation Strategy-2 Such differentiation should result into: • Perceived & actual delivered value for customers • Command a premium price for its products • Increase unit sales & Gain buyer Brand loyalty Approaches for achieving Cost Differentiation 1.

Over differentiating increasing service needs or usage constraints is a mistake. Few rival firms are following differentiation approach. There is less head to head competition.• • • • • • • • • Factors of Differentiation Strategy The Product can be differentiated in many ways and buyers perceive these differences as having value. Any differentiation that works well gets imitated and there is need for constant up gradation. 204 . Being timid & not striving to open up about competitors defect and differentiating that is not visible to buyers is a pitfall. Differentiating something that does not lower buyer‘s cost or improves perceived value is a mistake. Buyers needs and uses are diverse. Technological change is fast paced and competition revolves around evolving product features. Trying to charge a too high a premium price.

where differentiation is a norm. • Target market is Price & Value conscious buyer. buyers significantly better product attributes. • Best Cost Provider Strategies are ‗hybrid‘ Strategies balancing emphasis on Low Cost & Differentiation. with diversity of products. 205 . • It is middle path between pursuing a low cost advantage and differentiation strategy. so that they can justify higher price above Low – Cost leaders and with sufficient differentiation can win over high-end Differentiation Leaders.Best Cost Provider Strategies • Best Cost Provider Strategies are for giving customer ‗more value for money'. • To be successful. Best Cost Strategy must offer.

g. Armani. Reliance Fresh. Rolls Royce. • Producing ‗Private-Label‘ imitating Brand name merchandise & selling directly to retail chains. • e. Kesari Tours 206 . Rolex. • By offering niche members a product perceive as well suited for their own unique tastes & preferences and be at top of Market pyramid due to their strength of differentiation. Rolls Royce. e-Bay for e-auctions. Focussed Low Cost Strategy: • Serving buyers in the target market niche at lower cost & lower price than rivals.a status symbol. Porsche for sports cars. e. Target market segment is called as ‗niche‘. Focussed Differentiation Strategy: • Serving a buyer segment that is looking for special product attributes or seller capabilities.Focussed or Market Niche Strategies Focussed Strategies have concentrated attention on a narrow piece of the total Market. Gucci.g.

low cost year after year. A good basic product with acceptable quality & few frills. 207 .Low Cost Provider Strategic Target Basis of competitive advantage Product Line A broad cross section of the market Lower overall costs than competitors. good value. Production emphasis Continuous cost reduction without sacrificing attributes Marketing emphasis Keys to sustain strategy Make virtue of product features with low cost Economical prices.

Many Product. charge a premium for differentiation Constant innovation to stay ahead. with differentiating features. Production emphasis Production superiority with differentiating features buyers are willing to pay Marketing emphasis Keys to sustain strategy Advertise features.Broad Differentiation Strategic Target Basis of competitive advantage Product Line A broad cross section of the market Ability to offer something attractively different. Few key differentiators. wide selection. 208 .

Best Cost Provider Strategic Target Basis of competitive advantage Product Line Value oriented buyers More value for money Items with appealing & assorted upscale attributes. 209 . Production emphasis Items with appealing & assorted upscale attributes with lower costs Marketing emphasis Keys to sustain strategy Advertise best value. Unique expertise in managing costs while offering upscale features & attributes. comparable features with lower value.

. Basis of competitive advantage Product Line Production emphasis Marketing emphasis Lower overall costs than competitors in niche market. Continuous cost reduction without sacrificing attributes Communicate budget priced product features that fits niche market requirements. A product tailored to tastes & requirements of niche market. Keys to sustain strategy . Do not loose 210 focus by entering other markets. Stay committed to serving niche at lowest over all cost .Focussed Low Cost Provider Strategic Target Narrow market niche satisfying distinctively different buyers needs & preferences.

Stay committed to serving niche market at better differentiation.Focussed Differentiation Provider Narrow market niche satisfying Strategic Target distinctively different buyers needs & preferences. Communicate how product features does the best of meeting niche market requirements. Custom made products that match the tastes & requirements of niche market. 211 good value. Do not loose focus by entering other markets Economical prices. Keys to sustain strategy . low cost year after year. A product tailored to tastes & requirements of niche market. Basis of competitive advantage Product Line Production emphasis Marketing emphasis Attributes that appeal specifically to niche members.

Growth. (Diversification Strategies. Syllabus ----------------------------------------------------------------7. Outsourcing Strategies. • Retrenchment. • Mergers. Vertical Integration Strategies. Strategic Alliances & Collaborative Partnerships). ----------------------------------------------------------------(8) 212 . Grand Strategies: • Stability. Acquisition & Takeover Strategies.7.

Marketing & Sales. Using Internet as Distribution Channel. Finance Timing the Company‟s Strategic move in marketplace: a) First Mover. b) Fast Mover? And/or c) Late Mover. R & D. 5. 2. Human Resources. Integrate backward or Foreword? 4. if so. Initiate offensive Strategies? 6. 213 . Outsourcing? 5. 3. to what extent? Functional Strategies to support above Strategic Choices: 1.Strategic Option Menu Overall Low Cost Provider Broad Differentiation Best Cost Provider Focussed Low Cost Provider Focussed Differentiation Complimentary Strategic options: 1. Engineering. Merge with or acquire other companies? 3. Defensive Strategic moves? 7. Production. 4. Strategic Alliances & Collaborative Partnerships ? 2.

The Corporate Strategy in both cases is about setting the basic direction of the firm as a whole.Grand Strategies • Having settled on one of the Competitive Generic Strategy. It could be a small entrepreneur firm with single location and single business or a corporate conglomerate with multi-location. • Grand Strategies are Corporate Level Strategies. diversified several different businesses. we now need to decide on other Strategic Actions to complement on the choice basic Competitive Strategy chosen. • Corporate Strategies are basic decisions about allocating & transferring resources among different businesses and managing & nurturing portfolios to achieve overall corporate objectives. Setting a choice of Direction that a firm should adopt. 214 .

According to Glueck. These three dimensions are: – Customer Group – Customer Functions and – Alternative Technologies.Business Dimensions • Any Business is defined along three dimensions and combinations thereof. many mixed ―strategies‘ do take place. such as: 215 . • Combination Strategies. • Retrenchment Strategies. the business definition also becomes complex. These Strategies are: • Stability Strategies. which are used as alternatives and in a combined way. • As the organisations becomes large & diversified. there are four Grand Strategies. • These Strategies are pure and depending upon various dimensions of the businesses. • Expansion Strategies. Glueck has described four dimensions.

a) b) . a) b) Internal / External Dimensions: When the Organisation is an independent entity. it operates under External Dimension.Business Dimensions 1 & 2 1. 216 2. Related / unrelated Dimensions: When organisation adopts a Strategy related to its existing Business Definition. the Related Dimension operates and When organisation adopts a Strategy that is un-related to its existing business either in terms of Customer Groups. it is operating under Internal Dimensions and When the Organisation adopts a strategy in association with another entity. the unrelated dimension operates. Customer functions or alternative Technology.

The vertical dimension operates when an organisation adopts a strategy which results in the expansion or contraction of the existing business definition of one or more businesses in terms of the utilisation of alternative technologies.3. 217 . The passive dimension operates when an organisation adopts a defensive strategy as a reaction to environmental threats and opportunities. a) b) Business Dimensions 3 & 4 Horizontal / Vertical Dimensions: The horizontal dimensions operates when an organisation adopts a strategy which results in serving additional customer groups and/or satisfying other customer functions in such a way that they compliment the existing business definition of one or more of its business. Active / Passive Dimensions: The active dimension operates when an organisation adopts an offensive strategy in anticipation of environmental threats and opportunities. a) b) 4.

all alternatives are not feasible or possible and we narrow down the choice of few major strategic alternatives.Thus combination of Four Grand Strategies. these possibilities should be 32 x 3 = 96 and if we consider weight-ages for each factor the Strategic alternatives could be mind boggling. However. four Dimensions and two types in each dimension give rise to 32 possible mixed Strategies and if we consider three dimensions of Business Definition. 218 .

industry downturn. . No new threat of substitutes and new entrants. It is dangerous to be complacent.1. However. Also no new strengths have been generated and no new weaknesses have been developed. 1. this should be a conscious decision and should not arise out of in-activity and owing to inertia.a) No-Change Policy: It is a conscious decision of not doing anything new and continue with present business definition. rules. govt. it may not be worthwhile to alter strategy in present situation. Stability Strategies: 1.b) Profit Strategy: No change policy cannot sustain for long and situations keep changing. When environment is stable and predictable with no new significant threats & opportunities in the environment. However if company believes that the changes like economic recession. competitive pressures are 219 temporary and will turn favourable after some time.

if the problems are not temporary. Sometimes after a major expansion firms need to stabilise. Pause / Proceed – with – caution Strategy is a temporary strategy like profit strategy and is used for consolidation. It is used to test the ground before going ahead with fullfledged Grand Strategy. increase productivity and some such measures to tide over the difficult days. the company position deteriorates. hold investments / replacements. However. allow strategic change to percolate through organisation structure and allowing existing systems to adopt the strategy and the move for further expansions. 220 . raise prices.then firm opts for maintain profit policy by artificial measures like cut costs. It is also used to bide the time for more opportune time and move on with rapid strides again.

it is actually going backwards.a) Expansion through Concentration: Firms tend to rely on doing what they know they are best at doing. This is a first preference strategy of firm doing what they are doing already and would like to invest more in known business. The firm should also have financial strength to sustain expansion. Emerging technologies etc. Concentration Strategy involves investment of resources in a product line for an identified market. market has high potential for growth and industry is sufficiently attractive for concentration to take place. globalisation. (Bajaj. The firm has proven technology. Maruti) 221 .2. Expansion Strategies If organisation is not moving ahead. 2. • Expansion Strategies are of 5 types. Companies aim for substantial growth to take advantage of Growing economy. burgeoning markets. liberalisation.

Scope of business definition is widened. There are two 222 types of Integrations. In the Recession time. it is industry dependent and adverse condition in industry can affect. Expansions are pivoted around present base of customers. • The limitations are putting all resources at one project. Product obsolescence is another threat for the heavy investment. All integration strategies require Trade-offs. improves competitive advantage due to in depth knowledge & expertise.b) Expansion through Integration: When firms use their existing base to expand in the direction of their raw material or the ultimate consumer or acquire adjacent businesses. . The firm aims at cost economics. it is too difficult for concentrated firms to withdraw. Alternative technologies are used for backward or forward integration. expansion through Integration takes place. The firm moves up or down the value chain. This is exploring Vertical and Horizontal dimensions of Grand Strategy. • 2.• Concentration strategy involves minimal organisation changes. It is also one type of ‗Make or Buy‘ decision.

Diversification involves all dimensions of Strategic Alternatives. It changes business definition. Many a times Horizontal Integration is a merger of like industries. • Backward Integration means retreating to source of raw materials while forward integration moves the organisation to its ultimate customers. It could be internal or external. • Horizontal Integration: When an organisation takes up the same type of products at the same level for production or for marketing. related or unrelated. horizontal or vertical. • Integration strategy gives more control on Value chain but carry a risk as industry is set to serve same customer group and in case product fails or becomes obsolete. 223 technological etc. . • 2.• Vertical Integration: When an organisation start making new products that serve its own need or is for self consumption.c) Expansion through Diversification: Several firms diversify to reduce the risk of dependence on product and same set of customers.

(ITC – Tobacco & Hotel. • Conglomerate diversification: Diversification in activities which are totally unrelated to existing business definition of one or more of its businesses. customer groups & functions and /or alternative technology. Essar – Shipping & Steel. Shriram – Nylon Fibre & Ball bearings. It could be market related concentric diversification as different products for same set of customers or Technology related Diversification as related technology to the present business or combination of Market & Technology related diversification.• Concentric Diversification: The activity is related to existing business definition either in businesses.) 224 . etc.

International Strategy. 2. Global Strategy. Joint Ventures Strategy.d) Expansion through Co-operation: 1. 225 . 3. Takeovers or Acquisitions Strategy. Trans-national Strategy. Strategic Alliances Strategy 2. Mergers Strategy 2.2. 4. 3. Multi-domestic Strategy.e) Expansion through Internationalisation: 1. 4.

226 . • External Developments. Shrinking market share. Shrinking markets. Government Policies. Wrong Strategies. accordingly. • Symptoms are noticed in poor performance. Retrenchment Strategies. declining profits. falling sales. increasing debt. various types of Retrenchment Strategies are adopted. • The organisation with proper monitoring controls can sense impending danger and position itself to find alternatives. The organisation need to find out problem areas and diagnose the causes of the Problems. Changing Customer needs. Obsolete Products. dwindling Cash flow. Substitute Products. • Retrenchment Strategy is followed when an organisation substantially reduces scope of its activities.3. could be reasons for decline.

Temporary recovery situation but no sustained turn-around: Possible product re-positioning.Retrenchment Strategy Situations for Recovery • Slatter has described four types of Retrenchment Strategy situations for recovery Realistically non recoverable situation with little chance of Survival : Not competitive company. Products or Services are in terminal decline.. Possible market development or a possible market re-positioning. Divestment is possible or Turn-around is possible by finding ‗niche‘ market. Low potential for Improvement. where organisation can be a leader. new forms of Competitive advantage. which cannot be revived. Industry has attractiveness is still available and decline was caused more by internal factors. Sustained recovery situation with genuine possibility of Turnaround: A possible new developed product. Sustained survival situation but no potential for future growth: Turnaround is possible but Industry is in slow decline. revenue generation is possible. Company with cost dis-advantage. Therefore. a very little potential for growth is possible. 227 . cost reduction.

