Strategic Management

MODULE:
STRATEGIC MANAGEMENT
LECTURER:
INGABIRE N. ALLEN
Bac.honors in Accounting and Finance,

Msc. Human Resource Management
Introduction
Definition(s):
•Strategic
management can be defined as the process whereby all
the organizational functions and resources are integrated and
coordinated to implement formulated strategies which are
aligned with the environment, in order to achieve a
competitive advantage through adding value for the
stakeholders.
•Strategic management can also be defined as the art of mobilizing
resources and the science of formulating, implementing and
evaluating decisions that enables an organization to realize its
objectives.
•Strategicmanagement is further defined as the process by which top
management determines the long-term direction of the organization
by ensuring that careful formulation, implementation and continuous
evaluation of strategy take place.
Labor for the future 2

A BRIEF
SUMMARY/HISTORY
In the 1920s, managers of an organization were more
concerned about day-to-day operations rather than future
planning.
When the competition accentuated after few years, managers
felt the need to prepare budgets through tools, such as
capital budgeting.
However, these tools proved to be a failure to anticipate the
future accurately. Thus, the concept of future planning was
introduced in organizations. Future planning is formally
known as “strategic planning”, and further developments
led to the evolution of a technical term called “strategic
management.”
CONT’
Strategic management requires efficient allocation of an
organization’s valuable and scarce resources.
An organization practicing strategic management achieves
the following benefits:
 Facilitates the breakthrough thinking about future goals of
the organization.
 Creates a vision and mission of the organization.
 Develops guiding principles and strategic goals of the
organization.
 Converts inputs of the organization into outputs.
 Optimizes the organizational performance and process to
deliver quality products and services.
Strategic Management Model
 The strategic management model or strategic planning
model is a tool used by managers to plan and implement
business strategies. Although with variations, most are
divided into six stages.
 Understanding these stages will help managers to create
and implement strategies in their own firms.
 Mission: The most basic part of the model is a broad
focus that the firm’s top management team must decide
before any other strategic planning can take place.
 A mission outlines what a firm wants to do and how it
will do it. Example: to provide low cost housing units
to consumers in Rwanda

CONT’
 Objectives: The firm’s the long term achievement follow its
mission. The objectives are measurable aspects for
achieving the mission. Example of an Objectives might
include constructing a factory, raising capital to a certain
level.
• Situation analysis: This phase involves assessing the current
environment. There are a variety of frameworks for
performing this analysis, but the most commonly used is a
SWOT analysis, which measures the firm’s strengths,
weaknesses, opportunities and threats.
• Strategy formulation: This stage takes into account the
firm’s objectives and the situation analysis. Strategies are
created that aim to achieve the firm’s objectives given the
environmental situation.

Implementation
 This is application stage which is the most difficult

because it requires the high cooperation of all
members of the organization. It takes several months to
complete.
 Control: This is the final step in the strategic
management model. The purpose of this stage is to make
adaptations to the strategy after the implementation.
Often the environment and even firm objectives will
change. This step is used to recognize this and make
adjustments to the firm strategies to adapt to the
changes.

Strategic Planning Steps
Cont’
Definition of the Strategic Planning Process
 Strategic planning is a process undertaken by an
organization to develop a plan for achievement of its
overall long-term organizational goals.
 Strategic planning process should include
a situational analysis (SWOT analysis).
 Strategic planning is essential for organizational
success.
Here are the main steps for strategic planning.
 Analysis of the current state: Here, you analyze your organization's
external and internal environment. You may conduct a SWOT
analysis, which is an examination of your organization's strengths,
weaknesses, opportunities, and threats.
 You will also carefully examine the specific external environmental
factors, such as your rivals, the power of your suppliers, the power
your buyers or customers have, whether there is a viable threat that
major clients or customers can effectively substitute your product or
service, and whether there are any barriers to entry into a new market.
Defining the future state
Here, you will develop an organizational vision and
a mission statement that describes the future of your
organization - where it wants to be, its essential
values, and what it wants to do.
After you have defined the organization's vision and
mission, you can begin to formulate a detailed strategy
to achieve them.
Exercises
 Define the concept of strategy and discuss the model
of strategic management.

“Globalization”
Globalization
 Globalization is the process by which businesses or
other organizations develop international influence or
start operating on an international scale.
 It is how countries are coming together as one big global
economy, making international trade easier. In the 20th
century, many countries agreed to lower tariffs, or taxes
on goods that are imported from other countries.
 It is also referred to as the process of interaction and
integration among people, companies, and governments
world wide.

Globalization
Internationalization of markets and corporations

Global (worldwide) markets rather than national
markets/local markets.
 Not too long ago, a company could be successful by
focusing only on making and selling goods and services
within its national boundaries/local markets.
 International considerations were minimal
 Profits earned from exporting products to foreign lands
were considered frosting on the cake, but not really
essential to corporate success.

Cont’
 We are in a world in which national economies are
merging into an interdependent global economic system-
globalization.
 Globalization refers to ‘a shift towards a more integrated
and interdependent world economy.’
 The world’s economies are transforming very fast and
are increasingly being integrated as a result of
globalization.

 While the trend towards globalization is not new, the
rate at which this shift has been occurring has
accelerated in recent years, with far –reaching
implications for business and management. The
challenge is how to cope, remain competitive and
prosper in this demanding and ever –changing global
environment.

 Globalization reshapes the macroeconomic and the
personal level of everyday life in every part of the world
by opening up new opportunities and tearing down
boundaries that keep people separate from one another.
This means unlimited possibilities for interaction,
cooperation and collaboration as well as personal,
national, regional, and global economic growth and
prosperity.

 The globalization phenomenon has made all these issues
more acute, but at the same time also considerably more
complex.
 The problem that MNC now encounter is not only the
technological quick fixes of the past, but how they
should be supplemented.
 Considerations like culturally influenced human
behavior, political and legal environments, the economic
and monetary environments, and strategic alliances are
some of the complex global issues influencing the
strategic manager’s task.

Negative Impact of Globalization
Globalization caused to the loss of national sovereignty up
to great extent. Due to integration of world economy,
countries are losing their autonomy in pursuit of
economic policies.
They need to provide relaxations in their international trade
policies, and at certain level, compromise with their
domestic objectives.
Countries have to follow the international trade laws and
conventions proposed by the international institutions
such as World trade Organization (WTO) and
International Monitory Fund (IMF).
 Unparalleled Economic Growth: The negative
consequence of globalization, which the world
witnessed during the 20th century, was unparalleled
economic growth. During this period, the global per
capita GDP increased almost up to five times, but the
increase was not steady
International Inequality: International inequality was
another major issue that was noted during the 20th
century. According to the World Bank, Inequality is
defined as “the disparity of income and standard of
living among nations and their citizens.” Therefore,
such disparity between the rich and poor nations was
commonly seen, the richer nations were getting richer
while the poorer nations were getting poorer.
 Deteriorating Workers’ Interest in Advanced
Nations: Today, analysts from the developed nations are
still in a great dilemma whether the competition from the
low-wage economies displaces the workers from high-
wage jobs and decreases the demand for less-skilled
workers.
However, the doubt is quite acceptable because due to the
free movement of goods and services, the workers in the
advance nations have suffered a lot
The organizations in advance nations have shifted their
interest towards the low cost and high profit processes.
 Loss of National Sovereignty:
Another major concern of globalization is the loss of national
sovereignty. Due to integration of world economy,
countries are losing their autonomy in pursuit of economic
policies.
They need to provide relaxations in their international trade
policies, and at certain level, compromise with their
domestic objectives. Countries have to follow the
international trade laws and conventions proposed by the
international institutions such as WTO and IMF. The
diminishing tariff and non-tariff trade barriers to promote
uninterrupted flow of goods and services are the common
examples
 Various modes of entry in a foreign market: The
mode of entry or decision of how to enter into a
foreign market puts a significant impact on the
results. Expansion can be done through the following
mechanisms:
Exporting: Refers to the procedure of selling and
marketing of domestically produced goods and
services to other nations.
Exporting is one of the oldest and successful ways of
reaching to the foreign markets. Since the goods are
produced in domestic markets thus no investment is
needed to put up in foreign production facilities in the
target markets.
 Licensing: Refers to an international licensing agreement
that allows foreign firms to manufacture an owner’s
product for a fixed term in a specific market. In other
words, licensing permits an organization to use the
property of the licensor in foreign nation.
 Such property usually includes intangible items such as
trademarks, patents, and production techniques.
Licensing refers to an arrangement where foreign
organization gets a right from the organization to produce
a product with in its country.
Joint venture: Comes with five common
objectives such as market entry, risk and reward
allocation, technology sharing and joint product
development, and approving to government
regulations. Joint ventures are favourable in the
following cases:
The strategic goals of the partner meet, while
their competitive goals deviate
In comparison to the industry leaders the partner
has small size, market power, and resources
 Both the partners have ability to learn from each
other.
 Foreign direct investment:
Refers to the direct ownership of facilities in the foreign or
target nation. FDI involves transfer of resources such as
capital, technology, and human resource. FDI may also
take place through the acquisition of a prevailing unit or
formation of a new enterprise.
A high degree of control in operations is provided by the
FDI, which helps in knowing the consumer and the
competitive environment in better way.
 Franchising: Refers to a strategy that is mostly
employed by the service organizations.
The franchiser gives the right to franchise to sell the
franchiser services. The costs and risks of setting the
operations in the foreign market are bore by the
franchisee
McDonalds and KFC is the famous example of
franchising.
 Strategic Alliances:
Allows the organizations to share the risks and resources. The

