IV Trimester – MBA0941 Strategic Management


Strategy and Process

Strategic Management
Concept of Strategy STRATEGY: It is Unified, Comprehensive, and Integrated long term plan that relates to the strategic advantages of the firm to the challenges of the environment. STRATEGIC MANAGEMENT: It is a stream of decisions and actions which leads to the development of an effective strategy to help achieve the corporate objective. It is a continuous, iterative, & Cross functional process of matching firm with its environment. COMPETITIVE ADVANTAGE: is delivering superior value advantage to your target customers relative to your competitors. Or delivering equivalent customer value to your target customers relative to your competitors , but at a lower cost.

Strategic Management
Strategy is is a set of related actions that managers take to increase their company’s performance. Strategic leadership is about how to most effectively manage a company’s strategy making process to create competitive advantage. The strategy making process is the process by which managers select and then implement a set of strategies that aim to achieve a competitive advantage. Strategy formulation is the task of selecting strategies where as strategy implementation is the task of putting strategies into action, which includes designing, delivering and supporting products improving the efficiency and effectiveness of operations and designing a company’s organisation structure, control system and culture

A business unit is a self-contained division that provides a product or service for a particular market. enabling the company to gain a competitive advantage and achieve superior profitability and profit growth. Business model A business model is managers conception of how the set of strategies their company pursues should mesh together into a congruent whole. . when its profitability is greater than the average profitability of all other companies competing for the same set of customers.Strategic Management Competitive advantage A company is said to have a competitive advantage over its rivals.


It is an answer to question – “What business are we in?”      GOALS / OBJECTIVES : End to be achieved. Vision is an art for seeing invisibles. It is To make Profit for today and forever To satisfy Customers today and forever To satisfy Employees today and forever 6 .MISSION & GOALS OF A COMPANY  VISION: It is a vividly descriptive image of what you what to be or what you want to be known for. It is a process of legitimization of corporate existence of business. To pursue the Creation of Value to all Stakeholders in the Business. philosophy and grand design of the firm. MISSION : It a statement of intent of “what a firm wants to create and through which line of Business”. It defines the culture.

Three Big Strategic Questions • Where Are We Now? • Where Do we Want to Go? • How Will We Get There? 7 .

The Five Task of Strategic Planning • • • • • Developing a Vision and a Mission Setting Objectives Crafting a Strategy Implementing and Executing Strategy Evaluating Performance. Reviewing the Situation and Initiating Corrective Action 8 .

and Where we are headed”. 9 . What we do.An organization’s MISSION • reflects management’s vision of what the organization seeks to do and to become • sets forth a meaningful direction for the organization • indicates an intent to stake out a particular business position • outline “Who we are.

• Should be set at levels that require stretch and disciplined effort. 10 .Setting Objectives • The purpose is to convert the mission into Specific Performance Targets • Serve as yardsticks for tacking company progress and performance.

11 .What is a Strategic Plan? • A strategic plan specifies where a company is headed and HOW management intends to achieve the targeted levels of performance.

Strategic Management Basic model Options on Competitive Positioning Learning points from deviations Four Basic Elements Strategic management is the process of moving where you are to where you want to be in future – through sustainable competitive advantages 12 .


14 .Characteristic of the Strategic Management Process • An ongoing exercise • Boundaries among the tasks are blurry rather than clearcut • Doing the 5 task is not isolated from other managerial responsibilities and activities. perfecting the current strategy. • The time required to do the tasks of strategic management comes in lumps and spurts rather than being constant and regular. • Involves pushing to get the best strategy supportive performance from each employee.



innovation and customer responsiveness .What is a Business level strategy • Business level strategies are firm-specific business model that will allow a company to gain a competitive advantage over its rivals in a market or industry. • It aims at improving the effectiveness of a company’s operations and thus its ability to attend superior efficiency. • Its ability to improve company’s operations helps in achieving cost leadership or helps the company in differentiating its product from the rival company. 17 . quality.

Key stakeholders in a business organization include creditors. owners (shareholders). and may be in contact with the business on a daily basis. or may just occasionally. customers. unions. and the community from which the business draws its resources. or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization's actions. and policies. They may have a direct or indirect interest in the business. government (and its agencies). group. suppliers. 18 . objectives. • Person. directors. employees.Stake holders in Business • A stakeholder is any individual or organisation that is affected by the activities of a business.

Management and employees – they may also be shareholders – they will be interested in their job security. . Trade Unions – who will represent the interests of the workers. Pressure Groups – who are interested in whether the business is acting appropriately towards their area of interest. Customers and suppliers. Government – especially the Inland Revenue and the Customs and Excise who will be collecting tax from them. prospects and pay.The main stakeholders are: Shareholders (not for a sole trader or partnership though) – they will be interested in their dividends and capital growth of their shares. Banks and other financial organisations lending money to the business.

Stakeholders have an interest in the company but do not own it (unless they are shareholders). The owners often have to balance their own wishes against those of the other stakeholders or risk losing their ability to generate future profits (e.g. the other stakeholders’ desires tend to cost money and reduce profits. . Often the aims and objectives of the stakeholders are not the same as shareholders and they come into conflict. the workers may go on strike or the customers refuse to buy the company’s products).Stakeholders versus Shareholders It is important to distinguish between a STAKEHOLDER and a SHAREHOLDER. They sound the same – but the difference is crucial! Shareholders hold shares in the company – that is they own part of it. The conflict often arises because while shareholders want short-term profits.

Social responsibility for one group can conflict with other groups. especially between shareholders and stakeholders Stakeholder Shareholder Employee Supplier Customer Local community Government Environment Example of responsibility to that stakeholder Good return on investment Fair pay and working conditions Regular business and prompt payment Fair price and safe product Jobs and minimum disruption Employment for local community Less pollution .Social Responsibility Social responsibility is the duty and obligation of a business to other stakeholders.

Customer Care. Direction Taxation.Examples of a company's stakeholders Stakeholders Owners private/shareholders Government Senior Management staff Non-Managerial staff Trade Unions Customers Suppliers Creditors Community Examples of interests Profit. Involvement. Environmental issues. VAT. Liquidity Jobs. Legal requirements Value. Credit score. Performance. Growth Rates of pay. Ethical products Providers of products and services used in the end product for the Customer. Quality. Legislation. Shares . Job security Working conditions. Minimum wage. Low unemployment Performance. New contracts. Targets.

(For example the general public.although they do not engage in direct economic exchange with the business . suppliers. creditors. customers.NonMarket (or Secondary) Stakeholders are those who . and the media) .are affected by or can affect its actions. and employees) External Stakeholders . (For example stockholders.Market (or Primary) Stakeholders are those that engage in economic transactions with the business. business support groups. communities.activist groups.Types of stakeholders Internal Stakeholders .

the framework for all your strategic planning.Vision The Vision of a company lays out some desired future state. Whether for all or part of an organization. “Where do we want to go?” . For ex: To become the world’s leading consumer company for automatic products and services. •A vision statement may apply to an entire company or to a single division of that company. Your vision statement is your inspiration. •A vision statement is sometimes called a picture of your company in the future but it’s so much more than that. what the company would like to achieve. the vision statement answers the question. it articulates often in bold terms.

