BENEFITS OF THE CONCEPT OF STRATEGY

The following are the benefits of the concept of strategy:

i) It rationalizes allocation of scarce resources.
ii) It motivates employees to shape their work in the context of shared corporate goals.
iii) It assists management to meet unanticipated future changes.
iv) It ensures organizational effectiveness through implementation and evaluation of the strategy.
v) It is a powerful tool to management to deal with the future which is uncertain and hazy in all
respects.
vi) It improves the capability of management in coping with the volatile external environmental
forces.
vii) It encourages the management to choose the best course of action to realize the objectives.
viii) Strategy planning system provides an objective basis for measuring performance.
PITFALLS OF THE CONCEPT OF STRATEGY
The concept of strategy has the following pitfalls:
i)It is a complex, cumbersome and complicated to formulate corporate strategy.
ii)Corporate strategies are useful for long range problems. They are not effective to overcome
current exigencies.
iii)The corporate strategy formulation process calls for considerable time, money and effort.
Developing appropriate corporate strategy is not a simple and economical proposition.
For financially weak companies, cost becomes a great hindrance
iv) As future is uncertain and cannot be predicted accurately, the strategic planning system based
on hazy and uncertain estimates are not exact.
v) Implementation of corporate strategy is influenced by organizational factors, behavioral
factors and motivational factors. The gap between formulation and implementation of corporate
strategy does not give desired results to the organization.
Q2Explain the three dimensions of a business definition.
Answer:
THE THREE DIMENSIONS ALONG WHICH A BUSINESS IS DEFINED
Abell came up with the concept of the three dimensions along which a business is defined to
enable a decision-maker' to think in a structured manner and systematically move in one or more
dimensions generating a number of feasible alternatives. The three dimensions along which
a business is defined are
customer groups, customer functions
and
alternate technology.
Business definition is at the core of business strategies. By defining the who, what, and how
of a business, a business definition seeks to provide the direction in action has to be taken. The
who of the business definition refers to the customer groups that are targeted by a business.
Customer groups are identified based on the needs that they seek to satisfy. The bases for
identification popularly used are demographic characteristics, geographic segmentation
or lifestyles. Businesses must continuously focus on the needs of the customer group they
identify for targeting. The what of a business definition deals with customer needs. The basic
needs of food, clothing are examples of customer needs. There could be higher older need of

entertainment, education, security and social status. Businesses aim at the satisfaction of these
needs. Companies must dedicate the necessary time and resources to define customer needs.
Products and services are then designed to satisfy these needs. A business earn its revenues from
providing customer satisfaction through products and services. Beyond customer satisfaction is
the idea of customer delight that aims at providing even more value than what a customer would
normally expect

iii.
Analyse how well the parent corporation fits with the business unit. All in all, corporate
parenting focuses intensely on the role of the parent in adding value to the individual businesses.
Reference:
M Alexander, A Campbell and M Goold, "A new model for reforming -e planning review" in
Planning Review, Jan-Feb 1995.
CASE STUDY
In a market dominated by behemoths like SAIL and TISCO, finding a niche is of crucial
importance for a small player .What could a Lloyds do with a meagre annual capacity of making
six lakh tonnes of HR coils while SAIL sold over 1,600 lakh tonnes in the same time? Should
Lloyds follow the market leader or adopt its own unique approach to its business strategy? It is in
the context of such questions that Lloyds' attention came to rest on the manufacturing process.
Almost all steel producers adopt the blast furnace technology. In this, the process starts with a
clear differentiation among the ultimate products to be manufactured. So, manufacturing batch
size has to be large enough to take up customised orders. The raw material, iron ore, has to pass
through several complex stages of manufacturing. Lloyds looked for an alternative technology
that could suit its requirements. The solution lay in the Electric Arc Furnace technology where
the unique feature was that initial manufacturing stages need not differentiate among different
products .Such a differentiation came at a much later stage. Translated into a business
proposition, what it meant was that Lloyds could operate with a much smaller batch size of, say,
100 tonnes and deliver quickly. For instance, a 1,000-tonnes small order of specialised product
custom-made to buyer's specification could be delivered in as little as 15 days. Such a quick
delivery schedule would not be possible for a large, integrated steel manufacturer .In this
manner, analogous to small gunboats that could effectively torpedo a large, slow-moving ship,
Lloyds carved out a niche in the highly competitive steel market.

Question:
Comment on the nature of the business strategy of Lloyds. What are the conditions in which such a
strategy would succeed? Could fail?
Answer:
NATURE OF THE BUSINESS STRATEGY OF
LLOYDS

The business strategy for Lloyds is twofold. Firstly, as a small player in the industry, Lloyds has
created a competitive advantage for itself by employing
electric arc furnace
technology, it has speeded up the manufacturing process such that customer orders could be met
with in less than15 days. This would increase customer satisfaction and give Lloyds a
competitive edge. With the introduction of the new technology, Lloyds will now be able to meet
customer-specific orders in a shorter period of time than the big companies. The manufacturing
process has
also been made simpler because differentiation is coming in at a later stage. The reduction in thel
ength of the manufacturing process time has also led to the reduction of the work-in-process
inventory. This would mean than the company would have funds that would otherwise be tied up
in inventory, available for other purposes. Lloyds looked for an alternative technology that could
suit its requirements. The Electric Arc Furnace technology worked well for Lloyds because of
the unique feature that initial manufacturing stages need not differentiate among different
products. This speeded up the manufacturing process such that Lloyds could now operate with a
much smaller batch size of, say, 100 tonnes and deliver quickly. Referring to the business
definition of Abell, that defines business in three dimensions of customer groups, customer
function and technology; the customer groups here are customers of steel products who need
various differentiated steel products. The case highlights that Lloyds could deliver specified
custom-made orders within 15 days thereby highly satisfying its customer function, i.e. what
customers need. This is achieved through the electric arc furnace technology. Thus, Lloyds has
redefined its business, according to the three dimensional business definition.