home organization forms a partnership with the international
organization.
Every partner brings the knowledge and resources and tries to
learn new capabilities. Strategic alliance develops the core
competencies that contribute to the goals of an organization.
The most common reason why organizations form the strategic
alliance is to gain the technological skills and knowledge.
Strategic Decision-Making
 Strategic decision making is the process of charting a
course based on long –term goals and a longer term
vision. By clarifying your company’s big picture aims,
you will have the opportunity to align your shorter term
plans with this deeper, broader mission – giving your
operations clarity and consistency.
 Strategic decision making aligns short-term objectives
with long-term goals, and a mission that defines your
company’s big picture purpose.
Mission and Vision
Strategic decision-making should start with a clear idea of
your company’s mission and vision – the reasons you exist

as a business.
In other words, if you know what you want over the long term,
you will be better positioned to implement these aims and
principles into your daily decisions.
Long term goals
Long term goals are part of your mission and vision. A vison is
an idea and long term goals are expressions of how these ideas
play out- with milestones and real world objectives. These goals
are critical to the strategic decision making process, because
they guide your choices and provide measurable and
quantifiable ways to assess whether you are successfully
aligning your company’s direction with the values you have
articulated to guide your business.

Short term goals
•It is easy to loose sight of the strategic –decision making process
when you are focusing on short term goals and decisions that concern
day-to-day activities and issues.
Strategic decision making generally pertains to the long-term future of
an organization.
There are various ways to carry out the process of strategic decision
making in an organization. Some of the ways are as follows:
◦ Intuitive Decision-Making: Implies the use of common sense to
make decisions.
◦ Rational Decision-Making: Involves selecting the most logical
solution to the problem by gathering data.

Cont.
 Behavioral Decision-Making: Depends on the
behavior of humans. Behavioral decision-making
involves active participation from employees in
decision-making to make a decision more effective
and efficient. It also leads to a sense of
belongingness within the employees.
The discussion of the issues in strategic decision-
making is as follows:
 Rationality/logically in Decision Making: Implies
that a final decision should be made from different
alternatives in such a way that the objectives of the
organization are achieved in the best possible
manner.
 Creativity in Decision Making: Implies that a
strategic decision should be unique and different in
nature. Creativity in decision-making process leads to
exploring the alternatives and achieving the objectives
in an exceptional manner
 Volatility in Decision Making: Implies that every
problem may have different solutions depending on
different perceptions of different individuals. Thus, it
can be inferred that the process of strategic decision-
making involves volatility.
Different Criteria for Making Strategic Decisions:
 Implies setting objectives for making decisions. The
three major criteria in strategic decision making are
as follows:
 Maximization Concept: Implies maximizing the
returns.
 Pragmatic Concept: Means setting objectives
realistically and optimally.
 Incremental Concept: Implies moving towards
achieving the objectives through small incremental
steps.
Electronic Commerce
Use of the Internet to conduct business transactions
Basis for competition on a more strategic level rather than
traditional focus on product features and costs
Electronic Commerce -- Trends
 Forcing company transformation

 Market access & branding changing – disintermediation of
traditional distribution channels
 Balance of power shift to consumer
 Competition changing

Pace of business increasing
Internet purchasing beyond traditional
boundaries
Knowledge key asset – source of
competitive advantage

Session#2 26 Nov 2019

Roles of Strategic Management in the Organization
 Strategic Management in Marketing

Strategic management helps the marketers to develop effective plans for
market development and product development. Marketers strive to
achieve the vision and mission of the organization with the help of
marketing strategies, which focus on:
 Enhancing customers’ loyalty by retaining them.
 Expanding the distribution channels of the organization
 Increasing sales of the organization by penetrating new markets
 Understanding the customers and competitors
 Developing relationship marketing with the clients..
Cont.
 Strategic Management in Finance
Organizations aim at achieving maximized returns on invested
funds .A strategic financial thinker makes plans and policies
to manage the funds of the organization. Plans and policies
are related to the decisions regarding financial investment
and borrowings, reserves, and surplus. The financial
strategies focus on:
Determining the least cost combinations of resources
 Taking investment decisions that maximize the net present
value and shareholder’s wealth
 Identifying scarce financial resources and balancing them
effectively
 Raising funds for the organization through issue of shares
Cont.
Strategic Management in Human Resource
In an organization, the role of human resource is very
significant and is subject to constant change. Today,
organizations are focused on human resource management that
helps in acquiring, developing, and retaining the employees to
meet the goals of an organization. The strategic management
policies for human resource are focused on:
Developing high quality workforce by hiring and retaining
talented people
 Enabling employee participation for the achievement of
objectives
Cont.
 Ensuring special motivational programs for employees
 Establishing performance targets for employees
 Measuring the performance related to targets
 Providing appraisal systems and training and
development to employees
Strategic thinking in human resource department leads to
increased productivity in the organization, which further
helps in gaining competitive advantage
Levels of Strategy
Cont.
 Corporate level strategies: Helps in developing the
objectives, allocate the resources, and coordinate with
business Units. A corporate-level strategy is futuristic,
innovative, and pervasive in nature, and includes major
decisions, such as mergers, takeovers, liquidations, and
diversification.
 Business-Level Strategy: Involves the strategies designed
by the business heads of each SBU. A business-level
strategy allocates resources among the functional areas of
business. In addition, it is more specific and action-oriented
as compared to corporate-level strategy. It relates with the
how aspect of business. Business level strategies help in.
.
Cont
Establishing coordination among different business
units; for creating synergy and implementing the
corporate- level strategies of an organization.
Evaluating the needs of the market, and delivering
products and services accordingly.
Creating sustainable competitive advantage for each
business unit.
Cont.
Functional-Level Strategy:
Involves the strategies designed by functional managers to
carry out day-to-day activities of an organization. In this
strategy, resources are allocated to each operation of the
business.
A functional-level strategy ensures development and
coordination of resources in an organization.
It can be further divided into operational level strategies.
For example, a marketing strategy is divided into sales,
distribution, and promotional strategies.
The main objectives of a functional level-strategy are:
Cont.
 Facilitatingcoordination among the different functional
areas such as, marketing, finance, human resource, and
production.
 Aligning each functional area with the respective
business-level strategies. Consequently, this helps in
attaining the corporate-level strategies of an
organization.
 Coordinating the different activities in each functional
area. For example, different marketing activities such as
promotion, advertising, and marketing research need to
be integrated for implementing an effective marketing
strategy.
Concept of Strategic Business Units (SBU)
 Large organizations often divide their entire business into
smaller and independent segments to carry out the
operations effectively and efficiently.
 These independent business segments are called Strategic
Business Units (SBUs) of an organization.
 There are two types of SBUs:
◦ Single-level SBUs: Imply a single business unit that deals