1. market.a) Retrenchment Strategies: Turnaround Strategies: • 3.a. The person could be deputed by banks. Turnaround specialist is employed to do the job and existing team is temporarily withdrawn. feedback.3: Replacement of existing team. Target setting.a. 3.2: In another situation. especially CEO and / or merging sick unit with a healthy one. market segment positioning. then management team handles the entire turn-around strategy with support of advisory specialist external consultant.: If CEO has credibility with Banks and Financial Institutions and if a qualified Consultant is available. • Possible actions could be: Analysis of Product.3. production processes. 228 . remedial actions. production logic. competition.a. • 3.

b. 229 . • Divestment is done in two ways : A part of company is divested or firm may sell a unit outright to a buyer. severe competition. Technological up-gradation asking for funds which are not available. Divestment as a part of merger plan of mutual exchange. mismatch of business with the company. a better alternative is available for investment. who finds the purchase as a strategic fit. Selling a part of company for survival of organisation. project feared to be non-viable in long range.1: Divestment is done due to negative cash flows.b) Retrenchment Strategies : Divestment Strategies: • 3.3.

3. The neglect may have been deliberate. It is a last resort. 230 • . it could be a planned liquidation. Liquidation may be inevitable in spite of best efforts of the entrepreneur. writing was on wall as Mills did not invest in to new technology for more than 50 years. where company shuts down and tries to sell its assets. In case of Textile Mills of Mumbai.c) Retrenchment Strategies : Liquidation Strategies: • This is most un-attractive strategy. Liquidation is difficult due to various legal constraints and protection given to employees in labour law. Secondly. Some times liquidation can happen through court order for compulsory winding up and sometimes winding up can be voluntary. in view of prices of real estate in Mumbai.

Combination Strategies • Combination Strategies are mixture of Stability. It is very difficult in the business environment to follow a single pure Strategy. (Stability). and Adding an entirely new product like ‗Automotive Paint‘ with new set of customers & functions (Expansion). Expansion and Retrenchment strategies. while eliminating or closing the contract division. • As an example. Situation is Complex and business demands different strategies to suit the situational demands made upon the organisation. Addition of new variety of ‗Decorative paint‘ for widening customer base. observe a paint company following three strategies together. which used to take Painting Contracts (Retrenchment). They are either followed simultaneously or in a sequential way. 231 .

if so. Outsourcing? 5.Complimentary Strategic options: • • • • • • • 1. Strategic Alliances & Collaborative Partnerships? 2. 232 . Initiate offensive Strategies? 6. Using Internet as Distribution Channel. to what extent? Timing the Company‟s Strategic move in marketplace: • a) First Mover. Defensive Strategic moves? 7. Merge with or acquire other companies? 3. Integrate backward or Foreword? 4. • b) Fast Mover? And/or • c) Late Mover.

Rapid advances in technology. • Strategic Alliances are collaborative partnerships where two or more companies join forces to achieve mutually beneficial strategic outcomes.1. The fastest & surest way to fill up the gap is Alliances with enterprises with desired strengths. These alliances are mainly for bridging gap of resources and technology. new markets in developed & under developed countries. Strategic Alliances & Collaborative Partnerships? • In the present era of Privatisation & Globalisation. The global environment requires diverse & expensive skills. resources. 233 . free economy. • Industries also find that they do not have expertise for running the race of Global leadership. Industries have to face altogether different challenges not faced hitherto. technological skills. These alliances are more than company to company give & take dealings but fall short of Merger or JV. and invasion of foreign companies are forcing Industries to enter into race of building Global presence and into race of adopting new technologies.

build new expertise & competencies faster. e. in-side information & knowledge about unknown / unfamiliar markets & cultures. • Get a handle to participate in target technology or industry. makers of complimentary product and some select companies. distributors. • It is now common for companies to pursue their strategies in collaboration with suppliers. but alliances are also done with suppliers. These alliances are mostly done with Value chain contributors.g. • Master new technology. . IBM & DELL.Advantages of Alliance: • Alliance is basically between equals. • Access valuable skills & competencies. distributors as partners by many big business houses. 234 • Open up broader opportunities. • Gain. Advantages of Alliance: • Get into critical country markets quickly.

willingness to bargain on issues. real collaboration and not merely arm length exchange of ideas. In US only about 39% of Alliances are found to be stable. Stability of alliances depend upon their success in adopting to changing internal & external conditions. • Alliance partners should guard themselves from undue dependence. resources and contributions and respect each other.Stability of Alliances: • Alliances have a very high rate of divorce. • Alliances to be successful should have partners working together. To be a market leader companies must develop their own capabilities or alliance will ultimately lead to Merger or Acquisition. changing conditions which make initial reason for alliance as obsolete. They should have co-operative arrangements working for win-win solutions. • Causes for failures of alliances could be. in-ability to work together. 235 . more attractive technologies and / or rivalry at marketplace. Over a period the partners must learn skills and technology. Others are either outright failures or are limping along. Each partner must bring in high value allied skills. diverging objectives and priorities.

was created. corporate finance and Management dealing with the buying. both Daimler-Benz and Chrysler ceased to exist when the two firms merged. finance. • In the pure sense of the term. and a new company. often of about the same size. agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a “Merger of equals. or help a growing company in a given industry to grow rapidly without having to create another business entity. For example. a Merger happens when two firms. DaimlerChrysler.Merger & Acquisition Strategies: • The phrase Mergers and Acquisitions (abbreviated M&A) refers to the aspect of corporate strategy." Both companies' stocks are surrendered and new company stock is issued in its place. selling and combining of different Companies that can aid. 236 .

• M & A have not produced hoped-for results on many instances. Conflicts of management styles and difference in Corporate Cultures create problems in integration. In other words. Cost savings.Merger & Acquisition Strategies-2: • When one company takes over another and clearly established itself as the new owner. the real difference lies in how the purchase is communicated to and received by the target company's Board of Directors. • Whether a purchase is considered a Merger or an Acquisition really depends on whether the purchase is friendly or hostile and how it is announced. employees and Shareholders. the purchase is called an Acquisition. the buyer "swallows" the business and the buyer's stock continues to be traded. expertise sharing. the Target Company ceases to exist. Resistance of rank and file employees of two large companies is some times too formidable to resolve. From a legal point of view. 237 . and enhanced competitive capabilities take substantially long time to materialise in view of above problems.

. 5. To expand companies geographic coverage. 4. further.Strategic objectives of Mergers & Acquisitions: 1. To extend company‘s business into new product categories or international markets. 6. To pave the way for the acquiring company to gain more market share and. create a more efficient operation out of combined companies by closing high cost plants and eliminating surplus capacity industrywise. 3. To try to invent new industry and lead the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities To fill resource gaps 238 2. To gain quick access to new technologies and avoid the need for a time consuming R & D effort.

as economic size for individual items in value chain could be different and hence such specialised skilled processes or items in value chain could be outsourced to specialists.Outsourcing Strategies: • Unlike Integration. Integration has problems of mismatch of capacities. 239 . • A company should generally not perform any value chain activity internally that can be performed more efficiently or effectively by its outside business partners – the exception is when an activity is strategically crucial and internal control over the activity is deemed essential. outsourcing is narrowing boundaries of the business.

3. 2. Outsourcing streamlines the Company operations in ways that cut time it takes to get the newly developed product in to the market. Cost reduction – An activity cane be performed more cheaply by outside specialists.Advantages of Outsourcing: 1. 240 . The activity not connected with core competence and not crucial to firm‘s ability to achieve sustainable competitive advantage and will not affect the technical ‗Know-how‘ can be outsourced to advantage. Outsourcing allows the company to concentrate on strengthening and leveraging its core competencies. Outsourcing reduces company‘s risk due to changes in technology and/ or change in buyer preferences. 5. 4. A particular skilled activity can be performed better by outside specialist. 6.

a differentiation advantage. when used with initiative are termed as Offensive Strategy giving Competitive advantage to the initiator. a resource advantage. • The initiator of the Offensive Strategy has to come up follow-up offensive & defensive moves to sustain the initially won competitive advantage. • However. resourceful rivals won‘t take lightly and exert pressure to overcome the disadvantage they are facing because of initiative taken by one of their associates. These advantages. competent.Offensive Strategy • Offensive Strategic moves include yielding a cost advantage. 241 .

g AMD & Intel. having plant in backyard of rival. superior customer service capability are some other options. running Comparison ads. e. 242 . One of the options is to offer equally good product at lower price. Other option could be to outsmart competitor by bringing in latest version of product in market before him and making his product obsolete. In second instance.Types of Offensive Strategies-1 1. Initiatives to match or exceed the competitor strengths: When rivals have strong competitive advantage. then firms are forced to take an initiative and take an offensive stand to whittle away from pressure. when competitor is very strong and established. an offensive strategy to offer alternate products at faster pace and at cheaper price sometimes works and afterwards people get used to alternate product. Adding new features.

or Win away customers with your strong brand appeal over his weak brand. or making special sales campaign. 243 .Types of Offensive Strategies-2 2. Initiatives to capitalise on weaknesses of the competitor: This option has better chance than challenging strengths of competitor. where rival has weak presence in market. Options could be going after rival whose product lag in quality & features. or take advantage of geographic reasons. Service camps where rival lacks in service department. or paying special attention to market segment which your rival is neglecting.

free samples. coupons. etc.Types of Offensive Strategies-3 • 3. new models & styles. in store displays. rebates. additional performance features. increased advertising. such an offensive measure has more chances of success 244 . When a product has sufficient Brand image & when a new specifically attractive product or service is being launched. Simultaneous initiatives on many fronts: Company may launch a Grand Offensive on many fronts simultaneously and compel rivals to take defensive actions. price cuts. customer service thrust & improvements. Such offensive may include.

Taking a jump ahead. introduce products in new market segments for selected buyers with different attributes & performance features. digital camera. i-phone. It could also include launching initiative in geographic area where competitors have not yet reached. End-run offensives: involves going around competitors instead of taking them head on and change rules of game & competition. sport-utility-vehicles of Honda Accura or ford Lexus. e.Types of Offensive Strategies.4 4.g.leapfrogging by using next generation technology.g. LCD screens 245 . which support existing business & technology such as 3 G hand sets. blackberries. e. This may include. introducing new products that redefine the market & terms of competition. wireless communication.

who do not have resources or market visibility to challenge the leaders. Challenger Companies attack in areas neglected by biggies or where they have become vulnerable. Guerrilla offensives: This is adopted by small challenger companies. when leaders have some quality problems or having a big discount sale week. 246 .5 5.Types of Offensive Strategies. etc. This is hit & run technique. a short offensive and win away selected client account. or offering products at shortest & confirmed deliveries when leaders are facing delivery problems. prompt technical support when clients are frustrated with leaders. Offering quality.

New geographic area. 247 .6. Choose which rivals to attack.6 Pre-emptive strikes: This is one of a kind offensive move. Small local & regional firms with limited capabilities. Whosoever is first gains maximum competitive advantage! Pre-emptive strategies involve being first to secure an advantageous position. otherwise chance of success are dim. Struggling enterprises who are on the verge of going under. where rivals are kept away and cannot duplicate and then strike competitors by May be securing a big renowned distributor. etc. new shopping mall. Good location for to cheap transportation & raw materials. where they are best in areas like Resource strengths and competitive capabilities. a) b) c) d) e) f) g) Types of Offensive Strategies . It could be leaders. here the challenger must be strong to strike weak company. who are always vulnerable or Second run firm with weaknesses. The pre-emptive strikes are done on the basis of core competency of challenger.

The defensive strategies do not improve competitive edge but they help to fortify company‘s competitive position.Defensive Strategies: In competitive environment every successful company has to face the threat of challenges from rivals and new entrants. The defensive strategies are used to lower the risk of being attacked and weakening the impact of attack. • New Products. Two forms of Defensive Strategies are: 1. 248 . new features. Blocking the avenues open to Challengers: Defender can participate in alternative Technology to reduce attack of better Technology which may be offered by rivals. close vacant niches. protect valuable resources and prevent possibilities of imitation. broaden the product range.

Publicly committing the company to match competitors‘ terms & prices. Signalling Challengers that retaliation is likely & let challengers that the battle will cost more than its worth. Developing capability to provide spare parts. . sponsoring gift hampers. Lengthening warranty periods. Providing free coupons. free service training or camps. Publicly announcing management‘s commitment to maintain the firm‘s present share. give away samples. Maintaining a war chest & marketable securities. Search & appoint creditable distributors & book them with volume discounts & other finance terms so as to discourage them from trying other suppliers.• • • • • 2. • • • • Have economy priced product range to ward off price wars. Making an occasional strong reaction on moves of weak 249 competitor to enhance the company‘s image of tough defender.

Company considers that strong support and good will of dealer network is essential. Web is considered in partnership with dealers 250 and not in competition. How much emphasis to be placed for use of internet? Managers must decide how to use the Internet in positioning the company in marketplace? • Using Internet Just to Disseminate Product Information: and use internet to direct customers to distribution channel partners for sales transaction or indicate locations retail stores. Dealers are considered better positioned to deal with ―brick & click‖ Strategy for Company products / services. . Companies need to address how best to make internet as part of the business to use as distribution channel. This is to avoid conflict with already existing distribution channel partners. Direct sale on net will indicate weakening commitment to distributors.Strategies for Using Internet as distribution channel • The internet era has brought second wave of Internet entrepreneurship.

251 . doing market research.Using Internet as Minor Distribution Channel: Here. This path will be beneficial to dealers & will not create resistance. testing product. the strategy is to use Internet to gain online sale experience.g. giving buyers option for colour & features so as to gain more & first hand knowledge about customers‘ choices. e. ‗Nike‘ selling some footwear on line. getting feed back from web surfers and create sufficient interest about Company‘s Product and Services in web community.

Customers visiting web site are automatic prospective buyers. This policy is beneficial in certain circumstances. where direct downloading is more comfortable than going to shop and getting a CD.• Using “Brick and Click” Strategy: Sell directly to customers on line and at the same time use traditional whole sale & retail channels. ―Software Programmes‖. Internet has more reach and geographic constraints are taken care of with help of dealers in that area. 252 . e. Also where the technology is more suitable for ‗build to order‘ strategy. though Distribution channels are necessary and customer need to have a physical contact with Product / Services.g. On-line sell improves profitability as dealer commission could be up to 35 – 40% of retail price.