Mission A company’s mission describes what it is that the company does. • A mission statement is a brief description of a company's fundamental purpose. It is the first component of the strategic management process which provides frame work or context within which strategies are formulated. A mission statement answers the question. anytime”. "Why do we exist?" • The mission statement articulates the company's purpose both for those in the organization and for the public. output and communicate image-anywhere. value and major goals. vision. process. 25 . For ex: the mission of kodak is to provide “customers with the solution they need to capture. store. It includes four main components mission.

measure. intention. 26 . the end or aim to which the view is directed in any plan. aim. view. It is also a mission statement. plan. General objectives of a firm. design.Purpose That which a person sets before himself as an object to be reached or accomplished. or exertion. as listed in its articles of incorporation or memorandum of association.

on the basis of their perceived worth. • A commercial activity engaged in as a means of livelihood or profit. or an entity which engages in such activities. 27 .Business Definition • Economic system in which goods and services are exchanged for one another or money. Every business requires some form of investment and a sufficient number of customers to whom its output can be sold at profit on a consistent basis.

"I'm in the computer business. Commerce is buying and selling products or services.") 28 .Business • A business is an enterprise or entity that provides products or services to customers. Business is doing commercially viable and profitable work.e. • A business: A legally recognized organization or enterprise that operates with the objective of earning a profit from the sale of goods or services • Business: The activity in which you participate in order to earn money (i.

Long term goals and short term objectives are derived from mission. 29 .Objectives and Goals Definition Objectives and goals are used interchangeably in Management literature but the recent strategic literature shows a suitable distinction between these two terms. which the organisation tries to achieve through its operations. Objective is the end. So growth is a goal where as an objective is to increase growth by 10% in terms of market share and sales over last year. Goal is an open ended statement. which does not qualify what needs to be achieved and the time frame for completion.

It is split into business wise and functional targets and performance targets.Objectives and Goals Objectives form the basis for all other functional decisions such as finance. employee satisfaction 30 . Areas where Objectives are set •Growth •Profitability •Market share •Productivity •Technology •R&D and Innovation •Corporate Social Responsibility. manufacturing. Objectives indicate the organisational performance to be realised and expected over a period of time. marketing and human resource. Image.

Long term and short term 31 .Objectives and Goals Characteristics of Objectives Objective setting is a complex Process. It has certain characteristics •Specific •Time Bound •Measurable •Challenging •Objectives form a hierarchy •Constraints •Verifiable •Time frame.

Objectives and Goals Formulation of Objectives It is a complex Process. 32 . •The forces in the environment •Realities of firm’s resources and power relationship •The values of top management •Past strategies Objectives are important for strategic management for the following reasons: •Objectives help to relate the organisation in the environmental context. •Objectives help to coordinate decisions. All of them aware of company’s objective to coordinate •Objectives serve as standards of appraising organisational performance and evaluate the success and failure of Orgn. It helps to attract people.

policies. customers. and institutions affecting the way a corporation (or company) is directed. employees. The principal stakeholders are the shareholders. customs. administered or controlled. the board of directors. plus a healthy board culture which safeguards policies and processes. and the community at large. creditors. suppliers. laws. Sound corporate governance is reliant on external marketplace commitment and legislation. 33 . Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed.Corporate Governance &Social Responsibility Corporate Governance Corporate governance is the set of processes.

the Shareholders. the Management. Dr.Corporate Governance The basic objective of Corporate Governance would be "enhancement of the long-term shareholders value while at the same time protecting the interests of other stakeholders." •3 key constituents of Corporate Governance are : 1. 2. the Board of Directors and 3.Sundararajan .S.

Sundararajan .What.S. market forces. Why and How of Good Governance? – Good governance: balance or match between the culture (mutual expectations) and self-interest of the participants – Why Good Governance? To make all participants better off – Elements of Good Governance: balance among regulation. and social norms Dr.

Objectives of good corporate governance 1. Strengthen management oversight functions and accountability Balance skills. 4. 2.Sundararajan 36 .S. experience and independence on the board appropriate to the nature and extent of company operations Establish a code to ensure integrity Safeguard the integrity of company reporting Risk management and internal control Disclosure of all relevant and material matters Recognition and preservation of needs of shareholders Dr. 5. 6. 3. 7.

Principles of Corporate Governance Commonly accepted principles of corporate governance include: •Rights and equitable treatment of shareholders. •Role and responsibilities of the board. •Disclosure and transparency. •Interests of other stakeholders. •Integrity and ethical behaviour. .

Examples include: •competition •debt covenants •demand for and assessment of performance information (especially financial statements) •government regulations •managerial labour market •media pressure •takeovers .Internal corporate governance controls Monitoring by the board of directors. External corporate governance controls encompass the controls external stakeholders exercise over the organisation. Balance of power and Remuneration. Internal control procedures and internal auditors.

It means open and transparent business practices that are based on ethical values and respect for employees.Corporate Governance &Social Responsibility Corporate Social Responsibility CSR has become an integral part of corporate strategy. It is designed to deliver sustainable value to society at large as well as to shareholders. community and natural environment. Some of the benefits of being socially responsible is that they can attract good employees who prefer working for a responsible firm 39 .

Corporate Governance &Social Responsibility Theories of Corporate Social Responsibility • The instrumentation theories • Political Theories • Integrative theories • Ethical Theories  Wealth creation is main aim of CSR Areas of Social Responsibility Pollution Control. Training selfhelp and Philanthropic activities 40 . Health and hygiene.

Unit II

Competitive Advantage
Competitive advantage is delivering superior value advantage to your target customers relative to your competitors. Or delivering equivalent customer value to your target customers relative to your competitors , but at a lower cost. It has four dimensions namely efficiency, quality, innovation and customer responsiveness. These are developed by building competencies, resources and capabilities. Three critical issues are relevant in this regard i.e. 1) What are the factors influence CA? 2) Why do successful companies lose their CA? 3) How can companies avoid failures and CA over time.


Unit II

Competitive Advantage
Generic Building blocks of Competitive advantage Efficiency, quality, innovation and customer responsiveness are four basic ways for lowering costs and achieving differentiation. The four factors are interrelated in the sense, superior quality leads to superior efficiency and innovation will increase efficiency and innovation will increase efficiency, quality and customer responsiveness. Efficiency Quality Innovation

Unit II

Competitive Advantage
Distinctive Competence: It is a unique strength that allows a company to achieve superior efficiency, quality, innovation and customer responsiveness. Sources of Distinctive Competencies 1.Resources and 2.Capabilities 1. Resources is an asset, competency, process, skill or knowledge. It may be tangible like land, building, plant, machinery and intangible like brand names, reputation, patents, know-how and R&D. It should satisfy three conditions i.e. value, Unique, Extendibility. 43

which bring together and put them to purpose use. Sanyo. established distribution networks. Capability drivers are patents. The organisation’s structure and control system gives rise to capabilities. HDFC 44 . favorable location. which are intangible. ICICI. Sony. process improvement.Unit II Competitive Advantage 2. Toshiba. Hitachi. licenses. and interrelationship. Capabilities Capabilities are skills. HPCL. Ex: HLL.

Durability depends on three factors: Barriers to imitation. Capability of 45 Competitors and Dynamism.Distinctive Competence Distinctive Competencies is a unique strength that allows a company to achieve •Superior Efficiency •Superior Quality •Superior Innovation •Superior Customer Responsiveness Durability of Competitive advantage It refers to the rate at which the firms capabilities and resource depreciate or become obsolete. .

Bench marking involves identification of best practices adopted in other companies. quality.Avoiding Failure and Sustaining competitive Advantage •Usually imbalance between various dimension of competitive advantage such as efficiency. innovation and customer responsiveness are considered to be the main reason for failure of many firms. . prudential use of power helps 46 to maintaining Competitive advantage. •Bench marking will facilitate organisations to build distinctive competencies. •Appropriate leadership style. •Need for new organisational structure and control systems in response to the Changed environment. •Most significant step in avoiding failure is identification of barriers to change and overcoming such barriers.