in a single product or one area.
◦ Multiple-level SBUs: Imply the business units of an
organization that are divided according to geographical
areas or products.
Components of Strategic Management
The various components of strategic management are discussed as
follows:
◦ Vision: Gives a long-term view of the organization.
◦ Mission: Describes the scope and purpose of an organization.
◦ Objectives: Refer to the results that an organization seeks to achieve
in the long run.
◦ Policies: Refer to guidelines given to managers and subordinates for
guiding their decisions and actions, while implementing the
organization’s strategy.
◦ External Environment: Consists of the factors that affect the
organization’s activities. It includes social, legal, economic,
political, technological, and ethical factors.
◦ Grand Strategy: Implies a package of different long-term strategies
related with market development, product development,
innovations, and joint ventures.
Process of strategic Management
Cont.
 Let’s discuss the stages of strategic management as follows:
 Establishment of Strategic Intent: Lays down the foundation
for strategic management of the organization. The elements of
strategic intent are vision, mission, objectives, and business
definition.
 Formulation of Strategies: Refers to the development of
strategies by analyzing the internal and external environment
of an organization through various techniques.
 Implementation of Strategies: Implies a process of putting
formulated strategies into action.
 Strategic Evaluation and Control: Refers to the process of
comparing the actual results with the desired performance.
Environmental Scanning
 Every organization has an internal and external environment.

In order for the organization to be successful, it is important
that it scans its environment regularly to assess its
developments and understand factors that can contribute to its
success. Environmental scanning is a process used by
organizations to monitor their external and internal
environments.
 The purpose of the scan is the identification of opportunities
and threats affecting the business for making strategic
business decisions. As a part of the environmental scanning
process, the organization collects information regarding its
environment and analyzes it to forecast the impact of changes
in the environment. This eventually helps the management
team to make informed decisions.

Components of a Business Environment

 As you can see above, the internal environment of
an organization consists of various elements like the
mission/objectives of the organization, structure,
culture, quality of employees, labor unions,
technological capabilities, etc. These elements lie
within the organization and any changes to them
can affect the overall success of the business.
 On the other hand, an organization cannot operate in
a vacuum. Also, there are many factors outside the
walls of an organization which affects the functions
of the business. These factors constitute the external
environment of an organization.

 The internal environment offers strengths and
weaknesses to business while the external environment
brings opportunities and threats. The four influencing
environmental factors known as SWOT Analysis are:
 Strength – an inherent capacity of an organization
which helps it gain a strategic advantage over its
competitors.
 Weakness – an inherent constraint or limitation which
creates a strategic disadvantage for a business.
 Opportunity – a favorable condition in the
organization’s environment enabling it to strengthen its
position.
 Threat – an unfavorable condition in the organization’s
environment causing damage to the organization.

What is the Purpose of Environmental
Scanning?
 Environmental scanning is important for a variety of reasons.
It is the responsibility of company executives to keep tabs on
issues that have a direct impact on their customers and
suppliers. They must also be aware of the strengths and
weaknesses of competitors, changes in regulatory standards,
as well as macroeconomic and political changes that can
affect their company.
 The business landscape is highly dynamic due to the
rapid advancement in technological innovations. This
makes it critical for organizations to have an in-depth
understanding of the market dynamics to create winning
business strategies. Businesses can prevent being left
behind through consistent research and learning as well
as organization-wide knowledge sharing to keep
everybody up to date on the most important industry
trends.

How Often Should Organizations Perform
Environmental Scanning?
 The number of environmental scans a company

should perform depends on its needs. If an
organization is active in a highly dynamic and
technology-driven environment, the company needs
to consistently track trends and developments in its
industry and apply the results to develop improved
strategies and processes. However, organizations
operating in less dynamic environments may only
require environmental scans once in a while.

What are the Areas Covered by Environmental
Scanning?
 To survive, grow, and succeed in a highly competitive and

constantly changing commercial landscape, organizations
must become adept at identifying and adapting to the multiple
challenges and opportunities in the industry. One of the best
ways of conducting a successful, result-oriented
environmental scan requires assessment of the factors listed
below.
 Economic conditions
 Competition
 Global opportunities
 Employment trends
 Technological advancement
 Industry
 Geopolitical climate
 Socio-cultural expectations

When companies are putting resources and time toward an
environmental scan by using PESTEL model, they want
the results to be as comprehensive as possible.
Most scans include a thorough look at
Competition,
Economics,
Technology,
legal issues, and social
Demographic factors.
Geographical Factors
.
 External Factors
Competition
Businesses should scan the competition to find out how they
stack up to competitors and how they can earn a customer's
business.
 Economics
Businesses need to study the economy to discover the current

trends, buying power, and strength. Are people losing their
jobs and cutting back on spending? This may be a sign to
re-evaluate the pricing strategy, because there are times it
may be better to take a 20% profit rather than a 50% profit.
customers.
 Technology
Technology has had a dramatic impact on small businesses.

Specifically, the use of social media and the Internet has
never been more vital to a business' success. Years ago, a
business only used technology in the office to take care of
finances and maintain the cash register and customer
information.
 Process of Environmental Scanning:
Environmental scanning is a useful managerial tool for
assessing the environmental trend. The following process
is adopted for environmental scanning.
 Study the forces and Nature of the Environment:
In the first step of environmental scanning, the forces of the

environment that have got significant bearing in the
growth and development of the business should be
identified. They may be political, economic, sociology-
cultural, technological, legal, physical environment and
global components.
 Determine the sources of Information:
 After studying the process and nature of the
environment, the sources of collecting information from
the environment should be determined. There are
different sources through which information on business
environment may be collected. They are as follows:
 Secondary sources:
Newspapers, book, research articles, industrial and trade

publications, government publication, and annual report
of the competitors.
 Mass media:
Radio, TV and Internet.
 Internal sources:
Internal reports, management information system, data

network, and employee.
 External agencies:
Consumers, marketing intermediaries and suppliers.

 Formal studies:
Formal research and study by employee, research agencies,

and educational institutions.
Spying and surveillance of the competitors.
Scan and Assess the Trend:
In this step of environmental scanning process. It involves a
detailed and micro study of the environment to identify the
early signals of potential changes in the environment.
 It also detects changes that are already under way and
shows the trend of the environment.
 The trend should be assessed in terms of opportunities and
threats.
Methods of Scanning
 Techniques/Methods of Environmental scanning:
Environmental scanning is a technique of detail study of the
environment. It is done to assess the trend of the
environment and prepare the organization accordingly.
There are different techniques/methods of environmental
scanning. They are discussed below:
 Executive opinion method:
It is also called executive judgement method. Under this

environment is forecasted on the basis of opinion and views
of top executives.
A panel is formed consisting of these executives.
Expert opinion method:
Under this environment forecasting is based an
opinion of outside experts or specialist.
The experts have better knowledge about market
conditions and customer taste and preferences.
This method is similar to executive opinion
method. However, it uses external experts.
 Delphi method:
This method is extension of expert opinion method. It
involves forming a panel of experts and questioning
each member of the panel about the future
environmental trend.
Later, the responses and summarized and returned to the
members for assessment.
This process continues till the acceptable consensus is
achieved.
 Extrapolating method:
 Under this method, the past information is used to
predict the future. Different methods used to extrapolate
the future are time series, trend analysis and regression
analysis.
 Historical analogy:
 Under this, the environmental trends are analyzed with
the help of other trends which are parallel to historical
trend.
Importance
Importance of Environmental Scanning:
Signals threats: It provides an early signal of threats,
which can be defused or minimized if recognized
well in advance
 Customer needs:
 It signals an organization to the changing needs and
requirements of the customers.
 Capitalize opportunities:
 It helps an organization capitalize opportunities
earlier than the competitors.

