Module 1 Introduction to Strategic Management

1. Introduction to Strategy

Meaning : Strategic Management is a field of study that involves the process through which
firms define their missions, visions, goals, and objectives, as well as craft and execute strategies
at various levels of the firms’ hierarchies to create and sustain a competitive advantage. Strategy
is a high level plan to achieve one or more goals under conditions of uncertainty.

Definition: Strategy is the unified, comprehensive and integrated plan that relates the strategic
advantage of the firm to the challenges of the environment and is designed to ensure that basic
objectives of the enterprise are achieved through proper implementation process”

➢ Characteristics of Strategy:

1. Strategy is a systematic phenomenon:Strategy involves a series of action plans, no way

contradictory to each other because a common theme runs across them. It is not merely a good
idea; it is making that idea happen too. Strategy is a unified, comprehensive and integrated plan
of action.

2. By its nature, it is multidisciplinary: Strategy involves marketing, finance, human resource

and operations to formulate and implement strategy. Strategy takes a holistic view. It is
multidisciplinary as a new strategy influences all the functional areas, i.e., marketing, financial,
human resource, and operations.

3. By its influence, it is multidimensional: Strategy not only tells about vision and objectives,
but also the way to achieve them. So, it implies that the organisation should possess the resources
and competencies appropriate for implementation of strategy as well as strong performance
culture, with clear accountability and incentives linked to performance.

4. By its structure, it is hierarchical: On the top come corporate strategies, then come business
unit strategies, and finally functional strategies. Corporate strategies are decided by the top
management, Business Unit level strategies by the top people of individual strategic business
units, and the functional strategies are decided by the functional heads.

5. By relationship, it is dynamic: Strategy is to create a fit between the environment and the
organisation’s actions. As environment itself is subject to fast change, the strategy too has to be
dynamic to move in accordance to the environment.

6. Strategy requires searching for new sources of advantage: To achieve sustainable long
term competitive advantage the firm must invent new rules and new games to become unique
and create wealth. Simply copying the leader means value is destroyed for all the firms. Thus to
look different, strategy differentiation is a must.

7. Strategy is almost always the result of some type of collective decision-making process:
The vision, mission, objectives, and corporate strategies are determined by top management.
Business Unit strategies are decided by heads of business units and functional plans by
functional heads. But the top management consent is a must. It is the senior management which
resolves paradoxes between the conflicting objectives, existing functions and future activities,
and the resources allocation.

2. Strategic Management Process

Strategic management process has following five steps:

Step # 1. Mission and Goals: The first step in the strategic management begins with senior
managers evaluating their position in relation to the organization’s current mission and goals.
The mission describes the organization’s values and aspirations; and indicates the direction in
which senior management is going. Goals are the desired ends sought through the actual
operating procedures of the organization. It typically describe short-term measurable outcomes.

Step # 2. Environmental Scanning: Environmental scanning refers to a process of collecting,

scrutinizing and providing information for strategic purposes and helps in analyzing the internal
and external factors influencing an organization. After executing the process, management
should evaluate it on a continuous basis and strive to improve it.

Step # 3. Strategy Formulation: Strategy formulation is the process of deciding best course of
action for achieving organizational objectives. After conducting environment scanning process,
managers formulate corporate, business and functional strategies.

Step # 4. Strategy Implementation: Strategy implementation implies putting the organization’s

chosen strategy in to action and making it work as intended. Strategy implementation includes
designing the organization’s structure, distributing resources, developing decision making
process, and effectively managing human resources.

Step # 5. Strategy Evaluation: Strategy evaluation which is the final step of strategy
management process involves- appraising internal and external factors, measuring performance,
and taking remedial/corrective actions. Evaluation assure the management that the organizational
strategy as well as its implementation meets the organizational objectives.
3. Vision & Mission

1.Mission Statement: A Mission Statement defines the company's business, its objectives and
its approach to reach those objectives. The mission statement describes what the organization
needs to do now to achieve the vision. The vision and mission statements must support each
other, but the mission statement is more specific. It defines how the organization will be different
from other organizations in its industry. Here are examples of mission statements from
successful businesses:

• Adidas: We strive to be the global leader in the sporting goods industry with brands built
on a passion for sports and a sporting lifestyle.
• Amazon: We seek to be Earth’s most customer-centric company for four primary
customer sets: consumers, sellers, enterprises, and content creators.

2. Vision Statement: A Vision Statement describes the desired future position of the company.
Elements of Mission and Vision Statements are often combined to provide a statement of the
company's purposes, goals and values. The vision statement does not provide specific targets.
Instead, the vision is a broad description of the value an organization provides. It is a visual
image of what the organization is trying to produce or become. It should inspire people and
motivate them to want to be part of and contribute to the organization. Vision statements should
be clear and concise, usually not longer than a short paragraph.

• Disney: To make people happy

• IKEA: To create a better everyday life for the many people

4. Characteristics of good mission statements

1.They Are Unique to Your Business :Mission statements should never be generalized in such
a way that any other company could steal what you wrote and use it as their own. When crafting
these statements it’s vital to remember what makes your company different, unique, and special.

2.They Create Expectations: A good mission statement embraces the expectations of a target .
audience for something they truly crave. For example, Zappos’ mission statement is “To provide
the best customer service possible.” That creates the expectation in Zappos’ customers that they
will deliver superior customer service each and every time.

3.They Are Realistic :Some companies fall into the trap of crafting mission statements that are
so philosophical that they lose all touch with reality. Mission statements must be grounded in
what your company provides customers in the present
4.They Are Memorable ::This doesn’t mean that readers must be able to recite your mission
statement in whole as if it’s a catchphrase, but it does mean that people should be able to
associate key aspects of that statement with your company.

5.They Are Positive: It’s important that you avoid negative messages because mission
statements are all about how your business solves a problem, fulfills a want or need, or makes
life easier for your target audience.

6.They Are Targeted: It’s important to remember that mission statements are expressed to your
target audience, so the message must match the wants and needs of that audience. Going back to
the Zappos example, the company knew that customer service was a huge deal among women
who shopped for shoes, so it tailored its statement to match the desires of that audience.

5. Objectives and Goals

1.Objectives: Objectives are the end results of a planned activity. They are stated in quantifiable
terms. Objectives are stated differently at various levels of management. Objectives play a very
important role in enhancing the efficiency and effectiveness of an organization. The following
characteristics must be present in fairly framed objectives:

• They should be specific and unambiguous.

• They should have a particular time horizon within which it is expected to be achieved.
• They should be flexible enough so that if changes are required, they may be
incorporated easily.
• They should be attainable.
• They should be measurable.
• They should be understandable
• They should help in the achievement of the organization’s mission and vision.
• They should be challenging
• An objective is ‘SMART’: Specific: easy to understand and clear. – Measurable: in
other words, easy to quantify. – Achievable: possible to be attained. – Realistic: this
one is similar to achievable. The aim must not be ‘pie in the sky’. – Time-bound:
related to specific durations and dates

2.Goals: Goals are an intermediate result which is expected to be achieved by a certain span of
time. It is a target which an organization wishes to achieve in long term. It provides the basis for
judging the performance of the organization. Goals may be classified into two categories:

• Financial goals: They are related to the return on investment or growth in revenues
 • Strategic goals: They focus on the achievement of the competitive advantage in the
industry.

