INSTITUTE –University School of

Business
DEPARTMENT -Management
M.B.A
Strategic Business & Globalization
Dr. Rajeev Prasher
Professor

UNIT-1 Strategic
Management DISCOVER . LEARN . EMPOWER

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Course Objectives

• The objective is to give students an understanding of the approaches and tools for planning
and controlling strategy at the organization and sub-unit levels.
• To provide an experience in case analysis and practical application of planning and control
skills
• To develop required skills for strategy formulation.
Course Outcomes

• To have a clear understanding of the key concepts and principles of strategy formulation
and competitive analysis. Formulate organizational vision, mission, goals, and values
• To utilize ethical decision-making processes to help with formulation of organizational
vision, mission, and goals. Apply appropriate tools, theories and concepts to analyze
strategic issues in organizations and to develop strategies for implementation.
• To get hands-on experience in crafting business strategy, reasoning carefully about strategic
options to evaluate action alternatives, and making sound strategic decisions..

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 Strategic Analysis and Choice in
Single- or Dominant-Product
Businesses: Building Sustainable
Competitive Advantages
4
Concerned with Proper Selection of Business Level
Generic and Grand Strategy Alternatives

Based on your SWOT analysis which of the Generic

and Grand Strategies are you better equipped –
resources wise – to successfully implement?

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Key Issues: Strategic Choice in Single Businesses

1. What strategies are most effective at building sustainable

competitive advantages for single business units?

2. Should dominant-product/service businesses diversify to

build value and competitive advantage? What grand
strategies are most appropriate?

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Prominent Sources of Competitive Advantage

Cost leadership

Sources of Differentiation
competitive
advantage Speed

Market focus
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 Evaluating A Business’s Cost Leadership Opportunities

A. Skills and Resources Fostering Cost Leadership

• Sustained capital investment and access to capital
• Process engineering skills
• Intense supervision of labor or core technical operations
• Products or services designed for ease of manufacture or delivery
• Low-cost distribution system

B. Organizational Requirements Supporting Cost Leadership

• Tight cost control
• Frequent, detailed control reports
• Continuous improvement and benchmarking orientation
• Structured organization and responsibilities
• Incentives based on meeting strict, usually quantitative targets

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Evaluating A Business’s Cost Leadership Opportunities --
C. Examples of Ways Businesses Achieve Competitive Advantage

Process innovations lowering Product redesign to reduce Technology

production costs number of components development

Safety training for all employees reduces absenteeism, downtime, and Human resource
accidents management

Reduced levels of management cuts Computerized, integrated information system General

corporate overhead reduces errors and costs administration

Pr
of
Favorable long-term contracts; captive suppliers or key customer for supplier
Procurement

it
Subcontracted
service
Global, online Economy of scale Computerized Cooperative technicians

e
m
vic
suppliers provide in plant reduces routing lowers advertising with repair

ar
r
Se
distributors creates product

g
automatic equipment costs transportation correctly

in
local cost
restocking of and depreciation expense first time
advantage in or bear
orders based on buying media costs
sales space and time

Inbound logistics Operations Outbound logistics Marketing & sales 9

Advantages of a Cost Leadership Strategy
Low-cost advantages reduce likelihood of pricing pressure
from buyers
Sustained low-cost advantages may push rivals into other
areas, lessening price competition
New entrants must face an entrenched cost leader without
experience to replicate cost advantages
Low-cost advantages should lessen attractiveness of
substitutes
Higher margins allow low-cost producers to withstand supplier
cost increases
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Key Risks of Cost Leadership

Many cost-saving activities are easily duplicated

Exclusive cost leadership can become a trap

Obsessive cost cutting can shrink other competitive

advantages involving key product attributes

Cost differences often decline over time

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Evaluating A Business’s Differentiation Opportunities
A. Skills and Resources Fostering Differentiation
• Strong marketing abilities
• Product engineering
• Creative talent and flair
• Strong capabilities in basic research
• Corporate reputation for quality or technological leadership
• Long tradition in an industry or unique combination of skills
• Strong cooperation from channels and suppliers of major components