First mover has many advantages. Bigger the first mover advantage.First / Fast / Late Mover Strategy • ‗When‘ to make a Strategic move is equally important as ‗what‘ move to make. new features. more attractive the move is. new distribution channels can give a cost advantage over rivals. • Being first mover is an offensive move of ‗pre-emptive strike‘. technology requirement. competitive capabilities and high quality management. 253 . first mover has to have good financial resources. It will depend upon the product life cycle. important competencies. • First mover builds up reputation & image. However. but fast & late mover can also be a profitable move. • First mover‘s customers are likely to retain brand loyalty giving him firm footage in market. Rivals are not ready & this makes imitation difficult. • First mover‘s early commitment to new technology.

It may be cheaper to copy. It may be easier to copy first mover and improve upon by learning from errors on part of first mover and de-bug the problems. Being a Fast follower and late starter can also be an advantageous move with wait and see policy. First mover must time his product entry with precise combination of features. . A follower and late mover assume that first mover to be slow in learning and updating his 254 products. the initial advantages of first mover can be nullified over a time and with safety. Being the first mover need competency and cost.• • • The first move cannot be for name sake. customer value & sound revenue – cost – profit economics to sustain the edge over rivals and maintain market leadership. If the product life cycle is long.

Syllabus =============================== 8. Growing. Tailoring strategy to fit specific industry: • Life Cycle Analysis – • Emerging. Mature & Declining Industries. (4) =============================== 255 .

Tailoring strategy to fit specific industry Strategies for: • Competing in Emerging Industries. • Runner-Up Firms. • Competing in Mature Industries. • Firms in Stagnant or Declining Industries. • Competing in Fragmented Industries. high-Velocity Markets. • Competing in turbulent. • Sustaining Rapid Company Growth. • Weak and Crisis-Ridden Businesses. 256 . • Industry Leaders.

form JVs with companies having complementary technology 8. Acquire. 6.Strategies for : Competing in Emerging Industries: 1. and critical material component. 2. new geographical areas. Pursue new customer groups. merge. Strategy deals with risks & opportunities. Risk taking entrepreneurship. 257 . 7. Form strategic alliance with key suppliers for gaining technological expertise. new user applications. 4. 3. improved product quality with additional performance features. Make it easy & cheap for first time buyers for them to experience industry‘s first generation product. Try for winning early race to Industry leadership. specialised skills. Strategy to go all out for perfecting the Technology. Broad or focussed differentiation Strategy with technological superiority. 5.

• Initiate fresh actions regularly in every few moths without waiting for situations compelling change. A middle path is anticipating change. HighVelocity Markets The Strategy could be offensive or defensive. • Have strategic partnerships with suppliers making tie in products. • Strategies to invest aggressively in R & D for leading edge of technical know how. • Develop quick response capability.Strategies for: Competing in Turbulent. thereby • keep company‘s product & services fresh & exciting to withstand changing environment. depending upon where you react to change or you lead the change. 258 .

Concentrate on Value Chain.. 259 . some segments are growing. Expand Internationally.• • • • • • • • • Strategies for : Competing in Mature Industries: At matured stage. Even in declining industry. drive down your costs and strategise to become industry leader as low cost provider. Build new or more flexible capabilities. Concentrate on increased sales to present customers. check your portfolio and prune added products & models being in list for name sake. Concentrate on product differentiation with quality improvement & innovation. & do not allow Fat additions. Acquire rival firms. Know the needs of buyers in that segment & fulfil them. trim costs. Strategies for : Firms in Stagnant or Declining Industries: Concentrate on Value chain.

young product crowded with many aspirants. • Have good distributor chain. Entry barriers are low. 260 .Strategies for: Competing in Fragmented Industries: • There are hundreds of industries co-existing in a very big market without differentiation and there is an absence of clear market leader. in view of volume. initial investment can be low to start business. • Become a low cost operator. specialised and mange low cost with differentiation. • Add differentiators. product is global. • Focus on limited geographic area.

• Medium span Strategy: use existing resources and capabilities and enter into new business having a growth potential. Time span 3 to 5 years • Long Span Strategy: Look at businesses that do not exist today. Use present resources for venture investment. some loss expected on new business but strategy is longevity & significant future gains 261 . Present cash flow reduces.Strategies for : Sustaining Rapid Company Growth: • Short span strategy could be to expand in present business and obtain increased revenue. Time span 1 to 3 years.

Use arm twisting tactics.• Strategies for : Industry Leaders: • Stay on Offensive Strategy : Strategy is to be first mover and a proactive market leader. bigger R & D outlay. Patenting feasible alternative technologies. Keep rivals in reactive mode or scrambling to keep up your pace. • Fortify and defend Strategy: Increased spending on advertisement. Keep prices reasonable. • Muscle flexing strategy :– Overkill : Quickly matching and exceeding challenges from rivals. 262 . Display displeasure on customer for trying others and offer some specific benefits for Brand Loyalty. Use Promotional campaigns to keep rivals away from gaining. Add personalised services. Grow faster than the Industry as whole and wrestle marker share from rivals.

or to have superior product or to have a distinct image (Differentiation) • Strategy to be a content follower – no trendsetting moves but steal customers aggressively by copying and with special privileges. 263 • Using a combination of these efforts. • Launching efforts to boost revenues. • Strategies for: Weak and Crisis-Ridden Businesses. • Offensive Strategy to build market share. These are also up-coming market challengers.• Strategies for: Runner-Up Firms: These are second tier companies with lesser market share than the leader. • Selling off Assets. • Revising the existing Strategy. • Strategy to grow through acquisition. • Strategy to fill up vacant niche. . • Pursuing cost reduction. • Strategy to be a specialist. These are Retrenchment & Turn around strategies.

buyer‘s wishes for something better. emerging technological alternatives and be prompt in adapting to changing market conditions. Avoid Strategies which can be successful only in optimistic circumstances. Attacking competitive weakness is always safer and profitable than attacking competitive strength.Crafting a successful Business Strategy: 1 : • • Take a long term view for Company‘s Competitive position and take those Strategic moves on top priority. 264 • • • • . Invest in creating sustainable competitive advantage. Be alert about unmet customer needs. Do not under-estimate rivals in their reactions or commitment to do better. Do not assume most optimistic circumstances while forming Strategies.

it must be a well thought & well executed.Crafting a successful Business Strategy: 2 : • • Check possible cost advantages before cutting prices. Prepare your defences before being aggressive. Compromise Strategies are not sustainable. It should be noted that a middle path strategy and compromise strategy are two different matters. • • 265 . then we should really strive meaningful jump in quality / services / performance. You need to be Low cost provider for winning Price cutting war. Be aware that offensive Strategies always invite retaliation. Best cost provider Strategy is not a compromise. Aggressive moves to capture market share from rivals will invite a price war which will be detrimental to every body. If you have a differentiation Strategy as a base. You need to cut costs before cutting prices. Any minor variation in rival‘s product will not be noticed by buyer and will not be important to them.

New Business Models and strategies for Internet Economy: • Shaping characteristics of E-Commerce environment – • E-Commerce Business Model and Strategies – • Internet Strategies for Traditional Business – • Key success factors in E-Commerce – • Virtual Value Chain. (6) 266 .Syllabus 9.

Business-to-Consumer (B2C). information. 267 .Commerce as Business Process means activities that support commerce electronically by networked connections. services. The products may be physical. for example. payments via network like internet. • E.What is E-commerce? • E-Commerce from Communication point of view: It is the ability to deliver products. • E-Commerce as Online process: E-commerce is an electronic environment that allows sellers to buy and sell products / services and information on the internet. • E-commerce from Interface point of view means information and transaction exchange: Business to Business (B2B). business process like manufacturing and inventory and business to business process like supply chain management are managed by the same networks as business to consumer processes. Consumer to Consumer (C2C) and Business to Government (B2G). like cars or services like news or consulting.

What is E-commerce? • E-Commerce-Structure: E-commerce deals various media: data, text, web pages, internet telephony, and internet desktop video. • E-Commerce Market: E-commerce is a worldwide network. A local store can open a web storefront and find that the world is at its door step – customers, suppliers, competitors, and payment services along with advertisement presence. • E-commerce is selling goods and services on the retail level with anyone, anywhere, via internet. It includes new business opportunities that result in greater efficiency and more effective exchange of good and services. Every transaction is blocks of information exchanged between E-merchant and a customer via the corporate Web site. Examples :,,,


What is E-business?
• E-business is conducting critical business systems and constituencies directly via internet, extranets and intranets. • E-business is the conduct of business on the internet, in supply-chain planning, tracking, fulfilment, invoicing and payment. It includes buying, selling as well as servicing customers and collaborating with business partners. E-business has various Goals: • Reach new markets. • Create new products or services. • Build customer loyalty. • Enrich human capital. • Make the best use of existing and emerging technologies. • Achieve market leadership and competitive advantage. • Example: ―SAP‖: Provider of Business Software used for ERP. ―Online banking services‖ is one more example.


E-commerce Business Models:1:
• The important generic models are • B2B, B2C and C2B, C2C • B2B is ―Business to Business‖ E-commerce is an automated exchange of information between different organisations. B2B involves only the firm‘s business / trading partners, like Suppliers, Distributors, Dealers, Vendors and so on. This is used for awareness, product research, supplier sourcing, transactions, post-support sales. B2B transactions can be EDI, mails for purchasing goods and services, buying information, consulting services, requesting proposals, receiving proposals. • B2B are alternative ways of executing transactions between buyers and sellers that are business organisations; a network of independent organisations and long term trading partners. • B2C : ―Business to Consumers‖ Commerce is retailing on World Wide Web.

E-commerce Business Models:2:
• Storefront Model: It is an E-commerce site which offers products or goods for a price. Website displays products with product information, cost with a shopping cart and ordering mechanism. The web business merchant makes money the same way as traditional shop merchant. Typically, books, computers, electronic goods, pizza delivery are sold through Storefront Model • Click and Mortar Model is a shop that combines both Website and a physical store. Goods can be physically examined and returned to store directly. • Built to Order Merchant Model is website which offers goods or services with an ability to order customised versions. Generally Computer vendor adapts this model. • Service Provider Model: for ex. ‗Pizza delivery Service‘, Movie Ticket delivery service, Flower delivery service. Some service providers provide advertising based access to their service. One of the successful ad-driven sites is

E-commerce Business Models:3:
• Subscription based Access model: Visitor registers himself, pays monthly or annually and access unlimited service. Typical for accessing database, news, articles, online games. Movie shows etc. One of the Indian example is • Prepaid Access Model: Some services like telephony, movies are accessible by offering payment by minute and handled via a subscription. • Broker Model: Brokers are intermediaries; they bring buyers and sellers together and facilitate transaction between them by charging fee for every facilitated transaction. These transactions can be B2B, B2C, C2C etc. is an example. • Advertiser Model: These are free sites which offer free access for something and display advertisements as banners. Visitor can click the advertisement and visit the webpage of the advertiser and can order his requirements.

E-commerce Business Models:4:
• Portal Site Model: For news, Stock information, Weather, message boards, chats etc. These sites allow the visitors to personalise the interface and content. For example or • Free access Model: Provides free web space. • Virtual Mall Model: A site that hosts many merchants, service providers, brokers and other businesses. • Virtual Community Model is a website that attracts a group of users with a common interest who work together on the site., are few of the such sites. • Infomediary Model: An Infomediary collects, evaluates and sells information on consumers and their buying behaviour to other parties. Infomediary offers something free to visitor that requires free registration by visitor, which allows Infomediary to monitor the visitor‘s online activities. • Trust Intermediary Model is an entity that creates trust between buyer and the seller, which provides a secure environment for buyer and seller. They offer branded goods and provide escrow services and maintain privacy. Examples are ‗verisign‘, ‗cybercash‘, https//:

Strategies for Internet Economy.
• Many companies doing e-business are still in the investment and brand-building phase and have yet to show a profit. However, as e-businesses shift their focus from building a customer base to increasing revenue growth and profitability, it is required for the e-business to re-evaluate their current business strategies. • E-commerce is fundamentally changing the economy and the way business is conducted. E-commerce forces companies to find new ways to expand the markets in which they compete, to attract and retain customers by tailoring products and services to their needs, and to restructure their business processes to deliver products and services more efficiently and effectively. • McCarthy‘s four marketing mix model and Porter‘s five competitive forces model are used to identify strategies for Internet and achieve a competitive advantage. The development and implementation of e-business strategies will contribute to increased profit.

McCarthy's Four Marketing Mix Model:1:
• Internet Economy has impact on McCarthy‘s four marketing mix (product, price, promotion, and place) and also on Porter‘s 5 competitive forces (the threat of new entrants, rivalry among existing firms, the threat of substitutes, the bargaining power of suppliers, and the bargaining power of buyers) • According to McCarthy (1960) and again McCarthy (1999), a firm develops its marketing strategies by first identifying the target market for its products or services. It then develops a marketing mix. A particular combination of product, price, promotion, and place (i.e., distribution and delivery functions in the supply chain) designed to enhance sales to the target market. A unique mix of these elements in a given industry allows firms to compete more effectively, thus ensuring profitability and sustainability. Since the Internet has a significant impact on the makeup of this marketing mix, Internet companies should develop strategies that take the unique nature of online marketing into account. 275

Strategy shall be to differentiate the product by adding extra features. • Internet companies can also expand their product line into areas related to their existing product lines. For example. • Use ‗customer centric‘ strategy rather than ‗product centric‘ strategy. • Introduce ‗niche‘ product by understanding need of small segment of recently started selling personal computers in addition to its existing line of electronic products such as disk drives and memory. 276 .McCarthy‟s Product Strategies • On the Internet. Pull information from customers and improve and customize the products. consumers can easily collect information about products or services without travelling to stores to inspect products and compare prices. This is known as Product Bundling which counteracts the threat of product Substitutes and rivalry.