6: 7S Framework

Introduction: The McKinsey 7S Framework was designed by former employees like Tom
Peters, Richard Pascale and Robert Waterman jr, formers consultants of McKinsey, the
American consulting firm and is applied in organizations all over the world.The 7S in this
diagnostic model refer to the seven elements or factors that start with the letter ‘S’. According
to Tom Peters, Richard Pascale and Robert Waterman jr, the condition is that the internal
relationships between these elements are well-organized and that the elements steer the
organization in the same direction. n the 7S Framework the so-called hard and soft elements are
incorporated, in which hard elements aim at matters an organization can influence directly. The
soft elements are present in an organization in a more abstract way and can be found in the
organizational culture.

1.Hard Elements:

• 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. But it’s hard to tell if such strategy is well-aligned with
other elements when analyzed alone. So the key in 7s model is not to look at your
company to find the great strategy, structure, systems and etc. but to look if its aligned
with other elements..

• 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.

2.Soft Elements:

• 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.

7: Porter’s five forces model

Porter’s five forces model is an analysis tool that uses five industry forces to determine the
intensity of competition in an industry and its profitability level. Five forces model was created by
M. Porter in 1979 to understand how five key competitive forces are affecting an industry. Porters
model of competitive forces assumes that there are five competitive forces that identifies the
competitive power in a business situation. These five competitive forces identified by the
Michael Porter are:

1.Threat of substitute products: Threat of substitute products means how easily your
customers can switch to your competitors product. Threat of substitute is high when:

▪ There are many substitute products available

▪ Customer can easily find the product or service that you’re offering at the same or less price
▪ Quality of the competitors’ product is better
▪ Substitute product is by a company earning high profits so can reduce prices to the lowest level.

In the above mentioned situations, Customer can easily switch to substitute products. So
substitutes are a threat to your company. Profits and prices are effected by substitutes so, there is
need to closely monitor price trends. In substitute industries, if competition rises or technology
modernizes then prices and profits decline.

2.Threat of new entrants: A new entry of a competitor into your market also weakens your
power. Threat of new entry depends upon entry and exit barriers. Threat of new entry is high
when:

▪ Capital requirements to start the business are less

▪ Few economies of scale are in place
▪ Customers can easily switch (low switching cost)
▪ Your key technology is not hard to acquire or isn’t protected well
▪ Your product is not differentiated

3.Industry Rivalry: Industry rivalry mean the intensity of competition among the existing
competitors in the market. Intensity of rivalry depends on the number of competitors and their
capabilities. Industry rivalry is high when:

▪ There are number of small or equal competitors and less when there’s a clear market leader.
▪ Customers have low switching costs
▪ Industry is growing
▪ Exit barriers are high and rivals stay and compete
▪ Fixed cost are high resulting huge production and reduction in prices

These situations make the reasons for advertising wars, price wars, modifications, ultimately
costs increase and it is difficult to compete.

4.Bargaining power of suppliers: Bargaining Power of supplier means how strong is the
position of a seller. How much your supplier has control over increasing the Price of
supplies? Suppliers are more powerful when

▪ Suppliers are concentrated and well organized

▪ a few substitutes available to supplies
▪ Their product is most effective or unique
▪ Switching cost, from one suppliers to another, is high
▪ You are not an important customer to Supplier

5.Bargaining power of Buyers: Bargaining Power of Buyers means, How much control the
buyers have to drive down your product’s price, Buyers have more bargaining power when:

▪ Few buyers chasing too many goods

▪ Buyer purchases in bulk quantities
▪ Product is not differentiated
▪ Buyer’s cost of switching to a competitors’ product is low
▪ Shopping cost is low
▪ Buyers are price sensitive
▪ Credible Threat of integration

Buyer’s bargaining power may be lowered down by offering differentiated product.

8: SWOT Analysis

SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to

evaluate a company's competitive position and to develop strategic planning. SWOT analysis
assesses internal and external factors, as well as current and future potential. A SWOT analysis is
designed to facilitate a realistic, fact-based, data-driven look at the strengths and weaknesses of
an organization, its initiatives, or an industry.

• Strengths describe what an organization excels at and what separates it from the
competition: a strong brand, loyal customer base, a strong balance sheet, unique technology,
and so on. For example, a hedge fund may have developed a proprietary trading strategy that
returns market-beating results. It must then decide how to use those results to attract new
investors.
• Weaknesses stop an organization from performing at its optimum level. They are areas
where the business needs to improve to remain competitive: a weak brand, higher-than-
average turnover, high levels of debt, an inadequate supply chain, or lack of capital.
• Opportunities refer to favorable external factors that could give an organization a
competitive advantage. For example, if a country cuts tariffs, a car manufacturer can export
its cars into a new market, increasing sales and market share.
• Threats refer to factors that have the potential to harm an organization. For example, a
drought is a threat to a wheat-producing company, as it may destroy or reduce the crop yield.
Other common threats include things like rising costs for materials, increasing competition,
tight labor supply and so on.

9: Value Chain Analysis

Definition: Value chain analysis is a process of dividing various activities of the business in
primary and support activities and analyzing them, keeping in mind, their contribution towards
value creation to the final product. And to do so, inputs consumed by the activity and outputs
generated are studied, so as to decrease costs and increase differentiation. Value chain analysis is
used as a tool for identifying activities, within and around the firm and relating these activities to
an assessment of competitive strength.

Classification of Value Chain Analysis

Value Chain Analysis is grouped into primary or line activities, and support activities discussed as
under:
1. Primary Activities: The functions which are directly concerned with the conversion of input
into output and distribution activities are called primary activities. It includes:
▪ Inbound Logistics: It includes a range of activities like receiving, storing, distributing, etc.
which make available goods and services for operational processes. Some of those activities
are material handling, transportation, stock control, etc.
▪ Operations: The activity of transforming input raw material to final product ready for sale, is
termed as operation. Machining, assembling, packaging are the activities covered under
operations.
▪ Outbound Logistics: As the name suggests, the activities that help in collecting, storage and
delivering the product to the customer is outbound logistics.
▪ Marketing and Sales: All the activities like advertising, promotion, sales, marketing
research, public relations, etc. performed to make the customer aware of the product or
service and create demand for it, comes under marketing.
▪ Service: Service means service provided to the customer so as to improve or maintain the
value of the product. It includes financing service, after-sales service and so on.
Support Activities: Those activities which assist primary activities in accomplishment, are
support activities. These are:
▪ Procurement: This activity serves the organization, by supplying all the necessary inputs like
material, machinery or other consumable items, that required by the organization for
performing primary activities.
▪ Technology Development: At present, technology development requires heavy investment,
which takes years for research and development. However, its benefits can be enjoyed for
several years and by a multitude of users in the organization.
▪ Human Resource Management: It is the most common plus important activity which excel
all primary activities of the organization. It encompasses overseeing the selection, retention,
promotion, transfer, appraisal and dismissal of staff.
▪ Infrastructure: This is the management system, which provides, its services to the whole
organization and includes planning, finance, information management, quality control, legal,
government affairs, etc.