B. Organizational Requirements Supporting Differentiation

• Strong coordination among functions in R&D, product development, and marketing
• Subjective measurement and incentives instead of quantitative measures
• Amenities to attract highly skilled labor, scientists, and creative people
• Tradition of closeness to key customers
• Some personnel skilled in sales and operations - technical and marketing

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Evaluating A Business’s Differentiation Opportunities --
C. Examples of Ways Businesses Achieve Competitive Advantage

Cutting edge production technology and product features to Technology

maintain a distinct image and actual product development

Programs to ensure technical competence of sales staff and marketing Human resource
orientation of service personnel management

Comprehensive, personalized database to build knowledge of customers to be used in General

customizing how products are sold, serviced, and replaced administration

Pr
Quality control presence at key supplier facilities; work with suppliers’ new product

of
development activities AllowingProcurement

it
service
personnel
Purchase superior Careful inspection JIT coordination Expensive, considerable

m
ice
quality, well- of products at each with buyers; use of informative discretion to

ar
rv
step in production own or captive credit

g
known advertising and

Se
customers

in
to improve transportation
components, promotion to build for
performance and service to ensure repairs
raising quality and lower defect rates timeliness brand image
image of final
products

Inbound logistics Operations Outbound logistics Marketing & sales 13

Advantages of a Differentiation Strategy

Rivalry is reduced when a business successful

differentiates itself

Buyers are less sensitive to prices for effectively

differentiated products

Brand loyalty is hard for new entrants to overcome

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Key Risks of Differentiation

Imitation narrows perceived differentiation, rendering

differentiation meaningless

Technological changes that nullify past investments or

learning

Cost difference between low-cost competitors and the

differentiated business becomes too great for
differentiation to hold brand loyalty
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 Evaluating A Business’s Rapid Response Opportunities

A. Skills and Resources Fostering Speed

• Process engineering skills
• Excellent inbound and outbound logistics
• Technical people in sales and customer service
• High levels of automation
• Corporate reputation for quality or technical leadership
• Flexible manufacturing capabilities
• Strong downstream partners
• Strong cooperation from suppliers of major components

B. Organizational Requirements Supporting Rapid Response

• Strong coordination among functions in R&D, product development, and marketing
• Major emphasis on customer satisfaction in incentive programs
• Strong delegation to operating personnel
• Tradition of closeness to key customers
• Some personnel skilled in sales and operations - technical and marketing
• Empowered customer service personnel

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Evaluating A Business’s Rapid Response Opportunities --
C. Examples of Ways Businesses Achieve Competitive Advantage

Use of companywide technology sharing activities and autonomous Technology

product development teams to speed new product development development

Develop self-managed work teams and decision making at lowest Human resource
levels to increase responsiveness management

Highly automated and integrated information processing system; include major General
buyers in the systems on a real-time basis administration

Pr
of
Preapproved, online suppliers integrated into production
Procurement

it
Locate service
technicians
Working very Standardize dies, JIT delivery plus Use of laptops

ice
at customer

m
closely with components, and partnering with linked directly to

rv
facilities that

ar
Se
suppliers to include production are

g
express mail operations to

in
their choice of equipment to allow geograph-
services to ensure speed the order
warehouse location quick changeover ically
to minimize to new or special very rapid delivery process and close
delivery time orders shorten the sales
cycle

Inbound logistics Operations Outbound logistics Marketing & sales 17

Advantages of a Speed-Based Strategy
Creates a way to lessen rivalry because firm has the availability
of something a rival may not

Allows firm to charge buyers more, engender loyalty, or enhance

its’ position relative to its buyers

Generates cooperation and concessions from suppliers since

they benefit from increased revenues

Substitutes and new entrants are trying to keep up with the rapid
changes rather than introducing them
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Creating a Competitive Advantage Based on Speed