• Sellers can employ a price discrimination strategy that makes it difficult for buyers to compare the prices of alternative product charges different prices for different markets by asking customers to enter their zip codes before they can obtain prices. For‟s Price Strategies • Employ appropriate pricing strategies for selling products over the Internet. • Protect profits by achieving cost leadership in a particular market or industry 277 . www.

• Build a base of loyal and profitable customers by formulating ‗customer-centric promotion strategies‘ and respond to this new customer power. companies have to employ promotion strategies like building a direct link with consumers and enter into a dialogue with them about products (dialogue-based marketing or one-to-one marketing).amazon. www. For example. To manage ebrands effectively and efficiently.McCarthy‟s Promotion Strategies • Mass marketing and sales promotions result in expensive. inefficient brand management. companies have to employ promotion strategies different from those used by traditional marketing • To manage e-brands effectively and efficiently.000 affiliates 278 . • A revenue-sharing marketing strategy is an affiliated marketing program with partners based on launched its affiliate program and now has some 400.

279 . ft. For example. distribution centre in leased a new 322. By Investing in physical assets such as a warehouse. Amazon. Nevada. The Internet and its associated application software have significantly changed the way companies‘ products or services are delivered by reducing transaction and distribution can compete more effectively with Barnes & Noble.McCarthy‟s Place Strategies • For most companies. Amazon. place refers to the supply chain (or value chain).560 sq. The place aspects of the marketing mix are closely related to the distribution and delivery of products or services. E-businesses (particularly e-retailers) need fully automated distribution warehouses to meet demand from shoppers on the Internet. One way for companies to differentiate their products from rival companies is faster and more efficient delivery of products to their customers • Integrate online and bricks-and-mortar businesses (clicks-and-mortar strategy).

A company can also achieve competitive advantage by altering the competitive forces. (2) rivalry among existing firms within an industry. and (5) the bargaining power of buyers. Since the Internet dramatically affects these competitive forces. (4) the bargaining power of suppliers. increase profits) over its competitors. and provides insight into how profitability will evolve in the future.Porter's Five Competitive Forces Model • According to Porter. • The company positions itself so as to be least vulnerable to competitive forces while exploiting its unique advantage (cost leadership). a firm develops its business strategies in order to obtain competitive advantage (i. 280 . It does this by responding to five primary forces: (1) the threat of new entrants.. exposes the underlying drivers of average industry profitability. (3) the threat of substitute products/services. Internet companies should take these forces into account when formulating their strategies. • Analyzing the forces illuminates an industry‘s fundamental attractiveness.e. • The five competitive forces model provides a solid base for developing business strategies that generate strategic opportunities.

The Internet also brings many more companies into competition by expanding geographic markets. Companies can enter into e-commerce easily. • The number of people with Internet access has reached an estimated 304 million worldwide. The Internet also changes the balance of power in relationships with buyers and suppliers by increasing or decreasing the switching costs of these buyers and suppliers.Impact of the Internet on Marketing Mix and Competitive Forces • The Internet can dramatically lower entry barriers for new competitors. an increase of almost 78 percent. 281 .

It also facilitates partnerships or strategic alliances by networking partners or allies.• By reducing customers' search costs. the Internet makes price comparison easy for customers. The Internet creates new substitution threats by enabling new approaches to meeting customer needs and performing business functions (Porter 2001). 282 . The Internet also facilitates an electronic integration of the supply chain activities. achieving efficient distribution and delivery. and thus increases price competition and shifts bargaining power of customer‘s new promotion venues. World Wide Web (www) technology itself has produced new promotion venues.

Price. and Place Strategies Product Price Promotion Place Threat of New Entrant Differentiation. centric Promotion. Price Customer Discrimination.E-Business Strategies for Competitive Advantage: Product. Promotion. Innovation or Cost Niche Product leadership. Mortar Strategy Revenue Sharing 283 . Performanc e based Click & Appeal. Value added Products Outsourcing Strategic Alliance.

Product Price Promotion Place Threat of Product Substitutes Differentiation like bundling Innovation and or Niche Product Customer centric strategy Rivalries among Existing firms Price discrimination Cost leadership. Value added products Outsourc ing Strategic Alliances Clicks and Mortar Strategy 284 . Value added products / services Customer Centric Promotion Performance based Brand appeal Revenue Sharing Clicks and Mortar Strategy Product Price differentiation discrimination Innovation and or Niche Product Cost leadership.

Product Price Bargaining Power of Suppliers Promotion Place Outsourcing Strategic alliances Value added Revenue products / Sharing services marketing Bargaining Power of Buyers Value added Customer products / Centric services Promotion Performance based Brand appeal Revenue Sharing Outsourcing Strategic alliances 285 .

product information. • Information such as pricing. is dramatically changing the very fundamentals of business. Businesses that do not rethink their fundamental value proposition based on this possibility may lose their competitive edge.Key success factors in E-Commerce. employment statistics. customer lists. or worse. the most important—wave in the information revolution. costs. • Information is a key part of the value chain in all businesses. By providing a vehicle for the delivery of information with unprecedented availability and reach. in particular Internet technology. 286 . supplier relationships. legal proceedings. • Internet technology and its derivative Intranets (connecting employees and internal systems) and Extranets (connecting external partners and systems) are having a profound and far-reaching impact on business. today's information technology. defect records. and historical statements and plans is now available to all freely. This explosion in connectivity is the latest—and for business strategists.

287 .

In the top left quadrant. you will need to apply technology and electronic media to improve two basic aspects of your operation. technology must be maximally leveraged to maintain even modest profits. In the top right quadrant. In this graphic. companies are often fighting a multitude of new combatants within a commoditized market. which in turn finances ongoing reinvestment. where price competition is acute.• However. refer to the following graphic. 288 . • Enhance your efficiency—a move that will lead to improved profitability • To see how these efforts can lead to greater levels of competitive success. the four quadrants represent overall characteristics of value propositions—for individual products. while at the same time leveraging the power of technology to slash the cost of sales and operations and generate market-leading profitability. You must: • Differentiate your products and services—and improve your market share. services or entire companies in any industry. companies successfully differentiate their products and services to capture increased market share. if you want to benefit from this new Internet economy. In this situation.

• In the bottom right quadrant. and that are generally trailing the pack in leveraging IT. maintaining market leadership requires a disciplined focus on continual improvement along both dimensions. They lose market share and ultimately risk failure. companies—usually inheriting their market differentiation from their legacy—still enjoy acceptable profit margins but are at extreme risk of new market entrants inventing new ways to leverage technology to deliver the same or superior value to their customers less expensively and more rapidly. Moving up and to the right. In the lower left quadrant are usually the enterprises that offer customers products or services that are not differentiated from less expensive options. • The underlying canvas of this diagram—the market itself— is constantly being pulled down and to the left by new competitors with innovative ideas and new technologies that make those ideas less expensive to realize. 289 . Following strategies are required to be employed to accomplish continual improvement in both market share and profitability.

290 . • In this environment.2) Profit is dependent upon differentiated value. it has become difficult to differentiate products and services. If you are to remain competitive. a) Economic and Pricing Models • a. distribution and affinity with complementary products and services. • It is absolutely vital that differentiation be achieved and maintained through constant attention to innovation in intrinsic value. understandable value.1. you will need to set yourself apart from your competition. Market Share: Through Increased Differentiation:1: • Customers from anywhere can reach out to merchants anywhere—and vice versa—they can evaluate their options with a few clicks of a mouse button. branding.1) Customers will only purchase products or services with real. • a.

Then continually improve all of the above. • a. evaluate the activities of your competitors. Market Share: Through Increased Differentiation:2: • a.3) Distribution channels are more important then ever • a. try to develop breakthrough ideas.5) Understand the information dynamics of your marketplace as it changes with the Internet.1. 291 . And move quickly. keep your plans confidential until they're ready to launch and continually improve every aspect of your electronic value proposition and operations. as expressed on the Internet. and you have a strong differentiation strategy to drive profitability and you've constructed a distribution strategy that leverages new intermediaries.4) Make sure your value proposition. is real and understandable.

so also is America Online (AOL) • b.1) "Distributors are dead on the Internet. develop a strategy to grapple with it as aggressively as possible.3) Understand what's happening to intermediation within your industry.2) New intermediaries known as "aggregators" such as search.b) Distribution Channel Reengineering • b." The disintermediation process is on. . This has happened barely within 24 months since the first largescale launch of Internet trading services. Large percentage of retail stock market transactions are now conducted on line rather than through human brokers. Yahoo is perhaps the best known new intermediary. • b. and ensure that it works 292 through measurement of results. news and community Web sites. In many fundamental respects.

1) Brand loyalty has become one of the most powerful differentiators in e-commerce. therefore. Assess where selfservice Web sites can be implemented. build communities among customers and adapt the systems to the patterns of customer behaviour d) Brand Strategy and Development : d. Greater the depth of these impressions. a material market advantage might get lost and a new and an 293 undesirable brand attribute might get attached .1) Customer support is one of the most powerful differentiators in the online world.c) Customer Service Re-engineering and Optimization c. Brand gets embodied through set of thoughts and emotions.2) In the online world. Recognize the power of online opinion. the process of managing publicity—both good and bad—is as important as ever. d. the stronger the brand—in a positive or negative direction. impressions can be transmitted in seconds to millions of people. integrate them with your existing support knowledge systems.

d.3) Understand that your online brand must be differentiated from competitors. it's much harder for your message to be heard. in many cases. it is easier than ever to actually communicate a message to large numbers of people. 294 . e) Audience Development e. e. However. that it must be developed within a disciplined and planned program. you must have an audience.1) On the Internet. Create an Audience Development. Successful online marketing program boils down to the same objective as in the physical world: developing an audience or "Audience Development" is preferred phrase for online marketing.2) To succeed in any marketing endeavour.

1) Users expect a Web site. the ease of comprehension and the speed of the results. compelling and efficient manner. interactivity and efficiency.3) Critical success factors for any Internet application are usability.2) Optimal user experience blends several common objectives into a seamless visual and interactive experience: the personality of the brand.f. and leverage the interactivity of computing. audience and purpose. Intranet or Extranet to present information in an intuitive. User Experience Design f. the purpose of the interaction. and then measured for optimization 295 . These factors should be integrated into a user experience plan aligned with brand. This is part of the process of creating a powerful user experience. f. f.

2. enabling nomadic users to access application systems and databases from any access point. Applications should operate from within a single Internet browser standard. An Internet Architecture is defined as an IT infrastructure model with the following attributes: It should support any type of user device. 6.Profitability: Through Increased Efficiency • The first step to leverage Internet technology within business processes across your company is to establish an Internet Architecture. All databases should be server-based. It should employ self-teaching content and make it readily accessible and understandable. 7. including user profiles. It should support self-service access to the information infrastructure. It should be structured within a standard network and resource 296 management infrastructure. It should comply with standard networking protocols It should permit any type of device or system to act as a server. It should support multi-tiered architecture. 5. which is the basis for client/server systems. 1.2 . 8. Multi-tiered architecture. as well as authentication and security systems. . 3. 4.

recruiting and stock administration. • E-commerce. both business-to-business and business-toconsumer. 297 . • Value chain integration. analysis and EIS. • Point-to-point. conference and broadcast communication. • Financial reporting. • Distribution and service channel automation. • Customer support. • Human resources benefits administration. • Sales force automation.• Once the IT infrastructure model is ready as above. • Document management and workflow. • Inventory and configuration management. following business processes are to be used. • Knowledge management.

Examples are given of the businesses finding they can provide better products and services—and even new products and services—faster and at a lower cost. Some are expanding their market by making the Internet the integral core of their businesses • Dell Computers was one of the first PC makers to recognize the tremendous market potential for e-commerce on the Internet.3 .Profiles of Success in the Internet Economy • Successful profile in Internet Economy occurs by tapping the increased efficiencies of Internet Architecture and by adopting new differentiation strategies through the Internet. the Web offered Dell an excellent avenue for reaching new customers and re-establishing itself as an innovator and market leader. and projects that ultimately 100 percent of its business will be conducted on line 298 . Dell now conducts a considerable portion of its total business on line. Because its products are highly commoditized.

• Manheim Auctions recognized that selling used cars is a difficult. This company found a way to propel the used-car business into the '90s with new and innovative ways of selling that eliminated the need for high-pressure sales tactics on a car lot. As a result of its early realizes all its revenues from the saw a huge market of people who prefer to browse the Web rather than browse through bookshelves in a retail store. "dog-eat-dog" business that makes many potential customers uncomfortable. the company has quickly created a large and growing Internet-based business. • Amazon.000 dealers subscribing to its online used-car auction site. 299 . The company reports that it has generated sales from more than 4. Amazon.

Customers are demanding that businesses deliver these services through the Internet. 24-hour service and support information. They are demanding online services such as e-commerce. the ability to check product availability and track their accounts or portfolios. 300 . • They expect companies to make it as easy as possible for them to purchase products and services—without the need to go from store to store in search of the items and services they need. • Businesses must understand the complex technologies that have come together on the Internet. they also must understand how to integrate their Internet strategy with their overall business strategy. • The customers themselves are driving much of this change. and Internet technologies have taken a giant leap in making information universally and economically available. • Internet has created a wave that is engulfing just about every business and changing its fundamentals. and the availability of timely news and updates. • Internet technology to be used to deconstruct and reconstruct the value chain in just about every industry.Characteristics of Internet Economy • Information is a key part of the value chain in business.

you can ride the Internet 301 wave to new levels of success. • Integrating Internet technology successfully into a business involves fundamental considerations. • By partnering with a strategic firm such as Dynamic Net Inc. . more significantly. to help you accomplish these objectives. Inc.. PWC. many companies have not yet developed the necessary skills and technology expertise in-house to create solutions that tap the full potential of the Internet. money and. using it to their advantage. experience and resources necessary for developing new strategies and improving business processes using Internet-based technologies. effort. Forrester Research found that one of the most common mistakes companies make when implementing an Internet project is not having a clear vision or purpose for the solution.Getting There from Here • But many are taking a haphazard approach. resulting in wasted time. that have the breadth of expertise. • For example. • That's why it is important to partner with companies such as Dynamic Net. • Internet is a relatively new arena that will have a far-reaching impact. lost opportunity. Companies must rethink their business strategies and plans in light of the oncoming Internet wave.