Module 2 Types of Strategies

1.Levels of Strategy

• Corporate Level Strategy: Corporate strategies are the ‘top’ level of strategy in an
organization. The corporate strategy will define the overall direction the organization will
move in and the high-level plans of how. These plans are usually created by a select strategy
group such as the CEO and top management. Generally this is the group involved because
they hold a deep understanding of the company and strategic business knowledge needed to
steer the organization in the right direction. A corporate strategy is generally broader in
nature compared to the other strategy levels. Strategies at this level are more conceptual and
futuristic than business/functional area strategies, and will usually span a 3-5 year period.

• Business Strategy Level : The business-level strategy is the second tier in the strategy
hierarchy. Sitting under the corporate strategy, the business strategy is a means to achieve the
goals of a specific business unit in the organization. Implementing this strategy level is only
useful for organizations with multiple business units. An organization with multiple business
units may sell products as well as services or may sell multiple products/services in different
industries. A large Bank is a prime example of an organization selling multiple services in
different industries, with business units in corporate banking, wealth management, risk
management, and capital raising to name a few. Each of these business units would have
distinct goals, and a distinct business strategy to achieve these goals.

• Functional Strategy Level: This is the level at the operating end of an organization. At
the functional level of strategy, decisions made by employees are often described as tactical
decisions. They are concerned with how the various functions of an organization contribute
to the other strategy levels. These functions can include marketing, finance, manufacturing,
human resources and more. Functional strategy deals with a fairly restrictive plan, giving the
objectives for each specific function.In simple terms, this is the strategy that will inform the
day to day work of employees and will ultimately keep your organization moving in the right
direction. The functional strategy level is probably the most important level of strategy. This
is because, without functional strategies, your organization can quickly lose traction and 'get
stuck', while competition moves forward.

2: Porter’s Generic strateges.

Porter suggested four "generic" business strategies that could be adopted in order to gain
competitive advantage. The strategies relate to the extent to which the scope of a business'
activities are narrow versus broad and the extent to which a business seeks to differentiate its
products.

The differentiation and cost leadership strategies seek competitive advantage in a broad range of
market or industry segments. By contrast, the differentiation focus and cost focus strategies are
adopted in a narrow market or industry

1. Cost Leadership :In cost leadership, a firm sets out to become the low cost producer in its
industry. The sources of cost advantage are varied and depend on the structure of the industry.
They may include the pursuit of economies of scale, proprietary technology, preferential access
to raw materials and other factors. A low cost producer must find and exploit all sources of cost
advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above
average performer in its industry, provided it can command prices at or near the industry
average.

2.Differentiation leadership: In a differentiation strategy a firm seeks to be unique in its

industry along some dimensions that are widely valued by buyers. It selects one or more
attributes that many buyers in an industry perceive as important, and uniquely positions itself to
meet those needs. It is rewarded for its uniqueness with a premium price.

3.Cost Focus : You target a niche market (little competition, ‘focused market’) and offer the
lowest possible price. In this strategy, you choose to target a clear niche market and through
understanding the dynamics of the market and the wishes of the consumers, you can ensure that
the costs remain low.

4. Differentiation Focus :You target a niche market (little competition, ‘focused market’) and
your product or service has unique features. This strategy often involves strong brand loyalty
among consumers. It’s very important to ensure that your product remains unique, in order to
stay ahead of possible competition. In order to choose the right strategy for your organisation,
it’s important be aware of the competencies and strengths of your company.

3: Corporate-Level Strategy

Definition: Corporate-Level Strategy refers to the top management’s approach or game plan for
administering and directing the entire concern. These are based on the company’s business
environment and internal capabilities. It also called as Grand Strategy.
It reflects the combination and pattern of business moves, actions and hidden goals, in the
strategic interest of the concern, considering various business divisions, product lines, customer
groups, technologies and so forth.

➢ Classification of Corporate-Level Strategies

1. Stability Strategy: Stability is a critical business goal which is required to defend the existing
interest and strengths, to follow the business objectives, to continue with the existing business, to
keep the efficiency in operations, etc.In the stability strategy, the firm continues with its existing
business and product markets, as well as it maintains the current level of endeavour as the firm is
satisfied with the marginal growth.

2.Expansion Strategy :Also called a growth strategy, wherein the company’s business is
reevaluated so as to extend the capacity and scope of business and considerably increasing the
overall investment in the business. In the expansion strategy, the enterprise looks for
considerable growth, either from the existing business or product market or by entering a new
business, which may or may not be related to the firm’s existing business. Basically, it
encompasses diversification, merger and acquisitions, strategic alliance, etc.

3.Retrenchment Strategy : This is pursued when the company opts for decreasing its scope of
activity or operations. In retrenchment strategy, a number of business activities are retrenched
(cut or reduced) so as to minimize cost, as a response to the firm’s financial crisis. Sometimes,
the business itself is dropped by selling out or liquidation.Therefore, areas where there is a
problem is identified and reasons for those problems are diagnosed, after that corrective or
remedial steps are taken to solve those

4.Combination Strategy : In this strategy, the enterprise combines any or all of the three corporate
strategies, so as to fulfil the firm’s requirements. The firm may choose to stabilize some areas of
activity while expanding the other and retrenching the rest (loss-making ones).

4. Stability Strategy

Definition: The Stability Strategy is adopted when the organization attempts to maintain its
current position and focuses only on the incremental improvement by merely changing one or
more of its business operations in the perspective of customer groups, customer functions and
technology alternatives, either individually or collectively.
Generally, the stability strategy is adopted by the firms that are risk averse, usually the small
scale businesses or if the market conditions are not favorable, and the firm is satisfied with its
performance, then it will not make any significant changes in its business operations. Also, the
firms, which are slow and reluctant to change finds the stability strategy safe and do not look for
any other options.

Stability Strategies could be of three types:

1.No-Change Strategy: The No-Change Strategy, as the name itself suggests, is the stability
strategy followed when an organization aims at maintaining the present business definition.
Simply, the decision of not doing anything new and continuing with the existing business
operations and the practices referred to as a no-change strategy. When the environment seems to
be stable, i.e. no threats from the competitors, no economic disturbances, no change in the
strengths and weaknesses, a firm may decide to continue with its present position. Therefore, by
analyzing both the internal and external environments, a firm may decide to continue with its
present strategy. Generally, the small or mid-sized firms catering to the needs of a niche market,
which is limited in scope, rely on the no-change strategy

2.Profit Strategy : The Profit Strategy is followed when an organization aims to maintain the
profit by whatever means possible. Due to lower profitability, the firm may cut costs, reduce
investments, raise prices, increase productivity or adopt any methods to overcome the temporary
difficulties. The profit strategy can be followed when the problems are temporary or short-lived
and will go away with time. The problems could be the economic recession or inflation, industry
downturn, worst market conditions, competitive pressure, government policies etc. If the
problem persists for long, then profit strategy would only deteriorate the firm’s overall financial
position.
3. Pause/Proceed with Caution Strategy : The Pause/Proceed with Caution Strategy is well
understood by the name itself, is a stability strategy followed when an organization wait and look
at the market conditions before launching the full-fledged grand strategy. Also, the firm that has
intensely followed the expansion strategy would wait till the time the new strategies seeps down
the organizational levels and look at the changes in the organizational structure before taking the
next step.