 Qualitative information:
 It provides a base of objective qualitative
information about the environment that can be
utilized for strategic management.
 Intellectual simulation:
 It provides intellectual stimulation to managers in
their decision making.
 Image:
 It improves the image of the organization as being
sensitive and responsive to its environment.
SWOT Analysis:
SWOT is an abbreviation for Strengths, Weaknesses,
Opportunities and Threats. SWOT analysis is an
important tool for auditing the overall strategic
position of a business and its environment.
Portfolio Analysis:
An important objective of a strategic audit is to ensure
that the business portfolio is strong and that business
units requiring investment and management
attention are highlighted. This is important - a
business should always consider which markets are
most attractive and which business units have the
potential to achieve advantage in the most attractive
markets.
ETOP(Environmental Threat and opportunity Project)
 Refers to a technique of external environment analysis,
suggested by Glueek. You can use ETOP to judge the
different components of the organization’s environment.
ETOP divides the environment into different components
and evaluates the impact of each component on the
organization. Each environmental component is further
divided into sub-factors that affect the organization. The
advantages of ETOP are:
 Helps an organization to identify the opportunities and
threats
 Consolidates and strengthens the position of an
organization in the market
 Formulates appropriate strategies for an organization
Business level Strategies and Industry Life Cycle
 Every industry passes through different stages in its entire life

cycle. There are four stages in the life cycle of an industry,
which are:
◦ Embryonic Stage: Refers to the take-off stage of the
industry. Embryonic stage includes the industry that is in the
starting stage of its life cycle.
◦ Growth Stage: Refers to the stage in which an industry
strives to expand.
◦ Maturity Stage: Refers to the stage in which an industry
becomes fully developed.
◦ Decline Stage: Refers to the stage in which the industry’s
performance starts declining.
Porter’s Competitive Strategies
 Michael Porter proposed two generic competitive strategies,
which are as follows:
◦ Lower Cost: Refers to the strategy under which an
organization designs, produces, and distributes a product or
service in a more efficient manner, and at a cost lower than
its competitors distribute.
◦ Differentiation: Refers to the strategy under which an
organization provides unique and better quality products,
which have more features.
 When the two generic competitive strategies are combined
with the two types of target market; they result in four types of
generic strategies, which are cost leadership, differentiation,
cost focus, and differentiation focus strategy
Industry analysis and competition:
Porter’s five forces
 Industry analysis—also known as Porter’s Five Forces
Analysis—is a very useful tool for business strategists.
It is based on the observation that profit margins vary
between industries, which can be explained by the
structure of an industry.
 The Five Forces primary purpose is to determine the
attractiveness of an industry. However, the analysis also
provides a starting point for formulating strategy and
understanding the competitive landscape in which a
company operates.

Porter’s Five Forces Analysis
 The framework for the Five Forces Analysis consists of these

competitive forces:
 Industry rivalry (degree of competition among existing firms)—
intense competition leads to reduced profit potential for companies
in the same industry
 Threat of substitutes (products or services)—availability of
substitute products will limit your ability to raise prices
 Bargaining power of buyers—powerful buyers have a significant
impact on prices
 Bargaining power of suppliers—powerful suppliers can demand
premium prices and limit your profit
 Barriers to entry (threat of new entrants)—act as a deterrent against
new competitors

Porter’s Competitive Strategies (contd.)
 Cost Leadership: Refers to the strategy under which
an organization delivers its products or services at a cost
lower than its competitors, and targets a broad market
segment.
 Differentiation: Refers to the strategy under which an
organization provides unique products or services to its
customers.
 Cost Focus: Refers to the low cost generic competitive
strategy in which an organization focuses on a small
segment of the market.
 Differentiation Focus Strategy: Signifies the generic
competitive strategy in which an organization offering
unique products or services focuses on a very small
segment of the market.
Porters 5 forces Model
Porter’s five forces of the model are discussed as follows
Threat of New Entrants:
Refers to the ease with which potentially new entrants can
enter an industry. The degree of threat of new entrants in
an industry depends on the entry barrier of the industry.
The lower the entry barrier, the higher is the threat of new
entrants, and vice versa. Low entry barrier attracts new
players to enter an industry, which, in turn, puts a pressure
on the price level. Therefore, a low entry barrier limits the
profit potential of an industry.
Bargaining Power of the Suppliers:
Refers to the ability of the suppliers to manipulate the price
of the products supplied to an organization. If the suppliers
have a high bargaining power, the profit potential of the
industry would be relatively low. The suppliers enjoy a
high bargaining power if there are a few suppliers catering
to a large number of organizations in the industry. In
addition, if the product or service is unique in nature, and
there is no other substitute of the product; even then the
suppliers have an upper hand.
Bargaining Power of the Buyers: Affects the
profitability of an industry substantially. Bargaining
power of the buyers refers to the ability of the buyers
to bring down the price of products and services
offered by an organization. If the bargaining power of
the buyers is high, the profitability of the industry is
adversely affected. Buyers enjoy a high bargaining
power if they purchase a significantly large portion of
the product or service of the organization. In addition,
bargaining power of the buyers is high if a similar
product is available with other organizations.
Threat of Substitute Products:
Plays a vital role in determining the profitability of
an industry. Substitute products refer to the
products which satisfies the same need of
customers as other products. For example, laptop
is a substitute of the Personal Computer (PC).
Availability of substitutes limits the profit
potential of an industry as the organization cannot
charge a higher price for its product. For example,
if the prices of Pepsi increase, consumers would
easily switch to Coke
Competitive Rivalry among Existing Competitors:
Refers to the intensity of competition among different
organizations in an industry. According to Porter, the
intensity of competition within an industry depends on a
number of factors. These factors are the number of
competitors, growth rate of the industry, nature of the
product or service, product diversity, and exit barriers.
Higher the intensity of competition; lower the profitability
of an industry.
McKinsey &7S Model
Introduction:
The model is based on the theory that, for an organization to
perform well, these seven elements need to be aligned and
mutually reinforcing.
So, the model can be used to help identify what needs to be
realigned to improve performance, or to maintain alignment
(and performance) during other types of change.
Whatever the type of change – restructuring, new processes,
organizational merger, new systems, change of leadership,
and so on – the model can be used to understand how the
organizational elements are interrelated
McKinsey 7S Framework
Strategy : A strategy is a plan developed by a
firm to achieve sustained competitive
advantage and successfully compete in the
market
In general, a sound strategy is the one that’s
clearly articulated, is long-term, helps to
achieve competitive advantage and is
reinforced by strong vision, mission and values
Structure:
A structure represents the way business divisions and units
are organized and includes the information of who is
accountable to whom. In other words, structure is the
organizational chart of the firm. It is also one of the
most visible and easy to change elements of the
framework.
Systems are the processes and procedures of the company,
which reveal business’ daily activities and how decisions
are made.
Systems are the area of the firm that determines how business
is done and it should be the main focus for managers during
organizational change.
Skills are the abilities that firm’s employees perform very
well. They also include capabilities and competences.
During organizational change, the question often arises of
what skills the company will really need to reinforce its
new strategy or new structure.
Staff element is concerned with what type and how many
employees an organization will need and how they will be
recruited, trained, motivated and rewarded.
Style represents the way the company is managed by top-level
managers, how they interact, what actions do they take and
their symbolic value. In other words, it is the management
style of company’s leaders.
Shared Values are at the core of McKinsey 7s model. They are
the norms and standards that guide employee behavior and
company actions and thus, are the foundation of every
organization.
BCG MATRIX
Introduction :The Boston Consulting group’s product

portfolio matrix (BCG) is designed to help with long-term
strategic planning, to help a business consider growth
opportunities by reviewing its portfolio of products to
decide where to invest, to discontinue or develop products.
It's also known as the Growth/Share Matrix
The Matrix is divided into 4 quadrants derived on market
growth and relative market share
 Stars (high share and high growth)
Star products all have rapid growth and dominant market
share. This means that star products can be seen as market
leading products.
These products will need a lot of investment to retain their
position, to support further growth as well as to maintain its
lead over competing products.
This being said, star products will also be generating a lot of
income due to the strength they have in the market.
 Cash Cows (high share, low growth)
Cash cows don’t need the same level of support as before.
This is due to less competitive pressures with a low growth
market and they usually enjoy a dominant position that has
been generated from economies of scale.
Cash cows are still generating a significant level of income
but is not costing the organisation much to maintain. These
products can be “milked” to fund Star products.
 Dogs (low share, low growth)
Product classified as dogs always have a weak market share
in a low growth market. These products are very likely
making a loss or a very low profit at best.
These products can be a big drain on management time and
resources.
The question for Managers are whether the investment
currently being spent on keeping these products alive,
could be spent on making something that would be more
profitable.
 Problem Child (low share, high growth)
Also sometime referred to as Question Marks, these
products prove to be tricky ones for product managers.
These products are in a high growth market but does not
seem to have a high share of the market.
There could be reason for this such as a very new product
to the market. If this is not the case, then some questions
need to be asked. What is the organisation doing wrong?
What is competitors doing right? It could be that these
products just need more investment behind them to
become Stars.
Porter Diamond Model
Introduction of Porters Diamond Model:
Porter’s Diamond is an economic model developed
by Michael Porter in his book The Competitive
Advantage of Nations. The tool is often used to
analyse the external competitive environment or
marketplace, which helps companies to determine
the relative strength and explain why certain
industries have become competitive or possess
regional advantages.
In this model, the regional advantages can be
assessed by four factors, which includes:
Firm Strategy and Rivalry/competition,
opposition
Demand Conditions
Related and Supporting Industries
Factor Input Conditions.