302 .

manufacturing. The value chain is separated into two separate chains because both the marketplace (physical) and the marketspace (virtual) need to be managed in different ways to be effective and efficient (Samuelson 1981). which is then distributed and supported by the information infrastructure. thereupon the context provider supplies actual customer interaction. the linkage between the two is critical for effective supply chain management.The virtual value chain:1: • The virtual value chain. is a business model describing the dissemination of value-generating information services throughout an Extended Enterprise. distribution and sales of traditional companies. 303 . • There are many businesses that employ both value chains including banks which provide services to customers in the physical world at their branch offices and virtually online. It supports the physical value chain of procurement. This value chain begins with the content supplied by the provider. created by John Sviokla and Jeffrey Rayport. • Nonetheless.

304 .e. • In the virtual value chain the ‗virtual‘ indicates that the value adding steps are performed with information. synthesize and distribution of information. information has become a dynamic element in the formation of a business‘ competitive advantage. The information collected is utilized to generate innovative concepts and ‗new knowledge‘. The completion of these five events. Internet services). organization. and if they are not currently offering services that are information based (i. An examination of the VVC model informs the business to what function they have in the chain. The transfer of information between all events and among all members is a fundamental component in using this model. allows businesses to generate new markets and new relationships within existing markets. selection. This translates to a new value for the consumer. The process of a business refining raw material into something of value and the sequence of events involved is similar to that of business collecting information and adding value through its cycle of events. how they can make the transition to the information based model. In the VVC the creation of knowledge/added value involves a series of five events: gathering.The virtual value chain:2: • In the virtual value chain (VVC).

it is then fully possible to plan.Stages of the value adding information process • Businesses implement value-adding information by using the three stages of the Rayport and Sviokla model: • Visibility – By using information businesses learn the ability to view physical operations more effectively. . IT creates value in the marketspace. by producing a parallel value chain in the marketspace. implement. The new relationship between business and customer is strongly based on using IT. the business moves the value adding activities from the marketplace to the marketspace. This implies that products and services are 305 presented by IT in the form of bits. and assess events with greater precision and speed. The virtual value chain is used to co-ordinate the activities of the physical value chain. • Mirroring Capability – Businesses duplicate their once physical activities for virtual. With the assistance of IT. In other words. • New Customer Relationships – Businesses present value to the customer by new means and in new fashions.

Relevance to the business world:1: • The Virtual Value Chain has the benefit of having a view that encompasses the entire network along with its strong employment of IT. internal operations. Each business‘ internal and external relationships are managed by IT and value adding and generation of ideas are relying more and more on IT. information and knowledge for the market. The VVC model has a strong relationship to the supply chain and the goal of that relationship is to produce materials. 306 . Using this approach Mary Cronin separates the VVC into three elements: inputs from supplier. IT maintains the relationship among the members of the chain. • New technological developments in IT are drastically changing the way businesses operate. The VVC model does not indicate any shifts in the market. and customer relations. or how and when the customer‘s needs will change. This trend has led to a different approach to value chain thinking.

With use of the Internet. forums and discussion groups collect the necessary information about the products and 307 services that the business provides . In other words. The internet is also used to distribute information about the products and services to the market (i.e. electronic catalogues). • The internal operations element is in regards to the business‘ value adding events which are based on the effective procurement and distribution of the information within the business. • The customer relations element concentrates on applying the information directly from the customers‘ needs and attitudes about the product or service to add value. The internet is a useful tool in acquiring the direct information about the customer‘s needs and attitudes.Relevance to the business world:2: • The inputs from supplier element are focused of the Internet and how it can add value to the business‘s acquisition activities. the business can procure and distribute information globally with relative ease and low cost. business‘ with use of the Internet have the capability to find different suppliers quickly (effective) and for different purposes (efficient). It is essential that businesses can emulate this model because of the increasing large role information plays in the business world. Following the distribution.

The processes for transferring raw information to products and services are unique to the information world. By careful interpretation of the differences and interactions among the value adding events of the physical and virtual worlds. could change the competitive dynamics of industries. 1996) To properly use the information. • Managers must learn to utilize and value the virtual world of information. However. managers can more clearly visualize the strategic issues facing the business. the methods for creating value are different in these worlds. in turn. 308 . that is to create value from it. Although the value chain or the marketspace is similar to that of the marketplace. "executives may be able to create valuable digital assets that. "By thinking boldly about the integration of place and space." (Rayport et al.The Management of Virtual Value Chain:1: • Today managers need to concentrate on how their business creates value in both the physical and virtual world. there is an increased dynamic involved. managers must explore the marketspace." Sviokla and Rayport comment.

both users and businesses need to realize the potential that IT has for their business. not as a source of value itself. quality. It is essential for businesses to use IT in the most effective way and to have knowledge to implement IT systems. However. allowing businesses to use information for the creation of innovative products and services that are exclusive to the marketspace.The Management of Virtual Value Chain:2: • The conventional value chain model uses information for solely support. Lastly. • This study establishes that the strategy of IT is an important issue for a business. cost structure and profitability are all characteristics that are directly affected by IT. Productivity. 309 . with the arrival of the Internet the virtual value chain has been enabled.

FedEx has been able to capitalize using the VVC by adding value for the customer (for free) and in turn has increased customer loyalty in an intensely competitive market. 310 . In this increasingly information based economy managers must extract value from both the physical and virtual value chains to succeed.The Management of Virtual Value Chain:3: • An example of using the VVC to create such services includes the Federal Express Corporation which recently created a customer designed website to track packages by using their air bill number.

Strategy implementation: • Project implementation – • Procedural implementation – • Resource Allocation – • Organization Structure – • Matching structure and strategy.Syllabus 10. (3) 311 .

•Functional and Operational Implementation. •Procedural Implementation. 312 . •Structural Implementation. •Behavioural Implementation. •Resource Allocation.8 Issues in implementation: •Project Implementation.

Procedures. Rules & Regulations 313 .Strategies Plans Program Projects Budgets Policies.

ROI. ROE. consistent. Long Term (5-10 years) Medium Term (3 Yrs) Short Term (1 Year) 314 . These are integrated and coordinated.Strategies F u n c t io n al Pl a n B r o a d O b j e c t iv e s Corporate Corporate Plan A n n u al O p e r a t I o n B u d g e t s Sector Plan Business sector Divisional Plan Division Product / technology Plan Product Level Long Term / Medium Term Objectives : Market Share. New Markets. prioritised and measurable objectives.

– – – Unifying all groups in one direction. Basis for strategic control. Mobilise people and enable them to participate in direction of growth. 315 . – – Role clarity to managers and sub-ordinates. Focus on Growth. Motivate employees. – – Provide challenges for functional groups Tool to Operationalising strategies.Advantages of Annual Objectives: – – Tangible Growth targets.

• Marketing arrangements 316 . economic and ecological aspects).1. whether new or Modernisation or expansion or diversification. Profitability and cash flow. • Organisation. location. feasibility study. backward integration. technical. Project Implementation: • Conception Phase: Extension of Strategy Formulation Phase. • Means of financing. • Definition Phase: Preparation of Detailed Project Report considering marketing. • Project promoters & Financial details of the company. nature of Industry. • Project details detailed Cost of project. Prioritising projects conceived. nature of products. financial (eligible for scrutiny by financial institutes.

• Economic considerations like competition, economic benefits to country or region, contribution to development, ancillaries etc. • Environment aspect • Govt. consents like licence, capital goods, foreign Exchange, technical collaboration permission etc.
• Planning and organising phase: Designs, budgets, finance, schedules, manpower, systems and procedures. • Implementation Phase : detailed engineering, order placement, testing, trial and commissioning of the project. • Clean up phase : disbanding the project set up and handing over of the facility to operation.

2. Procedural Implementation
• • • • • • • • • • Formation of the company Licensing procedures SEBI requirements MRTP requirements Foreign collaborations procedures FEMA requirements Import and Export Licences / requirements Patenting and trade mark requirement Labour legislation requirement Environmental requirement and Pollution board requirements Consumer protection requirements Procedures for availing Incentives and facilities to get benefits.

• •

3. Resource Allocation
• Resource allocation deals with procurement and commitment of financial, physical and human resources to strategic tasks. • Project related resources are generally one time requirements and for on-going concern the resources are required on continuous basis. • Finance is primary resource. It is required for creation and maintenance of other resources. Long term resources are required for creation of capital assets and short term finance is required for working capital. • Resources could be internal or external. Internal resources are retained earnings, depreciation provisions, other reserves etc. • External resources are equity and long term loans. Also money market resources such as bank credits, hire purchase debt, instalment credit and fixed deposits. • Resource allocation : This could be top down where resources are allocated by top level to all other levels of organisation based on budgets. In a bottom up scenario budgets are drawn by operation group as required. However Strategic Budgeting is a mix of both and is dynamic. It involves to and fro communications and actions between all levels of management based on strategic decisions. 319

Resources availability

Top management

Corporate Policy Guidelines

Goals Short & Long

Approvals & sanctions

Strategic budget Minimising gaps Executive Management
Core Competencies, Marketing & past Performance, Environment, culture Pr op os al s

Operating Management

Targets / Operation Budgets

Implementa tion

Types of Strategic Budgets
I n d u st r y G r o w t h R a t e 20%

BCG Matrix for Strategic Decisions

Stars 15%

Question Marks

SBUs / Multidivisions / Multidepartments are identified for Resource allocations for Investment.


Cash Cows 5% Low High Relative Market Share


Cash flows are based on their strengths in BCG Matrix.

Low 321

Types of Strategic Budgets
• PLC Based Budget: Product / SBU Life Cycle: Resources are allocated based on different stages Product / SBU Life Cycle. • Capital Budgeting: A separate budget is drawn for Capital requirement in case of new SBU or new product or expansion or modernisation. In case of capital sources fund raising are different. • Zero based Budgeting: ZSB is based on present evaluation and not based on past performance. Each requirement is to be justified by operation group on the basis of fresh calculation of costs and targets. In other words the resource allocation demand is based on ―ground zero‖ • Parta System: This system is mainly used by conservative business houses where CEO is basically a financial wizard. This system is based on daily net cash flow (before tax and dividend) statement. The net cash flow is pre determined and agreed figure between SBU In-charge / Operating Management and the Chairperson / owner / major stock holder of the company. This is a daily budgeting and reporting 322 system.

Factors affecting Resource Allocation:
• Objectives of the Organisation – Realisation of Strategic Intent. • Dominant Strategists – Powerful Lobbying, influential departmental heads, CEO preferences etc. • Internal Politics – Resource allocation is construed a Power Statement and SBU In-charges, departmental heads strive for grabbing more resources for their departments. • External Influences – Government policies, statutory requirements, demands from financial institutes, Share holders, Community, necessity of Pollution control and safety equipments. • Scarcity of Resources – Financial, physical and human resources, cost of capital and that of cash credits, Government Policies with regards to raw materials and Technology. • Credit-worthiness of organisation– ability to raise funds. • Overstatement of needs – Bottom up or democratic ways of resource allocation gets developed in to every one grabbing his share of pie by overstating and dramatising their needs. • It is a role for CEO for managing resources. He need to have a Strategic Plan and communicate the same to all executives and 323 ensure that resource allocation decisions are taken amicably.

4. Structural Implementation
Owner - Manager Employees



Public Relations





Divisional / Product
Corporate Finance


Legal / PR


Gen. Manager- DIV. A

Gen. Manager- Div. B

Marktg., Operations, Pers.,

Marktg., Operations, Pers.,


H. D.E.K 325 . G.F Div.C Div.• SBU Based CEO Head SBU 1 Head SBU 2 Head SBU 3 Div. A.B.

Matrix Corporate Finance CEO Operations Personnel Marketing Head – A Location / Product / Plant Head – B Location / Product / Plant Head – C Location / Product / Plant 326 .

Network Region A Project M Function X Corporate Headquarte r Region B Project N Function Y 327 .

It also offers advantage of nearness to raw materials or to markets / customers. 328 . This enables optimum use of specialised skills. Product separation helps organisation in addition /deletion decisions.• Product based Structures: In large volume scenario it makes a sense to have a separate organisation dedicated to a product. • Geographic Structures: Set ups at different sites sometimes evolve due to expansions and mergers. it enables organisation to concentrate on specific customer group and provide exclusive attention required for that particular product / services. It helps in fair degree of decentralisation. It helps in creating specialised skills and timely response to changing needs of the customers. It needs a very good top level coordination and communication amongst all locations and corporate office. • Customer based Structures: Assuming that sales volume justifies the need of separate setup.

• Intrapreneurial Structure: This is a cluster of various owner driven set-ups. the structure corresponds to process of providing products or services directly served to customer thereby eliminating special corporate functions like marketing. finance etc. Executives have to be multifunctional in such a case as the core process is managed by cross functional teams. The firm employs both process oriented horizontal teams and functional departments. It encourages entrepreneurial abilities of its employees.‖ • In horizontal type. • Delaminated Matrices are combination of Horizontal organisations with a Functional structure. 329 . These two layers of matrix organisation are separated providing depth of expertise and capabilities to the organisation. Employees as entrepreneurs with support of parent organisation can apply its full attention to his part of business for development of new ideas for products and services. • There are also ―Horizontal Organisations‖ and ―Delaminated matrices.