5. Expansion Strategy

Definition: The Expansion Strategy is adopted by an organization when it attempts to achieve a

high growth as compared to its past achievements. In other words, when a firm aims to grow
considerably by broadening the scope of one of its business operations in the perspective of
customer groups, customer functions and technology alternatives, either individually or jointly,
then it follows the Expansion Strategy. The reasons for the expansion could be survival, higher
profits, increased prestige, economies of scale, larger market share, social benefits, etc. The
expansion strategy is adopted by those firms who have managers with a high degree of
achievement and recognition. Their aim is to grow, irrespective of the risk and the hurdles
coming in the way.

➢ Types of Expansion Strategies:

1.Expansion through Concentration : The Expansion through Concentration is the first

level form of Expansion Grand strategy that involves the investment of resources in the product
line, catering to the needs of the identified market with the help of proven and tested
technology. The strategy followed when an organization coincides its resources into one or more
of its businesses in the context of customer needs, functions and technology alternatives, either
individually or collectively, is called as expansion through concentration.

2. Expansion through Diversification :The Expansion through Diversification is followed

when an organization aims at changing the business definition, i.e. either developing a new
product or expanding into a new market, either individually or jointly. A firm adopts the
expansion through diversification strategy, to prepare itself to overcome the economic
downturns. Generally, the diversification is made to set off the losses of one business with the
profits of the other; that may have got affected due to the adverse market conditions

3. Expansion through Integration : The Expansion through Integration means combining

one or more present operation of the business with no change in the customer groups. This
combination can be done through a value chain. The value chain comprises of interlinked
activities performed by an organization right from the procurement of raw materials to the
marketing of finished goods. The expansion through integration widens the scope of the business
and thus considered as the grand expansion strategy.
4. Expansion through Cooperation : The Expansion through Cooperation is a strategy
followed when an organization enters into a mutual agreement with the competitor to carry out
the business operations and compete with one another at the same time, with the objective to
expand the market potential.

The expansion through cooperation can be done by following any of the strategies as
explained below:

➢ Merger: The merger is the combination of two or more firms wherein one acquires the assets
and liabilities of the other in the exchange of cash or shares, or both the organizations get
dissolved, and a new organization came into the existence.The firm that acquires another is
said to have made an acquisition, whereas, for the other firm that gets acquired, it is a
merger.

➢ Takeover: Takeover strategy is the other method of expansion through cooperation. In this,
one firm acquires the other in such a way, that it becomes responsible for all the acquired
firm’s operations. The takeovers can either be friendly or hostile. In the former, both the
companies agree for a takeover and feels it is beneficial for both. However, in the case of a
hostile takeover, a firm try to take on the operations of the other firm forcefully either known
or unknown to the target firm.

➢ Joint Venture: Under the joint venture, both the firms agree to combine and carry out the
business operations jointly. The joint venture is generally done, to capitalize the strengths of
both the firms. The joint ventures are usually temporary; that lasts till the particular task is
accomplished.

➢ Strategic Alliance: Under this strategy of expansion through cooperation, the firms unite or
combine to perform a set of business operations, but function independently and pursue the
individualized goals. Generally, the strategic alliance is formed to capitalize on the expertise
in technology or manpower of either of the firm.

MODULE 3: STRATEGY IMPLIMENTATION AND CONTROL

1. Strategy Implementation

Definition: Strategy Implementation refers to the execution of the plans and strategies, so as to
accomplish the long-term goals of the organization. It converts the opted strategy into the moves
and actions of the organisation to achieve the objectives. Simply put, strategy implementation is
the technique through which the firm develops, utilises and integrates its structure, culture,
 resources, people and control system to follow the strategies to have the edge over other
competitors in the market.

➢ Process of Strategy Implementation

1. Building an organization, that possess the capability to put the strategies into action successfully.
2. Supplying resources, in sufficient quantity, to strategy-essential activities.
3. Developing policies which encourage strategy.
4. Such policies and programs are employed which helps in continuous improvement.
5. Combining the reward structure, for achieving the results.
6. Using strategic leadership.

2. Leadership in strategic management.

Definition: Strategic Leadership can be defined as the ability of the top level managers or
executives to determine the future courses of action and direction of the firm and motivate the
members to make efforts in that direction. This is possible by formulating and communicating
the firm’s vision to the members of the organization develops strategies – keeping in mind the
organization’s internal and external environment, aligning the strategy with its work environment
initiating change needed for the strategy implementation and influencing the employees to take
part in the execution of the strategy.

➢ Functions of Strategic Leader

▪ Setting the direction

▪ Strategic decision making
▪ Human capital management
▪ Translating strategies into actions
▪ Change Management
▪ Effective communication within the organization
▪ Ensuring efforts are made in the right direction.
▪ Developing strategic competencies.
▪ Framing policies and plans for the effective implementation of strategic decisions.
▪ Developing and maintaining a constructive work culture
 3.Strategies for managing change.

1. Propose Incentives
2. Redefine Cultural Values
3. Exercise Authority
4. Shift the Burden of Change
5. Recruit Champions of Change

4.Portfolio analysis.

Strategic portfolio analysis involves identification and evaluation of all products

or service groups offered by company on the market (so called product mix) and preparing
specific strategies for every group according to its relative market shareand actual or projected
sales growth rate. It can be also used to make strategic decision about strategic business units.

Portfolio analysis in strategic management allows to answer key questions how to shape the
present and future business portfolio (of product or services) in order to reduce the risk of
functioning in a changing environment, and increase the effects of the implemented strategy.

5, BCG Matrix

The BCG Matrix is a tool used in corporate strategy to analyse business units or product lines
based on two variables: relative market share and the market growth rate. By combining these
two variables into a matrix, a corporation can plot their business units accordingly and determine
where to allocate extra (financial) resources, where to cash out and where to divest. The main
purpose of the BCG Matrix is therefore to make investment decisions on a corporate
level. Depending on how well the unit and the industry is doing, four different category labels
can be attributed to each unit: Dogs, Question Marks, Cash Cows and Stars

1.Question Marks: Question marks are low-share business units in high-growth markets. They
require cash to hold their share, let alone increase it. The company needs to think hard about
question marks – which ones should be built into stars, and which ones should be phased out?
Question marks have the following characteristics:

▪ Low relative market share in a relatively young but promising market (growing)
▪ Potential of becoming stars if the market share can be increased
▪ If necessary market share is not reached, question marks are likely to turn into dogs as soon as
the market gets more mature
▪ Careful analysis is needed to determine whether to invest or not.
 2.Stars :Stars are high-growth, high-share businesses or products. They often need heavy
investment to finance their rapid growth. Eventually, their growth will slow down, and they will
turn into cash cows. Stars have the following characteristics:

▪ High market share in a promising market

▪ To turn a star into a future cash cow, heavy investment is needed to fight competition and expand
market share.