Customers. suppliers. task environment •International Environment •Economic Forces •Socio cultural forces •Legal Environment •Political forces •Technological forces •Industry. Government.External Environment Environmental factors can be classified as •Macro environmental factors and •Factors which are specific to the given business i. . structure. Culture.e. Competitors 47 •Internal Environment: Resource.

External Environment Macro Environmental factors •Demographic Environment •Technological Environment •Socio Cultural Environment •Economic environment •Political environment •Regulatory environment •International enviornment 48 .

External Environment Factors Relevant to Specific Business •Market environment •Supplier environment •Environmental Scanning •Task Environment 49 .

Bargaining Power of Buyers 4.Threats of Substitutes 5.Porter’s Five Forces Model and Strategic Group Five Forces 1.Rivalry among Existing Firms 50 .Threat of New entrants 2.Bargaining power of Suppliers 3.

Capital Requirements 5.Government Policy 7.Economies of scale 2.Access to Distribution Channels 6.Product Differentiation 3.Brand Identity 51 .Cost Advantage 4.Porter’s Five Forces Model and Strategic Group Threat of New entrants Sources of possible barriers to entry 1.

unique (software) •Substitutes are not easily available (electricity) •Suppliers can threaten with forward integration and compete directly with the existing firm. •A purchasing firm buys a small quantity of the supplier’s goods and services and it is unimportant to the supplier.Porter’s Five Forces Model and Strategic Group 2. Bargaining power of Suppliers Conditions prevail for Powerful supplier •The supplier industry is dominated by a few companies selling (petroleum industry) •The product of service is differentiated. 52 .

Porter’s Five Forces Model and Strategic Group 3. Bargaining Power of Buyers Buyers are powerful in the following circumstances •The suppliers are more in number but the buyers are few •The buyers buy in large quantity •More no. of alternative suppliers and their undifferentiated products •The cost of changing supplier is not much •The supplier depends on the buyer •The purchased items is not important to the final quality/price •The buyers has the potential to integrate backward by producing product •The buyers can use the threat of vertical integration for price 53 .

Porter’s Five Forces Model and Strategic Group 4. . Threats of Substitutes •Tea is a substitute of a coffee •Water is considered a substitute of soft drinks •Saccharine is substitute for sugar Availability of few substitute provides opportunity for the company to raise the price and get higher profit 5. Rivalry among Existing Firms Reasons for intensity of rivalry among established players Industry competitive structure (ICICI vsSBI) Demand conditions 54 The height of Exit Barriers in the industry.

Industry Analysis 55 .

availability of substitutes. Process and product R&D requirements •Social Factors: Ecological impact. Work ethics. seasonality. Manpower Regulations.Personnel adaptability •Competitive Competitive Intensity. Degree of integration. consumer protection.unionisation. Profitability. patents.factors: Inflation. Complexity. Product differentiation •Technological factors: Maturity. Wage level Foreign Exchange Impact.Demographicchanges. Share volatility. Barriers to exit. captive markets. Barriers to entry. Legislation/protection. Taxation supply. Degree of concentration. 56 .External Environment Factors Relevant to Specific Business •Market factors: Market size. Capacity utilization factors: •Economic and Govt. growth rate.

has different mission. For ex. 57 . Mc Donald. A company’s close competitors are members of the same strategic group. objective. though in the same restaurant industry. In a strategic group. strategies and in different strategic group.Strategic Groups Within an Industry a strategic Group refers to a set of Business units which pursue similar strategies with similar resources. each member company almost follows the same basic strategy as other companies in the group. Burgar King and Domino are the restaurant industry and have many things in common. Haldiram.

Members of the strategic group mainly threaten a company’s profitability. Three major strategic group emanate from the mapping such as i)mini steel plants. Strategic group in an industry can be mapped by two dimensional graph by selecting two variables. ii)integrate steel plants iii)specially steel and cheap import 58 .Strategic Groups Since the companies in a strategic group follow similar strategy the product of such companies are viewed by consumers as substitutes for each other.

5.Limitations of Strategic Group model 1. 3. The two models provide a static picture of competition which overlooks the possibility of innovation in business. Critics of five forces model are of the view that innovation brings in new products.No attention to individual differences of companies but they overemphasize the importance of industry and strategic group structure. 4. 5-forces model assumes a clear recognisable industry 6. 59 . 2. Very weak evidence of a link between strategic group membership and company profit rates. 5-forces model does not consider the possibility of industry structure being altered. The issues like partnerships are not addressed in this model 7. process and enormous profits.

A strategist should be aware of these development during strategy formulation and anticipate them in advance. and Decline.Strategic Types Different Strategic types • Defenders • Prospectors • Analysers and • Reactors Competitive Changes During Industry Evolution Growth. Maturity. these stages and give rise to opportunity and threat for an industry. 60 .

Strategic Types The industry life cycle model is used for analysing the effect of industry evolution on competitive forces Based on the industry life cycle model. •Embryonic industry environment •Growth industry environment •Shakeout environment •Mature industry environment and •Declining industry environment 61 .e. industry environment could be identified i.

The world economy has undergone a fundamental change. The increasing globalisation of markets and production has two underlying reasons. Trade barriers got decrease and free flow of goods. time and culture. Globalisation of production and global markets are taking place.Globalisation and Industry Structure In conventional economic system. The tastes and preference of customers of different countries are converging on common global norms. With globalisation. national markets are separate entities separated by trade barriers of distance. capital and services has been set in motion. markets are moving towards a huge global market place. 62 .

Channel televisions such as HBO. The intense rivalry forces all firms to maximise their efficiency.Globalisation and Industry Structure The revolution that took place in communication. Technological innovations have revolutionalised globalisation of markets. 63 . information and transportation technologies enabled companies to reduced cost of information processing. quality innovative power and customer satisfaction. CNN. For example US auto market was swept by Japanese auto giant all of sudden. to establish worldwide communication network and to link together worldwide operations. MTV are received and watched in many countries.

National Context and Competitive Advantage In globalisation successful companies in certain industries are found in specific countries. Japan.consumer electronics company in the world German – Chemical and engineering companies in the world US – computer and bio technology India – raw material resources and food industry sector Intensity of rivalry Factor National Competitive conditions Determinants of Competitive Advantage advantage Competitiveness of related and supporting industries Local demand conditions 64 .

which makes competitive advantage superficial and temporary. So companies try to imitate the market leader to sustain the competitive advantage and try to establish good relationship with supplier to reduce cost. repositioning by incumbents and tactical redefinitions of market boundaries as diverse industries merge. Market stability is threatened by short product life cycles.Globalisation and Industry Structure Hyper Competition It occurs in any industry due to intense environmental uncertainty. . improve quality and gain latest 65 technology. short product design cycles new technologies frequent entry by unexoected outsiders.

1: Strategic Management 1. 9.What do you mean by CSR illustrates with examples how Indian companies pursue CSR. 3. Write the steps involved in this process. 4.Briefly Explain the Capabilities and Competencies in Strategic Management.Explain the Strategic Groups and Limitations.What is strategy? Define Strategic management and write the elements of strategic management. Explain the Environmental analysis in Strategic Management process. 8. 6.Mention the objectives and benefits of strategic management. 5. Discuss the steps involved in strategic Management Process. How do companies formulate mission statement that contribute to Strategic Management ? illustrate with example. 10. 2.Motivation No.Name the components of external environment and explain any two of them. 66 .Discuss Competitive Advantage of Textile industries in India with help often illustration 7.