This strategy works and succeeds where there is integrated manufacturing and there are few
competitors such as in monopolistic competition as in this case, and is capable of winning
customers from the larger companies. But success in an integrated steel industry means reorganizing the whole value chain to make it more efficient and meet the tight schedules of
delivery. This means that extra costs would be incurred which implies reduced unit profit
Businesses seek to enhance their competitive advantage by providing customer value in the form
of products and services. The how of the business definition refers to the alternative
technologies used to provide services and products that satisfy the perceived needs of the
customer groups identified. Besides technical knowledge, alternative technology refers to the
skills and competencies that a business utilizes to provide products and services. The core
competencies of a business dwell in its skills base and this is used to provide value to the
customer. As can be concluded from above, business definition lays down the framework within
which businesses can operate. It can also provide direction in which businesses can expand or
retrench.
Q3 What role do incentives play in strategy implementation?
Answer:
THE ROLE OF INCENTIVES IN STRATEGY IMPLEMENTATION
Incentives motivate employees and determine the way they approach their jobs and even life in
general. If organisational culture is geared towards achievement, incentives help to motivate

and put their utmost energies for the work. In its absence, high achievement-oriented people
develop frustration and desert the organisation Therefore, for implementing strategies, incentives
play a very important role and enhances achievement- oriented organizational culture.
Q4. What is meant by aligning social responsiveness to strategic management?
Answer:
SOCIAL GOALSETTING ALIGNING SOCIAL RESPONSIVENESS TO STRATEGIC
MANAGEMENT
Social goal setting approach emphasizes on incorporating social concern in the objectives of an
organization on a perpetual or periodic basis. A combination of both can also be followed in
which some social concerns can be undertaken on perpetual basis while others can be taken
on project basis for specific period. Aspects like consumer satisfaction and environmental
protection can be taken on perpetual basis whereas special projects for certain specific social
causes like eliminating the impact of destruction caused by certain natural calamities can be
taken on periodic basis. In attempting to align social responsiveness to strategic management, an

iii. Analyse how well the parent corporation fits with the business unit. All in all, corporate
parenting focuses intensely on the role of the parent in adding value to the individual businesses.
Reference:
M Alexander, A Campbell and M G oold, "A new model for reforming -e planning review" in
Planning Review, Jan-Feb 1995.
CASE STUDY
In a market dominated by behemoths like SAIL and TISCO, finding a niche is of crucial
importance for a small player .What could a Lloyds do with a meagre annual capacity of making
six lakh tonnes of HR coils while SAIL sold over 1,600 lakh tonnes in the same time? Should
Lloyds follow the market leader or adopt its own unique approach to its business strategy? It is in
the context of such questions that Lloyds' attention came to rest on the manufacturing process.
Almost all steel producers adopt the blast furnace technology. In this, the process starts with a
clear differentiation among the ultimate products to be manufactured. So, manufacturing batch
size has to be large enough to take up customised orders. The raw material, iron ore, has to pass
through several complex stages of manufacturing. Lloyds looked for an alternative technology
that could suit its requirements. The solution lay in the Electric Arc Furnace technology where
the unique feature was that initial manufacturing stages need not differentiate among different
products. Such a differentiation came at a much later stage. Translated into a business
proposition, what it meant was that Lloyds could operate with a much smaller batch size of, say,
100 tonnes and deliver quickly. For instance, a 1,000-tonnes small order of specialised product
custom-made to buyer's specification could be delivered in as little as 15 days. Such a quick
delivery schedule would not be possible for a large, integrated steel manufacturer .In this
manner, analogous to small gunboats that could effectively torpedo a large, slow-moving ship,
Lloyds carved out a niche in the highly competitive steel market

Comment on the nature of the business strategy of Lloyds. What are the conditions in which such a
strategy would succeed? Could fail?
Answer:
NATURE OF THE BUSINESS STRATEGY OF
LLOYDS
The business strategy for Lloyds is twofold. Firstly, as a small player in the industry, Lloyds has
created a competitive advantage for itself by employing
electric arc furnace
technology, it has speeded up the manufacturing process such that customer orders could be met
with in less than15 days. This would increase customer satisfaction and give Lloyds a
competitive edge. With the introduction of the new technology, Lloyds will now be able to meet
customer-specific orders in a shorter period of time than the big companies. The manufacturing
process has
also been made simpler because differentiation is coming in at a later stage. The reduction in thel
ength of the manufacturing process time has also led to the reduction of the work-in-process
inventory. This would mean than the company would have funds that would otherwise be tied
upin inventory, available for other purposes. Lloyds looked for an alternative technology that
could suit its requirements. The Electric Arc Furnace technology worked well for Lloyds because
of the unique feature that initial manufacturing stages need not differentiate among different
products. This speeded up the manufacturing process such that Lloyds could now operate with a
much smaller batch size of, say, 100 tonnes and deliver quickly. Referring to the business
definition of Abell, that defines business in three dimensions of customer groups, customer
function and technology; the customer groups here are customers of steel products who need
various differentiated steel products. The case highlights that Lloyds could deliver specified
custom-made orders within 15 days thereby highly satisfying its customer function, i.e. what
customers need. This is achieved through the electric arc furnace technology. Thus, Lloyds has
redefined its business, according to the three dimensional business definition.

This strategy works and succeeds where there is integrated manufacturing and there are few
competitors such as in monopolistic competition as in this case, and is capable of winning
customers from the larger companies. But success in an integrated steel industry means reorganizing the whole value chain to make it more efficient and meet the tight schedules of
delivery. This means that extra costs would be incurred which implies reduced unit profit.