3.Cash Cows: Cash cows are low-growth, high-share businesses or products. These established
and successful SBUs need less investment to maintain their market share. As a result, they
produce cash that the company uses to pay its bills and to support other SBUs that need
investment. As we have learned, question marks and stars require heavy investment, which
usually comes from the profitable cash cows. Cash cows have the following characteristics:

▪ High market share in a slowly growing or mature market

▪ Create the highest cash flow
▪ No further investment should be undertaken due to limited or non-existent growth potential
▪ The company should try to “milk” the cash cows as long as possible.

4. Dogs :Dogs are low-growth, low-share businesses and products. They may generate enough
cash to maintain themselves, but do not promise to be large sources of cash flow. Dogs have the
following characteristics:
▪ Low relative market share in a slowly growing or declining market
▪ Products do mostly not generate large profit and may usually just break even
▪ The company should divest dogs, as these products have a negative effect on the overall
profitability of the company. Instead of carrying dogs along, the company should better focus on
products or SBUs with greater potential.
6.GEC Matrix

The General Electric Matrix is extensively used to appraise competitive scenarios. GE Matrix is
a viable tools that assist managers to develop organizational strategy that is based mainly on
market attractiveness and business strengths. The G.E matrix is constructed in a 3x3 grid with
Market Attractiveness plotted on the Y-axis and Business Strength on the X-axis, both being
measured on a high, medium, or low score.
Market Attractiveness :The attractiveness of a market is established by how advantageous it is
for a company to enter and compete within this market. It is based on numerous factors such as
the size of the market and the rate at which it is growing, the possibility of profit, the number of
competitors within the industry and their weaknesses. There are numerous factors which can help
govern attractiveness such as Industry size, Industry growth, Market profitability, Pricing trend,
Competition intensity, Overall risk and returns in the industry, Opportunity to differentiate
products and services and Distribution structure.

Business and Competitive Strength :This factor assists to select whether a company is capable
enough to compete in the given markets. It can be determined by factors within the company
itself such as its assets and holdings, the share it company holds in the market and the
development of this share, the position in the market of its brand and the loyalty of customers to
this brand, its creativity in coming up with new and improved products and in dealing with the
fluctuating situations of the market, as well as considering environmental/government concerns
such as energy consumption, waste disposal. Factors that Affect Business Strength include
Strength of assets and competencies, Relative brand strength, Market share and Customer loyalty

Five steps must be considered in order to formulate the matrix;

• The range of products produced by the SBU must be listed

• Factors which make the particular market attractive must be identified
• Evaluating where the SBU stands in this market
• Processes through which calculations about business strength and market attractiveness
can be made
• Determining which category an SBU lies in; high, medium, or low
7.TOWS Matrix

TOWS Matrix can be defined as the tool to analyze, generate, compare, and select the business
strategies to attain the overall goals and objectives of the company such as higher sales,
increased profits, and enhanced brand value amongst other crucial ones. TOWS Matrix follows
the roots of SWOT Analysis but is quite indifferent from the same as SWOT Analysis mainly
focuses on the aspects of opportunities and threats whereas TOWS Matrix is the tool
for strategy generation and selection.

The 4 TOWS Matrix Strategies :

1) Strengths and Opportunities in TOWS Matrix / SO :The first and foremost strategy of the
TOWS Matrix involves the using of internal strengths of the company to make optimum use of
the external opportunities available to the company. Example: If the company has developed a
niche and distinct brand image in the market and minds of the consumers and there is
an opportunity to tap the new market locations or coming up with the new line of products and
services for the same target market, it is one of the best options for the growth of the firm.

2) Weakness and Opportunities in TOWS Matrix / WO :The second strategy in the line of
TOWS Matrix indicates that the management of the company will find various options and
alternatives to overcome the weaknesses and take advantage of the opportunities that are coming
in the way. It is the best way to diminish the weakness and exploit the opportunities. Example: If
the company is not an expert in any of the business facet that is required for the growth and
success and is presented with the opportunity for an alliance with the other company that has the
required expertise, it works as a win-win situation for both the parties involved.

3) Strengths and Threats in TOWS Matrix / ST :This strategy of the TOWS Matrix implies
that the management of the company would exploit all the internal strengths to overcome any of
the potential threats that in the way of the business to accomplish the desired goals and
objectives. Example: If the company is facing the astute competition for the existing players in
the market or from the new entrants that are offering the new and innovative range of the
products that are similar to the ones offered by the company, the company needs to harp on the
internal strengths such as quality of the offerings, authentic manufacturing techniques, customer
service, and rich legacy of the brand amongst others.

4) Weaknesses and Threats in TOWS Matrix / WT: This one is the least appealing strategy of
the TOWS Matrix as which company would harp on its weaknesses to overcome the external
threats on the business. It is always advisable to minimize the weaknesses to avoid the possible
threats.
8.Strategy evaluation

Strategy evaluation and control is the process of determining the effectiveness of a given
strartegy in achieving the organizational objectives and taking corrective actions whenever
required.

Strategic evaluation and control is related to that aspect of strategic management through which
an organisation ensures whether it is achieving its objectives Contemplated in the strategic
action. If not, what corrective actions are required for strategic effectiveness. Glueck and Jauch
have defined strategic evaluation as follows:

“Evaluation of strategy is that phase of the strategic management process in which the top
managers determine whether their strategic choice as implemented is meeting the objectives of
the enterprise.

➢ The process of Strategy Evaluation consists of following steps-

1.Fixing benchmark of performance: It must focus on questions like:

• What standards should be set?

• How should the standards be set?
• In what terms should these standards be expresses?

The firm must identify the areas of operational efficiency in terms of people, process,
productivity, and pace. Standards set must be related to key management tasks .The criteria
for setting standards may be qualitative or quantitative. Therefore standards can be set
keeping in mind past achievements, compare performance with industry average or major
competitors. Factors such as capabilities of a firm, core competencies, risk bearing ability
strategic clarity and flexibility and workability must also be considered.

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. But various
factors such as managers contribution are difficult to measure. Similarly divisional performance
is sometimes difficult to measure as compared to individual performance. Thus, variable
objectives must be created against which measurement of performance can be done. The
measurement must be done at right time else evaluation will not meet its purpose. For measuring
the performance, financial statements like - balance sheet, profit and loss account must be
prepared on an annual basis.

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. The positive deviation indicates a better performance. The
negative deviation is an issue of concern because it indicates a shortfall in performance. Thus in
this case the strategists must discover the causes of deviation and must take corrective action to
overcome it.

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. If
the strategists discover that the organizational potential does not match with the performance
requirements, then the standards must be lowered. Another rare and drastic corrective action is
reformulating the strategy which requires going back to the process of strategic management,
reframing of plans according to new resource allocation trend and consequent means going to the
beginning point of strategic management process.

