STRATEGIC MANAGEMENT

An Introduction
Session 1a

Dr. Chiranjit Das

Assistant Professor
IBS Dehradun
1. What is strategy?

2. Why is studying strategic management important?

3. Can you think of an organization that does not need

strategic management?

4. What are your expectations from this course? How

does this course fit in with your overall career goal?
 STRATEGIC MANAGEMENT

It is a process of systematically creating,

implementing, and controlling of firms recourses
for gaining long-term competitive advantage. It is
also managing firms’ internal and external
stakeholders.
 STRATEGIC MANAGEMENT (EXAMPLES)

Ikea (www.ikea.com)

It is a Swedish furniture manufacturer, caters to all

needs of young, style-conscious and price
sensitive furniture buyers.
 Walmart

It is the world largest retailer known for

its everyday low cost price.
 Adani Enterprise

Adani Enterprise is one of the fastest growing companies

in India. It covers a wide range from power generation to
shipping, from coal mining to real estate, from vegetable
oil to creation of port, special economic zone, and
international trade.
Expansion and Diversification of Academic Activities

A Management institute, X, diversified its program

portfolio such as Executive education, certification
course, online MBA, MDPs and FDPs.
 Strategy Functional level
Looking outside
formulation strategies

Strategy Business level

Looking inside
implementation strategies

Looking at
Strategy for the Global strategies
relations between
future
inside and outside

Corporate-level
strategy
Porter’s Five Forces Shaping Industry Competition

Threat of New
Entrants

Bargaining Rivalry among Bargaining

Power of Existing Power of
Suppliers Competitors Buyers

Threat of
Substitute
Products or
Services
 Suppliers
Sources of bargaining power:
Switching costs Importance of volume to suppliers
Differentiation of inputs Impact of inputs on cost or differentiation
Supplier concentration Threat of forward/backward integration
Presence of substitute inputs Cost relative to total purchases in industry

New entrants
Entry barriers: Industry Competitors
Economies of scale Factors affecting rivalry: Substitutes
Brand identity Threat determined by:
Brand identity Industry growth
Capital requirements Relative price performance
Switching costs Concentration and balance
Proprietary product Of substitutes
Informational complexity Fixed costs /value added
differences Switching costs
Diversity of competitors Intermittent overcapacity
Switching costs Buyer propensity to substitute
Corporate stakes Product differences
Access to necessary
Exit barriers
inputs
Low-cost product design
Government policy
Expected retaliation Buyers
Bargaining power of buyers:
Buyer concentration Price sensitivity
Porter’s
Buyer volume Price/total purchases Five-Forces
Switching costs Product differences Framework
Buyer information Brand identity (Source: Ghemawat, 2002:56)
Buyer profits Ability to backward integrate
Substitute products Impact on quality/performance
Pull-through Decision makers’ incentives
10
 An Attractive Industry – The Global Soft Drinks Industry
The Concentrate Producers
Threat of New Low
Entrants

Low Low

Bargaining Rivalry among Bargaining

Power of Existing Power of
Suppliers Competitors Buyers

Few players
But very high rivalry
Threat of
Substitute Low to Moderate
Products or
Services

11
An Unattractive Industry – the Indian Jute Industry

Threat of New Low

Entrants
Low to
Moderate High

Bargaining Rivalry among Bargaining

Power of Existing Power of
Suppliers Competitors Buyers

Low rivalry

Threat of High
Substitute
Products or
Services

12
 Internal Analysis External Analysis

Strengths Opportunities

Weaknesses Threats

Resource-based Model Environmental Models of

Competitive Advantage

13
 PESTEL Analysis
• Political
• Economic
• Social
• Technological
• Environmental
• Legal
 Firm Resources
•For the firm, resources and products are two
sides of the same coin.

•Most products require the services of several

resources and most resources can be used in
several products.

•Examples of resources are: brand names, in-

house knowledge of technology, employment of
skilled personnel, trade contacts, machinery,
efficient procedures, capital, etc
(a)On which of the firm's current resources should
diversification be based?

Which resources should be developed through

diversification?

In what sequence and into what markets should

diversification take place?
•Firm Resources and Profitability

•Attractive resources- Machinery, Customer

loyalty, Production Experience

•Link between resources and diversification

Diversification strategy and resources

•Limits to growth

•A resource-based motivation for growth

•The direction of growth

 VRIN

•Valuable

•Rare

•Imperfectly imitable

•Non-substitutable
Capabilities and Core competence
• Unique and distinctive recourses that create value
for the company.

• Skill and Knowledge base, Technological system,

values and norms, managerial system.

• Core Competence is an area of special expertise that

is result of complex streams of technology and work
activity.

• Microsoft, Google, Toyota, Honda

 Dynamic Capabilities
• It is continuous reconfiguring or regenerate your
core capabilities or competence to adopt the change
in the dynamic market.

• Continuous sensing and seizing of market

• Co-evolving

• Employees trust and commitment

• Adaptive and absorptive capacity