4. Identification of key activities necessary to be performed for achieving Objectives and realising the Mission through the formulated strategy.• Organisations are structured to implement strategic plan in best possible way. 2. Organisational Design: 1. All functions and activities that are critical from strategy view point are required to be considered. The activities which are similar in nature and skills are grouped together. 5. Design establishes an interrelationship between these different departments for the purpose of coordination and 330 communications. Different groups of activities are accommodated in the structure. 3. Regions and so on to which the group of activities are assigned. Creation of Departments. . Divisions. Thus key activities performed to achieve Objectives and realise the Mission are required to be considered in Organisational design.

3. Different groups of activities are accommodated in the structure. 5. 2. Organisational Design: 1. Creation of Departments. 4. The activities which are similar in nature and skills are grouped together. Regions and so on to which the group of activities are assigned. 331 .• Organisations are structured to implement strategic plan in best possible way. Thus key activities performed to achieve Objectives and realise the Mission are required to be considered in Organisational design. Divisions. Identification of key activities necessary to be performed for achieving Objectives and realising the Mission through the formulated strategy. Design establishes an interrelationship between these different departments for the purpose of coordination and communications. All functions and activities that are critical from strategy view point are required to be considered.

Traditional Organisations Emerging Organisations One large firm Vertical Communication Small business units with Cooperative relationship. Horizontal Communication Centralised and Top-down decision Making Vertical Integration Work / Quality based Teams Functional Work teams Minimum Training Individual-focussed specialised Job Design Decentralised and participative decision making Outsourcing and virtual organisations Autonomous work teams Functional Work teams Extensive Training value chain team-focussed Job 332 Design .

Establish Standards Determine corrective performance Measure Performance Evaluate Performance against Standards 333 .Organisational Systems • Control Systems – The measurement and correction of the performance of activities of all the people in structure in order to make sure that enterprise objectives and plan devised to achieve the same is accomplished.

Bonus. Motivation can be monetary such as Salary. Appraisals are used for salary fixation. perks 334 . Rewards and non monetary such as recognition.Organisational Systems • Information Systems – The Organisational Arrangements that provides information to managers to perform their tasks and relate their works to others. designation. management development. etc. This is also known as MIS • Appraisal Systems – Evaluating managerial performance. incentives. awards. • Motivation Systems – to enforce desirable behaviour.

In decentralised planning corporate strategy performs a directive role for divisions. Planning can be centralised or decentralised depending upon Organisational Character. Plans are provided as packaged plan for implementation in centralised planning by planning committee.Organisational Systems • Planning Systems – Planning is basically formulating strategy. 335 . who in turn does planning taking environment into consideration.

skills and performance of mangers to enable them to perform their duties.• Development systems – is a process of gradual. New Experiences Managerial behaviour Performance Experience Learning Management Development 336 . systematic improvement in knowledge. The process of management Development Individual Characteristics Organisational Characteristics Training & Education.

Implementation of strategy has thus many behavioural issues. Behavioural Implementation. 337 .5. • Personal Values and Business Ethics. • Leadership. • Use of Power. • Corporate Politics. • Corporate Culture. • Behaviour of the strategist has a huge impact on implementing the chosen strategy.

Behaviour of leader lead to actions around.• • • • • • • • • • • Leadership in Implementation:1: Leadership plays a critical role in the success and failure of an enterprise. Leadership thrives on entire organisational Culture. This is required at times depending on the strategy which involves high returns. Leader with absence of a real concepts provides anti leadership. Leader uses his influence and creates intrinsic motivation and bring about Transformation of the organisation Risk Taking Leader: Willingness to take high risks. Leaders Influence relationship between individuals. Leaders have Personality traits and Qualities. 338 . It is one of the most important elements affecting Organisational performance. Situation in which leader has to operate decides the mettle of a leader. Leader transacts with sub-ordinates and indicates Role differentiation. Subordinates and situation at times show dependence on a leader. This generates Contingency behaviour within the leader.

He should have interpersonal skills and creativity to Mobilise people. He should identify changes in environment and should operate a trigger. Their career planning and establish a succession plans. • Key role of Leaders: CEO: Identifying Strategy and implement. • CEO should develop and choose future strategists. He remains accountable for success or failures. Normally a promotion within. • Participation: Inviting participation at all levels in the decision-making. Process and strategy implementation. 339 . • Coercion involves domination.Leadership in Implementation:2: • Technocracy: Optimum decisions based on technical needs • Organicity: The flexibility and adaptability in changing requirements is required to satisfy an agile operating staffs. is useful for moral of the organisation. authoritarianism by top management complied with wishes given in Mission and adjectives.

340 .Corporate Culture • Corporate Culture is a set of important assumptionsoften un-stated but most members share in common. you will get salary‖. shared actions like service oriented approach. ―there is stagnation at Top‖ or ―Turnover is important. • Strategists have four approaches to create a strategy related supportive culture.‖ • Thus shared things like uniforms. This depends on strategyculture relationship. Shared sayings. shared feelings like ―hard work is not rewarded here‖ creates a Corporate culture. Something like ―people at top do not understand‖ or ―Whether you work or don‘t work.

then To change strategy to fit corporate culture Changes required are very low and compatibility of change is also low. Changes required are very high and compatibility of change is also high. then To adapt strategy implementation to suit corporate culture. then To change corporate culture to suit strategic requirements :Changes required are very low and compatibility of change is high.Ignore corporate culture: Changes required are very high and compatibility of change is low. then 341 .

knowledge and experience 342 of Managers.• Corporate Politics and Power: Power is an ability to influence others and politics is carrying out activities though not prescribed by any Policy to gain advantages and influence distribution. . ‗Legitimate Power‘ Abilty of Mangers to influence behaviour of sub ordinates. Expert Power is due to competence. ‗Coercive Power‘ – Ability to penalise negative results. • Corporate politics is not good or bad but it creates divisiveness which is not good. • Sources of Power : ‗Reward Power‘ – ability of Manager to reward people of his choice. Referent Power is Managers to create liking among subordinates due to charisma or knowledge.

Business ethics are traditionally been considered as core values like honesty. • Top management to set examples. These views forms personality of a leader and creates a group‘s morale. trust.Personal Values and Business Ethics • Value is a view of life and a judgement of what is desirable and what is correct. 343 . • Consistently monitor and nurture values and build ethics. • Incorporate in new comer trainees and in training programme. respect & fairness. • Communicate Values & Ethics through wide publicity. To inculcate these value and ethics: • Consider Values & Ethics of a person during recruitment.

with ISO:14001:2004 which concerns Environment Management Systems.Social Responsibility and Strategic Management • Social Responsibility along with ethics becomes a stated or un-stated requirement. • Presently. It has differing views. most business houses observe a balance and undertake to deliver social responsibility and business objectives without contradicting each other. the society in large remains a major stake holder and we cannot escape our dues to society and towards social responsibility. for successful implementation. create Organisation Structure and evaluate its effectiveness. others boast around it. rural development. • Social Responsibility extends beyond the workforce and stakeholders and many business houses take up activities for community welfare. • Like any other strategic functions. while some do not want it to be considered in business operations. 344 . sports etc. But all said and done. However. it has become a necessity to address the mode and means of delivering social responsibility. Organisations need to allocate resources. It gets attended in Strategic Planning through environmental appraisals.

345 . HRD etc. • Resources are allocated function wise for their optimal contribution to the achievement of Business and Corporate level Objectives. • Natural derivation is to develop Functional Plans and Policies. Finance. • Functional Strategy deals with limited restricted plan which provides objectives for a specific function.Functional and Operational Implementation. • We create various functions like Marketing. Objectives and Goals are of generic nature. for effective implementation of the Strategic Plans. Mission. • Enterprise Vision. Operation.

A basis is created for controlling activities of all different functional areas of business. Plans are laid down clearly for all functional departments and Policies provide discretionary framework. Functional Strategies are implemented through defined plans and policies for various functions. . 2. Thus functional mangers do not spend time groping in dark. 5. 3. Functional mangers can handle similar situations effectively. 346 4. The strategic decisions are implemented by all the functions of the organisations. Co-ordination across the different functions takes place where necessary.Functional Plans and Policies: • 1.

Strategy Formulation Nature of Product / Services Nature of market Manner in which Market is to be served Operational System Objective Operational System Structure Operational Policies and plans 347 .

Behavioural issues in implementation: • Corporate culture – • Mc Kinsey‘s 7s Framework – • Concepts of Learning Organization (3) 348 .Syllabus 11.

Description of the 7-S Frame work of MC Kinsey 349 .

• Structure: The way the organization's units relate to each other: centralized.Description of the 7-S Frame work of MC Kinsey • The 7-S framework of McKinsey is a Value Based Management (VBM) model. etc. • Style: Cultural style of the organization and how key managers behave in achieving the organization‘s goals. (Core Competencies). hiring. decentralized (the trend in larger organizations). over a time to reach identified goals. • Skill: Distinctive capabilities of personnel or of the organization350 as a whole. What does the organization stands for and what it believes in. Competition and Customers. • Staff: Numbers and types of personnel within the organization. • Strategy: Strategy is a Plan for the allocation of a firm‘s scarce resources. functional divisions (top-down). network. matrix. processes and routines that characterize how important work are to be done: financial systems. . • Shared Value: The interconnecting centre of McKinsey's model is: Shared Values. information systems. These are Central beliefs and attitudes. holding. • System: The procedures. Together these factors determine the way in which a corporation operates. promotion and performance appraisal systems. Strategy considers Environment.

• Align departments and processes during a merger or acquisition.The McKinsey 7S Framework • Ensuring that all parts of your organization work in harmony • While some models of organizational effectiveness go in and out of fashion. The alignment issues apply. Developed in the early 1980s by Tom Peters and Robert Waterman. two consultants working at the McKinsey & Company consulting firm. • Examine the likely effects of future changes within a company. • The McKinsey 7S model can be applied to elements of a team or a project as well. regardless of how you decide to define the scope of the areas you study The 7S model can be used in a wide variety of situations where an alignment perspective is useful. one that has persisted is the McKinsey 7S framework. the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful. for example: • Improve the performance of a company. 351 .

on the other hand. can be more difficult to describe. and formal processes and IT systems.The Seven Elements Hard Elements Strategy Structure Systems Soft Elements Shared Values Skills Style Staff •"Hard" elements are easier to define or identify and management can directly influence them: These are strategy statements. and are less tangible and more influenced by culture. 352 . these soft elements are as important as the hard elements if the organization is going to be successful. However. organization charts and reporting lines. •"Soft" elements.

style. so do all the other elements 353 . • Placing Shared Values in the middle of the model emphasizes that these values are central to the development of all the other critical elements. The company's structure. As the values change. systems. staff and skills all stem from why the organization was originally created.• The way the model is presented in Figure depicts the interdependency of the elements and indicates how a change in one affects all the others. The original vision of the company was formed from the values of the creators. strategy. and what it stands for.

for an organization to perform well.How to Use the Model • The model is based on the theory that. organizational merger. • Whatever the type of change . or to maintain alignment (and performance) during other types of change. change of leadership. new processes. It's then a question of adjusting and tuning the elements of the 7S model to ensure that your organization works effectively and well once you reach the desired endpoint. 354 . and so ensure that the wider impact of changes made in one area is taken into consideration. So. the model can be used to help identify what needs to be realigned to improve performance. new systems. and so on .restructuring. these seven elements need to be aligned and mutually reinforcing. a proposed future situation (Point B) and to identify gaps and inconsistencies between them.the model can be used to understand how the organizational elements are interrelated. • You can use the 7S model to help analyze the current situation (Point A).

355 . we've developed a Mind Tools checklist and a matrix to keep track of how the seven elements align with each other. The 7S model is a good framework to help you ask the right questions .• However. based on your organization's specific circumstances and accumulated wisdom. skills and experience. improving performance and managing change. it is not simple. For that you'll need to bring together the right knowledge. Changing your organization probably will not be simple at all! Whole books and methodologies are dedicated to analyzing organizational strategy. • When it comes to asking the right questions.but it won't give you all the answers. Supplement these with your own questions.

• Strategy: • What is our strategy? • How to we intend to achieve our objectives? • How do we deal with competitive pressure? • How are changes in customer demands dealt with? • How is strategy adjusted for environmental issues? • Structure: • How is the company/team divided? • What is the hierarchy? • How do the various departments coordinate activities? • How do the team members organize and align themselves? • Is decision making and controlling centralized or decentralized? Is this as it should be. and then repeat the exercise for your proposed situation (Point B).7S Checklist Questions • Here are some of the questions that you'll need to explore to help you understand your situation in terms of the 7S framework. given what we're doing? • Where are the lines of communication? Explicit and implicit?356 . Use them to analyze your current (Point A) situation first.

• Systems: • What are the main systems that run the organization? Consider financial and HR systems as well as communications and document storage. • Where are the controls and how are they monitored and evaluated? • What internal rules and processes does the team use to keep on track? • Shared Values: • What are the core values? • What is the corporate/team culture? • How strong are the values? • What are the fundamental values that the company/team was built on? • Style: • How participative is the management/leadership style? • How effective is that leadership? • Do employees/team members tend to be competitive or cooperative? 357 • Are there real teams functioning within the organization or are they just nominal groups? .

• Staff: • What positions or specializations are represented within the team? • What positions need to be filled? • Are there gaps in required competencies? • Skills: • What are the strongest skills represented within the company/team? • Are there any skills gaps? • What is the company/team known for doing well? • Do the current employees/team members have the ability to do the job? • How are skills monitored and assessed? 358 .

• Next look at the other soft elements. strategy. what needs to change? • As you adjust and align the elements. Do they support the desired hard elements? Do they support one another? If not. and then re-analyzing how that impacts other elements and their alignment. . • Check off alignment between each of the elements as you go through the following steps: • Start with your Shared Values: Are they consistent with your structure. now examine where there are gaps and inconsistencies between elements. you'll need to use an iterative (and often time consuming) process of making adjustments.7S Matrix questions • Using the information you have gathered. The end result of better 359 performance will be worth it. How well does each one support the others? Identify where changes need to be made. what needs to change? • Then look at the hard elements. and systems? If not. Remember you can use this to look at either your current or your desired organization.

you can really move your organization or team forward.• Key points: • The McKinsey 7Ss model is one that can be applied to almost any organizational or team effectiveness issue. • The process of analyzing where you are right now in terms of these elements is worthwhile in and of itself. • Once these inconsistencies are revealed. chances are there is inconsistency between some of the elements identified by this classic model. 360 . • If something within your organization or team isn't working. • But by taking this analysis to the next level and determining the ultimate state for each of the factors. you can work to align the internal elements to make sure they are all contributing to the shared goals and values.