 Firm Strategy and Rivalry is the competition in the home
market that drives innovation and quality.
 When there’s lots of competition and lots of rivalry, this
keeps companies on their toes, and so they try to out-
compete each other by continually
 developing more innovative and quality products and or
services.
Factor Condition is a country with sophisticated homebuyers
that have awareness and demand for advanced, quality, and
innovative products, which can create international
competitiveness
 Related and Supporting Industries are the inputs for a
country, which drives its success. For example, the raw
material from fabric suppliers in Italy helps to drive the
success of the Milan fashion industry.
 Factor Input Conditions are the factors of production that
includes things like skilled labour, education, capital,
climate, and infrastructure.
 The government has played a major role
in creating the regional advantage as it
supported and funded scientific research
and launched the construction of more
roads and canals in the 19th century.
 By, satisfying all these factors in Porter’s
Diamond it, therefore, helps to explain
why Germany’s luxury high power car
manufacturing industry has a regional
advantage.
Competitive Intelligence
Introduction
Competitive Intelligence is the purposeful and
coordinated monitoring of your competitor(s), wherever
and whoever they may be, within a
specific marketplace... Your "competitors" are those
firms which you consider rivals in business, and with
whom you compete for market share.
CI also has to do with determining what your business
rivals WILL DO before they do it. Strategically, to
gain foreknowledge of your competitor's plans and to
plan your business strategy to countervail their plans.
Most of the value-added in manufacturing or product companies is
created by knowledge-based service activities such as research
and development, marketing research, product design, customer
service, advertising, or distribution.
Value of Competitive Intelligence:
 How do we most usefully define the company's mission, its
strategic intentions, its objectives and its strategic choices?
 What do we need to know to develop and to select strategies
which are not only successful, but sustainable?
 What new products should we build and which markets should we
enter and how?
 How do we implement our competitive strategy?
Competitive intelligence is usually composed of five
major areas of endeavour,
 Assessment of strategies
 Competitor perceptions
 Effectiveness of current operations
 Competitor capabilities
 long-term market prospects
Corporate analysis
 Corporate analysis is a broad term that describes the
creation of an in-depth evaluation of a corporate entity.
 In most situations, the analysis will cover all aspects of
the company, including finances, profit margins,
organizational structure, and growth opportunities.
 The idea behind this type of detailed corporate analysis
is to gain an understanding of the general corporate
health and prospects for future growth of the
corporation.
 It is not unusual for a corporation analysis to
systematically investigate each aspect of the company’s
operation and seek to develop an opinion of the current
efficiency of those aspects.

Internal analysis for effective strategy development
 In order to develop the most effective and efficient

strategy, it is important to analyze the organization
internally, i.e. to look at more closely at the
organization’s resources, capabilities and core
competencies, in order to have an informed
understanding of the current situation.
 Methods for doing internal analysis will now be
discussed. These techniques must not be seen as
exclusive as they also be complementary.

Resource – Based view
 Resources, organizational capabilities and competencies are the
foundation characteristics that make up the competitive advantage
of an organization.
 If management wants to manage strategically, as a useful starting
point for internal analysis it is important to understand what
‘resources’ are and characteristics will make them unique.
Resources
There are three types of resources that will lead to distinctive
competencies and therefore to competitive advantage. There are:
• Tangible assets;
• Intangible assets;
• Organizational capabilities

 Resources may include all the financial, physical, human,
and intangible assets that are used by an organization to
develop, manufacture, and deliver products and or
services to its customers or clients.
Tangible assets: Location of an organization, buildings and
equipment, etc.
Intangible assets: These you cannot touch, but are critical
assets that create the real competitive advantage. Example
the reputation and brand name of Coca-Cola is the reason
why it has a competitive advantage over Pepsi.
The advantage of intangible assets is that they are less
visible and difficult for competitors to understand,
purchase, imitate or replace.

Capabilities: There is no competitive advantage to an
organization if resources are available but there is no
capacity to deploy them through a complex process of
interactions with the tangible and intangible resources.
Capabilities are actually the glue that emerges over time
and binds the organization together.
Organizational capabilities are the complex network of
processes and skills that determine how efficiently and
effectively the inputs in the organization will be
transformed into outputs.
The foundation of many organizations’ capabilities lies
in the skills and knowledge of the employees and often in
their functional expertise.

Value Chain Analysis
Introduction :
• Every organization has a chain of activities through which the
inputs are transformed into the outputs.
The concept of value chain analysis introduced by Michael porter
,refer to set of activities that creates to set of activities that creates
value for an organisation. The activities involves various stages
through which a product reaches the final customer
Value chain analysis helps in providing clarity about areas where the
strength and weakness of the organisation lie.
These are following
 Inbound logistic: It include all activities that an organisation use
for receiving storing and transporting input into the production
processes warehousing and inventory control.
 Examining the value chain as a method of doing internal
analysis refers to a way of looking at a chain of
activities to determine where value is really added to
the product or service.
There are three aspects of resources in particular that
create customer value.
There are:
• The product is unique and or different;
• The product is cheaper than that of competitors;
• The organization has the ability to respond to the
customer’s needs yet quickly.

 The value chain analysis gives businesses a clear idea of how
to adjust their actions and processes to provide the most value
to their target market and increase profit margins for the
company.
 Primary and Support Activities
 Identifying the primary and support activities is the first
step in creating a value chain analysis.
 These are the key processes and systems a business uses
to develop product or service.
 Primary Activities
 There are five primary activities and they include all the
actions that go into the creation of a business' offering.

 Operations: Its includes all activities which help in
transforming raw materials into finished products.
 Outbound logistics: It involve activities which an
organization uses for receiving storing, and
transporting outputs that result from the production
process . Ex its physical distribution and
warehousing
 Marketing and sales: It includes all the activities
which includes marketing and selling products to
end consumers. Ex Promotion and distribution
process
 Services': Its includes maintain and enhance values
of the product. Ex after sales services and
maintenance.
 Human resource Management: It involve the
activities for managing human resource .Ex
recruitment ,selection and performance appraisal .
 Technology development: Includes all tasks
required for the development and improvement of
product and services. Ex R&D,
 Firm infrastructure : It includes components such
as organisational structure ,culture ,control systems.
 Procurement: Includes all the activities which an
organisation uses for obtaining inputs. Ex of such
activities are purchasing fixed assists and raw
materials
SUPPLY CHAIN MANAGEMENT : DEFINITION
SCM is involved in producing and delivering a final

product or service, to customer in order to satisfy
his/her needs.
The integration and organization of information and
logistic activities across firms in a supply chain for the
purpose of creating and delivering goods and services
that provide value to customers.
External Environmental analysis
 The organization and the environment in which it
operates are not closed systems because they influence
each other.
 The organization thus cannot be successful if it not in
step with its environment. The fact that an organization
interacts with its environment means that it is acting as
an open system and will both affect and be affected by
the environment. This means that the organization
draws its inputs, such as human resources, physical,
financial and informational resources from the
environment and distributes its products and
services back to the environment.

