STRATEGIC MANAGEMENT (MOST IMPORTANT)

•Business Environment, Competitive Advantage

•Strategy – Definition, Mintzberg’s 5 P’s.
•Elements in Strategic Management Process
•Vision, Mission, Setting Objectives/ Targets
•Environmental Scanning and Organisational Scanning
•SWOT Analysis, TWOS Model, Core Competency
•Functional , Business and Corporate level strategies
•Mike Porter’s Five Forces and Generic Value Chain Models
•Mike Porter’s Diamond Model, Strategic Choices.
•Strategies – Growth, Stability, Turnaround.
•Growth Strategy
a. Expansion by Concentration (Ansoff Model)
b. Horizontal and Vertical expansion
c. Diversification
d. Internationalisation/Globalisation – EPRG model,
e. JV, M & A
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• Stability – incremental improvements, Turnaround.
• Mckinsey’s 7 S model – Strategy, Structure, Systems,
Staff, Skills, Style, Shared values.
• V U C A environment
Knowledge Management and Organisational
Transformation, Managing Change, Creativity &
Innovation

• Strategic Evaluation and Control

• Balance Score Card

• Red Blue and Purple Ocean theories

• BCG, GE matrix(Nine windows),
• Core Values for Most Admired Organisation
• TQM and BPR and Six Sigma
• Corp Sustainability – CSR – 3 P, 4 E models
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Strategic alternatives for Corporates

1. Growth & Expansion

2. Stability

3. Turnaround / Downsizing / Retrenchment

4. Any combination of these three

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Major reasons for adopting different Coroporate strategies
1. Expansion strategy is adopted because :
a. It may become imperative when the environment
demands increase in pace of activity.
b. Psychologically, strategists may feel more satisfied with
the prospects of growth from expansion: CEO may take
pride in presiding over organisation perceived to be growth
oriented.
c. Increasing size may lead to more control over the market
vis-à-vis competitors.
d. Advantages from the experience curve and scale of
operations may accrue.
2. Stability strategy is adopted because :
a. It is less risky, involves less changes and people feel
comfortable with things as they are.
b. The environment faced is relatively stable.
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c. Expansion may be perceived as being threatening.
d. Consolidation is sought through stabilisation after a
period of rapid expansion.
3. Turnaround/ Downsizing strategy is adopted because
a. The management no longer wishes to remain in business
either partly or wholly, due to continuous losses and the
organisation becomes unviable.
b. The environment faced is threatening.
c. Stability can be ensured by reallocation of resources
from unprofitable to profitable businesses.
4. Combination strategy is adopted because :
a. The organisation is large and faces complex environment
b. The organisation is composed of different businesses,
each of which lies in a different industry, requiring a
different approach.
(Ex. Tata Power – Expansion at Gen, Stability at Trans., Delloitts)
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Growth & Expansion Strategies

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Expansion Strategies
1.Expansion through concentration (Ansoff Model)

2.Expansion through integration

3.Expansion through diversification

4.Expansion through cooperation

5.Expansion through Globalisation

6.Expansion through digitalisation

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ANSOFF MODEL

3 4

Product
Diversification
Development

1 2

Market Market
Penetration Development
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Expansion through concentration (Ansoff Model)

• Market Penetration : Make Customer Satisfied

• Market Development : Explore new markets and make

more Customers Satisfied

• Product Development : Develop more Products to satisfy

Customer of each Segment.

Hitting Market Share

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Expansion through integration
•Horizontal integration : Acquiring a Company in your own
industry.

•Vertical integration
(a) Backward integration: Acquiring a Company from Supply
Chain to reach Source

(b) Forward integration : Acquiring a Company from

Distribution Chain to reach
Customer

S--------------Input------Process------Output ------------ C
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Expansion through diversification

•Concentric Diversification : entering into the new industry

which is close to existing
industry

•Conglomerate Diversification : entering unrelated industry.

Emerging Industry :
A new industry formed due to new knowledges, new needs.
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Expansion through concentration ( Ansoff Model)
Simple, first level type of expansion strategy.
Market Penetration, Market Development,
Product Development.
Advantages
Require minimal changes, euphoria, success and more
motivation.
Towards specialisation and more in depth knowledge.
Intense focusing on utilisation of resources.
Decision making process is under less strain as there is a
high level of predictability. Past experience is valuable as it
is replicable.
Disadvantages
“Putting all eggs in one basket has its own problems”.
Industry growth, attractiveness and maturity.
Recession, Market fickleness, new technologies.
Too much knowing/ expertise creates inertia.
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Expansion through integration

• Horizontal integration
When an organisation takes up a same type of products at
the same level of production or marketing process, it is said
to follow a strategy of horizontal integration. A horizontal
integration strategy results in a bigger size with
concomitant benefits of a stronger competitive position in
the industry. It may be frequently adopted with a view to
expand geographically, by buying a competitor’s business,
to increase the market share or to benefit from economies
of scale. Yet, it does not take the organisation beyond its
existing business definition. It still remains in the same
industry, serving the same markets and customers through
its existing products, by the means of the same
technologies. Horizontal integration is quite similar to
mergers and acquisitions since these are one of the means
for integrating horizontally.
Ex. Bridgestone Tyres, Tata Corus, Mittal Arselor etc.
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Expansion through integration