Hill Gareth R.Assignment No.L.1: Strategic Management Case Study on Strategic Management Kindly refer the page Number 73&74 Strategic Management An Integrated Approach Author: Charles W.Jones 2009 Edition 67 .

and (3) aligning policies. practices. 68 . (2) envisioning a new or effective role for the firm in a creative manner. and resources to realize that vision.Unit-III Strategies Corporate Strategy Approach to future that involves (1) examination of the current and anticipated factors associated with customers and competitors (external environment) and the firm itself (internal environment).

This may appear to be a strange starting point but unless you can answer these type of questions you cannot produce vision statements and mission statements that have any real meaning.Unit-III Strategies Corporate Strategy Corporate Strategy will ask you to answer fundamental questions such as "Why are you in business?" and "Why are you in this particular business?". Corporate coaching may produce a business plan as a summary document but that is almost incidental. 69 .

DIRECTIONAL STRATEGIES Growth Concentration Vertical Growth Horizontal Growth Diversification Concentric Conglomerate Stability Cautiously proceed Maintain Profit Retrenchme nt Turnaround Divest/Sale Liquidation .

STRATEGIC ALTERNATIVES Generic or grand or basic strategies •Stability -better after sales service. Technology •Retrenchment -Withdrawal -Customer group. modernize plant.function. technology (unprofitable) •Combination E. Improve performance to sustain •Expansion -Change in customer group. Wide variety of services to customers (stability) -New products in product range (expansion)S . function. bulk discount.g.

Overall cost leadership strategy 2.Focus on niche market .STRATEGIC ALTERNATIVES Michael Porter -Three type of generic strategies (Business Level Strategies) 1.Differentiation strategy 3.

Cost leader is relatively safe as long as he maintains cost advantage.1. 2. Cost leadership strategy try to produce goods/services at a lower cost than other players and try to out perform others. the cost leader can survive and with stand the competitive force and make above average profits.The cost leadership can charge lower price than immediate competitors and achieve higher profit than competitors.Overall cost leadership strategy This is a generic business level strategy in which a large business produces at the low cost possible. . Low cost strategy implies tight production controls and rigorous use of budgets to control production process.When rivalry increase in the industry at a later stage with price competition. no frills products and services for a large market with a relatively elastic demand. 1.

.The cost advantage arises from different factors like •Efficient scale economies •Benefits of early entry •A large market share •Locational advantage •Synergy between functions •Experience curve effects •Dropping unprofitable customers •Minimum R&D expenses •Just-in-time inventory The cost leadership strategy have some of advantages and some disadvantages.

Companies which pursue differentiation strategy create product which are perceived as unique by customers. Sometimes a differentiator creates products for each market segment and proves to be a broad differentiator. IBM and Dell Computers differentiation their products through high product quality and reliability of trained force. Example. and they charge premium price.Differentiation Strategy This is a generic business level strategy wherein a larger business products and markets to the entire industry products that can be readily distinguished from those of companies. which is above industry average. Sony makes 24 models of colour television sets to suit the needs of different market segments. . A differentiator often divides the market into segments and niches.2. Mercedes Benz cars Roles watches Procter and Gamble.

by type of customer or by segment of product line. It is a specialised differentiator or cost leader. It also get some advantages and disadvantages.Differentiation Strategy A venues of differentiation are as follows •Brand image •Channel clout •Competent structure •Unique process •Advanced R&D setup and •Product Innovation Differentiation has more advantages instead disadvantages. which may be defined geographically. A focused company pays attention to serve a particular market niche. Focus Strategy This is the strategy is pursued to serve the needs of a limited customer groups or segment. A geographic niche is defined by a locality. .

Life cycle Effects – embryonic. the choice of investment strategy to support the chosen business level strategy is crucial in order to gain a competitive advantage. matirity and decline stages Competitive tactics. sales and marketing to develop distinctive competencies In investment strategy two aspects deserve a strategist’s attention 1.Market Location Tactics . Differentiation strategy requires massive investment in functions such as research and development. shakeout.Competitive Position – based on market share and distinctive competencies (strong/weak) 2.timing tactics.Business Level Strategy While choosing a business level strategy in terms of product/market/distinctive competency. growth. An investment strategy involves deployment of human and financial resources to gain a competitive advantage.

distribution and pricing •Financial Strategy •Operations Strategy •Human Resource Strategy •Research and Development Strategy •Information System Strategy •Management Attitude to risk •Culture .Business Level Strategy Functional Strategy •Out Sourcing •Marketing Strategy-product development. advertising and promotion.

Strategy in Global Environment Global Expansion In international business operations. They perform the following activities: •Transferring their distinctive competencies •Dispersing various value creation activities to favorable location •Exploiting experience curve effects Competitive Pressures 1.Pressure for cost reduction and 2.Pressure for local responsivenessDifferences in consumer tastes and preferences Differences in infrastructure and traditional practices Differences in distribution channel and Host GovernmentDemands . Companies expand their operations globally in order to increase their profitability. business enterprises pursue global expansion to support generic business level strategies such as cost leadership and differentiation.

Transnational strategy. Global Strategy 4.Strategic Choice In international Business. Multi domestic strategy 3.International strategy 2. companies pursue four Strategies such as 1. .

differentiation. and other strategic issues. • The concept of vertical integration can be visualized using the value chain. the vertical scope of the firm is an important consideration in corporate strategy. and expansion upstream is referred to as backward integration. Because it can have a significant impact on a business unit's position in its industry with respect to cost. 81 . Consider a firm whose products are made via an assembly process. • Expansion of activities downstream is referred to as forward integration.Unit-III Corporate Strategies Vertical Integration The degree to which a firm owns its upstream suppliers and its downstream buyers is referred to as vertical integration.

•Facilitate investment in highly specialized assets in which upstream or downstream players may be reluctant to invest and *Lead to expansion of core competencies. .Benefits of Vertical Integration Vertical integration potentially offers the following advantages: •Reduce transportation costs if common ownership results in closer geographic proximity. •Capture upstream or downstream profit margins. •Provide more opportunities to differentiate by means of increased control over inputs. •Increase entry barriers to potential competitors. for example. •Improve supply chain coordination. if the firm can gain sole access to a scarce resource. •Gain access to downstream distribution channels that otherwise would be inaccessible.

•Decreased flexibility due to previous upstream or downstream investments. •Potentially higher costs due to low efficiencies resulting from lack of supplier competition. For example. the drawbacks may negate any potential gains. (Note however.) •Decreased ability to increase product variety if significant inhouse development is required. the firm may need to build excess upstream capacity to ensure that its downstream operations have sufficient supply under all demand conditions. that flexibility to coordinate vertically-related activities may increase.Drawbacks of Vertical Integration While some of the benefits of vertical integration can be quite attractive to the firm. •Developing new core competencies may compromise existing competencies. Vertical integration potentially has the following disadvantages: •Capacity balancing issues. . •Increased bureaucratic costs.

Factors Against Vertical Integration The following situational factors tend to make vertical integration less attractive: •The quantity required from a supplier is much less than the minimum efficient scale for producing the product. •The vertically adjacent activities are in very different types of industries. •The product is a widely available commodity and its production cost decreases significantly as cumulative quantity increases. •Strategic similarity between the vertically-related activities. •The core competencies between the activities are very different. •Sufficiently large production quantities so that the firm can benefit from economies of scale. For example. The firm then may be viewed as a competitor rather than a partner . manufacturing is very different from retailing. •Reluctance of other firms to make investments specific to the transaction.Factors Favoring Vertical Integration The following situational factors tend to favor vertical integration: •Taxes and regulations on market transactions •Obstacles to the formulation and monitoring of contracts. •The addition of the new activity places the firm in competition with another player with which it needs to cooperate.