9. Balanced Scorecard

The balance scorecard is used as a strategic planning and a management technique. This is widely
used in many organizations, regardless of their scale, to align the organization's performance to
its vision and objectives.
The scorecard is also used as a tool, which improves the communication and feedback process
between the employees and management and to monitor performance of the organizational
objectives.
As the name depicts, the balanced scorecard concept was developed not only to evaluate the
financial performance of a business organization, but also to address customer concerns, business
process optimization, and enhancement of learning tools and mechanisms.
The balanced scorecard is divided into four main areas and a successful organization is one that
finds the right balance between these areas.
 • Financial Perspective - This consists of costs or measurement involved, in terms of rate
of return on capital (ROI) employed and operating income of the organization.
• Customer Perspective - Measures the level of customer satisfaction, customer retention
and market share held by the organization.
• Business Process Perspective - This consists of measures such as cost and quality related
to the business processes.
• Learning and Growth Perspective - Consists of measures such as employee satisfaction,
employee retention and knowledge management.

➢ Features of Balanced Scorecard

• Objectives - This reflects the organization's objectives such as profitability or market
share.
• Measures - Based on the objectives, measures will be put in place to gauge the progress
of achieving objectives.
• Targets - This could be department based or overall as a company. There will be specific
targets that have been set to achieve the measures.
• Initiatives - These could be classified as actions that are taken to meet the objectives.

➢ The Need for a Balanced Scorecard

Following are some of the points that describe the need for implementing a balanced scorecard:
• Increases the focus on the business strategy and its outcomes.
• Leads to improvised organizational performance through measurements.
• Align the workforce to meet the organization's strategy on a day-to-day basis.
• Targeting the key determinants or drivers of future performance.
• Improves the level of communication in relation to the organization's strategy and vision.
• Helps to prioritize projects according to the timeframe and other priority factor

10. Strategic control

Definition: “Strategic control involves the monitoring and evaluation of plans, activities, and
results with a view towards future action, providing a warning signal through diagnosis of data,
and triggering appropriate interventions, be they either tactical adjustment or strategic
reorientation”

➢ Types/Tools of Strategic control

1.Premise control: A company may base its strategy on important assumptions related to
environmental factors (e.g., government policies), industrial factors (e.g. nature of competition),
and organizational factors (e.g. breakthrough in R&D). Premise control continually verifies
whether such assumptions are right or wrong. If they are not valid corrective action is initiated
and strategy is made right. The responsibility for premise control can be assigned to the
corporate planning staff who can identify for assumptions and keep a regular check on their
validity.

2. Implementation Control: In order to implement a chosen strategy, there is need for preparing
quite good number of plans, programs and projects. Again resources are allocated for
implementing these plans, programs and projects. The purpose of implementation control is to
evaluate as to whether these plans, programs and projects are actually guiding the organisation
towards its pre-determined goals or not.

In case it is felt, at any time, the commitment of resources to a plan, program or project is not
yielding the fruits as expected, there is need for matching revision. That is implementation
control is nothing but rethinking or strategic rethinking to avoid wastes of all kinds.

3. Strategic Surveillance: This is aimed at a more generalized and overarching control.

Strategic surveillance can be done through a broad based, general monitoring on the basis of
selected information sources to uncover events that are likely to affect the strategy of an
organization.

4.Special Alert Control: This is based on a trigger mechanism for rapid response and immediate
reassessment of strategy in the light of sudden and unexpected events. Special alert control can
be exercised through the formulation of contingency strategies and assigning the responsibility of
handling unforeseen events to crisis management teams. Examples of such events can be the
sudden fall of a government at the central or state level, instant change in a competitor‟s posture,
an unfortunate industrial disaster, or a natural catastrophe.

MODULE 4 CORPORATE MANAGEMENT AND GOVERNANCE

1. Corporate governance

Corporate governance is the combination of rules, processes or laws by which businesses are
operated, regulated or controlled. The term encompasses the internal and external factors that
affect the interests of a company’s stakeholders, including shareholders, customers, suppliers,
government regulators and management. The board of directors is responsible for creating the
framework for corporate governance that best aligns business conduct with objectives.

Principles of corporate governance

While corporate governance structure may vary, most organizations incorporate the following
key elements:

• All shareholders should be treated equally and fairly. Part of this is making sure shareholders
are aware of their rights and how to exercise them.
• Legal, contractual and social obligations to non-shareholder stakeholders must be upheld.
This includes always communicating pertinent information to employees, investors,
vendors and members of the community.
• The board of directors must maintain a commitment to ensure accountability, fairness,
diversity and transparency within corporate governance. Board members must also possess
the adequate skills necessary to review management practices.
• Organizations should define a code of conduct for board members and executives, only
appointing new individuals if they meet that standard.
• All corporate governance policies and procedures should be transparent or disclosed to
relevant stakeholders.

Core values/pillars/principles of corporate governance.

1.Fairness: The corporate governance framework should protect shareholder’s right and ensure
equitable treatment of all shareholders including minority and foreign shareholders. All
shareholders should have the opportunity to obtain effective redress for violation of their rights.
In addition to shareholders, there should also be fairness in the treatment of all stakeholders
including employees, communities and public officials. The fairer the entity appears to
stakeholders, the more likely it is that it can survive the pressure of interested parties

2.Responsibility: The Board of Directors are given authority to act on behalf of the company.
They should therefore accept full responsibility for the powers that it is given and the authority
that it exercises. The Board of Directors are responsible for overseeing the management of the
business, affairs of the company, appointing the chief executive and monitoring the performance
of the company. In doing so, it is required to act in the best interests of the company.

3.Transparency: A principle of good governance is that stakeholders should be informed about

the company’s activities, what it plans to do in the future and any risks involved in its business
strategies. Transparency means openness, a willingness by the company to provide clear
information to shareholders and other stakeholders. Disclosure of material matters concerning
the organisation’s performance and activities should be timely and accurate to ensure that all
investors have access to clear, factual information which accurately reflects the financial, social
and environmental position of the organisation
 4.Accountability: Corporate accountability refers to the obligation and responsibility to give an
explanation or reason for the company’s actions and conduct

• The board should present a balanced and understandable assessment of the company’s position
and prospects;
• The board is responsible for determining the nature and extent of the significant risks it is willing
to take;
• The board should maintain sound risk management and internal control systems;
• The board should establish formal and transparent arrangements for corporate reporting and risk
management and for maintaining an appropriate relationship with the company’s auditor, and
• The board should communicate with stakeholders at regular intervals, a fair, balanced and
understandable assessment of how the company is achieving its business purpose.

2.Role and function of Board of Directors

1.Trusteeship: The board of directors act as trustees to the property and welfare of the company.
Hence, the board must use the company’s property for the long-run gain of the company, but not
for their personal use.

2.Formulation of Mission, Objection and Policies: Board of directors must see the long run view
and have long run perspective of the company. The board formulates, reviews and reformulates
the company’s mission, objectives and policies which forms the basis for strategy formulation and
implementation.