• Vertical integration
Any new activity undertaken with the purpose of either
supplying inputs (such as raw materials) or serving as a
customer for outputs (such as marketing of firm’s products)
is a vertical integration. It is of two types – Backward and
Forward integration.
Backward integration means retreating to the source of raw
materials.
Forward integration moves the organisation ahead, taking it
nearer to the ultimate customer.
 Input Process Output
S ………I-----------------------------I………… C
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Expansion through diversification
• Diversification
Diversification involves substantial change in business
definition – singly or jointly – in terms of customer functions,
customer groups or alternative technologies of one or more of
a firm’s businesses. When new products are made for new
markets then diversification takes place. The notion of
diversifying is therefore related to the newness of products or
markets or both. By adopting diversification, an organisation
does something novel in terms of making new products or
serving new markets or doing both simultaneously.
1. Concentric or Related diversification
a. Marketing related concentric diversification
ex. Company in sewing machine biz entering
into household appliances biz.
b. Technology related concentric diversification
ex. A leasing firm offering hire-purchase services to
institutional customers also starts consumer financing
for purchase of durables to individual customers.
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c. Marketing and technology related concentric
diversification
ex. A synthetic water tank manufacturer makes other
synthetic items such as pre-fabricated doors and
windows, while the technology relatedness is in the
common technology of plastic processing and
engineering required for manufacturing these products.
2. Conglomerate or unrelated diversification
When an organisation adopts a strategy which requires
taking up those activities which are unrelated to the existing
business definition of any of its businesses, either in terms
of their consumer groups, customer functions or alternative
technologies, it is conglomerate diversification.
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Reasons for Conglomerate Diversification
1. Spreading business risks by investing in different
industries.
2. Maximising returns by investing in profitable businesses
and selling out unprofitable ones.
3. Leveraging competancies in corporate restructuring by
turning round loss making companies.
4. Stabilising returns by avoiding economic upswings and
downswings through having stakes in different industries.
5. Taking advantage of emerging opportunities afforded by an
expanding economy and encouraging government policies.
6. Migrating from businesses under threat from the business
environment.
7. Exercising of personal choice by industrialists and
managers to create industrial empires by owning
businesses in diverse sectors.
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Risks of Diversification
1. Diversification, especially unrelated, is a complex strategy to
formulate and implement. It demands a very high level of
managerial, operational and financial competence to be
successful.
2. Diversification strategies demand a wide variety of skills.
Different businesses operating in diverse industries would
require dissimilar sets of skills to manage them successfully.
3. Diversification results in decreasing commitment to a single or
few businesses and diverting it to several of them at the same
time. This phenomenon often results in a situation where
businesses that need more attention get less and the ones
needing little get more. Imbalance of commitment does not
help to realise the many benefits of diversification such as
maximum returns.
4. Diversification often does not result in the promised rewards.
Experience around the world shows that it is easy to be lured
by the glamour of diversification and not be able to reap the
benefits of synergies and strategic advantage
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ultimately. In fact, cases are legion where the shareholders
value instead of being enhanced, has been lost due to
diversification.
5. Diversification increases the administrative costs of
managing, integrating and controlling a wide portfolio of
businesses. This can often offset the savings expected
through synergies in the case of related diversification or
decreasing risks anticipated in unrelated diversification.
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Expansion through Co-operation
Rising above competitive situations and creating a “Win Win”
Situation.

• Joint Ventures
a. Maruti Suzuki
b. Hero Honda
c. Tata & Singapore Airlines

• Mergers & Acquisitions

a. Coca Cola acquiring Thums Up
b. Tata Power acquiring Boomi Coal Fields
c. LG starting a Retail in Opera House
d. Microsoft acquiring Nokia
e. Tata Motors acquiring Jaguar & LR
f. Tata Steel acquiring Corus in Holland
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Expansion through Internationalisation
International strategies are a type of expansion strategies that
require orgnisations to market their products or services
beyond the domestic or national market. For doing so, an
organisation would have to assess the international
environment, evaluate its own capabilities and devise
strategies to enter foreign markets.
Globalisation
Factor Proportion Theory
Factors of Production which helps in building Economy
1. Land

2. Labour

3. Raw Materials (Natural Resources)

4. Capital

5. Technology

6. Skills
Strength of Developed and Less Developed Countries

Developed Countries Less Developed Countries

Capital Land

Technology Labour

Managerial Abilities Raw Materials

Marketing Skills Untapped Markets

 Strength of Developed Countries are

Movable
and
Strength of Less Developing Countries are

Immovable.
 So,
Movable should move to Immovable
to create a Win – Win situation for both.

Capital comes as F D I from Developed countries to Less

Developed countries.
Technology, Managerial Abilities and Marketing Skills
follows.
 “Make in India” Concept

Emanating from Factors Proportion Theory

 International Business
E P R G Model
International Business Corporate Approaches

1. Ethnocentric (Home country orientation)

2. Polycentric (Host country orientation)

3. Regiocentric (Regional orientation)

4. Geocentric (World orientation)

 International Business

Germany India

+ Customs Duty
100 %

Rs 100 + Rs 20 Rs 120

Transportation
Cost

2 - 2 - 2 Concept of Export
International Business
International Business
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Expansion through Digitalisation
Digitalisation is defined as digital coding of information and the
growing productivity gains in processing and transmission it
enables.
It is a technical term denoting the conversion on analogue
electrical signals into digital signals, a process that takes
place, for instance, in the case of recording music on a
compact disk, when physical sound waves in the form of
electrical sound signals get converted into digital electronic
signals. Computerisation can help in compressing huge
amounts of analogue data into digital data making it possible
for organisations to amplify, transmit, modulate, store, retrieve
and reconvert data. Computerisation also makes it possible to
deal with data in its various forms: text, audio, still images,
animation, video and other forms that we call multimedia.
Digitalisation helps creating e-business or e-commerce which
is a vital aspect of globalisation. It is a futuristic strategy.
Thank you