• Has become a major source of competitive advantage for many firms

• Involves the availability of a rapid response to customers by
• Providing current products quicker
• Accelerating new product development or improvement
• Quickly adjusting production processes
• Making decisions quickly

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Key Risks of a Speed-Based Strategy

Speeding up activities that have not been conducted in a

fashion prioritizing rapid response should only be done
after attention to training, reorganization, and/or
reengineering

Some industries - stable, mature ones - may not offer much

advantage to a firm introducing some forms of rapid
response
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Creating a Competitive Advantage Based on Market Focus

• Involves building cost, differentiation, and/or speed competitive

advantages targeted to a narrow, market niche
• Allows a firm to
• “Learn” its target customers
• Build up organizational knowledge of ways to satisfy its target market
better than larger rivals
• Risks of focus strategies
• Can attract major competitors to the segment
• Believing a focus strategy, by itself, creates success, rather than a form of
low cost, differentiation, or speed

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Industry Environments and Strategy Choices
Emerging Industries

Industries Transitioning to Maturity

Mature and Declining Industries

Fragmented Industries

Global Industries
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Characteristics of Markets in Emerging Industries
• Proprietary technology and technological uncertainty
• Competitor uncertainty regarding inadequate information
• High initial cost structure
• Few entry barriers
• First-time buyers require initial inducement
• Inability to easily obtain raw materials and components
• Need for high-risk capital

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 Strategic Options for Emerging Industries
1. Ability to shape industry’s structure

2. Ability to rapidly improve product quality

3. Establish favorable relations with key suppliers

4. Ability to establish technology as dominant force

5. Acquire a core group of loyal customers

6. Ability to forecast future competitors

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Characteristics of Industries Transitioning to Maturity

• Intense competition for market share

• Increased sales to experienced, repeat buyers

• Greater emphasis on cost and service

• Declining profitability

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Strategic Options for Maturing Industries
1. Prune the product line

2. Emphasize process innovation

3. Emphasize cost reductions

4. Focus on selecting loyal buyers

5. Pursue horizontal integration

6. Expand internationally
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Pitfalls to Avoid in Competing in Maturing Industries

A middle-ground approach to selecting a generic competitive

strategy

Sacrificing market share for short-term profits

Waiting too long to respond to price reductions

Retaining unneeded excess capacity

Engaging in sporadic efforts to boost sales

Placing hopes on new products

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Characteristics of Mature/Declining Industries
• Demand grows more slowly than economy,
or even declines

• Slowing growth is caused by

• Technological substitution

• Demographic shifts

• Shifts in consumer needs

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Strategic Options for Mature/Declining Industries

1. Focus on key market segments offering growth

opportunities

2. Emphasize product innovation and quality

improvement

3. Emphasize production and distribution efficiency

4. Gradually harvest the business

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Pitfalls to Avoid in Competing in Mature/Declining Industries

Being overly optimistic about prospects for an industry

revival

Getting trapped in a profitless war of attrition

Harvesting from a weak position

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 Characteristics of Fragmented Industries
• No firm has a significant market share
• No firm can significantly influence industry outcomes
• Examples
• Professional services
• Retailing
• Wood and metal fabrication
• Agricultural products
• Funeral industry

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 Strategic Options for Fragmented Industries
1. Tightly managed decentralization - Intense local coordination, high personal service,
local autonomy

2. Formula facilities - Standardized, efficient, low-cost facilities at multiple locations

3. Increased value added - Difficult to differentiate products/services

4. Specialization - Product type, customer type, type of order, geographic areas

5. Bare bones/no frills - Intense low margin competition (low overhead, minimum wages, tight cost
controls)
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 Characteristics of Global Industries
• Differences in prices and costs among countries due to
• Currency exchange fluctuations
• Differences in wage and inflation rates
• Other economic factors
• Differences in buyer needs across countries
• Differences in competitors and ways of competing among countries
• Differences in trade rules and governmental regulations across countries

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Strategic Options: Pursuing Global Market Coverage