The following are a few of these alternatives for relationships between vertically-related organizations: •long-term explicit contracts •franchise agreements •joint ventures •co-location of facilities •implicit contracts (relying on firms' reputation) .Alternatives to Vertical Integration There are alternatives to vertical integration that may provide some of the same benefits with fewer drawbacks.

Reasons for strategic Alliance •To gain access to foreign market •To reduce financial risk •To bring complementary skills •To reduce political risks •To achieve competitive advantage •To set technological standards How to make strategic Alliance work? •Alliance structure •Managing the alliance .Global Strategic Alliance A strategic alliance is a cooperative agreement between companies who are competitors from different companies. It may take the form of formal joint venture or short-term contractual agreement with equity participation or issue-based participation.

STRATEGIC ALTERNATIVES DIMENSIONS OF GRAND/GENERIC STRATEGIES I. Related /Unrelated .To existing customer groups. existing customer.Independent of any other entity .Association with other entity II.Internal/External . function. technologies .

Horizontal/Vertical -Serving additional customer groups -consolidating backward/forward IV. Active/Passive Active -offensive strategy Passive -Defensive strategy 4 grand strategies ×4 dimensions ×2 types of each dimensions ×3 dimensions of each business definition = 96 Mixed strategies .STRATEGIC ALTERNATIVES DIMENSIONS OF GRAND/GENERIC STRATEGIES III.

technological up gradation as a strategy. . high -internal expansion strategy Merge with another company -for modern .STRATEGIC ALTERNATIVES MODERNIZATION STRATEGIES Developing new technology strategy i.external expansion strategy .internal stability strategy.stability -prior to expansion & diversification If pace of modernization is low . improve efficiency and productivity .Extensively used by Indian organization .e.Increased production. lower cost.

STRATEGIC ALTERNATIVES DIVERSIFICATION AND INTEGRATION STRATEGIES 1. Vertical Integration -make new products to serve its own needs -backward/forward integration 2. Horizontal Integration -Same product -more customer group -merger similar companies -Spartek Ceramics takeover of Neycer Ceramics .

hosiery. technology •ITC -Cigarette & Hotel •TTK group -Chemicals. function. Concentric diversification •Marketing & technology related -rain coat manufacturer -rubber based items . contraceptives .STRATEGIC ALTERNATIVES DIVERSIFICATION AND INTEGRATION STRATEGIES 3. Conglomerate diversification .Unrelated to customer groups. shoes •Technology related.Unrelated technology (cosmetic & sewing machines -women) 4.leasing company -hire purchase •Marketing related .gloves.

TAKEOVER AND JOINT VENTURE STRATEGIES •Diversification & Integration •Merger ( Amalgamation) •A acquires B -B merged with A •A & BC -Consolidated •Horizontal Concentric •Vertical Conglomerate .STRATEGIC ALTERNATIVES MERGER.

JOINT VENTURE •2 firms in one industry •2 firms across different industries •Indian & foreign firm in India •Indian & foreign firm in foreign country •Indian & foreign firm in third country •Last two types are on increase now .

Mismanagement •Uncompetitive products. low morale.TURNAROUND STRATEGIES •Reversing a negative trend •Retrenchment -internal/external –improve internal efficiency -Divestment/liquidation Danger signs: •Persistent negative cash flows •Negative profits •Declining market share •Deterioration in physical facilities •High turnover. sick company .

Human approach .E credibility –rare •Existing team -withdraws temporarily -turnaround specialist –employed •Replace existing team / C.Surgical .MANAGING TURNAROUND •Existing team -support external consultant -if C.E Approaches: .

ACTION PLAN FOR TURNAROUND •Analysis of product. competition.setting. feedback. production process. remedial action . market segment positioning •Clear thinking -market place &production logic •Implementation of plans-target . market.

DIVESTMENT Divestment -(divestiture or cutback) -sale of or liquidation of a portion of business -SBU or profit center 1. Spinning it off -financially and managerially independent company with stake venture 2. Sell a unit outright Kelvinator India -spin-off -Avanti scooters -high production cost .

subject to supervision of court •Combination strategies –popular Criteria for strategic choice •Does strategy exploit the opportunities present in the environment? •Is it consistent with the resources of the firm.LIQUIDATION •Rarely -large companies liquidate •Buyers rare for purchase of assets •Court. voluntary. its competitive advantage & core competence? •Is the chosen level of risk feasible? •Is it appropriate to the values & aspirations of the firm? .

The gap between the two positions constitutes the background for various alternatives and diagnosis. •Focusing on the strategic alternatives •Evaluating strategic alternatives •Consider the Selection/decision factor •Criteria for evaluation alternatives (Objective &subjective factors) •Make choice of strategy The gap between what is desired and what is achieved widens as the time passes if no strategy is adopted.Gap Analysis In Gap Analysis the strategist examines what the organisation wants to achieve (desired performance) and what it has really achieved (actual performance). .

•Resource allocations .Factors affecting strategic choice •Nature of environment –stable? •Firm’s internal realities •Ambition of CEO / owners •Company culture •Firm’s capacity to execute the strategy.

Strategic Implementation •Evolve a systematic procedure to implement the strategy chosen –Procedural implementation plan –Proper resource allocation plan –Structural implementation plan –Functional implementation plan –Behavioural implementation plan •Evaluate and control through strategic and operational control measures •Success of a strategy is very much dependent on how the strategy is execute .

external objects. . TECHNIQUES OF ENVIRONMENT SCANNING SWOT ETOP ETOP: It is a process of dividing the environment into different sectors and then analyzing the impact of each sector on the organization. and dispensing information for tactical or strategic purposes. have a favorable impact on the organization. analyzing. Environmental scanning is a process of gathering. ETOP provides a clear picture to the strategists about which sectors & different factors in each sector. influences or circumstances under which someone or some thing exits.Environmental Threat and Opportunity Profile(ETOP) Environment means the surroundings.

major importers are the US & EU but India exports mainly to Africa.Environmental sectors Economic Nature of impact Impact of each sector Growing affluence among ETOP FOR BICYCLE COMPANY urban consumers. growth rate for niche market like sports. overall industry growth rate not encouraging. Market International Global imports growing but India’s share shrinking. Organized sector a virtual oligopoly with 4 major manufacturers. . buyers critical & better informed. rising disposable incomes & living standards. trekking etc is high.

as recreation. wide usage. customers preference . Industry too small to draw attention. Social Environment & health friendly transport option. convenient in traffic.Political Bicycle principal mode of transport for low & middle income. Regulatory Parts & components reserved for SSI. bicycle industry a thrust area for exports.

Technological Up gradation in progress. product innovations ongoing like battery operated & lightweight foldable cycles .Supplier Mostly ancillaries in smallscale sector supply parts & components. import of machinery simple. industrial concentration in Punjab & Tamilnadu. rising steel prices.

ORGANIZATIONAL APPRAISAL •Internal Environment .Capacity & ability to use distinctive competencies to excel in a particular field .Abilty to use its ‘S’ & ‘W’ to exploit ‘O’ & face ‘T’ in its external environment Organization resources .strength / weakness .strength & weakness in different functional areas Organization capability . availability .Physical & human cost.