Senge further remarks that "the rate at which organizations learn may become the only sustainable source of competitive advantage". Learning Organisation • There is a difference between Organisational Learning and Learning Organisation. 361 . Argyris (1977) defines Organisational Learning as the process of "detection and correction of errors" • while Senge (1990) defines Learning Organisation as "a group of people continually enhancing their capacity to create what they want to create". • A Learning Organisation is an Organisation that learns and encourages learning among its people in an effort to create a more knowledgeable and flexible workforce capable to adapt to cultural changes. • Organisational Learning is a Process and Learning Organisation is a Structure.Concepts of Learning Organization • Organisational Learning vs.

systems capable of bringing about their own continuing transformation. influence and manage these transformations. Learning Organizations develop as a result of the pressures facing modern organizations and enables them to remain competitive in the business environment. • We must. A Learning Organization has five main features. We must make the capacity for undertaking them integral to ourselves and to our institutions. We cannot expect new stable states that will endure for our own lifetimes. He provided a theoretical framework linking the experience of living in a situation of an increasing change with the need for learning. in other words. that is to say. We must become able not only to transform our institutions. we must invent and develop institutions which are ‗learning systems‘. 362 (Schon 1973: 28) . mental models. shared vision and team learning. • The loss of the stable state means that our society and all of its institutions are in continuous processes of transformation. in response to changing situations and requirements. personal mastery.• A Learning Organization is the term given to a company that facilitates the learning of its members and continuously transforms itself. become adept at learning. We must learn to understand. systems thinking. • Donald Schon. guide.

Firms and Territories are organized in networks of production. management and distribution. (Castells 2001: 52) • A failure to attend to the learning of groups and individuals in the organization spells disaster in this context.• Subsequently. but in the flow of knowhow that will sustain their business. • Productivity and competitiveness are. The core economic activities are global – that is they have the capacity to work as a unit in real time. or chosen time. companies need to invest not just in new machinery to make production more efficient. organizations and governments and we have to operate in a global environment and that has altered its character in significant ways. Organizations need to be good at knowledge generation. As Leadbeater (2000: 70) has argued. on a planetary scale. a function of knowledge generation and information processing. we have seen very significant changes in the nature and organization of production and services. by and large. Companies. appropriation and exploitation 363 .

This means those who remain need to work more effectively. there are usually factors prompting their change. These needs 364 can be met through embracing the tenets of the Learning Organization. • To create a competitive advantage. • It has been found that as organizations grow. understand what is happening in the outside environment and produce creative solutions using the knowledge and skills of all employed within the organization. • To remain competitive. • This requires co-operation between individuals and groups. companies need to be able to learn faster than their competitors and also develop a customer responsive culture. the solutions that are proposed often turn out to be only short term (single loop learning) and re-emerge in the future. free and reliable communication. . which has resulted in fewer people in the company. they lose their natural capacity to learn as company structures and individual thinking becomes rigid. many organizations have restructured. and a culture of trust.Why do Learning Organizations develop? • Organizations do not organically develop into Learning Organizations. • Modern organizations need to maintain knowledge about new products and processes. • When problems arise in the company.

1991: 1) Pedler et al. collectively accountable change directed towards shared values or principles. where collective aspiration is set free. 365 . (Pedler et. It is not brought about simply by training individuals. where new and expansive patterns of thinking are nurtured. • Learning organizations are characterized by total employee involvement in a process of collaboratively conducted. but should be well thought out. (Watkins and Marsick 1992: 118) • According to Sandra Kerka (1995) most conceptualisations of the learning organisations seem to work on the assumption that ‗learning is valuable. later redefined this concept to “an organization that facilitates the learning of all its members and consciously transforms itself and its context”. continuous. and most effective when shared and that every experience is an opportunity to learn‘. • "Organisations where people continually expand their capacity to create the results they truly desire.Learning Organisation : Definitions • The Learning Company is a vision of what might be possible. and where people are continually learning to learn together" (Peter Senge. reflecting the fact that change should not happen just for the sake of change. al. it can only happen as a result of learning at the whole organization level. 1990).

Characteristics of a Learning Organization-1 • Learning Organization exhibits five main characteristics. a Shared vision and Team learning. If any of these characteristics is missing. • However O‘Keeffee believes that the characteristics of a Learning Organization are factors that are gradually acquired. Mental models. • Systems thinking also state that all the characteristics listed must be apparent at once in an organization for it to be a Learning Organization. then the organization will fall short of its goal. • Learning Organizations employ the method of thinking when assessing their company and develops information systems that measures the performance of the organization as a whole and of its various components. • Systems thinking • This is a conceptual framework that allows people to study businesses as bounded objects. rather than developed simultaneously. Personal mastery. Systems thinking. 366 .

Characteristics of a Learning Organization-2 • Personal Mastery • Personal mastery is the commitment by an individual to the process of learning. • A Learning Organisation has been described as the sum of individual learning. • Individual learning is acquired through staff training and development. therefore it is important to develop a culture where personal mastery is practiced in daily life. However learning cannot be forced upon an individual if he or she is not receptive to learning. There is a Competitive Advantage for an organisation whose workforce can learn quicker than the workforce of other organisations. 367 . rather than the product of formal training. • Research has shown that most learning in the workplace is incidental. but it is important for there to be mechanisms by which individual learning is transferred into Organisational Learning.

which is what they actually do. and theories-in-use. which they intend to follow. In the creation of a learning environment it is important to replace confrontational attitudes with an open culture that promotes inquiry and trust. • To achieve this. the Learning Organisation will have mechanisms for locating and assessing organisational theories of action. these need to be discarded in a process called ‗unlearning‘ Wang and Ahmed refer to this as ‗triple loop learning.Characteristics of a Learning Organization-3 • Mental models • Mental Models are the terms given to ingrained assumptions held by individuals and organisations. • To become a Learning Organisation. If there are unwanted values held by the organisation. organisations tend to have ‗memories‘ which preserve certain behaviours. these mental models must be challenged. • Similarly.‘ 368 . norms and values. • Individuals tend to espouse theories.

Therefore… Learning Organisations tend to have flat. 369 • • • • . however Senge states that these are transitory goals and suggests that there should also be long term goals that are intrinsic within the company. The most successful visions are built on the individual visions of the employees at all levels of the organisation The creation of a shared vision is likely to be hindered by traditional structures where a company vision is imposed from above.Characteristics of a Learning Organization-4 • Shared vision The development of a shared vision is importantly provides incentive to the workforce to learn as it creates a common identity that can provide focus and energy for learning. decentralised organisational structures. The topic of shared vision is often to succeed against a competitor.

• The benefit of sharing individual learning is that employees grow more quickly and the problem solving capacity of the organisation is improved through better access to knowledge and expertise. • Team learning requires individuals to engage in dialogue and discussion. and implementation of this knowledge throughout the organisation. therefore it is important that team members develop open communication. • Learning Organisations also have excellent knowledge management structures. dissemination. 370 . acquisition. which allow creation.Characteristics of a Learning Organization-5 • Team learning is the accumulation of individual learning. shared meaning and understanding. • Learning Organisations have structures that facilitate team learning with features such as boundary crossing and openness.

. it is argued that organisations need to ‗discover how to tap people‘s commitment and capacity to learn at all levels‘ (Peter Senge.. more systematically. 1990) • And that ―the pressure of change in the external environments of organisations.Characteristics of a Learning Organization-6 • The basic rationale for such organisations is that in situations of rapid change.. and more quickly than they did in the past. . • They must learn not only in order to survive but also to thrive in a world of ever increasing change‖ (Pearn. 1997). • For this to happen. adaptive and productive will excel. • The key ingredient of the Learning Organisation is in how organisations process their experiences and how they learn from their experiences rather than being bound by their past 371 experiences.. is such that they need to learn more consciously. only those that are flexible.

Learning Organisation Concepts
• The concept of organisational learning evolved from the individual learning process, but organisational learning is

not simply the collectively of individual learning
processes, but it engages interaction between: • Individuals in the organisation

• Interaction between organisations as an entity
• Interaction between the organisation and its environment • The major Learning Organisational concepts focus on ―Continuous Improvement‖, ―Culture‖ and ―Innovation and Creativity‖.


The concept of Learning Organisation
―A learning organisation should consciously and intentionally devote to the facilitation of individual learning in order to continuously transform the entire organisation and its context ― (Pedler et al. 1991) ―A learning organisation should be viewed as a metaphor rather than a distinct type of structure, whose employees learn conscious communal processes for continually generating, retaining and leveraging individual and collective learning to improve performance of the organisational system in ways important to all stakeholders and by monitoring and improving performance‖ (Drew & Smith, 1995)


Continuous Improvement

The adoption of Total Quality Management practices
Creation and maintenance of learning culture: adopting to cultural change, collaborati ve team working, employee empowerment and involvement, etc.




Innovation and Creativity

Organisation learning is the process by which the organisation constantly questions existing product, process and system, identify strategic position, apply various modes of learning, and achieve sustained competitive advantage

Facilitation of learning and knowledge creation; focus on creative quality and value innovation

Problems / issues that may be encountered in a Learning Organisation: • Even within a Learning Organisation, problems may be encountered that stall the process of learning or cause it to regress. • Most of the problems arise from an Organisation not fully embracing all the facets outlined above that are necessary in a Learning Organisation. • If these problems can be identified, work can begin on improving them. Organisational barriers to learning: • Some organisations can find it hard to embrace personal mastery because as a concept it is intangible and the benefits cannot be quantified. Additionally, personal mastery can be seen as a threat to the organisation. • This threat can be real, as Senge points out, that ―to empower people in an unaligned organisation can be 374 counterproductive‖.

Organisational barriers to learning: (Contd.)
• In other words, if individuals do not engage with a shared vision, personal mastery could be used to advance their own vision. • In some organisations a lack of a pro-learning culture can be a barrier to learning. • It is important that an environment is created where individuals can share learning without it being devalued and ignored. • So more people can benefit from their knowledge and the individual becomes empowered. • A Learning Organisation needs to fully embrace the removal of traditional hierarchical structures. These are a barrier to the development of shared vision and to the sharing of knowledge.

Individual barriers to learning
• Resistance to learning can occur within a Learning Organisation if there is not sufficient ―buy in‖ at an individual level. • This is often encountered by people who feel threatened by change or believe that they have the most to lose. • The same people who feel threatened by change are likely to have closed mind sets are not willing to embrace engagement with mental models. • Unless implemented coherently across the whole organisation, learning can be viewed as elitist and restricted to more senior levels within the organisation. • If this is the case, learning will not be viewed as a shared vision. • If training and development is compulsory, it can be viewed as a form of control, rather than a form of personal development. • Learning and the pursuit of personal mastery needs to be an individual choice, therefore enforced take up will not work.

Ideas on the "Why Learning Organisation?"
• Because we want superior performance and competitive advantage • For customer relations • To avoid decline • To improve quality • To understand risks and diversity more deeply • For innovation • For our personal and spiritual well being • To increase our ability to manage change • For understanding • For energized committed work force • To expand boundaries • To engage in community • For independence and liberty • For awareness of the critical nature of interdependence 377 • Because the times demand

• ===================================== • 12. Functional issues: • Functional plans and policies – • Financial, • Marketing, • Operations, • Personnel, • IT, (2) ======================================

Functional Plans & Policies:
• • Functional Strategies are derived from Business & Corporate Strategies and are implemented through Functional & operational Implementation. Functional Strategies deal with limited plan designed to achieve Objectives in a specific Functional area, allocation of resources for that functional area and coordination among different functional operations to achieve Functional Objectives. Functional Plans & Policies are developed for: The Strategic decisions are implemented by all parts of an Organisation. There is a basis available for controlling activities in different functional areas of Operation. Plans are laid down for what is to be done and Policies provide guideline for discretions and Functional Manager‘s time in decision making is reduced. Required Coordination amongst different functions takes place. 379

• 1. 2.


Financial Plans & Policies Sources of Funds: 1. 2. Fixed Asset acquisitions. Loans & Advances. Usage of Funds: 1. Capital Mix Decisions. 3. Capital Structure. . Plans & Policies related to sources of funds determine how financial resources will be made available for implementation of Strategies. Current Assets. Reserves & Surpluses as source of Funds. Banks & FIs. Procure of Capital. 6. 380 4. 4. 5. Capital Investments. Working Capital Borrowings. 3. 2. Investment or Asset mix decisions. Relationships with Lenders.

6. Credit and Risk Management. 3. Usage of Funds relates to efficiencies & effectiveness of resource utilisation in the process of Strategy Implementation. cost reduction and Tax planning 6. 5. Management of Funds: 1. Cash.5. Organisations which implement business strategies of cost leadership must practice proper management of Funds. Management Control Systems. System of Finance. Aiming at Conservation and Optimum utilisation of Funds. Good management of funds often creates the difference between 381 strategically successful or unsuccessful Company. 2. . Accounting & Budgeting. 4. Dividend decisions. Cost control. Relationship with Shareholders.