3.Designing Organizational Structure: The board designs the structure of the organization based
on the objectives, policies, environmental factors, degree of competition, role of quality,
expectations of employees etc

4.Selection of Top Executives: The board should assume the responsibility of screening and
selecting the top executives who can formulate and implement the strategies. Chief executives are
key personnel in the process of strategy implementation.

5.Financial Sanctions: The important financial decisions like sanctioning of finances to various
projects, reserves, distribution of profit to shareholders and repayment of loans and advances etc.,
are taken by the board. Further, the board reviews the financial performance of the company from
time to time and reformulates the financial policies.

6.Feedback: The board has to obtain information from the external environmental factors and feed
that information forward to various key points in the company in order to prevent possible hurdles
and mistakes in the process of achieving organizational goals. The board also feeds the information
back to the executives regarding their failures in decision-making with a view to avoid the
recurrence of such mistakes.

7.Link between the Company and External Environment: The board acts a vital and continuous
link between the company and external environment like government, other companies, social and
economic institutions etc.

➢ Responsibilities of Board of Directors

1. Long-range corporate objectives.

2. Corporate strategies or long range plans for meeting objectives.
3. Allocation of major resources.
4. Major financial decisions.
5. Mergers, acquisitions, divestment.
6. Top Management Performance Appraisal.

3.Role and skills of Top Management:

➢ Skills of a Manager:

Leadership Skills
Management Skills
Interpersonal Skills
Personal Character
Analytical Skills
Communication Skills
Listening Skills

➢ Functions of a Manager:

• Planning
• Organizing
• Staffing
• Leading
• Controlling
4. Innovation culture

Innovation culture is the work environment that leaders cultivate in order to nurture unorthodox
thinking and its application. Workplaces that foster a culture of innovation generally subscribe
to the belief that innovation is not the province of top leadership but can come from anyone in
the organization

➢ Elements of Innovative Companies

• Leadership
• Intelligence:
• Collaboration:

➢ How to Create a Culture of Innovation

1. Understand the Current Situation

2. Define Innovation for the Company

3. Make Innovation Measurable

4. Create Employee-led Groups

5. Think Beyond Your Common Processes

5. Corporate Social Responsibility

Corporate Social Responsibility is a management concept whereby companies integrate social

and environmental concerns in their business operations and interactions with their stakeholders.
CSR is generally understood as being the way through which a company achieves a balance of
economic, environmental and social imperatives (“Triple-Bottom-Line- Approach”), while at
the same time addressing the expectations of shareholders and stakeholders.

Key CSR issues: environmental management, eco-efficiency, responsible sourcing, stakeholder

engagement, labour standards and working conditions, employee and community relations,
social equity, gender balance, human rights, good governance, and anti-corruption measures.

Advantages of CSR:

• Improves the image of a company:

• Helps attract and retain potential employees:

 • You get into the good books of regulatory authorities:

• Attracts new investors:

• A brand new way to advertise your brand:

➢ Dimensions of Corporate Social Responsibility

1.Internal Dimensions of CSR:

Human Resource Management: How the company deals with its human resources is certainly
part of its corporate social responsibility. This will include all workplace-related issues such as
levels of salaries, timely disbursal of wages, administration of benefits, issues related to working
hours, and quality of work.

2.Health and Safety at Work: Amongst all issues relating to the company’s human resources,
those dealing with health and safety deserve special mention. There is increasing pressure to
recognize corporate responsibility towards workers’ health and safety. This is of particular
importance when workers are exposed to hazardous materials or when they have to work in
potentially dangerous working conditions.

3.Adaptation to Change:We live in an ever-changing world and it is the responsibility of the

employer to prepare the employees to meet and deal with the changes. When the industry is
going through a phase of rapid automation and computerization, the employer may be expected
to help train its employees to meet the new challenges faced due to this onslaught of technology.
It is also very important to ensure that the employees leaving the organization are fully equipped
to face the challenges in the outside world.

4.Management of Environmental Impact and Natural Resources: Companies have to be

exceedingly careful while utilizing natural resources. Even when they have a licence or mandate
to use a particular resource, society does expect them to be judicious and restrained while using
them. Entrepreneurs have to be particularly careful while using shared resources.

External Dimensions of CSR:

1.Local Community: There is a very complex interrelationship between a corporate and the
community around which its activities are centred. At the least, the company may be expected to
be part of the local economy by providing jobs, consuming local products and services, and
contributing to local taxes.
2.Business Partners, Suppliers, and Consumers:Dealings of a corporate with its business
partners may come under scrutiny. The corporate is expected to be fair and honest in its dealings
with suppliers and consumer additionally, it is also expected to promote an honourable code of
conduct amongst its business partners and supplier

3.Human Rights:The company’s record on human rights is very important for its positive public
image. Corporate world would avoid supporting an administration that has a past history of
human rights abuses. That is one of the reasons why many large companies are wary of
identifying themselves closely with the Chinese Government.

4.Global Environmental Concerns: Many companies, mostly large companies in industries

notorious for their adverse impact on the environment, are going out of their way to prove their
environmental credentials. Chevron, British Petroleum, and other fossil- fuel companies
constantly advertise their efforts to encourage the use of alternative clean fuels and sustainable
technologies.

6: Triple Bottom Line (TBL)

The triple bottom line (TBL) is a framework or theory that recommends that companies commit
to focus on social and environmental concerns just as they do on profits. The TBL posits that
instead of one bottom line, there should be three: profit, people, and the planet. The concept
behind the triple bottom line is that companies are responsible first and foremost to all their
stakeholders, and these include everyone that is involved with the company whether directly or
indirectly, as well as the planet we're all living on.

People + Planet = Social + Environmental Responsibility

People: Companies that follow the triple bottom line way of doing business think about the
impact their actions have on all the people involved with them. This can include everybody from
farmers supplying raw materials, on up to the CEO of the company. Everyone's well-being is
taken into consideration. The company offers health care, good working hours, a healthy, safe
place to work, opportunities for advancement and education, and does not exploit their labor
force (by using child labor or offering sweatshop wages). In some cases, the "people" bottom line
can also include the community where the company does business.

Planet : Triple bottom line companies take pains to reduce or eliminate their ecological
footprint. They strive for sustainability, recognizing the fact that "going green" may be more
profitable in the long run. But it's not just about the money. Triple bottom line companies look at
the entire life cycle of their actions and try to determine the true cost of what they're doing in
regards to the environment. They take pains to reduce their energy usage, they dispose of any
toxic waste in a safe way, they try to use renewable energy sources and they don't produce
products that are unsafe or unhealthy for people and the planet.

Profit: The financial bottom line is the one that all companies share, whether they're using the
triple bottom line or not. When looking at profit from a triple bottom line standpoint, the idea is
that profits will help empower and sustain the community as a whole, and not just flow to the
CEO and shareholders.