ABC Key factor rating . long term Financial Analysis .Ratio Analysis.Rating of different factors through different questions Value chain analysis VRIO framework . EVA.METHODS & TECHNIQUES USED FOR ORGANIZATIONAL APPRAISAL Comprehensive.

METHODS & TECHNIQUES USED FOR ORGANIZATIONAL APPRAISAL … BCG. GE Matrix . PIMS. McKinsey 7S Balanced Scorecard Competitive Advantage Profile Strategic Advantage profile Internal Factor Analysis Summary .

may be distinctive competence • Strategy that best exploits the firms resources • Identify resource gaps & Invest in upgrading .SWOT ANALYSIS • Identify & classify firm’s resources-S&W • Combine firm’s strength into specific capabilities – Corporate capability.

Weakness(-5).ORGANIZATIONAL APPRAISAL Organizational Capability Profile (OCP) . Strength(5) Financial Capability Profile (a) Sources of funds (b) Usage of funds (c) Management of funds Marketing Capability Profile (a) Product related (b) Price related (c) Promotion related (d) Integrative & Systematic . Normal(0).

ORGANIZATIONAL APPRAISAL Operations Capability Factor (a) Production system (b) Operation & Control system (c) R&D system Personnel Capability Factor (a) Personnel system (b) Organization & employee characteristics (c) Industrial Relations General Management Capability (a) General Management Systems (b) External Relations (c) Organization climate .

EXAMPLES OF ORGANIZATIONAL CAPABILITY PROFILE Financial Capability Bajaj . decentralized collection Reliance .Company / Product Image .Cash Management LIC .Distribution Channel IDBI/ICICI Bank .Amicable relation with Ford Marketing Capability Hindustan Lever .Wide variety of products Tata .Centralized payment.high investor confidence Escorts .

Industrial relations problem .New specialty chemicals Personnel Capability Apollo tyres .absorb imported technology Balmer & Lawrie .EXAMPLES OF ORGANIZATIONAL CAPABILITY PROFILE Operations Capability Lakshmi machine works .R&D .

stable Best edited & most professionally produced .largest selling newspaper Unchallenged leadership .EXAMPLES OF ORGANIZATIONAL CAPABILITY PROFILE General management capability Malayalam Manaroma .Unified.

Capability Factor Competitive strengths / Weakness •Finance •Marketing High cost of capital.parts & components available •Operational . company position secure P&M .excellent .STRATEGIC ADVANTAGE PROFILE (SAP) A picture of the more critical areas which can have a relationship of the strategic posture of the firm in the future. reserves & surplus Fierce competition.

STRATEGIC ADVANTAGE PROFILE (SAP) Capability Factor •Personnel Competitive strengths / Weakness Quality of management & personnel par with competition High Quality experienced top management .take proactive stance •General .

SWOT Analysis .


GAP Analysis .


Strategy: the direction and scope of the company over the long term. Structure: the basic organization of the company, its departments, reporting lines, areas of expertise and responsibility (and how they inter-relate). Systems: formal and informal procedures that govern everyday activity, covering everything from management information systems, through to the systems at the point of contact with the customer (retail systems, call center systems, online systems, etc).

THE SOFT S’s Skills: the capabilities and competencies that exist within the company. trained and motivated. What it does best. Staff: the company's people resources and how the are developed. Ultimately they guide employees towards 'valued' behavior. Style: the leadership approach of top management and the company's overall operating approach. . Shared values: the values and beliefs of the company.

C.E.E.MCKINSEY’S APPROACH TO PROBLEM-SOLVING • The problem is not always the problem • Create structure through “M.” (Mutually Exclusive. Collectively Exhaustive –grouping principle) • Don’t reinvent the wheel • Every client is unique (no cookie cutter solutions) • Don’t make the facts fit your solution • Make sure your solution fits your client • Sometimes let the solution come to you • No problem is too tough to solve .

0 High 6.7 Medium 3.GE Nine-Cell Matrix Industry Attractiveness • Market Size • Growth Rate • Profit Margin • Intensity of Competition • Seasonality • Cyclicality • Resource Requirements • Social Impact • Regulation • Environment • Opportunities & Threats • Relative Market Share • Reputation/ Image • Bargaining Leverage • Ability to Match Quality/Service • Relative Costs • Profit Margins • Fit with KSFs 10.3 Weak 1.0 Rating Scale: 1 = Weak . 10 = Strong .7 Average 3.0 Strong 6.3 Low 1.

Strategy Implications of Attractiveness/Strength Matrix • Businesses in upper left corner – – Accorded top investment priority • Strategic prescription is grow and build Businesses in three diagonal cells – Given medium investment priority Invest to maintain position Businesses in lower right corner – Candidates for harvesting or divestiture – – • May be candidates for an overhaul and reposition strategy .

The Attractiveness/Strength Matrix • Allows for intermediate rankings between high and low and between strong and weak Incorporates a wide variety of strategically relevant variables Stresses allocating corporate resources to businesses with greatest potential for – – • • Competitive advantage and Superior performance .

GE 9 Cell Matrix High Competitive Strengths Low High Invest Grow Attractiveness Hold Harvest Divest Low .

GE 9 Cell Matrix for Pepsico High Competitive Strengths Low High Snack Foods Attractiveness Soft Drinks Low .

Distinctive Competence – A Competitively Superior Resource • A distinctive competence is a competitively valuable activity that a company performs better than its competitors • A distinctive competence is a competitively potent resource source because it – Gives a company a competitively valuable capability unmatched by rivals – Can underpin and add real punch to a company’s strategy #1 – Is a basis for sustainable competitive advantage .

high-quality manufacturing of motor vehicles Starbucks Innovative coffee drinks and store ambience .Examples: Distinctive Competencies Toyota Low-cost.


Balanced Scorecard
 Balanced Scorecard – A model integrating financial and non financial measures. (Kaplan & Norton 1996)  Causal link between outcomes drivers of such outcomes and performance

 Translates the vision and strategy of a business unit into objectives and measures in 4 distinct areas  Financial  Customer  Internal Business process  Learning and growth

The Balanced Scorecard
Purpose of Balanced Scorecard:
A method of implementing a business strategy by translating it into a set of performance measures derived from strategic goals that allocate rewards to executives and managers based on their success at meeting or exceeding the performance measures.

The Balanced Scorecard
(Source: Kaplan & Norton, 1996)
Reasons for the Need of a Balanced Scorecard 1. Focus on traditional financial accounting
measures such as ROA, ROE, EPS gives misleading signals to executives with regards to quality and innovation. It is important to look at the means used to achieve outcomes such as ROA, not just focus on the outcomes themselves.

1996) Reasons for the Need of a Balanced Scorecard 2.The Balanced Scorecard (Source: Kaplan & Norton. Executive performance needs to be judged on success at meeting a mix of both financial and non-financial measures to effectively operate a business. .

The Balanced Scorecard
(Source: Kaplan & Norton, 1996)
Reasons for the Need of a Balanced Scorecard 3. Some non-financial measures are drivers of
financial outcome measures which give managers more control to take corrective actions quickly. (Example: controls in jet cockpit for pilot)

The Balanced Scorecard
(Source: Kaplan & Norton, 1996)
Reasons for the Need of a Balanced Scorecard 4. Too many measures, such as hundreds of
possible cost accounting index measures, can confuse and distract an executive from focusing on important strategic priorities. The balanced scorecard disciplines an executive to focus on several important measures that drive the strategy.

Casual link between the measures
Financial Perspective How do we look to our Shareholders?

Customer Perspective How do our customers look at us? Learning and Growth Perspective How can we continue to improve?