 External environmental analysis focuses its attention on
identifying and evaluating trends and events beyond
the control of a single organization, and also reveals
key opportunities and threats confronting the
organization that could have a major influence on
the firm’s strategic actions. If this external
environmental analysis is done well, it enables managers
to formulate strategies to take advantage of
opportunities and avoid or reduce the impact of threats.

Basic Concepts of Strategic Management
Environmental
Variables
corporate business
strategy
Introduction: Corporate strategy refers to a set of decisions
that determine an organization’s objectives, goals, and
purpose.
Corporate level strategy is often referred to as a corporate
strategy or corporate business strategy. It encompasses the
strategic scope of the entire organization.
For most organizations, a corporate level strategy is the only
strategic plan required.
It also comprises of the principal policies and plans to
achieve those objectives. In addition,
corporate level strategy is comprehensive in nature, and
defines the business in which the organization plans to
operate
The top management of an organization formulates corporate-
level strategies.
These strategies are mainly concerned with decisions
regarding the product or service to produce and the
geographical location to target.
Corporate-level strategies give a direction to an organization
to achieve its objectives.
In addition, these strategies determine resource allocation,
such as how to allocate cash and equipment among various
departments.
Decisions regarding expansion policies or addition of new
products also fall within the area of corporate-level
strategies.
 Corporate-level strategies deal with the following
major issues:
 Defining the type of business that an organization
should venture into
 Dividing the resources among different operations of
the organization
 Transmitting and transferring the resources from one
set of businesses to another
 Selecting and managing the investment portfolio of
an organization
 Deciding the nature and level of diversity required to
exist in a particular business
Intensification
strategy
 Introduction: Expansion through concentration or
intensification(rising in term of quality )strategy
involves attaining expansion by combining the
resources in one or more area of the
organization’s business.
 This is also known as focus strategy, implying that
an organization would like to concentrate more on
the business that it is already doing. It involves
investment of larger resources in a product line for
an identified market, with the help of a proven
technology.
The expansion can be followed by adopting the
following means:
 Market Penetration:
Implies selling more products in the same market.

 Market Development: Involves identifying the
new markets for selling the existing products.
 Product Development: Refers to selling new
products in the existing markets.
 Expansion through concentration has following
advantages:
 Involves minimum organizational changes, thus, it is less
threatening
 Enables an organization to master in one or a few
businesses and gain specialization in them
 Focuses on the available resources, and creates
conditions to develop competitive advantage
 Helps managers to deal easily with problems, as they are
already familiar with the type of problems
Limitations
 Highly Concentrated:
Implies that concentration strategies are highly dependent on the
industry; thus, adverse conditions in an industry can affect
organizations. For instance, if the textile industry is hit by
recession, it would be difficult for an export house to avoid the
impact of recession
 Cash Flow Problem:
Makes the sustainability of an organization. For instance, large
cash inflows are required when the organization plans to
expand.
Vertical & horizontal Integration
 Meaning & Concept:
Expansion through integration is performed through value
chain, which ensures the integration of an organization’s
interlinked activities.
For example, an organization can integrate the activity of
procuring raw material with the activity of producing
finished product.
Expansion through integration widens the scope of an
organization’s growth by combining the activities related to
the present activity of an organization
. An organization moves either vertically or horizontally
Vertical Integration:
 Implies an activity that is carried out with the purpose of
supplying inputs, such as raw materials; or distributing
the final product to customers. In Vertical, usually each
member of the supply chain produces a different product
service, and the products combine to satisfy a common need
 Backward and forward integration are two types of
vertical integration. In backward integration, the
organizations become their own suppliers; whereas in
forward integration, the organizations take control of
distributing the products
 For example, if an automobile organization buys its
supplier organization, which sells tires for its cars, it is
known as backward integration.
 However, if a wholesaler purchases a retailing outlet to
directly sell products to end cosumers, it is known as
forward integration.
 Horizontal Integration:
Refers to a situation when an organization merges with
or acquires other organizations serving the same
customers, with the same or similar products, and
adopting the same marketing process.
Horizontal integration increases the size and profits of an
organization by increasing its market share. An example
of horizontal integration can be a pizza restaurant
expanding its product range by acquiring a hamburger
chain.
Internal gains
Advantages of Vertical Integration:
Lower transaction costs
Lower uncertainty and higher investment
Ability to monopolize market throughout
the chain.
Strategic independence (especially if
important inputs are rare or high in prices,
Benefits to society
Better opportunities for investment growth
through reduced uncertainty
Local companies are better positioned against
foreign competition.
Disadvantages of Vertical Integration
Internal losses
Higher coordination costs
Higher monetary and organizational costs of
switching to other suppliers/buyers
Weaker motivation for good performance at the
start of the supply chain since sales is guaranteed
and poor quality may be blended into other inputs
at later manufacturing stages
Losses to society
Monopolization of markets
Rigid organizational structure, having much
the same shortcomings as the socialist
economy .
Advantages of Horizontal Integration:
Economies of Scope
Dominate the Market
Reduction in the cost of international trade
Disadvantage of Horizontal Integration
Substitutes market is often very different

Diversification
Introduction of Diversification
 Meaning & Concept of Diversification:
Expansion through diversification involves an extensive
change in the business of an organization in terms of
customer functions, customer groups, or alternative
technologies. Diversification strategy is a form of
corporate strategy for a company. It seeks to increase
profitability through greater sales volume obtained
from new products and new markets
In simple words, it means diversification into related or
unrelated businesses.
Under the diversification strategies, an organization
launches new products, serves new markets, or does
both simultaneously.
Diversification is part of the four main growth strategies
defined by the Product/Market Ansoff matrix:
Note: The notion of diversification depends on the subjective

interpretation of “new” market and “new” product, which
should reflect the perceptions of customers rather than
managers. Indeed, products tend to create or stimulate new
markets; new markets promote product innovation.
Reasons for Diversification
The basic reasons for adopting diversification
strategies are as follows:
Minimize the risks by spreading it over several
businesses
Help in capitalizing strengths and minimizing
weaknesses
 Maximize the returns by investing into profitable
businesses
 Assist in migrating from a stagnant business to a
lucrative business
Stabilize returns by avoiding economic fluctuations
 Help in reaping the benefits of synergies
A strategic alliance
Meaning of Strategic alliance
Introduction: A strategic alliance is a mutual agreement
between two or more organizations.
“A strategic alliance is a partnership between two or more
organizations that unite to pursue a set of agreed upon
goals but remain independent subsequent to the
formation of the alliance to contribute and to share
benefits on a continuing basis in one or more key
strategic areas.”
Organizations enter into the strategic alliance with their
suppliers or competitors to gain competitive advantage.
These alliances enable organizations to enter new
markets, obstruct competitors, and generate higher
revenues.
Benefits
. The benefits of strategic alliances are as