MODULE 5: RECENT DEVELOPMENT IN STRTEGIC MANAGEMENT

1. Core competence as the root of competitive advantage

Core competency: Organizations with core competencies enjoy global leadership. It represents
the organization’s will to harmonize their multiple resources and skills. It distinguishes the firm
in a market place because of its products and service’s uniqueness and because they become
difficult to imitate by others. In such an organization, all business strategies revolve around the
core competency. Core competencies give a company one or more competitive advantages, in
creating and delivering value to its customers in its chosen field. Organizations which believe in
spending generously on research and development can and the ones which experiment and
investigate the processes can develop core competency. Core competencies lead to the
development of core products. Core products are not directly sold to end users; rather, they are
used to build a larger number of end-user products.

Competitive advantage is a business strategy where companies find ways to differentiate

themselves from their competitors to attract more business. Service-based industries, such as
hospitality, banks, health care use competitive advantage strategies to gain an elevated position in
the field. Usually competitive advantage is sought out of one or more functional advantages.
Competitive advantages give a company an edge over its rivals and a capability to produce greater
value for the firm and its shareholders. The more sustainable the competitive advantage, the more
complex it is for competitors to offset the advantage.

There are two main types of competitive advantages: comparative advantage and differential
advantage. Comparative advantage, or cost advantage, is a firm’s ability to produce a good or
service at a lower cost than its competitors, which gives the firm the ability sell its goods or
services at a lower price than its competitors or to generate a larger margin on sales. A
differential advantage is created when a firm’s products or services differ from its competitors
and are seen as better than a competitor’s products by customers.
2 .Blue Ocean Strategy

Definition: 'Blue Ocean Strategy is referred to a market for a product where there is no
competition or very less competition. This strategy revolves around searching for a business in
which very few firms operate and where there is no pricing pressure.

Description: Blue Ocean Strategy can be applied across sectors or businesses. In today's
environment most firms operate under intense competition and try to do everything to gain
market share. This situation usually comes when the business is operating in a saturated market,
also known as 'Red Ocean'.

When there is limited room to grow, businesses try and look for verticals or avenues of finding
new business where they can enjoy uncontested market share or 'Blue Ocean'. A blue ocean
exists when there is potential for higher profits, as there is now competition or irrelevant
competition.

The strategy aims to capture new demand, and to make competition irrelevant by introducing a
product with superior features. It helps the company in make huge profits as the product can be
priced a little steep because of its unique features.

Example: Apple ventured into digital music in 2003 with its product iTunes.
Apple users can download legal and high quality music at a reasonable price from iTunes
making traditional sources of distribution of music irrelevant. Apple was successful in capturing
the growing demand of music for users on the go. All the available Apple products have iTunes
for users to download music.

3: Red Ocean Vs Blue ocean strategy

4. Strategy Canvas

Strategy Canvas is a central diagnostic tool and an action framework that graphically captures, in
one simple picture, the current strategic landscape and the future prospects for an organization. It
is basically a tool to visually show how a company will or has created a blue ocean strategy. It is
used to plot how the current competitors compete in a market space, what factors they compete
on and how your company and the competition scores on each key factor. It is also used to show
how a company can change its focus to separate itself from the competition and attract non
customers currently to the industry to become customers.
The horizontal axis on the strategy canvas captures the range of factors that an industry competes
on and invests in, while the vertical axis captures the offering level that buyers receive across all
of these key competing factors. A value curve or strategic profile is the graphic depiction of a
company’s relative performance across its industry’s factors of competition.

The strategy canvas allows your organization to see in one simple picture all the factors an
industry competes on and invests in, what buyers receive, and what the strategic profiles of the
major players are

The strategy canvas serves two purposes:

• It captures the current state of play in the known market space, which allows users to
clearly see the factors that an industry competes on and invests in, what buyers receive,
and what the strategic profiles of the major players are.
• It propels users to action by reorienting their focus from competitors to alternatives and
from customers to noncustomers of the industry and allows you to visualize how a blue
ocean strategic move breaks away from the existing red ocean reality.

5: The Four Actions Framework

The Four Actions Framework developed by W. Chan Kim and Renée Mauborgne is used to
reconstruct buyer value elements in crafting a new value curve or strategic profile. To break the
trade-off between differentiation and low cost in creating a new value curve, the framework
poses four key questions, shown in the diagram, to challenge an industry’s strategic logic.

The Eliminate-Reduce-Raise-Create (ERRC) Grid developed by W. Chan Kim and Renée

Mauborgne is a simple matrix like tool that drives companies to focus simultaneously on
eliminating and reducing, as well as raising and creating while unlocking a new blue ocean.
This analytic tool complements the Four Actions Framework. It pushes companies not only to
ask the questions posed in the Four Actions Framework but also to act on all four to create a new
value curve (or strategic profile), which is essential to unlocking a new blue ocean. The grid
gives companies four immediate benefits:

• It pushes them to simultaneously pursue differentiation and low cost to break the value-cost
trade off.
• It immediately flags companies that are focused only on raising and creating, thereby lifting
the cost structure and often over-engineering products and services – a common plight for
many companies.
• It is easily understood by managers at any level, creating a high degree of engagement in its
application.
• Because completing the grid is a challenging task, it drives companies to thoroughly
scrutinize every factor the industry competes on, helping them discover the range of implicit
assumptions they unconsciously make in competing.

6. Types of Ecommerce Business Models

1.Business - to - Business (B2B) :A website following the B2B business model sells its products
to an intermediate buyer who then sells the product to the final customer. As an example, a
wholesaler places an order from a company's website and after receiving the consignment, sells
the endproduct to the final customer who comes to buy the product at one of its retail outlets.

2.Business - to - Consumer (B2C) : A website following the B2C business model sells its
products directly to a customer. A customer can view the products shown on the website. The
customer can choose a product and order the same. The website will then send a notification to
the business organization via email and the organization will dispatch the product/goods to the
customer.

3.Consumer - to - Consumer (C2C): A website following the C2C business model helps
consumers to sell their assets like residential property, cars, motorcycles, etc., or rent a room by
publishing their information on the website. Website may or may not charge the consumer for its
services. Another consumer may opt to buy the product of the first customer by viewing the
post/advertisement on the website.

4.Consumer - to - Business (C2B): In this model, a consumer approaches a website showing

multiple business organizations for a particular service. The consumer places an estimate of
amount he/she wants to spend for a particular service. For example, the comparison of interest
rates of personal loan/car loan provided by various banks via websites. A business organization
who fulfills the consumer's requirement within the specified budget, approaches the customer
and provides its services.
5.Business - to - Government (B2G): B2G model is a variant of B2B model. Such websites are
used by governments to trade and exchange information with various business organizations.
Such websites are accredited by the government and provide a medium to businesses to submit
application forms to the government.

6.Government - to - Business (G2B): Governments use B2G model websites to approach

business organizations. Such websites support auctions, tenders, and application submission
functionalities.

7.Government - to - Citizen (G2C):Governments use G2C model websites to approach citizen

in general. Such websites support auctions of vehicles, machinery, or any other material. Such
website also provides services like registration for birth, marriage or death certificates. The main
objective of G2C websites is to reduce the average time for fulfilling citizen’s requests for
various government services.