. Quality. Personal Selling. Packaging etc. (Discounts. Allowances. Credit terms) Promotion: Marketing communications intended to convey the company and product or service image to prospective buyers.) 382 . Sales Promotion and Publicity) Place: Distribution process by which goods or services are made available to the customers. Brand names. (Advertising.Marketing Plans & Policies • These are 4Ps of Marketing Product: Goods & Services offered by Organisation to its Target market. coverage of markets. (Choice of Models. logistics.) Pricing : Money that Customers pay in exchange of Goods & Services. inventory storage management. Mode of payment. Features. etc. (Transportation. Payment period.

extent of vertical integration. Targeting. Operational Planning & Control – Production Planning. Product or Service design. Segmentation. Marketing Organisation. Maintenance of Plant and Equipment. 383 Research & Development . Work systems. inventory. Layout. Market Standing. Marketing Management Information System) Operations Plans & Policies: Production System – Capacity. (Marketing mix. Quality Management. Marketing System. Location. Cost. Degree of Automation. Positioning. Company Image. Operation Plans & Policies deals with vital issue affecting the capability of the Organisation to achieve objectives.Integrative & Systematic Factors: • This part of the plans & policies related to Marketing Management. Materials supply.

working conditions etc. Collective bargaining. . Image of Organisation as an Employer. Compensation. The value of 384 information is source of Strategic Advantage. Quality of Managers.Personnel Plans & Policies: • HRM Plans & Policies relate to providing & maintaining human resources: Personnel System: Manpower Planning. Staff & Workers. Employee satisfaction & morale. availability of Development opportunities for employees. Information management Plans & Policies: Information capability factors relate to design & management of the flow of information within and from outside. Selection.. Industrial Relations: Union – Management relationship. Communication and Appraisal Organisational & Employee Characteristics: Corporate image. Safety & Security. Development.

Quality.• Acquisition and Retention of Information: Sources. Computer professionals. Quantity. up gradation facilities. compatibility to organisational needs. Systematic and Supportive Factors: availability of IT infrastructure and its relevance. • Integrative. • Processing and Synthesis of Information: Database management. Software capability and ability to synthesise information. 385 . • Transmission & Dissemination of Information: speed. width & depth of coverage of information with willingness to accept the information. investing in state of art systems. retention capacity and security of information. • Retrieval & Usage of Information: Availability and appropriateness of Information formats and the capacity to assimilate and use information. scope. and timeliness of Information. top management support. Computer Systems.

Strategy Evaluation: • • • Operations Control and Strategic Control Symptoms of malfunctioning of strategy Balanced Scorecard. (2) ================================== 386 .Syllabus ================================== 13.

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process performance. long term learning and skills development. marketing and developmental inputs to these.Balanced Score Card (BSC) • The Balanced scorecard (BSC) is a strategic Performance Management tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy. For example. and so on. • The Balanced Scorecard helped organizations achieve a degree of ―Balance" in selection of performance measures Balanced Scorecard helps provide a more comprehensive view of a business • This tool is also being used to address business response to Environmental Changes. • Balance Card focuses not only on financial outcomes but also on the operational. Organizations measure. those factors which influenced the financial outputs. 388 . market share / penetration.

Also to use of financial measures alone for the strategic control of the firm is unwise. process performance. There is a "lag" between actions and Financial Outcome. Organizations should also measure those areas where direct management intervention is possible. 389 . long term learning and skills development. • Balanced Scorecard helps organizations achieve a degree of "balance" in selection of performance measures. In 1992. Robert Kaplan and David P Norton. which provided a visual way to craft business strategies. the Strategy Map." "Internal Business Processes" and "Learning and Growth. and so on. • Organisations cannot directly influence Financial Outcomes as they relate to past.• Organizations must also control those factors which influences the financial outputs." • Phrase ―Balanced Scorecard" was coined in the early 1990s. such as. This new tool. market share / penetration. Scorecards achieve this balance by selecting measures from three additional categories or perspectives: "Customer. They added another innovation. by Dr.

Feedback and Learning. in focussing their attention on strategic issues and the management of the implementation of strategy. balanced scorecards comfortably co-exist with strategic planning systems and other tools. Communicating the vision and link it to individual performance. 2. 3. In fact. Business planning.• • 1. Balanced Score Cards helps managers. index setting. Implementing Balanced Scorecards typically includes four processes: Translating the vision into operational goals. 4. and adjusting the Strategy accordingly 390 . it is important to remember that the balanced scorecard itself has no role in the formation of strategy.

• A balanced scorecard of strategic performance measures is then derived directly from the strategic objectives. It illustrates how the organization plans to achieve its mission and vision by means of a linked chain of continuous 391 improvements. • Strategy Mapping:A strategy map is a visual representation of the strategy of an organization. so as to "connect the dots" to form a visual presentation of strategy and measures. and is generally easier for managers to work through.• Measures are selected based on a set of "strategic objectives" plotted on a "strategic linkage model" or ―Strategy Map". managers select a few strategic objectives within each of the perspectives. • To develop a ‖Strategy Map‖. • The strategic objectives are distributed across the four measurement perspectives. and then define the cause-effect chain among these objectives by drawing links between them. Methodology of Strategy Mapping . This type of approach provides greater contextual justification for the measures chosen.

the strategy map illustrates the long-term game plan or competitive strategy to achieve increased profitability. it illustrates the plan by which the organization intends to improve performance of its mission. which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top 392 two rows). improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up). In either case it illustrates the cause-and-effect relationships between different strategic objectives and their measures. • Strategy maps are communication tools used to tell a story of how value is created for the organization.Strategy Mapping • For a commercial business. For a non-profit or governmental organization. They show a logical. or Key Performance Indicators (KPIs) that are included in a Balanced Score Card. Generally speaking. . step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-andeffect chain.

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• Customer perspective. The four perspectives • Financial perspective. • Align the organization with strategy. • Identify and align strategic initiatives. • Conduct periodic strategic performance reviews to learn about and improve strategy. • Clarify strategy and make strategy operational. • Innovation and learning perspective. • Internal process perspective. 394 . • Link budget with strategy.• Kaplan and Norton found that companies are using Balanced Scorecards to: • Drive strategy execution.

Return On Capital Employed. Return on Equity. It represents the long-term strategic objectives of the organization and thus it incorporates the tangible outcomes of the strategy in traditional financial terms.1. Profit Margins. Financial Results. etc • and Harvest: Cash Flow analysis with measures such as Payback Periods and Revenue Volume. Return on Capital Employed. The Financial Perspective • The company‘s implementation and execution of its strategy must contribute to the bottom-line improvement of the company. Return on Investments. Economic Value Addition. 395 . Residual Income. EVA. Acquisition of new customers. Growth in revenues etc • Sustain: Operations and Costs. by calculating the Return On Investment. etc. Net Operating Income • Financial KPIs : Cash Flow. • The three possible measurements as described by Kaplan and Norton (1996) are: • Rapid growth: Increased sales volumes.

2. • The measures are value that is delivered to the customer (value proposition) and Cost • Value proposition: (e..The Customer Perspective • The Customer Perspective defines the value proposition that the organization will apply to satisfy customers and thus generate more sales to the most desired (i. CSI – Customer Satisfaction Index. the most profitable) customer groups. customer satisfaction. or product leadership. 396 .g. Customer Intimacy. • The value proposition can be centred on one of the three: operational excellence. Performance – Customer Complaint Record – Claims. market share). • Cost: Delivery Time.e. Quality Parameters – Six Sigma initiatives. • KPIs could be : Cost Leadership. Performance and Service. Quality.

Internal Process Perspective • The Internal Process Perspective is concerned with the processes that create and deliver the customer value proposition.(by expanding and deepening relations . • Operations management . . • Innovation . etc). Accident Ratios. Environment 397 Compatibility. It focuses on all the activities and key processes required in order for the company to excel at providing the value expected by the customers both productively and efficiently. supply chain management.(by establishing good relations with the external stakeholders). Operational Equipment Effectiveness – OEE.(by new products and services) • Continual Improvement .CSI). • These can include both short-term and long-term objectives as well as incorporating innovative process development in order to stimulate improvement. • KPIs – Opportunity Success rate.(by improving asset utilization.3. • Customer management .KPI and • Regulatory & Social .

Illness Rate. Internal Promotions. Innovation and Learning Perspective • The innovation and learning perspective is the foundation of any strategy and focuses on the Intangible Assets of an organization. mainly on the internal skills and capabilities that are required to support the value-creating internal processes. • This of course will be in the long term. the systems (information capital). (Succession Plan). and the climate (organisation capital) of the enterprise. Gender Ratios 398 . • These three factors relate to the infrastructure that is needed in order to enable ambitious objectives in the other three perspectives to be achieved. • Learning and growth: KPIs: Investment Rate. since an improvement in the learning and growth perspective will require certain expenditures that may decrease short-term financial results. • The Innovation & Learning Perspective is concerned with the jobs (human capital). whilst contributing to long-term success. Employee Turnover.4.

Customer Complaints and Claims. (Sold Time for Consultants.). Market Share. Inventory Turnover. Machine Breakdowns. 399 . JIT Index = Process Time / Total Cycle Time • Quality –Defective units. Late deliveries. CSI – Customer Satisfaction Index. Customer loyalty. • Throughput Cycle Time = Processing Time (Value Adding) + Storage Time + Movement Time + Inspection Time (Non Value adding times). Occupancy rates for Hotels etc. Customer Retention. Rework Percentage.Key Success factors – Non Financial • Customer Related : Bookings. Backorders-Backlog. Products Returned. Scrap. Key Account orders. Field service Expenses. • Internal Business Processes: Capacity Utilisation. On time Delivery. Yields.

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2. Poor Financial Results and / or. Low employee Morale: High Employee Turnover. • • • The strategic Symptoms frequently include one or more of the following (Grant. 2002): Low growth exposes ‗strategic sloppiness‘ and ‗strategic errors‘ Strategic change is often „lumpy‟ as firms lurch from strategy to strategy to combat low growth. Missing targets too often.Symptoms of Mal-Functioning of Strategy -1 • 1. much is reactive Contains elements of „hasty opportunism‟ Poor Organisational Results: Unsustainable Business Results. Missing Commitments. 403 . • • • 4. Poor Operational results. Whilst some policy appears proactive. • • 3.

Quality taking second place lagging behind practice prevailing over law. 7. Very few repeat orders. . missing commitments. Poor Work Climate in Organisation: Organisation developing unsustainable work practices. 404 Resulting into decreased Quality in all spheres of Operation. Unable to manage competition. Customer Dissatisfaction: Customer Complaints non-specific to Quality. Unable to sustain market competition. 6.Symptoms of Mal-Functioning of Strategy-2 • • • • • • • • • • • • • • 5. Loss of key account Customers or loss of customers in general. Repeated Customer complaints for same cause. Loss of Market Share: Lack of Innovation. Lack of Up-Gradation. Delayed deliveries.

and forming ‗their‘ opinions accordingly? 5. All seven of the symptoms show that you and others in the corporation are being hampered in managing effectively by faults which manifests to failure or poor 405 performance.Symptoms of Mal-functioning for a CEO: 1. Are your subordinates apparently trying to anticipate your likes and dislikes . Do you have few.and that illness is as common as the cold. The disease is chronic mismanagement. if any. Are you attending too many meetings. and ones which are discussing the wrong things? 2. Are you unclear about where you stand with your boss or bosses? 6. activities which are not connected to the company? All these personal behaviours are symptoms of a corporate disease . Do you learn about things only after they‘ve already happened? 4. Are your incentives disproportionately dependent on the share price? 7. . Do subordinates consult you too often before taking action? 3.

Each of these seven items puts the company and its stakeholders at risk. They are expected to deploy superhuman qualities in order to live up to the previous six postulates.CEO Cult in Organisations This happens due to a CEO Cult :The Cult holds these seven Beliefs: 1. primarily by boosting ‗shareholder value‘ (i. 406 . The CEO has no trouble in turning the other directors into acquiescent poodles. His or her authority is enhanced by the exercise of personality . 6.. The CEO runs the company.even charisma. 5. 3.e. 2. The CEO controls all events and is the source of all important information. on the basis of order-and obey. He or she does so. CEOs place pleasing shareholders above all else. 4. the share price) 7. The Cult is fallacious and dangerous.

CEO should. including you. For example. top-down and lateral so that everybody. 407 • Stop the business taking over the whole of your life. • Operate on a mutual. not the share price. collaborative processes that make excellent decisions and effective execution far more likely. has the fullest possible picture of what‘s going on everywhere. and concentrate on them. • Listen to full and frank discussion with subordinates before guiding people to the best consensus. .What a CEO should do? • Generate collective.. • Limit the number of meetings you attend to those whose purpose are clearly defined and demand your presence. advise-and-consent basis (avoiding order-and-obey) in relations with superiors and subordinates • Work out the vital metrics of the business.. • Delegate ample authority and autonomy to subordinates so that they can take decisions and actions on their own initiative. • Establish communications bottom-up.

analyse and suggest remedies and practical workable solutions. & Conditions of. an organisation. understand. Evaluate the situation described in Case. policies. strategies. 1. Guidelines for systematic approach to prepare a case for Discussions.Comments • Case Method is quite old & method of learning from real life situations. Prepare ETOP & SAP in your notes. Through these events & conditions. Think of Strategic Alternatives & suggest best options. Support your proposal with facts.Case Study Method . Read case again. issues and role of individuals in the case. 4. grasp the facts. Read case once for familiarity. reasons & arguments. discuss. reader of a case gets to know the situation prevailed in that organisation for him to dwell on. make notes. • A case is narration of events in. Attempt to understand objectives. First introduced by Harward Law School in 1871. problems & their causes. jot down important points. 3. get a feel of the situation. 5. 408 . 2.

Do not copy word to word from Case. Use headings. you assumptions for arriving at your conclusion. 7. for major issues and recommendations made by you. Labels. State quantitative & qualitative criteria. Industry analysis. 409 . SWOT. 8. but do not overlook major issues.6. 10.. Include analysis based on techniques like ETOP. Specifically state you assumptions when making recommendations. 9. Provide a summary. Provide supporting evidence and benchmarks used for evaluation. Present whole written structure to be in one logical & integrated way. Propose comprehensive plan for Strategy Implementation considering resources and manageability of implementation. Adopt nice style of writing. Evaluate you proposal. competitive analysis. Keep the written analysis simple. 11. Topic issues. SAP. in a page. Value Chain. 12.

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