follows:
Help organizations to enter into new markets by
forming partnership with other organizations
 Reduce the manufacturing costs by pooling
resources to utilize them efficiently
Develop technological capabilities by sharing
technological expertise
Types of strategic Alliance
 Pro-competitive Alliance:
Involves the relationship between inter-industry
alliances, such as manufacturers, suppliers, or
distributors.
These alliances offer the advantages of vertical
integration.
 Non-competitive Alliance: Involves the intra-
industry partnerships between non-competitive
organizations.
In non-competitive alliance, the areas of activities of
organizations do not relate with each other. Thus,
there is no competition between them.
 Competitive Alliance: Refers to a partnership
between two or more rival organizations. There can
be intra-industry or inter-industry competitive
alliance. Many foreign organizations enter into
strategic alliance with local competitive
organizations.
 Pre-competitive Alliance: Implies the partnership
between two or more organizations from unrelated
industries. This alliance is formed to work on
different activities, such as development of new
technology, new product, or new idea. Joint
research and development activities are an example
of pre-competitive alliance.
Strategic choice
Meaning: The strategy of an organization is
related to various decisions, such as how,
when, and where to compete in the market.
Strategic choice is the process of making the
final decision from the available
alternatives.
A good strategic choice is one that is based on
correct data, facts, and figures and involves
sound and rational reasoning.
A bad choice taken by an organization is one
that involves poor judgment and a weak
strategic outlook towards organization’s future
. For example, an organization has to decide
whether to position its product at a niche
market with high price and less promotion or
at the mass market with low price and high
promotion.
The decision of selecting one of these choices
comes as a challenge for an organization, as it
has to select from various alternatives to
achieve the objectives in the best possible
manner.
 The features of strategic choice are explained as
follows:
 A strategic choice should be genuine: Implies that a
choice should be made after analyzing various options
available to an organization.
 A choice should clearly show what an organization
should or should not do. For example, which
customers to target or which not to target.
 A strategic choice should be sound: Specifies that a
choice should be logical and based on relevant data,
facts, figures, and beliefs. It should neither ignore nor
rely fully upon the intuition of choice makers.
 A strategic choice should be actionable: Implies that
a choice should be implemented properly. It further
elaborates that a choice should be easily broken
down into a number of steps for its easy
implementation.
 A strategic choice should be compelling: Means that
an organization should take a choice in such a way
that it demands the commitment from every
member of an organization. The entire management
should feel comfortable and energetic about the choice
taken by the organization
Pricing Strategies
Different Pricing Strategies
 Differential Pricing:
The differential pricing implies charging
different prices from different customers
for the products having the same quality
and quantity. In other words, the marketers
adopt different prices for the same products
for different types of customers.
Example of differentiated pricing can be
selling coca cola at 300Frw in the super
market, 350Frw in theatres and 500Frw in
restaurants.
Cont.
 Promotional Pricing:
Promotional pricing refers to a pricing strategy that
helps in promoting the product. This type of pricing
is called as the marketing technique.
It is defined as the policy of reducing the prices to
attract the customers towards a product.
 Product-Line Pricing:
Product line pricing can be defined as the
establishment of the single price for all the products
in the product line. The main goal is to maximize
the profits of the whole production rather than
looking at the individual product
Cont.
New-product Pricing: Setting the price of a new
product is the most significant and difficult .The
new price can be set high to cover the costs or low
to give the discounts to the customers.
(a) Price Skimming that refers to charging the
maximum price for the product by the marketer.
This type of pricing helps the marketer to know
what the customer is willing to pay for a product
and generates the profits for the short term and long
term,
(b) Penetration pricing that refers to charging the
minimum price for a product for gaining larger
market share. It is expected that the customers
switch to the product because of the lower price.
Cont.
Psychological Pricing:
Psychological pricing is used when a marketer
wants the customers to respond emotionally
rather than rationally; it is because some prices
have a psychological impact. According to
some customers, high price is indicator of good
quality of a product. Their perception is
psychologically based on the value of a
product. This type of
Pricing can be seen in the products such as
perfumes as more costly the perfume is, the
higher will be its quality.
Corporate
Restructuring
Meaning & Concept
Corporate restructuring is defined as an activity
that involves changes in the business or
organizations.
Business restructuring involves changes in the
composition of the organization’s structure
to create a profitable enterprise.
Financial restructuring involves changing the
equity and debt structure.
Organizational restructuring includes changes
in the structure of the organization by
reducing the number of employees and re-
designating positions
Cont.
Forms of Corporate Restructuring Corporate
restructuring includes evaluating the business
strategies, estimating the value of the business,
and identifying the financial alternatives
available for consideration.
Various forms of corporate restructuring
strategies are as follows:
Expansion: Refers to expanding the operations
through mergers and expansions, tender offers,
and joint ventures.
Divestitures: Involves selling the portion of the
organization to a third party
Mergers
&
Acquisitions
Introduction
Merger:
In a merger the boards of directors for two
companies approve the combination and seek
shareholders approval.
After the merger, the acquired company ceases to
exist and becomes part of the acquiring company.
Cont.
Acquisition:
In a simple acquisition the acquiring company
obtains the majority stake in the acquired firm,
which does not change its name or legal
structure.
An example of this transaction is Manulife
Financial Corporation's 2004 acquisition of John
Hancock Financial Services, where both
companies preserved their names and
organizational structures.
Cont.
Mergers & Acquisitions can take place:

 By purchasing assets
 By purchasing common shares
 By exchange of shares for assets
 By exchanging shares for shares
Cont.
Reasons for Mergers and Acquisitions:
improve Finances for lower cost of capital
Improving company's performance and
accelerate growth
Diversification for higher growth products or
markets
To increase market share and positioning giving
broader market access
Strategic realignment and technological change
Tax considerations
Undervalued target
Cont.
Turnaround Strategy is a
retrenchment(economizing ,reducing the
expenditure )strategy followed by an organization
when it feels that the decision made earlier is
wrong and needs to be undone before it
damages the profitability of the company.
Simply, turnaround strategy is backing out or

retreating from the decision wrongly made earlier
and transforming from a loss making company
to a profit making company.
Cont.
Following are certain indicators which make it
mandatory for a firm to adopt this strategy for
its survival. These are:
 Continuous losses
 Poor management
 Wrong corporate strategies
 Persistent negative cash flows
 High employee turn over
 Poor quality of functional management
 Declining market share
 Uncompetitive products and services
Cont.
Divestment Strategy is another form of
retrenchment that includes the downsizing of
the scope of the business.
The firm is said to have followed the
divestment strategy, when it sells or
liquidates a portion of a business, one or
more of its strategic business units or a major
division, with the objective to revive/renew
its financial position
The divestment is the opposite of investment
Cont.
Following are the indicators that mandate the firm to
adopt this strategy:
 Continuous negative cash flows from a particular
division
 Unable to meet the competition
 Difficulty in integrating the business within the
company
 Better alternatives of investment
 Lack of integration between the divisions
 Lack of technological up gradations due to non-
affordability
 Market share is too small
 Legal pressures
Cont.
Liquidation(insolvency)Strategy is the most
unpleasant strategy adopted by the organization
that includes selling off its assets and the final
closure or winding up of the business operations.
It is the most crucial and the last resort to
retrenchment since it involves serious
consequences such as a sense of failure, loss of
future opportunities, spoiled market image, loss of
employment for employees, etc.
The firm adopting the liquidation strategy may find it
difficult to sell its assets because of the non-
availability of buyers and also may not get
adequate compensation for most of its assets
Cont.
The following are the indicators that
necessitate a firm to follow this strategy:
 Failure of corporate strategy
 Continuous losses
 Obsolete(out of date) technology
 Outdated products/processes
 Business becoming unprofitable
 Poor management
 Lack of integration between the divisions
Cont.
Combination Strategy:
Definition: The Combination Strategy is the
combination of any grand strategy used by an
organization in different businesses at the same
time or in the same business at different times
with an aim to improve its efficiency.
Such strategy is followed when an organization is
large and complex and consists of several
businesses that lie in different industries,
serving different purposes. Following example
to have a better understanding of the
combination strategy
Example
• A baby diaper manufacturing company
augments its offering of diapers for the babies
to have a wide range of its
products (Stability) and at the same time, it also
manufactures the diapers for old age people,
thereby covering the other market
segment (Expansion).
• In order to focus more on the diapers division,
the company plans to shut down its baby wipes
division and allocate its resources to the most
profitable division (Retrenchment).
STRATEGY
EVALUATION AND
CONTROL
OVERVIEW OF STRATEGY EVALUATION AND
CONTROL
 Strategy Evaluation and control is as significant as
strategy formulation because it throws light on the
efficiency and effectiveness of the comprehensive
plans in achieving the desired results. The
managers can also assess the appropriateness of the
current strategy in today’s dynamic world with
socio-economic, political and technological
innovations.
 Strategic Evaluation and control is the final phase
of strategic management.
cont
 The significance of strategy evaluation and control lies
in its capacity to co-ordinate the task performed by
managers, groups, departments etc, through control of
performance. Strategic Evaluation and control is
significant because of various factors such as - developing
inputs for new strategic planning, the urge for feedback,
appraisal and reward, development of the strategic
management process, judging the validity of strategic
choice etc.
The process of Strategy Evaluation and control
consists of following steps
1.Fixing benchmark of performance - While fixing the

benchmark, strategists encounter questions such as -
what benchmarks to set, how to set them and how to
express them.
In order to determine the benchmark performance to be
set, it is essential to discover the special requirements
for performing the main task
Cont’
2.Measurement of performance - The standard
performance is a bench mark with which the
actual performance is to be compared. The
reporting and communication system help in
measuring the performance. If appropriate means
are available for measuring the performance and
if the standards are set in the right manner,
strategy evaluation becomes easier.
3.Analyzing Variance - While measuring the actual
performance and comparing it with standard
performance there may be variances which must
be analyzed. The strategists must mention the
degree of tolerance limits between which the
variance between actual and standard
performance may be accepted
Cont’
4.Taking Corrective Action - Once the
deviation in performance is identified, it
is essential to plan for a corrective action.
If the performance is consistently less than
the desired performance, the strategists
must carry a detailed analysis of the
factors responsible for such performance
STRATEGIC CONTROL
 Strategic Control, the last step of the Strategy