1. License foreign firms to produce and distribute a

firm’s products

2. Maintain a domestic production base and export

products

3. Establish foreign-based plants and distribution in

foreign countries
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 Grand Strategy Selection Matrix
Overcome weaknesses

Turnaround or Vertical integration

retrenchment Conglomerate diversification
Divestiture
Liquidation External
Internal
II I (acquisition or
(redirected
merger for
resources
within the firm) III IV resource
capability)
Concentrated growth Horizontal integration
Market development Concentric diversification
Product development Joint venture
Innovation

Maximize strengths 35
 Model of Grand Strategy Clusters
Rapid market growth
1. Concentrated growth 1. Reformulation of concentrated
2. Vertical integration growth
3. Concentric 2. Horizontal integration
diversification 3. Divestiture
4. Liquidation
Strong I II Weak
competitive competitive
position IV III position
1. Concentric 1. Turnaround or retrenchment
diversification 2. Concentric diversification
2. Conglomerate 3. Conglomerate diversification
diversification 4. Divestiture
3. Joint venture 5. Liquidation
Slow market growth 36
Conclusion: Selecting a Business Strategy to
Achieve a Competitive Advantage

Focusing on key sources of competitive

advantage requiring total, consistent
commitment
Selection of
appropriate Weighing skills, resources,
business organizational requirements, and risks
of each source of competitive
strategie(s)
advantage
involves
Considering unique effects of the generic
industry environment on a firm’s value chain
activities
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 References

1.Lawrence R.Jauch., Glueck William F. - Business Policy and Strategic

Management, Frank Brothers, McGraw Hill, Fifth edition.
2.John A Pearce II, Richard B Robinson, Amita Mittal- Strategic Management
formulation, Implementation and Control, Tata McGraw Hill, Twelfth
edition.
3.K.Aswathappa, Business Environmentand Strategic Management, Himalaya
Publishers, Second edition, New Delhi

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French Revolution (1789-1799)
• Before French Revolution Bourbon family of kings ruled France.
• French society was divided into: Clergy, Nobility and the third estate.
• Monarchy: Country is ruled by a monarch and the authority or crown is generally inherited.
• Democracy did not exist before the French revolution.
• Under the hereditary monarchy in France the King held himself to the representative of
God on earth. Louis XIV, XV, XVI.
• Palace of Versailles (Chateau de Versailles) was the center of political power in in France
since 1682.
• First estate or clergy: (1) Higher clergy; (2) Lower clergy. Comprised on 1% of the
population; didn’t pay taxes; led luxurious life; held one-fifth of the land; collected a tax
called Tithe from people.
• Second estate or nobility; were aristocrats; comprised 2% of population; didn’t pay taxes;
controlled 30% of the land.
• Third estate; 97%; included big businessmen, merchants, court officials, landless labour,
servants; paid taxes- Tithe (1/10; voluntary; paid to church), Taille (paid to the King; also
levied on salt and tobacco); %age of tillage varied from year to year.
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Enlightenment: 18th century-The Age of Reason
• Man is not born to suffer but is born to be happy. 18th century French philosophers
asserted that the doctrine of Nature be understood. Understand the law of nature and the
faith in ‘reason’.
• Intellectual Movement: Emphasized knowledge acquisition, education of people; got cues
and clues from the American revolution and its leader Benjamin Franklin.
• The French revolution gave humanity new ideas- liberty, fraternity and equality.
• Voltaire (1694-1778): His writings gave ideas fed the fire of revolution; all religions absurd,
contrary to reason; exposed high handedness of clergy.
• Locke: envisaged a society based on freedom, equal laws and opportunities.
• Rousseau (1712-78): Considered democracy as the best form of government;

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 Blackboard
Assessment Pattern

Components HT-1 HT-2 Assignment Surprise Business GD Forum Attendance Scaled

Test Quiz Marks

Max. Marks 10 10 6 4 4 4 2 40

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THANK YOU

For queries
Email:
rajeev.e9245@cumail.in

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