Internal Business Perspective What we must excel at?

BSC: Causal Relationships Strategy Customer Financial Internal Process Learning .

•Evolve a systematic procedure to implement the strategy chosen •Procedural implementation plan •Proper resource allocation plan •Structural implementation plan •Functional implementation plan •Behavioural implementation plan •Evaluate and control through strategic and operational control measures •Success of a strategy is very much dependent on how the strategy is execute .Unit IV-Strategy Implementation Strategy implementation is essential part of strategic management process.

.Strategy Implementation Problems while implementing Strategy •Implementation takes longer time than required •Unanticipated major problems crop up •Ineffective coordination of activities •Crisis management took lot of time •Employees have less than required capabilities •Inadequate training of lower level employees •Problems arising from uncontrolled external environment •Inadequate leadership on the part of departmental environment •Lack of precise definition of implementation of tasks and activities •Inadequate monitoring of activities through information system.

Strategy Implementation Strategy implementation process requires •Development of programmes •Budgets •Procedures •Strategy is implemented through appropriate structure •Control system •Corporate strategy leads to changes in organisationstructure •i. .e. Creation of new strategy •Emergence of administrative problems •Economic performance declines •Invention of new appropriate structure •Profits return to its previous level.

Information distoration 3.Tall structure Problems with tall structure 1.Number of middle managers.Coordianation 2.Strategy Implementation Basis of designing Structure 1.Flat structure 2.Integration Vertical Differentiation 1.Motivational problems 4. 5.Differentiation (vertical and Horzontal)and 2.Centralisation/ Decentralisation .

Transfer pricing 4.Distortion of information 2.Strategy Implementation Horizontal Differentiation •Simple structure •Functional Structure •Multidivisional structure Advantages and Disadvantages of Multidivisional structure 1.R&D 5.Competition of resources 3.Bureaucratic Costs •Matrix structure •Product team structure •Geographic structure. •Network structure .

Strategy Implementation Integration and control Staffing Staffing and strategy Matching Managers to strategy Executive succession and strategy Issues in Downsizing International issues in staffing .

Strategy Implementation Designing strategic Control system Strategy control is the process by which suitable control systems are established at the corporate business and functional levels in a company in order to evaluate whether a firm is able to achieve superior efficiency. Four steps involved in strategic control system 1.Compare actual with targets 4. . quality.Create measuring and monitoring systems 3. innovation and customer responsiveness.Evaluate and take corrective actions.Establish standards and targets 2.

Develop a measuring systems 3. Establish targets or standards •Physical standards •Cost standards •Capital standards •Revenue standards •Program standards •Strategic plan as control points 2.Strategy Implementation 1. Comparison of actual performance against the target 4. Initial corrective actions in the wake of deviations Characteristics of Good System Flexible enough to respond to unforeseen events Give accurate information about the company Provide information in a timely manner in such a way to avoid .

Market Control 2.Output Control 3. which provide context for) •First level or Individual level managers Types of Control system There are four types of control system 1. which provide context for) •Divisional level Managers (set controls.Strategy Implementation Levels of Control •Corporate level Managers (set controls.Bureaucratic Control 4. which provide context for) •Functional level Managers (set controls.Organisational culture .

Designing a Global structure •Multi domestic Strategy •International Strategy •Global Strategy •Transnational strategy .Cost leadership strategy and structure 4.Structure and control at the business level 3.Strategy Implementation Matching Structure and Control to strategy 1.Differentiation Strategy and structure 5.Structure and Control at functional level •Manufacturing Function •Sales function •R&D function 2.Focus strategy and structure 6.

•ROI •EPS •RE •EVA •MVA and Financial Ratios . Structure at corporate level •Unrelated diversification •Vertical Integration and •Related Diversification Performance Measurement Performance Measurement is a significant part of evaluation and control.Strategy Implementation Matching Structure and Control to strategy 7.

Non Substitutability 5.Control over contingencies 6.Control over information 4.Ability to cope up with uncertainity 2.Organisational Power and Politics Sources of Power 1. Power and change conflict 1.Centrality 3.Control over resources Organisational conflict Sources of Conflict •Differentiation •Task relationship •Scarcity of resources .Strategy Implementation Implementing Strategic Change: Politics.

.Strategy Implementation Organisation’s conflict Process 1.Felt conflict 4.Perceived conflict 3. Conflict resolution Strategies •Changing task relationship•Changing controls•Changing leadership•Changing strategy•Changing organisation •Unfreezing Refreezing.Manifest conflict 5.Latent conflict 2.Conflict aftermath Managing Conflict Strategically 1. Movement.

Premise control 2.Implementation Control 3.Determining the need for change 2.Determining the obstacles to change 3.Strategy Implementation Steps in Changing Process 1.Special Alert Control .Evaluating Change Techniques of Strategic Evaluation and Control •Strategic Control: There are four types of Strategic Control 1.Implementing change and 4.Strategic Surveillance and 4.

Innovative culture 7.Unit V Strategic issues Strategic issues in Managing Technology and innovation 1. Environmental Scanning 3. Time to market issues 4. Strategy iplementation 6. Strategy formulation 5. Organisational design . Role of Management 2. Corporate entrepreneurship 8.

8.Evaluation and control . 7. 5. 3. 2. Direct integration New product Business Department Micro New venture Department New Venture division Independent Business Units Special Business Units Nurturing and Contracting Contracting Complete spin-off 9. 9. 4. 6. Organisational design 1.Unit V Strategic issues 8.

Competitor analysis . private educational institutions and charities 2. Corporate governance 4. Stake holder analysis 3. Private hospitals. Public Governmental agencies such as universities. libraries and museums Application of Strategic Management concepts 1. SWOT analysis 2.Unit V Strategic issues Strategic Issues in Non Profit Organisation Non Profit Organisation may be classified as 1. Industry analysis 5.

Strong employees are more committed to their profession 5. Sponsors and government interference 4. Service is intangible and difficult to measure 2. .Unit V Strategic issues Strategic Issues in Non Profit Organisation Constraints on Strategic Management 1. Reward punishment system is under severe restraints. Beneficiary’s influence may be weak 3.

Issues in Strategy Implementation 1. Issues in Strategy formulation 1. Issues in Evaluation and control 1. 4. Professionalism Vs Rigidity 2. Goal Displacement and internal politics. Linking pin become important 3. Inputs rather than outputs .Unit V Strategic issues Strategic Issues in Non Profit Organisation 1.Goal conflict 2. Shift from results to resources 3. Decentralisation 2. Job enlargement and professionalism 3. Rewards/punishment are not related to performance 2.

Strategic Piggy backing 2. Venture Capital 3. Strategic Alliance . Mergers 4.Unit V Strategic issues Popular Strategies of Non Profit Organisation 1.

” “If you are going to be build a business that mortar model. you have to destroys the old brick-andin E-commerce.NEW BUSINESS MODELS AND STRATEGIES FOR THE INTERNET ECONOMY “If you are going to be build a business that mortar model. in E-commerce. you have to destroys the old brick-and- ” .

NEW BUSINESS MODELS AND STRATEGIES FOR THE INTERNET ECONOMY • Internet Technology and Market Structure • Strategy-Shaping Characteristics of the ECommerce Environment • E-Commerce Business Models and Strategies • Internet Strategies for Traditional Businesses • Innovative Business Models and Fast-Evolving Strategies are KSFs in E-Commerce .

or not having. e-commerce capabilities tilts the scales toward valuable resource strengths or threatening weaknesses – Creatively reconfiguring the value chain will affect a firm’s competitiveness vis-à-vis rivals .Impact of the Internet and E-Commerce • Impact on external industry environment – Changes character of the market and competitive environment – Creates new driving forces and key success factors – Breeds formation of new strategic groups • Impact on internal company environment – Having.