Management Process, consists of monitoring and
evaluating the strategy management process as a whole
to ensure that it is operating properly.
 Strategic Control focuses on the activities involved in
environmental analysis, organizational direction, strategy
formulation, strategy implementation, and strategy control
itself – checking that all steps of the strategy management
process are appropriate, compatible and functioning
properly. Strategic control also involves the monitoring
and evaluation of plans, activities, and results with a view
toward future action providing
OPERATIONAL CONTROL
 Operational control systems are designed to

ensure that day-to-day actions are consistent
with established plans and objectives. It
focuses on events in a recent period. Operational
control systems are derived from the
requirements of the management control system.
 Corrective action is taken where performance
does not meet standards. This action may
involve training, motivation, leadership,
discipline, or termination
Difference between Strategic Control and Operational control
 Strategic control requires data from more sources.

The typical operational control problem uses data
from very few sources.
 Strategic control requires more data from external
sources. Strategic decisions are normally taken with
regard to the external environment as opposed to
internal operating factors.
 Strategic control is oriented to the future. This is in
contrast to operational control decisions in which
control data give rise to immediate decisions that
have immediate impacts
Cont’d
 Strategic control is more concerned with
measuring the accuracy of the decision premise.
Operating decisions tend to be concerned with the
quantitative value of certain outcomes.
 Strategic control standards are based on
external factors. Measurement standards for
operating problems can be established fairly by
past performance on similar products or by similar
operations currently being performed.
 Strategic control relies on variable reporting
interval. The typical operating measurement is
concerned with operations over some period of
time: pieces per week, profit per quarter, and the
like.
FORMULATING
STRATEGIES: BUSINESS
AND FUNCTIONAL
STRATEGIES
BUSINESS STRATEGIES
Business strategies include marketing strategies,

new product development strategies, human
resource strategies, financial strategies, legal
strategies, supply-chain strategies, and
information technology management
strategies. The emphasis is on short and
medium term plans and is limited to the
domain of each department’s functional
responsibility. Each functional department
attempts to do its part in meeting overall
corporate objectives,
Cont’
Marketing Functional Strategies
Below are some of the more important functional
strategies. It is important that functional strategies
be supportive of the overall business strategy and
consistent between themselves.
Price
What is included in the initial price, Price level,
Discounts and Terms
Product
Quality, Features and options, Styling, Brand name,
Product line and related products, Warranties and
guarantees, Service and after-sale items
Cont’
Promotion
Advertising, Personal selling, Promotion
and Publicity
Place
Distribution channels, Inventory levels and
locations Transportation methods
Finance and Accounting Functional Strategies
Capital structure
Budget systems and approaches
Capital investment methods and Credit
strategies
Emphasis between leasing and buying
Human Resources Functional Strategies
design
Job
Job specifications Recruiting
Selection approaches and criteria
Hiring methods
Compensation systems and Evaluation
systems
Criteria of Training and development
Promotion criteria
Information Systems Functional Strategies
Strategicinformation systems
Computers, and Databases
Standardization policies and approaches
Support for mobile computing
Cont’
Production/Operations Functional
Strategies
Size of business
Location of the business and Product
design
Type of equipment and tools
Cont’
Inventory size and strategy Quality control
methods
Degree and types of cost controls
Level of specialization
Degree and approach towards
technological innovation Focus between
product and process
STRATEGY
IMPLEMENTATION
Strategy implementation is sum total of the
activities and choices required for the
execution of a strategic plan.
It is the process by which policies and
processes are put into action through
development, budget, programme and
procedures. Although implementation is
usually considered after strategy
formulation, implementation is the actioning
key part of strategic management.
Cont’
Strategy formulation and strategy
implementation should be considered
together because they are like two sides of
same coin. Poor implementation has often
been blamed for strategy failures yet
problem may lie with the strategy
formulation.
cont
Therefore, unless top management considers
these basic questions statistically, even the
best planned strategy is unlikely to provide the
desired outcome. Companies experience
varied problems in relation to implementation
of a strategy as listed below;
Implementation took more time than
expected/anticipated.
Unanticipated major problems occurred.
Activities were ineffectively conducted.
Competing activities and crisis took attention
away from the implementation.
Cont’
The involved employees were inadequately
trained or prepared for the implementation.
Uncontrollable external environmental factors
created problems.
Departmental managers provided inadequate
leadership and direction.
Key implementation tasks and activities were
poorly defined.
The information system inadequately
monitored activities
Cont’
Who implements strategy?
Top Management (Director) - Depending on
how the corporation is organized those who
implement strategy will be more diverse set
of people than those who formulate it.
In large multi-industry corporations, the
implementations are everyone in the
organization. Vice presidents or functional
areas, directors, managers of unit areas work
together in putting together large scale
implementation plans
Cont’
Functional/Unit Managers - Plant manager,
project manager and unit heads put together
plan for their specific plant, department or
unit. Therefore, every operational manager
down to the first line supervisor and every
employee is involved in one way or the other
in implementing corporate business and
functional strategies.
All Employees - Many people in the
organization who are crucial to strategies
successful implementation probably have
little to do with the development of corporate
or even the business strategy
Assignment
1.Grand Strategies are often called master strategies
and are intended to provide basic direction for
strategic actions. Thus, they are seen as the basics
of coordinated and sustained efforts directed
toward achieving long-term business objectives.
Categorize Grand strategies.
2.During a workshop of the Senior Managers of one
of the key state corporations; one Manager was
heard commenting that Joint Ventures mean that
company joins with another company to form a
new organization. If you agree or do not agree
with this comment, defend your position with
appropriate example.

Strategic Management

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Strategic Management

Uploaded by

Copyright:

Available Formats

MODULE:

Bac.honors in Accounting and Finance,

Labor for the future 2

Labor for the future 5

Labor for the future 6

 This is application stage which is the most difficult

Labor for the future 7

Labor for the future 12

Labor for the future 14

Internationalization of markets and corporations

Labor for the future 15

Labor for the future 16

Labor for the future 17

Labor for the future 18

Labor for the future 19

Allows the organizations to share the risks and resources. The

Labor for the future 31

Labor for the future 32

Labor for the future 33

Electronic Commerce -- Trends

 Forcing company transformation

Labor for the future 37

Labor for the future 38

Labor for the future 39

 Strategic Management in Marketing

◦ Single-level SBUs: Imply a single business unit that deals

 Every organization has an internal and external environment.

Labor for the future 53

Labor for the future 54

Labor for the future 55

Labor for the future 56

Labor for the future 57

 The number of environmental scans a company

Labor for the future 58

 To survive, grow, and succeed in a highly competitive and

Labor for the future 59

Businesses need to study the economy to discover the current

Technology has had a dramatic impact on small businesses.

In the first step of environmental scanning, the forces of the

Newspapers, book, research articles, industrial and trade

Internal reports, management information system, data

Consumers, marketing intermediaries and suppliers.

Formal research and study by employee, research agencies,

It is also called executive judgement method. Under this

earlier than the competitors.

 Every industry passes through different stages in its entire life

Labor for the future 77

 The framework for the Five Forces Analysis consists of these

Labor for the future 78

Introduction :The Boston Consulting group’s product

Labor for the future 107

 In order to develop the most effective and efficient

Labor for the future 108

Labor for the future 109

Labor for the future 110

Labor for the future 111

Labor for the future 113

Labor for the future 114

SCM is involved in producing and delivering a final

Labor for the future 119

Labor for the future 120

Implies selling more products in the same market.

Substitutes market is often very different

Note: The notion of diversification depends on the subjective