• Internet is composed of Characteristics of Internet Market Structure – Integrated network of users’ connected computers – Banks of servers and high-speed computers – Digital switches and routers – Telecommunications equipment and lines .

Supply Side of the Internet Economy • Major groups of Internet and e-commerce firms comprising the supply side include – Makers of specialized communications components and equipment – Providers of communications services – Suppliers of computer components and hardware – Developers of specialized software – E-commerce enterprises • • • • Business-to-business merchants Business-to-consumer merchants Media companies Content providers .

enterprising ecommerce rivals • Entry barriers into e-commerce world are relatively low • On-line buyers gain bargaining power .Strategy-Shaping Characteristics of the E-Commerce Environment • Internet makes it feasible for companies everywhere to compete in global markets • Competition in an industry is greatly intensified by new e-commerce strategic initiatives of existing rivals and by entry of new.

• Internet makes it feasible for firms to reach beyond their borders to find the best suppliers and.“at Internet speed” Strategy-Shaping Characteristics of the E-Commerce Environment (continued) . often in uncertain and unexpected directions • Internet results in much faster diffusion of new technology and new ideas across the world • E-commerce environment demands that firms move swiftly . further. to collaborate closely with them to achieve efficiency gains and cost-savings • Internet and PC technologies are advancing rapidly.

in the form of both technological expertise and managerial know-how Strategy-Shaping Characteristics of the E-Commerce Environment (continued) .• Internet and e-commerce technology open up a host of opportunities for reconfiguring industry and company value chains • Internet can be an economical means of delivering customer service • Capital for funding potentially profitable ecommerce businesses is readily available • Needed e-commerce resource in short supply is human talent.

Effects of the Internet and E-Commerce • Can produce important shifts in an industry’s competitive forces • Alters industry value chains. spawning substantial opportunities for increasing efficiency and reducing costs • Affects a company’s resource and weaknesses • Rapid pace of technological change often uncertain direction strengths with an .

• Provide new opportunities to put • Offer potential to exploit a globally-connected Internet business opportunities in a infrastructure in place globally wired e-commerce environment – Build out telecommunications system – Business-to-business sales – Install millions of servers – Provide high-speed Internet connections to billions of businesses and households – Develop software and networks to create a wired global economy – E-procurement – Business-to-consumer sales – E-retailing – Provide content – Provide services to users Overview of E-Commerce Business Models and Strategies .

Business Models: Suppliers of Communications Equipment • Traditional business model of a manufacturer is being used by most firms to make money – Sell products to customers at prices above costs – Produce a good return on investment • Strategic issues facing equipment makers – Several competing technologies for various components of the Internet infrastructure exist – Competing technologies may • Have different performance minuses • Be incompatible pluses and .

Strategy Options for Suppliers of Communications Equipment • Invest aggressively in R&D to win the technological race against rivals • Form strategic alliances to build consensus for favored technological approaches • Acquire other companies with complementary technological expertise • Hedge firm’s bets by sufficient resources one or more of technologies investing in mastering the competing .

Establish networks ahead of rivals to get in position to sign up customers . creating sizable up-front expenditures and heavy fixed costs – Key to success .Business Models: Suppliers of Communications Services • Business models are based on profitably selling services for a fee based on a flat rate per month or volume of use • Firms must invest heavily in extending lines installing equipment to have capacity to – Provide desired point-to-point service and – Handle traffic load and • Investment requirements are particularly heavy for backbone providers.

Name recognition and advertising . cable TV service and Internet access into a single package for a single monthly fee • Key strategic weapons for last mile providers .Business Models: Suppliers of Communications Services (continued) • Fierce competition has emerged among “last mile” providers selling high-speed Internet access • Strategic options – Provide high-speed (broadband) Internet connections using new digital signal line technology – Provide wireless broadband services or cable Internet service – Bundle local telephone service. long distance service.

Business Models: Suppliers of Computer Components and Hardware • Traditional business model is used .Stay with or ahead of rivals in introducing next-generation products • Competitive advantage will most likely be based on strategies keyed to low-cost .Make money by selling products at prices above costs • Strategic approaches – Stay on cutting edge of technology – Invest in R&D – Move quickly to imitate technological advances and product innovations of rivals • Key to success .

Business Models: Developers of Specialized E-Commerce Software • Business model involves – Investments in designing and developing specialized software – Marketing and selling software to other firms • Profitability hinges on volume • Strategic approaches – Sell software at a set price per copy – Collect a fee for every transaction provided by the software – Rent or lease the software .

distribution and delivery activities to specialists .Business Models: E-Commerce Retailers • Sell products at or below cost and make money by selling advertising to other merchandisers • Use traditional model of – Purchasing goods from distributors – Marketing items at a Web store – Filling orders from inventory at a warehouse manufacturers and • Operate Web site to market and sell product/service and outsource manufacturing.

fresh. and entertaining attract traffic .Strategic Approaches: E-Commerce Retailers • Spend heavily on advertising to build widespread brand awareness. draw traffic. and start process of developing customer loyalty • Add new product offerings to help to firm’s Web site • Be a first-mover or at worst an early mover • Pay consideration attention to Web site attractiveness to generate “buzz” about the site among surfers • Keep Web site innovative.

Handling warehousing and delivery activities • Firms are using services of “Internet middlemen” to efficiently sort all the supplier choices • Firms are using focus strategies to zero in on specific niches.Business Models: Suppliers of E-Commerce Services • Key strategic issue for e-commerce retailers . pursuing competitive advantage based on – First-mover mastery of a particular technology – Product superiority – Unique product attributes – Convenience and ease of use – Speed – More value for the money .

Internet Strategies for Traditional Businesses • Use Internet technology to communicate and collaborate closely with suppliers and distribution channel allies • Reengineer company and industry value chains to revamp how certain activities are performed and to eliminate or bypass others • Make greater use of build-to-order manufacturing and assembly • Build systems to pick and pack that are shipped individually products .

doing real-time market research.Internet Strategies for Traditional Businesses (continued) • Use Internet to give both existing and potential customers another choice of how to interact with the company • Adopt Internet as an integral distribution channel for accessing new buyers and geographic markets • Gather real-time data on customer tastes and buying habits. and use results to respond more precisely to customer needs and wants .

Key Success Factors: Competing in the E-Commerce Environment • Employ an innovative business model • Develop capability to quickly adjust business model and strategy to respond to changing conditions • Focus on a limited number of competencies and perform a relatively specialized number of value chain activities • Stay on the cutting edge of technology • Use innovative marketing techniques that are efficient in reaching the targeted audience and effective in stimulating purchases • Engineer an electronic value chain that enables differentiation or lower costs or better value for the money .

What is a strategic planning 7. Explain the different types of stability strategy with example. 12. 10. 8. Elaborate the impact of strategy implementation 3. What is cost leadership? Explain the Advantages and disadvantages of cost leadership. 4. 13.Motivation No. How does socio –economic factor influence the strategic management.What is bench marking? Explain differentiation strategy.Explain BCG MATRIX &GE Matrix 6. Write briefly about strategic alliance 9.What are the generic building blocks of competitive advantage? 2. Describe and evaluate alternative expansion stratergies. What is SWOT analysis 183 .2: Strategic Management 1.Explain value chain and exit barrier 11. Discus some major business policies 5.

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